Umbrella companies can be helpful for contract workers with multiple employers (which is very common for short term contractors). The umbrella company takes on the administrative burden of payroll from the contractor. It charges fees for its work

This is how it works:   

• A worker is engaged to work for a contractor
• Worker signs an employment contract with the umbrella company
• Umbrella company bills the contractor for work done (by the worker)
• Umbrella company pays the worker

This is great for anyone working for lots of different contracts.

Unfortunately there are some unscrupulous umbrella companies. They are attracting workers with schemes that enable their workers to have higher pay. Very often these schemes are illegal.

Some examples of illegal payments:

• Money on the pay slip which is not taxed (eg a loan)
• The worker is paid more money than shown on the payslip

Eventually the worker faces a large tax bill with extra penalties and interest.

Just remember :

If it sounds too good to be true – it is!

Here is a link with further information: https://www.gov.uk/guidance/working-through-an-umbrella-company#how-an-umbrella-company-works

There are £26.6 billion of pensions in the UK which remain unclaimed by 2.8 million savers. That’s an average of £9,500 per saver (ref. Pensions Policy Institute Autumn 22).

The last time I moved house I had 4 different pensions which needed contact details updating, it wasn’t great fun but I got it done.

It’s not a much of a stretch to see that anyone in poor health or not so hot on admin may have forgotten to do this amidst the upheaval.

Keep your pension details up to date, make sure your employees know that they are personally responsible for keeping their pension details up to date and help your nearest and dearest keep theirs up to date to.

So is it still worth paying dividends or just pay a bonus?

I’m really interested in this, so I’ve been thinking about this, had a dig and thought I’d share with you what I’ve found.

This is an important question for those of you who are company directors or have employees with shares. Historically dividends were generally seen as a tax efficient way of employee shareholders (including directors)  taking money out of a company.

HMRC have made changes to both corporation tax and personal tax which are narrowing the gap. If you company is going to make a profit is it more tax efficient to have a bonus in your pay packet or issue dividends?

If you have a bonus:

There could be a combination of additional personal tax and NI and employers NI (depending on your gross salary). The personal tax allowance is frozen for 23-24 at £12,570.

The company does not pay corporation tax on the bonus.

If you take dividends:

The dividend you take will be net of corporation tax.

HMRC have increased the corporation tax rate from 19% for profits over 50k to 25% with marginal relief up to £250k (so there effectively is a sliding scale of CT rates between 50K and 250K profits).

For the tax year 23/24 HMRC have reduced the tax allowance on dividends to £1000. For a basic rate tax payer (£12,750 to £50,270) the tax on dividends is 8.75%. Higher rate tax is at 33.75% (£50,271 to £125,140) and additional rate at 39.35%.  

The wonderful Stephen Relf at Croner-I has done some work on this and has produced a very useful sample calculation. I won’t bore you with the details, here is the summary:

Company Profit £500K (before bonus paid)

Bonus / Dividend Available £40K (before CT / Employers NI)

For someone falling in the Higher Rate tax band he calculated:

23/24 the dividend route gave a tax advantage of £173.

22/23 the dividend route gave a tax advantage of £2138.

In conclusion Stephen Relf states that much depends on individual circumstances but there are broad principals in mind, that dividends are more likely to be tax efficient where the company continues to pay CT at 19% or where the recipient is a basic tax payer.   

For further reading please refer to Croner-I Extracting Profits, Paying and Receiving Dividends.

Much of the detail had already been leaked by the time Chancellor Jeremy Hunt took to his feet in the Commons to deliver his first Budget. He wanted to focus on one of the Prime Minister’s key priorities – growth – in this budget.

He started by saying that the OBR (Office for Budget Responsibility) forecasts the UK will avoid a technical recession in 2023, with inflation expected to fall significantly from 10.7 % by the end of the year.

There was good news for small businesses with the Annual Investment Allowance of £1 million, which means 99 % of all businesses can deduct the full value of their investment from that year’s taxable profits.

Small and medium-sized businesses will be able to claim a credit worth £27 for every £100 they spend if they invest 40% or more of their total expenditure on Research and Development.

But the news wasn’t so good on corporation tax, which is to increase from 19% to 25% on their profits from April.

He also announced the creation of 12 new investment zones across the country including the East and West Midlands, Manchester, the North East, South and West Yorkshire, Teesside and Liverpool. There will also be at least one each in Scotland, Wales and Northern Ireland.

There were energy measures too with nuclear power to be re-classified as “environmentally sustainable”. He also announced £20 billion of support for the development of carbon capture, usage and storage.

He also confirmed the government will extend support for energy bills at current levels for a further three months.

In one of the biggest surprises he announced he would increase the pensions annual tax-free allowance from £40,000 to £60,000. He also announced he would abolish the Lifetime Allowance which currently stands at £1.07 million.

That measure is designed to get older workers (those over 50) back into work and retain those with experience, such as doctors, who may retire early due to the Lifetime Allowance.

He also promised to remove the barriers to work for parents by announcing 30 hours of free childcare for all children over nine months.

In other measures, he announced that fuel duty will be frozen and the 5 pence cut to fuel duty on petrol and diesel, which was due to end in April, will be kept for another year.

Labour Leader Keir Starmer accused the Chancellor of lacking ambition.

As ever the devil will be in the detail but this felt like a budget to keep things calm and steady rather than the radical moves we saw in Kwasi Kwarteng’s mini-budget which so spooked the markets.

Courtesy of the Institute of Accountants and Bookkeepers (IAB)

HMRC have changed their penalty system with the aim of making it fairer. The new regime aims to ensure that regular offenders are penalised more heavily than businesses who have the occasional misdemeanour.

To avoid penalties make sure you:

1. submit your VAT return on time and
2. Ensure HMRC has received your payment on time.

If you’re having difficulties contact HMRC and arrange a “Time to Pay” agreement.

The new regime comes into place for the first VAT return period starting on or after 01/01/2023.

The system consists of three separate penalties:

Late Submission Penalty

There is now a points system in place. For Quarterly returns:

Each time a return deadline is missed a penalty point will be given. The fourth time a return deadline is missed a penalty of £200 will be issued. From that point a £200 penalty will be issued each time a VAT return deadline is missed. This will continue until the business has had a “clean slate” of no late returns and all returns have been made for a 12 month period. Businesses filing VAT quarterly with penalty points will have their points removed after 12 months so long as they have not crossed the threshold of being penalised and have all submitted all their VAT returns.

Late Payment Penalties

First penalty part 1 will be charged if 16-30 days inclusive from the payment due date unless a time to pay agreement has been made. The penalty is 2% of what was outstanding at day 15.

First penalty part 2 will be charged if a time to pay arrangement was made. OR the outstanding VAT was paid 31 days or more after the due date. The penalty is calculated as 2% of that which was outstanding between day 15 and Day 30.

Second Penalty will be charged until payment is made in full or a time to pay is made after 31 days. This is calculated at 4% per year for the outstanding balance and calculated at the time it is paid.  

Late Payment Interest

Late payment interest will be charged from the day the payment becomes overdue until the day it is paid off. The interest rate used is the Bank of England Base Rate plus 2.5%. The Late Payment Interest also applies to Late Submission Penalties and Late Payment Penalties if they are paid after 30 days.

There is a familiarisation period in place up to 31^st December 2023. The late payment penalty First Penalty part 1 will not be charged, so no late payment penalty until the VAT bill is more than 30 days overdue.

The details are different if you file VAT annually and monthly. For more information please contact me or visit the HMRC website.

I’m very please to announce that I’m the first bookkeeper the King’s Lynn to gain the Xero Accounting Software Bronze Partner status.

I support both Xero and Quickbooks accounting packages. Supporting both of these packages enables me to offer a service which fulfills all my clients needs.

When you need help keeping on top of your bookkeeping feel free to give me a call. We can discuss how I can help you with no obligation. Contact me on 07771 333324 or email jo@barnowl-bookkeeping.co.uk I am based near King’s Lynn. From here I am able to serve Wisbech, Swaffham, Downham Market, Fakenham and the North Norfolk coast

You may have seen this in the news recently. The scheme is now up and running so you can register, see the link below.

Businesses of any size (including those with under 50 employees) can now register to order free lateral flow tests for their employees. The deadline for registration is 31st March 2021. The scheme will remain open until the end of June 2021. The government is still recommending that those who can work from home should continue to do so.
The Department of Health and Social Care (DHSC) estimates that 1 in 3 could be carrying the virus which means they could be spreading it in workplaces without knowing.
Rapid testing detects cases under 30 minutes. Positive cases can then isolate immediately, breaking chains of transmission.
The Federation of Small Business (FSB) Chairman Mike Cherry said: “A workplace testing infrastructure that works for businesses of all sizes as well as consumers is fundamental to bringing the coronavirus under control and ensuring that this current lockdown is the last. It’s great to see that the smallest businesses can now apply to set-up testing facilities on their premises.”
The expansion of asymptomatic testing is already well underway in larger companies for those who need to leave home for work.

An online portal has been launched for businesses to find out more about offering rapid workplace testing.

Register to order free rapid lateral flow coronavirus tests for your employees – GOV.UK (www.gov.uk)

In addition, all local authorities in England are now offering rapid lateral flow testing for small businesses who are unable to offer rapid workplace testing. Employers can find their local test site at

Find out if your area offers rapid lateral flow test sites – GOV.UK (www.gov.uk)

With thanks to Croner-I. Source URL: https://app.croneri.co.uk/whats-new/covid-workplace-testing-now-available-all-businesses

Barnowl Bookkeeping Services specialises in taking the strain off small manufacturing businesses. Giving you more time and enabling you to become more profitable. We can help you to improve your cash flow and reduce your costs. Interested? Based near King’s Lynn with easy access to Wisbech, Downham Market, Swaffham, Fakenham and the North Norfolk Coast. Call Jo on 07771 333324. jo@barmowl-bookkeeping.co.uk. www.barnowl-bookkeeping.co.uk

The Bounce Back Loans scheme was launched in May 2020 to provide financial support to businesses across the UK that were losing suffering financially as a result of the COVID-19 pandemic. Qualifying small businesses can borrow between £2,000 and £50,000.

Currently the loan is available until 31 March 2021. The Budget on 3^rd March may include an extension to applications. 

The government has just announced greater repayment flexibility. “Pay as You Grow” will allow businesses to wait up to 18 months before making repayments of the loan. 

Once repayments start there are some helpful options :

• Make to interest-only repayments for a period of six months (up to three times over the life of the loan).
• Have a single six months repayment holiday. (once over the life of the loan). 
• The loan can now be extended from six to ten which will significantly reduce monthly payments. The interest rate to be kept at 2.5%.

These Pay as You Grow options will be available to more than 1.4 million businesses that have borrowed.

Existing Bounce Back loans can be topped up to a maximum of £50,000. This option also has a deadline of 31^st March (it may also be amended in the Budget on 3^rd March).

Further information is available from HMRC at

 Apply for a coronavirus Bounce Back Loan – GOV.UK (www.gov.uk)

With thanks to Croner –I.

Do you need help with your business? I offer the following services: bookkeeping, payroll, CIS, VAT and Self-Assessment for the Self Employed. Based near King’s Lynn I am also within easy reach of Swaffham, Downham Market, Wisbech, Fakenham and the North Norfolk Coast. Pro Advisor for Xero and Quickbooks. Contact me on 07771 333324, jo@barnowl-bookkeeping.co.uk. www.barnowl-bookkeeping.co.uk

Announced by HMRC on 25th January 2021 :

Penalties will not be charged for late filing of 19-20 Self Assessment. Self assessment must be filed online by 28‌‌ ‌February.  Any filed after 28th February 2021 will have a penalty to pay.

The Self Assessment tax bill is still due by 31‌‌ ‌January. Interest will be charged from 1‌‌ ‌February on any amounts outstanding. HMRC accepts payments online, or through their bank, or by post before they file.

If you cannot afford to pay by 31‌‌ ‌January, an affordable plan could be set up for payment in monthly instalments. The 2019-20 tax return will need to have been filed before setting up a time to pay arrangement. To see if you qualify read more : Self Assessment customers to benefit from enhanced payment plans – GOV.UK (www.gov.uk)

Would you like help with your bookkeeping, VAT, CIS, payroll or self assessment? Please do not hesitate to contact me on 07771 333324 or email me jo@barnowl-bookkeeping.co.uk. I am registered bookkeeper specialising in manufacturing. Based in King’s Lynn enables me to cover Swaffham, Wisbech, Downham Market, Fakenham and the North Norfolk Coast.

If you were eligible for the last two grants you may be eligible for this third grant. If you may be eligible HMRC will have contacted you. The third grant covers trading in the period 1^st November 2020 to 29^th January 2021. It is based on 3 months profit averaged from the years 2016/2017 to 2018/2019, capped at £7,500. Read more about it here :

Claim a grant through the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

In my last blog I outlined that there were some uncertainties regarding a particular statement.

“You must also

• reasonably believe there will be a significant reduction in your trading profits due to reduced demand or your inability to trade.”

Read the HMRC webpage here :

Check if you can claim a grant through the Self-Employment Income Support Scheme – GOV.UK (www.gov.uk)

This has now been clarified as follows:

Reduction in trading profits refers to your whole year. It means you will have to look back at profits from 31^st October to the year start and forecast profits from when you make your claim to the end of your financial year. If you use a financial year which is not in line with the HMRC year of 6^th April 2020 to 5^th April 2021 you may have to look at the impact over 2 financial years.   

Any previous grants are not to be included in the figures for trading profit.

HMRC have not given a hard and fast test for “significant reduction in profits”. They have given a lot more examples of trading situations which do and do not qualify. Read these carefully and make the “honest assessment” that HMRC are asking you for.

I do hope this helps.

There may be a fourth grant released to cover the period from February to April. The legislation for this grant has not been passed so there could be further changes to the wording.

With thanks to the Institute of Chartered Accountants in England and Wales (ICAEW)

COVID-19: Self-Employment Income Support Scheme version 3 | ICAEW

Please contact me if you would like some hep with your business. I offer the following services: bookkeeping, payroll, CIS, VAT and Self-Assessment for the Self Employed. Based near King’s Lynn I am also within easy reach of Swaffham, Downham Market, Wisbech, Fakenham and the North Norfolk Coast. Pro Advisor for Xero and Quickbooks

 www.barnowl-bookkeeping.co.uk  Tel. 07771 333324

email jo@barnowl-bookkeeping.co.uk