Phishing is the fraudulent act of emailing a person in order to obtain their personal/financial information such as passwords, credit card or bank account details. These emails often include a link to a bogus website encouraging you to enter your personal details.

HMRC have issued some guidance to help you recognise a phishing email but it can be summed up very simply – HMRC never send notifications of a tax rebate by email, or ask you to disclose personal or payment information by email. It really is that simple – if it says it is from HMRC and tells you that you owe or are owed money; it’s a fake – ditch it and forward it to the address below so that HMRC can attempt to stop this happening.

phishing@hmrc.gsi.gov.uk

Please pass this message on to stop other people being scammed.

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This refers to a nasty bit of HMRC legislation (IR 35) targeting contractors who operate through a limited company (known a service companies). Essentially, this is where a worker avoids direct tax deductions under PAYE by using a company to invoice the end user for their services. Typical examples are IT consultants, supply teachers not to mention senior executives in some government agencies!

Typically, these types of service companies will only have one client (who some might cynically call an employer). HMRC are doggedly determined to see this one through and as such, they are increasing the level of investigations and have devised 12 business entity tests – have a go and see what score you get.

• Business premises test  - Does the business own or rent business premises separately from the contractor’s home or end client’s premises? (10 points if yes)
• PII test – Does the contractor need professional indemnity insurance? (2 points if yes)
• Efficiency test – Has the business had the opportunity in the past two years to increase its revenue by working more efficiently? (10 points if yes)
• Assistance test – Does the business employ any workers who bring in at least 25% of the yearly turnover? (35 points if yes)
• Advertising test - Has the business spent over £1,200 on advertising in the past year; entertainment does not count as advertising (2 points if yes)
• Previous PAYE test – During the past year, has the end client engaged you with no major changes to your working arrangements (Minus 15 points if yes)
• Business plan test - Does your business have a business plan with a regularly updated cash flow forecast, and does it have a business bank account, identified by the bank as such and separate from your personal account? (1 point if yes to both parts of the question)
• Repair at own expense test – Would the business have to bear the cost of rectifying any mistakes? (4 points if yes)
• Client risk test – During the past two years, has the business been unable to recover payment amounting to more than 10% of yearly turnover? (10 points if yes)
• Billing test – Does the business invoice for work carried out before being paid and negotiate payment terms? (2 points if yes)
• Right of substitution test – Does the business have the right to send a substitute? (2 points if yes)
• Actual substitution test – Has the business hired anyone in the previous two years to do the work it has taken on? (20 points if yes)

The scores used to assess contractors’ risk profiles are as follows:

• Less than 10 points puts you at high risk of status being challenged
• 10-20 points puts you at medium risk of your status being challenged
• More than 20 points puts you at low risk of your status being challenged

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The start of a new tax year is the perfect time to move payroll providers and last year we broke all our previous records for new load-ups.  We would love to achieve that again this year so, if you are clutching one of these lovely newsletters, howsoever you came by it, we will load you up (April only) for nothing – how good is that?

So, if you want a professional, value for money payroll service and you want a free load-up – call us now for a quote. Thank you!

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The steady march to £10,000 of tax free income by the end of this fixed term Parliament continues with another sharp increase in the personal allowance (up £630). However, higher-rate tax payers are not invited to this particular party – the increase on PA being entirely off-set by the lowering of the standard rate band.

A far more modest move in the annual NI-free threshold to £7,596 leaves this some way off the target of £10k of income without deduction. It is also slipping further behind the tax band – so much for tax and NI alignment then.

In short – if you are a standard rate tax payer you will be approximately a pint and a curry better off a month. If you are a higher rate tax payer – bag of peanuts? Maybe not even that.

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Ruling in favour of Ms Cornes, Judge Blewitt said: “The tribunal finds as a fact that the appellant made all reasonable attempts to arrange a time to pay agreement prior to the trigger date and cannot be held accountable for the delay in HMRC attempting to contact her when she had been told that HMRC would contact her to discuss the matter.”

In a further statement, the judge also said that the separation of Crones and her husband, taken together with her husband’s alcoholism, constituted a reasonable excuse for late payment of tax.  So, while there is not a definitive legal statement of what constitutes a reasonable excuse, HMRC does give some guidance as follows:

• life-threatening illness, for example a heart attack that prevents you dealing with your tax affairs
• the death of a partner shortly before a payment or tax return deadline
• unexpected or unforeseeable postal delays
• important documents lost, through theft, fire or flood, that can’t be replaced in time
• late receipt of your online Activation Code, User ID or password even though you asked for them before the tax return deadline

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RTI is coming soon; find out what it means for you as an employer and what ir might mean for your employees... yawn

The honest answer is everything. The introduction of RTI is the biggest change in payroll since PAYE was first introduced. Under RTI employers will be required to return personal and payroll information about each employee as they make a payment to them. This will allow HMRC to track employees’ individual tax and earnings information real time.

HMRC believe that this will improve the accuracy of tax taken and also provided much more meaningful information by which to assess benefit claimants. In simple terms, it will provide HMRC with a lot more information about your employees than they ever have before. It also means they will know exactly how much you as an employer owes on a month by month basis.

From a practical point of view there is still much to be done. Payroll software developers are busily working on the changes that will have to be made to allow the software to be able to pass this information via the Government Gateway. All employees paid via BACS will be given a unique reference that will be added to the BACS data. This will allow HMRC to cross-match the data. This is a massive change in practices and procedures for employers/payroll agents and there is still much we don’t really know.

HMRC are inviting employers to joint RTI from April of this year with compulsory RTI requirements coming in October. But be warned, HMRC have announced that employers may be required to join before that date.

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As soon as I heard of it, I thought of Charles Dickens creation in Little Dorrit of the “Office of Circumlocution”. This place, created by Dickens in the middle part of the 19^th century, was a world where public information, debtors’ petitions, disputes and settlements stayed for years, unresolved and unmoving, presided over by people who were “altogether splendid, massive, overpowering and impracticable”.   It was a world where the public couldn’t approach other than via the official forms and where “upon my soul you mustn’t come into the place saying you want to know, you know”. Sound familiar?

Okay, so we move the clock forward one hundred and fifty years and find that the Office of Circumlocution has been re-invented by our new Government and called the Office of Tax Simplification without, as far as I can gather, a hint of irony.  Not even a nod in the direction of the esteemed Mr Dickens who surely, as with his ghost of the Christmas To Come, saw the writing on the wall.

So, what is the Office of Tax Simplification? Formed in July 2010, it is made up of tax experts from HM Revenue & Customs and HM Treasury as well as external secondees from the tax and legal professions. The sort of people that you could never describe as “altogether splendid, massive, overpowering and impracticable”?  No, never, of course not; these are accessible people, that live in the real world and understand the day-to-day burdens of running your own business…

And what is their purpose? The Office has been established to provide advice to the Chancellor on simplifying the UK tax system, with the objective of reducing compliance burdens on both businesses and individual taxpayers.

So, over to you; as users of this system – have you noticed a reduction in your compliance burdens? Have you found HMRC to be more accessible, more approachable (with or without the official forms)?  No? Me neither. Still, it is early days; let’s look again in another 150 years.

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• Timescale has moved backwards (what a surprise) likely introduction will be between April and October 2012
• Information will not now be processed via BACS as was initially mooted. Information will be fed in via existing channels being Government Gateway or EDI
• Additional employee information required will be passport numbers for those without NINOs and also disclosure about how many hours each employee works (likely to be in bands)
• The have retracted the requirement to include details of holiday pay and strike pay due to adverse response in consultation.

The burning questions that have not been addressed by HMRC are what exactly will they do with all this extra information and who and when will it be processed into anything usable?

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The proposals are based around the concept that a profit and loss account with accompanying balance sheet are somehow burdensome to produce. So instead, small limited companies would file a simplified trading statement put together on a cash (not accruals) basis. This would be accompanied by a statement of position – which we think will basically be a list of assets and liabilities – and a simplified annual return. In order to make this system work however, there would be a requirement for returns to be filed within 12 weeks of the year-end (currently you get 9 months) and that all such entities will have to have the same year-end (date not yet determined).

Surely, this so called reduction in red tape only increases the burden on a whole host of small businesses – namely accountants who will have to introduce new procedures for cash reporting and no doubt buy more software add ons not to mention doing 12 months of work in 3. Like every other accountant out there, my training was based around certain principles; double entry book-keeping, balance sheets that fitted together with a P& L account and the accruals concept – cash reporting means nothing to anyone. You may as well do away with any reporting requirement as introduced this.

Incorporating a business comes with a bundle of burdens and responsibilities – another core plank of my training – if small entities feel this is too burdensome then don’t incorporate.

If the Government really want to help small businesses reduce red tape they should look at Money Laundering Regs, Data Protection, employment regulation and health and safety requirements. And don’t get me started on the new PAYE burdens – online filing, and coming soon NEST and real-time information. Clueless.

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