BBC questioned about the employment status of celebrities 5

This Monday (18th July), the BBC’s CFO, Zarin Patel and its head of employment tax, David Smith, were quizzed about the use of personal service companies (PSC’s) within the corporation by the Commons Public Accounts Committee. It emerged that out of the Beeb’s 467 presenters, 148 broadcasters, i.e. nearly a third, were being paid via PSC’s. These 148 are not unique, however, as the BBC engages 25,000 freelancers.

http://www.contractorweekly.com/contractor-news/tax-a-ir35-news/512-bbc-ir35-witch-hunt

This has been under discussion for a while and back in 2010 Accountingweb reported

Amongst those appearing as freelancers are: Jeremy Paxman (earning about £1m a year); Fiona Bruce (with annual earnings of around £500,000); and Fearne Cotton (who rakes in around £200,000 per annum)*.

However, not all presenters have fled the broadcaster’s payroll, with the likes of Huw Edwards (Ten O’Clock News presenter); Nick Robinson (political editor) and Evan Davis (presenter of the Today programme) still prepared to suffer good old fashioned PAYE.

http://www.accountingweb.co.uk/topic/tax/ir35-and-celebrities-big-bucks-contracting/428140

It is hard to see on the face of it why a TV presenter would not be an employee based on:

  • Control
  • Personal Service/Subsititution
  • Mutuality of Obligation
  • Financial Risk

A BBC spokesman stated that the corporation provides HMRC with a detailed annual report of all payments made to PSC’s.

In response HMRC has now announced that it will increase its investigations into PSC’s. After admitting that HMRC had only enquired into 23 PSC’s, the department’s chief, Lin Homer, vowed to increase such investigations ‘ten-fold’ over the next year.

steve@bicknells.net

Did you hear about the case of the lap dancer and the night club? employment status 2

Miss Quashie, who has a daughter, began work as a stripper at Stringfellows in June 2007. She earned thousands of pounds to provide for her child.

But she was dismissed from the Central London nightspot in December 2008 following allegations of drug use, which were changed to an allegation of dealing after she took a test. She denied both allegations.

Read more: http://www.dailymail.co.uk/news/article-1319609/Face-lapdancer-used-womens-rights-campaigner-suing-sacking.html#ixzz20aX6oMIj

At Tribunal the the judge ruled she was an employee, but now the contract could be rendered illegal because of Miss Q’s dealings with HMRC.

Stringfellows argue that even if Miss Q was employed she acted illegally by representing to HMRC that she was self employed.

A key point in the case now is that ‘ any illegal act by a worker in the context of the job they do for you might invalidate the contract’ this could include misleading HMRC. [Indicator Tips&Advice Tax 28-06-12]

http://www.accountingweb.co.uk/article/stringfellows-stripper-goes-back-tribunal/527059

Employment status is complicated area that seems to continue to become more complicated.

steve@bicknells.net

What are the differences between a Ltd Co and a Plc? 6

Well over 95% of limited companies in the UK are “private” – it is by far the most common form of limited company.

The main advantages of a being public limited company are:

  • Better access to capital – i.e. raising share capital from existing and new investors
  • Liquidity – shareholders are able to buy and sell their shares (if they are quoted on a stock exchange)
  • Value of shares – the value of the firm is shown by the market capitalisation (based on the share price)
  • The opportunity to more easily make acquisitions – e.g. by offering shares to the shareholders of the target firm
  • To give a company a more prestigious profile

As always there are some disadvantages to being a PLC (as opposed to remaining as a private company).  The main downsides are:

  • Once listed on a stock exchange, the company is likely to have a much larger number of external shareholders, to whom company directors will be accountable
  • Financial markets will govern the value of the company through the trading of the company’s shares, and will represent the market’s view of the company’s performance over time
  • Greater public scrutiny of the company’s financial performance and actions

These are the main differences in summary:

  1. You must use the description ‘PLC’
  2. A public company must have issued share capital to a nominal value of £50,000 of which 25% must be paid up.
  3. Only public companies can offer their shares to the public
  4. There are strict rules that shares must be issued for full value
  5. PLCs must file their accounts within 6 months from their year ends
  6. PLCs must have two directors
  7. PLCs must have a suitably qualified company secretary
  8. PLCs must hold AGMs when the accounts can be received
  9. PLCs cannot approve written resolutions unless authorised by the articles
  10. There are strict regulations on PLCs purchasing or providing financial assistance to purchase their own shares
  11. Traded PLCs cannot place restrictions on transfers of its shares. Otherwise such restrictions in the articles are permitted
  12. Election of directors at general meetings must be in separate resolutions
  13. PLCs cannot take advantage of the abbreviated accounts regime (but nor can larger Ltd Co’s)
  14. Listed PLCs can hold shares in treasury (with limits)
  15. Listed PLCs must have their remuneration report approved at the AGM
  16. PLC directors can only have authority to issue shares for five years
  17. A PLC articles cannot exclude pre-emption rights on the issue of new shares
  18. PLC financial results must use International Accounting Standards if listed but unlisted Plc’s can use UK GAAP
  19. Nominees of PLC shareholders where the PLC is listed on a regulated market can nominate information rights for the shareholders
  20. The articles of PLCs must have a specific authority to enable the board to authorise a transaction where the director has a conflict of interest

steve@bicknells.net

 

Did you have fun on your corporate day out? you could be in for a tax bill 2

Small businesses across the UK will soon see HM Revenue & Customs (HMRC) clampdown on corporate away days.

That is according to law firm Pinsent Masons, which said that the department will now ask for tax and National Insurance on the cost of such events.

Joe Quinn, the company’s Director, explained: “If tax inspectors think that there is too much of a fun or social element to a company’s offsite event then they should be treated as though they are a taxable treat for employees.”

http://www.taxassist.co.uk/francksidon//?pg=news.php&article=12790

Staff Parties and Annual Functions costing less than £150 per head are exempt if open to staff generally but Corporate Hospitality is another minefield

Her Majesty’s Revenue and Customs (HMRC) make it quite clear that members of staff, such as sales representatives, who would be expected to attend corporate hospitality events in order to entertain clients as part of their role within the company, would be exempt from any potential charge on benefits in kind. Other members of staff, who were present purely as a perk of the job, would be deemed as being in receipt of a benefit and therefore would be liable for a charge. Visitors, not employed by the hosting company would be exempt. The company paying for the corporate hospitality would also be able to treat the expenditure as entertaining clients, for which they could claim tax relief.

http://ukmoneymarket.co.uk/other/corporate-hospitality

steve@bicknells.net

 

 

Why stocktaking in Bars is essential 1

Pubs, Bars, Restaurants & Night Club operators… It’s a cash business!! And where there’s cash there’s a fiddle, you may think you know them all, you might! But what you don’t have is eyes in the back of your head and the time to watch hours of CCTV footage to catch them at it, and that’s just the tip of the iceberg.

Over pouring, cross ringing, recipe knowledge, wastage, breakages, deliveries, poor GP’s are all areas you need to be on top of if you are to make any profit from your hard earned takings, and given today’s economic climate, knowing how your business is performing and at the very least verifying your in house weekly results via an independent auditor makes sense and could be worth tenfold the monthly cost in potential lost profit.

By choosing an independent stocktaking company who specialise in the licensed trade, you can be certain of finding the answers you need to improve and grow your business effectively.

Stocktaking is essential to all businesses, as it enables you to check that your business is performing to its optimum potential. Stocktaking also highlights any problems with stock losses, for instance theft, and determines whether the pricing and ordering of stock is accurate, allowing you to react and make adjustments to improve your margins or re visit your suppliers costs.

On average 28 Pubs close every week and Net closers are 14 Pubs per week http://fullfact.org/factchecks/pub_closures_alcohol_business-3237

In the current climate stocktaking has to be essential.

steve@bicknells.net

 

Should my Assets be Revalued – How are assets revalued? (IAS16) Reply

Most assets decrease in value over time with usage and should be depreciated over their useful economic life. However, some assets increase in value for example Land & Buildings and some Metal based assets.

Under the revaluation model, revaluations should be carried out regularly, so that the carrying amount of an asset does not differ materially from its fair value at the balance sheet date. [IAS 16.31]

If an item is revalued, the entire class of assets to which that asset belongs should be revalued. [IAS 16.36]

Revalued assets are depreciated in the same way as under the cost model.

If property, plant, and equipment is stated at revalued amounts, certain additional disclosures are required: [IAS 16.77]

  • the effective date of the revaluation
  • whether an independent valuer was involved
  • the methods and significant assumptions used in estimating fair values
  • the extent to which fair values were determined directly by reference to observable prices in an active market or recent market transactions on arm’s length terms or were estimated using other valuation techniques

Revaluing Assets will not create a tax charge because:

1. If the asset value increases, the revaluation creates a balance sheet revaluation reserve – Debit Assets, Credit the Revaluation Reserve – in does not create a profit, it increases the Net Worth of the business

2. Revaluing an Asset does not affect Capital Allowances these are based on the Cost of the Asset

3. Revaluing an Asset will not generate a Deferred Tax Charge because although it will affect depreciation, it should be excluded from the Deferred Tax computation as it is excluded from Capital Allowances (IAS 12) – Revaluing the asset increases its carrying value without altering its tax base (since revaluations have no immediate tax consequences)

4. Revaluing an Asset does not create a Capital Gain, Capital Gains will only crystalise if the asset is sold

steve@bicknells.net

Should my Work in Progress be classified as a Debtor (UITF40) 3

It’s a common issue and area of confusion and it has tax implications. WIP is valued at the lower of cost or net realisable value but Debtors whether invoiced or not are valued at Sales Value, uninvoiced Sales are shown as Amounts Recoverable on Contracts within Debtors.

Here is an example from HMRC

A joiner contracts to create fitted bookcases in an office for a total price of £15,000. He purchases the timber (materials cost £6,000) and builds the doors in his workshop. He also prepares the timber for the rest of the structure in his workshop. He then builds the skeleton of the bookcases on the customer’s premises and attaches thereto the timber that he has already prepared in his workshop. What is the accounts treatment if his year end occurs after he has prepared the timber and the doors but before he has gone to the customer’s premises to build the skeleton and fit them?

The contract is a single contract and the joiner should recognise revenue according to the stage of completion of the work. It is not relevant whether the work is done at his workshop or at the client’s premises. Neither is it relevant that part of the contract can be regarded as ‘goods’ and part as ‘services’: both are treated in the same way for accounting purposes.

Let us assume the joiner assesses that he has done 1/3 of the work by the year end and he has used half of the timber and other materials. The calculation would be: total price £15,000 less materials at cost (£6,000) leaves £9,000. Assuming the profit attaches only to the labour, accrued income is £3,000 (1/3 complete) plus materials at cost of £3,000 ( a half used), a total of £6,000. The remaining half of the total cost of the materials (£3,000) is work in progress. These figures should then be adjusted to reflect any likely losses, discounts, delay in payment or cost of difficulties expected to arise in completing the contract. Any progress payments received should be treated as creditors in accordance with SSAP 9.

http://www.hmrc.gov.uk/manuals/bimmanual/bim74270.htm

Also further guidance at

http://www.hmrc.gov.uk/helpsheets/hs238.pdf

http://www.icaew.com/en/technical/tax/tax-faculty/~/media/Files/Technical/Tax/Tax%20news/TaxGuides/TAXGUIDE-8-06-UITF-40-and-Taxation.ashx

So do you have Work in Progress or Amounts Recoverable on Contracts?

steve@bicknells.net

How De-pooling Short Life Assets can reduce your tax 1

In the Finance Bill 2011 the period over which expenditure on plant or machinery can be given “short life assets” (SLA) treatment was extend from 4 year to 8 years.

The change will have effect for expenditure incurred

• on or after 1 April 2011 for businesses within the charge to corporation tax (CT); and

• on or after 6 April 2011 for businesses within the charge to income tax.

If a business elects for plant or machinery to be treated as a short life asset, capital allowances are calculated individually on the asset until a “cut-off” point. This ensures that, if the asset is sold or scrapped before the cut-off point, the total allowances given over the period of ownership equal the actual net cost of the asset to the business.

An election will be beneficial if the asset depreciates faster than the rate at which capital allowances are given, and it is sold before the cut-off date.

Expenditure incurred on an asset given SLA treatment is allocated to a ‘single asset pool’ for the cut-off period. The current four-year cut-off period is four years from the end of the chargeable period in which the expenditure is incurred.

Writing-down allowances are given on the reducing-balance each year, currently at 18 per cent. If the item is scrapped or sold within a ‘four-year cut-off’ period, the remaining balance of expenditure in the pool is compared with the disposal proceeds. A further allowance, or charge, is made for the difference. This ensures that allowances given to this point match the actual net cost of the SLA.

If the Asset was placed in the Main Pool the tax relief would come through in future years through the WDA. So using the SLA will speed up Tax Allowances.

If the asset is not disposed of within the ‘four-year cut-off’ period, the remaining expenditure in the single asset pool is transferred to the main capital allowances pool, where writing-down allowances will continue to be available in the normal way.

The exceptions to SLA treatment are listed in section 84 CAA 2001 and include most cars and all expenditure on ‘long-life assets’ (assets with a useful economic life of at least 25-years) and ‘integral features’ of a building or structure.

A SLA election must be made for corporation tax within two years of the end of the relevant chargeable period in which the expenditure is incurred. For income tax the time limit is normally the anniversary of the 31 January following the tax year in which the end of the relevant chargeable period occurs.

Assets that cannot be treated as SLAs are:

  • assets that were provided for some other purpose including leasing under a long funding lease before being brought into use for a qualifying activity CA23030;
  • assets received as a gift CA23040;
  • assets used for special leasing CA20040;
  • cars apart from cars hired out to people in receipt of certain disability allowances CA23510;
  • long life assets CA23700;
  • special rate expenditure assets CA20150;
  • assets provided for leasing except:
    • those used in the designated period for a qualifying purpose and for no other purpose; and
    • cars provided for disabled people in receipt of certain allowances;
  • assets leased overseas that qualify for WDAs at the 10% rate CA24200;
  • assets leased to two or more persons jointly where at least one lessee is a non- resident who does not use the asset exclusively for earning profits chargeable to tax and the leasing is not protected leasing CA24400;
  • ships CA25000;
  • assets used partly for a qualifying activity and partly for other purposes CA27000;
  • assets that receive a partial depreciation subsidy CA27100.

http://www.hmrc.gov.uk/manuals/camanual/CA23620.htm

steve@bicknells.net

RTI and the Universal Credit Reply

Under the new rules companies submitting payroll payments to BACS will need to include additional information along with the BACS transaction including the payee’s tax code, pay to date and tax to date amongst other items of information. These new rules have been named RTI or Real Time Information by HMRC.

Migration started in April 2012 with an aim to have all companies migrated by the end of 2013.

RTI will:

  • make the PAYE process simpler and less burdensome for employers and HMRC; for example by removing the need for the end of year return (P35 and P14) and simplifying the employee starting and leaving processes
  • make PAYE more accurate for individuals, over time reducing the number of bills and repayments sent after the end of the tax year
  • enable HMRC to pursue late payments more effectively
  • support the payment of Universal Credits
  • reduce Tax Credits error and fraud

http://www.hmrc.gov.uk/rti/employerfaqs.htm

To enable RTI payroll providers and BACS providers are currently rolling out new software and applications.

The Universal Tax Credit will be launched in 2013 and will replace:

  • income-based Jobseeker’s Allowance
  • income-based Employment and Support Allowance
  • Income Support
  • Child Tax Credits
  • Working Tax Credits
  • Housing Benefit.

What’s different about Universal Credit?

The main differences between Universal Credit and the current welfare system are:

  • Universal Credit will be available to people who are in work and on a low income, as well as to those who are out of work
  • most people will apply online and manage their claim through an online account
  • Universal Credit will be responsive, as people on low incomes move in and out of work, they’ll get ongoing support – giving people more incentive to work for any period of time that is available
  • most claimants on low incomes will still be paid Universal Credit when they first start a new job or increase their part-time hours
  • claimants will receive just one monthly payment, paid into a bank account in the same way as a monthly salary
  • support with housing costs will go direct to the claimant as part of their monthly payment.

http://www.dwp.gov.uk/policy/welfare-reform/universal-credit/

steve@bicknells.net

ABI to withdraw notification of Bank’s interest on Insurance Policies Reply

Since 1992, an agreement has been in place between the Association of British Insurers (‘ABI’) and the British Banking Association (‘BBA’) whereby a bank could notify its interest in relation to secured properties and the insurers would tell the bank of any cancellation or alteration in cover, with a grace period to allow the bank to arrange its own policy if the borrower had failed to maintain the required cover.

Last September the ABI announced that they were ending this agreement and that co-insured status either as Joint Insured or Composite Insured would be the only options open to Banks. These options are likely to increase insurance premiums.

Banking sources tell me that last week it was agreed that ABI would extend the agreement with BBA to December 2012, the BBA are yet to issue guidance and comment.

steve@bicknells.net