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R & D boost for smaller businesses

Wednesday, November 4th, 2015

In a major boost for pioneering small businesses, the Financial Secretary to the Treasury, David Gauke, recently launched a new plan outlining how government will make it easier for small businesses investing in research and development to claim tax relief.

The two-year plan, which is a response to an HMRC consultation, aims to increase take-up of research and development (R&D) tax relief through raising awareness of the relief amongst small businesses and making it easier for them to apply.

The tax relief, which encourages companies to invest in costly new product development, helps companies reduce the amount of corporation tax they pay on profits by offsetting them against any investment in research and development. Latest statistics for 2013-14 show more than 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but the government wants to go further.

Financial Secretary to the Treasury David Gauke said:

R&D is crucial for the long-term growth of the UK economy. Over 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but we need to go further to support pioneering small businesses.

That’s why we’ve published a document setting out our plans to increase awareness and make it easier for people to apply.

The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief’, was published 28 October 2015 and sets out that:

  • From November, small companies – with a turnover under £2 million and fewer than 50 employees – will be able to seek advance assurance on R&D tax relief. This will give them greater certainty and enable them to plan their finances effectively.
  • HMRC will explore ways to improve its communication around R&D tax relief, including looking at ways to use data and work with other government agencies to identify companies that have carried out R&D but have not claimed relief.
  • Interactive guidance will be developed with stakeholder involvement

HMRC evaluation shows that each £1 of tax foregone by R&D tax relief stimulates between £1.53 and £2.35 of additional R&D investment. SME R&D relief works by way of super deduction, allowing companies to reduce profits liable to corporation tax by 230 per cent of their qualifying R&D expenditure. In 2013-14, businesses received £1.75 billion in R&D tax relief, an increase of almost £750 million since 2009-10.

Bigger houses for parents: the solution to young people’s financial woes?

Wednesday, May 7th, 2014

Parents of young adults are increasingly opting to buy larger properties in order to accommodate their children, who are finding themselves unable to purchase or rent their own home.

Over a fifth of parents who moved home in the last six months reportedly decided to acquire a larger house, a reason stated being that their adult children struggling to make ends meet would then have the option of staying with them.

Many of these parents have resigned themselves to the fact that their children may be staying with them, at least periodically, up until their late twenties.

A number of factors are said to contribute to young people’s widespread inability to become fully independent of their parents. These include:

  • house prices, whose rise outstrips wage growth in many parts of the country, especially the south
  • large amounts of student debt
  • fewer opportunities, and more stringent requirements, for young people attempting to secure employment.

The research comes from the Royal Mail, who questioned users of its mail forwarding service about their new homes. Around 13,000 homeowners were quizzed between October last year and April this year.

21 per cent of respondents stated that their children’s problems with full independence – their lack of money, or of simply being unable to find a property of their own – was a factor in their decision to search for a larger abode.

Andrea Martin, Royal Mail’s managing director of data services, said: ‘It is interesting to see so many people buying larger properties in the expectation that their children will be living with them longer into adulthood.

‘Alongside this, patience is proving a virtue in the housebuying market with people prepared to sit it out to find the right home for them.’

Sir Jon Cunliffe called for action to be taken to stabilise the housing market, saying that it would be ‘dangerous to ignore the momentum that has built up in the UK housing market’.

The Royal Mail’s data also shows that two out of every five parents who have helped their children to buy property are concerned about their own finances later in life.

And the report raised concerns over the possible emotional stress inflicted upon aging parents as they continue to work to accommodate their children into their twenties.

The Office for National Statistics has released figures showing that 3.3 million aged 20- to 34 years old lived with their parents in 2013 – the highest number since it started keeping records in 1996.


Wages rising faster than inflation

Wednesday, April 16th, 2014

There’s more good news for the British economy as wages are increasing at a higher rate than that of inflation, for the first time in six years.

It was announced yesterday (15th April 2014) that inflation had fallen for the sixth consecutive month to 1.6 per cent. Meanwhile pay is increasing across the private and public sector.

The ONS reports average earnings rose 1.7 per cent in the three months to February compared with a year earlier, up from 1.4 per cent last month.

Unemployment is also falling. Figures suggest only 6.9 per cent of the workforce is out of work, the lowest figure since February 2009.


The worst excuses for not paying minimum wage

Friday, March 21st, 2014

Minimum wage exists for a good reason – it’s the baseline rate that all employers are required to pay their staff, and as such, at least in theory, it guarantees a certain standard of living for the working people of Britain.

But in some cases, the wage is simply not being paid – and part of HMRC’s remit is to enforce the standard.

The public body recently released some of the worst excuses they have been given by employers who fail to pay the full amount. We can presume that they have done this in order to demonstrate to businesses that there exists no good reason to deny workers a fair, living wage – and we are doing our bit to spread this information by sharing some of those excuses here.

  • An employer gave this excuse: ‘When the national minimum wage goes up I do increase the amount I pay a little, even if the total pay is still below. I don’t think its right to ignore the rises.’ This person may not have ignored the law outright, but neither did he make much effort to follow it.
  • ‘I don’t think my workers know anything about the national minimum wage because they don’t speak English.’ Rights are of course granted even to those who don’t know they exist.
  • In the same vein: ‘It wasn’t a conscious decision to say “I’m not going to pay this,” but I’ve never really considered doing it because I’ve not had people come to me and say, “I’m not getting paid enough” or, “Is this the minimum wage?”‘ Workers may not know their rights, or they may simply fear losing their jobs if they cause a fuss. The law does not apply only to those who have the clout to ask for a raise.
  • Another employer told HMRC: ‘I know I am paying them too little, but they are happy to work for this amount because they are getting experience.’ Workers must be paid the minimum wage except in select circumstances, for example, as part of a formal course of education.

‘Most employers are honest and pay their staff the correct rate,’ said Jennie Granger, director general of enforcement and compliance at HMRC. ‘But this research shows that some still view the national minimum wage as a choice and will even try these crazy excuses to avoid paying workers what they are due.’

Last year, HMRC forced back-pay of £4 mn to workers who had not received their wages in full. The minimum wage is currently £6.31 an hour for those over 21.

UK GDP ‘to exceed pre-recession peak’ this summer

Friday, March 7th, 2014

A number of economics and business analysts say that Britain’s recovery from recession will soon be well underway, with wage increases and rising employment to produce figures rivalling those from before the downturn.

The British Chambers of Commerce predicts a quick recovery for the economy, stating that the country’s GDP will this summer exceed that from the start of 2008.


Calls for businesses to pay ‘living wage’ as poverty rises among the employed

Friday, February 7th, 2014

Businesses are being called upon to pay staff a wage in line with the rising cost of living, as the number of ‘working poor’ increases.

Around 13 million people in the UK are currently classed as in poverty, and last December, for the first time, it was found that more than half of them were in work.

It is currently estimated that a person must earn £8.80 per hour to support themselves in London and £7.65 elsewhere – though the minimum wage for those over 21 is set at only £6.31.

A report by the Living Wage Commission states states UK employment is becoming ‘increasingly unequal’, with 420,000 more people being paid below  ‘living wage’ in the past 12 months.

The report also states that 5.24mn workers – more than a fifth of the workforce – are paid below living wage.

The pressure is on businesses of all sizes to demonstrate their commitment to their employees and to the economic recovery by raising wages to a ‘more realistic’ standard.

However, many businesses are also struggling financially, and their swansea accountants may tell them they can ill afford to raise wages across the board – at least, not without potentially losing clients by demanding higher prices.

There are said to be a number of causes for the rise in the working poor. The Joseph Rowntree Foundation contends that a rise in part-time work and zero-hour contracts have lowered unemployment on paper, but done little to help people out of poverty.

So while there may be more people in work than this time last year, there is little indication that there are significantly more hours being worked.

Additionally, minimum wage has not risen in line with the cost of living nor inflation, resulting in many becoming unable to enjoy the quality of life they are used to.

Julia Unwin, Chief Executive of the Foundation, said: ‘We have a labour market that lacks pay and protection, with jobs offering precious little security and paltry wages that are insufficient to make ends meet.

‘While a recovery may be gathering momentum in the statistics and official forecasts, for those at the bottom, improving pay and prospects remain a mirage.’

Dr John Sentamu, Archbishop of York and chair of the Living Wage Commission, said: ‘The idea of “making work pay” increasingly sounds like an empty slogan to the millions of people who are hard-pressed and working hard and struggling to make a living.’

Economists warn that the proliferation of low-pay, low-skill work is incompatible with the needs of a first world country.


ACCA calls for extension of tax return deadline

Thursday, January 30th, 2014

The Association of Chartered Certified Accountants has called for the deadline for filing a self-assessment tax return to be delayed, due to a number of new measures that have been introduced since last year.

HMRC requires all returns to be filed tomorrow at the latest – but ACCA makes the case that the government should make special allowances this year.

The government is requiring many people claiming child benefit to make use of self-assessment forms following welfare reforms last year, meaning many people filling out the forms this year will have never done so before.

Those families earning between £50,000 to £60,000 can continue to receive child benefit, but they must complete a self-assessment form this year, and also in subsequent years in order to pay tax on the benefit.

The process is likely to be confusing for many. In addition, heavy fines and rates of interest apply to incorrect or late returns, even in the case of honest mistakes being made.

Another crucial factor in ACCA’s call for the deadline to be extended is that many more people have become self-employed since last January. With this rise in self-employment, there will be many more people expected to file returns for the first time who many also be confused by the process.

Chas Roy-Chowdhury, ACCA’s head of taxation, said first-timers ‘are going to miss the deadline not because they have been putting it off, but because they are newcomers.

‘It’s not an easy form to complete, and often mistakes will happen because people filling them in don’t know for sure what should be included.’

He also stated, ‘HMRC has a common sense decision to make. Either it can stick to the deadline and penalise all those families and self-employed people who are struggling to get to grips with the self-assessment process, or it can do the right thing and give them a lifeline by extending the deadline.’

It is unlikely that the deadline will be officially changed at this late stage – though the government might be persuaded to decide whether to fine those who file late on an individual basis.

As of yesterday, Her Majesty’s Revenue & Customs was still waiting on some 2 million tax returns to be filed.

For those who miss the deadline, there will be an initial fine of £100 – even if no tax is owed. Starting from the first of May, fines will accrue at the rate of £10 per day for 90 days.

Claiming tax relief for the self-employed

Friday, January 17th, 2014

There are more reasons than you might be aware of in favour of working for yourself. We’re all aware of certain perks – this way, you get to choose their own hours, holidays and direction. Another advantage of being self-employed is that you actually get to claim the tax on many of your business expenses back from the government.

Many people who are self-employed are dimly aware that some of the things they buy and consume for work are tax deductible. At the same time, a lot of people aren’t taking full advantage of this allowance and consequently are losing out on large amounts of money.


How To Prepare For Retirement And Choose A Pension Plan

Thursday, December 19th, 2013

In uncertain times, it’s as important as ever that you get the best pension plan possible. There are so many options available however, and the chance to save – or lose out on – a significant chunk of cash for the years ahead.

That’s why it’s best to shop around, read the small print and be as sure as you can that you are buying in to a plan that’s right for you.

One of the biggest choices you need to make as you prepare for retirement is also the first. You’ll need to pick an annuity provider – basically, an insurance company that will pay you a fixed income for as long as you live. This is in return for the money you’ve already saved in your pension pot.

Like any form of insurance, there’s an element of risk involved for both parties. In essence, you’re more likely to benefit the longer you live after retirement – the providers, on the other hand, will pay out less if you pass away sooner rather than later.

When you do pass, the company keeps whatever money you have already given them – it doesn’t go to your next of kin, the government or anyone else. So the insurance companies refer to your lifestyle and actuarial tables in calculating how much you’re eligible to receive.

Many pensioners simply accept the rate offered by the insurance company they’ve used throughout their life, thinking it may be the best, or close enough to the best, rate they could be offered.

However this is actually a relatively competitive market. You may be able to do a lot better than you realised, so do ask around and see what other providers can offer you.

When you do shop around, be sure to divulge any information that might increase your offer.

For example, if you smoke, are overweight, or have a medical history, you may be quoted a better rate. To be blunt, that’s because the provider in question reckons that indications of illness will result in a shorter lifespan for you and a better deal for them.

It’s estimated that up to 70% of retirees could qualify for an enhanced rate, but only a fraction actually get it.

If you can negotiate a high rate though, you can beat the system by living as long as you can, and receive a guaranteed income for the rest of your life!

We do stress that you take the time to research properly, as it’s so easy to change providers before you start receiving your pension – but you can’t switch afterwards.

Tax free celebration for Christmas

Thursday, December 19th, 2013

Most business people are aware that if they keep the “per head” expenditure below £150 for the annual bash, and if they follow the other HMRC guidelines, then there should be no risk that HMRC will seek to treat the payments as a taxable benefit.

However, if the cost creeps over £150, to say £200 per head, the total amount will be taxable not the excess of £50. This is because the £150 is not an allowance. And watch out for VAT. The £150 cost ceiling is VAT inclusive.

The following examples are taken from HMRC’s website and highlight some of the issues that need to be born in mind:

Example 1

A company holds an annual Christmas party for all its staff. The average cost per employee is £50. This is exempt.

In addition the directors hold an annual party at Christmas for its directors at which the cost per head is £75. This function is not open to staff other than directors. Consequently it is not covered by the exemption because it is not available to staff generally. The full benefit is chargeable on directors attending.

Example 2

A company holds two annual dinner dances open to all its employees in the tax year. The total cost of the first, including transport and accommodation provided for certain guests, was £10,000 including VAT. The total number of persons attending was 100 and the cost per head was therefore £100.

The second dinner dance cost £8,000 including VAT, and 100 people attended this. The average cost was therefore £80.

The total cost per head for both functions was £180 so they cannot both qualify for exemption. Since the cost per head of each party on its own was not more than £150, either event can qualify for exemption on its own but it is more beneficial overall for the first to be exempted. So the benefits arising from that function will not be charged and those arising from the second function will be charged.

For employees who attended:

  • both events, they will be chargeable only on the benefit of £80 for the second event
  • only the first event, there will be no chargeable benefit because that event is exempt
  • only the second event, they will be chargeable on the benefit of £80.

If the average cost per head of each of the functions exceeded £150 the full amount of the benefit of both functions would be chargeable. The £150 is not an allowance to be set against an amount that exceeds that figure.

If you are concerned that your annual party may be running close to the tax limit please contact us and we will run through the figures with you.

Merry Christmas…