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Danger – Bad Tax Advice!

danger thin ice

Did you know that the information that HMRC give you is often incorrect?

A Civil Service Capability Review has found that one in four of us contacting HMRC is given incorrect or incomplete information. ONE IN FOUR!

That’s a massive problem.

The official message is that Self Assessment is easy, but it clearly is not true. Tax is complicated and it changes every single year. Even for small mounts of money, tax is taxing!

VAT Mini One Stop Shop (VAT MOSS)

How will the VAT Mini One Stop Shop (VAT MOSS) work?

You may opt to use the VAT Mini One Stop Shop (VAT MOSS) online service to save you having to register for VAT in every EU Member State where you supply digital services. This will be available from 1 January 2015, but you will be able to register to use it from October 2014.

If you are an EU business, you may register and use the VAT Mini One Stop Shop (VAT MOSS)  online service in the Member State where you have your business. Using the VAT MOSS online service means you can submit a single calendar quarterly VAT MOSS return and payment covering all your EU digital service supplies. For example, if you register for the VAT MOSS online service in the UK, you will be able to account for the VAT due on your B2C digital service sales in any other Member States where you do not have an establishment by submitting a single VAT MOSS return and any related payment to HM Revenue & Customs (HMRC). HMRC will send an electronic copy of the appropriate part of your VAT MOSS return, and the related VAT payment, to each relevant Member State’s tax authority on your behalf. The VAT rate used will be that of each Member State of Consumption at the time the service was supplied.

VAT on digital services to consumers

Did you know that you will have to charge VAT on digital services to consumers from 1st January 2015?

On 1 January 2015, The European Union (EU) VAT place of supply of services rules will change for business to consumer (B2C) supplies of broadcasting, telecommunications and e-services (digital services). A consumer means a private individual.

These changes will affect all businesses that supply digital services to consumers, whether or not they are registered for UK VAT. This is because there are no registration limits for digital service supplies made to consumers outside the UK. Any business supplying digital services to a consumer in another Member State therefore has to charge VAT on the supply in that Member State and register for VAT in that Member State.

If your customer does not provide you with a VAT Registration Number (VRN), and you have no other information that suggests that your customer is in business and VAT registered, you can treat this as a B2C supply.

VAT Mini One Stop Shop (VAT MOSS)

To save you having to register for VAT in every EU Member State where you supply digital services, you may opt to use the VAT Mini One Stop Shop online service (VAT MOSS). This will be available from 1 January 2015, but you will be able to register to use it from October 2015

Remember this affects all businesses not just VAT registered ones. Contact us on 01243 788041 if you need help with this.

Eight ways to cure the time management problem

We all know that poor time management is important. But if we really accounted for our time in the same way that we did every other cost we would probably be in for a shock.  According to research by global consulting firm Bain & Co and enterprise analytics company VoloMetrix, company executives receive 30,000 external communications a year compared with 1,000 in the 1970s.

The research revealed big productivity losses related to time management because businesses to not track and monitor employees’ time as closely as they track other resources, such as capital.

Do you record time spent as a cost against individual sales in your P&L or does it just fall into the salaries line in your overheads? Knowing how much time directly supports your sales is a critical performance measure. So if you already do this where does the rest of the time go?

The top eight time consumers according to the report are:

  • Muddled company agendas. Agendas should be clear for everyone in the company so that employees know which tasks are the top priority and the tasks that can be shelved.
  •  A time is free attitude. Time is clearly not free and should be managed as carefully as any other asset or resource.
  • Projects. Having the bright idea is the easy bit. But does the business case for the project really stand up when the time factor is costed properly.
  • Too many layers. The more organisational layers the more work is created in managing and communicating before the core tasks are carried out.
  • Anyone can call a meeting. The authority to call a meeting should be limited, as should the number of attendees.
  • Murky decision making. Decision making can be streamlined through the use of a standardised decision-making process.
  • Meeting time is free time. A clear agenda, advance preparation and attention to getting results on time can ensure maximum productivity at meetings.
  • Where did the time go? Time spent in meetings and on emails should be tracked and targeted to assess and improve productivity.

When we think of time management, it is not just out own time we should be worrying about.

Helen Alexander

Millbrook Financial Management Ltd

Tax free mobile phones

You are allowed to provide your employees with one tax free mobile phone each. But you have to do it the right way otherwise it could cost you and your employee tax and national insurance.

The tax free mobile phone

  • The contract must be between the employer and the mobile phone company.
  • There are no reporting requirements
  • There is no tax or NI to pay
  • Tablets are not included but smartphones are.

Employee’s own phone – employer pays supplier direct

  • The contract is between the employee and the phone company
  • You have to report on a P11D
  • Add the value of the benefit to earnings through the payroll
  • Employer pays class 1 NI
  • Employee pays NI, but no tax
  • No NI is payable if it was acquired for business use only but still have to report

Employee’s own phone – employer reimburses monthly contract

  • The contract is between the employee and the phone company
  • You reimburse the monthly tariff so this is just earnings.
  • Employer pays NI
  • Employee pays NI and tax.

Employee’s own phone – pay as you go

  • You only reimburse identified business calls
  • You must report on a P11D unless you have a dispensation or the employee earns less than £8,500
  • There is no tax or NI to pay.

RTI non-filing notice?

If your business has a payroll then you may, like me, have received an RTI non-filing notice from HMRC. “Rubbish” is a polite version of my reaction. RTI should be the most straight-forward part of the payroll. The hard part is often calculating who is owed what if you have many non-salaried staff. So it would be fair to say that I was a bit miffed.

OK, so what is the consequence? Well until April, nothing. But, after April, possibly a fine from HMRC. So  I phoned HMRC. Their assumption was that I had not filed a return, hence the RTI non-filing notice. More worrying was that they could not tell me specifically why I had received the notice. My theory is that it was caused by correctly filing a return on Feb 6th for a Feb 7th payroll which is after the HMRC PAYE month-end of Feb 5th.

I can only hope that HMRC get their act together with the RTI system. A quick look on the web revealed a tidal wave of RTI non-filing notices this week.

Of course if you really haven’t kept on top of things then you need to take a deep breath and file your RTI returns. And get some help from a Chartered Management Accountant if you need to.

Helen Alexander

Millbrook Financial Management Ltd

Interim or final dividend – does it matter which?


Dividends are used by many business owners as a tax-efficient way to extract profit from a company. So it is important to understand the procedure for paying them. But does it matter whether the dividend is final or interim if the tax treatment is the same?

The Companies Act 2006

It isn’t HMRC that makes the distinction between the two dividend types, but company law. The Companies Act 2006 says “The company may by ordinary resolution declare dividends, and the directors may decide to pay interim dividends”

So one group of  people, the directors,  may pay interim dividends, but shareholder approval must be obtained before a final dividend is paid.

So why is HMRC interested?

HMRC doesn’t particularly care which type of dividend is paid. It is interested in whether the payment is really a dividend or whether it was salary a bonus or a loan payment. As higher taxes and NI may accrue with these payments HMRC will want to see proof that the payment was a genuine dividend.

And this is where the timing of the payment and the paperwork are important. Under new anti-avoidance rules it is no longer possible for a director to receive a loan from the company, repay it to avoid the 25% tax charge and then take out a fresh loan within 30 days. HMRC will want to be certain that the payment is indeed a dividend. If the correct procedure has been followed and the paperwork is complete then this should not be challenged.

Employing the self-employed – time to stop burying your head in the sand

Do you run a small business charity or non-profit organisation?

If you have employees then by now you should be filing on-line payroll returns every time you pay your employees. From 6 April 2013 employers started reporting PAYE information to HM Revenue & Customs (HMRC) in real time. You may see this referred to as Real Time Information – or RTI. This means that employers (or their accountant or bookkeeper) have to:

  • send details to HMRC every time they pay an employee, at the time they pay them
  • use payroll software to send this information electronically as part of their routine payroll process

But we don’t have any employees!

Really? Are you sure?

Think very carefully about all of the people you make payments to. Are you really sure that they are self-employed?

Now that I have planted a seed a doubt in your mind take a look at the Employment Status Indicator on the HMRC website.

By answering a number of questions you can check whether that “helper” you make a payment to would be classed as an employee. Can you satisfy yourself that every person you pay would be classed as self-employed?

So that’s all clear then!

Well, unfortunately not quite so clear and a recent example has come to light in the instance of church organists. A phone call to the general HMRC helpline yielded the answer that an organist might be employed or self-employed depending on circumstances. Further probing however yielded a very different answer.

Following an Employment Tribunal decision, wherein an Organist was declared to be an employee, it has been the Law since 2007/8 that he/she should have been put on a payroll and been subject to the usual tax rules. Two further Tribunals have decided in similar manner, that an organist is an employee.

An HMRC Employment Status Officer has advised that Church of England Organists:

  • Are engaged under Canon Law (which is correct);
  • Play what the Incumbent authorises (according to that Law);
  • Cannot substitute anyone else without the Incumbent’s express permission;
  • Any substitute would be under his (the Organist’s) control (another employee) otherwise the Organist could not determine the substitution;
  • Must play the required music on set days and at set times determined by the Incumbent;
  • Does not provide his own “tools”, i.e. the organ;
  • Have full employment rights under EU Law.

This is a very specific example that illustrates the need to check employment status carefully.

Deadline to register for self assessment tax return is 5th October

You may never have worried about filling in a tax return before now. Unfortunately you could be in for a shock and a penalty if you fail to register a new source of income for the tax year ending April 2013. You have until October 5th to register any change in circumstances with HMRC. This is particularly likely to affect those employees with earnings over £50,000 still claiming child benefit.

So who needs to complete a tax return?

You need to complete a self assessment tax return if any of the following apply:

  • You are self-employed
  • You are a company director, unless it is a non-profit organisation and you don’t receive payments or benefits
  • You are a Minister of Religion of any faith
  • You are a Lloyds Name/Member
  • You have annual income over  £100,000
  • You are an employee/pensioner but have other taxable income
  • You are over £10,000 taxed income from savings/investments.
  • You have over £2,500 of untaxed savings/investments.
  • You have over £10,000 of property income before expenses or £2,500 property income after expenses
  • You earn over £50,000 and are still claiming child benefit.

A phone call to the HMRC self assessment helpline on 0300 200 3310 will enable you to beat the deadline and register for a tax return for your income source. But allow yourself plenty of time for the call. My phone call this morning to register for a tax return took 25 minutes to be connected to an HM Revenue & Customs Officer.

Helen Alexander ACMA

Good News for Churches!

The Government has announced an extension to the Listed Places of Worship Scheme which will take effect from 1 October 2013.

The Listed Places of Worship Scheme makes a grant available towards the cost of the VAT on building work for listed places of worship.

More churches will be eligible to claim from 1 October 2013 when works to pipe organs, bells and bell ropes, and turret clocks may be included for claims under the scheme. Just as importantly professional fees will also become eligible when directly related to eligible building work. This reverses a previous change which forced local communities to find the additional cost of VAT on services such as architect’s fees.

In addition to these changes to the scope administrative changes should simplify the claim procedure. This will allow applicants to make one claim every 12 months for eligible invoices totaling between £500 and £1,000. This is in addition to an unlimited number of claims for work of £1,000 or more. There will no longer be a requirement to send the original invoices, and weekly payment runs will help to ease the cash flow for cash-strapped communities.

These very welcome changes show that the Government has listened to the concerns of communities struggling to maintain listed buildings for the benefit of the nation from the donations of individual households.  The fixed budget for this grant scheme was increased in 2012-13 to £42 million with the intention of eliminating the lottery of the previous year where churches had to submit claims with the hope of reclaiming all of the eligible VAT only to find that they received less than 50% when the number of claims in the quarter went over the budget available. It is no surprise that taxes raised by stealth on charitable donations are unpopular.

Helen Alexander

Millbrook Financial Management

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