Late payments clampdown hailed ‘a victory’

Large businesses could be fined for failing to pay smaller suppliers on time as part of a package of welcome measures launched by the government earlier this month.

It means that company boards will be held accountable for their payment practices for first time.

The Small Business Commissioner has been given new powers to tackle late payments – including fines and binding payment plans.

The Prompt Payment Code has also been strengthened and a new fund has been set up to encourage businesses to use technology to simplify invoicing, payment and credit management.

Announcing the moves, Minister for small business Kelly Tolhurst said: “These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment.”

The measures are to be welcomed and some would say long overdue, though it remains to be seen the size of the impact they will actually make.

And once again it is important to stress these measures are looking to tackle a huge problem. Late payments are currently estimated to cost UK SMEs a staggering £6.7billion annually.

Behind that figure are stories of individual businesses put under serious pressure. Small companies are paid late it causes financial hardship and puts a break on growth. For some it can be the tipping point that leads to them going out of business.

The Blackpool-based Federation of Small Businesses (FSB) has welcomed the crackdown on bigger businesses which have poor payment practices towards their smaller suppliers and contractors.

Its national chairman Mike Cherry said: “Late payments and poor practices are a scourge which leads to the closure of 50,000 small businesses a year. The measures will for the first time see the culprits brought to account.

“When small firms are paid late, it causes financial hardship and stifles growth.”

And he added: “By forcing audit committees of big businesses to report payment practices in company annual reports, there will be no more covering-up by those who treat smaller suppliers shabbily.

“Ending late payments and poor practices is not only the right and fair thing to do, it will also spare small firms the financial impact of waiting for the money they’re owed, and instead allow them to invest and grow.”

To discuss any issues raised by this article please contact me on 01772 430 000

Mind the gap

The UK tax gap – the difference between what should be paid and what is actually being received – remains at its lowest for five years, new figures have revealed.

However, the amount of money going into the nation’s coffers is still £33bn shy of what it should be.

Publishing the figures, HMRC says that the roll-out of Making Tax Digital (MTD) for businesses will help to narrow the gap, as companies get things “right first time”.

The gap may still be large but Mel Stride, Financial Secretary to the Treasury, said: “Had the tax gap remained at its 2005/06 level the UK would have lost £71bn in revenue destined for public services, enough to build 200 hospitals.”

The new figures show that, in 2017/18, 94.4 per cent of all tax due was paid. Taxpayer errors and “failure to take reasonable care” made up £9.2bn of the lost cash with “criminal attacks” accounting for £5.4bn.

And the Corporation Tax gap has fallen from 12.5 per cent in 2005/06, to just over eight per cent.

In its statement HMRC said: “The majority of customers want to get their tax right, but today’s figures show that too many are still finding this hard, with avoidable mistakes costing the Exchequer over £9.9 billion a year.

“£3 billion of this is attributable to VAT alone, which underlines the importance of the action HMRC has been taking with Making Tax Digital.

“HMRC launched Making Tax Digital in April this year for VAT-registered businesses, with turnover above the VAT threshold, requiring them to keep digital records and submit their VAT return using compatible software. So far, over 400,000 businesses have joined the service.

“HMRC expects this service to reduce tax lost due to avoidable errors by ensuring businesses make fewer mistakes, thanks to the improved accuracy that digital records provide and the fact that information is sent directly from those records to HMRC, helping to eliminate transposition errors.”

To discuss any issues raised from this article or to talk about any tax issues you face please contact me on 01772 430 000

Construction set for big VAT shake-up

Major changes to the way VAT is collected in the construction industry are set to come into effect from October 1 and they are likely to have a big impact on SMEs in the sector.

They need to act now to ensure their accounting systems and the way that they operate are ready for this latest tax shake-up.

It has been estimated that the new ‘domestic reverse charge’ rules could affect up to 150,000 businesses in the construction and building trade in the UK.

And there are fears that the change could hit the cash flow of sub-contractors in an industry that is already feeling the squeeze when it comes to payments.

Some businesses use the VAT they collect from customers as working capital before they pay it over to the HMRC. They will need to prepare for potential cash flow problems when the new rules come into effect.

It makes it really important that businesses look closely at their supply chain and their customers and determine how the change will affect them, and what they can do to minimise any impact.

The reverse charge will apply throughout the supply chain where payments are required to be reported through the Construction Industry Scheme (CIS).

It is expected that supplies between sub-contractors and main contractors will be most affected by the change.

At present a sub-contractor is responsible for charging and accounting for VAT to the taxman on supplies to main contractors.

Under the new reverse charge rules the main contractor will be responsible for declaring the VAT on supplies received from the sub-contractor.

An equivalent VAT deduction can also be claimed by the main contractor subject to the normal rules of VAT recovery.

The new rules apply only to certain building and construction services and to charges in the supply chain – not to end users.

The reverse charge will exclude businesses that supply specified services to connected parties within a corporate group structure or with a common interest in land. In these circumstances, the taxman says, the supplies in question will then revert to normal VAT accounting rules.

What it does mean is that VAT cash will no longer flow between businesses. For every transaction, the VAT will be registered and clearly stated on the invoice as a reverse charge.

Businesses which receive services from another contractor will need to determine which VAT rate applies and whether the services received will be subject to the charge.

HMRC says that it is introducing the new rules because of growing concern over the amount of “missing trader fraud” taking place.

The fraud involves a supplier issuing a VAT invoice and collecting the tax from their customer before going “missing” – without declaring the VAT to HMRC.

In a statement HMRC said: “VAT fraud in construction sector labour supply chains presents a significant risk to the Exchequer.

“Organised criminal gangs fraudulently take over or create shell companies to steal VAT whilst operating alongside actual construction services.”

To discuss how the construction industry domestic reverse charge for VAT could affect your business, or to talk about any aspect of VAT, please contact me on 01772 430000.

The green route to growth

As businesses grow and enter new supply chains it is becoming a common requirement for them to demonstrate their commitment to reducing their carbon footprint.

It can open new opportunities but also be a daunting task. However, help is at hand for Lancashire’s SMEs. And the benefits of getting it right can include significant cost-savings as well as paths to new markets.

The Making Carbon Work (MaCaW) project is a University of Central Lancashire (UCLan) and industry collaboration that aims to help small businesses overcome the challenges and barriers they face when looking to move to a low carbon model.

WNJ has referred a number of its clients to MaCaW, which is supported by Boost, Lancashire’s business growth hub.

We are delighted to be able to help business reduce their carbon footprint and save costs by signposting them to this scheme.

The project looks to support them as they work to implement low energy practices which will not only reduce their “carbon burden” but will also deliver cost savings to their organisation.

The programme includes carbon baseline analysis, site visits and energy audits, along with the creation and implementation of an integrated low-carbon action plan.

There are 50 per cent match funded grants available – up to £8,000 – for relevant equipment. And the project will help organisations to manage and report their emissions effectively.

The ERDF supported programme is aimed at county-based companies that employ less than 250 people and have an annual turnover of less than £45m or a balance sheet total less that £38m.

Mark Nelson, business engagement officer at MaCAW, says: “We aim to work with SMEs across all sectors to identify and prioritise the opportunities available to them.

“We encourage businesses to look at everything they do in their organisation in terms of the amount of carbon they are generating.

“It is about raising awareness of the benefits of carbon reduction, not just in terms of the environment but also the savings companies can make by going on this journey. From an SME’s point of view it makes real business sense.”

There are plenty of simple ways that businesses can start their low carbon journeys. They include:

• Nominating an ‘Energy Champion’ to promote energy efficiency throughout the business
• Regularly monitoring energy use so it can be compared with weather, production or sector specific standards
• Conducting ‘walkaround’ energy surveys to identify were use is concentrated, understand how it can be controlled an identify opportunities to make savings
• Committing to an achievable reduction target and reviewing regularly to reflect improvements made
• Exploring upgrades to equipment to reduce energy use, increase production capacity and develop new product lines

MaCaW is a further initiative from UCLan that WNJ has been able to introduce to clients. In addition to the Innovation Clinic and its funding for training project.

For information on how Making Carbon Work (MaCaW) can help your business make energy and cost savings contact 01772 893963 or email:

GDPR hasn’t gone away – are you at risk?

It’s been 12 months since the introduction of General Data Protection Regulation (GDPR) – and one thing is for sure, the challenges it presents haven’t gone away.

GDPR came into force in May 2018, introducing a number of significant changes including new rights for people to access the information businesses hold about them, obligations for better data management for businesses, and a new regime of fines and enforcement actions.

At the start of 2019 Google became the first tech giant to be hit with a record fine for breaching GDPR in the EU – it was slapped with a massive £44m penalty by the French regulator.

The fine followed complaints over how Google handled people’s data, with experts warning other tech firms would be next in the firing line.

And it’s not just tech firms. Recent research from cloud data firm Talend revealed that an estimated 74 per cent of UK organisations had failed to address requests from individuals seeking to get hold of their personal data within the one-month specified time period required under GDPR.

It found that only 17 per cent of companies complied correctly with the requests, while nine per cent gave incomplete or delayed responses.

The maximum amount that firms can be fined under GDPR is €20m or four per cent of global turnover, whichever is larger. And the Google penalty has been described as a “warning shot” at digital and tech businesses.

And it is not just big companies that have to be aware of GDPR and ask themselves if they are compliant and if they are protected.

For instance, the Information Commissioner’s Office (ICO) is issuing fines for companies and sole traders that are not registered.

In November last year the ICO fined a number of organisations across a number of sectors for non-payment of the data protection fee.

Since May 2018 every organisation or sole trader which processes personal information is required to pay the fee to the ICO, unless it is exempt.

The cost of the fee depends on organisation size and turnover. There are three tiers ranging from £40 and £2,900.

The perils of the tech world we live in are growing. Cyber and phishing attacks are on the increase and we are also continually contacted by companies seeking help after falling for the scams and losing thousands of pounds.

As well as the financial loss, security breaches can put a firm at risk of falling foul of GDPR.

A year on it is worth asking the question again: Are you GDPR compliant? Here’s our checklist for you to go through:

• Do you know what personal data you hold and reasons why
• Do you have appropriate consent?
• Do you have a record of processing?
• Do you have appropriate privacy notices?
• Do you have sufficient security?
• Do you know how to handle a breach?

If you answer is ‘No’ to any of the above, please give Penny a call today. To discuss any issue regarding GDPR and cybersecurity and how AW Training and Compliance can help contact her 01257 460081 or email:

Penny is a management and leadership expert with a background in regulatory compliance. She is a certified EU GDPR Practitioner, ISO17024 certified and Institute of Information Security Professionals accredited.

In this May 2019 issue:

Doctors tapering off as pension tax rules bite; Record IHT tax take parallels estate planning confusion; Payslips for all; Van or company car: what’s the real thing? How long do you want to work…?

Doctors tapering off as pension tax rules bite

Measures designed to limit the cost of pensions tax relief to the Treasury are having some unwelcome consequences, as some senior doctors have found their incomes disappearing.

Some members of the medical profession have found changes to legislation mean their earnings are getting swallowed up by the tax system. According to a recent Financial Times report some NHS consultants are being landed with tax bills of up to £87,000, prompting them to reduce working hours or even take early retirement.

The doctors’ problems primarily stem from the implementation of the pension annual allowance tapering rules. These have two key trigger points:

• ‘Threshold income’ (broadly speaking total income from all sources, less personal pension contributions) exceeding £110,000; and

• ‘Adjusted income’ (broadly total income from all sources plus employer pension contributions) exceeding £150,000.

If both levels are crossed, then the standard annual allowance for pension contributions of £40,000 is reduced by £1 for each £2 by which ‘adjusted income’ exceeds £150,000, subject to a minimum annual allowance of £10,000. The all-or-nothing nature of the triggers can mean that just an extra £1 of earnings brings the taper rules into play. That additional £1 could therefore result in an additional tax bill of much more than £1.

To complicate matters further, £110,000 sits almost in the middle of the band of income between £100,000 and £125,000 at which the personal allowance is tapered away, creating an effective marginal tax rate of up to 60% (61.5% in Scotland). Added to that will usually be 2% national insurance contributions.

The Financial Times article said that many doctors had been ‘surprised’ by their pension tax bills. This implies they had not sought personal financial advice on how the pension taper rules, introduced from April 2016, would affect them.

There are ongoing discussions between the Treasury and the Department for Health and Social Care about the issue, but it seems highly unlikely the former will forgo the revenue generated by the annual allowance rules (over £560m in 2016/17). In the meantime, the episode serves as a reminder of the importance of regular financial reviews to avoid – or at least be aware of – the growing range of tax traps in the UK’s labyrinthine tax legislation.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Record IHT take parallels estate planning confusion

While the Treasury benefitted from record inheritance tax (IHT) receipts of £5.2bn in 2018, new figures show that many people are unaware of how the IHT system works or how it could help them pass their wealth to their beneficiaries.

A survey out in April from Quilter showed that only 37% of those asked were aware of inheritance tax rules. Under half of those surveyed knew about basic IHT rules around gifting or the nil rate band. At the same time, however, 60% thought the rules likely to be important for how they could pass wealth on, highlighting the disconnect between the information available and understanding the practical implications for individuals and their families.

The Office of Tax Simplification (OTS) is due to deliver the second part of its review of IHT regulations during this spring, following an initial report in January that looked largely at administrative issues. The review is aimed at simplifying how IHT is implemented, with the second of the reviews expected to focus on specific areas of change.

With additional complications like the residence nil rate band still focusing on the nuclear family, the IHT regime appears out of step with modern families and concerns about inter-generational wealth. A House of Lords committee on intergenerational fairness has already reported across a range of issues from housing to pension credits and estate tax.

Among a raft of recommendations, they called IHT “capricious and not fit for purpose”. Going back to fundamentals, the Lords report questions why and how assets should be taxed at death or on transfer to the next generation. The report suggested options such as a capital receipts tax payable on income received by beneficiaries or exempting certain assets from IHT if earmarked for first home purchase by a family member.

Whether any of these ideas come to fruition, and whatever the awaited OTS report recommends, there are ways in which the existing IHT regime can currently benefit your own estate planning and ensure a fairer distribution of your assets through your family. The £3,000 a year annual gift allowance is good place to start. So is reviewing your will and making sure your assets will be dispersed the way you wish.

Let us know if we can help.

Payslips for all

It may have come as a surprise to realise that until this April, not all workers were entitled to a payslip.

From 6 April, all workers now have a statutory right to receive an itemised payslip, including zero hour and casual workers. Up to that date, the right only extended to employees. Employers must now be prepared to provide information on ‘time worked’ with details of the number of hours being paid on workers’ payslips. This can be given either as a single aggregated figure or separate figures for different types of work at different rates. Workers should be able to clearly see that they have been paid for the hours worked at the appropriate statutory rates where relevant.

As the new rules were coming into force, however, the Department for Business, Energy and Industrial Strategy (BEIS) released a survey revealing that many don’t entirely understand all the information on their slips – only 62% were confident about everything they saw. Gaps in understanding were higher for women than men (55% of women compared to 70% of men admitted to not understanding their complete payslips) and younger workers.

April also marked the 20th anniversary of the national minimum wage (NMW), which has risen this year to £7.70 an hour for employees between 21 and 24. At the same time the national living wage saw a record 5% increase to £8.21 an hour for employees over 25, However, the BEIS survey also revealed misunderstanding around entitlement to the NMW, with around 30% believing that only permanent employees are entitled to receive it.

With the new payslip rules now in force, it’s even more important for all workers to be aware of their entitlements and check that they are receiving them. But many people don’t check their payslips, trusting their employers to get it right and assuming deductions are correct. Payroll offices do make mistakes or may have been given erroneous information on pay and allowances. For permanent employees likely affected by April’s increase to auto-enrolment contributions, there is even more reason to make sure everything is present and correct.

Encouraging employees to question anything they don’t understand, and to ask if concerned about unknown deductions, will go a long way to consolidating trust. Ensuring engagement with wages flows into helping workers with informed financial decision-making, pensions planning and alleviating one of the major factors of workplace stress.

Van or company car: what’s the real thing?

The phrase ‘define your terms’ could have been invented for the benefit-in-kind rules around company cars. A recent case that ended up in the Upper Tribunal between Coca-Cola and HMRC illustrates the importance of understanding when a van is a van – or legally a car.

These definitions determine the relevant income tax and NICs payable where a vehicle is provided to an employee as a benefit-in-kind. The charges vary considerably between ‘cars’ and ‘vans’, with tax on company cars generally much higher than for vans.

In the legislation, the key concept is around use as a ‘goods vehicle’, so:

• A car is not classed as a goods vehicle.
• A van is a goods vehicle with a weight of 3.5 tonnes or less when loaded.
• A ‘goods vehicle’ is described as one “of a construction primarily suited for the conveyance of goods or burden of any description”.

The case centered on three models of vehicles provided by Coca-Cola to technicians who had previously been provided with cars. Over time the equipment they were required to use became heavier and they were offered different vehicles – either a ‘panel’ van or a modified vehicle. Two models of a VW Kombi had dual capability, where some elements could be added or removed for additional passengers or equipment. Which is where the problems started.

The employees who were given these vehicles had their PAYE coding notices adjusted by HMRC for car benefit and the employer, Coca-Cola, was assessed for Class 1A NICs. They appealed initially to the First Tier Tribunal on the grounds that the vehicles were not cars but vans. The models came under scrutiny under the definition of “construction” and whether they were “primarily suited” for the purpose used, which was ‘the conveyance of goods’.

The case hinged on the second element of primary suitability. Because the Kombi model could be used both for carrying passengers and for conveying goods, the Upper Tribunal ruled it did not have a primary suitability for only conveying goods and so could not be classed as a goods vehicle. It therefore had to classed as a car for benefit-in-kind purposes. The other model narrowly fell on the other side of the argument. Ultimately the VW models were deemed to be more like mini-buses, while the other vehicle on offer was a van.

The upshot of this complex case is that the external appearance of any vehicle is not the deciding factor for benefits-in-kind. Internal configuration and the purposes behind it will make a difference. Being aware of how legal definitions may be applied could ultimately save you and your employees some potentially painful lessons.

How long do you want to work…?

As people are living longer, a parallel older-age profile is emerging in the labour force.

Source: National Statistics 16/4/2019

Labour market statistics for the period December 2018 to February 2019 revealed some impressive results. In the UK, employment of those aged 16–64 was running at 76.1%, the joint highest level ever and up 0.7% on a year ago.

Drill down into National Statistics numbers and some interesting facts emerge:

• The increases are being driven by more women aged 50–64 in the workforce. At the start of the decade, 58.5% of women aged 50–64 were in employment, whereas the latest figure is 68.1%. Coincidentally in 2000, that was the male rate of employment in the 50–64 age band.
• The proportion of men aged 50–64 in work has also risen over the same period, but less dramatically – from 71.4% in 2010 to 76.8% now.
• At 65 and beyond, employment is reaching record levels for both men and women, as the graph shows. Women and men aged 65 and over have an employment rate of 7.9% and 14.2% respectively, compared to 5.5% (women) and 10.8% (men) in January 2010.

There are several reasons for the increase in employment beyond age 50:

• For women – and now men – the rise of state pension age (SPA) has undoubtedly had an impact. As recently as April 2010, the SPA for a woman was 60. By October next year, both men and women will share a SPA of 66.
• The ending of compulsory retirement ages has encouraged longer working lives.
• The gradual disappearance of final salary pension schemes, particularly in the private sector, has forced some people to revise their retirement plans.
• Economic conditions have played their part. Real (inflation-adjusted) wage growth has been virtually zero over the last 10 years, limiting the scope for retirement savings.

Working for longer can be beneficial to health, although the case is by no means clear cut: continuing work-related stress could be life shortening. The key is to be able to choose when to stop work, rather than have the decision forced upon you. To get into that position, there is no substitute for adequate retirement planning – preferably well before the age 50, yet alone 65, is reached.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

In this April 2019 issue:

  1. Probate fees hike delayed.
  2. Remember the Spring Statement?
  3. Up and running – MTD for VAT is live.
  4. Painful lessons from the loan tax charge.
  5. Property tax payment window cut.

1. Probate fees hike delayed

An expected revision of the probate fees structure for England and Wales set for 1 April has been delayed.

The proposed changes will increase the cost of probate from the current single, flat charge of £215 to a minimum of £250. A new fee structure based on the size of estate being administered will rise through six bands to a maximum of £6,000. The probate fee threshold will rise from £5,000 to £50,000. Over half of estates will pay no probate under the higher threshold and more than 25,000 more estates a year will be exempt.

By classifying the increases as a fee rather than a tax, the government was able to put the changes forward as a statutory instrument or secondary legislation, rather than primary legislation which requires greater parliamentary scrutiny.

Citing pressures on parliamentary time from the ongoing Brexit crisis, the Ministry of Justice announced that the statutory instrument has yet to be approved. Once this happens, the new regime will come into effect 21 days later. While such instruments are normally passed without debate, MPs can raise objections and force a vote on an issue, leading to amendments and further delay. The Labour party has already objected to the probate proposals and as yet there is no new timetable.

The confusion on the timing of the changes has created a log jam with HMRC as people tried to beat the original 1 April deadline and apply for probate. HMRC must process inheritance tax (IHT) registration forms before probate can begin This has led to HMRC taking a more flexible stance on registering an estate for IHT purposes. It has said the process will be more flexible for the time being on IHT registration so that people can wait to submit IHT forms before starting the probate application.

Individuals who may be asked to be executors should think carefully about the terms of any executorship once the new fee structure is in place. Bank accounts can be frozen while probate is being processed, so they could be asked to help fund probate fees if a loan is not secured. Under the new regime, these could be substantial.

2. Remember the Spring Statement?

The Chancellor’s Spring Statement could easily have passed you by as March was dominated by other high-profile events.

Ever since he announced a move to an Autumn Budget in 2016, Philip Hammond has made it clear that he wanted to avoid the Spring Statement becoming a mini-Budget. His vision was that in March he would simply be presenting a brief response to the latest forecasts from the Office for Budget Responsibility (OBR). As the Treasury website stressed, “there will now only be one major fiscal event each year”.

Nevertheless, it is unlikely that either the Treasury or the Chancellor wanted the Spring Statement to be an event that was completely overshadowed by other parliamentary business occurring on the same day, as it was by the votes on whether to rule out a no-deal Brexit. Ironically, the Chancellor made his statement on the assumption of “a smooth and orderly exit from the EU”.

There were virtually no new tax initiatives in the Statement, although there were hints that a ‘deal dividend’ would help in keeping taxes low as well as allow increased public expenditure. In the background papers published alongside the Statement, there were reminders that the tax screw continues to be tightened in some areas. For example, Mr Hammond promised a consultation paper fleshing out two measures announced in the October Budget, designed to restrict two long-standing capital gains tax reliefs on residential property.

The OBR’s calculations explain why the Chancellor did not mention fresh tax cuts, as opposed to maintaining low tax levels. In this new 2019/20 financial year, government borrowing is projected to increase by £6.5bn and to still be £13.5bn by 2023/24. Income tax and national insurance contribution receipts have been rising faster than expected and are the main reason why the OBR’s overall finance figures looked rosier in March than last October.

As has been the case for some years now, if you want to see your tax bill reduce, taking control of your personal opportunities for improved tax planning is the place to start.

3. Up and running – MTD for VAT is live

After tests, pilots and amid continuing controversy, Making Tax Digital (MTD) for VAT went live on 1 April.

All VAT registered businesses above the £85,000 threshold are now required to keep their records digitally and submit their VAT return via compatible software. HMRC stated that around 100,000 had registered by the April Fool’s deadline out of an estimated 1.2 million businesses affected.

It’s worth remembering that 1 April marked the requirement to keep digital records, not to sign up for MTD itself. Once a business is signed up, it can no longer submit VAT returns through previous methods, such as typing figures into the portal. For businesses who submit VAT returns on a calendar quarter basis, signing up earlier than necessary could mean HMRC will expect the return to be submitted via MTD software, which the business may not be ready for.

With the first quarterly VAT return affected by MTD the June 2019 return, HMRC is taking a relaxed line on any penalties for the first year of the roll out as companies become more familiar with the requirements. Where businesses are doing their best to comply with MTD, filing and record keeping penalties may not be issued.
Digital records
Where a business has not yet signed up, it should have begun to keep its records digitally for the next VAT period starting on or after 1 April. If they are using software, this must be MTD-compatible. They can then sign up to the MTD service and have their software authorised.

Companies unfamiliar with software systems can use bridging products that will work with spreadsheets and HMRC has a list of those available. Any existing exemptions from online VAT filing will be maintained, while those unable to register for the new regime on grounds of age, disability, religion or location can apply to be exempt.

HMRC issued additional guidance prior to the launch. Where more than one product is used to keep digital records, these must be digitally linked. This is defined as a transfer or exchange of data between products and could include importing and exporting files, linking cells in spreadsheets and uploading and downloading files. These links between products must be in place by 31 March 2020, except for businesses who have secured a deferral from HMRC which have until 30 September 2020.

Regardless of where they are in their digital compliance and software upgrades, businesses should still aim to pay their VAT on time. Let know if we can help.

4. Painful lessons from the loan tax charge

5 April also marked the deadline from which those still affected by loan schemes will now have to pay a potentially punishing tax bill. The controversy surrounding the loan charge deadline is a reminder of the dangers of aggressive tax planning.

If you were offered a way of being paid a ‘salary’ that involved no income tax and no national insurance contributions (NICs), would it ring alarm bells?

In the late 1990s and early 2000s, many contractors and consultants were offered the option of joining schemes which purported to make tax and NICs disappear. At the time, some decided the chance was too good to miss. Their choice was often in response to IR35, the HMRC crackdown on people sidestepping taxation as employees by claiming self-employment or operating via one-person companies. The schemes promoted had various structures, but one key factor was that they relied on earnings being replaced by low or zero-interest loans that were never intended to be repaid – hence the schemes often being described by HMRC as ‘disguised remuneration schemes’.

HMRC never approved these schemes but took their time to act against them. Blocking legislation for new loans was announced in 2010, by which time HMRC was already challenging some schemes through the courts. However, it was not until 2016 that the then Chancellor, George Osborne, introduced legislation that treated the amount of any loans outstanding at 5 April 2019 as income. It is that measure which has recently brought the subject into the headlines. HMRC has estimated that 50,000 people face a charge averaging £64,000.

With hindsight, avoiding all tax and NICs on earnings now looks a deal too good to be true. That it seemed credible 15–20 years ago shows how attitudes to tax avoidance have changed since the turn of the century. It is also a reminder that if you are offered an avoidance scheme that appears to make your tax liability evaporate, it could be many years before you – or possibly even your executors – discover it does not.

A parliamentary group has called for the charge to be delayed for six months following a debate which had to be abandoned due to flooding in the House of Commons. They have also challenged HMRC about its statements around the loan charge. The controversy looks set to continue.

5. Property tax payment window cut

From 1 March the timescale for payment of stamp duty land tax (SDLT) in England and Northern Ireland has been cut in half.

Both residential and commercial property transactions now have only 14 days to pay SDLT.

The cut, down from 30 days previously, affects all property transactions in the two countries. The 14 days start from the ‘effective date’ of the transaction. The effective date is usually when the transfer is completed, but there can be circumstances where the majority of the contract has been ‘performed’ prior to completion.

Even where no tax is due, for example where a property is nil-rated at under £125,000 or there is another form of exemption, HMRC still requires a return to be filed within 14 days of completion of the transaction.

Once the 14-day window has closed, interest will begin to run on the charge and penalties will become due. The time limit applies to both UK and non-UK purchasers. If the return is filed late, the following penalties apply:

• £100 if a return is filed up to three months after the filing date;
• £200 if a return is filed more than three months after the filing date.

If a return is not filed within 12 months after the filing date, a tax-based penalty is also payable, which can be up to the full amount of tax due.

HMRC has said the process has been simplified and they believe the shorter window will increase efficiency. The majority of SDLT returns and payments have been completed within seven days during the previous 30-day window, so HMRC does not believe very many transactions would be adversely affected. Those dealing in more complex transactions, however, have expressed concern about the shorter time frame.

Individual purchasers are responsible for ensuring the tax is paid, though they are likely to have a solicitor or conveyancer acting for them. Where property is transferred as a result of an inheritance, or where no money or other payment is involved, or because of divorce or dissolution of a civil partnership, there is no SDLT charge to pay.

SDLT returns should be made electronically via HMRC. There are different forms for different types of transactions. There is still a 30-day window to apply for a deferral of SDLT, although the return in relation to any deferral must be filed within the new 14-day window.

MTD for VAT goes live

It has finally happened. After tests, pilots and amid continuing controversy and concern from small business leaders, Making Tax Digital (MTD) for VAT hit its deadline and went live at the start of this month.

It means that all VAT registered businesses above the £85,000 threshold are now required to keep their records digitally and submit their VAT return via compatible software.

According to figures from the taxman, around 100,000 businesses had registered to do so on deadline day, April 1, out of an estimated 1.2 million that will be affected.

And it appears that many still don’t know how it will affect them. A survey of 500 companies carried out for the Daily Telegraph newspaper on the eve of the deadline revealed almost a quarter had not even heard of MTD.

It is worth remembering that April 1 marked the requirement to keep digital records, not to sign up for MTD itself.

Once a business is signed up, it can no longer submit VAT returns through previous methods, such as typing figures into the portal.

For businesses who submit VAT returns on a calendar quarter basis, signing up earlier than necessary could mean HMRC will expect the return to be submitted via MTD software, which the business may not be ready for.

With the first quarterly VAT return affected by MTD being the June 2019 return, HMRC is taking a relaxed line on any penalties for the first year of the roll out as companies become more familiar with the requirements.

Where businesses are doing their best to comply with MTD, filing and record keeping penalties may not be issued.

Businesses that have not yet signed up should have begun to keep records digitally for the next VAT period starting on or after April 1.

If they are using software, this must be MTD-compatible. They can then sign up to the MTD service and have their software authorised.

Companies unfamiliar with software systems can use bridging products that will work with spreadsheets and HMRC has produced a list of those available.

Any existing exemptions from online VAT filing will be maintained, while those unable to register for the new regime on grounds of age, disability, religion or location can apply to be exempt.

HMRC also issued additional guidance prior to the launch. Where more than one product is used to keep digital records, these must be digitally linked.

This is defined as a transfer or exchange of data between products and could include importing and exporting files, linking cells in spreadsheets and uploading and downloading files.

These links between products must be in place by 31 March 2020, except for businesses who have secured a deferral from HMRC which have until 30 September 2020.

Regardless of where they are in their digital compliance and software upgrades, businesses should still aim to pay their VAT on time.

To discuss any aspect of MTD and how it affects you and your business please contact me on 01772 430000.

Cloud accounting – how we can help

Cloud accounting software is changing the way that businesses operate their bookkeeping functions.

With the imminent introduction of Making Tax Digital (MTD) it is important to consider whether this software could assist your business, not only allowing you to file your VAT returns but also enabling you to take advantage of numerous efficiency and cost saving benefits.

At WNJ, we have a dedicated team that can help and advise you and who are all cloud accounting specialists. We work closely with expert providers; Xero, Sage, QuickBooks and FreeAgent to give our clients the best solutions that suit their individual accounting needs.

We will set you up and train you to use all of the functions with confidence. And we can also provide a full or partial outsourced book keeping service.

To discuss cloud accounting benefits and determine which provider would be best suit your business, please call me on 01772 430000.

The advantages of going digital

HMRC’s vision to digitalise the UK tax system is nearly upon us as VAT registered businesses with turnover above £85,000 will be required to use compatible software to maintain their records and to update the taxman quarterly, starting from April.

It may seem like a minefield but help is available when it comes to digital tax advice – and making sure you have the systems and processes to meet the challenge and the switch-over can even help when it comes to running your business.

Whilst much of the press and media coverage has been highlighting the cost to small business of this new legislation, here at WNJ we believe that for many businesses it will be the catalyst to a new age where the legislation is forcing changes which will in a relatively short period of time allow savings in time and money.

Whilst there are many different accounting software solutions, here at WNJ we have ensured that our dedicated Cloud Accounting team have the expertise to show business owners how the use of appropriate software will reap these benefits.

A good accounting solution allows easy invoicing, including quotes, estimates and statements – all you need to do business and get paid. You can track what you’re owed so you can see how much each customer owes at -a-glance and chase overdue balances. And it allows you to bank securely and accurately. It is also time-saving, bank transactions effortlessly flow into software and can be automatically matched to your invoices.

The available software also produces reports such as profit and loss, balance sheet, trial balance, and more – these are ‘clever reports’ that empower business decisions.
It also takes care of VAT when it comes to calculating and submitting returns, giving confidence with compliance. And it’s functions include the ability to produce cashflow forecasts that will allow businesses to plan ahead.

Access to invoicing and expenses apps mean you can work at the office, at home or on-the-go on your computer, tablet, and phone – whenever you need it. And the package can also help speed up sales and purchases, and calculate profit.

There are free webinars available for clients to get the most out of the software and we are always happy to help clients with queries and problem solving.

WNJ has hosted a number of seminars already and plan more over the next year to give clients a further insight into the potential benefits and capabilities of Cloud Accounting.

To discuss the software available and any aspects of the government’s digital tax drive, please call me on 01772 430000.