Pillow May Team

Pillow Talk

Contractors Temporary Workplace Rules

Sector-ContractorsContractors travelling to and from a client’s site must comply with HMRC’s temporary workplace rules if they wish to claim travel and subsistence expenses against their taxable profits. In general if travel is allowable then subsistence is too.

“A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose”

The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months.

Where the test is met; the workplace becomes a permanent workplace and travel between that place and home will be ordinary commuting and is not tax deductible.  Therefore the employee must personally pay for their travel costs to the workplace.

Watch out as consecutive assignments in the same area are treated as a single workplace, even though you may be working for different clients. Your journey to work must change significantly for your workplace to change.

Key points to remember:

  • Travel from home to a normal place of work is not tax allowable.
  • To be a normal place of work, frequency and permanence must be present.
  • Frequency is established when 40 per cent or more of an employee’s time is spent at a particular location.
  • Permanence is established when a 24-month placement is expected at a particular location.
  • Once the expected length of time at the temporary workplace exceeds 24 months then tax relief for travel is immediately withdrawn, but expected permanence that is later terminated cannot be retrospectively claimed for.

Contractors incorrectly claiming expenses and subsistence could face back taxes, interest and penalties if their error is discovered by an HMRC inspector during the course of a routine inspection. Call us today if you have any concerns.

For further information as supplied by HMRC, please visit: The 24th month rule

 

Is it time you started using a CRM system?

crmAs your business and client list grows, it becomes more and more difficult to maintain a personal relationship with each and every one of them, whilst remembering every detail.

Moving to a CRM (Customer Relationship Management) system allows you to automate and centralise all of these details in one place, ensuring you maintain that close relationship which each of your valued clients.

As much as a spreadsheet will store all the details for you, it is very one dimensional and can quickly become out of date. A CRM allows you to store significant amounts of information on each client, link to other software programs such as your accounting package and email campaign software and automate all your communications including follow up to meetings, leads, phone calls etc.

How you follow up with clients or prospects can make or break your business.

The more information you can acquire and use, the better your follow up will be as you will be able to personalise each response in a timely manner. Being able to harvest the information you hold into your communications will elevate your business. The right CRM system will not only make this possible, but it could even automate the process for you so that you have more time for strategy and development.

As your CRM connects to other back-office applications, it will join up processes and remove double handling of tasks and data entry; allowing you and your staff to manage time more effectively.

The system prompts users to follow up on activities and sends automated alerts to ensure important actions occur. Shared diaries, team calendars and service schedules give everyone clear visibility of individual activities.

Deciding on a new system can be daunting. To ensure you have the right system, it is critical to define what your requirements are at the beginning and to take into consideration future developments.

For further information on a few CRM systems that our clients use, see the links below

Capsule CRM

Salesforce CRM

InTouch CRM

Zoho CRM

VAT Tips for FreeAgent Users

ec vatA new tax year has begun and as usual, there are changes to rules and regulations that will affect freelancers, contractors and small business owners.

If you have recently left the Flat Rate Scheme there may be some points for you to take note now that you are reclaiming VAT.

Please ensure that when you are reclaiming VAT, you have a VAT receipt or an invoice clearly showing the VAT that has been applied. Be especially careful of overseas software companies such as Google & Adobe as they may not have applied VAT to your payment.

If you have been travelling outside of the UK then food, taxi, hotel and other travel costs will be services consumed outside of the UK.  In Freeagent, you will need to choose the EC Status of “UK/Non-EC” and put the VAT as 0% as the VAT can’t be claimed through the UK VAT return.  You would only choose “EC Goods/Services” settings if the goods and services are bought back into the UK.

If you wish to reclaim international VAT on these, you do that like this click here

But for small values to be honest it’s never worth it.

Company Cars – New Advisory Fuel Rates from 1st June 2017

Fuel advisory rates are used to calculate the amount of VAT that you can reclaim, relating to the fuel element of the mileage allowance payments; or the mileage claim that you can make if you have a company car but pay for your fuel privately.  Mileage allowance payments should be made at rates of 45p per mile for the first 10,000 miles per tax year and 25p thereafter.

These advisory fuel rates apply to all journeys on or after 1 June until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.

Engine size Petrol LPG
1400cc or less 11p 7p
1401cc to 2000cc 14p 9p
Over 2000cc 21p 14p
Engine size Diesel
1600cc or less 9p
1601cc to 2000cc 11p
Over 2000cc 13p

Hybrid cars are treated as either petrol or diesel cars for this purpose depending on their engine type.

Any questions please get in touch

Directors’ Responsibilities & Duties Explained

directorsCompany directors are responsible for the management of their companies. They must act in a way most likely to promote the success of the business and benefit its shareholders. They also have responsibilities to the company’s employees, its trading partners, and the state.

As a director, you need wide powers to help you promote the company. However, you face serious penalties if you abuse those powers or use them irresponsibly.

1. Appointing Directors

Every private limited company must have at least one company director and the first director(s) are appointed by the shareholders who form the company.

  • You can appoint both executive and non-executive directors –If you are a director but have no executive position within the company, you are classed as a non-executive. Non-executive directors still carry the same responsibilities as other directors, even if they have nothing to do with the day-to-day running of the company.
  • Some people are debarred from becoming directors – Auditors may not be appointed directors of the companies for which they act or people who have been disqualified, have undischarged bankrupts or under 16.
  • Details of directors must be reported to Companies House – the appointment, departure or change of particulars of any director must be reported to within 14 days, using the appropriate form.

2. Exercising Directors’ Powers

  • Check if there are any restrictions listed in the articles of association – If the directors act outside the company’s objects, the company may be entitled to take legal action against them. You can only change the company’s objectives by getting shareholder agreement.
  • You must act within the powers granted in the articles of association – The articles of association define the rules governing how the company is to be run, including what the directors’ powers and responsibilities are. The articles also set out how decisions are to be taken. For example, the procedures for calling a board meeting and how many directors are needed to vote on a proposal.
  • In exercising directors’ powers, you must show reasonable skill – You are required to exhibit ‘such a degree of skill as may reasonably be expected’ from a person with your knowledge and experience.
  • You must also exercise a degree of care in your actions as a director – The test of an acceptable level of care is what a reasonable person would do in looking after their own affairs. You are generally not liable for the actions of your fellow directors, if you knew nothing about them and took no part in them, but you have a duty to make sure you are informed about the company’s affairs.

3. Fiduciary Responsibilities

As a director, you must act in a way which you think is most likely to promote the success of the company for the benefit of its shareholders.

  • Substantial deals between the company and you must be approved by the shareholders – This also applies to deals involving someone connected with you, such as a relative and your contract of employment must normally be approved by the shareholders.
  • You must not use your position to make private profits at the company’s expense – If you are found to have secretly profited from a contract, you might be forced to hand those profits over to the company. You are legally obliged to declare any actual or potential conflict of interest.
  • You must give equal consideration to all shareholders – Even if you hold most of the shares, or act as the nominee of the major shareholder, you must consider the interests of shareholders as a whole.
  • The company is a separate legal entity from its directors, shareholders and employees – The best interests of the company are not always the same as the best interests of the shareholders and you must consider the interests of other stakeholders such as creditors and employees. You must also consider the long-term prospects of the company and its reputation.

4. Responsibilities Under Company Law

Directors are personally responsible for ensuring that the company complies with company law. These duties are usually delegated to the company secretary (if the company has one) or to a director or trusted employee. However, you must ensure that these responsibilities are carried out.

  • You must make sure that the statutory returns are filed with Companies House on time – these include the annual directors’ report, strategic report (unless the business qualifies for the small company exemption) and accounts, the annual confirmation statement, notice of changes to directors and secretaries and register of people with significant control.
  • All companies have to file accounts with Companies House – in most cases small and medium-sized companies can submit abbreviated accounts. Small companies do not generally need to have their accounts audited and as such are not required to appoint an auditor.
  • Most private companies are no longer obliged to hold an AGM – if you do hold an AGM, you must give appropriate notice (usually 14 days) and ensure minutes record all decisions. This could protect you if you face legal action.
  • You are no longer required to circulate copies of the annual accounts for approval – however, members must be sent a copy before they are filed with Companies House and a director must sign the balance sheet and approve and sign off the directors’ and strategic reports.
  • You must provide company details on business stationery and elsewhere

5. Other Legal Duties

  • You must pay the correct amounts of tax, VAT and National Insurance on time
  • You must take reasonable care to ensure the health and safety of your employees – You can be prosecuted for dangerous practices started or continued with your consent, or illness or accident attributable to your negligence. You must undertake a risk assessment. If you have five or more employees, you must record this in writing and have a written health and safety policy.
  • You must comply with employment law in dealings with employees – You (personally) can be sued for unfair dismissal, discrimination or unfair work practices, such as unequal pay.

6. Potential Penalties

Exercise your responsibilities carefully as the penalties for failure to do so can be severe.

  • Even in a limited liability company, you might be held personally liable for losses – These include losses arising from illegal acts such as wrongful or fraudulent trading, and acts beyond your powers or undertaken with insufficient skill and care.
  • You could be disqualified from acting as a director for some types of conduct – They include continuing to trade when the company is insolvent, failure to keep proper accounting records, failure to pay tax and failure to co-operate with the official receiver. Disqualification lasts from two to 15 years.
  • Some actions could result in criminal convictions – They include failure to keep proper accounting records, fraudulent trading, health and safety shortcomings and misappropriation of company funds.
  • Wrongful trading – You will be guilty of wrongful (or even fraudulent) trading if you allow the business to carry on and incur debts when you know there is no reasonable prospect of the company repaying them. If you do, you could be held personally liable for the company’s debts if it subsequently becomes insolvent.

 

7. Avoiding Danger

  • Monitor the financial situation of the company continuously – You should do this whether or not you are the financial director.
  • Take steps to minimise losses if the company is in, or faces, financial difficulties – Ask an insolvency practitioner to advise the board. Take detailed minutes of the meeting.
  • Make sure that minutes of directors’ meetings are maintained in any event – They could protect you against future legal action, particularly where there have been boardroom disagreements.
  • Keep in mind what you can and must do If necessary, review the requirements of your employment contract and powers granted under the articles of association.
  • Whenever possible, avoid giving personal guarantees for the company’s debts – Always negotiate to limit the extent of any guarantee (eg by limiting its duration).
  • Consider directors’ and officers’ liability insurance – This will pay for legal expenses, and sometimes, damages awarded against you, if you are sued. The company may also be able to indemnify directors.

Set up auto enrolment with PensionSync on Xero

pensionAre you about to stage for Auto Enrolment?

Connect Xero to your pension provider through PensionSync to ensure your contribution file is on time and contributions transfer directly. You can add your staging date, pension provider, and pension contributions to set up automatic enrolment for workplace pensions in Xero.

Please note you can only do this if you about to stage and are new to payroll and auto enrolment, or if you have already started enrolling employees using another product.

All your employee details and contributions are posted in one transaction directly to the Pension company and to HMRC.

If you have a direct debit set up to automatically make the pension payment over to the pension company, you wont need to login to your pension account to submit any details or to just make the payment – it will be done automatically.

Xero currently supports direct electronic pension submissions to NEST and The People’s Pension (TPP).

If you don’t use NEST or TPP, or don’t want to file electronically, you can set up manual auto enrolment and submit your pension contribution files manually.

Step by Step Guide –

Connect and file your pension contributions with NEST or TPP

  1. In the Settings menu, select Payroll Settings.
  2. Click the Workplace Pension tab.
  3. Import or manually enter your Staging date.
  4. (Optional) Enter a Workforce postponement date, if you want to postpone assessment by up to 3 months. Xero will automatically add this date to all your employee records.
  5. (Optional) Enter Pension Admin Details. Xero will update these fields if NEST or TPP already hold this information.
  6. (Optional) Enter Signatory Information if you’re using Xero to send worker communications.
  7. Enter liability and expense accounts under Payment accounts.
  8. Under Pension Filing Due Dates, enter the dates that your pension provider expects you to complete your filings. Xero will update these fields if NEST or TPP already hold this information.
  9. Select your Pension provider and enter your Employer ID.
    NB: Your employer ID in NEST is ‘NEST Employer ID’ and for TPP it is ‘Account Number’.
  10. Click Save and Connect.
  11. Xero will redirect you to a PensionSync authentication screen. Confirm your details with your pension provider to allow Xero to retrieve your scheme details and then Xero will send your pension filings.

    NB: Authentication can take an hour. Xero will send you an email to let you know if your scheme has been retrieved.

    If you need to make changes to your scheme with your pension provider, update them and click Refresh Scheme Details to update them in Xero.

  12. Enter your Pension groups for each employee.
  13. (Optional) If you’ve been taking pension contributions before connecting to Xero through PensionSync, check each employee’s pay template to ensure the correct pension pay items are used.
  14. Confirm your scheme details are correct, then click Save and Connect.

Changes to the flat rate VAT scheme for limited cost businesses

vatAs I`m sure you are aware, the chancellor announced in his Autumn Statement 2016 that he would be adding a new flat rate percentage of 16.5% for all limited cost businesses. This renders the flat rate VAT scheme pretty much useless for most businesses so we were hoping that the lobbying of the government on this point would cause a further amendment. However in the budget, the chancellor confirmed that the change was still going ahead.

What changes are needed to FreeAgent

If you left the flat rate scheme on 31 March 2017, your next VAT return will be prepared under two basis – the period up to 31 March 2017 under the flat rate scheme and the period from 1 April 2017 to 30 April 2017 under the cash accounting scheme.

You do this as follows:

  1. Go to Taxes – VAT within FreeAgent which will bring up a list of all the VAT returns currently in existence on FreeAgent. Select the “VAT Return 04 17” by clicking on the wording in the list which will bring up the VAT screen.
  2. Click “Edit Details” button in top right hand corner. Then choose Period Ends On and type 31 Mar 17. Don`t change any other settings.
  3. Go back to the VAT return list (Taxes – VAT) and hopefully a new VAT Return “VAT Return 0617” will have appeared. If not, refresh the screen a couple of times. Select this return by clicking on the wording in the list.
  4. Click “Edit Details” button in top right hand corner. Then choose Period Ends On and type 30 Apr 17; Accounting Basis – Cash and Flat Rate Scheme – Not on Flat Rate Scheme. Then “save” the changes.
  5. You will now see that the details box on the right hand side of the VAT return show a Calculation Basis of “Cash” and Flat Rate Scheme of “Not on Flat Rate Scheme”.

For more details on editing the VAT return, see the following FreeAgent Knowledgebase article: https://www.freeagent.com/support/kb/vat/each-vat-return/. Let us know if you get stuck with this and we’ll adjust the FreeAgent settings for you.

To submit your VAT return for quarter ended 30 April 2017

To submit your VAT return for the quarter ended 30 April 2017, follow the steps below:

  1. Add together the entries on the VAT return 0317 and VAT return 0417 ideally using an excel spreadsheet which you then save into the Files area of Freeagent for future reference (this is found using the down arrow beside your name in the top right hand corner of the screen).
  2. Log into your government gateway VAT online account at https://www.tax.service.gov.uk/gg/sign-in?continue=/business-account/vat and submit the VAT return figures that you calculated in step 1
  3. Go to Taxes – VAT within FreeAgent to bring up the list of all the VAT returns and select the “VAT Return 0417”.
  4. On the right hand side of the VAT return, you will see a label “Unfiled”. Click on the down arrow and select “Mark as filed”. You will then get a notification from Freeagent stating that all unfiled prior returns will also be marked as filled so select “OK”.

Whilst you are in the FreeAgent VAT section, we would recommend that you check that the next VAT return listed under Taxes – VAT i.e. “VAT return 0717”. Open up this VAT return by clicking on it and check that the details on the right hand column of the screen show as VAT Return Period Dates “01 May 17 to 31 Jul 17”; Flat Rate Scheme as “Not on Flat Rate Scheme” and Calculation Basis as “Cash”. MAKE SURE THAT THESE DETAILS ARE THE SAME FOR ALL FUTURE VAT RETURNS ON FREEAGENT as sometimes the VAT details change back to the old settings!

Cash accounting on FreeAgent

You are probably feeling a little bit daunted about handling your own VAT calculations. Do not worry too much as FreeAgent has been written to help small businesses account for their VAT as accurately and easily as possible as follows:

  • When you explain an expense as a category, FreeAgent will automatically know the VAT rate normally attributable to that expense category and will enter it automatically. However, we would recommend checking the VAT rate to the supplier’s invoice.
  • When you set up a customer, you can tell FreeAgent whether you normally charge VAT to that customer or not.

Don`t forget to keep copies of all your supplier VAT receipts attached to the relevant entries in Freeagent as this will make things much easier should you ever get a VAT inspection!

Hopefully this blog has clarified the changes relating to the flat rate VAT scheme but please do get in touch if you have any further questions.

 

 

Holiday Accrual Systems Explained & Calculator

Holiday Accrual Systems Under the new accounting reporting standards coming into effect this year, accrued holiday pay must be included for the first time.  This is the amount of holiday that each employee has leftover, unused at the company year-end.  We thought it would be timely to remind everyone how holiday pay works!

Almost all workers are legally entitled to 5.6 weeks paid holiday per year (known as statutory leave entitlement or annual leave). An employer can include bank holidays as part of statutory annual leave.  Part time workers are entitled to the same amount of holiday (pro-rata) as full time colleagues.

Holiday management can be a real headache, particularly when it crosses over with other forms of leave, such as sick leave or parental leave.  A record should be kept of each employee’s leave and most of our clients use an excel spreadsheet or Xero’s inbuilt Time Off tracker.

Statutory holiday entitlement starts to build up – or accrue – from the first day of employment. It accrues monthly in proportion to the annual entitlement.

For example:

A full-time worker in the ninth month of employment would have built up 9/12ths (or three-quarters) of annual entitlement. The statutory annual entitlement for a typical five-days-a-week job is 28 days, so in this case the worker would have accrued 28 x 9/12 = 21 days.

When employees are on sick leave during this period, they continue to accrue holiday at the normal rate. And if the employee can’t take this leave during their first year because of sickness absence, then the employer must let all or some of it be carried over to the next year.

What about maternity leave? Again, the employee continues to accrue statutory minimum holiday and any additional contractual holiday entitlement. The holiday can’t be used during maternity leave, though arrangements could be made to add the leave on to the beginning or end of the maternity leave period. The same goes for paternity leave.

At the end of employment, employees are entitled to a payment for any unused holiday that has been accrued. Conversely, a contract of employment could make a provision that workers terminating their employment repay the employer for any leave taken beyond the amount that has been accrued.

In the second year of employment, workers are entitled to all their leave as soon as the new holiday year starts. Employers may choose when the leave is taken and for how long – for example, a two-week shutdown around Christmas and New Year.

An employer can choose to offer more leave than the legal minimum. They don’t have to apply all the rules that apply to statutory leave to the extra leave. For example, a worker might need to be employed for a certain amount of time before they become entitled to it.

Statutory Holiday Entitlement Calculator

Calculate statutory holiday entitlement in days or hours for a full leave year or work out the holiday that someone is entitled to when they start or leave a job part way through a leave year HERE

 

Giving Back in April – Dolphins’ Den

12243366_356386331152067_909657373038358063_nPillow May makes a monthly donation to B1G1 or a local charity suggested by our team or clients for every set of accounts, tax return or feedback form submitted, so in being one of our clients you have once again, allowed us to make a difference to the following amazing scheme:- Dolphins’ Den.

Dolphins’ Den aims to empower people to achieve their dreams. They encourage people with a learning disability to believe in themselves and to set up their own business or community project.

 How does Dolphins’ Den work?

HowDolphins’ Den begins with a series of workshops which aim to support people to think about their ideas for a business or community project. After completing the workshops, participants can sign up to receive one-to-one mentoring from a local business person. The role of a mentor is to support the participants to make their idea a reality.

Find outFind out more about our projects, about mentoring for Dolphins’ Den or about opportunities for local businesses to get involved and support the project.

View video for further information

New grant fund & support for growing businesses

inspireAs a valued Client, I would like to make you aware of some financial and expert help which is now available to growing businesses in Wiltshire. As part of our commitment to supporting our Clients, we Partner with Inspire who are a not for profit organisation, funded by UK and Local Government to support growing businesses in Wiltshire. Joining one of the growth networks gives you access to very significant support and expertise amongst which are the following

1. Free, fully funded training for you and your staff on anything from technical courses, digital learning to management and leadership training.

2. A new Grant fund aimed at projects to grow your business and can help pay the cost of professional advice required or investment in new equipment.

3. Grants for innovation projects or development of new products.

4. Business Leadership education, fully funded by a leading Investment Bank

Here is a short video which explains more. If you’d like to find out more, please let me know and I’ll arrange an introduction for you.