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

Preparing for a no deal Brexit

HMRC has announced it is stepping up efforts to ensure businesses are ready to trade post-Brexit as the chances of a no deal continue to increase.

It is automatically enrolling companies in an important customs system and doubling the numbers registered.

More than 88,000 VAT registered companies across the UK are being allocated an Economic Operator Registration and Identification (EORI) number in order to keep trading with customers and suppliers in the EU after the UK has left.

So far 72,000 companies have already registered for EORI numbers. With Brexit preparations accelerated under the new government, ministers say they are “taking decisive action” to speed up the rollout of the scheme to help ensure the smooth transit of goods.

EORI numbers are a unique ID number allocated to businesses that enables them to be identified by Customs authorities when doing business with other traders.

If businesses do not have an EORI number post-Brexit, they will be unable to continue to trade with EU member states.

Letters informing businesses of automatically allocated EORI numbers are being sent out.

Announcing the move, Chancellor Sajid Javid said: “As the government accelerates its preparation to leave the EU on 31st October it is right businesses are prepared too.

“There can be no time for delay which is why HMRC has allocated thousands of businesses with a trading number to ensure they can continue to trade their goods through Europe from day one.

“This will help ease the flow of goods at border points and support businesses to trade and grow.”

And an extra £2.1bn was also allocated to government departments last month to prepare for no deal.

Getting an EORI number is one of the steps that businesses need to action urgently to be prepared for leaving the EU

After getting an EORI number, businesses will need to decide whether to complete customs declarations themselves, or employ a customs agent to do this.

As part of the extra £2.1bn the government is doubling the support made available for customs agents to train new staff or invest in better IT.

If employing a customs agent, businesses will need to supply their EORI number.

Traders also need to decide whether to apply for Transitional Simplified Procedures to make it easier to import goods from the EU.

If businesses have been issued a UK EORI number by HMRC and then apply online, they will receive a message to say that they already have one.

To discuss this article and any issues it may raise please contact me on 01772 430000

Late payments clampdown hailed ‘a victory’

Large businesses could be fined for failing to pay smaller suppliers on time as part of a package of welcome measures launched by the government earlier this month.

It means that company boards will be held accountable for their payment practices for first time.

The Small Business Commissioner has been given new powers to tackle late payments – including fines and binding payment plans.

The Prompt Payment Code has also been strengthened and a new fund has been set up to encourage businesses to use technology to simplify invoicing, payment and credit management.

Announcing the moves, Minister for small business Kelly Tolhurst said: “These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment.”

The measures are to be welcomed and some would say long overdue, though it remains to be seen the size of the impact they will actually make.

And once again it is important to stress these measures are looking to tackle a huge problem. Late payments are currently estimated to cost UK SMEs a staggering £6.7billion annually.

Behind that figure are stories of individual businesses put under serious pressure. Small companies are paid late it causes financial hardship and puts a break on growth. For some it can be the tipping point that leads to them going out of business.

The Blackpool-based Federation of Small Businesses (FSB) has welcomed the crackdown on bigger businesses which have poor payment practices towards their smaller suppliers and contractors.

Its national chairman Mike Cherry said: “Late payments and poor practices are a scourge which leads to the closure of 50,000 small businesses a year. The measures will for the first time see the culprits brought to account.

“When small firms are paid late, it causes financial hardship and stifles growth.”

And he added: “By forcing audit committees of big businesses to report payment practices in company annual reports, there will be no more covering-up by those who treat smaller suppliers shabbily.

“Ending late payments and poor practices is not only the right and fair thing to do, it will also spare small firms the financial impact of waiting for the money they’re owed, and instead allow them to invest and grow.”

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

Mind the gap

The UK tax gap – the difference between what should be paid and what is actually being received – remains at its lowest for five years, new figures have revealed.

However, the amount of money going into the nation’s coffers is still £33bn shy of what it should be.

Publishing the figures, HMRC says that the roll-out of Making Tax Digital (MTD) for businesses will help to narrow the gap, as companies get things “right first time”.

The gap may still be large but Mel Stride, Financial Secretary to the Treasury, said: “Had the tax gap remained at its 2005/06 level the UK would have lost £71bn in revenue destined for public services, enough to build 200 hospitals.”

The new figures show that, in 2017/18, 94.4 per cent of all tax due was paid. Taxpayer errors and “failure to take reasonable care” made up £9.2bn of the lost cash with “criminal attacks” accounting for £5.4bn.

And the Corporation Tax gap has fallen from 12.5 per cent in 2005/06, to just over eight per cent.

In its statement HMRC said: “The majority of customers want to get their tax right, but today’s figures show that too many are still finding this hard, with avoidable mistakes costing the Exchequer over £9.9 billion a year.

“£3 billion of this is attributable to VAT alone, which underlines the importance of the action HMRC has been taking with Making Tax Digital.

“HMRC launched Making Tax Digital in April this year for VAT-registered businesses, with turnover above the VAT threshold, requiring them to keep digital records and submit their VAT return using compatible software. So far, over 400,000 businesses have joined the service.

“HMRC expects this service to reduce tax lost due to avoidable errors by ensuring businesses make fewer mistakes, thanks to the improved accuracy that digital records provide and the fact that information is sent directly from those records to HMRC, helping to eliminate transposition errors.”

To discuss any issues raised from this article or to talk about any tax issues you face please contact me on 01772 430 000

Construction set for big VAT shake-up

Major changes to the way VAT is collected in the construction industry are set to come into effect from October 1 and they are likely to have a big impact on SMEs in the sector.

They need to act now to ensure their accounting systems and the way that they operate are ready for this latest tax shake-up.

It has been estimated that the new ‘domestic reverse charge’ rules could affect up to 150,000 businesses in the construction and building trade in the UK.

And there are fears that the change could hit the cash flow of sub-contractors in an industry that is already feeling the squeeze when it comes to payments.

Some businesses use the VAT they collect from customers as working capital before they pay it over to the HMRC. They will need to prepare for potential cash flow problems when the new rules come into effect.

It makes it really important that businesses look closely at their supply chain and their customers and determine how the change will affect them, and what they can do to minimise any impact.

The reverse charge will apply throughout the supply chain where payments are required to be reported through the Construction Industry Scheme (CIS).

It is expected that supplies between sub-contractors and main contractors will be most affected by the change.

At present a sub-contractor is responsible for charging and accounting for VAT to the taxman on supplies to main contractors.

Under the new reverse charge rules the main contractor will be responsible for declaring the VAT on supplies received from the sub-contractor.

An equivalent VAT deduction can also be claimed by the main contractor subject to the normal rules of VAT recovery.

The new rules apply only to certain building and construction services and to charges in the supply chain – not to end users.

The reverse charge will exclude businesses that supply specified services to connected parties within a corporate group structure or with a common interest in land. In these circumstances, the taxman says, the supplies in question will then revert to normal VAT accounting rules.

What it does mean is that VAT cash will no longer flow between businesses. For every transaction, the VAT will be registered and clearly stated on the invoice as a reverse charge.

Businesses which receive services from another contractor will need to determine which VAT rate applies and whether the services received will be subject to the charge.

HMRC says that it is introducing the new rules because of growing concern over the amount of “missing trader fraud” taking place.

The fraud involves a supplier issuing a VAT invoice and collecting the tax from their customer before going “missing” – without declaring the VAT to HMRC.

In a statement HMRC said: “VAT fraud in construction sector labour supply chains presents a significant risk to the Exchequer.

“Organised criminal gangs fraudulently take over or create shell companies to steal VAT whilst operating alongside actual construction services.”

To discuss how the construction industry domestic reverse charge for VAT could affect your business, or to talk about any aspect of VAT, please contact me on 01772 430000.

The green route to growth

As businesses grow and enter new supply chains it is becoming a common requirement for them to demonstrate their commitment to reducing their carbon footprint.

It can open new opportunities but also be a daunting task. However, help is at hand for Lancashire’s SMEs. And the benefits of getting it right can include significant cost-savings as well as paths to new markets.

The Making Carbon Work (MaCaW) project is a University of Central Lancashire (UCLan) and industry collaboration that aims to help small businesses overcome the challenges and barriers they face when looking to move to a low carbon model.

WNJ has referred a number of its clients to MaCaW, which is supported by Boost, Lancashire’s business growth hub.

We are delighted to be able to help business reduce their carbon footprint and save costs by signposting them to this scheme.

The project looks to support them as they work to implement low energy practices which will not only reduce their “carbon burden” but will also deliver cost savings to their organisation.

The programme includes carbon baseline analysis, site visits and energy audits, along with the creation and implementation of an integrated low-carbon action plan.

There are 50 per cent match funded grants available – up to £8,000 – for relevant equipment. And the project will help organisations to manage and report their emissions effectively.

The ERDF supported programme is aimed at county-based companies that employ less than 250 people and have an annual turnover of less than £45m or a balance sheet total less that £38m.

Mark Nelson, business engagement officer at MaCAW, says: “We aim to work with SMEs across all sectors to identify and prioritise the opportunities available to them.

“We encourage businesses to look at everything they do in their organisation in terms of the amount of carbon they are generating.

“It is about raising awareness of the benefits of carbon reduction, not just in terms of the environment but also the savings companies can make by going on this journey. From an SME’s point of view it makes real business sense.”

There are plenty of simple ways that businesses can start their low carbon journeys. They include:

• Nominating an ‘Energy Champion’ to promote energy efficiency throughout the business
• Regularly monitoring energy use so it can be compared with weather, production or sector specific standards
• Conducting ‘walkaround’ energy surveys to identify were use is concentrated, understand how it can be controlled an identify opportunities to make savings
• Committing to an achievable reduction target and reviewing regularly to reflect improvements made
• Exploring upgrades to equipment to reduce energy use, increase production capacity and develop new product lines

MaCaW is a further initiative from UCLan that WNJ has been able to introduce to clients. In addition to the Innovation Clinic and its funding for training project.

For information on how Making Carbon Work (MaCaW) can help your business make energy and cost savings contact 01772 893963 or email: macaw@uclan.ac.uk

GDPR hasn’t gone away – are you at risk?

It’s been 12 months since the introduction of General Data Protection Regulation (GDPR) – and one thing is for sure, the challenges it presents haven’t gone away.

GDPR came into force in May 2018, introducing a number of significant changes including new rights for people to access the information businesses hold about them, obligations for better data management for businesses, and a new regime of fines and enforcement actions.

At the start of 2019 Google became the first tech giant to be hit with a record fine for breaching GDPR in the EU – it was slapped with a massive £44m penalty by the French regulator.

The fine followed complaints over how Google handled people’s data, with experts warning other tech firms would be next in the firing line.

And it’s not just tech firms. Recent research from cloud data firm Talend revealed that an estimated 74 per cent of UK organisations had failed to address requests from individuals seeking to get hold of their personal data within the one-month specified time period required under GDPR.

It found that only 17 per cent of companies complied correctly with the requests, while nine per cent gave incomplete or delayed responses.

The maximum amount that firms can be fined under GDPR is €20m or four per cent of global turnover, whichever is larger. And the Google penalty has been described as a “warning shot” at digital and tech businesses.

And it is not just big companies that have to be aware of GDPR and ask themselves if they are compliant and if they are protected.

For instance, the Information Commissioner’s Office (ICO) is issuing fines for companies and sole traders that are not registered.

In November last year the ICO fined a number of organisations across a number of sectors for non-payment of the data protection fee.

Since May 2018 every organisation or sole trader which processes personal information is required to pay the fee to the ICO, unless it is exempt.

The cost of the fee depends on organisation size and turnover. There are three tiers ranging from £40 and £2,900.

The perils of the tech world we live in are growing. Cyber and phishing attacks are on the increase and we are also continually contacted by companies seeking help after falling for the scams and losing thousands of pounds.

As well as the financial loss, security breaches can put a firm at risk of falling foul of GDPR.

A year on it is worth asking the question again: Are you GDPR compliant? Here’s our checklist for you to go through:

• Do you know what personal data you hold and reasons why
• Do you have appropriate consent?
• Do you have a record of processing?
• Do you have appropriate privacy notices?
• Do you have sufficient security?
• Do you know how to handle a breach?

If you answer is ‘No’ to any of the above, please give Penny a call today. To discuss any issue regarding GDPR and cybersecurity and how AW Training and Compliance can help contact her 01257 460081 or email: info@awtraining.co.uk

Penny is a management and leadership expert with a background in regulatory compliance. She is a certified EU GDPR Practitioner, ISO17024 certified and Institute of Information Security Professionals accredited.