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Do you use the Employment Status Tool?
Determining whether a worker is Employed or Self Employed isn’t always easy.
HMRC updated and improved their tool in April 2015.
The Employment Status Indicator (ESI) tool enables you to check the employment status of an individual or group of workers – that is whether they are employed or self-employed for tax, National Insurance contributions (NICs) or VAT purposes.
The ESI tool is essential for anyone who takes on workers, such as employers and contractors. (The tool refers to anyone in this position as an engager.) Individual workers can also use the tool to check their own employment status.
The tool cannot, however, be used to check the employment status of certain workers:
- company directors or other individuals who hold office
- agency workers
- anyone providing services through an intermediary (sometimes referred to as IR35 arrangements)
The ESI tool is completely anonymous, so no personal details about the worker or engager are requested.
Click here to use the HMRC Tool
steve@bicknells.net
#isitok – to just be a really good management accountant?
I never really knew what I wanted to do for a living, just that I was good at maths, economics & geography which pointed towards some form of business occupation. I did a degree in Accounting & Financial Analysis at Warwick Business School, without truly knowing what accounting was. After graduating I just did some temp work in an accounts office (they hired me full time within a few days) before a recruiter sat me down one day and said I needed to get my act together and get qualified if I wanted a proper career. It didn’t need much research to work out CIMA was the route to go. Following this route enabled me to become a Chief Accountant, Financial Controller then Financial Director within a fairly short space of time. All of this was in the small company environment and I was involved in every key decision, which was fascinating and rewarding! But the politics were rife and the hours were long!
The question – How can I do all the fun stuff, the analysis/reporting/decision support/director mentoring without selling my soul to the business? My answer was to go freelance and try and emulate what I had done before but across a number of businesses in different sectors. This just reinforced what I’d previously thought – I had found my vocation in life – working with owner managers or MD’s of smaller companies, understanding their aspirations, delving into the businesses, providing the right information, making a difference, adding value, finding solutions to problems, evaluating everything for them – but not taking it home every day.
During all of this I entered into the CIMA Members in Practice world, a place full of very successful people, a mix of high flying entrepreneurs, some more traditional accounting practices offering compliance as a lead service, some specialist consultants, but as far as I could see not so many freelancers like myself. At the annual conferences in the midst of all these success stories I’ve quite often sat back and thought ‘Am I doing something wrong?’ My worry was that I had no desire to build an ever expanding business, I had no appetite for compliance work, I didn’t possess a specialism where I would stand out from the crowd and I didn’t feel I needed the best looking website or my own app (or certainly couldn’t afford it). On reflection, the last 15 years has confirmed to me I’m not doing anything wrong, it’s actually ok to focus on what you feel you’re really good at.
#isitok – to just be a really good management accountant? – I think it is.
Cheers
Mark
www.avalon-ma.com
Mark Tomsett, Avalon Management Accounting Limited
Celebrating 15 years as a Freelance Management Accountant
Weekly Work Life Balance Formula
It just occurred to me the other day that I think I’ve found a good work-life balance. Being a freelance management accountant gives you freedom to work from home and plan your own day but you also need to engage with people at your customer sites to stay in tune with how businesses thrive and survive. You also need to have some flex for the urgent customer requests, keep your education on track, fit in your business admin and plan some midday slots down the gym (it’s less busy and there are less biceps and six packs to be compared to).
Nearly everyone has key elements to their job that if balanced well could make for a better work life.
So I’ve created a formula for my ideal work life balance as a planning tool for my own work;
My Weekly Work Life Balance Formula is:
WWLB = 2.5C + 1.5H + 0.25A + 0.25E + 0.5F
© 2015 Avalon Management Accounting Limited
C = Day working at Customer Site
H = Day working at Home
A = Day of Business Admin
E = Day of Education
F = Day of Flex (for anything unplanned – if not required
for work use for Marketing)
This formula can be applied in any order during the week and the days at home, on admin and education can be partly early morning or in the evening to allow extra social time during the usual “9-5” working day.
Have a think about your ideal formula.
Cheers
Mark
http://www.avalon-ma.com
Mark Tomsett, Avalon Management Accounting Limited
Celebrating 15 years as a Freelance Management Accountant
VAT for sole trader start-ups
How to maximise your VAT reclaim
Plan ahead and reclaim everything
If you are setting up a business and can ahead, you can register for VAT from the date your business will start. For most traders there is not any restriction on the date the business can start, but for some professional services eg barristers and advocates, no trade exists until they qualify. To maximise the VAT to be reclaimed, the sole trader can register for VAT in advance of date of commencement, effective the date they are due to qualify. This means that the VAT registration will be in place from the 1st day of trading and all sales invoices can be issued as VAT invoices.
Pre-registration VAT
There are specific rules allowing pre-registration VAT to be reclaimed, but any claims to recover pre-registration VAT must relate to the same trade and made by the same person. A sole trader who incorporates the business is not the same legal person as the new company. Any VAT suffered by the (unregistered) sole trader can’t be claimed as pre-registration VAT by the new company.
Get help with registering
Your accountant will be able to register you for VAT and recommend the best scheme for you. It can take a few weeks for HMRC to process applications, but accountants who are registered as agents with HMRC are likely to have a quicker turnaround time. For advice on registering for VAT and setting up your invoices, please visit the Alterledger website.
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New reporting requirements for intermediaries
An intermediary is any person who makes arrangements for an individual to work for a third party or be paid for work done for a third party. An employment intermediary is also commonly referred to as an agency.
From 6 April 2015, intermediaries must return details of all workers they place with clients where they don’t operate Pay As You Earn (PAYE) on the workers’ payments. The return will be a report (or reports) that must be sent to HM Revenue and Customs (HMRC) once every 3 months.
Agencies will be required to let HMRC know the following details:
- Contractor’s name, address, date of birth, etc.
- PAYE reference.
- National Insurance number.
- How the contractor was engaged during the period (i.e. was he working via a limited company).
- The duration of each assignment.
- Details of the contractor’s limited company (e.g. company registered number).
- How much was paid to the contractor.
The regulations will give HMRC information that will enable it to decrease false self-employment and abuse of offshore working. This will help HMRC to:
- support intermediaries that comply
- penalise intermediaries that don’t comply
- make sure the right tax and National Insurance is paid by people working through intermediaries
- reduce unfair commercial advantage
Here is link to the full reporting requirements – Legislation Link
This is the link to consultation – Consultation
steve@bicknells.net
Say goodbye to small earnings
Say hello to small profits
HMRC has changed the name of the threshold for paying Class 2 National Insurance from the Small Earnings Limit to the Small Profits Threshold. If you earn less than £5,965 in 2015-16 you won’t need to pay Class 2 NI, but if you do, it will be calculated as part of your 2015-16 tax return and due with the rest of your tax by 31st January 2017.
English: British National Insurance stamp. (Photo credit: Wikipedia)
Alterledger can help
For more information on filling in your tax return, contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and cut your tax bill.
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Sole Traders lose Goodwill Tax Relief
Since 6th April 2008 and until 3rd December 2014 Sole Traders and Parternships were able to claim Entrepreneurs Tax Relief on Goodwill when becoming a Limited Company.
Until the 3rd December 2014 they would claim there Capital Gains Allowance
| Period | Tax-free allowance |
|---|---|
| 5 April 2013 to 6 April 2014 | £10,900 |
| 5 April 2014 to 6 April 2015 | £11,000 |
Then claim ER which reduced the rate of tax to 10% on the gain.
But from the 3rd December they will now pay Capital Gains at the normal rates of CGT which are 18% or 28% (for Higher Rate Income Tax Payers).
This doesn’t change the potential ability of the company to offset goodwill against their Corporation Tax Return.
There are still other benefits related to goodwill as explained in this blog
The tax benefits of goodwill on incorporation?
steve@bicknells.net
Self Employed National Insurance
Changes to payment of National Insurance
HMRC has announced changes to the way that the self-employed will pay their Class 2 and Class 4 National Insurance Contributions (NIC). This is not the first time the process has changed. Some people still refer to paying their stamp – in days of old you had to buy special stamps for your NIC!
English: British National Insurance stamp. (Photo credit: Wikipedia)
No new direct debits
Until recently I would have encouraged the self-employed to set up a Direct Debit Instruction (DDI) with HMRC to pay their Class 2 NIC. From April 2015 HMRC will calculate the NIC due from your self-assessment tax return.
Deferment of National Insurance Contributions
If you currently defer NIC, you don’t need to re-apply to do so. HMRC will be sending out letters in December to everyone who currently defers NIC to confirm this. Any new applications to defer NIC will not be processed. For more information on National Insurance for the Self Employed please go to my blog post here: Class 2 NIC.
Alterledger can help
For more information on filling in your tax return, contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and cut your tax bill.
Related articles
Musicians tax breaks
Will Scottish entertainers make more money with proposed musicians tax breaks?
One of the consequences of the Scottish Independence Referendum is a “Command Paper” to be produced by Lord Smith of Kelvin and the Scottish Devolution Commission. Among the proposals being put to the commission is copying an idea from Ireland to give artists and musicians tax breaks.
Special treatment for artists
The Republic of Ireland has given artists a tax exemption since 1969 which means the profits from the sale of works do not attract income tax up to a maximum of €40,000, or £31,500. Everyone agrees that the tax system should be simplified – except of course if it the complication benefits you. Is this a valid sign of support for artists or will everyone want “special treatment”?
Alterledger can help
Why wait for the law to favour your industry? Contact Alterledger or visit the website alterledger.com to see if you can organise yourself better and claim more expenses to cut your tax bill.
What are the differences between employees and contractors?
According to figures released by the Office for National Statistics last week, self-employment is at its highest level since records began almost 40 years ago.
There are currently 4.6 million people self-employed, with the proportion of the total workforce that are making a living for themselves sitting at 15%, compared to 13% in 2008 and less than 10% in 1975.
As highlighted by Everreach and the Daily Mail.
A worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice. Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.
Many workers want to be self-employed because they will pay less tax, this calculator gives you a quick comparison between being employed, self employed or taking dividends in a limited company.
HMRC have a an employment status tool to help you determine whether a worker can be self-employed or should be an employee http://www.hmrc.gov.uk/calcs/esi.htm
steve@bicknells.net
Business Accountant 