MTD VAT Pilot is Now… Open to All
HMRC announced (10/1/2019) that their Making Tax Digital for VAT (MTDfV) pilot is now open to all those mandated to keep digitally compliant records and to file MTD-compatible VAT returns for return periods commencing after 31 March 2019.
In an email issued, HMRC stated: “this marks a significant milestone towards our ambition to become one of the most digitally advanced tax administrations in the world.”
HMRC boasts that over one hundred VAT-registered businesses are now signing up to the scheme on a daily basis, with more than 3,500 having already joined.
Even though the majority will not need to file their first MTD-complaint return until early August, the department wants “as many eligible businesses as possible to join the pilot ahead of the mandation of the service in April”, as it will provide assurance that the service works for all types of customer.
What does it mean?
This means that all VAT-registered entities with an annual VAT-able turnover in excess of the £85,000 compulsory registration threshold – i.e. those mandated to onboard from April – will now have the chance to test their accounting systems prior to April.
A minority of compulsory registered businesses – those with the most complex VAT affairs – have had their mandation date deferred to their first return period starting on or after 1 October 2019.
VAT groups now able to join the pilot
HMRC has also opened its MTDfV pilot to VAT groups with immediate effect, in order to enable them to start testing the service – even though they are not mandated to join until October.
The department “will continue to update you as we open up the pilot to the remainder of the population who are mandated to join from October.”
Want to know more?
Update letter from The Pensions Regulator
The Pensions Regulator (TPR) is beginning to write reminders to all employers that, from 6 April 2019, the minimum amount to be paid to a workplace pension is increasing to 8% – and that they, the employers, must contribute at least 3% of the total contribution.
To be prepared for this increase, TPR have recommended seeking further guidance from their website, and to ensure that the payroll software used is compliant with the changes.
Alternatively, if you want informed, proactive advice, you can talk to us.
Guide to completing P11Ds published
A new online guide has been published by HMRC to aid employers in determining which benefits and expenses need to be declared in the P11D forms.
These forms can be completed online using:
- the PAYE online for employers’ service;
- or the online end-of-year expenses and benefits forms.
More details are available in the HMRC expenses and benefits guide.
Employer tax rates and thresholds for 2019/20
HMRC have updated the online guidance available, now providing a detailed list of income tax and NIC rates applicable to employers for 2019/20. The comprehensive list can be used by employers for 2019/2020 for payroll and employee expenses.
The list includes:
- PAYE tax and Class 1 National Insurance Contributions
- Tax thresholds, rates, and codes
- Class 1 National Insurance thresholds
- Class 1 National Insurance rates
- Class 1A National Insurance: expenses and benefits
- Class 1B National Insurance: PAYE Settlement Agreements (PSAs)
- National Minimum Wage
- Statutory Maternity, Paternity, Adoption and Shared Parental Pay
- Statutory Sick Pay (SSP)
- Student loan and Postgraduate loan recovery
- Company cars: Advisory Fuel Rates (AFRs)
- Employee vehicles: Mileage Allowance Payments (MAPs)
HMRC’s most bizarre excuses for late returns
As the deadline approaches for submitting returns, here are HMRC’s strangest reasons for late or failed submissions, from taxpayers who missed the Self-Assessment deadline last year.
- My mother-in-law is a witch and put a curse on me.
- I’m too short to reach the post box.
- I was just too busy – my first maid left, my second maid stole from me, and my third maid was very slow to learn.
- Our junior member of staff registered our client in Self-Assessment by mistake because they were not wearing their glasses.
- My boiler had broken, and my fingers were too cold to type.
There were also some dubious expenses claims for unconvincing items like woolly underwear and pet insurance for a dog. Some of the most questionable include:
- A carpenter claiming £900 for a 55-inch TV and sound bar – to help him price his jobs.
- £40 on extra woolly underwear, for five years.
- £756 for a dog’s pet insurance.
- A music subscription, so someone could listen to music while they worked
- A family holiday to Nigeria.
None of these excuses and expenses were successful!
Scottish Budget income tax changes
The Scottish Draft Budget took place on 12 December 2018. To assist those of you who might be affected, we have published a table containing the 2019/20 proposed rates and bands (for non-savings and non-dividend income), along with the 2018/19 rates and bands.
|Scottish Bands 2018/19||Scottish Bands 2019/20||Band Name||Scottish Rates|
|Over £11,850* – £13,850||Over £12,500* – £14,549||Starter||19%|
|Over £13,850 – £24,000||Over £14,549 – £24,944||Scottish Basic||20%|
|Over £24,000 – £43,430||Over £24,944 – £43,430||Intermediate||21%|
|Over £43,430 – 150,000**||Over £43,430 – 150,000**||Higher||41%|
|Over £150,000**||Over £150,000**||Top||46%|
* assuming the individual is entitled to a full UK personal allowance.
** The personal allowance will be reduced if an individual’s adjusted net income is above £100,000.
The allowance is reduced by £1 for every £2 of income over £100,000.
The personal allowance is currently £11,850 for 2018/19 and will increase to £12,500 for 2019/2020.
- For UK taxpayers entitled to a full personal allowance, the higher rate is set at £50,000.
- The tax rates for non-savings and non-dividend income remain at 20%, 40%, and 45% for income over £150,000.
The rate for 2019/2020 will mean that Scottish employees earning approximately £27,000 from employment income will pay the same income tax as the rest of the UK on a similar income. Higher rate earners in Scotland with income of £150,000 and over will pay, approximately, £2,670 of income tax more than those on a similar income in the rest of the UK.
Scottish Budget property tax changes
The 2019/20 Scottish Draft Budget includes changes to Scottish Land and Buildings Transaction Tax (LBTT).
The policy priority for residential Land and Buildings Transaction Tax (LBTT) continues to be to help first-time buyers and those moving through the property market.
The policy has helped over 80% of taxpayers to pay less LBTT than in England – or none at all.
The current rates and bands are as follows.
| Residential property
| 0 – £145,000
| £145,001 – £250,000
| £250,001 – £325,000
| £325,001 – £750,000
| £750,001 and over
The rates apply to the portion of the total value which falls within each band.
First-time buyers’ relief
Relief is available for first-time buyers of properties costing up to £175,000. The relief increases the zero-tax threshold from £145,000 to £175,000. First-time buyers purchasing a property which is more than £175,000 will also benefit, and the relief will be apportioned only to the price below the threshold.
Higher rates of Land and Buildings Transaction Tax
Certain residential properties, such as buy-to-let and second homes, incur higher rates of LBTT.
From the 25 January 2019, the Additional Dwelling Supplement (ADS) increased from 3% to 4% and will apply to transactions which occurred before the 12 December 2018. ADS is applicable where an individual owns, or partially owns, a property, or purchases another which is not replacing a main residence. There is an eighteen-month rule which will prevent some purchases incurring the additional rates.
Non-residential rates and bands
The Government has reduced the non-residential LBTT rates from 3% to 1%, and increased the upper rate from 4.5% to 5%, with the starting threshold reduced to £250,000 from £350,000.
These changes will not apply where a transaction was started before the 12 December 2018.
The revised rates and bands for non-residential LBTT transactions are as follows.
|0 – £145,000||0%|
|£145,001 – £250,000||2%|
|£250,001 – £325,000||5%|
|£325,001 – £750,000||10%|
|£750,001 and over||12%|
List of deliberate tax defaulters published online
HMRC have published an updated list containing details of taxpayers who have been penalised for deliberate errors in their tax returns or have purposely failed to comply with tax requirements.
HMRC are able to publish details where an investigation has been made and where the taxpayer has been charged one or more penalties for deliberate tax evasion on tax of more than £25,000.
Open Banking: What is it and how can it help your business?
In the UK, the Competition and Markets Authority (CMA) has mandated that the nine largest current account providers must offer standardized Application Programming Interfaces (APIs) for current accounts to Account Information Service Providers (AISPs) and for payments to Payment Initiation Service Providers (PISPs).
What does this mean? By providing access to this data from third parties and banks, Open Banking provides small businesses with the opportunity, through technology such as QuickBooks Online, to have a real-time view of their banking and transactional data.
This will help to more accurately predict tax liability (VAT payments), to proactively manage cashflow, to more quickly provide credit scores for loan and finance applications, and to offer the ability to analyse spend and buying patterns – all to help small businesses best budget their finances.
The UK is not at the forefront of Open Banking innovation globally, but it is estimated that Open Banking has the potential to create a revenue opportunity of at least £7.2bn by 2022 across retail and SME markets.
Making Tax Digital for VAT pilot
In the middle of October, HMRC opened the Making Tax Digital for VAT pilot. This is now available for nearly 70% of those mandated to file MTD-compliant VAT returns for all future VAT-return periods starting after the 31 March 2019.
The requirement to join VAT-MTD applies to all VAT registered entities with a VAT-able turnover of above the £85K compulsory VAT-registration threshold. This applies whether they file their returns on a monthly or quarterly basis.
Businesses wishing to join HMRC’s pilot must complete an online registration process, they must keep their VAT records digitally from the first day of their next VAT Return period, and they must submit subsequent VAT returns using MTD-compliant software such as QuickBooks Online.
There is a six-month deferral of mandation for the approximately 3.5% who have complex requirements. These include trusts, not for profits, VAT divisions and groups, local authorities, overseas traders, and annual accounting scheme users. Pilot testing for these groups is expected to open in Spring 2019.
HMRC have released a timeline with more details on Pilot eligibility, which you can view here.
Autumn Budget 2018
In the Autumn Budget, the Chancellor Philip Hammond stated that “austerity is coming to an end, but discipline will remain”. He outlined a promise for a “double deal dividend” from Brexit and referenced that there is likely to be a full-scale Spring Budget if Brexit negotiations don’t go well.
Changes to Entrepreneurs’ Relief
For disposals on or after 29 October 2018, the Chancellor announced changes to the Entrepreneurs’ Relief (ER) rules.
During his October Budget, he introduced a requirement for a person claiming ER to have at least a 5% interest in the distributable profits and the net assets of the company. This stands in order for one to be deemed to have an interest in a ‘personal company’.
The new ‘tests’ are in addition to the existing tests and they must be met throughout the specified period in order for relief to be due.
The existing tests require a 5% interest in the ordinary share capital and 5% of voting rights.
In addition to the new tests, the Chancellor extended the minimum qualifying period from one year to two years. For this, certain conditions must be met by the claimant.
The measure will take effect on disposals on or after 6 April 2019, except where a business ceased before 29 October 2018.
Draft legislation has been issued which, if enacted, will ensure that, where an individual’s qualifying holding is reduced below 5%, they can elect to exercise their entitlement to ER by claiming a deemed disposal. Furthermore, where there arises a charge to capital gains tax, a further election can be made to defer the payment of the tax due until actual disposal.
The relief will only apply where the reduction below 5% occurs as a result of the company raising funds for commercial purposes by means of an issue of new shares wholly for cash consideration. The new rules will apply for share issues which occur on or after 6 April 2019.
Changes to Capital allowances
The Budget includes an increase to the Annual Investment Allowance (AIA) for two years up to £1 million. This is in relation to qualifying expenditure incurred from 1 January 2019, currently at £200,000 per year. Additional changes to the rules outlined include the following:
- Reduction to the rate of writing down allowance on the special rate pool of plant and machinery. This includes long-life assets, thermal insulation, integral features, and expenditure on cars with CO2 emissions of more than 110g/km, from 8% to 6% in April 2019.
- Confirmation and clarification as to the costs of altering land, for the purposes of installing qualifying plant or machinery for capital allowances, for claims on or after 29 October 2018.
- The 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List will come to an end from April 2020.
- An extension to the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.
- The introduction of a new capital allowances regime for structures and buildings will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.
HMRC Tax Return Filing Time
The deadline for submitting 2017/18 self-assessment tax returns online is 31 January 2019 with a penalty of £100 if the return is late.
Last year approximately 11 million taxpayers completed the return with 10.7 million being on time. In a statement, Angela MacDonald, HMRC’s Director General for Customer Services:
“Time flies once the festive period is underway, yet the ‘niggle’ to file your tax return remains… We want to help people get their tax returns right, starting the process early and giving yourself time to gather all the information you need will help avoid the last minute, stressful rush to complete it on time. Let’s beat that niggle.”
For help with completing your tax return please contact us.
Choosing the right location for your business
With Amazon’s recent decision on the new location for their business, here are some aspects to consider when making a similar investment of your own. The location should be consistent with your particular style and image. If your business is retailing, do you want a traditional store, for example? Or would you like to try operating from a kiosk or a cart that you can move from place to place?
Consider who your customers are
Demographics play an important part in your choice of location. Consider who your customers are and how important might be their proximity to you. For a retailer and some service providers, this is a critical consideration. For other types of businesses, however, it might not be as important.
Research and review the community to establish whether there is a sufficient percentage of that population that matches your customer profile. Do however think about communities that are largely dependent on a particular industry for their economy, as a downturn could be bad for business.
In addition, consider the work force skills required. Are there people with these skills in the community, with sufficient housing, schools, recreational opportunities, and culture?
Foot fall, traffic, and parking
If you are a retail business, then consider where shoppers are likely to pass by, rather than being hidden away. Monitor traffic outside of the location at various times throughout the day and assess how accessible the facility will be for customers, employees and suppliers.
If requiring deliverables, establish whether suppliers will be able to easily and efficiently courier. Be sure that there is convenient parking for both customers and employees. As with foot traffic, take the time to monitor the facility at various times and days, to see how the demand for parking fluctuates.
Competition and other services
Are competing companies located nearby? Sometimes that’s good, such as in industries where comparison shopping is popular, as you can catch the overflow from existing businesses. If a nearby competitor is only going to make your marketing job tougher, look elsewhere.
Consider what other businesses and services are in the vicinity, whether there is any benefit from customer traffic, and whether there is a suitable range of places and restaurants for employees. You might also want to think about the location of other facilities nearby, such as child care, convenient shops, etc.
Infrastructure, utilities and costs
Check that the building has the infrastructure – adequate electrical, air conditioning, and telecommunications services – to support your business requirements and to meet your present and future needs. For utilities, check what is included in rent, as this can be a major part of the expense.
Lastly, verify the medium- to long-term rental expectations and commitments, so as to mitigate any rental rise.
Brexit: The ‘No Deal’ Scenario
In preparation for the possibility of the UK leaving the EU without a Withdrawal Agreement, the Government has published a collection of documents outlining what a “no deal” Brexit could mean.
They have stated: “The government does not want or expect a no deal scenario. However, it is the duty of a responsible government to prepare for a range of potential outcomes, including the unlikely event of no deal. In the event of leaving the EU without a deal, legislation will be necessary to ensure the UK’s Customs, VAT and Excise regimes function as intended after the UK leaves the EU and so, on a contingency basis, HM Treasury and HM Revenue and Customs will lay a number of Statutory Instruments (SIs) under the Taxation (Cross-border Trade) Act 2018 (TCTA) and the EU Withdrawal Act 2018 (EUWA).”
As events unfold in the rundown to 29 March, please reach out to us for help to understand how it may impact your business.
Stamp duty relief benefits 180,000 new homeowners
According to HMRC, more than 180,000 first-time buyers have benefitted from First Time Buyers’ Relief (FTBR) from Stamp Duty Land Tax (SDLT).
Introduced in the November 2017 Budget, FTBR has saved homeowners more than £426 million.
FTBR is a relief from a charge on SDLT for first-time buyers of residential property situated in England and Northern Ireland – where the market value purchase price is no more than £500,000.
If you, and anyone else you’re buying with, are a first-time buyer of a residential property, you can claim relief on purchases:
- made on or after 22 November 2017;
- Where the purchase price is no more than £500,000.
You will pay:
- 0% on the first £300,000;
- 5% on the remainder up to £500,000.
In the 2018 Autumn Budget, it was announced that FTBR had been extended to cover purchases of qualifying shared ownership properties where the first-time buyers did not elect to pay SDLT on the market value of the whole property when acquiring their initial interest.
The extension of the relief will apply retrospectively from 22 November 2017, meaning that a refund of tax will be payable to those who have paid SDLT after 22 November 2017 in circumstances which now qualify for first-time buyers’ relief.
- Scotland replaced SDLT with Land and Buildings Transaction Tax in 2015 and then, in February 2018, brought in its own version of FTBR.
- In April 2018, Wales replaced SDLT with Land Transaction Tax (LBT). While Wales does not have a version of FTBR, the residential property threshold at which LBT becomes payable (£180,000) is higher than in any other part of the UK.
Please do not hesitate to talk to us if you want to know more about any of the property transaction taxes within the UK.
Inheritance Tax Review by the Office of Tax Simplification
The first of two reports on inheritance tax (the second will be shared in Spring 2019) has been published by The Office of Tax Simplification (OTS).
An unprecedented 3,000 people shared their views about Inheritance Tax with the OTS, far more than in any previous review. Many of the respondents told the OTS that, at what is such a difficult time, they felt they were being asked to fill in complicated forms even when the relative who had died had only left a small amount.
The OTS’s own website stated:
“Too many people have to fill in Inheritance Tax forms, and the process is complex and old fashioned.
“Although Inheritance Tax is payable on less than 5% of the estates of the 570,000 people who die in the UK each year, around half of the families have to fill in the forms. Many also told us that their relative had worried about inheritance tax during their lifetime, even though it was not going to affect them.”
The first report gives an overview of concerns raised by the public and by professional advisors during the review and highlights the benefits of:
- Reducing or removing the requirement to submit forms for smaller or simpler estates, especially where there is no tax to pay;
- Simplifying the administration and guidance;
- Having banks and other financial institutions standardise their requirements;
- Automating the whole system by bringing it online.
It will be interesting to see what the second report has to say…
Small Businesses warned of “heavy price” of Making Tax Digital
Shortly before Christmas, HMRC started to send out “encouragement letters” to businesses within the scope of Making Tax Digital for VAT (MTDfV) and to those who were eligible to join the MTDfV pilot. In total, over a million letters will be sent out before the end of February.
Parliament’s Economic Affairs Committee has warned HMRC that small businesses “could pay a heavy price for the proposed change.” It also stated that HMRC has “failed to adequately support small businesses” ahead of the introduction of MTDfV, set to start from 1 April 2019. The Committee has urged HMRC and the Government to “start listening” to small businesses’ MTDfV concerns.
The legislation affects businesses which have a VAT-able turnover above the current VAT registration threshold of £85,000. Affected firms will need to keep a digital record of their business transactions and submit their VAT returns through third-party software, or spreadsheets, linked to HMRC’s own systems – via an application programming interface (API).
Please contact us for more information about the forthcoming MTDfV and how it may impact on your business.
Scottish tax bands diverge further
On the 12 December 2018, Derek Mackay, the Scottish Finance Secretary, unveiled the Scottish Budget for 2019/20 .
You will recall that this time last year he introduced two additional tax bands, which meant that Scottish resident taxpayers would now pay income tax at five different rates on their non-savings non-dividend income. Meanwhile, their income from savings, dividends, and any capital gains were to be taxed by reference to the rates and tax bands effective in the rest of the UK.
The effect of last year’s changes means that, in many instances, it is necessary to perform two parallel tax computations to establish the total income tax due and the applicable CGT rate.
This year, it’s okay – you can breathe a sigh of relief. Mackay has resisted the temptation to introduce further divergence in the rates of income tax this year.
For 2019/20, a Scottish taxpayer will be entitled to the same £12,500 personal allowance as the rest of the UK. The Scottish allowance will also be withdrawn at the same rate of £1 for every £2 of adjusted net income over £100,000.
|Band in 2019/20||Name of band||Income tax rate %|
|12,501 – 14,549||Starter rate||19|
|14,550 – 24,944||Basic rate||20|
|24,945 – 43,430||Intermediate rate||21|
|43,431 – 150,000||Higher rate||41|
Due to the fact that the power to set NIC rates and thresholds has not been devolved, the rates and thresholds applicable in Scotland are the same as in the rest of the UK.
In her recent AccountingWEB article, Rebecca Cave drew attention to the fact that “Combining the NIC and income tax rates for a Scottish taxpayer produces some very odd marginal rates”.
Land and Building Transaction Tax changes
Mackay is to increase Scotland’s Land and Buildings Transaction Tax (LBTT) Additional Dwelling Supplement (ADS) from 3% to 4%, effective from the 25 January 2019. This will take it out of line with the English equivalent Stamp Duty Land and Tax (SDLT) ADS rate of 3%.
The LBTT changes do not stop there. On the same date (25 January), the LBTT rates applicable to commercial property are also set to change:
|Up to 150,000||0||0|
|150,001 – 250,000||3||1|
|250,001 – 350,000||3||5|
The shape of things to come
Unless the Chancellor’s threat of a Spring Budget comes to fruition, we will have to wait until next autumn to see if the changes to LBTT will be mirrored by similar SDLT changes in England and Northern Ireland.
What about Wales?
Many of you reading this article will recall that since the 1 April 2018, the Welsh Assembly replaced SDLT with a Land Transaction Tax (LTT). It is, therefore, entirely possible that Wales might choose to adopt similar rates to those proposed by Scotland, or even to do something entirely different.
Advisory fuel rates for company cars
From 1st December 2018, there have been new company car advisory fuel rates published, stating that the previous rates can be used for up to one month from the date the new rates apply. The rates only apply to employees using a company car, and the advisory fuel rates for journeys undertaken on or after 1st December 2018.
|1400cc or less||12p|
|1401cc – 2000cc||15p|
|1600cc or less||8p|
|1601cc – 2000cc||10p|
|1600cc or less||10p|
|1601cc – 2000cc||12p|
Marketing considerations for 2019
As we leave 2018 behind, it’s worth taking stock of this period of increased regulation on customer data protection and privacy – in parallel with its acceleration in marketing technology capabilities.
This blog provides an overview of what to consider in terms of the evolving expectations of and demands on customer journeys and the impact they may have on the marketing aspect of your business. The following are the top three marketing trends and strategies to consider for 2019.
Evolving customer experience and journeys
2018 has brought more paths through which customers can satisfy their ideal approach to buying. With the onset of conversational user interfaces through voice search and recognition from the likes of Apple Siri and Amazon Alexa, this is adding a key customer touchpoint that many marketing approaches are yet to adopt and adapt to.
Such examples help fuel the customer need for convenience, being able to request what they want, when they want it, and how. As data becomes richer in terms of what we understand about customer behaviour, the personalisation of the customer experience can become deeper – albeit at a time when the use of data is being re-evaluated by companies such as Facebook.
If you are continuing with the over-used approach of marketing to “millennials”, this will limit how your brand or customer experience connects with twenty- to thirty-year olds today – as building your marketing approach will be subject to change in observing this consumer group.
There is a huge opportunity in blending customer data from silos, such as combining what you know from your business data on your customers with that which is coming from social data. Marketing teams will need to best balance the careful use of client data, segmenting based on specific personas and on an experience personalised on how customers wish to interact.
Be more than a service. Be a trusted brand with values
“Your brand is what people say about you when you’re not in the room” (Jeff Bezos)
For companies who have not yet positioned their brand to a set of values, you should do so in 2019. The majority of today’s customers are belief-driven buyers, harnessing their brand loyalty to what the company stands for – whether that is helping others, trust, quality, innovation etc. Although there maybe the danger of alienating some customers, brand values can deepen the customer-company relationship at an emotional level.
Manage your reputation; be prepared for a crisis
“It takes twenty years to build a reputation and five minutes to ruin it” (Warren Buffett)
“With Google, if a result is based on an established view, it will find its way on to the first page. Taking this approach, if the sentiment about your brand is a bad one, intentionally or accidently, then this may cause significant collateral damage for a long time – if a suitable response is not deployed.
“With the depth of opportunity for brands to advertise on nearly every website and platform consumers use, negative reviews can proliferate rapidly, and it is essential you are able to respond to help mitigate, correct, or address the perception. For example, this might be by listening to what people are saying online and making adjustments accordingly.
“No company is safe from reputation or brand crises and, as such, it is recommended to have a dedicated owner in your team to manage such an unfortunate event.
Newswire and blog articles in HTML:
VAT Making Tax Digital – A Giant Step
It’s official. Sole traders and companies with up-to-date VAT affairs are now able to join HMRC’s test phase for VAT Making Tax Digital (MTD). While testing of VAT-MTD started last April, until now it has been on a limited, controlled, invitation-only basis.
In what can be taken as a clear indication of the department’s confidence, the VAT MTD pilot has now been opened to accept everyone.
In support of the public test phase, a suite of new and updated guidance is available to help VAT-registered businesses and their agents get to grips with the new requirements.
The newly published guidance covers:
- Use of software to submit VAT returns. A guide outlining how to sign up a business for the MTD-VAT pilot and how to join.
- For agents: use of software to submit VAT returns. A guide outlining how an agent and their clients can sign up for the MTD-VAT pilot.
- Find software suppliers for sending VAT returns and Income Tax updates. This lists third-party HMRC-recognised software packages that support the Income Tax and VAT-MTD pilots.
HMRC has also published a series of videos on its Help and Support page:
- How to sign up for Making Tax Digital for VAT.
- How does Making Tax Digital for VAT affect you?
- Making Tax Digital for VAT – what software is compatible?
- Digital record-keeping for VAT.
- Creating an Agent Service Account.
Can everyone join?
As of last month, provided they haven’t incurred a default surcharge in the last two years, just over 40% of the approximate 1.1 million VAT-registered entities, who are required to keep digital records and file MTD-compliant VAT returns from April next year, will be able to apply to onboard early.
A further 100,000 will be able to join the public pilot by the end of this month.
Those who can’t join
There’s a small but significant list of VAT registered entities who yet remain unable to join the pilot. These include those who:
- trade with the EU;
- are based overseas;
- submit VAT returns annually;
- make payments on accounts;
- use the flat rate scheme;
- are newly registered and have not yet filed a return;
- are members of VAT groups or VAT divisions;
- have received a Default Surcharge notice in the last 24 months. However, they will be allowed in by the end of this month;
- are unincorporated not-for profit organisations;
- are trusts;
- are Local Authorities who complete VAT form 21;
- Public Corporations;
To help them plan, HMRC has published a timetable indicating when each of the embargoed cohorts will be able to join the pilot.
3.5% to get a deferral
HMRC has reported that 3.5% of those mandated will not be able to onboard before the end of December.
This cohort will have their mandation date pushed back to October 2019.
Those affected include:
- VAT groups or VAT divisions.
- Overseas traders registered for VAT.
- Local Authorities.
- Public Corporations.
All of those in the deferral group will be written to by HMRC.
What is Making Tax Digital?
Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and to keep on top of their affairs. This will ultimately result, for millions of people, in the end of the annual tax return.
As the first stage of a wider roll-out process, VAT-registered businesses with VAT-able turnover above the compulsory £85,000 registration threshold will be mandated to join the VAT Making Tax Digital for Business regime. To meet their VAT return obligations, this will apply to all return periods commencing April 2019.
As a minimum, they will be required to maintain their VAT records digitally and to file MTD-compliant VAT returns using third party software. Those mandated to join will no longer be able to log on to HMRC’s portal to complete and file their online return.
Those businesses who voluntarily registered for VAT, with a VAT-able turnover under £85,000, will not be required to use the system, although they can choose to do so voluntarily.
Contact us if you’re confused about what MTD will mean for your business. We’re here to help.
Helping businesses and individuals prepare for a ‘No Deal’ Brexit
The government has issued notices that aim to help both businesses and individuals prepare in the event of a UK-EU agreement not being realized. The notices cover passports and driving licenses, together with data protection and mobile phone roaming charges. With concerns surrounding the possibility, on 29 March 2019, of the UK leaving the EU without a deal, a survey by the Federation of Small Businesses (FSB) has revealed:
- 14% of small businesses have started planning for a No Deal Brexit. Another 41% believe that a No Deal Brexit will have an impact on their business but have not yet started planning for the possibility.
- 10% believe that a No Deal Brexit will have a positive impact on their business. 48% believe a No Deal scenario will have a negative effect.
Reflecting on the research, FSB National Chairman, Mike Cherry, stated:
“It is obvious that our small firms are not prepared or ready for a chaotic no deal Brexit and the impact that it will have on their businesses. If you sell your products to the EU, buy goods from the EU or if your business relies on staff from the EU, you now see this outcome as a clear and present threat to your business.”
To see the FSB survey press release visit here.
It’s coming whether we like it or not. But don’t worry! We can help you navigate your way through the uncertainty that is Brexit.
Self-employed Class 2 National Insurance remains
The government has decided not to abolish Class 2 National Insurance Contributions (NICs) from April 2019. This is today paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more annually.
Robert Jenrick, Exchequer Secretary to the Treasury stated, “We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.”
He added, “Having listened to those likely to be affected by this change, we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.”
Guidance on recognising phishing emails and texts
The guidance has been updated on how businesses and individuals should recognise whether contact from HMRC is genuine or whether it is phishing or fake.
Five Steps to a Successful Business Strategy
When setting out on a new venture or business idea, so many businesses do not succeed. This could be down to a combination of factors. Yet, one common factor is the challenges associated with executing the idea and establishing it in the market.
To ensure your idea or business has the best start, or if you are reviewing current plans and progress, you must first develop an effective business strategy to support you. To help, here are five steps to guide you.
- Build up your data and knowledge
To know where you want to go is first to understand where you are today. The best way to do this is to investigate the past. This could be through data from your market, so you understand the size of the opportunity at stake. Investigate the total market size, the number of potential customers, and the growth rates of similar projects. Using the SWOT framework helps you identify Strengths, Weaknesses, Opportunities, and Threats, both internally and externally.
You might want to use the PESTLE model to explore deeper into external factors that may affect your business. This looks into the Political, Economic, Social, Technological, Legal, and Environmental aspects of your business and market. It is key to make sure you involve the right people in this process to help you build up your data and knowledge.
Once you understand the market, begin to narrow down your idea, exploring the unique business problem you are looking to solve, and the market opportunity associated to it.
- Build Your Vision and Mission Statement
Your vision should be used to describe the future direction of the business and its aims in the medium to long term. It’s about describing your organisation’s purpose and values. This should be built in parallel to your mission statement, which defines the organisation’s purpose and outlines its primary objectives.
In simple terms, organisations summarise their goals and objectives in mission and vision statements. These serve different purposes but are often confused with each other. While a mission statement describes what a company wants to do now, a vision statement outlines what a company wants to be in the future.
The mission statement focuses on what needs to be done in the short term to realise the long-term vision. So, for the vision statement, you are asking where do you want to be in three to five years’ time. The mission statement, alternatively, asks: what do we do? how do we do it? for whom do we do it? what value do we bring?
Amazon’s Corporate Vision Statement: “To be Earth’s most customer-centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Google’s Corporate Mission Statement: “To organize the world’s information and make it universally accessible and useful.”
- Define your Strategy and Tactical Plans
At this stage, the aim is to develop a set of high-level objectives for all areas of the business. These need to highlight the priorities and inform the plans that will ensure delivery of the company’s vision and mission. By reviewing your work in step one across the SWOT and PESTLE analyses, you can layer these into your SMART Objectives (Specific, Measurable, Achievable, Realistic and Time-related).
Your objectives must also include factors such as KPI’s, resource allocation, and budget requirements. It is key to align your resources and structure according to the strategy, so to clarify everyone’s role and accountability.
- Track and Manage Performance
All the planning and hard work may have been done, but it’s vital to review continuously all objectives and action plans – to ensure you’re still on track to achieve that overall goal. Managing and monitoring a whole strategy is a complex task, which is why many directors, managers and business leaders are looking to alternative methods of handling strategies. Creating, managing and reviewing a strategy requires you to capture the relevant information, break down large chunks of information, plan, prioritise, and have a clear strategic vision.
- Execute, Learn and Review
Firstly, execute your business strategy with excellence and, throughout, capture learning so that it can be reapplied or used to adjust the plan if necessary. Do not be afraid to make mistakes, but make sure each mistake is an opportunity to apply learning to the strategy. Executing at the highest level is key: anyone can have a good idea, but those who can execute make a lesser idea into a successful business.
Remember always to celebrate your team and business successes. It can be quite easy to get dragged into the here-and-now and forget to reflect on the great achievements of the organisation.
A daunting prospect
If after reading our article, you feel daunted by what you need to do, don’t worry. We are here to help you every step of the way. Simply give us a call and we will guide you through the challenging start-up maze.
Since November 2017, more than 120,000 first-time buyers have saved £284,000 following the introduction of first-time buyers’ relief from Stamp Duty Land Tax (SDLT). SDLT is a tax on properties in England and Northern Ireland. It is estimated that, over the next five years, this relief will help over a million people get onto the property ladder.
The relief ensures that first-time buyers purchasing homes valued up to £300,000 do not incur a SDLT charge at all – with those paying up to £500,000 also benefitting from a reduction.
Mel Stride, MP, The Financial Secretary to the Treasury said, “once again, we can see that our cut to stamp duty for first-time buyers is helping to make the dream of home ownership a reality for a new generation – exactly as we intended…”.
He added, “In addition, we’re building more homes in the right areas, and have introduced generous schemes such as the Lifetime ISA and Help to Buy.”
Scotland and Wales
Those buying property in Scotland pay Land and Buildings Transaction Tax (LBTT), whilst those in Wales (since 1 April 2018) pay Land Transaction Tax (LTT). Earlier this year, Scotland introduced its own version of a new LBTT relief for first-time buyers of properties up to £175,000.
The Scottish relief raised the zero-tax threshold for first-time buyers from £145,000 to £175,000. It is estimated that around 80 per cent of first-time buyers in Scotland will pay not LBTT at all.
Furthermore, Scottish first-time buyers acquiring properties above £175,000 will also benefit from relief on the portion of the price below the threshold – meaning all first-time buyers will benefit from the relief by up to £600.
In Wales, where SDLT has been replaced by a LTT from 1 April 2018, the starting rate will be £180,000, benefiting not just first-time buyers but all home buyers in Wales.
HMRC warns: Declare offshore assets
As of 1 October, the new Requirement to Correct (RTC) rules are upon us. Previously, under HMRC Offshore Disclosure Facilities, taxpayers had been encouraged to come clean with an offer of lower penalties than would have been incurred if “the error” had been discovered by HMRC.
All that has now changed. Failure to Correct rules, introduced alongside RTC, leave non-compliant taxpayers facing penalties of up to 200% of the resultant tax liability – or even more. Where the tax involved exceeds £25,000 per tax year, an additional penalty of up to 10% of the value of the asset concerned may be charged.
RTC only applies if HMRC is able to raise an assessment to recover the tax unpaid on 6 April 2017. Normal assessing rules apply to decide whether HMRC is able to raise such an assessment.
The most common reasons for failing to declare offshore tax are in relation to foreign property and holiday homes, investment income, and moving money into the UK from abroad.
HMRC have said the following:
“Offshore non-compliance occurs when there is tax owed to HMRC as a result of tax non-compliance and that non-compliance involves either an offshore matter or an offshore transfer.
The tax non-compliance involves an offshore matter if the unpaid tax is charged on or by reference to:
• income arising from a source in a territory outside the UK
• assets situated in a territory outside the UK
• activities carried on wholly or mainly in a territory outside the UK, or
• anything having effect as if it were income, assets or activities of a kind described above.
The tax non-compliance involves an offshore transfer if it is not an offshore matter, but the income (or sale proceeds in the case of a capital gain), or any part of the income, was either received abroad or was transferred abroad before 6 April 2017.
For inheritance tax, the tax non-compliance involves an offshore transfer if it is not an offshore matter, but the disposition that gives rise to the transfer of value involves a transfer of assets, and after that disposition, but on or before 5 April 2017, the assets, or any part of the assets, are transferred to a territory outside the UK.
In all cases, references to the income, proceeds or assets transferred includes any assets derived from or representing the income, proceeds or assets.
If the non-compliance meets these definitions, the RTC rule applies and failure to correct the position will result in the new tougher FTC penalties.”
Mel Stride, The Financial Secretary said, “Since 2010 we have secured over £2.8 billion for our vital public services by tackling offshore tax evaders, and we will continue to relentlessly crack down on those not playing by the rules.”
RTC is supported by the Common Reporting Standard (CRS), an international legal framework permitting the automatic exchange of information, between different country’s tax authorities, regarding financial accounts and investments held by non-residents, in order to help stop tax evasion. CRS came into force in the UK in 2016. In excess of one hundred countries are already signed up to CRS and are starting to share information. It has already significantly increased HMRC’s ability to detect UK taxpayers’ overseas non-compliance.
If you would like to discuss this, or any other matter further, then please contact us.
New Fuel Rates published for Company Cars
New company car advisory fuel rates were published, on September 1st, with the guidance indicating that the previous rates may be used for up to one month from the date the new rates applied. This only effects employees using a company car. The listed rates are shown below.
Petrol Engine size
12p 1400cc or less
15p 1401cc – 2000cc
22p Over 2000cc
LPG Engine size
7p 1400cc or less
9p 1401cc – 2000cc
13p Over 2000cc
Diesel Engine size
10p 1600cc or less
12p 1601cc – 2000cc
13p Over 2000cc
Latest guidance from HMRC in Employer Bulletin
HMRC Employer bulletins are magazines published every two months, giving up-to-date information on payroll topics for employers and agents.
The latest edition has useful information on reporting payroll information, information on the National Living Wage and the National Minimum Wage, and also information on fully electric company cars. There are also articles on Construction Industry Scheme (CIS) webinars and Welsh Rates of Income Tax. The Employer Bulletin is used to inform you about new products and any changes which may affect your employees. This information provides information on the following:
1. Reporting your payroll information accurately and on time.
2. Irregular payments and your completion of Full Payment Submissions.
3. Starter Declaration on a Full Payment Submission (FPS).
4. PAYE Settlement Agreements and Scottish Income Tax.
5. National Living Wage and National Minimum Wage.
6. Advisory Electricity Rate for fully electric company cars.
7. Welsh Rates of Income Tax.
8. Construction Industry Scheme (CIS) webinars.
9. Postgraduate Loans.
10. Benefits and Expenses: Company cars.
11. Tax avoidance loan schemes.
12. Completing an EYU in respect of employee’s National Insurance Contributions
13. Employment Income: Draft Legislation
14. Deadline for post-16 Child Benefit.
Hold tight for Brexit! Business guidance in the event of no deal
With less than six months to go until the UK leaves the EU – and with no post-Brexit deal yet on the table – there’s no doubt that we are entering unchartered waters. So, what should we do?
The UK’s Government insists that preparations for a no-deal scenario are part of its overall Brexit preparation strategy. Indeed, the Prime Minister’s Chequers statement, issued after her cabinet’s infamous July away day, included a pledge to step up preparedness for all possible outcomes to the negotiations, including a no deal scenario.
August technical notices
On the 23 August, a little over a month after May’s statement, the Department for Exiting the EU published 25 ‘technical notices’.
The documents covered such diverse areas, as:
• Applying for EU-funded programmes
• Driving and transport
• Money and Tax
• Importing and exporting
• Regulating medicines
The notes were supported by guidance entitled “UK government’s preparations for a ‘no deal’ scenario”. Its aim was to put the technical notices in context by explaining the Brexit negotiation’s progress to date and what might happen if the UK were to crash out of the EU.
September White paper
In early September, the House of Commons joined the party by publishing a briefing document (white paper) called “What happens if there’s no Brexit deal?”
At 172 pages, it’s not exactly a bedtime read. Nevertheless, its fifteen chapters cover all areas from “how could no deal happen?” through to “external relations”, and it is an excellent source of no-deal Brexit information.
HMRC publish a letter
In an unprecedented move, HMRC wrote to 145,000 businesses across the UK about the ramifications of a no-deal Brexit, should Britain crash out of the EU and the Customs union on the 29 March 2019.
The letter, written by HMRC’s Deputy Chief Executive Jim Harra and published on the 17 September, started positively by acknowledging:
“The UK government has reached agreement with the EU on the vast majority of withdrawal issues, including the terms of an implementation period. Full agreement on this will mean that trading with the EU during the implementation period would broadly stay the same until 31 December 2020.”
It then sought to give a degree of reassurance by stating “The approach of continuity does not mean that everything will stay the same, but the priority is maximising stability at the point of departure.”
After referring to the government’s focus “on securing a future partnership with the EU following the end of the implementation period in December 2020”, the letter’s tone changed. Harra referred to a no-deal eventuality being unlikely and continued to reassure readers: in the event of no-deal, the government is committed to prioritising stability for businesses.
He added that:
“we will continue to work closely with industry to ensure that interventions in a no deal scenario are conducted in a way which minimises delays and additional burdens for legitimate trade, while robustly ensuring compliance.”
If a disorderly exit happens there would, of course, be immediate changes to the way British businesses trade with the EU. Jim’s letter set the position out very clearly:
“If we leave the EU without a deal in March 2019, there would be immediate changes to the way UK businesses trade with the EU that impact on your business.
• UK businesses having to apply customs, excise and VAT procedures to goods traded with the EU, in the same way that already applies for goods traded outside of the EU.
• Trading partners in the EU having to apply customs, excise and VAT procedures to goods they receive from you, in the same way that they do for goods received from outside of the EU.
In particular, if your business currently trades only with the EU then you’d have to start completing customs declarations from March 2019 and customs checks would apply to your business for the first time.”
The letter concludes by saying, “there is no need to contact HMRC at this stage”. However, it suggests, “If you’re a member of a trade body, they might have useful information on their website. VAT advisers, customs agents, freight forwarders and other businesses also have services to help you to follow customs rules”.
There are many sources of information on Brexit, from listening to the TV and radio through reading newspapers to searching the web. However, some are more reliable than others. To get a balanced and informed view of what is going on, it is wise to access information from more than one source.
Government sources of information
• GOV.UK “Brexit” pages – you can sign up to receive regular updates.
• Government has published technical notices across a range of topics on GOV.UK to explain what will apply if the UK leaves the EU without a deal, including:
o The House of Commons published a white paper in early September
o HMRC’s Jim Harra’s “advice and guidance” letter
To discuss how this may impact your business, please contact us.
Blog: 5 Steps to Resilience
Running and managing your own business can be one of the hardest challenges of your life. The ups, the downs, the cash flow challenges, finding the right people – the list is endless. Likewise, though, are the ups in terms of success: winning the next deal, finding the best employees to help you.
However, one common trait business leaders possess is their ability to battle through the hard times, by way of resilience – a heroic struggle that is not for all. Resilience is not something we are born with, but instead is something we develop during our lifetimes. Below are the five essential tips on how to become more resilient.
1. Keep a positive attitude.
This is key to deflecting stress scenarios, to restructuring your pessimistic or negative thoughts. You need to ask yourself whether there is any rational basis to feel negatively about a situation.
It is also important to recognize that you are in control as to whether the glass is half-empty or half-full. Reframing your thoughts can also help you to be positive, so that you can alter the perceived value of the challenging event by accepting it and recovering from it.
2. Develop your moral compass.
Altruism is strongly related to resilience – and strengthening your set of core beliefs can help. The authors note that there is a strong correlation between faith and religious or spiritual beliefs and resilience.
3. Find a resilient role model and develop your coping skills.
Consider taking a resilient role model, such as a world leader or a successful business or sports star, so that you can consider how they would respond to stress. Also consider how spiritual beliefs help towards a deeper management of challenging times.
Rather than withdrawing and surrendering to your stress situations, the most resilient individuals use active rather than passive coping skills. You could minimise the self-questioning caused by the stress situation by creating positive thinking and in turn facing the fear directly.
4. Build your social network and physical fitness.
Rather than going solo, it is important to build a safety net of friends and family to help cope with stress situations. Regular exercise is one of the keys to cleansing your mind of stress – as it has been linked to improvements in mood, cognition, regulation of emotion, immunity, and overall self-esteem. Try to think of exercise as a welcome reprieve rather than a task, framing your mindset in a positive way.
5. Remember the 8-8-8 rule.
On a typical day, many people are over-worked, with lack of sleep and limited social or personal time. By breaking the day into thirds – eight hours for work, eight hours for personal / family time and eight hours for sleep – is recommended as a suitable routine to help you keep on top of the mental daily stresses.
The recent Bank of England 0.25% interest rate increase (to 0.75%) sees UK interest rates at their highest since March 2009. This change will have an immediate impact on interest costs, such as mortgages for those on variable or tracker rates, whilst the rise may take a little longer before it benefits savers.
In response, CBI Principal Economist Alpesh Paleja stated ‘The Monetary Policy Committee has signaled further rate rises over the next few years, if the economy evolves as they expect’. He added, ‘These are likely to be very slow and limited, particularly over the next year, as uncertainty around Brexit takes its toll on business investment.’
Summer holidays and Tax-Free Childcare (TFC)
Throughout the summer holidays, the government has been reminding parents seeking help for childcare costs that they can use Tax-Free Childcare (TFC). This is worth up to £2,000 per child per year, to pay for regulated holiday clubs. Findings from a recent survey by YouGov suggest that:
- 31% of parents feel stressed about arranging childcare for the school holidays.
- 30% of parents are concerned about balancing their job and school holiday childcare.
- 54% of parents indicate that they look forward to their children returning to school in September.
Making Tax Digital for VAT (MTDfV)
HMRC has published a new VAT Notice (700/22), ‘Making Tax Digital for VAT’.
The new notice provides information on the new rules with which VAT-registered entities will have to comply.
For VAT return periods commencing after 31 March 2019, VAT-registered entities with annual VAT-able turnover above £85,000 will legally be required to keep digital records for VAT purpose, using MTD compatible software and providing the data of the VAT return to HMRC through an API application programming interface.
This will take effect from 1 April 2019, for taxpayers who have a ‘prescribed accounting period’ which begins on that date, or from the first day of a taxpayer’s prescribed accounting period beginning after 1 April 2019.
Tax legislation next round published
For the Finance Bill 2018-19, the government has published draft legislation that could affect a range of taxes, from Stamp Duty Land Tax (SDLT) to Income Tax. This is now open for consultation and is aligned to the commitment from the government for a ‘competitive and fair tax system’.
The payment of taxes is also outlined, with businesses and individuals who do not pay their taxes on time potentially facing a penalty.
Running until 31 August 2018, the consultation will conclude on the final contents of the Finance Bill 2018-19, which will be subject to confirmation expected in November at the Budget 2018.
Marriage Allowance- 1 million couples eligible for £900 tax boost
Three million UK couples have claimed their Marriage Allowance. However, it is estimated that a further one million have not.
The Marriage Allowance allows married couples or those in a civil partnership, where neither pay beyond the basic tax rate, to transfer 10% of their unused personal allowance to their spouse or civil partner. This, in turn, can reduce their tax bill by up to £238 a year in 2018/19. The allowance was introduced in April 2015, and appropriate claims can be back-dated to prior years.
Relief for first-time buyers in Scotland
Around 80% of first-time buyers will pay no Scottish Land and Buildings Transaction Tax (LBTT).
30 June 2018 saw the introduction of the First-Time Buyers tax relief. The change has meant that the zero-rated LBTT threshold has increased from £145,000 to £175,000 for first-time buyers.
It is expected that this initiative will benefit 12,000 first-time buyers per year.
Cold calling ban requested on pensions
HMRC recently issued a consultation concerning draft technical regulations to ban pension cold calling
The consultation document sets out the policy intentions behind the proposed ban and invites comments on the draft regulations to implement the ban set out at Annex A.
Since the government has already consulted on the policy, this consultation is a technical consultation intended to seek final views on the draft regulations to ensure they meet policy objectives.
This draft also outlined the ban on cold calls promoting retirement income products. The consultation ended on 17 August 2018.
Raising finance for your business: Where to start
To help you kick-start your business, there are several ways in which to raise finance to get your idea underway or to further accelerate your growth.
At the time of writing, these are the most common routes to explore for finance. However, new offerings for finance are constantly evolving in line with financial innovations – so it is recommended to keep a close eye on what is happening. For now, these are the recommended routes, meaning that you don’t have to rely exclusively on traditional avenues, such as banks, to raise funds:
Keep it in the family
When transforming a new idea into a business, many people first go to their friends and family to help raise funds. Whilst many start-ups do this to help fund their new venture, it is recommended that you seek legal advice to ensure that you capture all aspects of the agreement in writing. This could be a simple contract between parties, including a detailed business plan and financial forecast for their review.
This will help to prevent challenges that may appear in the future, protecting your business and the investments of your friends and family. Most importantly, it will help you to maintain your personal relationships.
Business Angel investment
Angel Investments is a means for private and industry investors to explore opportunities to use their personal finance in exchange for shares in your business. Their expectation is usually for a return on their investment between three and eight years.
The good news here is that Angel Investors typically play an active role in your business, offering support and guidance to your strategy and plan. Obviously, then, an investor familiar with your industry would in most cases be the best choice.
For more information, the UK Business Angels Association, here, is a good place to start.
One option, rather than asking a few people to contribute large sums, is to ask a large amount of people to each invest smaller amounts. This is known as Crowdfunding and can appear in different forms:
- Equity is when the investment is exchanged for shares or for a stake in the business.
- Debt is when the money is provided with the view to receive money back with interest.
- Donations are for when people believe in your idea and base their contribution on their belief in that cause. Donors will expect nothing in return for their provision of funds.
Grant and Loans for Start-Ups
The government aims to accelerate the UK economy and as such provides grants and loans for businesses.
Grants are where a portion of taxpayers’ money each year is saved to drive new business ideas. With the money offered nationally, you will need to apply so that the government can assess whether you are eligible for the grant.
Start Up loans are provided through a government scheme aimed at entrepreneurs, with the average loan estimated at £6,000. Applications can go to £25,000 however, supported by twelve months of business mentoring. The loan must be paid back within five years, typically with an interest rate of 6%.
The tax gap for 2016 – 2017 has fallen to 5.7%, HMRC has confirmed. The “tax gap” relates to the tax that should be paid and the actual tax paid to HMRC.
In a statement, Mel Stride, Financial Secretary to the Treasury, said: ‘These really positive figures show that the tax gap is the lowest in the last five years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.’
She added, ‘Collecting taxes is essential for funding our vital public services such as the NHS. Indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.’
It is understood that HMRC considers the improvement to be linked to the department’s sustained efforts to tackle evasion and avoidance. From the findings in the Tax Gap publication, it was noted that small businesses made up the largest proportion of unpaid tax of £13.7 billion.
Additional findings include:
- 9.2 billion of unpaid taxes were due to errors and failure to take reasonable care.
- £5.4 billion made up by criminal attacks.
- £7.9 billion from income tax, national insurance contributions, and capital gains tax, equivalent to 16.4% of self assessment liabilities.
- The VAT gap indicates an improving trend, falling from 12.5% in 2005/06 to 8.9% in 2016/17.
RTI filing extended by HMRC until April 2019
The payroll Real Time Information (RTI) late filing easement has been extended by HMRC until April 2019. For the RTI payroll, it is a requirement for employers to submit details of payments made to employees on or before the day that salaries/wages are paid. The new amended easement applies when a Final Payment Submission (FPS) is late but is completed within three payment days of the employee’s pay day.
The easement applies from 6 March 2015 to 5 April 2019, but it must be noted that HMRC has clarified that employers who persistently file after the payment date but within these three days may be contacted or considered for a penalty. This could range from £100 to £400, depending on the size of the company.
Fraudsters stopped by HMRC, saving the public £2.4m
Fraudsters have been tackled by HMRC, with a focus on the use of premium rate phone numbers for services HMRC provide for free. The reported fraudsters create fake websites for HMRC and then look to charge for what are actually free services from HMRC, through re-direction to premium rate phone numbers. HMRC has confirmed that its genuine 0300 numbers are mainly free, or at least charged only at the local landline rate.
Mel Stride, Financial Secretary to the Treasury, said, ‘We know that HMRC is the most spoofed government brand, as criminals try to take advantage of the fact that everyone has some involvement with the tax authority. In this particular case, scammers try to dupe the public into paying large sums for services that are available for free or low cost.’
She added, ‘This is a brazen con, charging premium rates whilst simply redirecting calls to the real HMRC numbers that are available at low or no cost. It is a testament to the hard work of HMRC that they have prevented criminals extracting £2.4 million from the public.’
Latest edition of Employer Bulletin for employer guidance
In the latest edition of the Employer Bulletin, published by HMRC, there are a number of articles, including:
- P11D and P11D(b) filing and payment deadlines.
- Benefits in kind with cash allowances, flexible benefit packages, and salary sacrifice.
- National Living and Minimum Wage increases.
- Student Loans – to update payroll if you receive an SL1 for an employee.
- Fitness at Work – to help employers cut these costs and take advantage of the significant tax savings.
- Childcare voucher information and contracted childcare schemes.
- The Apprenticeship Levy – Levy-paying employers can then create an account on the apprenticeship service to spend levy funds on apprenticeships.
- CIS – Construction Industry Scheme with key pointers for subcontractors.
HMRC proposes new VAT rules for construction services
Subject to consultation, HMRC proposes to introduce new VAT rules for construction services, which have been published in a draft statutory instrument for consultation. It suggests, under the draft legislation, that supplies of standard or reduced-rated construction services between construction or building businesses will be subject to a domestic reverse charge. The result would mean that the customer will be liable to account for VAT due rather than the supplier. This legislation is expected from the 1st October 2019.
HMRC publish list of software providers for Making Tax Digital
HMRC has published the Making Tax Digital for VAT Guide, the Software Suppliers Supporting Making Tax Digital List, and HMRC Stakeholders Communication pack on the GOV.UK website. All can be found on the MTD for VAT collection page.
The notice gives guidance on digital record keeping and should be read in conjunction with other VAT notices.
- HMRC notes that more than 150 software suppliers have stated their interest in providing software for Making Tax Digital for VAT. Currently, there are just over twenty developers with VAT-MTD ready products.
- Of the 150, over forty have said they’ll have software ready during the first phase of the VAT-MTD pilot.
- The pilot will be opened to allow more businesses and agents to join later this year.
There is also the MTD for Business – Stakeholder Communications pack, which is intended to support businesses that need to make the transition to digital VAT business record keeping as well as the submission of VAT returns using MTD-compatible software from 1 April 2019.
If your business is above the VAT turn-over threshold of £85,000, please discuss with your accountant how QuickBooks Online can help get you ready to file for MTD for April 2019.
Becoming self-employed? Here are five recommended rules to help you.
1. Have clear goals and be realistic about what you want to achieve.
Consider what you want to achieve, whether this be the dream of building your business, eventually having staff, or giving something back to society. Do you want to work less hours, have a better work / life balance, or just be your own boss?
Once you decide, make sure you make your goals realistic and ensure you determine your process goals – the things you will need to do to get you to your overall goal.
Have your goal and objective clear and written down at the start, and keep referring to it to avoid straying off course. Building a business takes time and any distraction is time you will not get back.
2. Be brutal with your time and leverage support around you.
Be strict about working hours, as this may be one of the main reasons you went self-employed in the first place. Don’t be tempted to waste your time: balance your working hours between building your new prospect base, networking for business, and delivering to your customers.
Make sure you have a support network around you. It can be lonely working alone and it is great to have others with whom to share ideas and thoughts to help you and your business improve. These can be colleagues, networking groups, or industry bodies.
3. Have professional standards.
Consider all you do to put the customer at the heart of your business and be professional at all times. Be on time for all appointments and be dressed appropriately, acting professionally on the clients’ premises and following appropriate business etiquette.
Balance what you do as a professional off-line with that online. Make sure your website, invoices and methods of payment are all to a high professional standard. With cost effective business solutions such as QuickBooks Self-Employed, you can easily manage all aspects of your business process in a professional way.
4. Keep close and connected to your industry.
Whatever industry you are in, it will be constantly evolving, and it is key to keep connected, staying close to new developments, compliance, regulations, and best practices. This will help you get the training and certifications you need, as well as remaining an expert in your industry.
5. Maintain your work / life balance.
Focusing only on work is not good for anyone, so do consider what other hobbies or family activities you might enjoy. Maintain your social and family balance and avoid being over-worked.
Who would have thought that the Intermediaries Legislation – commonly known as IR35 – is almost twenty years old? Despite the passage of time, issues regarding employment status are less clear than ever.
This is certainly no less true in the last few months, which has seen three IR35 related cases pass through the First-Tier Tribunal (FTT) – with conflicting outcomes…
Christa Ackroyd Media Ltd
The BBC engaged (contracted) Christa Ackroyd through her Personal Service Company (PSC), Christa Ackroyd Media Limited (CAM), to co-present their Look North Program on a seven-year contract. In 2013, after a three-month period off air, Ackroyd was sacked. It was reported at the time that the sacking was because of an alleged dispute concerning her employment status and payment of tax. This was later supported by documents produced to the Courts, revealing that the BBC terminated CAM’s contract after HMRC issued to Ackroyd’s company a formal demand for unpaid tax.
Employed or not?
Despite Ackroyd’s insistence to the contrary, HMRC successfully argued before the FTT that she was engaged under a contract of service (employed contact), rather than one for services (a self-employed contract).
The FTT’s ruling stated that she was “economically dependent on the hypothetical contract with the BBC,” which took up most of, if not all of, her working time and that a “hypothetical contract of that length […] terminable only for a material breach points towards a contract of employment.”
The First-Tier Tribunal ruled that the TV personality’s contract was caught by IR35, and they landed her company with an eye-watering £420,000 bill.
Mark Daniels – MDMC Limited
A few weeks later (March 2018), a second IR35-related case came before the FTT, and with it came further layers of complexity and uncertainty. Mark Daniels provided his services to Structured Tone Limited (SLT) though a PSC (MDMC Limited) – which in turn was engaged by Solutions, a recruitment agency.
In 2016, HMRC determined that the contract to provide services on large construction projects should have been caught by IR35, and that the service company should have paid PAYE and NIC. In effect, there had been a contract for service.
Daniels successfully appealed, with the FTT finding that the engagement was for services, not for service, and that Daniels should not be treated as an employee.
Lack of rights
An absence of rights under the hypothetical contract – the lack of a notice period, holiday pay, or any employment benefits – proved to be a key factor influencing the FTT. All of these would have had to be present if Daniels had been engaged directly as an employee.
Interestingly, the FTT dismissed “control” as a factor by concluding that, in a large project, there is a clear structure to the work which had to be done, and that an individual working within that structure was not being controlled by the end user; they were merely working within the structure.
Ian Wells – Jensal Software Limited
Details of an October 2017 case have recently received publicity. Its focus was on weak Mutuality of Obligation (MOO).
Wells worked on a project concerned with DWP’s Universal Credit (UCs) rollout.
It involved him attending a DWP office and travelling to different sites. He had the use of a secure DWP laptop and the tribunal heard evidence of meetings between Wells and DWP managers involved with the project.
HMRC concluded that there been a direct contract between Wells and the DWP during the period of engagement – a contract of service, not a contract for services. Wells was asked to pay £14,658 in income tax and £12,011 in respect of Class 1 NICs.
At the FTT stage, the judge examined in detail three conditions determining employment status.
- Mutuality of obligation (MOO),
- The degree of control,
- Sufficient mutuality of work-placed obligation.
On the question of MOO, the judge stated: ‘The essence of the relationship was that there was no continuing obligation on the part of the DWP to provide work; if it chose to abandon the project there was no contractual basis upon which Mr Wells could demand further work…” The MOO was too weak, and, as a result, the relationship did not go far enough to be classed as one of employment.
Lack of control
When he turned to degree of control, the judge said ‘The level of control exercised did not go beyond that which was usual for an independent contractor…”
He concluded that Mr Wells was not subject to a degree of control to an extent that would constitute a contract of employment.
Off-payroll working for the public sector
New IR35 rules concerning “Off-payroll Working” in the public sector came into effect on 6 April 2017.
The effect has been to shift responsibility for decisions on whether IR35 is applied – from the intermediary-worker providing their services via a PSC, to the public-sector engager.
Where an engagement is deemed to fall within the new IR35 rules, the person paying the PSC (that is the public-sector body or third-party-agency) is responsible for deducting tax and NICs under PAYE.
In many instances, public-sector bodies have made blanket decisions. In these cases, workers providing their services through an intermediary have been caught under the new rules even when they clearly are not.
New Off-payroll consultation
Things could become even more complicated if Phillip Hammond’s stated intention to widen the reach of Off-payroll working legislation to the private sector becomes reality.
On the 18 May 2018, HMRC and HM Treasury published a consultation document called “Off-payroll working in the private sector”.
Where does this leave us now?
The recent flurry of FTT cases, combined with last year’s legislative changes and the recently published private sector worker consultation, only serve to underpin how difficult it is to navigate the intermediaries’ taxation legislation.
If you are concerned that you might be caught by IR35, or if you are considering working through a PSC, contact us, we are not IR35 experts and do not offer advice on IR35 but we can refer you to Accountax Consulting to ensure you get the right advice.
There have been warnings issued by HMRC regarding tax scams that approach individuals through SMS and emails. At present, HMRC are processing real refunds for the previous year and the scam is intended to replicate this approach through messages claiming the taxpayer is entitled to a rebate. This subsequently leads to the request of personal account details in order to facilitate that rebate.
It is key to understand and to stress that HMRC will only ever inform individuals of a tax refund by post or through their employer – and that they will never provide this communication through email, SMS, or voicemail. It is advised not to access or click any links, downloads, or attachments from any suspect messages from HMRC.
In a recent comment on the issue, the Financial Secretary to the Treasury, Mel Stride, stated, “We know that criminals will try and use events like the end of the financial year, the self-assessment deadline, and the issuing of tax refunds to target the public and attempt to get them to reveal their personal data.”
If you are concerned that you might have been approached by a scammer, or if you would just like more information, contact us for the right advice.
The start of a new year is a great time for reflection, in particular when it comes to your finances, and planning to best achieve your goals in the forthcoming year.
Following these 5 simple steps, should help you prepare to have your finances in order.
Prioritise around your clearly defined financial goal
First step is to set a clear financial goal; this should avoid being vague and should not be unachievable. Such actionable goals could be “to have increased my savings and use the full ISA allowance for the year”, or “to have cleared my credit card down to zero”.
Be sure to prioritize your approach to achieve your goals, so in this case you could set a weekly target of saving and/or to make a list of your debts to pay off first, interest rates against the debt could help you plan which to tackle first. In setting a goal, such as to make a 10% annual return on savings, there would be no point in having a credit card charging 15% per month on debt, as this would diminish the achievement.
Use your tax-free allowances
Whether you are investing in your own SIPP, or in an ISA, make sure to maximise the tax-free allowances that you are entitled to, for example, you can save £4,000 per year tax free into an ISA account. In terms of try to reduce the tax you are paying, such as for a higher rate tax payer, consider how by paying more into your pension, you can offset some of the tax you are charged.
Set your own personal “tax” on your salary each month
Automatic savings plans are an ideal way to get started. Consider this concept – if the government increased your tax rate, you would naturally pay it. So, by setting your own ‘tax rate’ you could automatically save a set amount monthly by transferring into a savings account, to help reach a savings goal.
Out with the old and do what you love
Make sure to close previous old and unused bank accounts and credit cards as these can impact your credit score rating and access to finance. Then focus on doing what you love, finding a way to turn your passions and hobbies into a profit.
Learn and give back
By committing the time to read financial content, you can support your learning, and explore new investment approaches and business metrics. Even if you could only manage 1 hour per week, perhaps a train journey or some breakfast reading, you could to start to review your financial library with a view to help build a portfolio of diversified investments for the future, or maybe retirement. Once your savings and investments are underway, or at a level which you feel comfortable, then you could give back to a designated charity, making the investments and resources even more meaningful by helping others.
If you would like to find out more about any of the savings opportunities or you would like help setting your 5 goals, please get in touch after all we are here to help.