Latest News from HCA – May 2016

Dividend Tax Changes

Are you aware that the taxation of Dividends has changed since the start of the new tax year? Are you therefore prepared for the likely additional personal tax liability?

Under the Old system (to 05/04/16)

  • £100 dividend paid is £111 income less £11 tax 
  • Tax rates 10%/32.5%/37.5% on gross 
  • Or 0%/25%/30.6% in reality 
  • Therefore many Directors within the Basic Rate Tax band (BRB) did not have any additional tax liability.

How the New system works (from 06/04/16)

  • 10% tax credit goes - £100 is £100 so Basic Rate Band /Higher Rate Band go further 
  • Tax rates 7.5%/32.5%/38.1% or in other words, a 7.5% rise 
  • Except for the first £5,000 total dividends 
  • No tax charged 
  • But does use up BRB/HRB but not PA 

In the majority of cases, Dividend is still more tax efficient than salary, but the gap has reduced and an additional tax liability will apply. Here are some thoughts on how you can mitigate the personal tax impact?

  • Declare extra dividends as at 31.03.16 (subject to reserves and profits, if no cash add to directors loan account)
  • Can a spouse or other family member be issued shares and also take a dividend?  
  • Do you charge interest on any directors loan to company?  
  • If you own the trading premises, do you charge rent to the company? 
  • If you would like to discuss this further, then please do not hesitate to contact us.

How secure is the cloud?

Are you considering the cloud for your server or the storage of your data?

Perhaps, like other clients of ours in the past, you may have a concern about how secure this cloud thing actually is. We understand as it feels insecure, with your data stored on servers and systems you don't own, see or control, but ownership is not security. So in this short article, we will highlight a few of the considerations you may make when evaluating cloud services.

  • What do others say about the cloud service provider you are considering?
  • Is there a data back up facility, preferably automated and which you can test now and again?
  • What is the balance between ease and speed of access versus still being secure?
  • Is the password recommendation to a level that feels secure? Perhaps two factor authentication?
  • Do you want the data to be held in encrypted files?
  • How easy is collaborative working with access to the files by colleagues in a secure way?
  • What is there virus protection level?
  • Do you prefer a server for your own data or are you happy to share this with others?
  • Will your software run on the providers platform ok or do you need customisation?
  • What is the support like? Can you speak to someone easily?
  • How do the costs compare? Not just the direct investment but the ongoing costs and indirect costs such as time.
  • If you would like to explore the option of the cloud and hear more about how our clients are benefitting, then please do not hesitate to speak to one of our IT-tech team.

Are you ready for your Auto Enrolment staging date?

The first consideration is to know when you need to stage and start meeting your new obligations as an employer under the new Workplace Pension legislation and rules? If not, you can visit the Pension Regulator’s web site here and simply add your PAYE reference number to find out the date.

Then in preparation of the staging date, there are two key considerations:

  1. Which pension scheme or provider will you use for the employees pension contributions? How will you communicate with them? How will you pay them the premiums collected from the payroll? We recommend you don’t leave this too late as demand for such schemes is growing and currently the service to meet the high demand that is looming is untested.
  2. Consider how the day to day administration will be undertaken. This is not just how the contributions are calculated as part of your ongoing payroll, but how you assess your workforce and communicate with them using the recommended letters? Have you considered who is eligible etc, whether you will postpone for a short period and how you will correctly provide the option for an employee to opt in or out?

We have helped our clients to prepare for their obligations and some clients have already staged. So if we can help, then please do not hesitate to contact us.

Changes for the Construction Industry Scheme (CIS)

Following announcements in the Autumn Statements 2014, as from April 2016 the following changes were added to the Construction Industry Scheme administration:

  • Mandatory online filing of CIS returns will be introduced with the offer of alternative filing arrangements for those unable to access an online channel by reason of age, disability, remote location or religious objection.
  • The directors' self assessment filing requirements will be removed from the initial and annual compliance tests.
  • The threshold for the turnover test will be reduced to £100,000 in multiple directorship situations.

 From 6 April 2017 mandatory online verification of subcontractors will be introduced.  

One of our specialist areas is construction, so if you have any questions, then please do not hesitate to contact us.

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