Nick from Quest Chartered Management Accountants describes how sole trader sub contractors can claim their tax refund for CIS.
As always, if you do need any help please call 0121 235 0315.
Just in case you were in any doubt what is important in business then here is some clarification:
If you are think of starting a business and would like to talk to a qualified accountant in Birmingham who actually knows what it’s like to start a run a business then please call me – 07754 51532
Nick Bonnaud ACMA
Don’t go to university – start a business instead!
Recent estimates put the average debt that university graduates will suffer at around forty four thousand pounds. This is an extraordinary sum, and has prompted me to question why there is no debate or even discussion about whether or not young bright people should start their own businesses instead of going to university.
I recognise that university can have such enormous value for those pursuing specific professional career paths. There is simply no way to advance in subjects such as medicine, geology or advanced sciences unless you have an appropriate and strong educational background. However, I also believe that there is a strong minority whose aspiration is to start a business of their own, and in a context in which graduates are likely to be paying debts into their fifties I feel it is about time that there was some debate as to whether entrepreneurialism could provide a genuine alternative for those motivated in that direction.
I was recently approached by two schools to speak about entrepreneurialism to fourteen and fifteen year olds as the subject now does appear on their curricula, and made it clear that I would be encouraging students to think about starting their own businesses – and both schools were immediately horrified.
The posh school said that all of their students were very bright and wouldn’t want anyone to dissuade them from going to university. The poor school said their students often struggled and they didn’t want anyone denting their (already fragile) aspirations to go into higher education.
Following this experience I followed up and I spoke to many parents, teachers and school administrators and it has become extremely clear that the educational system is wholly geared towards pushing students towards further education and other career aspirations, particularly entrepreneurialism, are discounted and even discouraged.
I recognise that starting a business represents a large degree of risk and is certainly not for everyone but my purpose in writing is to at least question why the status quo is so completely geared towards huge debts and further education when much more modest investment in a business could lead, for those who want it, to a much more rewarding business and life experience.
What do you think?
After the budget are you feeling hard done by?
At least you won’t be taxed twice – unless you run a business.
In amongst the winners and losers from yesterday’s budget one group seemed to have slipped under the media’s radar.
Hundreds of thousands of small business owners will now be taxed twice on the same profits.
For many years the logic has held that small business profits should only be taxed once – through corporation tax and not taxed again if dividends are paid out. The chancellor changed the rules yesterday and from April any shareholder that receives more than £5000 in dividends will find that the same profits will be taxed again at a starting rate of 7.5%.
The government has offered some explanation pointing to ‘Tax Motivated Incorporation’ as the target. This means that they want to stop the practice of setting up limited companies specifically to avoid tax. It is currently common practice for contractors, care workers and others to set up companies in which they are the only employee in order to pay less.
Several years ago legislation known as IR35 was brought in specifically to address this issue and the announcement yesterday signals the complete failure of HMRC to implement and police IR35 over recent years.
By proceeding as the government has, it has tarred the genuine small business community with the same brush and punished them for maintaining investments in their own business. The proposed cuts in corporation tax will not offset these changes and will not occur until 2017 and 2018.
Let’s hope the pain felt by small business owners has not damaged growth by then.
Nick Bonnaud ACMA
Quest Chartered Management Accountants
Government proposals for a new statutory residence test have been postponed until April 2013. In an unprecedented move, these guidelines will define tax residence for individuals, but not companies. They will in some cases mean that current and past presence in the UK could determine whether or not a person is regarded as a UK resident.
The test will comprise of three parts, they are as follows,
Part A: Non-Residence
An individual will be considered a non-resident if they,
– Are not a resident in the UK in all of the previous three tax years and are in the UK less than 45 days in the current tax year.
– Are resident in the UK in one or more of the previous three tax years and present in the UK less than 10 days in the current tax year.
– They have left the UK to carry out full-time work abroad and are present in the UK less than 90 days in the tax year, with no more than 20 of those spent working in the UK.
Part B: Residence
An individual will be considered a UK resident if they,
– Are present in the UK for 183 days or more in a tax year.
– Have only one home which is in the UK, or have two or more homes all of which are in the UK.
– Carry out full-time work in the UK over a continuous period of more than nine months, this excludes short breaks such as illness and holidays, with no more than 25% of the relevant duties being undertaken outside the UK within that period.
Part C: Connections and Day Counting
This part of the test will take the form of a tie breaker, and it will apply to individuals whose residence status doesn’t fall in to Part A or B. An individual must then compare the number of days they spend in the UK against factors such as whether or not an individual has family living in the UK, whether they have accommodation that they spend time in during the tax year, whether or not they carry out substantive work in the UK and whether or not they have spent 90 days or more in the UK in either of the previous two tax years.
What is it?
Back in the 2011 Autumn statement, the Chancellor George Osborne announced the introduction of an ‘above the line’ tax credit by April 2013 to encourage R&D activity by larger companies. Above the line tax credit will enable loss making companies to claim a payable credit.
The intention behind the credit is to incentivise the investment decision makers in companies.
Who Does it Apply to?
Companies or organisations can only claim R&D Relief if a project seeks to achieve an advance in overall knowledge or capability in a field of science through scientific or technological uncertainty. This is opposed to simply seeking an advance in ones own state of knowledge or capacity.
Defining Your Project
To determine whether your project falls in to the correct category, there are 4 questions that you should take in to consideration, they are as follows,
1) What is the scientific or technological advance?
This is where you should consider what exact scientific or technological advance is being sought, simply stating the name, process and functionality of the project will not suffice.
2) What were the scientific or technological uncertainties involved in the project?
This exists when knowledge of whether the projected outcomes are scientifically possible or technologically feasible is not readily available or deducible by a competent professional working in the field.
3) How and when were the uncertainties actually overcome?
This section is used to describe the methods adopted to overcome the uncertainties, and what analysis and subsequent investigations were undertaken. This section does not have to contain great detail, just a sufficient amount to show that the process was not straightforward.
4) Why was the knowledge being sought not readily deducible by a competent professional?
It might be publicly known that others have attempted to resolve the aforementioned uncertainties and failed, on the other hand the uncertainties may have been resolved however information doesn’t exist in the public domain that show precisely how.
Which Costs Qualify?
There are several costs that fall under the category of R&D, for example,
– Employee Costs.
– Staff Providers
– Payments to Clinical Trials Volunteers.
When to Claim
Claims for R&D Relief must be made in your Company Tax Return or amended return. The average time for making your claim is two years after the end of the relevant Corporation Tax accounting period.