IR35 and Public Authorities

IR35 for public authorities

HMRC have issued revised guidelines on who falls within the remit of a public authority under IR35. The changes apply from April 2017 and relate to whether the legislation applies to one off payroll contracts.
The guidance can be found below:

www.gov.uk/guidance/off-payroll-working-in-the-public-sector-reform-of-intermediaries-legislation

Public authorities need to decide whether the off payroll working rules apply and the conditions have been met. They will need to deduct income tax and nation insurance contributions if the worker is paid directly, or advise the agency if the off payroll working rules apply before the contract or work starts.

The definition of a public authority includes government departments,agencies and local authorities, companies controlled or owned by the public sector, schools and universities and the National Health Service.

Where a public authority has fully contracted out services to a third party and the workers do not personally provide their services to the public authority, then the rules would not apply.

A Managed Service Company (MSC) is a form of intermediary company through which workers provide their services to end clients. The worker doesn’t exercise control over the company.
If the worker is providing their services to a public authority through an MSC, the off-payroll working in the public sector rules will apply.

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Rangers EBT case : Press Release by CIOT

Supreme Court takes a strong stance on the Rangers EBT case
HMRC is likely to issue follower notices to employee benefit trusts (EBTs) currently under enquiry, where the circumstances match those in the Supreme Court’s decision in the Rangers case, says the CIOT.

www.tax.org.uk/media-centre/press-releases/press-release-supreme-court-take-tough-line-rangers-‘landmark-tax-case’
The Supreme Court has decided1 that tax planning undertaken by Rangers Football Club2 involving an Employee Benefit Trust (EBT) did not succeed in avoiding employment income tax and National Insurance Contributions on amounts paid to the EBT for players and executives. This followed successes by the Club in the First Tier and Upper Tier Tribunals but a reversal in the Court of Session.
Lord Hodge, delivering the judgement of the Court, said that the appeal raised a “fundamental question about the nature of the income tax charge on employment income” but he was ultimately very clear in his view that “the sums paid to the trustee of the Principal Trust for a footballer constituted the footballer’s emoluments or earnings”.
Colin Ben-Nathan, Chair of the CIOT’s Employment Taxes sub-Committee, said:

“We understand that HMRC have a large number of enquiries ongoing into EBTs at the moment and they will therefore feel vindicated by this decision.
“Whilst many employers have already settled with HMRC, for those that have not it is likely that HMRC will now issue “follower notices”3 where they consider that the circumstances sit on all fours with Rangers. These notices will require employers to pay up the tax or face a penalty if they fight on but lose in the courts, neither of which choices will be particularly appealing after the Rangers decision.”

He added that:

“This judgement demonstrates that the courts are taking an increasingly tough line on tax avoidance, adopting a purposive approach and certainly not considering […]

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Budget 2017

A SIMPLE GUIDE TO THE BUDGET 2017
This is a basic guide to the Budget 2017.  It is an introduction only and should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.

A stronger, fairer, better Britain were the themes of the Budget. You can read the individual measures below.

Marriage allowance
This applies from 6 April and allows for the transfer of £1,150 of a personal allowance to a spouse or partner.

Self-employed National Insurance Contribution
The main rate of Class 4 NIC’s will increase (from the current rate of 9%) to 10% from April 2018 and to 11% from April 2019.

Dividend Allowance
The tax-free dividend allowance was introduced from April 2016 so that the first £5,000 of dividend income would be tax free.

The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.

Corporation tax
The corporation tax rate will be reduced from 20% to 19% for the 2017/18 tax year and to 17% by 2020.

Annual Investment Allowance
The annual investment allowance of £200,000 per annum remains available for companies and for unincorporated businesses.

Making tax digital
Rollout beginning April 2018; however for unincorporated businesses with a turnover below the VAT registration threshold there would be a delay of one year to the introduction of quarterly reporting.

UK Deemed Domicile
Individuals who are not domiciled in the UK will be deemed to be UK domiciled for tax purposes if they are either resident in the UK for 15 of the past 20 tax years, or if they are born in the UK with a UK domicile of origin and return to the UK having obtained a domicile of choice elsewhere

VAT

2016/17           2017/18
Standard rate               […]

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Negligent director and national insurance

National insurance contribution reversal for an alleged negligent director
FIRST TIER TRIBUNAL CASE
ANTHONY PETER BROUGHTON-HEAD Appellant
– and –
THE COMMISSIONERS FOR HMRC Respondents
The Tribunal determined the appeal on 6 February 2017

Abstract:

Negligent director – balancing of evidence – accruing national insurance years for pension purposes – reinstating contribution years.

Introduction:

Mr Broughton-Head appealed against the decision of HMRC in relation to the payment or non-payment of Class 1 National Insurance Contributions (NICs) between 1985 and 1991. The appeal related to the tax years 1986 to 1989 as they were important to the appellant in respect of his pension.

The appeal was against a decision which stated the the taxpayer had paid nil national insurance contributions during the tax years 1985 to 1991 and he was accused of being a negligent director.

Background:

The Social Security (Contributions) Regulations 1979 makes provision for the treatment for the purposes of contributory benefit of late paid or
unpaid Class 1 contributions. Where the late payment or failure in making payment is shown not to be attributable to the negligence on the part of the primary contributor, the primary contribution is to be treated as duly paid.

The appeal was against the previous decision that the appellant was a negligent director. He was the director of a company called Broughton- Head Timber Ltd (Timber), which was wound up on 19 January 1994.

The Insolvency Section of HMRC investigated matters and concluded that he was a negligent director and that no contributions had been paid for the tax years 1986/87, 1987/88 and 1988/89. The appellant’s contributions for those tax years were removed from his record. Case details regarding the contributions were not available.

The appellant requested HMRC in September 2014 to reverse the removal of the contributions from his national insurance records, which HMRC refused to […]

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Self Assessment & PAYE tax gap narrows

Self assessment & PAYE tax gap narrows
The UK’s tax gap, which is the difference between tax collected by HMRC through self assessment, disclosure schemes and tax investigations and the amount of tax owed has narrowed to 6.4%. This is welcoming news for both the Treasury and the economy as a whole. Much of the gap will relate to avoidance and evasion.

Despite this fall, from 6.6% in 2012/2013, there is still a staggering £34bn to be collected, showing there is still much to be done, says ACCA (the Association of Chartered Certified Accountants).

Chas Roy-Chowdhury, ACCA head of taxation, stated:

“It is a huge credit to the staff at HMRC that they have managed to lower the tax gap despite constant cuts to their budget. However with £34bn still uncollected, and the government struggling to meet its borrowing target the Chancellor should reconsider his decision to cut HMRC’s resources.

Corporate tax avoidance may be falling but there is still a sizeable amount lost due to innocent mistakes and evasion. It is in these areas where more resources for HMRC could be best deployed. In helping guide those who want to pay the right amount of tax and in investigating those who are determined not to pay tax.

We should also remember that these figures include £1bn collected from accelerated payment notices. Those are a one off catch-up from historic schemes that won’t be repeated – and there is always the risk that even some of those amounts will have to be returned, as taxpayers are challenging HMRC’s approach in this area.”

Pension Relief – availing the opportunity

Pension Relief – availing the opportunity
Although the government has announced that pension relief will be reduced from April 2016, there is still a window of opportunity to utilise any unused relief’s from the last three years.

Pension relief  is the amount that can be paid into a pension fund in any single year tax free. It currently stands at £40,000, however from April 2016 that will fall to £30,000 for everyone. Tax payers who pay income tax at 45% will find this pension relief amount even lower. However, what some people may not realise is that unused contributions from the last three years can be carried forward.

Chas Roy-Chowdhury, ACCA head of taxation, said: ‘£40,000 or even £30,000 may sound like a lot of money to pay into a pension fund but that includes both employer and employee contributions, and for anyone with more than one pension fund it is the total amount spread over the multiple schemes.”

“It is very disappointing the government has chosen to reduce the amount people can save tax free for their retirement. It is another blow to creating a nation of savers – as the Chancellor and Prime Minister pledged to do after being elected in 2010. I would urge everyone that is able to use their full allowance every year, to check whether they have unused allowance from previous years. If you are unsure check with your pension provider, they will be happy to provide you with a statement of contributions for each year.”

“Those hit hardest, again, will be those just entering the workplace. Not only will they have a reduced yearly allowance but also a reduced lifetime allowance. The government seems to be targeting younger workers and making it more […]

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Tax Freedom!

 Tax Freedom for individual taxpayers is two days later in 2015

Taxpayers in the UK are working two days longer on average in 2015 before they start earning for themselves, the Association of Chartered Certified Accountants (ACCA) has stated.
Research by Adam Smith Institute  has found tax freedom day is two full days later than last year. Tax freedom is calculated as the date taxpayers stop paying taxes and start earning for themselves.  This tax freedom day fall on 31 May in 2015.

The tax freedom day has been increasing steadily over the years. Due to the overly complicated tax system in the UK and the numerous indirect taxes that exist, UK tax payers are paying more and more to the government, even after five years of increases in personal allowances.

Chas Roy-Chowdhury, Head of Taxation at the ACCA said: ‘The rises in the personal allowance have created a huge amount of fiscal drag. More and more people are being caught in the 40% tax bracket. At the end of the 1980s only 500,000 people were paying the higher rate of tax, now that is more than four million people. So despite all the Government hype on increasing the personal allowance we are actually two full days worse off this year before our income is ours to keep.

‘Despite large cuts to the public sector the government is needing more and more money to keep public services going, a bill that has to be paid for by all UK taxpayers. Individuals are well within their rights to take steps to legally reduce their tax burden. ISAs are the perfect example of one method they can use.’

Other steps include:

Claiming all benefits and allowances: Taxpayers’ money is ploughed into a wide variety of state benefits […]

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General Election Pledges

General Election Pledges by the Parties
With the General Election round the corner, below are the key points made by the major parties regarding taxation.
The Labour Party’s General Election pledges:

 Introducing a new 10p rate of tax
 Re-introducing the 50% top rate of income tax for people earning over £150,000
No rate increases of Income Tax, National Insurance or VAT
Abolish the controversial non dom status
Review of HMRC’s working practice and culture
Extra powers provided to Scotland so they can make more decisions over tax
Introducing mansion taxes on properties worth over £2m

The Conservative Party’s General Election pledges:

Increasing Personal Allowances to £12,500
Increase the 40% higher rate tax threshold to £50,000
No rate increases in VAT, National Insurance contributions or Income Tax
Married couples to be allowed to transfer their personal allowances of up to £1,060 to their partner, where both partners are basic rate tax payers
Increase the annual non dom charge
Inheritance tax threshold for married and civil couples to rise to £1m

Liberal Democrats’ General Election pledges:

Increase Personal Allowances to £12,500
Consider raising the employee National Insurance threshold to the Income Tax threshold
Set a target for HM Revenue and Customs to reduce the tax gap and continuing to invest in staff to enable them to meet it
Introduce a new offence- corporate failure to avoid economic crime. Introduce penalties for directors and custodial sentences
Increase annual non dom charges
Reform Capital Gains Tax and Dividend Tax relief
Introduce a High Value Property Levy for properties worth more than £2m throughout the UK
Allow Local Authorities to allow council tax of up to 200% on second homes

Green Party’s General Election pledges:

Increase the top rate of income tax to 60%
Increase staff at HMRC by 15,000 per year
Introduce legislation to reduce the tax gap
Replace Council Ta and Business rate with a system of Land […]

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Do Small Businesses Value Business Plans

Business Plans for Small Businesses
Up to 29% of small and medium sized businesses fail to see a reason for preparing a business plan, following research undertaken by Close Brothers Business Barometer, which takes into account views of small and medium sized business owners along with senior management.

Worryingly, 43% of those who do not have a business plan admit they don’t see it as necessary and 20% state they keep business plans in their head. 15% claim having a business plan is not a priority for them.

Those businesses that do have a business plan, a surprising 40% review them at least once a year, with 20% reviewing it every two years.

Although having a business plan is important, it is only useful if it is reviewed regularly and reflects the ambitions of the business, current and future trends and realistic targets are set, bearing in mind the economic and industry challenges. Regular SWOT analysis (strength, weaknesses, opportunities and threats) should be undertaken and the findings should be implemented and regularly followed up. Otherwise reviewing a business plan

becomes another task undertaken by the business with no meaningful outcome.

The CEO of Close Brothers Asset Finance, Mike Randall stated, “It is somewhat concerning that so many small and medium-sized firms do not have a business plan as without clear direction, they may be missing out on opportunities for growth and not realising their full potential.”

“Planning is key to any business throughout its lifecycle. A formal plan can be an extremely valuable tool for managing and growing a business as it allows a company to recognise its strengths and weaknesses and ensure they have appropriate plans in place.”

‘Of the companies we talked to that do have a business plan, the majority said […]

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Success of a business

Success of a business
Numbers, decisions and seeing the big picture; some factors which contribute to the success of a business.

Businesses need to know different numbers, not just numbers extracted in Real Time, but other figures which are forecasted such as budgets and predictions. Not only do businesses need to keep an eye out on their own figures, but knowing the figures and benchmarks of the industry they belong to is also important to remain competitive.

A decision can only be made when all the numbers have been analysed, especially for those decisions which affect expansion programmes and obtaining extra finance. Having real time information at your disposal is imperative to making the right decision. Therefore having the right figures in front of you is essential in making the right decisions leading to success of a business.
Legal Requirements
Directors have a duty to ensure the company is meeting the legal requirements set by statue. Accountants can advise on how to achieve these duties and can point them in the right direction, however the overall duty remains with the directors. There are legal requirements for nearly all transactions undertaken by a company; from paying a salary, issuing dividends, paying interest on loans and treatment of VAT on expenditure. Knowing when to convene meetings, when notices should be issued, treating minority shareholders correctly; these are some of the issues directors have to be aware of.

Where directors are following the legal requirements, it follows that the business is heading in the right direction.
Record Keeping
With cloud accounting on the uptake by both businesses and accountants, the availability of Real Time information has never been easier. There are many cloud accounting providers on the market which simplify the steps taken to record a transaction. […]

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