Pensions: how does tax relief work?

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An individual makes their pension contributions out of their taxed and NIC’d income. Most individual pension contributions are made “net of tax”.  The pension scheme will then gross up the payment by claiming 20% tax relief from the government.  So for £80 contributed by the individual, the scheme also gets £20 from government, giving a […]

How you treat your employees will determine the fate of your company

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Business magnate Richard Branson, founder of the Virgin Group, believes that employers should put their employees before their clients. “Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients. Most businesses put customers first while employees are just secondary. Employees are the branches […]

Is there such a thing as too much teamwork?

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Open plan offices and the use of messaging apps have encouraged always-on, constant collaboration at work. But research from Harvard’s Ethan Bernstein suggests that we develop more, and better, solutions to problems when we take occasional breaks from the group so we can ponder on our own. Such intermittent collaboration strikes an ideal balance between […]

Record keeping & tax: what, how and until when?

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Good record keeping is vital, not just to ensure timely and accurate filing of tax returns but also in the event of any challenge by HMRC. Penalties can also be levied if your records are incomplete or inaccurate. Generally, you need to keep sufficient records to support any income or expenses included in a tax […]

Recreational benefits

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An employer can provide sporting or recreational benefits tax-free to: Its employees. Any member of their family and household. Main conditions: Benefit to be available to all staff. Benefit not generally available to the public. Benefit cannot include vehicles, holidays or take place in domestic premises. Unfortunately the exemption excludes membership to public gyms and sports […]

The Circular Economy Model: Reuse, Remanufacture or Recycle

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With August 1 marking Earth Overshoot Day, the point during the year that we will have consumed the ecological resources and services that Earth can regenerate in one year, it is clear that something has to change. The circular economy requires a significant shift in mindset, starting with the design process, which must ensure that […]

Student loan repayment threshold rises by 2.9%

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The government has increased the loan repayment thresholds (the amount graduates can earn before making repayments) for student loans by 2.9% and confirmed the introduction of a postgraduate loan system deductible from PAYE effective 6 April 2019. The Department for Education (DfE) has confirmed that from 6 April 2019 the thresholds will increase for tax […]

EU adopts proposal to cut VAT on e-books

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The Professional Publishers Association (PPA) has welcomed an EU decision to reduce VAT on online publications, including electronic books, newspapers and periodicals. At present, electronically supplied services such as digital publications are taxed at the standard VAT rate, which in the UK is 20%. This contrasts with traditional media, which is zero-rated. The directive, which […]

HMRC update guidance on salary sacrifice for employers

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HMRC’s salary sacrifice guidance has been updated to provide information about the effect of employees changing from childcare vouchers to the new tax-free childcare scheme. Salary sacrifice for employers explains how to set up a salary sacrifice arrangement and calculate tax and National Insurance contributions. The guidance has been updated to add more information about […]

Brexit: Risks for UK and EU companies

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With less than six months until the exit, the main risks areas businesses may face are as follows: 1. Cyber-attacks: future cooperation between the UK and EU on this issue remains uncertain. No deal will have a knock-on effect on security. Businesses are concerned that the future involvement of the UK in organisations such as the […]

Bizarre excuses given for late Companies House filings

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An erupting volcano and a paper-eating goat are just two of the unusual explanations provided by directors for their inability to file their company accounts on time, according to this year’s analysis by Companies House of the most unusual excuses it received. Other reasons given for not meeting the deadline included the filer finding his […]

Childcare vouchers deadline 4 October 2018

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The Government will withdraw the tax and National Insurance relief associated with childcare vouchers for brand new applicants from 4 October 2018, with Tax-Free Childcare (TFC) providing help with childcare costs instead. For anyone who has not claimed childcare vouchers yet, it means they need to join in time for their employer to action their […]

Brexit uncertainty hits future planning at businesses

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Lack of clarity around the Brexit process is hitting preparations for business after the UK leaves the EU, with only a third of finance professionals in large businesses reporting their organisation has started scenario planning and just 20% of those in small organisations, according to a poll. Around eight out of 10 of the respondents […]

HMRC outlines ‘no deal’ preparations for EU-only UK traders

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HMRC has written to 145,000 VAT-registered businesses across the UK, including Northern Ireland, which only trade with the EU, explaining changes to customs, excise and VAT in the event of a ‘no deal’ Brexit, which would require them to complete customs declarations for the first time. While HMRC stresses that it is ‘unlikely’ the UK […]

UK employees less ethical than European counterparts

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UK employees seem to take a more lenient approach than the average European employee to questionable workplace practices, according to a survey by the Institute of Business Ethics which found that 38% believe petty fiddling is inevitable in a modern organisation compared to 30% of their European counterparts. The survey sought to establish whether employees […]

HMRC update guidance on paying the Apprenticeship Levy

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HMRC have updated guidance on how to allocate the apprenticeship levy allowance across multiple PAYE schemes and/or connected companies and charities. Pay Apprenticeship Levy explains when the apprenticeship levy needs to be paid and how to report payments. The guidance has been updated at the section about ‘how to allocate your allowance’. The apprenticeship levy […]

Government outlines VAT implications if no Brexit deal

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The Government has set out the VAT implications for businesses in the event of a “no-deal” Brexit. For most UK businesses there will be no change to the VAT rules.There will, however, need to be some specific changes to VAT rules and procedures applying to transactions between the UK and EU member states. The key […]

HMRC late payment interest rates revised

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On 2 August 2018, the Bank of England Monetary Policy Committee voted unanimously to increase the Bank of England base rate to 0.75%. HMRC interest rates are linked to the Bank of England base rate and, as a consequence of the change, HMRC interest rates for late payment have also increased.  These changes came into […]

Micro Accounts

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Accounting Standard – Accounting periods beginning on or after 1 January 2016 can no longer be prepared using the Financial Reporting Standard for Smaller Entities (FRSSE). Accounts for most companies with turnover up to £632,000 will be prepared under the Micro Entities Regime (FRS105). Micro accounts lack detail and so we also prepare detailed accounts […]

Worker status

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Employment law has developed to acknowledge that some individuals are not self-employed or employed, but are “workers” with some limited employment rights.  In tax law there are still only two statuses: employed or self-employed.  If an individual is a worker for employment law they are likely, but not necessarily, they will be self-employed for tax […]

Does your accounts system comply with MTD for VAT?

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Making Tax Digital (MTD) for VAT is scheduled to start in April 2019 which means that your VAT information needs to be submitted to HMRC digitally. On 18 December 2017, HMRC published draft legislation together with examples of how the business account records might link with the HMRC computer in order to comply with MTD […]

Tax relief for energy saving technology

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For a number of years there has been a generous 100% tax break for businesses that install energy saving technology in their premises. This is in addition to the £200,000 annual investment allowance for plant and machinery. The technology that qualifies for this 100% tax break includes energy efficient boilers and energy saving lighting systems. […]

Pension Planning

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For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer. Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the […]

What to consider when deciding which type of trading entity to use

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Should I be trading as a sole trader, partnership, limited liability partnership (LLP), company limited by shares, company limited by guarantee or a Community Interest Company (CIC)? There are a series of issues that need to be considered when deciding which type of trading entity to use: What is the expected profit of the business […]

Fixed rate mileage

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The following rates can used for fixed rate mileage: Car or van               First 10,000 business miles 45p Additional business miles 25p (remains 45p for national insurance purposes only) Motorcycles 24p Bicycles 20p Passenger payments 5p (all per mile) Note that these rates cover fuel, insurance, services, repairs, MOT, road tax, and car depreciation. […]

Are Spouses Wages Fully Deductible?

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HMRC have recently won a tax tribunal case where they were seeking to challenge the deduction for a wife’s wages in arriving at the profits of her husband’s business. The judge agreed with HMRC that the amount allowed as a deduction should be limited based on the hours spent and appropriate rate for the work […]

Off-payroll working

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HMRC has updated its guidance the intermediaries legislation (IR35) to clarify that the IR35 rules may apply if an agency, umbrella company or similar third-party supplies a worker by engaging their company rather than the individual directly. The new guidance can be found here. As with all of our tax tips and web pages this […]

Making Tax Digital for business delayed

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The Government has responded to pressure from accountants and other interested parties and announced the delay of Making Tax Digital for Business to 2020 at the earliest. Quarterly VAT reporting using the new system will be mandatory from 2019. In a further U-turn, three million small businesses and buy to let landlords below the VAT […]

Is your company carrying out research and development?

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Many companies are still missing out on valuable tax breaks for expenditure on research and development (R&D).  HMRC have recently updated their guidance on claiming R&D tax credit relief and have reminded companies that it is possible to obtain advance assurance that the R&D activities are eligible to make a claim. For small businesses the […]

Thinking of winding up your company?

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Up until 6 April last year, the distribution of cash to shareholders on the winding up of a trading company by a liquidator, was usually taxed as a capital gain, potentially taxed at just 10% with the benefit of entrepreneurs’ relief. However, last year’s Finance Act introduced a targeted anti-avoidance rule that may tax such […]

The Apprenticeship Levy

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From 5 April 2017 HMRC has introduced an apprenticeship levy. The levy is charged at 0.5% of the businesses total payroll cost and applies to all businesses operating payroll.   Each business receives a £15,000 allowance each tax year which means that they do not have to pay the levy until 0.5% of their payroll […]

Auto Enrolment Rates Increase

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The current minimum pension contributions for employees inside Auto Enrolment are 2%, with the employer being required to contribute at least 1%.   From 6 April 2018 the minimum contributions will increase to 5%, with the employer required to contribute at least 2%.   This will increase further to 8% from 6 April 2019 onwards, […]

Workers – IR35 and Employment Intermediaries

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If any of your company’s income is caught by the Intermediaries Legislation (known as IR35) you will need to make a “deemed salary” calculation. Also if any of your company’s workers regularly work under the control of one of your customers then this has to be reported to HMRC under the Employment Intermediaries legislation.  There […]

Pensions – personal or company?

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For owner managers of dividend paying companies there is a marginal tax saving of 1% by making a company (employer) pension contribution compared to a personal pension contribution. For example if your company could pay £12500 into a pension scheme there is no tax charge on you.  There is simply £12500 going into your pension […]

Public Sector IR35

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Public sector bodies paying limited companies for workers now have to assess whether IR35 rules apply to that company.  If so then payments made on or after 6 April 2017 (regardless of invoice date) will have PAYE and NI deducted by the public sector body (or by the agency if they use one).  The payment […]

Budget Update: Corporation Tax Rates

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The Chancellor announced that the Government is committed to continue to have the lowest corporate tax rate of the G20 major trading nations.  As already announced the corporation tax rate reduces to 19% from 1 April 2017 and then to 17% from 1 April 2020.   The Government is also keen to continue to encourage […]

Budget Update: Tax Free Dividend Allowance to be Reduced to £2,000

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The Chancellor has announced measures to limit the rise in tax-driven incorporation. The £5,000 tax free dividend allowance will be reduced to just £2,000 from 6 April 2018. Mr Currently, once the dividend allowance has been used the remaining dividends are taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into […]

Uber case – does this affect you?

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The crux of the recently highly publicised Uber case is the question of who is supplying the end client. Uber argued it was the drivers supplying the end client:  Client buys service (transport) from driver; driver buys service from Uber (logistics).  (Uber just an agent) The Employment Tribunal found that it was Uber supplying the […]

Low and ultra low emmision cars

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Tax relief for businesses on cars is restricted.  Cars purchased are generally excluded from the 100% annual investment allowance enjoyed on most equipment purchases.  Cars leased often have an element of the lease cost disallowed for tax purposes restricting the tax relief. Rules for special relief for less polluting cars have been revised and extended.  […]

Quarterly reporting by employment intermediaries

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Ever since 6 April 2015 employment agencies and other intermediaries have been required to make quarterly reports of payments made directly to workers or via partnerships, LLPs and companies where no tax has been deducted from the payments. These requirements apply if you supply a person rather than supply a service.  If your client needs […]

Register of members – reminder of importance

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A recent tax case reminds us of the need to keep good company records.  In this case the taxpayer had not got good documentation regarding a share issue.  The lack of evidence of new shares being issued proved very costly for the taxpayer in terms of later tax relief being denied by HMRC. The most […]

Life assurance paid by your company with no tax charge

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Pension contributions made by an employer are tax free (within limits).  Contrast that with medical insurance paid by the employer which is almost certainly taxable on the employee or director as a benefit in kind. Historically most life assurance that pays out to an employees family (not the employer) has been seen as a taxable […]

Extension of Entrepreneurs Relief to outside investors

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Capital gains tax rates on sale of shares in unlisted trading companies are currently 10% for basic rate tax payers and 20% for higher rate and additional rate tax payers.  If the gain is covered by Entrepreneurs Relief (ER) then the rate is 10% even for higher rate and additional tax payers.  Broadly, the main […]

Seed EIS relief can be denied

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The Enterprise Investment Scheme (EIS) and the recently introduced Seed EIS provide generous tax breaks for investors who subscribe for shares in qualifying companies provided the correct procedures, and in particular the correct forms, are used to claim tax relief. Seed EIS provides income tax relief of 50% of the amount invested and EIS 30% […]

Tax free perks for directors and employees

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The tax free perks we see most often used by small business owners are pensions, child care vouchers, mobile phones, bicycles and annual parties. Pension payments for directors and employees For owner managed businesses it is better to pay company pensions (employer contributions) than personal pensions (employee contributions).  This is because employer contributions avoid any […]

Contractors working for public sector bodies and agencies

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HMRC are consulting on the implementation of new rules that will require public sector bodies to consider whether IR35 applies to contractors providing services to it.  If IR35 the public body will have to make relevant deductions from the payment to the contracting company.  Up to now IR35 has always been assessed by the contractor’s […]

Corporate losses

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For losses arising on or after 1 April 2017, when carried forward to future years the loss can be set against any income, including other trades and capital losses.  Currently, and until 31 March 2017, losses carried forward to future years can only be set against profits in the same trade. Similarly, group relief (setting […]

Corporation tax and loans to participators

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The corporation tax rate for all companies is set to fall from 20% currently, to 19% from 1 April 2017. The rate was set to fall to 18% from 1 April 2020.  In the Summer 2016 Budget it was announced the rate will instead reduce to 17% from 1 April 2020. The tax charge on […]

IR35 when working for public sector

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Broadly IR35 (the Intermediaries Legislation) requires personal service companies (usually single person company) to pay the director a salary of at least 95% of some types of turnover.  This applies to turnover which would be employment income were it not for the personal service company sitting between the worker and the client. The March 2016 […]

2016-17 Tax code change due to new dividend tax

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As discussed in other posts, from 6 April 2016 dividends will attract an additional 7.5% tax on top of taxes previously in place. HMRC have decided to try to collect some of the additional tax due through tax codes which apply to salaries. To do this HMRC will estimate dividends for 2016/17 based on figures […]

Closing Limited Companies

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New rules come into force from 6 April 2016 which may increase tax on closure of a limited company after that date.  Broadly speaking, many company closures that would currently trigger a capital gains tax charge will from 6 April 2016 instead trigger a much higher income tax charge. If you are thinking of closing […]

Big Company Tax

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Aside from opinions on the rights and wrongs of the Big Company Tax situations, we thought a few facts may be of interest. Government revenue in 2014/15 was made up of Income tax 32%; National Insurance 21%; VAT 22%; Duties 11%; and Corporation Tax 8%.  Green Taxes, Capital Gains Tax, Stamp taxes and other receipts […]

HMRC cash back on green equipment purchases

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It is widely known that most business equipment attracts full tax relief in the year of purchase these days.  This is under the relatively generous annual investment allowance (AIA) that gives full relief for most equipment purchases.  The AIA is broadly up to £200,000 per year per business. However if your company has tax losses […]

Does your company operate in an Enterprise Zone?

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If your company is located in one of the 30 or so enterprise zones, there are significant Government incentives to encourage investment. Enterprise zones include Didcot Growth Accelerator, Science Vale at Chalgrove, Enterprise M3 at Farnborough and Royal Docks City of London. HMRC have added to their online guidance, showing sites within enterprise zones that […]

Restricting relief on closure of company

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One of the anti-avoidance measures announced in the Autumn Statement on 25 November was to potentially end the 10% capital gains tax rate (with the benefit of entrepreneurs’ relief) on distribution of capital from a company. This is a much lower rate than the rate of income tax on dividend payments, particularly when the new […]

Research and Development tax relief: Advance Assurance

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From November 2015 HMRC introduced Advance Assurance for companies that claim Research and Development (R&D) tax relief. If your company carries out R&D for itself or other companies, it could qualify for Advance Assurance. This means that for the first 3 accounting periods of claiming for R&D tax relief, HMRC will allow the claim without […]

Corporation Tax Return Filing Deadlines

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There can be no late filing penalty for corporation tax returns if the return is filed with HMRC by the date on which the accounts are due at Companies House. There have been cases where HMRC have incorrectly raised a penalties based on tax return due dates being earlier than Companies House accounts due dates.   […]

Consultation on Changes to Personal Service Companies (IR35)

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In the Summer 2015 Budget the government announced that HMRC would start a dialogue with businesses on how to improve the effectiveness of the existing intermediaries legislation. HMRC will engage with stakeholders over the next few months to explore options to make the legislation more effective in protecting the Exchequer and leveling the playing field […]

Corporate Tax Rate To Be Cut To 18%

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The current UK corporation tax rate of 20% is the lowest rate in the G20, the 20 major trading nations. This rate continues to apply until 2017 when it has been announced that the rate will be reduced to 19% and then 18% in 2020. This appears to make trading via a limited company more […]

Scam emails

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Always be suspicious of any email mentioning a refund from a “tax credit office agent”. Look out for links to fake version of the GOV.UK website. Never provide details or similarly sensitive information on the basis of an email request. HMRC’s director general of benefits and credits, Nick Lodge, HMRC, said the department never asks […]

Dividend Tax – Summer Budget 2015

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From April 2016 Dividend Tax Allowance of £5,000 a year meaning that the first £5000 of dividends received will not be taxed. However the tax credit attaching to dividends is to be abolished and a new dividend tax rate 7.5% for basic rate taxpayers, 32.5% for higher rate and 38.1% for additional rate. We calculate […]

Flexible pensions to go ahead in 2015

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In his March 2014 Budget, the Chancellor announced that there would be significant changes to allow individuals to have greater access to their pension funds from 2015. The proposed changes have been consulted on during the summer and the Treasury have now published the outcome, together with draft pensions legislation, enabling the new flexible regime […]

Gift Aid on sale of donated goods

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HMRC has amended its guidance for charities that claim Gift Aid on the sale of donated goods. Gift Aid normally only applies to gifts of money by an individual. However, in certain situations, Gift Aid can be claimed by charities or community amateur sports clubs on the income from the sale of supporters’ goods on […]

Consultation planned on employee’s travel rules

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The Office of Tax Simplification is seeking to make the current tax rules for dealing with travelling and subsistence claims clearer for both employees and employers. As a result, the treasury are consulting on possible changes to the rules and the way that such expenses are reported. The government intends for any new rules to […]

Improved tax breaks for innovative companies

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There are currently two very generous tax breaks for companies involved in research and development (R&D) , particularly those that go on to patent their products or inventions. Many such companies may not be claiming all the relief that they are entitled to. Firstly, R&D tax credit relief provides companies with an enhanced corporation tax […]

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