MAKING TAX DIGITAL (MTD)

On no ……. not another change imposed by UK Government which brings more red tape, compliance and inevitable cost! I’m afraid so and we groan even as we write about it.

Apparently Making Tax Digital (MTD) is meant to improve the processing of tax returns for individuals and businesses. Wow – that would be great if it does what it says on the tin!

In case you missed it, the plans were first announced in 2015, and to be honest, most people are still not aware of what this means or how this will affect them. We know this because the ICAEW surveyed 500 business asking if they are aware of the new requirements and what steps they have taken to prepare for the changes and nearly half of respondents said they had not heard of MTD for VAT!

This might be the case for you and your business, and you may not be thinking about MTD because it’s not due to be completed in full until 2020; however implementation is already taking place now and the big shift will start for VAT from April 2019.

Just in case you were struggling to find some good reading material to send you to sleep at night or at work – here are a few questions and answers about MTD to help:

So, who does MTD affect?

Well, it will apply to almost everyone from individual tax payers, to the self-employed, landlords and most businesses.  HMRC have confirmed that they will allow for some exemptions such as “for taxpayers who cannot engage digitally” and for those who are below the minimum threshold of £10,000 annual sales.

And, what does MTD actually mean?

The main changes ahead revolve around:

To begin with – tax returns will all be completed digitally.

Already, every small business owner and individual tax payer can register for their online account and access it in order to check their records and manage their details with HMRC. To file your tax return digitally, you will be required to use certain types of software which we will discuss in more detail later on.

And then … – the annual tax return will be scrapped and instead be replaced with quarterly tax submissions in which you will need to declare your income tax and national insurance obligation.

It is not the case that you will need to submit a full tax return four times a year, but rather, submit more accurate updates more regularly to HMRC. This will mean that you will no longer have to wait until the end of the tax year to know how much tax you have to pay. (Yippee!)

Can you please tell me how MTD will help my business and me?

Well, we are informed that the changes planned for MTD are designed to improve the current processing of tax returns – hard to believe we know. Here are some of the answers we are being told:

Better use of information:

There will no longer be a need to submit the same information time and time again because HMRC will be able to see the data that is stored elsewhere such as from employers, banks, building societies and other government departments. You will also be able to see what data HMRC holds for you and check at any time that it is complete and correct.

Tax in real time:

With more regular updates, HMRC will be able to collect and process information affecting tax as close to real time as possible to help prevent errors and stop tax due or repayments owed building up.

A single financial account:

MTD will mean that by 2020 you will be able to see all your tax liabilities and entitlements in one place so you can be clear on where you stand and allow for more efficient budgeting.

Being able to handle your tax with HMRC digitally means being able to update information any time anywhere with an internet connection.

As MTD will rely on software and apps, it can go as far as allowing you to handle your tax with even just a mobile device, making the process much more convenient.

Can’t wait?? Well, here is some idea as to when you and the rest of us need to start making tax digital:

 What we understand so far is this:

Only businesses with a turnover above the VAT threshold (currently £85,000) will be required to submit digital records and only for VAT purposes from 2019 and it is planned that businesses will be required to submit other taxes digitally and quarterly from 2020 onwards

 

Like the couple above – it can be too much!  So, we will be back with some info and insights in the near future.  In the meantime if you are desperate to know more sooner please get in touch and drop us an email with your query to: hello@jeffreyahuddart.co.uk

 

Gill Johnson joins the Huddart Team

Gill Johnson’s first passion was triggered 30 years ago by what has been dubbed ‘the soap wedding to end all soap weddings’ – when Neighbours favourites Scott Robinson (Jason Donovan) and Charlene Mitchell (Kylie Minogue) walked down the aisle in Australia.  You may remember (that will betray your era) that UK viewers had to wait over 18 months to watch Episode 523 (premiered in 1987) when the episode finally reaching BBC1 in November 1988.

It pulled in nearly 20 million viewers one of whom was a very young Gill Johnson who became so starry eyed (understatement!) over Jason Donovan that when she celebrated her 21st birthday it was time to follow her passion and head to Australia where she lived and worked for 2 years.

Gill’s return to the UK was driven by another passion of hers which is her family.   While still in Australia her mum sadly become unwell and she came home immediately to be with her during a very tough time.  This decision proved how key it is to follow your passion as her mum passed away the next year and Gill, to this day, enjoys such positive and happy memories of that special time.

Now back in England and pursing her own career, her husband started his own business and as it grew and developed he desperately needed help in the back office with accountancy services and asked Gill to get involved.

Gill was at that time and travelled to places like China and Hong Kong so it was quite a leap to get involved in the family business and in particular the accountancy side of it which was totally new.  In her own words she fell into her next passion, accountancy, through getting involved in the family business which gave her an appetite for accounts and motivated her to enrol at North Trafford College and pursue her accountancy exams (AAT).

We are delighted that Gill, who lives locally, continues to follow this passion and has joined us as an Accounts Assistant and is already proving to be a super addition to the Huddart Team.

While she is without question following her passion for accountancy, she still has a little bit of a passion left for Australia.  In June 2018, along with her husband and young family, she took part in the BBC programme ‘Wanted Down Under’.  It will be screened in January 2019!

We have appointed Gill to help us as a firm follow our passion which is – to build a strong and positive relationship with our clients beyond the invoice and help them manage and improve their business (their passion) in both the good times and the bad of starting, growing and completing the life-cycle of business.

 

ANNOUNCEMENT

We are delighted to announce that Richard Goodman FCA of Goodmans Chartered Accountants, Whitefield, Manchester has merged his practice with ours.

Richard founded his practice in 1984 and has been considering retirement for some time and been looking for an acceptable firm with which to merge his practice.  When asked why he chose to join forces with Huddarts he said it was because of our shared vision for clients, our Chartered status, business experience, resources, and the excellent rapport we have built up over the last few months.

Going forward, we are excited to share that Richard will be working with Huddarts over the next couple of years during which we’ll be working together on the smooth transfer of client relationships, his detailed knowledge of their affairs, and to ensure that it is business as usual in all respects.

In the meantime if you are one of Richard’s clients reading this announcement you are more than welcome to pop into our office in Worsley.  It is on Walkden Road near the railway station, next to the florist with free parking out front, at the side and the rear.  (Sat Nav co-ordinates: M28 7DP)

 

 

3 POTHOLES TO AVOID WHEN SELLING YOUR BUSINESS

I read somewhere a little while ago that around 15 – 20% of UK business owner/managers are looking to sell their business at any one time which could be you if you are reading this.

There are many twists and turns and ups and downs on the road of selling your business and over the years we have, from experience, discovered a number of ‘potholes’ which can easily interrupt, slow down and even halt the process entirely. According to www.potholes.co.uk potholes are a major factor in causing axle and suspension failure, which costs British motorists an estimated £2.8 billion every year. So they can and do cost money and create real frustration and that is exactly what they do in the selling process. While there are more I have chosen 3 potholes we have encountered in our experience.  Here they are:

1. Giving minimum preparation to an exit

In an ideal world it is best to have a clear exit strategy and preparation for a sale begin 2-3 years in advance of a completion.

In all honesty, in the real world this rarely happens and many owner managers have a wake-up call of some kind be it their health, stage of life, or unpredicted personal circumstances which forces a speedy decision to put their business up for sale. Once they have decided it is time to sell they start looking for an offer they have constructed in their heads before thinking about what happens next. In our experience this failing to plan and prepare in is a real pothole.

Why is it a pothole? Well, with minimum preparation when a potential buyer begins to put the spotlight on the business for sale, more often than not, things appear which can trigger a dilution of confidence in the buyer which can lead to a reduction in what is offered. When this due diligence process is underway you can be sure that time and money will have already been spent and it is not uncommon for the seller to feel that they are beyond the point of no return and therefore accept a lesser sale price than what was first envisaged. There have been occasions when the buyer’s spotlight has shown up something which is totally unacceptable and consequently pulls out of the process entirely.

So it is always best to know that lack of planning and preparation can be a real pothole and that it can be avoided with good planning and preparation.

2. Thinking it is a DIY (Do It Yourself) process

Most owner managers are so used to being in control doing most things for their business that they can perceive that selling their business is something they can easily do themselves as they know it best and believe that somewhere in their network they can do a deal.

To be fair, they do know it best however whatever the size or nature of the business, selling it can get complicated and does suck up so much of an owner/managers time that they can easily take their eye of the ball in terms of running their business.

Often the DIY approach neglects to put in place a non-disclosure agreement for the protection of the business but the normal argument for the this approach is that it saves money by removing some of the professional fees normally incurred from lawyers and accountants. The outcome can disadvantage the seller in terms of the strength of their negotiating position as well as overlook key elements which are necessary to get the process from start to finish. It is a specialist field and we have found that choosing the DIY approach is a real pothole which can be avoided by having advisors who are experienced in the process.

3. Procrastination

Procrastination as we all know is the habit of delaying an important task, usually by focusing on less urgent, more enjoyable, and easier activities instead. It is different from laziness, which is the unwillingness to act. This is a real pothole for owner managers and it rears its head in deciding when to sell and also at the point a buyer puts an offer is put on the table.

It is of course common sense that the most opportune time to sell a business is when there is no pressure to. When you sit down and think about it the best time to sell and achieve the best price is when the sales and profit graph are on the up. Procrastination in choosing when to sell can lead to trying to sell it when the graph is flat lining or dipping and in that scenario there is a real risk in dilution of value.

We have found that even when a buyer is in play it is terribly important to stop procrastination or a drawn out process seeping in. Why? Because the longer a deal takes and the slower it proceeds the less likely it is to cross the finishing line. Whether it slows down through protracted negotiation on the heads of terms, or one side feels they are paying too much and the other that they are not getting enough, or a post deal consultancy agreement is not adequate, or integration is not thought through enough, or not enough warranties are in place or there is the loss of a feel good factor, it is crucial to fix the differences quickly and not delay.

The formation of a deal is when both parties are meant to be showing their very best performance and their highest standards so that trust, goodwill and energy is being established in equal measure by both sides. Get it right before completion and there is a greater probability that it will go right post completion.

www.potholes.co.uk states that if all authorities were given the budgets they need to fix their roads, it would take English authorities 12 years to catch up with the current backlog, and Welsh authorities 14 years. Potholes are real on the road and on the road to selling your business. Avoid them at all costs!

 

|Tom Bathgate MBA|July2018|tom.bathgate@broadthunder.co.uk|

Pensions are changing!

Pensions are changing

People in the UK today can expect to live longer than ever before. The number of retired people will rise by more than a third by 2050 but there will be relatively fewer people saving.

In 2008 the government introduced new pensions laws to get people saving. The idea is to help people to save by giving them access to a workplace pension scheme so they don’t have to rely on just the State Pension.

Many workers will be enrolled into a workplace pension without having to ask. This is called auto enrolment (AE).

After they join, workers will be able to put money from their pay into a retirement pot that will be ready for them later in life. Most workers will also be entitled to a contribution from their employer and from the government in the form of tax relief.

These are big changes to the way pensions will work in the years ahead.

Auto enrolment

Most workers in the UK are going to be automatically enrolled into a workplace pension scheme by their employer. From the date they’re automatically enrolled they’ll have a month to choose not to join, or ‘opt out’. If they do nothing they’ll be enrolled in the scheme. They’ll make contributions to their retirement pot from their pay for as long as they’re employed or until they take their money out.

Workers and employers can both contribute into NEST to build a retirement pot that’s invested on behalf of the worker. Workers who earn over a certain amount are entitled to a minimum contribution into their pot when they’re paid.

Minimum pension contributions

Minimum contributions are based on what’s known as ‘qualifying earnings’. Qualifying earnings are a section of a worker’s pay. For the 2018/19 tax year this is everything over £6,032 and up to £46,350. The qualifying earnings band is reviewed by the government each year.

Workers who earn at least as much as the lower threshold each year are entitled to a minimum contribution into their retirement pot.

The minimum contribution rate itself only applies to a worker’s qualifying earnings. So in the 2018/19 tax year, a worker’s minimum contribution will be 2.4 per cent of everything they earn over £6,032 but not of anything they earn over £46,350.

How minimum contributions are worked out

The minimum contribution is made up of money from a worker’s pay, money from their employer and tax relief from the government.

Employers can choose a more straightforward way of calculating their minimum contributions if they want to make things simpler. As long as the contribution is at least as much as the minimum, then employers will still be complying with their new duties.

The minimum contribution was introduced at 2 per cent of a worker’s pay. This is currently 5 per cent and will increase to 8 per cent in April 2019 (as illustrated above).

At Huddart’s we set up our workplace pension with NEST (National Employment Savings Trust).

Employers who set up their auto enrolment pension schemes with NEST end up feeling pretty good about it all. It could be the quick and straightforward set up. It could be that it’s free to use. Or perhaps it’s knowing that NEST has been set up by the government.

Every employer in the UK has to offer their staff a workplace pension scheme. Over 600,000 employers have already signed up to NEST. Joining them couldn’t be easier and we would welcome the opportunity to help you do this!

Source: https://www.nestpensions.org.uk/schemeweb/nest.html