Changes in terms of the SRA Accounting Rules which may affect you are:

• The definition of client money now states 2.1″Client money” is money held or received by you:  d) in respect of your fees and any unpaid disbursements if held or received prior to delivery of a bill for the same.  This may, in some cases, mean that there is no need for a client account, including if all monies received in advance are in respect of fees and disbursements and clients are informed in advance (2.2).

• Any transfers made for paid disbursements will now need to be covered by a bill or notification to the client under 4.3 Where you are holding client money and some or all of that money will be used to pay your costs: a) you must give a bill of costs, or other written notification of the costs incurred, to the client or the paying party.

• There is no longer a rule on residual balances.  The rule now states: 2.5 You ensure that client money is returned promptly to the client, or the third party for whom the money is held, as soon as there is no longer any proper reason to hold those funds.

• The SRA have always been keen for solicitors not to be seen as providing banking facilities via their client account.  Rule 3.3 is very clear:  You must not use a client account to provide banking facilities to clients or third parties. Payments into, and transfers or withdrawals from a client account must be in respect of the delivery by you of regulated services.

• Rule 8.3 now states that the COFA or manager must sign off the reconciliation, which is to be carried out in the same timeframe as under the old rules – every 5 weeks.  Any differences shown by the reconciliation should be investigated and promptly resolved.

The word “promptly” appears several times in the SRA Accounting Rules, but there is no definition for this term.  The solicitor will need to decide what is promptly and in reality, this may not mean that any changes are made in the current practices.  It is, however, recommended to document the procedures and controls to ensure that the SRA and the reporting accountant are satisfied that the rules have been considered.

If you have any queries, please do get in touch.

https://www.sra.org.uk/solicitors/standards-regulations/index/

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• Capital allowances – The capital allowances special rate for qualifying plant and machinery assets will be reduced from 8% to 6% (from 6 April 2019) while a new 2% non-residential Structures and Buildings Allowance (SBA) is available where contracts for physical construction works are entered into on or after 29 October 2018.

• Employment Allowance (EA) – Only employers with an employer National Insurance contributions (NICs) bill below £100,000 in their previous tax year will be eligible for EA, which provides businesses and charities with up to £3,000 relief, from April 2020.

• Personal Allowance (PA) and higher rate threshold – The PA and higher rate threshold will rise to £12,500 and £50,000 respectively from April 2019, one year earlier than planned. Both will remain at the same level in 2020-21 and then the PA will increase by Consumer Price Index (there is no corresponding commitment in relation to the higher rate threshold).

• Off-payroll working in the private sector – In line with public-sector bodies and agencies, the IR35 extension rules will be applied in the private sector from April 2020. Responsibility for operating the charge will move from individuals to the organisation, agency or other third party engaging the worker, though small organisations will be exempt.

• VAT registration threshold – The current level of £85,000 will remain for a further two years until April 2022. The government will look again at the possibility of introducing a smoothing mechanism to avoid the ‘cliff-edge effect’ for small businesses once the terms of EU exit are clear.

• Duties – Fuel duty will be frozen for a ninth successive year. Duty rates on beer, most cider and spirits will also be frozen, though duty on wine will increase in line with the Retail Price Index. Duty rates on all tobacco products will increase by two percentage points above Retail Price Index inflation until the end of this Parliament.

• Business rates –  Bills will be cut by one-third for retail properties with a rateable value below £51,000 for 2 years from April 2019 (until the next rate revaluation).

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Here are a few of the mistakes that are made:

1. Not using or carrying forward losses

Certain types of losses can be offset against certain types of income in the year of the loss or earlier years, which can lead to overpaying tax

2. Ignoring tax coding notices

Tax codes sometimes contain pensions, tax underpaid in previous years or benefits in kind, which are then ignored in the main body of the return

3. Not entering foreign income

Dividends from foreign investments, income from holiday rental properties and other foreign income is sometimes forgotten.  UK taxpayers are taxed on their worldwide income, with double taxation relief available in certain circumstance

4. Not adjusting child benefit tax

If you earn over £50,000 and receive child benefit, there is likely to be an adjustment required to the tax payable to clawback benefits.  This mistake leads to an underpayment of tax

5. Private use adjustments

Clients often forget to adjust expenditure for private use, such as telephone or motor expenses

6. Claiming expenses that are not allowable

Entertaining, legal fees and repairs are areas where clients often make mistakes in claiming expenses that are not tax deductible.  Of course, there are also expenses which can be claimed that are missed by clients, such as use of home as office

7. Property rental tax changes

The rules have changed on what relief can be claimed in respect of mortgage interest on property rentals.  Rent a room relief could be available and this has increased to £7,500.  Wear and tear allowance is no longer available on furnished lets.  All changes that can easily trip up the “same as last year” type approach to completing returns

8. Resisting penalties/interest

If you make a mistake and it was genuine (ignorance is no defence), then don’t assume that the penalty imposed by HMRC stands. Penalties should only be imposed if the mistake was careless, or worse.  It is, however, much better to make sure your tax return is correct and suffer the £100 later filing penalty, than send in a rushed return on 31^st January.  The cost of any errors could be far worse than £100

9. Ticking the wrong boxes

HMRC provide a guide to completing returns that will help here, but this is an easy mistake to make, which may give HMRC the ammunition to raise a penalty.

10. Getting your Unique Tax Reference (UTR) wrong

HMRC may have difficulty matching your payment with the return or the processing of the return may get delayed leading to a delay in any repayment due.  Either way, trying to sort this out over the phone at a time when everyone else is chasing could be a hassle.

My advice – speak to an expert and get it right first time!  Two Rivers can prepare your self-assessment return for a competitive rate.

Please note: All rates and allowances are correct at the time of writing

The post 10 Common Self-Assessment Tax Return Mistakes appeared first on Two Rivers Accounting Services Limited.

It only lends to charities and social enterprises and other organisations where the loan is for a social purpose. It offers loans from £50,000 up to £3.5 million and will work with other social lenders to provide larger loans. Repayment terms can be for up to 25 years.

Charity Bank also offers a range of competitively priced deposit accounts. This includes its recently launched Ethical Easy Access Account which been developed to meet the needs of charities and business savers.

All deposit accounts can be opened online and eligible deposits are protected by the Financial Services Compensation Scheme, the UK’s deposit guarantee scheme.

Details of Charity Bank’s loans can be found here and its deposit products here.

Contact their savings team for more information: call 01732 441944 email savings@charitybank.org or visit charitybank.org.

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It’s that time of year again, it has been planned for months and everyone is excited to see which member of staff is going to make the most of the booze budget – yes, it the Christmas Party!

But as a company owner, when the glitter has settled in the hoover bag and it is time to sort out the accounts, what must you think about?

Is this a staff party?

If the party is primarily for entertaining staff, that’s fine.  The party must be open to all staff, not just directors, in the location in question.  There will be no benefit in kind for staff if the party is within the limits.

What are the limits?

• If the total cost of the party, including VAT, travel and accommodation, exceeds £150 per head, the whole amount is taxable on the employee and the employer will pay national insurance on the benefit.  Under this amount and no benefit applies.
• If there has already been a summer function, then the cost of this must be taken into account as the £150 is per annum, not per function
• You can use the limit against one function. For example, if the Summer Ball costs £85 per head and the Christmas Party costs £160 per head, then only the Christmas Party will be taxable in full.

Can I claim back the VAT?

Yes.  But, if there was an element of entertaining UK clients, then the proportion relating to these guests is disallowed.

If your staff are there to entertain the clients, the whole amount of VAT is disallowed.

Is it allowable for Corporation Tax?

Yes. The full amount of the party, even if above the £150 limit for staff, is allowable, unless it is deemed to be entertaining clients.

Call us on 01753 869549 if you wish to discuss your concerns or clarify any points raised.

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