Announced in the Autumn Budget 2024, all double cab pick-up (DCPU) vehicles will once again be classified as cars for tax purposes, which will lead to significant tax increases.

Potentially a three-fold benefit-in-kind increase which is a devastating blow for tradespeople who rely on their trucks for work.

Primarily types of crew cab with a payload over 1 tonne have been classed as a ‘van’ for income tax and national insurance purposes, and only those with a payload of under 1 tonne deemed as ‘cars’.  Over the years, there has been a number of discussions and court cases with HMRC surrounding the classification of what ‘van’ actually means.

Autumn Budget 2024

“The government will treat double cab pick-up vehicles (DCPUs) with a payload of one tonne or more as cars for certain tax purposes. From 1 April 2025 for Corporation Tax, and 6 April 2025 for income tax, DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind, and some deductions from business profits.”

Impact of DCPU being a Car

From 1 April 2025 for corporation, and 6 April 2025 for income tax, DCPUs with a payload of one tonne or more will be treated as cars for the purposes of capital allowances, benefits in kind (BIK) and some deductions from business profits. This reclassification means that drivers will be liable to a much higher BIK tax, depending on the vehicle specifications.

The existing capital allowances treatment will apply to those who purchase double cab pickups before April 2025.

Furthermore, the transitional BIK arrangements will apply to employers that have purchased, leased, or ordered a double cab pick-up before 6 April 2025. In this case, they will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

Examples

If ordered or owned before the rule change, a Toyota Hilux Invincible X 2.8 Auto, would be treated as a commercial vehicle, taxed at a flat rate of £3,960 for 2024/25. As a 40% taxpayer, this would mean an annual BIK tax of £1,584.

If ordered after April 2025 as a company car with a P11D value of £47,542 and CO₂ emissions of 259g/km, the BIK rate would be 37%, totalling £17,591. That same 40% taxpayer, this now equates to £7,036 annually, an increase of £5,452 from the current tax rate.

Based on a company-owned Ford Ranger Wildtrack with the 2.0-litre turbo diesel engine and an automatic gearbox, this has a total value of £40,350. That particular truck emits 230g/km of CO2, putting it the highest BiK bracket for company cars and as such you’ll have to pay 37% of the truck’s value per year – bringing the total bill to almost £15,000.

Recommendation

In particular for businesses in construction, farming and other industries where pickups are used we recommend reviewing their current fleet and assessing the impact of the changes taking place in the new tax year.

As the new regulations do not come into effect before April 2025, we would advise to our clients to consider replacing some of the existing vehicles for DCPUs or consider taking out new DCPU leases before the end of the qualifying period to extend the beneficial tax treatment for up to 4 years.

Get in touch

If you would like further information on these areas, please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk

Conducting due diligence is a critical step in the process of buying or selling a business. It involves a thorough investigation to ensure that all aspects of the business are understood and that there are no hidden liabilities or risks. Here’s a comprehensive checklist of areas to cover during due diligence on a business sale:

1. Financial Due Diligence

• Financial Statements: Review the last 3-5 years of financial statements, including balance sheets, income statements, and cash flow statements.
• Tax Returns: Examine the company’s tax returns for the same period.
• Debtors and Creditors: Analyse aging reports to understand the collectability of receivables and the timeliness of payables.
• Debt Obligations: Identify any outstanding loans, lines of credit, or other debt obligations.
• Financial Projections: Assess the validity of the business’s financial projections and budgets.

2. Operational Due Diligence

• Business Model: Understand the business model, revenue streams, and profit margins.
• Key Customers and Suppliers: Evaluate relationships with major customers and suppliers. Review contracts and agreements.
• Stocks: Check the inventory levels, turnover rates, and valuation methods.
• IT Systems: Review the company’s IT infrastructure, software licenses, and data security measures.
• Facilities and Equipment: Inspect the condition and ownership status of facilities and major equipment.

3. Legal Due Diligence

• Corporate Documents: Review the company’s incorporation documents, bylaws, and minutes from board meetings.
• Contracts and Agreements: Examine all contracts and agreements, including leases, sales agreements, supplier contracts, and employment agreements.
• Litigation: Investigate any past, ongoing, or potential litigation or legal disputes.
• Intellectual Property: Verify ownership and protection of intellectual property, including patents, trademarks, copyrights, and trade secrets.

4. HR and Management Due Diligence

• Organisational Structure: Understand the organizational chart and the roles and responsibilities of key management.
• Employee Contracts: Review employment contracts, non-compete agreements, and benefit plans.
• Employee Turnover: Analyse employee turnover rates and reasons for departures.
• Cultural Fit: Assess the company culture and its alignment with the acquiring company’s culture.

5. Market and Competition Due Diligence

• Market Position: Evaluate the company’s position in the market and its competitive advantages.
• Industry Trends: Research current and projected trends in the industry.
• Competitors: Identify key competitors and assess their strengths and weaknesses.

6. Environmental and Regulatory Due Diligence

• Compliance: Ensure the business complies with all relevant local, state, and federal regulations.
• Environmental Impact: Investigate any environmental liabilities or compliance issues.
• Permits and Licenses: Verify that all necessary permits and licenses are in place and up to date.

7. Customer and Sales Due Diligence

• Customer Base: Analyse the customer base, including customer demographics, purchasing patterns, and customer satisfaction.
• Sales Performance: Review sales performance metrics, sales processes, and sales pipelines.
• Marketing Strategies: Assess the effectiveness of marketing strategies and campaigns.

8. Risk Assessment

• Business Risks: Identify any significant risks, including market risks, operational risks, financial risks, and legal risks.
• Risk Mitigation: Evaluate the strategies in place to mitigate identified risks.

9. Integration Planning

• Transition Plan: Develop a transition plan to ensure a smooth transfer of ownership.
• Synergies: Identify potential synergies and integration opportunities between the acquired business and the acquiring company.

Documentation and Reporting

• Due Diligence Report: Compile a comprehensive due diligence report summarising findings, highlighting potential risks, and making recommendations.
• Action Plan: Create an action plan to address any issues uncovered during the due diligence process.

Conclusion

Thorough due diligence helps mitigate risks and ensures informed decision-making when buying or selling a business. By systematically evaluating financials, operations, legalities, human resources, market position, and risks, buyers and sellers can achieve a fair and transparent transaction.

Get in touch

If you would like further information on these areas, please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk

Furnished Holiday Lets (FHLs) in the UK have specific rules that property owners must adhere to in order to qualify for various tax benefits. A summary of rules for each Property:

Qualification Criteria

1. Location:

• Must be located in the UK or the European Economic Area (EEA).

1. Furnishing:

• It must be furnished, meaning it should contain sufficient furniture and fittings for normal occupation​.

1. Commercial Letting:

• Let on a commercial basis with the intention to make a profit​​.

Letting Conditions

1. Availability:

• Available for letting to the public for at least 210 days in the tax year​​.

1. Actual Letting:

• It must be actually let for at least 105 days in the tax year. Days when the property is let to friends or relatives at zero or reduced rates do not count towards this total​​.

1. Pattern of Occupancy:

• No lettings for more than 31 consecutive days to the same person, and the total of such longer-term lettings must not exceed 155 days during the tax year​​.

Elections

1. Averaging Election:

• If you own multiple FHL properties, you can average the occupancy levels across all your properties to meet the letting conditions​​.

1. Period of Grace Election:

• If the letting conditions are met in some years but not in others, you can use a period of grace election for up to 2 consecutive years if you can demonstrate a genuine intention to meet the letting condition but were unable to do so​.

Tax Benefits

1. Deduction of Finance Costs:

• FHL owners can deduct the full amount of their finance costs, such as mortgage interest, from their rental income​​.

1. Capital Gains Tax (CGT) Relief:

• Qualifying FHLs can benefit from Business Asset Disposal Relief (BADR), which reduces the CGT rate to 10% on gains up to a lifetime limit of £1m​.

1. Capital Allowances:

• Owners can claim capital allowances on items such as furniture, fixtures, and fittings, which can be deducted from rental income​.

1. Pension Contributions:

• Profits from FHLs count as relevant earnings for pension purposes, allowing owners to make tax-relieved pension contributions​​.

However recent changes to the tax regime for Furnished Holiday Lets (FHLs) in the UK were announced in the Spring Budget of 2024, with the significant impacts set to take effect from April 2025.

Key Changes

1. Abolition of FHL Tax Advantages: Starting from April 2025, the special tax regime for FHLs will be abolished. This means the various tax benefits that FHLs currently enjoy will no longer be available. These include:

• Full Deduction of Finance Costs: Currently, FHL owners can deduct mortgage interest from their rental income. This will no longer be possible under the new rules​​.
• Capital Gains Tax (CGT) Relief: Business Asset Disposal Relief (BADR) allowed for a 10% CGT rate on qualifying gains. This will be replaced by standard residential property CGT rates of 18% for basic rate taxpayers and 24% for higher rate taxpayers (28% for disposals up to March 2024)​​.
• Capital Allowances: FHLs could claim capital allowances on items such as furniture and fittings. This benefit will also be removed​​.
• Relevant Earnings for Pension Contributions: Income from FHLs currently counts as relevant earnings for pension purposes, allowing for tax-relieved pension contributions. This will no longer be the case​​.

1. Anti-Forestalling Measures: From March 6, 2024, anti-forestalling rules will apply to prevent individuals from using unconditional contracts to lock in current tax benefits before the regime changes​​.
2. Transition Adjustments: Owners may need to make transitional adjustments, such as accounting for the disposal value of assets where capital allowances have been claimed​​.

Implications

• Increased Tax Burden: The changes will likely increase the tax burden on those owning FHLs, as they will lose the ability to deduct full finance costs and benefit from lower CGT rates.
• Impact on Pension Contributions: The loss of relevant earnings status for pension purposes could reduce the amount of tax-relieved pension contributions for owners.
• Potential Shift to Long-term Lettings: Without the tax advantages, property owners might consider shifting from short-term holiday lets to long-term residential lettings​​.

Strategic Considerations

Owners of FHLs should seek professional advice to understand the full impact of these changes on their financial situation and consider potential adjustments to their investment strategy. This might include evaluating the viability of continuing with holiday lets versus transitioning to long-term rentals or exploring incorporation options to mitigate tax impacts​.

These changes are part of broader efforts to address housing availability and affordability issues by reducing the tax incentives for short-term holiday rentals, thereby encouraging more properties to be available for long-term tenants​.

Get in touch

If you would like further information on these areas, please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk

Running a business involves staying on top of various regulatory changes and compliance requirements. Here are some important updates from Companies House that may impact your business operations:

Changes Effective March 4th:

1. Registered Office Addresses: Starting March 4th, it's important to note that PO Boxes will no longer be accepted as registered office addresses. However, an Agent/Accountant address remains acceptable. Ensure compliance by updating your registered office address accordingly.
2. Registered Email Addresses: All companies are now required to provide a registered email address for official correspondence.

Upcoming Fee Adjustment on May 1st:

1. Companies House Fees Increase: Beginning May 1st, 2024, Companies House fees will undergo adjustments to support ongoing reforms. Find the full list here.

Forthcoming Changes (Date to be Announced):

1. Enhanced Information Scrutiny: Companies House will have increased authority to query, remove, or reject inconsistent or incorrect information.
2. Stricter Company Name Checks: Expect additional scrutiny on company names entered into the register.
3. Annotations and Data Accuracy: Companies House will flag potential issues and remove inaccurate information through improved data matching.
4. Data Sharing and Identity Verification: Enhanced data sharing with government departments and law enforcement agencies, coupled with stringent identity verification requirements for company owners, runners, or new setups.
5. Account Filing Amendments: A reminder that accounts must be filed electronically, and small or micro-entity companies will encounter changes in the details required.

We understand that staying compliant with these regulatory changes can be overwhelming. Rest assured, our team is here to assist you every step of the way. If you have any questions or require assistance with these updates, please don't hesitate to reach out to us.

Get in touch
If you would like further information on these areas please contact one of the team.

Since 1 April 2023, the rules have changed such that the rate of corporation tax that a company pays, and when, is now dependent on the level of its profits as well as the number of its associated companies.

Rate of corporation tax

With effect from 1 April 2023, standalone companies with profits exceeding £250,000 are subject to tax at the new main rate of 25%. Companies with profits below £50,000 continue to be taxed at the current rate of 19%. Companies with profits of between £50,000 and £250,000 are taxed at the 25% rate but are entitled to marginal relief.

The relevance of Groups of companies and/or associated Companies, is that the profit thresholds need to be divided by the number of ‘associated companies’ to determine the rate of tax payable.

Associated companies

The previous ‘related 51% group company’ rules have been repealed and replaced by the associated company rules with effect from 1 April 2023. Accounting periods straddling this date will be split into two notional accounting periods and profits apportioned on a time basis. Profits apportioned to the first notional period will be taxed at 19% accordingly and the tax rate applied to profits of the second notional period will be determined by the number of companies associated at any time from 1 April 2023 until the end of that accounting period.

A company is associated with another if, at any time in the chargeable accounting period (a) one company has control of another, or (b) both companies are under the control of the same person or group of persons.

This is an extension to the previous rules where, broadly, one company had to be a 51% subsidiary of the other or both companies had to be 51% subsidiaries of the same company.

This change in definition now takes into account control by individuals and could, therefore, bring in companies which were previously ignored. As an example, an individual directly holding 100% of the shares in four separate trading companies will see all four companies treated as associated from April 2023. In this example, each company will be subject to tax at the main rate of 25% when its profits exceed £62,500 (that is £250,000/4).

Some group companies do not need to be treated as associated companies including:

• dormant companies;
• passive holding companies (essentially with no activity other than receiving and distribution of dividends); and
• companies owned by associates of that person (or persons), providing the relationship between those companies is not one of ‘substantial commercial interdependence’.

To determine control of a company, it is necessary to look at the shares held by a person as well as their associates. An associate would include the individual’s spouse or civil partner, lineal descendants, ancestors and siblings.

On the face of it, therefore, a company owned wholly by one spouse would be associated with a separate company owned wholly by the other spouse, unless it can be demonstrated that there is not substantial commercial interdependence between the two companies. Examples of instances where there may be substantial commercial interdependence include:

• Financial interdependence – including where one company has made a loan to the other or both companies have a financial interest in the same business.
• Economic interdependence – such as both companies having common customers or the activities of one company benefitting the other.
• Organisational interdependence – which could include the two companies employing the same people, having the same management team or sharing premises/equipment.

Quarterly instalment payments regime

As well as determining what rate of corporation tax will apply, associated companies will also need to be considered to establish whether a company is large or very large for the quarterly instalments payment regime.

A company is deemed to be large and required to make quarterly payments where it has taxable profits of at least £1.5 million, divided by the number of associated companies at the end of the last accounting period. A company will normally have a grace period for the first year it is deemed to be large unless its taxable profits for that year exceed £10 million divided by the number of associated companies, again at the end of the last accounting period.

Accelerated instalment payments applies to ‘very large’ companies where taxable profits exceed £20 million, again divided by the number of associated companies at the end of the last period.  There is no ‘year of grace’ provisions for companies moving into the ‘very large’ payment regime.

Taking our earlier example, the four companies would previously have all had separate thresholds of £1.5 million and £20 million respectively for determining whether they fall within the instalments regime. From April 2023, however, each company would be treated as large if its taxable profits exceed £375,000 and very large at the point they exceed £5 million.

The new associated companies definition could therefore result in many more companies finding themselves within the quarterly instalments regime. The new associated company rules for instalment payments only needs to be considered for accounting periods beginning on or after 1 April 2023, with the related 51% group company rules continuing to apply for accounting periods straddling 1 April 2023.

Companies pushed into the large companies quarterly instalment regime for the first time from 1 April 2023 (assuming a 31 March year end) will be required to make their first instalment payment by 14 October 2023 (being six months and 14 days from the start of the accounting period commencing 1 April 2023) unless the ‘year of grace’ provisions apply. Those subject to the very large regime would have had to have made their first instalment payment by 14 June 2023 (being two months and 14 days from the start of the accounting period starting 1 April 2023).

Action to take

It will be important to understand the number of associated companies to estimate future tax liabilities and give consideration to rationalising the number of entities within the group to reduce the number of associated companies. This could be achieved by consolidating active companies and/or dissolving any companies with small/negligible trades.

Get in touch

If you would like further information on these areas please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk

A £50 gift to yourself and your staff!

If you are a Limited company, then you can give yourself a gift at Christmas as the company is giving the gift and not you! You can also give gifts to your employees. The limit is £50 and counts as a trivial benefit exemption so no Tax or NI is payable. This does not apply to cash – so it must be a gift. Vouchers not exchangeable for Cash up to £50 may be exempt under the trivial benefit rules. Where the voucher exceeds £50, you will need to report these on a P11D form to HMRC.  So, a couple of bottles of wine and some chocolates would count as a trivial benefit.

If you spend more than £50

Buying a gift that costs more than £50 (and this includes delivery charges) will count as a taxable perk for the employees that receive it. They will then have to pay tax and you as the employer will have to pay National Insurance. For example, if you were to give a £60 gift it will cost you a total of £85 because of the tax and NI due.

The gifts must carry a clear advertisement for the business (e.g. with branding or logo) which must be on the gift itself, not just the wrapping. They can’t be alcohol, food, drink, tobacco (unless they are your business) or vouchers. Non-promotional gifts and larger gifts are classed as entertaining and are not tax-deductible as an expense.

VAT and gifts

If you are not using the Flat Rate Scheme you are able to reclaim the VAT incurred on purchasing the gift. But you may, however, have to account for VAT on the value of the gifts if the gifts received by the recipient are more than £50 in a year. If a gift is exempt or zero-rated (i.e. a book) you will not have to account for the VAT.

Gifts for your clients – direct tax deductions

The gifts must carry a clear advertisement for the business (e.g. with branding or logo) which must be on the gift itself, not just the wrapping. They can’t be alcohol, food, drink, tobacco (unless they are your business) or vouchers. Non-promotional gifts and larger gifts are classed as entertaining and are not tax-deductible as an expense.

Cash bonus

Any cash (or cash equivalent) gift you give to employees as a Christmas bonus for example counts as earnings, so you’ll need to:

· Add the value to your employee’s other earnings

· Deduct and pay ‘Pay As You Earn’ (PAYE) tax and Class 1 NI via payroll

Virtual or in person Christmas Party

There is an allowance of £150 per employee for a Christmas party. Since the pandemic if you decide not to have an in person Christmas event HMRC will still let you have a virtual Christmas party and you can still have the £150 allowance per employee.

The costs can include food, drink, virtual pantomimes, online entertainment events and postage costs.  The VAT is reclaimable, but only for the staff costs, not partners.

Get in touch

If you would like further information on these areas please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk

The rules dictating when the trading profits of unincorporated businesses are subject to income tax are changing.

From April 2024, the existing basis period rules known as the ‘current year basis’, will be abolished and replaced with a tax year basis of assessment. Under the tax year basis, businesses will be subject to tax on their profits arising in the tax year, regardless of their accounting period end.

Tax year 2023/24 will act as a transitional year, to switch over from the current year basis to the new tax year basis.  In this transitional year, the basis period will be made up of two different elements:

• A 'standard part' being the normal basis period (i.e. the 12 months following the end of the basis period for 2022/23); and
• A 'transition part' running from the end of the standard part to 5 April 2024 (or 31 March 2024 if that date is used).

In effect, businesses will be required to bring into account an additional amount of profits running from the end of their normal basis period to the end of the 2023/24 tax year.

Two measures are allowed to reduce the impact of this:

• businesses can deduct any overlap relief they may have from the additional transition part profits; and
• any remaining transition profits can then be spread over a period of up to five years.

Get in touch

If you would like further information on these areas please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Today, the financial landscape for businesses and taxpayers in the UK received a significant update with the Chancellor of the Exchequer, the Rt Hon Jeremy Hunt MP, unveiling the Autumn Statement. Packed with measures aimed at bolstering economic growth, supporting enterprises, and enhancing the employment scenario, this statement also heralds a wave of administrative reforms to modernize and streamline the tax system. Let's delve into some of the pivotal announcements that will shape the financial terrain in the coming months.

National Insurance Contributions (NICs) Adjustments

One of the headline changes revolves around adjustments to National Insurance rates. Effective January 6, 2024, the main rate of Class 1 employee NICs will decrease from 12% to 10%. Simultaneously, from April 6, 2024, the main rate of Class 4 self-employed NICs will be reduced from 9% to 8%. In a further move, starting April 6, 2024, individuals with profits exceeding £12,570 won't be mandated to pay Class 2 NICs, although they'll retain access to contributory benefits, including the State Pension. Those within the profit range of £6,725 to £12,570 will continue receiving benefits through National Insurance credits, while individuals earning below £6,725 can still opt to pay Class 2 NICs voluntarily for access to contributory benefits.

Extension of NICs Relief for Hiring Veterans

In a gesture of support for veterans transitioning to civilian employment, the government has prolonged the NICs relief for employers hiring former members of the UK regular armed forces. This extension, stretching until April 5, 2025, grants employers a reprieve on the secondary Class 1 NICs for the initial 12 months of a veteran's first civilian job.

Permanent Full Expensing for Capital Allowances

Previously introduced as temporary measures, the Spring Budget 2023 saw the inception of first-year allowances for qualifying expenditure on plant or machinery. The latest announcement solidifies the permanence of full expensing and the 50% first-year allowance, removing the previous expiry date of March 2026.

Tax Reliefs and Support

The Autumn Statement also heralds an array of measures aimed at bolstering various tax reliefs. Enhanced support for R&D-intensive SMEs, an extension to freeport tax reliefs' 'sunset date,' and administrative changes to creative industry tax reliefs are among the notable adjustments.

Making Tax Digital (MTD) Enhancements

In a bid to streamline the tax process for Income Tax Self Assessment (ITSA), the government is set to introduce design changes to MTD. These changes aim to simplify the system for taxpayers and their representatives, removing the need for an End of Period Statement and providing exemptions for certain taxpayers, including those without a National Insurance number.

National Minimum and Living Wage Uprating 2024-2025

Come April 1, 2024, eligible workers aged 21 and above across the UK will witness a substantial 9.8% increase in the National Living Wage, rising to £11.44 per hour. Furthermore, young individuals and apprentices on the National Minimum Wage will also see their wages uplifted to £6.40 per hour.

Off-Payroll Working (IR35) and PAYE Liability

Legislation proposed in the Finance Bill 2023 aims to empower organizations to mitigate additional PAYE liability under the off-payroll working rules. This adjustment allows for the accounting of Income Tax and Corporation Tax already paid by a worker and their intermediary in cases of client organization non-compliance. These changes will be effective from April 6, 2024.

The Autumn Statement of 2023 presents a tapestry of changes designed to propel economic growth, simplify tax procedures, and provide crucial support to various sectors. Stay tuned for further guidance and prepare for these changes to ensure a seamless transition into the revamped financial landscape.

Get in touch
If you would like further information on these areas please contact one of the team.

These reforms are designed to enhance transparency and to make tracking and investigating financial crimes simpler. However, it is worth noting that their administrative implications will have the most impact on small businesses.

The Companies House reforms include the following:

• The introduction of identity verification for all new and existing registered directors, People with Significant Control, and those delivering documents to the Registrar of Companies;

• The introduction of a new register of beneficial ownership which will seek to identify who ultimately owns and controls companies in the UK;

• Accounts will need to be filed digitally using commercial software and not via Companies House

• Anyone seeking to make filings on behalf of a UK entity must first be authorised by Companies House. This includes company secretaries, formation agents, solicitors and accounting firms.

• A company must have a registered office address which is “appropriate”, meaning somewhere that documents delivered to it would be expected to come to the attention of a person acting on behalf of the company and can be recorded by obtaining an acknowledgement.

• All companies to maintain a non-public “appropriate e-mail address” where messages can reach a person acting on behalf of the company.
• Changes to the financial information that small companies are required to file with Companies House. This includes the removal of the option for small companies to prepare and file abridged accounts and introduction of the requirement to file a profit and loss account;

• Companies House fees are expected to increase.

• New penalties for non-compliance with the requirements.

1) Who is affected by the Companies House reforms?

It is small companies that will be affected by the reforms. Small companies are defined as those that meet at least two of the following criteria:

• Turnover of £10.2 million or less
• 50 or fewer employees
• Gross assets of £5.1 million or less

The criteria means that most companies will be considered to be small companies.

2) What will be the impact of the reforms for those affected?

This will partially depend on the size and structure of the company.

• Increased compliance costs, particularly for businesses with several directors and Persons of Significant Control.
• Reduced flexibility in how companies can file their accounts.
• Greater transparency but less privacy, as more information about limited companies’ financial information will be easily available to the public.
• Larger risk of investigation by Companies House.

There will also be a requirement for all limited companies to file their profit and loss account at Companies House. Micro-entities will also need to file their profit and loss account but will remain exempt from needing to file a Director’s Report.

3) When will the reforms come into effect?

There is currently no timescale for when each of these Companies House reforms will be introduced, but the legislation is going through Parliament, after which Companies House will also need to update its systems prior to enactment. However, it is expected that these will take effect sometime in 2024.

Get in touch

If you would like further information on these areas, please contact one of the team.

Phone: 01508 333040

Email: office@abcabacus.co.uk

Website: abcabacus.co.uk

As an employee or a director working from home, you are allowed to reclaim reasonable ‘work from home’ expenses from your company.

Flat rate basis

HMRC allows you to reclaim a flat rate per month, depending on the number of hours a month you would typically work from home. Well actually, the flat rates are published for the self employed but on occasion we meet a director/employee who opts to use the flat rate rather than calculate an actual cost.

You don’t need to provide any records of the household expenses you’re claiming relief for.

• 25 to 50 hours a month =  £10
• 51 to 100 hours a month = £18
• 101 and more hours a month = £26

Actual cost basis

If you believe and can prove by way of a ‘fair and reasonable’ calculation that your actual costs are higher than £4 per week, then you may claim the higher sum.  You will need supporting evidence to show that the amount you are claiming is no more than the additional household expenses you have actually incurred.

You can claim:

Actual costs, which may include;

• Light, heat and power expenses
• Calls made on your home telephone or a second business line if incurred for business purposes
• Insurance, if there is business equipment insured under that policy
• Repairs if incurred on business equipment
• ISP/broadband costs, subject to the contract
• NOT ALLOWED IF the contract was in place before you started working from home
• A proportion of invoiced cleaning costs of your workspace
• NOT ALLOWED IF you pay cash wages with no receipt  to a cleaner
• Rent  – only where you have incurred additional rental charges wholly and exclusively for the purpose of running your business

You cannot claim:

• Mortgage capital, interest or rent on your home as you would have incurred these anyway
• Water rates
• Any other expenses that do not have receipts

The rules for directors and employees who work from home differ slightly to the self employed. Directors and employees are not allowed to claim rent or mortgage interest whereas the self employed can. A director, may however be able to rent out part of their property to the business and claim tax relief on mortgage interest and rent. This almost always results in a higher claim, however this leads to a potential for Business Rates, Increased Insurance and possibly CGT on eventual sale of the property.

Calculating an actual cost claim

1. % Space: Calculate the proportion of household space you use for business – No. of rooms used for business / No. of usable rooms in the house (exc. kitchens and bathrooms) – or square footage if your rooms are of disproportionate size
2. % Time: Calculate the amount of time the space is used for business. Hours per week used for business / 168 hours (24 x 7)
3. 3. % to Claim = % Space x % Time
4. 4. £ to Claim = the allowable costs x % to Claim

Get in touch

If you would like further information on these areas please contact one of the team.

Phone: 01508 333040
Email:office@abcabacus.co.uk
Website: abcabacus.co.uk

Accounting for crypto-currency trading requires adherence to the guidelines provided by HMRC.

Here are some key points to consider crypto trading:

• Classification: Cryptocurrencies are typically accounted for as assets. However, the specific classification may depend on the nature of your activities. As individuals, HMRC generally treats cryptocurrency trading as speculative in nature, while when for businesses, it may be considered trading or investing.
• Record-Keeping: It is essential to maintain detailed records of all cryptocurrency transactions, including dates, amounts, exchange rates, transaction fees, and any other relevant information. These records will help you calculate gains, losses, and any tax liabilities accurately.
• Valuation: Cryptocurrency values can be volatile, so it is important to determine a consistent method for valuing your holdings. Generally, the HMRC accepts valuations based on reputable exchanges or cryptocurrency price indices on the day of the transaction.
• Capital Gains Tax (CGT): For individuals, profits from cryptocurrency trading are subject to CGT. If the total gains from all your disposals in a tax year are below the annual CGT exemption threshold, no tax is due. However, if your gains exceed the threshold, then report and pay CGT on the taxable amount.
• Trading as a Sole Trader Business: If you are trading cryptocurrencies as a business, you may be liable to pay income tax on your trading profits instead of CGT. In such cases, you may also need to consider other tax obligations like VAT.
• Deductible Expenses: When trading cryptocurrencies as a business, you can deduct allowable expenses such as transaction fees, exchange fees, and professional fees from your trading profits. However, personal expenses unrelated to the business cannot be claimed.
• Reporting Obligations: If you are trading cryptocurrencies as a business, you must maintain proper accounting records and include the trading activity in your annual tax return. Individuals who make gains above the CGT exemption threshold should also report the transactions on their tax return.

It is important to note that as crypto is a relatively new concept that tax regulations are subject to change, consulting with a qualified accountant or tax advisor who is familiar with crypto taxation to ensure compliance is recommended.

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If you would like further information on these areas please contact one of the team.

Phone: 01508 333040
Email: office@abcabacus.co.uk
Website: abcabacus.co.uk

In the ever-evolving world of e-commerce, businesses in the UK must have a robust accounting system in place to navigate the complexities of online transactions. With the increasing popularity of online shopping, efficient e-commerce accounting is essential for managing finances, making informed decisions, and complying with UK regulations.

1.      Selecting Suitable Accounting Software: Choosing the right accounting software is the foundation of effective e-commerce accounting. Evaluate different platforms like QuickBooks Online, Xero, or Sage, considering their features, integrations, and compatibility with UK accounting standards. Look for functionalities such as VAT management, multi-currency support, and compliance with HMRC regulations to ensure smooth operations.

2.      Setting Up a Chart of Accounts: A well-organized chart of accounts is vital for accurate financial reporting. Customise your chart of accounts to include relevant categories such as sales revenue, cost of goods sold (COGS), shipping expenses, VAT accounts, and payment gateways. This structure enables you to track and analyse your finances effectively.

3.      Automating Data Entry: This saves time, minimizes errors, and provides real-time financial information. Integrate your accounting software with your e-commerce platform, payment gateways, and bank accounts. This integration automates the import of sales, expenses, and other financial data, streamlining bookkeeping tasks and reducing the risk of manual errors.

4.      VAT Compliance: A crucial consideration for e-commerce businesses. Ensure your accounting software can handle VAT calculations and reporting. Configure VAT rates specific to your products or services, set up reverse charge mechanisms for B2B transactions, and generate VAT reports to facilitate compliance with HMRC requirements.

5.      Inventory Management: Efficient inventory management is key for e-commerce success. Implement an inventory tracking system that syncs with your accounting software. This integration enables accurate tracking of inventory levels, COGS, and valuation. Additionally, utilise tools like SKU management, re-order points, and stock alerts to optimise inventory control.

6.      Bank Reconciliation: Regularly reconcile your bank accounts, payment gateways, and merchant accounts with your accounting software. This process ensures accurate recording of transactions and early identification of discrepancies. Reconciliation helps maintain the integrity of your financial records and provides a clear view of your cash flow.

7.      Financial Reporting and Analysis: Leverage the reporting capabilities of your accounting software to generate financial statements, such as profit and loss statements, balance sheets, and cash flow statements. Analyse relevant key performance indicators (KPIs) such as gross profit margin, average order value, and customer acquisition costs. These insights empower you to make informed business decisions and identify areas for growth.

8.      Cash Flow Management: Effectively managing cash flow is critical for the sustainability of any e-commerce business. Monitor your cash flow regularly, forecast future cash flows, and plan accordingly. Consider factors like seasonal trends, payment terms, and currency fluctuations to ensure sufficient working capital to support your operations.

9.       Audit and Compliance: Maintain proper financial documentation to facilitate smooth audits and comply with UK accounting regulations. Stay updated on changes in UK accounting standards and tax laws, such as Making Tax Digital (MTD). Review your accounting processes, implement internal controls, and limit access to financial information to minimize the risk of non-compliance.

Streamlining e-commerce accounting requires careful consideration of VAT compliance, accounting software capabilities, and adherence to UK accounting standards. By selecting suitable accounting software, automating data entry, managing VAT, implementing effective inventory management, and leveraging financial reports and analysis, you can optimise your e-commerce accounting processes. Incorporate the best practices discussed in this blog to enhance financial management and set your e-commerce business on a path to long-term success.

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If you would like further information on these areas please contact one of the team.

If you're considering starting a new business or changing your current business structure, we have included pros and cons of the two main structures available below.

Self-employed

This is the most popular way of running a business in the UK, and may be the best option if you want to get your company up and running quickly with minimal fuss. You can set the wheels in motion without worrying about filing annual accounts, paying corporation tax, or registering your business with Companies House.

Instead you just need to register for Self Assessment which is a simple process that can be done online. Following that your only administrative responsibility is to complete your Self Assessment tax returns each year. To help with this process you should get into the habit of keeping an accurate record of your expenses, receipts and invoices from day one.

A major drawback to this type of structure is that no legal distinction between yourself and the company exists; you as an individual are essentially the business. If the business fails for any reason, and there are debts outstanding, a self-employed sole trader is held personally liable for this and must ensure the debt is cleared. In extreme cases therefore, you could find yourself declared bankrupt as a result of your business’ financial difficulties.

You must pay income tax on any profits which take you above the personal allowance, currently £12,50 (22/23 tax year). You should be aware that your personal allowance includes any income received from other sources, for instance if you are in paid employment elsewhere. You are also responsible for making National Insurance contributions (NIC) on any profit above £6,365.

Limited company

Choosing to set up as a limited company is not as straightforward as registering as self-employed, and it does come with ongoing additional administration responsibilities. The business needs to be registered with Companies House, directors must be appointed and an annual tax return along with a set of accounts must be filed.

On the plus side however you could find yourself paying substantially less tax than you would as a sole trader. This is because you are able to take company profits as dividends instead of receiving this as income; dividends are taxed separately, and are not subject to NICs. Due to this, limited companies tend to have more complex accounting responsibilities; however you can employ an accountant to ensure you are fulfilling your tax and legal obligations.

A major difference between a limited company and a sole trader is that a limited company is classed as a separate legal entity to its shareholders and directors. This means that unless fraudulent activity has taken place, you as a director will not be held personally accountable for any financial difficulties the company finds itself in. This creates a clear distinction between your home life and your business, which helps to reduce the financial risk to those individuals involved with the company.

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If you would like further information on these areas please contact one of the team.

These are some pointers for looking after your business finances during the current economic climate – which we previously issued to clients during Covid

• Ask for a partial or full payment up front
• Invoice on completion – not at end of the month
• Reduce terms to 7 days – not the usual 14 or 30
• Offer 1-5% early payment discount
• Hit Milestones during a contract – so further invoice can be issued
• Request Progress Payments on longer projects/tasks
• Get sign-off on completion or milestone – to avoid payment disputes
• Systemise Billing process – Quickbooks can automate regular invoices
• If payment overdue – add interest – and collect this
• Factor the Invoice process – removes the risk at a small cost
• Negotiate longer payment terms from Suppliers
• Bulk buy at a discount
• Reduce stock levels
• Raise finance against assets – equipment or property
• Review costs – look at cancelling subscriptions where possible
• Reduce personal costs – so that lower drawings/salary/dividend can be taken

Get in touch
If you would like further information on these areas please contact one of the team.

It was wonderful meeting lots of new people and making some great contacts.

As part of our stand we held our 'Spin to Win' competition - we had three prizes available, highest, lowest and closest to 999!

We are delighted to announce our winners are as follows.

Highest - David Wickham
Lowest - Darran Vertigan
999 - Michelle Smith

Congratulations to you all - you should now have received an email from us with details around claiming your prize.

Prizes

Our prizes included a year's free subscription to Hammock.

Hammock is an accounting platform for landlords. It provides bookkeeping, tax statements and property investment metrics (loan to value ratio, rental yields, profit and loss, arrears balance and more). It also helps eliminate spreadsheets and paper notes, by giving you real-time access to your rental income and expenses.

Hammock also makes sure that you stay on top of compliance, sending you notifications and alerts about expiring documents and certificates.

If you sign up through ourselves, not only do we get preferential rates with Hammock, but we would also provide any advice and guidance on usage including initial set up.

If you are interested in how Hammock can work for you - get in touch today.