A Guide to Making Tax Digital for VAT

Making Tax Digital (MTD) is the government’s scheme that makes online tax filing and payment ad digital record keeping mandatory. Whilst all types of business related tax will be included in the scheme, only Making Tax Digital for VAT has so far been given a roll-out date.

The government’s aim with MTD is to reduce tax errors and generate over £600 million in additional revenue. There are however benefits for businesses says the government, namely more straightforward record-keeping.

The MTD for VAT pilot programme is already in operation. Having started in October, it is open to any business that wishes to take part. The pilot will come to a close on 1 April 2019, at which point MTD for VAT will become mandatory for all VAT-eligible businesses, other than a minority which have had their roll-out date deferred until October 2019.

Let’s take a look at what will be involved for businesses once the official MTD for VAT roll-out date kicks in.

What do I have to do under MTD for VAT?

If you are a VAT registered business with a Taxable turnover above the VAT threshold, then you will need to keep and preserve your VAT records digitally and send your VAT returns to HMRC using MTD-compatible software.

To see what records you will need to keep digitally, take a look at VAT Notice 700/22.

When do I need to start following MTD rules?

Your start date will vary depending on your individual VAT period. You must start following MTD for VAT rules from the first day of your first VAT period that starts on or after 1 April 2019. After this date you will no longer be able to submit a paper based VAT return, or manually complete a VAT return online.

Your current VAT filing deadlines will not alter once MTD for VAT is introduced.

What should I do to prepare for MTD for VAT?

If you are not already using accounting software then you should make the switch as soon as possible. Bear in mind that by 2020, virtually all business taxes will fall under MTD rules, and without accounting software you will not be in a position to comply.

Remember that MTD for VAT is not just about online filing of VAT returns; it is also about maintaining digital VAT records.

If you are considering your options concerning accounting software, our guide to keeping your books in line should prove helpful.

If you are in any doubt as to your responsibilities concerning Making Tax Digital for VAT you should not hesitate to discuss the matter with your bookkeepers or accountant.

The Pros and Cons of Traditional Accounting

Last month we looked at what is involved in cash basis accounting. This month we are exploring the alternative: traditional accounting.

What is traditional accounting?

Traditional accounting, also known as ‘accrual’ accounting, involves recording income and expenditure at the point where an invoice was issued, or when a bill was submitted. This is opposed to cash basis accounting, where records are only made when money physically enters or leaves a business.

Who uses traditional accounting?

In practice, traditional accounting may not suit smaller businesses or sole traders. This is because invoices are recorded at the point they are issued, rather than when they are paid.

This means that you may find invoices included in your tax return figures that are yet to be paid. The risk here is that the invoice payment may take some time to come in, or may not even transpire at all. However, that invoice will still count as income for tax purposes. With cash accounting, there is no need to pay tax on anything you have not yet been paid for.

Traditional accounting tends to be more suited to the larger business, although for the smaller business expecting to grow rapidly, it is usually the better option because the turnover limit for cash accounting is £150,000.

Limited companies and limited liability partnerships must use traditional accounting.

What do I need to do if I use traditional accounting?

Traditional accounting requires you to keep records of all income and expenditure. This includes stock and equipment and its value at the end of your accounting period; all payments made to employees such as wages, benefits and bonuses; vehicle and travelling costs associated with the business; any interest accrued on bank and building society accounts, and all income.

What are the benefits of traditional accounting?

Most benefits of traditional accounting come in the form of being able to set off losses against other income, and being able to claim significantly more capital allowances. Cash accounting only allows capital allowances to be claimed against cars.

Traditional accounting, or cash accounting – which is best for your business? If you are in any way unsure as to the best accounting method for your individual circumstances, you are best advised to discuss the matter with your bookkeepers or accountant.

A Guide to Limited Company Allowable Expenses

Last month we looked at allowable expenses for self-employed workers. We pointed out that limited company rules on expenses are different and that we would look at those separately, which is precisely what we are doing in this post.

What are allowable expenses for a limited company?

The key rule to follow concerning limited company expenses is that they must be genuine. In other words, the expense must be something that was incurred exclusively, wholly and necessarily during the course of running your business.

Expenses that cross over both business and personal use cannot be claimed. It is important to retain all receipts and invoices so that if it becomes necessary, you can prove that your expenses claims were genuine.

What are typical limited company expenses that can be claimed for?

The following are some of the allowable expenses which can be set off against Corporation Tax:

Salaries – all PAYE salaries including directors and staff.

Subcontractor fees – if you engage subcontractors or freelancers to undertake work for your business then these will be classed as allowable expenses.

Pension contributions – all pension contributions paid to staff, providing they are made via an approved scheme.

Employer’s National Insurance Contributions – any contributions payable on employee salaries can be claimed for.

Travel and parking costs – travel expenses is another topic that needs its own dedicated post which we will cover in the future but suffice to say in general that most travelling costs will be classed as allowable expenses. Company car expenses can also be claimed, although there is a benefit in kind charge for private use.

Accommodation costs – if you are staying away from your normal place of business then you can claim accommodation costs, providing you do not claim for more than 24 months at a temporary place of work.

Subsistence costs – you can claim for subsistence whilst away from your normal place of work, but again as with accommodation costs, you cannot claim if you have exceeded 24 months at a temporary place of work. Incidental overnight expenses can be claimed at £5 per might or £10 per night if abroad should you be working away from home.

Training fees – providing the training delivers skills that are relevant to your business then you can claim for the costs involved.

Business insurance – all genuine business insurances such as employer’s liability, professional indemnity, property and vehicle insurance are classed as allowable expenses.

Telephone, mobile and internet fees – providing the contracts are in the name of the business you can offset the costs against your Corporation Tax. If you work from home then you can claim the cost of business calls made from your residential telephone line.

Use of home as office – home workers can claim £4 per week without receipts, or calculate a proportion of the household bills.

Computer equipment – all computer equipment and software used for business purposes can be claimed for.

Advertising and marketing costs – anything you spend on promoting your business is an allowable expense.

Business gifts – you may gift up to £50 per individual before complex rules apply.

Professional fees – anything you spend on accountants, solicitors, surveyors, etc. can be claimed for.

Health care – any employee who uses a computer is entitled to an eye test, the cost of which you can claim for. You can also claim for annual employee health checks.

It is advisable to always consult with your bookkeepers or accountant if you are unsure as to whether an expense is a genuine business one that can be included in your Corporation Tax return.

Cash Basis Accounting Explained

Cash basis accounting is a method often used by sole traders and partners to work out income and expenses for a Self-Assessment tax return. Many small business owners choose to use cash basis accounting rather than traditional accounting. Here we look at why that is, and how cash basis accounting works so you can decide whether it’s for you.

With cash basis accounting, you only need to declare money when it comes in and leaves your business. So, at the end of the tax year, you only have to pay Income Tax on the money you have received during your accounting period.

Is cash basis accounting right for me?

There are some instances when cash basis accounting won’t be the right choice for you. For example, if you run a business that is not straightforward, for example with extensive stock levels; if you wish to claim bank charges or interest in excess of £500 per year as an expense; if you have losses that you wish to offset against other taxable income, and if you have a need to obtain business finance, because you may be asked for accounts drawn up using traditional accounting.

Who can use cash basis accounting?

Any small self-employed business such as a sole trader or partnership can use cash basis accounting providing their annual turnover is £150,000 or less. If you run multiple businesses, then if you use cash basis accounting for one of them, then you must use it for the others. If the combined turnover for all your businesses exceeds £150,000 then you cannot use this accounting method.

You can however remain within the cash scheme if your income rises during the current tax year. So for example if you commence the tax year earning £140,000, but by October your turnover has increased to £200,000 then you can continue to use cash basis accounting for the rest of that tax year, providing your turnover does not exceed £300,000. If it does, then your next tax return will need to use traditional accounting.

Limited companies and limited liability partnerships are not permitted to use cash basis accounting. There are also certain other exceptions, a list of which can be found here.

Can I switch from traditional accounting to cash basis accounting?

If you qualify for cash basis accounting then you can switch from traditional accounting, however there may be some adjustments that need to be made, for which it is likely you will need professional guidance.

If you are in any doubt as to whether cash basis accounting is right for your business, talk to your bookkeepers. They will be able to advise you on an individual basis and guide you as to the best accounting method depending on your current and future needs.

A Guide to Self Employed Expenses

If you work on a self-employed basis, there are certain running costs that you are allowed to deduct from your overall turnover before you calculate your taxable profit. These are known as ‘allowable expenses’, and as a self-employed worker, it is important that you are aware of what these are, because if you don’t factor them in when you calculate your annual tax return, you could be missing out on potential savings which could be quite significant.

Allowable expenses do not include anything you take from your business to pay for things you buy for personal use. Limited company rules on expenses are different, and we’ll look at those in a separate post in the future. 

What can I claim as allowable expenses?

The following are allowable expenses which can be deducted from your taxable income as a self-employed worker:

Office costs – these include things like rent, rates, security costs, utility bills, insurance costs, telephone and internet, printing and printing supplies, postage, computer software and stationery.

Travelling costs – costs for the likes of fuel, parking and public transport fares are all classes as allowable expenses, as are hotel rooms, vehicle licence fees, repairs and servicing, vehicle insurance, breakdown cover and meals on overnight business trips.

Clothing expenses – if you wear a uniform for work or use protective clothing then you can claim expenses for these. Actors and entertainers can also claim for their costumes.

Staff costs – if you employee staff on any basis, or use subcontractors, then their salaries or fees are classed as allowable expenses. Bonuses, pensions, benefits, agency fees and employer’s National Insurance are also included.

Goods for resale – any goods you purchase to sell on are allowable expenses, as are raw materials and any direct costs incurred from the production of goods.

Financial costs – your costs for professional services such as an accountant, a solicitor, surveyors and architects are all allowable providing they are for business use. You can also claim for professional indemnity insurance cover, bank charges, interest paid on loans and hire purchase and leasing payments.

Advertising and marketing – if you advertise your business via any medium then you can claim those costs as allowable expenses. So for example print advertising, mailings, digital marketing costs, website hosting and free samples. You can also claim for subscriptions to professional or trade journals and trade or professional body membership, providing it is connected to your business. Client or supplier entertainment and event hospitality are not allowable expenses, neither are gym membership fees, payments to political parties or charity donations.

Any fines issued for breaking the law are not allowable expenses.

If you want to make sure you are claiming everything possible, why not take advice from your local bookkeepers? They know precisely what can and cannot be claimed for, and could even help to save you money on your annual tax return.

2018 Autumn Budget Summary

The Autumn Budget of 2018 has proved quite a beneficial one, particularly for the small business. Let’s take a look at some of the key points from this year’s Chancellor’s speech. 

Employment set to keep growing

With employment at a near record high, the Office for Budget Responsibility has forecast that it will keep growing. 3.3 million more people are in work since 2010, and it is reckoned that 800,000 more jobs will be available by 2022. 

National Living Wage to increase

From April 2019, the National Living Wage will rise from £7.83 per hour to £8.21 per hour, effectively benefiting in the region of 2.4 million workers, with a rise of £690 per year for those working full time. 

Tax-free Personal Allowance to rise

The tax-free Personal Allowance, the amount you earn before you start paying tax, will rise by £650 in April 2019 to £12,500. This is something that has been introduced earlier than planned, and it will be maintained in 2020. 

Higher Rate Threshold to increase

The amount higher earners can net before they pay tax at 40 per cent is set to increase from £46,350 to £50,000 in April 2019. So, in 2019-2020, there will be almost one million fewer higher rate taxpayers than in 2015-2016. 

Universal Credit work allowances increased

£1.7 billion will be invested into increasing existing work allowances in Universal Credit. This will see working parents and those with disabilities claiming Universal Credit £630 per year better off. There will also be additional help for people moving from existing benefits to Universal Credit as well as targeted support for those repaying debts. 

Travel benefits on the horizon

2019 will see fuel duty remaining frozen for the ninth year in a row, whilst short haul Air Passenger Duty will also stay the same for the eighth year running. Long haul rates are set to rise in line with inflation.

£30 billion will be invested to improve roads. A £28.8 billion National Roads Fund incorporates £25.3 billion for the Strategic Road Network to improve motorways, trunk roads and A-roads. It will also assist with the funding of the new network of local roads, to be called the Major Road Network, as well as larger local road projects. There will also be a fund of £420 million for local authorities to repair potholes and to repair tunnels and bridges, as well as £150 million to improve local traffic hotspots like roundabouts. 

Retail boost

Retail businesses will enjoy a £1.5 billion boost with business rates for smaller high street outlets seeing their rates bills slashed by a third for two years starting from April 2019. There will also be a £675 million investment into the improvement of transport links; the redevelopment of vacant shops into homes and offices, and the restoration of historic properties. 

Extra protection for businesses

The government will invest £1 billion more into defence over the next two years, providing the Ministry of Defence with more funds to help protect the country against cyber-attacks and other threats. 

Increase in the Annual Investment Allowance

The Annual Investment Allowance will rise from £200,000 to £1 million from 1 January 2019 to 31 December 2020 with the aim of helping businesses invest and grow. In addition, from October 2018 businesses will be able to deduct 2 per cent of the cost of any new non-residential structures and buildings off their profits before tax is due. 

Changes to the Apprenticeship Levy

Further changes to the Apprenticeship Levy will be introduced with a view to supporting employers. From April 2019, larger businesses may invest up to 25 per cent of their levy to support apprentices in their supply chain. For some employers there will be a cut of 50 per cent on what they currently pay for apprenticeship training, with the government to make up the shortfall. Further details will be released in early 2019.

Should you have any questions about how the latest Autumn Budget will affect your individual business, your local bookkeepers will make an excellent first port of call.

Time for Employers to Get Winter Ready

The UK is well known for coming to a standstill once extremes of weather kick in. With winter on the horizon, now is the time to get ready for the employment related implications of the impending cold, frosty weather and the potential upheaval to business that snow can bring.

Unpredicted, unusual weather often leaves employees in a spin as to whether they should be putting themselves at risk by tackling icy conditions to get into work. There is also the question as to whether staff who cannot make it in due to transport problems should be paid; what happens if you decide to close the premises and what obligations employers have for keeping staff safe and comfortable during cold weather spells. Let’s take a look at all these issues. 

The issue of pay

Where weather conditions are making it a challenge to get into work, employers are not under any obligation to remunerate staff for missed days. Whilst it is not the fault of the employee that they cannot make it in, neither is it the fault of the employer.

If you wish to maintain good relations with staff and to avoid causing them financial difficulties, you could offer to allow them to take the time as paid leave from their annual leave entitlement; or to make up the time in other ways, perhaps by getting in early or staying later once the weather has improved.

If you decide to close during inclement weather, it is customary to pay regular wages, unless it states otherwise in the contract of employment.

You could of course allow employees to work from home; getting key personnel set up for remote working is an excellent strategy which will help to keep your business running at all times of the year. 

The issue of childcare

Where workers with parental responsibilities are forced to take emergency time off because nurseries or schools are closed due to bad weather, this is a situation where there is an official entitlement to take unpaid leave. The time taken should be used to arrange alternative care for the dependent, rather than actually take care of them themselves. 

The issue of working conditions

For working environments where roles are stationary, the temperature must be at least 16 degrees Celsius. For active roles, the temperature must be a minimum of 13 degrees. This is according to Regulation 7 of the Workplace (Health, Safety and Welfare) Regulations 1992. If you have staff working outside during cold weather then you have a duty to ensure they are kept warm and hydrated. 

Ensure frequent breaks; provide advice on how to stay hydrated without resorting to alcohol or caffeine; show employees the importance of warming up muscles before commencing strenuous work and be sure to provide protective clothing such as insulated footwear, headwear and gloves. 

The issue of safety

It is vital that working conditions are safe for all workers. Make sure that slip hazards are minimised as far as possible by taking steps to clear ice and snow. If you have workers who are expected to drive as part of their role, ensure their vehicles are safety checked and equipped with torches, blankets, first aid kits, drinking water and other essentials. Also be sure to provide training in how to deal with typical cold weather related incidents. 

The issue of communication

Ensure you have a policy in place that sets out your expectations at times of extreme weather conditions. Without it, your workforce will be unclear as to the rules. Bear in mind the effect that adverse weather has on the overall supply chain, overheads and staff productivity when setting your policy so that you work to minimise the risk to your business.

Make it clear as to the methods by which staff will be advised about premises closures and any special arrangements. It could be a notice on the company website or intranet; an email or a text message.

You can talk to your local bookkeepers for advice on how to deal with these issues in the first instance, and of course you should take legal advice when it comes to putting together your extreme weather policy.

The Extended Working Day - Should Checking Emails on the Commute be Classed as Work Time?

Recent media discussion has raised the question of whether dealing with work emails whilst commuting to and from the workplace should be counted as part of the working day. Let’s take a look at what’s being said.

Researchers have found that commuters on their way to work were actually using their journeys to catch up on emails in advance of starting their working day, and that those on their way home were actually spending their commute completing work they hadn’t managed to finish during the working day.

Instead of providing flexibility with working, the study revealed that access to technology during the commute actually makes people work longer hours as well as increasing pressure.

“The findings raise questions about the work-life balance and whether it is healthy to stretch out the working day with people routinely answering emails beyond office hours”, the BBC said.

The working day has been extended, says study

Increased access to Wi-Fi on trains and the widespread adoption of smartphone use has extended the working day according to a study conducted by the University of the West of England. The study polled 5,000 rail passengers on commuter routes into London. It revealed that 54 per cent of commuters use the Wi-Fi on the train to send work emails, whilst others used their own data connections to do the same.

Those on the way to work were catching up with emails in advance of the working day, whilst returning commuters were finishing work off that they hadn’t managed to complete during the working day. The study showed that as internet access has improved, it has led to extended working hours on smartphones and laptops. Commuting parents even reported the journey as a ‘transition’ from parenting roles to working roles.

Many workers see the commute as an opportunity to clear the decks before they get home so they can put work behind them until the next day.

The research findings do raise questions concerning work-life balance and whether it is indeed healthy to stretch the working day both ways beyond office hours.

Should dealing with work related emails during the commute count as work time?

"There's a real challenge in deciding what constitutes work," said Dr Jain, from the university's Centre for Transport and Society who also said it would mean employers would want "more surveillance and accountability" for how commuters were spending their time before getting to their desks.

"This increasing flexibility has the potential to radically shift the work-life balance for the better - but it also leaves open the door to stress and lower productivity," said Jamie Kerr, of the Institute of Directors.

"With the concept of clocking on and clocking off no longer straightforward, defining where leisure begins and work ends will be vital for both employers and individuals, as well as a complex task for regulators."

A policy on working hours and how extra-curricular time is to be treated is vital. Be sure to take appropriate legal advice.

Government Guidance on VAT and Brexit

What are the implications of VAT for businesses if there’s no Brexit deal? That’s precisely what the recent guidance published by the government sets out to explain.

A situation where the UK leaves the European Union in a no-deal scenario is thought to be unlikely, given the mutual commitments of the UK and the EU in reaching a negotiated outcome. The government believes that negotiations are going well and that a positive deal should be on the cards. However, they do say that they have a duty, as a responsible government, to ‘prepare for all eventualities’, and that includes a no-deal scenario.

The government has been putting a programme of work in place over the past two years to make sure that the UK is primed and ready in all scenarios. So, as March 2019 approaches, it has found itself in a situation where preparations need to be accelerated. They have, therefore, put together a series of technical notices, with a view to helping individuals and businesses understand what would happen in a no-deal scenario, so that informed preparations can be made.

You will probably have received a notice from HMRC recently. This notice carried the aim of informing UK businesses of the implications for VAT rules for goods and services traded between the UK and EU member states should the situation arise that the UK exits the EU with no agreement.

The government is confident that a good deal will be reached that works for both sides, but as we said, all scenarios are being prepared for. In other words, it is contingency planning. The government is keen for businesses to be fully aware of how a no-deal scenario would affect them, and wants them to start taking steps to mitigate any risk, even if it is unlikely. They have issued a technical notice including early planning support on VAT to help businesses understand the potential impacts. They say that further details, including specific actions that businesses should take, will be provided in due course.

The government says that for most UK businesses, there will be no change to VAT rules. But for those that are affected, there are numerous technical notices designed to help, such as the Trading with the EU if there’s no Brexit deal notice, covering customs, excise and import processes at the border.

The UK will continue to have a VAT system after it exits the EU. The revenue that comes from VAT is crucial for funding public services. The VAT rules around UK domestic transactions will continue to apply to businesses in the same way as they do now.

If the UK exits the EU on 29 March 2019 without a deal, the government will aim to maintain VAT procedures as close as possible to how they currently run for continuity purposes. However, if there is no deal, then changes will be made to the VAT rules and procedures relating to transactions between the UK and EU member states. The government has taken decisions and actions where necessary in order to mitigate the impacts of these changes for businesses. The main changes that will take place are summarised here.

No changes will be made before March 2019; however it is important for businesses that are importing goods from the EU, exporting goods to the EU, supplying services to the EU and interacting with EU VAT IT systems such as the VAT Mini One Stop Shop (MOSS) to start to prepare now.

If you are uncertain as to where to look for advice, talk to your local bookkeepers in the first instance. They will point you in the right direction. Don’t delay in starting to prepare, because March 2019 is not far away.

The Law on Employing Children

If you are in an industry where employing children is the norm, you will need to know about the laws surrounding child employment, such as minimum ages and pay scales.

Child work and minimum ages

A child can start part time work when they reach the age of 13. This is the minimum age for part time work, other than when children are employed in television, theatre and modelling work. Any child working in these areas will require a performance licence.

When it comes to full time work, children are only permitted to commence such a role once they reach the minimum school leaving age. Once they do, they are allowed to work up to a maximum of 40 hours per week. When someone reaches the age of 18, they immediately attain adult employment rights. In England, all young people must either be in training or part time education until they are 18 years of age.

Paying children and young people for work

 

Children under the age of 16 are not entitled to the National Minimum Wage. Under the age of 16, there is no National Insurance to pay, so they do not need to be included on the payroll unless their total income exceeds their Personal Allowance.

Once a child reaches the age of 16, things change. Young workers between the ages of 16 and 17 are entitled to a minimum of £4.20 per hour. Their pay must be included in your running payroll. If they earn more than £116 per week then you must include them in your PAYE calculations.

Restrictions on child working

There are numerous restrictions in place when it comes to child working. For example, children are not permitted to work during school hours; for more than one hour before school, unless allowed under local bylaws; before 7am or after 7pm; in an industrial setting; without an employment permit issued by the local council’s education department (if required under local bylaws); for more than four hours without a break lasting a minimum of one hour; in any work that may be harmful to their health, well-being or education; without a two week break from any work during the school holidays for each calendar year and in most betting shop and pub roles and those prohibited by local bylaws.

Special rules apply during term and school holiday times.

During term time, children can only work up to 12 hours per week. This includes  maximum of two hours on Sundays and school days, and a maximum of five hours on Saturdays for those aged between 13 and 14 years, or 8 hours for 15-16 year olds.

During school holidays, children aged between 13 and 14 are only permitted to work up to 25 hours per week, including a maximum of five hours on Saturdays and weekdays, and a maximum of two hours on Sundays. 15-16 year olds can work up to 35 hours per week, including a maximum of 8 hours on Saturdays and weekdays, and up to two hours on Sundays.

Local bylaws and child working

 

Local bylaws vary and will set out the jobs that children cannot undertake if they are under the minimum school leaving age. Some will also restrict working hours, the type of employment that a child can undertake, and the conditions of that work. You’ll need to liaise with the education department of your local council or the education welfare service to learn more and ensure you are working within their parameters.

If you are in any doubt as to pay scales for child workers, your bookkeepers will be able to provide the guidance you need.

The Law on Holiday Pay and Casual Workers

Employers are of course aware of the requirement to pay its workforce a certain amount of paid leave every year. But what about casual workers, are they also entitled to paid holiday leave? Let’s take a look.

Every worker is entitled to 5.6 weeks of paid annual holiday and accrued holiday pay on termination, calculated from the first day of their employment contract.

When you have workers on a 5-day, 40-hour working week, it is straightforward to calculate their entitlement to 28 days of paid holiday per year. For other regular shift patterns, it is simply a case of multiplying the number of working days each week by 5.6 to discover the yearly entitlement. However, when it comes to workers with irregular working patterns such as casual workers or those on zero hours contracts, it gets a little trickier to make the calculation. But these people are still entitled to statutory leave, so it is important to know how to work out their entitlement.

Casual worker calculations

The most straightforward way of working out holiday entitlement for casual workers is to award them accrued entitlement. In other words, they get to earn holiday entitlement based on the number of hours they have actually worked.

You will need to ensure your employees accrue the minimum of 5.6 weeks of paid leave. To do this, there is a rule you can apply. This is the ‘rule of 12.07 per cent’. This means that for each hour an employee works, 12.07 per cent of it, i.e. 7.242 minutes, is paid holiday entitlement.

So for example, workers who complete three 8-hour shifts every week for four weeks will accrue 11.5872 hours of holiday entitlement. This means they can book almost one and a half shifts off work, and still be entitled to get paid.

For businesses operating outside of regular hours, for example those that open on bank holidays, these can be included in the standard holiday allowance. So whilst there is a reduction in the number of days employees are able to book as paid leave, it does mean they get paid for bank holidays.

To improve morale and staff retention, some employers increase the amount of paid leave they offer their workers. For example, some employers will offer both the standard 28 days of paid leave, or the equivalent for casual workers, plus bank holidays.

If you are uncertain about how much leave to pay your casual workers for, or any workers for that matter, your bookkeepers will be able to help you make the calculations.

The Law on Work Rest Breaks Explained

Workers over the age of 18 years are generally entitled to three different types of rest break during the working day. These are rest breaks at work; daily rest and weekly rest. Here we are taking a look at each of these three types of break.

Rest breaks at work

Anyone who works more than six hours per day is entitled to one 20-minute rest break during the day. Whether this is a tea break or a lunch break is up to the employer, and whether the break should be paid for is a matter to be set out in the employment contract. There is no law to dictate that rest breaks should be paid.

Daily rest breaks

Workers have the right to a minimum of 11 hours rest between their working days. So for example, anyone finishing work at 5pm should not start work again until 4am the next day.

Weekly rest

There are two main rights that workers hold with regard to weekly rest. The first is a right to an interrupted 24 hours without any work each week. The second is an uninterrupted 48 hours without any work each fortnight.

Different workplaces, different contracts

Some employment contracts may state that the worker is entitled to more or different breaks from work. Providing the minimums are honoured, it is up to the employer to set out the details of the breaks.

Employers must give their workforce sufficient breaks to ensure their health and safety is not put at risk. This is particularly important when work is monotonous, for example production line work. Workers in domestic private houses, for example au pairs or cleaners, are not entitled to rest breaks for health and safety reasons.

Rest break timings

Employers are able to state when employees take rest breaks during work time, providing they meet certain criteria. One of these criteria is that the break is taken in one go somewhere in the middle of the day, i.e. not right at the beginning or end of the day. The other is that workers are allowed to spend their breaks away from their workstation.

If an employer insists that a member of staff returns to work before their break is finished, then the break does not count. In other words, workers must be allowed to take their full breaks.

Other rights regarding breaks

Unless it is specifically set out in a worker’s employment contract, members of staff do not have the right to take breaks for smoking, or get paid for rest breaks.

Special circumstances and exceptions

Some workers, for example shift workers, are entitled to compensatory rest breaks. Lorry and coach drivers, and young people, have different rights when it comes to rest breaks.

For more information, visit https://www.gov.uk/rest-breaks-work. You can also talk to your local bookkeepers who will point you in the right direction when it comes to staff rest breaks.

Why Employers Should Look to Soft Skills Over Technical Skills

Research has revealed that almost half of UK companies are finding it a challenge to source skilled workers. Because of this, just over 20 per cent are seeking out candidates with outstanding soft skills so they can work on honing the necessary technical skills on the job.

The research, conducted by Robert Half, shows the soft skills that UK business leaders are willing to prioritise. These include openness to new ideas, willingness to accept change and good communication abilities. Team spirit and flexibility also rank as important to employers.

It is vital in this fast-moving digital-led age of work that employees have the skills to adapt to change. Employers are therefore keen to source workers with the ability to keep pace.

Matt Weston is UK managing director of Robert Half. He says, ‘It’s no longer enough to simply execute on the day-to-day tasks. Being adaptable, collaborative and open to innovation and change are vital employee characteristics for modern organisations. As the skills shortage continues to tighten, businesses looking to tap into a wider talent pool need to consider the long-term value a candidate’s attitude and soft skills can bring to a role.’

Matt says that this means employers need to look beyond the qualifications listed on a CV. Candidates who make a point of showcasing their soft skills on paper should be put at the top of the pile.

Why are soft skills important in the workplace?

Soft skills are sometimes referred to as transferable skills. They are not specialised or technical but more in line with the personality of an employee. Soft skills include teamwork, problem solving and communication.

Soft skills hinge on attitude and are personality-driven. For this reason it is vital to consider soft skills when taking on a new member of staff. Even the skill of being able to demonstrate soft skills is something important to look for.

Soft skills are important because your staff represent you in front of your clients. Communication and attitude are therefore vital. In addition to this, soft skills are important when it comes to interactions between colleagues. How do your people work together? What’s their approach to teamwork? To sharing knowledge? A healthy and productive working environment hinges on soft skills.

So, if you are finding it a challenge to source new talent with the right technical skills, instead look more to their soft skills. Because if you can bag a great attitude and approach, making up the technical skills with training should come easy.

Five Days Paid Leave for Working Carers Could be on the Cards

The case for five day’s statutory paid leave for carers is being discussed by the government. This is good news for everyone, including employees and employers.

The government has set up a working group comprised of representatives from various departments and the Treasury to look into the implications of giving carers certain employment rights.

Around one in nine UK workers find themselves juggling caring responsibilities with paid work and a third of working age carers hold down full time jobs. One in six carers had at some point given up their jobs in favour of dedicating their time to their caring duties, and almost three million reduced their working hours to allow sufficient time for caring responsibilities. These are significant figures.

Recommendation to revise the Flexible Working Regulations

It has been recommended that the Flexible Working Regulations 2014 should be revised so that the right to flexible working is in place starting from an employee’s first day in the job. This right currently only applies to those with 26 weeks’ of continuous employment.

The government has set up a taskforce to investigate how flexible working could be promoted, taking into consideration the Prime Minister’s call for businesses to advertise all jobs as flexible from the outset, unless genuine commercial reasons exist not to. This would mean a shift of responsibility from the employee requesting flexible working, to the business offering it as standard.

Raman Sankaran is chief commercial officer at health insurance provider Simplyhealth. He has said that there is a strong business, economic and social imperative to get support for working carers right.

“The government has identified the need to increase the status of carers, sharing its vision for them to receive the same recognition in the workforce as parents.

However, for any attempt to raise awareness of the challenges facing working carers to initiate a permanent change in workplace culture, this must be underpinned by the introduction of practical measures and working practices that can help alleviate the pressures they face on a daily basis,” he said.

As an employer, you may be waiting with anticipation to learn whether there will be any new legislation introduced covering flexible working for carers. You may however decide that your workers are too valuable to you to wait, and perhaps consider offering flexibility to those members of staff who have caring responsibilities. It is of course currently up to you, but in the name of goodwill and staff morale, it may be something to think about. You could always discuss it with your local bookkeepers if you have any concerns.

How to Deal with a Summer Heatwave

The summer heatwave of 2018 has hit the headlines for so many reasons. It is perhaps the fact that is has been so prolonged that has taken us all by surprise, not least employers who have to deal with cries of ‘it’s too hot to work’ from their staff.

So, is there actually a temperature limit when it comes to working conditions? And can employees officially cry off when the mercury rises to a certain point? A summer heatwave can be a bone of contention for any employer, so let’s take a look at some of the most common issues that arise when things really start to hot up in the workplace.

Is there a maximum working temperature?

There is a benchmark that suggests people work best in a temperature range of between 16 and 24 degrees Celsius. It may however come as a surprise to many employees that there is in actual fact no fixed minimum or maximum temperature limit for the workplace. The Health and Safety Executive (HSE) does state that the working temperature should be ‘reasonable’ depending on the type of work and the workplace.

The Chartered Institute of Building Services Engineers recommends temperatures for a range of working environments. These include 20 degrees Celsius for offices and dining rooms; 18 degrees for shops and hospital wards; 16 degrees for factories where light work is involved, and 13 degrees for heavy work in factories. However, there is no set legal limit.

Employers should therefore observe the guidelines, and be reasonable in their approach. Remember that morale is important, but there should of course be limits to your reasonableness. For example, if your office is air-conditioned, the temperature outside should not really factor.

The daily commute

There is no real excuse for staff to avoid travelling to work during hot weather. Public transport does of course hit challenges when extremes of weather come into play, so if your employees genuinely cannot make it into work because of cancelled trains or issues on the roads, you will need to be prepared with a policy on commute-related absence.

Promote well-being

Taking care of your workforce during a heatwave is the responsible thing to do as an employer. Ensure there is access to plenty of cool drinking water and encourage staff to drink clear fluids in place of coffee and other caffeine-containing drinks. Bear in mind that the average recommended daily water intake increases during hot weather. Remind everyone to steer clear of heavier meals and stick to lighter snacks, and of the merits of staying in the shade rather than using a lunchbreak to top up the tan. There is no harm either in swapping the cake run for an ice-lolly run!

Special consideration

If you have employees who may be particularly susceptible to the heat then you’ll need to take special measures. Anyone suffering from medical conditions, who is pregnant or who is taking medication may require rest breaks more frequently. You may need to provide personal fans if there is no air conditioning, or relocate affected staff to cooler areas if they are situated in especially warm spots such as close to windows. If your workforce has to wear personal protective clothing that may be difficult to work in under high temperatures, you’ll need to give that consideration too, as you would any personnel who work outdoors and may be exposed to the risks of skin cancer, sunburn and sunstroke.

Dress Code

If you operate a strict dress code, you may consider a dress-down period during the hot weather to make things more comfortable for your staff. Clients and visitors will no doubt understand your decision, and your people will thank you for the temporary relief.

Introduce a heatwave policy

If you do not have a clear policy in place concerning extreme weather, it’s time to draw one up. Cover everything from heatwaves to blizzards and you’ll be prepared for everything. It is important that employees are aware of protocol in such situations, and it will assist with consistency too. Once a policy is in place and there are set rules, no one can claim unfair treatment.

If you are unsure how to deal with heatwave related situations arising this summer, why not talk to your local bookkeepers? They will help you work out whether your staff should be paid for any unplanned leave taken related to the weather and should be able to steer you in the right direction in creating a heatwave and weather policy.

Recommendations for Keeping Your Books in Line

Surrounded by boxes of receipts? Using Word to produce your invoices? Excel to keep track of your earnings and outgoings? It’s time to get your small business books in line!

Nowadays there are all sorts of easy to use online bookkeeping systems that can help you manage your invoicing and purchase transactions and keep you on top of everything. They can be accessed any time, any place you have an internet connection.

These systems offer a lot more than keeping track of income and expenditure; they provide a total management platform. Features such as invoicing and statements with built-in card payment facilities; payment reminder letters for overdue accounts; quotes that you can later convert to invoices and a purchase order system are all geared towards making the life of the small business owner so much easier.

Online Bookkeeping Systems: So Many Benefits

Most online bookkeeping systems will link with your bank accounts, allowing you to see precisely what you have in your accounts and on your cards, and what you owe at any given time.

You can mark invoices as paid; run reports to see who owes what and work out your cash flow and profit and loss position for any time period. Receipts can be scanned in so you have all your records in one place, so there is no need for paper filing systems. You can also prepare your VAT returns and even submit them through some of the platforms. In other words, you will be able to keep your business running smoothly, and stay on top of your current financial position. And with all this information readily at hand, it makes everything so much more a piece of cake when it comes time to submit your annual returns.

Your accountant can also usually be given access to the platform so their work for you is cut down too. They can run management reports and journals to help you keep one step ahead when it comes to your tax and VAT position.

Free Trials and Useful Links

Many online bookkeeping systems offer a free trial, which is great for making sure you are comfortable with it before you commit. Billing is usually monthly or yearly.

Here are some useful links for you to a range of online bookkeeping systems. Why not have a look through and see which one could be best for your particular needs?

Kashflow: https://www.kashflow.com/

QuickBooks: https://quickbooks.intuit.com/uk/

Sage: https://www.sage.com/en-gb/

Xero: https://www.xero.com/uk/

Free Agent: https://www.freeagent.com/

Financial Force: https://www.financialforce.com/financial-management/accounting/

Still not sure? Why not have a chat with your bookkeepers? They’ll know what will suit you best and will also be able to help you get set up once you make your choice.

Data Vulnerability Could Cost Small Businesses Dear

According to research, almost one million businesses in the UK are at risk of losing company data because they do not back it up. A further 2.8 million risk losing valuable information because they are storing back-up copies in the same location as the original data. This is according to Beaming, a business internet service provider.

Beaming’s survey reveals that 83 per cent of UK firms do back up their data, however half of these save it on storage devices or servers that are on the same premises as the source data, rendering them at serious risk should there be a malware attack or theft or loss of data.

Just as much of concern is that the remaining 17 per cent of businesses surveyed don’t make back-ups at all. The survey reports that of all company types, micro companies and sole traders are least likely to back up their data.

Old School Back-Up Routines

Some small and medium sized businesses are still asking personnel to take physical back-ups home with them, and around a third of large and medium sized organisations copy data to their own servers.

Only 35 per cent of UK businesses are said to store their back-up data off the premises, and 13 per cent of micro businesses and 15 per cent of sole traders use a cloud storage service such as Google or Microsoft as their back-up system.

The recommendation by business continuity experts is that back-ups are made to data storage facilities a minimum of 30 miles from the company premises in order to reduce the risks posed by natural disasters. A lot of businesses however that follow this guidance use cloud storage, and have not bothered to find out exactly where their data is held.

Time to Think Seriously About Data Storage

Sonia Blizzard is managing director of Beaming, the company behind the survey. She says that a lot of businesses, especially the smaller ones, are not doing enough to protect their sensitive data.

She says, ‘The introduction of GDPR has highlighted the need for secure and resilient data storage in order to mitigate the risk of significant data loss.’

‘We’d encourage businesses to think seriously about private cloud or co-location services when it comes to storing highly sensitive data or mission critical applications. These should only be accessed through the most secure forms of connectivity.’

It is vital to think about how your business would function should a loss of data occur. It is also crucial to be aware of the fines that can now be levied under GDPR following a data breach.

If you are unsure as to the integrity of your data storage and back-up methods, you should take advice from an IT security expert without delay.

Research source: http://smallbusiness.co.uk/company-data-safety-store-2544068/

Can a Disqualified Director act as a Shareholder?

All sorts of grounds can lead to director disqualification. Non-payment of debt to HMRC; wrongful and fraudulent trading in insolvency; failure to comply with company legislation; unfit conduct and criminal conviction are some of them.

Directors are disqualified under the Companies Act 1990. Disqualification orders can apply for up to 15 years, and are issued with a range of restrictions.

Disqualified Director Restrictions

Disqualified directors are not permitted to act as trustees; they cannot sit on the board of a charity, police authority or school; neither are they allowed to act as a registered social landlord. They cannot sit on a health board or social care body and they are banned from practising as an accountant, solicitor or barrister.

In addition, a director disqualification order will also prevent those disqualified from acting as a director of any UK registered company or any overseas company with links to the UK. It is also not allowed to form, run or market a company. Any breach of the terms of the disqualification order could lead to a custodial sentence of up to two years.

Despite all of this, disqualified directors are actually not banned from owning shares. Anyone disqualified as a director is still permitted to purchase shares in public companies and can also hold shares in UK registered private limited companies.

A Grey Area of Law

This may of course appear confusing, because as we said, disqualified directors are forbidden from forming, running or marketing a company. So how does this work?

The law states that disqualified directors cannot be directors of UK companies. They can’t form a company, but they are allowed to hold shares. In other words, they can part-own a company with other non-disqualified directors, providing those non-disqualified directors are responsible for marketing and running it.

It is a bit of a grey area of law, but for the present time the answer to our original question is yes, a disqualified director can be a shareholder.

If you have been disqualified as a director and are unclear on your rights, the best thing to do to ensure you do not breach the terms of your disqualification order is to take professional advice.

Physical Data Security for GDPR Compliance

More than 50 per cent of organisations do not use a physical lock to protect their IT equipment, according to the Kensington IT Security & Laptop Theft Survey.

The General Data Protection Regulation (GDPR) states that practical steps must be taken to secure sensitive data. The Information Commissioner’s Office (ICO) recorded nearly 700 data security incidents between April and June 2017, of which 3.5 per cent resulted from data being kept in an insecure location, or theft of the only copy of encrypted data.

In the finance sector 256 per cent of reported data breaches are down to lost or stolen devices.

A physical security plan is vital to protect data. The devices on which data is stored need to be safeguarded, and the plan must extend to remote workers. In-roads to data breaches can come from anywhere in the organisation. Devices such as laptops, personal computers, tablets, portable drives and smartphones must all be protected. Also bear in mind that your insurance provider will have particular requirements when it comes to physical security measures. These must be adhered to if your cover is to remain valid.

The following measures should prove helpful in securing your data in a physical sense:

Portable Device Lockdown

Ensure all portable devices are stored in an insurance graded safe when not in use. Set a lock-away policy for staff leaving their desks, even if it’s just to attend a meeting or take a break. Never leave portable devices in a vehicle. Invest in a custom designed lockable laptop case to keep your devices safe when you’re on the move. It also stands to reason that the utmost care should be taken when travelling on public transport with portable devices.

Office Lockdown

Regardless of whether your office is located within your home, or in commercial premises, it is crucial that it is securely locked when you are not in it. Ensure you use British Standards approved locks and that these are professionally fitted. If you don’t, you may be in breach of insurance requirements. Door bars, grilles and shutters add another layer of security where workspace is particularly vulnerable, such as offices on ground floors.

Record and Monitor

CCTV monitoring doesn’t only provide vital evidence in the event of a break-in, it also acts as a deterrent AND, when combined with motion detection, prompts alerts to be sent to a smartphone or tablet. Real time images of what’s going on in your business premises will help you take the appropriate action to protect what is valuable.

Control and Deter

Security lighting deters intruders by literally putting them in the spotlight, whilst access control allows you to manage precisely who enters your premises. Even if you work from home, you can see who is at your door before opening it using a smart doorbell. On a larger scale, you can control access to your premises via codes, fobs and swipe cards or even biometric entry via the likes of fingerprints or iris recognition.

Always Take Specialist Advice

Not sure what security measures to put in place? Always talk to an experienced, accredited security expert before you make any investments. Tailored advice will make all the difference.

Operating as a Sole Trader Following Director Disqualification

Directors who have been disqualified for fraudulent or wrongful trading in insolvency, or for other reasons, are bound by the restrictions placed upon them by the Company Director Disqualification Act 1986.

Disqualification can last between 2 and 15 years. Many directors wonder what they can do in terms of working.

The fact is, no disqualified director can go on be the director of any UK registered company or an overseas company connected with the UK. Neither can they form, market or run a company or sit on the board of a charity, police authority, school or social care body. There is also a ban on practising as a solicitor, barrister or accountant. Any breach of the terms of the disqualification order can lead to a prison sentence of up to two years.

Continuing Working After Disqualification

It is however still possible for most ex-directors to carry on working in some way. If there is a wish to continue running a business, then setting up as a sole trader is an option, as the restrictions laid down by the Company Director Disqualification Act only apply to the forming, running and marketing of limited companies and limited liability partnerships.

Setting up as a sole trader will of course require a degree of reorganisation. Tax and legal implications will come into play, so it is essential to take professional advice. Here are the main differences:

Remuneration and tax

Before: As a director you were paid through a salary and dividends. Corporation Tax and dividend tax applied. Now as a sole trader, you will keep your earnings which will be subject to tax on a Self-Assessment basis.

Liability

As a director, you enjoyed freedom from personal liability for company debts and negligence. As a sole trader however you will face unlimited personal liability, which means your personal assets could be called upon to settle any debts connected with the business or partnership.

The Importance of Expert Advice

If you have been disqualified as a director and want to carry on trading in the sector that you know, it is vital to exercise due consideration when restructuring your business. Always bear in mind that a breach of the terms your disqualification order could land you with a custodial sentence.

It is therefore wise to seek advice from an accountant who will be able to guide you on the right way to proceed. They will also be able to make certain you are following the right guidelines when it comes to tax and filing commitments.

Why not make your first port of call your local bookkeepers? They can help you with a general overview of your obligations as a sole trader and how these will differ from your previous role as a director. They can then introduce you to an accountant for the full guidance you need.

A Guide to Misfeasance Claims

Misfeasance is the misapplication of money or company property. As far as directors of a company are concerned, misfeasance is considered a breach of fiduciary duty. For directors facing a misfeasance claim, there are certain steps that must be taken.

Step 1: Respond to the claim letter without delay

When you receive a letter of claim, be sure to deal with it straight away. The liquidator will expect a response within a particular time period. If you fail to respond within this time then you could face court proceedings, the costs of which could be very damaging. You should however not respond on a whim and without taking legal advice, because doing so could scupper your chances of minimising the impact of any claim.

Step 2: Take Professional Advice

Misfeasance claims can be for considerable sums of money which could be seriously damaging for a business. It is therefore essential to seek specialist legal advice as early on as possible. You should never respond to a claim before you take such advice. This is your opportunity to clearly present the facts of the situation. With a well-structured response, you will stand a much better chance of avoiding the claim altogether, or at very least, mitigating the consequences.

Step 3: Arrange to Meet the Liquidator

If you can sit across the desk from the liquidator and discuss your circumstances and put across a good case (as assisted by your solicitor) then your chances of a more advantageous outcome will be boosted.

Step 4: Decide What You Want to Achieve

It may be that you are intent on completely denying the claim and you wish to have it set aside. Then again, you may be satisfied to settle the claim in part, with the goal of minimising the amount being claimed.

Some directors are happy to accept the claim in full and settle with as little hassle and time spent as possible. If you are in agreement with most of the claim being made, or you just want everything to be settled quickly, you may be best advised to settle early. Sometimes the liquidator will accept a payment plan for settlement over a period of time.

If you wish to completely defend the claim, you will need to be realistic. It is going to take time and money to reach a settlement. Some claims can take up to two years to reach even a final hearing, with costs spiralling as more time passes.

Next Steps

Whatever you decide to do, be sure to take professional advice. You’ll need an accountant and a lawyer who specialises in misfeasance claims. Be sure to choose one with particular skills in negotiation and strategy planning. Why not ask your local bookkeepers if they can recommend anyone?

What to Consider When Choosing a Business Bank

Whether you are setting up a business bank account for the first time as a new business, or switching to a new banking facility, there is a lot to consider when making your choice of business bank. Here we look at what you should think about when weighing up your options.

Interest Rates

For your savings accounts, it is obviously desirable to have the best possible rates of interest so that you earn as much as possible. But don’t place all your focus on this element, because there are other factors that may provide you with benefits that turn out to be more significant. If you don’t hold too much of a balance in your savings accounts as a rule then don’t make this your main basis for choice.

Financial Products

Some banks offer a more preferential range of business credit cards and loan facilities. If products like these are important to your business, for example if there is a credit card on offer that has no fees, gives you a higher credit limit and a competitive balance transfer rate then that could be a deciding factor for you. Just be sure to prioritise your requirements, because these features could come at a cost in terms of reduced benefits in other areas.

Also consider that the products you need during the early days of your business are likely to be different to those required as your business becomes more established. At the outset for example, you may benefit from an overdraft facility whilst you find your feet with cashflow. You may even need a start-up loan. Later on, these features may not be so important and you may be more inclined to appreciate things like business development funding.

Bank Charges

When it comes to bank charges, there is little you can do to avoid them on a business account. Some banks will offer free banking for the first one or two years, but you’ll need to weigh this up with the charges you’ll face once the free period is over.

When looking at bank charges, think about how you bank. If you mostly use online banking and electronic transfers, work out what sort of charges you’ll be looking at for those types of transaction. If however you make more use of counter services, perhaps because you get paid in cash or cheques rather than bank transfer, consider an account that doesn’t levy too high a charge for those. If you need to take card payments, look at the costs involved in processing those.

Branch Services

If you value a face to face service and personalised advice, and / or you are going to need to use counter services on a regular basis, make sure you choose a bank with a good choice of local branches for easy access. Bear in mind that some banks are more geared towards online services, and that others are closing branches in certain areas of the country on a fairly regular basis.

Some branches offer specialist services, such as access to small business advisers. These can be very valuable, especially to the fledgling business. Check out what is on offer in this respect during your research.

Other Considerations

Other factors to consider when choosing a business bank are payment processing times for your inbound and outbound payments; international banking facilities – vital if you do business with overseas clients; access to discounts and offers, and ease of switching account should you wish to move to another bank.

If you are uncertain as to what should matter most to you when choosing a business bank, why not ask your local bookkeepers for advice?