News & Updates

The Government has announced an independent review of the controversial loan charge, but the taxes due on historical loans (disguised renumeration loans) won’t be cancelled or suspended while the review takes place.

Taxpayers who are part way through agreeing a settlement with HMRC regarding the loan schemes they have used, or who have opted to pay the loan charge instead, need to take action as follows:

Already settled with HMRC
Where tax is being paid by instalments the taxpayer should carry on making those payments.

Waiting to settle with HMRC
Where all information was provided to HMRC by 5 April 2019, the taxpayer can either wait for the outcome of the review or agree a payment schedule with HMRC, either way interest will continue to accrue on the outstanding tax due.

Will pay loan charge instead
The taxpayer should report the additional information required about outstanding loans to HMRC by 30 September 2019. HMRC reserves the right to charge penalties if this information is not provided on time.

Received APN
The taxpayer should pay any tax demand by an Accelerated Payment Notice (APN), as penalties will be charged if the tax is not paid on time.

Open tax enquiry
The enquiry will continue throughout the period of the loan charge review.

Written by the Tax Advice Network

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

 

Return on Marketing Investment

 

Calculating return on investment (ROI) on marketing activity has been a longstanding challenge for businesses.

 

Return on marketing investment is a metric used to measure the overall effectiveness of a firm’s marketing strategy in order to help the management team to make better decisions around future marketing investments.

 

Marketing activity adds value to different business functions in different ways. Your sales team might define marketing value in terms of revenue growth whereas your operations team might view it in terms of cost management or pricing strategy. As such, you should map out what value means to each function and create metrics that measure the impact of marketing for each part of the business.

 

In order to track and measure ROI on marketing, you need to know how much you are spending on it – this is where your marketing budget comes in. Set a marketing budget at the start of the year alongside clear objectives which focus on areas such as new client acquisition, client retention, brand and reputation development, etc.

 

It can be helpful to explain the marketing budget to colleagues.

By providing visibility on how each spend in the marketing budget aligns with the firm’s key strategic objectives, you can educate your colleagues and establish the credibility of your marketing function.

 

It is often necessary to educate your colleagues in relation to the uncertainties of marketing. Just because the firm invests £100 in marketing doesn’t necessarily mean it will make £1,000 in new sales. There are various uncontrollable factors which influence the outcomes of marketing activities and you should take the time to help your colleagues to understand this.

 

You can then create some KPI’s which illustrate the return on marketing investment against each strategic objective and also measure how the marketing investment has delivered value to each business function in your firm.

 

If your business has a client relationship management (CRM) system you can track how many customers your marketing campaign has targeted. You can also track the conversion rate – i.e. what percentage of customers who were marketed to by your firm actually purchased from you each quarter.

 

Marketing is a long-term investment in developing relationships with potential customers. The ROI may take several months to start coming through. As such your reporting should focus on longer-term measures (i.e. quarterly rather than monthly measures). As time goes by you should be able to show how business growth followed each marketing campaign.

 

Creating a more inclusive workplace

 

Diversity and inclusion are hot topics as society is driving firms to become more inclusive.

 

Most business owners and managers are well aware of the value of having a diverse workforce. Different views, different experiences and different ways of thinking among team members can help businesses to come up with new and innovative ideas.

 

However, having a diverse team of people working in your business doesn’t work very well if the firm doesn’t have an inclusive culture. To make the most of your team you need to welcome them to the team and encourage them to get involved.

 

Put simply, diversity is the mix of people in your business. Inclusion is how you leverage and utilise that mix of people. An inclusive business gives everyone the opportunity to contribute.

 

While managers and business leaders have ultimate responsibility for setting the firm’s culture, employees can do their part in making it a more inclusive environment. For example, your team members could make an effort to interact with other employees outside of their own team. This could help them to gain new insights from other parts of the business and encourages them to become interconnectors between different teams / departments.

 

Another good way to encourage inclusion is to involve other people in your meetings – you could invite a guest from a different department to join your monthly team meetings.

They could contribute their views and this would also give them the opportunity to get to know your team. To change things up even more, you could rotate the person who leads the meeting each month. This means that at least one different person is speaking at each meeting.

 

The most inclusive businesses leave their assumptions at the door. It is easy to make assumptions about other colleagues. Making a conscious effort to leave your biases at the door will encourage others to do the same.

 

Inclusive businesses are about empowering others. Encourage your team members and colleagues to grow by letting them solve problems, come up with new ideas and develop new skills. Encourage them to be accountable. This shows your colleagues that you have confidence in them and in their ability to perform their job well.

 

Dispute resolution through arbitration

 

Arbitration is the process of bringing a business dispute before a neutral third party in order to resolve the situation.

 

Arbitration is a form of alternative dispute resolution (ADR), used in place of litigation in the hope of settling a dispute without the time and expense of going to court.

 

The process begins when two parties agree to settle their dispute through arbitration. The decision may also have been made for them by the addition of an arbitration clause to a contract that both parties have signed. The third party, an arbitrator, hears the evidence brought by both sides and makes a decision. Sometimes (usually) that decision is binding on the parties. It is worth noting that there is generally no appeals process, unlike in court proceedings.

 

There are various benefits to settling a dispute through the use of arbitration. The speed and informality of the arbitration process are major reasons why many businesses select arbitration over litigation. In many cases, arbitration can be a shorter process, and if no lawyers are needed, it can be less costly.

The two parties to the arbitration can also have control over the selection of the arbitrator. This differs to a court case where the judge and jury selection is out of the hands of the two parties. Finally, arbitration hearings are private and the results are not on public record. This can save face for both parties who may not want to publicise their dispute.

 

More businesses are including arbitration clauses in their agreements and contracts as a way to quickly and quietly resolve disputes. These clauses can help to protect businesses from expensive court cases while still giving customers and third parties an avenue to resolve disputes.

 

The power of saying “no”

 

It’s important to be able to say “no” at work without making enemies.

 

It’s a simple word, but one that far too many of us have trouble saying.  Perhaps it is because you’ve become successful by saying yes to every business opportunity, every request that has come your way, in order to grow your business or develop your career.

 

However, as you progress through your career, you become more successful and new opportunities will inevitably emerge. More people and more projects will vie for your time.

You cannot do everything and this is when it may be necessary to start saying no to things.

 

More than ever, we are all working harder with less resources which means that we can often take on too much work. Sometimes saying “yes” to another project when you are already at full capacity effectively means that you’re saying no to completing the tasks that you already have to do.

 

Steve Jobs famously said that “focusing is about saying no”. Focusing on what matters, not just what is in front of you, is the key to driving the success of any business.

 

Most teams in most businesses set out their annual objectives at the start of the year. These objectives should align with the overall goals of the business. Individual projects and day-to-day tasks should align with these objectives. If a new project or request doesn’t align with your team’s objectives then it might be best to push back and say “no”.

 

If a senior colleague asks you to do something, a flat “no” may not be an appropriate response. Instead it may be more appropriate to say that you don’t have any capacity at the moment, outlining the key projects that you are currently working on. If the new request is to be prioritised, your colleague may suggest that one of your other projects is put on the back burner.

 

When it comes to managing your time, your career, and your business, over-committing yourself isn’t a sign of success. If you’re struggling to say no, think back to all the times when agreeing to take on something new distracted you from your own priorities. How much time, energy, and stress might have been saved if you had just been able to say no?

 

If you don’t have time to take on more work, next time simply say, “No, I cant commit to that due to other priorities.” You don’t need to apologise or over-explain. Just be polite and move on.

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

 

GOVERNMENT U-TURN ON PENSION TAX FOR DOCTORS AND OTHERS?

 

In earlier newsletters we reported that hospital doctors and GPs were lobbying the government to amend the pension tax rules as the current system of restricting tax relief on pension contributions means many doctors paying almost all of the extra salary back in tax if they take on additional responsibilities or work additional shifts.

This issue does not just affect doctors. From 2016/17 those taxpayers with ‘adjusted income’ over £150,000 and ‘threshold income’ over £110,000 receive a tapered annual allowance.  This taper potentially reduces the normal annual pension allowance from £40,000 down to a minimum of £10,000 which may result in tax payable on excess contributions. As mentioned in earlier newsletters we can assist you in computing the potential liability.

The government have recently announced that it would consult on allowing senior NHS staff to select their level of pension accrual at the start of the year, to give them more pension capacity to take on additional work without breaching their annual allowance.

The Treasury has also agreed to reconsider the “taper”, which restricts pension tax relief, not just for NHS workers but across the public sector. But what about the private sector!  Look out for possible changes to pension tax relief in the Autumn Budget.

NO VAT PENALTY IF YOU MISSED THE FIRST QUARTERLY MTD DEADLINE

If you pay your VAT quarterly by direct debit the sign-up window has closed for the 7 August (30 June quarter) submission. Do not worry as HMRC have announced that you will not be penalised this time so you may file the old way and come back when the direct debit has been collected to sign up in time to file the next return.

Although HMRC will not penalise you, they will send a letter telling you that you missed the deadline and asking you to take action.

COMPANY OFFICERS JOINTLY AND SEVERALLY LIABLE FOR VAT PENALTY

The decision in a recent tax tribunal case reminds us that directors and other company officers may be personally liable for VAT penalties of their company. The recent case involved a penalty for late registration for VAT where the threshold had been exceeded.

Three conditions must be satisfied before the liability for a penalty payable by the company can be imposed on an individual:

• A penalty must be payable by the company for a deliberate failure.
• The individual on whom HMRC seek to impose liability must be an “officer” of the company
• The deliberate failure must be attributable to that officer.

WHEN IS A VAN NOT A VAN?

HMRC are being urged to provide clarity and consistency on the tax treatment of commercial vehicles such as VW Kombi Vans marketed as goods vehicles. The need for clarity follows the ruling in an important tax tribunal case involving “vans” provided to employees of Coca Cola.

The court has upheld the HMRC view that certain vehicles are not goods vehicles but motor cars for benefit in kind purposes. Consequently, the income tax and national insurance payable by employee and employer is significantly higher than if the vehicles had been classified as goods vehicles.

CERTAIN VANS ARE EXEMPT FROM INCOME TAX

 

There is no assessable benefit in kind where the van is only used for business journeys or the private use of the vehicle is insignificant. Examples would include making a slight detour to pick up a newspaper on the way to work, or taking an old mattress or other rubbish to the tip once or twice a year.

 

INCOME TAX DEFINITION OF “GOODS VEHICLE”

 

The income tax legislation defines a “goods vehicle” as “a vehicle of a construction primarily suited for the conveyance of goods or burden of any description…”

Although the VW Kombi vans failed this test the Tribunal held that Vauxhall Vivaro vans provided by Coca Cola did fall within the definition of goods vehicles!

It is understood that this case is due to be heard at the Court of Appeal which will provide legal precedent over the tax treatment. Until then it gives employers a dilemma as to how to report such vehicles on employees’ form P11d and also whether the position in earlier years should be rectified.  The employers expected to interpret the rules!

What is also particularly confusing, and thus difficult for businesses to deal with, is that the benefit in kind rules are not the same as the rules for capital allowances and VAT.

CAPITAL ALLOWANCES DEFINITION OF “MOTOR CAR”

 

The definition of a “motor car” for plant and machinery allowances purposes is a mechanically propelled vehicle except a vehicle:

 

1. constructed in such a way that it is primarily suited for transporting goods of any sort, or
2. of a type which is not commonly used as a private vehicle and is not suitable for use as a private vehicle.

 

VAT DEFINITION OF “MOTOR CAR”

 

For VAT purposes the definition of a motor car has been amended several times over the years. The current definition states:   “Motor car” means any motor vehicle of a kind normally used on public roads which has three or more wheels and either:

 

1. is constructed or adapted solely or mainly for the carriage of passengers; or
2. has to the rear of the driver’s seat roofed accommodation which is fitted with side windows or which is constructed or adapted for the fitting of side windows;

tribunal had to seek evidence from automotive industry experts so how are There are a number of exceptions to this rule notably vehicles constructed to carry a payload of one tonne or more. A common example would be a “double cab” pick-up such as a Mitsubishi L200 or Toyota Hilux.

 

DIARY OF MAIN TAX EVENTS

 

SEPTEMBER / OCTOBER 2019

 

Date	What’s Due
1 September	Corporation tax for year to 30/11/18 unless pay by quarterly instalments
19 September	PAYE & NIC deductions, and CIS return and tax, for month to 5/9/19 (due 22 September if you pay electronically)
1 October	Corporation tax for year to 31/12/18 unless pay by quarterly instalments
5 October	Deadline for notifying HMRC of chargeability for 2018/19 if not within Self-Assessment and  receive income or gains on which tax is due
19 October	PAYE & NIC deductions, and CIS return and tax, for month to 5/10/19 (due 22 October if you pay electronically)

 

From 6 April 2020 calculation of company car taxable benefits will be changed to favour electric and hybrid vehicles. However, due to a switch in the methods used for measuring CO2 emissions tax advisers will have to refer to two different car benefit tables.

The calculation of company car benefits is based on the official CO2 emissions of the vehicle and a percentage of the list price. For every 5g/km of additional emissions from 94g/km the percentage is increased by one point until the maximum 37% is reached.

Cars with emissions of less than 94g/km are unfairly taxed by this system, so from 6 April 2020 the lower bands of the car benefit table will be redrawn as follows:

 

CO2              Hybrid miles     Petrol and       Diesel

Emissions      on zero            electric            %

g/km             emissions         %

 

0                   N/A                  2                   N/A

1-50              less than 30      14                 18

1-50              30-39               12                 16

1-50              40-69               8                   12

1-50              70-129             5                   9

1-50              130 or more      2                   6

51-54            N/A                  15                  19

 

Hybrid cars with CO2 emissions of no more than 50g/km are split into five bands depending on the zero-emissions range the car is capable of. Pure electric cars are taxed at 2% of list price. For cars with CO2 emissions of over 54g/km the percentage increases by one point until the maximum 37% is reached. These percentages will remain unchanged until 6 April 2023.

A spanner has been thrown into this arrangement by a change the method the UK uses to determine CO2 emissions, from New European Driving Cycle (NEDC) measure to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), with effect from April 2020.

The CO2 emissions measured under WLTP tend to be higher than under NEDC. To compensate for this sudden jump in recorded CO2 emissions, the car benefit table will be altered again from 2020/21 but only for cars first registered on and after 6 April 2020.

This means we will have two parallel tables to calculate car benefit for 2020/21 to 2022/23. The table above must be used for cars registered before 6 April 2020. For cars registered on and after 6 April 2020 all the percentages are reduced by 2%, so new electric cars will have zero taxable benefit for 2020/21.

This “new car” table will be amended in 2021/22 so all percentages are increased by 1%, and again in 2022/23 when all percentages will be increased by another 1%. This should bring the old car and new car tables back in line, so we can revert to one table, assuming the Government doesn’t have other ideas by then.

 

Written by the Tax Advice Network

Setting-up pensions auto-enrolment for our clients’ employees was a right PITA three to four years ago. If we subcontracted this task to a specialist pensions administrator, we should check that our client is on top of their re-enrolment obligations.

All employees who opted out of the workplace pension must be re-enrolled in that pension after three years. The employer needs to write to each opted-out employee and inform them they will be automatically re-enrolled on the re-enrolment date. This date is set by the employer but is normally chosen as the third anniversary of the staging date for auto-enrolment.

Employees can immediately opt-out of the workplace pension again if they choose to do so. Individuals with very large pension pots may be advised to opt-out if they have taken steps to protected the level of their pension lifetime allowance, as making further pension contributions could break that protection.

Once the employer has re-enrolled all affected employees, it must submit an online declaration of compliance to The Pensions Regulator, within five months of the third anniversary of the original staging date.

Written by the Tax Advice Network

The domestic reverse charge for CIS registered businesses was due to start on 1 October 2019, but shortly after 3pm on Friday 6 September HMRC released Revenue and Customs Brief 10(2019), which announced a 12-month delay until 1 October 2020.

It is regrettable that this postponement was announced so close to the implementation date, as many firms have spent a lot of time and money getting their clients ready to handle this complicated change to their VAT processes. The reasons given for the delay are concerns within the construction industry and to avoid the changes coinciding with Brexit.

We will now have to repeat the communications exercise to our CIS registered clients, telling you to put on hold any changes you had planned for your invoicing procedures, VAT periods and the flat rate scheme. If you have already made alterations in these areas, this is what we can do:

VAT invoices
The VAT invoice procedure needs to revert to charging VAT on all sales invoices. Where the structure of the invoice can’t be changed back before 1 October to charge VAT, a separate VAT-only invoice should be raised. HMRC has said it will take into account the fact the change in the implementation date for the reverse charge may have cause errors when it reviews businesses’ VAT records.

VAT periods
Under the reverse charge process subcontractor businesses would not charge VAT on their invoices to the contracting firm in the chain above them. The subbie would thus not receive any VAT from their customer but would have to pay out VAT on their purchases. This would have a significant effect on their cash-flow and put those subcontractors in a VAT repayment claim position. One way to ease that pain is to change to monthly VAT returns, so VAT could be reclaimed more frequently.

If you have already changed to monthly filing periods, your VAT period can be amended to quarterly periods through your business tax account. If you signed up to MTD we can do this as your agent through the page: “Manage your client’s details for MTD for VAT”. If you have not signed-up to MTD you need to access the old VAT online service for agents, and change the VAT periods there.

Flat rate scheme
Where the subcontractor doesn’t charge VAT on his invoices under the reverse charge, it would be crazy to remain within the flat rate scheme, as that would require him to pay a flat rate of VAT on all sales invoices. Where the business has asked to leave the flat rate scheme from 30 September 2019, that request needs to be cancelled. We may be able to do this through the old VAT online service for Agents, but we will probably have to ring HMRC to get that request cancelled.

Written by the Tax Advice Network