National Cloud Accountant and Bookkeeping Service | 246 Godstone Road, Whyteleafe, Surrey, CR3 0EF | 0845 388 2298 | 01883 819 568 | info@cloudbookkeeper.co.uk

Six Months From MTD, HMRCs Communications Campaign

With the deadline of April 2019 getting ever closer, HMRC have been critised on the lack of education or guidance with regards to the upcoming changes to the tax system, though many professionals in the accounting and bookkeeping field hailing MTD (Making Tax Digital) as a step in the right direction.

Many still worry, however that they is still too large of a knowledge gap surrounding MTD, even for those in the accounting profession itself. A recent survey performed by the ICAEW was released highlighting that over 40% of businesses that will be affected by the new changes are unaware of said changes and therefore could be instore for some serious ramifications.

In an effort to allay some of these concerns and ensure everyone who need be aware of these changes are; HMRC have begun work on a communications campaign to shed light on all the new facets of the MTD programme, starting with a tweet on the 19th of September 2018, linking to a web page “Making Tax Digital: how VAT businesses and other VAT entities can get ready.” 

A HMRC spokesperson has said “We are starting to ramp up communication activity with businesses, initially with information to help them prepare for MTD and later how they can sign-up for the service.”, and while this page that has been linked doesn’t contain any new or previously unreleased information about MTD it does contain some simplified guidance about those it may affect and how to keep up to date with the changes that will be coming in to effect.

For more information about the MTD initiative, follow this link:

IR35 Rules – Are you Employed or Self-Employed

Introduced back on the 6th of April 2000, the IR35 rules were put in place to combat tax avoidance, specifcally targeting workers withing the IT industry, though not limited to a single industry. In fact these rules could apply to any worker that provides their services through a personal service company or other form of intermediary.

Before attempting to decide whether or not these rules may affect you and your business, below we will discuss the conditions that must be met to consider yourself either Employed or Self-Employed;

According to HMRC you are an Employee if:

– You are required to work regularly unless on leave (e.g. holiday, sick leave, maternity/paternity, shared parental leave.)
– You are required to do a minimum number of hours, and expect to be paid for the time you work.
– A manager or Supervisor is responsible for your workload, deciding when and how work should be completed.
– Someone else cannot be sent to do your work.
– The business deducts tax and NI (National Insurance) Contributions from your wages.
– You recieve holiday pay
– You are entitled to statutory sick pay and maternity or paternity pay.
– You can join the business’s pension scheme.
– The business’s disciplinary and grievance procedures apply to you.
– You work at the business premises or at an address specified by the business.
– Your contract sets out a redundancy procedure.
– The business provides the materials, tools and equipment for their work.
– You only work for the business, or if you have another job, it is completely different from your work within the business.
– Your contract, statement of terms and conditions or offer letter (which may be described as an ‘employment contract’) use terms like ‘employer’ and ‘employee’.

If you can answer ‘yes’ to most of the conditions above, despite an intermediary, it is likely that there is an underlying employee to employer relationship in place and therefore triggers the application of the IR35 Ruleset, the reverse is also true, if the answer to most of these conditions was ‘no’ then it is likely that there is no such relations ship and therefore the IR35 do not apply.

According to HMRC you are Self-Employed if:

– You are in business for you/yourselves and are responsible for the success or failure of your business and can make a profit or a loss;
– You can decide what work you do and when, where or how it is completed.
– You can hire someone to perform the work.
– You are responsible for fixing unsatisfactory work in your own time.
– You agree a fixed price for your work with your engager – it doesn’t depend on how long it takes them to perform the job.
– You use your own money to buy business assets, cover running costs and provide the tools and equipment that is necessary.
– You can work for more that one client.

When attempting to remain outside the rules as governed by IR35, specifically when using an intermediary, the relationship should be structured as per the rules above.

Therefore whenever working through intermediaries to remain self-employed ensure that you fully understand the differences between the relationships with your client and yourself, else the IR35 rules may apply to you and result in unforseen charges.

Tourist Tax plans – “Illogical” says Hospitality Chief

 

Chancellor Hammond has been urged to do away with plans for an upcoming tourist tax, this new tax entails adding a local surcharge of at least £1 to all hotel bills, a move which is being heavily contested by UK Hospitality Chief Exec. Kate Nicholls.

Mrs Nicholls has written to Hammond, displaying her opposition to such a bill, one exerpt from the letter reads as such, “I am writing to convey our profound opposition to such a policy and our sincere concern over the impact any additional taxation would wreak on an already-strained and over-burdened sector,” this draft was seen by The Daily Telegraph.

This new initiative was brought to discussion earlier this year as local councils were seeking new ways to increase their income against “Increasingly stretched local finances.” Popular tourist destinations Bath and Oxford have revealed plans earlier this year to introduce a similar tax after reports from last December that Birmingham will put a £2 levy on vistors to the 2022 Commonwealth Games.

Nicholls has described these plans saying “This is inequitable and Illogical,” and calling that they would “create bizzare incentives” for tourists to become ‘day-trippers’ rather than long stays, thereby damaging the tourism of the UK.

Others are also standing in opposition of this new plan, with Mike Cherry, Chairman of the Federation of Small Businesses, said “Our visitor economy is a huge success story, contributing more than £125bn to the economy annually and providing vast tax receipts to pay for public services.”.

The Model Office and New Technology

 

The Model Office for those that are unaware, as the are possibly the opposite of what you would expect from a ‘Tax office’, they are a fairly new addition being established only 18 months ago. The goal is explore new technologies and develop ways that they can be used to help customers in thier various taxation needs. And with the ever evolving state of the technological world that is by no means a small feat.

One the focuses for the Model Office currently is the addition of the rising popularity of home voice systems, for example Alexa, Amazons home voice system. The purpose of many home voice systems like Alexa are allow users to provide quick and easy access to internet services, like music and internet searches, but this can be adapted to many things.

The Model Office has examined the main reasons for customers calling HMRC last year and have grouped and built these reasons into an Alexa ‘skill’. This skill means that when customers say to their Alexa, “Alexa, open HMRC” they will then be asked a series of questions by the device and dependant on the answers given, they will be directed down the most suitable route to have their queries answered. In some cases the user will also be asked if they would like an SMS message containing a link to the relevant guidance from the GOV.UK website.

It is good to see new technology being implemented in ways that seem to be genuinely useful for those less versed on the intricacies of taxation law.

GDPR Compliancy and Payslips

Depending on where you work and who you work for, you should receive your earnings either weekly, fortnightly or monthly and accompanying them should be some paperwork, commonly called a payslip. This payslip outlines the payment and contains some personal information specific to you.

Under the new rules of the GDPR (General Data Protection Regulation), many companies may need to look at how the information contained on these payslips are kept secure, and all UK induviduals and organisations need to ensure that these rules are being followed. Many have expressed confusion about the distribution of payslips under GDPR, so in what format should payslips be distributed?

The three most common ways that payslips are distributed are:

– Paper
– Email
– ‘Portal’

Paper payslips

One of the ways that many recieve their payslips, is that they are posted to either the business or to the employee’s home address, for many this is how payslips have always been distributed and is the most familiar. The new GDPR legislations do not state that this is no longer an option, but it is recommended that for those that use this method to consider using envelopes that are marked as private and confidential, and even possibly using more secure delivery methods e.g. registered post.

Email Paylips

An upcoming distribution method for payslips is via email, many business have begun to use this method in attempts to save on paper waste, time and money, as this method is certainly quicker than the paper method. Though in this age of the Internet, employers must be vigilant about protecting this information, one such way to do so leads on to the next method to be discussed.

‘Portal’ Payslips

A relatively new form of distribution in this regard, many businesses have begun to use portals to allow employees access to their payslips. Portals are online systems that allow employees to login, and stored within this system are the employees payslips. This method is likely the most secure as the systems will only allow users to see the content in which they are authorised, as well as still having the benefits of this being cheaper and quicker that the postal method.

However the payslips are distributed, the most important thing to keep in mind is that your employees data is kept safe and secure, and for further information on that be sure to browse some of the other articles on the Cloud Bookkeeper website.

‘Unfair’ HMRC interest rate change?

The ACCA accountancy body has said that the recent interest change is “simply unfair” because of the growing divide between interest rate for repayments to taxpayer and late payment fees.

Simply put the interest charged for those that pay their tax late has increased by 0.25% to 3.25%, supposedly inline with the rise in the Bank rate, whereas the repayment interest has remained at 0.5% and is frozen at this rate, this has been true since 2009.

ACCA have said that they believe there should be a level playing field but HMRC have replied saying the repayment rate has never fallen below its current rate of 0.5% despite the Bank rate.

The reasoning behind this is that HMRC is attempting to prevent overpayment of tax as a way of recieving a higher interest rate than possible on some savings accounts. Therefore based on the current formula used to determine this amount the Bank rate would have to rise higher than 1.5% for this to change.

This is currently a controversial decision as Chas Roy-Chowdhury, head of taxation at ACCA, has said there should be a ‘level playing field’ and that HMRC changes should simliarly apply to both how much they charge and to how much they pay.

Making Tax Digital, Costs not Savings

It has been estimated that the new MTD inititaive will cost firms £37 million a year and will have no cost saving effect, reveals HMRC.

MTD is the digital redesign of the tax system, which means that most VAT-Registered companies will need to keep digital records of VAT and submit their returns digitally also. This programme was proposed by former Chancellor George Osborne and was suggested to ‘modernise’ tax returns. But it has been revealed that it may end up costing more than it saves.

The original proposal was estimated to save businesses £100 million a year from 2021. But HMRC’s latest estimation is that there will be no savings but instead will cost firms £37 million per annum, they predict that transition will cost less, but the ongoing costs will outweigh the ongoing savings, these new estimations come from the changes made to the programme last year which include a slower rollout.

One major change is that now only business with a turnover of £85,000 have to file digitally, and those business lower than that are excempt.

Though a spokesperson from HMRC have said that the costs incurred by businesses are likely to qualify for full tax relief, which is not reflected in these estimates. This is yet to be definitively announced and therefore we cannot be sure if this will come into effect.

Honours ‘Blacklist’ for Celebrity Tax Avoidance

HMRC policy of advising against honours for tax-avoiding celebrities, has been backed by Sir Vince Cable.

What this means is that celebrities who use legal but possibly controversial schemes of tax avoidance are being ‘blacklisted’ from receiving honours in order to protect the reputation of those holding these honours and the honours themselves. A FOI (Freedom of Information) request revealed that those proposed for this list are graded on a traffic light system to gauge the induviduals suitability.

Green for Low Risk, Amber for Medium Risk and Red for High Risk.

This initiative has been backed by Liberal Democrat leader Sir Vince Cable, saying “The Principle is right, I think the public is fed up with abusive tax avoidance by induviduals and companies,” and “It seems perfectly reasonable to me that the Inland Revenue should be taking a tough line on tax avoidance.”

Sir Cable, who is a former business secretary, added that some celebrities may be confused as to why they are being investigated and analysed for this list, because many could be unaware of their involvement in tax avoidance due to their finances being handled by accountants.

This list will be given to the Cabinet Office honours committee and the prime minister and decisions with be made from there.

Last year, retired football player, David Beckham had an email leak that seemed to depict his frustration at not receiving a knighthood in 2013, it has also been noted that he was on a list of celebrities who invested in a tax avoidance schemes, which was successfully challenged by HMRC.

At this time it is not known whether this had an impact on him not receiving said knighthood.

For more information on how the Honour system works, click the following link. Guide to the Honours.

Allowable Expenses

The following spreadsheet  is to provide some guidance as to the type of expenses that you can offset against your property income or capital costs.

To view this spreadsheet please follow this link (Spreadsheet).

Please note that this spreadsheet is to be used for guidance and educational purposes only. The information within the spreadsheet does not constitute as advice by Cloud Bookkeeper and will not be held responsible for any decisions based on this spreadsheet.

HMRC CGT Calculators for Shares and Property

HMRC has recently added two new CGT or Capital Gains tax calculators to their list of tools for shares and property disposals.

HMRC calculators and tools is a list of HMRC calculators and tools to help you work out what you could possibly owe in tax liabilities.

To view the full list of calculators and tools follow this link (https://www.gov.uk/guidance/hmrc-tools-and-calculators).

To view the CGT Shares Calculator – (https://www.gov.uk/tax-sell-shares/work-out-your-gain)

To view the CGT Property Calculator – (https://www.gov.uk/tax-sell-property/work-out-your-gain)