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What is the ‘plug in grant’ on electric vehicles?

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The UK government has closed the plug-in car grant scheme to new orders. This follows a  public evaluation report highlighting that while the grant was vital in building the early market for electric vehicles, it has since been having less of an effect on demand.

Other existing price incentives, such as company car tax, continue to have an important impact. The report also found the plug-in van market will benefit from grant incentives more to support businesses and their fleets in making the switch.

How much is the plug in car grant?

To continue the UK government’s drive towards net zero, £300 million in grant funding will now be refocused towards extending plug-in grants to boost sales of plug-in taxisvans and trucksmotorcycles and wheelchair accessible vehicles, as announced in the autumn statement.

Discover how the ‘plug in grant’ could affect you and your business. Simply, contact us today, we can look to offer individual business advice and look at the best choices to save money and benefit from grant incentives.

Making Tax Digital for VAT – New penalties for non-compliance

HMRC have issued guidance for VAT-registered business and their agents on how to avoid penalties for non-compliance with the Making Tax Digital for VAT (MTD) rules.

In particular, there is a new £400 per return penalty if you file a return but do not use functional compatible software.

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There are additional penalties if the business does not keep its records digitally. HMRC may charge you a penalty of between £5 to £15 for every day on which the business does not meet that requirement.

Key extracts from HMRC guidance include:

You must file your VAT return using functional compatible software

Functional compatible software means a software program, or set of software programs, products or applications (apps) that can:

  • record and store digital records.
  • provide HMRC with information and VAT returns from the data held in those digital records.
  • receive information from HMRC.

You must keep records digitally

You must keep some records digitally within your functional compatible software. This is known as your ‘electronic account’. Your electronic account must contain:

  • your business name, address and VAT registration number.
  • any adjustments from calculations you make outside your functional compatible software for any VAT accounting schemes you use.
  • the VAT on goods and services you supplied, meaning everything you sold, leased, rented or hired (supplies made).
  • the VAT on goods and services you received, meaning everything you bought, leased, rented or hired (supplies received).
  • any adjustments you make to a return.
  • the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you bought and sold.
  • the rate of VAT you charged on goods and services.
  • your reverse charge transactions, where you record the VAT on the sale price and the purchase price of the goods and services you buy.
  • copies of documents that cover multiple transactions made on behalf of your business, like those made by volunteers for charity fundraising, a third-party business or employees for expenses in petty cash.

All transactions must be contained in your electronic account, but you do not need to scan paper records like invoices and receipts.

Our team at Kirkwood Wilson are here to support you with your digital accounting, and help you prepare with the latest compliance. If you would like to learn more please contact us for simple and straightforward business advice.

National Insurance (NI) is on the rise – how will it affect you?

With the cost-of-living crisis really beginning to bite, an increase to NI rates may leave a bitter taste in the mouth of both employers and employees. Today, we’ll break down those increases and show you the little bit of light at the end of the tunnel with the increases.

You may remember that back in November 2021, Rishi Sunak announced that NI rates would be rising across the board by 1.25%. The change would affect both employees and employers, seeing the former rise to 13.25% for basic rate taxpayers and to 3.25% on any earnings over £50,270. Employer’s NI would rise to 15.15%. The tax hike is being labelled as a Health and Social Care Levy and is designed to benefit the NHS.

National Insurance, what you need to know as an employee

For an employee earning £25,000, the cost to the employer for 22/23 will increase by £198.75. HMRC has tried to alleviate some of this additional increase by increasing the employment allowance from £4,000 to £5,000 for the 22/23 year. The £1,000 increase to the employment allowance will alleviate some of the pain felt by employers in the face of this increase, although for many businesses it will still ultimately mean they are worse off when coming to payroll.

For employees, with an NI increase to 13.25% (again assuming a salary of £25,000 with a standard tax code and no deductions) an employee would be taking home around £150 per year less than they were in the previous tax year.

Back in March 2022, at an emergency budget aimed at tackling the huge rise in costs facing consumers, Rishi Sunak further announced that the threshold at which employees would begin paying NI would rise in line with the personal allowance to £12,570.

As a result in our example above, the employee would actually be earning somewhere in the region of £205 more than in the last tax year. It’s nothing major, but some help all the same.

National Insurance impact on shareholders

We also shouldn’t forget the impact on shareholders receiving dividends in this new tax year. Dividend rates have historically been:

  • 0% on the first £2,000
  • 7.5% on a dividend taxed at basic rate
  • 32.5% on a dividend taxed at the higher rate
  • 38.1% on dividends taxed at the additional rate.

Aside from the first £2,000, each tax bracket will see an increase of 1.25% to its tax rate. The impact of this would be an uplift of £12.50 of tax on every £1,000 of dividend voted.

If the increase to NI rates is giving you cause for concern or you’ve any questions or need business advice on any of these topics please get in touch with one of our very helpful team members at the office on 01704 546000.

Crypto-currency – what is it and how on Earth is it taxed?!

Crypto-currency – what is it and how on Earth is it taxed?!

By now, you’re probably no stranger to the term ‘Crypto’, but what exactly is Crypto-currency and how does it interact with the UK tax system? Today, Craig will break down some of these questions and hopefully put your mind at ease as to how you might be looking after your portfolio.

What is Crypto-currency?

According to the Oxford dictionary, Crypto-currency is “a digital currency in which transactions are verified and records maintained by a decentralised system using cryptography, rather than by a centralised authority”. 

You may have heard of currencies such as Bitcoin and Ethereum, which make up over 50% of the Crypto market. However, the overall market is flooded with new and emerging coins which people are investing in all the time.

How is Crypto-currency taxed?

Cryptocurrencies are seen by HMRC as an asset and any gains in the value of a currency are therefore taxed under Capital Gains Tax rules. Where an investor needs to take particular care is when disposing of a currency. Each sale is classed as disposal even in the case where the currency is being traded for another. If you are a business currently using Crypto-currency discover how our business advice can help.

Many people are under the impression that the chargeable event occurs when the funds from the sale are moved across to a bank account, although this as mentioned above this is not the case. It’s also very important to note that the investor will need to take steps to ensure they are in control of records that show when purchases and sales were made in order to calculate any potential gain.

How to report crypto currency on tax return?

At the time of writing, the crypto market is seeing something of a crash. It’s worth remembering that gains are calculated based on the sales price at the time less what you initially paid for the currency and any associated selling costs. You may have seen a drop in the price of your coin, however, a gain may still be present as the selling price may be higher than the price you paid.

In a very small amount of cases, HMRC may deem an investor as a trader instead. This is only likely to be happy where the volume of transactions is significant (potentially upwards of 10,000 trades per year). 

The Crypto market is fast moving and is always evolving as more and more people jump onboard. We’ll keep you up to date with any changes on Crypto currencies, but should you have any further questions please get in contact with our team on 01704 546000.

Curious how Kirkwood Wilson can help you learn more about us, and case studies with our clients.

kirkwood wilson support eco friendly business actions

How to make your business more environmentally friendly

This month we saw Earth day go from strength to strength and become one of the largest environmental movement, with over 1 billion people and more than 75,000 partners involved each year across almost 200 countries.

So what can WE do to help be an eco-friendly business? Here are our top tips to help your business move towards net-zero carbon. Not only are there environmental benefits, but there are also financial and accounting benefits too! 

Businesses need to lead the way in moving towards net-zero carbon emissions. There is no quick fix so businesses need to start the journey now and move towards the ultimate goal of net-zero, over the next few years. Here are some of the changes that you can implement in your firm. 

How to be environmentally friendly

  • Switch to a green energy supplier
  • Switch to electric vehicles
  • Reduce business travel
  • Focus on reducing waste
  • Switch to lower carbon suppliers

Switch to a green energy supplier.

Green energy is generated by renewable sources such as wind, hydroelectric or solar. The more businesses that switch to green energy suppliers the quicker the shift away from fossil fuels such as coal or oil will be. 

Switch to electric vehicles.

If your business has a fleet of petrol or diesel vehicles, you could switch across to electric-only vehicles, this will naturally make you that much more of an eco-friendly business. It is also worth noting that company car drivers who choose an electric vehicle also enjoy a reduced benefit-in-kind, for tax purposes. If you deliver products or services to your customers, showing up in an electric vehicle sends a positive message that your firm is an environmentally responsible business.

Reduce business travel.

Reducing business travel will help to reduce your carbon footprint. Air travel is responsible for significant carbon emissions so really challenge yourselves on whether meeting objectives can be met via Zoom or Teams.  Commuting also contributes to carbon emissions. Encouraging your staff to work from home, some of the time will help to reduce your carbon emissions. Face-to-face meetings are still very important but it is key to get the balance right.

Focus on reducing waste.

Wasted paper, water, energy, or raw materials contribute to climate change and also cost money. 

You can reduce your energy bills by ensuring that all equipment is turned off at night. 

You can also invest in improved insulation and thermal management of your business premises in order to reduce the amount of central heating that is required, particularly in the winter months. You can also encourage staff to print less and reuse or recycle materials, where possible. Embracing new technology such as electronic signatures, etc. can further reduce your reliance on paper.

Switch to lower carbon suppliers.

Research low carbon suppliers and where possible, switch to using them instead of your traditional suppliers. Even small changes such as using a local supplier rather than an overseas firm will help to reduce the carbon footprint of transporting materials to your business premises. If you only buy from other businesses that are taking action on climate change, you will help to further drive the business community towards our shared goal of net-zero carbon. Examples could include banks that offer paperless statements, logistics companies that use electric vans, or food companies that recycle and use minimal packaging.

What is my carbon footprint?

Curious about the carbon footprint of your business? There are a variety of information sources that can help you see your impact and potentially help transform you into an eco-friendly business. Head to the government carbon calculator.

For help with business advice, tax efficiencies, or simple advice on choosing an electric vehicle, contact us today on 01704 546000, or via email [email protected]

The importance of a shareholders’ agreement

Some of the questions we are most frequently asked nowadays are around the subject of shareholders’ agreements so we thought today we’d share with you a little bit of our knowledge and thoughts.

What are shareholders funds?

Company Law states shareholders who:

  • Own more than 50% can pass a motion at a company meeting regardless of the views of other shareholders
  • If that shareholder(s) owns more than 75% of the shares they control the company outright and can veto the decisions of all other shareholders.  

This may not suit all business situations, especially where you have two or more founders holding equal share capital or a group of owners with varying amounts of capital, some of whom are directors and some who are not, but who are all working together for the company’s success.

A shareholders’ agreement is entered into between all or some of the shareholders in a company. It governs the relationship between the shareholders, the management of the company, ownership of the shares and the protection of the shareholders. They also help dictate the way in which the company is run. 

What is a shareholders agreement?

A shareholders’ agreement can help define how a business makes decisions to the benefit of all owners and is recommended where:

  • A small number of owners want to reach collective and fair decisions for the benefit of all
  • Some owners may want to be able to influence decisions that are particularly relevant to them
  • Some shareholders may not be directors and cannot influence operations on a day-to-day basis

Typically it is seeking to deal with the three “D’s” of death, disability, and disagreement. It also regularly helps advise over the retirement of a director or the buying back of shares.  

Key areas for any shareholder agreement 

This is not a comprehensive list as each situation is different, but it may help you collect the thoughts of all shareholders before you draw up an agreement.

  1. Company details including structure, directors, and officers
  2. Purpose and aims of the company
  3. Equity split of shareholders
  4. Parties to the agreement
  5. Shareholders rights, obligations and commitments
  6. Decision making processes on major issues required voting majorities and day to day operating decisions
  7. Restrictions on the sale of shares
  8. Rights of first refusal and pre-emptive rights to acquire shares on leaving, retirement, death, or disability 
  9. Death, disability, and other retirement compensation payments
  10. Management contracts, director approval, and remuneration amounts
  11. Insurance and other protective requirements
  12. Professional advisers and change of professional advisers
  13. Dispute resolution
  14. Changes to and termination of the agreement
  15. Buy out provisions for leaving shareholders
  16. Valuation of shares on changes and valuations of the business

Over the years many clients have strayed away from an agreement due to the perceived expense of setting the proposal up in the first instance. Our view is that a shareholders’ agreement is an essential document for any limited company and an equitably drafted agreement should provide comfort to all parties to the agreement. We have seen many instances in the past where specific scenarios would have been much better dealt with given the intervention of an agreement and in our opinion the benefits far outweigh the costs.

There really is no bad time to set up a shareholders’ agreement, so please get in touch if you need help in planning for an agreement, especially where there are several shareholders, a new company is being formed, a shareholder wants to sell their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder. 

We will be happy to assist with share and company valuations and putting the shareholders wishes into an agreement with our local, recommended solicitor.

Need some expert advice, contact us today!

Paying VAT on your side hustle income

Whilst the COVID pandemic caused major operational issues for many businesses, its effect on the business world led to many furloughed employees looking to ‘side hustles’ as a way to generate extra income for themselves and their families.

What is a side hustle?

The term side hustle is relatively new and is defined by the Cambridge Dictionary as a piece of work or a job that you get paid for doing in addition to your main job. For many, this extra income has helped alleviate financial strain throughout the pandemic. For others, it was the start of a fledgling business, often being run on an e-commerce platform such as Amazon or Etsy.

When would I need to pay VAT on my side hustle?

You’ll only really be required to account for VAT on your sales when you reach the compulsory VAT registration threshold of £85,000. Some businesses choose to register for VAT at lower levels of turnover as it sets them up for any period of growth in the future.

Although not always the case, e-commerce sales will generally be between a business and an individual consumer. One thing we’ve always recommended where this is true is that the business sets their pricing structure up from the beginning to account for any monies they’ll lose in VAT when they do eventually reach the VAT threshold.

As a worked example, if a business sells a product for £30 and it is VAT registered, then it will have sales of £25 and will account for £5 of sales VAT each time it makes a sale. The business effectively collects the £5 of VAT on behalf of the consumer and pays it over to HMRC, usually at the end of each quarter.

The VAT rules on sales made in the UK are relatively straightforward. Where things become a little more complicated are when sales are exported from the UK to other countries. Post-Brexit rules mean that you are able to zero-rate (ie charge no VAT) most sales, as long as you keep evidence that the goods were actually exported from UK shores.

Get side hustle accounting advice you can trust

If you’re thinking of selling on Amazon or any of the other e-commerce platforms, please do not hesitate to get in touch and we’ll be happy to help you get set up in the right manner. Feel free to contact our friendly team on 01704 546000.

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Submitting your tax return

If you’ve already sent us your information and we have submitted your return to HMRC, thank you! You don’t need to do anything else other than pay any amount due.
If you have not sent us your information (because of Coronavirus) HMRC are now waiving late filing and late payment penalties for one month – giving you extra time, if you need it, to send your information to us so we can complete your tax return and submit it to them.
You will not receive a late filing penalty as long as your tax return is filed online by 28 February. Interest will be charged from 1 February on any outstanding liabilities you have not paid. You will not be charged a 5% late payment penalty if you pay your tax or make a Time to Pay arrangement by 1 April.
If you can’t pay in full by 31 January because of financial difficulties, HMRC may be able to help by arranging a payment plan. Payment plans or payments in full must be in place by midnight on 1 April to avoid a late payment penalty. If you owe less than £30,000, you may be able to do this online without speaking to them. Go to GOV .UK and search ‘HMRC
payment plan’.

Get in Touch

If you need help with submitting your tax return please do not hesitate to get in touch on 01704546000 or email us at [email protected]

Is Outsourcing Payroll a Good Idea?

If you ask most business owners, they’ll tell you there aren’t many more important elements to a successful business than a happy workforce.

When we begin onboarding a new client, invariably the first burning question on their lips will be, “will we have enough time to make sure the payroll is completed on time this month?”. An effective payroll department, whether it is outsourced or kept internally, is key to ensuring the team is paid when they should be paid, pension contributions are submitted to the relevant provider and taxes are filed and paid to HMRC on time.

Why employ an internal payroll expert?

For a long time, many business owners have employed a bookkeeper and a payroll manager within the business to complete the monthly pay runs for the company. The most obvious benefit to this is the knowledge of the team that the manager has, but also includes:

  • The company retains control of when the figures are completed, giving them instant access to payslips when they are completed. 
  • New staff members are more likely to be picked up by an internal expert as they’re often also in control of onboarding the employee.

Why should I consider outsourcing payroll tasks?

Whilst the reasons above might give food for thought for bringing someone into the business to manage payroll, there is clearly a significant cost to hiring someone as part of the team. 

Freeing up the business owners busy schedule

If the business owner completes the payroll for the company themselves, clearly the outsourcing of the monthly payroll processing will free up even more time for the owner to work on the business rather than in it, something we’re really keen on.

Ensures confidentiality and reduces training costs

There is no reliance upon one person completing the work when your payroll is completed externally. Internal training costs are minimised, and the outsourced provider bears the risk of ensuring there are no handover issues if the person processing the payroll leaves. Add this to the fact that any information you send to the accountant remains entirely confidential and you’ve removed one very big headache!

Ensuring your company is HMRC compliant

Payroll outsourcing services help to ensure that your company remains compliant with HMRC filing deadlines, whilst mitigating the risk of technical errors occurring with the team’s pay. Payroll legislation is an ever-changing landscape, with updates to Statutory Maternity Pay, Statutory Sick Pay and the National Minimum Wage occurring each year, making staying up-to-date with changes one of the most important tasks for a business.

Payroll outsourcing services from Kirkwood Wilson Accountants

You should of course weigh up both sides of the argument if you’re considering the next move for your company’s payroll. At Kirkwood Wilson, we have a vastly experienced team of payroll specialists who would be happy to have a conversation with you about our payroll outsourcing services to ourselves. Our payroll outsourcing service which we provide to our clients using leading software Xero, includes the management of auto- enrolment pension contributions using NEST and the construction industry scheme so you can be rest assured that all of the necessary reductions have been made.
For more information about the payroll outsourcing services available at Kirkwood Wilson Accountants get in touch with our specialist team. Call us on 01704 546000 or email [email protected].

Building your knowledge with our Construction Industry Scheme guide

Since its inception in 1999, the Construction Industry Scheme (also known as CIS) has undergone many changes. The CIS was initially brought in with the aim of applying more rigorous testing and compliance for any businesses that wanted to receive any form of gross payment from a contractor or contractors. Read our Construction Industry Scheme guide to find out more about CIS and the most important terms you need to know. 

2007 – CIS verification becomes mandatory

In 2007, the Construction Industry Scheme was introduced in its current format. Thereafter, online subcontractor verification became mandatory and three new classes of subcontractors were implemented. Under these new classifications, new tax deductions were introduced. For ‘Verified Subcontractors’, tax was set at 20% tax deduction, whilst ‘Unverified Subcontractors’ face a tax deduction of 30%. 

This means that under the Construction Industry Scheme, greater emphasis is placed on the contractor to consider the employment status of the subcontractor that is working for them. 

2021 – Changes to VAT rates

The Construction Industry Scheme saw another significant change in 2021. Value Added Tax (VAT) is no longer charged by subcontractors unless they are working for the end user. 

One of the major benefits of this is that it makes things far more straightforward from a cash flow perspective, as subcontractors now tend to be in a refund position for VAT on a regular basis. However, the knowledge required to make the right administerial decision has gone to another level. 

To make sure you’re submitting the correct CIS tax returns, you should speak to a specialist accountant who has experience of working with CIS and can advise you appropriately. 

Construction Industry Scheme guide and glossary

Read on to find out more about the Construction Industry Scheme and some of the most common terms you will come across when you’re delving into the world of the Construction Industry Scheme. 

Whether you’re a seasoned CIS veteran, or you’re about to complete your CIS return for the very first time, our team of expert accountants here at Kirkwood Wilson Accountants can support you with your CIS return.  

Contractor

You’re considered a contractor if you bring in workers to help you to complete work for your clients. However, you can of course be both a constructor and subcontractor. 

Subcontractor

You are classified as a subcontractor if you get your work from someone else who is ‘higher up’ in the building chain than yourself. For example, you are a part of the building process for a house builder, such as a bricklayer. 

Subcontractor Verification

When a subcontractor comes onboard you must verify them with HMRC using their UTR number and National Insurance Number or Limited Company Registered Number, before you even make a payment to them. Upon verification, HMRC will then tell you how much tax to deduct before you can pay them. The subcontractor will either be classified as gross or will have 20% or 30% tax applied. 

Tax Deductions

In our Construction Industry Scheme guide we will go into further detail about the specific tax deduction amounts below. However, where a subcontractor has provided you with labour services, you may need to withhold an amount of CIS tax to be paid over to HMRC later in the month. CIS tax is not deducted from the VAT amount charged by a subcontractor or any materials you are reimbursing them for. 

Gross Payment Status

Your subcontractor does not need any tax deducting from you. For example, if they send you an invoice for £1,000, you will pay them £1,000 as requested. 

Verified Subcontractor

Upon receipt of their verification number, you will be required to deduct 20% from your subcontractor’s invoice. For example, if they sent you an invoice for £1,000, you will deduct £200 and this amount will be paid to HMRC. This means that the subcontractor will receive £800. 

Unverified Subcontractor

Here, you won’t receive a verification number for this subcontractor and therefore you will need to deduct 30% tax from them. This means that if they issue you with an invoice for £1,000, you will pay £300 of this to HMRC and will pay £700 to your subcontractor.

Domestic Reverse Charge for VAT (DRC)

This is a relatively new term. This means that subcontractors are required to use the DRC for VAT if they satisfy a certain criteria set out by HMRC. This criteria can be found on the HMRC website here

CIS Return Period

Each CIS tax return period runs in line with the months of the year for payroll purposes. You may already know that these dates run from the 6th of one month to the 5th of another. For example; the first month of each financial year is 6th April to 5th May. 

CIS Filing Deadline

At the end of each return period, you will need to make a declaration to HMRC that includes all of the deductions you have made for each subcontractor. The filing deadline is the 22nd of the month following the end of the period.

Subcontractor Statement

A subcontractor requires a statement from the contractor, which can be provided either monthly or yearly. This is to offset the tax they’ve had deducted against the end of year liabilities. Here at Kirkwood WIlson Accountants, we use digital accounting software such as Xero to make this administration much easier to manage. 

CIS tax accountants

We understand that the Construction Industry Scheme can be a bit of a minefield to navigate. The introduction of digital accounting software has helped to ease the burden for contractors and subcontractors alike significantly over the last few years. Xero digital accounting software has helped simplify the entire admin process by making CIS tax calculations and submissions a straightforward task. 
The team at Kirkwood Wilson are experts in digital and cloud accounting and would love to have a chat with you if you’re finding returns difficult to cope with. Contact us on 01704 546000 or at [email protected] and one of our friendly, knowledgeable team members will be happy to help.