Providing services to a public sector – off payroll working


In the latest Employer Bulletin HMRC advise those providing services to a public sector client through their own limited company to ensure they are ready for the new rules which take effect from 6 April 2017.

The new rules for off payroll working, commonly referred to as IR35 or the Intermediaries legislation, take effect from 6 April 2017.

These changes mean individuals working through their intermediary in the public sector will no longer be responsible for deciding whether the intermediaries’ legislation applies and then paying the appropriate tax and National Insurance contributions (NICs). This responsibility will instead move to the public authority client, agency, or third party that pays the worker’s intermediary, and they will also now become responsible for making sure that, where the rules apply, the relevant income tax and NICs are deducted and reported through PAYE in real time.

The public authority client is required to tell any agency or third party its view as to whether the rules apply. HMRC have been consulting on these new rules and the legislation has yet to be finalised.

HMRC confirm that ‘work is continuing on the development of the new Employment Status Service, and the online tool should be available for use in March. We have launched an off-payroll working in the public sector page on GOV.UK where you can find guidance for fee-payers, PSCs and public authorities to use, and links to material such as the technical note’.

If you have concerns in this area please contact us.

Internet links: Employer Bulletin Technical note

What will the Spring Budget bring for business?


With two Budgets in 2017, and the Spring Budget scheduled for Wednesday 8 March 2017, the Confederation of British Industry (CBI) have written to the Chancellor Philip Hammond outlining what they would like to see in the Budget proposals.

The CBI’s letter calls for the government to ‘back businesses’ growth ambitions’ to help build prosperity across the UK, and to work alongside firms to ‘prioritise stability’ during periods of economic uncertainty.

The CBI has also urged the government to tackle the UK’s ‘outdated‘ business rates regime and limit its ‘growing burden’ on businesses.

Elsewhere, the Federation of Small Businesses (FSB) has advocated for a ‘pro-business Budget’ that supports self-employed individuals, urging the government to help more people start up in business.

We will keep you informed of pertinent Budget announcements.

Internet links: CBI news FSB news

Construction Industry – subcontractor verifications


HMRC have confirmed in the latest Employer Bulletin that changes will be made to the verification of subcontractors in the construction Industry Scheme (CIS) from 6 April 2017.

From 6 April 2017, contractors must use an approved method of electronic communication to verify their subcontractors. So from 6 April 2017 HMRC will no longer accept any telephone calls to verify subcontractors and from then contractors must verify subcontractors using:

  • the free HMRC CIS online service, or
  • commercial CIS software.

This change is one of a series made to CIS to increase HMRC efficiency and accuracy, and to reduce administration. HMRC are also reminding contractors that they have also introduced additional features of the online system including the ability to amend returns online, and the addition of an online message/alert service.

Contact us for help with CIS issues.

Internet link: Employer Bulletin

Self assessment expense claims


HMRC have released a list of the most outlandish items which have been claimed as expenses. These include:

  • Holiday flights to the Caribbean
  • Luxury watches as Christmas gifts for staff – from a company with no employees
  • International flights for dental treatment ahead of business meetings
  • Pet food for a Shih Tzu ‘guard dog’
  • Armani jeans as protective clothing for painter and decorator
  • Cost of regular Friday night ‘bonding sessions’ – running into thousands of pounds.
  • Underwear – for personal use
  • A garden shed for private use – plus the costs of the space it takes up in the garden
  • Betting slips
  • Caravan rental for the Easter weekend.

Ruth Owen, HMRC Director General of Customer Services, said:

‘Year after year we receive a number of ludicrous expense claims, ranging from international holiday flights to expensive designer clothing, which we would never uphold. Why should the honest taxpayer pick up the bill for others? HMRC will only accept those claims which are genuine, such as legitimate travel expenses or the cost of tools for the job.

For help with your tax affairs please do get in touch.

Internet link: GOV.UK news

Flat Rate VAT Changes and How to Deal with it


FLAT RATE VAT CHANGES – How Does it Affect YOU.

Small Businesses will find that the significant changes announced will increase the amount of VAT that they will have to pay.

This will affect your business if you use the VAT Flat Rate Scheme but which spend very little on goods, including raw materials – such as firms providing services, i.e., consultants.

The VAT Flat Rate Scheme simplifies businesses’ record keeping and makes it easy to work out the VAT they have to pay.

Our Government announced these changes in the 2016 Autumn Statement.

How does The Flat Rate Scheme work?

Under the Flat Rate Scheme, the process for calculating output VAT is simplified.

For example, the flat rate percentage for a Contractor shop is 12% – so if the contractor invoices his services for £120 including VAT of £20, he will pay a flat rate of £14.40 (£120 x 12%) to HMRC.

We provide advice to our clients on which sales count in the VAT calculation as this is complicated. We can provide you further advice on this and information is also on the HM Revenue and Customs (HMRC) website.

The percentages for each type of business vary.

The Government has designed the flat rate scheme so that they generate roughly the same amount of VAT, but it should be much easier to work out.

However, because it is an approximation, some businesses will pay more, and some less. The government is concerned that some businesses are using the Flat Rate Scheme to pay less VAT than is appropriate and effectively profit from the scheme.

How is the VAT Scheme changing?

In the Autumn Statement, Chancellor Philip Hammond announced changes which affect businesses which have a very low cost base. These businesses are now called “limited cost traders”. Does this apply to you?

Limited cost traders can still use the Flat Rate Scheme, but their percentage will be 16.5%. So if they sell £120 of work, including £20 of VAT, the flat rate amount is £19.80 (£120 x 16.5%).

A limited cost trader is defined as one that spends less than 2% of its sales on goods (not services) in an accounting period.

When working out the amount spent on goods, it cannot include purchases of:

  • capital goods (such as new equipment used in a business)
  • food and drink (such as lunches for staff)
  • vehicles or parts for vehicles (unless running a vehicle hiring business)

A firm will also be a limited cost trader if it spends less than £1,000 a year, even if this is more than 2% of the firm’s turnover on goods.

Will this affect You?

It will increase the VAT paid by labour-intensive businesses where very little is spent on goods. For example, this may affect IT contractors, consultants, hairdressers and accountancy firms.

It will also affect construction workers who supply their labour, but where the main contractor provides the raw materials.

When does this start?

The new rules start on 1 April 2017, but may also affect invoices issued, and goods bought, from now on. HMRC have also issued strict rules about invoicing in advance and “anti-forestalling” on the Flat Rate Scheme.

The scheme can be more complicated than expected, and each business should assess whether they fall within the new rules. Contact us for more information on the matter and to check what impact this has on your business.

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