Tax and Profit tips from an unfiltered, opinionated accountant.
You all want your firms to thrive, don’t you? It can be a right handful sometimes, you know the feeling. You want to see it grow, not leave you feeling like you’ve been chasing your tail all day.
The key is taking control of your time, use it like a bag of gold. Here’s a few tips on how to do that…
Let’s talk about simplifying your operations to get things running a bit smoother. We’re looking to identify any problems in your current processes, there’s always room for improvement.
On that note, one of the best ways to increase productivity is to invest in some decent practice management tools. We’re talking software that’ll make dealing with clients, working as a team, keeping track of jobs, and the day-to-day grind a whole lot easier.
To stop spending so much time faffing about, start prioritising effectively. Use the Urgent Important Matrix to do this.
Group your tasks into 4 quadrants:
Once you’ve grouped your tasks, you’ll know what you need to focus on and what you need to avoid.
Now you have identified tasks that need to be done, delegate the low-value work to your team so that you can focus on the ones that require your level of skill.
If you delegate effectively (i.e. delegating authority as well as tasks), you can take a step back knowing the day-to-day stuff is running smoothly. This frees you up to focus on the real game-changers, the things that’ll make the firm grow.
You need to invest more time in quadrant 2, doing the planning and budgeting and development activities that will grow your firm. It’s easy to forget things in the daily grind, chaps. Schedule those important jobs – it’s the best way to ensure they get done.
If you prioritise these tasks and appoint the rest, you’ll have time tosit down with a cuppa, and focus on them. You just need to find the days and times where you can work productively and without any interruptions.
It really is as simple as that. To build your business, not your workload, you need to follow these 4 steps. When you do these consistently, you’ll find that each day follows a more chilled approach:
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Alright, career burnout. It’s no mystery, is it? It’s when you’ve worked yourself into the ground at your job. You graft away until there’s nothing left in the tank. Like a faulty kettle, you can’t even manage a flick of the switch to make a cuppa, never mind a whole day’s work. All you’re left with is a strong feeling of “can’t be bothered” and the desire to throw in the towel.
The dreaded burnout looks a bit like this…
Career burnout can happen for several reasons. Here’s the long and short of why you might be feeling like you’re going through the motions at work:
If you suspect you’re experiencing burnout, don’t just grin and bear it. See it as a chance to get to the bottom of things. Once you figure out why, you can make some proper changes that will get you back on your feet. Here’s a few things to get you started:
Right, that’s that sorted.
Don’t mess about with burnout any longer, you’ll end up feeling rotten. Figure out what’s nicked your joy at work, don’t be scared about changing things up, and always take care of yourself. Change might seem like a right palaver, but in this case, it’s for the best. You’ll be feeling as good as new again in no time!
Interested to find out more?
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Look, I’m a bloke who’s been in and around construction for the last 30+ years. We blokes don’t talk about this ‘feelings’ stuff. This is why the biggest killer of men under 50 is suicide – sobering thought that. I’m not saying we need to become all snowflaky and wet behind the ears, but as the saying goes, it’s good to talk. You’ve got a duty of care to the lads (I’m guessing it’s nearly all lads) on your sites and your employees in the office. Banter can cover up for many a troubled soul.
Let’s first go to the dictionary and ask the experts. Self-care encompasses everything related to maintaining physical health, including hygiene, nutrition, and seeking medical care when needed. It’s a decision-making process empowering individuals to look after their health efficiently and conveniently, often in collaboration with health professionals.
Got that?
At a simple level, this is about helping your staff come to work and be happy, safe and healthy. But also to recognise they may bring their woes from home to work.
Sure, you see your business as your baby, but as the saying goes ‘it takes a village’. And to keep your business booming, you need to make sure your employees are healthy and happy, so they can stay on their A game.
Let’s break this down into the different types of self-care.
Emotional Self-Care: Involves practices like positive self-talk, taking regular breaks, and maintaining social connections. As business owners, you’re sure to have experienced your fair share of burnout. It’s all about not letting your employees head down the same road. A simple ‘you alright, mate?’ may be enough to spot someone struggling.
Physical Self-Care: Such as, prioritising sleep, regular exercise, and choosing nutritious foods. Don’t look at me like I’m a fine one to talk. My body has been defined by some of the best food that Manchester can offer! Just ignore my office’s favourite bowl of special chocolate… that’s all about helping our clients’ emotional health when they visit.
Spiritual Self-Care: Work with me on this one. This may sound a little woo-hoo to you. But what works for others may not be your thing. Such as attending religious services, taking religious holidays off, spending time in nature, meditation, and keeping a gratitude journal.
Self-care involves making healthy lifestyle choices, responsibly using medicines – including the caffeine-laden and energy-type drinks, recognising symptoms, self-monitoring, and self-management of health conditions. But sometimes it’s not so easy to spot these dips in mental health by yourself. Believe me, my business coach is the first to tell me if I’m trying to overcommit. So, you need to open up the conversation with your employees as well.
Stress and burnout are rampant. Average ratings of personal well-being in the UK have declined across all measures in the year ending March 2023. I’m sure we have personal stories to tell of how our mental health or people around us suffered during and after the COVID-19 years.
Similarly, older research commissioned by Mind found that 57% of the people surveyed drank alcohol after work to cope with stress. In addition to this, 28% said they smoked cigarettes, 16% took prescribed sleeping aids, and 15% took antidepressants. And yes, as a regular vaper, I know I am part of those statistics, but don’t judge me!
Self-care mitigates these issues, enhancing mental and physical health, reducing illness risks, and boosting energy.
We need to look after ourselves first! Without that, our work is sure to suffer.
Investing in your employees’ self-care isn’t just beneficial for them; it’s a strategic move that can significantly boost your business in various ways:
Employees practising self-care are more likely to be mentally and physically rejuvenated, leading to higher productivity. After all, your on-site employees are often doing a hard physical job for you. They need all the energy and strength they can get. Regular self-care reduces fatigue, enhances concentration, and fosters a more energetic and efficient workforce.
A culture that prioritises self-care attracts top talent and retains them. Employees are likelier to stay with a company that values their well-being, reducing turnover costs and enhancing its reputation as a desirable workplace.
Burnout is a major cause of reduced productivity and increased absenteeism. Encouraging self-care reduces the risk of burnout, ensuring that your team remains motivated and engaged.
A workplace that promotes self-care is often characterised by positivity and higher morale. This environment fosters collaboration, creativity, and community, enhancing the work atmosphere.
When employees feel cared for, their loyalty and engagement increase. This heightened engagement leads to better customer service, enhanced team collaboration, and a stronger commitment to the company’s goals.
Replacing employees is expensive. Fostering an environment of self-care can significantly reduce turnover, saving the company substantial recruitment and training costs.
Well-rested and mentally healthy employees are more likely to think creatively and propose innovative solutions, driving the business forward.
Employees who engage in self-care have clearer minds and are better equipped to make sound, strategic decisions, which is crucial for the growth and success of any business.
A company that promotes self-care and employee well-being enhances its brand image, making it more attractive to potential clients and partners who value corporate responsibility.
Employees who regularly practice self-care are more resilient during stressful periods, such as economic downturns or organisational changes, ensuring business continuity and stability.
Employees feel valued and important when a company takes active steps to encourage self-care. This sense of belonging can foster a strong, united workforce aligned with the company’s mission and values.
By integrating self-care into your business culture, you not only enhance the well-being of your employees but also set up your business for long-term success. In today’s fast-paced and stressful business environment, a strategy that includes employee self-care is not just beneficial; it’s essential.
We’ve all been there, haven’t we? Burnt the midnight oil, pushed like a donkey up a hill, and forgotten to fill our own tank in the process. Well, that’s where self-care comes in. Fostering a culture of self-care in the workplace is crucial for both employee well-being and organisational success.
Teach all employees about self-care practices and their significance. By organising workshops and distributing informative materials, the staff gains essential knowledge. This approach means a well-informed workforce is better equipped to manage their health, enhancing overall productivity and morale.
Introduce flexible working schedules to help balance professional and personal life. Allowing employees to adjust their work hours fosters an environment where stress is minimised and optimises work-life balance, resulting in a more engaged and efficient team.
Offer mental health resources, such as counselling services and app subscriptions. This commitment to mental health support signifies that the organisation values its employees’ well-being. Staff members feel supported and valued, increasing job satisfaction and engagement.
Providing training for effective stress and time management equips employees with critical skills. This initiative ensures that staff can better manage workplace pressures, contributing positively to the organisation’s efficiency and reducing burnout.
Clearly defining work hours helps employees distinguish between work and personal time. This means that employees can fully disengage from work after hours, leading to increased focus and productivity during working hours.
Implement mentoring programs for personalised guidance in self-care. This approach supports individual development and strengthens the team dynamic, leading to a more cohesive and supportive work environment.
When leaders practice self-care, they set a positive example within the organisation. This leadership style fosters a culture where self-care is valued and practised, ensuring employees feel encouraged to prioritise their well-being.
Don’t forget about yourself in all this! You can’t pour from an empty cut, can you? So, taking care of yourself isn’t a luxury, it’s essential. This means ditching the all-nighters, fuelling yourself with proper grub, and finding ways to unwind. Burnout is a nasty bugger, and it’ll sink your ship faster than a leaky bucket.
Here’s the bottom line: A happy boss makes for a happy crew, and a happy crew makes for a successful business. It’s all connected. Look after your lot, and they’ll look after the business. It’s a win-win, see?
Interested to find out more?
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Navigating the complexities of tax obligations within the construction industry can be a daunting task (if you do it alone), especially for subcontractors uncertain about their standing in the Construction Industry Scheme (CIS).
This scheme, established by the UK government, aims to regulate the way contractors make payments to subbies for construction work, ensuring tax and National Insurance Contributions (NICs) are correctly handled.
Understanding whether you fall under CIS as a subcontractor is crucial for compliance, avoiding penalties, and optimising your financial operations, so don’t get confused!
The Construction Industry Scheme (CIS) is designed to prevent tax evasion in the construction sector. The UK construction industry would be a scary place if we never had it.
Let me spell it out for you, Under CIS, contractors deduct money from a subcontractor’s payments and pass it to my good friends at HM Revenue and Customs (HMRC). These deductions are meant as advance payments towards the subcontractor’s tax and NICs. The primary goal is to ensure that subbies pay the correct amount of tax and NICs. Thankfully, that goal is achieved (most of the time).
If you are a mainstream contractor or deemed contractor, registration for CIS is mandatory. This applies if you pay subcontractors for construction work.
As a subcontractor, if you perform construction work for a contractor, you fall under the ambit of CIS. While registration is not mandated by law, unregistered subcontractors face higher tax deductions from their payments (30% instead of 20% or 0% for those registered). No one wants to be paying more tax, do they? So, it’s important to register.
Businesses that operate both as contractors and subcontractors must register for CIS in both capacities and follow the respective rules and regulations.
Even if the compliance requirements for subcontractors are not as stringent as those for contractors, certain obligations must be met:
Failure to comply can lead to penalties and affect your financial standing, which no one wants so make sure to follow each step.
If I’m unable to physically do it for you, the next best thing would be to make it as simple as possible for you. I’ve created a step-by-step guide to registering for CIS as a subbie.
If you’re struggling with any of these steps, then reach out to us at Cloud Accountancy Ltd.
Not registering for CIS or failing to comply with its requirements can lead to increased tax deductions (30% instead of 20% or 0%) and potential penalties.
Moreover, it complicates the process of claiming any overpaid taxes, so do me a favour and (please) register!
If you are involved in construction work as a subbie, it’s likely you fall under CIS. Consider the following to confirm:
Registering for CIS can lead to lower tax deductions and smoother financial operations. If you’re unsure about your status or how to proceed, consulting with a tax professional or HMRC can provide clarity and ensure you comply with the necessary regulations.
Interested to find out more?
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Yesterday, the chancellor announced his spring budget.
There is a lot to digest and unpick. With a general election looming, it was clear that the chancellor had decided to put more money back into the pockets of working people. However, not much of this money directly comes to small business owners.
National Insurance Contributions are again being cut. The government is cutting the main rate of employee National Insurance by 2p from 10% to 8% from 6 April 2024. Combined with the 2p cut announced at Autumn Statement 2023, this will save the average worker on £35,400 over £900 a year.
The government is also cutting a further 2p from the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement 2023. This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will now be reduced from 9% to 6%. Combined with the abolition of the requirement to pay Class 2, this will save an average self-employed person on £28,000, around £650 a year.
The point where businesses need to register for VAT is going up from £85,000 to £90,000. This will supposedly help small businesses grow. There are differing opinions about this. What we see is that, in reality, businesses often slow their growth as they near the VAT threshold. Radically lowering the VAT threshold towards £40,000 or even lower would make it a level playing field for most small businesses. But then, what does the Chancellor really know about small businesses?
Inflation has more than halved from its recent peak, i.e. from 11.1% to 4.0%. The OBR forecasts inflation to fall to its 2% target in Q2 2024, a year earlier than in their November 2023 forecast. In 2023, the UK was pretty much in recession as GDP grew by 0.1%. Growth is now forecast to pick up from the first half of 2024 and the IMF is forecasting that the UK will have the third fastest cumulative growth in the G7 over the 2024-2028 period.
The UK government has recently announced an extension of the Recovery Loan Scheme, which will provide £200 million in funding to assist small businesses to invest and expand. To qualify for the loan, businesses must have a turnover of £45 million or less, must be viable, and should not be experiencing any financial difficulties.
Capital allowances are a great way for businesses to reduce their tax bill. By deducting the value of certain items such as equipment, machinery, and certain business vehicles from their profits, businesses can benefit from tax relief. It’s a smart way to save money and reinvest it back into the business. Full expensing is an allowance which allows companies to use these capital allowances in the year that the investment was made. The chancellor indicated yesterday that at some point in the near future full expensing for leased assets is coming. When? Apparently ‘when affordable to do so’.
At the moment, there is a situation where a household with 2 parents, each earning £49,000 a year, still gets the full Child Benefit, but those with one parent earning over £50,000 will see some or all of the benefit withdrawn. From 6th April 2024 the point at which child benefit will start to be withdrawn will now be at a higher level of earnings i.e. £60,000 not £50,000. Instead of starting to lose child benefit once at least one parent earns over £50,000 a year, it will be £60,000. It will be taken away entirely from £80,000 a year, rather than £60,000. But more importantly, the government is consulting on moving the system from being based on an individual’s salary to a system based on household income. This new system will come in by April 2026. So watch this space!
The government is keen to increase the amount of available housing. It is reducing the higher rate of property capital gains tax from 28% to 24% in April. This will benefit any property owner who is selling a property which is not their home.
The ‘temporary’ 5p cut in fuel duty is being extended for another 12 months.
The alcohol duty freeze is being extended from 1st August to 1st February.
There is a new ISA in town! This ISA gives savers another £5k tax-free allowance, on top of the current £20k that can be subscribed into an ISA. The only restriction is this new UK ISA
needs to be invested in british businesses.
The government is also announcing over £1 billion of new tax reliefs for the UK’s creative industries. This includes introducing a 40% relief from business rates for eligible film studios in England for the next 10 years; introducing a new UK Independent Film Tax Credit; and increasing the rate of tax credit by 5% and removing the 80% cap for visual effects costs in the Audio-Visual Expenditure Credit. A permanent extension will be made to tax relief for theatres, orchestras, museums and galleries.
The government is abolishing the Furnished Holiday Lettings tax regime from 6th April 2025 and the multiple dwelling stamp duty relief from 1st June 2024. Contracts that were exchanged on or before the 6th March 2024 – i.e. before the budget was announced – will continue to get the multiple dwelling stamp duty relief regardless of the completion date. Any purchase that completes before the 1st June 2024 will also get this relief.
The tax breaks for non-domicilied residents, people who live in the UK, but not domiciled here for tax purposes have been abolished. Currently, foreign nationals who live here, but are taxed in another country, do not have to pay tax on their foreign income for up to 15 years. From April 2025 this is changing.
For new arrivals, who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on foreign income and gains arising during this 4-year period, during which time this money can be brought to the UK without an additional tax charge.
Existing tax residents, who have been tax resident for fewer than 4 tax years and are eligible for the scheme, will also benefit from the relief until the end of their 4th year of tax residence.
There are transitional arrangements being put in place for existing non-doms.
In Oct 2026 vapers will be taxed more and the tax on cigarettes and tobacco products will go up.
Sadly, the government is not – on the surface of it – making an investment in front-line HMRC staff. It is investing an extra £140m to improve HMRC’s ability to manage tax debts. Think of
this as an investment in identifying where more tax is due and then having the headcount to get this money paid. If you don’t already have tax investigation insurance, now is the time to take it out!
In addition, it was announced that there is a consultation on how best to implement the Crypto-Asset Reporting Framework and amendments to the Common Reporting Standard.
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We’ve all been there. Buried under a mountain of paperwork, and the taxman breathing down your neck. That’s where a reliable accountant coms in. We’re not just talking about someone who shuffles numbers about – no, this is someone who can steer your business into success.
We explore essential factors to consider when hiring an accountant, including their experience, fee structure, range of services, accessibility, and the importance of a personal connection (it’s always good to have a chin wag with your accountant).
Hopefully, this will help you find an accountant who is not just a number cruncher but a valuable part of your business’s growth and success.
An accountant is a pivotal ally in your business, playing a crucial role beyond traditional bookkeeping. They help avoid costly financial errors and can save money in the long term.
Accountants offer value-added services, crucial for staying in line with tax requirements, compliance, and strategic planning. You don’t want HMRC breathing down your neck, do you?
Choosing the right accountants isn’t like picking a pint at the local, ind you. This person will be your money mate, your financial guru. They’ll decipher tax laws that’d make a rocket scientist cry into his ale, keep the taxman at bay, and stop your cash from disappearing faster than a pasty at a footie match.
First things first, experience is important! Find an accountant who’s been around the block a few times, someone who’s seen it all in your industry. Like me, with over 30 years under my belt, I’ve seen it all in the property and construction game. Makes a right difference, I can tell you.
Nothing worse than a surprise bill, so let’s talk fees. Fixed fees are your best bet here, none of that messing about with hourly rates. A set price means you know where you stand, no nasty surprises, no hidden costs. You should feel comfortable picking up the phone to your accountant without worrying about the clock ticking.
This allows the accountant to focus on providing value, not just billable hours, aligning their incentives with your business outcomes.
Assess the range of services an accountant offers. You may start with needing just tax return services, but consider your growth ambitions. Don’t refine yourself to the bare minimum services, us accountants can do more than you think!
Ensure the accountant can support your evolving business with bookkeeping, payroll, regular accounting updates, Construction Industry Scheme services, finance administration, business mentoring, cash flow planning, and budgeting. All of which we provide at Cloud Accountancy.
Your accountant should be easily accessible and proactive. They should provide timely updates, alert you to financial regulatory changes, and offer advice for improving financial management. You shouldn’t be the one always doing the chasing.
Look for signs of proactive engagement in your initial interactions, and consider their responsiveness and availability, including the possibility of face-to-face meetings or support through digital channels. If you find it difficult to get a hold of them in the early stages, they’re probably not for you!
A strong personal connection with your accountant is important. It’s not a sin to want to have a laugh and joke with your accountant, sometimes. The right accountant understands your business motivations, is enthusiastic about your industry, and maintains a positive, approachable demeanour.
A good personal fit means open communication (some banter here and there), tailored tax planning, and a partnership that aligns with your personal and business financial goals.
So, there you have it. Your accountant is an investment in your business’ future. Find the right bloke, or bloke-ess. And watch your business climb that ladder. Now, get out there and find yourself a financial whizz. Or, drop me a line and let’s get talking.
Interested to find out more?
Call us on 01617 985789
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Explore the CIS Reverse Charge, transforming VAT accounting in UK construction since March 1st, 2021. Learn its purpose, conditions, exceptions, and invoicing rules. Whether you’re a contractor or subcontractor, gain essential insights for VAT compliance.
The Construction Industry Scheme (CIS) Reverse Charge is a significant alteration in VAT accounting within the UK construction sector. Initiated on 1st March 2021, this procedure changes the usual VAT accounting process, where now, in specific transactions within the construction industry, the buyer (contractor) is responsible for the VAT instead of the supplier (subcontractor).
The primary objective of the CIS reverse charge is to combat VAT fraud in the construction sector. It aims to reduce tax evasion and improve compliance within the construction industry by shifting the VAT payment responsibility from subcontractors to contractors.
This method prevents fraudulent activities, such as missing trader fraud, ensuring that VAT is correctly accounted for and paid to HMRC.
The reverse charge should be applied when the following conditions are met:
The CIS reverse charge does not apply to:
Included Services |
Excluded Services |
| Construction, alteration, repair, extension, and demolition of buildings/structures. | Drilling for or extracting oil or natural gas. |
| Work on land that forms part of the landscape, including infrastructure projects like roadworks, railways, and waterways. | Mineral extraction and related underground construction activities. |
| Installation of essential systems (heating, lighting, air-conditioning, etc.) in buildings/structures. | Manufacturing and delivery of building/engineering components or machinery. |
| Internal cleaning as part of construction or renovation projects. | Professional services (architects, surveyors, interior/exterior design consultants). |
| Preparation or completion services like site clearance, excavation, foundation work, and landscaping. | Artistic work installations (sculptures, murals) unrelated to construction. |
| Signwriting, signboard erection, and related advertising installations. | |
| Installing non-essential fixtures (seating, blinds, shutters, security systems). |
When issuing invoices under the CIS reverse charge, it’s crucial to adhere to the following guidelines:
Ensure each invoice includes all the standard VAT invoice information.
Make it crystal clear that the CIS reverse charge is in play. This means that the customer, not the supplier, takes responsibility for VAT accounting to HMRC.
Specify the VAT amount or rate applicable under the reverse charge. Importantly, this doesn’t get added to the total charge to the customer.
Your invoices must feature specific wording to signal the application of the reverse charge. Here are some examples:
“Reverse charge: VAT Act 1994 Section 55A applies.”
“Reverse charge: Customer to pay VAT to HMRC.”
“Reverse charge: S55 VATA 94 applies.”
These words are your ticket to ensuring both parties understand their VAT responsibilities and deliver a clear advantage in compliance.
Participants:
Scenario:
Company A hires Company B for electrical work.
Company B invoices Company A for £10,000, stating the CIS reverse charge applies.
Company A, the contractor, records the £10,000 invoice as both input and output VAT.
Company A pays £10,000 to Company B, deducting £2,000 (20%) for CIS.
Company A remits the £2,000 CIS deduction to HMRC.
Company B reports the payment from Company A but doesn’t charge VAT.
This demonstrates how the CIS reverse charge shifts VAT responsibility to the contractor, ensuring proper tax compliance in construction projects.
The introduction of the domestic reverse charge necessitates specific adjustments in your VAT return filing:
When applying the domestic reverse charge to your sales, these should be recorded in box 6 of your VAT Return, indicating the value of the sales excluding VAT. There’s no need to enter anything in box 1 for these sales, as VAT accounting for them is the buyer’s responsibility.
If you are purchasing services under the reverse charge as a contractor, you need to account for the VAT differently:
As always, seeking guidance from a qualified accountant or tax professional is advisable. They can provide tailored advice and ensure your VAT Returns comply with HMRC regulations.
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The UK’s Construction Industry Scheme (CIS) is more than just tax stuff. It’s the lifeline of your construction gig. Born in 1971 to outsmart the tax dodgers, CIS has become this big, complex beast that every contractor and subcontractor needs to tame.
Think of this guide as your handy map through the CIS jungle, helping you sidestep pitfalls, dodge hefty fines, and stay cool under HMRC’s watchful eye. We’re here to break down the tricky bits and show you how the right tech can make CIS a walk in the park.
The Construction Industry Scheme (CIS) is a tax deduction scheme involving payments made by contractors to subcontractors in the UK construction industry.
Originating in 1971 to combat tax evasion, CIS has undergone various transformations, the most significant in 2007, to include more stringent requirements for contractors and subcontractors.
Under CIS, contractors deduct money from a subcontractor’s payments and pass it to HMRC, counting as advance payments towards the subcontractor’s tax and National Insurance.
It sounds simple, doesn’t it? In reality, CIS is complicated. Get it wrong, and you could be in for a big bill. Or even worse HMRC poking their nose into your business and having a big dig around. From experience you don’t want HMRC having a rifle through your business affairs!
I’m going to get real with you for a moment. When new construction clients come to us, sorting out CIS mistakes and problems is probably our biggest money spinner. You could also say we are rather good at unpicking CIS problems…
CIS, while essential for tax compliance, presents numerous challenges:
Navigating CIS in the UK construction sector is crucial for tax compliance, but pinpointing which activities fall under its umbrella can be tricky, especially for property investors and developers. Sometimes us accountants even need to take advice on this.
For instance, property investment typically stays outside CIS unless construction spending surpasses £3 million within 12 months.
This means that careful monitoring of expenditures is essential to ensure compliance and avoid unexpected tax obligations. Yes, it’s the boring accountant in me coming out again. Good record keeping is not optional. It’s crucial to help you save money and make sure you keep your accountant happy.
The contract’s nature significantly influences CIS applicability. Mixed contracts, blending CIS and non-CIS work, necessitate a thorough analysis. I’m giving my age away here, but I’ve been in the building trade for 30-odd years. Yes, I did start in the working world when I was very young. It’s fair to say ‘it’s grim up north’. Anyway, I digress, contracts in the construction industry are always changing and evolving. This a long way of saying, get advice! (Hint: we can help)
Understanding each contract’s intricacies is crucial to avoid non-compliance risks and financial consequences.
In our experience, determining whether an activity is subject to CIS is a common hurdle for many in the construction and property sectors. Assumptions often lead to issues. Then issues often leads to large unexpected tax bills or, once again HMRC starting to poke their nose into your affairs. The only nose you want poking into your affairs is your accountants to help you run your business and keep your financial processes running smoothly!
One of the classic mistakes I see construction company owners make is win a contract and then just get started with it; rather than considering whether the lad (or person) you are taking on to support you with the contract is an employee or CIS contractor. For example, if you keep your best plasterer busy for a whole year and don’t work for someone else, HMRC could decide that they are an employee. There are legal ways to get around this problem, but get in touch for how we can help.
It’s vital to get expert advice to ensure your business aligns with CIS regulations, translating into smoother operations and a lower risk of penalties.
Failure to register with HMRC can lead to significant fines. Non-registered contractors and subcontractors face steeper tax deduction rates and additional penalties. For example, if you are a cleaning company, then your cleaners actually come under the CIS scheme. Funny fact, not many accountants know this. And yes, I can be a real bore at parties…
Staying up-to-date with the latest CIS rules is not just good practice; it’s a critical defence against non-compliance’s financial and operational impacts.
All payments to subcontractors, including those with gross payment status, must be meticulously reported in monthly CIS returns. Investing in robust record-keeping systems is advantageous, ensuring accuracy and compliance.
This means staying organised simplifies reporting and protects against potential discrepancies and penalties.
The revenue love fining construction companies. Failure to get your CIS scheme right and the revenue will happily fine you £100 a month per return that isn’t filed. The evil people they are is that if you fail to file your CIS return each month for 12 months, they will fine you £1200 up to a maximum of (at time of writing) of £7800. This really can kick you in your ‘backside’ if you get this wrong. I have successfully got these penalties cancelled. But don’t chance it; it needs strong mitigating evidence to cancel penalties. If I had a pound for every time I saw construction companies filing to get their CIS reporting done on time and correctly, I’d now be on a beach in Marbella sipping a cold beer.
Correctly identifying the employment status of subcontractors is a crucial task for contractors. Errors in classification can lead to unexpected tax and National Insurance liabilities.
Diligent evaluation of each subcontractor’s status isn’t just about meeting CIS requirements; it’s a key aspect of maintaining financial health and regulatory compliance.
What Work is Subject to CIS, and What Work is Exempt?
Understanding what falls under CIS is vital. Generally, CIS covers most construction work, including site preparation, alterations, dismantling, construction, repairs, decorating, and demolition.
Exemptions include:
Professional Services: Roles like architects, surveyors, and some engineers and consultants.
Material Manufacture and Delivery: These are outside the CIS scope.
Non-Construction Site Services: Like canteen or facilities management.
Specific Exemptions: Work paid for by charities, educational bodies, or on the subcontractor’s own property under certain conditions.
Please find the list of exceptions on the HMRC website here.
A plea for you, don’t guess with this stuff. Take advice from an accountant who knows their way around the CIS scheme. The one short phone call to your accountant could save you lots of money in the future.
If you are in the middle of a chain of contractors, subcontractors and subcontractors, CIS gets a little more complicated. Very simply, don’t guess, give us a call and we will sort you out.
Gross Payment Status enables subcontractors to receive full payment without initial deductions. Qualification requires passing business, turnover, and compliance tests.
Benefits for subcontractors include improved cash flow and simplified tax management, though rigorous adherence to tax obligations is necessary to maintain this status. As I have mentioned a few times penalties for getting this wrong can be onerous. I don’t care if I am repeating myself again (sorry, not sorry), but using Gross Payment status means contractors don’t get penalised if you get it wrong.
Modern CIS-compatible software addresses various CIS challenges:
CIS-compatible software automates the verification of subcontractors with HMRC, ensuring they are registered and eligible for work under CIS.
This automation extends to the accurate calculation of tax deductions, significantly reducing the likelihood of errors.
This means contractors can focus more on their core business activities, knowing their tax compliance is accurately managed.
These tools simplify the administrative workload by maintaining detailed transactions and subcontractor payment records.
They facilitate generating and submitting accurate monthly returns, ensuring they meet HMRC’s deadlines and requirements.
Efficient record-keeping is crucial, as it streamlines submissions and provides a reliable audit trail in inquiries or inspections.
CIS software actively monitors compliance, providing timely alerts for upcoming deadlines and notifying users of legislative changes that might affect their operations.
This proactive approach ensures that businesses remain compliant and are not caught off-guard by new regulations or reporting requirements.
It also offers real-time access to data, allowing businesses to closely monitor their payments and compliance status, which is essential for effective financial management and planning.
Integrating CIS operations with other financial aspects like VAT and payroll is another key feature of modern software.
This integration streamlines overall financial management, reducing the effort and time required to reconcile different accounting areas.
By aligning CIS with broader financial operations, businesses can achieve more cohesive and efficient financial management, leading to better-informed decision-making and a more comprehensive view of the company’s financial health.
We offer as a service for our clients to do CIS payroll, CIS filing and verifications to help take one of the headaches off your long to-do list. After all, why guess when we can help keep you and your business on the right side of HMRC. We also have a cost-effective service for your CIS contractors to help them legally keep their records, maximise their tax refund, and file their tax returns each year.
As a contractor in the construction industry, CIS registration is crucial for compliance and smooth business operations. Register today to avoid penalties and streamline your subcontractor payments.
Subcontractors, while not mandated to register, can benefit from lower tax deductions by registering. Don’t miss out on this financial advantage.
Need guidance? Reach out to us at Cloud Accountancy for expert advice on CIS and its impact on your business.
Call us on 01617 985789
Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb
Register now and ensure your business is compliant and efficient.
Cryptocurrencies have rapidly evolved from niche assets to mainstream investments, capturing the attention of investors and regulators alike. As the popularity of crypto grows, so does the need for a clear understanding of the tax implications associated with these digital assets.
The 2022/23 tax return is the first one that HMRC has properly recognised income from Crypto. Just goes to show that Crypto is now mainstream and something that HMRC are starting to get very interested in.
Are you looking to get involved in the ‘world of crypto’ but don’t know where to start with how to stay tax-efficient, and what you actually owe taxes on.
In this comprehensive guide, we’ll explore the intricacies of cryptocurrency taxation in the UK, shedding light on key guidelines and considerations.
HMRC does not view cryptocurrencies as ‘currency’ or ‘money’. Instead, they are treated as property, making them subject to Capital Gains Tax (CGT) upon disposal, which includes selling, trading, or gifting them.
Taxable events also include using crypto to pay for goods or services, exchanging them for a different type of crypto asset, and giving them away, with some exemptions like gifts to spouses or civil partners.
Key points to consider:
In previous years, you may have had a defence that there was no box on your tax return for explicit cryptocurrency gains or losses, and you have muddled up your CGT return. Now there is a box on your tax return for crypto gains or losses. This means that in slightly boring accountancy speak, you need to have ‘supporting schedules’ for your crypto gains or losses.
Taking off my accounting/tax hat for a moment, this means you have a document which shows every trade (see definitions below for what this could be) of cryptocurrency that you have done.
My sources tell me that the HMRC will be asking the organisations behind the major cryptocurrencies for reports on who has traded what and when, just as they are doing this for Amazon, Etsy and the big online buying and selling platforms. How will this happen? Who knows? But the revenue has mighty computers that love analysing data and comparing it against the returns that have been submitted.
The bottom line is cryptocurrencies are a minefield for tax purposes. (Do you like my pun?) You may only be dabbling in them, but I can’t state this more strongly: you will need the help of an accountant. That’s to file your tax return both for you personally and any investment or trading business that you have. Not just any accountant. Given my 30 years of wrangling with HMRC, I can see that they are gearing up to start poking around in crypto investors affairs. A ‘cloud accountant’ or a ‘digital accountant’ or an accountant specialising in small business owners isn’t good enough. You need an accountant who truly understands tax and crypto. (Hint: We do) If your accountant charges you under £500 for your tax return, if you have dealings with Crypto, then run away very quickly…
Crypto investors engage in various activities, including trading, mining, and staking. Each activity comes with its own set of tax implications.
This is where you buy crypto assets using ‘normal’ currency and sell them on for a profit. These profits from buying and selling cryptocurrencies could be subject to CGT if they exceed the tax-free allowance. In exceptional circumstances, where trading is frequent and sophisticated, it might be treated as income and subject to Income Tax. Once again, ask your accountant to deem whether your trading can be treated as income. The likelihood is it wouldn’t be.
For certain types of crypto assets, such as Bitcoin, you can earn rewards by ‘mining’. Income from mining is treated as trading income or miscellaneous income, depending on the nature of the activity. In either case, the income is taxable if it exceeds the trading allowance of £1,000 in a tax year.
Staking is a form of a reward that you can earn from your crypto assets and is typically taxable as trading or miscellaneous income. Individuals may treat it as savings income and claim a personal savings allowance, but CGT rules may apply if disposed of later.
This is nothing to do with Apple products! This could be a ‘free’ crypto asset received from someone else in return for a service or simply because you own another type of crypto asset. The tax treatment of airdrops depends heavily on the reason for receiving the crypto asset.
For all of the above, Income Tax and National Insurance contributions apply to crypto received as income. The tax rate depends on total income, with specific bands determining the applicable percentage.
Calculating CGT involves determining the gain for each transaction, typically the difference between the purchase price and the sale price. Allowable costs, such as transaction fees, advertising, contract preparation, and valuation fees, can be deducted. Crypto assets must be grouped into pools by type for cost calculation, with specific rules applying to tokens bought and sold within 30 days.
Reporting and paying CGT can be done through a Self Assessment tax return. Accurate record-keeping, including transaction types, dates, quantities, values in pound sterling, and bank statements, is essential. This is not me being a boring accountant, this is me saving you time, money and angst in the future.
Beyond investment, cryptocurrencies are increasingly used as a form of income. If used for forms of income, such as payments for employment duties, these could be subject to Income Tax and National Insurance contributions.
For CGT from crypto over the £12,300 tax-free allowance, you’ll pay either 10% or 20% tax, depending on which band you fall under. The amount depends on transactions made, the tax that applies and the Income Tax band that you fall into.
The bill can be reduced by unused capital losses brought forward. This means it is SO important for your tax returns to be done promptly and any capital losses clearly identified. These capital losses could be more than just Crypto, such as selling shares at a loss, or making a loss on a property deal. You get the picture! I’m going to get boring again, but record-keeping here is vital again…
The crypto landscape is ever-changing, and staying ahead of emerging trends is vital for taxpayers. We’ll provide updates on regulatory shifts but staying informed about these changes is essential for anticipating their impact on cryptocurrency taxation.
To ensure that you’re staying compliant, involve a professional in your tax planning.
Call us on 01617 985789
Or book a meeting at https://calendly.com/d/ckfd-tzk-zbb
Partner with us and discover how our tailored accounting solutions can maximize your profits and minimize your taxes in the property industry.
Take the first step towards Financial Freedom, today.
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