INSIDER AUGUST. New system to challenge business rates outlined. Self-employment growth driven by part-timers. Appealing business rates

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1 For more information and full details of our office network please visit the website or alternatively contact us INSIDER AUGUST 2016 New system to challenge business rates outlined A system to allow businesses to check and appeal business rates bills has been announced. The aim is to ensure that disputes are settled more promptly. Currently, over 955,000 appeals have been submitted against rating valuations but less than 2% of business rates appeals proceed to a tribunal hearing. The new process is part of the government s target of self-sufficiency for councils and the retention of 100% of local taxes by Announcing the plan on 6 July 2016 the then secretary of state for Communities and Local Government, Greg Clark, said: The vast majority of disputes will now be settled long before lengthy litigation and will mean businesses and councils can get on with planning budgets, confident they are getting a fair deal. Appealing business rates In England and Wales business rates are charged on non-domestic properties such as offices and warehouses. Bills are paid in February or March for the following tax year. Currently, businesses can appeal against the rateable value of their business through the Valuation Office Agency. Under the new system, firms can appeal through 3 stages: check all information must be up to date and accurate challenge providing an alternative valuation and supporting evidence appeal the opportunity to appeal to an independent valuation tribunal. A new 300 fee will be charged to lodge an appeal (which is refunded if the appeal is successful). Penalties of up to 500 will be issued for those sending false information. Self-employment growth driven by part-timers The number of self-employed workers increased from 3.8 million in 2008 to 4.6 million in Data from the Office for National Statistics (ONS) shows that the number of part-time, self-employed workers grew 88% between 2001 and 2015, compared to 25% for full-time, self-employed workers. Part-time workers accounted for 1.2 percentage points of the overall 1.6 percentage point increase in self-employment between 2008 and There was little evidence of older part-time workers moving to a full-time position, job searching or experiencing dissatisfaction with their status. Further findings: Talk to us today about business rates. older workers are more likely to make the transition from full-time to part-time self-employment than younger workers full-time workers are choosing to enter part-time self-employment rather than retirement.

2 Self-employed checklist Whether you are a sole trader or in a partnership, it is important to register yourbusiness with HMRC before trading. There are 4 things to complete if you re resel self-employed: 1. HMRC register with HMRC to pay income tax and national insurance. You will need to do this by 5 October in your business second tax year 2. self-assessment sment register to pay your tax each year. The payments will usually be due on 31 January and 31 July 3. VAT register er your business if your turnover is over 83, records rds keep accounts of business income and outgoings. gs. 500, Help tob Buy ISAs opened More than half a million lion people have opened a Help to Buy ISA since the scheme was launched in December The Help to Buy ISA allows lows people to save up to 200 a month while receiving a 25% government bonus. The figures show that the average age price of a home purchased using a Help to Buy scheme is 189,795 a figure below the national average of 292, % of property sales using the scheme have taken place outside London while over half of completions have been for new build homes. Other findings: Contact us to discuss self-employment. 129,000 first-time buyers have used a Help to Buy scheme 1,000 households a month on average have purchased their own home through Right to Buy since ,000 households have made use of government backed schemes since Peter Andrew, deputy chairman of the Home Builders Federation, said: The various Help to Buy schemes are really making a difference, helping people to save for and buy a new build home and so driving demand, and in turn housing supply. Help to Buy schemes Alongside the Help to Buy ISA, there are affordable home ownership schemes available for those looking to purchase a property. These include: Equity loan Those with a 5% deposit can receive a 20% low-interest loan towards a new build home worth up to 600,000 (or 300,000 in Wales). There is a separate scheme in Scotland. Mortgage guarantee A mortgage guarantee to buy a home worth 600,000 or less with a 5% deposit. Small firms: 10% of day spent chasing payments Small business owners spend 10% of their working day chasing payments, according to research by Xero. London businesses spend the most time chasing payments, up to 1.5 days each month followed by 1.3 days in Wales. Customers who themselves are waiting for payments and a lack of consistency on payment terms are the main reasons for overdue payments. Other findings: 52% of surveyed business owners are concerned about unpaid invoices the worst affected sectors for late payments include HR, IT and manufacturing 37% said that late payments effect productivity and cashflow. Emma Jones, founder of Enterprise Nation, said: The late payment epidemic the UK is facing has to change so small business founders don t spend so many hours chasing doubt and worrying about cashflow on the back of late payment. Managing your cashflow The following steps could help small businesses who are struggling with late payments: Talk to us today about saving to buy a property. invoicing an efficient invoicing process is vital to receive payments sooner rather than later keeping records managing time and material expenses on projects and ensuring that everything is invoiced payment terms outline payment terms and shorten them if needed to encourage your customers to pay sooner payment methods offering easy methods for customers to pay will help decrease late payments. We can advise on ways to improve your cashflow.

3 ACTIVE PRACTICE UPDATES AUGUST 2016 Audits and accounts A guide to keeping accounts and how an audit can beneit your business. An audit is an oficial inspection of a company or organisation s accounts by an independent body. A company can choose to be audited in order to prove to its investors or shareholders that its accounts are sound. An external audit should also determine whether all inancial reporting is in accordance with current accounting standards and legislation. If a company ensures that its accounts, reporting and record keeping are in accordance with legal requirements, an audit should not be too taxing a process. Statutory accounts All companies irrespective of their size must ile statutory accounts each year. They are prepared using the information found in a company s inancial records at the end of each inancial year. All companies in the UK are legally obliged to send copies of their statutory accounts to: their shareholders anyone who can go to their annual general meeting HMRC Companies House (unless they send abbreviated accounts). All statutory accounts must include a balance sheet that shows the value of everything the company owns, what it owes and how much it is owed. They should also include: a proit and loss report showing the company s sales, costs and the proits or losses it has made over the inancial year a director s report notes about the accounts. Some companies will also have to include an auditor s report. Statutory accounts must meet UK GAAP or International Financial Reporting Standards. Abbreviated accounts Some small companies can send abbreviated accounts to Companies House consisting of a signed balance sheet and any notes. The balance sheet must have the name of a director printed on it and be signed by a director. Companies that send abbreviated accounts will still need to send statutory accounts to HMRC and company members. A company is considered small if it meets 2 of the following conditions: it has a turnover of 10.2 million or less there is less than 5.1 million on its balance sheet it employs 50 or fewer people. Small companies can also qualify for an exemption that means their accounts do not need to be audited and they can choose whether to send a director s report. Micro-entities can prepare simpler accounts, send only a balance sheet to Companies House and beneit from the exemptions small companies are entitled to. To be deined as a micro-entity, a company must meet 2 of the following criteria: have a turnover of 632,000 or less have 316,000 or less on the balance sheet have 10 or fewer employees. For more information and full details of our office network please visit the website or alternatively contact us

4 Audits and accounts Record keeping It is a legal requirement for a company to keep and maintain accurate inancial records. If a company fails to keep accounting records it can be ined up to 3,000. Any discrepancies which come to light when the company is audited might also lead to further investigation by HMRC and Companies House. The accounting records which a company must keep are as follows: all money spent and received all assets owned by the company debts the company is owed or owes stock owned at year end all goods purchased and sold who goods were purchased from or sold to, unless the business is a retailer. These records must be kept for a minimum of 6 years (though there are some cases where they will need to be kept for longer). The company must immediately notify their Corporation Tax Ofice and try to accurately recreate them if records are destroyed. Penalties and deadlines If a private limited company is late iling annual accounts with Companies House it will have to pay a penalty. The penalties are on a sliding scale and are doubled if a company iles late 2 years in a row: Timescale Penalty 1 month months months 750 More than 6 months 1,500 A company can appeal a penalty but must give a credible reason for iling late and prove that circumstances beyond anyone s control e.g. a ire or lood destroyed them a few days before iling. The government will only accept circumstances that are deemed exceptional so delays in postal delivery, illness and being unfamiliar with the process will not be considered. Reasons for being audited All private limited companies are subject to annual statutory audits unless they meet 2 of the following rules: Turnover Total assets Number of employees Accounting periods beginning on or after 1 January million 5.1 million Accounting periods beginning before 1 January million 3.26 million 50 or fewer 50 or fewer Some companies that are not legally required to be audited choose to undergo the process so that they know that their accounts are accurate and their inancial reporting is in accordance with Companies House regulations. Other companies are audited because it is required by their backers. A company may also be subject to an audit if the authorities or regulators suspect that there may be some issues or problems with the accounts. The audit process for either situation is essentially the same. In addition some companies are required to have an audit (even if they meet the exemption criteria). This includes: the company is involved in banking or issuing e-money it s a public company (that s not dormant) if a shareholder (or group of shareholders) who owns at least 10% of the shares requests an audit. Contact us today to talk about audit criteria. The audit process Audits are usually carried out by a qualiied accountant or accountancy practice. The aim of the auditor is to ensure that the accounts and inancial statements issued by a company are accurate and compliant with UK GAAP. A statutory audit will check certain aspects of a company s inancial reporting to ensure that they meet government guidelines or requirements from regulatory authorities where applicable and UK GAAP code. The auditor will forensically examine a company s accounts and inancial records and statements. There are 4 stages to an audit: planning and designing the audit approach testing the company s internal inancial controls and evaluating the company s recording of transactions analysing or testing a company s inancial records to ensure that the numbers add up producing an auditor s report. The auditor will ensure that they understand the company s industry, regulators, accounting policies, objectives and strategies, and business risks before commencing the audit. The auditor will check inancial records, receipts, invoices, bank statements and compare inancial information with noninancial company information to check consistency. The company must make all of these records available to them. The auditor s inal report will include the auditor s conclusion as to whether the company s inancial statements are accurate and fairly presented. The auditor s report will be signed and dated before it can be iled with Companies House. Contact us to discuss any aspect of audits or keeping accounts.

5 ACTIVE PRACTICE UPDATES AUGUST 2016 Gifts and inheritance tax How gifts can reduce your liability for inheritance tax. Inheritance tax (IHT) at 40% is due on the portion of a person s estate that exceeds 325,000. This can be reduced to 36% if 10% (or more) of the estate is given to charity. Married couples and civil partners can transfer any unused allowance to their spouse, meaning the nil-rate band can potentially double to 650,000. Although leaving an inheritance has traditionally been a key part of estate planning, attitudes are changing. Research by Prudential has found that people s expectations around being able to leave an inheritance have changed signiicantly in the last 5 years. 28% of people planning to retire this year think they ll leave an inheritance, compared to 52% in Instead, people are choosing to inancially support their loved ones while they are alive: 35% already give money to family members the average gift is 250 a month 13% give more than 500 a month. In most cases (81%) children and their partners are the beneiciaries, though 15% of individuals support their parents. Seeing your assets being put to use while you are alive can be very rewarding. In addition, gifts can help reduce IHT as most are exempt from IHT if you live for 7 years after making the transfer. A careful gift-giving strategy can help minimise your liability to IHT and ensure that you leave as much as possible of your estate to your loved ones. Lifetime gifts Gifts are not restricted to money - they can include possessions and a loss in value (for example if you sell something for less than its worth, the difference is considered a gift). Married couples and civil partners who live permanently in the UK can give anything to their spouse without attracting IHT. This means it is possible to reduce the value of an estate by giving assets to a spouse. However, the gift may form part of the spouse s estate when they die so this is not always the most tax-eficient strategy. Most other lifetime gifts are free from IHT if the giver lives for 7 years after making the transfer. If you die within 7 years and your estate is worth more than 325,000, tax will be charged on the gifts at the following rates: Years between gift and death 3 40% % % % 6-7 8% Tax (unless paying the reduced rate) There is no limit on lifetime gifts, so they can be a tax-eficient way of transferring assets that you do not need to keep in your estate. It may be advisable to cover substantial gifts by insurance against death within 7 years. If you continue to beneit from a gift, it will form part of your estate for IHT purposes and the 7-year rule will not apply. For example if you gave a painting to your son but kept it at your home, you would still be considered to be beneitting from it. For more information and full details of our office network please visit the website or alternatively contact us

6 Gifts and inheritance tax Other exempt gifts Certain types of gift are exempt from IHT. Annual exemption You can give away up to 3,000 in gifts each tax year. Any remaining annual exemption can be carried over to the next tax year making the maximum annual exemption 6,000. Wedding and civil partnership gifts There are different limits depending on your relationship to the bride or groom: 5,000 to a child 2,500 to a grandchild or great-grandchild 1,000 to anyone else. Small gifts You can give as many people as you like gifts of up to 250 a year. There are certain restrictions around this exemption: it cannot be set against a gift of more than 250 you can t give a person 250 if you ve already given them a gift using another exemption. Regular gifts from income Gifts from income are exempt from IHT provided that the gift giver can maintain their normal lifestyle. The deinition of normal is subjective but generally speaking, the gift shouldn t change your ability to continue your current standard of living. If your ability to meet your inancial obligations (such as mortgage payments or utility bills) changes as a result of a regular gift from your income, this will be seen as you not being able to maintain your normal lifestyle. Examples of this kind of gift include: payments into savings accounts life insurance policy premiums Christmas, anniversary and birthday presents. Help with living costs There is no IHT due on gifts that go towards helping certain people with living costs. This includes: ex-spouses or partners relatives who are dependent because of illness, old age or disability children (including step-children and adopted children) under 18 or in full-time education. Political parties Gifts to political parties with either 2 MPs or 1 MP and at least 150,000 votes in a general election are also free from IHT. Charities Gifts to charities, museums, community amateur sports clubs and universities are not liable for IHT. Speak to us about IHT planning and gifts. Giving away your home Perhaps the ultimate gift that can be given is a place to live and the security it provides. Homes are treated like any other gifts and the 7-year rule applies. However, there are different criteria to meet if you give the home away and then continue to live in it. The home won t be included in the value of the estate provided that the original owner: lived in the house for at least 7 years paid rent at the market rate paid their share of the bills. The 7-year rule applies if the original owner dies within 7 years. In other circumstances, different rules apply. This area of IHT is complicated, so you should seek professional advice about your particular situation before giving property away. We can advise on gifts of property and your circumstances. Keeping records Keeping a record of gifts will help your executor and HMRC calculate which how much of your estate (if any) is liable for IHT. Information to include: what you gave how much the gift is worth the recipient the date you gave it. Creating a gifting strategy Although it is tempting to transfer assets out of your estate in order to minimise IHT, you shouldn t take risks with your inancial stability. Ensuring that you are inancially secure, particularly in retirement, should be a priority. Once you have made the gift you no longer have control over the asset in question, so think carefully about the implications before making a decision. Contact us today to talk about IHT planning.