The new procedures under GDPR for businesses will come into effect on 25 May 2018, and there are unlimited fines for failure to comply.  Although this is EU legislation, it will not be affected by Brexit.

The procedures cover how you store and protect customer data, how long you retain such data, and what customers can require you to do in connection with that data.

In general, you will be treated as a data processor or a data controller, or both.

Personal data is a valuable commodity and can be used for criminal purposes or commercial marketing.  It, therefore, needs to be protected by all reasonable means.

The purpose of the regulation is to ensure that customers can find out quickly what data you hold on them and can require you to amend or delete that data.  Most importantly, you have a responsibility to keep the data safe and to notify any affected customers and the Information Commissioner’s Office (ICO) of any security breach within 72 hours of becoming aware of that breach.

It will be important to educate all personnel by publishing a statement of best practice and preparing a risk assessment to demonstrate that you have taken reasonable steps to comply with the legislation and so far as possible to prevent security breaches from happening.

In view of the administrative and reputational costs of cyber security breaches, particularly if you hold information for a large number of customers on your computer system, it may be worth considering insuring against this risk.  Bear in mind, however, that this type of insurance is probably best purchased on a bespoke basis, because generic policies are likely to contain exclusions which could render them worthless.

It will be sensible to ensure that regular backups are taken of computer data files and that these backups are kept for an appropriate period and are securely stored so that they will not be tainted if the main system is hacked.  It is also important to ensure that employees do not open e-mail attachments unless they are absolutely certain that the e-mail is genuine.  There have been cases where the sender’s e-mail address is very slightly different from a genuine address you might expect.  A recent version of this sort of scam involves attaching an “invoice” and asking you to check it is correct.  By doing so, you may infect the entire system, possibly with ransomware which asks you to pay a fee or lose all your data.  Even if there is no apparent immediate effect, some infiltrations can lay dormant for months or even years gathering valuable information.

You should also consider encryption of outgoing e-mails in case these are intercepted.

Although this article refers to “customers” the regulation also applies to any other personal data you may hold.  It does not appear to be restricted to information held on computer or “in the cloud” so you could be at risk if an employee leaves personal files in an unlocked car and they are stolen, for example.

In this blog we will outline some of the tax implications that individuals who own a buy to let property, or are considering purchasing a buy to let property, should be aware of.

Changes to the level of interest relief available

• From the 6 April 2017 onwards, the level of interest that can be deducted from rental income received from the let of a residential property will be restricted, this measure will be introduced gradually over three years

• Finance costs include mortgage interest, any payments that are equivalent to interest, and incidental costs of obtaining finance, such as fees and commissions, legal expenses for negotiating drafting loan agreements or valuation fees required to provide security for a loan

• From the 2017/18 to 2019/20 tax year, landlords will be able to deduct a certain percentage of the total finance costs from the rental income received, the remainder of the finance costs will then be deducted as a tax credit from the overall tax liability. The specific percentages for each tax year are highlighted below:

• During the 2017/18 tax year the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction

• During the 2018/19 tax year, the deduction from property income will be restricted to 50% of the finance costs, with the remaining 50% being given as a basic rate tax reduction

• During the 2019/20 tax year, the deduction from property income will be restricted to 25% of the finance costs, with the remaining 75% being given as a basic rate tax reduction

• From 2020/21 all financing costs incurred by a landlord will be given as a basic rate tax reduction

• The tax reduction works by taking the mortgage interest suffered during the tax year and multiplying it by 20%, this amount will then be deducted from your overall tax bill

• If your adjusted total income does not exceed the basic rate band (currently £32,500 for 2017/18, plus personal allowance of £11,500) you will not be affected by the changes

Replacement of Domestic items relief

• From April 2016, landlords will no longer be able automatically to deduct 10% of their rental profits as notional wear and tear. They will be able to claim tax relief only on costs they have incurred, such as if they have bought a new sofa or bed for the property

• Landlords will also have to start to keep receipts. Previously, landlords could write off the 10% even if they had not spent a single penny on repairs or replacements

Stamp Duty Land Tax

• Stamp duty land tax (SDLT) rates for buy to let and second properties changed on 1 April 2016, and now include a 3% additional surcharge on top of the normal SDLT rates

Capital Gains Tax (‘CGT’)

• CGT will be levied when you sell a property that is not your home

• If you have lived in the property for some time prior to it being let before you may be entitled to principle private residence relief and lettings relief. For this relief to be in point, you must have treated the property as your ‘only or main home’ for a period of time

• CGT has been increased for residential properties recently, and is now charged at either 18% or 28%

If you would like any further advice regarding buy to let properties, or any other assistance on tax matters, please do not hesitate to contact Amy Armitage (Tax Manager), John Neighbour (Tax Director) or any other member of the HB team on 01992 444466

It’s always interesting to have a peek behind the scenes, so we’ve asked members of the team to let us know what a typical day in the office is like for them. It’ll help you to get to know us better and give you a better understanding of the work we do. This time, we’d like to introduce you to one of our Directors, Karen Chase.

As a Director, my job involves: managing, training and helping the audit/accounts team, overseeing and reviewing audits and accounts, dealing with clients, preparation of accounts, personal and corporate tax returns. I also help to run the office and oversee Charlotte, our business administrator, as well as attending networking meetings and seminars.

A typical day

5.45 am – Woken up by the alarm. I had enough time to get ready before I woke the kids up to get them ready for school. Mum arrived at 7 o’clock to look after my daughter Brooke, then take her to school, and I left with my son Keaton at 7.15. After dropping Keaton off, I got a peaceful half hour drive to work.

7.50am – The first thing I did when I arrived at work was check my emails, then I drew up a list of things I had to do and work I needed to delegate, e.g. analysing figures in a different format for a client with a German parent company. I then reviewed the work our trainee accountants Ryan, Ben and Angelo had done the previous day, and set them new tasks. Our manager Catherine Hill usually helps me with these things, but she’s just started maternity leave – I’m already missing her loads!

When the rest of the team arrived, we discovered that Brad, another trainee accountant, had passed his exam and had brought in cakes to celebrate. However, there were none for me as I’d just started a 12-day detox – Karen with no coffee is not ideal!

9.00am – I had a meeting with one of our accountants, Barrie, about a current audit. They had a new provision in their accounts, so we needed to talk about what the audit approach would be.

9.30am – I then reviewed a client’s audit files and emailed them to arrange a post-audit meeting.

10.45am – I spent a few minutes setting up a new client on our system who I’d had a meeting with the previous day, making sure we had all the correct documentation on file and asking for any we still needed.

11.00am – I reviewed a small accounts file that our manager Karen had done, then passed it back to her so she could send final accounts to the client for signature.

11.30am – I had a quick catch-up with Charlotte about all the events HB Accountants are involved in: the Ambition 2017 sales and marketing conference for SMEs; the Teens Unite stall at Hoddesdon Loves Christmas (25 November); the Hertfordshire Business Awards evening (23 November); and also to check on the progress of our office Christmas lunch and Secret Santa.

Getting the payroll right every month is crucial for any company, however large or small. A recent survey has identified Europe as the most complex payroll region in the world, with 65% of professionals saying that managing legislative, HR and payroll updates is their number one challenge, with issues such as GDPR, Working Time Regulations, IR35 and the gender pay gap adding to the complexity.

If you run your own business and have been struggling with managing your own payroll, or your payroll manager has just handed in their notice, then it’s time to think about the benefits of outsourcing your payroll to a specialist company.

Reduces errors

Mistakes will be costly in terms of time and money to put right. Vitally, they will inconvenience the member/s of staff concerned, possibly even leading to them having problems paying their rent or mortgage. This will not only be very stressful for them, but it could result in reduced motivation and loyalty. And if payroll mistakes happen on a frequent basis, you could end up losing staff.

By outsourcing the work to payroll specialists, the likelihood of errors becomes minimal.  

You benefit from their years of experience

When you outsource your payroll to a specialist, you get the benefit of the combined experience of every expert in their company. They will also be in a much better position to stay up-to-date with developments and make sure you are compliant with employment laws and implementing changes in legislation, e.g. auto-enrolment and GDPR.

Allows you time to do what you do best

Why would you want to struggle with a task that you’re not familiar with when the success of your business depends on you concentrating your time on doing what you do best? That’s exactly what payroll specialists are doing!

By outsourcing payroll to a specialist, you can concentrate more of your time and energy on running your business, secure in the knowledge that all your staff will be paid what they’re due, on time.

You save on the costs of staffing

If you employ a dedicated member of staff to deal with your payroll, then you will be responsible for their recruitment and training. But if you are not a payroll specialist, how well do you understand what you’re looking for in terms of skills and experience when recruiting a new member of staff? And if that person doesn’t work out and leaves your company at short notice, where will that leave you with regards to getting the payroll done? By outsourcing your payroll to an accounting specialist, you are also relieving yourself of these worries.

You will also be saving on the costs of having another member of staff in the office, including overheads, equipment costs and other resources, recruitment costs, contributions, perks etc.

Peace of mind

Essentially, by outsourcing your payroll, you are giving yourself peace of mind, enabling you to concentrate your time and energy on running the business. With no margin for error and real time reporting to the Inland Revenue, our payroll specialist team can help you fulfil your payroll needs accurately and on time, every time.

If you would like to talk to us about the possibility of outsourcing your payroll, please contact us to make an appointment.

If you own shares in a family trading company they are treated as business property for inheritance tax (IHT) purposes and can pass to your heirs tax-free on your death.

If the next generation are not interested in carrying on the family business, you may decide to sell the shares.  The problem with this is that the money you receive will not be business property and will therefore be charged to IHT (probably at 40%) if you still have it when you die.  You will also be charged capital gains tax (CGT) at 10% or 20% when you sell the shares.

If, within the period beginning one year before the sale and ending three years after the sale, you reinvest some or all of the proceeds in a qualifying Enterprise Investment Scheme (EIS) investment, you can hold-over the capital gain.  If you reinvest within two years after the sale you will also retain the IHT business property relief.  Whether or not you claim to defer the capital gain, you will also be able to claim 30% of the amount invested against your income tax liability.  That income tax relief can be split between the tax year during which you acquire the EIS investment and the previous tax year.  There will be no capital gains tax payable on the sale of the EIS investment if held for at least three years (any deferred gains tax would, however, be payable on that occasion), but any losses can be set off against gains arising in the same or future years (including the deferred gain).

The income tax relief is restricted to an EIS investment of £1 million.

EIS investments are regarded as high-risk and your investment would not be protected.  However, some qualifying investments are asset-backed and some can even provide an income-stream.

With the ever-growing public awareness of their impact on the environment, the labour market, societies and small businesses around the world, more and more companies are being scrutinised about their attitude toward the way they operate. In fact, your company’s ethical stance is increasingly important, with customers wanting to see proof that your company takes care of its staff, the local community, and the environment.

Why is Corporate Social Responsibility (CSR) so important?

There are some compelling business reasons for your company to adopt a CSR policy. According to the UK Small Business Consortium: “88% of consumers said they were more likely to buy from a company that supports and engages in activities to improve society.”

Sharing and promoting your CSR policy will gain you more clients and customers and also a lot of positive PR. Use social media to let people know what you’re up to and to post news of staff who take part in fundraising activities. If you’re doing something special that is benefiting the community (e.g. corporate sponsorship, fundraising, providing work experience for vulnerable members of society), send a press release to your local newspaper, business magazines and organisations your company is a member of (e.g. the local Chamber of Commerce) in the hope of getting editorial coverage.

And if you are thinking of entering business awards, being able to show evidence of a strong CSR policy can really help your submission – indeed, it could mean the difference between being a finalist and being a winner.

CSR is as important on a global basis as it is in first world countries. The United Nations Industrial Development Organization (UNIDO) actively supports SMEs in developing countries with environmentally and socially responsible entrepreneurship. “Ensuring that CSR supports, and does not undermine, the development of small and medium-sized enterprises (SMEs) in developing countries is crucial to meeting the goal of improving the impact of business on society.”

Hoddesdon companies and their CSR policies

In Hoddesdon, Pindar Road is a hugely important commercial area in terms of industry and business. Out of interest, we looked at the websites of companies based on Pindar Road to see how they promote their CSR policies.

Our findings reveal that few companies publicise their CSR policies on their websites, but this isn’t to say that they are not doing anything in this area – indeed they are; references are made to staff taking part in events to raise money for charities on social media – they just need to make more of it.

To encourage you to think about highlighting elements of CSR your company excels at, here are examples of Pindar Road companies who talk about aspects of Corporate Social Responsibility on their websites.

Enterprise Document Solutions UK

One of the main selling points for a document management company like e-docs UK is that it works towards a paperless office, and this is going to have an obvious environmental impact. However, e-docs has gone further, with an active environmental

policy to lessen its own environmental impact, incorporating objectives and targets for the future, promoting environmental awareness, ensuring its operations are socially responsible, recycling wherever possible and using reputable waste carriers.

Affvs UK Limited

Affvs UK salvages vehicles that have been written off by insurance companies. It has turned a business requirement to be compliant with Environmental Agency guidelines into a CSR promotional tool. It provides information about the salvage process and guidance about buying used car parts which creates a good impression of a trustworthy company that cares about the customer.

In addition, it donates 10% of vehicle scrap value to Essex & Herts Air Ambulance Trust.

DW Windsor

DW Windsor is a designer and manufacturer of lighting solutions. This company’s main angle is that it supports British industry by sourcing components and raw materials from UK companies and, in doing so, supports the employment and skills of the country’s workforce. They are a member of the ‘Made in Britain’ campaign.

In addition, the company has also been a sponsor of Isabel Hospice’s Bubble Rush this summer, news of which was covered on its social media channels.

MISL

Three years ago, document management company MISL gained publicity for a recruitment drive that resulted in the employment and training of 20 previously unemployed new members of staff. Sadly there have been no updates about how the 20 have progressed as this could have provided extra publicity for the company.

Ambition Broxbourne Business Centre

The Ambition Broxbourne Business Centre is part of a nationwide chain run by Basepoint Business Centres. The Centre’s success as a business in its own right relies on the success of the start-ups and small businesses that rent office space. The company therefore provides free business support and mentoring for its members, and many Basepoint centres have regular networking meetings. Charity is at the heart of Basepoint’s CSR. The company is owned by The Act Foundation, a grant-funding charity, with all the profits going to people in need. Each centre also supports a local charity with fundraising activities, though there is no mention of Broxbourne’s chosen charity on the Basepoint website.

National Windscreens

Another company that is part of a nationwide group which understands the importance of informing consumers about its CSR policy. National Windscreens takes its environmental policy seriously, recycling 100% of its glass. And like many large companies, it also adheres to the Modern Slavery Act which means a commitment “to ensuring that there is no modern slavery or human trafficking violations in our supply chains or in any part of our business”.

Our own CSR policy

Here at HB Accountants, we take our own responsibilities seriously. We play an active role in the local community, with fundraising events for local charities and networking events to support other local businesses.

Our staff regularly take part in fundraising activities for the official HB charity, which this year is Teens Unite.

We are also a finalist in the Supporting Young People category at the forthcoming Hertfordshire Business Awards.

If you would like to talk to us about how we can help your business, contact us for more details. We would also be very happy to talk about all our CSR policies and activities at the same time!

In the old days, all your accounting was done on a disc. You would buy the software on a disc and install it onto your computer. It was self-contained, which meant that as long as your computer was working, everything would run smoothly.

Unfortunately, there were downsides. What if something went wrong? The system may well not have been supported, so if something did go wrong, you had to bring in outside experts to sort things out. Every two to three years, you’d have to make a decision about whether or not to buy an updated disc. And when it came to submitting figures to your accountant, you had to download the information and send it on a separate disc, risking it being damaged or lost in the post.  And if your accountant only ever saw your figures once a year and you’d been inputting them wrong, it wouldn’t be picked up until there was a year’s worth of corrections to make to the annual accounts. The downsides of disk-based applications have led to the introduction of cloud accounting.

These days, more people are switching to Cloud accounting, but mainly because there is no disc alternative any more! The switch happened fairly seamlessly and most people have adopted the new system quite happily. However, there are some people who are still wary of the Cloud; if you’re one of them, it might help to understand the advantages.

How the Cloud has simplified the accounting process

How you input your figures hasn’t changed at all, but the fact that the software is hosted remotely has revolutionised the process, making things a lot easier for all the parties involved for a number of reasons:

• All information is updated in real-time, enabling a number of users to work on the same file without having to send each other different versions every time it’s updated. The people who need to see the figures, e.g. bookkeeper, MD, can access it whenever they need to. This can save a lot of confusion about what changes have been made as it’s always up-to-date in real-time.
• It simplifies the year end processes. As your records are updated simultaneously, all your accountant needs to do to access your figures is to log in. They can work on your data, print reports, raise queries and make any adjustments they need to do there and then, speeding up the process considerably. Accountants can also log in at any time to check that everything’s all right, giving companies the reassurance that they’re on the right lines, and for any errors to be picked up early. With permission, we like to check our clients’ figures on a quarterly basis which gives us and you peace of mind.
• The software is automatically upgraded meaning you’re always working on the latest version.
• You no longer have to worry about the expensive and bother of security and maintenance as the host companies take care of backups, updates and cyber security. In fact,your data is probably safer on the Cloud as it is encrypted and password-protected, meaning that even if your computer is stolen, all your information remains secure.
• Cloud accounting is very cost-effective. Although you will have to pay a monthly fee to use the software, in the long run you could still end up saving money on the old system where you simply bought a disc. Your office will spend less on hardware as all your data storage is taken over by the Cloud company, with the added bonus of that hardware not taking up valuable office space; and you will no longer need to employ or outsource IT experts to look after it.

Tax Tips for Individuals

In this month’s tax update, we will discuss some tax tips for individuals.

Please note that the rates referred to throughout the blog are noted for the 2017/18 tax year which runs from the 6^th April 2017 – 5^th April 2018.

It will be key to think about any of the options discussed in this blog prior to the end of the current tax year, being 5^th April 2018.

Use of Yearly Allowances

Everyone gets a range of allowances to use each tax year as below:

The Personal Allowance (Income Tax)

Everyone receives a personal allowance for income tax each tax year, the current personal allowance is £11,500. The personal allowance is the level of income an individual can receive before they suffer any income tax and therefore is effectively tax-free income.

Please note that the personal allowance is restricted if you earn over £100,000 during the tax year

The Dividend Allowance

Everyone also receives a £5,000 dividend allowance, dividend income within the dividend allowance is taxed at the dividend nil rate of 0%.

The Personal Savings Allowance

From 2016/17 a savings nil rate (0%) applies to taxable interest income within an individual’s savings allowance, the allowance received depends on that band of taxation that the individual falls into during the tax year as below:

Basic rate: £1,000

Higher rate: £500

Additional rate: nil

Capital Gain Tax Annual Exemption

Everyone gets a tax-free allowance of £11,300 to use against capital gains during the 2017/18 tax year.

Spousal Exemption for CGT purposes

Spouses may make transfers to each other on a ‘No Gain No Loss Basis’, meaning no Capital Gains Tax will be due. This can be an effective tax planning tool when using capital losses or annual exemptions that a spouse has remaining.

It is efficient tax planning to ensure that everyone makes use of the tax free allowances offered to them each tax year.

Tax Reducers

Transferable Personal Allowance/ Marriage Allowance (‘MA’)

The Marriage Allowance allows certain individuals who are married or in a civil partnership to elect to transfer some of their personal allowance to their spouse or civil partner. The election will be of help to couples where one of the spouses either has insufficient income to utilise his or her personal allowance or has income which is taxed at 0%, for example because it falls wholly within the starting rate band for savings income.

The amount of the personal allowance which can be transferred is 10% of the personal allowance. The recipient obtains a reduction in his income tax liability (a tax reducer) equal to 20% of the transferred amount. We therefore reduce the tax liability by £1,150 x 20% = £230. This reducer cannot result in a repayment of tax due.

The following conditions must be met for an individual to qualify:

• Must be married or in a Civil Partnership
• Neither spouse must pay tax at the higher rate (i.e. 40% rate)
• Election must be made within 4 years of the end of the tax year to which it applies

EIS/SEIS Investments

Investing in shares within the EIS and SEIS these schemes can result in a tax reducer as below:

EIS: 30% of the amount invested up to an annual limit of £1,000,000 (max relief £300,000)

SEIS: 50% of the amount invested up to an annual limit of £100,000 (max relief £50,000)

Losses

Rental Losses

Rental losses generated during a tax year can be carried forward against future rental profits.

There are many expenses which individuals do not realise they are able to deduct from rental profits during the tax year i.e. replacement of carpets, decorating expenses etc.

Capital Losses

Capital losses generated from the sale of a capital assets i.e. shares, property etc. can be carried forward to use against future gains arising.

Losses generated must be used against current year gains in priority during the tax year.

If you’re setting up a small business from scratch, you know that money is going to be tight. That’s why most entrepreneurs begin by trying to do everything themselves in order to keep costs down. But there are some compelling reasons to seek professional help from an accountant from the very beginning, which may end up saving you a lot of money in the long run.

Firstly, an accountant can help you get the structure right, especially when it comes to tax. For instance, often when a couple set up a business together, one of them will continue working in a full-time job until the business takes off. An accountant will help you set up an equal shareholding which will help keep finances ‘in the family’ when it comes to dividends. This can be especially helpful in cases where doing this can keep you under the 40% tax threshold.

Secondly, an accountant can help out with HMRC-related matters, helping you with VAT registration, setting up your payroll, registering for Corporation Tax etc. You can rest assured that your accounts would be set up accurately – it is not uncommon for people doing it themselves to make mistakes which can be costly to put right. And an accountant can also help you out with company registration.

The future isn’t necessarily bright

It is quite common for two or more friends or acquaintances to go into business together. Sometimes this doesn’t end well and the business suffers when friendships end and one of the partners wants out. To prevent a lot of grief and expense in such an event, it is recommended that all partners draw up a Shareholders’ Agreement before the launch of the business. A good accountant will be able to recommend a solicitor who specialises in these agreements.

Advice

Accountants are always happy to help give clients advice which points them in the right direction. They can put you in touch with bookkeepers, and can also recommend the right bank to have your company account with – the bank that is right for your personal account isn’t necessarily the right bank for your business.

It is always a good idea to keep in touch with your accountant and recommend touching base every three months to make sure everything’s running smoothly? This is especially important if you’re doing your own bookkeeping, as you need to make sure it’s up-to-date and being completed properly – if not, there will be plenty of time to fix any errors.

Our approach

From time-to-time, all small business clients have little questions that will only take a couple of minutes to answer, but they are reluctant to get in touch with their accountant about it. We don’t have a problem with our clients calling us with such questions and are happy to answer them free of charge. That way small issues can be dealt with before they can escalate.

Maybe you’ve just set up your own business and are looking for a new accountant. Or perhaps your accountant has just retired and you need to look for a new one. What you need to bear in mind is that hiring the right accountant for your business isn’t a simple process. Who you choose to look after your accounts is crucial, especially if you have plans to expand as you will need to look for someone who will come with you on your journey to success – an accountant who will not just help you with your tax return, but also advise you on your business, and get more involved in the financial side of things the bigger your company gets.

Ask around

Word-of-mouth – sometimes called ‘earned advertising’ for a good reason – remains one of the most powerful marketing tools there is, with around 84% of people relying on it as a trustworthy source of information. So one of the best ways of choosing a new accountant is to ask your business contacts for referrals. If they’re happy with theirs, they’ll be happy to give you a recommendation. If you don’t get any joy from referrals, ask the people you meet at networking groups. Who knows, you may already know someone from an accountancy firm who’s a member of one of your groups – if you already like and trust them, then it’s definitely worth setting up a meeting to talk about how their company can help you.

Look at the website

However glowing the testimonials about possible future accountants are, you must always do your research. Start with the company’s website and look at the accounting services they offer with an eye on what you might need in the future. If you choose an accountancy firm now that doesn’t have the expertise to help you as your business expands, you’ll end up back at square one.

Keep your options open

However good you think one firm is – and you may well end up hiring them – always keep your options open. Choose a shortlist of three or four firms you think are a good fit and arrange face-to-face meetings with all of them.

What you’re looking for is a company that is a good fit for your business, so go armed with lots of questions. In addition to the fees, you need to find out about the services they provide, as well as their customer services. Ask questions about their turnaround time on jobs in order to get a feel for how they process and prioritise their work, and how they are likely to treat you as a client.

In addition to questions about fees and service levels, it’s important to ask questions about the qualifications and experience of the people who would be dealing with your accounts. When you reach the stage where you need extra help from the firm, who will you be dealing with? You need to know that you could work with them, always trust that they are on your side and are constantly looking for ways of adding financial value to your company.