Month: July 2014

Doctor, Doctor, I think you should be an Employee

Young Doctor with stop sign

A report in the Telegraph on the 14th July 2014…

Dozens of NHS executives face possible investigation by HM Revenue and Customs after they refused to answer questions about their tax arrangements, it can be revealed.

An investigation has identified 86 senior health service officials paid off-payroll who have refused to give assurances to their employers that they are paying the correct level of income tax and national insurance.

They are paid through service companies – arrangements that allow public sector employees to be paid as contractors through private companies, potentially cutting their tax bills.

http://www.telegraph.co.uk/health/healthnews/10966314/Dozens-of-NHS-executives-face-tax-inquiry-into-off-payroll-earnings.html

Monitor found 30 foundation trusts had issues to resolve in their report of the 10th July 2014:

  • 20 foundation trusts have 1 or more senior employees paid through an off-payroll arrangement, and they are waiting for responses after asking those employees for assurance about their tax arrangements
  • 23 foundation trusts (including some of the 20 above) still have at least 1 board member or senior member of staff with significant financial responsibility employed through an off-payroll arrangement
  • of these 23 trusts, 9 are facing wider issues relating to their performance which they have explained is affecting their ability to recruit and retain permanent skilled staff; this resulted in the need to use interim off-payroll contracts to attract high-performing staff to help improve the foundation trust’s situation
  • as a result of their performance issues, these 9 trusts are facing current enforcement action by Monitor, which is unrelated to their use of off-payroll employment
  • out of those 23 trusts, the other 14 which are not facing enforcement action have plans to end off-payroll arrangements by the end of the year

Will this end the use of PSC’s in the NHS?

steve@bicknells.net

What are Directors Emoluments?

Businessman With Gold Bar

The reporting requirements are set out in The Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, obviously emoluments include:

  1. Salary
  2. Bonuses
  3. Compensation for Loss of Office
  4. Benefits
  5. Share Options
  6. Long Term incentives
  7. Pensions

But it can also include payments made via other companies for ‘Qualifying Services’, these are payments paid in relation to the Directors services as a Director of the reporting company (Section 8, Part4, Paragraph 17).

In many cases this could be obvious for example if the Director used a Personal Service Company (PSC) or if the director invoices the company for management services or for management charges. But often invoices relate to the supply of products and services which don’t fall within qualifying services.

Its worth noting that unquoted companies with less than £200k for Directors Emoluments are not required to report details of the highest paid director.

Its also worth remembering that any related party transactions should be fully disclosed in the related party note, so is further clarification of what should be emoluments needed?

steve@bicknells.net

 

 

You could employ your spouse to help you do your job

Accounting Standards

Many micro business owners employ their spouse and as long as they perform a role in the business that’s fine and it can be very tax efficient.

But there are circumstances in larger businesses with several owners/directors where it isn’t practical to directly employ your spouse.

However, it could be possible to claim an expense for using your spouse as an assistant, take a look at EIM32415

A deduction can be given in the following circumstances:

  • where the employee is paid solely by results so that, in taking on assistance, the employee can maximise his or her earnings from the employment.
  • where it is actually part of the duties of the employment to engage and remunerate assistants to do some of the work.

So it may be possible to amend your employment contract to identify parts of your job that could be done by someone else and you could add a clause which says that you must ensure the work specified is done and that its your duty to employ an assistant to do it.

The duties could be anything – Admin, Secretarial, Market Research, Telesales…..

Depending on how much you pay your assistant you may need to account for PAYE and NI.

steve@bicknells.net

Is there any point in DOTAS if the tax will be paid upfront?

Scaring amounts

The Finance (No2) Bill 2014, which is due to receive Royal Assent in July, contains legislation which will enable HMRC to demand payment upfront of disputed tax in certain cases, principally involving tax avoidance or deferral. It is estimated that up to 43,000 taxpayers could receive such a demand. Those demands will be issued over an extended period but the first are likely to be issued as early as September 2014.

Taxpayers who have sought tax advantages through tax avoidance schemes that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) are likely to be most affected.

Here is a link to the SRNs (Scheme Reference Numbers) affected – click here

Over the next 2 years HMRC estimates that it will rake in £7 billion through the use of these notices. Of this £7 billion, individuals will weigh in with £5.1 billion. This would equate to each person having a gross income of £262,000.

Last week the Financial Times reported that Ingenious Media, an investment company, warned 1,300 of its investors, including business leaders, entertainers and sporting celebrities, such as David Beckham, to expect substantial tax bills with interest, as reward for using its tax avoidance scheme. (Contractor Weekly)

This is a radical change and many might say its been a long time coming.

It has always struck me as slightly bizarre the DOTAS were registered and allowed to exist.

steve@bicknells.net

 

Is your business ignoring Mobile?

Mobile phone in the wallet

A OnePoll survey commissioned by AppsBuilder reveals that £52.6 billion of potential revenue to be gained via mobile is being ignored by over 3.2 million UK SMEs. It found that 65.8% of the nation’s 4.9 million SMEs don’t currently have a mobile presence, equating to potential lost revenues of £52.6 billion in the next 12 months alone. The number of consumers in the UK using mobile phones to access the internet has doubled over the past three years and about 5% of all UK retail sales come via mobile phones. (Law Donut)

Its not just about Apps, websites too need to be optimised…

With only 10% of the UK’s small and medium-sized enterprises (SMEs) having a mobile optimized website, businesses could be missing out on £77 billion in annual revenue a study has found. And only 13% of those without a mobile optimized site plan to have one by the end of 2014.

The survey, conducted by Impact Research for hibu, asked 900 UK SME owners and IT leaders about their companies’ websites, revenues and future plans for the mobile web. It showed that 45% of UK SMEs do not have a website, yet believe their annual revenue could rise by 5.4% if they had a website that was optimised for mobile transactions, equating to an average of £11,155 extra turnover annually.

http://internetretailing.net/2014/02/ignoring-the-move-to-mobile-is-costing-uk-smes-77bn-a-year-study-find/

I find it incredible that 45% of SME’s do not have a website? how will customers find them?

The days of looking yellow pages and printed directories are long gone, most people search google to find the goods and services they need.

steve@bicknells.net

 

What is your status – Self Employed or Employed?

Business people group.

A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.

HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm

If a worker should be an employee HMRC will seek to recover the employment taxes from the employer not the worker, so there are considerable risks for the employer if the status of its workers is wrongly assessed.

Some employers might decide to insist that sub-contractors must be limited companies, as companies can’t not be reclassified as employees.

The sub-contractor would then need to assess whether IR35 applies to their contract. If IR35 does apply then please read this blog on Deemed Payments

steve@bicknells.net

 

 

 

Has your Virtual FD ever been a Real FD?

Flying Superhero

If you search the internet you will find that almost every accounting practice now offers to be your Virtual FD. Compliance work on year end accounts and tax returns has become highly competitive and accountants feel they should provide additional services.

Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time FD) but they need help with:

  • Business Plans
  • Budgeting and Forecasting
  • Cash Flow Management
  • Buy or Rent decisions
  • Capital Investment Appraisal
  • Accounting Procedures and Systems
  • Business Strategy
  • Busines Funding and Investment
  • KPI’s

Virtual FD’s fill this gap because:

  1. You only pay for what you need
  2. There is no employment contract
  3. It provides access to higher level of expertise (in theory)

In May this year the ACCA issued a warning after research from cloud accounting software provider ClearBooks showed just 8 per cent of small businesses considered an accountant’s qualifications when choosing one. There is no law preventing anyone from calling themselves an accountant, and that as a result small businesses could be unknowingly paying someone without the necessary skills to handle their finances and help their business grow.

Although some unqualified accountants may do good work, an unqualified accountant is not answerable to any regulatory body and so cannot be disciplined. They have not passed exams that would have tested their knowledge, they are not subjected to any ongoing inspection of their practices and processes, and, crucially, they are not obliged to participate in any ongoing training to keep them up to date with ever changing legislation. Many may not even have any professional indemnity insurance, which clients can turn to if their qualified accountant makes a mistake.

So what experience does your accountant have to show that they have the skills to be your Virtual FD?

I am sure that in theory they have the technical skills but is that enough?

With the exception of CIMA accountants many accountants in practice have never worked in business let alone been a Finance Director!

I happen to think that time served experience as an FD does make a difference because it greatly improves your insight and skills.

Would you get on a plane with a Pilot who in theory knew how to fly but had never actually piloted a plane before?

When you choose a Virtual FD you are trusting them with the success of your business. Choose wisely!

steve@bicknells.net

 

 

 

 

VAT crisis for Stalls, Car Boots, Serviced Offices and Markets

Crafts- Market /Craft fair with stall holder

Until now the hire of stalls and other pitches used for temporary sales events have generally been considered to be the supply of land and exempt from VAT in accordance with Item 1, Group 1, Scedule 9 VAT Act 1994 and http://www.hmrc.gov.uk/vat/managing/reclaiming/partial-exemption.htm

But following discussions at EU level in connection with antiques fairs HMRC now feel that VAT should be chargeable at Standard Rate.

Not only that HMRC want VAT to be payable on add-on services such as promoting the fair, providing power and security which had been treated as incidental and VAT exempt.

The change in policy (according to http://www.tipsandadvice-vat.co.uk) came about following a VAT inspection and the decision is now being appealed.

Whilst the case applies to antiques if HMRC win it will be applied to:

  • Car Boot Sales
  • Services Office Accomodation
  • Market Stalls

This could have a massive effect on small traders who are not VAT registered.

steve@bicknells.net