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Glasgow
+44 (0)141 221 2984

Edinburgh
+44 (0)131 225 6366

Stirling
+44 (0)1786 451745

Dumbarton
+44 (0)1389 765238

Hamilton
+44 (0)1698 459444

French Duncan

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The annual burden of tax compliance for small businesses

The end of the tax year is in sight, a key time for you to make sure you’ve done everything you can to minimise your tax burden. The average UK small business spends £5,000 and three working weeks every year on tax compliance, according to the latest findings from the Federation of Small Businesses (FSB).

The FSB’s ‘Taxing Times’ report signposts the many hurdles small businesses face when meeting their obligations and paying their taxes. Almost half of participating businesses said determining the tax rates at which they’re required to pay is a challenge. Meanwhile, four in ten businesses said they find exemptions confusing.

Value Added Tax (VAT), Pay-As-You-Earn and Employer National Insurance Contributions (ENICs) were reported as the most time-consuming taxes to get to grips with. According to the FSB, the average small business spends 95 hours a year complying with these three alone. This is why more than three-quarters of small firms pay a specialist to ensure they meet their tax obligations correctly.

Almost half (47%) of small firms pointed out that business rates have made growing their firm more difficult, whilst a similar proportion claimed corporation tax has hampered their expansion. Just under half (44%) of businesses accused ENICs of stifling growth and one-in-seven respondents blamed VAT.

When asked about changes that would reduce the tax compliance burden, 53% of businesses suggested that making payments by instalment would improve the process and make it more straightforward.

A similar proportion (52%) also said they would prefer to receive an early estimate of their tax bill. Meanwhile, around 40% of respondents highlighted that automated tax calculations would be a useful option.

If you are looking for any assistance with tax compliance please do not hesitate to contact us either via our website or call 0141 221 2984

Furnished Holiday Lets - VAT

The default position for supplies of land and property is that such supplies are exempt, with some notable exceptions.  One such exception to this rule is the provision of holiday accommodation, which is standard rated. 

Generally, holiday homes are dwellings whose use throughout the year or as a principal private residence is restricted.  This might include holiday chalets and sites for holiday chalets, caravans, huts and house boats, or any other accommodation which is suitable for holiday or leisure use.

In some cases, private residential accommodation might be utilised for holiday accommodation, which can mean an exempt property might be used to make taxable supplies.  However, it is generally less likely that taxable holiday accommodation will be used for exempt residential purposes. 

Where a residential property is used for mixed purposes throughout the year, i.e. part residential and part holiday accommodation, the VAT liability of supplies must be determined based on the facts as they apply in each case.  Factors such as how and where the property is advertised together with the duration of lets and turnover of tenants will need to be considered when reaching a decision on VAT liability.

Where VAT taxable turnover received from holiday accommodation in any 12 month period exceeds the VAT registration threshold, currently £85,000, then the business will be required to register for VAT.  All future income received from holiday letting will be subject to VAT at the standard rate, though residential letting income will remain exempt, meaning the business may be required to carry out partial exemption calculations to apportion VAT incurred on costs.

As VAT is a specialised area of tax, where you breach the registration threshold and are unsure what to do, please contact French Duncan VAT Senior Manager Maria McConnell either by email to m.mcconnell@frenchduncan.co.uk or call 0141 221 2984.

This blog is part of a series of eight, you can see all other blogs here:

1. Furnished Holiday Lets - an introduction & your obligations

2. Furnished Holiday Lets - qualifying conditions & elections

3. Furnished Holiday Lets - Income Tax & Capital Gains Tax

4. Furnished Holiday Lets - Non Resident Landlords

5. Furnished Holiday Lets - Making Tax Digital

6. Furnished Holiday Lets - Inheritance Tax

7. Furnished Holiday Lets - Conclusion & Services

 

 

Incentivising your employees – benefits to using an EMI scheme

Are you thinking about incentivising your employees or and you reading this and asking why would I want to?

I have found that Enterprise Management Incentive (EMI) schemes are very popular among private firms.  They are used to encourage key employees to remain with the company, to reward them for their performance and to encourage and to inspire the employees to think commercially about increasing the value of the company as they are now entitled to a slice of the action on sale.

Some employers are reluctant to use share schemes as they may not want to give shares to all their employees.  Unlike other share schemes, with the EMI scheme you can be selective with who you wish to include.  EMI schemes work by the employer granting an employee the option to buy shares in the company.  At a future date, within 10 years, the options are exercised and the employee now owns the shares.  In a lot of cases this is structured so that the options are exercised in the future when the company is going to be sold.

Furthermore, the tax advantages associated with EMI schemes are particularly beneficial to the employees.  With an EMI scheme, the value of the shares is agreed with HMRC at the date the options are granted.  There is no income tax charge at the date the options are granted and if the options are granted at market value (MV) there is no income tax charge at date of exercise either.  This can be very beneficial where the company has increased in value between grant and exercise of the options.

When the shares are sold capital gains tax (CGT) will be calculated based on the difference between MV at sale and the price paid by the employees.  Where the shares are EMI shares and the relevant conditions are met the shares may qualify for Entrepreneurs Relief (ER) and thus any taxable gains would be subject to CGT at 10%.  If the shares don’t qualify for ER, CGT would be payable at 20% for higher rate tax payers.

There is a lot to consider before pulling the trigger on this and I would encourage any employer thinking about going down this route to get in touch with any questions.  At French Duncan we have great experience in helping our clients through this full process from start to finish.

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