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By Cheaper Accountant, Mar 9 2017 07:00AM

The Government has just announced further changes to the dividend tax system during the budget that will impact all limited company Directors who pay themselves via a combination of salary topped up with dividends. Paying a low salary to a director from a limited company and then paying dividends afterwards if a popular method of reducing income tax and in particular National Insurance charges but this due to get bit more expensive.


There have been a number of changes to the dividend tax system with the scrapping of the dividend tax credit and the introduction of new dividend tax rates. Yesterday’s budget announcement means that things are set to change yet again.


What are the changes?


The main headline change announced was a reduction in the tax-free dividend allowance from the current amount of £5,000 down to £2,000. This is a significant decrease and will result in more tax being paid by the owners of limited companies and will impact a number of small businesses across the UK.


The reduction will come into effect during April 2018.


The increased cost to a basic rate taxpayer is expected to be £225 per annum.


Why is the change being introduced?


The current Government has made changes to bring the tax paid by director-shareholders closer to, or more in line with, the tax paid by regular employees.


What should I do about this?


The impending change to the tax-free dividend allowance raises the prospect of maximising the use of the current year’s tax free allowance rather than leaving profits within a limited company.


The change doesn’t alter the current strategies for minimising tax on income extracted from a limited company as there are still significant gains with regards to reduced National Insurance payments when receiving dividends.


As with all changes to the tax system more detailed guidance will be released closer to the time of implementation and we will endeavour to update the blog to reflect this as and when needed.

By Cheaper Accountant, Mar 1 2017 12:35AM

If a limited company director is late with the statutory company filings, for example the confirmation statement and the company accounts, to Companies House this may result in the limited company being dissolved or struck off by Companies House. Once the company has been dissolved under these circumstances there a number of steps that must be undertaken to restore or reactivate the limited company.


Why has my limited company been dissolved?


Companies House generally use their statutory powers to strike off or close a limited company if they suspect that the company is no longer active. They may reach this conclusion if you:


1. Fail to file the Confirmation Statement on time and this is long overdue


2. Fail to file the Company Accounts on time and these are long overdue


What are the consequences?


If your limited company has been dissolved you are very likely to find that your company bank account has been frozen and won’t be able to access any cash held within the account.


Another significant consequence is that you as a director will become personally liable for all company debts if you continue to trade after the company has been dissolved. You will not benefit from the limited liability protection that a limited company offers.


How do I restore my limited company?


There are a number of steps that you need to take to restore your limited company and these are explained below:


1. Complete Form RT01


2. Enclose a cheque for £100 made payable to “Companies House”


3. Complete the outstanding Confirmation Statement


4. Complete the outstanding Company Accounts


5. Enclose payment in full for any fines that have been issued by Companies House which remain unpaid


6. If the company has any assets at all you must apply to the Government for a Waiver Letter to demonstrate that you have the Crown’s written consent to restore your limited company.


The form you need to complete this can be found here and you will need to enclose payment of £64.


7. Once you have all of the above documents ready you will then need to post them to Companies House at the following address:


Companies House

Crown Way

Cardiff

CF14 3UZ


If you find yourself needing to restore a dissolved limited company feel free to contact one of our accountants and we generally assist clients with this free of charge.


Note: if you need any accounts or confirmation statements to be completed then there will be a charge for us to complete this work.

By Cheaper Accountant, Feb 15 2017 07:00AM

We see some confusion from time-to-time relating to the need to register as an employer and in turn operate PAYE and complete RTI submissions to HMRC. You must register as an employer if you meet the conditions requiring registration. However, not all companies need to register as an employer and you could be paying your accountant to complete the company’s monthly payroll and RTI submissions when this isn’t actually needed.


What triggers the need to register as an employer?


If your company pays you or another employee a monthly salary of £486 a month (during the 2016-17 tax year) or more then you will need to register as an employer. This is sometimes referred to as the employer registration threshold.


The above assumes that the employee(s) in question are only employed by your company and they are not receiving a pension or other taxable benefits.


What this does mean is that you can pay yourself or another employee £485 a month and then you avoid needing to register as an employer and you don’t need to pay your accountant to operate PAYE for you and you don’t need to pay your accountant to submit monthly RTI returns to HMRC.


How do I register as an employer?


If you need to register as an employer this can be done by clicking on the following link and then simply entering all of the details requested: https://www.gov.uk/register-employer


Once you have registered as an employer HMRC will post you your employer reference number and tax office reference number. You or your accountant will need these details to complete your company payroll and RTI submissions to HMRC.

By Cheaper Accountant, Feb 14 2017 06:39AM

The VAT Flat Rate Scheme is due to change in April 2017 and the changes will dramatically reduce the benefits or gains associated with operating the Flat Rate Scheme for many small businesses across the UK. The Flat Rate Scheme has been used by many businesses a method of boosting income by charging VAT of 20% on customer invoices and then paying a lesser % to HMRC and simply pocketing the gain. This is all changing and for many businesses it simply won’t be worthwhile operating the scheme in the future.


What is the Flat Rate Scheme?


The Flat Rate Scheme is a VAT scheme that small businesses can sign up to and the aim of the scheme is to offer small businesses a simplified and less burdensome approach to calculating and paying VAT to HMRC.


The scheme allows small business to charge 20% VAT on all invoices issued to customers and to then pay HMRC a reduced percentage of the total income received. If you are a management consultant, for example, your flat rate percentage would be 14%.


This means that on a £100 invoice you would add VAT of £20 (being 20%) and you would then receive total income of £120. You would then pay HMRC 14% of £120, being £16.80, resulting in a gain of £3.20.


These gains could add up across a 12 month period.


What is changing?


From 1 April 2017 small businesses with a low cost base will be impacted by the changes to the Flat Rate Scheme. This will affect many businesses that offer services and this could be anyone contracting, freelancing or providing consultancy services via a limited company or as a sole trader.


If you spend less than 2% of your turnover on goods (not services) per annum then you will be classed as a “limited cost trader” and you will be impacted by the changes.


Furthermore, if you spend less than £1,000 per annum on goods, regardless of your level of turnover, you will be also classed as a “limited cost trader” and you will be impacted by the changes.


If you fall into any of the above categories you will need to pay HMRC VAT at a rate of 16.5% of total income from sales (or turnover).


So if you are a management consultant, continuing on from the example proved above, you will need to pay HMRC 16.5% of the £120 you receive from your customer resulting in VAT due of £19.80, which leaves a gain of only £0.20.


As you can see from the example above the changes can result in major reduction in income and it hardly seems worthwhile operating the scheme post March 2017.


If you want to discuss any of the changes further then feel free to email one of our cheap accountants at info@cheaperaccountant.co.uk.

By Cheaper Accountant, Feb 3 2017 07:00AM

We complete the annual company accounts and associated company tax return for a number of clients throughout the year. Once completed and submitted clients then often ask us how they can actually pay the corporation tax due. Making payment is a fairly simple process and this blog post will elaborate on exactly how all limited companies can make payment to HMRC for corporation tax due.


Payment methods


As you might expect HMRC offer a number of payment methods and these are details below:


Online or Telephone Banking


You can make payment via your online or telephone banking facility to the following details:


Account Name: HMRC Cumbernauld


Sort Code: 08 32 10


Account Number: 12001039


Reference Number: This is your 17 character payslip reference for the period you’re making payment for.*


*The correct payment reference can be found at the bottom of the letter posted out to the limited company requesting a corporation tax return to be submitted. You will find a payment slip at the bottom of this letter.


*You can also locate the correct payment reference through your HMRC online account if you have registered with HMRC for Corporation Tax online. Simply click ‘View Account’ and then click ‘Accounting Period’.


Online or Telephone Banking – Overseas Bank Account


If you make a payment from an overseas bank account you will need the following details:


IBAN: GB62BARC20114770297690


BIC: BARCGB22


Online with a Debit Card or a Credit Card


You can pay online directly to HMRC by clicking on the following link: https://www.tax.service.gov.uk/pay-online/corporation-tax


To complete the payment via the HMRC online payment page you will need to enter the following:


1. Your 17 character payslip reference (as explained above)

2. The total amount of corporation tax due


Cheaper Accountant is the UK’s leading affordable accountants and we offer the completion and submission of annual company accounts and company tax return from as little as £100.

By Cheaper Accountant, Jan 17 2017 12:16AM

From time-to-time we come across clients who need to submit a replacement set of accounts to Companies House. This could be for a number of reasons, but we often find that clients rush to submit something to Companies House to avoid a penalty and then when we are engaged by such a client we find that the accounts need to be corrected and replaced. This blog hasn’t been written to criticise those who submit their own accounts as there are capable and able business owners out there. The intent of this article is to simply guide the reader through the process that needs to be followed to successfully replace the accounts lodged with Companies House. There are a couple of very specific steps that must be taken to avoid the replacement accounts being rejected by Companies House.


What do I need to file with Companies House?


All limited companies are required to submit a Confirmation Statement every 12 months on the anniversary of when the company was incorporated (or opened).


So if you opened you limited company on 31 May 2016 then your Confirmation Statement would be due 31 May 2017 and then every 12 months afterwards.


All limited companies are also required to submit company accounts to Companies House within 9 months of the end of the company accounting period or financial year. The first financial year is generally 12 months following the date of incorporation and then every 12 months afterwards.


I’ve made an error in the accounts submitted to Companies House, how do I replace these?


There may be a good reason why you need amend the accounts that have already been submitted to Companies House. To file a replacement set of accounts you will need to follow the steps below:


1. You must post the amended accounts to Companies House on paper.


2. The amended accounts must be for the same period as the original accounts that were submitted.


3. The word “Amended” must be clearly displayed on the front of the accounts to avoid them being rejected as duplicates.


4. The accounts must clearly state that they:


• replace the original accounts

• are now the statutory accounts

• are prepared as they were at the date of the original accounts


5. The amended accounts must be signed by a company director.


By following the above steps the amended or replacement accounts will be successfully filed with Companies House.


We can complete and submit your accounts for you from as little as £100 so feel free to get in touch and request a free quote should you need any help with your accounting work.

By Cheaper Accountant, Jan 16 2017 07:00AM

The deadline for all 2015-16 self assessment tax returns is quick approaching and if your return is still to be prepared and submitted we urge you to act quickly on this. The final deadline for personal self assessment tax returns to be submitted to HMRC is 31 January 2017 for the tax year ending 5 April 2016. With only a couple of weeks left in the month of January (at the time of posting this blog update) time is quickly running out. Anyone who submits their return late will face a penalty issued by HMRC and it is extremely difficult to remove this once the penalty has been issued.


Do I need to submit a self assessment tax return?


In general terms if you have received untaxed income or you have very complicated tax affairs you are very likely to need to submit a self assessment tax return.


HMRC may have already written to you requesting a self assessment tax return to submitted for the 2015-16 tax year. In this case you do need to submit a return or you are very likely to face a fine.


What if I am Director of my Limited Company?


This doesn’t mean that a tax return is compulsory and the above guidance also applies in this case. In fact there are a number of limited company directors who do not need to submit a tax return.


Take a look at one of our previous blogs here for further details: Limited Company Director: Self Assessment Tax Return Compulsory?


What happens if I submit my self assessment return late?


If you submit your self assessment tax return for the 2015-16 tax year after midnight on 31 January 2017 you will face a penalty of £100. This applies even if your return is only one day late.


This fine could then increase to £10 a day if the return is not submitted within 3 months following 31 January.


You can read more about the fines here: Self Assessment Tax Returns: Deadlines and Fines if Missed


Next steps


If you are in any doubt about whether or not you need to submit a self assessment tax return you should consult your accountant now. It is best to avoid costly fines and delays with submitting your return and if you need help with this one of our accounts will be able to complete and submit your return for you. Our prices for self assessment tax returns start at only £50 for non-complex returns.

By Cheaper Accountant, Dec 8 2016 11:20PM

VAT MOSS is an aspect of the VAT regime which applies to digital products sold within the EU. The requirements of VAT MOSS are different to the usual VAT requirements and this will be explained further below. It is important to consider the impact of VAT MOSS if you are a supplier of digital products as this scheme may result in different VAT rates being levied on your customers. Those impacted are quite often creative individuals who operate in the digital sphere and sell related products online.


What are digital products?


Digital products include the following:


1. Images or text, which can be as simple as a PDF file or a screensaver

2. Online magazines

3. The supply of a website or hosting services

4. The online maintenance of programmes and equipment

5. The supply of software and even software updates or patches

6. Online advertising


If you supply any of the above to an end-user consumer then you will be impacted by VAT MOSS.


How does VAT MOSS work?


This scheme was introduced on 1 January 2015 and it effectively means that VAT must be charged at the place of purchase rather than the place of supply. This means that the VAT rate is determined by the rate charged by the country in which your customer purchases your product. So you will have to charge your customer local VAT based on where they used the service.


This has numerous impacts for companies who sell digital products in a number of countries across the EU as each country has a different rate of VAT or local sales tax.


What do I do next?


You might already be asking yourself if you need to register for VAT in each of the EU countries you sell to, the short answer is no you don’t need to do this. HMRC offer the VAT MOSS (which stands for VAT Mini One Stop Shop) scheme so you don’t need to register in each different country. You will simply report your sales and VAT collected to VAT instead and then pay HMRC the VAT due.


It is worth noting that you will still be required to charge this local rate of VAT even if you are not registered for VAT within the UK. This means that a number of UK companies may be forced to comply with VAT rules when this was previously optional if your turnover was beneath the UK VAT registration threshold.


Sales to businesses and sales of physical or tangible products are not affected by the VAT MOSS rules.

By Cheaper Accountant, Nov 15 2016 12:23AM

It can be difficult to secure the best foreign exchange deals especially when currency rates are constantly moving and global events weigh down on the global economy increasing the rate of change within the currency market. We will here focus on getting the best value for those make regular currency transfers throughout the year and this could be for either business or personal use. Anyone who is seeking to purchase holiday currency will also benefit from the following advice.


No Fees or Zero Commission


When searching for the best currency exchange deals you should look beyond the obvious “no fees” or “zero commission” as these always contain hidden costs that impact the real rate you receive. These deals are often well below the market rate and you will lose cash compared to the best available options. This can amount to a considerable sum if you are transferring a large amount overseas such as a deposit for or down payment on a foreign property.


The High Street Bank


The second place to avoid is your high street bank. The majority of deals offered by banks do not represent value for money and offer low exchange rates when compared to the market rate. This is how the banks make large profits. There are a number of alternatives to the high street bank who offer far better exchange rates which results in more cash for you.


TransferWise


One of the best and most simple options we found when comparing a number of foreign exchange providers is TransferWise. This company offers a handy app that can be used on your smart phone and the rates offered are the best around and very hard to beat. You will find that TransferWise is very simple to use with all currency transfers completed reliably and very quickly. We like transfer wise so much that we now use this for all of our own foreign exchange transfers. TransferWise don’t send money overseas but complete transfers via a network of local bank accounts in each country which allows for very low-cost bank account transfers. These savings are then passed on to you. The exchange rate you receive could result in 10% to 15% more cash in your pocket.


MoneyCorp


Another great option is MoneyCorp who offer very competitive rates to business and personal users. The rates offered by MoneyCorp are very similar to those offered by TransferWise and this is our second choice option for the currency transfers we complete. You will need to transact all transfers either via your online account or over the telephone. An online account is fairly easy to open although slightly more onerous than using the app provided by TransferWise.


Other Options


If you are more concerned about speed and need money to reach an overseas destination instantly you may want to consider Western Union, MoneyGram or even PayPal. These services are more expensive and you won’t receive a market leading exchange rate but they could be useful for low value currency transfers. PayPal was in fact the most expensive option that we could find so we would certainly advise against using PayPal to transfer money overseas and only use this as a last option.

By Cheaper Accountant, Oct 17 2016 07:00AM

A popular tax saving income extraction strategy is to pay yourself, in your capacity as the director and shareholder of the limited company, a low salary from the company and then to pay dividends on top of this. This still remains the most tax efficient method of releasing income and in indeed paying yourself from your limited company. The blog post How Much to Pay from Limited Company explains this option in more detail and we won’t repeat this again here. Instead we will focus on what this strategy means for graduates who have a student loan to repay.


Salary and dividend payments


The above strategy to pay yourself from your limited company is a great way to save tax due to the savings in employee and employer national insurance payments. If you were to pay yourself a full salary via PAYE you will pay substantially more in income tax and NI payments when compared to paying yourself a low salary and then taking dividend income on top of this. The new dividend tax does increase the tax take associated with this slightly but do not overlook this option as it remains the best option for the vast majority of limited company owners.


What about my student loan?


There seems to be a misconception amongst a number of people that student loan repayments will not be due on salary income below the student repayment threshold. This is only partly true. Yes, if you have a low salary and no other income then you are unlikely to need to make any repayments towards your student loan balance. However, dividends are in fact counted as income when you are assessed against the student loan repayment threshold. This means that if your combined income (salary plus dividends received) exceeds the repayment threshold you will need to make repayments towards your student loan.


Always factor in your student loan when making decisions about extracting income from a limited company to avoid any surprises when you lodge your Self Assessment Tax Return.


Is this still a viable strategy for paying myself?


Yes, the above strategy for paying yourself from your limited company is still a low tax option for anyone with a student loan. The fact that you have a student loan doesn’t change the strategy per se but it does mean that you need to keep aside some cash to pay the student loan repayment sum after lodging your self assessment tax return. The HMRC tables found here will give you an idea of how much cash to save each month.


Take a look at the blog post linked to within the first paragraph to read more information on how to execute this income strategy during the 2016/17 tax year.