Accidental landlords on the wain

The number of homes let by ‘accidental landlords’ has fallen for the first time in five years, a new report reveals.

So-called accidental landlords are those who didn’t buy a property with the intention of letting it out, but who have ended up doing so.

That’s usually because they cannot sell and need to move, or have decided to buy a new home and hold on to their existing property as an investment.

Research from lettings expert Hamptons International has revealed that one in 14 (7.1 per cent) homes that came onto the rental market this year had been listed for sale within the previous six months, the lowest level since 2015.

It says that since tax changes were introduced in the 2018 Budget, the proportion of homes let by accidental landlords has fallen.

The changes that come into being in April 2020 will increase the amount of tax some landlords, who have lived in their rental property at some point, will have to pay if they sell.

Aneisha Beveridge, head of research at Hamptons International, said: “Despite a weaker sales market, which tends to encourage accidental landlords, the proportion of homes to let having previously been listed for sale has fallen for the first time in five years.

“The tax changes being introduced in April 2020 will increase the capital gains tax bill for some accidental landlords who choose to sell after that date.

“Great Britain’s most expensive regions and where prices have risen the most, recorded the biggest fall in accidental landlords.

“This is unsurprising given that landlords in these areas will have seen the greatest gains and therefore could see their tax bills rise the most.”

As well as changes to capital gains tax, bigger potential stamp duty bills for buying another property and changes to tax on rental income have also contributed to the decline in accidental landlord numbers, the agency says.

Previously people could offset all their mortgage interest on the property against rent and only pay income tax on the difference.

However, this is being cut back to a maximum 20 per cent tax credit against mortgage interest, which will be in place fully from April next year.

Total rental revenue is also now added to a landlord’s income to decide their tax rate – previously it was only profit after interest that counted. That potentially means some will find themselves moving up a tax bracket.

To discuss any aspect of these changes and how they may affect you please contact me on 01772 430 000.

Calls for small business support grow

UK business leaders are calling for decisive action to support struggling small firms.

The Lancashire-headquartered Federation of Small Business (FSB) is calling for a major reduction in business rates bills for small firms, as thousands struggle to stay afloat amid spiralling operating costs.

It is calling for the ‘Retail Discount’ – which allows small retailers with rateable values of up to £51,000 to claim a 33 per cent discount on their rates bills – to be increased to at least 50 per cent.

And it wants the support to be made permanent and extended to small firms operating in other sectors, including manufacturing.

The organisation is also calling for the threshold for Small Business Rates Relief to be increased from £12,000 to at least £30,000.

The FSB has been arguing for wider business rate reform as confidence among small businesses falls and costs spiral.

Responding to ONS figures showing monthly retail sales were flat (0.0 per cent) in September, FSB national chairman Mike Cherry said: “The latest retail sales figures reflect a difficult year for the sector, and demonstrate the struggles our high street firms are currently facing.

“Confidence among small retailers remains low, with pressure from employment costs, high rents and competition from large, exclusively online brands.

He added: “While the retail rates discounts this year have been welcomed, these will soon come to an end – leaving us with a system that remains regressive and is not linked to a business’ ability to pay.

“Given the pressure on small businesses, improving the relief by increasing the 33 per cent discount to 50 per cent or more, making it permanent – and indeed extending it to include small firms across the economy, would help revitalise and reform town centres.”

The organisation also says small business want to see “a significant uprating” of the small business discount on national insurance bills available through the Employment Allowance.”

To discuss any issues raised by this article please contact me on 01772 430 000.

Loan Charge review announced

An independent review of the Loan Charge will be led by Amyas Morse, former chief executive of the National Audit Office, it has been revealed.

Announced by Chancellor Sajid Javid, the appointment follows months of pressure from MPs, taxpayers and campaigners concerned by the controversial charge and its impact on people.

The Loan Charge came into effect on April 6 and applies to anyone who used so-called ‘disguised remuneration schemes’.

The legislation added a 45 per cent non-refundable charge on all loans advanced through the schemes – some of them dating back to 20 years ago – unless the individual had agreed with HMRC to settle their tax affairs beforehand.

However, many of the 50,000 people caught up in the issue are low paid and were persuaded by their employers to join the schemes. Many of them are reported to be facing bankruptcy.

Yet, at the time the schemes were set up, HMRC did not question their legitimacy.

The Treasury says Sir Amyas will report back with his recommendations by mid-November, ahead of the January deadline when individuals would need to pay the charge.

The review will consider whether it is an “appropriate way” of dealing with individuals that entered the schemes.

Instead of being paid a salary that would be subject to income tax and national insurance, workers in these schemes were loaned money — typically via an offshore trust — on terms that meant the debt was unlikely to be repaid.

Financial Secretary to the Treasury Jesse Norman said: “These disguised remuneration schemes are highly contrived attempts to avoid tax, but it is right to consider if the Loan Charge is the appropriate way of tackling them.

“The government fully appreciates the concerns expressed by individuals, campaigners, and MPs who have raised concerns about the Loan Charge.”

The government says that while the review is under way the Loan Charge remains in force.

Federation of Small Businesses (FSB) national chairman Mike Cherry, said: “Telling sole traders that they’ll have an update on where they stand as late as November, with then potentially only two months to settle-up, is unreasonable, especially so in such an uncertain and unpredictable climate.

“The loan charge is causing misery for thousands of sole traders – many of whom were acting on the advice of employers or financial professionals when they agreed to schemes which were, at the time of participation, perfectly legal.

“Interventions like the loan charge make it impossible to plan for the future. Many who are playing fair when planning their tax affairs today will be wondering where else the Government might suddenly change the rules, start applying new laws to years past and demand big pay-outs.

“In future, HRMC should establish a tax efficiency white list, guaranteeing that – if the scheme is listed – you have cast iron protection from a retrospective grab if you use it.”

To discuss any business or personal tax matters please contact me on 01772 430 000.

Why it doesn’t have to be taxing!

With so many tax topics currently impacting on small businesses, it is little wonder that it can be struggle to keep up leaving owners and managers feeling intimidated by the whole process.

That is the starting point to a special information and advice session that WNJ is organising next month in conjunction with The Business Clinic.

We’ll be looking to help business owners better understand their tax bill and plan for their tax liabilities.

Originally scheduled to take place earlier this year, I’ll be delivering the advice clinic ‘Don’t Let Your Tax Become Taxing’ with my colleague Steve Towler on Wednesday November 27.

Steve deals with tax consultancy and compliance matters here at WNJ, principally for owner managed businesses.

That includes corporate reconstructions and exit planning, as well as advising on income tax, capital gains tax and inheritance tax matters.

The advice clinic is WNJ’s latest collaboration with The Business Clinic – a growing Preston-based community interest company set up to support businesses across Lancashire.

The Business Clinic delivers independent and thought-provoking strategy, skills and support to ensure healthier profits.

The organisation is run and supported by local business professionals like ourselves – who come from an array of different sectors and backgrounds.

They take part in surgeries and clinics giving businesses impartial support and advice and focusing on their strategy and development.

They include ‘peerworking’ surgeries that explore business opportunities and challenges and bespoke open clinics centre on business development and skills.

WNJ’s tax advice session will take place at The Business Clinic’s offices at Lockside Office Park in Preston from 6pm-8pm on November 27. To book your place online visit www.thebusinessclinic.org

And to discuss any tax matters in your business please contact me on 01772 430 000.

Why charities need an experienced auditor

The importance of charities appointing auditors and independent examiners with specific experience and a proper understanding of the sector has been underlined by a new report.

The study by the Charity Commission has revealed that only around half of the charity accounts reviewed met the regulator’s external scrutiny benchmark.

Nigel Davies, head of accountancy services at the Charity Commission, says: “We know from research we have carried out into public trust in charities that the public care deeply about transparency.

“It is therefore vital that charities are able to provide an accurate and clear picture of their finances.

“External scrutiny is an essential part of the checks and balances process that charity accounts go through and so it is disappointing that so many independent examiners and auditors appear to lack the necessary understanding of the external scrutiny framework.

“Those that are getting this right are playing an important role in upholding charities’ accountability to us as regulator, and the public.”

The team at WNJ has widespread experience working with a range of small charities, supporting them and working to understand their specific and special requirements.

It is important to remember that these organisations are totally different to limited companies operating in the commercial world.

Take their fundraising. A charity’s money can come from a wide range of sources, from local authorities, private donations and raffles.

Their stakeholders are also different and that also has to be borne in mind. Working with a charity is a different discipline to working in the commercial world.

A sample of 296 charity accounts was assessed in the latest study. The accounts were assessed against a new external scrutiny benchmark to determine whether a minimum standard of scrutiny by auditors and independent examiners had been met.

The commission drew the accounts, for the financial year ending in 2017, from three random samples of charities of different sizes.

It found that 46 per cent of the accounts failed to meet the benchmark, with standards worse for smaller charities.

Nigel Davies adds: “I hope trustees will learn from this study, in terms of the expectations around reporting, and in ensuring they select an independent examiner that knows about and understands the requirements.”

To discuss any aspects of this report and how we can help your charity please contact me on 01772 430000.

Nutrition specialist’s appetite for growth

A PRESTON family business set up two years ago to specialise in plant-based protein foods is going from strength to strength, with the support of WNJ.

NutreeLife won the prestigious Be Inspired in Business Award (BIBA) for best new business earlier this month.

And its team are hard at work planning for their move into new purpose-built food manufacturing premises in Burscough – a £1.2m investment in the nutrition specialist firm’s future.

NutreeLife is also working with British Olympic legend Daley Thompson on a new range of low-sugar protein sports bars.

The company began life at Red Scar in Preston and today has a turnover approaching £3m and a 13-strong staff.

The business was created to “make great nutrition accessible for all” and its founders have years of experience and dedication in the food, nutrition and beverage industry.

Chief executive Patrick Mroczak and managing director Adam Hodgkinson set out to establish NutreeLife after recognising a gap in the market for a vegan and ‘free-from’ range of protein supplements.

Patrick says the move to West Lancashire is needed to give the business the space it needs as it continues its growth.

The new state-of-the-art facility is currently under construction and will be completed by February next year.

He says: “We were delighted to win the BIBA and to have the work we have put into the business since we began recognised.

“These are really exciting times both for the business and the industry. We are operating in a really growing sector which has massive potential.

“We’re also finding that our innovative and flexible approach is giving us the edge on European manufacturers, with more businesses looking to make their products here in the UK.

“We are also very strong on new product development. We create bespoke recipes for our customers and we have previously invested £1m into our manufacturing operation.”

Patrick added: “We’ve been supported and helped by WNJ right from the beginning of our journey.

“The advice and guidance we have received from them has been invaluable in helping us to get where we are today.”

To discuss how WNJ can help support your business please contact me on 01772 430000.

Driving changes in company car tax

Do you know your WLTP from your NDEC? If you drive a company car or administer a company car scheme it pays to understand the distinction between the two.

And you may also want to review your company car needs in the light of changes to the tax rules coming in next year.

New vehicle emissions measuring standards coming in from 2020 mean the tax benefits from company cars may not be as useful as they once were.

The changes come as new figures from the UK reveal the rising tax burden for company car drivers. On average company car tax is now a staggering 50 per cent higher than it was 2009.

WLTP is the Worldwide Harmonised Light Vehicles Test Procedure, the latest way to measure vehicle emissions and fuel consumption based on something approaching real world data.

For cars registered from April 6, 2020, the WLTP figures will be the yardstick for company car tax – and vehicle excise duty.

NDEC is the New European Driving Cycle. Last updated in 1997, for years has provided emission and fuel consumption measures and is the current basis for company car tax.

To confuse things further NDEC numbers are being published that are calculated by adjusting the WLTP figures which manufacturers now must produce.

The switch from the older, inaccurate NDEC to the more realistic WLTP has resulted in increases to measured CO2 emission figures.

The size of the increase varies between vehicles, but European Commission research in 2017 suggested an average of 22 per cent for petrol cars and 20 per cent for diesels, with smaller engines attracting the largest rise.

Company car tax scales for 2020/21, when WLTP starts to apply to new vehicles, were set back in 2017, before the full impact of WLTP was understood.

Last month the Treasury announced that the company car scale rates set in the Finance (No 2) Act 2017 for cars registered after April 5, 2020, would all be cut by two per cent in 2020/21 and one per cent in 2021/22. NDEC figures will continue to be used for older cars.

There is some good news. In the next tax year electric-only vehicles will have a taxable benefit of zero – at present the benefit is 16 per cent of their list price.

The bad news is that other newly registered cars will mostly see an increase in their benefit value over the 2019/20 figure because of the higher WLTP measures of CO2 emission.

For example, a £30,000 petrol car with 104g/km NDEC emission now (and a 2019/20 taxable benefit of £7,200) could have WLTP emission figure of 126g/km, implying a 2020/21 benefit value of £8,400 if registered after April 5, 2020.

If you are due to change your company car in the next year, make sure you know what tax you are going to pay for it. It might be worth making sure the car is registered before April 6 2020.

And it could also make sense to review whether a company car now makes financial sense.

To discuss any issues arising from this article or any tax issues you may be facing please contact me on 01772 430000.

Higher wages spark price hikes

MORE than four in ten small companies in the UK have been forced to raise prices because of higher rates of basic pay, according to a new study.

The research from the FSB says business owners are cutting profits and productivity-enhancing investments in an attempt to absorb inflation-beating wage increases.

Some are even paying themselves less and cutting staff hours, according to the Lancashire-based organisation.

An increase to the National Living Wage (NLW) in April to £8.21 an hour saw seven in ten of the 1,000 businesses surveyed lower profits or absorb costs in an attempt to handle the hike.

The small business organisation is now warning against “arbitrary political targets” for wages and is urging caution from the Low Pay Commission (LPC).

April’s NLW increase coincided with the roll-out of fresh HMRC reporting requirements, higher employer pension contributions and increases to business rates.

Previous FSB research shows that the cost of government policy interventions to the average small firm is up £60,000 since 2011.

FSB national chairman Mike Cherry says that small business continue to be “ahead of the curve” when it comes to pay.

He said: “More than half were paying all staff the current National Living Wage before they were obliged to do so – an even greater proportion were doing so in the smallest firms.

“We’re now seeing more small business owners than ever saying that living wage increases are impacting the bottom line. Their first instinct is usually to take the hit personally, paying themselves less rather than cutting staff.

“While politicians are locked in a battle of who can make the boldest promises on pay, they fail to acknowledge that – within many smaller businesses – bigger pay packets often mean less investment, fewer training opportunities and higher prices.

“With pay now outstripping inflation, it’s harder and harder for small business owners to put funds aside for the investment needed to close the UK’s productivity gap.”

The FSB says higher minimum wage rates are “not a sliver bullet” with action needed on various fronts to end poverty and not simply burdening smaller businesses with more costs.

And it wants to see an independent ‘Low Pay Commission to determine future wage rate increases based on economic realities.

The organisation says that the government should also uprate the £3,000 Employment Allowance and deliver its manifesto commitment to a national insurance holiday for small businesses that take-on those “furthest from the labour market”.

To discuss any issues raised by this article please contact me on 01772 430000.

Not such a happy New Year for some

A glitch in the HMRC system means self-employed workers could be landed with an unwelcome start to the New Year – and a higher tax bill in January.

The implications for cash flow are obvious, where money set aside for your tax payments could end up being spent over the next six months.

And not to mention the usual post-Christmas expenses that most of us tend to find in the first month after the celebrations.

Self-assessment statements for payments on account affecting the self-employed have either not been sent out at all or show a zero balance where a payment was due on July 31.

And that means if you’re not entirely clear about when you need to pay what you owe, the consequences of the incorrect information may mean you have skipped an outstanding payment for July or have been undercharged.

When it comes to the next payment period in January 2020, you could be faced with a much higher bill to pay to cover the missed July payment.

The fault apparently lies in the HMRC system failing to generate payments on account for 2018/19 for some taxpayers.

Despite knowing about the error for some months, HMRC has not corrected it, leading to incorrect balances showing for the July 31 payment.

So what can you do about it? If you were expecting to submit a half-yearly payment and either received a low or zero balance or no statement at all, you should contact HMRC as soon as possible.

While the taxman has said those affected will not have to pay interest for underpayment or non-payment at July, there will not be such generosity on demands for the full amount owed in January.

With rising numbers turning to self-employment, it’s not always easy to get to grips with all the processes involved in keeping on top of your finances.

Planning to file your tax returns and pay regularly should be factored into your financial workflow, regardless of whether HMRC notifies you or not.

HMRC does not regard lack of understanding of the finer points of self-assessment as a ‘reasonable excuse’ for late filing.

To discuss this and any other tax matters or concerns please contact me on 01772 430000.

Are you prepared for a cyber-attack?

IT is a staggering statistic. According to new research, small businesses in the UK are collectively subject to almost 10,000 cyber-attacks a day.

One in five firms has revealed a cyber-attack has been committed against their business in the past two years.

And more than seven million individual attacks are reported over the same period, equating to 9,741 incidents a day.

The annual cost of such attacks on the small business community is horrendous – it has been estimated at £4.5bn, with the average cost of an individual attack put at £1,300.

Victims are most frequently subject to phishing attempts, with 530,000 small firms suffering from such an attack over the past two years.

Hundreds of thousands of businesses also report incidences of malware (374,000), fraudulent payment requests (301,000) and ransom-ware (260,000).

Those based here in the North West are most likely to be the victims of cyber-attacks, with 25%, reporting incidences.

So how prepared are you? The research from Lancashire-based business organisation FSB would seem to indicate many firms simply aren’t.

One in three small firms (35 per cent) say they have not installed security software over the past two years.

Four in ten (40 per cent) do not regularly update software, and a similar proportion do not back up data and IT systems. Fewer than half have a strict password policy for devices.

WNJ has been working with experts at Lancashire-based AW Training and Compliance to make businesses more aware of the threats.

We continually highlight the danger of phishing – where criminals send emails claiming to be from reputable organisations such as banks.

It is becoming more common and we are continually urging businesses of all sizes to be on their guard.

Penny Davis of AW Training and Compliance has shared these measures you can take to protect yourself from this type of fraud:

• Configure accounts to reduce the impact of successful attacks by giving your employees the lowest possible level of IT privilege needed to do their job

• Train your staff to be on their guard – to look out for requests that are unusual – for example, sending a large, one-off payment to a supplier, or providing their passwords or credit card details.

• Be aware of what to look out for. Although phishing emails are becoming more sophisticated, there can be warning signs such as incorrect addresses, or poorly written messages with grammatical mistakes.

To discuss any issue regarding cyber-security and how AW Training and Compliance can help contact Penny on 01257 460081 or email info@awtraining.co.uk