From 1 May, HM Revenue and Customs (HMRC) will charge a £10 daily penalty for each day an online return is late, up to a maximum of 90 days.

This daily penalty will come in addition to the initial £100 late filing penalty for missing the 31 January filing deadline.

Looking ahead, further penalties of at least £300 (or five per cent of the tax due, if that is more) will be issued for returns that are six and 12 months late.

Anyone who has received a late filing penalty and has not yet sent a return, but thinks they do not need to be in Self Assessment should call HMRC on 0845 900 0444. If HMRC agrees, the return and any penalty will be cancelled.

Link: Tax return deadlines and penalties

www.accountants4smallbusiness.com

The scheme is designed to encourage banks to lend by making cheap loans available, on the condition that they will pass on the benefits to businesses and homebuyers.

Bank of England figures suggest banks took nearly £14 billion from the Funding for Lending scheme between August and December last year but lending by participating banks was actually lower in that period than in the six months before the scheme was introduced in July 2012.

The Bank of England announced on 24 April that the scheme would be extended from January 2014 to January 2015.

To encourage banks to speed up lending, in 2014 banks will be able to access £10 of cheap money for every £1 they lend to small and medium-sized enterprises (SMEs) in 2013. Every £1 of lending to SMEs in 2014 will allow banks to borrow £5 in 2015.

Funding for Lending will also be expanded to include lending by banking groups involving leasing and invoice discounting companies, which the Treasury said could be “important sources” of finance to some SMEs.

The CBI’s Matthew Fell commented:  “Funding for Lending is already making a difference to the housing market and there are signs that it is starting to lower the cost of finance for business. The additional incentives for banks should accelerate activity in the small business financing market.

But he added: “Funding for Lending is only one piece of the jigsaw. Boosting firms’ confidence by raising awareness of the various funding schemes available is critical.”

Link: SME access to finance schemes guidance

www.accountants4smallbusiness.com

Don’t forget the Company Law when considering dividends, ie dividends are paid to shareholders based on the available retained profits of the company

• do liase with us and refer to your management accounts so you know what level of profit is available
• don’t take dividends as monthly income. (HMRC may argue such dividends actually have similar characteristics to that of a monthly salary. As a result, the tax and national insurance could be charged on these regular dividends, leaving you out of pocket and with an unexpected tax bill.)
• do take infrequent dividends – we would recommend no more than 4 per year
• do ensure dividends are paid in line with your limited company shareholding (Company law), eg if you have 90% of the shares, then you should take 90% of the dividends

www.accountants4contractors.com

www.accountants4contractors.com

Definition of non exclusive –

24 hours equals a full day and if you believe that you spend 10% of the time operating the business then that would equal 2.4 hours every day, for example

Definition of useable rooms –

Lounge; dining room; bedrooms; study

You would then define the use of ONE of these rooms

Worked example (hypothetical) –

Total costs for running the home £1,000 per month (including all bills and mortgage interest only)

3 useable rooms (1 bedroom/ 1 lounge and dining room)

10% of the day worked from home 7 days a week

Amount claimed in this example would be £1,000 / 3 rooms x 10% = £33.33 per month or £400 per year

Minimum and maximum sensible amounts to claim:

Minimum – HMRC have a fixed allowance that they will allow you to claim £4 per week without any evidence of working at home as an office therefore £208 per year is an amount that you can claim without any issues.

Maximum – the maximum we suggest you claim should be based on the attached. We suggest you complete this and keep on file to support your claim. Please liase with your Accountant if this amount needs to be changed in your online accounts because it is a recurring amount.

Tip – complete and file the agreement attached to show HMRC should they ever ask.

www.accountants4contractors.com

HMRC’s official view on Subsistence for overnight stays is that expenses such as, laundry, magazines and telephone calls when working away from home, are allowable. What’s more, no receipt is required for these, and you can claim £5 per night (£10 per night if abroad). If you claim more than £5 then all this allowance will be taxable ie. if you claim £6 then the whole £6 will be taxable.

Day and overnight meals – receipted

Days

HMRC official view on Subsistence for working away from home ( your trading address) is that you need receipts, eg for your lunch. It is suggested that the amount be restricted to around £5 per day

Pragmatically, this means you will have to log, potentially, 20 meals a month when completing your expenses. For this reason, Rodliffe has had a historical policy whereby we suggested it’s reasonable to claim £5 per day as subsistence. We feel this is still a reasonable policy, however, because of an increase in the number of expense related enquiries threatened by HMRC then we suggest you keep all your receipts for lunches, coffee, etc. to be on the safe side.

Example – if you decide to claim £100 per month subsistence then we suggest you keep all your receipts. If the receipts add up to £110 one month and £90 the next then you are broadly in line.

Overnight

In addition to the overnight allowance above, if you are required to work overnight then the cost of an evening meal can be claimed with a reasonable receipt. We suggest that you should have worked in excess of 10 hours that day on the clients site in order to qualify.

• For large companies (as classified under the rules of the R&D scheme), this change will move the R&D benefit from the tax line in a large company’s accounts to operating profit.
• A company will therefore be able to directly offset the relief against the cost of carrying out qualifying R&D in the same was as it would with a grant.
• The ATL credit is designed to make R&D relief more visible to those making investment decisions and provide greater cash flow support to companies with no corporation tax liability.  
• The introduction of the ATL credit follows an increase in the rate of the small and medium-sized enterprises (SME) R&D tax credit from 175 per cent to 200 per cent from April 2011 and to 225% from April 2012, which continues to provide targeted support for early stage companies and start-ups investing in R&D in the UK.

Three new lenders – Market Invoice, URICA and Beechbrook Capital – will share more than £30 million of government funding to offer SMEs alternatives to traditional bank lending.

They have committed to attracting additional funding from private sector investors, with the total expected to boost the pool of credit available to SMEs from the three lenders by more than £70 million.

Business Secretary Vince Cable said on 22 March: “A lack of access to finance is still choking off too many small businesses, preventing them from growing, taking on new staff or investing in new equipment.

“We are taking a range of actions to support SMEs and shake up business finance markets, including through the new business bank.

“Today’s £30 million announcement is an important boost for non-traditional lenders with creative and innovative solutions. It will increase competition and create a more diverse and balanced market for business lending.”

The funding comes from the Business Finance Partnership (BFP), through which the government has committed to provide £100 million of funding for non-traditional lenders in order to diversify sources of finance available to SMEs.

Currently, 85 per cent of all business loans are handled by the big four banks.

Link: Business finance finder

In particular, the existing three-tier system of fixed fees chargeable on overdue debts has been retained, with the additional caveat that creditors may now add reasonable costs to the total over and above these fixed sums. That means that, when you are forced to take formal action in order to recover a debt, you can now charge:

• statutory interest at 8% over the Bank of England base rate, AND
• a fixed fee of £40 on debts up to £999.99, OR
• a fixed fee of £70 on debts from £1,000.00 to £9,999.99, OR
• a fixed fee of £100 on debts of over £10,000.00, AND
• reasonable additional costs incurred while chasing the debt.

All of this is, of course, in addition to the full original amount owed – and with the inclusion of recovery costs in what can be claimed for, it now means that creditors should not lose out overall when a debtor decides to leave their invoice until it is overdue before making payment.

When can I charge?

The governmental consultation on the Late Payments Directive had originally proposed a 60-day standard payments period on some work, particularly in the public sector; in a joint response by Safe Collections and the PCG, we expressed concern about this. Legislation already allows standard payment terms to be overruled in agreed contractual terms, meaning the existing 30-day standard period can be extended to 60 or 90 days – or any other duration, for that matter – on a case-by-case basis.

With much focus at present on attempts to improve the nation’s cash flow, and to reduce the average time taken for an invoice to be paid, we (and the creditor clients and debtor companies we spoke with) were reluctant to see a standard 60-day period be introduced at a time when many small firms are struggling to get paid on time.

Ultimately the final form of the legislation retains the 30-day standard period for payment on commercial debts, meaning you should expect payment:

• within 30 days of receipt of your invoice by your client, OR
• within 30 days of completion of the work (if this is later), OR
• within the alternative terms agreed by both parties in the relevant contract.

Beyond these deadlines, you are in principle permitted, under law, to add the appropriate fixed fee immediately, and to begin accruing interest on the amount owed; however, as always, it may be wiser in the first instance to offer more flexible payment terms, in order to give your customer a second chance to pay.

Either way, the new legislation appears to extend greater protection to contractors than was previously the case when chasing payments, and it will be interesting to see how long after March 16th it is before the first claims begin to be reported.

https://www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt

Here is some clarification.

The general rule is that where you are employed on a contract you may claim travel expenses until you are aware that the length of the contract, from the date it first started, will be for 24 months or more.  It is not the point at which you have worked at the temporary place for 24 months that is relevant, but the time when an expectation that you will work there for 24 months (or more) first arises that is critical.

Once you become aware that you will be working at a temporary place of work for 24 months or more then from that point in time it is considered to be a permanent place of work and consequently travel is considered by HMRC as ordinary commuting.

When engaging on a new contract with an unrelated client, HMRC operate a restriction as to what is considered a change in the temporary place of work.  They do not necessarily view a change in the contracting company’s client to be a conclusive change in travel to a new temporary place of work where the location is in proximity the previous place. This is most simply explained by remembering that you are employed by a Limited Company and if 2 clients are situated close to each other with similar journeys required to travel to the sites then essentially the location of your place of work is to all intents and purposes identical.  It is important to remember that you are working for the same company even though the end clients may not be connected.  Conversely 2 successive contracts of 12 months with the same business but in different parts of the country will always be seen as travel to a temporary workplace.  It is likely that HMRC would view different places of work in the ‘Square Mile’ as the same location, whilst locations with a geographical separation of 25 miles would be less likely.

It is important to be aware that contracts which span a break of a few months may be viewed as continuous for the purposes of ascertaining whether there is a permanent place of work where the nature of the subsequent contract may be considered to be an extension of the previous.  To be classified as an intervening contract it would be necessary to physically invoice the client and not enter into an ‘arrangement’.

Where an employee spends less than 40% of their time at a place of work it can never be considered as a permanent work place and travel will always be allowable.

Please see link to HMRC below for more information,

http://www.hmrc.gov.uk/helpsheets/490.pdf