June Questions and Answers
Newsletter issue – June 2024
Q: As part of my professional role, I belong to a professional body, for which I pay membership fees each year. It’s becoming somewhat expensive to keep it going but it is nonetheless an important part of my job. Somebody mentioned they had claimed tax relief for the membership fees. Is this possible?
A: Yes, it is true that you can claim tax relief on professional membership fees. To be eligible for this, the membership is important to have for you to do your job, according to the official HMRC guidance. You can also claim relief on annual subscriptions you pay to approved professional bodies or learned societies, "if being a member of that body or society is relevant to your job", the guidance states. But if you didn’t pay yourself – for example, your employer stumped up the money for the fees – then you can’t claim the relief. The other key thing to bear in mind is that your professional body must be on the approved HMRC list. To check if yours is, please visit this page .
Q: The turnover of my business has been no higher than £68,000 over a 12-month period since we started but has now risen to £91,000. It reached this point on 5 May 2024. What do I need to do about VAT registration?
A:Once your total VAT taxable turnover for the last 12 months goes above the threshold you must register for VAT with HMRC. Up until April 2024 it had remained at £85,000 for seven years, but now in the new 2024/25 tax year, it has risen to £90,000. Although you can voluntarily register for VAT if you’re below this amount, it doesn’t sound as if your business has taken that approach previously.
But now your turnover is at £91,000, you need to register with HMRC within 30 days of the end of the month that you went over the threshold. According to HMRC: "Your effective date of registration is the first day of the second month after you go over the threshold."
So, in your case, it means you will need to have registered by 30 June 2024 and your effective registration date will be 1 July 2024.
For any business which realises it’s going to go over the £90,000 mark in the next 30 days, you have to register by the end of that period. So, in that example, say your company (previously not VAT-registered) brings in a new £150,000 deal on 1 June, with payment coming to you within that same month. You would have to register by 30 June.
Lastly, just to clarify what HMRC defines as turnover. It says this is "the total value of everything you sell that is not exempt from VAT."
Q: We’re a fledgling business in the scientific sector with a turnover of under £500k at the moment and just 22 staff. We’re looking to make sure we claim the tax relief we’re entitled to under the Government’s Research and Development scheme. What do we need to know?
A:It sounds like you are in a position to claim Research and Development (R&D) tax relief but let’s look at what you need to do for your project to meet the necessary criteria. What qualifies as R&D? HMRC states that it "must be part of a specific project to make an advance in science or technology".
For anyone reading this working in social sciences, however, including economics, I’m afraid you wouldn’t qualify.
The type of relief you can get depends on the size of your company. In your case, you’d fall under the small and medium sized enterprise category. It’s clear you would qualify under the criteria, which states SMES must have less than 500 staff and a turnover of under 100 million euros or a balance sheet total under 86 million euros.
Further stipulations are that your project must be connected to either your current trade or one you plan to set up following the results of the research. The scheme also requires you to explain a number of things, including how it is advancing the field of knowledge, how it’s overcoming a "scientific or technological uncertainty" and also why it could not "be easily worked out by a professional in the field ".
The official guidance also states that "your project may research or develop a new process, product or service or improve on an existing one. "
If you’d like further help with understanding R&D tax relief, please do get in touch with our team and we would be happy to discuss the full details.