Employed or self-employed?
Determining whether a person is employed or self-employed has been a contentious issue for many years.
The Supreme Court has now ruled that a plumber who was 'self-employed' was a 'worker.' A worker is entitled to a reduced amount of employment rights such as holiday pay, minimum wage, sick pay and pension rights. This decision could have huge implications and incur additional liabilities for businesses across the country.
Employers cannot presume that categorising a person as 'self-employed' will limit their employment rights or determine their tax position. The Pimlico Plumbers case should serve as a reminder that review self-employed arrangements to determine whether they are vulnerable to being re-categorised as workers.
Could you benefit from using a VAT Scheme?
As the Making Tax Digital (MTD) for VAT April 2019 date looms large (coupled with delays to HMRC's digital projects) it is worthwhile looking at VAT special schemes.
A number of special schemes are available to VAT registered businesses, which, subject to meeting the conditions, businesses can choose to use if they so decide. These include the following:
- cash accounting scheme
- annual accounting scheme
- flat rate scheme for small businesses
- flat rate scheme for farmers
- retail schemes
- second-hand schemes
- tour operators’ margin scheme.
Please contact us to discuss these in more detail.
Tax Treatment of Termination Payments
New rules for the tax treatment of termination payments of payments in lieu of notice (PILON) are being introduced from 6 April 2018.
Whether or not the employee is entitled to a contractual payment in lieu of notice, employees will pay tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked their notice in full.
Contact RZ Associates for more information.
Pre -Registration input VAT
Where goods were bought by the business in the four years prior to the date of VAT registration and those goods are still on hand at registration, input tax may be claimed to the extent they are for use in making taxable supplies. This means that if the business uses those goods for exempt, non-business or private use, there would need to be an apportionment to reflect that. However, there is no adjustment required to reflect use prior to VAT registration.
Assuming wholly business use in a fully taxable business the input tax would be claimable per the original VAT invoice.
Indexation Allowance - Post January 2018
Capital gains indexation allowance for companies was stopped from 1 January 2018. However, contrary to belief, limited companies are still able to make a claim for indexation allowance, albeit claimed in a slightly different way.
The change means that when a company makes a capital gain on or after 1 January 2018, the indexation allowance that is applied in order to determine the amount of the chargeable gain will be calculated up to December 2017. Previously indexation allowance would be calculated up to the month in which the disposal of the asset occurred.
Indexation was completely removed for individuals from April 2008 as part of the capital gains tax simplification. The result of which would be the same for companies who have bought assets since 1 January 2018 as zero indexation allowance would be applicable to those assets.
It is therefore theoretically a good time for companies who have held assets for a number of years to bank the relief whilst it is available and of most benefit to them as any inflation on the asset post-January 2018 would not be covered by an indexation allowance.
Indexation for companies may follow suit and eventually be completely scrapped as we suspect the rules to be brought in line with individuals. There has however been nothing officially announced on this as yet.
Trading and property allowances
For the tax year 2017/18 we saw the introduction of two new £1,000 tax-free allowances, the property allowance and trading allowance.
The trading and property allowance provides for a complete exemption from income tax if the total trading or property income in the year is less than £1,000.
If a person has both types of income, they will receive a £1,000 allowance for each.
Each is aimed at relieving the taxpayer of having to report nominal amounts of income which HMRC would, in turn, find very cost-ineffective to process and collect the tax due.
Full exemption is only available if the total income, not profit, is below the limit. So individuals are required to record their income level and if their trading income goes above £1,000 they will need to inform HMRC and be subject to self-assessment.