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Staff Tax Tips – 10 October 2018

specialist accountancy services

Staff tax tips for this week are listed below. We have added links to more detail as appropriate. We will be adding a least two posts a month under this heading so please ask your staff to add their names to our newsletter distribution list that will link to these articles.

What does “bona vacantia” mean?

‘Bona Vacantia’ means vacant goods and is the name given to ownerless property, which by law passes to the Crown. The Treasury Solicitor acts for the Crown to administer the estates of people who die intestate (without a Will) and without known kin (entitled blood relatives) and collect the assets of dissolved companies and other various ownerless goods in England and Wales.

In relation to the liquidation of private companies in the UK, why is it important to ensure that bank accounts are closed (emptied) before liquidation is completed?

To get yourself up-to-date on this topic read here

Why is shared occupancy a consideration from April 2019 if you are claiming rent-a-room relief?

Legislation will be introduced in Finance Bill 2018-19 to provide an additional test of ‘shared occupancy’ that must be met in order for the taxpayer to be eligible for rent a room relief.

This ‘shared occupancy’ test will provide that the individual, or a member of their household, in receipt of income must have a ‘shared occupancy’, a physical presence for all or part of the period of the rental, with the individual whose occupation of the furnished accommodation is generating receipts.

Those taxpayers that do not satisfy this test will no longer be eligible to claim rent a room relief on those receipts.

See the examples listed here.

Budget day is set for Monday, 29th October 2018

This will be the last budget before Brexit. You can keep abreast of changes advised on the Gov.uk website, but details will not be published until after the Chancellor has made his announcements.

We are speculating (based on the URL for last year’s announcements) that details will be available here: https://www.gov.uk/government/topical-events/autumn-budget-2018

 

Can you solve this puzzle?

A bit of light relief. See if you can solve this classic logic puzzle:

A farmer wants to cross a river and take with him a wolf, a goat, and a cabbage. There is a boat that can fit himself plus either the wolf, the goat, or the cabbage.

If the wolf and the goat are alone on one shore, the wolf will eat the goat. If the goat and the cabbage are alone on the shore, the goat will eat the cabbage. How can the farmer bring the wolf, the goat, and the cabbage across the river?

A solution will be published in our next newsletter.

Answer to last week’s puzzle:

The man is of short stature. He can’t reach the upper elevator buttons, but he can ask people to push them for him. He can also push them with his umbrella, which he always carries when its raining.

 

Brexit planning with clients

Whichever side of the Brexit debate you support, there does seem to be an inevitability about the UK’s severance from the EU March 2019. For better or worse we are going to have to deal with the consequences.

Hopefully, the date set to thrash out the details will be completed in November and we will be able to see the wood for the trees. Based on this assumption, I am now planning to write a comprehensive planning bundle for practitioners that they can use to support clients through the Brexit transition.

My feeling is that whatever shade of Brexit is finally agreed there will be a down-side bump in economic activity as we adjust.

What will the Brexit Planner consist of?

My initial thoughts are focusing on the following elements:

  • Recession planning – consultancy you can offer now to improve business fitness in readiness for the likely downturn in activity next year. This would include fact sheets written for clients promoting this service and copy that you could add to your website and promote through social media.
  • A simple risk assessment calculator that you could display on your website that would help website visitors assess their post-Brexit risks, and consequently, their need to contact you for advice.
  • More detailed, but still easy to read, fact sheets that you could offer clients who import or export to suppliers and customers in the EU, and will need to change their systems accordingly.
  • A less business orientated fact sheet that advises UK residents what Brexit will mean in practice for them: the need for visas, passport changes, driving in the EU etc.
  • A similar fact sheet for ex-pats presently living in the EU, or UK residents with property in the EU.
  • Depending on the terms of exit, a number of specialist fact sheets to support clients, for example those involved in transport of goods to the EU.
  • A fairly detailed summary of what Brexit means for accountants. It will include a round up of the major changes, and more importantly in my opinion, the promotion of opportunities to step in and support clients. This will be a resource to bring partners and staff up-to-date.
  • I will reshape the various fact sheets into articles that can be used as copy for websites and blogs.
  • A bibliography with links to GOV.UK source material, so you have all your background material accessible from one place.
  • I will be producing a “Brexit – for better or worse” video as part of Landmark’s Tax Box service in the first week of January 2019, the generic version will be made available to Brexit Planner buyers as iFrame code. This can be added to your website.

All of the above will be accessible via a dedicated Brexit Planner dashboard. In this way I can quickly update any changes to material provided.

What I need from you

Based on the above notes, what have I missed? Are there any other resources you would like me to produce?

Email me with your thoughts and suggestions. bob@landmarkpd.co.uk

 

Budget crystal ball gazing

Philip Hammond exudes the steady as we go approach and yet the Prime Minister was full of beans when addressing the Conservative conference today. We are promised the end of austerity and handouts to counter any negative effects of Brexit. But what are we to expect when the Chancellor steps up the box on the 29th?

My budget predictions

This is my take on possible items for the 2018 Autumn Budget:

  • Further tightening of legislation to stop the use of tax avoidance schemes.
  • A possible Google tax on the income of businesses that sell goods in the UK (usually on the internet) but divert most of their profits to low-tax jurisdictions, thus avoiding UK corporation tax.
  • The usual inflation proofing of tax allowances.
  • Very doubtful we will see an increase in tax rates, although there may be a promise of further, minor reductions to corporation tax in future years – thus establishing the UK as a de facto tax haven for business.
  • As we now have high levels of personal debt in the UK, a really useful additional relief would be tax relief at basic rate on credit card interest payments?
  • The government is supposed to be promoting tax simplification. Could we see capital gains taxed as income and the complex CGT rules scrapped?
  • The Office of Tax Simplification did toy with the idea that small company profits be taxed under income tax rules on shareholders – the “look through” scheme. This was abandoned as too complex, but what about an increase in the hybrid rates of dividend tax to compensate for lost NIC deductions?

And don’t forget the clauses already published. There are 40.

Presenting budget updates to clients

I do encourage firms to reconsider how they present the budget news and other tax announcements to clients.

To most taxpayers, especially those who are invited to read the usual post budget summaries, changes announced take on the appearance of “yawn” material: something to read (and not finish) if you have difficulty sleeping. The written word requires readers to create interest in the material they read, and I’m afraid, reading about tax – even if self-interest takes a part – does not quite hit the spot.

However, part of our job is to keep clients informed and up to date, which is why any attempt to make budget summaries more entertaining is worth consideration, and video presents just such an opportunity.

I write the scripted budget video output for our Budget Box service. Tapping into this visual presentation of otherwise dry information can engage visitors directed to the content on your website. At present, I guarantees to have the video ready for your website the day after the budget. You will also have access to the script and a fact sheet that you can send to clients…

If you would like to access video content for your website Landmark is offering discounted access to the 2018 autumn budget video for just £130 plus VAT. No strings attached. I will leave the offer open until 26th October.

My Budget summary

In reality, Brexit will likely scupper any major changes and I doubt Philip Hammond will be confident enough to give too much away. So in most respects its more likely to be “steady as you go”.

The Chancellor is breaking with tradition and has set budget day for a Monday. Must remember to go easy on the beers Sunday night. Budget day is usually the busiest day of my working year.

Staff Tax Tips – 21 September 2018

specialist accountancy services

Staff tax tips for this week are listed below. We have added links to more detail as appropriate. We will be adding a least two posts a month under this heading so please ask your staff to add their names to our newsletter distribution list that will link to these articles.

Umbrella companies in HMRC’s Spotlight

HMRC are upping their challenge to have certain schemes classified as tax evasion. In their Spotlight 45 report they say:

Some people that are employed through agencies and umbrella companies are signing up to arrangements that claim to save them tax, but are in effect tax avoidance schemes.

Most employment agencies and umbrella companies operate within the tax rules. However, some umbrella companies and agencies promote arrangements that claim to be a ‘legitimate’ or a ‘tax efficient’ way of keeping more of your income by reducing your tax liability.

To get yourself up-to-date on this topic read HMRC’s Spotlight here

What are the badges of trade?

Don’t know? These are the factors that HMRC take into account when deciding if a person(s) are engaged in a business activity. These criteria can be used to bring rogue traders into tax, but also deny loss relief to individuals who are unlikely to make profits from their endeavours.

See the summary list here.

Finance Bill draft clauses 2018-19

Way back in July 2018, HMRC published a number of draft clauses for the forthcoming Finance Bill.

In particular you should be aware that:

  • The qualifying criteria for rent-a-room relief is to change,
  • The requirement to produce receipts to cover scale rate expense payouts is to be abolished,
  • The donor benefit rules are to be changed for Gift Aid,
  • Changes to Optional Remuneration Arrangements for taxable cars and vans,
  • Loss relief rules for corporation tax are changing.

And much more. Take a look at the full range of changes here. 

 

Can you solve this – a man in a lift?

A bit of light relief. See if you can solve this classic logic puzzle:

A man living on the tenth floor takes the elevator down to the first floor every morning and goes to work. In the evening, when he comes back – on a rainy day, or if there are other people in the elevator – he goes to his floor directly. Otherwise, he goes to the seventh floor and walks up three flights of stairs to his apartment. Can you explain why?

There are a number of possible solutions, but there is one in particular that hits the spot.

A solution will be published in our next newsletter.

Answer to last week’s puzzle:

Take the cap off the bottle and pour contents into the pipe, ball will float to the top…

 

Professional Indemnity and GDPR bear-trap

I came across this article published by www.professionalindemnity.co.uk and have their permission to reproduce on the Landmark blog. It flags up an interesting dilemma for practitioners, the opening paragraph says it all: If I comply with the new rules [GDPR] and delete files containing personal client data, will I invalidate my professional indemnity cover? 

The full article says:

Just when you thought you were getting your head around GDPR along comes another awkward conundrum. Here’s the question: If I comply with the new rules and delete files containing personal client data, will I invalidate my professional indemnity cover?

In this article we do our best to untangle the issues and give you some clear guidance.

Best practice becoming illegal practice?

Professional services firms need to hold large quantities of sensitive personal data within their client records. Accurate record-keeping and file retention is a vital part of good business practice and risk management. It allows firms to defend themselves against claims of professional negligence and also allows them to present themselves as low-risk when obtaining and maintaining Professional Indemnity Insurance.

However, the new GDPR regulations would appear to call this best practice into question.

Between GDPR and a hard place

The new regulations make it clear that a business has no general right to hold and process personal data relating to its clients. What’s more, if a client demands that the business remove that data from their files, it would appear that the business must do as asked.

However, if the business goes along with this request and the client subsequently makes a claim against it for professional negligence, that makes it much harder for the business to present a robust defence. If the files have been deleted the business has no evidence with which to counter their claims. This makes it easy for the client to “get creative” with their version of events.

Damned if you do, damned if you don’t

Most if not all professional indemnity policies make it a condition of cover that the insured party keep detailed records – precisely so the business and the insurer can make a strong defence case based on solid documentary evidence. Even if this condition is not made explicit in the small print the insurer may argue that the behaviour of the business has been prejudicial to a successful defence and that they will therefore not cover the costs and damages.

So, if a business deletes files containing personal information it is making it easier for clients to successfully sue them for negligence, as well as increasing the likelihood of their insurer refusing to accept the claim.

So, here is your dilemma. Do you continue to maintain and keep proper records but risk a fine from the UK’s Information Commissioner’s Office? Or do you delete existing files, and cease to keep detailed records of work you have done for clients, but leave yourself wide open to claims for professional negligence whilst at the same time possibly voiding your professional indemnity cover (or at the very least making it harder and more expensive to get cover going forward)?

Now the good news

The GDPR rules are written in such a way that a business may, under certain circumstance, be permitted to keep personal details and client files. Precisely because you need to keep proper and detailed records (for the reasons outlined above) this provides lawful justification for retaining personal client data within the terms of the GDPR regulations. The justification specifically relates to the following articles:

Article 6.1 (b) (Performance of a contract)

This article basically says that a business is allowed to process personal data if that data is required to perform its obligations under a contract. The fact that there is a contract gives you lawful right to process the client’s data.

Article 6.1 (e) (Task carried out in the public interest)

Under this article a business can legitimately argue it is in the public interest for the company to meet its responsibilities in the event of a client making a claim for professional negligence. If the business fails to remedy the financial consequences of bad advice or poor services delivery, because their professional indemnity insurance was void, this would be harmful to society as a whole. So, once again, this clause provides justification for retaining the personal data and files.

Article 6.1 (f) (Legitimate interests)

Under this clause the firm has a legitimate interest in holding and processing personal client data because it is entitled to defend itself against claims for professional negligence and requires the data in order to assess and defend any such a claim.

Still unsure? Talk to us

Provided you take a judicious approach to processing and storing personal data, bearing in mind the GDPR rules, you shouldn’t have any problems. Also, we all know by now that EU rules can change so the rules may look very different in a year or two, but once records are deleted you can’t get them back.

So this is still something of a grey area and it remains to be seen how the relevant authorities will respond when faced with a situation where a client asks for their personal details to be deleted but a business refuses. If you are still unsure about any of these issues and would like further advice or reassurance, do not hesitate to get in touch with us – our experts will be very happy to assist.

Like to contact the author? Complete online contact form here. 

Do you have an Agents Services Account?

It would seem that HMRC are making life for professionals even more difficult with the advent of MTD. Those firms who have already registered their new agent service account should skip this blog, if you haven’t dipped your toe in this particular process as yet, you may find the following notes useful.

Here’s what I did to register my small practice:

Create a new agent services account

  1. Go to agent’s sign up page
  2. Select business type
  3. Enter your practice CT or income tax UTR and post code
  4. Check details are correct and follow link to Government Gateway
  5. Enter contact details and set password (watch out for the criteria)
  6. Make a note of your User ID and Gateway Agent ID
  7. Add your agent business’s details
  8. Add your address details
  9. Confirm address details
  10. Make a note of your Agent services account number, and then
  11. Continue to your agent services account.

That’s half the job done. You can now ask clients to authorise you to deal with their obligations, or link to your current Self-Assessment and VAT clients. I decided on the latter.

HMRC’s instructions to link client’s data

The notes say:

Use this service to allow your agent services account to access your current client relationships.
If your clients sign up to report their income and expenses, or their VAT returns, through software, you will then be able to:

  • use software to access information about these clients,
  • act on your client’s behalf for these services without having to ask for their authorisation again.

When to use this service

You should use this service if you expect to provide any of the following services for clients:

  • report their income and expenses through software,
  • report their VAT returns through software.

This service will not allow you to access these services on your client’s behalf:

  • register a client’s trust,
  • view a client’s PAYE income record.

Before you start

You will need the login details for each of the agent Government Gateway accounts your business uses for your Income Tax Self-Assessment and VAT clients. On the next screen, sign in with one of these Government Gateway accounts to start linking your existing clients.

You will need to repeat this process for each Government Gateway account your business uses.

Account linked

Follow the instruction until you get the above confirmation. HMRC then advise:

What you can do next

Your agent services account can now access your current client relationships linked to this Government Gateway account.

So, if your clients are signed up to report their income and expenses, or their VAT returns, through software, you can now:

  • use software to access information about these clients,
  • act on your client’s behalf for these services without having to ask for their authorisation again.

You will still need to use your software or Government Gateway accounts to manage your client lists.

If you use more than one Government Gateway account, you will need to repeat this process for each Government Gateway account your business uses.

Sign in using a different Government Gateway account to start linking it to your agent services account.

Job done

Now I need to make sure all affected VAT clients are using MTD compliant software before 1 April 2019…

Staff Tax Tips – 7 September 2018

specialist accountancy services

Staff tax tips for this week are listed below. We have added links to more detail as appropriate. We will be adding a least two posts a month under this heading so please ask your staff to add their names to our newsletter distribution list that will link to these articles.

Class 2 NIC

The long running saga to dispense with Class 2 NIC for the self employed, which was due to happen April 2019, is apparently to be abandoned by the Treasury according to press commentary circulating yesterday (6 September 2018).

If true, this long overdue simplification of NIC for the self-employed will no longer occur. Perhaps it was the complex changes to Class 4 NIC – to provide qualifying contributions for State Benefits and Pension rights – that has proved to be the nail in the coffin?

Brexit, the hard variety

The government has issued a fairly comprehensive set of guidelines setting out the likely consequences of a no-deal exit from the EU. The gateway to this information is summarised here.

In the domain of taxation, and particularly VAT and duties, affected clients will need to factor in the cash flow and profit affects of customs tariffs and import VAT. If you have time, read the relevant section of HMRC’s guidance here. HMRC do seem to be responding to lobbying by the business community. On one point in particular, “Accounting for import VAT on goods imported into the UK” HMRC have confirmed that:

If the UK leaves the EU without an agreement, the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will apply both to imports from the EU and non-EU countries.

In reaching this decision, the government has taken account of the views of businesses and sought to mitigate any adverse cash-flow impacts keeping VAT processes as close as possible to what they are now. 

If the UK leaves the EU without an agreement, the government will introduce postponed accounting for import VAT on goods brought into the UK. This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT on or soon after the time that the goods arrive at the UK border. This will apply both to imports from the EU and non-EU countries.

In reaching this decision, the government has taken account of the views of businesses and sought to mitigate any adverse cash-flow impacts keeping VAT processes as close as possible to what they are now. 

Clients who trade with the EU are likely to be in for an unsettling period next year and until the dust settles, both with regard to the terms of Brexit and the transitional arrangements. Professional advisers will need to keep their wits about them and be ready to step in and help affected businesses meet these challenges.

 

Why is “consent” an important element of the new the GDPR?

If you are still unclear on this issue take a look at the ICO website, and in particular, this section here

 

Can you solve this?

A bit of light relief. See if you can solve this logic puzzle:

You are playing table tennis with a friend and the ball falls down a 30 cm long, 5 cm diameter metal tube, completely encased in concrete, just open at ground level. You obviously can’t reach down and retrieve the ball, but you do have your table tennis bats, a plastic water bottle, and a meter length of string in your pocket. Using just these items how do you retrieve the ball and continue your game?

A solution will be published in our next newsletter…

 

 

Add GDPR reseller consultancy to your services

Reseller on Newspaper background

We now operate in the new, improved data protection environment of the GDPR. No doubt readers of this article are fully compliant?

As you have acquired new skills in the process, then why not offer them to clients: help clients achieve compliance?

GDPR Auditing Ltd + Landmark

Earlier this year we collaborated with the directors at GDPR Auditing to create a workbook for accountancy firms that guided practitioners through the compliance maze and in the process, provided them with a permanent record of of their progress.

If you have not yet tackled this issue then take a look at what we created here.

Our GDPR Reseller option

Once you have completed our workbook, and acquired the skills, you can apply for Reseller status. This will allow you to acquire our workbooks for clients at a discounted rate and negotiate a fee with clients based on your projected time input.

No additional costs involved

There is no additional cost, you can apply for affiliate reseller status by applying from the user portal that we provide when you purchase your GDPR workbook. If you need more information about the process, contact support@gdprauditing.com.

What’s in it for you?

In a nut-shell, the sale of two or three days consultancy for every client that is keen to achieve compliance for their business.

Brexit – hedging your bets

broken image of UK and EU flags

The following article summarises the advice, or as it’s described “guidance”, recently published by HMRC, just in case the powers that be fail to reach agreement, and we crash out of the EU on 29th March 2019 – a so-called hard Brexit.

Please help yourself to the copy if you would like to add it to your own blog posts, websites or newsletters.

Customs procedures with a “no deal” Brexit

This week we are paraphrasing, from HMRC’s guidance announcements, the likely changes to customs procedures if the so-called “no deal” scenario becomes a reality. Essentially, the two-way, free movement of goods between the UK and the EU will cease and the raft of changes that firms trading with the EU will need to accommodate are significant.

Whilst the political process is deadlocked, or so it would seem, the information shared below is very much the worst possible out come for importers and exporters to the EU from a red-tape perspective. If the government is successful in negotiating a softer version for the UK exit from the EU, then some, or perhaps all, of the following changes may not have to be made.

As we indicated last week, contingency planning should now include at least an appreciation of the import/export changes that will need to be faced if we leave the EU with no deal. And so, warts and all, this is what will need to be considered.

The specific customs changes would include:

  • Businesses would have to apply the same customs and excise rules to goods moving between the UK and the EU as currently apply in cases where goods move between the UK and a country outside of the EU (customs duty may also become due on imports from the EU. This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration).
  • Separate safety and security declarations would also need to be made by the carrier of the goods (this is usually the haulier, airline or shipping line, depending on the mode of transport used to import or export goods).
  • The EU will be obliged to apply customs and excise rules to goods it receives from the UK, in the same way it does for goods it receives from outside of the EU. This means that the EU would require customs declarations on goods coming from, or going to, the UK, as well as requiring safety and security declarations.
  • The Excise Movement Control System (EMCS) would no longer be used to control suspended movements between the EU and the UK. However, EMCSwould continue to be used to control the movement of duty suspended excise goods within the UK, including movements to and from UK ports, airports and the Channel tunnel. This will mean that immediately on importation to the UK, businesses moving excise goods within the EU, including in duty suspension, will have to place those goods into UK excise duty suspension, otherwise duty will become payable.

Before importing goods from the EU after 29 March 2019

UK businesses will need to:

  • Register for an UK Economic Operator Registration and Identification (EORI) number. Businesses are advised by HMRC that they do not need to do anything now. For those businesses that sign up for the EU Email updates, they will be contacted when this service becomes available.
  • Ensure their contracts and International Terms and Conditions of Service (INCOTERMS) reflect that they are now an importer.
  • Consider how they will submit import declarations, including whether to engage a customs broker, freight forwarder or logistics provider (businesses that want to do this themselves will need to acquire the appropriate software and secure the necessary authorisations from HMRC).
  • Decide the correct classification and value of their goods and enter this on the customs declaration.

When importing goods from the EU after 29 March 2019, a business will need to:

  • Have a valid EORI number.
  • Make sure that their carrier has submitted an Entry Summary Declaration at the appropriate time.
  • Submit an import declarationto HMRC using their software, or get a customs broker, freight forwarder or logistics provider to do this for them.
  • Pay VAT and import duties including excise duty on excise goods unless the goods are entered into duty suspension (for example a customs or excise warehouse – a financial security will be required to cover the duty liability of the goods whilst they are being moved to the warehouse). Import VAT may also be due although HMRC have indicated that this process may be dealt with on the VAT return thus delaying any cost impact at the time of import.
  • Once excise goods leave a customs suspensive arrangement, they may be immediately entered into an excise duty suspension regime. A business will need to declare the goods on EMCS for onward movement via a Registered Consignor.

Businesses may also need to apply for an import licence or provide supporting documentation to import specific types of goods into the UK, or to meet the conditions of the relevant customs import procedure.

Before exporting goods to the EU, a business will need to:

  • Register for an UK Economic Operator Registration and Identification (EORI) number. You do not need to act now, but you will want to familiarise yourself with this process.
  • Ensure that contracts and International Terms and Conditions of Service (INCOTERMS) reflect that you are now an exporter.
  • Consider how you will submit export declarations, including whether to engage a customs broker, freight forwarder or logistics provider (businesses that want to do this themselves will need to acquire the appropriate software and secure the necessary authorisations from HMRC). Engaging a customs broker or acquiring the appropriate software and authorisations from HMRC will come at a cost.

When exporting goods to the EU, a business will need to:

  • Have a valid EORI number.
  • Submit an export declaration to HMRC using their software or on-line, or get their customs broker, freight forwarder, or logistics provider to do this for them. The export declaration may need to be lodged in advance so that permission to export is granted before the goods leave the UK (the export declaration also counts as an Exit Summary Declaration).
  • Businesses may also need to apply for an export licence or provide supporting documentation to export specific types of goods from the UK, or to meet the conditions of the relevant customs export procedure.

When exporting duty suspended excise goods to the EU, a business will need to continue to use EMCS to record the duty suspended movement from a UK warehouse or premises to the port of export.

Readers who are considering their options and are engaged in contingency planning for their trade with the EU after March 2019, may be less than enthusiastic if they have managed to reach this part of our article. If you want more information you could read HMRC’s notes on the subject here.

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Staff Tax Tips – 23 August 2018

specialist accountancy services

Staff tax tips for this week are listed below. We have added links to more detail as appropriate. We will be adding a least two posts a month under this heading so please ask your staff to add their names to our newsletter distribution list that will link to these articles.

Phishing emails

If clients ask you what to do if they have received strange emails from HMRC, generally, those emails should be ignored, and clients should never part with personal information or bank details. Latest details of genuine instructions from HMRC can be viewed here.

CGT – 30 day window to make payments on account

The government seem keen to introduce payments on account within 30 days of the disposal of affected residential property. This change will likely apply from April 2020. Link to recent update. 

Do you know how long clients need to keep their tax records?

For companies its:

6 years from the end of the last company financial year they relate to, or longer if:

  • they show a transaction that covers more than one of the company’s accounting periods
  • the company has bought something that it expects to last more than 6 years, like equipment or machinery
  • you sent your Company Tax Return late
  • HMRC has started a compliance check into your Company Tax Return.

And for the self-employed:

You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.

 

Are your self-employed clients solvent?

There is a significant difference between the Balance Sheets of limited companies and sole traders and partnerships.

Limited company accounts

When you produce company accounts it is a fairly simple task to calculate the corporation tax due for the accounting period, and you are required to add this as a short-term liability in the accounts, reducing reserves accordingly.

Accounts of sole traders and partnerships

As profits are chargeable to income tax, and as other sources of personal income may not be known when the accounts are prepared, it is not unusual for accounts to be prepared without any deduction for unpaid income tax or Class 4 National Insurance based on business profits to the year end date.

And so…

Are your self-employed clients solvent?

Many self-employed traders tend to withdraw any available cash flow not required to maintain their business requirements, forgetting that from those withdrawals they need to meet any future tax liabilities based on past accounting periods. Depending on their accounting year-end, they may have a payment on account included as drawings, but any balance of taxes due are generally met from the profits of future trading periods.

Could be interesting to calculate any balancing income tax and Class 4 NIC liability at the balance sheet date and deduct this amount from the sole trader’s or partner’s capital account?

Those self-employed traders who are used to withdrawing profits before adjusting for any outstanding taxes, may actually, be overdrawn on their capital accounts.

No doubt most practitioners are making these adjustments, all-be-it after the accounts are prepared, to ensure that clients will have the funds to meet future tax bills and keep their self-employed businesses solvent.

Not a level playing field

This issue does flag up an obvious contradiction, that it is not really possible to compare the net worth of incorporated and unincorporated businesses without adjusting for any unpaid, future tax liabilities of the self-employed that are relevant to profits earned up to the Balance date. Wonder if banks take this into account?

Need to remind clients? A neat solution using Outlook.

I was scratching my head, trying to figure out how to remind myself to send a forgetful client to pay their SA tax next year, January and July 2019. I don’t have a large client list these days and I have most of my clients pretty well trained to pay up on time. I was about to cop-out, and make myself a diary reminder in Outlook to email my client on the due dates, when it occurred to me that I could create an email now (in Outlook) and delay sending it until a future date. And you can…

The process is quite straight forward, and many thanks to support.outlook.com for the tip. It is (for later versions of Outlook):

Delay the delivery of an Outlook email

  1. While composing a message, select the More options arrow from the Tags group in the Ribbon.
    Select More Options to set a delivery delay.
  2. Under Delivery options, select the Do not deliver before check box, and then click the delivery date and time that you want.
    Set a date and time to deliver your message.
  3. Click Close.

  4. When you’re done composing your email, click Send.

After you click Send, the message remains in the Outbox folder until the delivery time.

Review email reminders in the Outlook, Outlook folder

How easy was that? And I can review emails not sent by simply opening the Outlook folder. This might be a good post to direct to your team if you don’t have a solution working in-house already.