The COVID-19 pandemic has resulted in substantial numbers of people working from home. The below outlines the tax implications of working from home expenses for both the employed and self-employed.

Employed

Household expenses

Employees who work from home may receive the homeworking allowance of £6 per week from their employer. The allowance is free from tax and National Insurance contributions and covers additional household expenses, such as: utility bills, heating, additional insurance etc.

The allowance is normally available to employees who work from home under the homeworking arrangements. However, HMRC have confirmed that the allowance will be available to employees who were required to work from home as a result of office closure or self-isolating. As things return to ‘normal’, employees who wish to continue working from home for a few days a week may need to enter into the homeworking arrangement with their employer if they want the homeworking allowance to continue. Employers should look to obtain legal advice in respect of any changes to employment conditions, temporary or permanent.

If the additional expenses exceed £6 per week, the allowance may be increased but the amount has to be agreed with HMRC, if it is intended to be free from income tax and National Insurance contributions.

Alternatively, the employer may reimburse the employee for the additional costs of electricity, heating, business calls. In this case, records evidencing the additional costs incurred by the employee must be kept. Reimbursements of any expenses, which would have been incurred by the employee anyway, such as council tax, rent, pre-existing broadband and telephone bills, water rates, would not be tax free.

Office equipment

Employers may provide the following equipment to their homeworking employees, tax free:

• One mobile phone per employee with no private use restriction.
• Laptops, tablets, computers, office supplies, desk, chair, provided private use of the item is insignificant.

The employer may then claim capital allowances in respect of purchase of the equipment.

If the employee purchased office equipment themselves, the employer may reimburse the employee for it and the reimbursement will not be taxable, provided that private use of the equipment is insignificant.

If the employer does not reimburse for the cost of the equipment, the employee may claim a deduction from their employment income on their tax return, provided that the equipment was purchased wholly, exclusively and necessarily for the performance of the duties. The employee must keep receipts to evidence the expense.

Travel

Travel expenses are not claimable if they constitute ordinary commuting between home and permanent workplace. However, if an employee’s home becomes their permanent workplace and they are required to travel to a temporary workplace from time to time, the travel costs would be deductible. On the other hand, if the employee works partly from home and partly in the office, their permanent workplace is their home and their office and any travel between those may not be claimed.

Self-employed

If you are self-employed and working from home, there are a number of expenses you may claim against your trading income. Any expenses that are claimed by self-employed individuals must be business expenses, i.e. incurred wholly and exclusively for the purposes of the trade.

Household expenses

Household expenses may be claimed either as a business proportion of actual costs or as a simplified flat rate deduction.

The first option entails a reasonable apportionment for business use of the actual costs incurred on mortgage interest or rent, utility bills, Council Tax, telephone, broadband, etc. The business proportion is estimated based on either the amount of time you spend working from home or on the number of rooms in the property.

Alternatively, a simplified flat rate deduction may be claimed. The rates that may be claimed depend on the number of hours you worked from home in a particular month:

• If you worked between 25 and 50 hours in a month you may claim £10 for that month.
• If you worked between 51 and 100 hours in a month you may claim £18 for that month.
• If you worked more than 101 hours in a month you may claim £26 for that month.

The simplified flat rate deduction is only available if you work from home for 25 hours or more in a month.

Home office

Repairs and maintenance costs of the home office, such as repainting, may be claimed as a trading expense. However, costs incurred in respect of any extensive works carried out to create or improve a home office may not be fully recoverable. Capital allowances may be available on certain expenditure such as a heating system. Each item would need to be looked at individually to determine the correct tax treatment.

If you purchased equipment or furniture for your home office, you may either claim capital allowances (if you use traditional accounting) or deduct the cost in the normal way (if you use the cash basis of accounting).

If you wish to adapt your home so that one room is used exclusively as your home office, this may have unwanted tax consequences on the eventual sale of the property as main residence relief may be restricted.

In addition to the above, other business expenses such as stationery, post, travel, advertising, etc. should be available as usual.

If you require further advice in respect of the expenses you can claim, please feel free to contact us.

CIS Reverse Charge

When you think of ‘reverse charge’ non EU services usually spring to mind. However, from 1 March 2021 there will be an introduction of the Construction Industry Scheme (CIS) reverse charge.

The reverse charge will mean customers should account for output VAT on supplies of building and construction services where the charge applies.

For the charge to apply the following conditions will have to be met:

1. Both supplier and customer will have to be based in the UK and VAT registered.
2. Both supplier and customer will have to be registered for CIS.
3. The supply for construction services or materials are either at the standard rate or reduced rate of VAT.

The CIS charge does not apply to non-VAT registered customers and suppliers who are part of the same group.

As a rule of thumb: It is important to remember that the application of VAT under this scheme is such that the end customer applies for VAT and the supplier of the construction or materials does not.

Example application of the scheme:

Geoffrey (CIS registered) supplies Tariq (CIS registered) with demolition and construction services and invoices him £5,000 exc. VAT. Tariq pays Geoffrey £5,000 as there will be no output VAT on this amount.

Geoffrey’s VAT return

Geoffrey would include a VAT amount of nil in box 1 as he did not charge any output VAT under the CIS scheme. He would declare the net sale of £5,000 in box 6 of the VAT return and therefore would not pay anything to HMRC for this transaction.

Tariq’s VAT return

Tariq as the end customer must account for a reverse charge on his VAT return. Tariq includes £1,000 (£5,000 x 20%) in box 1 of his VAT return and also input VAT of £1,000 in box 4 of his VAT return. Consequently, Tariq would not pay nor receive anything from HMRC for this transaction.

HMRC provides the following list for services which fall within the CIS reverse charge scheme:

• constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services.
• constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence.
• installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure.
• internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration.
• painting or decorating the inside or the external surfaces of any building or structure.
• services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and burrowing, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works.

As a consequence of the introduction of the scheme, businesses may find that they have been impacted with regards to cash flow.

Once VAT registered (which we can organise for you), you have to file VAT returns generally every 3 months and pay any VAT due to HMRC. Again, we’ll let you know all the dates and deadlines, and complete your VAT return in good time.

VAT is, in concept, a simple tax. But we believe it’s one of the most complex taxes once you dig into the detail, so let us know if you have any concerns. Complexities that can arise include:

• Whether to register for flat rate VAT
• Whether it’s in your interest to do cash accounting
• Importing and exporting
• Whether your sales are zero rated, standard rated or exempt
• VAT on overseas sales made through the internet
• We also offer full, concise bookkeeping services to help aid you in record keeping in order to keep your vat records up to date.

Here at Manor Lawson, we want to help you make the right choices when it comes to VAT – so please use the contact box or ring us on 07969824712 to get started.

Here at Manor Lawson Accountants, we can add real value to your business by working out how you can keep more of your money, increase your profits and achieve your goals.

We do this by spending time with you so we can get to know you and your business.

Time spent with us understanding your business is valuable because then we can:

• help your business grow through a full understanding of ‘the numbers’
• help you work out if you’re charging your customers the right amount
• help clarify the personal, professional & financial objectives for your business
• introduce you to people that can help your business
• work out how to keep the tax you pay to a minimum in the short & long term

If you’re ambitious for your business we can really help.

Turning a business from one where the owner controls everything, to a commercial business where the employed management and the business systems enable it to run without the owner, is really hard.  We have particular expertise to enable you to navigate this difficult course.

To make this change, you’ll find it invaluable to gain a proper understanding of how your accounts work, what tax you have to pay and how the system works.

Cash flow is a recurrent problem for businesses, with so many demands on your cash:

• loan repayments
• investment for the future
• slow paying customers
• tax
• suppliers

And that’s before taking money out of the business to live on and to have a good time.

You may well ask, ‘I’m making all this profit, why don’t I have any money?

We can help you answer this question by showing you how the cash flows through your business then work with you to improve the way that happens.

If you need something doing, you’ll want a speedy response – and that’s what you’ll get from Manor Lawson – we will always provide a swift response to your emails and phone calls.

Let us make sure all the compliance work for your business – that’s the VAT, PAYE, annual accounts etc – is done on time, every time so you can spend your energy and resources developing your business.

We have fixed fee agreements so that you always know what you’re going to pay in advance, all normal communications are included. Just look around our website for an overview of the services which we can offer, email us at graham@manorlawson.co.uk or ring us on 07969824712 to find out more about how we can help you.

If your eligible get your refund in your bank quickly and efficiently. Claim the maximum expenses available.

WHAT CAN MANOR LAWSON ACCOUNTANTS, OFFER YOU?

• We offer you a personal service
• Contractors who move to us say that’s so refreshing
• They’re used to being treated as one of a group
• To us that’s battery farm accounting
• You are unique
• So is your business
• That means you need a bespoke service
• We will provide you with ‘free-range’ accounting services

WHAT DOES THAT MEAN IN PRACTICE?

We want to meet you – and if Saturday suits you best, then that’s when we’ll meet – If you like your weekends off then we will see you in the evening. If you haven’t started contracting yet, we can talk you through the options and help you work out what will work best for you.

If you’re already contracting then we can give you and your business a ‘health-check:

• are you fully IR 35 compliant?
• are you claiming all the expenses you’re entitled to?
• is your record-keeping efficient?
• should you be VAT registered?
• what are your goals?
• is contracting right for you?
• have you got plans in place for what happens if you lose your income?
• have you got plans in place for if you die?
• have you got plans in place for retirement?

As a client of Manor Lawson Accountants,  you’ll notice the difference.

Give us a ring on 07969824712 to find out how you can get the service you deserve.

Staff always want to be paid exactly the right amount of money, and on time. But payroll is surprisingly complex and the rules change quickly. The last few years have seen the process transformed through innovations such as RTI and auto enrolment, and it is difficult for a business owner to keep on top of the latest legislation. When you consider all the tax changes, sick pay, maternity pay and other unexpected issues that may crop up on a weekly or monthly basis, it makes sense to let experts handle it for you.

This is where we come in. Our payroll services are fast, efficient and cost-effective. We have a wealth of experience in running payroll for all circumstances, from paying a single employee once a month to paying over a hundred staff on a weekly basis.

We can provide the following payroll services:

• Weekly, Fortnightly or Monthly payslips to all staff by email attachment.
• A full auto enrolment service, including pension upload to your provider.
• Full Payment Submission (FPS) to HMRC.
• Calculation of your monthly or quarterly PAYE/NIC liability to HMRC.
• Monitoring of staff holidays and sickness.
• Accurate deduction or payment of sickness and maternity benefits in line with Government legislation and company contracts.
• Student loan payments.
• Completion of payroll year-end routines and reporting.
• Summary reports for bookkeeping.

We can help register your payroll scheme and operate a payroll bureau on your behalf, filing all necessary RTI and other HMRC documents on your behalf. Payroll made easy with minimum fuss, payslips, CIS certificates can be posted or emailed immediately to suit you’re requirements.

The most common reasons that a tax return may be required are as follows:

• You are self employed or a partner in a partnership
• You are a company director
• You have large amounts of savings or investment income
• You have untaxed savings or investment income
• You own land or property that is being let
• Your household receives Child Benefit and you have income in excess of £50,000
• You have income from overseas
• You have sold or given an asset away (such as a holiday home or some shares)
• You’ve lived or worked abroad or aren’t domiciled in the UK
• The staff at HM Revenue & Customs are not tasked to advise you on how to organise your affairs and minimise your tax. Therefore, if you want to make sure you are paying the right amount of tax, you should consult a professional.

Does the thought of dealing with your bookkeeping and preparing VAT Returns fill you with dread? Manor Lawson Accountants can help – we provide quality and professional bookkeeping services for all types and sizes of businesses, leaving you to concentrate on making your business a success.

Let us free you from the burden of bookkeeping

We’ll make your bookkeeping a breeze

Frankly, bookkeeping can be time consuming at the best of times, and downright tedious at the worst. Wouldn’t it be great to find a trusted and reliable expert who can really help?

If you’ve been struggling to find enough time, or in fact the inclination, to keep your records straight, we can share the load.

Free your time with our bookkeeping service

Our full bookkeeping service gives you the time to concentrate on running your business, safe in the knowledge that everything is covered.

You can delegate the enormous burden of keeping your records straight to us. We’ll help keep track of your business, your sales and profits and your cash flow situation. And make producing your year end accounts a doddle.

What’s included?

• Hassle free bookkeeping
• Monthly updates on the performance of your business.

What’s in it for you?

• By becoming one of our clients you’ll benefit from Fixed Fee Accounting. Absolutely no surprises, strings, catches or extra charges. Just the price we said it would be.
• Relief! We’ll handle all the paperwork and leave you to focus on your business
• Accurate and dependable. No more messy records, just accurate, organised and usable information to help your business
• Trusted client support. You can rely on friendly, expert one on one client care to keep you on top of your accounts admin.
• A Friendly Ear. We’re always available to chat through any questions you may have concerning your accounting records and bookkeeping.

Fancy a chat?

For a free initial consultation and a no obligation quote call Graham on 07969824712 and discover why Manor Lawson is more than just the numbers.

Our hassle-free tax advice service

Our tax and tax planning service is perfect whether you’re a sole trader, sub contractor or an employer running your own business.

We can help you understand what you need to pay and when, manage the whole process for you, plus give advice on reducing your tax liabilities using the most tax efficient methods.

What’s included:

• Preparation and submission of Tax Returns to HMRC
• Tax planning advice and guidance

What’s in it for you?:

• By becoming one of our clients you’ll benefit from Fixed Fee Accounting. Absolutely no surprises, strings, catches or extra charges. Just the price we said it would be.
• Relief! We’ll handle all the paperwork and leave you to focus on running your business.
• No More Fines! We’ll make sure your returns are filed on time to avoid unnecessary fines and penalties.
• Tax advice: At Manor Lawson Accountants we will give you guidance on reducing tax liabilities the most tax effective way.
• A Friendly Ear: we’re always available to chat through any questions you may have concerning tax or tax planning and it’s impact on your business.

For sole traders and partnerships, year end accounts will form the basis of the business owners’ self assessment tax return.

For a partnership, the year end accounts will also state the balance on each partner’s current account. For owner-managed limited companies, the limited company accounts will house details of the directors’ salaries and the dividends paid to shareholders, which will need to tally with their self assessment tax return.

The year end accounts provide invaluable information about your business. You can see if the margin on your sales prices is set appropriately and how the latest performance compares to last year. Movements in sales and expenses are laid bare, allowing you to make better decisions in the future. Anomalies are highlighted and can then be investigated. Having year end accounts brings you closer to your business and will help drive success.

Banks will also prefer to see a set of accounts for self employed applicants looking to raise finance or apply for a mortgage.

Deciding on a Year End

Limited companies, partnerships and sole traders are free to pick whatever year end they like.

Many business owners will pick a calendar year or the tax year (either 31st March or 5th April). Picking the tax year will make your tax liability based on the latest finalised accounts and therefore as current as possible. Consequently, some business owners prefer to have a tax year end, because they have a better feel for what their tax liability might be.  Opting for the 31st March or 5th April will also avoid any complicated overlap relief calculations for sole traders or partners.

Alternatively, you might choose a year end that suits your business – a quiet time of the year when you can have the time get everything together:  count up stock and summarise your unbilled work, etc.

If you have other business interests, think about making the year ends all the same. This means the deadlines are easier to remember because they will be similar but does also mean they all come at once!

You should look to prepare sole traders accounts and partnership accounts well ahead of the tax return deadline of 31st January. Companies typically have nine months from their year end to complete their accounts, but it’s always best to check on Companies House’s website what the company accounts filing deadline is.

Give yourself as much time to prepare the accounts as possible. Rushing can lead to errors and there may be receipts or bank statements you need to find. It also allows you to consider if you’ve claimed everything you’re entitled to and whether there are any tax planning opportunities available.

Bookkeeping

We can prepare your accounts from whatever bookeeping records you have – whether they be computerised, spreadsheets, a cashbook or a bag of receipts. And we can advise you on how to strengthen your record keeping procedures, which in turn will help you run your business more effectively.

It goes without saying that your accounts will be prepared in accordance with accounting standards and we will check that you are claiming everything your entitled to.

Whether you are a sole trader, partnership or limited company, letting us prepare your year end accounts will relieve you of what can be an extremely stressful and time-consuming exercise.

We are here to help

Our accountants offer competitive pricing with flexible appointment times and are dedicated to offering a professional, friendly service.

If you need assistance with your year end accounts, simply call our friendly team now on 07969824712 or drop us an email at manorlawson@outlook.com.