Stuart Adam, Thomas Coombs

Plan now for the end of the tax year

Thomas Coombs is reminding individuals to use all the tax reliefs and allowances available to them before the current tax year ends on 5 April 2016 in order to minimise liabilities.

According to Stuart Adam, Partner at Leeds-based Thomas Coombs, there are a number of investment and tax planning ideas that should be considered.

For example, if you have adult children who are planning to buy a home, you might consider gifting funds so that they can invest in the new help-to-buy ISA. This new ISA is available to first time buyers over the age of 16. Savings of up to £200 per month attract a 25 per cent tax free bonus from the Government, providing £3,000 cashback on a maximum saving of £12,000. On the subject of ISAs, have you used your maximum annual investment of £15,240? Or has £4,080 been invested in a Junior ISA or Child Trust Fund for any child under the age of 18?

Stuart Adam also reminds pensioners that from 6 April 2016, tax relief will be restricted for 45 per cent taxpayers. However, there are transitional rules that may give you the opportunity to make extra pension contributions and claim full tax relief.

“The Lifetime Allowance (LTA) reduced from £1.5 million to £1.25 million in 2014 will reduce to £1 million on 5 April 2017. If this is likely to affect you, I suggest you take advice as there are ways of protecting your funds if you act now,” said Stuart Adam

Business owners are also prompted to seek advice because from 6 April 2016, Dividend Tax Credit will be abolished and replaced by a new Dividend Tax Allowance of £5,000 a year.

As Stuart Adam explains: “The new rates of tax on dividend income above the allowance will be 7.5 per cent (up from 0 per cent) for basic rate taxpayers, 32.5 per cent (up from 25 per cent) for higher rate taxpayers and 38.1 per cent (up from 30.56 per cent) for additional rate taxpayers. These changes to dividend taxation will impact on the overall tax rates for owner-managers, in particular, those who have traditionally extracted their income by way of a low salary and a much larger dividend.”

However, the income tax position is only part of the picture because for most owner-managed businesses, the overall tax costs (including the corporation tax position) will need to be considered. The overall tax cost of extracting a dividend will increase from approximately 20 per cent to 26 per cent for a basic rate taxpayer, 40 per cent to 46 per cent for a higher rate taxpayer and from 45 per cent to 50.5 per cent for an additional rate taxpayer.

“If you have cash in your business which you wish to extract in the form of dividends ahead of the 1 April deadline you need to get in touch with us now to ensure you don’t miss out,” said Stuart Adam, adding: “If you would like professional advice on anything discussed here, or dedicated advice tailored to your circumstances, please contact us by Stuart Adam at Thomas Coombs.

Get to grips with your company accounts

Businesses are being warned by accountants Thomas Coombs to prepare their company accounts on time as new data shows that businesses in the UK have already been fined more than £65 million since April last year.

The figures released by Companies House show that between April and December 2015 more than 140,000 penalties were issued to businesses.

In comparison the whole of the 2014/15 financial year saw nearly 179,000 penalties issued, totalling fines of around £84 million.

Late filing penalties were initially introduced more than 20 years ago to encourage directors to file their accounts and report on time.

All companies – large or small, trading or non-trading – must send their annual accounts at the end of their financial year.

If accounts are late a penalty is automatically imposed, starting at £150 for a private company whose accounts are not more than one month late, up to £1,500 if they are more than six months late.

Public companies are subject to much higher fines of £750 for accounts that are not more than one month late and up to £7,500 if it is more than six months beyond the deadline.

Businesses can appeal against penalties and so far this year around 24,000 appeals have been lodged, of which 4,427 were not collected due to discretion and 641 that were cancelled outright.

Christopher Darwin, Partner at Leeds-based accountants Thomas Combs, said: “Every business in the UK, whether trading or not, must submit their annual accounts on time. Failing to provide them to Companies House will lead to an automatic penalty, which will only grow larger with time.

“While there is always the possibility to appeal, the majority of penalties are not cancelled and any appeal will place an additional financial and administrative burden on your business. Often the easiest option is to appoint a professional who can help you collate your accounts and submit them on time.”

If you would like assistance completing your annual company accounts, please contact Christopher Darwin

Avoid a penalty and plan ahead for staff pensions

Thomas Coombs is reminding small businesses that they face large fines for not adhering to new staff pension rules.

Around half a million UK employers with fewer than 30 employees will be required to enrol eligible staff into a pension – and start paying into it – this year. All employers have been given an automatic enrolment date, called a ‘staging date’, and this is the date by which they must ensure workers are signed up.

But Thomas Coombs fears that many SMEs won’t give themselves enough time. As a result, many of Britain’s businesses could be subject to fixed penalties of £400, daily fines of £50 to £500, and even prosecution.

Christopher Darwin, Partner, at Leeds-based Thomas Coombs said: “Employers should start planning around one year before their staging date”.

“It is all too easy to put it off but this is an issue that cannot be overlooked. There will be thousands of employers needing to meet their workplace pension duties in 2016 and so it makes sense to approach a trusted firm for advice in plenty of time. We don’t want to see anyone pay a fine that could be avoided by simply planning ahead.”

For more information about how Thomas Coombs can help your SME with staff pensions, please Christopher Darwin.

Thomas Coombs encourages investors to seek out HMRC seal of approval

Leeds-based accountants Thomas Coombs is encouraging people using the Seed Enterprise Investment Scheme (SEIS) to check the credentials of start-ups before investing in them.

The SEIS was created to encourage individuals and other businesses to invest in new enterprise and entrepreneurship in return for tax incentives.

Under the scheme, individuals can invest a maximum of £100,000 in a single tax year, which can be spread over a number of companies.

In return they can receive up to 50 per cent tax relief in the tax year the investment is made, regardless of their marginal rate.

Investors also benefit from 100 per cent capital gains tax relief on the growth of the value of SEIS shares and loss relief should the SEIS start-up fail.

However, investors are being warned by Thomas Coombs to avoid businesses that lack advance approval from HM Revenue & Customs (HMRC).

HMRC runs a pre-approval service that looks at tax compliance for SEIS companies and investigates a business’s share structure, qualifying trade and how money raised from SEIS will be spent.

Once granted by HMRC, investors can then trust that the company will deliver the promised tax breaks – providing the rules are not broken during the 36 month investment term.

However, pre-approval is not compulsory and many start-ups fail to submit their plans to HMRC, leaving investors at risk of not receiving the benefits promised if the SEIS rules are not met by the start-up company.

Andrew Cowe, Senior Tax Manager at Thomas Coombs, said: “Investors taking advantage of the tax arrangements surrounding the SEIS need to be careful when investing their money.

“Not all firms have been vetted by HMRC and those that have not, may be unable to provide the tax benefits promised under the scheme. Checking they have HMRC’s seal of approval is vital to guarantee the success of your investment.”

Andrew Cowe also added that businesses seeking investment through the scheme should apply for accreditation from HMRC. He/she said: “While pre-approval is not compulsory, completing the process could give investors more confidence to invest in your business.

“The process to be granted approval can be somewhat time-consuming, but the benefits could be massive and with the right professional help a lot of the burden can be taken away.”

If you would like to know more about the benefits of SEIS or any other Government-backed tax incentivised investment scheme, please contact Andrew Cowe.

Stuart Adam, Thomas Coombs

Businesses should make strong cash flow their New Year’s resolution

Businesses need to prioritise cash flow in 2016 to ensure stability and help drive growth, according to Leeds based accountants Thomas Coombs.

Cash flow refers to the net amount of cash and cash-equivalents moving into and out of a business and having healthy cash flow is an important part of a business’s survivability.

Many small-to-medium businesses will face new cash flow issues in the New Year with the introduction of the National Living Wage (NLW), which will see the minimum wage rise to £7.20 per hour for employees over the age of 25 from April.

Some companies will also face the additional payroll costs associated with the on-going auto-enrolment scheme for workplace pensions, but businesses will benefit from new rules on benefits-in-kind.

Under the new rules employers will be exempt from paying income tax and national insurance contributions on benefits worth less than £50 that are provided to employees.

However, many businesses are likely to continue to struggle with late payments from customers, despite new rules from the Government that will enforce shorter and stricter payment periods.

Stuart Adam, Partner at Thomas Coombs, said: “All businesses should be aware of their current cash flow situation and should also have some idea of their future cash flow.

“Businesses are likely to see costs go up next year, especially with the introduction of the NLW, which could affect the health of a business’s cash flow.

Stuart Adam added that profitable and seemingly successful businesses had failed because cash flow had suffered and they weren’t able to pay outstanding bills on time.

“Speaking with an accountant could be extremely beneficial to businesses concerned about cash flow,” said Stuart Adam.

Most firms will be able to help you forecast future cash flow and manage current costs and payments to ensure your business’s cash reserve remains healthy.”

If you would like to know more about our range of cash flow and budgeting services, please Stuart Adam.

Christmas comes second to work for SME owners

Thomas Coombs has commented on news that, according to Zurich’s latest SME Risk Index, 49 per cent of the UK’s small business owners worked on Christmas Day last year.

The research indicated the challenges of achieving a work-life balance, with a further nine per cent having admitted to missing their child’s nativity play and 13 per cent having missed the Christmas party.

Furthermore, the research went on to show that 14 per cent of decision makers have not taken any annual leave this year, whilst 18 per cent have not had more than 10 days off this year.

Christopher Darwin, Partner at Leeds-based Thomas Coombs said: “Missing big events and not taking holiday days shows the pressure that many small firms are under.” Christopher Darwin went on to say that Thomas Coombs can assist SMEs with a number of tasks that they may be trying to undertake on their own.

“This is a very busy time of the year for everyone, especially SMEs. In gearing up for Christmas, there are so many things to deal with, such as payroll, the self-assessment tax return, and the implications of auto-enrolment,” said Christopher Darwin “I hope that everyone gets to enjoy the holidays and that’s why I’d like to remind SME owners that Thomas Coombs can help you with your backlog. We can pick up the pieces and help your business to run smoothly throughout the festive season and into 2016.

“At Thomas Coombs, we understand the pressures faced by SMEs and so we want to help business owners to achieve a healthy work-life balance and put Christmas back on the calendar,” concluded Christopher Darwin.

To find out what Thomas Coombs can do for you, please contact Christopher Darwin

Tax return should be top of people’s Christmas list, says Thomas Coombs

At this time of year most people’s focus will be on buying presents, putting up decorations and preparing the Christmas dinner, but Leeds based accountants Thomas Coombs says people need to remember the self-assessment tax return deadline.

Taxpayers who are required to complete self-assessment tax returns have until midnight on 31 January 2016 to submit them online to HM Revenue and Customs (HMRC).

Failure to send your tax return and pay any outstanding tax could lead to severe penalties, starting with a £100 automatic fine that will be applied to all online tax returns if they are late by just one day.

Any tax returns still outstanding three months after the deadline will be subject to a fine of £10 per day for each day the tax return is due, up to a maximum of 90 days.

Any return that is six months late will be subject to an automatic fine of £300 or five per cent of the tax due, whichever is the higher. For returns that are 12 months late, another £300 fine or five per cent of the tax due will be added.

Any tax outstanding during this period will also be subject to interest on the amount due; meaning that the longer a return is left the larger the final tax bill will be.

Andrew Cowe, Senior Tax Manager at Thomas Coombs, said: “Every year thousands of people fall foul of HMRC’s strict deadlines for self-assessment tax returns, but it doesn’t have to be like this.

“At Thomas Coombs we understand that people are busy at this time of year, so it pays to get a helping hand with your tax return. Contacting an accountant isn’t always costly and it could save you hundreds of pounds in penalties.”

Andrew Cowe added that while the deadline was short there was still time for individuals to conduct tax planning in order to minimise their liabilities.

“It is never too late to speak to a tax adviser about opportunities to reduce your tax bill. There are a number of HMRC-approved tax reliefs on offer that some people may not be aware of or believe that they are not entitled to,” said Andrew Cowe

“In most cases a quick discussion with a tax professional will give you a better idea of whether you are paying too much tax.”

If you would like assistance with your tax return or would like to see if you could minimise your liabilities, please contact Andrew Cowe.

Stuart Adam, Thomas Coombs

A welcome boost for SME funding

The government’s move to introduce flexibility for replacement capital within Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes, as revealed in the recent Autumn Statement, has been welcomed by Leeds based Thomas Coombs which claims it is a boost for small business funding.

Replacement capital is finance that has previously been provided to a business but has been returned to the funder. Until now, EIS funding has not been allowed to replace that capital. However, the news that replacement capital may now be allowed within EIS and VCT regulations, subject to state aid approval, brings the UK in line with the EU.

Stuart Adam, Partner at Thomas Coombs said: “Replacement capital was not allowed under the original UK scheme regulations, but it is allowed under the overarching Global Block Exemption Regulations that govern tax-advantaged venture capital schemes in the EU.

“This is an anomaly that looks like it will be rectified, although it’s likely to be next year when the details are finalised. When it is though, the UK will be on a level playing field with the rest of the EU, which is going to be beneficial for the economy and strengthen the finance that is available to businesses.”

The move is likely to allow 50 per cent of any investment to be in the form of replacement capital up to a maximum of £5 million, limited to half of this figure in any rolling 12 month period.

“I think that this news could result in a new source of funding for SMEs as well as giving private investors greater flexibility over the companies they invest in,” said Stuart Adam.

If you would like more information, please contact Stuart Adam.

SMEs will benefit from Autumn Statement says Thomas Coombs

Leeds based accountancy firm Thomas Coombs has today welcomed measures announced in the Autumn Statement that are set to benefit SMEs and ensure their success, but fears for individuals buying a second home.

Recognising the financial burdens faced by SMEs, Chancellor George Osborne announced that the Small Business Rate Relief (SBRR) in England will be extended until April 2017. This means that around 405,000 of the smallest businesses will continue to receive 100% relief from business rates, with a further 200,000 benefiting from tapering relief.

In addition, SMEs should be able to access finance more easily following news that the government plans for Experian, Equifax and CreditSafe to receive SME credit information from designated banks and provide equal access to this information to all financial providers.

Finally, for SMEs looking to take on an apprentice, George Osborne declared that small businesses will continue to receive support. First mentioned in the 2015 Summer Budget, the apprenticeship levy, which will be introduced in April 2017, aims to raise £3bn a year and will be set at 0.5% of the payroll bill. However, as there will be a £15,000 allowance, only around 2% of UK employers will pay it. The policy plans to redress the shortfall of skills in the British economy – which the Chancellor said is, “one of the enduring weakness of the British economy” – and create three million apprenticeship positions by 2020.

However, a new stamp duty rate for people buying homes as buy-to-let properties and second homes will be 3% higher than normal stamp duty.

Christopher Darwin, Partner at UK200Group member firm Thomas Coombs said: Today’s Autumn Statement has shown that the government sees the importance of SMEs for this country’s economy. By promoting competition for SME credit and encouraging more apprentices to start work, as well as extending the Small Business Rate Relief, the Chancellor has shown that he is committed to supporting the UK’s SMEs.

“The rise in stamp duty for buyers of buy-to-let properties and second homes will affect our clients as there are a great many scenarios that mean individuals could be affected. I would urge anyone that is unsure of their situation to contact me for advice.”

If you would like advice on any of the subjects raised in the Autumn Statement, please Christopher Darwin.

Stuart Adam, Thomas Coombs

HMRC has set its sights on the affluent, warns Thomas Coombs

Leeds – based accountancy firm Thomas Coombs is warning those with high incomes to get their tax affairs in order as HM Revenue & Customs bolsters its Affluent Unit.

HM Revenue & Customs (HMRC) has announced this week that it has doubled the number of inspectors trawling through the tax files of individuals earning £150,000 or more.

The so-called ‘Affluent Unit’, which concentrates on people who earn enough to pay the 45 per cent additional-rate tax, has increased its headcount by 54 per cent in two years, from 213 in 2012/2013 to 327 in 2014/2015.

Before now, the taxman has mainly investigated ‘high net worth’ individuals who earn £1 million or more.

However, Thomas Coombs believe the increase in the number of tax investigators may indicate that they are now turning their attention to those further down the income scale.

Stuart Adam, Partner of Thomas Coombs, said: “This growth in the Affluent Unit reflects HMRCs drive to improve revenue collection across the board.

“We have seen that this unit is especially interested in those owning property in the UK and abroad or who use offshore bank accounts. Individuals that have filed self-assessment returns late or anyone who has previously invested in a scheme devised to reduce tax bills may also be a target.

“If anyone is concerned that they might be the subject of a tax investigation now or in the future should contact a professional who can act on their behalf to minimise any potential penalties.”

For more information please contact Stuart Adam.