Sherad Dewedi, Author at Shenward

When is it ok to form a limited company for your buy to let business and when is it not?

A recent report by estate agent Hamptons showed that a record number of new limited companies have been set up by landlords in 2021, revealing a 23% increase compared to the previous year.

Why? When a landlord buys a property through a limited company, they are able to benefit from more attractive tax rates, and this has led to a greater increase in this practice over the last year.

But it’s not appropriate in all circumstances and you’ll need to proceed with caution. Here we explore the subject on a deeper level to ensure any decisions you make are well informed.

What is a buy to let limited company?

A buy to let limited company is a company you can use to buy investment properties through a limited company instead of in your own name. Some may refer to this as a Special Purpose Vehicle ‘SPV’.

The same rules apply for a buy to let limited company as a usual limited company, with business owners having to submit regular accounts to Companies House. These include:

Annual accounts
Confirmation statement.
Corporation tax return (CT600)
VAT returns
Employer (PAYE) returns

Buying a property through a limited company is more cost effective in terms of tax for some landlords, as the laws on buy to let taxation have made investing in property more expensive. For example, mortgage interest costs can no longer be reclaimed in full by landlords who own residential properties in their personal name. Additionally, landlords can no longer claim the 10% wear & tear allowance.

How does a buy to let limited company work?

When you invest in property some landlords choose to get a buy to let mortgage, which is usually in their name.

If you choose the alternative route and set up a buy to let limited company, the company owns the properties rather than the individual, and the mortgage is taken out in the company’s name.

The landlord would pay money into the small business set up and this money would be used for a deposit for purchasing the properties. The remaining monies would then be covered by a limited company buy to let mortgage.

In order to get the mortgage, the limited company has to be set up before the mortgage begins but the limited company does not have to be trading for a certain amount of time.

What are the benefits of setting up a limited company for buy-to-let?

Setting up a limited company for a buy to let property has many benefits, for example it allows landlords to continue to offset their mortgage interest against their profits.

A buy to let limited company also means a landlord’s profits are subject to Corporation Tax rather than individual tax, meaning they’re taxed at a rate of 19 percent rather than a greater rate for individuals. Companies can also claim mortgage interest as a business expense, but they still usually have to pay stamp duty on a limited company buy to let.

Within a corporate structure like a limited company, there is an opportunity to pay a tax efficient salary and dividends, through tax benefits. The first £2,000 of dividend income for each recipient is taxable at 0% – this rule isn’t available for those who aren’t set up as a limited company.

These are just a few of the incentives for landlords to choose a limited company structure, and others include:

Tax relief for all interest paid
Keeping personal finances separate
Income that has accumulated in the company can be distributed after retirement
If ownership is to be passed or shared between family members, share capital offers greater flexibility than real property
Limited companies have a separate legal status and are considered as separate legal entities, offering limited liability protection to landlords
When using a limited company, landlords can also consider the option of selling the company instead of the property. Stamp duty on shares is 0.5%, making it a better option for those looking to buy
For landlords planning to pass their business to family members, succession planning is a lot easier with limited companies than an individually owned.

What are the disadvantages of a buy to let limited company?

As with any tax planning, there are some disadvantages to explore. These should be considered by landlords when choosing which is the best option for their personal circumstances:

If a landlord were to transfer an existing property to a buy to let limited company, they would be subject to capital gains tax and stamp duty tax. The stamp duty land tax would be based on the market value of the property being transferred.
Once the limited buy to let company is set up, the company will need to file an Annual Tax on Enveloped Dwellings (ATED) return, though this is only if the value of the property is above £500,000.
Once the landlord has used the tax-free dividend allowance of £2,000, the dividends will then be subject to the landlord’s marginal rate of tax, which could anywhere between 32.5% or 38.1%.
The number of lenders willing to provide a mortgage for a buy to let limited company is lower and the mortgage interest rates tend to be higher. Of course, this is likely to change once the market begins to change and adapt this newer way of acquiring property, but currently this demand does not reflect the behaviour of the lending market.
There are also additional administration costs required to manage a company, which will result in additional compliance costs and overheads.

Whether a landlord chooses a buy to let limited company or not completely depends on their personal circumstances, properties acquired and what they plan to do in the future with the portfolio.

As always, we’re on hand to advise on the best tax planning route taking into consideration your circumstances. Contact us today if you require support.

There is a lot of uncertainty surrounding finances, especially given the current circumstances. As a result, business owners and sole traders are naturally asking more questions.

With a number of key financial dates approaching, our experts have provided answers to this month’s frequently asked questions.

When does the furlough scheme end? What are the key changes in August and September?

The Coronavirus Retention Scheme, or furlough as we know it, has been extended until 30th September 2021. This means after this date the government will no longer provide financial contributions to employees’ salaries.

Until the end of August, the government will continue to contribute, but as of July 1st, this amount will begin to lower.

In July, contributions for hours not worked will lower to 70% of wages up to £2,187, and in August, 60% of wages up to £1,875.

In line with previous months, for hours not worked, employees are still required to receive 80% of wages up £2,500 per month.

This means, as of July 1st, employers will be asked to make a contribution of 10% up to £312.50, and 20% up to £625 from August until the scheme ends in September.

Should self-employed workers claim the 5th SEISS grant? How is this calculated?

The fifth and final Self-Employed Income Support Scheme (SEISS), is available to self-employed workers with lost income from 1st May to 30th September. This should be available to claim from “late July”.

To be eligible for the grant, you must have traded in the tax years 2019-20 and 2020-21 and have submitted your tax returns on or before March 2nd, 2021.

The criteria require you to either be currently trading but experiencing a lack of demand, or operating at a lowered capacity due to coronavirus, or be unable to trade due to current restrictions or measures.

Your 2019-20 self-assessment tax return will be assessed, and you will not be eligible if your trading profits exceeded £50,000. You should only apply for this grant if you honestly believe your income will take a hit in the given trading period (May-September).

Different to the previous grants, the upcoming fifth grant will be calculated based on how much your turnover was reduced between April 2020 and April 2021. Should your turnover reduction be 30% or over, you’ll be eligible to receive 80% of 3 months average trading profits, with a maximum available grant of £7,500. If less than 30%, you’ll be eligible to receive 30% of 3 months average trading profits, with a maximum available grant of £2,850.

How do I repay SEISS grants which should not have been claimed?

In the event that you realise you have claimed an SEISS grant without being eligible, or have become ineligible due to tax amendments, you must contact the HMRC. Generally, you should inform the HMRC within 90 days of receiving the grant.

If you realise you were not eligible at the time you applied for the grant, you should inform the HMRC online you need to repay some or all of the grant. After this you will be given the bank details to repay what you owe.

If following a tax amendment, you became ineligible you should tell the HMRC of the amendment using their online form. After which they will send you a letter confirming how much you owe and how to repay it.

Grants received between 6 April 2020 and 5 April 2021 can also be paid via the self-assessment tax return.

When is the next income tax liability due?

The next income tax liability payment is due on the 31^stof July

P11D- who needs it and when should it be filed?

A P11D is a form which is to be completed by employers who offer benefits. It is used to declare expenses and benefits given to employees which are not subject to PAYE tax, e.g., company car, medical insurance, beneficial loans.

The P11D form filing deadline is the 6^thof July.

Got a burning question? Reach out to us at hello@shenward.com

The UK tax system is complex, there’s no denying it. And with the introduction of various COVID relief funds of late, it’s become even harder for the everyday individual to get their heads around it.

The good news is, Tax Planning exists – and tax planning strategies for individuals can be created too.

You might be thinking “How can I possibly plan how much Tax I am going to pay?” Well, it’s possible, and we’re here to tell how.

What is Tax Planning?

Tax planning is quite simply the process of arranging your affairs – making a plan – in order to legally minimise tax liability.

You’ll notice we emphasised the word ‘legally’, and that’s because contrary to popular belief, there are several ways in which individuals can legitimately reduce the amount of tax they are or will be liable to pay.

How? By understanding the wide range of reliefs and provisions in the UK.

Why are Tax Planning strategies important for individuals?

Tax Planning strategies for individuals are important. FACT.

They enable you to take advantage of opportunities which minimise your tax bill without breaking any rules or being deceitful.

Developing a tax plan and sticking to it will mean you get to keep hold of more of your finances to either invest or spend. There are times when you are starting a new business, acquiring or disposing a business, or even property, plant & machinery, where careful planning will be required.

AGRESSIVE TAX AVOIDANCE AND TAX EVASION ARE NO GO AREAS

Aggressive Tax Avoidance

Aggressive tax avoidance has and always will be a bit of a grey area. Of course, it’s frowned upon by the government, but the final decision is always made in court and a court hearing must take place.

Why? The courts need to determine whether there is manipulation of the law in a way that doesn’t represent the government’s tax intentions. It’s worth noting that if you’re ever in a situation whereby you’re unsure of whether your actions will be classed as tax avoidance, seek professional advice. HMRC will not take it lightly if found to be avoiding tax, and you’ll end up having to pay the full amount of tax which would have been due, PLUS INTEREST.

We discourage clients against aggressive tax planning or tax avoidance schemes. We ALWAYS advise clients to avoid taking advantage of tax legislation for which it was not designed for, i.e. promoting HMRC’s anti-avoidance legislation wherever it arises.

Tax evasion

Tax evasion refers directly to an individual who deliberately avoids paying their tax. They are classed as being non-compliant with the law regarding payments, nor the policies.

As you can imagine, tax evaders deliberately break the rules to ensure that they don’t pay the correct amount of tax. Usually, it involves misrepresentation or concealment of the true state of finances to the authorities. TIP: Tax evasion is a PROSECUTABLE OFFENCE, so don’t be tempted. Failing to declare your full income or hiding tax assets just aren’t worth it.

At Shenward, we act for clients who may face HMRC inquiry under their most serious line of enquiry, Code of Practice 9. We have a successful track record in advocating clients’ positions to achieve an optimal outcome for all parties.

Tax Planning Recommendations

Now we get down to business. By now, you’ll understand that tax planning is legal, but that doesn’t mean to say you shouldn’t seek professional support. To give you an idea as to whether you could benefit from tax planning support, we’ve outlined our ideas and recommendations below.

Income tax ideas and recommendations

Can you exchange part of your salary for benefits?

Exchanging part of your salary for tax free benefits is extremely valuable to those close to the higher tax threshold – between £100,000 and £150,000. Opting for tax efficient benefits can help you reduce your salary to under the threshold and is completely legal.

It’s important to note that since April 2017, the number of tax-free benefits on offer has significantly reduced, so you’ll need to ensure you’ve done your research. Examples of tax-free benefits include cycles for commuting and childcare vouchers – some even opt for onsite nurseries.

2. Can you take advantage of the dividend allowance?

Company owners paying themselves a salary can be tax efficient if they take advantage of the dividend allowance. The tax-free dividend allowance currently stands at £2,000. This means you can take £2,000 from your company every year outside of your salary without paying tax on it. Anything more than that is taxed based on your income tax band:

Basic Rate 7.5%
Higher Rate 32.5%
Additional Rate 38.1%

3. Can you restructure your buy to let portfolio within a marriage?

Married couples have an added advantage when it comes to income tax. Where property is involved, if one member of the couple is a basic rate taxpayer and the other a higher rate taxpayer, it would make sense to ensure that the basic rate taxpayer should receive taxable rents. However, it’s a complicated process and if not managed correctly, you can end up wiping out the savings with other taxes triggered.

4. Can you incorporate let properties into a ltd company?

In certain circumstances, it may be beneficial to form a limited company to manage the property let portfolio. There are several advantages to incorporating your portfolio into a limited company; namely enabling mortgage interest relief which is tax deductible, taking advantage of lower tax rates (corporation tax at 19% and dividend tax at 7.5%), and future planning i.e. passing down wealth to your family. Taking your non-minor children into this company and gradually reducing your own involvement/ownership can be very tax-efficient in passing down your wealth.

There are several drawbacks though, such as capital gains tax which is payable upon transfer of properties, and it is unlikely incorporation relief would be available. Transactional costs such as stamp duty, legal fees, borrowing costs are also payable. So, it is vital to plan ahead. An alternative option could be the implementation of trusts. Which would help mitigate inheritance tax upon your death. This requires a detailed assessment of your current portfolio to determine whether this is a viable option.

5. Have you got a spare room you can rent out in your house?

Yes. There is such a thing as a ‘rent a room’ relief, and it’s been around for many years. The relief allows homeowners to rent a room for a value of up to £7,500 per annum before paying tax.

Carry back ideas and recommendations

Can you use past capital losses?

Capital losses are carried forward indefinitely, so make sure you’re aware of the process and speak to your accountant.

Are you using your annual exemptions?

In tax year 21/22 everyone is legally allowed to realise a capital gain up to the annual exemption threshold of £12,300. Whilst it’s available during the year, if not used, it cannot be carried forward.

Can you use Investors Relief?

These are available to businesses and those with shares in personal companies only and cover holdover relief and rollover relief.

Are you eligible for Business Asset Disposal Relief?

Formerly known as Entrepreneurs’ Relief. Previously each individual had a lifetime limit of £10m gains at which they pay a flat rate of 10%, as opposed to 20%. Lifetime limit reduced to £1m in 2020 Budget. It is still a very lucrative relief for those eligible businessmen/women and shareholders, provided the criteria are met.

Can you utilise your spouse’s annual exemption?

Transferring 50% of the property before sale to a partner would mean it was treated as though your spouse was a joint owner from when the property was first bought.

Can you claim relief when you sell your home?

Usually exempt under Principal private residence rules. If you let out your previous home and live elsewhere – you can claim PPR for the time you lived there.

Inheritance tax ideas and recommendations

Can you switch your assets?

Inheritance Tax is always payable on the value of your estate if it exceeds £325,000. The good news is business assets and agricultural land have IHT exemptions. It’s always worth asking yourself whether you can switch your existing assets to things such as shares in private trading companies, or even agricultural assets as an example.

Why not leave your family home to a dependent?

In the tax year 21/22, there is an additional Inheritance Tax nil rate band of £175,000 when a property belonging to a deceased loved one is left to a dependent – dependents are classed as biological, step or adopted.

Why not make charitable gifts in your will?

Many people naturally want to leave part of their estate to charity when they pass but doing so can also reduce the need for your family to pay Inheritance Tax. Leaving at least 10% of the net value of your estate is usually the way to go. However, where the estate value is high, a reduced rate of 36% is charged where 10% or more is left to charity.

Can you take advantage of equity release plans?

If you’re aged over 55, there are a numerous equity release plans available to free up funds for multiple purposes. It works by using the value of the home to release a lump sum, which is only paid back when the homeowner goes into long term care or passes. The benefit is that the homeowner can still continue to reside in the home.

When did you last update your will?

Many people make a will and then never look back over it. Regularly reviewing your will as your family and financial circumstances change will help you understand what Inheritance Tax your family may be liable to pay.

Consider leaving your ISA to a spouse/civil partner

Income and capital gains received through an ISA are tax-free throughout their lifetime, but when you pass, the value is added to your estate and becomes subject to Inheritance Tax. But, if you leave the ISA to your spouse of civil partner, they can’t legally be charged Inheritance Tax – gifts between spouses/civil partners are exempt.

Contact us to talk through your tax planning strategy

Over the years, we’ve supported hundreds of people with their tax planning strategies, ensuring they are always acting legally and in line with HMRC regulations. If you’d like to find out how we can help you, please get in touch here.

[vc_row][vc_column][vc_single_image image=”2698″ img_size=”large” alignment=”center”][vc_column_text]

A This week as part of our ‘meet the people behind Shenward’ series, we caught up with Rashid from our Bradford office to gain insight into why he chose to be an accountant, his life inside and outside of Shenward, and who his dream celebrity client would be.

Tell us about your role at Shenward?

I’m a Senior Accountant. My day is understandably rather varied – more so due to last year’s events. Typically, I work on producing accounts, corporation tax, tax planning and supporting clients with their queries on tax.

I really enjoy how every day is different and I have to say, one of the best parts of the role is being able to get to know our clients and the stories behind their business.

What inspired you to become an Accountant?

I’ve always been interested in business and for as long as I can remember, been inspired by those building successful and meaningful businesses. As an accountant, I play a key part in supporting clients with their business success and they value our support so much. Being able to do this was one of the key reasons why I chose this career.

My role is often about being that level-headed person the client can come to, making sure their business survives and prospers, and giving them support to make sure that their resources aren’t stretched too thinly.

What first attracted you to Shenward?

Shenward is an aspiring and ambitious firm. I was impressed by the partner’s professionalism during my interview and enjoyed hearing about their future plans. The team are hardworking, but they are also extremely social, which makes for the perfect culture to work in.

What’s a typical day in the office like?

Loud music, plenty of food and partying all day everyday… Ok, back to reality, jokes aside – a typical day consists of preparing accounts and addressing tax queries. You never know what a client will ask next, and I love it.

If you weren’t an Accountant, what would you be?

I was highly interested in space in my teens, then intrigued by F1 as I got older. I imagine I would have been some form of engineer.

Over the last few years, I have grown a liking for good architecture and design. The importance of space and light, the use of natural lighting and resources for efficiency, so perhaps an architect.

Tell us about who Rashid is, what do you enjoy doing etc?

I am of the age where I enjoy and value my family time. I want to spend time with my 2-year-old son and enjoy the cute baby stages of his life before he hits the teens (wish us luck).

I think it’s important to connect with your children from a young age, to create a bond and friendship so they can freely share their life experiences without hesitation.

Life is becoming ever more demanding and stressful, especially for young children, many of whom suffer from some form of mental health, so it is ever important to be there for them.

If I can support my son through the difficult stages of life, to encourage him to achieve his best, and follow his ambition, confidence and self-esteem – I will consider my role as a father a success.

Aside from family, I like the odd bit of DIY, and I’ve had plenty of that over the last few months working on my house.

Which celebrity would be your ideal client?

I am not that envious of celebrities, but if I could choose from multiple popular figures, I wouldn’t mind Neil Armstrong, Michael Schumacher (praying he gets well) or the late Zaha Hadid.

Funniest moment in your career?

There are a couple of moments I can think of, but they might not be best shared in public. Other than that, the conversations I have with colleagues, the stories they tell probably top the charts. There was a moment last year when in a quiet room with the accounts team, we heard a big bang in the corner of the room, turned out my colleague let one loose, I couldn’t breathe so had to run downstairs to get some fresh air.

What one piece of advice would you give to business owners reading this?

Please keep an eye on your business operations and document EVERYTHING! Also, it would help if they considered some form of tax planning, better time management and organisation as it can save a lot of money. The number of fines and interest paid unnecessarily due to negligence always surprises me.

[/vc_column_text][/vc_column][/vc_row]

A specially created shopping list covering everything you’ll need for outdoor trading in hospitality.

As of Monday 12^th April, restaurants, bars, cafes and other food and drink establishments were legally allowed to reopen their doors to customers on the proviso that guests were seated outside and were served at their table.

For many in the hospitality industry, whilst this was good news, it came with an added cost. Those who hadn’t previously had an outdoor area needed to not only apply for a licence to trade outside, but invest in new furniture, safety equipment and more.

The good news is, those in Bradford are now able to reclaim some or all of those costs thanks to the introduction of the Bradford Council Outdoor Trading Grant.

AND, with applications open until 31^st May, those who haven’t yet made their purchase, still have time to do so.

As purchases must be made before applying, we’ve created a dedicated shopping list covering everything you’ll need to offer outdoor dining and drinking, all under the £1,500 allowance and terms of the grant.

Outdoor Trading Shopping List

Whether you’re a bar, restaurant, café or other establishment, the environment you create for your customer must be right or you run the risk of losing out on their valued custom. So, let’s explore how we can create the perfect environment.

Tables

https://www.diy.com/departments/agad-wooden-picnic-bench/1573263_BQ.prd

Shelter

Next on the list, presuming you haven’t blown the budget on the wooden tables, is a shelter to protect your customers from the rain – we are in Britain after all.

Tong Garden Centre has this handy pop-up gazebo, perfect for outdoor drinkers and diners. At just £269, it’s a bargain!

https://www.tonggardencentre.co.uk/shop/products/parasols-and-gazebos/got-it-covered-pop-up-gazebo-grey.html

Or, perhaps if you need a couple, you could opt for B and M stores budget option coming in at just £80.

https://www.bmstores.co.uk/products/garden-party-marquee-6-x-3m-36673

Menus

Paper menus are the safest way to minimise the spreading of germs. Sure, you can clean down plastic menus, but why not opt for the safe option and get paper menus you can shred and recycle after use.

There’s a number of options we’ve found:

For just £60, you can purchase 250 menus in colour printed on both sides at Print Bradford https://www.printbradford.co.uk/

Or, if you want to put in a bulk order, why not head to Cheap Print Online where you can buy 10,000 for just £349

https://www.cheapprintonline.com/.

Sanitiser

COVID-19 hygiene practices must still be adhered to, so why not make it easier for guests to follow with the introduction of more outdoor sanitisers?

They come in at just £125+VAT each over at Sign Holders

https://www.sign-holders.co.uk/virus-protection/hand-sanitiser-solutions/foot-operated-hand-sanitiser.html

Barriers

If you’re planning on using space on council land, such as outside your property and not on within enclosed gardens, barriers are a must. We found these cute little barriers over at Nisbets, which come in a variety of colours and cost just £81. 58

https://www.nisbets.co.uk/bolero-black-canvas-barrier/cf137?cm_sp=Peerius-_-productRecsTop-_-image.

Lighting

Lighting is essential for those late-night diners and drinkers. Whilst there are many affordable options, we love these lights at B and M coming in at just £10 each.

https://www.bmstores.co.uk/search?query=outdoor+lighting

These are just a few of the items we’ve found, but if you’re a local business and you’re selling similar items which could be of use, please feel free to let us know and we’ll include your items.

About the Grant

The grant has been introduced by Bradford Council for Bradford postcode businesses only. Under the scheme, the council is offering local businesses in the hospitality and visitor economy sectors additional new support to cover costs associated with reopening.

Up to £1500 is available to help local small businesses pay for outdoor furniture and equipment which many have purchased to allow them to open under the recently relaxed restrictions. Along with the authority’s new pavement extensions, the Outdoor Trading Grant is designed to assist businesses to operate in Covid-safe open air trading spaces.

Terms and conditions

To be eligible for the grant, you MUST already have or be approved for a licence to trade outside. If you don’t have one, you can apply online here www.bradford.gov.uk/business/licensing/terms-and-conditions-for-an-outdoor-seating-licence.

Any items being claimed for MUST have been purchased already and you’ll need to have the receipts to prove this. Please note, items must have been purchased after February 1^st, 2021.

The Grant cannot fund indoor furniture, outdoor heaters, crockery, cutlery, table linen, glasses, cooking equipment, refreshments, staffing and running costs.

As always, our friendly team is on hand to support with any questions or the advice. Please contact us via the contact us form or email hello@shenward.com.

[vc_row][vc_column][vc_column_text]

This week as part of our ‘meet the people behind Shenward’ series, we caught up with Olivia from our Leeds office to gain insight into why she chose to be an accountant, her life inside and outside of Shenward, and who her dream celebrity client would be.

Tell us about your role at Shenward?

It’s great, I love the variety. Working in the Audits and Accounts department means I primarily spend my time completing client facing work and company secretarial duties. Some days I can have my head stuck into preparing financial statements, other days I will be completing and filing Corporation Tax returns, VAT returns and self-assessment returns. Each year, I also get the opportunity to complete multiple audits for our clients, which I love.

What inspired you to become an Accountant?

There are a few reasons really, the first being that it runs in the family. Both my mum and my grandparents are accountants, so you might say it’s in my DNA!

I also recognised it would be a great career in terms of stability and the fact that whilst on the job you develop a good understanding of what it takes to run a business and the taxes involved, which will be useful wherever I go in life.

What first attracted you to Shenward?

I was instantly impressed by the fact that the Leeds office had a small team. I felt it was possible to really get to know your colleagues because of this. The beauty was, despite it having a smaller team, Shenward still offered the training I needed to get qualified.

During the interview when I learned that my role would involve so many different tasks and responsibilities, I knew it was the role for me. The variety is what keeps an accountant’s job interesting.

What’s a typical day in the office like?

From a work perspective, that’s hard to define. No day is the same in terms of the work I need to do due to the differing client we have on our portfolio. Typically though, the office atmosphere is relaxed, so we are able to chat but also get our heads down and work.

If you weren’t an Accountant, what would you be?

I enjoy working with computers, so maybe something in IT. I’d also like to be an author because I love writing!

Tell us about who Olivia is, what do you enjoy doing etc?

In my free time I enjoy creative writing and playing video games. Family and friends are important to me, so I prior to covid, I would enjoy spending time with them. It’s certainly been difficult over the last year.

Which celebrity would be your ideal client?

Tricky one! They would need to be funny and easy-going, so maybe Dara O’Brien or Bill Bailey.

Funniest moment in your career?

Hard to pinpoint actually. I think the funniest moments come from conversations with my colleagues. We all get on really well, so days are never dull chatting with them.

What one piece of advice would you give to business owners reading this?

Tax planning is EVERYTHING, so make sure you pay attention, it could save you a lot of money!

If you’d like to join Olivia and the rest of our amazing team, please email Sherad@shenward.com to find out more about our current vacancies.

[/vc_column_text][/vc_column][/vc_row]

The impact of the Covid-19 pandemic on people’s lives and livelihoods has meant that for many submitting a Self-Assessment Tax Return hasn’t been at the forefront of their mind.

With a third national lockdown and schools being closed, the annual last-minute rush to submit tax returns by January 31 may not have been the No1 priority this year.

HMRC has recognised that and if you’re one of the estimated three million or so taxpayers who hasn’t submitted their tax return yet, all is not lost.

HMRC realised this week that people were struggling and this year’s deadline for the 2019-20 tax return has been extended by a month until February 28.

That means late filing won’t incur an automatic £100 fine as it would normally do, though it’s not a ‘get-out-of-jail-free’ card and interest will still accrue on tax due from February 1.

The move by HMRC means that people have a little breathing space but if you can file by Sunday, January 31 you should do so.

If you can’t, here’s a few last-minute tips to help ensure your tax return is as complete as possible and that you only pay the tax that is due.

Make sure you declare all your income

Honesty really is the best policy when it comes to tax affairs. Think carefully about every little pot of income, even foreign income that was not remitted to the UK. If you’re a UK taxpayer it needs to go down.

What about interest on savings too? Yes, rates are at an all-time low and interest is likely to be negligible but it still needs to be declared.

Income from property rentals too needs to be added. It’s worth sitting down for a few minutes and listing where your money comes from.

Claim all your allowances

There are lots of small ‘tax breaks’ and allowances that all add up when it comes to minimizing the amount of tax you pay.

Did you get married or enter a civil partnership but haven’t told HMRC? Married Couple’s Allowance could cut your tax bill by between £351 and £907.50 a year, according to gov.uk. This applies if one of you was born before April 6, 1935.

If you were born afterwards you may be able to claim Marriage Allowance which lets you transfer £1,250 of your personal allowance to your husband, wife or civil partner and could reduce their tax bill by up to £250.

Were you instructed to work from home in the early weeks of the pandemic? You could claim tax relief for additional household costs such as heating, metered water and electricity bills.

Everyone has a Personal Tax-Free Allowance, of course, but there are other allowances to consider too.

Dividend Allowance means the first £2,000 you receive in dividends from investments is tax-free.

Maybe you earn money from buying and selling on eBay or offer a freelance service. Lots of us have a little sideline these days. You can make £1,000 tax-free. This is known as a “trading allowance.”

You can also claim an allowance for spousal or child maintenance payments. Subject to certain conditions the allowance could be worth 10% of the maintenance you pay up to a maximum of £326.

If you or your spouse or civil partner are registered blind or have severely-impaired sight your personal tax allowance is increased. This is worth £2,450 for 2019-20.

Money still tight? Consider Time to Pay

HMRC wants to help if you’re struggling to pay. If you can’t afford to pay your latest bill you can set up a payment plan.

You can only do that if:

* You owe £30,000 or less;

* You do not have any other payment plans with HMRC;

* Your tax returns are up to date;

* It’s less than 60 days after the payment deadline.

You can choose how much to pay straightaway and how much you want to pay each month. You will, however, have to pay interest.

A last piece of advice?

Yes! Be kind to yourself and plan ahead. Keep the pressure off in January 2022 by doing your homework and keeping records as you go.

Keep your tax affairs in order through the year and then when the 2020-21 tax year ends in April you can start preparing your tax return early.

Why not do yourself a favour and submit next year’s tax return early and forget the January blues?

From March 2021 HMRC intends to transfer around one million VAT-registered businesses from the VAT Mainframe (VMF) onto their Enterprise Tax Management Platform (ETMP). This is a process known as “bulk migration.”

There’s a lot of jargon there and you just want to know what it means for your business, right?

It’s pretty straightforward. It’s all about HMRC modernising the way it collects taxes.

Those who have already signed up to Making Tax Digital (MTD) are not affected by the latest changes and don’t need to take any action.

However, those businesses with a taxable turnover of more than £85,000 a year who have not signed up to MTD must do so now or could be hit by a penalty charge.

What’s this “bulk migration” all about?

It’s HMRC getting its systems in order. The transfer or “migration” of these remaining businesses will mean HMRC doesn’t have to continue to operate two separate systems. The old VAT mainframe is expensive to run and maintain so it’ll save money and, hopefully, be more efficient for everyone.

What do I need to do?

Just continue to file your VAT returns as you normally would through your Business Tax Account. Things may look a little different after the switch but change is OK. Keeps us on our toes. The basic principles are the same.

MTD for VAT will be extended to include businesses with taxable turnover below £85,000 from April 2022.

Selecting MTD software and signing up to MTD now will save time and effort in the future. It’s well worth getting it sorted now.

Will my Direct Debit be affected?

Good thinking! For Direct Debits to continue after the migration, HMRC will need a valid and current email address for your business.

This is for your protection and allows HMRC to comply with UK banking regulations which ensure they must inform customers of the date the Direct Debit goes out and how much is being taken.

HMRC will ask businesses for an email address via their Business Tax Account. Doing it online saves time. Without a valid email address HMRC may be unable to collect VAT payments.

What if my accounting software isn’t compatible?

That’s only a problem if you’re still using eXtensible Markup Language (XML) and, to be honest, it’s out-dated and you need an upgrade!

XML allows some software products to file VAT returns directly to HMRC – but that won’t be available after migration. There’s only a small number of businesses who still use XML anyway and from April 21 it will no longer be an option.

I have an agent who handles the VAT for me. Won’t they sort it all out?

Yes – but do have a conversation and check everything is organised.

Following the switch over, agents won’t be able to use the agent online service for VAT clients not yet signed up for MTD. Instead they must file clients’ VAT returns through what’s called an Agent Service Account. Best check with your agent to make sure everything is ready to go.

So that’s what you need to know when it comes to VAT migration. It’s not as complicated as it sounds when you strip out the jargon.

It’s all about the continuing drive to make HMRC one of the most digitally advanced tax collectors in the world and that should be a benefit to us all.

If you need further guidance, we’re always happy to help, so feel free to contact us on hello@shenward.com.

Lockdown 3.0 came hard and fast just a day after most businesses returned to work after the Christmas and New Year break.

Businesses hoping for better times with the turn of the year were left disappointed and ‘non-essential’ shops hoping for a boost from the January sales were forced to close. Overnight the traditional ‘Happy New Year’ refrain seemed to stick in the throat somewhat.

The Government was quick to announce a new £4.6 billion package of financial help aimed at keeping businesses afloat until the Spring but for many that still won’t go far enough.

What the Government is offering is a good start but many firms are on the brink, even with furlough extended to the end of April.

There is only so long a business can sustain itself without any actual trade and the stop-start nature of the Covid-19 restrictions ramps up the pressure on businesses already under extreme stress.

Chancellor Rishi Sunak will look again at help for businesses in the Budget on March 3 but until then businesses should look closely at what is available.

Here we look at the financial support that it’s still not too late to claim.

What is the National Lockdown Grant announced on January 5 and who’s it for?

One-off top ups for retail, hospitality and leisure businesses who are legally required to close;
Those with premises with a rateable value of £15,000 or less can claim £4,000;
Those with rateable value between £15,000 and £51,000 can claim £6,000;
Larger businesses with rateable value greater than £51,000 can claim £9,000.

Coronavirus Job Retention Scheme (known as ‘furlough’)

It’s been around a while now but there are strict deadlines for claiming. Currently the Government will pay 80% of employees’ usual wages for hours they do not work up to a maximum of £2,500 per month.

The deadline for claiming for furloughed employees in December is January 14, for January it’s February 15.

The scheme is open until April 30.

Deferring VAT

VAT-registered businesses which had a VAT payment due between March 20 2020 and June 30 2020 can defer payments until March 31 2021.

Statutory Sick Pay Rebate

You can reclaim Statutory Sick Pay paid to employees off sick, self-isolating or shielding because of Coronavirus. It covers up to two weeks for eligible employees.

The company has to be UK-based and have had fewer than 250 employees since February 28 2020.

Christmas Support Payments for Pubs

If your pub was in Tier 2 or Tier 3 between December 2 and 29 2020 you may be eligible for a payment of up to £1,000.

The pub must be in England and have less than 50% in revenue from food sales.

Apply to your local authority before January 31 2021.

Business Rates Holiday for Retail, Hospitality and Leisure

Business rates have been waived for 2020-21 for retail, hospitality or leisure businesses. You should receive this automatically through your local authority if your business is eligible.

Coronavirus Business Interruption Loan Scheme

UK businesses can access loans of up to £5 million, as long as they have a turnover of less than £45 million a year.

They need to be considered viable by a lender if it was not for the pandemic and have been negatively impacted by Coronavirus.

The scheme is open until March 31 2021.

Coronavirus Bounce Back Loan

Small-medium sized enterprises and the self-employed may be able to borrow between £2,000 and £50,000, interest-free and repayment-free for the first 12 months.

Businesses must be UK-based, established before March 1 2020 and negatively impacted by Coronavirus.

The scheme is open until January 31 2021 and loans can be topped up to the maximum.

Time to Pay Service to Ease Tax Burden

HMRC offers a Time to Pay service for businesses struggling to meet their tax bill on time. Contact HMRC to see if your business is eligible.

Local Restrictions Support Grant for Businesses Forced to Close

Grants may be available from your local council if all or part of your business was closed by law at any time between August 1 and November 5 2020 or after December 2 2020.

Your business must have been in Tier 2, 3 or 4 and you can claim for each 14-day period your business was closed for. How much depends on the rateable value of your property.

Local Restrictions Support Grant for Businesses that Stayed Open

If your business was in a Tier 2 or 3 area between August 1 and November 5 2020 and stayed open you may have a claim.

You will have to show your business was negatively affected and payment is based on the rateable value of premises.

Additional Restrictions Grant

Local authorities were given extra money for businesses impacted by local restrictions.

Local authorities will decide who is eligible and for how much. Businesses which could benefit are those supplying a sector forced to close or if your business is in the events industry. It’s worth checking with your local authority about what’s available.

Self-Employment Income Support Scheme

The scheme is open for the self-employed to make a third claim – a taxable grant worth 80% of annual monthly trading profits, capped at £7,500 in total. Only those eligible for the first two rounds are eligible again.

The claim for a third grant runs from November 1 2020 to January 29 2021, and must be made on or before January 29 2021.

There’s a lot to take in but there’s more information on how to claim on the Government website www.gov.uk where you can enter in specific details about your business and see what’s available.

Just be aware of the deadlines because when it’s gone, it’s gone!

If there’s one thing we can agree on, 2020 has been a strange and difficult year for most. As 2020 comes to an end and we step into the new year with haste, now more than ever is a crucial time to start to plan for the year ahead.

There are many political and economic factors that will need to be accounted for when planning, as well as keeping a close eye on competition and sector specific trends.

Before we get started, first things first… what exactly is a business plan and why is it beneficial to my business to have one?

What is a business plan?

A business plan is a roadmap for your business. It helps business owners see the bigger picture when it comes to planning and helps guide them to success. When owning a business, planning ahead is key to successful business decision making, after all you wouldn’t start a journey without checking out the best route before you set off.

Why is it important to have a business plan?

With recent research showing nearly half of small businesses fail, it’s key to plan and understand your sector.

Understanding your position in the market and planning for every eventuality is often key to a successful business. It’s important to lay out your business’s objectives and plan for where you see yourself heading, while putting in milestones to hit along the way will allow you to track success as your business grows and develops.

The main reasons business owners have a business plan is to help aid critical decision making, they help reduce risk, secure financial support from investors, set benchmarks and measure success, and plan for economic and government implications.

But where do you start when formulating a business plan in 2021?

As we know 2020 has been like no year before, so there are a few areas which need to be considered when planning for 2021, here are a few to bear in mind as we look at the year ahead:

Be prepared for a stricter lockdown if infections increase after Christmas. You will need to plan for how this affects you operationally and think about the impact on budget
Be prepared to plan for staff return to work after furlough ends in March 2021, there may be increases to overheads that need to be considered
Do not assume that the furlough bonus of £1k per employee will be reintroduced, again these are potential increases to overheads that will need to be considered for later down the line
Does IR35 impact you? You can find out the ins and outs of how this affects your business here: https://www.gov.uk/guidance/understanding-off-payroll-working-ir35
Does reverse charge in CIS impact you? You can see how your business is affected here: https://www.gov.uk/guidance/vat-reverse-charge-technical-guide
Marketing, sales strategy – consider any opportunities following Brexit. You can see tips and advice on planning for Brexit in our earlier blog here

If you’re looking for further help with where to get started with your business plan for 2021, we have a whole host of experts, specialising in different sectors who are happy to advise you as we head into another potentially turbulent year. Click here to contact us