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Don’t be an easy target for HMRC in 2019

We are seeing more and more professional services firms – and their clients being investigated by HMRC for tax evasion. HMRC issued 1,414 production orders to accountancy, law and other professional services firms in relation to investigations into tax evasion according to this report by economia.

At least two Manchester United stars were reported to have been investigated by HMRC over alleged image rights tax evasion as the authorities opened new cases against top footballers in the Premier League.

As enquiries escalate amongst top flight footballers, tax investigations into the affairs of small business are also on the increase and we say it is because both groups are easy targets for HMRC.

Are you under investigation by HMRC?

Murray Patt, founder of Manchester-based accountants Alexander Knight & Co, said:

“It increasingly feels as if small and medium-sized businesses and Premier League footballers are two of the most targeted groups for tax investigations by HMRC.

“In the case of footballers, forming an image rights company to receive payments of up to one fifth of a player’s salary is actually a legitimate tax strategy approved by the authorities if set up appropriately.

“However, it’s logical for the authorities to launch investigations into high profile players who earn their wealth via multiple sources because it can be a rich source of extra income, particularly for players who are new to the Premier League from other countries where tax rules are different.

Get insurance for HMRC investigations 

“Let’s not forget that small and medium sized businesses are an even easier target. If you don’t take care as a small business owner you’re at risk of being pulled up over minor mistakes or small disparities, which could incur disproportionately heavy fines and penalties imposed by HMRC.

“It’s important to have insurance in place to cover the cost of an investigation if you are a small or medium sized business, since in most cases you won’t have the funds of a top-flight footballer. Don’t get caught offside by HMRC.”

Alexander Knight & Co will arrange insurance for you and your business against the costs of an expensive HMRC investigation. Don’t get caught offside by HMRC. Speak to our specialist tax team now on (0161) 980 8788.

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WATCH: A coffee and a chat with Aquavision

In the first of our series of ‘A coffee and a chat with…’ we went to sunny Stockport to see our client Aquavision which is gearing up for growth in 2018 thanks to a flow of international orders.

Aquavision, the Stockport-based manufacturer of waterproof televisions is gearing for growth as international orders boom.

Aquavision manufactures in-wall and waterproof televisions which are being snapped up by luxury hotels and high-net worth individuals.

The business is now the UK’s market leader in the niche, grew revenues by twenty per cent last year, and has developed a vast network of professional partners worldwide.

Alastair Benn started the business from humble beginnings in his own garage.

Soon after making the world’s first waterproof television, he won his first order for a hotel project, the business boomed and he quickly had his entire family assisting him in boxing and dispatching the televisions.

Now operating from 10,000 sq. ft. premises and employing twenty people, the business exports 50 per cent of its sales to almost every country in the world. Aquavision serves four core markets: bathrooms, custom integrations, maritime and hotels.

Products range from 16” to the massive 85” screens manufactured onsite by a team of specialists. The hardware and software in the televisions integrates with all major manufacturers and the business is successfully developing a partnership with top-end audio brand Bang & Olufsen.

Alastair Benn, Managing Director of Aquavision, said:

“Waterproof televisions are in high demand across the world which is reflected in the fact that fifty per cent of our orders come from overseas. I’m passionate about producing high quality, luxury televisions.

“From day one, we’ve never compromised on quality and this is why we remain the number one British manufacturer of in-wall and waterproof televisions. We work hard at maintaining our reputation and we’re proud of the work we’re doing here.”

“We’ve not been affected at all by the Brexit decision or the recent General Election. We’re still growing, we’ve got an international outlook to business and we’re certain our European and worldwide partners will continue to do business with us as long as we maintain our innovation and customer service.

“The exchange rate has been great for our export market and we see no reason why any business which strives for innovation and has a global outlook can’t succeed. We’re proud to be creating new jobs and we’re dedicated to being based in Greater Manchester as we target revenues of £5m within the next eighteen months.”

Alexander Knight & Co is very pleased to be advising the Stockport-based firm.

Aquavision is a wonderful example of a successful British family-owned entrepreneurial company pushing the boundaries of what is possible in a fast-moving industry. We’re pleased to be working with the management team, advising them on tax strategy, growth and the business plan for the UK and international markets.

Stockport is one of those areas of Greater Manchester that seems to have increasingly more entrepreneurs springing up, re-locating and seeking professional advisers.

Investment into the borough has been considerable and there is a business culture developing there largely as a result of the successful implantation of an economic development strategy supported by Stockport MBC.

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Murray Christmas!

Murray Christmas from everyone at Alexander Knight & Co accountants

We’d like to wish all our staff, clients and business associates a very Murray Christmas!  Thank you for all your support in 2017.

We are already looking forward to working with you as you grow your business in 2018. 

Murray Christmas from everyone at Alexander Knight accountants

Murray Christmas from everyone at Alexander Knight & Co.

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Our special delivery for Barnardo’s

Murray Patt accountant makes special delivery to Barnardos

We were pleased, alongside our friends Gresham Wealth Management, to bring some some much-needed Christmas cheer to children at Barnardo’s in Wythenshawe.

Alison and Murray dropped off boxes of presents, including food and toys for girls and boys, which will be distributed this week to vulnerable families supported by Barnardo’s in Wythenshawe.

Ragen Fallon, team manager at Barnardo’s Children’s Centres, said:

“We are delighted to receive these gifts which will go some way to bringing some festive cheer to some of the most vulnerable youngsters in our local community. We appreciate the support of local businesses like Alexander Knight & Co.”

We are very happy to support this important charity and we are pleased to bring smiles to the faces of youngsters who receive amazing support from the hard-working staff, volunteers and other donors.

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Autumn Statement 2017: our summary

The Chancellor Philip Hammond presented his first Autumn Budget on Wednesday 22 November 2017. His report set out a number of actions the government will take including support for more housebuilding.

His view is that the economy continues to grow and as a result the UK is creating more jobs.

The major attention-grabber was aimed at first time buyers who will not have to pay Stamp Duty Land Tax on homes costing up to £300,000.

Our summary focuses on the tax measures which may affect you, your family and your business.

Overall, it was a rather low-key budget for businesses. It’s a no-gain, no-loss budget for many of our clients. There was a lot of bluster about ‘looking at this’ and ‘thinking about that’, but not really much action, although this is really as we expected.

The increase in the research and development (R&D) tax credit scheme for large companies is good but an increase should have also been extended to SME’s who qualify. We wanted to see more incentives for SMEs not just the large corporates.

The uplift in EIS relief to £2m could be interesting to our entrepreneurial clients, although the application of more anti-avoidance measures may counter the benefit.

The raising of the basic and higher rate income tax threshold is positive for the economy and means more money can be spent on goods and services providing a tangible boost but it’s not major news.

Most SMEs will welcome a crackdown on the levels of taxation paid by multinational competitors operating outside UK jurisdictions.

On the negative side we want to see a reduction of red-tape for small businesses – the fact that the Chancellor is considering reducing the threshold at which small firms need to be registered for VAT is concerning. Any adverse changes to the VAT regime must be carefully considered.

The Budget proposals may be subject to amendment in the Spring Statement and subsequent Finance Act. You should contact us before taking any action as a result of the contents of this summary.

You can find our full summary of the Autumn Statement here.

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R&D Tax Credits update 2017

Many of our clients are benefitting from the current R&D tax credits regime and this will continue.

It’s disappointing that the increase in R&D tax credits has only been extended to large businesses – rather than SMEs. However, the chancellor has confirmed a renewed campaign to alert SMEs to the fact R&D tax credits exists and we welcome this.

For more details about how to claim R&D tax credits for your business please speak directly to Murray Patt on 0161 980 8788.

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Corporation tax and NICs

Corporation tax

Corporation tax rates have already been enacted for periods up to 31 March 2021. The main rate of corporation tax is currently 19%. As a reminder, the rate for future years is:

  • 19% for the Financial Years beginning on 1 April 2018 and 1 April 2019
  • 17% for the Financial Year beginning on 1 April 2020.

Class 2 National Insurance contributions (NICs)

The 2016 Budget announced that Class 2 NICs will be abolished from April 2018. The legislation to effect this measure was intended to be introduced this year.

In November 2017 the government decided to implement a one year delay so that Class 2 NICs will be abolished from April 2019.

The government is still committed to abolishing Class 2 NICs. The deferral allows time to engage with interested parties with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits.

Class 4 NICs

The Chancellor announced in the 2017 Budget proposals to increase the main rate of Class 4 NICs from April 2018 but was forced to make a subsequent announcement that the increase would not take place and there will be no increases to NICs rates in this Parliament.

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Making tax digital (again!)

In July 2017, the government announced significant changes to the timetable and scope of HMRC’s digital tax programme for businesses. VAT will be the first tax where taxpayers will keep digital records and report digitally to HMRC.

The new rules will apply from April 2019 to all VAT registered businesses with turnover above the VAT threshold.

As with electronic VAT filing at present, there will be some exemptions from Making Tax Digital for VAT. However, the exemption categories are tightly-drawn and unlikely to be applicable to the generality of VAT registered businesses.

Keeping digital records will not mean businesses are mandated to use digital invoices and receipts but the actual recording of supplies made and received must be digital. It is likely that third party commercial software will be required. Software will not be available from HMRC. The use of spreadsheets will be allowed, but they will have to be combined with add-on software to meet HMRC’s requirements. In the long run, HMRC are still looking to a scenario where income tax updates are made quarterly and digitally, and this is really what the VAT provisions anticipate.

We are on hand to support you through this process.

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More HMRC investigations

The government is investing a further £155m in additional resources and new technology for HMRC.

This investment is forecast to help bring in £2.3bn of additional tax revenues by allowing HMRC to:

  • transform their approach to tackling the hidden economy through new technology
  • further tackle those who are engaging in marketed tax avoidance schemes
  • enhance efforts to tackle the enablers of tax fraud and hold intermediaries accountable for the services they provide using the Corporate Criminal Offence
  • increase their ability to tackle non-compliance among mid-size businesses and wealthy individuals
  • recover greater amounts of tax debt including through a new taskforce to specifically tackle tax debts more than nine months old.

Speak to our team about our tax investigation service to ensure that you are not met with unexpected costs on 0161 980 8788.

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New VAT thresholds looming?

There had been some speculation leading up to the Budget that the VAT registration limit would be significantly reduced. The Chancellor has announced that the VAT registration and deregistration thresholds will not change for two years from 1 April 2018 from the current figures of £85,000 and £83,000 respectively.

In the meantime, the government intends to consult on the design of the threshold.

Talk to our team on 0161 980 8788 about your current VAT arrangements to ensure that you are complying in a tax effective way.

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