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IR35

The IR35 legislation is aimed at what HMRC calls “disguised employees”. These are individuals who attempt to use an intermediary, usually their own limited company (a “personal service company”) to avoid paying tax.  Before the IR35 legislation closed the loophole in the law, people could set up a limited company and then hire out their services in that company’s name to do the same job as an employee.  Working through a company significantly reduced their tax bills, as well as the employer’s national insurance bill of the “client” who would otherwise have been their employer.

The IR35 legislation aims to prevent this form of tax avoidance by differentiating between individuals who operate as genuine contractors, and those who work as independent entities but with the working conditions of employees.  HMRC can launch IR35 enquiries and inspect contracts and arrangements, and if they decide that a self-employed contractor is “inside IR35” i.e. a “disguised employee”, they can require payment of backdated tax, national insurance, interest and possibly a penalty.  It’s therefore essential that self-employed contractors operating through limited companies are aware of this and check their contracts carefully to ensure compliance with the IR35 rules, or seek help to do this.

If you are concerned about IR35, you can talk to us.

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Are you giving out the wrong message for your business?

I recently saw a leaflet for something I could be have been interested in. At the point of taking the next step I looked for an email address to email to arrange a meeting to discuss their offering. My impression of this business suddenly did a nose dive on the professionability scale. They had a hotmail email account. Was this a part time business? Another person involved in this business had an email address sexysuzy@……. For the cost of a domain running at around £6 for 2 years, why had they not grabbed it?

I then saw that they had a website with the business domain so why were they not using the domain with an associated email address? This person had a good website so I proceeded to email.

Not getting a reply I telephoned the number on the website but it went to the home phone answerphone. Had I got the wrong number?

It took three weeks for an email reply which was full of apology. Was this person taking their business seriously? Could they cope with the work I was proposing to give them?

We met up and he gave me his business card. Oh dear! I think it was a DIY job from Staples and was completely mismatched to the website. It was poorly thought out, poorly printed and was misaligned. It gave incomplete information and contained spelling mistakes.

This business was giving out all the wrong messages before we had had the opportunity to work together.

The meeting went well but the jury is still out as to whether to use him. I have my doubts.

What is the point of all this? This person could have made a much stronger impact with so little effort.

Had he had a consistent brand image – domain, logo, standard of presentation, my impression would have been very different.

Had the telephone been answered by a human or by a professional answerphone, my impression would have been very different.

Had the initial response been earlier and the final proposal sooner after the meeting, my impression would have been very different

By the time we got to the end of the sale process, I had lost confidence in this person which is such a shame. Time will tell if I made the right decision.

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Manual book-keeping or Electronic book-keeping

We are often asked for our opinion on book-keeping packages.  Our view is you need to use it 52 weeks of the year so choose what suits you.  However, as companies grow, it can be beneficial to use proper software for the job.  This can save a lot of headaches at the end of the year.

Cloud or Local is the next question.  Many software companies now offer cloud software where you can access it any time from anywhere to suit you.  This can be useful but many are not happy with this feeling that their data is not safe.

Harmonea have recently reviewed 10 book-keeping software packages which are a mix of local and cloud software offerings.  If you would like a copy, please ask.

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What is a registered office and do I need one?

What is a registered office address?

A registered office address is a legal requirement of all Limited Companies and Limited Liability Partnerships (LLPs) incorporated in the UK. Its purpose is to provide Companies House and HMRC with an official address for delivering statutory mail and legal notices. It must be a full, physical postal address in the same part of the UK where your company is registered i.e. England and Wales, Scotland or Northern Ireland. Both residential and non-residential addresses are permitted but many people prefer to keep their homes private.

Your registered office does not have to be in the same part of the country where your main trading activities are carried out, nor do you ever have to visit it. It is simply for receiving official mail and storing statutory records for inspection purposes.

 

Why do I need a registered office for a limited company?

  • Legally required under UK company law
  • Official mailing address for statutory correspondence.
  • Details are placed on public record to create corporate transparency.
  • Statutory records and registers must be kept and made available for inspection at the registered office.

You can change your registered office at any time after company formation as long as it stays in the same UK country.

 

Can I use my home as a registered office?

You may use your home for this purpose but it is not mandatory, nor is it the best choice. Ideally, you should use a non-residential address for reasons of privacy and professionalism.

The benefits of a non-residential registered office are:

  • Due to the public disclosure of corporate information, the use of a residential address could result in unwanted visitors and unsolicited mail at your home.
  • More likely to be perceived as an established, credible business if you have a professional registered office address.
  • Draws a clear line between work life and home life.

 

If you would like Harmonea to be your Registered Office address, please contact us.

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Are you owed money?

Are you owed money by an individual or a company?

Have you chased your invoice over and over again to no avail?

Do you want to take it further but don’t know how?

Contact Harmonea and they can help.

We can walk you through the steps on how to submit a claim through Money Claim online or submit the claim on your behalf.

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Construction Industry Scheme

CIS (Construction Industry Scheme)

You must tell HM Revenue and Customs each month about payments you’ve made to subcontractors through your monthly return.

You need to send your monthly returns or submit them online to HM Revenue and Customs by the 19th of every month following the last tax month.

You must pay HM Revenue and Customs every month by the 22nd (or the 19th if you’re paying by post). You may be charged interest and penalties if you pay late.

Pay CIS deductions to HMRC in the same way as PAYE and National Insurance payments.

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When do I need to submit my VAT return?

You usually submit a VAT Return to HM Revenue and Customs every 3 months.

Action                                                                         Deadline

Submit Paper VAT return                                            last day of the month following the end of the return period – standard deadline

Submit Online VAT return                                          7 calendar days after the standard deadline – extended deadline

Payment Online                                                           7 calendar days after the standard deadline – extended deadline

Payment by DDM                                                        3 bank working days after the extended deadline

For example:

Return period                 Paper return         Online return       Pay online                        Pay by DDM

30 April                31 May                   7 June                    7 June                    10 June

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When do I need to pay my Corporation Tax?

Annual Accounts and Corporation Tax

After the end of its financial year, your private limited company must prepare:

You need your accounts and tax return to meet deadlines for filing with Companies House and HM Revenue and Customs.

Action                                                                         Deadline

File first accounts with Companies House               21 months after the date you registered with Companies House

File annual accounts with Companies House           9 months after your company’s financial year ends

Pay Corporation Tax                                                      9 months and 1 day after your ‘accounting period for Corporation Tax ends

File a Company Tax Return                                         12 months after your accounting period for Corporation Tax ends

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VAT – an introduction

VAT  (or Value Added Tax to give its full name) was introduced in the UK IN 1973 and is the third largest source of government revenue  after income tax and National Insurance.  VAT is levies on the sale of goods and services by UK businesses.

The standard rate of VAT is currently 20% and this rate has been in place since 4th January 2011.   This rate covers most goods and services.

The other rates are:-

Reduced rate of 5%, which covers some goods and services, such as domestic  fuel or children’s car seats.

Zero rate, examples of which are children’s clothes and some foods.

Some items are exempt from VAT altogether, such as postage stamps and insurance.  No VAT is charged on anything that is outside the scope of the UK VAT system.

 

VAT is charged by a business  at the point of sale of goods and services.   The threshold for a  business  to register for VAT is when the  VAT taxable turnover exceeds £83,000 (April 2016).   (Taxable turnover is the total value of everything sold that is not exempt from VAT.  There are, however, different thresholds for buying and selling from other EU countries).

To register for VAT, a business will need to contact HMRC if the business goes over the VAT threshold in a rolling 12 month period.  In fact, a business should monitor its turnover regularly  to check whether it will go over the threshold.   It is generally possible to register with HMRC and it is possible to appoint an agent such as Harmonea to submit VAT returns behalf of the business.

The de-registration level for a business is less then £81,000 (April 2016).

There are various VAT schemes and here are examples of some of the schemes:-

 

The VAT Accrual Scheme:-

This is commonly used.  The return is calculated on the difference between the sales and purchase invoices within the relevant period, in this case, the last quarter.  The return does not take account of whether the sales and purchase invoices have been paid or are still outstanding.     A return is submitted to HMRC every quarter.

The Flat Rate Scheme:-

With this scheme, a business will pay a fixed amount of VAT.  The business will retain the difference between what it pays to HMRC and what it invoices its customers for.   However, no VAT can be claimed on the business’s purchases.  There is an exception to this, where it is possible to reclaim VAT on a single purchase of capital expenditure, where the amount of the purchase, including VAT, is over £2000.

The threshold for joining this scheme is £150000 and is over £230000 to leave.  The scheme cannot be rejoined  until 12 months after leaving.

There are incentives for the first year of registration.

 

Cash Accounting Scheme:-

With this scheme, VAT is not included on the sales of a business until the customer pays the invoice.  With regard to the purchases, the VAT on these cannot be reclaimed until the purchases have been paid.  Cash Accounting is ideal for those with slow payers.

The joining threshold for this scheme is £1.35 million and the threshold for leaving the scheme is £1.6 million.

 

Annual Accounting Scheme:-

If this scheme is used, the business will make advance VAT payments to HMRC.  These payments are based on the VAT due for the previous year or on an estimated  return for a new business.

Only once VAT return is submitted each year and this will include the balance of the VAT due.   If the VAT has been overpaid , then it will be necessary to apply for a refund.

The turnover would need to be £1.35 million for joining the scheme and over £1.6 million to leave.

 

A VAT return can be submitted online and is due one calendar month and seven days after the end of the last quarter, (a quarter is known as the accounting period).  The payment also needs to reach HMRC within this timeframe.  There are various penalties for late submission of a VAT return, the severity of which depends on the amount of previous late submissions and the turnover of the business.

 

Please contact Harmonea if you would like any more information on VAT.

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