Hybrid work and tax: What counts as a business journey?

Hybrid work and tax: What counts as a business journey?

28.5.2024 | Tax

Hybrid work and tax: What counts as a business journey?

Beatons navigates the complexities of hybrid working arrangements, ensuring compliance and minimising taxable office travel. 

 

Working from home is now normal practice for many employees, and most companies have their own set of regulations about how this works for them.

HM Revenue and Customs (HMRC) has its own rules in relation to some work from home matters, particularly around travel.

HMRC has clear guidelines regarding what constitutes ordinary commuting and private travel for tax purposes, particularly in light of the rise of hybrid or flexible working arrangements.

In essence, if an employee is required to work from home as an essential aspect of their job, HMRC typically allows tax relief for travel expenses incurred while journeying from home to another designated workplace, like the office, for job-related duties.

This allowance hinges on the premise that homeworking is necessary due to the absence of facilities elsewhere. However, if an employer provides suitable facilities in alternative locations or if the employee opts to work from home, HMRC will not recognise homeworking as an objective job requirement.

Take the case of an area sales manager based in Glasgow managing a regional sales team across Scotland. Despite the company’s nearest office being in Newcastle, the manager cannot practically commute there and is mandated by the employer to maintain client information securely at home. Therefore, mileage is eligible for tax relief when travelling to the company’s Newcastle office.

Following the lasting impact of COVID-19, plus advancements in communication technology, many employers now offer employees the option of flexible or hybrid working arrangements. Typically, employees do have a designated office they can attend on office-working days.

So, if the flexible working setup is voluntary, employees are not obliged to work from home. Consequently, any journeys from home to the office are considered ordinary commuting and do not qualify for tax relief.

Employers should be mindful of this distinction, especially when reimbursing staff using approved mileage rates. Reimbursing expenses for home-to-office travel for employees who choose hybrid working could inadvertently classify the payment as a benefit, necessitating tax and national insurance deductions through payroll.

If there are uncertainties regarding eligibility for tax relief on home-to-office journeys, employers and employees alike are encouraged to seek clarification from HMRC or relevant tax advisors.

If you are unsure about whether you or an employee qualifies for tax relief on home to office journeys, please call Beatons, who will be happy to help.

Click here for more detailed information.

The ultimate company prenup: what’s a shareholder agreement and why do I need one?

The ultimate company prenup: what’s a shareholder agreement and why do I need one?

19.4.2024 | Tax

The ultimate company prenup: what’s a shareholder agreement and why do I need one?

Running a business can come with challenges but none more difficult than a breakdown in relationship between shareholders.

There are a number of reasons why disputes may arise; such as a change in the direction of the company, lack of performance by certain directors or mistreatment of duties.

So what can be done to mitigate a costly fallout?

Well, this is where a shareholder agreement comes into play.

These vital documents set out shareholders’ rights and responsibilities, and they can significantly influence safeguarding the interests of both shareholders and the company itself.

Think of it like a prenuptial agreement for your company; a private agreement between shareholders that regulates their relationship after they go into business together and will cover what would happen if, for any reason, the relationship doesn’t go to plan.

What to address

Having a shareholder agreement is not a legal requirement but sadly, relationships can change, ideas and aspirations can be upended, and we have no control over the economic climate or the fact that sometimes life just throws you an unexpected curve ball.

When tackling a shareholders agreement, know that all have certain standard elements. The key to making yours successful, however, is to put in some extra thought to get the most comprehensive arrangement in place.

Key areas to consider would be:

  • Rights and responsibilities – this includes details such as voting rights, dividend distribution, and obligations related to financial contributions or management responsibilities
  • Transfer of shares – a restriction on a shareholder transferring their shares to another party
  • Sales of shares – an agreed valuation basis, should a shareholder wish to exit the business
  • Restrictive covenants – limiting a shareholders business activity while being an existing member and post exiting. This might include clauses that help safeguard the company’s intellectual property, trade secrets, and competitive advantage.
  • Events of default – looking at what happens to shares in the event of death, divorce, bankruptcy and so on
  • Succession planning – outlining procedures for transferring shares, resolving disputes related to a transition in ownership, or specifying how a buyout must happen in the event a shareholder leaves or dies.

What about minority shareholders?

Shareholder agreements can include provisions designed to protect the rights of minority shareholders.

Generally, decisions within a company are decided by a majority vote. Therefore, if a company has a single or a small group of majority shareholders, they are able to control all decisions made.

But this may not be desirable in all scenarios.

Therefore, an agreement may include provisions that ensure minority shareholders have a say in certain key decisions, promoting fairness.

Solving conflict

This is the big one. Usually, the main reason for drawing up the document in the first place.

This is where it really pays to bring in the professionals. Yes, standard shareholder agreement templates are readily available on the internet, but as templates, they will not have all the information that is pertinent to your business. As such, they are unlikely to be fit for purpose.

And in the event of a dispute, it’s unlikely that an off-the-peg shareholder agreement will give you the tools necessary to progress to a satisfactory resolution.

The best shareholder agreements, therefore, include mechanisms for resolving conflicts, such as mediation, arbitration, or predetermined procedures for making decisions.

We would recommend involving your solicitor to assist with drawing up the legal document to ensure that it will be clear what actions should be taken and will stand up to scrutiny in the courts if required.

This structured framework can then help reduce the risk that a dispute could escalate to the point of disrupting the business.

Business as usual

Hopefully, once a shareholders agreement is entered into, it can be filed away and doesn’t need to be looked at again.

But for some, that isn’t going to be the case. And if you find yourself in a situation where things are not panning out, you’ll be glad you invested some time and money in planning ahead.

For help and advice with a SHA or any other accountancy needs, please contact Beatons info@beatons.co.uk or 01473 659777.

Companies House given new powers to combat criminal acts

Companies House given new powers to combat criminal acts

19.3.2024 | Tax

Companies House given new powers to combat criminal acts

For the first time, the new regime will also require people setting up companies to state that the business activities will be lawful.

This month, new measures have come into force to help Companies House combat criminal acts and money laundering.

The powers are based on the Economic Crime and Corporate Transparency Act 2023 (ECCT Act) which launched on 4 March 2024.

Rules around confirmation of company activity will become more stringent as authorities attempt to tackle the growing abuse of the company registration system.

In recent times, these abuses have been highlighted in the news, and situations often involve businesses or individuals receiving demands to their registered business addresses, citing scenarios of which they have no knowledge.

New measures
Now, Companies House will require those setting up new companies to confirm the lawful purpose of forming a company during the incorporation process to help stop unscrupulous firms being formed.

As part of the bolstered measures, all companies will now need to provide a Registered Email Address when incorporating or as part of their next confirmation statement to give Companies House further security.

Additionally, the annual confirmation statement will also now require confirmation each year, stating that the company’s intended future activities will be lawful.

Sharing of data
Companies House will be assisted in being robust with the new measures by powers to allow it to share data with other government departments and law enforcement agencies, with the aim of clamping down on illegal activity.

These new measures do mean increased fees from Companies House, effective 1 May 2024. Businesses can find out more about the fees here: Changes to Companies House fees—Changes to UK company law.

The new measures are accompanied by new criminal offences and civil penalties to help with their enforcement.

Stronger checks
As part of the rollout of new powers, Companies House will also be able to query information and request supporting evidence when necessary.

Stronger checks can now be made on company names and there will be greater ability to tackle and remove inaccurate information.

The use of PO Boxes is also being scrapped, meaning it will no longer be acceptable for a company to use a PO Box as its registered office address. Companies House has warned it will be actively checking Registered Offices on an ongoing basis. Failure to respond quickly could result in businesses being fined or suspended from the register.

Beatons Director Nick Marshall said: “Fraudulent approaches to businesses can cause a real problem. Criminals are constantly finding ways to try to out-fox companies for demands relating to bogus scenarios. These new rules should help to protect businesses and clamp down on organisations set up solely for the purpose of fraud-related activity.

“Complying with the new rules is vital, and Beatons is available to help any clients who need support.”

If you have any concerns about a communication you receive from Companies House, please contact Beatons for advice.

Email info@beatons.co.uk or call 01473 659777.

For more information on the new powers to tackle fraud, click here.

Essential strategies for navigating recession

Essential strategies for navigating recession

21.2.2024 | Tax

Essential strategies for navigating recession

As businesses navigate these challenging times, here are some key considerations from the experts at Beatons. 

Last week, the Office of National Statistics (ONS) dealt a sobering blow with the announcement that the UK has officially entered a recession. With a 0.3% drop in Gross Domestic Product (GDP) for the October to December 2023 quarter, following a 0.1% decline in the previous quarter, the signs are unmistakable. Two consecutive quarters of GDP decline mark the onset of a recession, triggering waves of concern and uncertainty among businesses.

However, amidst the apprehension lies an opportunity for proactive measures to mitigate the impact and even foster growth. As businesses navigate these challenging times, here are some key considerations from the experts at Beatons:

Assess financial resilience

Take a deep dive into your business’s financial health. Strengthen cash reserves, trim unnecessary expenses, and explore diversifying income sources to reduce dependence on just a few major customers. Prepare cash flow forecasts to anticipate downturns and make contingency plans to safeguard against financial shortfalls.

Analyse customer behaviour

During economic downturns, consumer spending habits shift. Identify essential purchases versus non-essential ones and tailor your marketing strategies and offerings accordingly. Understanding your customers’ current needs and price sensitivities is crucial for adapting to evolving market dynamics.

Review supply chains

Evaluate the resilience of your supply chain. Identify key suppliers that may struggle during a downturn and consider alternative options. Building stronger relationships with suppliers and maintaining open communication can help anticipate and manage potential challenges effectively.

Protect staff morale

Invest in maintaining high morale among your employees. Economic uncertainty can breed anxiety, impacting productivity and, ultimately, the bottom line. Implement cost-effective strategies such as flexible work arrangements, skill development programmes, and performance incentives to retain the best talent and keep good staff motivated.

Look into strategic investment.

Despite uncertainties, economic downturns often present investment opportunities. Explore acquiring undervalued assets or pursuing mergers and acquisitions at reduced prices. Strategic investments during downturns can position your business for long-term growth and competitiveness.

 Seek government assistance

Stay informed about government support programmes aimed at assisting businesses through recessions. Policy changes, tax relief measures, funding schemes, and loan financing assistance can provide much-needed support during challenging times.

Maintain a long-term vision.

Adopt a positive attitude and maintain a long-term perspective. While a recession may indicate broader economic challenges, it doesn’t dictate your business’s potential for success. Stay focused on opportunities for growth and remain adaptable to change.

There’s no doubt that navigating a recession requires careful planning and adaptability. However, by implementing proactive measures and staying informed about available resources, businesses can survive and emerge more robust and resilient in the long run.

Beatons can support you through these challenging times. Get in touch with its expert team to learn more about its Tough Times Action Pack, which is designed to provide guidance and support when you need it most.

Start the year right – with tax planning

Start the year right – with tax planning

23.1.2024 | Tax

Start the year right – with tax planning

Get your house in order by sorting out your tax affairs, especially before the tax year wraps up on April 5th. 

From inheritance tax planning to wills and pensions, here, the experts at Beatons give a rundown on ways to plan ahead.

ISA and pension savings

One of the first tax planning points would be to maximise your ISA allowances for the 2023/24 tax year (currently £20,000 each). Also, consider increasing your pension savings before 5 April 2024, as the unused annual pension allowance from 2020/21 lapses after three years.

Year-end inheritance tax planning

Many were expecting an announcement from the Chancellor in the Autumn Statement about cuts to, or the abolition of, inheritance tax (IHT).

He could be saving it for his Spring Budget, so while we wait to find out, consider utilising the £3,000 gifts annual exemption for 2023/24 and, if available, the unused amount from 2022/23.

It’s important to know that £3,000 is the overall exemption for the tax year, not the amount for each donee. More generous amounts can be given away by taking advantage of the exemption for regular gifts out of income (See below).

Regular gifts out of income

It had been thought that the chancellor might restrict the exemption from inheritance tax for regular gifts out of an individual’s surplus income, but not for now. Inheritance tax is designed to tax transfers of capital.

The donor must be able to demonstrate that the gifts were made from surplus income for the transfers not to be taken into consideration for IHT.

This rule applies where there is a regularity to the payments, such as a standing order to pay school fees or pension contributions on behalf of children or grandchildren.

HMRC does require proof that the payments are paid out of post-tax income and do not limit the donor’s normal lifestyle. Detailed records are required, and we can help you with a suitable spreadsheet.

Paying pension contributions for others

Payments into a pension scheme are usually limited to the relevant earnings of an individual in a given tax year. This restriction does not apply where the contributions are less than £3,600 gross, allowing parents and grandparents to make payments on behalf of children and grandchildren with limited income. Payments of £2,880 a year would attract a 25% uplift from the government which could grow to a substantial amount by the time the child reaches retirement age (currently age 55 but increasing to 57 in 2028). The parent or grandparent may be able to justify that the payments qualify for the regular gifts out of income exemption from inheritance tax mentioned above if a standing order was set up for no more than £240 a month.

When did you last review your will?

Having spent time with family over the festive period, it might have crossed your mind to review your will. This really isn’t something to leave until later in life. It’s an important piece of planning to have in place at any stage, especially when considering property or provision for children.

Without a will, statutory rules dictate how your assets are distributed on death and these may not be tax efficient. You may want to make specific provision for your unmarried partner or for the guardianship of your children.

Many people mistakenly think that if they die without making a Will, their spouse (or civil partner) will automatically inherit everything, but this is not necessarily the case. According to the laws of intestacy in England, for deaths occurring on or after 26 July 2023, the surviving spouse would inherit a statutory legacy of £322,000, all of the personal effects, and half of the remaining estate. The deceased’s surviving children (or their descendants) would split the remaining half of the estate equally. If those descendants are under the age of 18, their inheritance is kept back for them until they turn 18. Note that intestacy rules are different in Scotland, Wales and Northern Ireland.

Handing down a family home

The wording of your Will is important when noting that the inheritance tax (IHT) nil rate band continues to be frozen at £325,000, subject to any announcements in the Spring Budget.

There is currently an additional nil rate band of up to £175,000 for passing on the family home to direct descendants on death. We can work with your solicitor to make sure your Will is tax efficient.

Where some of the nil bands are unused on the death of the first spouse, the balance is available on the death of the surviving spouse, potentially allowing a married couple (or civil partners) to pass on assets of up to £1 million at today’s rates without paying IHT.

The residence nil band is even available when you downsize to a cheaper property. For example, if a married couple currently live in a large house worth £500,000 and downsize to a flat worth £300,000, they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property. They could even sell the house and move into a rental property or a care home and still benefit from this nil band.

Charity donations

Leaving 10% or more of your estate to charity means the rate of inheritance tax on the amount chargeable reduces from 40% over the nil rate bands to just 36%. Make careful considerations around this, as it would reduce the amount to be passed to other beneficiaries.

For help and advice on any of the areas in the above article, please contact Beatons at info@beatons.co.uk or call 01473659777.

Beatons Group is not authorised to provide Investment advice. Before proceeding we recommend that you take appropriate advice from a financial advisor.

Thinking ahead to ensure a prosperous new year

Thinking ahead to ensure a prosperous new year

12.12.2023 | Tax

Thinking ahead to ensure a prosperous new year

Beatons gives an overview of some of the steps you can take now, to help breathe new life into your business. 

At Beatons, we know that the current financial climate continues to be challenging and may mean that businesses could struggle for a number of reasons; costs are high, custom might be lower, not to mention the ever-changing financial rules and regulations.

As 2023 comes to a close, we’d like to give an overview of some of the steps you can take now to help breathe new life into your business or at least help ensure things remain steady in 2024.

Is your financial information in good shape?

Monitoring and controlling the financial performance of your business is of paramount importance, and regular management information is vital to its continued success.

These financial reports can seem tiresome when the business of getting on with the job is more pressing  – but they’re crucial. They’ll make sure you’re on top of profit and loss and have a good idea of the balance sheet – helping you to see problems before they spiral.

Too many businesses neglect their management accounts, and it can be a costly mistake.

We help lots of our clients prepare management accounts on a monthly or quarterly basis. Could outsourcing this work mean that your firm hits the ground running in the new year?

Stress test expenditure

Growing your business is important, and we know that an entrepreneurial mindset really matters. But sometimes it can lead to ‘too much, too soon’. Even if your company is long established, there will be times when being cautious is the right thing to do.

Take a balanced approach to capital expenditure in the coming months and consider stress testing large expenses. For example, what if the market drops in the new year, will your profits be able to cope with the extra costs? This is especially important to consider in terms of higher interest costs.

Keep an eye on cashflow

Cash is the lifeblood of a business, but with so much emphasis usually put on turnover and profitability, it can be easy to overlook this fact. Of course, the bottom line is important, but poor cash flow management can drive a growing and/or profitable company out of business.

The risk is especially great for expanding companies. For example, if billing is delayed at the same time as stock is accumulated to fulfil increased orders, you can find yourself short of the cash needed to pay suppliers and employees. The preparation of budgets and cashflow forecasts is an important tool in identifying potential cashflow issues in the future. Use sensitivity calculations to reflect the position if targets are not achieved and consider plans to address that scenario if necessary. If this is a concern, do talk to us further about the benefits of projections and we can assist you with these.

In the meantime, we’ll leave you with this:

Why did the scarecrow get a big Christmas bonus?

Because he was outstanding in his field.

We’re experts in accountancy – not jokes!

Get in touch for any of your finance needs – t: 01473 659 777 or  e: info@beatons.co.uk