IR35 – a waste of time for HMRC?
It has been revealed that over a six year period the IR35 rules raised only about £1.5 million on average per year. When you consider that the original estimate, given in 1999, was that over £220 million would be collected in National Insurance alone – each year, it’s pretty obvious that someone got their sums badly wrong. Now, who was the chancellor in 1999?
Taking into account the cost of IR35 status enquiries and failed cases, it has probably cost more to collect the money than has actually been received. It is to be hoped that a future chancellor applies common sense and scraps the whole IR35 idea.
The information has been supplied to the Professional Contractors Group following a request under the Freedom of Information legislation.
IR35 is the mechanism introduced to stop the perceived drain on the exchequer caused by contractors operating through a limited company. It was thought that many “subbies” doing this were doing so to reduce their tax bill. Of course, the simple answer would have been to equalise the tax treatment of employed, self employed and companies. Strangely this hasn’t happened and it is still more tax efficient to operate via a Ltd company.
If you think IR35 might affect you, please contact us. If you want to look at the tax advantages of operating via a Ltd company, we’ll be pleased to help.
ISC – Scam
We have discovered what looks like a scam and want to warn people about it.
Someone is using the name and company registration number of one of our clients, ISC Ltd, to carry out a scam. People are being contacted by email and through recruitment adverts to act as an “independent customer service evaluation/mystery shopper” for ISC.
This is not genuine and will, at some stage, involve either sending money or divulging bank account details. If you have been contacted by, or been tempted to respond to an advert supposedly placed by, ISC Ltd – do not respond to it. It is a scam. If you are already in the process of carrying out an assignment, stop and do not spend any money or give your bank details. You may wish to report it to the police.
The name David Peters has been used and we know that there has been some activity in west London and that adverts have been placed in the West Midlands but suspect that it could be much wider than this.
ISC Ltd are a genuine company but have nothing to do with the scam. Their directors are horrified at the thought of their name being used in this way.
Loads of people told us we should have a page on Facebook – so we’ve set one up.
Not sure how useful it is going to be, but we’ll see. We’ll put on some pictures of staff and outside activities.
Many thanks to Nathan, here on work experience, for doing this for us. Not sure that he expected to work in an accountant’s office for a week and end up playing around with Facebook.
BPSS (Business Payment Support Scheme) getting tougher?
The Business Payment Support Scheme staff seem to be getting harder in their approach. I have rung them twice today on behalf of clients and the attitude and approach is definitely much tougher than it was just a few weeks ago. More questions are being asked and they won’t just agree to fairly lengthy periods of repayment without question.
I was surprised by the apparent ease which repayments were agreed when the scheme first started. I am, however, concerned that it could go the other way. There is a sensible balance to be struck and I hope that common sense prevails. Times are difficult for a lot of businesses and the BPSS has been a lifeline for a few of our clients, particularly with bank borrowing being so difficult.
I would be interested in the impression which other accountants are getting about the operation of the scheme and whether they think that it is becoming more difficult to reach an agreement.
VAT Online Filing – Compulsory! Did you know?
From 1st April 2010 it will become compulsory for all VAT registered businesses with a turnover in excess of £100,000 pa, and all businesses which register for VAT after that date, to file their VAT Returns online. Some accounting software (eg KashFlow and Sage) already include a facility to file VAT online. Many businesses using older software will not have the facility built in and will have to find another method of filing.
Filing can be done via the HMRC website but I am surprised at how little software seems to be currently available to assist in filing VAT online. We are currently trying to decide how best to incorporate the facility into our service for those clients which don’t use online filing ready software. The primary software package which we use within the practice doesn’t have the facility so we are evaluating the options for ourselves too.
I understand that filing using an XML file should be pretty simple – but, not being completely au fait with all things technical, I don’t quite understand how this is likely to work. I understand that XML can be generated from an Excel file so, I guess that we will have to export the info from our accounting software to an Excel spreadsheet then, somehow, convert it to XML and send it to HMRC. If there’s someone who’s more technically competent than me out there who can explain the process in simple terms, I’d love to hear from them.
The change is only about three VAT returns away, yet most businesses aren’t even aware of the proposal. We still have clients with turnovers in excess of £100,000 who don’t have access to the internet. It’s going to be a major shock for them.
Unless there is some publicity, I can envisage a major panic next February/March. Now, that comes just after the 31st January deadline for tax returns and around about the time we are preparing to submit PAYE returns so my staff are not going to be very happy if we are inundated with queries then.
Did I mention that April 2010 is also the deadline for filing end of year PAYE returns on line for all companies? There are quite a few businesses still doing manual payroll. Haven’t seen a lot of publicity about this either.
National Minimum Wage Increase – October 2009
From October 2009 the National Minimum Wage will increase from £5.73 per hour to £5.80 per hour for employees aged 22 and over. This is an increase of 1.2%.
The rate for 18-22 year olds will increase from £4.77 per hour to £4.83 per hour – a slightly larger increase in percentage terms – 1.25%.
16 and 17 year olds will have an increase from £3.53 per hour to £3.57 per hour – only 1.13%.
The other part of the announcement was that, from October 2010, the plan is to extend the top rate to include 21 year olds.
If you have problems keeping track of payroll legislation or just find payroll a nuisance, we can help you manage it.
How helpful is your accountant? Can’t do – or find a way!
The way that accountants approach a problem can make a major difference to clients. Too many accountants seem to take a passive, rather than an active, role when dealing with problems. Two recent situations highlighted this for me.
In the first, a friend asked me for help. We don’t do the accountancy for his company (yet) because of a historic connection with another firm of accountants. A problem had arisen which could potentially have serious consequences. The other accountants just said that the company couldn’t do what was being proposed without further explanation or help – even a face to face meeting with the senior partner failed to get any further than this. My friend came to see me, we had a cup of coffee while he explained the situation and the frustration he was feeling. I agreed that the other accountant was absolutely correct in what they said – but, having taken the time to listen, I knew the reason behind the request and I proposed a different way to arrive at the same result.
I wrote down the steps to take and my friend took it away and read my instructions over the phone to the other accountants who said, “Yes – we’ll do that for you”. There was no explanation as to why they hadn’t proposed what was a simple and logical process.
In the second, we took over a client from a substantial regional firm of accountants. On looking through the information which the client gave us, we spotted a potential problem concerned with overseas income. The client said that this had not been pointed out previously. In our letter to the old accountant, we asked about this. In their reply, they said that they had never been asked about this point so had not given advice on it and were not prepared to comment. In other words, they weren’t prepared to take the extra step and consider the implications of the work they had done.
Incidentally, the reason the client moved from that particular firm was because the client spotted an error in the accounts and went to see one of the partners to point out the error and ask for it to be corrected. There was an error and it was corrected but the client wasn’t very happy about receiving a bill for the time spent with the partner pointing out the error.
Accountants are supposed to be a businesses most trusted adviser – and that is how it should be. But, time and again examples of indifference or, worse, obstruction come to light. A good accountant with an understanding of your business and wide experience of business in general and a pro active approach can be invaluable to your business.
Before choosing an accountant, make sure that you talk to them and be confident that they are not “Can’t Do” accountants but are the type that will “Find a Way”.
CIS – First return for the year.
The first CIS (Construction Industry Scheme) monthly returns for the 2009/10 tax year are due to be submitted by 19th May. It is clear that many contractors have trouble in getting their returns in on time because, according to Construction News penalties of £180 million have been paid by contractors.
That isn’t small change by any standards which makes me wonder why contractors don’t organise themselves properly to ensure their returns are submitted in time. There is relatively inexpensive software available to help produce the returns and file them, or accountants and payroll bureaux will do it at a reasonable price.
If you are a contractor in the construction industry and have been subject to penalties in the past, do something about it. Either invest in software to help or leave it to a professional to sort it out for you – but do it now. Don’t pay unnecessary penalties.
HMRC refund delays causing problems for businesses
Around 10% of requests for refunds of overpaid tax are being randomly referred to a specialist HMRC unit in Bristol for checking. The checking takes weeks, possibly months, and during the process all requests to issue the refunds are ignored. The taxpayer isn’t told what is happening or that there is likely to be a delay. It isn’t possible to contact this unit to find out what is happening.
This sort of delay for businesses already hit hard with cashflow problems can be very serious. Where a business knows that a refund is due, it plans accordingly, possibly even commiting to major purchases.
On the one hand the government are saying that all government departments will pay their bills on time but, on the other hand, HMRC are holding on to taxpayers money for an indeterminate period.
Is payroll a nuisance?
Payroll is considered a nuisance by many small business owners. They hate doing it, don’t understand it and spend ages at it. And yet, payroll is possibly the easiest regular business function to outsource. There are many specialist payroll bureaux offering quick and easy solutions for payroll, including ensuring that all of the returns are made on time and eliminating the risk of penalties.
For a function to be suitable for outsourcing it should either reduce the cost or improve the quality. Payroll outsourcing generally achieves both of these. Improvement in quality is generally pretty obvious because the accuracy is improved and properly printed payslips and reports are produced so that employees have greater faith in the management. Some small businesses argue that there isn’t a cost saving because they do it themselves. Of course there’s a cost saving unless you think your time is worthless!
One client of ours used to do her own payroll for two employees every week. She estimated that she spent between 15 and 20 minutes per week and couldn’t evaluate how much time she spent at year end. We took over the payroll and she rings us with the employees’ hours. Because there are only two employees, we can calculate the net pay while she’s on the phone (about 2 minutes). Payslips and summaries are in the post that day. Job done – quickly, accurately and efficiently. Time saved by the client is between 15 and 20 hours per year. She earns around £25 per hour so her extra earning capacity from outsourcing her payroll is possibly £400. Does she pay £400 for the payroll service? No she doesn’t pay anywhere near that.
And, there are other benefits. She can contact us with employment related queries, we deal with HMRC enquiries and she has confidence that tax and NI are being correctly calculated.
Payroll is linked to CIS (Construction Industry Scheme) so, if you are a CIS contractor, outsourcing both your CIS and payroll makes even more sense. The CIS penalty regime is very strict and you need to be efficient to avoid them.
Outsourcing payroll frequently makes sound economic sense so, if you want to grow your business, please consider it – talk to your accountant and check what payroll services are available. Of course, we’d love to help you and you can contact us here, but we appreciate that there are other options.
