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By Cheaper Accountant, Mar 27 2020 06:28AM

We added a blog earlier this week to provide details of three of the key Government support packages for businesses facing difficulties caused by the Covid-19 coronavirus. This outlined the support arrangements for those employees who employed via PAYE and what employers needs to do to claim the 80% Government wages grant. A lot of questions have been asked about the Self Employed and what support they will be able to access. There was initially little on offer when the initial support measures were announced. However, the Government has now announced further measures for the Self Employed and this blog post will outline what support is available and what this means for those who are Self Employed.


The details on all of the Government support measures may still evolve as the finer details are worked through. HMRC are still in the process of implementing systems and processes to facilitate all of these measures.


Who qualifies for this support?


HMRC have indicated that those individuals who are Self Employed or a Member of a Partnership will be able to access this support scheme.


In addition to the above the following criteria will apply:


1. You must have filed a personal Self-Assessment Tax Return for the tax year 2018/19.


2. You must have traded during the 2019/20 tax year.


3. You must be trading when you apply for this Government support or would be trading had it not been for Covid-19.


4. You must intend to trade during the tax year 2020/21.


5. You must have actually lost trading profits due to Covid-19.


There is a final test that must also be satisfied.


Your trading profits from your Self-Employment business activities must be less than £50,000.


More than half of your total income must also be from your Self-Employment business activities.


HMRC will apply this final test to:


- The 2018/19 tax year alone.


- The average trading profits for the tax years 2016/17, 2017/18 and 2018/19.


The average here will simply be the total income for the three tax years divided by 3.


If you started trading between 2016 and 2019 then only the tax years where a self-assessment tax return was submitted to HMRC with Self-Employment trading activity will be used in the above calculation.



How much money will I receive?


HMRC will pay a taxable grant of 80% of the average profits from the following three tax years (where applicable):


i. 2016/2017


ii. 2017/2018


iii. 2018/2019


HMRC will simply take the self-employed trading profit for each of the three years, total these, and then divide by three.


For example:


2016/2017 self-employed trading profit = £5,000


2017/18 self-employed trading profit = £10,000


2018/19 self-employed trading profit = £15,000


Total of the above = £30,000.


Average = £10,000


The above yearly average will then be used to calculate a monthly value. We are assuming that this is likely to be simply 1/12 of the average annual trading profit (the initial HMRC guidance isn't clear on this).


Assuming this is correct the Government Grant payable (for three-month period) in the example above would be £10,000 x 3/12 = £2,500 x 80% = £2,000.


This will then be automatically paid to the individual by HMRC at the start of June at the earliest. One payment will be made for the three months in question.


You must note that this is capped at a maximum grant payment of £2,500 per month for a period of three months.



How do I apply for this grant?


HMRC have indicated that they will review the data that they hold for all Self-Employed individuals and they will decide if an individual is eligible for the scheme and then write to the individual inviting them to apply for the Government grant online.


HMRC have stated that Self-Employed individuals do not need to call HMRC. They have commented that this will simply slow them down further and delay them from completing the urgent work needed to implement the above grant scheme.


Once the application has been competed HMRC will contact you to inform you of how much cash you will receive and when this will be paid.



We do hope that all clients remain well and healthy during these testing times. We are always here to help and support all clients in any way we can.

By Cheaper Accountant, Mar 24 2020 06:24AM

The UK Government has recently announced a number of measures that are aimed at supporting small businesses during the current Coronavirus, or Covid-19, crises. Many of the finer details are yet to be released at the time of writing this blog update as things are changing here on an almost daily basis. We have received a large volume of questions from clients relating to what Government support they can access and how to access these cash payments.


The virus has certainly impacted the daily lives of millions of people around the world and the spread of the virus appears to be far from over. This is likely to lead to one of the most challenging and testing times many of us have experienced during our lives as our daily routine changes beyond all normal recognition. As isolation becomes the new norm for most people across to the UK the Government has pledged financial support to businesses expected to amount to £350 billion. This is a significant contribution towards helping some of the financial difficulties that people will inevitably face but there are already many people asking if this will be enough. I suspect that people’s lives may well change quite considerably and many of us may have to learn to live with less, hopefully only for the short term.


Before I get into some of the specifics, I first wanted to express my hope and wishes that all clients, their family members and loved ones remain fit and well and my heart goes out to anyone who has or is suffering some of the more significant outcomes resulting from this virus. The Cheaper Accountant team are here to help you in any way we can and will endeavour to keep responding to all client questions and queries as quickly and efficiently as possible during this difficult time.


I’ll now present initial details (which are subject to change and further clarification by the Government) on three of the measures that may benefit our clients.



1. Wage Cost Support


HMRC will be tasked with reimbursing 80% of what they are calling “furloughed” employees. This basically means all employees that a company cannot afford to pay the wages for due to the coronavirus.


These employees are those who have been asked to stop working but have not been made redundant.


The employers in this scenario will be able to access Government funds to cover part of the regular monthly salary cost to prevent these employees from being made redundant.


How does the Wage Scheme Work?


The employer and employee will need to discuss and agree to the employee being classified as a furloughed worker. The employee will then remain on the employer’s payroll, rather than being terminated.


We believe that no work can be undertaken for the employer during the furloughed term in order to qualify for Government assistance.


The employer will then be able to claim a grant of up to 80% of the salary cost up to a cap of £2,500 a month.


The scheme will initially be operated for a period of three months.


What should an employer do?


An employer will need to categorise all impacted employees as furloughed workers and then inform the impacted employees of this change. The aim will be to seek agreement from the employee.


We are currently expecting that an online submission will then need to be made to HMRC to notify them of all furloughed employees to ensure eligibility and to facilitate the grant payment.


HMRC are currently implementing the systems and processes that are required to allow the scheme to operate as at the present the functionality simply doesn’t exist.


Early indications were that the first payments would be made during late April but backdated to 1 March.



2. VAT Payment Deferral


The Government has granted a three-month deferral for VAT payments until the end of June for all UK businesses. This means that no VAT payments will need to be made during the period 20 March 2020 through to 30 June 2020.


This will be applied automatically, and companies will not be required to apply to benefit from the above deferral.


The tax liability will need to be paid later down the line and will not be extinguished by the Government. The Government has indicated that liabilities accruing during this period will need to be paid by the end of 2020 or possibly even as late as the first quarter of 2021.


All VAT reclaims and refunds will be processed as normal.



3. Income Tax Payment Deferral


The Government has announced that all payments due on 31 July 2020 will be deferred until 31 January 2021. With no interest or penalties being applied during the deferral period.


This will again be applied automatically, and individuals will not be required to apply to benefit from the above deferral.


This applies to any person who is self-employed.



Feel free to contact us via emailing info@cheaperaccountant.co.uk if you need any further clarification on any of the above three support packages.

By Cheaper Accountant, Feb 24 2020 08:00AM

We are often asked about the company tax returns (CT600’s) that are needed during the first year of operating a limited company. This is often due to HMRC writing to a limited company and formally requesting for a company tax return to be filed for two different and separate periods of time. This blog post will explain why and when two returns are required to be prepared and filed with HMRC as well as the implications for the Annual Company Accounts.


What is a CT600 / Company Tax Return


The term CT600 is the name of the HMRC form that is used to file a company tax return for the purposes of declaring the corporation tax due on limited company profits.


The form CT600 is one element of the company tax return. A full company tax return comprises the following elements:


1. Form CT600

2. The Company Accounts

3. Tax Computations

4. Any supplementary pages


It is a requirement for all limited companies to file a properly completed for CT600, the computations showing how the figures in the return have been derived from the relevant contents of the company accounts, a copy of the Full Company Accounts.


Filing a Company Tax Return with HMRC


Since 2011 it has been compulsory for all companies to file the company tax return with HMRC online and this must be completed using the iXBRL computer language. This allows HMRC to receive one file containing the CT600, the corporation tax computations and the company accounts.


A qualified accountant will often use industry specific accountant software that is designed to complete this task. Furthermore, this professional accountant software is usually linked to the accountant’s HMRC agent account allowing the accountant to submit the company tax return to HMRC on your behalf. The accountant will generally only need your company’s UTR to complete this submission.


Why file Two Company Tax Returns (CT600s) following the first year?


When a new company is created this is can be on any day of any month but the filing date of the first set of accounts will be automatically set to end of the month 12 months later. This more often than not results in the first set of Company Accounts spanning more than 12 months in total, if even for only a few days.


A company tax return (CT600) can only be prepared for a maximum of 12 months. This is why two tax returns are required to be submitted to HMRC during the first year of operating a limited company.


For example, if you created your limited company on 13 September 2019 then the first company accounting period will end on 30 September 2020. This means that the first set of company accounts will be prepared for the period 13 September 2019 to 30 September 2020.


In the above example, two Company Tax Returns will be required as follows:


1. 13 September 2019 to 12 September 2020

2. 13 September 2020 to 30 September 2020


Do I need to complete Two set of Company Accounts?


The good news here is that only one set of company accounts spanning the full period (of slightly more than 12 months) is needed. The one set of accounts are filed with Companies House and in turn these one set of accounts form the starting point or the basis of the two company tax returns.


An accountant when preparing the CT600 element of the company tax return and the corporation tax computations will simply apportion the relevant figures between the long and short periods. The first return will be for the first 12 months and the second return will be for the rest of the period.


Overall the same amount of corporation tax will be due.


What about paying the Corporation Tax due?


When paying the corporation tax due for the period it is advisable to pay this as two separate amounts for the two separate periods. You do need your HMRC payslip reference to be able to make these payments. HMRC will post out two letters with a formal request to file a company tax return and you can find the required payslip references at the bottom of these letters. Another option is to complete the full agent authorisation process for corporation tax and then your accountant will be able to access the payslip references via the online HMRC account.


If you make the full payment for both period amounts against one payslip reference only, HMRC are likely to post a cheque refund to your company as they will assume that this in an overpayment. This means that you will need to bank this cheque and then make a further payment to HMRC. Getting the two payments right the first time round will avoid you needing to take this further action.


What happens if I miss one of the company tax returns or file it late?


If you do miss a company tax return or file it late you will receive an initial fine of £100 but this will increase over time depending on how late the return is. HMRC will also charge interest on any overdue corporation tax that remains unpaid.



If you are unsure of your filing obligations or need help from a qualified and affordable accountant then feel free to send an email to info@cheaperaccountant.co.uk

By Cheaper Accountant, Feb 13 2020 07:00AM

We are often asked by clients for what length of time they should keep on file their main accounting records for their limited company so we thought we would prepare a short blog update to address and answer this question. This narrative will explain what is meant by the term accounting records and then go on to confirm how long these records should be held for.


Accounting Records


It is a legal requirement for all limited company directors to maintain sufficient company and accounting records. A director must maintain certain records about the company itself in addition to financial records.


Some typical examples of company records are the forms that are required to be filed with Companies House, such as the Confirmation Statement, including the PSC register and shareholder listings.


Typically, your accounting records will include records of:


1. Money spend by the company, such as receipts.

2. Money received by the company, such as invoices and till rolls.

3. Other items such as company bank account statements.


How should I keep these records?


Generally speaking, you will need to retain the above accounting records for a period of 6 years from the end of the last company financial year.


This is why we often advise clients to keep these records on file for 7 years just in case. If you are towards the end of an accounting period then some of your accounting records will be closer to being 7 years old than a straight six years.


What happens if I don’t keep any accounting records?


To put it in simple terms, you can be fined £3,000 by HMRC or be disqualified as a company director.

By Cheaper Accountant, Jan 13 2020 07:00AM

The deadline for filing an individual’s Self Assessment Tax Return is fast upon us. The final deadline date that must be met to avoid a fine being issued is 31 January 2020 so there are only a couple of weeks remaining.


If you are registered for Self Assessment with HMRC then you must act now.


Extended hours during this period


We have extended our working hours during this period as we are committed to meeting the filing deadline for all clients, both new and old. If you are new client then feel free to send an email to us at info@cheaperaccountant.co.uk as there is still time for us to complete and file your personal Self Assessment Tax Return.


We will be working double our usual hours to ensure that all work is completed up until 31 January. The best part is that our fee for a basic self assessment tax return remains a low £50. We believe that this represents exceptional value for all of our clients.


So, make sure that you have your personal UTR and P45’s/P60 to hand as well other a few other items that we will ask for.


What happens if my Self Assessment Tax Return is submitted late?


If your self assessment tax return is submitted one second after midnight on 31 January you will be fined £100 by HMRC. We don’t want anyone to wake up to this reality during February as it’s simply not worth paying a fine.


What’s worse is that the fine increases if the tax return isn’t filed within three months following the 31 January deadline.


If you have attempted to complete your Self Assessment Tax Return but have reached your wits’ end half way through or simply need help to complete the return, then please get in touch now. Send an email to info@cheaperaccountant.co.uk and you will receive a quick response outlining the information we need and the fee you will be charged should you wish to proceed.


Let’s all have a great start to 2020!

By Cheaper Accountant, Nov 1 2019 07:00AM

It can be very tempting to spend money from your company on entertainment expenses such as dinner or drinks with clients, but the big question is does this qualify as a tax reducing expense. This blog post will address this in detail and clarify where you can gain a tax benefit.


To begin the discussion, it is worthwhile clarifying the entertainment expenses are not usually tax deductible within the UK. This means that any expenditure on entertaining that is put through the company will not qualify as a tax reducing expense and will not reduce the company profit that corporation tax is calculated on. So, in essence there will be no benefit to you from putting such expenses through your limited company, for example.


However, as with many other aspects of taxation this is not always the case and it’s not as clear cut as this. If an event is for staff only then there are circumstances where the expenditure can be classed as an employee reward, rather than entertainment, and then qualify as tax deductible expenditure.


What is Tax Deductible?


A Christmas party is a great example of this type of expenditure that can be classified as an employee reward rather than entertaining. The costs are exactly the same in nature in reality (dinner and drinks, for example) but under these circumstances they are now tax deductible.


However, the following guidance should be noted:


1. The total spend per head must not exceed £150.

2. This cannot include the entertaining of clients.

3. If there are staff and clients at the event, then only the staff related proportion of the total costs will be tax deductible.


What about VAT?


The rules here follow a similar theme and you can’t generally include entertainment expenses on your VAT return.


You may be able to add the costs of providing staff rewards and incentives such as the example provided above.


If you have any questions about tax deductions, then contact one of our cheap accountants who will be happy to provide you with further advice and guidance.

By Cheaper Accountant, Oct 29 2019 07:00AM

To begin with a micro-entity is basically a very small company. This is defined as a company with an annual turnover of no more than £632,000 and a balance sheet total of no more than £316,000. In addition to this the company must have a maximum of ten employees or less. Well, when I say must …. only two of the three criteria need to be met to qualify as a micro-entity.


The UK Government appreciates that in the majority of instances micro companies are owner-managed and do not have a separate shareholder and management relationship when it comes to communicating the company’s financial performance. As such it stands to reason that the burden of preparing a comprehensive set of accounts may be unsuitable and considered disproportionate when compared to other larger companies.


This is exactly why the micro-entity regime began. This new company classification aims to reduce the time and cost of meeting company statutory reporting requirements by:


1. Allowing a far more simplified format of company accounts, containing fewer elements;

2. Simplifying the accounting standards that should be applied.


So, as we mention in point 1 above micro-entity accounts are a far more simplified format of accounts that contain far less information. These are in simple terms a summarised balance sheet only. The full contents of micro-entity accounts are:


• Simple balance sheet and footnotes;

• Signature of a director and name printed at the bottom of the balance sheet;

• Statement on the balance sheet above the director’s signature that the accounts have been prepared in accordance with the micro-entity provisions.


What are the main benefits of micro-entity accounts?


• Highly simplified presentation of the balance sheet with very little detail required.

• No requirement to file a profit and loss account for the public record.

• No requirements to file an auditor’s report.

With less disclosure required for the public record, less company information will be available to competitors.


Should you need any further help or guidance with your company statutory accounts then feel free to email one of our cheap accountants who will be very happy to assist you with all your accounting needs.

By Cheaper Accountant, Sep 17 2019 07:00AM

If you are the director of a limited company and you work from home, as a lot of our clients do, you should consider renting a room to your limited company. This is fairly straight forward to set up and the rent paid by the company can be used to reduce any taxable company profits and in turn reduce your corporation tax bill.


Things to consider


1. You will need to create a valid rental agreement to support this arrangement.

2. You will need to calculate a suitable rent to be paid by the limited company.


What about personal taxes on the rental income I receive?


When the rent that is charged to the company is calculated you need to remember that the rent charged should be equal to the cost of the room to you. This way the rental income that you receive will be equal to the cost of the room and as such there is no taxable gain.


You will need to remember to disclose the rental income received and the associated costs on your self-assessment tax return but no income tax will be due.


Who can do this?


The best part to all of this is that you can operate this arrangement if you rent your home or if you own your home, so no one is excluded. The rental calculations will be slightly different as the rent you pay to your landlord will need to be considered if you rent your home vs the mortgage interest you pay if you are a homeowner.



If you are interested in setting up an arrangement like this then feel free to contact one of our cheap accountants who will be able to advise you further and calculate an appropriate rental charge for you as well as drawing up a rental agreement to support the arrangement. It’s also worthwhile noting that the professional advice and guidance you need to enter into a transaction like this is provided free of charge to all of our paying clients.

By Cheaper Accountant, Sep 6 2019 07:18AM

It may be tempting to simply not register for Child Benefit if you are a high earner due to the High-Income Child Benefit Charge (HICBC) which can result in the full amount of child benefit for the year being repaid when your self-assessment tax return is filed. Makes sense. However, you could be missing out on a subtle benefit that not many people will be aware of. Let me explain further below.


The repayment mechanism that was introduced by the Government some years ago now as part of the "Austerity" reforms is applied when the parent claiming child benefit, or their partner, earns more than £50,000 a year. The repayment rate increases from above £50,000 all the way up to £60,000. At an income of £60,000 the charge (or repayment) is equal to 100% of the child benefit received.


If you are a parent earning more than £60,000 a year the temptation may be to simply not to make a claim for the child benefit, since this will need to be repaid in full.


However, what not everyone realises is that a claim for child benefit also confers state pension rights. A parent who claims and is registered for child benefit relating to a child under the age of 12 will automatically receive Class 3 National Insurance credits. These National Insurance credits provide a qualifying year for state pension purposes of up to 12 years.


An individual needs 35 qualifying years for the full single-tier state pension and at least 10 qualifying years for a reduced state pension. Now you can see the appeal here!


Failing to register for child benefit can mean missing out on an automatic entitlement to 12 qualifying years towards the state pension. This could be a huge miss if the parent is a stay-at-home parent or even working part time. This is a strong chance that not enough NI contributions would have been paid through employment to make it a qualifying year.


Don't worry about having to repay the child benefit if you do earn more than £60,000. You can simply call HMRC and elect not to receive it; this is very different to not claiming it.


You can also backdate a claim for child benefit by up to three months. So if you are in this position you should claim without delay.

By Cheaper Accountant, Apr 1 2019 07:00AM

As we enter the 2019/20 tax year, which begins on 6 April 2019, the strategy of paying yourself a low salary from your limited company topped up with dividends remains as important as ever when seeking to minimise the tax take on your income. In fact, this strategy remains the lowest tax option. So the strategy to pay yourself remains the same but this blog article will explain how much you can pay yourself without incurring any income tax and national insurance charges.


The good news is that the monthly sum that we recommend you pay yourself has increased to £715 a month (up from £702 a month during 2018-19) which results in an annual director’s salary of £8,580. You should then pay yourself dividends on top of this low level of salary.


At this level of salary you won’t have to pay employer or employee national insurance contributions and no income tax will be due to be paid to HMRC on the wage you receive. The dividends you receive will be subject to dividend tax but a tax-free dividend allowance of £2,000 will apply during 2019-20.


The total director salary of £8,580 is less than the personal allowance (£12,500) for the 2019-20 tax year but don’t be tempted to pay yourself up to the personal allowance as you will then end up paying more tax.


If you pay up to the personal allowance you will be liable to pay national insurance contributions that can be avoided at the £8,580 salary level.


The lowest tax option is to simply pay yourself dividends instead to use up the remainder of your personal allowance and then use the dividend tax free allowance. This means that you can receive a total of £14,500 tax free (personal allowance plus the dividend allowance).