A .C . M O L E & S O N S C H A R T E R E D A C C O U N TA N T S
tive
AUTUMN 2018
A president’s life
Love Musgrove
On 6 June 2018 tax partner Paul Aplin was elected president of the Institute of Chartered Accountants in England & Wales (ICAEW). His term ends on 5 June 2019. Here he shares some of his experiences from his first four months in office. Paul writes: “It has been a busy four months, dividing my time between Stafford House in Taunton and ICAEW’s headquarters at One Moorgate Place in the City of London. Although I have been dealing with politicians and senior civil servants for over ten years in my roles with the ICAEW Tax Faculty, being president has taken this to a different level. ICAEW has over 150,000 members in 153 countries around the world. The president’s role is therefore an international one. The day after I was elected, I welcomed tax directors from seven overseas professional bodies to Chartered Accountants Hall and I have since welcomed the presidents of the Institute of Chartered Accountants of Zimbabwe, the Institute of Chartered Accountants of Nepal and the Institute of Chartered Accountants of India. At the end of June, I visited ICAEW members in Malaysia and officiated at a prize giving ceremony for students at Sunway College in Kuala Lumpur.
In October I flew to Southern Africa to visit members of ICAEW and of the Botswana Institute of Chartered Accountants in Gaborone. In addition to reaching out to our overseas members and building strong links with other institutes, we also undertake capacity building work around the world, helping to build stronger audit and financial capacity as part of our ambition to build a world of strong economies: there can be no strong economy without a strong accountancy profession. In the UK I have attended round table sessions and meetings with Nicky Morgan (chair of the Treasury Committee of the House of Commons), Liam Fox (Secretary of State at the Department for International Trade), Mel Stride (Financial Secretary to the Treasury) and Esther McVey (Secretary of State at the Department of Work and Pensions) – where I was happy to find her new Parliamentary Private Secretary, Taunton’s MP Rebecca Pow. I attended the Labour and Conservative Party conferences and spoke at the Diplomatic Heads of Mission receptions alongside Shadow Foreign Secretary Emily Thornberry, Shadow Brexit Secretary Keir Starmer, Foreign Secretary Jeremy Hunt and International Development Secretary Penny Mordaunt. Back at Chartered Accountants Hall I shared a platform with Bank of England Chief Economist Andy Haldane and delivered a speech at Mansion House in the company of the Lord Mayor. I’ve spoken at conferences and dinners around the UK on issues ranging from tax, to the impact of digital technology on business; from social mobility to economics education. What lies ahead? Visits to Australia, Singapore, Malaysia, Hong Kong, Dubai, Mauritius and Cyprus. It is an amazing job and one I never dreamed I would get to do. As far as I am aware, I am the first president from the South West in the ICAEW’s 138-year history. And my work? Thanks to technology I can keep in touch by email, see my post and access the office systems wherever I am in the world.
A .C.MOLE & SONS
CHARTERED ACCOUNTANTS CHARTERED TAX ADVISERS
E. info@acmole.co.uk www.acmole.co.uk
A. C. Mole & Sons Stafford House, Blackbrook Park Ave, Taunton, Somerset TA1 2PX T. 01823 624450 F. 01823 444533
We have always been active in the community supporting and organising events and being involved in various fund-raising activities.
The Budget
Throughout each year, with the help of family, friends and clients, we organise events to raise money for our chosen Charity of the Year. To date events have included our more (and even less) athletic staff running Taunton 10k, our annual outdoor theatre show, quiz evenings, race nights, Christmas jumpers and baking and consuming a significant amount of cake. Our charity of the year this year is Love Musgrove, the official charity of Musgrove Park Hospital. The charity helps provide resources that would not normally be funded by the NHS. The money we raise will help to provide a much-needed, high specification MRI scanner. Currently the two MRI scanners operate to full capacity and a third scanner would be a great asset to the community.
BUDGET 2018
pro
Our first fund raising event this year was an open-air performance by touring theatre company The Pantaloons of The Importance of Being Ernest. Other events include a quiz, prize bingo and a further theatre production of A Christmas Carol on 23 December, to be held at The Quantock Brewery in Bishops Lydeard – the evening performance is sold out, but there are still a few tickets available for the afternoon performance.
Cyber security With more and more business activity going on line, the importance of taking cyber security seriously has never been greater. The National Cyber Security Centre’s 2017/18 report highlighted a number of significant threats. These include ransomware attacks (where files are “locked” by the attacker, who then demands a ransom to unlock them), fake emails purporting to come from within the victim’s business giving instructions to make payments and data beaches in which confidential customer information is obtained. Victims have included not only high-profile businesses such as Equifax, Uber and British Airways but also many much smaller businesses. There is a wealth of advice on the NCSC’s website on identifying and mitigating threats. It is well worth reading.
Chancellor Philip Hammond (or Fiscal Phil as he referred to himself in his speech) delivered his third Budget on Monday 29 October 2018.
forecast in March 2018), £31.8 billion in 2019/20, £26.7 billion in 2020/21 and £23.8 billion in 2021/22. No date has been set for achieving a surplus.
The Office for Budget Responsibility (OBR) revised its growth predictions to 1.3% for 2018, 1.6% for 2019 and 1.4% for 2020 and 2021. The uncertainty over the impact of Brexit makes it likely that the figures will be revised again in 2019. Mr Hammond had already allocated £3.7bn to Government departments for Brexit preparations and in the Budget he added a further £0.5 billion to that war chest. He also said that he would upgrade the Spring Statement in March 2019 to a full Budget if necessary.
Debt as a percentage of GDP peaked in 2016/17 and is set to continue falling. As the Government is still borrowing however, the national debt will continue to increase in absolute terms. It is now forecast to reach £1.810 trillion this year and to hit £1.896 trillion in 2023/24.
The deficit – the amount by which the Government’s annual expenditure exceeds its income – is now expected to be £25.5 billion for 2018/19 (£11.6 billion lower than
The Budget Red Book once again highlights the UK’s poor productivity, which remains well below the average for the UK’s main competitors. This has been a persistent problem since the financial crisis in 2008. For more detail about the Budget, turn to page two.
Image: James Gourley
A N D C H A R T E R E D TA X A D V I S E R S
AUTUMN 2018
S E G N A H C TAX S L A U D I V I D FOR IN
e d that th e c n u o n n ncellor a rease to c in l il The Cha w e allowanc l a n 9, a year o s 1 r 0 e 2 p il r p e from 6 A igher rat h e h T £12,500 . ed an plann h t r £50,000 e li o r t a e e s a e r r will inc lso a yea threshold (a e t a d same owance ll a e h T from the d). n planne a se h t r e li r ea en increa h t l il w shold n. and thre h inflatio it w e n li r in ent limit each yea A) investm while count (IS r,
BUDGET 2018
x yea gs Ac ual Savin 019/20 ta 2 id iv e d . th In r e fo Th ,000 to £4,368 in at £20 increase l il w s A will rema r IS for Junio further the limit were no re e th , s res nds n in the p nts to pension fu e peculatio s to m e y e it a c p p n s a n e w D llo ef o to tax reli e in the Lifetime A changes s a n an incre ril 2019. other tha 6 Ap m o fr 0 0 £1,055,0
CAPITAL GAINS TAX
The annual exem pt amount will in crease to £12,000 for in dividuals and pe rsonal representatives a nd to £6,000 for trustees of settle ments for 2019/2 0.
There will be som e changes to princ ipal private residen The final period of ce relief. ownership covere d by the relief aft occupation has ce er ased has already been reduced fro years to 18 month m three s. It will reduce fu rther, to just nine from 6 April 2020 months, . The availability of lettings relief (whe private residence re a has been let for pa rt of the period of ownership) will als o be restricted fro m 6 April 2020 to where the owner situations was in shared oc cupancy with the There will be no ch tenant. anges to the 36 m onths final period exemption availab le to disabled peop le or those in a ca re home. The qualification period for ownersh ip of assets or sh Entrepreneurs’ Re ares for lief will be increas ed from one year years and where to two the disposal is of shares, the claim to have a 5% inter ant will have est in both the dis tributable profits net assets of the and the company.
BUSINESS TAXATION The rate of corporation tax will, as already announced, fall from 19% to 17% from 1 April 2020. The VAT threshold will remain at its current level until 31 March 2022. The Annual Investment Allowance (for investment in plant and machinery) will be increased from £200,000 to £1m for two years from 1 January 2019 to 31 December 2020. A new Structures and Buildings Allowance will give relief for the cost of non-residential commercial buildings. The allowance will be given at 2% a year over a fifty-year period for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29 October 2018. There will be no balancing allowances or charges on sale: the purchaser will simply take over the unexpired portion of the original allowances. Expenditure on integral features and fittings that are currently allowable will continue to qualify for writing down allowances for plant and machinery, including the Annual Investment Allowance. The Structures and Buildings Allowance will be funded in part by a reduction in the rate of writing down allowance on the special rate pool of plant and machinery from 8% to 6%. Special rate expenditure includes expenditure on long-life assets, thermal insulation and integral features. Plant and machinery writing down allowances will not change. Having placed the onus on public sector bodies to decide whether individuals working through limited companies should
be treated as employees, the Government has decided to extend that responsibility to the private sector from April 2020. This will, however, only apply to large and medium sized organisations. The employment allowance, which reduces employers’ national insurance bills by up to £3,000 a year, will be restricted to businesses which paid less than £100,000 in employer national insurance contributions in the previous tax year from April 2020. From April 2020, the Government will introduce a new 2% Digital Services Tax on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users.
Last word
It seems only fair to give the Chancellor the last word: “Our economy,” he said “continues to confound those who talk it down”. Long may that continue.
Making Tax Digital From the start of their first VAT quarter commencing on or after 1 April 2019 all VAT registered businesses with sales in excess of £85,000 will have to maintain their business records in digital form and file their quarterly VAT returns using software and apps. The software and apps will have to meet the standards demanded by HMRC. The programme is called Making Tax Digital (MTD). On 16 October, HMRC opened up its MTD for VAT pilot to around half a million businesses. This represents just under half the number of businesses that will be mandated to comply with MTD.
only if they link through special “bridging” software to MTDcompliant software which can then communicate with HMRC’s system. HMRC will adopt a light touch approach to this requirement in the first year of MTD.
The government has also announced that some VAT registered businesses with turnover in excess of £85,000 will have their mandation date deferred by six months to 1 October 2019. The affected businesses include trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, traders based overseas, those required to make payments on account and annual accounting scheme users.
If the initial information is captured digitally, for example an image of a purchase invoice captured on a mobile phone app and transferred to MTD compliant software, the original invoice does not strictly need to be retained. If information from a purchase invoice is input manually to software then the original invoice does need to be retained. Our advice however would be to retain original paper invoices and documents in either situation, until MTD beds down.
Why is the Government doing this?
The Government believes that errors in record keeping lead to a loss of tax of around £8 billion a year and that MTD will reduce that loss by around 10%. They also say that businesses and individuals expect to be able to interact with HMRC digitally.
What will the new requirements be?
If you are within the scope of MTD for VAT you will need to maintain your VAT records using MTD-compatible software which will be able to communicate with HMRC’s system to submit your VAT return. The only information that will be sent to HMRC is the information contained in the normal VAT return boxes: the transaction-level detail will not be not transmitted. Many businesses use spreadsheets to maintain their business records. Spreadsheets will still be permissible but
Do I really have to do this?
If you come within the requirements at the beginning of this article, yes. There will be very limited exceptions (on grounds of disability, age or remoteness of location), but we expect HMRC to grant such exemptions only in very limited cases. There will be a “soft landing” approach to penalties for noncompliance with the MTD filing requirements in the first year. HMRC will not penalise businesses that fail to meet the requirements, as long as they have tried to do so. That will not be the case in year two however, so our advice is to endeavour to comply fully from the start. There will be no soft landing on penalties for failure to actually pay the VAT due on time.
What do I do next?
If you haven’t already talked to us and think that you may be affected by the new rules, please contact us as soon as possible. 1 April is not far away!
AUTUMN 2018
S E G N A H C TAX S L A U D I V I D FOR IN
e d that th e c n u o n n ncellor a rease to c in l il The Cha w e allowanc l a n 9, a year o s 1 r 0 e 2 p il r p e from 6 A igher rat h e h T £12,500 . ed an plann h t r £50,000 e li o r t a e e s a e r r will inc lso a yea threshold (a e t a d same owance ll a e h T from the d). n planne a se h t r e li r ea en increa h t l il w shold n. and thre h inflatio it w e n li r in ent limit each yea A) investm while count (IS r,
BUDGET 2018
x yea gs Ac ual Savin 019/20 ta 2 id iv e d . th In r e fo Th ,000 to £4,368 in at £20 increase l il w s A will rema r IS for Junio further the limit were no re e th , s res nds n in the p nts to pension fu e peculatio s to m e y e it a c p p n s a n e w D llo ef o to tax reli e in the Lifetime A changes s a n an incre ril 2019. other tha 6 Ap m o fr 0 0 £1,055,0
CAPITAL GAINS TAX
The annual exem pt amount will in crease to £12,000 for in dividuals and pe rsonal representatives a nd to £6,000 for trustees of settle ments for 2019/2 0.
There will be som e changes to princ ipal private residen The final period of ce relief. ownership covere d by the relief aft occupation has ce er ased has already been reduced fro years to 18 month m three s. It will reduce fu rther, to just nine from 6 April 2020 months, . The availability of lettings relief (whe private residence re a has been let for pa rt of the period of ownership) will als o be restricted fro m 6 April 2020 to where the owner situations was in shared oc cupancy with the There will be no ch tenant. anges to the 36 m onths final period exemption availab le to disabled peop le or those in a ca re home. The qualification period for ownersh ip of assets or sh Entrepreneurs’ Re ares for lief will be increas ed from one year years and where to two the disposal is of shares, the claim to have a 5% inter ant will have est in both the dis tributable profits net assets of the and the company.
BUSINESS TAXATION The rate of corporation tax will, as already announced, fall from 19% to 17% from 1 April 2020. The VAT threshold will remain at its current level until 31 March 2022. The Annual Investment Allowance (for investment in plant and machinery) will be increased from £200,000 to £1m for two years from 1 January 2019 to 31 December 2020. A new Structures and Buildings Allowance will give relief for the cost of non-residential commercial buildings. The allowance will be given at 2% a year over a fifty-year period for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29 October 2018. There will be no balancing allowances or charges on sale: the purchaser will simply take over the unexpired portion of the original allowances. Expenditure on integral features and fittings that are currently allowable will continue to qualify for writing down allowances for plant and machinery, including the Annual Investment Allowance. The Structures and Buildings Allowance will be funded in part by a reduction in the rate of writing down allowance on the special rate pool of plant and machinery from 8% to 6%. Special rate expenditure includes expenditure on long-life assets, thermal insulation and integral features. Plant and machinery writing down allowances will not change. Having placed the onus on public sector bodies to decide whether individuals working through limited companies should
be treated as employees, the Government has decided to extend that responsibility to the private sector from April 2020. This will, however, only apply to large and medium sized organisations. The employment allowance, which reduces employers’ national insurance bills by up to £3,000 a year, will be restricted to businesses which paid less than £100,000 in employer national insurance contributions in the previous tax year from April 2020. From April 2020, the Government will introduce a new 2% Digital Services Tax on the revenues of certain digital businesses to ensure that the amount of tax paid in the UK is reflective of the value they derive from their UK users.
Last word
It seems only fair to give the Chancellor the last word: “Our economy,” he said “continues to confound those who talk it down”. Long may that continue.
Making Tax Digital From the start of their first VAT quarter commencing on or after 1 April 2019 all VAT registered businesses with sales in excess of £85,000 will have to maintain their business records in digital form and file their quarterly VAT returns using software and apps. The software and apps will have to meet the standards demanded by HMRC. The programme is called Making Tax Digital (MTD). On 16 October, HMRC opened up its MTD for VAT pilot to around half a million businesses. This represents just under half the number of businesses that will be mandated to comply with MTD.
only if they link through special “bridging” software to MTDcompliant software which can then communicate with HMRC’s system. HMRC will adopt a light touch approach to this requirement in the first year of MTD.
The government has also announced that some VAT registered businesses with turnover in excess of £85,000 will have their mandation date deferred by six months to 1 October 2019. The affected businesses include trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, traders based overseas, those required to make payments on account and annual accounting scheme users.
If the initial information is captured digitally, for example an image of a purchase invoice captured on a mobile phone app and transferred to MTD compliant software, the original invoice does not strictly need to be retained. If information from a purchase invoice is input manually to software then the original invoice does need to be retained. Our advice however would be to retain original paper invoices and documents in either situation, until MTD beds down.
Why is the Government doing this?
The Government believes that errors in record keeping lead to a loss of tax of around £8 billion a year and that MTD will reduce that loss by around 10%. They also say that businesses and individuals expect to be able to interact with HMRC digitally.
What will the new requirements be?
If you are within the scope of MTD for VAT you will need to maintain your VAT records using MTD-compatible software which will be able to communicate with HMRC’s system to submit your VAT return. The only information that will be sent to HMRC is the information contained in the normal VAT return boxes: the transaction-level detail will not be not transmitted. Many businesses use spreadsheets to maintain their business records. Spreadsheets will still be permissible but
Do I really have to do this?
If you come within the requirements at the beginning of this article, yes. There will be very limited exceptions (on grounds of disability, age or remoteness of location), but we expect HMRC to grant such exemptions only in very limited cases. There will be a “soft landing” approach to penalties for noncompliance with the MTD filing requirements in the first year. HMRC will not penalise businesses that fail to meet the requirements, as long as they have tried to do so. That will not be the case in year two however, so our advice is to endeavour to comply fully from the start. There will be no soft landing on penalties for failure to actually pay the VAT due on time.
What do I do next?
If you haven’t already talked to us and think that you may be affected by the new rules, please contact us as soon as possible. 1 April is not far away!
A .C . M O L E & S O N S C H A R T E R E D A C C O U N TA N T S
tive
AUTUMN 2018
A president’s life
Love Musgrove
On 6 June 2018 tax partner Paul Aplin was elected president of the Institute of Chartered Accountants in England & Wales (ICAEW). His term ends on 5 June 2019. Here he shares some of his experiences from his first four months in office. Paul writes: “It has been a busy four months, dividing my time between Stafford House in Taunton and ICAEW’s headquarters at One Moorgate Place in the City of London. Although I have been dealing with politicians and senior civil servants for over ten years in my roles with the ICAEW Tax Faculty, being president has taken this to a different level. ICAEW has over 150,000 members in 153 countries around the world. The president’s role is therefore an international one. The day after I was elected, I welcomed tax directors from seven overseas professional bodies to Chartered Accountants Hall and I have since welcomed the presidents of the Institute of Chartered Accountants of Zimbabwe, the Institute of Chartered Accountants of Nepal and the Institute of Chartered Accountants of India. At the end of June, I visited ICAEW members in Malaysia and officiated at a prize giving ceremony for students at Sunway College in Kuala Lumpur.
In October I flew to Southern Africa to visit members of ICAEW and of the Botswana Institute of Chartered Accountants in Gaborone. In addition to reaching out to our overseas members and building strong links with other institutes, we also undertake capacity building work around the world, helping to build stronger audit and financial capacity as part of our ambition to build a world of strong economies: there can be no strong economy without a strong accountancy profession. In the UK I have attended round table sessions and meetings with Nicky Morgan (chair of the Treasury Committee of the House of Commons), Liam Fox (Secretary of State at the Department for International Trade), Mel Stride (Financial Secretary to the Treasury) and Esther McVey (Secretary of State at the Department of Work and Pensions) – where I was happy to find her new Parliamentary Private Secretary, Taunton’s MP Rebecca Pow. I attended the Labour and Conservative Party conferences and spoke at the Diplomatic Heads of Mission receptions alongside Shadow Foreign Secretary Emily Thornberry, Shadow Brexit Secretary Keir Starmer, Foreign Secretary Jeremy Hunt and International Development Secretary Penny Mordaunt. Back at Chartered Accountants Hall I shared a platform with Bank of England Chief Economist Andy Haldane and delivered a speech at Mansion House in the company of the Lord Mayor. I’ve spoken at conferences and dinners around the UK on issues ranging from tax, to the impact of digital technology on business; from social mobility to economics education. What lies ahead? Visits to Australia, Singapore, Malaysia, Hong Kong, Dubai, Mauritius and Cyprus. It is an amazing job and one I never dreamed I would get to do. As far as I am aware, I am the first president from the South West in the ICAEW’s 138-year history. And my work? Thanks to technology I can keep in touch by email, see my post and access the office systems wherever I am in the world.
A .C.MOLE & SONS
CHARTERED ACCOUNTANTS CHARTERED TAX ADVISERS
E. info@acmole.co.uk www.acmole.co.uk
A. C. Mole & Sons Stafford House, Blackbrook Park Ave, Taunton, Somerset TA1 2PX T. 01823 624450 F. 01823 444533
We have always been active in the community supporting and organising events and being involved in various fund-raising activities.
The Budget
Throughout each year, with the help of family, friends and clients, we organise events to raise money for our chosen Charity of the Year. To date events have included our more (and even less) athletic staff running Taunton 10k, our annual outdoor theatre show, quiz evenings, race nights, Christmas jumpers and baking and consuming a significant amount of cake. Our charity of the year this year is Love Musgrove, the official charity of Musgrove Park Hospital. The charity helps provide resources that would not normally be funded by the NHS. The money we raise will help to provide a much-needed, high specification MRI scanner. Currently the two MRI scanners operate to full capacity and a third scanner would be a great asset to the community.
BUDGET 2018
pro
Our first fund raising event this year was an open-air performance by touring theatre company The Pantaloons of The Importance of Being Ernest. Other events include a quiz, prize bingo and a further theatre production of A Christmas Carol on 23 December, to be held at The Quantock Brewery in Bishops Lydeard – the evening performance is sold out, but there are still a few tickets available for the afternoon performance.
Cyber security With more and more business activity going on line, the importance of taking cyber security seriously has never been greater. The National Cyber Security Centre’s 2017/18 report highlighted a number of significant threats. These include ransomware attacks (where files are “locked” by the attacker, who then demands a ransom to unlock them), fake emails purporting to come from within the victim’s business giving instructions to make payments and data beaches in which confidential customer information is obtained. Victims have included not only high-profile businesses such as Equifax, Uber and British Airways but also many much smaller businesses. There is a wealth of advice on the NCSC’s website on identifying and mitigating threats. It is well worth reading.
Chancellor Philip Hammond (or Fiscal Phil as he referred to himself in his speech) delivered his third Budget on Monday 29 October 2018.
forecast in March 2018), £31.8 billion in 2019/20, £26.7 billion in 2020/21 and £23.8 billion in 2021/22. No date has been set for achieving a surplus.
The Office for Budget Responsibility (OBR) revised its growth predictions to 1.3% for 2018, 1.6% for 2019 and 1.4% for 2020 and 2021. The uncertainty over the impact of Brexit makes it likely that the figures will be revised again in 2019. Mr Hammond had already allocated £3.7bn to Government departments for Brexit preparations and in the Budget he added a further £0.5 billion to that war chest. He also said that he would upgrade the Spring Statement in March 2019 to a full Budget if necessary.
Debt as a percentage of GDP peaked in 2016/17 and is set to continue falling. As the Government is still borrowing however, the national debt will continue to increase in absolute terms. It is now forecast to reach £1.810 trillion this year and to hit £1.896 trillion in 2023/24.
The deficit – the amount by which the Government’s annual expenditure exceeds its income – is now expected to be £25.5 billion for 2018/19 (£11.6 billion lower than
The Budget Red Book once again highlights the UK’s poor productivity, which remains well below the average for the UK’s main competitors. This has been a persistent problem since the financial crisis in 2008. For more detail about the Budget, turn to page two.
Image: James Gourley
A N D C H A R T E R E D TA X A D V I S E R S