HMRC refuses to give pay details to tax agents from 1st May 2017
From the 1st May 2017 HMRC will change its current process of being able to confirm individual pay and tax details to tax agents, who ask for this information over the phone.
So, why are they doing this and what’s the process moving forwards? Well, HMRC says that the change to the existing process is to reduce the call handling costs and timing and to address security for taxpayers. Currently, HMRC receives 2.7 million telephone requests for taxpayer pay and tax details each year, and these are not just for employed taxpayers who are within self assessment. A great number of the calls are from high volume repayment agents.
The security concerns have been raised due to callers impersonating the taxpayer. In addition, there are instances where the taxpayer has not been aware that they have signed an authorisation form 64-8 and/or a deed of assignment for tax repayments.
When the taxpayer contacts HMRC directly, they will be given the requested details over the phone, or they will be directed to access their personal digital tax account.
Under the new process – even where the agent IS authorised to act, that agent will not be able to deal with HMRC directly on the taxpayer’s behalf.
From the 1st May, there will be a brief recorded message when using the Agent Dedicated Line to explain the new procedure. HMRC will also write to tax agents notifying them of the change, and will announce the new process in the next edition of Agent Update.
Digital Solutions To Help Agents
So, in response to “HMRC refuses to give pay details to tax agents”, from late summer 2017 HMRC expects to have a digital solution in place to allow authorised tax agents to access pay and tax details for clients, without making a phone call. It’s not clear if this solution will be available to all tax agents, or if the agent will first have to pass a new security clearance to access the data.
HMRC has said that all new data access solutions will only be provided as APIs.
So What Does This Mean For Our Clients?
Basically this means that more correspondence will be coming directly to our clients, which will then need to be forwarded to us as we will not receive copies from HMRC. Furthermore, a greater responsibility will fall to our clients, as we will need to receive the correspondence from HMRC in a timely manner. Hopefully we will also be able to access the new Digital Solution mentioned above but the timescale for this is still yet to be delivered.
This new process begs the question as whether the proposed changes breaks the spirit of Your Charter (the taxpayers’ charter), which says at point 1.5:
“We’ll respect your wish to have someone else deal with us on your behalf, such as an accountant or a relative. To protect your privacy, we’ll only deal with them if they have been authorised to represent you, and we’ll deal with them courteously and professionally.”
VAT flat rate scheme advantages restricted
Last week, the Chancellor announced in the Autumn Statement that many contractors and other service providers will lose the cash benefit of the VAT Flat Rate Scheme from April 2017.
Flat Rate Scheme
The Flat Rate Scheme (FRS) – is used by many small businesses to make their VAT reporting simpler. In addition, many businesses also gain a cash advantage from using the flat rate scheme. However, this advantage is to be cut back significantly from 1 April 2017, as announced by the Chancellor. The Flat Rate Scheme will continue, although many businesses will not find it cost effective to use.
Currently, when using the Flat Rate Scheme, the business ignores VAT incurred on purchases when reporting VAT payable – with the exception of capital items which cost £2,000 or more. The process is to simply multiply the gross turnover (including VAT charged at the normal rates) by the FRS percentage according to their specific trade sector.
This Flat Rate Scheme percentage is taking into account the amount of VAT likely to be incurred on business expenses.
The common percentages used by service-related businesses are:
- Accountancy and legal services 14.5%
- Journalism or entertaining 12.5%
- Computer or IT consultancy 14.5%
- Business services not listed elsewhere 12%
- Estate agents and property management 12%
- Management consultancy 14%
If the business incurs minimal expenses, in a sector with a low FRS percentage, it will pay less VAT to HMRC under the FRS than it would outside the scheme.
Many businesses register for VAT voluntarily prior to their turnover reaching the VAT threshold, in order to use the Flat Rate Scheme and gain the cash advantage.
Abuse Of The Flat Rate Scheme
It is believed by the government that many small businesses have abused the Flat Rate Scheme by using it as the law intended. In response, it is changing the terms of the scheme to make the scheme less attractive, and to reduce the cash advantage enjoyed by service-related businesses.
From 1 April 2017, a small business will be required to use the Flat Rate Scheme percentage of 16.5% if it is a “low cost trader”. This is more likely to adversely affect businesses in all of the trade sectors listed above, and quite possibly many other similar businesses, as 16.5% of the gross turnover is equivalent to 19.8% of the net leaving virtually no credit for VAT incurred on purchases.
Low Cost Trader
A Low Cost Trader is a business whose expenditure on goods only is less than 2% of its gross turnover. Or if it is more than 2% of the turnover, the amount spent on goods is less than £1,000 per year. Any expenditure on; capital items, motor expenses, or food or drink for consumption by the business, is ignored when working out the 2% or £1,000 threshold.
This emphasis on ‘goods’ will discriminate against businesses who incur VAT on services such as: rent, software licences, IT support, digital journals, sub-contractors, telecoms etc.
In VAT terms, a service is anything which is intangible, or where the cost relates to a tangible asset, it is the temporary use of that asset – such as hiring.
What To Do Next
We will need to review the use of the Flat Rate Scheme for every client who currently uses that scheme.
Any of our clients who are trading below the VAT threshold of £83,000 may wish to deregister from VAT with effect from 1 April 2017. Businesses who are already trading above that threshold may need to withdraw from the FRS from the same date.
Please Note that any attempt to invoice in advance for services to be provided on or after 1 April 2017, to capture that invoice within the FRS, will be treated as if the invoice was issued on 1 April 2017
For further information regarding the restriction to the VAT Flat Rate Scheme contact Maze Accountants on 020 8643 9633.
Monday Morning Motivation
Hey Folks, how about this for some Monday Morning Motivation?
“To Be Successful, The First Thing To Do Is Fall In Love With Your Work.”
A lot of the general population say that they hate Mondays and that the weekend is not long enough! But that is mainly because they have not “fallen in love with their work”. Or quite simply they are doing a job that they are not interested in. It just doesn’t “float their boat” or get them going. Do you jump out of bed on a Monday morning, keen to get to work?
As the quote above says, to be successful you need to love what you do. And if you don’t love what you do, then you won’t have the passion and you won’t have the drive to make it a success.
Many people start a business because they have a passion for a hobby, helping the local community or another reason. It doesn’t really matter what the reason is behind starting the business. The key ingredient is they have PASSION for what they do. If you are passionate about your business – your products or services that will give you drive to make your business a success.
Of course, it is always sensible to make sure that it is a viable business. And Maze Accountants can help you with that. We can help you work out your costs – overheads, cost of sale, manufacturing costs, packaging and so on. And that’s where our passion lies – we really love helping new businesses get off the ground and to become a successful business.
We Love What We Do!
It’s simple, we love what we do – and – if you love what you do, we can help you to love it more (is that even possible?) by guiding you to a profitable business model.
Our clients use us because we are qualified, knowledgeable, serious (yet fun) and we will change your mind about stereotypical accountants. Because we are not stereotypical accountants. We still get the job done but we also have fun – and that rhymes. So why not find out why it “pays to be with Maze” – that also rhymes.
This was written at just after 9am on a Monday morning. Why? Well, I was thinking about Monday mornings and how the majority of people appear to respond to Monday mornings. Negatively!
We all have bills to pay and whilst the majority of people don’t really look forward to Monday mornings, they know they’ve got to get to work, to earn the money, to pay the bills.
So, how could you change your perception of Monday mornings? How could you be passionate about your work? What’s your drive and motivation for getting out the door and getting to work?
Do you need some help with your Monday Morning Motivation – or more specifically your business accounts (no matter what sort of mess they may be in) then you are more than welcome to contact Maze Accountants on 020 8643 9633.
We are based in Banstead, Surrey – previously in Sutton and we look after many local individuals and businesses. Our range of accountancy services are listed here.
A Quick Overview of the Autumn Statement 2016
So, we’ve been waiting in anticipation for Philip Hammond MP to announce the Autumn Statement as Chancellor of the Exchequer. And in order to get the information out as soon as possible, we have got a quick overview of the Autumn Statement 2016 in a snapshot below.
And how does the Autumn Statement affect the British population? Which changes have been put forward? If you’re keen to know – but can’t actually be bothered to read all of the detail, here is a quick overview of the Autumn Statement 2016 here for you.
And the main point that everyone wants to know is “Will We Be Better Off… Or Worse Off?”
Here are the “Winning” points:
- Savers A new savings account from National Savings & Investments is to be launched. It is expected to pay 2.2% over a three-year term on a maximum balance of £3,000. Details will be announced in the Budget next year, which will now take place in the autumn. It was announced that Autumn Statements will be moved to the spring and will involve “no major fiscal changes” except in response to unexpected circumstances. The annual ISA allowance will rise to £20,000 in April next year.
- Pensioners The “triple lock” on the state pension will remain in place.
- Those Aspiring Home Owners £7.2bn will be put towards support of the construction of new affordable homes, including spending by housing associations. A new £2.3bn Housing Infrastructure Fund will be established for infrastructure for up to 100,000 new homes in high-demand areas. The Help to Buy “equity loan” scheme and the Help to Buy ISA will remain.
- Taxpayers The tax-free personal allowance is raised to £12,500 and the threshold for higher-rate tax to £50,000 as per previous announcements. After 2020, the thresholds will rise in line with the consumer prices index. The National Insurance threshold for employees and employers will be aligned at £157 a week. There will be no cost to employees. Class 2 National Insurance contributions will be abolished in April 2018, which will simplify National Insurance for the self-employed, as mentioned in the Budget.
- Workers On State Benefits The amount of benefits that claimants can keep while in work is to be increased. More than £1bn will be diverted into the welfare system in a move designed to ease the impact of previous cuts. The Chancellor said the Government had no plans for further welfare savings measures in this parliament beyond those already announced.
- For Motorists A clampdown on whiplash claims will save each driver £40 on premiums. Fuel duty is to be frozen, saving the average driver around £130 a year compared with pre-2010 plans.
- Employees Earning Minimum Wage The National Living Wage will rise from £7.20 an hour to £7.50 from April 2017, and steps to ensure that people are paid the minimum.
- Parents The Chancellor confirmed that the Government would begin to roll out tax-free childcare across Britain in early 2017. He said this would represent a saving of up to £2,000 per child.
- Tenants Letting agents’ fees charged to tenants, which currently add as much as £500 to the cost of renting a home, are to be banned.
- Employees Who Are Made Redundant The first £30,000 of termination payments will remain tax-free. There had been fears of a reduction. As announced in the Budget, from April 2018 termination payments over £30,000, which are already subject to income tax, will also be subject to employers’ National Insurance contributions.
- Pension Savers The Government will shortly publish a consultation on options to tackle pension scams, including banning cold calling in relation to pensions, giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse “small self-administered schemes”.
And the “Losing” points?
- Savers Using ‘Drawdown’ Pensions The annual allowance for saving into a pension for those who have started to “draw down” their pension savings will be cut to £4,000 from £10,000.
- Buy-To-Let Investors While tenants will benefit from the removal of upfront letting agents’ fees [winning point], landlords can expect to be worse off, if they now have to meet the costs of various agents’ services such as credit and immigration checks.
- Tax Avoidance Schemes To tackle tax avoidance, the Government would “strengthen sanctions and deterrents” and will take further action on disguised remuneration tax avoidance schemes.
- Employees Tax Perks The rules that govern “salary sacrifice” – buying services from your pre-tax income through your company are to be tightened. However, saving for your pension this way is not affected by the change in the rules. Arrangements relating to childcare, the Cycle to Work scheme and ultra-low emission cars are also unaffected.
- Insurance Policyholders Insurance premium tax (IPT) is to rise from 10% to 12%.
- House Buyers There has been no change to the stamp duty regime. The amount raised for the Exchequer from stamp duty is expected to rise from £11.3bn to £16.8bn by 2012-22.
- Foreign Pensions Tax treatment of foreign pensions will more closely mirror the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. Currently there are opportunities to extract money without paying UK tax.
There you have it, a quick overview of the Autumn Statement 2016.
But what about the Autumn Statement 2016 from a business perspective?
Here are the key headline points for businesses:
- Corporation Tax To Fall To 17% Corporation tax will continue to fall to 17% by 2020 and this is in-line will measures introduced in Budget 2016. Hoping to help benefit over a million businesses, this rate will be the lowest of any G20 nation.
- £1bn To Be Invested In Full-Fibre Broadband And Trialing 5G Networks Over £1bn will be invested in digital infrastructure in the hope to make the UK a “world leader in 5G”. From April 2017, 100% business rates relief will be provided for new full-fibre infrastructure for a five-year period.
- £400m To Be Invested In Growing Innovative Firms The government, through the British Business Bank, will be investing £400m into VC firms to support scale-ups and smaller businesses.
- UK Export Finance Capacity Doubled UK Export Finance capacity was doubled – with the aim to make it easier for British businesses to export and receive insurance from the private sector.
- Supporting Management Skills For Businesses Sir Charlie Mayfield’s review of business productivity will be implemented, with the government providing £13m to help businesses improve their management skills.
What To Do Next?
Want to know how some of these changes may affect you and your business? We can give you advice on how best to adapt to the changes as outlined in the Autumn Statement. Schedule a discussion here or call us on 020 8643 9633.
Here’s a link to the announcement from HM Treasury