Salary sacrifice clarity from HMRC

I’ve added a new phrase to my list of HMRC favourites this week, it’s “Optional remuneration arrangements” – a crossword clue – 15 letters, two words? The answer, of course, is salary sacrifice, so why the more arcane version?

I picked up the heading when I was researching detailed commentary by HMRC on the recent changes to salary sacrifice schemes.

You will find detailed examples of the various changes on page EIM44010 of the Employment Income Manual. To understand the comments you will need to grapple with type A and type B arrangements, according to the notes “type B arrangements are arrangements, other than type A arrangements…”. I really do believe that new and complex legislation is hitting the legislative fan faster than the OTS is pulling it away.

But, if you have an eye for detail, detail is what you get. Even the most avid bibliophile will find something to please them here.

 

Cross-selling: Need to contact clients?

Without doubt, lack of time is the constant companion of practitioners. We all know the issues that are likely to cause problems for clients, it is another matter to make space to provide clients with accessible information on these key issues and kick-start a conversation that will conclude with new advice given.

The pundits are constantly reminding us that selling to existing customers is so much easier than converting new customers. We have done the hard work, why not capitalise on this relationship and cross-sell more services.

The Landmark tax library is brim full with booklets and other copy to make your approaches to clients that much easier. Topics covered include:

  • Tax planning for 2017-18
  • Making Tax Digital
  • Business status planning
  • Company profit extraction planning

Additionally, we have added material that you could use in your approaches to new client prospects:

  • 20 questions – explains how you can help solve a range of basic problem that many smaller businesses will face.
  • What HMRC won’t tell you about your tax – promotes the value and need for professional advice

As a bonus, we have also included a bunch of tax and business development calculators…

You can access all this material now for an annual subscription – updated every year, and new material will be added as opportunities occur. Follow this link for more information.

 

MTD v salary sacrifice demise

Watch and listen is the new byword for capturing the attention of your website visitors. According to research, it is much easier to communicate ideas via a video than a page of fine print.
Our first TaxBox video will be relaesed in the next two weeks and will cover one of two “hot” topics: Making Tax Digital or the apparent demise of salary sacrifice as an effective tax (or rather NIC) planning tool. We have two scripts written, and are waiting to see if the Summer Budget arrives with the rolled-over MTD legislation reinstated. If it is published, we will go with MTD, otherwise the July video will cover the salary sacrifice changes.
The video will follow the same format as the video link below: words and graphics on-screen, with a professional voice over (female voice) and sound track (sound track is optional). You can also add a 50 word audio intro that we would spool at the beginning of the video – only available of you choose the TaxBox Plus service.
The videos can be added to any website, we can send the required code to your developer. The TaxBox Plus service also provides you with a copy of the MP4 file so you can upload to YouTube or other viewing platforms.
Take a look at the video link below to see what it will look like.

OTS has released it’s annual report

placeholderCan life get any easier? Yes, if the OTS continue to influence tax policy and practice.

 

 

 

Part of their recent Annual Report is copied in below:

 

4.5 Over the next year we will complete our work in a number of areas: • our final report on VAT will be delivered in advance of the Autumn Budget • our final reports on the Corporation Tax Computation and on “paper” Stamp Duty will be published in the summer.

4.6 In addition, we will continue to engage with stakeholders on Making Tax Digital and there is likely to be ongoing work on employment status and the Gig economy. We have also reflected on the effect of a range of our earlier recommendations, which has been encouraging, and has provide us with some lessons for the future and contributed to our future agenda.

4.7 Within the one to three year time horizon, we will consider whether there is more to be done in relation to any issues arising from the Corporation Tax report, owner managed businesses and measures designed to support investment and the raising of capital. Other areas for consideration include savings, tax reliefs and the complexity index.

4.8 Our longer term work programme will continue to evolve and develop; we always welcome views and suggestions. The challenges of the digital economy and how new technology might be harnessed to simplify the experience of using the tax system will certainly feature.

 

If you have a yen to get involved follow this link.

Anti-money laundering measures are changing on 26 June.

Scottish LLPs subject to new regulation

The Queen’s speech

The Queen’s speech yesterday did not seem to include much about fiscal policy making. In the published “What it means for you” policy document, section 2.5 headed, National Insurance Contributions Bill says:

The Bill will legislate for National Insurance contributions (NICs) changes announced at previous fiscal events (Budget 2016 and Autumn Statement 2016).

This, presumably, would introduce minor changes to NIC rates and the retirement of Class 2 contributions from April 2018. What is of more interest is the section 5 headed “Other Measures”, this says:

The programme will also include three Finance Bills to implement budget decisions. Summer Finance Bill 2017 will include a range of tax measures including those to tackle avoidance. The programme will also include a technical Bill to ratify several minor EU agreements and further Bills, which will be announced in due course, to effect the UK’s withdrawal from the EU. The government will also be taking forward a range of other measures which may not require primary legislation.

As this Queen’s speech covers a two-year period, we can perhaps assume that the three Bills referred to will be:

  • Summer Budget 2017
  • Autumn Budget 2017
  • Autumn Budget 2018

Of immediate concern, is the need to provide some clarity on the items removed from the original spring Finance Bill 2017. Hopefully the Summer Finance Bill will be published in short order so we can see what is what.

The final comment reproduced above, … The government will also be taking forward a range of other measures which may not require primary legislation, is of interest. For example, I believe that it would be possible to re-introduce the MTD legislation as orders in counsel, a statutory instrument, or some other device that would preclude further debate in the Commons or House of Lords.

Hopefully, in the coming weeks we will be more the wiser, not less…

Time for a targeted approach?

Most accountants are pretty adept at sending out broadcast messages to keep clients and prospects informed across a whole range of topics, but how often does this broad brush approach land a fish? In my experience, not very often. Certainly, it covers the basics; clients cannot say they have not been kept informed.

I have spoken to a fairly wide cross section of business owners in the past few weeks, the self-employed, landlords, director/shareholders, and most have amazed me with their lack of appreciation of current tax and legislative changes.

The only common denominator seems to be their reluctance to stray from the news they read in the tabloid press or a quick click-and-delete glance through updates that litter their Inboxes – some of which, will be from your practice.

I think it’s time to combine this with a more direct approach.

If I said to you – how many clients are still struggling to keep records electronically – my guess is you could quickly draw up a list?

If I asked you how many landlord clients still keep their records in diaries or lists of expenses, some estimated, some with invoices attached, my guess is you would have more than one or two?

If I asked you how many clients still haven’t written Wills, or considered how they are going to manage when they retire, or how they will deal with the disposal of their business when they retire?

Identifying the problems that clients have already encountered, or that they are likely to encounter is not particularly difficult; nor is formulation and implementation of solutions. What is difficult, is stimulating an interest in these issues and, in my opinion, this can best be done by approaching clients directly.

The time consuming elements of this process are possibly: identifying the issues to raise, and producing a form of words to communicate these to clients without boring them to death. Fortunately, I have the time to do this for you, with a little help and encouragement. I aim to write a “Direct Approach” bundle: say ten documents, that I will add to the Landmark library.

Send me an email with your list of issues that you believe clients need to engage with in order to comply with forthcoming changes, or events. The first practitioners to suggest a topic that I select will receive a pack of Word documents that you could use or edit to make the appropriate approaches, with my compliments for making a contribution.

Time to drill down, figure out the key issues that clients need to address and kick start the simple five step approach I will also send you. I’ll eat my hat if this doesn’t produce positive results…

All replies to bob@landmarkpd.co.uk please.

Best regards,

Bob

 

The hidden tax on car benefits for employers

I have copied in below an article I distributed to Landmark’s blog copy service today. I have often thought that it would be interesting to quantify the actual Class 1A NIC cost to employers of providing a company car. Very definitely, it is rarely 13.8% of the true cost of providing the vehicle. Feel free to use the article, no copyright restrictions.

Businesses that provide employees with taxable benefits: company cars, health insurance and so on, will be aware that a benefit in kind charge is added to the employee’s income and subjected to an income tax charge the same as their salary.

Employers will also be aware that the cumulative sum of all the taxable benefits of their employees are subjected to an employers’ National Insurance charge – at present, this Class 1A charge amounts to 13.8% of all taxable benefits provided.

Which means the true cash cost of providing £10,000 of taxable benefits is £11,380.

Unfortunately, some benefits are not based on an identifiable cost, but on a scale rate applied by HMRC. Of particular concern are car and car fuel benefits for the use of company cars.

Consider Thrifty Ltd, who provide a second hand Toyota to Jane, a salesperson. The annual cost to the company is calculated as:

  • Fuel £200 per month, of which £25 covers private fuel.
  • A further £100 per month to cover insurance, repairs, and road tax, and
  • The car was purchased for £12,000 second hand – and is expected to be worth £4,000 after 4 years – and so the expected annual depreciation amounts to £2,000. The cost of the car when new was £19,000.

The company consider the overall, annual cost of £5,600, including depreciation, to be acceptable.

The CO2 rating of the car is 122 g/km, and Jane’s annual benefit in kind charge for 2016-17 is (£19,000 x 21%) £3,990. The 21% is the scale rate applied by HMRC to cars with a CO2 rating between 120 – 124 g/km). Not bad, Jane is only being taxed on £3,990 when the underlying cost of the car for 2016-17 was £5,600.

Unfortunately, this is not the complete story. The company pays for all of Jane’s fuel, including fuel for private use. This means the car fuel benefit charge applies and this is based on the formula – £22,200 x 21% – £4,662.

Therefore, Jane’s total car and car fuel benefits amount to £8,652 (£3,990 + £4,662), when the underlying cost to her employer is just £5,600, and Thrifty Ltd will have to stump up £1,194 in Class 1A NIC, increasing the annual cost of providing the car to £6,794. The true rate of NIC payable is therefore 21.3% (£1,194/£5,600*100).

In this particular case, Jane would be advised to pay Thrifty Ltd the £25 a month to cover her private fuel. At a stroke this would mean the car fuel benefit would no longer apply, and reduce her taxable benefits for the use of the car from £8,652 to £3,990. As a bonus, the company Class 1A NIC would also reduce, from £1,194 to £551. As the true cost of the car is still £5,600, this reduces the effective NIC charge to 9.8% (£551/£5,600*100).

We are happy to discuss this conundrum with readers who feel they could benefit from advice in this area.

If you want to try out the Blog Copy service, as an additional source of material for your website, or handouts, you can register online.

Are you interested in increasing cross-sales and prospect conversions?

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