Originally written by Timothy Adler on Small Business
Small businesses struggling with Covid debt will not be forced to pay overdue tax to HMRC immediately, says business secretary Kwasi Kwarteng.
HMRC had manoeuvred itself to be first in line to be payed-out should a small business go bust post-Covid. Being pressured into payment by tax collectors can be an extremely unpleasant experience for owner-directors of small businesses.
But Mr Kwarteng has told the Institute of Directors and business group R3, which represents insolvency and restructuring practitioners, that HMRC will go easy on small businesses unable to pay tax because of Covid-19 debt.
>See also: Small business owners who duck out of repaying Covid debt face ban
The government wants to avoid a tsunami of insolvencies this summer.
The news will come as a relief to small business owners, who already have enough to worry about with a stop-start reopening post-lockdown just as Covid-19 financial support such as Bounce Back Loans start having to be repaid.
Insolvency practitioners have warned that many small businesses will struggle to stay afloat from July when emergency Covid-19 financial support measures begin to be wound down.
In a letter, obtained by the Financial Times, Mr Kwarteng wrote that HMRC would be updating its
Tag Archive for HMRC
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Mileage allowance in the UK – what is it and how does it work?
by Katerina Nicolova • • 0 Comments
Originally written by Katerina Nicolova on Small Business
Providing mileage allowance for employees who drive for work has become more popular in recent years. But with HMRC’s many rules, it can be confusing for employers and employees alike how this process works. This article will guide you through the main rules you should be aware of as an employer paying out mileage allowance, as an employee receiving the payments, and as self-employed – claiming deductions.
Mileage allowance for employees
My employees use their private vehicles for travelling for business. Do I have to provide them with mileage allowance payments?
As an employer, you are not obliged to pay a mileage allowance to your employees. However, many choose to reimburse their employees for business mileage, as anything paid under or at the same level of the approved mileage rates from HMRC is not reported to the authority.
Your company can choose to pay the exact amount of mileage allowance as stated by HMRC, less or more than it.
If you pay more per mile than the approved rate, the excess sum will be considered as personal benefits for your employee and they’ll have to pay tax on that amount.
To pay out MAPs (mileage allowance payments), your employees
Hot Business News Today
Mileage allowance in the UK – what is it and how does it work?
by Katerina Nicolova • • 0 Comments
Originally written by Katerina Nicolova on Small Business
Providing mileage allowance for employees who drive for work has become more popular in recent years. But with HMRC’s many rules, it can be confusing for employers and employees alike how this process works. This article will guide you through the main rules you should be aware of as an employer paying out mileage allowance, as an employee receiving the payments, and as self-employed – claiming deductions.
Mileage allowance for employees
My employees use their private vehicles for travelling for business. Do I have to provide them with mileage allowance payments?
As an employer, you are not obliged to pay a mileage allowance to your employees. However, many choose to reimburse their employees for business mileage, as anything paid under or at the same level of the approved mileage rates from HMRC is not reported to the authority.
Your company can choose to pay the exact amount of mileage allowance as stated by HMRC, less or more than it.
If you pay more per mile than the approved rate, the excess sum will be considered as personal benefits for your employee and they’ll have to pay tax on that amount.
To pay out MAPs (mileage allowance payments), your employees
Hot Business News Today
5 most common tax mistakes when you’re self-employed
by Simon Thomas • • 0 Comments
Originally written by Simon Thomas on Small Business
What’s worse when you’re self-employed? Having to pay your tax bill, or making a mistake and finding out you’ve overpaid?
Filing your small business taxes each year does not have to be stressful or painful. Tax can be a bit of a headache for anyone in business, and for the self-employed, it’s no different. The danger of getting taxed wrongly could mean submitting tax returns late, incorrectly, or not at all, leading to some hefty penalties and time-consuming investigations from HMRC.
>See also: How the newly self-employed should navigate the complex SEISS process
However, if you make sure to do little bits of work throughout the year, filing your taxes can be quite straightforward.
5 most common tax mistakes when you’re self-employed
Some stresses are easily avoidable. Make sure to avoid these 5 common tax return mistakes that many self-employed people make:
#1 – Not registering for self-assessment
If you earn more than £1,000 from one or more trades, you must register with HMRC. People commonly confuse this with the basic personal allowance and believe they do not need to register with HMRC unless they earn over a certain threshold.
This, however, isn’t the case.
Everyone is entitled to earn a certain
Hot Business News Today
5 most common tax mistakes when you’re self-employed
by Simon Thomas • • 0 Comments
Originally written by Simon Thomas on Small Business
What’s worse when you’re self-employed? Having to pay your tax bill, or making a mistake and finding out you’ve overpaid?
Filing your small business taxes each year does not have to be stressful or painful. Tax can be a bit of a headache for anyone in business, and for the self-employed, it’s no different. The danger of getting taxed wrongly could mean submitting tax returns late, incorrectly, or not at all, leading to some hefty penalties and time-consuming investigations from HMRC.
>See also: How the newly self-employed should navigate the complex SEISS process
However, if you make sure to do little bits of work throughout the year, filing your taxes can be quite straightforward.
5 most common tax mistakes when you’re self-employed
Some stresses are easily avoidable. Make sure to avoid these 5 common tax return mistakes that many self-employed people make:
#1 – Not registering for self-assessment
If you earn more than £1,000 from one or more trades, you must register with HMRC. People commonly confuse this with the basic personal allowance and believe they do not need to register with HMRC unless they earn over a certain threshold.
This, however, isn’t the case.
Everyone is entitled to earn a certain
Hot Business News Today
Super-deduction tax break – what is it and how does it work?
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
What is the super-deduction tax?
The super-deduction £25bn tax break, announced in last Wednesday’s Budget, is intended to spur investment by providing 25p off company tax bills for every pound of qualifying spending on plant and machinery.
How the super-deduction works
The super-deduction offers 130 per cent first-year relief on qualifying main rate plant and machinery investments from April 1 2021 until March 31 2023 for companies.
For most business equipment, there will be a super-deduction of 130 per cent of the expenditure incurred. This will mean that on a spend of £100,000, the corporation tax deduction will be £130,000, giving corporation tax relief at 19 per cent on £130,000, which is £24,700.
Normally such expenditure would either fall within a company’s annual investment allowance and produce relief of only £19,000 or alternatively be tax-relieved at 18 per cent of the cost per annum.
Nigel May, partner at MHA MacIntyre Hudson, said: “Companies looking to use this relief will need to take care when the assets that the expenditure relates to are sold: tax charges may then arise clawing back the relief. It is perhaps worth noting that certain expenditure is excluded, in particular the acquisition of company cars.”
What
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Super-deduction tax break – what is it and how does it work?
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
What is the super-deduction tax?
The super-deduction £25bn tax break, announced in last Wednesday’s Budget, is intended to spur investment by providing 25p off company tax bills for every pound of qualifying spending on plant and machinery.
How the super-deduction works
The super-deduction offers 130 per cent first-year relief on qualifying main rate plant and machinery investments from April 1 2021 until March 31 2023 for companies.
For most business equipment, there will be a super-deduction of 130 per cent of the expenditure incurred. This will mean that on a spend of £100,000, the corporation tax deduction will be £130,000, giving corporation tax relief at 19 per cent on £130,000, which is £24,700.
Normally such expenditure would either fall within a company’s annual investment allowance and produce relief of only £19,000 or alternatively be tax-relieved at 18 per cent of the cost per annum.
Nigel May, partner at MHA MacIntyre Hudson, said: “Companies looking to use this relief will need to take care when the assets that the expenditure relates to are sold: tax charges may then arise clawing back the relief. It is perhaps worth noting that certain expenditure is excluded, in particular the acquisition of company cars.”
What
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Small business should get HMRC refund to cover Covid losses, say MPs
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small business and the self-employed should get a tax refund to cover their Covid losses, an influential Treasury select committee has recommended.
Under a “loss carry-back” scheme, any business, whether it’s a limited company or a sole trader, would get a cheque back from HMRC reimbursing them for Covid losses, providing they paid tax in Britain for three years before the pandemic.
A similar policy was adopted during economic crises in 1991 and 2008.
>See also: Restart Grant for your small business – what is it and where to claim
The Government should also look favourably on a further extension of the Annual Investment Allowance – which provides tax relief for expenditure on most plant and machinery – and possibly keep it permanent at the current level.
In its Tax After Coronavirus report, the select committee says that now is not the time for tax rises or clawing money back post pandemic. That said, significant fiscal measures, including revenue raising, will possibly be needed in the future, MPs said.
A moderate increase in corporation tax could raise revenue without damaging growth, the committee agreed.
Rishi Sunak is reportedly going to announce a stepped increase in corporation tax from 19 per
Hot Business News Today
SME borrowing problems as HMRC creditor status changes
by Chris Williams • • 0 Comments
Originally written by Chris Williams on Small Business
SME borrowing problems lie ahead as HMRC is now a preferential creditor who will be paid ahead of floating charge or unsecured creditors in the event of a company insolvency.
What does this mean for businesses trying to raise working capital finance?
Previously, under the Enterprise Act 2002, creditors of an insolvent business were paid out of available funds by a liquidator in the following order:
Fixed charge creditors
Ordinary preferential creditors (effectively employees)
Secondary preferential creditors (FSCS)
Prescribed part carve out
Floating charge creditors
Unsecured creditors (incl HMRC)
From 1 December 2020, the Finance Act 2020 means HMRC is now a ‘secondary preferential creditor’ to be paid before floating charge creditors. This is important, because HMRC is often one of the largest creditors in an insolvency. Businesses collect various taxes (PAYE, NI, VAT) paid by their customers and employees, on behalf of HMRC, so if a business fails it usually fails with substantial amounts owed to HMRC in taxes collected, but not yet paid over.
Before the change, HMRC may not recover this tax revenue if there were also amounts owed by the insolvent business to floating charge creditors. This is because there would often be no funds left for distribution to
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Self-employed should pay equal tax with employees, says top thinktank
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The self-employed and small business owners should pay as much tax as the employed, influential think-tank the Institute for Fiscal Studies argues.
The current tax system does not really work for anybody, says the IFS in its report published today. The self-employed pay National Insurance and income tax at lower levels than their employed counterparts – often when they are doing the same job for companies.
The government is losing £15bn in tax revenue annually through the self-employed paying less tax, said the IFS.
>See also: You should file your tax return by January 31, despite HMRC extension
“There is a large, unjustified and problematic bias against employment and labour incomes and in favour of business ownership,” said the report. “The differential tax rates create inefficiency, unfairness, complexity and revenue loss.”
The IFS report said that for a job earning £40,000, a full-time employee could pay up to £4,300 more in tax than if the same work was done by someone with their own company.
And if you’re a self-employed partner in the financial services industry on a £308,000 average salary, you pay £20,000 less tax each year than someone doing the same job as a full-time employee.
Tax policy