There are certain conditions to meet when you claim for Trivial Benefits as business expenses. Please note, there are two good aspects when you claim for these through your company:
you receive the benefit of the allowance on a personal basis; and
your business saves tax on this at the same time.
Trivial benefits are a recent entry into the UK tax system. They were first brought in on 6 April 2016. Indeed, Trivial Benefits cover the scenario where a business makes rewards to its directors and staff. The allowance is tax-free, and I would advise that you claim for this, if you qualify. What’s more, it is also an excellent way to reward directors and employees throughout the year.
Most importantly, this expense is not well known. Lots who can claim overlook to do this. Many contractors, due to a lack of awareness, do not even know that this allowance exists.
HM Revenue & Customs’ (HMRC) guidance
HMRC state that a business can provide trivial benefits to an officer of a `close’ company. An `officer’ means a director or secretary. The term `close’ company means companies that have five or fewer shareholders. In real life, most contractor companies will have nowhere near five shareholders. Therefore, most will qualify for this tax-deductible allowance.
There is some further official guidance from HMRC. This guidance states that if the total provided does not exceed £300 over the tax year, it is tax-deductible. Also, you need to retain invoices or receipts for all Trivial Benefits that you claim during the tax year.
To be exempt from tax and NI, the Trivial Benefit will need to meet the following four conditions:
The cost of the trivial benefit is no more than £50 in total inclusive of VAT
It is not cash or a cash voucher that you can exchange for cash
The payment is not a reward for any work or performance
The amount is not part of any work type of duty
There is nothing new about an employer that provides its staff with benefits such as a gift at Christmas. Employers sometimes provide a free meal to celebrate a member of the staff’s birthday or another special event. Some employers also provide free tea and coffee for their employees while they are at work.
What to bear in mind
Under the rules, you can afford to spend a bit more on yourself and your staff without having to pay tax on this.
Gift vouchers up to £50 are ok to claim, providing that you cannot exchange the voucher for cash.
Please note, you need to make sure that you do not go over the limit. If you do go over this, even by a small amount, the total cost will be taxable through the employer’s payroll.
It is also crucial to note that trivial benefits are not the same as benefits in kind (BIK). BIK applies when your employer provides you with some form of benefit. The BIK could be a company car, motorbike or van. It could also be medical insurance, dental cover, a director’s loan, or other benefits.
Please also remember, if you would like to make a payment of a trivial benefit, it is not in place of any work payment.
What’s more, the £300 limit mentioned above applies to an officer of a `close’ company. Where a business provides a benefit to the director’s family member or household, we need to treat this as being provided to the officeholder. This is then part of their annual exemption.
You should adhere to the limits and exemptions. If you do, the employer will receive a Corporation Tax (CT) deduction on the cost of the Trivial Benefits.
How you can claim for these as a UK contractor
If you work as a contractor through your own UK business, this is one allowance that you should claim. You can claim for this each year as long as you follow the above guidelines. Please make sure that it is not cash or a cash voucher (a cash voucher is a voucher that you can exchange for cash).
Also, please make sure that it is not more than £50 each time. The annual allowance is £300 per director. Therefore, you can claim for the £50 up to six times a year, each year. The amount will save CT at 19%. You also receive the benefit of what items that you spend this on. Please also make sure that you obtain the receipts each time that your business pays for a Trivial Benefit.
Even now, three years on from the intro of this tax-free expense, many are not aware of it. It is not well known, and as a result, many business owners that can claim this do not do so. There is no definitive list that covers what your trivial benefit can cover. Therefore, as long as you bear in mind the exemptions above, it can be for any cost.
Therefore, if you are a contractor who runs your own UK company (with five or fewer shareholders), please think about claiming for this in the future.
Most contractors do not have a complex tax return. Therefore, this is a fairly simple process. The majority will have a salary, dividends, and perhaps some personal bank interest.
If you have a good contractor accountant, they will usually prepare your SA tax return for you. If they do this, they should also submit your return to HM Revenue & Customs (HMRC) on your behalf. However, you ultimately have to make sure that you include all of your taxable income on your return.
To sum up, it is also up to you to:
make sure that all other details on your return are correct; and
you submit your return accurately to HMRC
Register for SA
You need to register for SA with HMRC before you can complete your tax return. If you are a director of your own company, your accountant will usually take care of this process.
Once you register, you will receive a Unique Taxpayer Reference (UTR). The reference is two sets of five digits. Please make sure that you keep this in a safe place.
Going forward, HMRC will send you a notice to complete a tax return through the post each year. You normally receive this in April or May, which is just after the tax year-end on 5 April. If you do not receive this notice, but you are under the SA system, or you should be under the SA system, you still need to complete your return.
Registration to file your SA return online
Today, most taxpayers file their SA tax returns online via the HMRC website. If you plan to do this yourself, you need to register for an online account with HMRC. As part of this process, HMRC will send you an activation code through the post. This code will go to your home address, and it normally arrives within seven working days. When you receive this, you need this to activate your account with HMRC. After you have done this, you can then file your return online.
Completing your SA return online
How complex your SA tax return is will depend on how complex your personal financial affairs are.
When you complete your SA return, there are various sections to fill in:
Your primary employment gross salary and tax as shown on form P60. If you have your own business and pay yourself a salary, your accountant should have sent form P60 to you. Also, you will need a copy of the form P11D from your employer. This form will show any benefits in kind. If you have any benefits through your own company, your accountant should have sent a copy of form P11D to you in June or July. * As an aside, if you have worked at several different employers in the past and have various pension schemes from former employers, something that you may be interested in is pension consolidation.
The pay and tax details that you receive from a second job. Or, the details of any income from previous employment. These details show on the end of year P60 form or your final payslip in the tax year. If this is the first year that you are to complete Self Assessment, it could be your salary and tax that show on your P45 form from your previous employer. You will have received A P45 form shortly after leaving your former employer.
Redundancy lump payment from a former employer and/or any unemployment benefit.
The details of any income (and expenses) that you receive from Self-Employment.
Any details of income and expenses from any Partnerships.
Further items that may go on to your return
Any income from investments, this includes pensions.
Dividend income. It will include dividends from your own company. It will also include any other dividends that you may have received.
If you are a landlord, the details for any property that you rent out, these details include the income and expenses.
Any interest you receive on bank or building society accounts. This interest does not include any that you receive on ISAs.
Any foreign income.
Details of any Capital Gains transactions including any claims for Entrepreneur’s Relief -a gain or loss on the sale of a second home, a business or other chargeable assets.
Child Benefit income -this may need to be paid back if you or your partner earned over £50,000.
Any gifts to charities under Gift Aid -if you are claiming tax relief. Claiming for these will only affect your tax bill if your overall gross income is over £50,270.
As part of your personal tax return preparation, and on an ongoing basis where appropriate, you could consider making use of the transfer of themarriage allowance. This is only beneficial in certain scenarios but you could benefit from this.
Submit your return
When you complete your SA return yourself via the HMRC website, this will work out what tax you are due to pay or what refund you are due.
Alternatively, if you are to submit a paper return, HMRC will usually send you a tax calculation through the post.
If you have an accountant, they will usually provide you with backup schedules for the tax return, as well as a copy of your completed return. They will also submit the tax return to HMRC on your behalf.
The deadline when you file your SA tax return online with HMRC is 31 January that follows the end of the tax year. This date is also when you should pay any tax that is due.
What’s more, for the tax year ended 5 April 2021, the filing deadline is 31 January 2022.
You can still fill in a paper return (SA100), but the deadline to complete and file this by is 31 October. Please note this is also the date when you should pay any tax that is due.
Therefore, for the tax year ended 5 April 2021, the filing deadline is 31 October 2021.
Paying your tax bill
With regards to payments, the above means that HMRC should receive any liability in their bank account by the relevant date. When you make your payment, the reference that you quote is your UTR code with a capital `K’ at the end of this.
If you owe £3,000 or less, you are also able to ask HMRC to collect the tax you owe by adjusting your tax code. Please talk to your accountant if this is something that you would like to do.
Payments on account
As part of the personal tax system, you may also need to make what is called `Payments on account’ by 31 January and 31 July each year. These are payments on account of the next year’s tax bill.
If you miss the 31 October or 31 January deadlines, HMRC will automatically charge you a £100 penalty. This penalty is regardless of the reason why your return was delivered late.
The £100 penalty applies if you are up to three months late.
You have 30 days to pay your tax bill before 5% is chargeable on it.
Further to the above, you have 90 days to file your tax return in after which it will cost you £10 a day in fines (up to 90 days -£900).
There are further penalties every six months (£300) and twelve months (a further £300) if you are even later.
Furthermore, there are also penalties if you do not pay your tax bills on time. There is also interest too for late when you pay your tax late.
Thank you for taking the time to read this guide. I cover most of the aspects in this, and it should give you a good insight into how SA works.
As you can see, SA is quite a complex area, and it is relatively easy to get lost if you are not sure. Hopefully, my guide has given you a good insight into this. If you have any particular questions yourself, you should check with your accountant.
My VAT guide covering VAT in more detail gives you an overall insight into how VAT works.
Under HMRC’s rules, a business needs to register for VAT if its VAT taxable annual sales go over £85,000 (the ‘threshold’), or the business knows that it will do.
A business’ VAT taxable sales are the total of all goods that you sell and the services that you provide that are not VAT exempt.
1 Compulsory registration
A business needs to register for VAT if:
it expects its VAT taxable sales to be more than £85,000 in the next 30 day period
the business had a VAT taxable sales of more than £85,000 during the last 12 months
Other registration instances
A business might also need to register for VAT in some other cases. It will depend on the kinds of goods or services it sells and where it sells them. You can find more info on this on the HMRC website.
If the business exceeds the VAT threshold in the next 30 day period
A business must register if it discovers that its total VAT taxable sales are going to be more than £85,000 in the next 30 day period.
The business will then need to register by the end of those 30 days. Its effective date of registration is the date that it discovers this, not the date its sales went over the threshold.
If the business exceeded the VAT threshold in the past 12 months
A business must register if, by the end of any month, its total VAT taxable sales for the last 12 months was over £85,000.
The business needs to register within 30 days of the end of the month, after which it exceeds the threshold. Its effective date of registration is the first day of the second month after it goes over the threshold.
If a business registers late, it must pay what it owes from the date that it should have set up its registration.
The business may also receive a penalty. The level of penalty will depend on how much it owes and how late its registration is.
2 Voluntary registration
A business can register voluntarily if its business sales are below £85,000.
Many contractors decide to register even if they are beneath the VAT threshold. The reason for this is because they can reclaim the VAT on their business expenses.
Being registered for VAT also gives your business more credibility in the eyes of certain recruitment sectors.
Invoicing your clients once you are registered for VAT
Once registered for VAT you will need to know how to add VAT when you create your invoices for your work. If you are also recharging expenses to your client you will also need to know how to do this.
Once registered for VAT, a business must charge VAT on its charges to its customers. Charging VAT on your invoices applies from the date of VAT registration.
The current standard rate of VAT is 20%.
The above should give a good guide as to when you need to register for VAT. There are also benefits to registering even if you are not required to do so. Of course, this depends on your own situation.
When you are creating your own home office, what should you think about?
Today, hundreds of thousands of people work from home in the UK. It comes as no surprise as it can be good to both the employer and the employee due to lower costs for the employer, flexible work at home and in the office, increased work rate, and a better work-life balance. As a result, for those who have their own business, many may wonder what expenses they can claim for as business expenses.
You may have been working at home for several years, or you are just about to start. Therefore, it is key to have the ideal home office to do your work.
For other useful tips, have a read of my article coveringtax tips for contractors for handy tips you should know when you have your own business (this is a member only article and you can read it if yousign up as a member). This includes my latest advice for best tax planning ideas.
What to think about
First of all, you should think about having a separate room or an assigned space in your home to act as an office. What’s more, it is key to keep this separate from your home space.
Next, it would be a good idea to try and make sure that your office has a window or is close to one to let in natural daylight. When you stare at a screen all day with no natural light, it is not suitable for your eyes. You should also try and avoid having a window behind you as this can cause screen glare.
A key thing to note is you must make sure you have a good internet connection when you do your work. Should it not be, you could buy a booster or have your router moved closer to your working space.
Finally, it is also key to keep your personal space and office space separate.
What costs can you claim for your home office?
The types of costs you can claim will include any work-related equipment, furniture and furnishings, and electrical work for your home office.
What’s more, in a typical home office, you will be able to claim a desk and office chair. An ergonomic office chair would be worth investing in, especially if you will spend long hours at your desk. Furthermore, you could also claim for a bookcase, a filing cabinet, and other work-related furniture.
Computer equipment in your home office will include a computer or laptop, monitor, keyboard, mouse, printer, scanner. You might also buy an office phone and I explain here what you can claim for phone charges. These are quite cheap to put in place, and it would be a good idea to keep work calls separate to your personal calls.
In contrast, you should not claim for any structural changes to your house to accommodate your office. Doing this could result in Capital Gains Tax implications on you on a personal basis. It will occur if you sell your house at a future date.
As with all other expenses that you claim through your business, you should make sure that you obtain receipts for any office costs that you claim.
When you have your home office, besides working here, you may also read up on any news from yourprofessional subscriptions from professional bodies.
As a final note, if you are not sure about anything when planning your home office, please consult your contractor accountant.
Have you ever heard of the Confirmation Statement, and if so, what is this? Well, whether you have just set up your own company or have been running a company for a while, it is a form that you will need to file with Companies House each year. The form is filed on public record along with a shortened version of company accounts and these documents are available for inspection on the public record. If you have a good accountant they will usually file the Confirmation Statement for you.
A brief history
As a director of your own company, the form became a requirement to complete in the UK in 2016. Furthermore, the form took the place of a previous version named the Annual Return.
The Confirmation Statement now shows less info when you compare it to its previous versions. The rise of cyber-related crime in recent years prompted the government to make changes to the form.
The info that you report on the form shows up on the Public Register (PR). The PR is on the Companies House website, and it is available for both businesses and individuals to see.
As a director, it is one of your legal duties to file a Confirmation Statement each year. When you do so, the details held by Companies House for your UK company will then be accurate and up to date.
Companies House filing duties
Every year, as a director, part of your duties include filing two documents with Companies House. These two documents are:
The annual Accounts. The accounts that you file display certain financial info about your business. The accounts include your Balance Sheet and they are a reduced version from the full set of company accounts. They only show the info that Companies House requires under the present reporting requirements.
The Confirmation Statement. This form shows your business’ legal data. You will report on here who the company officials are and where the registered office is. It also shows other details, such as the business trade (this is signified by the SIC code) and who the controlling parties are.
The Confirmation Statement
The Confirmation Statement form has a `made up to date.’ This date is normally the anniversary of when your business’ incorporation. That is unless you decided in the past to file one to a different date.
What’s more, your Confirmation Statement is due with Companies House 14 days after the date that you make the form up to.
You can file the form online via the WebFiling service on the Companies House website. Your accountant will typically do this for you as part of their service.
There is also a £13 fee to pay when you file the form. This fee is a tax-deductible expense.
Besides the annual Conformation Statement form that you need to file, you can also file a further one before your next one is due if required. You might need to do this if you become aware that an error needs correcting. There is no £13 fee to pay if you file another form before the next one is usually due. However, you have to complete a paper version and send it through the post.
Report changes during the year
Every company needs to report to Companies House certain changes when they take place during the year.
One frequent change may include a change in your registered office address. Another change may be when you appoint or resign the officials or the change of a company official’s address.
Other changes may include the allotment of new shares and the who owns the shares.
The registered office address. Also, a Single Alternative Inspection Location. This address is also known as SAIL.
The Confirmation Statement also shows the address where you keep the company’s statutory registers.
The full name(s) of each director. Also, their residential address and service address. It will also include their date of birth, occupation, and nationality.
The full name of your company secretary. Also, their service address. Today, most contractors do not have one as there is now no legal requirement for this.
The full names of the shareholders. It includes the type of shares that are in issue. It also shows the details of any transfer of shares.
Shown on the Confirmation Statement is a statement of capital that will include the total number of shares in the company. It will also include the aggregate nominal value of the shares and, if relevant, the aggregate amount that is unpaid on the shares.
You should also confirm for each type of shares, the total number of shares, and the rights that attach to them. You also need to show their trading status and their aggregate nominal value.
The Confirmation Statement also shows details for any PSC. PSC stands for Person with Significant Control. These include their name, date of birth, nationality, and the same two addresses as a director. It also shows the date when they first became a PSC.
Please note, all companies now need to keep a PSC register at their registered office. You can also keep this at the alternative SAIL address. It must also be ready for inspection upon request.
It is a legal duty to file the Confirmation Statement each year. Failure to do so could lead Companies House to think that your company is no longer trading. They could then strike your business off the register.
If your company does not have a secretary, it will be one of the directors who will takes the duty of ensuring the Confirmation Statement is filed on time every year.
If you complete the form yourself, you will need to check through the details. Please make sure that you make any necessary changes before you file this.
As a final thought, many UK contractors do not have to worry about the need to file the Confirmation Statement They will typically just let their accountant deal with this for them.
First of all, the UK public register is an index of UK companies. What’s more, Companies House maintains this, and they keep the info of all UK companies on file. They update throughout the year when each company makes an update.
There are hundreds of thousands of companies on this index. Please note, you can view the public record on the Companies House (ROC) website.
The first thing to think about, before you set up a new company, is which address you would like to use for the business.
What’s more, when you set this up, the Companies Act 2006 will require you to provide an address for each of these:
The registered office address. This address is where the business should receive its post.
A service address. The address here is where company officers are contactable.
The usual residential address’ for the directors
An address of the initial subscribers (shareholders)
As mentioned above, the Companies Act requires a company officer to provide their residential address. In most cases, this will be their home address. Please note they do not show this on the public record.
Choosing your registered office
When you set up your company, please note if you choose to use your home address as either:
your service address
registered office or
…then it will always show as a part of the public record. It is also the case even if you change it at a later date. To sum up, you should have a careful think about this before you set up your new company.
What’s more, most company formation agents, solicitors, and accountants often offer an address hosting service for a small fee.
ROC’s public record is a list for all UK companies. In return for the benefit of limited liability status, a company must be open and transparent with regards to certain aspects of its affairs.
Therefore, when you set up a new company, ROC will review and register specific info about the company. This info is then made available to the public.
This collection of public info is often known as the public register. What’s more, the details are at hand online for the public and businesses to search for free of charge. A person using this may need to look up some data, or they may be looking to do business with a company.
During a company’s lifetime, Companies House expects you to keep these details up to date.
To sum up, a person who becomes a director or officer of a company must be ready to have some of their private details show up on the public record.
The director’s details that show up
The four pieces of info that show up on the public record for all UK directors are:
the month and year of your date of birth
A director’s address and what you need to bear in mind
A service address is one that a director can use to receive mail for the business. This address can be the same as the registered office address, or it can be somewhere else.
A residential address is a director’s usual home address, and a director will need to inform ROC of this. Please note, it will not show up on the public record for all to see as they keep it on a private register.
ROC may provide home address details to credit reference agencies and certain public bodies if there is a requirement to do so.
Therefore, if a director uses their home address as their service address or the registered office address, it will appear on the public record.
To sum up, if you do not want your home address to show on the public record, you should show a different address from the outset. This address will show as your registered office and your director’s service address. This address can be that of your accountant, a service provider, or perhaps somewhere else.
An overall summary of the info on the UK public record
Below are the details that ROC displays online for each UK company:
The nature of the business, i.e., the trading activity (s) (this is signified by the SIC code)
The details of PSCs. PSC stands for People with Significant Control
The details of any official documents filed. The documents will include any accounts and Confirmation Statements. It will also include any changes to the company’s details. These sorts of changes include the directors, secretary, registered office, year-end, issue of new share capital, etc
PSCs must give the same basic personal info as directors for the public record. They will also need to show details of how they control the company. Furthermore, all PSC info is on the public record, apart from their home address. The actual day of the month when they were born is also not shown.
What’s more, if a PSC chooses to use their home address as their service address, it will show up on the public record.
Furthermore, you can find more info about PSCs in ROC guidance.
How can you change the details on the UK UK Public Register
To make a change to your director address or PSC address, or indeed other changes you can do so by:
File a change via the ROC WebFiling service. You will need to create an account on their site to be able to do this; or
Making a change via the annual Confirmation Statement. Again, you will need to have an account to be able to file this.
As a final note, the UK Public Register is open and at hand, for anyone to see. ROC cannot prevent any third parties from being able to find certain details here. The details for all UK companies show up here, as I explain above. Therefore, if you would like to hide your home address, please take on my advice above.
What’s more, ROC does not actively index info from its search services. Further to this, it is also good to know that they do not have any features on there that make it easier for search engines to collect or save this info.