Month: September 2017

HMRC lose first case to fine a Senior Finance Officer for errors

All companies must deliver correct and complete tax returns.

A company may not be able to do this if its tax accounting arrangements are not fit for purpose. These arrangements will range from how it accounts for its business transactions to how it works out its final tax liability.

Schedule 46 FA09 sets out rules for certain large companies. Those companies must establish and maintain their tax accounting arrangements and their Senior Accounting Officer (SAO) is responsible for ensuring that they do.

This guidance tells the reader about

  • the rules that put responsibilities on those companies and particularly their SAOs
  • the actions that those companies and SAOs must take
  • how HMRC will ensure that they comply with the rules, and
  • the penalties chargeable if they fail to comply.

The way in which HMRC ensures compliance with the SAO rules is consistent with HMRC’s wider strategy for Mid-sized and Large Businesses by which we seek to build and maintain open and transparent relationships with companies and to work collaboratively with them in real time to reduce their level of tax compliance risk.

Currently SAO rules only apply to large companies (turnover of £200m plus) but will HMRC extent this to smaller companies?

Senior Accounting Officer Main duty: what is the main duty

The main duty of a Senior Accounting Officer (SAO) is to take reasonable steps to ensure that a qualifying company, see SAOG11000, establishes and maintains appropriate tax accounting arrangements.

This means, in particular, that the SAO must take reasonable steps to

  • monitor the accounting arrangements of the company and
  • identify any respects in which those arrangements are not appropriate tax accounting arrangements.

Penalties

A penalty of £5,000 is charged for the following failures:

  • Failure by the company to notify HMRC of the name and contact details of its SAO
  • Failure by the SAO to carry out their main duty under the rules
  • Failure by the SAO to provide a certificate to HMRC, or providing a certificate that contains a careless or deliberate inaccuracy.

The penalty is payable by the person responsible for the failure, as above.  The penalties are at a flat rate and cannot be mitigated.

K Thathiah v HMRC [2017] UKFTT 601 (3 August 2017)

The FTT found that a senior accounting officer (SAO) had not breached his main duty under FA 2009 Sch 46.

The case related to VAT errors totaling £1.3m despite providing ‘clean’ certificates, however, it was decided that reasonable steps were being taken to ensure the accuracy of VAT returns for example setting up a team, providing training and using an agent.

I think all SAO’s should take this a warning! get the right systems and procedures or face personal penalties

steve@bicknells.net

HMRC Tax Experts to directly advise growing businesses

On the 20th September 2017 HMRC announced

A new service to directly help mid-sized businesses as they expand and grow, has been launched today by HM Revenue and Customs (HMRC).

There are around 170,000 mid-sized businesses registered in the UK. Businesses with either a turnover of more than £10 million or more than 20 employees, and undergoing significant growth, can now seek expert help from HMRC growth support specialists.

Known as the Growth Support Service, HMRC tax experts will offer dedicated support, tailored to the customer’s needs. It has been created to help growing, mid-sized businesses access the information and services they need.

This could include:

  • helping with tax queries about their growing business

  • supplying accurate information and co-ordinating technical expertise from across HMRC

  • supporting them to get their tax right first time and access relevant incentives or reliefs

I wonder if HMRC have plans to help other businesses too?

steve@bicknells.net

 

1 in 5 Estate Agents are expected to go bust!

According to a report published by accountancy firm Moore Stephens in July (reported in the Independent), a total of 19 per cent of estate agents – or 4,928 out of the 25,560 across the country – are showing signs of financial insolvency.

There are two major factors behind the figures

Online Agents

The growth of agents like Purple Bricks, Right Move, Zoopla and others.

The offer lower fees and easy access which is putting high street agents under pressure to cut their fees.

Reduced Activity

The volume of house sales.

The level of property sales is still below where it was before the 2007/8 financial crisis. In the year to March, 1.2 million properties were sold, marking a 32 per cent decrease on the pre-crash high of 1.7 million. [Independent]

steve@bicknells.net

When is a Van not a Van? when its a VW Transporter Kombi!

It makes a big difference whether a vehicle is treated as a Car or a Van for tax purposes, in summary:

  1. Benefit in Kind on Cars is linked to CO2 where as on a Van its Flat Rate (and could be zero if your private use is insignificant)
  2. Vans qualify for the Annual Investment Allowance, Cars have restricted Capital Allowances
  3. You can reclaim VAT on Vans but its much harder to reclaim VAT on cars

HMRC have some guidance in EIM23150….

Under this measure, a double cab pick-up that has a payload of 1 tonne (1,000kg) or more is accepted as a van for benefits purposes. Payload means gross vehicle weight (or design weight) less unoccupied kerb weight (care is needed when looking at manufacturers’ brochures as they sometimes define payload differently).

Under a separate agreement between Customs and the Society of Motor Manufacturers and Traders (SMMT), a hard top consisting of metal, fibre glass or similar material, with or without windows, is accorded a generic weight of 45kg. Therefore the addition of a hard top to a double cab pick-up with an ex-works payload of 1,010 kg will convert the vehicle into a car (net payload reduced to 965 kg). Under this agreement, the weight of all other optional accessories is disregarded. HMRC has also adopted this treatment.

http://www.hmrc.gov.uk/manuals/eimanual/eim23150.htm

Kombi’s have been a grey area, but not any more, following the case of Noel Payne v HMRC as reported by Croner Taxwise…

Under ITEPA 2003 S.115, a van is a vehicle where its primary construction is for the conveyance of goods or burden.  Kombi vans and those similar have not previously been thought to fall into this category due to them being designed to carry both goods and people. Historically, HMRC has offered a concession from 2002/2003 onwards for vehicles of a very similar construction, double cab pickups (including both uncovered and covered models), if the payload capacity of the pickup exceeds a metric tonne. HMRC accepts that these vehicles can be treated as a van for benefit in kind purposes.

With such similarities in the construction of the Kombi van, this has led to this concession being applied to the Kombi vans as well. However, in Noel Payne vs HMRC, a judgment was reached that the primary construction of the kombi van was not for the conveyance of goods alone but rather that its purpose was for the conveyance of both goods and people equally. This means that the Kombi did not meet the requirement to be considered to be a van and therefore for benefit in kind purposes it is a car.

The advice from Croner is that from now on Kombi’s and any van built to carry passengers should now be treated as a car for benefit in kind purposes, the case did involve a Vivaro as well but that was manufactured as a Van and later converted so that was allowed to be treated as a Van.

This also has implications for VAT and Capital Allowances.

steve@bicknells.net

How will Clause 24 affect you?

Clause 24 of the Finance Bill sets out restrictions for individuals on claiming mortgage interest as a cost against their property investment income, for individuals it will work as follows

2017/18 75% of the interest can be claimed in full and 25% will get relief at 20%

2018/19 50% of the interest can be claimed in full and 50% will get relief at 20%

2019/20 25% of the interest can be claimed in full and 75% will get relief at 20%

2020/21 100% will get only 20% relief

These rules will not apply to Companies, Companies will continue to claim full relief.

The rules also don’t apply to Furnished Holiday Lets.

Essentially Section 24 removes Interest from the property expenses and gives you tax relief at 20% (basic rate). So Higher rate tax payers will pay more tax.

The Mortgage Works have a spreadsheet calculator that demonstrates this and also incorporates other profits and income.

www.themortgageworks.co.uk/includes/xls/T1036_Tax_Change_Calculator.xlsx

steve@bicknells.net

Can you afford to be unethical?

Until the financial crisis in 2008 it felt like very little was being done to stop tax avoidance or unethical behaviour by businesses, but the climate has now changed.

Just because something isn’t illegal it doesn’t mean its ethical or moral and customers are now holding businesses to account.

UK waste management agency Business Waste polled 2,000 shoppers about their high street habits and found that 90% said they take a business’s ethical record and accreditation into account when it comes to things like paying taxes and environmental issues.[startup donut]

For example, 95% look for hygiene certificates and 75% want to see indications that companies they use are taking care of the planet. In addition, 45% say they would only consider using businesses that pay their tax in the UK.

Since 2012 we have seen companies like Google, Amazon and Star Bucks held to account over tax by the public accounts committee.

Back in 2014 Fair Tax was launched to try to help promote businesses who pay taxes rather than trying to avoid paying

The Fair Tax Mark Criteria assess the quality of a business’ publicly available information on key tax and transparency issues. In this context, publicly available information primarily means a full set of accounts available to all via Companies House or the company website. However, it can also include the company website and/or any other freely available printed material.

For every business type, the criteria are divided into two main categories that assess a business on:

  • Transparency

  • Tax rate, disclosure and avoidance

http://www.fairtaxmark.net/

Its time that all businesses became ethical businesses!

steve@bicknells.net

If it looks like a loan, it is a loan!

Contractors and Business Owners have been using Loans as disguised remuneration for decades.

Basically, a loan isn’t income so schemes have been created to lend money through various means. HMRC view these as tax avoidance.

How contractor loans work

In a contractor loans scheme you’re paid in the form of a loan from a trust or company, sometimes referred to as a remuneration trust.

You don’t get your payment (or ‘loan’) directly from the company you’re providing work for because it’s diverted through a chain of companies, trusts or partnerships.

The companies that promote these schemes will tell you this will save you tax.

Why these schemes could cost you more

Scheme promoters will tell you that the payment is non-taxable because it’s a loan, and doesn’t count as income.

In reality, you don’t pay the loan back, so it’s no different to normal income and is taxable.

So if you’re using one of these schemes and being paid this way you’re highly likely to be avoiding tax. You could end up paying additional taxes, penalties and interest as well as a fee to the promoter.

https://www.gov.uk/guidance/contractor-tax-loan-schemes-can-cost-you-more

What if its not called a loan?

Contractor Weekly reported this week that Contractors are now being advised to say that they holding funds in ‘fiduciary capacity’ on behalf of the company.

According to their article calling a loan by a different name doesn’t impress HMRC, it looks like a loan so it is a loan!

It is recommended that you tell HMRC about these schemes by e mailing exitstream.counteravoidance@hmrc.gsi.gov.uk

If you are using one of these schemes HMRC will be looking for you!

steve@bicknells.net

SA302 Madness

In order to get a mortgage, brokers and lenders ask employees for payslips and P60’s and for business owners they ask for SA302’s and Tax Overviews (often lenders also want an accountants certificate to certify the clients trading results).

The SA302 shows:

  • Pay from all employments
  • Profits from self employments
  • Property Profits
  • Dividends
  • Tax and National Insurance due

You can get copies of SA302’s from HMRC https://www.gov.uk/sa302-tax-calculation

The Tax Overview shows:

  • Tax Due
  • Tax Paid

You can only get Tax Overviews from your online HMRC account.

Lenders and Brokers are often insisting on HMRC SA302’s (which can take several day or even a couple of weeks to obtain).

On the 25th August HMRC wrote…

Agents have told us that not all their client’s lenders will accept the self-serve copy printed from their HMRC online account or the commercial software used to file the SA return, or their commercial software does not print.

We have been working with the Council of Mortgage Lenders to understand their requirements and the changes necessary to accept self-served copies of the tax calculation from the HMRC online account or the commercial software used to file the SA return. We have also liaised with commercial software companies to ensure their software offers a print facility.

A list of lenders who will accept self-serve copies can be found in the HMRC’s guidance, Mortgage providers and lenders who accept a SA302 tax calculation and a tax year overview.

It is always worth checking with the lender or mortgage provider what they require as evidence of income. And should another third party require a copy of the tax calculation, you may wish to ask if they accept a self-serve copy.

Now that we have made all the changes required to allow agents to self-serve online, we will no longer be issuing paper copies of the tax calculations directly to agents from the 5 September 2017.

So basically, clients will have to call HMRC if they need an SA302 with the HMRC logo and the lender won’t accept a self serve or agents copy.

Why are lenders and brokers being so picky! surely if an accountant provides the information that will be sufficient?

steve@bicknells.net