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.

TV channel for your practice?


Many practitioners harbour an obsession with Google page rankings. In fact, many pay a fortune to maintain a page one listing. They may like to reconsider their options.

As of December 2015, YouTube attracts more visitors than Google. Why, you might add, does this matter? It matters because it illustrates a trend towards seeking information in a video, rather than a text format. My research points to a readiness to watch and listen rather than watch and read. The former suits our drift towards passive engagement with data rather than the active, pouring through text activity to which we are accustomed.

Consider these stats:

Today, I entered the following search criteria in Google: “accountants UK”, there were about 35,300,000 results. I then entered the same search terms in YouTube, 96,400 results. On the first page of the YouTube results only two videos were posted by firms actively promoting themselves as accountants in the UK. And a quick reminder, YouTube is regularly attracting more visitors than Google.

In my opinion, these numbers point to opportunity: why aren’t more accountancy firms posting promotional videos to YouTube?

The classic response to advertising your firm’s presence on the internet is a website, most firms have a website. A growing number of firms also have a FaceBook page. Very few firms have a YouTube channel. The phrase is well-chosen, a YouTube website is called a “channel”, basically a page where you list your video offerings; I like the idea that we can all have a TV channel, one that we can dial to from any browser, and that provides viewers with compelling ideas and information that helps to solve tax-payers problems in a video format.

And I’m not saying that websites or FaceBook have had their day, far from it, what I am suggesting is that a YouTube channel for your practice may be a worthwhile add-on to your online promotional activity.

I am building a Landmark YouTube channel, and I am going to increase the number of branded videos that we offer to firms on a variety of tax and business development issues. I will use the channel to promote the ideas introduced today and eventually, will provide help and support to build practice YouTube channels, if required. It is also worth mentioning that YouTube channels can be monetized… More on this in future posts to this blog.

As a bonus, video content can also be uploaded to your website or FaceBook page, ironically, this will also stimulate the Google algorithms and lift your Google page rankings.

Take a look at our new video offerings for accountants; they can be branded for your practice and add interest to your website. The service is called TaxBox and the first video due for release 1 July 2017, will answer the question “How will I be affected by Making Tax Digital?”. http://landmarkpd.co.uk/tax-box

Data carousel

My guess is Making Tax Digital will go ahead as planned. The present election hiatus, that places civil servants in “Purdah” for the duration, and the relevant legislation in suspension, has side-lined the issue somewhat, but I expect the “washed-up” parts of the Finance Bill 2017 to be reinstated.

I think we must assume that self-employed businesses (including landlords) with turnover in excess of the VAT registration threshold will need to register for MTD and be prepared to upload relevant data from April 2018.

As HMRC have advised that this upload process will have to be facilitated via the use of recognised accounts software my concerns are to identify how, as a practitioner, I will support clients to fulfil their MTD obligations.

I use Xero for bookkeeping purposes and VAT filing, and TaxCalc to convert Xero TBs into statutory accounts and tax returns – both filed via the TaxCalc software. As far as I can presently ascertain, both Xero and TaxCalc are developing API links with the Gov.uk, MTD personal tax accounts; in fact, TaxCalc are developing a simplified cash book add-on, I assume clients will be able to use this to replace their spreadsheet solutions to bookkeeping?

The clock is ticking.

Post election, we will have less than 9 months to unscramble which piece of software is going to act as the MTD upload engine, let’s hope that the software providers are not in purdah and that the MTD solutions are produced in good time.

I would be interested in receiving comments from practitioners on how they are approaching this dilemma – thoughts?

Tax videos for your website

 A number of practitioners have contacted me since I sent out my previous missive on the new tax video service I am launching. Be reassured, the videos are NOT me wittering on about tax in front of a camera!
They 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.
Take a look at the video link below to see what it will look like.

Criminal Finances Act 2017 – are you prepared?

My good friend, David Winch, has posted an authoritative update on the changes that practitioners should be considering following the admission to the statute books, of the Criminal Finances Act 2017.

The goal posted have well and truly shifted and firms will need to consider the tax advice given by their staff and principals with some care from now on. David states in his blog:

The Act creates, at sections 44 to 52, a new offence of failing to prevent the facilitation of tax offences.  This new offence may be committed by an organisation such as a limited company or a partnership (but not by an individual).  The essence of the offence is that where an individual has committed an offence which has facilitated a tax offence by another, then the organisation with which he is connected (typically his employer) may be prosecuted for its failure to prevent the individual committing his offence.

For example if an employee of a bank or a firm of accountants facilitates a tax offence by a customer or client then not only will that employee be liable to prosecution (as he is now) for his criminal conduct in facilitating the tax offence but the organisation will be liable to prosecution for this new offence.  In this way the government intends to hold organisations to account for the criminal misconduct of their employees and other persons acting on their behalf.

Under existing law the organisation would only be liable to prosecution if the ‘directing mind’ of the organisation were engaged in criminal conduct.  Because employees who commit tax evasion facilitation offences are typically not at the most senior level of the organisation which employs them the organisation itself is not currently at risk of prosecution.  The Act changes that.

The new offence is modelled on the s7 Bribery Act 2010 offence of failing to prevent bribery.

As with the Bribery Act offence, guidance will be issued to assist organisations to set up appropriate procedures to prevent tax evasion facilitation offences by their employees and agents.  Key principles are likely to include risk assessment, prevention procedures, due diligence, staff training, and monitoring and review.

I recommend you read David’s post in full. It is available here.

Damage limitation

I added the following article to my weekly blog service for subscribers today. Feel free to copy, edit and post to your website. While we wait for the politicians to work out their differences – a hard or soft exit – it feels like it’s stating the obvious, but should we be talking to to Brexit vulnerable clients now? Trimming the sails before a threatened storm (even if it doesn’t materialize) may mean the difference between capsizing or reaching port in one piece. To be honest it’s hard to see how any of us are going to be unaffected.

The article follows:

The phrase “in-limbo” comes to mind when describing the present outlook for businesses in the UK. What will be the outcome of the June election? What will be the outcome of the withdrawal from the EU?

There is a possibility that will all be affected. If not directly involved in trade with Europe, we may be part of the downward supply chain.

What to do?

First of all, damage limitation planning may be appropriate. If part of your export sales are with Europe, or with firms who supply goods or services to Europe, there is an increased risk that your future prospects may be negatively affected post Brexit. Accordingly, you could:

  • See what opportunities there are to seek out new markets outside the EU.
  • Collaborate with customers who are dependent on EU sales to make joint approaches to non-EU markets.
  • What government assistance is available?
  • Take a fresh look at investment decisions to see if it would be more prudent to retain liquidity, or reduce borrowings to meet any future financial challenges.

It would also be illuminating to prepare realistic financial forecasts based on various what-if criteria.

There are compelling reasons for being prepared and the present hiatus may be that quiet period before the storm that gives us the space to do just that. Businesses that have concerns should face their anxieties head-on, and we can help.


If you would like to tap into my weekly blog copy service, sign up here…

Affordable tax videos for your website

According to a recent post by Liraz Margalit Ph.D. on the Psychology Today website:

Whether it’s YouTube, Vine or integrated content, video has quickly become one of the most impactful ways to speak to an audience. According to a recent study by Usurv, if you want visitors to your site to share and interact with your content, delivering it via video is the best way to go. Consumers are 39 percent more likely to share content if it’s delivered via video, and 36 percent more likely to comment and 56 percent more likely to give that video a coveted “like.”

She follows on:

Videos are processed by the brain60,000 times faster than text. Think about the heavy lifting your cognitive system has to do when reading an article vs. watching a video clip! Humans are hardwired to avoid demanding cognitive strain, so this tendency toward “laziness” will, more often than not, invite us to choose information that is easy to process over the form that makes us put out a lot of effort.

However, it would seem that text still has a part to play if visitors are intent on control: if they want to sort the wheat from the chaff and take from content what they need to solve their problem or otherwise satisfy a need.

There is no doubt, that if your website visitors are browsing without a great need for specific information, they may be drawn to videos on your site rather than ploughing through blocks of text.

In our opinion you should have both, video and text.

I have decided to offer quarterly videos on topical tax issues that you can stream from your website, YouTube or other video platforms. Watch the video that follows to see what is on offer.

Blowing of trumpets

Empathy is defined as – the ability to understand and share the feelings of another. In a therapeutic situation this is quite a useful skill, and one that should be honed if you truly want to understand what is going on across the other side of the table.

This is not a facility that we naturally develop and use as tax advisors. After all, we offer advice on tax issues.

But should we? In conversation, we are drawn to respond as soon as we realise that we have an opinion. Being specialist advisors, this is what we are paid to do, sit forwards and wax lyrically, about how smart we are, and usually with language that defies comprehension.

Empathy is the ability to place yourself in the others position: what are they thinking, how can I help. In an advisor client relationship, surely, this is the nub of any interaction? Who is this person and what are their problems, anxieties, why have they decided to come and see me? And then, how can I help and communicate this response once the client/prospect is clear that you understand what they are trying to say.

Generally speaking, the business community assumes that an accountant is qualified to do their job. In some respects, any time you spend trying to reinforce that assumption is wasted. So next time you are meeting a client after time has passed, or meeting a new prospect, make your first task asking questions; what you need to discover is what are their perceived problems. With that knowledge, you can then start a conversation about providing solutions.

Provide a solution and two magical events occur: your client will feel understood and amazed that you have a cure for his concerns, and, you can bill for your advice, which you should do whilst the tears of appreciation are flowing…

Give-aways and reception

Two ideas for spreading the word about the services you offer: how do you say thank you to clients and prospects, and how interesting is your reception area?

I visited an accountancy firm recently, and spent a rather tedious ten minutes (my fault, I was early) thumbing through out of date magazines (House and Garden!) and practice brochures that read like the fine print on my washing machine instructions. It reinforced my belief that a waiting room is also a place where you can intrigue visitors with the range of problems you are adept at solving. Wouldn’t it be wonderful, I mused, if the first thing that waiting clients or prospects said when you welcome them in your reception was: I didn’t know you offered that service, or I didn’t know this Making Tax Digital change would affect me, what do we need to do?

Only minor changes are required. What about a video loop setting out current tax challenges and opportunities? Or a range of brochures that set out in easy to read, accessible language the sorts of issues you can help tax payers and businesses deal with?

I can’t help with the video loop, at least not for a couple of months, but I can offer a range of client-facing booklets for 2017-18. Take a look.

The PDF booklets can be added as downloads to your website, printed and displayed in your reception, or emailed to new clients and new prospects as a way of engaging their interest in the services (problem solving solutions) that you offer.

Brand reinforcement and self-promotion should be tackled fearlessly, but with regard to the needs of your customers.

If you have other ideas for dressing up your reception, add a comment to this blog post…

Do we really think MTD is off the table?

I wrote the following article for Informanagement recently. A discussion of the likelihood that MTD is permanently shelved.

National events

It’s not often that national events impact the work of a tax advisor, with the exception, of course, of the annual changes imposed by the Finance Bill.

But now, we do have an additional event to factor into the advice we give clients – the surprise election in June and the consequent cull of a good part of the Finance Bill 2017.

In parliamentary parlance, a large section of the Finance Bill has been “washed up”, the idea, to shorten the Bill so it can be passed before the June election.

Unfortunately, one of the more significant sections of the Bill, dealing with MTD, has been deferred. Or has it been cancelled, or as Rebecca Cave’s article on the Accounting Web is titled “MTD law is shelved in wash-up”.

What do we say to clients? Glory be, HMRC have abandoned MTD, or nothing has changed, the legislation will be reintroduced after the election. Obviously clients, and many practitioners, will be hopeful that shelved means scrapped. But the evidence seems to point to a straight forward timing issue. If, as is likely, Mrs May returns to Downing Street after the election, will we see a Finance Bill (No2) 2017, restating the “wash-up” clauses and schedules, and any other items that Philip Hammond wants to throw into the mix?

HMRC are presently trialling MTD with a number of tax payers and their advisors, the code is written, the systems deployed. The aim, presumably, to fine tune the processes before the expected launch for over-VAT-limit unincorporated business from April 2018.

Again, what do we say to clients? Accountants tend to be a conservative bunch, so our guess is a steady as you go approach. We should definitely not be driven by media platitudes, “shelved”, “withdrawn” etc. Nothing is certain apart from death and taxes, but taxes are determined by legislation and until we see MTD firmly planted in a Finance Act there will always be uncertainty. For now, surely clients should proceed on the basis that MTD will be implemented as scheduled, as we await the outcome of the election and future tax legislation to clarify matters.

For practitioners that are still looking for a sense of direction on the implications of MTD, my support pack is still available.

Half-price subscription offer

I have created an online repository where you can download a copy of all my support packs and calculators for 2017-18.

It’s called the LANDMARK TAX LIBRARY 2017-18.

TAKE A SUBSCRIPTION NOW AND PAY LESS THAN 50% OF THE OVERALL VALUE – THE ANNUAL SUBSCRIPTION TO THE LIBRARY IS JUST £297 PLUS VAT

A list of the current contents are displayed below.

 

  1. TAX PLANNING ROAD MAP 2017-18This is our comprehensive tax planning bundle for 2017-18. Multiple planning issues that will need your client’s and staff’s consideration before 6 April 2018. Each section of the planning material is split into a short introduction and a detailed planning check list – all written in an easy to read style. We have also extracted all the planning check lists and created a “Tax planning check lists 2017-18” that can be used as reference material by staff. This booklet contains over 70 planning points (3,500 words).
  2. TAX CALCULATOR BUNDLE 2017-18We have created eleven tax and business development calculators for 2017-18. They include a mix of business tax, business development, personal tax and property tax issues and can be used to estimate liabilities and illustrate the benefits or otherwise of options available. The bundle is consolidated into an Excel file.
  3. MAKING TAX DIGITAL – be preparedWe now know that MTD will be happening from April 2018. The implementation timetable has been relaxed, all-be-it slightly, but we need to ready ourselves for the transformation from self assessment. This support pack will take you through the consultations, responses and legislation to identify what needs to be done before 6 April 2018, and outlines the opportunities to re-imagine and provide relevant support services for clients from this date.
  4. BUSINESS STATUS PLANNING 2017-18This support pack provides backup material to advise clients with business status choices: for example, sole trader vs limited company alternatives. If you are looking for material to present to clients, or inform your partners and staff regarding these issues, this bundle of documents should provide what you need. BONUS ITEM a spreadsheet calculator to workout the best-fit status for your clients.
  5. COMPANY PROFIT EXTRACTION STRATEGIES 2017-18The mechanics of the calculations are well known, basically, even with the reduction of the dividend allowance next year, a low-salary high dividend approach usually minimises tax and NIC costs for director shareholders. What is not so easy is demonstrating these benefits in an easy to absorb format for clients. Our support pack on this issuse provides a client facing booklet and the use of our 2017-18 “salary vs dividend” calculator.
  6. 20 QUESTIONS BOOKLET 2017-18Solving clients’ problems by providing appropriate services is a win-win outcome: it’s how we build our practices and help our clients prosper. Take a closer look at the opportunities this publication offers. The 20 questions were sourced from ideas provided by over 80 firms.
  7. WHAT HMRC WON’T TELL YOU ABOUT YOUR TAXThis short booklet will remind clients why they should seek professional advice. It highlights the age old conundrum that it’s what you don’t know that you don’t know that has a radical adverse affect on your situation. HMRC will inform taxpayers, but only if asked!
  8. SPRING BUDGET 2017 – CLIENT BOOKLETThis booklet does not list the various budget changes by rote, rather, we have attempted to focus on those issues that highlight opportunities or challenges for small businesses, property rental businesses and higher rate tax payers.
  9. CLIENT INFORMATION BOOKLETS 2017-18We have bundled all the client booklets for 2017-18 and made them available in this offering.

You can purchase these items individually from the landmark website, or you can access them all for £297 plus VAT, a 50% discount. Any new items added during the tax year will be included.

Finance Bill wash-up

The CIOT have produced an excellent listing of what’s in and what has been dropped in order to process the Finance Bill 2017 before parliament dissolves for the summer election. The table of changes is reproduced below. Although the clauses enacting MTD are in the “dropped list”, I see this as a temporary blip on the MTD horizon; no doubt these excluded items will be reintroduced as a No2 Bill after the election.

CIOT’s full article can be seen here https://www.tax.org.uk/media-centre/blog/media-and-politics/government-drop-majority-finance-bill

The full list of what is in and what is out of the Bill follows –

PART 1  
DIRECT TAXES  
CHAPTER 1  
CHARGE AND PRINCIPAL RATES  
Income tax charge and rates  
1 Income tax charge for tax year 2017-18 IN
2 Main rates of income tax for tax year 2017-18 IN
3 Default and savings rates of income tax for tax year 2017-18 IN
4 Starting rate limit for savings for tax year 2017-18 IN
5 Dividend nil rate for tax year 2018-19 etc OUT
6 Corporation tax charge for financial year 2018 IN
CHAPTER 2  
INCOME TAX  
Employment income  
7 Workers’ services provided to public sector through intermediaries  (+ schedule 1) IN
8 Optional remuneration arrangements (+ schedule 2) IN
9 Taxable benefits: time limit for making good OUT
10 Taxable benefits: ultra-low emission vehicles OUT
11 Taxable benefits: asset made available without transfer IN
12 Pensions advice OUT
13 Legal expenses etc OUT
14 Termination payments etc: amounts chargeable on employment income OUT
15 PAYE settlement agreements OUT
Pensions  
16 Money purchase annual allowance OUT
17 Overseas pensions (+ schedule 3) IN
18 Pensions: offshore transfers (+ schedule 4) IN
Trading and property businesses income  
19 Calculation of profits of trades and property businesses (+ schedule 5) OUT
20 Trading and property allowances (+ schedule 6) OUT
Investment income  
21 Deduction of income tax at source (+ schedule 7) IN
22 Life insurance policies: recalculating gains on part surrenders etc OUT
23 Personal portfolio bonds OUT
Reliefs relating to investments  
24 EIS and SEIS: the no pre-arranged exits requirement OUT
25 VCTs: follow-on funding OUT
26 VCTs: exchange of non-qualifying shares and securities OUT
27 Social investment tax relief  (+ schedule 8) OUT
28 Business investment relief OUT
CHAPTER 3  
CORPORATION TAX  
Corporation tax reliefs  
29 Carried-forward losses  (+ schedule 9) OUT
30 Losses: counteraction of avoidance arrangements OUT
31 Corporate interest restriction  (+ schedule 10) OUT
32 Museum and gallery exhibitions  (+ schedule 11) OUT
33 Grassroots sport OUT
34 Profits from the exploitation of patents: cost-sharing arrangements OUT
Hybrids and other mismatches  
35 Permitted taxable periods of payees and deductions for amortisation OUT
Northern Ireland  
36 Trading profits taxable at the Northern Ireland rate (+ schedule 12) OUT
CHAPTER 4  
CHARGEABLE GAINS  
37 Exemption from attribution of carried interest gains OUT
38 Elections in relation to assets appropriated to trading stock OUT
39 Substantial shareholding exemption OUT
40 Substantial shareholding exemption: institutional investors OUT
CHAPTER 5  
PROVISIONS RELATING TO MORE THAN ONE TAX  
Domicile, overseas property etc  
41 Deemed domicile: income tax and capital gains tax (+ schedule 13) OUT
42 Deemed domicile: inheritance tax OUT
43 Settlements and transfer of assets abroad: value of benefits  (+ schedule 14) OUT
44 Inheritance tax on overseas property representing UK residential property (+ schedule 15) OUT
Employee shareholder shares  
Clauses 45-47 IN
Disguised remuneration  
48 Employment income provided through third parties (+ schedules 16 & 17) IN
49 Trading income provided through third parties  (+ schedule 18) OUT
50 Disguised remuneration schemes: restriction of income tax relief OUT
51 Disguised remuneration schemes: restriction of corporation tax relief OUT
Capital allowances  
52 First-year allowance for expenditure on electric vehicle charging points OUT
Transactions in UK land  
53 Disposals concerned with land in United Kingdom OUT
Co-ownership authorised contractual schemes  
Clauses 54-56 OUT
PART 2  
INDIRECT TAXES  
VAT  
57 VAT: zero-rating of adapted motor vehicles etc (+ schedule 19) IN
Insurance premium tax  
58 IPT: standard rate IN
59 IPT: anti-forestalling provision IN
Landfill tax  
60 Landfill tax: taxable disposals OUT
Air passenger duty  
61 Air passenger duty: rates of duty from 1 April 2017 IN
62 Air passenger duty: rates of duty from 1 April 2018 OUT
Petroleum revenue tax  
63 Petroleum revenue tax: elections for oil fields to become non-taxable OUT
Vehicle excise duty  
64 VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc IN
Alcohol duties  
65 Alcoholic liquor duties: rates IN
Gaming duties  
66 Gaming duty: rates OUT
67 Remote gaming duty: freeplay OUT
Tobacco products  
68 Tobacco products duty: rates IN
69 Tobacco products duty: minimum excise duty IN
70 Tobacco products manufacturing machinery: licensing scheme OUT
PART 3  
SOFT DRINKS INDUSTRY LEVY  
71-107 (+ schedules 20-23) IN
PART 4  
FULFILMENT BUSINESSES   
108-119 (+ schedule 24) OUT
PART 5  
ADMINISTRATION, AVOIDANCE AND ENFORCEMENT  
Reporting and record-keeping  
120 Digital reporting and record-keeping for income tax etc  (+ schedule 25) OUT
121 Digital reporting and record-keeping for income tax etc: further amendments OUT
122 Digital reporting and record-keeping for VAT OUT
Enquiries  
123 Partial closure notices (+ schedule 26) OUT
Avoidance etc  
124 Errors in taxpayers’ documents OUT
125 Penalties for enablers of defeated tax avoidance (+ schedule 27) OUT
126 Disclosure of tax avoidance schemes: VAT and other indirect taxes (+ schedule 28) OUT
127 Promoters of tax avoidance schemes: threshold conditions etc IN
128 Requirement to correct certain offshore tax non-compliance (+ schedule 29) OUT
129 Penalty for transactions connected with VAT fraud etc OUT
Customs enforcement powers  
130 Power to enter premises and inspect goods OUT
131 Power to search vehicles or vessels OUT
Information  
132 Data-gathering from money service businesses OUT
PART 6  
FINAL  
133 Northern Ireland welfare payments: updating statutory reference OUT
134 Interpretation IN
135 Short title IN

 

Also worth noting is that the Government has tabled some amendments. Leaving aside a few related to clauses being deleted from the Bill, these cover –
Schedule 2 (Optional remuneration amendments) – amendments 11-12
Schedule 3 (Overseas pensions) – amendments 13-29
Schedule 4 (Pensions: offshore transfers) – amendments 30-56
Schedule 16 (Employment income provided through third parties) – amendment 57

What is Blockchain?

If you ever wondered what Blockchain is, read this article reproduced from a UK Business Insider article posted October 2016

It’s a technology conceived by the mysterious creator of bitcoin — the digital currency championed by a motley crew of privacy-obsessed libertarians, social activists, and some criminals.

Bank of AmericaAP Photo

Now the idea of blockchain has gripped Wall Street’s biggest institutions.

Its enthusiasts think it could change the world. Sure, it would make contracts more enforceable and speed up the settlement of stock trades — hence the interest from big banks. But some see it going much further, cracking down on sex trafficking, music piracy, and child labor.

And the key to all that — what attracts these different factions — is something that, on the surface at least, sounds rather banal: a digital ledger, like the one in your checkbook.

“Blockchain is a truly extraordinary technology that does really mundane things,” said Paul Brody, Ernst & Young’s global blockchain leader.

But for all the promise, these big questions remain: Who will foot the bill, and is it really as secure as supporters say?

What is blockchain?

In the non-blockchain world, we keep separate records of transactions. If you write your friend a check, you balance your own checkbook and your friend does the same when they deposit it. But things can go wrong. They might forget to update their checkbook ledger. And each bank has no way to know immediately if the person has enough in their bank account to cover it.

checkbook, checks, writing a check Flickr / oblivion9999

With a blockchain, instead of two separate checkbooks with two records of debits and credits, you’d both look at the same ledger of transactions. It’s private (encrypted, in computer-speak), and decentralized, so neither of you controls the ledger.

This “distributed ledger” operates on consensus. Both of you can look at the ledger. Each transaction gets put into a block. If you both say that block is valid and correct, it’s added to a chain. And that chain is protected by sophisticated cryptography: No one can change the chain after the fact.

Now imagine this in a more complex form. This is what gets people in finance and technology excited.

Say you want to buy a stock. Right now, your bank, brokerage, the stock exchange, and the company you’re buying all have separate, private records of transactions. They can’t see each other’s ledgers. Nor can they verify that everything is accurate among all involved.

With blockchain, they can all be on the same page — literally.

Your bank can verify that you have enough money to transfer to your brokerage. That transfer is added to the ledger of transactions that everyone involved can see. Then your broker executes a trade for 100 shares. That gets added to the blockchain, too. Everyone involved verifies it’s legitimate.

The exchange receives the order — also added and verified. And then the company’s shares end up in your account. You could see the record of all the shares you buy and sell in the permanent record. If you decide to sell the shares later, that transaction gets added to the blockchain.

And because it’s a consensus model in which every party confirms a transaction, “it gets more secure the more people you add” to the blockchain, Brody said. “When a transaction is completed, everyone has to get a copy of the transaction.”

That’s blockchain in its purest form. In reality, however, different companies are experimenting with different forms. A blockchain used in financial services could be private, or a hybrid model between the decentralized vision and a more traditional centralized model that bankers are used to. A regulator, for instance, could hold the key to a blockchain, and some companies are thinking about how to maintain a middleman.

Mysterious beginnings

No one knows who invented blockchain. The idea for it came from a paper published online eight years ago that unveiled bitcoin, the digital currency. The author, Satoshi Nakamoto, is thought to be using a pseudonym. The true identity remains a mystery, and there’s debate over whether it was created by an individual or group.

At first, bitcoin got all the attention. The idea of a secure, private currency, divorced from a specific government, captured the imaginations of technologists, libertarians, and people concerned about the power of big banks and government regulation. Bitcoin transactions occur peer-to-peer, meaning no government or third party is involved.

Goldman Sachs recruiting videoGoldman Sachs YouTube/Goldman Sachs

Today, bitcoin and blockchain still attract privacy-minded and antigovernment types. But it also increasingly appeals to people like Grainne McNamara. She spent years building out technology at banks like Morgan Stanley and Goldman Sachs. Now she’s a leader of PricewaterhouseCooper’s blockchain for financial services. And that means she spends a lot of time attending and hosting blockchain conferences.

At one, a speaker showed a picture of a shed in his presentation. McNamara remembers him jokingly saying, “Take the bankers behind the shed and kill them.” He didn’t know his audience.

McNamara was sitting next to former bankers, who found the whole thing humorous, she said.

Despite the shed metaphor, “it’s a peaceful cohabitation,” McNamara told Business Insider. “People genuinely appreciate the disruptive element to spawn innovation.”

A contract with a brain

One area blockchain proponents get excited about is the idea of a “smart contract.” While most bank agreements are still paper documents — banks are awash in paper, even in 2016 — a smart contract is a computer program that helps keeps everyone accountable.

video gamesPeople play a video game on the stand of Acer at the IFA Electronics show in Berlin, Germany, Sept. 2, 2015. Reuters/Axel Schmidt

Let’s say you’re a company that designs and sells video game consoles. You work with suppliers and shipping companies, and have a number of serious concerns. You want to make sure they’re manufactured well and on time. You want to make sure there are no labor violations, such as children working on the assembly line. And you want to make sure everyone gets paid on time.

In the old way of doing things, numerous contracts might be involved to manufacture one video game console. And each side may have its own paper copies.

Smart contracts provide automated accountability.

 

 

 

bi graphics a smart contractSamantha Lee / Business Insider

Because this is blockchain, everyone involved looks at the same contract; no one can change it without the permission of most others.

Here’s an example: When a truck picks up finished video game consoles from a factory in, say, China, the shipping company scans each box. Those are added to the blockchain, triggering a release of funds from the video game company’s bank account. No one has to invoice and chase a payment.

“You can marry up the delivery and payment of services,” Brody said.

It can go beyond getting paid, too. Each worker on the assembly line could scan their identification card, which is then verified by multiple sources such as government agencies and third-party auditors, ensuring the workers are not underage or overworked. And because it’s a blockchain, no one can alter the record later.

Some have discussed blockchain as a possible tool to help prevent sex trafficking and other scourges. And there are other uses for it that may become big parts of our lives.

Healthcare

bi graphics possible uses for blockchainSamantha Lee / Business Insider

Smart contracts in healthcare could do things such as trigger an insurance payment to a doctor when a patient undergoes a CT scan.

A blockchain could also be a secure place to store electronic medical records.

It would detail all patient-doctor communication, illness and treatment information, vaccination records, medical bills etc. Every subsequent doctor visit or treatment would be added to the blockchain, including those in different cities and countries, creating a complete, historical record of the patient’s health.

In this case, the blockchain is private, and only certain participants would have the encryption keys to see the record.

Music and media

Musicians may wish there had been blockchain when Napster undermined music sales around the turn of the century through file-sharing.

MusicBlockchain could prevent music piracy Flickr/Kelsey

Now some are thinking blockchain could prevent piracy and help boost sales. Artists could provide their music directly off a ledger, and smart contracts might ensure the right people are paid and only those with rights play the tracks.

A similar model could help fund news outlets and other media organizations.

Property records

Some companies’ whole job is tracking down property records. Blockchain could change that.

If property deeds were on a blockchain, the other participants (known as “network nodes”) that validate the transaction could be real-estate agents, financing banks, and a land registry authority.

Once the transaction is validated, it is added to the blockchain, and the updated state of the blockchain is broadcast to the participants in real time. As the blockchain maintains the history of all transactions, the entire history of the property and its owners is on the blockchain.

Trading and banking

The Australian Securities Exchange — ASX — plans to decide by mid-2017 if it will replace its post-trade clearing and settlement system with a blockchain version. This could be a turning point for blockchain and potentially a catalyst for widespread adoption.

Bank of EnglandBank of England Jim Edwards

Central bankers are also getting in on the action. The Bank of England and the People’s Bank of China are discussing issuing their national currencies — the pound and the renminbi, respectively — on blockchain. If successful, the technology would make the currencies more traceable, allowing the banks to track them through the financial system in real time.

Right now, this use of blockchain is limited to discussion and research papers, but if implemented, other central banks are likely to follow suit. The US Federal Reserve is closely following developments as well, with Fed Gov. Lael Brainard in charge of keeping an eye on the new technology.

It’s also rumored that other items such as diamonds, art, and food could be put on blockchain so the entire history of the items could be traced.

Buzz vs. reality

There are over 120 blockchain projects spanning a variety of industries, and the annual budget for blockchain initiatives in 2016 is estimated to be $1 billion.

In financial services, Goldman Sachs, JPMorgan Chase, and Bank of America are among the big names that have partnered with R3, a startup trying to bring blockchain technology to the finance world.

But if blockchain is going to work, it needs an industrywide standard. For the first bank to adopt this digital system and overhaul existing infrastructure, it could mean a risky and expensive investment, and that bank would have to hope others follow suit. No one wants to be the first to test that theory.

That’s why this is one of the few cutting-edge technologies that is generating a lot of talk but not a lot of action among banks. While they are dabbling in the technology, attending conferences and partnering with R3, no bank is taking the lead and going from proofs of concept to using it in the real world.

“To get the true value, you need the network effect,” said Graham Warner, head of global transaction banking product development in the Americas at Deutsche Bank. The more people and companies use blockchain, the more valuable the technology becomes.

Other challenges

For all its promise, some major impediments could prevent blockchain’s widespread deployment, including regulation, cost, and security issues.

Implementing and standardizing blockchain could cost in the billions of dollars, and it would mean an overhaul of legacy systems that people are used to and understand. Today’s technology works, and replacing it with something unproven is seen as an expensive risk.

Blockchain technology would also potentially mean a huge number of job losses, especially in middle- and back-office functions. Banks would have to get the remaining employees up to speed on the new technology, and using it would initially be a trial-and-error process.

Security and privacy issues

ethereumEthereum

In August, hackers stole $72 million worth of bitcoin from accounts at the Hong Kong cryptocurrency exchange Bitfinex. And in June, hackers stole $55 million worth of ether, a bitcoin rival. The nonprofit that runs ether, Ethereum Foundation, just rolled back the chain. It’s as if the hack never took place, and business returned to normal. But that worries purists.

The Ethereum hack — and the response to it — led Accenture to create an “editable blockchain model,” to “resolve human errors, accommodate legal and regulatory requirements, and address mischief and other issues,” according to a news release.

Blockchain enthusiasts say this threatens the very nature of the blockchain itself. One of the fundamental benefits of blockchain technology is its immutability — the blockchain represents a “golden record” of transactions, a complete, historical record that technically cannot be interfered with or undone.

But there “isn’t one blockchain to rule them all,” Warner said. “It will be an evolutionary, Darwinian process” to figure out which version of the blockchain applies to which use case.

What’s next

When McNamara learned about blockchain, she said she was “a little bit of a skeptic. But I’ve been proven wrong.”

The ecosystem is evolving, she said, and people involved, whether they’re activists or bankers, are getting together and talking about “shared values and pain points.”

ASX Australia Stock Exchange TraderASX AP

While some big players like the ASX may be using some form of blockchain as early as next year, some issues are holding blockchain back.

Different versions of blockchain are in development, and there’s little agreement on what’s the best or purest version to deploy. And dozens of startups are working on their own takes on blockchain. Innovation is happening, but all the competing ideas makes big companies cautious to commit to any one type.

But most proponents think everything will be worked out in due time, and that in the next few years, blockchain and its smart contracts would improve our lives, even if it operates quietly in the background, invisible to most people.

More: Blockchain Bitcoin BIQ Explainer

11 tax and business calculators for 2017-18

I have created eleven, easy to use calculator tools for 2017-18 that I am making available as a composite Excel file. The tools cover planning issues as well as the usual computational needs for practitioners.

The spreadsheet has a menu and works like an app, you can also print off results to show clients. They are designed to be used by staff and partners to illustrate the advantages, or otherwise, of planning choices. In a nut-shell they cover:

 

 

 

PROPERTY TAX:

  • Buy-to-let planning tool
  • Buy-to-let loan interest changes
  • Stamp duty

PERSONAL TAX:

  • Profit extraction, salary vs dividend
  • Income Tax planner
  • CGT planner

BUSINESS TAX & PLANNING:

  • Business break even point
  • Profit improvement
  • Sole trader vs incorporation comparison
  • Business use of home calculator
  • VAT Flat Rate Scheme planner (updated for 2017-18 changes

Download a copy from this page…

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