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Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

 

Managing in Uncertain Times

Due to Brexit, 2019 looks set to be a year filled with uncertainty for businesses.

 

The future is always unknown but this year managers will need to navigate some particularly choppy waters due to market uncertainty and global political turmoil.

 

Focus on what you can control

As a manager you can always control your response, attitude, behaviour, actions and words. You can choose to be proactive and inquisitive rather than paralysed. In times of uncertainty, the best managers step up and embrace their authority. When times are uncertain, your team wants you to lead the way. Bring your team with you on the journey, ask them for their opinion, include them in your planning conversations and challenge them to come up with new solutions.

 

Cash is king

In uncertain times, the old adage that “cash is king” carries even more weight. Cash is the lifeblood of your business and poor cash flow management kills businesses during tough economic times. Market volatility also creates opportunities. If you have cash or credit available to take advantage of these opportunities when they present themselves, you may be able to move quickly and move your business forward. As such, good cash flow management can allow you to cash in.

 

Embrace change and adapt

As your particular market changes, there will be opportunities for you to adapt. For example, if your customers have less budget to spend on buying products and services in your sector, it might be an opportunity for you to introduce a lower priced “value offering.” You could even go one step further and change your pricing model. For example, you could move clients to monthly retainers rather than charging a once-off annual fee.

 

Diversify

If you depend on one big client to keep your business going, you should consider how to diversify your client base. Sometimes even giant businesses fail during tough times. If your biggest client goes out of business, you don’t want to be collateral damage. Just like in investing, the key is to have a diversified portfolio. Now could be a good time to look at trying to win some new clients in order to make your business more resilient.

 

Things to stop doing in 2019

 

Many of us will have made a new year’s resolution for 2019. Perhaps we want to learn a new language, get in shape or spend more time with our family. The start of a new year is also a good time to decide what you’re not going to do in the office this year.

 

Stop trying to get your inbox to zero

The entire concept of getting your inbox to zero unread messages assumes that email is your top priority and therefore you should strive to do it perfectly. Email is only a tool. Your top priority should be creating and executing your business objectives, looking after your customers and growing profitability.

 

When it comes to managing your email, you should scan through your inbox a few times a day, pick out the priority emails and deal with those as soon as you have time to do so. It can be helpful to schedule “email time” in the morning and afternoon in order to keep your day free to deal with your meetings and other priorities.

 

Stop fighting your internal clock

Some people are early birds and others are night owls. Rather than fight with your body, work with it. If you are more productive in the morning, get up early and start work. Equally, if you are a night owl, then start late and finish late. You don’t need to be seen to stay late and work all night in the office. If you want to be really successful, focus on getting things done rather than being seen to work long hours.

 

 

Stop managing and start leading

Managers focus on doing things right. That has its place in any business. However, if you want to be a business leader, then stop managing and start leading. Leaders focus on doing the right things, and then involve the managers in order to ensure those things are done properly.

 

Stop snacking on unhealthy things in the office

Snacking on sugary treats will give you sugar highs and lows throughout the day and won’t do much for your health.  Replace cakes and sugary biscuits with fruit, nuts and healthy snacks like yoghurt.

 

If you can reduce your sugar intake you can kiss goodbye to the “3 o’clock slump.” Remember – a healthy body goes hand in hand with a healthy mind. Healthy minds tend to be the most successful and productive minds.

 

Does money really motive employees?

 

We all work to get paid but is money alone enough to motivate your employees?

 

Regardless of the type of business you run, you need to pay your employees fairly and in line with your competitors. If you don’t pay your people in line with the market, it can act as a de-motivator. However, once your pay scales are in line with industry norms, money alone isn’t really enough to keep your employees performing at a high level.

 

Paying in line with the market tends to achieve a rather neutral position, where there is no dissatisfaction among your employees but this does not translate into them being more motivated.

 

Various studies have shown that employees place a high value on freedom. They value flexible working, the opportunity to work from home when they want to and they want to work for businesses that invest in the technology that allows them to do this.

 

Welcome to our latest monthly tax newswire. We hope you enjoy reading this newsletter and find it useful. Contact us if you wish to discuss any issues further.

 

NO DEAL BREXIT – WHAT ABOUT VAT?

The Government and HMRC have updated its collection of high-level guides called “partnership packs”, intended to help businesses involved in importing and exporting prepare for changes to customs procedures after 29 March 2019 in the event of a “no deal” scenario.

If the UK exits the EU without a deal, UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in broadly the same way that already applies for goods traded outside of the EU.

In the event of a “no deal” Brexit the government’s aim will be to keep VAT procedures as close as possible to what they are now. This will provide continuity and certainty for businesses.

However, there will be some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU countries.

Postponed VAT Accounting for Imports

The government has announced that in the event of a “no deal” Brexit, it will introduce postponed accounting for import VAT on goods brought into the UK.

This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT at or soon after the time that the goods arrive at the UK border. This procedure will apply both to imports from the EU and non-EU countries.

Low Value Consignments

If the UK leaves the EU without an agreement, VAT will be payable on goods entering the UK as parcels sent by overseas businesses. Low Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. For parcels valued up to and including £135, a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK.

VAT Mini One Stop Shop (VAT MOSS) will come to an to end

A further change if the UK leaves the EU without an agreement is that the UK will stop being part of EU-wide VAT IT systems such as the VAT Mini One Stop Shop which currently simplifies VAT reporting for UK businesses.

CUSTOMS CHANGES

Businesses can currently move goods freely between EU countries. For customs purposes, this means that businesses trading with the rest of EU do not have to make any customs import or export declarations, and their trade with the EU is not subject to import duty.

In the event of a “no deal” Brexit there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation and movements of goods between the UK and EU would end.

HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces its Customs Handling of Import and Export Freight (CHIEF) system.

From 11pm on 29 March 2019, for businesses trading with the EU, the impacts would include businesses having to apply the same customs and excise rules to goods moving between the UK and the EU as are currently applied in cases where goods move between the UK and non- EU countries.

This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration).

For imports into the UK, a separate safety and security declaration needs to be made by the carrier of the goods (usually the haulier, airline, freight train operator or shipping line).

For exports from the UK, the export declaration includes the safety and security declaration.

WELCOME CGT ENTREPRENEURS’ RELIEF CHANGE FOR SHAREHOLDERS

In the December 2018 newsletter we alerted you to important changes to CGT entrepreneurs’ relief included in the latest Finance Bill that could have the effect of denying the relief to certain employee shareholders. As the result of lobbying by the professional bodies the government have made a late change in the Finance Bill to the definition of “personal company” so that fewer shareholders will be denied the relief when they dispose of their shares.

The normal test is that the shareholder is required to be entitled to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.

 

The amendment provides an alternative test which would allow relief where the individual is entitled to at least 5% of the sale proceeds in the event of a disposal of the whole of the ordinary share capital of the company, even if the 5% test in relation to distributable profits and assets on a winding up was not satisfied.

 

This remains a complex area and we would suggest that you contact us to review your company’s share structure to check whether particular shareholders would be entitled to relief for their shares.

 

CORPORATION TAX RELIEF BACK FOR ACQUIRED GOODWILL

 

A further late change to the Finance Bill will re-introduce relief for acquired goodwill on the acquisition of businesses with eligible intellectual property from 1 April 2019.

 

This relief was withdrawn back in July 2015 and the restoration of relief for goodwill and customer-related assets is very welcome although the new form of relief will be more restricted.

 

The proposed new relief will be given at a fixed rate of 6.5% on up to 6 times the value of any qualifying intellectual property assets in the business being acquired. Qualifying assets will include patents, registered designs, copyright and design rights and plant breeders’ rights. This means that the qualifying costs will be written off over just over 15 years and will not follow the treatment in the company accounts as currently applies to other intangibles.

 

TERMINATION PAYMENT CHANGES DELAYED TO 2020

 

HMRC have announced that the changes to the national insurance (NIC) treatment of termination payments and sporting testimonials have been delayed to 6 April 2020.

 

From 6 April 2020 Employer class 1A NIC will become payable on termination payments in excess of £30,000 and on sporting testimonials that exceed £100,000 (lifetime limit). The changes are intended to align the NIC treatment with the treatment for income tax although there is no NIC liability for the employee on such payments.

 

Whether or not the £30,000 exemption applies on termination of employment is a complex area and specialist advice should be obtained.

 

 

 

DON’T BE LATE IN PAYING YOUR PERSONAL TAX BILL

 

Individual’s 2017/18 income tax, CGT, class 2 and 4 NIC liabilities should have been paid by 31 January 2019.

 

Note that if the balance is still unpaid at the end of February 2019 a 5% surcharge penalty is added in addition to the normal interest charge unless a time to pay arrangement has been agreed with HMRC.

 

DIARY OF MAIN TAX EVENTS

FEBRUARY / MARCH 2019

Date	What’s Due
1/02	Corporation tax payment for year to 30/4/18 (unless quarterly instalments apply)
19/02	PAYE & NIC deductions, and CIS return and tax, for month to 5/02/19 (due 22/02 if you pay electronically)
1/03	Corporation tax payment for year to 31/5/18 (unless quarterly instalments apply)
2/03	5% penalty imposed on 2017/18 income tax, CGT, class 2 and 4 NIC still unpaid at this date
19/03	PAYE & NIC deductions, and CIS return and tax, for month to 5/03/19 (due 22/03 if you pay electronically)

 

There is a dedicated unit within HMRC that chases down employers who don’t abide by every letter of the national minimum wage regulations. If errors are found, the employer can face penalties of up to 200% of the underpaid amount, and be included on a public list of defaulting employers.

Please be aware of the new NMW rates that come into force for pay periods beginning on and after 1 April 2019:

Which rate is payable is dependant upon the employee’s age, so its essential that the correct birth date is recorded for each employee, and the ages of the employees are checked before each payroll is run.

The other NMW elephant trap for employers occurs when they make deductions from the employee’s gross or net wages, which takes the amount paid per hour worked down below the NMW rate. This rule applies even if the employee has agreed to the deduction, such as for a savings scheme.

Where lower paid employees take part in salary sacrifice schemes under which they surrender a fixed amount rather than a percentage of pay, and they also switch from full-time to part-time work, it is easy for the take-home pay to accidentally slip below the NMW rate. This can happen where the tax-free amount for childcare vouchers is sacrificed.

Written by the Tax Advice Network

It is looking increasingly likely that the UK will leave the EU without a withdrawal deal in place at 11pm on 29 March 2019. In that situation the VAT arrangements that EU member countries benefit from will immediately fall away for UK businesses. This will significantly affect businesses that import and export goods, but other businesses will also be affected by these changes:

Claiming EU VAT refunds

Where a business has incurred VAT on business expenses in another EU country during 2018, it would normally have until 30 September 2019 to reclaim that VAT. HMRC is urging businesses to submit those claims before 29 March 2019, as claims after that date will have to be submitted to the individual countries concerned, rather than through the HMRC portal.

VAT MOSS

If any of our clients are still registered for VAT MOSS, as the de-minimise threshold of £8188 kicked-in from 1 January 2019 (see our newsletter 29 November 2018), you will have their VAT MOSS registration cancelled automatically from 1 April 2019.

Where the business continues to make sales of digital services to non-business customers in EU countries after 29 March 2019, it will have to re-register for VAT MOSS as a non-EU business in an EU country, (ie not the UK) by 10 April 2019.

The de-minimise turnover threshold for VAT MOSS does not apply for non-EU businesses, so many of the UK businesses which dropped out of VAT MOSS from 1 January 2019 will be pulled back into that regime.

Check VAT number

Currently there is a VAT number checking service to check the validity of EU VAT registration numbers. From 30 March 2019 that service won’t cover UK VAT numbers, but businesses will be able to check UK-only VAT registration numbers on GOV.UK. In addition, UK businesses will continue to be able to use the EU VAT number validation service to check the validity of any other EU VAT registration numbers.

Written by the Tax Advice Network

Payment date

The deadline for paying stamp duty land tax (SDLT) is currently 30 days after the effective date of the transaction. This is also the deadline for submitting the land transaction return which reports the SDLT payable.

The effective date of a transaction is generally the completion date. However, this can be an earlier date where the transaction has been “substantially performed”, which would be when the buyer takes possession of the property, or pays a substantial amount of the consideration.

For transactions with an effective date falling on or after 1 March 2019 the due date for payment of the SDLT will be 14 calendar days after the effective date, and the filing deadline for the land transaction return also shifts to that date. Where the contract is contingent or there is an uncertain amount of consideration, the buyer can apply to HMRC to defer the SDLT payable, within 30 days of the effective date.

The deadlines for paying LBTT in Scotland and LTT in Wales will remain at 30 days from the effective date.

Rates

When a company purchases a residential property for over £40,000 it must pay the 3% supplementary rate of SDLT. A residential property is defined as one “which is used, or suitable to be used as a dwelling.” Properties which are not residential are taxed as commercial properties.

The FTT recently decided in PN Bewley Ltd v HMRC that a derelict bungalow was not suitable to use as a dwelling, so it could not be defined as a residential property for the purposes of SDLT. HMRC was required to consider the state of the property when it was acquired, not whether it could be renovated to be used as a dwelling at a later date.

This ruling will have also implications for purchases in Wales and Scotland, as LBTT and LTT have similar supplementary rates for purchases of residential properties by companies. However, the additional dwelling supplement (ADS) in Scotland increased from 3% to 4% on 25 January 2019 (see our newsletter on 20 December 2018).

Written by the Tax Advice Network

The terms of the VAT flat rate scheme (FRS) were changed for 1 April 2017 when the category of limited cost traders was introduced, but many businesses are still not following the new rules correctly.

HMRC has amended VAT Notice 733 to emphasise the steps to follow when deciding which trade sector the business falls into, and hence which flat rate percentage it should apply when using the FRS. If a business is defined as a limited cost trader it must use the FRS rate of 16.5% regardless of its actual trade sector.

A business must spend at least 2% of its turnover on relevant goods to avoid being a limited cost trader, and even if it manages to reach that threshold the total amount spent on relevant goods must be at least £250 per quarter or £1,000 per year. There are lots of exclusions from “relevant goods”, such as;

• capital assets;
• vehicle expenses;
• staff food & drink;
• promotional items purchased to give away; and
• goods acquired to sell when selling goods is not part of the main trade.

If you are new client and already registered for VAT and using the FRS when we take you on, we need to check that you have chosen the correct trade sector. HMRC can issue penalties and demand additional VAT for past years if a lower FRS percentage was chosen deliberately.

The catch-all category of “any other activity not listed elsewhere” (12% rate) should only be used if every other category has been checked to see if the business fits into it. There are a number of composite sectors which group apparently connected trades together such as “entertainment or journalism”.

Written by the Tax Advice Network