Do you have a second income as well as being employed?
It is quite common now-a-days to be employed in a PAYE job, but also to work for yourself, often not just for the money sake but due to the skills you have being in demand. However, people often don’t think they need to declare this income as part of their annual earning for tax to HMRC. And that’s where they are wrong.
So you want to start a limited company?
Are you really sure? Do you know why you want to have a limited company? Do you know the tax implications of a limited company? Are you a highly organised person and slightly schizophrenic to be able to split yourself from the company financially and operationally?
Yes, there MAY be tax advantages to being a company depending on the income/profit level of the company, but there are thresholds of effectiveness and subsequent budgets may change it. If being a company is marginal for tax purposes at the moment, then it is not a good enough reason. Limited liability may come into play; a divorce on the cards and want to limit access to funds; or just for the kudos of being a company. Some bigger companies only want to trade with other companies as the perception of being a company is better than being a sole trader. BUT, you have to be ready for it or have people around you that can deal with all the accounting and admin headaches.
Several months ago I wrote a blog about the Marriage Allowance transfer ability – where one person can transfer £1060 of their personal allowance to their spouse. You were able to sign up for it via the HMRC website which made it a permanent election until revoked. As accountants, we heard nothing more after that.
It is now time to start submitting you 2015/2016 tax return. The election to transfer the £1060 can be made at this time if you are one of the “lucky” millions of people that need to complete a return.
Bursary, Scholarship & Prize Money for Musicians & Performers
This is a topic that I have been asked about this year on my tour round music & drama colleges, so I thought it would seem appropriate to jot down a few lines.
At some stage in your musical or performing career, you may be lucky enough to be awarded a bursary, scholarship or win performing prize money. But are you sure you understand the tax implications of these?
Bursaries and scholarships are usually tax-exempt provided the person is in full-time education at a recognised university, technical college or similar education establishments that are open to the public at large and offer a range of courses – both practical & academic. This is part of S331 of the Income & Corporation Tax Act 1988.
Oh – such a fun topic this is – I am sure you will be riveted to your computer screen.
Flat Rate
Using the standard rate scheme, you need to record the vat on every purchase and every sale that is made in the business. However, a flat rate scheme allows you to just account for the VAT on the taxable supplies you make and not make a return for the VAT you have incurred. A lower amount is remitted to HMRC which takes into account VAT you may have suffered.
Back in April 2013, the government withdrew the allowance for renewals of furnishings in rental properties, so only the 10% wear & tear allowance was available for furnished property rentals.
The summer budget of 2015, the government announced that from April 2016, the 10% wear & tear allowance was being scrapped and replaced with a new “replacement allowance”. As an overview, the new allowance enables all landlords of residential lettings to deduct the costs incurred on replacing furnishings in that property. It applies to landlords of unfurnished, fully furnished and part furnished property but not to furnished holiday lets or commercial property.
VAT is an amount charged on most goods and services that are purchased in the UK and equivalent in Europe. A business registered for VAT will charge it on to other business and consumers in the UK. The good thing is that VAT registered business are able to recharge the amount of VAT that has been charged to them. The bad thing is that non-vat registered business and consumers are not able to claim back the VAT. Effectively it is a sale of good tax to consumers.
Let’s set the scene. You have children under 16 and they take time away from your business day with having to keep them “entertained/occupied” and dealing with their day to day needs. The time you spend with them means less time working which helps with the care of your children. So what do you do? I know, you can get a nanny, au pair, put them in after school clubs and get other people to do as much as possible so giving you back your time. (You can tell I don’t have children.)
Of course these costs must be tax allowable because if you don’t have childcare provision, then you can’t work so much, and if you can’t work so much then you are not earning the money to pay tax to the government? Aren’t they?
This subject seems to be one that many clients ask. Self-employed people mainly base their work place at home although work may take place at customer locations. This can be many trades & professions from plumbers, accountants, chiropractors, computer technicians etc. It also covers freelance musicians, actors and other performers.
As you visit customer sites, it would be reasonable to be able to charge to your business the cost of getting to the customer locations. But, there is a little bit of an issue if when you walk in after being at customer locations, your trading activity stops as you get home. If no work was done at home, it implies that home is not the true base of your business. You need to make sure that business happens in the home such as writing up proposals, quotations, invoices, research etc.
This is the second post in a series of VAT related blog posts. I do pick the most interesting of subjects. It is all to do with postage.
Most accountants and bookkeepers will tell you that postage is exempt from VAT – and that is perfectly true. The basic position is that posting letters and parcels via the Royal Mail (post office to you and me) are exempt from VAT. Happy days. BUT, as you would expect, it has it’s complications for businesses and it is often an area that VAT inspectors look at if you post/courier items.
