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Registered to carry out audit work Association of Chartered Certified Accountants.

www.auditregister.org.uk under number 8011438

Member of the Association of Chartered Certified Accountants
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01332 202660

Blog

Off-payroll working in the private sector

Adrian Mooy - Thursday, July 26, 2018

 

HMRC has launched a consultation on how to tackle non-compliance with the off-payroll working rules in the private sector and are asking for comments on the best way to do this.

 

HMRC estimates only 10% of PSCs that should apply the legislation actually do so, and the the cost of this is projected to increase from £700m in 2017/18 to £1.2bn in 2022/23.

 

This consultation provides an early evaluation of the public sector reform and invites responses on how best to deal with non-compliance in the private sector.

 

This consultation considers a number of potential options for tackling the non-compliance with the off-payroll working rules in the private sector. However, the fundamental principles of the off-payroll working rules, that the employment status test determines who should be taxed as employees, are not being considered as part of this consultation.

 

In respect of the public sector

 

‘HMRC has analysed PAYE data covering the first 10 months of the reform, from April 2017 to February 2018. This shows that in any given month since the reform was introduced, there are an estimated 58,000 extra individuals who are paying income tax and NICs undertaking work for a public authority above expected levels.

 

HMRC estimates that an additional £410 million of income tax and NICs has been remitted from these engagements, since the public sector reform was introduced.

 

On the basis of this evidence, the government’s assessment is that the public sector reform has been successful both in increasing tax compliance and resolving the compliance challenges faced by HMRC in enforcing the off-payroll working rules in the public sector.’

 

Private sector

 

‘The government considers extension of similar reform to the private sector to be the lead option which will effectively tackle non-compliance.’

 

The consultation closes on 10 August.

 

Internet link: GOV.UK consultation https://www.gov.uk/government/consultations/off-payroll-working-in-the-private-sector

HMRC extends RTI late filing easement until April 2019

Adrian Mooy - Wednesday, July 18, 2018

 

HMRC has extended the payroll Real Time Information (RTI) late filing easement until April 2019.

 

Under RTI payroll obligations employers must submit details of payments made to employees on or before the day that wages are paid via a Full Payment Submission.

 

The updated guidance extends the easement, introduced in April 2015 to April 2019. The easement applies where an employer’s FPS is late but all reported payments on the FPS are within three days of the employees’ payday. This easement applies from 6 March 2015 to 5 April 2019.

 

However, HMRC go on to clarify that employers who persistently file after the payment date but within three days may be contacted or considered for a penalty. Potential monthly penalties range from £100 to £400 depending on the size of the employer.

 

Workers' rights for Pimlico Plumber

Adrian Mooy - Tuesday, July 17, 2018

A plumber has won a legal battle for working rights in a Supreme Court ruling.

 

The Supreme court has backed up an earlier ruling by an Employment Tribunal in the case of a contractor engaged by Pimlico Plumbers.

 

Plumber Gary Smith carried out plumbing jobs for Pimlico Plumbers. He was VAT registered and paid tax on a self employed tax basis.

 

The Supreme Court has ruled that Gary Smith was entitled to workers' rights and confirmed that the Employment Tribunal was ‘entitled to conclude’ that Mr Smith was a worker.

 

As a worker, Mr Smith was entitled to rights including holiday and sick pay. Details of workers rights can be found GOV.UK worker

 

Pimlico Plumbers chief executive Charlie Mullins said that he was ‘disgusted by the approach taken to this case by the highest court in the United Kingdom.’

 

‘This was a poor decision that will potentially leave thousands of companies, employing millions of contractors, wondering if one day soon they will get a nasty surprise from a former contractor demanding more money, despite having been paid in full years ago. It can only lead to a tsunami of claims.’

Small businesses say the Government should simplify business rates

Adrian Mooy - Monday, July 16, 2018

 

A survey has revealed strong support from the UK’s small business community for measures to simplify business rates.

 

A total of 71 per cent of the small businesses questioned said business rates should be simpler and have a greater degree of flexibility.

 

Meanwhile, 49 per cent of SMEs said the Government is doing too little to assist with business rate relief, with just 36 per cent satisfied with its efforts.

 

Of those questioned for the research, carried out by Close Brothers Asset Finance, 56 per cent had seen their bills increase in the last two years.

 

“The message from SMEs is clear that more needs to be done,” said Neil Davies, CEO of Close Brothers Asset Finance.

 

“Our study has found that it’s a nuanced picture out there and what I mean by that is that the call for clarity is not driven by cost concerns.”

 

Chancellor Philip Hammond has previously made concessions following concerns from SMEs. This includes bringing forward the next business rates revaluation from 2022 to 2021.

A quarter of dads may be missing out on paternity pay, according to a new report

Adrian Mooy - Friday, July 13, 2018
 
The TUC has launched a new campaign calling on the Government to extend paternity pay to more workers, after discovering that a quarter of fathers may be missing out.

 

It found that of the 620,000 new working dads last year, more than 140,000 did not qualify for paternity pay, which provides up to two weeks’ paid time off.
 
This figure, it has said, is the result of two factors, either self-employment or because the individual hadn’t been with their employer for long enough.
 
The current rules regarding paternity pay give working dads the opportunity to claim up to two weeks’ paid leave if they are expecting a child, or adopting, including through a surrogacy arrangement – as long as they have at least six months’ service with their current employer by the 15th week before the baby is due.
 
During this time and while on leave, a father’s employment rights, including any pay rises and paid holiday time must be protected.
 
Unfortunately, the current regulations do not cover self-employed workers or freelancers, unlike self-employed mums, some of whom are eligible for a maternity allowance.
 
The TUC said that to address this inequality in the pay arrangements for men, all new and working dads should be given the same rights.
 
It is also calling on the Government to address statutory paternity pay, which is just £145.18 a week – less than half what a person working 40-hours a week would earn on the National Living Wage (£313.12). The TUC argues that paternity pay should at least meet the National Living Wage of £7.83 an hour.
 
TUC General Secretary Frances O’Grady said: “It’s so important for dads to be able to spend time at home with their families when they have a new baby.
 
“But tens of thousands of fathers are missing out on this special time because they don’t qualify for paid leave – or because they can’t afford to use their leave.
 
“We need a radical overhaul of family pay. The current system is too complicated, pays too little, and excludes too many workers.”

Professionals call on Treasury not to lower VAT threshold before MTD and Brexit

Adrian Mooy - Monday, July 09, 2018

 

The Low Incomes Tax Reform Group (LITRG) of the Chartered Institute of Taxation (CIOT) has called on the Treasury to resist pressure to reduce the VAT threshold from its current £85,000 until after the implementation of Making Tax Digital (MTD) and Brexit.

 

The call came after the Office of Tax Simplification (OTS) urged the Treasury to review the current threshold, prompting it to issue a call for evidence on the matter.

 

The level at which the VAT threshold is set is currently particularly sensitive as small businesses across the UK gear up for the introduction of MTD for VAT in April 2019, which will entail digital quarterly reporting using ‘designated software packages’. A lowering of the threshold would force even more businesses to comply with the new rules.

 

LITRG Chair, Anne Fairpo, said: “As VAT is based on a business’ turnover and not its profits, very many small businesses with low profits still find themselves having to deal with VAT on a day-to-day basis.

 

“We are hugely concerned that any lowering of the VAT threshold at this time could threaten seriously a small business’ ability to remain competitive in its marketplace if its trade is mainly with non-VAT registered customers.

 

“Lowering the registration threshold should only be considered if a smoothing mechanism can be incorporated into the VAT system to ease the tax cost and competition issues on crossing the threshold. Ideally, this should be in tandem with simpler VAT accounting and compliance requirements so that the additional administration a business must carry out on a day-to-day basis when it becomes VAT registered does not become too burdensome.

 

“We strongly believe that the prospect of a small business becoming a VAT registered trader is a daunting one for many and so may have the impact of stunting growth for some businesses.

 

“But if the threshold is set too low, this may entice some smaller businesses which might otherwise be compliant into the hidden economy. This is due to the overwhelming burden that they perceive VAT compliance to be and because they do not feel they can be competitive in their industry if they have to charge VAT.”

More than two-fifths of small business owners still unaware of MTD

Adrian Mooy - Friday, July 06, 2018

 

According to a new study, Making Tax Digital (MTD) is currently one of the biggest concerns for VAT-registered small business owners.

 

The research, prepared by Intuit QuickBooks, found that more than three-quarters of SME owners found the legislation challenging and difficult to understand.

 

It also reveals that 70 per cent were struggling to find the right new tools to help them comply, including 63 per cent of owners who weren’t sure which cloud-based software they would use.

 

Other concerns about MTD highlighted in the survey by SMEs include finding the additional time and managing the additional work.

 

This study shows that few SMEs are ready for the new MTD regime, which is due to come into effect in April 2019.

 

Under the current rules, VAT registered businesses with turnovers exceeding £85,000 will be required to maintain a digital record of their VAT transactions and submit their VAT returns using MTD-compliant software on a quarterly basis.

 

Worryingly nearly half (41 per cent) of small business owners are still unaware of MTD, with a further 22 per cent aware of what it is, but only planning to file taxes digitally if they are likely to incur financial penalties.

 

Accountants have also cited client education as their top concern in the lead up to MTD, with 29 per cent of those surveyed having concerns. This came just ahead of adapting their own practice to comply with MTD (27 per cent), and training clients on online software (27 per cent).

Building contractors will have to comply with complex new VAT rules

Adrian Mooy - Thursday, July 05, 2018

 

Those working in the construction and building industry are being encouraged to get to grips with a new way of accounting for VAT.

 

From 1 October 2019, builders, contractors and other trades associated with the construction industry will have to change the way they invoice supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain.

 

Under the new Reverse Charge for construction services (RC) rules, a main contractor must account for the VAT on the services of any sub-contractor, while the supplier does not invoice for VAT.

 

It is then down to the customer (main contractor) to account for VAT on the net value of the supplier’s invoice and at the same time deduct that VAT – leaving a nil net tax position.

 

The complex new RC rules only apply to other construction businesses that then use them to make a further supply of building services, and not to end users, such as retailers, landlords or private individuals. The RC also does not apply to associated businesses.

 

Despite its title, the new legislation will apply to a wide range of services connected to the building trade, including:

 

 - construction

 - alteration

 - repairs

 - demolition

 - installation of heat, light, water and power systems

 - drainage

 - painting and decorating

 - erection of scaffolding

 - civil engineering works

 - associated site clearance

 - excavation

 - foundation works.

 

The legislation also includes a list of exempted works and services, such as:

 

 - professional services of architects or surveyors, or of consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape

 

 - drilling for, or extraction of, oil, natural gas or minerals, and tunnelling or boring, or construction of underground works, for this purpose

 

 - manufacture of building or engineering components or equipment, materials, plant or machinery, or delivery of any of these things to a site

 

 - manufacture of components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or delivery of any of these things to a site

 

 - signwriting and erecting, installing and repairing signboards and advertisements

 

 - the installation of seating, blinds and shutters or the installation of security.

 

Introduced after a long initial consultation period, the recently released draft RC legislation, explanatory memorandum and tax information and impact note are designed to combat missing trader VAT fraud in the construction sector’s labour supply chains, which HM Revenue & Customs (HMRC) has identified as a significant risk to the public purse.

 

The main challenge for those working in the trade will be identifying which customers are liable for the RC. This will require businesses to check VAT registration numbers and obtain evidence that a customer is an ‘end user’ or not, so that if VAT is due it is invoiced correctly.

 

This will create a significant new burden that many companies and sole traders may struggle with. Therefore, businesses affected by the new RC legislation are being encouraged to plan ahead to ensure that as suppliers they do not charge VAT incorrectly, or as recipients, they apply the RC correctly.

 

Failure to operate the RC correctly could lead to error penalties. Output VAT wrongly applied on an invoice will also be collected by HMRC, but will not be recoverable by the recipient.

270,000 late penalty notices cancelled by the Revenue

Adrian Mooy - Monday, July 02, 2018
 
A response to a freedom of information request has revealed that HM Revenue & Customs (HMRC) cancelled 270,000 late penalty notices in 2016.
 
However, this figure was dwarfed by the 610,000 cancellations in 2015 and the 400,000 cancellations in 2014.
 
The request was made by a partner in a ‘magic circle’ law firm, who was himself issued with a late penalty notice, despite having submitted his tax return in December, ahead of the 31 January deadline.
 
Despite having filed on time, when HMRC overturned the penalty in March this year, it nevertheless issued a letter, stating “if you file on time we won’t charge penalties”.
 
While HMRC revealed the number of late penalty notices that were cancelled over the three-year period, it did not disclose how many of these were the consequence of errors on the part of the Revenue, as opposed to the taxpayer having a reasonable excuse for late filing.
 
A spokesperson for HMRC said: “We don’t want penalties, we just want tax returns. Taxpayers with a reasonable excuse for filing late or who have been taken out of SA do not have to pay penalties. Taxpayers who file on time are not issued with penalties.”

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