HMRC has opened a consultation on reforming Basis Periods for unincorporated businesses, such as sole traders and partnerships. The current rules are  straightforward for those that draw up their annual accounts to 5 April, however complexities arise for those with alternative accounting periods, particularly in the first few years of trading. Current Rules Under the current rules, businesses are taxed on the Current Year Basis. If a business draws it's accounts to 5 April, then the profits in that accounting period is allocated to the same tax year (i.e. 6 April - 5 April). Where a business selects an accounting period end date other than 5 April the situation becomes more complex. The Basis Period for a tax year for the busin...

In the upcoming years, taxpayers will not be issued with automatic penalties for the late filing of tax returns or the payment of tax. Instead, HMRC will issue "points" for missed deadlines, before a financial penalty is levied. It is intended that this new system will be fairer and only penalise those who persistently fail to meet their compliance obligations. The changes will apply to VAT customers for accounting periods beginning on or after 1 April 2022, and to those who submit self-assessment tax returns with business or property income exceeding £10,000 p/a for accounting periods beginning on or after 6 April 2023, and to all other self-assessment taxpayers from 6 April 2024. Current Rules (Self-Assessment) Under the current...

As part of the government’s coronavirus measures, businesses were given the option to defer their VAT payments between 20 March 2020 and 30 June 2020 under the VAT Payment Deferral Scheme. Initially, they were given until 31 March 2021 to pay any VAT liability accumulated in that period. However, it was later announced as part of the government’s Winter Economy Plan that these businesses would be able to opt to pay their VAT liability in up to 11 equal instalments over 2021-22 (interest free) using the VAT Deferral New Payment Scheme. Your Options In effect, if you deferred your VAT liability as part of the VAT Payment Deferral Scheme, you currently have three options for paying this: Pay the full amount of deferred VAT o...

Running a company imposes an abundance of filing obligations, those of common knowledge include accounts and company tax returns. However, there are also additional filing requirements that are often overlooked / incorrectly inputted despite the fact that omission / inaccuracy of these filing requirements can lead to fines and implications down the line. This article will highlight some of these filing obligations and the implications of failing to comply with these obligations. The Confirmation Statement The confirmation statement (annual return) is essentially just a check that the information Companies House has about a company is correct every year. Every company is required to submit one, including non-trading / dormant compan...

At PD Tax Consultants we value companies for all kinds of reasons, ranging from setting up employee share schemes to facilitating a management buy-out. In this article, we have provided a brief overview of the methods we typically use to value unquoted trading companies. It is important to understand that valuing companies is both a science and an art, and each valuer will make different judgement calls resulting in a differing result. With this in mind, it is often appropriate to use two or more valuation methods in order to ascertain a better idea of a value range and to ensure that the valuation reached is reasonable. 1. Maintainable Earnings Method The first and most commonly used method for valuing trading companies is the mai...

Efforts are being made by the Government to motivate businesses to own lower CO2 emission cars in the push to become a greener society. From April 2021, new tax measures - particularly relating to capital allowances - are being introduced to encourage and incentivise businesses to opt for more climate-friendly vehicles. First Year Allowances (FYAs) The Government announced during its last budget in 2020 that FYAs would be restricted to expenditure for new zero emission and new electric cars from 01 April 2021 onwards, with these FYAs being extended until April 2025. These allowances allow the whole of the expenditure incurred by the business to be deducted against trading profits in the period. It is important to note that the FYAs ar...

Earlier this month, the Government announced a new COVID-19 aid measure aimed at businesses who are required to close as a result of local lockdowns. In light of recent outbreaks of coronavirus, local lockdowns and restrictions have been introduced in high incidence areas. As a result of these new rules, some businesses (e.g. hospitality venues) will be restricted in the services that they can offer and may be required to shut their doors. Going forward, where a business is forced to temporarily close due to local lockdowns or targeted restrictions, they can make a claim to receive a grant of up to £1,500 per property every three weeks. Each payment will be made for a 3-week lockdown period, with each 3-week lockdown period triggerin...

In our previous article Protect & Thrive - Asset Protection & Holding Companies (30 March 2020) we looked at the benefits of inserting a 100% parent company above a trading subsidiary. But what happens when a group decides to simplify and rationalise its structure instead? This article focuses on situations where there are a number of holding companies above one or more trading companies and looks at the reasons why a group may choose to streamline its structure and the different options available. Benefits of a Simpler Structure A group structure may have arisen as a result of one or more management buy-outs and/or capital reduction demergers, rather than a direct conscious choice by the directors. Each company is required ...

It is common for business/financial decisions to be guided by the tax treatment of the transaction. However, in light of the tax legislation's complexity taxpayers may seek advance assurance before the event takes place to guarantee that the expected tax implications will indeed apply. In light of this, it is possible to write to HMRC to request advance clearance of the tax treatment of certain transactions. The tax legislation provides for clearances for certain arrangements (i.e. statutory clearances), and HMRC also provides a non-statutory clearance service for areas where the rules do not otherwise provide for it. The most common transactions that we as a firm seek clearance from HMRC include: Share-for-share exchanges Pu...

Many businesses have carried out new activities during the ongoing Coronavirus pandemic or alternatively were forced to temporarily suspend all trading activities. In light of the above, HMRC have recently updated the section in their Business Income Manual which relates to ‘Crisis-driven changes to trading activity’ to now cover the potential specific impacts of the Coronavirus pandemic on trading activities. This blog will cover the main changes: 1. New Trading Activities During COVID-19 & Lockdown When a business carries out an entirely new activity which is completely unrelated to its previous activities, then this will usually be treated as the commencement of a separate trade. However, if a business starts carry...