22
Aug, 2024

Tips at work

Tips received at work do not count towards your earning for the purposes of the National Minimum Wage. However, you are still required to pay Income Tax on these tips and may also need to pay National Insurance.

The person who is responsible for reporting the tax, and whether National Insurance is payable, depends on how the customer provided the tip and how tips are managed at your workplace.

Tips can be paid:

  • directly from a customer in cash or electronically, for example through a mobile app;
  • as part of your pay packet from your employer; or
  • through a separate system for managing and sharing out tips at your workplace (known as a ‘tronc’).

The Department for Business and Trade together with the Department for Business, Energy & Industrial Strategy published A Code of Best Practice on Service Charges, Tips, Gratuities and Cover Charges during October 2009.

Employers are not legally required to follow the Code of Practice, but if they do they should have a policy on tips that includes information on:

  • how tips are distributed or shared;
  • the name of the person responsible for managing tips (if there is one);
  • if tips paid directly to staff members by customers are treated differently;
  • any deductions taken from tips; and
  • what happens during leave, for example holidays, sick leave, parental leave.

Please note, it is illegal for an employer to pay wages ‘cash in hand’ without deducting the required tax and National Insurance contributions.

Source:HM Revenue & Customs | 19-08-2024
22
Aug, 2024

Definition of living together

There are many tax reliefs available to married couples or civil partners. In many cases, these reliefs are only available if the couple / civil partners meet the legal definition of living together.

This definition of ‘living together’ is set out in the Income Tax Acts as follows:

Individuals who are married to, or are civil partners of, each other are treated for the purposes of the Income Tax Acts as living together unless:

(a) they are separated under an order of a court of competent jurisdiction;

(b) they are separated by deed of separation; or

(c) they are in fact separated in circumstances in which the separation is likely to be permanent.

It is important to understand that the three alternatives mentioned all require the spouses or civil partners to be separated, meaning their marriage or civil partnership must have broken down. However, if the couple are not living together but their marriage or partnership has not ended, they are still considered to be living together for Capital Gains Tax purposes.

HMRC’s internal manuals on the transfer of assets between spouses discusses this point when talking about a transfer of an asset. The transfer of an asset between spouses or between civil partners will be treated as transfer at no gain/no loss if they are living together.

The date of separation is crucial in determining whether an asset transferred between spouses or civil partners is considered to have been transferred at no gain or loss.

Source:HM Revenue & Customs | 19-08-2024
22
Aug, 2024

Late filing penalties VAT returns

The VAT penalty regime that applies to the late submission and / or late payments of VAT returns changed for VAT return periods beginning on or after 1 January 2023. Under the new regime, there are separate penalties for late VAT returns and late payment of VAT.

The system is points-based. This means that taxpayers will incur a penalty point for each late VAT submission. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). For quarterly VAT returns, the penalty points threshold will be 4 points. The penalty points will reset to zero following a period of compliance, for quarterly returns this requires 12 months of compliance. There are time limits after which a point cannot be levied. 

There are also late payment penalties. A first payment penalty of 2% of the unpaid tax that remains outstanding 16-30 days after the due date. The second payment penalty increases to 4% of any unpaid tax that is 31 or more days overdue.

Late payment interest will be charged from the date a payment is overdue until the date it is paid in full. Late payment interest is calculated as the Bank of England base rate plus 2.5%.

Source:HM Revenue & Customs | 19-08-2024
22
Aug, 2024

No change to Corporation Tax rates?

The Corporation Tax Main Rate applies to companies with profits exceeding £250,000 and is currently set at 25%. For companies with profits up to £50,000, a Small Profit Rate (SPR) of 19% is applicable.

At present, there are no indications that Corporation Tax rates will rise from April 2025, but further clarity is expected at Budget Day on 30 October.

For profits between £50,000 and £250,000, a marginal rate of Corporation Tax is used to smooth the transition between the lower and upper limits. The lower and upper thresholds are also adjusted proportionately for short accounting periods of less than 12 months and for companies with associated entities.

Marginal relief gradually increases the effective Corporation Tax rate from 19% at profits of £50,000 to 25% at profits over £250,000. To calculate the Corporation Tax due, you will need to multiply taxable profits by the main rate of 25% and subtract the marginal relief. For the current 2024 fiscal year, the marginal relief fraction is 3/200.

Source:HM Revenue & Customs | 19-08-2024
22
Aug, 2024

Update on High Income Child Benefit Charge

Changes to the High Income Child Benefit Charge (HICBC) came into effect on 6 April 2024. The income threshold at which HICBC starts to be charged increased to £60,000 (from £50,000).

The charge is calculated at 1% of the full Child Benefit award for every £200 (2023-24: £100) of income between £60,000 and £80,000. (2023-24: between £50,000 and £60,000). For taxpayers with income above £80,000 (2023-24: £60,000) the amount of the charge is the same as the amount of Child Benefit received. The HICBC therefore either reduces or removes the financial benefit of receiving Child Benefit.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

Even if HICBC applies to you or your partner, it’s generally still beneficial to claim Child Benefit as doing so can safeguard certain benefits and ensure your child receives a National Insurance number. Claims can be made by using the HMRC app or online resources. New claims are automatically backdated for up to 3 months or to the child’s birth date if later.

Taxpayers can choose to continue receiving Child Benefit – and pay the tax charge – or opt to stop receiving benefits and avoid the charge.

Source:HM Revenue & Customs | 19-08-2024
22
Aug, 2024

What is an appropriate address for a company?

One of the key changes introduced as part of the Economic Crime and Corporate Transparency Act (ECCTA) was the introduction of new rules for registered office addresses. The ECCTA introduced new statutory objectives for the Registrar of Companies which they must promote when performing their functions. The changes took effect from 4 March 2024.

Under the new rules registered office addresses companies must, at all times, have an ‘appropriate address’ as their registered office.

An address is an ‘appropriate address’ if, in the ordinary course of events:

  • a document addressed to the company, and delivered there by hand or by post, would be expected to come to the attention of a person acting on behalf of the company; and
  • the delivery of documents there is capable of being recorded by the obtaining of an acknowledgement of delivery.

If a company's registered office address fails to meet the necessary requirements, it is deemed unsuitable. In such cases, Companies House may take action against the company and its officers for committing an offense.

If Companies House determines that a company's registered office is inappropriate, it can be changed to a default address maintained by Companies House. Should a company’s registered office be moved to this default address it must provide a suitable address and proof of ownership within 28 days. Otherwise, Companies House may initiate proceedings to strike the company from the register.

Companies using an agent’s address or another third-party provider’s address as their registered office, must ensure the address meets the requirements for an appropriate registered office address.

Source:Companies House | 19-08-2024
20
Aug, 2024

Persistence pays off

Persistence in following up leads is a crucial trait in many fields, especially in sales and practice business development. It involves consistently pursuing potential opportunities, contacts, or information, even when initial efforts do not yield immediate results.

Here’s why persistence is important and how it can be effectively practiced:

Importance of Persistence:

  1. Maximizing Opportunities: Not all leads will convert immediately. Persistence increases the likelihood of turning a lead into a successful opportunity by maintaining communication and demonstrating commitment.
  2. Building Relationships: Consistent follow-up helps to build trust and establish a relationship with the lead. This is essential when converting your prospects into new client instructions.
  3. Standing Out: In competitive environments, the most persistent individuals often stand out from the crowd. Persistence shows dedication and can differentiate you from competitors who give up after the first attempt.
  4. Overcoming Obstacles: Initial resistance or rejection is common. Persistence allows you to overcome these barriers, often leading to eventual success.
  5. Continuous Learning: Through persistent follow-up, you gather more information, refine your approach, and adapt to the needs of the lead, which improves your overall effectiveness.

How to Be Persistent in Following Up Leads:

  1. Set a Follow-Up Schedule: Create a timeline for following up with leads. This might involve setting reminders to check in after a certain period, ensuring that no lead is neglected.
  2. Automation: Many of these follow-up processes can be automated using email marketing techniques

The key is to see that it is a series of planned follow ups that is your best option to increase conversions. Do not give up if success does not come early.

Source:Other | 19-08-2024
20
Aug, 2024

Business leaders collaborate to Make Work Pay

British workers are set for better working conditions as the Government takes its first steps towards its Plan to Make Work Pay.

The Deputy Prime Minister and Business Secretary convened a meeting with trade unions and business leaders in a first-of-its-kind meeting 14th August 2024.

They agreed to wipe the slate clean and begin a new relationship of respect and collaboration to help deliver the Government’s first mission – to kickstart economic growth.

They discussed views on the Employment Rights Bill and wider Plan to Make Work Pay, with the Deputy Prime Minister and Business Secretary.

This comes soon after the Deputy Prime Minster and Business Secretary decided to overhaul the remit of the Low Pay Commission to deliver early progress on the Make Work Pay plan and put more money in working people’s pockets.

The Employment Rights Bill – which will play a key role in delivering the Plan to Make Work Pay – will be introduced within 100 days of entering Government.

As part of its Make Work Pay plan, the Government has committed to:

  • Ban exploitative zero hours contracts
  • End fire and rehire
  • Introduce basic rights from day one to parental leave, sick pay, and protection from unfair dismissal
  • Strengthen the collective voice of workers, including through their trade unions, and create a Single Enforcement Body to ensure employment rights are upheld
  • Make sure the minimum wage is a genuine living wage by changing the remit of the independent Low Pay Commission so for the first time it accounts for the cost of living
  • Remove the discriminatory age bands, so all adults are entitled to the same minimum wage, delivering a pay rise to hundreds of thousands of workers across the UK
Source:Other | 19-08-2024
15
Aug, 2024

Paying tax via your tax code

You may be able to have tax underpayments collected via your tax code when you are in employment or in receipt of a company pension. Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over the tax year.

You can pay your self-assessment bill through your PAYE tax code as long as these conditions apply:

  • You owe less than £3,000 on your tax bill (you cannot make a part payment to meet this threshold).
  • You already pay tax through PAYE, for example you are an employee, or you receive a company pension.
  • You submitted your paper tax return by 31 October or your online tax return online by 30 December. This means that that for the 2023-24 tax year you have until 30 December 2024 to file your online self-assessment returns in order to have the monies collected in the 2025-26 tax year starting on 6 April 2025.

HMRC will automatically collect what you owe through your tax code if you meet the three conditions set out above unless you have specifically asked them not to (on your tax return).

You will not be able to pay your tax bill through your PAYE tax code if:

  • You do not have enough PAYE income for HMRC to collect it.
  • You had paid more than 50% of your PAYE income in tax.
  • You had ended up paying more than twice as much tax as you normally do.
  • You owed £3,000 or more but made a part payment to reduce the amount you owe to less than £3,000.
Source:HM Revenue & Customs | 12-08-2024
15
Aug, 2024

What is Gift Hold-Over Relief?

Gift Hold-Over Relief defers the payment of Capital Gains Tax (CGT). It can be claimed when assets, including certain shares, are gifted or sold below their market value to benefit the buyer. The relief allows any gain on the asset to be 'held-over' until the recipient sells or disposes of it. This is achieved by reducing the recipient's acquisition cost by the amount of the held-over gain.

The person giving a qualifying asset is not liable for Capital Gains Tax (CGT) on the gift itself. However, CGT may be due if the asset is sold for less than its market value. Gifts between spouses and civil partners do not usually incur CGT. A claim for the relief must be made jointly with the person to whom the gift was made.

If you are giving away business assets you must:

  • be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company'); and
  • use the assets in your business or personal company.

You can usually get partial relief if you used the assets only partly for your business.

If you are giving away shares, then the shares must be in a company that is either:

  • not listed on any recognised stock exchange; or
  • your personal company.

The company's main activities must be in trading, for example providing goods or services, rather than non-trading activities such as investment activities.

Source:HM Revenue & Customs | 12-08-2024