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September 2017

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To September’s Tax Tips & MYOB News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

Please note that all our articles are written with our Business Companion Clients in mind.  If you would like to find out more about our comprehensive service have a look at our website.  Our charges start at just £56 per month* + VAT.
*for Yorkshire/ Lancashire including a 20% good books discount
September 2017
· Company Changes must now be Reported within 28 Days
· Double Glazing Salesman was Self-Employed
· Changes to Formatting of End-of-Year Accounts: FRS 102/FRS 105
· Employment of Directors
· September questions and answers
· September key tax dates
Company Changes must now be Reported within 28 Days top
Double Glazing Salesman was Self-Employed top
From the end of June, the Companies House Persons of Significant Control (PSC) regime has been tightened.  Now, any changes to a Company’s PSC information must be notified within 28 days as opposed to annual reporting via the Confirmation Statement (formally the annual return).

These changes are necessary in order for the UK to comply with the recent EU Fourth Money Laundering Directive (4MLD) which includes measures to prevent money laundering and terrorist financing.

Since June, any changes to existing PSC details (statements, residence, residence address etc.) must be reported to Companies House within 28 days of them occurring. Changes should be reported via the new PSC01 to PSC09 forms or through Companies House Webfiling. The Confirmation Statement will still include details of PSC information but will be used to confirm that the current information held at Companies House is correct. 

We can update the records held at Companies House for you through Webfiling.  But it is your responsibility to inform us immediately of changes to your registered office, share capital, shareholdings, appointments and terminations of directors.  Although the penalty regime has been relaxed up until now, this is likely to be tightened up in the future.

Employment status tax cases often make the headlines in the professional press and the June 2017 case of Tomlinson was no exception. In this case, the First-tier Tribunal found that a double glazing salesman (Mr Malcolm Tomlinson) was self-employed and not an employee as he had claimed.

As with most employment status cases, this case focused on the details of the terms on which Mr Tomlinson was engaged with the company.

Many facts of the case pointed towards a self-employed status, including the fact that there was no written contract in place and Mr Tomlinson was not required to give notice of leaving. He was paid on a commission-only basis and did not receive holiday pay, sick pay or pension contribution payments. He provided his own car, mobile phone and other equipment. However, many other factors emerged which tended towards employed status. These included authority to sign initial customer contracts on behalf of the company; an expectation for working in the company showroom approximately two days a week; an expectation to complete a holiday request form; appearances in company advertisement; and an expectation that Mr Tomlinson would not work for competitors.

Read More

Changes to Formatting of End-of-Year Accounts: FRS102/FRS105 top
We are now working with a new style of accounts. There is a series of new legal formats for the accounts that we are preparing for you, our clients.  Most of our smaller incorporated clients will now be reporting under one of two new Financial Reporting Standards.  As these look quite different to your previous accounts we are explaining here the main changes.  We hope you like the new format.
  • The common theme is that the notes are radically simplified.  The declarations are generally simplified and yet also extended in other directions:
  • There are tighter requirements to report financial Instruments including director loans.
  • Staff costs must include accruals for forthcoming funding to cover Defined Benefit Scheme funding shortfalls.
  • The Profit and Loss is replaced by a Statement of Income and Retained earnings which includes the dividends issued on the face of the accounts to show reconciliation to the closing reserves.

A) FRS 105 – Micro entities: Commercial companies only :

To use this companies must first qualify as “small” which is basically that the turnover is not more than £632k pa and no more than 10 employees.  FRS 105 accounts appear in a highly rigid format; there are no accounting policies and usually no notes.  What is included in a micro-entity set of accounts?
1.  You are only required to disclose the names of the director and the fact that they have taken advantage of small company’s exemptions in preparing the report.  Additional information can be added at your discretion, eg the company’s principal activity.
2.  There must be a statement by the company claiming exemption from audit as a small company.  The accountants report will follow the existing format.
3.  A Statement of Income and Retained earnings in a strictly dictated format which includes the dividends issued on the face of the accounts to show reconciliation to the closing reserves.
4.  A balance sheet at the reporting date which can be in one of two permitted formats, must have footnotes included at the bottom which cover:
    a)   Directors’ benefits: advances, credit and guarantees; and
    b)   Guarantees and other financial commitments of the entity

No other notes are given.  For example we used to have to make careful declarations about director borrowings or loans under ‘Related Parties’ notes. FRS 105 does not contain a section on related party disclosures. The only related party disclosures required are given in the footnote on the Balance Sheet. 

There are two major changes on the actual figures: A micro-entity is not required to account for deferred tax on timing differences.  Therefore we shall cease doing this.  We shall often be able to move to a less conservative depreciation policy as a result. Secondly investment property plant and equipment assets must be measured at cost less accumulated depreciation and impairment – there is no option to record assets at valuation. 

B) FRS 102 1A: Commercial businesses
Meanwhile our larger clients and holding companies are receiving accounts to a more detailed standard – FRS 102.  These have complex notes, policies and discretion to allow deferred tax and investment properties valuation.  Our bigger clients are on FRS102 – all the following are required:
  • Full directors report
  • Full accountants report
  • Income or P&L statement, which is now called an income and reserves statement, with dividends showing reconciliation to funds
  • Balance sheet with signature at Balance Sheet date.
  • Accounting policies
  • Notes to the Balance Sheet
  • Related party disclosures
  • Deferred Tax if this is provided for
The notes now have to cover matters like related parties, charitable activities, funds movements and personnel.  Particular changes have come in for reporting pension liabilities, concessionary loans, financial instruments, staff holiday accrual, use of fair value on investment property and stock valuations.

No other notes are required.  While notes can be added on a voluntary basis our policy will generally be to not do this. The declarations about director borrowings or loans will still appear under Related party disclosures under FRS 102.  Deferred Tax remains an option under FRS 102 1A but SAL will tend to set policies which allow us to avoid including this.

The option to file abbreviated accounts has gone.  ‘Filleted accounts’ can be submitted to the Companies House rather than full members accounts. .  You will need to write to us specially to ask for ‘filleted’ accounts to be sent instead.   However as eventually your business might have to be sold I would suggest that you consider revealing the limited details in 3 above to Companies House.  The only problem is that you might not want your customers to realise the dividends that you wish to take.  

C)  Charities:
Charities cannot benefit from FRS 105.  They have to use FRS 102.  No abbreviated or filleted accounts can be submitted to the charity regulators.  The new structure will be:
1.   Full director’s report: this needs to describe the charity’s ‘public benefit’, discuss risks and describe the Board’s attitude to reserves.  
2.   An independent examination / accountant’s report: It is unlikely that smaller charities will have an audit.  However there must be a statement by the company claiming exemption from audit as a small company.  The accountants report will follow the existing format.
3.   An income statement called a Statement Of Financial Affairs
4.   A statement of financial position ie a balance sheet at at the reporting date
5.   Comprehensive notes

There are changed requirements for the actual valuations and declarations are in line with the notes under B above.

D)  Cooperatives:
Similar to Charities, Cooperatives have to use FRS 102 rather than FRS 105.  No abbreviated / filleted accounts can be submitted to the mutuals / cooperatives regulators.  As before the requirements in B still apply.  There are particularly harsh requirements on those coops which wish to avoid an audit.

E)  Conclusion
Smaller clients should rely on the reports in their accounting system to plan their business, not the final accounts alone.  The new formats are simpler to read… but reveal less information than the full final accounts. 
Employment of Directors
September questions and answers top
A director should generally be taxed as though on an employment contract, whether there has been a contract issued or not. There is an exception for a Director to be taxed as an ‘office holder’ and therefore self employed. Self Employed Directors will have to meet the following conditions, which are tough unless they are essentially acting as trustees (perhaps of a Coop or charity):
Office Holder Criteria

But more usually these criteria are breached.  Directors usually have operational duties that exceed those terms. This is also the case with a contractor working in an organisation which receives public funding and therefore is subject to ‘Off payroll working’ regulations covered in our Jan newsletter.

For these reasons self-employment is not a safe option for payments to either directors or public sector consultants.  It doesn’t really matter if the payments are only occasional.  We recommend that the trustees/directors become employees. This avoids the possibility of a PAYE clawback.  You should make this change to employment, even if self-employment has been the practice in the past. 
Q. I have two small businesses which are treated as a group for VAT purposes, so we only submit a single VAT return covering both entities. Are we eligible to use the Flat Rate Scheme? Answer

Q. I am a sole trader and I run my business from home. I am using the cash basis for preparing my accounts for tax. Can I claim expenses for running my business from home? Answer

Q. I work for a sandwich delivery company and I use the company’s electric van to do my round each day. I take the van home with me at night and I am allowed to use it in the evenings and at weekends if I so wish. What is
the currently tax position for electric vans? Answer
September key tax dates top
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/9/2017

30 – Closing date to claim Small Business Rate Relief for 2016/17 in England
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

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About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Clearbooks.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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