The UK Government announced a new capital allowances relief. From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

• 130% super-deduction capital allowance on qualifying plant and machinery investments
• 50% first-year allowance for qualifying special rate assets

This super-deduction is designed to promote companies to invest in productivity enhancing plant and machinery. It is important businesses understand and take advantage of these generous new reliefs while they are available.

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive. There is no upper limit set for the expenditure, so as long the expenditure is incurred between 1 April 2021 – 31 March 2023. The enhanced relief also does not allow for plant and machinery that will be made available for leasing (including landlord fixtures within rented property) and excludes cars.

The pandemic has been a big blow for a lot of businesses, if you have been looking at equipment to help you grow, now may be the time to use this relief. If you are not sure on whether it is the right time to make a purchase, or if the equipment qualifies for the super-deduction relief, message us on nicola@crossaccountingservice.co.uk or if you would prefer to chat, call Cardiff: 02920 653 995 or Bridgend: 01656 530 063. Our team is always happy to help.

Self Employment Vs Employed

I get asked questions about subcontractors on a regular basis, so I thought I would share a few tips with you.

Employed

You will need to register for PAYE all employed staff regardless of the number of hours they work for you.    You need to keep personal information for example.  Name, address, national insurance, date of birth, hours worked and start and finish dates.   Keep a personnel file of any discussions or grievances too.

All employees require an employment contract, this can be simply done see the business link website for a template.

Business Link Template

Or you can use a registered HR Company to prepare one for you.

It describes the employee job title, description, hours of pay.  Rights to holiday entitlement, grievance procedures and sick and maternity leave.  Confirmation of start date and a job description, along with company rules and procedures.

You as the employer allocate work as required and set the hours of work to that employee, these are likely to consistent.  They do not have the responsibility of hiring or dismissing your staff.

You will need to keep employment records and records of salary paid, and you are responsible for their national insurance and income tax contributions.  You will also pay Employers National insurance on top of their salary, after the tax free allowances are taken into account.   Normally applying to full time time or part time after earning gross pay of £625 per calendar month. 2012/13 rates.

Self Employed or Contractors

Self employed staff or sub contractors are normally used on a temporary basis, the hours can be sporadic, and they have other customers besides yourself.

They would either be set up as a Limited Company, ie they are the employees of that company  or your supplier.   Or set up for self assessment.   They have the right to take or refuse a contract offered to them.  They also have the right hire and dismiss their own staff.

They have no entitlement to holiday pay, or sick pay through yourselves, or minimum wage.  But will normally charge for work done at their agreed hourly or fixed term rates.

They will either invoice you for the contract or have a deduction made on their fee through the CIS scheme.

The CIS scheme is a fairly simple scheme where you are either the contractor or the subcontractor, the contractor will deduct and pay over 20% of the subcontractors gross pay for income tax.  The subcontractor is responsible for their own national insurance.   There is a monthly submission required to tell the Inland Revenue what deductions have been made, and payment may be required.

Subcontractors can claim any overpaid deductions against their self assessment return, once a year.

A point to be wary of, any sub contractor that works only for you, and for more than six months will automatically be classed as an employee, once this time has elapsed and you will be responsible for their tax and national insurance.

If in any doubt contact the Inland Revenue helpline on 0845 900 0444

There are many case law studies, where this issue has become cloudy, and the sub-contractor has won the case, been able to sue the customer for lost holiday pay, sickness pay allowances.   Don’t let that be you.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own.  It is not intended to be used to make all of your business decisions but as a guide only.