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Buying an Art invesment through a company

If the artwork is kept at their home there will be a taxable benefit in kind, which needs to be declared on the annual form P11D.
Say the artwork cost £30,000:
Your client will pay income tax on 20% x £30,000 = £6,000 at their marginal rate, each year. The company must also pay class 1A NICs of 13.8% x £6,000 = £828 per year.

If the artwork is to be kept in a bank vault as a pure investment, there won’t be a benefit in kind charge for you. However, the business must pay the insurance and storage costs, for which there will be no tax deduction. There is also no tax deduction for the cost of buying the artwork as it is not an item used for the business.

If the company closes, any creditors will be able to access the value of that art, just as if it was cash. If the business is solvent when it closes holding significant investments, it may not qualify for entrepreneurs’ relief, which would otherwise reduce the tax you pay on any gain made on the liquidated asset of the company down to 10%.

Are you employing staff for the first time

There are 6 things you need to do when employing staff for the first time.

  1. Decide how much to pay someone – you must pay your employee at least the National Minimum Wage.
  2. Check if someone has the legal right to work in the UK. You may have to do other employment checks as well.
  3. Apply for a DBS check (formerly known as a CRB check) if you work in a field that requires one, eg with vulnerable people or security.
  4. Get employment insurance – you need employers’ liability insurance as soon as you become an employer.
  5. Send details of the job (including terms and conditions) in writing to your employee. You need to give your employee a written statement of employment if you’re employing someone for more than 1 month.
  6. Tell HM Revenue and Customs (HMRC) by registering as an employer – you can do this up to 4 weeks before you pay your new staff.

Business rates relief

There are a number of reliefs available to owners or tenants of smaller business premises. This article lists a number that can be claimed.
Small business rate relief:
You’ll get 100% relief (doubled from the usual rate of 50%) until 31 March 2015 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.
The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
Retail relief:
Some local councils will give you up to £1,000 off your business rates if you occupy a retail property with a rateable value of £50,000 or less. To be eligible the property must mainly be used as a shop, restaurant, cafe or drinking establishment.
You’re usually not eligible if your business provides financial services, medical services or professional services like legal advice or accounting.
Empty properties re-occupation relief
You may get 50% off your business rates if you start occupying a retail premises that’s been empty for one year or more.
Rural rate relief:
You may qualify for the rural rate relief if your business is in a rural area with a population below 3,000. The relief is between 50% and 100% off your business rates.
You can get rural rate relief if your business is:
  • the only village shop or post office with a rateable value of up to £8,500
  • the only public house or petrol station with a rateable value of up to £12,500
Local councils can also:
  • top up the mandatory 50% relief to 100%
  • give relief to other rural retail businesses of up to 100% (for properties with a rateable value under £16,500)
The availability of the various reliefs will depend where you business is based. If you think you may qualify for any of the rates relief discuss your options with your local council.

Wear & Tear Allowance (WTA)

f a property is let furnished – with sufficient furniture, furnishings and equipment for normal residential use – landlords can only claim tax relief for the furniture and equipment by way of the WTA. Prior to April 2013, landlords had the option of claiming the cost of replacement furniture instead.
The WTA is calculated as 10% of the gross rents less any tenant’s costs (e.g. water rates and council tax) met by the landlord.
WTA does not cover repairs, which continue to be tax deductible. The question is then raised can replacement of an item be counted as a repair? In this respect, landlords that let furnished property need to distinguish between:
  1. Replacement of items that are integral to the building, and
  2. Replacement of items that are not integral to the building.
Needless to say there are grey areas!
Replacement of items that are integral to the building
Fixtures integral to the building are those that are not normally removed by either tenant or owner if the property is vacated or sold. Examples include:
  • Baths
  • Washbasins
  • Toilets
  • Immersion heaters
  • Fitted kitchens and fitted white goods.
This list is not intended to be complete but gives an idea of the assets that are integral to the building and fall outside the wear and tear allowance. As these items are integral to the building, the cost of replacing these items is normally an allowable expense as a repair to the building.
Replacement of items that are not integral to the building.
Expenditure of this type will be covered by the WTA. Examples given on HMRC’s website in this category include:
  • movable furniture or furnishings, such as beds or suites,
  • televisions,
  • fridges and freezers,
  • carpets and floor-coverings,
  • curtains,
  • linen,
  • crockery or cutlery,
  • beds and other furniture
Unfortunately, these examples are not definitive: is a carpet glued to the floor a permanent fixture, or not part of the integral features?

HMRC delays RTI penalties

From 6 October 2014, HMRC was due to include smaller employers in the penalty regime for late filing of Real Time Information (RTI) payroll returns for 2014-15.
HMRC have announced that this penalty process will be delayed for a number of smaller employers.
They will now start from:
  • 6 October 2014 for employers with 50 or more employees
  • 6 March 2015 for employers with fewer than 50 employees
The size of the late filing penalties depends on the number of employees within the PAYE scheme.
Number of employees   Penalty per PAYE scheme
1 to 9 £100
10 to 49 £200
50 to 249 £300
250 or more £400
HMRC will use the latest information available to determine the number of employees, and the size of the filing penalty for each period where a return is late.

Cloud Bookkeeper Joins Bookkeepers network

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You now find Cloud Bookkeeper in the bookkeepers network diectory as a recommended bookkeeper,

National Minimum Wage

The National Minimum Wage rates

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. Find out what the current rates are and where to get help if you think you are being paid below the minimum wage rate.

New NMW rates from 1 October 2014

The following rates will apply from 1 October 2014:

  • £6.50 – the main rate for workers aged 21 and over
  • £5.13 – the 18-20 rate
  • £3.79 – the 16-17 rate for workers above school leaving age but under 18
  • £2.73 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship

Current NMW rates

There are different levels of NMW, depending on your age and whether you are an apprentice. The current rates are:

  • £6.31 – the main rate for workers aged 21 and over
  • £5.03 – the 18-20 rate
  • £3.72 – the 16-17 rate for workers above school leaving age but under 18
  • £2.68 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship

Claiming costs on a rental property

For periods before 6 April 2013 HMRC permitted a deduction for the cost of renewing carpets, curtains and white goods in all let residential properties on a concessionary basis. That concession was withdrawn with effect from 6 April 2013. The new rules now state that a wear and tear allowance (10% of the net rents) that covers furnishings and similar items, can only be claimed for fully furnished properties.

Your clients properties don’t count as fully furnished, even though they contain some white goods and carpets. HMRC will not accept claims for the cost of free-standing white goods in unfurnished residential properties. It will allow a deduction for the cost of replacing fixtures such as baths, toilets, integrated fitted ovens and hobs, as those costs can be classified as repairs. If your client replaces part of the fitted carpet they could claim that as a repair, but not the cost of putting new carpet down in the entire property.

Claiming travel costs

The first rule is that the cost of ordinary commuting cannot be claimed. This is defined as travel to a permanent workplace, which is somewhere attended regularly to perform the duties of the employment. Travel costs to a temporary workplace can be claimed, but the conditions that make a workplace ‘temporary’ must be met.

A place is not a temporary workplace if the employee attends for a continuous period of more than 24 months, or the attendance is expected to last more than 24 months. If your PSC takes on a contract that is expected to last say 36 months at one location, you can’t claim travel costs to that location, as your workplace is not a temporary workplace from the start of the contract.

Another definition of ‘temporary workplace’ is one which the worker attends to perform a task of limited duration or for some other temporary purpose. HMRC has a rule of thumb that if the worker is attending a place for 40% or more of his working time, that is a permanent workplace and travel costs to the location can’t be claimed.

If you work at your client’s office for say 15 hours per week out of a 40 hour normal working week, your client’s office is a temporary location even if the contract exceeds 24 months. Please discuss the matter of travel expenses with us before you take on a long contract, as the deductibility of the travel costs may tip the balance on whether the contract is worthwhile.

9 out of 10 Accountants See Benefits of Online Software

The Chartered Institute of Management Accountants (CIMA) recently conducted some research in the first half of July 2014 to try to determine what accountant practice attitudes were towards cloud-based accountancy software.

These findings will help to inform the agenda for a scheduled panel debate set to take place in October. 260 people took part in the survey which was conducted online.

With around 40 per cent of accountancy practices already using either Sage One or a cloud-based solution, there is a real awareness of the opportunities and benefits it brings. Out of the remaining two thirds of practitioners who have not yet made the transition to cloud, 8 out of 10 were aware of how online software would benefit their role.

Overall, a majority of 90 per cent believed that adopting a more ‘mobile working’ approach and utilising real time data would offer real advantages. The benefits cited are listed as:

  • Having improved data security
  • Option to move to subscription licensing and scalability
  • Automation
  • Lower costs for both hardware and software
  • Better working relationships with clients
  • Greater IT infrastructure control
  • Improved efficiency
  • The ability to work with ‘live’ real time data
  • The opportunity to work form various different locations

Just under half of respondents identified several different areas where they thought they could gain from expert guidance. These included:

  • Saving costs with cloud best practices
  • Managing security
  • Driving efficiency through the cloud
  • Driving profitability through business growth
  • Marketing to clients and potential clients
  • Migrating clients over to online solutions
  • Managing mobility

There are still quite a significant number (68 per cent) holding back with regard to switching over to a more online way of working, as they want to see some of the following options to be either improved or made available. These are:

  1. Management information solutions such as expert guidance on compliance and legislative issue
  2. Complex reporting solutions
  3. Final accounts solutions

Lastly, for all the recent touting of how more modern methods of communication are the way forward such as web chat and video calling, the perennially popular email is still the most preferred method of communication, favoured by 39 per cent. This is followed by the telephone at 22 per cent. It looks as if these more traditional ways of keeping in touch with clients are here to stay for a good while yet!

These findings make it clear that although there is a lot of interest in cloud-based software, and that most accountants are aware of the advantages it can offer, accountants still need to be assured that significant efficiencies can be gained and that their data is safe and secure