Tag: tax tips

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Tax Tip 

Don’t forget to claim the VAT on business mileage.

You can’t claim VAT on the full 45p but you can claim on the fuel element. You can find out the current fuel element Advisory fuel rates – GOV.UK (www.gov.uk)

For instance my care has a fuel rate of 14p. This means that, for every mile, I can claim 14p *20/120 = 2.33p in VAT. There is no VAT on the remaining 31p as that is deemed to be for insurance, maintenance, wear and tear etc.

All you need to do is to keep a VAT invoice* (not a credit card receipt please!) for fuel around the date of the journey ie when you you fill up before or after the trip.

*If you’re interested then it’s because the 45p is an allowance and EU/UK law states that you can’t claim VAT on allowances. The EU did one of their usual accommodating moves and agreed that, as long as there was a valid VAT invoice for fuel around the same date (eg filling up before or after the mileage) then the company could claim VAT on the fuel element of the 45p.

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Tax Tip

We’ve been busy doing Clarity Business Reviews for new clients. But what is a Clarity review?

Clarity is software that will connect directly to Xero or Quickbooks (or we can enter figures manually from other software). We can then look at 7 key indicators that reflect the profitability, value, and efficiency of your business. And how we can improve those 7 figures and your business as a whole.

Over zoom we discuss your business and identify actions within 5 areas so that you go away with an action plan.

The whole thing takes about an hour.

Then there are three options:

-Work through the actions on your own

-Join our Minerva Mastermind group on Facebook and a monthly Zoom call to check in on how you’re doing and maybe book an annual Clarity review

-Book monthly or quarterly coaching to help you to work through your action plan (Della is a qualified business coach and mentor as well as a chartered accountant)

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Tax Tip

Why we love Xero (Quickbooks online and Freeagent are quite good too) 

Xero is user friendly (according to our clients) software for small businesses. It sits in the cloud rather than on a single PC so that it can be accessed at any time by the business owner (that’s you) looking for management information, the bookkeeper (that may be you, Minerva, or somebody else) to input data, and your accountant (that’s us) to prepare your accounts or to give advice at any time. 

You can put the Xero app on your phone to raise quotes and invoices on site. You can buy a small card payment machine such as Square or Zettle for around £20 and, with the app on your phone, you can take payment on site. 

You can include a Stripe payment button on your invoices (although bank transfer is the cheapest method) to make it easy for customers to pay you by card. 

You can forward electronic invoices directly to Xero (or to Dext if you have the app) or upload them manually to attach to your transactions. Once you have attached a digital copy you can get rid of your paper copies although we recommend that you keep them somewhere until we have completed the year end. If you ever need to check an invoice it is easy to search the supplier in Xero to find it.  

Xero multi-currency version handles all your foreign currency purchases automatically.  

As long as your Xero is up to date we can estimate how much tax you will expect to pay at any time. 

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Tax tip

Paperwork (or the digital equivalent) is important

If you are running a limited company it is important that you don’t take any money out of the business without the correct paper trail. The company is a separate legal entity from the director/shareholder. It’s a bit like taking money out of your mother’s purse without permission.

The sort of paperwork you would need is:
– Salary needs a payslip
– Dividends need a minute and a tax voucher (contact us if you need a template)
– Interest payments (if appropriate) need a form CT61 filed with HMRC
– Expenses should be accompanied by receipts and a mileage log
– Pension payments should be paid directly to the pension provider

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Tax Tip

How to take dividends – tip 2

It’s not unusual for a married couple to hold shares in a company and each of them is entitled to receive dividends on those shares. But it is important that dividends are paid to the correct shareholder.

Whilst dividends can be paid into a joint account, they should NOT be paid into an account that does not belong to the shareholder. In other words, H’s shares must be paid into H’s bank account or H+W’s bank account and W’s shares must be paid into W’s bank account or H+W’s bank account.

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Tax Tip 

How to take dividends 

I see too many directors helping themselves to company cash and calling it ‘dividends’. But every payment out of the business should be accompanied by some sort of paperwork (or digital equivalent). For dividends you will need: 

  • Review of management accounts and forecast to demonstrate that their will be sufficient funds left in the business to cover future debts (HMRC are particularly keep on this!) otherwise the dividends are illegal 
  • Sufficient post-tax profit to cover the dividends (another reason they may be illegal) 
  • A minute of the board meeting voting for the dividend 
  • A tax voucher for each shareholder. 

We have templates for the last two and we can advise you on whether your bookkeeping is good enough for the first. Hint: if it’s not up to date then it can’t possibly be adequate. 

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Tax Tip

Higher income child benefit charge (HICB)

If you are receiving child benefit this may be restricted from £50,000 and withdrawn completely from £60,000. With two cliff edges to avoid here are a few things that you can do to legitimately reduce your income.

  1. Pensions. You (or your company) can pay up to £60,000 per year into your pension. This will save tax but can also reduce your income below the relevant limit. The downside is that this money is tied up until retirement.
  2. Charitable donations. Most people give to charity throughout the year but do take care to giftaid it where you can. These donation can save you tax if you are a higher rate taxpayer and also be used to reduce your income below the relevant limit.
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Tax Tip

Dividend paperwork is important.

There should be a board minute each time dividends are approved as well as a tax voucher for each shareholder.

In small owner managed businesses it is common to run a DLA (director’s loan account) throughout the year and to clear it with a single large dividend at the end of the year. With MTD coming in this will need to be done quarterly.

Before declaring any dividend the board must ensure that the company will still be solvent after the dividends have been declared. It is hard to do this without some sort of management accounts or financial review so keep a record of these too.

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Tax Tip

Company cars used to be an expensive perk but electric vehicles are now worth considering. For the 2023/24 tax year the P11D benefit in kind is just 2% of the taxable list price.

This means that you will pay tax on just 2% of the list price of the car.

If you have a penchant for expensive, less environmentally friendly, vehicles you might benefit from operating as a sole trader or a partnership.

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Tax Tip

6 July is the deadline for employers (or their accountants) to submit P11D benefit in kind information to HMRC. Unfortunately we’ve spotted some benefits due on company vans that could have been avoided.

The van is exempt if it is only used for business journeys which are trips made as part of work or to a temporary workplace. As a surprisingly generous move ‘insignificant’ private journeys are exempt, for example making a slight detour to pick up a newspaper on the way to work.

What is NOT exempt is journeys between home and a permanent workplace such as a builder’s yard. Vans should be left in the yard overnight to avoid a benefit in kind.

Similarly company vans do not need to be declared if they are pool vans. In order to be classed as a pool van ALL of the following conditions must be met:
• available for use and used by more than 1 employee
• available to each employee because they need it to do their job
• not ordinarily used by 1 employee to the exclusion of others
• not normally kept at or near employees’ homes (this is the one that catches people out)
• used only for business journeys – limited private use is allowed, but only if it’s incidental to a business journey, for example driving home to allow an early start the next morning

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