Q&A with Nick Casson of TaxAssist Accountants
Q: I'm a growing business and I'm aware that my turnover could mean that I need to register for VAT soon. Could you tell me what the threshold is please?
A: Since April 2015, the VAT registration threshold was £82,000.
As announced in the recent Budget, the VAT registration threshold from April 2016 will be £83,000.
If your turnover is hovering around the registration threshold, it is really important that you update your bookkeeping records regularly.
This i so that you can quickly identify when your turnover breaches the threshold.
That way you will register on time and not incur any late registration penalties. And you can start accounting for VAT so you’re not facing any large, backdated payments to HM Revenue & Customs.
Q: What information do I need to show on my invoice?
A: Invoices don’t have to be produced on a computer but there are stipulations you need to follow about what information needs to be displayed.
You must clearly display the word ‘invoice’ on the document. You must include: your business name, address and contact information, a clear description of what you’re charging for, the date of the invoice (if applicable), the date the goods or service were provided if different to the date of the invoice, the total amount owed. It’s good practice to give each invoice a unique number or reference and to include the name and address of the customer you’re invoicing, particularly if they’re also a business.
If you’re VAT-registered or trading as a limited company, slightly more information is required.
Q: If a company has provided an interest-free loan to a director of say £100,000, and assuming the loan balance stays the same the following year, does the corporation tax charge have to be paid again?
A: There are often tax implications where small companies provide loans to their directors or “participators” (any person having a share or interest in the capital/ income of the company– normally these are shareholders).
A company is a separate legal entity and company money belongs to the company.
The directors and shareholders would also stand to benefit from more favourable terms, than they might get from a bank from example.
To deter companies from making loans to directors or shareholders, a corporation tax charge arises on the company (S455). Previously this has been imposed at 25% but due to the change in the way dividends are taxed from April 2016, the charge is 32.5%. For small companies, the tax liability normally falls nine months after the end of the accounting period in which the loan was made.
Repayments – even made up to nine months after the relevant accounting period – would be taken into account before calculating the tax charge.
As the loan balance is reduced, HMRC refund the company the S455 tax so the tax charge is only temporary in effect.
However, a taxable benefit in kind would also arise on the recipient of the loan assuming it is over £10,000 and the benefit and therefore the tax charge would arise each year that the balance exceeds £10,000.
With the prospect of the S455 tax being refunded and avoidance of a benefit in kind charge, there is a definite incentive for the loan to be paid back as quickly as possible. If you’re experiencing cashflow problems, your local TaxAssist Accountant could work with you to produce cashflow forecasts/ business plans. You may also have options available to you to reduce the balance on your loan account. Contact us for more information.
Q: I’ve received a letter from Concentrix claiming they are checking tax credits claims for the self-employed on behalf of HMRC. Is the letter legit and should I be worried?
HMRC have contracts with some private companies to undertake work on their behalf; one of which is Concentrix. If you are contacted by Concentrix in relation to a tax credits claim, you should deal with them in the same way you would deal with HMRC. In April 2015, the rules tightened slightly and self-employed tax credits claimants must be able to demonstrate that their business is conducted on a commercial basis; with a view to achieving profits. These changes will not affect the rules for claiming Child Tax Credit.
The reason you have been contacted, is because the profits from your business per hour equate to less than the National Minimum Wage. The information you may be asked to provide should be typical business records, such as receipts and expenses, records of sales and purchases and bank statements. They may also ask for supporting documents such as a business plan, planned work, cash flow and profit projections.
If your business is in its early stages and is not yet profitable, you may have to rely more on your projections and business plans to satisfy HMRC/ Concentrix that you have aspirations of making good profits in the future.
HMRC will use the information provided to reach a decision about the claimants’ current working tax credit award. There is a risk that some claimants may lose their working tax credits if they cannot provide the evidence HMRC ask for and may have to repay any tax credits they are not entitled to.
For more information Tax Assists