Tax Tips and More Spring/Summer 2017
Budget 2017 Update
Tax-Free Childcare is Here
Cover That Protects You
What does you? Here points you and when force.
This new government initiative will be slowly rolled out this year, replacing the existing Childcare Voucher Scheme from April 2018.
Being a director, partner or officer of a company brings with it certain responsibilities, towards your employees, customers, stakeholders and the public.
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the Budget mean for we review the key need to be aware of they will come into
Contents
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Welcome and Partners
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Special Feature Budget 2017 Update
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Making Tax Digital Update
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Boost Your State Pension Whilst Looking After Your Grandchildren
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Tax-Free Childcare is Here
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HMRC Let Property Campaign for Landlords
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Flat Rate Probate Fees Switch to Sliding Scale
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Xero Add-On Introducing ApprovalMax
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Upcoming Events
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Charity Ball 2017
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Client News Planning for Success
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Cover That Protects You
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Employee Spotlight
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Changes Ahead for Those Working in the Public Sector
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“You do a lot of stuff don’t you…”
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www.raffingers.co.uk
Welcome to our SPRING/SUMMER Newsletter Spring is here, which means only one thing... the start of a new tax year! At the Budget 2017, we saw no major revelations, but the Chancellor did touch upon Making Tax Digital, new dividend rates and National Insurance changes, all of which we highlight in our updates on pages 4 and 5, along with many of the other announcements and when they will come into force. For those in the property sector, you may find our Let Property Campaign article interesting. Over the last few years, HMRC has stepped up its scrutiny of landlords, sending letters to thousands of buy-to-let investors it suspects of bending the rules in order to pay less tax. Because of this, we have seen a marked increase in those submitting information to HMRC through the Let Property Campaign. More information can be found on page 7. As always, we are pleased to welcome contributions this month from First Class Day Nursery Ltd, who took part in our ‘Planning for Success’ Case Study, Berns Brett, who provide guidance on D&O insurance and our very own Senior Tax Manager, Neill Staff, who has launched his new monthly blog, Tax from the Trenches. We hope that you have had a great start to the year. If you would like to contribute to our next edition, please get in touch. The Partners at Raffingers
Raffingers Partners
Gary Inglis Managing Partner gary.inglis@raffingers.co.uk
Andrew Coney Partner andrew.coney@raffingers.co.uk
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
Upcoming Events - Page 10
Budget 2017 Update SPECIAL FEATURE
March saw Philip Hammond deliver his Budget. In what was predicted to be an ‘upbeat’ speech, the Budget 2017 was geared towards taking “the next steps in preparing Britain for a global future”. Here are the key points you need to know:
Business Tax Research and Development (R&D) The government has reviewed the R&D Tax Credit regime and concluded that it is “globally competitive”. However, they will reduce administrative burdens around the scheme. Further details of which will be released shortly.
Corporation Tax Philip Hammond committed to retain the planned reduction in corporation tax from 20% to 19% in April 2017 and a further reduction to 17% by 2020.
Dividends The government plans to reduce the director’s shareholders tax advantage by cutting the dividend allowance from £5,000 to £2,000 in April 2018. This will supposedly help reduce the tax differential between the self-employed and employed, and those working through a company.
Personal Tax National Insurance Changes The difference between National Insurance Contributions (NICs) between those self-employed and those employed is said to be no longer justified. Therefore, it was annouced that from April 2018 Class 2 NIC will be abolished and Class 4 NIC will increase from 9% to 10% and 11% in April 2019. However, since making this annoucement, Philip Hammond has taken a u-turn and decided not to proceed with the Class 4 NIC, outlined in the Budget, in this Parliament. Although, they will continue with
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the abolition of Class 2 NICs from April 2018.
Savings The Chancellor has announced that the annual limit on investments into all ISAs is to increase from £15,240 (2016/17) to £20,000 from 6 April 2017. As well as cash ISAs, stock and shares ISAs and Help to Buy ISAs, the limit will also cover savings in the new Innovative Finance ISAs (available since April 2016), and Lifetime ISAs (available since April 2017). National Savings Bond available since April 2017 will pay 2.2% interest on deposits up to £3,000.
Income Tax The Chancellor confirmed increases in personal allowances and an extension to the basic rate band limit. 2016/17
2017/18
Personal Allowance
£11,000
£11,500
Basic Right Limit
£32,000
£33,500
Higher Rate Threshold
£43,000
£45,000
Other Issues Business Rates Business Rates cannot be abolished, but the government is looking to find a better way. Therefore, there is scope to reform the revaluation process, making the process more regular to avoid dramatic increases that currently occur. However, it was announced that: • There will be a £300million fund for businesses facing large increases in rates bills • Firms losing small business rate relief will have bill increases capped at £50 a month • Pubs will also receive a £1,000 discount on business rate bills in 2017, provided they have a rateable value of less than £100,000. This is predicted to help 90% of all pubs
Making Tax Digital Update At the Budget 2017, the Chancellor announced that there will be some leeway for smaller businesses and landlords.
Tax Avoidance
Making Tax Digital will now be postponed for one year for sole traders, partnerships and landlords with an income below the VAT threshold (which as of April 2017 is £85,000). If you meet these requirements you will not need to begin complying with the new regulations until April 2019.
A tax avoidance clampdown totalling £820million was announced. This is aimed at stopping businesses converting capital losses into trading losses, tackling abuse of foreign pension schemes and introducing UK VAT on roaming telecoms services outside the EU.
However, if you receive an income that is close or above the VAT threshold, you need to be aware of the changes as you will need to transition to the new digital tax system and begin quarterly reporting from April 2018.
National Minimum Wage and National Living Wage
Making Tax Digital will entail the use of cloud accounting software to submit quarterly information to HMRC. This means that to comply you will need to use an online accounting software to record income and expenses, and every quarter will be required to submit a summary of that information to HMRC online.
If you pay any of your staff the National Minimum Wage (NMW) and/ or National Living Wage (NLW), as of April 2017, new rates now apply. Please note the NLW for those aged 25 and over will increase from £7.20 to £7.50 per hour. The NMW will also increase for apprentices and workers over the age of 20. The following rates will therefore apply: • £7.50 - the NLW for those aged 25 and over • £7.05 - the main rate for workers aged 21 to 24 years old • £5.60 - the 18 to 20 rate • £4.05 - the 16 to 17 rate for workers above school leaving age, but under 18 • £3.50 - the apprentice rate, for apprentices under 19, or 19 or over and in the first year of their apprenticeship
Childcare Tax-Free Childcare for working families with children under 12, providing up to £2,000 a year for each child to help with childcare costs. From September 2017, the free childcare offer will double, from 15 to 30 hours a week for working families with three and four year olds in England, in total worth up to £5,000 for each child. For further information, contact: Gary Inglis 0208 418 2770 gary.inglis@raffingers.co.uk
If you are currently not using any form of digital software, it is important that you are aware of the proposed changes and begin to think about how your business will comply with the new regulations. The one piece of good news is that spreadsheets have survived, although from April 2018 they will need to be kept to HMRC requirements and possibly combined with other software to clean the data. How we can support you As Making Tax Digital will be compulsory and fines will be given to those that continually fail to comply, we are encouraging all businesses to get ahead of the game and transfer to an online software before it is mandatory. We have looked into all of the packages that meet HMRC’s criteria and Xero is the one that we are advocating. The software is incredibly easy to use, enables bank accounts to be reconciled immediately and gives you a real time view of your finances whenever you need them. To encourage businesses to begin thinking about transitioning to the new software sooner, rather than later, we are offering discounts on Xero until December 2017. To make use of this offer or for further information on Making Tax Digital contact Barry Soraff at barry.soraff@raffingers.co.uk.
Your Business Our Passion
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Boost Your State Pension Whilst Looking After Your Grandchildren Thousands of grandparents that are caring for their grandchildren are missing out on National Insurance (NI) credits that can boost their state pension by thousands of pounds. This little known scheme is available to workingage grandparents looking after grandchildren that are under 12 years old. Officially known as ‘Specified Adult Childcare’ credits; the scheme works by allowing mothers who are going back to work after the birth of their child to sign a form allowing a grandparent or other family member to receive NI credits for looking after their child.
on a proportion of their state pension because of gaps in their NI record due to looking after their grandchildren, instead of doing paid work. Just a year of not working can cost grandparents £231 per year of their state pension. This scheme enables grandparents, who are helping their children go back to work or those looking after their grandchildren in school holidays, get more than just quality time with their grandchildren. It is predicted that over 200,000 grandparents are missing out on the scheme. For further information, contact andrew.coney@raffingers.co.uk.
Many working-age grandparents are missing out
Tax-Free Childcare is Here Tax-Free Childcare is finally here. After initially being announced in 2013, this new government initiative will be slowly rolled out this year, replacing the existing Childcare Voucher Scheme from April 2018. Tax-Free Childcare will cover 20% of childcare costs (up to £2,000 per child, per year), for children up to the age of 12. To qualify for the scheme, you and your partner must be in work and each earn at least £115 a week, but no more than £100,000 each per year. You should also be aware of the following points: • Tax-Free Childcare is essentially an online account in which you will pay money into. To open an account, you must have children aged up to 12, or 17 if they have disabilities • Anyone can pay into the account, not just you and your partner • For each 80p paid in the government will add 20p • The money must be used to pay for childcare with a carer who is registered to receive a Tax-Free Childcare payment • To qualify, you must not be receiving free or subsidised childcare, or childcare vouchers from your employer
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• If you close the account or do not use the money for childcare, you will lose the government’s contribution Tax-Free Childcare will soon replace Childcare Vouchers. However, if you sign up for Childcare Vouchers before April 2018 (when they will be abolished), they will still be available to you and you will get to choose which scheme is more tax efficient. Childcare Vouchers enable savings of up to £933 per parent (£1,866 per family). Yet, Tax-Free Childcare saves 20% on childcare costs of up to £10,000 per child. There is no right answer as to which scheme is most beneficial; it all depends on your personal circumstances. Tax-Free Childcare is slowly being rolled out this year and will be available to those with the youngest children first. A fixed date for the scheme has not yet been announced, but we recommend you register on the gov.uk portal now so that you will be the first to know when you are entitled to open an account. If you are not currently registered for Childcare Vouchers, we also recommend that you join now so that you have the option to choose the scheme after April 2018.
HMRC Let Property Campaign for Landlords
Over the last few years, HMRC has stepped up its scrutiny of landlords, sending letters to thousands of buy-to-let investors it suspects of bending the rules in order to pay less tax. Our Senior Tax Manager and ex HMRC Inspector Neill Staff explains: We have seen a marked increase in HMRC activity in this area over the last few years. It is not uncommon for us to receive several calls each month from people who have had letters from HMRC asking them to confirm what properties they own and provide details of their rental income. In most cases, HMRC also asks for a schedule of worldwide assets and for the taxpayer to provide all their bank statements for review. The enquiry letters are based on information obtained by HMRC from the Land Registry along with housing benefit payments that are paid to landlords directly. HMRC has certainly been very busy in this area for several years now and, in the majority of cases, they have a very good idea of the properties that you own and the level of rental income or capital gains that they expect to see on your tax returns. But their information is not always accurate, and HRMC’s request to see bank statements, and asking you to provide a schedule of your worldwide assets, is often excessive and can be challenged. Even in cases where rental profits or capital gains have not been correctly disclosed, it is still possible to reach agreement with HMRC about the additional tax, interest and penalties. Raffingers has a proven track record of successful negotiations in this area and can help anyone who has received an enquiry letter. People tend to forget that HMRC has a backlog of potential landlord enquiry cases and all the inspector wants to do is assess any underpaid tax and move on to the next case. As a result of HMRC’s activities in the landlord sector, we are also receiving enquiries from people who wish to make a disclosure to HMRC about undeclared rental income or capital gains from property disposals before they hear from HMRC. This is certainly a good idea and can bring peace of mind. If you find yourself in this situation, you should be aware of HMRC’s Let Property Campaign and know just how easy it is to use.
HMRC has a very good idea of the properties that you own and the level of rental income or capital gains that they expect to see on your tax return. We have now used the landlord disclosure facility on a number of occasions and have found the whole process quite straightforward. More importantly, the officers at HMRC have been very helpful and supportive and, to date, we have had 100% agreement from HMRC regarding our disclosures in terms of the tax chargeable and the level of penalties that we proposed. In one particular case, HMRC agreed to a 10% penalty loading and allowed the taxpayer time to pay the additional tax. The campaign is open to individual landlords renting out residential property. This includes you if you are: • renting out a single property • renting out multiple properties • a specialist landlord, e.g. student or workforce rentals • renting out a room in your main home for more than the Rent a Room Scheme threshold • living abroad and renting out a property in the UK • living in the UK and renting a property abroad • renting out a holiday home even if you use it yourself If you are uncertain about whether you should make use of the Let Property Campaign and need a bit of advice, contact:
Neill Staff 0208 418 2671 neill.staff@raffingers.co.uk
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Flat Rate Probate Fees Switch to Sliding Scale
The government is to go ahead with plans to move from the current flat rate fee for applications for a Grant of Probate to a banded structure, where the fees increase in line with the value of the estate. Despite releasing a consultation on the matter, the government has ignored most of the responses and decided to implement the proposals regardless. Only 63 of the 829 responses to the proposals were in favour of moving to an estate value based fee system, which begs the question of why bother with the consultation in the first place! The new fees, which are shown in the table below are to be effective from May 2017.
Estate Value • 0 - £50,000 • £50,001 to £300,000 • £300,001 to £500,000 • £500,001 to £1m • £1m to £1.6m • £1.6m to £2m • Above £2m Currently, a £215 flat fee applies if probate is applied for by friends or family, which accounts for 40% of applications, or £155 if a solicitor or accountant completes the process. So, for all but the smallest of estates, there is a significant increase in fees. The existing fees reflect average administration costs and currently generate around £45million per annum in income for HM Court and Tribunal Service (HMCTS). The Ministry of Justice by its own admission expects the new regime will generate over £320million for the courts system. Some would argue this is therefore a form of taxation rather than a contribution to court costs!
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In addition, under the new measures, probate fees will be removed from the general fee remissions scheme (‘help with fees’) but provision will remain for exceptional fee remissions to be granted at the discretion of the Lord Chancellor, in particular, where the executor shows that they have exhausted all reasonable means of funding the grant of probate application. The new regime is likely to involve more work for executors as the fees need to be paid before the Grant is issued to enable access to estate funds. This may even involve executors having to source finance to meet the cost of the probate application. The Probate Service will be able, via a limited Grant of
New Fee • £0 • £300 • £1,000 • • • •
£4,000 £8,000 £12,000 £20,000
Probate, to provide some access for executors to the assets of the estate, for the sole purpose of paying the necessary fees. How this will work in practice remains to be seen as it requires the agreement of the banks or other financial institutions, so in practice may not work as it should.
Paul Dell 020 8418 2688 paul.dell@raffingers.co.uk
+ XERO ADD-ON
Introducing ApprovalMax Multi-step and multi-role approvals for your business.
Coupled with cloud accounting software such as Xero, ApprovalMax automates the approval authorisation process for finance and accounting documents, replacing paper trails and emailbased approval processes. It is exceptionally easy to set up and use: approval configuration can be done with a few clicks and requires no technical expertise.
Compliance and Accountability Default and custom reports can be generated to provide the approval activity history in audit-ready form. Proactive fraud detection measures such as tracking approval activities performed outside of the predefined approval workflow are also available. Ease of Adoption, Ease of Use
Complex workflows ensure that approval decisions are performed by managers with the appropriate authorisation level and in full accordance with corporate and regulatory requirements.
ApprovalMax ensures maximum ease of use and configuration for business users. It can be set up by users with no technical background. The app is integrated with Microsoft Outlook for email notifications as well as accessible on both web and mobile platforms.
Transparency of the Approval Process
ApprovalMax Solutions
Approval workflows mean automatic routing of approval requests is performed and notifications are sent to Approvers via email, pushing the approval process forward. Real-time report views of the approval progress ensure approval request tracking and timely management of approval delays.
ApprovalMax caters for small and medium businesses, bookkeepers, government and not-for-profit organizations, charities and public money financed organizations such as schools, churches, etc.
Multi-Step and Multi-Level Approvals
Exception Handling A whole range of capabilities, such as the ability to reject an approval request, and revoke, delegate, or force the approval decision, makes the approval workflow much more flexible.
The solutions include: Account Payable approval automation, Purchase Order creation and approval outside of Xero, complete purchasing solution - from Purchase Order creation to bill matching, shared financial service centre operations automation, and many more.
For further information about ApprovalMax and how it can be integrated into your business, contact: Amy Townsend 020 8418 2690 amy.townsend@raffingers.co.uk
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Upcoming Events
To attend any of our events contact lauren.aston@ raffingers.co.uk.
Xero Should Save Time not Take Time
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May 2017
11am-12pm | Webinar Are you spending more time than you expected on your cloud accounting software or are you still using a traditional desktop package? Cloud accounting streamlines the bookkeeping process, yet we are finding that many businesses are still struggling to get to grips with the software and are spending more time than necessary performing their day-to-day tasks. Our next cloud webinar will concern time efficiency and our tips for using features of the cloud to save you and your team valuable time.
Raffingers Foundation Charity Golf Day 2017
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June 2017
10am-8pm | Toot Hill Golf Club We are looking for golfers. Are you up for the challenge? Entry costs £75 per person and includes access to this fantastic 18 hole course, breakfast rolls, a three course dinner and a donation to Raffingers Foundation, a charity that supports those affected by ovarian and pancreatic cancer.
How to Make Your Business More Efficient
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July 2017
6:30pm-8pm | WeWork, Spitalfields If you want your business to work smarter and faster, cloud accounting software is a wise investment. Working in the cloud will give you a better overview of your finances, and improve collaboration within your team. What’s more, with Making Tax Digital just around the corner too, now is the time to begin thinking about implementing processes that will make you compliant. Thinking about this change now, gives you more time to adapt and implement the new processes into your business. Join us to find out: • How you can reduce the time you spend on your accounts and bookkeeping • How you can save time by: o Taking pictures of your receipts o Visualising your data, allowing you to spot trends instantly (such as who your best sales person is) o Automating many of your admin processes • Why cloud accounting software will be instrumental in making you compliant with Making Tax Digital and to your continued success
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Registered Charity Number: 1171885
Charity Ball 2017 Saturday 16 September | 6:30pm-12am | Black Tie Waltham Abbey Marriott, EN9 3LX Tickets: £75pp or table of 10 for £700 Sponsorship Options: Drinks Sponsorship
£2,000 Includes two free tickets, full page advertisement in the Charity Ball brochure, advertising space at the venue and credited as a key sponsor in all marketing material.
Charity Ball Brochure
£75 half page advertisement £100 full page advertisement - 19 LEFT £150 back page advertisement - SOLD £125 inside front cover advertisement - SOLD £125 inside back cover advertisement
Raffle/ Auction
We are in need of Raffle and auction prizes. Anyone who donates a prize will Raised so far be mentioned in our Charity Ball brochure given out to all 200 attendees.
To sponsor our Charity Ball or to book your tickets contact lauren.aston@raffingers.co.uk.
Raising Funds For: Your Business Our Passion
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Planning for Success First Class Day Nursery CLIENT NEWS
Background
The Result
First Class Day Nursery School Ltd is co-owned by Ginny Baker and Sharon Goate, who have been running the nursery for over 28 years.
Futrli has enabled Ginny and Sharon to keep a close eye on all aspects of their finances. They are now able to use Futrli to see reliable data on their business, their strengths and weaknesses and how the business is actually performing today. Through these insights action can be taken immediately on any negative data and peaks and trends can be monopolised.
The Day Nursery employs 42 staff and provides care and education for 180 families each week. Based in Benfleet, Essex the nursery is officially approved by Essex Country Council and is rated ‘Outstanding by Ofsted’.
The Challenge and Solution Raffingers provided bookkeeping services and annual accounts for the nursery. However, the owners did not have access to instant, up-to-date information and therefore were struggling to measure the business’ performance. Following a meeting with Adam (Partner at Raffingers) and Imran (Cloud Management Accountant at Raffingers), Ginny and Sharon were introduced to Futrli and the many benefits it could provide, amongst which was the ability to provide insights into the business’ performance. Just a bit about Futrli, it is not a traditional P&L reporting software. Instead, Futrli tracks any KPI of your choosing, as well as providing advanced forecasts. This means that not only can you measure your performance now, but you can decide where you want to be in five year’s time and through Futrli’s ‘what if’ and scenario planning features, you can see what needs to be done to get there.
For a free demo of Futrli and to see how it can benefit your business, contact: Adam Moody adam.moody@raffingers.co.uk 020 8418 2683
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Through being able to use Futrli for forecasting too, Ginny and Sharon can now plan more effectively for the needs of the business.
We would highly recommend Futrli to anyone who wishes to establish and/or maintain a successful business venture. - Ginny Baker, First Class day Nursery School Ltd
Cover That Protects You Many directors invest considerable time and resources in protecting the assets and liabilities of their limited companies. However, some do not realise that they also incur unlimited liability for their actions in connection with the business. Being a director, partner or officer of a company brings with it certain responsibilities – towards your employees, customers, stakeholders and members of the public, explains McFadyen.
Employee Spotlight
“If you are accused of misconduct, you are personally liable to defend the claim – and if you don’t have adequate cover, your personal assets are potentially at risk too.”
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 Associate Partner, Jebtha Kapirial.
Directors and Officers (D&O) liability insurance, also known as management liability insurance, offers financial protection by covering the cost of claims brought against an insured individual.
Name: Jebtha Kapirial Email: jebtha.kapirial@raffingers.co.uk
“A common misconception is that alleged misconduct by directors or companies is covered under other liability policies such as Professional Indemnity,” he adds. “Another is that you only need D&O insurance if you run a publicly traded or very large business. This is not the case. SMEs are just as vulnerable and face exactly the same risks and regulations as their larger peers, but often do not have the support of in-house HR or legal teams to fall back on.” In an increasingly litigious society, employment practice claims such as wrongful dismissal or sexual harassment can result in astounding settlements. For example, an engineering company was recently ordered to pay an employee £50,000 for failing to follow a fair dismissal procedure. Your investors also have the right to sue if their shares lose value as a result of a director or company’s alleged misconduct. When you consider the cost of defending, legal action can often run into the tens of thousands of pounds, the number of SMEs still without D&O cover is surprising. Some regard it as an unnecessary expense on top of other insurance costs, yet D&O claims are not covered under any other policy. However, the good news is that D&O insurance is more affordable than ever with policies costing from as little as under £500 per year. For more information, contact Ian.Mcfadyen@ bernsbrett.com or visit www.bbicover.com.
Career: I completed my A-levels at Sir George Monoux College in Walthamstow. Whilst there, I decided that University wasn’t for me and instead joined Jeffreys Henry as a Payroll Junior with the option of studying for AAT and ACA. This gave me exposure to payroll, bookkeeping, accounts and audit, giving me an all-round experience of accounting and the services we deliver. I qualified as a chartered accountant in 2010, and moved to Haines Watts in 2012 to broaden my experience. At Haines Watts, I was involved in the creative sector and had the opportunity to work with some high profile architects. Client service was the focus once again and this has really built up in me an appreciation for adding real value to clients, as well as taking care of the compliance work. I joined Raffingers in December 2016 as an Associate Partner and I am excited by the challenge ahead and the firm’s vision for the future. Interests: I enjoy watching and participating in sports and get involved in social work at the weekends. I am a Manchester United fan and things haven’t been great for us in the last few years, hopefully we will be back to our glory days soon under Mourinho! Partners Report: Jebtha has settled in really well; despite coming from a much larger firm he has adapted to the day-to-day challenges that come from working with a variety of clients. He has also helped improve our internal systems, although if I had known about his football team at the interview he might not have been so lucky!
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Changes Ahead for Those Working in the Public Sector BLOG
Blog by Lee Manning, Partner
On 20 March 2017 the final legislation regarding the reform of off-payroll working rules in the public sector was released. Since 6 April 2017, it is now the responsibility of the public sector body and engagers to apply the intermediaries’ legislation to applicable workers (namely those working through a PSC or other intermediary). The onus is on the public sector body to determine the status of a worker (historically this was down to the worker themselves). It is then the responsibility of the engager or agency to correctly apply PAYE tax and NIC, where applicable, before paying the worker. To help engagers and agencies, HMRC confirmed that the public sector body will be responsible for determining a worker’s status on or before the worker enters into a contract. However, the agency will still be responsible for deducing the correct employment taxes. To help with this, the government has released its Employment Status Service (ESS). This test will help determine whether a worker is deemed to be ‘offpayroll working’ for tax purposes. For contracts entered into before 6 April 2017, the public sector body needs to tell the fee payer prior to the first payment being made after 6 April 2017 as
Recruitment companies and engagers who supply workers to public bodies will be affected. These include schools, councils, NHS, BBC and any other public authority.
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it is the payment that triggers the new rules, not the date at which a contract is entered into. If the public sector body does not do this then it will become the fee payer. The worker also has a responsibility to notify the fee payer whether their intermediary meets the conditions of liability for IR35. If no notification is made by the worker, the fee payer will assume PAYE and NIC is to be applied. This new legislation is going to place considerable burdens on agencies as they are ultimately responsible for ensuring the correct amount of tax has been paid by its workers. It will also affect those working through a PSC or another intermediary as they will no longer receive any financial benefit and may even be worse off. With these changes now in force, it is important that those affected have processes in place to deal with the additional burdens.
Lee Manning 020 8418 2662 lee.manning@raffingers.co.uk
Tax From the Trenches | Neill Staff
“You do a lot of stuff don’t you…” I was having a chat with one of my non-tax friends the other day, telling him about a trip I’d made earlier in the month to see a client in the wilds of Essex. “You do a lot of stuff don’t you” said my friend. “I thought all you tax people just sat in a room and did tax stuff”. He had a point. A lot of tax stuff is just sitting in a room doing letters and schedules, but sometimes you get to go and meet people and things become interesting, like my visit to see the client in Essex. They wanted further information on Research and Development (R&D) and I had agreed to pop out and see them on my way home from work. When I got there I was met with the customary tea and biscuits followed by an interesting chat about what they were doing. This particular story has a happy ending so I’ll return to this later. But the discussions with my friend got me thinking a bit deeper about my job, the people I see, and the different aspects of tax and investigation work that I get involved in. So, I have decided to start pulling together a monthly blog about what tax can be like when viewed from the trenches each day. So what is there to talk about? In the search for what to write about I was brought down to earth with a bit of a bump, all to do with one of my presentations, which was published recently on YouTube. Those of you who crave the spotlight and look good in front of a camera might well love to see yourself on YouTube. I don’t, mainly because without meaning to, I tend to pull faces so I look like Stan Laurel. Also in my head, I’m not really overweight, maybe just a bit chunky for a middle aged guy. All I can say is that YouTube is an unforgiving mistress and all I could see were clear reminders that I should ease back from the Doritos. But, the seminar itself was actually a lot of fun. We had a full house of attendees that were genuinely interested about the subject matter (R&D), but just as important, there were some seriously classy nibbles laid on for after. Anyone who knows me will appreciate this always put me in a predicament. Naturally people want to come up and chat after you’ve finished speaking and that’s great of course, but I do love a bit of free food. In the end it probably worked out for the best in that most of the food had been eaten by the time I got there but I made sure whatever was left
wasn’t going to be thrown away. Another meeting of note took place last week with some HMRC Inspectors who flew down all the way from Scotland to meet with a client. I picked them up from the local station, as no-one wants HMRC arriving hot and irritable for a meeting! The Inspectors were genuinely nice guys, both middle aged, grey haired, highly sociable and just a little bit portly. Pretty much a mirror image of me! It was nice to speak to HMRC on the drive to the office to get a feel of who you’re dealing with and, most of the time, HMRC are just the same as everyone else. They have a job to do. The reason behind the meeting was a common scenario for lots of accountants. An unrepresented taxpayer gets an enquiry letter, panics, and supplies everything that HMRC has asked for, gets into a mess and then ignores everything HMRC send to him. He finally contacts an accountant when things start looking ugly, in this case tax assessments for over £100,000 and deliberate penalties of £20,000. I won’t go into the circumstances of the case in too much detail here, but just to say things were not even 1% as bad as HMRC first believed and the assessments and penalty determinations are well on the way to being cancelled, but I was quite taken by how scared the client was with the whole process. It’s so easy to be glib and take the whole HMRC enquiry process for granted when you deal with it day in day out. It’s good to see people face to face and to appreciate just how terrifying an enquiry letter or an information notice can be. People don’t just need a tax professional, sometimes they need reassurance and a bit of a hug. So finally, back to the meeting in the wilds of Essex and the client who is carrying out R&D. Well two weeks later we have a claim being sent to HMRC which if successful (which it will be) will generate a tax credit repayment of just over £25,000 for the client. We spoke on the phone before everything was submitted and the client was ecstatic. “You’ll have to come down and have tea with us again”. Neill Staff 0208 418 2671 neill.staff@raffingers.co.uk
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