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Useful comments and advice for Sole Traders, Freelancers and contractors from Freelancer Accountants. 0800 135 7157.

Pension Tax Windfall

The Government may have next April and unexpected tax windfall. It is expected from April 2015,  people will be allowed to access their pension funds, under the new UK Pension reforms.

It is expected that people will be able to withdraw all of their defined benefit scheme savings in one lump sum and then pay tax at their applicable marginal rate.

This should produce a spike in tax receipts which will be a welcome boost to the UK Treasury.

Have you used a tax avoidance scheme?

The Finance Bill has now received Royal assent and controversial accelerated payment notices are now law. This means from next month HMRC can issue accelerated payment notices to people HMRC consider have been involved in tax avoidance vehicles and demand the full disputed tax is paid upfront.

The more interesting point is not how HMRC use these powers with current tax avoidance vehicles, but how it applies the powers to schemes and investments made many years ago, where investors will have got tax relief and the scheme is now a distant memory in the tax payers mind.

Will HMRC use these new powers to demand back payment of associated tax relief, penalties and interest?

The treasury have published a list on gov.uk website which lists the avoidance schemes HMRC are targeting and state HMRC may issue notices to people using such schemes over the next 20 months or so.

This will be an interesting story to follow, as the sums involved are likely to run into millions of pounds plus the powers have been criticised by leading accountants and lawyers as they do not give the taxpayer an option of disputing the tax before paying at a tribunal and also not giving a right of appeal. Perhaps a more fundamental issue, one which HMRC disputes, is that it is changing the tax law retrospectively. It is going to get interesting!

Fancy being your own boss?

Easter has now passed, the weather is getting better and the days are becoming longer and people tend to be thinking more about the future and new business ventures and job opportunities.

Maybe you are thinking of leaving your corporate life and becoming your own boss, the media is full of success stories to tempt you into the world of self employment.

The reasons we find, as canary wharf accountants, people embark on self employment are less company politics, appraisal systems, independence and more money. What is seldom mentioned are the drawbacks which include loneliness and isolation, financial difficulties and the inability to make sales and market your business.

There are many ways to get around these difficulties, business hubs are great places to reduce the isolation and loneliness whilst often coming into contact with businesses that need your services, so you can make a few sales as well.

Also perhaps a fundamental of running your own business is understanding your own strengths and weaknesses, to be able to exploit your strengths and manage your weaknesses. Thus for example if you are a great salesman but weak in keeping your records in shape you need to ensure you have a bookkeeper you can call upon and a good local accountant who can assist you. The insight into your own strengths and weaknesses and managing them is fundamental in creating a good business.

A low risk of starting into self employment is freelancing or contracting using skills you already have and creating a business around it. Many successful business people started this way. If you are thinking of freelancing or contracting, contact us and we can advice you on the accounting and taxation implications of running a freelancing/contracting or small business.

Ministers slammed for overlooking creative industry potential

There is likely to be many a creative freelancer among those using an accountant in Canary Wharf, with many of those certainly likely to take an interest in the latest warning from the Institute for Public Policy Research (IPPR) that the government could be “missing a trick” in its failure to include the creative industry in its 11-sector economic blueprint. The think-tank described the omission as a snub to the considerable growth and job creation potential of this section of the economy.

The IPPR said that the government didn’t appear to be taking the creative sector seriously, despite 2012 seeing it surpass average industry growth 25-fold. The think-tank’s analysis also showed the creative industry’s growth to be almost three times the average since the bottom of the crash in 2009. While GVA growth for the economy as a whole was 1.1 per cent and 0.3 per cent in 2011 and 2012 respectively, the equivalent figures for the creative sector were 7.9 per cent and 7.7 per cent. In addition, GVA growth since the crash’s 2009 trough was 3.1 for the whole economy, but 8.7 per cent for the creative industries.

None of these figures will be greatly surprising to many of those at the sharp end of the creative sector making use of an accountant in Canary Wharf. Nor will they be shocked by the 8.7 per cent rise in turnover since the bottom of the crash in 2009, or the 18 per cent increase in the number of enterprises between 2008 and 2012 – from 185,000 to 217,000. The film and TV, advertising and marketing and design industries have been responsible for the greatest rises. However, noting the patchiness of growth across the country, the IPPR also suggested measures to support growth outside London’s boundaries.

IPPR Associate Director, Will Straw said that although the government was showing a commitment to a “march of the makers”, what he described as “the impressive efforts of one of the fastest growing industries in the UK” were not being noted sufficiently. He said that despite the likes of Arts Council funding, spectrum policy, broadband roll-out and the BBC license review already lending the government “major impact” on the sector, a coherent industrial strategy had not been provided across government departments. This, he stated, raised the possibility of some of the sector’s potential being squandered.

Mr Straw concluded, in words that will find little disagreement among creative freelancers using an accountant in Canary Wharf: “Given the rapid growth of this sector, which has been rapidly outstripping the rest of the economy since the financial crisis, there is a strong case for the creative industries to be prioritised by government. Eleven other sectors have been chosen but there seems to be little rationale for their inclusion while omitting one of Britain’s most thriving and exciting industries.”

 

Entrepreneur advocates investment for superfast broadband, not HS2

Many freelance clients of Richmond accounting firms are likely to have amassed, through considerable experience, much knowledge of what practices can financially help and hinder their work. Hence, they are likely to be opinionated about the recent claims of Scott Fletcher, an entrepreneur and the founder of award-winning cloud expert ANS Group, that the government should invest in high-speed broadband rather than the intended high-speed railway commonly known as HS2.

Mr Fletcher suggested in an article recently published on the website of Freelance UK that the move would bring greater financial benefit to the country than spending in excess of £46billion on the High Speed 2 railway. HeeHeHe proposed that UK businesses should be equipped with two forms of broadband, fibre-to-the-premises or FTTP and fibre-to-the-home or FTTH.

The entrepreneur argued that FTTP would be more useful to businesses in the short term, while FTTH would be similarly helpful to businesses over a longer period of time, given the increase that it would bring in the rate of development of new technology. This was because, he elaborated, common business practices in the UK are rapidly changing and will continue to rapidly change, leaving as the only certain prediction that fast data speeds will be crucial as the UK corporate world becomes increasingly digital.

The ANS Group founder’s suggestions are likely to provoke intriguing responses from freelance clients of Richmond accounting firms, and we reckon that the suggestions do have some merit. It is worth pointing out, for example, that though the government has claimed that HS2 would result in £12.6billion of economic benefits simply due to the reduced time spent on business travel, the National Audit Office has taken issue with this figure. The NAO claims that the figure has been reached due to “a simplifying assumption that that time spent travelling is unproductive.” This therefore suggests that corporate productivity could be boosted more cost-effectively through the provision of speedier broadband and a greater number of carriages on existing inter-city trains.

The Internet has done much to revolutionise corporate practices and, it seems, will continue to do so for a long time to come. For example, digital conferencing and mobile computing devices are likely to be used more and more often by businesses in future. This means that over time, face-to-face business meetings will likely become less necessary and therefore, so will very fast trains. We reckon that many UK businesses, including Richmond accounting firms and the freelance businesses that rely on them, will agree with such sentiments.

Should your children be taught taxation?

When you think back to your school days, you might imagine swapping football stickers in the playground and some boring science lessons, but if the Chartered Institute of Taxation (COIT) had its way, your children would also receive compulsory lessons in taxation. A good idea to teach those important financial lessons early, or taking taxation just that bit too seriously? We’re sure that there will be a wide range of opinions on the matter among the clients of our accountants Richmond here at Freelancer Accounting (http://www.freelanceraccounting.com).

The idea of such lessons, according to the body of chartered advisors, is that they would give school children a better idea of how tax works, why it is necessary and the obligations that they will have in their post-school life. The COIT’s recommendation came as it expressed its disappointment at the removal of a specific mention of education on taxes for 5 to 16 year olds from a new version of the draft national curriculum.

The most recent draft of the curriculum does still mention the teaching of “financial skills”, but clients of our contractor accountants will be interested to read that this was not enough for the COIT, which described tax as “one of the least understood areas of personal finance” faced by citizens. The body’s president Stephen Coleclough argued that with most schoolchildren eventually becoming employees, they would need to be able to understand a PAYE coding notice or payslip, in addition to identifying when it is wrong.

He added, in words that might make many of the clients of our IR35 accountants rue their own lack of knowledge of certain  taxes prior to becoming self-employed, that many of today’s schoolchildren “will go into business where tax is a key cost and administrative burden that cannot be ignored. An understanding of taxation – how it works, why it is necessary and what the obligations of the taxpayer are – is an essential part of financial education.”

There are various roles that schoolchildren can find themselves playing as adults in relation to tax. These include students needing to understand the by no means straightforward effect of PAYE, investors like those with an interest in investing in ISA and tax credit claimants. The institute therefore emphasized the importance of tax becoming “as familiar a feature of school education as Bunsen burner experiments and football” – something with which many of those using accountants for freelancers may feel inclined to agree.

In addition, the COIT drew attention to about a sixth of the ‘tax gap’ being attributable to error and carelessness on the part of taxpayers, according to HM Revenue & Customs. It said that public education could be instrumental in tackling this. This perhaps suggests that if such teaching ever became a reality, the sons and daughters of those turning to Freelancer Accounting (http://www.freelanceraccounting.com) for accountancy services could yet be rather better informed on tax than their often struggling parents. In the meantime, contact us now for more information on our tax accounting expertise.

Is your small business reclaiming all of the VAT it could?

So many freelancers and contractors approach Freelancer Accounting (http://www.freelanceraccounting.com) over worries about Value Added Tax (VAT), unsurprising given its reputation as a very complicated tax that is easily misunderstood. Without the assistance of the right PCG accountant, you may struggle to manage your VAT – and now, a study commissioned by Sage shows that significant cash savings are being missed by more than a third of smaller businesses as a result of their failure to claim back the tax, often due to a lack of understanding of the associated rules.

The study found that many of those running smaller businesses are unaware of every item on which it is possible to recoup VAT, resulting in at least half of all owner-managers estimating that they miss out on more than £500 each year. Although business owners tended to be aware that they could deduct tax for everyday office items like stationery and printer ink, they weren’t as likely to know that the same rules applied to certain other purchases, such as petrol. This may explain travel – including that by car – topping the list of the greatest expenses for owners, followed by “food and refreshments” which, like fuel, could also have VAT reclaimed on them in a business context.

Managing director of Sage’s small business unit, Lee Perkins, warned that businesses failing to claim back the VAT to which they were entitled were putting themselves at a competitive disadvantage, adding that “Despite being around for 40 years, the ever-changing nature of VAT has put many business owners off from digging into VAT and fully understanding what can be refunded.” This news suggests the potential value to small traders of enlisting the help of the accountants in Canary Wharf of Freelancer Accounting.

The findings showed that 36 per cent of owner-managers missed out on savings due to the complexities around VAT reclaiming, while 52 per cent think that they and their businesses are down by hundreds of pounds each year as a result of such negligence. It’s all the more of a shame, given the highly efficient and cost-effective VAT service offered by the accountants for contractors of Freelancer Accounting, encompassing the preparation of VAT returns, ensuring that the client is on the most appropriate scheme, representation of the client in meetings with HMRC, dealing with all HMRC correspondence and assistance for the client with registering for VAT.

As a highly regarded provider of fixed fee accountancy services, Freelancer Accounting (http://www.freelanceraccounting.com) can ensure that small traders across London and the South East of England benefit from the most informed and tailored advice on their VAT situation. Contact us now for the help that you need to better understand the reclaiming of VAT.

Creative industry tax relief spelt out by government

A recent development of interest to many of those using accountants for freelancers like those of Freelancer Accounting (http://www.freelanceraccounting.com) will be the introduction of new small print by the government concerning companies’ eligibility for ‘creative industry tax relief’. Creative industry tax reliefs are Corporation Tax reliefs enabling larger deductions or even payable tax credits to be claimed by qualifying companies when they calculate their taxable profits.

The way these reliefs work is that the amount of allowable expenditure is increased. In the event of the eligible client of a PCG accountant making a loss, there may be the option of ‘surrendering’ that loss, converting some or all of it into a payable tax credit. The introduction of Film Tax Relief in 2007 was followed by that of two further reliefs, Animation Tax Relief and High-end Television Tax Relief, in April 2013. Subject to state aid approval, a fourth relief for Video Games Development is also set to be introduced.

The rules concern eligibility for these tax breaks are therefore relatively clear just from their names, but should a contractor accountancy client be in any doubt about their potential qualification for a tax deduction or even a potential payable tax credit on their profits, they can email their queries to a unit inside HM Revenue & Customs that has special responsibility for the reliefs. In order to qualify for creative industry tax reliefs, companies should be both liable to Corporation Tax and directly involved in producing and developing certain films, video games, animation programmes or ‘high-end’ television programmes.

There are special tax rules that apply to film production companies producing films, irrespective of whether the films are intended to be released in cinemas, as well as television production companies producing relevant high-end television programmes or animation. Although it is possible for companies to opt out of these rules, doing so will invalidate their eligibility for Creative’s Tax Relief. There are also qualifying conditions that apply to the reliefs.

To qualify for the reliefs, those creative companies making use of accountants in London will need to subject their films, television programmes, video games or animations to a ‘cultural test’. Passing this test will entitle them to a formal certificate stating that the game, programme or production is ‘British’. Alternatively, qualification is possible through an internationally agreed co-production treaty. In all cases, one cannot qualify without formal certification.

Administration of the certification and qualification process is by the British Film Institute (BFI) on the Department for Culture Media and Sport’s behalf. For incomplete work, an interim certificate can be issued, while a final certificate can be issued if production is finished.

More guidance and eligibility information in relation to creative industry tax reliefs can be viewed on the HMRC website. It may make intriguing reading for many of the clients of our accountancy services, who are free to contact Freelancer Accounting (http://www.freelanceraccounting.com) at any time for the most up-to-date advice on their tax and accounting affairs.

More work and better pay attracting people to freelancing, says survey

As a contractor and a client of one of our accountants for contractors here at Freelancer Accounting (http://www.freelanceraccounting.com), chances are that you appreciate having the freedom to determine your own workload, something that is not enjoyed by those on the usual ‘9 to 5’. It therefore shouldn’t surprise you in the slightest to hear that so many people are choosing to work for themselves for this same reason, according to one recent poll.

The survey found that it was a perceived opportunity to get more work that led to 35 per cent of freelancers deciding to go it alone. For another 24 per cent, higher pay was an attraction. As for sources of freelance work, recruitment agencies ranked highest for popularity, with a third of freelancers stating that they had found their freelance projects in this way. Less than a quarter claimed to have found their work via job adverts – all interesting information for those presently considering going freelance and becoming a client of one of our small business accountants.

Indeed, there were some barriers to going freelance that were cited in the report, and which the right PCG accountant from a reputable firm like Freelancer Accounting could help to alleviate. 36 per cent of freelancers, for example, worried about their ability to gain a regular income, while 24 per cent of respondents fretting about finding regular clients. For 18 per cent, the management of HMRC paperwork was a source of concern. Freelancer Accounting’s seasoned and well-qualified accountants in Guildford are happy to advise freelancers on the management of their tax and accounting affairs, saving them time, money and stress so that they can focus on their core business.

Neither the popularity, nor the advantages of freelancing are an illusion, with about 40 per cent of all new jobs since 2010 having been the creation of freelancers and contractors, according to TUC. It is an indicator of how self-employed people have flourished in the UK’s post-recession landscape, and as the news of this has spread and other types of work have become scarcer, more and more people have decided to take the plunge into working for themselves, often with the assistance of specialist accountants for freelancers. There’s no doubt that the growth of freelancing has brought opportunities to those individuals and companies that appreciate the flexibility that it brings.

However, it is as important for a freelancer as it is for any other type of worker, to keep on top of their accounting and taxation affairs, ensuring that they operate in a way that is fully compliant as well as tax efficient. Freelancer Accounting (http://www.freelanceraccounting.com) is happy to cater for such people, providing them with access to dedicated contractor accountants who understand their business and serve as a vital point of contact, giving the most proactive and informed tax and accounting advice.

What do you need to know when setting up a freelance office for the first time?

Any individual who has been considering quitting the ‘9 to 5’ to set up their own freelance office will probably need little encouragement to do so by our own accountants in Canary Wharf here at Freelancer Accounting (http://www.freelanceraccounting.com). It does, after all, seem to reflect an increasing movement by many people and organisations towards more flexible ways of working. However, you will still need to be organised and disciplined to make the transition work.

The benefits of becoming a freelancer, with an experienced and capable PCG accountant by your side, are many – but it doesn’t suit everyone. Those who want to be able to work more flexibly, choosing their own hours, are certainly likely to welcome becoming freelance, as are those who are sick of long train or motorway commutes. It’s also very cost-effective, both in terms of the initial launch of your company and its subsequent operation. You can also enjoy your home surroundings and amenities and better accommodate the needs of the family, in addition to demonstrating to the tax authorities that you are ‘in business on your own account’.

There are many aspects of freelance working, however, that people do not look forward to so much – such as the potentially increased isolation and boredom and clashes between family and business demands. You may also struggle to switch between a home and work mind-set, and family and neighbours may continually interrupt you while working. There are, though, ways of overcoming these issues that many of the clients of our accountancy services adopt. These include having a separate phone line installed for work purposes, as well as scheduling breaks and taking the time to meet and socialise with people – the latter especially important if you live alone.

Other ways in which you can ensure that your transition to home working is as successful as possible, include simply treating your work time as seriously as you would if you were working in any other office, and ensuring that anyone you share your home with understands this. The most experienced people who use our small business accountants also know the importance of a definable, permanent workspace rather than the kitchen table, and also ensure that they meet the people that they are working with occasionally, given how much more memorable personal contact is than communication via email.

Bear in mind that rules that have been in effect since 2003 mean that business rates don’t normally need to be paid on a home office, subject to certain conditions. These include only using the kind of equipment that might be found in any domestic study and not employing people from the premises, among others. The Valuation Office Agency assesses the ratings and each case is considered on its merits.