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June 2018

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To June’s Tax Tips & MYOB News.

Have you given your employees their end of year pay summaries (P60s)? The deadline for these has now passed. Let us know if you have mislaid them for your staff.  If you would prefer that the payslips are sent direct to your employees in the future please let us know. 

June 2018
· MTD – Our Solution
· GDPR and email subscribers
· IT contractor wins IR35 case
· Using tax to keep employees healthy
· June questions and answers
· June key tax dates
MTD – Our Solution
Under Making Tax Digital (MTD), HMRC are planning for VAT to be accounted for entirely without human intervention.  They have a fantastical idea that VAT can be electronically derived.  HMRC are removing the VAT portal so you will not be able to key your VAT return into their system directly.  Here we describe some of the complexities that have to be accounted for – and our plan for a working solution for MYOB and AccountEge users.

The Problem with HMRC’s MTD Plans
The problem is that VAT is not simply 20% of the sales, take off 20% of the purchases.  It is much more sophisticated.  HMRC think that this can be administered within one piece of software.  Alternatively they want it processed within a spreadsheet and a second piece of VAT filing software.

Here are some of the complexities, HMRC expect us to make to our our VAT returns:

    Partial Exemption – based on different sectors of income/ expenditure
    Partial Exemption – based on % allocation
    Partial Exemption – based on both
    Second hand margin scheme
    Flat Rate Scheme %ge calculation
    Flat Rate Scheme Extra Capital equipment input tax recovery
    Reduction in VAT reclaimed on goods under the Capital Goods Scheme
    Retail Schemes
    Applying place of supply rules to declare imports (eg Google adwords, software from abroad)

Mandatory Adjustments have to made to the raw figures for:

    Reverse charge additions to both sales and purchases
    50% disallowed input tax on rental of cars
    100% disallowed input tax on car purchase (but not vans and operational vehicles)
    Agency VAT
    100% VAT invoices for imports
    Group member additions
    Addition of Fuel Scalar Charge (as a sale)
    VAT Rebates disallowed for private use
    Corrections for errors in a prior VAT accounting period
    Coding errors in your books in the current VAT accounting period
    Bad debt relief
    Changes between schemes within a period
    Cash accounting adjustments

Under MTD, HMRC will expect you to submit your VAT return in an approved VAT submission software.  They expect smaller businesses to make the amendments for any of the above directly inside their bookkeeping software.  But of course that will prove to be impossible.  As soon as there is a complexity HMRC’s plan is that if we will need a spreadsheet to make the calculation.  But you then need to feed the results of the spreadsheet into a third piece of software before transmitting to the HMRC.

A Workable Solution
It will be very difficult  to get any bookkeeping software to meet the complexities described above.  At the moment HMRC’s plan is for simpler businesses to backfeed any necessary adjustments back into the bookkeeping software to then allow the bookkeeping software to magically make the quarterly submission for you.  Even if this functionality is available in the software it will present bookkeepers with some very unusual problems.

We are designing a solution to avoid all this.  We anticipate taking responsibility for all our clients’ VAT filings, much as we currently do the declarations for your PAYE/NI/Student Loan and Pension contributions.  We are working with a software house to allow output data from the books to directly import into a specialist VAT filing software.  For those using MYOB or Acclivity AccountEdge this should be manageable.  The specialist software will then be used quarterly (or Annually for those on Annual Accounting) to meet the HMRC’s VAT filing requirements.  While we are going through the process of transforming the VAT reporting we shall need to make changes to your bookkeeping processes.  After we move to MTD we will need regular access to your data…. which we have arranged with most of our clients already.

Delaying the problem
For many businesses quarterly VAT Periods align with the tax year.  Then under MTD your first ‘MTD update’ is likely to be 01/04/19 to 30/06/19 and this would have to be submitted by 31/07/19.

The simplest way we can reduce our joint workload is to delay your admission to HMRC’s scheme.  We have researched various options and can see that if you move to VAT Annual Accounting and ask for a year end of  28/2/19 then you can delay your first compulsory MTD until April 2021.  See the table below:
the simplest way we can reduce our joint workload is to delay your admission to HMRC’s scheme.

Current Annual Accounting Period           1st VAT MTD report        Submitted to HMRC by
1/7/17 – 30/6/18                                               1/7/19 to 30/6/20                             31/8/20
1/8/17 – 31/7/18                                               1/8/19 to 31/7/20                             30/9/20
1/9/17 – 31/8/18                                               1/9/19 to 31/8/20                             31/10/20
1/1/18 – 31/12/18                                             1/11/19 to 31/10/20                        31/12/20
1/3/18 – 28/2/19                                               1/3/20 to 28/2/21                             30/4/21
1/4/18 – 31/3/19                                               1/4/19 to 31/3/20                             31/5/20
1/5/18 – 30/4/19                                               1/5/19 to 30/4/20                             30/6/20

By 2021, three years from now, the HMRC’s crazy scheme will hopefully have resolved itself.  Or Labour will be in power and Corbyn will follow through on his promise to abolish it for smaller businesses.  And the Making Tax Digital panic will have died down because we’ll be panicking about something else!
GDPR and email subscribers
IT contractor wins IR35 case top
We are all being inundated with emails from organisations asking us ‘This can’t be goodbye?, we don’t want to see you go’

Do we actually need to contact all the subscribers on our email lists to check if they want to continue to receive our emails?

The Information Commissioner’s Office (ICO)  advice is: if you want to contact individuals by email
you can only email or text them if they have specifically consented, or if they bought a similar product from you in the past and didn’t opt out from marketing messages when you gave them that chance.  If subscribers fall within these groups you don’t need to specifically ask them if they want to stay on your email lists.

You must include an opt-out or unsubscribe option in the message.
The confusion over HMRC’s application of the IR35 legislation continues after an IT contractor successfully appealed to the First Tier Tribunal (FTT) against a tax charge of some £26,000 in connection with a project he was working on with the Department for Work and Pensions (DWP).

In Jensal Software Ltd v HMRC Commrs [2017] TC 00667, the IT contractor, Ian Wells, successfully appealed a tax bill relating to a succession of contracts during the 2012/13 tax year. Wells provided his services through his limited company, Jensal Software Ltd, to the Department of Work and Pensions (DWP), via recruitment agency Capita.
Read More
Using tax to keep employees healthy
The adverse effects of being inactive can of course have a major impact on health and wellbeing. According to a recent government report, workers can spend up to three-quarters of their day sitting down, which contributes to a range of preventable health conditions, including the two leading causes of workplace absence: back injuries and stress, depression or anxiety. In 2016/17, 1.3 million workers suffered from work-related ill-health, which equated to 25.7 million working days lost. This has been estimated to cost £522 per employee, and up to £32 billion per year for UK business. With this in mind, HMRC have recently been reminding employers that there are certain tax breaks on offer for those who promote health and fitness for their workers.
Read More
June questions and answers top
June key tax dates top
Q. I use my own car for business. My employer reimburses me 20p per mile. In 2017/18 I travelled 15,000 on business. I am a basic rate taxpayer. Can I claim any tax relief for the use of my car? Answer

Q. I am an employee and am liable to income tax at the higher rate. I also receive income from a rental property that I own. My wife does not work. If I instruct the tenants to pay the rent directly to my wife, will that absolve me from declaring it on my own self-assessment return and avoid paying higher rate tax on it? Answer

Q. I am a VAT-registered sole trader. What is the VAT position if I buy a new car for £10,000 and part-exchange my used van for £4,000? Answer
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/6/2018.

Need Help? top
New Clients Welcome top
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