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The Yacht that wasn’t a benefit in kind
This is the case of Gillian Rockall v HMRC (2014) HKFTT 643.
Mr Michael & Mrs Gillian Rockall were involved in running a hotel and conference centre and providing high-end residential courses, amongst the companies assets was a 140 foot ocean-going yacht costing $11.9 million called Masquerade of Sole.
HMRC issued assessments on Mr & Mrs Rockall for the tax years 2000-2001 to 2008-2009 on the basis of personal use (benefit is normally assessed as 20% of the market value).
The Yacht was used for:
- Business Networking
- Customer Training
- Exploring Business Opportunities in the Caribbean and Mediterranean
- Friends and Acquaintances were taken on occassional trips to provide a opinion on opportunities
The Yacht was also placed with an agent for charter when not required for the purposes above.
The First-Tier Tribunal took the view that the use of the Yacht was only for Business and not for private purposes.
However under S203 ITEPA 2003 a benefit in kind would arise because the asset was at the disposal of the employees.
The Rockalls appealed to the First-Tier Tax Tribunal, on the grounds that the use of the yacht was tax-deductible under s365 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). This requires that the item comprising the benefit in kind was used ‘wholly, exclusively and necessarily in the performance of the duties of the employment’.
The tribunal has now ruled that the yacht was bought and operated purely for business purposes and thus was fully tax-deductible for both the Rockalls.
– See more at: http://www.step.org/yacht-used-impress-customers-were-legitimate-expense#sthash.dNRhVYmG.dpuf
Gulzari Babber (CIMA Past President) becomes Hon. Chairman AUKA
We are delighted to announce the appointment of Gulzari Babber as our new Honorary Chairman. Gulzari was the President of the Chartered Institute of Management Accountants in 2013. He has been a member in practice for 30 years and his practice is Gulzari Babber & Co Chartered Management Accountants based in Harrow.
Commenting on Gulzari’s appointment, Steve Bicknell, our Business Development Director stated: “We are delighted to welcome Gulzari to the board, he will help the Association to raise its profile and build closer links with the Institute. We are enthusiastic about working with him and benefiting from his experience and skills in developing the Association for the benefit of CIMA Members in Practice.”
Gulzari is equally positive about joining the board. “I am impressed with the work done by the Association and how they have managed to create strategic partnerships, whilst the Association is still in the early stages I am sure the hard work being put in will soon start to show results and would encourage all MiPs to support and join the Association,” he said. “The Association is focused on helping members participate in business opportunities, it’s democratic and all MiPs are welcome to become shareholders and it’s a not for profit organisation so the benefits flow directly to the members”
Press Release Monday 9th February 2015
Common Auto Enrolment mistakes..
The Pensions Regulator (TPR) has recently highlight the following problem areas:
- Employer forgeting to do the declaration of compliance within 5 months of staging, many employers wrongly assumed that registering on the Government Gateway was enough.
- Confusion caused by running multiple payrolls for the same employer for example weekly and monthly
- Completing the declaration of compliance but without choosing a pension provider
- Omitting self employed workers who have a contract to provide work personally
steve@bicknells.net
How do you create a Tronc?
Typically, an employee is appointed to administer the tronc and is usually referred to as the troncmaster. HMRC does not prescribe who the troncmaster should be.
Frank owns a pub and restaurant. Tips paid by cheque, debit and credit card are all passed to Sharon, the troncmaster, who has been appointed by Frank. Sharon operates PAYE on the tips that she distributes. A staff committee decides on the allocation and Frank has nothing to do with this.
Even though Frank has appointed Sharon as troncmaster he has played no part, directly or indirectly, in the allocation of the tips because he is not involved in determining who should receive tips and how much each employee should receive. In these circumstances, no NICs will be due on the tips received by the tronc members. Example from NIM02942
Y0u may also find my blog helpful
How Troncmasters can keep your tips NI and VAT Free
The Income Tax (Pay As You Earn) Regulations 2003 require an employer to
- Notify HMRC of the existence of a tronc created on or after 6 April 2004
And
- Give the troncmaster’s name (if known)
When you are notified of a tronc you should
- Confirm that there is an organised arrangement for sharing tips and determine
- How the tronc receives monies (for example employees paying in cash tips or an employer paying in credit card tips)
- Who holds the tronc monies and how (for example, is there a tronc bank account and if so who operates it?)
- On what basis are distributions made from the tronc and who decides that basis
- Which employees are tronc members
- Whether the person said to be the troncmaster accepts and understands the role (including the obligation to operate PAYE)
If you are satisfied that there is a tronc for PAYE purposes (bear in mind that a business could have more than one tronc, for example a hotel could have separate troncs for restaurant staff and housekeeping staff and each should be dealt with separately)
- Arrange for a PAYE scheme to be set up in the name of the troncmaster. Further information can be found in PAYE20160
steve@bicknells.net
HMRC Solicitors Campaign – do you have anything to declare?
You can tell HM Revenue and Customs (HMRC) about any income you haven’t declared (this is known as ‘voluntary disclosure’).
The Solicitors Tax Campaign gives you the chance to do this if you work within the legal profession as a solicitor in a partnership or company, or as an individual.
How to tell HMRC about undeclared income
- Fill in a notification form by 9 March 2015.
- Fill in a disclosure form and pay what you owe by 9 June 2015.
Use the calculator to help work out what you owe. Only use the calculator if both of the following apply:
- your tax affairs are straightforward
- you’re entitled to only basic personal allowances
There’s a different calculator if you need to tell HMRC about more than 5 years of unpaid tax.
Call the helpline before 9 June 2015 if you need more time to pay.
Help and advice
You can read more about how to make your voluntary disclosure.
Call the Solicitors Tax Campaign helpline if you need more help.
Solicitors Tax Campaign helpline
Telephone: 0300 013 4749
From outside the UK: +44 300 013 4749
Monday to Friday, 8am to 8pm
https://www.gov.uk/solicitors-tax-campaign
steve@bicknells.net
Taxman reveals top 10 terrible tax excuses
Last years excuses used in unsuccessful appeals against HMRC penalties for late filing and payment. Here’s the full list:
- My pet dog ate my tax return…and all the reminders.
- I was up a mountain in Wales, and couldn’t find a postbox or get an internet signal.
- I fell in with the wrong crowd.
- I’ve been travelling the world, trying to escape from a foreign intelligence agency.
- Barack Obama is in charge of my finances.
- I’ve been busy looking after a flock of escaped parrots and some fox cubs.
- A work colleague borrowed my tax return, to photocopy it, and didn’t give it back.
- I live in a camper van in a supermarket car park.
- My girlfriend’s pregnant.
- I was in Australia.
https://www.gov.uk/government/news/taxman-reveals-top-10-terrible-tax-excuses
The previous year, the following bizarre, exotic and flimsy excuses have all been used by tardy taxpayers:
- My pet goldfish died (self-employed builder)
- I had a run-in with a cow (Midlands farmer)
- After seeing a volcanic eruption on the news, I couldn’t concentrate on anything else (London woman)
- My wife won’t give me my mail (self-employed trader)
- My husband told me the deadline was 31 March, and I believed him (Leicester hairdresser)
- I’ve been far too busy touring the country with my one-man play (Coventry writer)
- My bad back means I can’t go upstairs. That’s where my tax return is (a working taxi driver)
- I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land (South East man)
- Our business doesn’t really do anything (Kent financial services firm)
- I’ve been too busy submitting my clients’ tax returns (London accountant)
All of these people and businesses received a £100 penalty from HM Revenue and Customs (HMRC) for filing late. They appealed against the decision using these excuses, but were unsuccessful.
https://www.gov.uk/government/news/revenue-reveals-top-10-oddest-excuses-for-late-tax-returns
Don’t be late get your return done!
steve@bicknells.net
Why working with accounting is about to get so much better
Anyone who works with businesses is fully aware of how important accounting is for the success of a company. Yet many business owners have a negative attitude towards accounting. A high percentage of entrepreneurs see accounting as a necessary evil and often a hindrance to starting a new company.
How is that possible? Wasn’t accounting invented to help companies manage their business?
The IT industry has brought us computers and the ability to create software to automate bookkeeping. While there is no doubt that accounting software has been a great help, when we look at the usage of it, something is wrong. More than half of the businesses in the UK keep track of their finances by using a combination of spreadsheets and word processors rather than using accounting software. In an age where computing power is ubiquitous and virtually never too far from our pocket, we should be able to do better than this.
In 2013, international accounting software provider e-conomic was considering what its next generation accounting software should look like. And decided to take a different approach. What would happen if we created a piece of accounting software for people who had no knowledge of accounting? And what if we made the basic functions free for people to use? We hoped that it would make accounting approachable by virtually anybody.
That’s how the Debitoor invoicing and accounting software was born.
Introducing simple accounting to the world
Today, more than 33,000 people in the UK and almost 300,000 people worldwide have signed up for Debitoor and have given us the privilege of approaching accounting in a different way. Debitoor is used in more than 30 countries, from the UK to South Africa, from Colombia to Australia and New Zealand.
Debitoor is an accounting package for very small businesses. It allows them to manage their customers, create quotes and invoices. It allows them to register their purchases, deal with bank and payments and helps them report their VAT directly to HMRC at the click of a button. Debitoor helps those small companies manage their assets and keep track of what’s on their balance sheet in a very simple manner. Finally, Debitoor helps business owners collaborate with their accountants by allowing them to share their data with them.
Debitoor’s mission is to make accounting cool to work with. Two years after we started, the typical reaction we get from accountants is: “Wow, convincing my clients to use this is going to be super easy!”. We have captured the essence of Debitoor in this video.
Letting users shape accounting software
But what have we done to make this possible? The most important ingredient has been a clear focus. Our mission has always been to make accounting easy for small business owners who know very little about accounting.
Here are some of the key principles we followed to build the Debitoor invoicing and accounting software:
– Approachable: We have removed any obstacles to getting started. There is no setup needed, we do not ask questions, users can start on the free package, the program is ready to go.
– Natural: We have eliminated all technical lingo. You will not find the words “debit” and “credit” in Debitoor. The workflows in the program follow the natural flows of a user with no accounting knowledge and the program uses the typical words he’d use.
– Forgiving: People make mistakes; and accounting systems typically make it quite complicated to correct mistakes. In Debitoor, actions can be undone and mistakes can easily be corrected.
– Instructive: We assume people do not know much about accounting, so we have structured the entire program to let users learn along the way. This is not just functionality but it encompasses the entire packaging of the product.
– User-driven: In an open forum, users can give their feedback and suggest new features, vote for their own or others’ suggestions and influence the further development of the software. This transparency is super important for us to develop a truly user-driven program.
– Collaborative: Most of our users share their data with their accountants in order to get help with taxes, reporting and ensuring quality.
We also had the privilege of building the product with the technology which was available in 2013. This has huge benefits for our users because it allows us to provide them with a service which is reliable, improving at a fast pace and very secure. Having a modern architecture also ensures that Debitoor is very easy to connect to other popular cloud services.
Debitoor’s user base is very diverse as its appeal is quite broad. Many of our users are freelancers, artists, consultants, designers or other creative people, but we have also small artisans and shop keepers or owners of clinics and small distributors. They all have missions and purposes in their lives and we try to help them with their accounting.
Check out the stories of Felicia Matheson from Prohibition Drinks in Newscastle, Northern Ireland and the story of Esther from The Roasting Shed in London.
Changing how an industry works
As with any change in technology, this brings great opportunities to the industry it affects. The introduction of new technology, however, takes a bit of time to mature. When television started to gain mass adoption in the 1950s, broadcasters used it as it was radio. The first shows had older men with glasses reading papers in front of a microphone. This was how it used to be with radio programs.
The availability of cloud software has created a set of providers who simply made traditional accounting software available on the internet. This, we believe, will change and we will see more and more software which is transformational in nature. That is what we are trying to do with Debitoor.
We are only at the beginning of this journey. The roadmap for Debitoor will focus on three main aspects:
1. Continue to add simple flows to support what today are very difficult accounting scenarios
2. Introduce more and more automation and intelligence to enable our users to do more with less knowledge
3. Strengthen the collaboration between users and their accountants by facilitating the sharing of data between them.
What will this mean for accountants and the accounting industry? This is what our users are telling us: They love doing their invoices and keeping track of their costs in Debitoor. It gives the nice feeling of being in control, it keeps them organized and allows them to focus on their business going forward.
At the same time, they also tell us that they need help from their accountants. They need help with taxes, they need help with reporting to authorities and a lot of them need a quality check from the experts. In addition, most of them need legal and financial advice on ad hoc issues they encounter in their life as entrepreneurs.
The biggest change for accountants is to be prepared to embrace the possibilities that technology gives us. Things like cloud storage and online applications will substitute manual processes, paper and data disks. Everything is now available via a web browser on your computer or on your phone.
In order to be successful, accountants will have focus on services that draw on their knowledge and experience and they will need to be prepared to serve their customers as they move towards those new technologies.
Increased access will not be limited to technology but also to services. This will also mean increased competition. The best thing an accountant can do is embrace change and be ahead of the curve, start small but start early. The customers are already going there.
Will your tax return stand up to HMRC Profit Benchmarking?
HMRC have been doing lots of research on SME businesses, the most interesting areas of research are:
Understanding Small and Medium Enterprise (SME) business life events – SME Customer Journey Mapping
Research was carried out to understand:
- the key life events and activities that SMEs experience
- how these relate to tax
- what opportunities there are for the improvement of HM Revenue and Customs (HMRC) services by more closely aligning them to business lifecycles
The Transparent Benchmarking Team Statement (November 2014)
HMRC is conducting a number of pilots, focussed on SME customers, designed to explore the effectiveness of publishing benchmarks on aiding greater voluntary compliance.
Following the first pilot (benchmark net profit ratios for Painters and Decorators, and Driving Instructors) in March 2014, HMRC will run two more in the autumn. One of these will focus on self-employed taxi drivers and pharmacists, where HMRC will be writing to around 2,500 agents that have a number of clients in the target sectors. The idea is to test whether publishing benchmarks through an agent is more effective than writing to a customer directly. Letters will also be sent to a sample of represented and unrepresented customers within the selected sectors to form control groups for evaluation purposes. All represented individuals and businesses written to directly will be informed that their agent has not received a copy of the letter.
The benchmark for both sectors is the net profit ratio. Because this is a controlled pilot exercise, not all agents or businesses within the relevant sectors will be receiving a letter. (source CIOT)
The Benchmarks we know so far are:
- Painters & Decorators range from 59% to 79%
- Driving Instructors 31% to 67%
So the range of profits are big!
We await the ranges for Taxi Drivers and Pharmacists.
If your profit doesn’t fit then you need to know why.
Do not ignore the letter because HMRC are likely to follow it up and assume you are deliberately trying to avoid tax!
You may have some valid reasons for not fitting the benchmark and you must explain those reasons to HMRC.
A deliberate error will results in a higher penalty (up 100% of the tax) but can also open the door to HMRC going back over up to 20 years of your accounts!
The letters refer to common mistakes in:
- Travel Expenses
- Telephone Costs
- Utility and insurance charges
- Professional Fees
- Capital Expenditure
You may find these blogs helpful
HMRC also have some useful toolkits/checklists…..
Private and Personal Expenditure Toolkit
steve@bicknells.net
What if you can’t complete your Self Assessment Tax Return?
11.2 million people will be required to complete a Self Assessment Return for 2013/14 and the deadline is the 31st January 2015.
The most common things you will need to know are:
- Employment Income – P60 and P11D
- Pension Contributions – statement from provider
- Donations to Charity
- Bank and Building Society Interest
- Dividends
- Buy to Let Investments, Holiday Lets and Second Homes
- Other Income
- Employment Expenses not paid by your employer including mileage to approved rates and clothing
- Professional Memberships related to your job and on HMRC List 3
- Home Office Expenses
What can you do if despite your best efforts you can’t find or get hold of the information you need?
Returns which include provisional or estimated figures should be accepted provided they can be regarded as satisfying the filing requirement.
- A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure
- An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost. The taxpayer is not required to tick box 20 of the Finishing your Tax Return section of the return page TR 6 (or equivalent in a return for an earlier year) where estimated figures have been used
If you make a mistake on your tax return, you’ve normally got 12 months from 31 January after the end of the tax year to correct or amend it. For example, if you send your 2013-14 online tax return by 31 January 2015, you have until 31 January 2016 to amendment it.
If you sent your tax return online by 31 January, it’s easy to amend it online too. You just need to log into your Self Assessment online account, go to the ‘at a glance’ page and choose the option to amend your tax return.
steve@bicknells.net
Top 15 points in the Small Business Bill
The Small Business, Enterprise and Employment Bill is going through parliment now
The Bill will open up new opportunities for small businesses to:
- compete
- get finance to create jobs
- grow
- innovate
- export
Here are my top 15 key points:
- For every piece of legislative brought in two pieces will be removed
- Prompt Payment
- Changes to Childcare Early Years and Child Minder Registrations
- Cheque imaging from smart phones (Presentment of Cheques)
- Banks will share data on Small Businesses with other Lenders
- Invalidating restrictive terms in business contracts to increase access to Invoice Discounting
- Company Transparency – Register of People with Significant Control
- Accelerated Strike Off
- Company filing changes
- Directors Disqualification – tougher rules
- Schools, Colleges, Higher Education to track students into the labour force
- Penalties for employers who fail to pay an Employment Tribunal award
- Penalties for non compliance with National Minimum Wage increased to 100% or upto £20,000
- Improved access to alternative finance
- Streamlined Company Registration
These are major changes that will affect us all!
steve@bicknells.net
Business Accountant 