Tax Tips and More | Autumn 2018 by Lauren Aston

Tax Tips and More Autumn 2018

Raffingers Foundation’s Charity Ball raised £2,000 for OCA and PCRF. Thank you to all who supported.

Countdown to Making Tax Digital

How to Reduce Your Inheritance Tax (IHT) Liability

Company Car Tax

From April 2019, ALL VAT registered businesses with a turnover above £85,000 must comply with the new VAT reporting requirements. Is your business ready?

The IHT Nil Rate Band has remained at £325,000 since 2009. With many estates now exceeding this, to reduce your IHT liability you must plan early.

The 2018 Finance Act has confirmed the tax rates for the next few years. Therefore, the decision on what company car you should choose can be made knowing the tax rates that will apply.

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Contents

Welcome and Partners

Special Feature Countdown to Making Tax Digital

All Change: Non-Residents and UK Property

How to Reduce Your Inheritance Tax Liability

Company Car Tax

Looking for Investment?

Xero Add-On Introducing simPRO

Raffingers Shortlisted for Two Industry Awards

Employee Spotlight

Upcoming Events

Raffingers Foundation Charity Ball 2018

Tax Free Benefits for Your Team

“You get what you pay for…”

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Welcome to our AUTUMN Newsletter

Raffingers Partners

The summer holidays are over, and it is back to work for many, which means it really is time to start thinking about what you want to achieve in the last quarter of the year.

Gary Inglis Managing Partner gary.inglis@raffingers.co.uk

One quite crucial thing we recommend is that you start thinking about getting your business compliant for Making Tax Digital, if you haven’t already. Making Tax Digital is not going away, yet we are finding many businesses are not facing up to the significance of it.

Andrew Coney Partner andrew.coney@raffingers.co.uk

Yes, from April 2019 it will only affect the way in which VAT is reported to HMRC and will only apply to those businesses VAT registered and with a turnover above £85,000. But, that is still quite a lot of businesses, and many businesses we have come across do not have the correct systems in place. The VAT gateway will be switched off, so you must think about transitioning to cloud software. Read our article on page 4 for all the details. In this edition, we also bring Inheritance Tax Planning advice for those with estates above the nil-rate band of £325,000 (page 7), guidance on the best company car (page 8) and advice on the best tax free benefit schemes for employees (page 14). Finally, we are pleased to announce that we have been shortlisted for three awards this year - Tax Team of the Year at the British Accountancy Awards, and Large Firm of the Year and Partner of the Year at the IRIS Customer Awards. We are extremely grateful for the recognition and thanks goes to our whole team for all their hard work. We hope you find our newsletter useful, for advice on any of the topics discussed, contact one of us. To contribute to our next newsletter, contact: lauren.kelly@raffingers.co.uk. The Partners at Raffingers

Lee Manning Partner lee.manning@raffingers.co.uk

Adam Moody Partner adam.moody@raffingers.co.uk

Suda Ratnam Partner suda.ratnam@raffingers.co.uk

Barry Soraff Partner barry.soraff@raffingers.co.uk

Paul Dell Partner paul.dell@raffingers.co.uk

Roy Butcher Partner roy.butcher@raffingers.co.uk

Neill Staff Partner neill.staff@raffingers.co.uk

Your Business Our Passion

SPECIAL FEATURE

Countdown to Making Tax Digital

From April 2019, Making Tax Digital (MTD) will apply to all VAT registered businesses that have a turnover above the VAT threshold of £85,000. Irrespective of whether they are a company, partnership or sole trader – all businesses that meet this criterion must comply.

MTD is getting real. With the release of more information from HMRC, such as a new VAT Notice and a published list of software suppliers, the countdown is officially on.

Who is affected and when? From April 2019, MTD applies to all VAT registered businesses that have a turnover above the VAT threshold of £85,000. Irrespective of whether they are a company, partnership or sole trader – all businesses that meet this criterion must comply. • For these businesses MTD will apply from the first VAT period that starts on or after 1 April 2019 • Those registered for VAT, but not over the threshold will not have to comply, but can opt in if they wish • Once a business is required to comply with MTD for VAT the requirements continue even if the turnover of the business subsequently drops below the VAT threshold

MTD Process and Software HMRC state that you must use ‘Functional Compatible Software’ to comply with MTD. This is essentially a software program or set of programs used to record and preserve digital records, send information and returns from data held in digital records and receive information from HMRC via the API platform. Spreadsheets You can choose to continue to use spreadsheets. However, these must meet digital requirements and be API enabled or have bridging software to make it compatible. Digital Links If you are using a spreadsheet to collate information from one or more digital products, there must be a digital link between them. There cannot be any manual intervention or re-typing of information from one product/ piece of software to another. The information must be automatically collated in the spreadsheet.

Businesses below the VAT threshold

Soft Landing Period

Businesses below the threshold will submit VAT returns in the usual way after April 2019, there are no changes.

HMRC has acknowledged that it is difficult to get a ‘digital link’ between all software that a company uses. Therefore, in these circumstances they have allowed a ‘soft landing period’, which gives businesses an extra year to arrange for digital links between all parts of their software.

However, if during the year you expect your turnover to exceed the VAT threshold and you are registered for VAT, you must comply with MTD at the beginning of the next VAT quarter. If during the year you expect your turnover to exceed the VAT threshold and you are NOT registered for VAT, you must comply with MTD as soon as you have registered for VAT.

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Note. This only applies to digital links. Businesses must still be recording information digitally and have an API in place to communicate information to HMRC from April 2019.

Digital Records

Adjusting Digital Records

Which records must be kept digitally?

If you need to adjust the input tax claimed or output tax owed, you need to record this adjustment in the software. Only the total for each type of adjustment will be required to be kept in digital software, not details of the calculations underlying them.

• Designatory data – business name, address, VAT registration number, any VAT accounting schemes. • Supplies made – for each supply you make you must record the time of supply (date on invoice/ receipt), net value of the supply excluding VAT and rate of VAT charged. If there is more than one supplier on an invoice and suppliers are within the same VAT period and charging the same rate of VAT, you can record it as a single entry. • Supplies received – you need to keep a track of the time of supply (often date on invoice), net value of the supply and the amount of input tax that you will claim. • Where you do not know how much input tax will be claimed. You have a choice, you can record the total amount of VAT, no VAT or estimate what will be recovered. • Businesses must keep evidence as they do now to claim input tax. • Receipts – you can now use software, such as ReceiptBank, to scan and record invoices. If you do not use software to capture a receipt or invoice and the information is just typed, you will HAVE to keep receipts in original form.

Special Schemes

Note. Invoices must be kept in paper or electronic form. By law you must keep some records in original form – e.g. C79 form.

• Retail Schemes – if you account for VAT using a retail scheme you must keep a digital record of your Daily Gross Takings (DGT). You are not required to keep a separate record of the supplies that make up your DGT. • Flat Rate Scheme – if you account for VAT using the Flat Rate Scheme you do not need to keep a digital record of your purchases unless they are capital expenditure goods on which input tax can be claimed. Also, you do not need to record the relevant goods used to determine if you need to apply the limited cost business rate. • Gold Special Accounting Scheme – if you make sales under this scheme you must keep a digital record of the value of sales and the total output tax on purchases under the scheme. • Margin Schemes – you are not required to keep the additional records required for these schemes in digital form, nor are you required to keep the calculation of the marginal VAT charged in digital form. However, the records must still be maintained in some format.

For further advice on MTD and how to ensure your business is compliant, contact: Lee Manning 020 3146 1604 | lee.manning@raffingers.co.uk

Making Tax Digital Timeline April 2019 - ALL VAT registered businesses above the threshold must keep their records digitally and submit their VAT return to HMRC through MTD compatible software. April 2020 - MTD to apply for ALL businesses for ALL taxes.

Your Business Our Passion

All Change: Non-Residents and UK Property

Extension of Capital Gains Tax to nonresidents holding UK real estate from 6 April 2019. Several changes to the way non-residents that hold UK land and property are taxed were included in the draft legislation for Finance Bill 2018-19, which was published on 6 July 2018. The first of these changes is the change to the scope of non-resident capital gains tax (NRCGT), which will now tax gains on shares in property rich entities. Since April 2015, all non-UK resident individuals, closely held companies, trustees, personal representatives and funds have been subject to NRCGT when disposing of a UK residential property. With effect from April 2019, the scope of NRCGT will expand and tax will now apply to gains made from: • Non-residential (i.e. commercial) UK property; and • “Substantial” interests in “UK property rich entities”, called “indirect disposals” Where an asset is brought into NRCGT for the first time, its value can be rebased as at April 2019, so that only the increase from April 2019 will be chargeable to tax. Non-resident companies and unit-trusts will be taxed at the corporation tax rate (currently at 19%), while individuals and other entities will be taxed at the capital gains tax rates (10% for basic rate payers and 20% for higher and additional rate payers). Property Rich Entities – Definition The extended NRCGT regime defines a property rich vehicle as one which derives at least 75% of the total gross market value of its assets from interests in UK real estate and has a “substantial indirect interest” in that land. Assets matched by an intercompany liability are excluded from this definition, so related party transactions should be reviewed when calculating gross

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assets to ensure these balances are not included. Substantial indirect interest – Definition Gains on disposal of shares will be chargeable to tax where the person making the disposal holds, or has held in the last two years, a substantial indirect interest, being 25% or greater interest in the company or other corporate vehicle. There is an exemption though – if all the UK property (or all but an insignificant value) has been used for trading purposes throughout the year leading up to the disposal, and it is reasonable to conclude it will continue to be so used after the disposal, then the NRCGT rules won’t apply. This should mean for example that most investments by non-resident investors in UK retail and hospitality businesses are exempt. Interaction with certain double tax treaties There are certain double tax treaties at present that preclude the UK from taxing gains realised by nonresidents on sales of “vehicles holding UK land”. Those treaties would override UK legislation, which means investors based in those jurisdictions may escape the new regime if they dispose of the vehicle holding the land rather than the land itself. There are, as expected, anti-avoidance provisions which counteract any transactions from November 2017 attempting to restructure property holdings in a way that takes advantage of tax favourable treaties. If you are a non-resident and would like further advice on the changes to NRCGT, contact us.

Andrew Coney 020 3146 1602 andrew.coney@raffingers.co.uk

How to Reduce Your Inheritance Tax Liability The Inheritance Tax (IHT) Nil Rate Band (NRB) is the amount of an individual’s estate that is not subject to IHT. The amount has not changed for almost ten years, remaining at £325,000 since 2009. With many estates now exceeding this, to reduce your Inheritance Tax liability you must plan early. Background We are in a different world than 10 years ago with the size of peoples’ estates having grown significantly and therefore the amount of IHT being paid has substantially increased. According to HMRC statistics, the number of people with estates worth over £1million has almost doubled in the last ten years, whilst the NRB continues to remain at the same level – bringing more and more estates into the IHT net and increasing the potential IHT liability of those with growing estates. What’s the answer? Indexing the NRB to inflation would be a start, as is the plan from April 2021, but that would be 11 years since the last rise in the NRB. Indexing to average estate size or house price inflation would be better but is the Government likely to do this? Probably not! A radical overhaul of the IHT system is probably needed to make it fair but that is probably not going to happen. A fairer system would see only the rise in values on death being taxed akin to a capital gains type regime, with a charge on death on assets that have increased in value since acquired – the double taxation argument then goes away, but the drop in revenues would be too much for a Government to risk the political outcry – so also an unlikely outcome from any “simplification” review. Ways to reduce your inheritance tax liability Individuals are better to take their own affairs in hand and not rely on the Government to reduce their inheritance tax liability on death. There are several IHT exemptions and reliefs. The most useful are outlined below: • An often-overlooked exemption being “normal expenditure out of income”. This allows regular gifts to be made from income and, provided the gifts do not reduce the donor’s usual standard of living, there is no limit to the amount that can be given away, and the amounts are immediately exempt from IHT. There is no need to wait the seven years and the amount that can be given away each year can increase as excess income increases.

• Cash gifts out of capital – these are Potentially Exempt Transfers (PETs) and will fall outside of the estate after seven years from the date of the gift. If large gifts are made you should consider effecting a seven-year term assurance life policy to cover the amount of tax on the value of the gift, so the tax can be paid if the PET comes back into charge. • Lifetime gifts into Trust. The NRB is available during lifetime, not just on death. With forward planning, it can be recycled by gifting capital every seven years. This strategy can remove a considerable part of wealth from the estate over time. Gifts into trust also provide other advantages in terms of protection of assets and allowing any gain on the asset being gifted to be held over, so it can be a good way of transferring assets that are pregnant with gain, as we say! The financial services market has also developed a range of products to assist with IHT planning to help you reduce your inheritance tax liability, including: • Qualifying Business Property Relief investments to shelter any value from IHT after two years of ownership • Discounted Gift trusts – which can give an IHT reduction whilst retaining a return from the gift in the form of tax-free capital repayments • Gift and Loan trusts - to put future asset growth outside of the estate What is your estate worth? As a first step to any planning, clients find it a worthwhile exercise to prepare a Personal Balance Sheet and then keep this up to date – not only is it a good housekeeping exercise, but also assesses the size of the estate and any potential IHT liability that could hit the estate in the future. This can then help as a foundation to future planning. Firstly, we recommend you assess the value of your assets. It may just start you thinking, and you may then want to consider early planning to reduce any potential IHT burden in the future – it is a tax that is unlikely to be going away as it continues to bring ever increasing revenues into the exchequer!

Paul Dell 020 3146 1606 paul.dell@raffingers.co.uk

Your Business Our Passion

Company Car Tax For many years the government’s company car tax policy has been designed around lower tax for lower emission cars. This policy continues, and the 2018 Finance Act has confirmed the rates for the next few years. Therefore, the decision on what company car you should choose can be made knowing the tax rates that will apply. Under the current tax system, employees (and directors) pay tax on the Benefit in Kind (BIK) for the use of the car provided by the company. The BIK charge is calculated by applying a percentage to the official value of the car (called the ‘P11D value’, which is usually the manufacturers’ list price of the car when new). The percentage that applies is determined by the car’s CO2 emissions – the higher the CO2 emissions, the higher the percentage rate. The BIK is then taxed at the employees’ appropriate personal tax rate – usually collected through the PAYE system. Company car BIK rates 2018 – 2021 Current company car BIK rates start at 19% for petrol and RDE2 compliant diesel cars, the rate increasing, in up to 1% increments as CO2 bands rise, up to a maximum of 37%. Since 6 April 2018, to account for the greater level of NOx emissions, a 4% diesel car tax supplement is payable which applies for non-RDE2 compliant diesels – the vast majority of current diesel models. All hybrid cars receive a reduced BIK rate because of their lower CO2 emissions, which tends to reduce their BIK rates by at least 2%, and often more. Note that for diesel hybrids, the 4% diesel surcharge does not apply,

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since they are not classed as diesel-powered cars, but alternatively fuelled vehicles for tax purposes. Electric vehicles are also rewarded with lower BIK rates with battery electric cars BIK-rated at 13% for the Financial Year 2018/19, increasing to 16% during 2019/20 and then reducing to only 2% for the Financial Year 2020/21. From April 2018, plug-in hybrids with CO2 emissions up to 75 g/km are BIK-rated at 13% to 16% (depending on CO2 emissions), with rates increasing by 3% for the Financial Year 2019/20. From April 2020, new BIK bands come into force for plug-in models with CO2 emissions of 1-50 g/km, with the new BIK levels dependent on the official electric-only range in miles. Those with a range in excess of 130 miles are classed as pure-electric models for the purposes of BIK ratings (at 2%), while those plug-in models with a range of less than 30 miles will be rated at 14%. The table opposite shows how the percentage BIK rates vary with vehicle CO2 and electric-only range. The table represents petrol, diesel and electric related BIK rates for 2018-2021. Since April 2018, HM Treasury has levied a 4% diesel supplement over petrol models to account for greater levels of NOx emissions for the majority of current diesel cars. The supplement applies to diesel cars not compliant with the Real Driving Emissions Step 2 (RDE2) test, which confirms that real-world emissions are close to, or better than, the current Euro 6 emissions standards for NOx. As of the start of 2018, no diesel models have yet passed the RDE2 test as the procedure itself is under final review.

BIK rates with CO2 and electric-only vehicles Company Vans Zero emission vans – existing legislation restricts the level of the van benefit charge to 20% of the normal van charge. Other Vans – the value of the BIK for non-incidental private use of a van is £3,350 from 6 April 2018. If the private use of a company van is incidental, no BIK charge applies. We would advise that a van policy is put in place to evidence the non-incidental private use position if the company is relying on this exemption.

FY 2018-19 FY 2019-20 FY 2020-21 %BIK Rate %BIK Rate %BIK Rate Vehicle CO2 (g/km)

Electric range (miles)

Petrol, Electric, RDE2 Diesel

Petrol, Electric, RDE2 Diesel*

1-50

130+

1-50

70-129

Planning Points

1-50

40-69

The Electric option! – What the opposite table shows is that electric cars from 20-21 onwards, especially the longer-range models, have a significant reduction in their BIK charges. The Government hoping of course that this will push more people towards the electric car option.

1-50

30-39

1-50

<30

51-54

55-59

60-64

65-69

70-74

76-79

80-84

85-89

90-94

Directors and their family – the company car option for the low emission cars may still be advisable. It’s certainly an option for the owner managed business owner who may want to provide their newly qualified children with a small car. The Insurance costs for the new driver is usually horrendous but if the company can meet this cost, the director suffering the BIK charge on a small low emission car may be worthwhile.

Barry Soraff 020 3146 1603 barry.soraff@raffingers.co.uk

95-99

100-104

105-109

110-114

115-119

120-124

125-129

130-134

135-139

140-144

145-149

150-154

155-159

160-164

165-169

170-174

175-179

180-184

185+

*Rate applies to diesel vehicles that do not meet the RDE2 standard. All BIK rates show apply to cars registered since 1998. Source: HMRC 2017.

Your Business Our Passion

Looking for Investment? Pitching a business to an investor is potentially the biggest sale you will ever make.

How do you successfully pitch to an investor? The advice generally is to understand: • Your market! • What is it you are providing that market? A key solution? Unique Product? • Your Unique Selling Point (USP) • Your business model and revenue streams

3. Are you prepared to share your business? The deal will evolve. Are you prepared to concede on certain management decisions? You need to know your worth. Be prepared to say no, because the deal must work for both sides. You need to be prepared to walk away if you do not feel comfortable with the deal.

The list is not exhaustive as you need to be concise.

Preparing for the pitch

But, what makes the perfect investment?

By now, you should have already tested your idea to understand the strength of the market for your product or service. You will have received feedback from friends, family and business experts. So, the next step is to make sure you can clearly explain your business idea.

You obviously need to stand out. Therefore, understanding three key concepts to successfully pitch your business is crucial. 1. The best sale you will make You are selling a business. To gain investment, you need to package your idea as a product. Pitching a business to investors is a complex process, and potentially the biggest sale as an entity you will likely ever make. Remember, people buy from people. They are investing in you as an individual, as well as the business concept. Ultimately, investors will be buying into your vision, your team, your commitment to make it work. What is it about you that they will want to buy into? You need to identify the main questions they will ask, and ensure you have those answers. 2. What is the investor bringing to the table? You need to balance the sale and understand what it is you want from the deal. What does the investor bring? How will the investor assist in scaling up your business?

• • • •

Funding Contacts Infrastructure A skillset

Preparation is obviously vital. You need to be able to convince your potential investor that your idea is a viable business proposal. Find out as much as you can about the person or organisation you are pitching to and what they will be looking for. Think about your business idea – can you explain what it is and how it can work in just a couple of sentences? If you cannot then you are not going to be able to pitch it successfully to anyone. Practice makes perfect, so read, cut back on the waffle to ensure it is succinct. Be ready to answer questions about yourself and your business and prepare questions that you may want answers to beforehand. Make sure you know your idea thoroughly: understand the strengths of your idea and make sure you are aware of any potential weaknesses.

Roy Butcher 020 3146 1607 roy.butcher@raffingers.co.uk

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+ XERO ADD-ON

Introducing simPRO Xero add-on for the trade and service industries

Finding ways to better manage workflow is essential in business. Accurately tracking quotes, jobs, and invoices can get complicated quickly, but with the right job management software, you’ll be able to optimise your working processes and increase both productivity and profitability. If you work in the trade or service industries, there are many ways to improve the management of your business’s workflow. One tool you may find useful is cloud-based job management software, simPRO. What is simPRO? simPRO is a comprehensive software tool designed for electrical, plumbing, FM, security, HVAC and project, service & maintenance businesses. With over more than 4,000 clients and 100,000 users globally in the United Kingdom, Australia, New Zealand, and the United States, simPRO is fast becoming the global leader in job management software. Wondering what simPRO can do for your business?

• Using the mobile app suitable for tablets and smartphones, field engineers can retrieve and update times, materials, job details and even add photos for each job in real time, enabling seamless data communication with the office. • Smart scheduling enables you to get the right

people to the right place on time. • Easily and quickly generate invoices reducing the time between job and payment to maintain positive cash flow. • On-site payment enables field techs to take payment as soon as a job is complete. • Purchasing and stock control allows access to real-time stock availability. • Estimating functionality generates fast, accurate quotes to win more business. • CIS functionality allows users to quickly and easily apply CIS deduction rates to invoices and generate information required for HMRC reports. How does simPRO work with Xero? Initially, customer, supplier, and employee information is sent from Xero to simPRO. Financial data can then be synced from simPRO to Xero as and when you need it. Users can sync data for customers, employees, suppliers, contractors, invoices, payments, credits, supplier invoices and contractor invoices. To find out more about simPRO visit www.simpro. co.uk/raffingers or contact Raffingers’ simPRO representative, Mat Wray, on 07415 468716 or email mathew.wray@simpro.co.uk.

Your Business Our Passion

Raffingers Shortlisted for Two Industry Awards We are pleased to announce that in the last few months we have been shortlisted for the British Accountancy Awards (BAA) and IRIS Customer Awards (ICA), for the categories: • Tax Team of the Year (BAA) • Firm of the Year (ICA) • Barry Soraff, Partner of the Year (ICA) We have a mission to help business owners achieve their goals. To achieve this mission, over the last 12 months we have expanded our Cloud Accounting department and offering, developed a knowledge hub for SMEs and innovated new services to support businesses in all aspects of their development and growth. Our Tax Team has also been taking part in new initiatives to raise awareness of the skills within the team to its clients and the wider business community. The level of expertise that now exists in the team means Raffingers has been able to extend its support to clients, particularly with R&D Tax Credits, Let Property Campaign, HMRC Enquiries and the Worldwide Disclosure Facility. The IRIS Customer Awards was launched this year to recognise accountancy practices and individuals thriving

Employee Spotlight In this slot we introduce you to a valued member of our team, allowing you to put a face to a name. This quarter we speak to our Client Service Manager and PA, Jonathan Niman. Name: Jonathan Niman Email: jonathan.niman@raffingers.co.uk Career: Jonathan studied history at the University of West England in Bristol. After graduating with a 2:1, Jonathan decided to follow the natural course of progress into... accountancy, and even more exams!

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in the digital economy. The awards celebrate best practice and recognises those accountants that have capitalised on new service opportunities. Whilst, the British Accountancy Awards are regarded as the industry’s most prestigious accolades, pinpointing professional development and highlighting excellence in the profession. The team at Raffingers are delighted to be shortlisted for these awards. The team has worked incredibly hard in the last 12 months to deliver outstanding services to our clients, as well as develop new opportunities.

Jonathan trained and worked at NWN Blue Squared for seven years before the merger with Raffingers in December 2017. Following the merger Jonathan was appointed a Client Service Manager and PA to Barry Soraff, where his experiences of working with a wide range of owner managed businesses and SMEs helps ensure our clients receive the best possible service. Interests: Jonathan is a massive Arsenal fan and has been a season ticket holder since he was young. Jonathan has seen Arsenal lift three premier league trophies and seven FA cups - long live Arsène Wenger! Jonathan is also a Paul Simon fan and recently travelled to New York to see him play his final ever concert at Madison Square Gardens. Partners Report: Jonathan is an integral part of the senior team at Raffingers. He joined us when we merged with NWN and is now a PA to Barry Soraff, engaging with a wide variety of clients and assisting with their varied requirements. Working with him is never quiet and a laugh is never far away. However if it is football related and Arsenal has had a poor result the last thing you will get is humour.

Upcoming Events October 2018 Charity Fraud Awareness Week: Cyber Security for Charities 9-12pm | 24 October 2018 | The Clubhouse London Charities, like all businesses, are becoming increasingly reliant on I.T, technology and digital tools. Whilst this can be positive in enhancing a charity’s efforts, it can also mean that the organisation is susceptible to a range of malicious cyber activity. Falling victim to a data breach can lead to donations being stolen, a damaged reputation and weaker financial position. Therefore, we are holding our seminar, Cyber Security for Charities, to help charities and not-forprofits improve their I.T systems and become less vulnerable to threats To register visit our website or contact ingrid.beya@raffingers.co.uk.

Profit Extraction & Minimising Tax for Recruitment Agencies 10-11am | 31 October 2018 | Webinar In partnership with The Recruitment Network, we will be hosting a webinar specifically for recruitment agencies. Partner, Lee Manning will be providing tips on how you can maximise your business’ wealth, as well as advice on tax planning strategies you could benefit from. To attend contact lauren.kelly@raffingers.co.uk

Raffingers Foundation Charity Ball 2018 On Saturday 15 September we celebrated the first anniversary of our Charity Ball. The night saw 70 guests join us at the Prince Regent in Chigwell for our 1920s themed night, which saw us raise £2,000 (and still counting). All money raised at the ball goes directly towards funding research projects conducted by Ovarian Cancer Action and Pancreatic Research Fund, as well as directly to those affected through grants, which have been used to fund items, such as private counselling. Each year, 9,000 people in the UK are diagnosed with pancreatic cancer and just 3% of those diagnosed survive the first five years. Pancreatic cancer has the lowest survival rates of all cancers. Similarly, UK survival rates of ovarian cancer are amongst the lowest in Europe. About 7,300 women are diagnosed each year and every single day 11 women in the UK die from this terrible disease.

£2,0is0ed0 Ra

More needs to be done and we are proud to be helping to raise awareness and funds for these causes. Your Business Our Passion

Tax Free Benefits for Your Team BLOG

By Andrew Coney

Do you provide your team with gifts and benefits in the most tax efficient way? Here are just a few of the most popular benefits:

Lunchtime Meetings – Food and drink provided to your staff over a lunchtime meeting may be taxable unless it is made available to all members of your team.

Trivial benefits and gifts – You can provide ‘trivial’ gifts to your team, such as a bottle of wine, chocolates or flowers, tax free. Just make sure it doesn’t exceed £50, that there is no contractual obligation, and it is not a reward for their work or performance.

Long Service Award – If you have an employee who has worked with you for at least 20 years you can provide them with a tax-free, non-cash award. It needs to be less than £50 per year of service. So, you can give them a £999.99 Rolex for 20 years’ service, happy days!

Entertainment – You can spend up to £150 per year, per head to entertain your employees. This can include the Christmas party, a summer barbecue or any other social event.

Counselling for employees – You can provide certain welfare counselling services for your employees’ tax free. The service must be available to all employees.

Childcare Vouchers – If any of your team are working parents, you can provide them with childcare vouchers worth up to £55 per week completely tax free, which is normally offered instead of salary, known as a salary sacrifice. Cycle to Work Scheme – Under the Government’s Green Transport Plan, you can provide your team with bicycles and cyclists’ safety equipment tax free. Homeworking – Provide equipment, services and supplies to an employee who works from home tax free (if any private use is insignificant). You can also cover the cost of additional household expenses for an employee who works from home. Just ensure that the amount you give them isn’t more than their additional household expenses and is limited to £4 per week. Travel – If you occasionally pay the cost of a taxi, for example in the case of late-night working, there is no tax to pay or reporting required. Loans provided to employees – Interest free loans to employees of less than £10,000 are tax free. This can be used for things such as annual travel cards.

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Employee Suggestion Schemes – there are two kinds of awards: encouragement awards (for good suggestions or to reward your employees for special effort), which are exempt up to £25, or financial benefit awards (for suggestions that will save or make your business money), which are potentially exempt up to £5,000. Mobile Phones – You may provide each team member with a mobile phone tax free. You can reduce their salary by an amount equivalent to the cost to you and therefore save the associated tax and national insurance. These are all great ways to remunerate your team for the superb work they do, which I’m sure will increase your team morale, reduce staff turnover, and subsequently save on recruitment and training costs. For further information or advice contact me:

Andrew Coney 020 3146 1602 andrew.coney@raffingers.co.uk

Tax From the Trenches | Neill Staff

“You get what you pay for…” I had an email earlier this week, from a chap living in Australia (Let’s call him Dennis). He had received a letter from HMRC saying that they knew he had let his property out, and that he might like to consider making a disclosure under the HMRC Let Property Campaign. Dennis explained that he’d rented out a property for a few years when he was in the UK. He had been in PAYE employment during this period and hadn’t realised that he needed to tell the tax office about his rental income. He then sold the house and emigrated to Australia. He went on to ask me what was required in terms of getting straight with HMRC, whether I could help him, and what it would cost. I emailed him back with a detailed explanation of what needs to be done in terms of the campaign disclosure, together with a review of the possible capital gains position on the disposal of the property. I also quoted an all-inclusive fee. The following day I received a reply from Dennis asking if I might be able to reduce my fee because another agent had quoted a substantially lower fee. Dennis made it clear that he would prefer to engage my firm, but the difference in fees was some £500. He asked, not unreasonably, if we could meet in the middle. He also attached the other agent’s fee quote which explained that the agent would complete and submit tax returns for each year. There was no mention of the capital gains issue (which will probably result in no additional tax but needs to be checked), nor was there any mention of the campaign disclosure. And so, to the point of this blog. There are many accountants and tax professionals out there who are great at their job and provide a good professional service to clients. All good accountants will have their specialist areas, but more importantly they will acknowledge that some areas of tax or accounting are beyond them. Sadly though, this doesn’t seem to extend to all accountants. I have to say this is a pet hate for me. People mainly go to accountants because they don’t fully understand about tax and want a professional to take care of everything. They are willing to pay a fee and just need the accountant to be honest in his level of understanding and service. It’s the same principle for me when it comes to DIY at home. I can paint walls and hang wallpaper, but anything to do with water or electricity is to be avoided at all costs and

I hire a professional. Then of course there’s the whole issue of trying to save money, and let’s be honest, we all do this to some extent. But how often have we gone for the cheaper option only to find out it costs more in the long run? In this case, the other accountant had proposed a course of action that would have ended up with the client paying late filing and payment penalties, which would not be payable using the disclosure facility. It is also pretty much guaranteed that HMRC would enquire into these very old tax returns to ask the obvious question of why it took so long to make a return of the rental income. In these circumstances, a HMRC enquiry is to be avoided, as you will be faced with some very searching questions from the Inspector about what expenses have been claimed, how you calculated the income, and what penalties should be charged. I should be clear at this point, that the disclosure facility doesn’t exempt the user from paying a penalty, quite the opposite. In fact, it is a part of the process for having the disclosure accepted. The difference is that the agent and client effectively decide on the behaviour behind the omission, or the failure, and then self-assess the penalty chargeable, subject to the tax rules of course. Basically, it is possible to reduce penalties to the legal minimum. I explained to Dennis that I couldn’t lower my fee quote, simply because I knew how much time it would take to deal with everything correctly. I also suggested that he check that the other agent had a decent grasp of the different areas of HMRC’s penalty regime and to see why he preferred not to use the disclosure facility. Dennis emailed me back within the hour to say that the agent had backtracked and was now proposing an additional £300. Dennis told me he no longer had faith in the other person and wanted to engage Raffingers. I am glad Dennis changed his mind, not only because we will do a great job in getting him clear with HMRC, but I’m glad he didn’t go with the cheaper option and end up paying more tax and penalties than he would have saved in fees. Sometimes, as they say, you get what you pay for...

By, Neill Staff 020 3146 1605 neill.staff@raffingers.co.uk

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