Are you ready for the OTS to check your employment status?
Contractor Weekly reported on th 29th July 2014…
As part of the ongoing mission to create a simpler and fairer tax system the Office of Tax Simplification (OTS) has been tasked with carrying out reviews of employment status and also tax penalties, with a view to producing a report in time for next year’s Budget.
According to the OTS, the boundary between employment and self-employment no longer reflects modern working patterns, particularly in recent years. Many people have multiple jobs and can be classed as employed in one whilst self-employed in another. The rise of the freelancing business model has also caused some to suggest this is a ‘third way’ between employment and self-employment.
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
It will be interesting to see the report that the Office of Tax Simplification (OTS) produce, especially if they find a ‘third way’
steve@bicknells.net
Would you borrow from PayPal?
The PayPal Working Capital fund will be trialled in the UK this autumn, with a more extensive rollout scheduled for 2015. Merchants (including eBay sellers) will be able to repay their advance with a share of their PayPal sales via card payments.
PayPal Working Capital is a loan of a fixed amount, with a single fixed fee. There are no due dates, minimum monthly payments, periodic interest charges, late fees, pre-payment fees, penalty fees, or any other fees. When you apply, simply select the amount you want — up to the maximum you qualify for. You choose the percentage of your sales that will be deducted from your PayPal account. (Deductions are made the day following each day of sales.) You’ll pay this percentage of your sales until your balance is repaid in full. You only make payments when you get paid.
PayPal Working Capital state that Working Capital offers major advantages compared with traditional ways of funding a business:
• Funding in minutes – PayPal’s strong relationship with its business customers means we can approve an advance based on their PayPal sales history. This means the customer completes a quick online application – there’s no need to spend hours gathering information about their business. And PayPal can make a decision and provide the funds in minutes.
• Pay when you get paid – Unlike traditional bank loans, PayPal Working Capital allows a business to repay the advance with a share of their PayPal sales. If they have a day without any PayPal sales that’s fine – they don’t repay anything that day.
• No credit check – PayPal Working Capital is a merchant cash advance against future sales – it’s not a loan – so no credit checks are needed and the advance does not impact on the customer’s business or personal credit record. There is a single, fixed fee that is displayed to the customer before they sign up. There are no interest charges or late payment fees.
Is this something your business will be able to use? or want to use?
steve@bicknells.net
How do you prove ‘No Private Use’ of a company car?
I spotted this case on the HMRC website the other day…
Elm Milk Ltd 2006 STC 792
A business bought a car for its managing director. It recorded a resolution that the car was for business use only. The managing director had another car that was used for private journeys.
The Court held that there was no reason why a car could not be made unavailable for private use by suitable contractual restraints, and that a company could enter into a binding employment contract with its sole director. Therefore, on the facts of the case, the car was available for business use only and input tax could be reclaimed.
The court held that HMRC had given too much weight to the physical constraints and insurance and should have focused on contractual constraints, the employment contract and board minutes.
The following case is also very interesting…
The ‘Shaw’ case
In the Shaw case the taxpayer bought two BMW X5 vehicles together, one for use in his farm business, the other for use privately. Mr Shaw also owned two other cars privately as well. HMRC [again] argued the case based on the social and domestic cover on the insurance policy, but Mr Shaw rebutted this by showing how the insurance policy for his combine harvester had ‘social, domestic and pleasure’ cover too! He added that the premiums for both the X5s and the harvester were lower as a result.
If there is No Private Use then there is no benefit in kind and no fuel scale charges.
So what should you do to prove there is no private use:
- Keep the car on the company’s business premises
- Keep the keys at the company’s business premises
- Prepare a Board Minute
- Makesure your contract of employment bans private use
- Keep a mileage log
- Insure the car principally for business use
Unlike Pool Cars you don’t have to prove it was available to other employees
steve@bicknells.net
Doctor, Doctor, I think you should be an Employee
A report in the Telegraph on the 14th July 2014…
Dozens of NHS executives face possible investigation by HM Revenue and Customs after they refused to answer questions about their tax arrangements, it can be revealed.
An investigation has identified 86 senior health service officials paid off-payroll who have refused to give assurances to their employers that they are paying the correct level of income tax and national insurance.
They are paid through service companies – arrangements that allow public sector employees to be paid as contractors through private companies, potentially cutting their tax bills.
Monitor found 30 foundation trusts had issues to resolve in their report of the 10th July 2014:
- 20 foundation trusts have 1 or more senior employees paid through an off-payroll arrangement, and they are waiting for responses after asking those employees for assurance about their tax arrangements
- 23 foundation trusts (including some of the 20 above) still have at least 1 board member or senior member of staff with significant financial responsibility employed through an off-payroll arrangement
- of these 23 trusts, 9 are facing wider issues relating to their performance which they have explained is affecting their ability to recruit and retain permanent skilled staff; this resulted in the need to use interim off-payroll contracts to attract high-performing staff to help improve the foundation trust’s situation
- as a result of their performance issues, these 9 trusts are facing current enforcement action by Monitor, which is unrelated to their use of off-payroll employment
- out of those 23 trusts, the other 14 which are not facing enforcement action have plans to end off-payroll arrangements by the end of the year
Will this end the use of PSC’s in the NHS?
steve@bicknells.net
Minding your Ps and Qs
Running your own business can be the biggest thrill you will achieve in your working life, or the most stressful and demoralising experience you can imagine. On some days it is both!
However, I have come to realise from my own experience, from talking to business owners, and from gurus such as Ron Baker, Peter Thompson and Steven Covey, that running a successful business is all about minding your Ps and Qs.
Given the stresses involved in running your own business it is vital you are passionate about your product or service. Let’s face it, it is much easier to engage with potential customers if you can show passion for what you do.
Once you know what you want to do, you need to have a robust plan. We business owners are often knowledgeable about our product or service but avoid those business areas we struggle with – often marketing, sales or finance. The process of creating a business plan forces us to review ALL the areas of our business which are crucial to our future success.
We need to present ourselves to the market. If, like me you run a service lead business, one of the best ways to do this is to network. People buy from people they trust so you need to be out there meeting, and getting to know, local business owners.
Consulting professionals to help in areas you are not expert in is wise. Very few of us are instinctive business people and there will be one or two areas we struggle with. Interesting it is often more cost effective to get an expert in to do an efficient job than to try and do it ourselves.
To me a key element of a quality service is communication – this means listening and responding to clients’ concerns. Even if you sell a product there is a service element to what you do and this will be your contact with your customer.
Effective communication will allow you to qualify a potential client’s needs and what they particularly value. Having established value it should be fairly easy to give them a price.
To close, your business will not be measured by the outside world on what it is but on what people perceive it to be. So keep your ear to the ground and ensure peoples’ perception matches your reality.
Fiona 🙂
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.
What are Directors Emoluments?
The reporting requirements are set out in The Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, obviously emoluments include:
- Salary
- Bonuses
- Compensation for Loss of Office
- Benefits
- Share Options
- Long Term incentives
- Pensions
But it can also include payments made via other companies for ‘Qualifying Services’, these are payments paid in relation to the Directors services as a Director of the reporting company (Section 8, Part4, Paragraph 17).
In many cases this could be obvious for example if the Director used a Personal Service Company (PSC) or if the director invoices the company for management services or for management charges. But often invoices relate to the supply of products and services which don’t fall within qualifying services.
Its worth noting that unquoted companies with less than £200k for Directors Emoluments are not required to report details of the highest paid director.
Its also worth remembering that any related party transactions should be fully disclosed in the related party note, so is further clarification of what should be emoluments needed?
steve@bicknells.net
You could employ your spouse to help you do your job
Many micro business owners employ their spouse and as long as they perform a role in the business that’s fine and it can be very tax efficient.
But there are circumstances in larger businesses with several owners/directors where it isn’t practical to directly employ your spouse.
However, it could be possible to claim an expense for using your spouse as an assistant, take a look at EIM32415
A deduction can be given in the following circumstances:
- where the employee is paid solely by results so that, in taking on assistance, the employee can maximise his or her earnings from the employment.
- where it is actually part of the duties of the employment to engage and remunerate assistants to do some of the work.
So it may be possible to amend your employment contract to identify parts of your job that could be done by someone else and you could add a clause which says that you must ensure the work specified is done and that its your duty to employ an assistant to do it.
The duties could be anything – Admin, Secretarial, Market Research, Telesales…..
Depending on how much you pay your assistant you may need to account for PAYE and NI.
steve@bicknells.net
Automatic enrolment: large employers are all in
The Pension Regulator’s latest post…..
Our report on the impact of automatic enrolment reveals that 99% of all the UK’s largest employers met their legal duties without the need for us to use our statutory powers.
This is encouraging news as thousands of medium employers are currently reaching their staging dates. We will continue to work over the months ahead to ensure that medium and small employers understand their obligations, comply with their legal duties and continue to view non-compliance by other employers as unacceptable
Are you ready for Auto Enrolment?
steve@bicknells.net
Is there any point in DOTAS if the tax will be paid upfront?
The Finance (No2) Bill 2014, which is due to receive Royal Assent in July, contains legislation which will enable HMRC to demand payment upfront of disputed tax in certain cases, principally involving tax avoidance or deferral. It is estimated that up to 43,000 taxpayers could receive such a demand. Those demands will be issued over an extended period but the first are likely to be issued as early as September 2014.
Taxpayers who have sought tax advantages through tax avoidance schemes that fall within the Disclosure of Tax Avoidance Schemes (DOTAS) are likely to be most affected.
Here is a link to the SRNs (Scheme Reference Numbers) affected – click here
Over the next 2 years HMRC estimates that it will rake in £7 billion through the use of these notices. Of this £7 billion, individuals will weigh in with £5.1 billion. This would equate to each person having a gross income of £262,000.
Last week the Financial Times reported that Ingenious Media, an investment company, warned 1,300 of its investors, including business leaders, entertainers and sporting celebrities, such as David Beckham, to expect substantial tax bills with interest, as reward for using its tax avoidance scheme. (Contractor Weekly)
This is a radical change and many might say its been a long time coming.
It has always struck me as slightly bizarre the DOTAS were registered and allowed to exist.
steve@bicknells.net
Business Accountant 