Tax

Research and Development (R&D) tax relief can prove an extremely valuable tax relief and, for companies carrying out significant qualifying R&D projects, it may mean not having to pay any corporation tax for many years or even claiming a repayment from HMRC.

Despite the above it still remains a relatively under-claimed relief with companies believing the rules and qualifying criteria to be complex and prohibitive. However this is not the cause. Get in touch today to find out how easy the process is: hello@dixcartuk.com.

>> Download Now

Tax

There are several incentives offered by the Government that small or medium businesses (SME) can access now to help them invest and grow.

1. Claim up to £5,000 with the Employment Allowance

Employment Allowance allows eligible employers to reduce their National Insurance Contribution (NIC) liability each year. Last month, HMRC increased the Employment Allowance from £4,000 to £5,000 to further benefit SMEs, which is a new tax cut worth up to £1,000 for nearly half a million SMEs.

Businesses will pay less Employers’ Class 1 National Insurance each time they run their payroll until the £5,000 has gone or the tax year ends (whichever is sooner), if their Class 1 National Insurance liabilities were less than £100,000 in the previous tax year. To find out if your business is eligible, get in touch today or find out more here.

2. Help to Grow: Get a discount of up to £5,000 on new software

The Government provides two ‘Help to Grow’ programmes to assist SMEs grow their business and build towards reaching its full potential:

• Help to Grow: Digital

This is a UK-wide Government backed scheme which allows businesses to choose, buy, and adopt digital technologies which will help their business develop.

Eligible businesses can receive a 50% discount when buying new software, worth up to £5,000 per SME. Businesses can also access online, free impartial advice and support about how digital technology can boost their business’ performance. 

• Help to Grow: Management

This scheme provides SMEs with access to a 12-week learning course on a range of topics from leadership and financial management to marketing and digital adoption, all designed to fit alongside work commitments.

This management course is 90% funded by the Government so businesses only pay £750, and it is delivered through leading UK business schools and by one-on-one support from expert business mentors.

By the end of the management programme, businesses will have developed a business growth plan to help reach their full potential.

To be eligible, businesses must be a UK-based SME, actively trading for at least one year, and have a total of between 5 – 249 employees.

3. Get up to half off Business Rates – from April 2022

There is a new business rates relief scheme which allows businesses such as small retail, hospitality, and leisure properties worth £1.7 billion in 2022/23, to benefit from 50% off their business rates bills, up to a cash cap limit of £110,000 per business.

The Government will reimburse local authorities that use their discretionary relief powers to grant relief. To find out which properties can benefit from relief, please get in touch or find out more here.

In addition, the business rates multipliers, which are used to calculate how much business’ rates should be paid, have been frozen for another year. For 2022 to 2023 the business rates multipliers are 49.9p for the small business multiplier and 51.2p for the standard multiplier.

From April 2022 there are no business rates due on a range of green technology, including solar panels and batteries, whilst eligible heat networks will receive 100% relief, helping business save around £200 million over the next five years.

4. Invest in your Business: Super-deduction and Annual Investment Allowance (AIA)

• The Super-deduction

For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments and a 50% first-year allowance for qualifying special rate assets.

Under the super-deduction, for every pound a company invests in any qualifying machinery and equipment (which can include the purchase of computers, most commercial vehicles, and office furniture), their taxes are cut by up to 25p ensuring the UK capital allowance regime is amongst the world’s most competitive.

• Annual Investment Allowance (AIA)

The AIA provides 100% relief for plant and machinery investments up to its highest ever £1 million threshold until 31 December 2021. Originally due to revert to £200,00 at the start of 2022, the extension of the £1 million limit for the Annual Investment Allowance allows businesses to spend up to £1 million on qualifying business equipment and deduct in-year its full cost before calculating taxable profits.

You can only claim AIA in the period you bought the item. The date you bought it is:

• when you signed the contract, if payment is due within less than 4 months, or
• when payment is due, if it’s due more than 4 months later.

You cannot claim AIA on business cars, items owned for another reason before starting the business, and items given to the business or business owner(s).

For more information, please get in touch or find out more here.

5. Fuel Duty

From 23 March 2022, the Government has implemented a 5p per little fuel duty cut on petrol and diesel for 12 months.

This cut, with the additional freeze in fuel duty in 2022 to 2023, will represent a £5 billion saving worth approximately:

• £200 for the average van driver
• £1,500 for the average haulier

Further Information

If you have any further related SME queries, please get in touch and we can give you tailored financial advice for your business. To find out what other support may be available for your business, please contact Paul Webb at hello@dixcartuk.com, or search ‘business support’ on GOV.UK.

Tax

If you own or work for a company with assets of £30 million or less, it may be able to offer Enterprise Management Incentives (EMI).

Companies can grant employees share options, up to the value of £250,000 in a 3-year period. Employees will not need to pay Income Tax or National Insurance if they buy shares for at least the market value of the shares when granted the option.

EMI Share Schemes is a Government approved, tax beneficial and very flexible way of incentivising key staff members. This guide outlines some of the most common options within the scheme to do this, from the Growth Share Scheme to the Phantom Share Scheme.

Click here to download the complete guide.

Companies that work in ‘excluded activities’ are not allowed to offer EMIs. Excluded activities include:

• Banking
• Farming
• Property development
• Provision of legal services
• Ship building

For further information on EMI Share Schemes, please contact Paul Webb, or email hello@dixcartuk.com.

Tax

The tax card outlines the business and individual tax rates for the tax year of 2022/23. All the essential tax facts, rates and figures are provided in one handy PDF, offering an easy point of reference all year round.

>> Download Now

Tax

It is that time of year again – when we are thinking about your P11Ds. We are pleased to provide you with this handy guide on benefits in kind.

What are benefits in kind?

Benefits in kind (BIKs) are benefits that employees or directors receive from their company which isn’t part of their salary package. Under general tax law most benefits are taxable remuneration and have to be reported to HMRC and any tax or NICs paid. 

There is a wide range of benefits in kind – from company cars to private healthcare that need reporting to HMRC.

Taxable benefits

A main list of taxable BIKs, including:

• Company cars
• Fuel for a company car for the employee’s personal use
• Loans for rail season tickets
• Interest free loans to employees/directors over £10,000
• Home phones with personal use
• Private Health Insurance
• Clothing allowance that is not essential for the employee’s job role
• Provision of Living Accommodation

Non Taxable Benefits

A few examples where circumstances may mean no tax is paid include:

• Parties and similar functions for all staff, costing no more  than £150 ‘per head’, including VAT and associated costs such as transport.
• Provision of one mobile phone where the employer contracts directly with the supplier. Any other contract or payment is taxable and NI’able and has specific treatment depending upon who the contract is with and how it is paid.
• Free or subsidised meals available for all employees. Working lunches are also tax free if available to all.
• Subscriptions for an individual who is a member of a professional body approved by HMRC.
• Car parking
• Approved mileage allowance payments for use of an employee’s car on business.

1^st 10,000 miles                                        45p per mile

Excess mileage                                         25p per mile

Motorcycles                                             24p per mile

Bicycles                                                      20p per mile

Passengers                                                 5p per mile

• Business travel but not ordinary commuting. These rules are complex especially for regular travel to a ‘temporary workplace’ and if this lasts more than 24 months.
• Relocation expenses up to a value of £8,000, subject to specific rules.

Trivial Benefits

There is a statutory exemption from tax and NIC for trivial benefits costing £50 or less. This only applies if the following conditions are met:

• The benefit cannot be cash or a cash voucher (Gift Vouchers are allowed)
• The average cost per person does not exceed £50 for each event
• The benefit is not provided through a salary sacrifice arrangement
• The benefit is not provided in recognition of services performed by the employee

To avoid smaller companies taking advantage of this, any benefits provided to directors or other office holders (or their families) have the exemption capped at a total cost of £300 per tax year.

Normal employees do not have this £300 limit but the exemption does apply to family or household members so if there is a function where partners are invited then each employee’s partner can share the £50 trivial benefit for the particular event.

If any of these conditions are not satisfied, the benefit is taxed in the normal way, subject to any other exemption (such as the annual staff function exemption). Importantly, if the cost exceeds the £50 limit, the whole of the benefit is taxed, not just the excess.

The rules around benefits in kind are complex and each example needs to be looked at based on its individual circumstances to see if any tax is payable by the employee and/or your company. There are many limits and exceptions within each of the options.

We will be pleased to assist in the review of the treatment of any expenses payments, which may not be covered above.

Reporting a benefit in kind

Benefits in kind are reported on a P11d form by the employer, not the employee. 

If a company offers their employees any of the taxable benefit in kind examples listed above, they will need to be included on your P11d.

A company will also need to file a P11d(b) form, which summarises the individual P11d forms they have completed for their employees and how much National Insurance will need to be paid. A company has to pay NICs at a rate of 13.8% for the tax year 2021/2022 of the determined values of the benefits in kind.

The P11ds must be filled by 6^th July 2022 for the tax year running 6^th April 2021 to 5^th April 2022.

P11d penalties for late filing

If you miss the deadline of 6^th July your company will incur fines of £100 per every 50 employees per month, or part month, until payment is received. You will also be charged penalties and interest if you are late paying HMRC.

Important Comment

Inform each employee of the details being returned before the form is submitted to HMRC so employees can point out any mistakes.

Further Information

If you do have any further related P11d queries, please get in touch and we can give you tailored advice on what your company needs to do to ensure compliance.

If you would like more information, please contact Edita Rendall or Paul Webb at hello@dixcartuk.com or your usual Dixcart UK contact.

Tax

R&D Tax Relief is a UK Government backed incentive designed to encourage innovation and increase spending on Research and Development activities for companies operating in the UK.

For SMEs:

• A deduction of 230% of the amount spent on R&D can be made from taxable profits, reducing the corporation tax due.

For loss making companies:

• The scheme allows up to 33.35% of a company’s R&D spend to be recovered as a cash repayment.

However, claims are often overlooked.

Business owners often; over-estimate the level of innovation that is required in order to claim, don’t know about the relief, or simply suspect that it is too good to be true!

To find out; what qualifies, how R&D tax relief is calculated and how to apply, please see: R&D Tax Credits

Tax

The reintroduction of the Statutory Sick Pay Rebate Scheme (SSPRS) means that employers with fewer than 250 employees will be able to claim up to two weeks’ SSP per employee for COVID-related sickness absences occurring from 21 December 2021.

Employers will be eligible for this support if they:

• are UK-based;
• employed fewer than 250 employees on 30 November 2021;
• had a PAYE scheme at 30 November 2021; and
• they have paid their employees’ COVID-related statutory sick pay (SSP).

The scheme will cover COVID-related sickness absences occurring from 21 December 2021. There are no details indicating when the scheme will end other than the government will keep the scheme under review.

If an employer made a claim for an employee under the previous scheme, they will be able to make a fresh claim for a new COVID-related absence for the same employee of up to two weeks.

As a reminder, employers must keep records of SSP that they have paid and want to claim back from HMRC. The following records supporting the claim must be kept for three years after the date the employer receives the payment:

• the dates the employee was off sick;
• which of those dates were qualifying days (ie, the days that the employee would normally work);
• the reason they said they were off work due to COVID-19;
• the employee’s national insurance number.

Claims can be made directly by the employer or we can make claims on behalf of our clients. 

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb in the UK office: advice.uk@dixcart.com.

Tax

It is well known that, under current proposals, the sale of cars fuelled wholly by diesel or petrol will be banned by 2030 but perhaps less well known is that a ban on the sale of hybrid cars is then set to follow from 2035.

For business owners and employers who provide their employees with company vehicles there are some substantial tax benefits on offer in the next few years for making the switch to pure electric.

Tax Relief on Acquisition

Businesses that want to buy a zero emissions or electric vehicle can benefit from a 100% corporation tax relief on the purchase price in the year of purchase – provided that the car is new and unused

This is a particularly attractive incentive for owner-managed companies, especially where the company director might be looking for a new electric car for themselves.

If the business leases the vehicle, then the lease payments for an electric car are fully deductible against tax for the employer, although VAT recovery is limited to only 50% of the VAT cost, where the vehicle is used privately by the employee.

Tax Cost for the Employee

Whether the car is bought or leased, the other major benefit of switching to electric – for both employee and employer – is the drastically reduced benefit in kind (the amount on which tax and employer’s NIC is payable).

The percentage for diesel and petrol cars increases the more polluting they are and can go as high as 37%. In contrast, for 2022/23, the percentage for an electric car is a very modest 2% – resulting in a much lower value for the taxable benefit in kind. This results in savings of income tax for the employee and Class 1A NIC for the employer.

Another advantage is that it is still possible for an employee to give up salary for their vehicle via salary sacrifice, without being caught by the Optional Remuneration Arrangements (OpRA) rules. These rules mean that when an employee gets a choice between an amount of salary or a benefit, they are usually taxed on the higher of the cash equivalent of the benefit or the salary forgone. But where the employee gives up some salary for an electric car then the employee can still only pay tax on the cash equivalent of the benefit in kind if this is less than the salary given up.

Fuel or Should that be Charging Up ?

There are also incentives for employers to provide workplace charging facilities so that employees can benefit from the convenience of charging while they are at work.

An employer paying to install electric charging equipment can claim 100% of the cost as a first-year allowance – again receiving immediate upfront tax relief – and they can also recover the VAT where the equipment is installed at their business premises.

There is no benefit in kind for the employee if they charge their company car up at the work premises – even if they then use that charge for private miles. This again compares very favourably to the position where an employee provides diesel or petrol for private use, where the benefit in kind cost for private fuel can be very expensive.

In fact, there is no benefit in kind applied to any employee who can charge up at, or near their workplace, even if the car is the employee’s own electric car rather than a company one, provided the facilities are available to all employees.

Time to Act?

At the present time, the favourable tax treatment as set out above, is set to run until March 2025.

However there is no guarantee how long these benefits will be retained so if employers want to take advantage of them, they should consider doing so sooner rather than later.

If you require additional information on this topic, please contact your usual Dixcart adviser or speak to Paul Webb in the UK office: advice.uk@dixcart.com.

Tax

Making Tax Digital for VAT

Making Tax Digital (MTD) is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs.

VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are currently required to follow the MTD rules by keeping digital records and using software to submit their VAT returns. This is voluntary if you are below the VAT threshold.

However, from 1 April 2022 ALL VAT-registered businesses will be required to follow MTD rules for their first VAT return, starting on or after April 2022. This includes businesses with rental income.

What does this mean for you?

You will be required to digitally record your bookkeeping and submit VAT returns using MTD compatible software, so your VAT returns can be filed directly with HMRC via APIs (Application Program Interfaces) rather than through existing portals.

“Digital” records can include use of spreadsheets, but these will need to contain a digital link. Alternatively, you can use ‘bridging software’ to connect to HMRC systems from your current system.

If you do not currently have compatible software, you may wish to upgrade at your account’s year end, to avoid switching during an accounting year.

If you are VAT registered but not yet signed up to MTD, you will need to sign up to MTD for VAT – you will not automatically be transferred to MTD. More information can be found here: Making Tax Digital for VAT.

How can we help?

Let us help you take this opportunity to review your existing processes and embrace technology. This will provide better information recording and therefore better insight into your business, as well as freeing up more of your time to do what you do best.

We can assist you with your digital bookkeeping and VAT compliance using MTD fully compatible software such as Xero, where your VAT returns can be submitted at the press of a button.

We can also help you find a solution using simple to use bridging software, which creates a link from your current bookkeeping system to HMRC.

We can do all of this for you, or we are equally happy to help you set it up yourself – whatever works best for you. For more information, please contact Julia Wigram.

Tax

Over the past few years, there has been an increase in customers buying goods and services using digital platforms and this has accelerated during the pandemic. This article will cover exactly what cryptoassets are and the tax treatment of crypto for both individuals and businesses.

What are Cryptoassets?

Cryptoassets, also known as ‘tokens’ or ‘cryptocurrencies’ or’crypto’, are cryptographically secured digital representations of value or contractual rights that can be:

• Transferred
• Stored
• Traded electronically

There are numerous types of cryptoassets and they each work in different ways. The main 4 types of cryptoasset that you may encounter are as follows:

• Exchange tokens – Intended to be used as a means of payment and this includes the most well know token, the bitcoin.
• Utility tokens – This provides the holder with access to particular goods or services on a platform. This is usually where a business will issue tokens and commit to accepting the tokens as payment for particular goods or services.
• Security tokens – This provides the holder with particular rights or interests in a business, such as ownership or entitlement to a share in future profits.
• Stable coins – These tokens minimise volatility as they are aligned to something that is considered to have a stable value, such as precious metals.

How HMRC Treats Cryptoassets

The tax treatment of all types of tokens is dependent on the nature and use of the tokens. It is not based on the definition of the token. HMRC does not consider the cryptoasset to be currency or money.

Tax Treatment of Cryptoassets for Individuals

Income Tax Treatment

The cryptoasset activity must be recognised as a trading activity for income tax rules to apply. To determine if a trading activity has taken place, HMRC will apply a series of tests known as ‘The Badges of Trade’. Any profits from this activity will be subject to income tax at an individual’s marginal rates (20%, 40% and 45%). There will also be Class 2 and 4 National Insurance due at the current rates applicable.

Capital Gains Tax Treatment

Where the transactions in cryptoassets are regarded as a personal investment, then they should be treated as a chargeable asset for Capital Gains Tax (‘CGT’) purposes. Any gain realised on a cryptoasset bought and subsequently sold, is subject to CGT at the current rate of 10% for a basic rate taxpayer and 20% for a higher rate taxpayer. Losses realised in the same way, can only be relieved against capital gains chargeable to CGT.

Non-Domiciled Individuals

The nature of cryptoassets is that they are decentralised, digital in nature, and do not have a physical location. Thus, determining the location or ‘situs’ of an asset is important for UK resident, non-domiciled individuals as it can change the tax consequences.

HMRC guidance has stated that the location of a cryptoasset is wherever the beneficial owner is resident. If the cryptoasset owner is resident in the UK, then the cryptoasset may also be located in the UK.

There is a need to watch out for the circumstances in which a UK resident, non-UK domiciled individual purchases cryptoassets using their untaxed foreign income or gains. They may have remitted those funds into the UK and triggered a tax liability on acquisition. If the individual then disposes of the cryptoasset and makes a gain, then the gain may also be taxable in the UK, without the benefit of the remittance basis of taxation.

Tax Treatment of Cryptoassets for Companies

Numerous transactions in cryptoassets by a company will invariably be regarded as trading for tax purposes. These profits will be subject to corporation tax at the current rate applicable (currently 19% for 2021 financial year). Any losses arising from cryptoassets are dealt with in the same manner as a trading loss.

However, if a business is not trading in cryptoassets, any profits will be treated as a chargeable gain for companies. The calculation of the gain would follow the pooling rules which also apply to shares and securities.

How We Can Help Crypto Investors

We are aware that HMRC are showing an increasing interest in Cryptoassets and their latest ‘nudge letter’ campaign will reportedly target UK taxpayers who may have failed to properly pay tax on their cryptoassets. 

HMRC are now armed with data gathered from cryptoasset exchanges and other sources, meaning that investigations into the UK tax affairs of crypto investors are likely to be imminent. 

Any taxpayers who receive a nudge letter, or who may be generally concerned about their tax position in respect of cryptoassets, should contact us as soon as possible to discuss the position. Please get in touch with Karen Dyerson, for more information.

Tax

Background

UK tax resident, non-domiciled, individuals who are taxed on the remittance basis, are not required to pay UK income tax and/or UK capital gains tax on foreign income and gains, as long as these are not remitted to the UK.

It is, however, crucial to ensure that this tax benefit is properly claimed.  Failure to do so  means that any planning undertaken by the individual might be ineffective and he/she might still be taxed in the UK, on a worldwide ‘arising’ basis.

For more information on domicile, residence and the effective use of the remittance basis please see Information Note 253.

Claiming the Remittance Basis

Taxation under the remittance basis in most cases is not automatic.

An eligible individual must elect this basis of taxation on his/her UK self assessment tax return.

If this election does not take place, the individual will be taxed on the ‘arising’ basis.

How to Claim the Remittance Basis on a UK Self Assessment Tax Return

The taxpayer must claim the remittance basis in the appropriate section of his UK self assessment tax return.

Exceptions: When You Do Not Need To Claim

In the following two limited circumstances, individuals are automatically taxed on the remittance basis without making a claim (but can ‘opt out’ of this basis of taxation if they wish to do so):

• Total unremitted foreign income and gains for the tax year is less than £2,000; OR
• For the relevant tax year:

• they have no UK income or gains other than up to £100 of taxed investment income; AND
• they remit no income or gains to the UK; AND
• either they are under the age of 18 OR have been UK resident in no more than six of the last nine tax years.

What Does this Mean?

Mr Non-Dom moved to the UK on 6 April 2021.  Prior to moving to the UK he researched “uk resident non-doms” online and read that he should be able to live in the UK on the remittance basis of taxation.

He therefore realised that if monies from the £1,000,000 bank account that he already held outside  the UK were remitted to the UK, these monies would be tax free.  He also realised that £10,000 of interest and £20,000 of rental income that he had received from an investment property outside of the UK would also benefit from the remittance basis and not be taxed in the UK.

He did not feel he had a UK tax liability and therefore did not correspond at all with Her Majesty’s Revenue &  Customs.

He did not formally claim the remittance basis and therefore the full £30,000 of non-UK income (interest and rental) was taxable, in the UK.  Had he properly claimed the remittance basis, none of it would have been taxable. The tax cost was significantly higher than the cost of filing a tax return.

Summary and Additional Information

The remittance basis of taxation, which is available for non-UK domiciled individuals, can be a very attractive and tax efficient position, but it is crucial that it is properly planned for and formally claimed.

If you require additional information on this topic, further guidance regarding your possible entitlement to use the remittance basis of taxation, and how to properly claim it, please contact your usual Dixcart adviser or speak to Paul Webb or Peter Robertson in the UK office: advice.uk@dixcart.com.

Tax

Prime Minister Boris Johnson announced on 7^th September 2021 a new UK wide ‘health and social care levy’ to address the funding crisis in this sector.

The new tax will begin as a 1.25% rise in National Insurance from April 2022:

• The current 12% rate on earnings between £9,564 and £50,268 will rise to 13.25%.
• The current 2% rate on earnings over £50,268 will rise to 3.25%.
• Workers above state-pension age will also contribute to the new levy.
• Employers will also need to contribute an additional 1.25% (employer national insurance is currently 13.8%).
• Anyone earning just under £10,000 will still be exempt.
• From 2023 this will become a separate tax on earned income and the National Insurance increase will appear on payslips as a “Health & Social Care levy”.
• From April 2022 a typical basic rate taxpayer earning £24,100 will contribute £180 which equates to £3.46 per week.

From April 2022 a typical higher rate taxpayer earning £67,100 will contribute £720 which equates to £13.85 per week.

Tax Increase on Dividend Tax Rates

From April 2022 there will also be an increase in tax of 1.25% on income received from share dividends, which will include company directors in receipt of dividend income from a company shareholding.

A basic rate tax payer is currently paying tax at a rate of 7.5% on dividend income and from April 2022 this will increase to 8.75%. A higher rate tax payer is currently paying tax at a rate of 32.5% and from April 2022 this will increase to 33.75%. An additional rate tax payer is currently paying tax at a rate of 38.1% and from April 2022 this will increase to 39.35%.