Recent research of 1450 business decision makers has revealed that 84% believe that chartered accountants have the skills and expertise to make businesses thrive.

81% of respondents are confident in the ability of accountants to navigate a new operating environment in the future with 70% see them as credible spokespeople on societal issues, such as sustainability, diversity, equality, and inclusion.

Chartered accountants were placed as the most trusted finance professionals, ahead of bankers, financial advisers, economists, and insurance brokers. They were placed alongside doctors, nurses, and teachers as ‘the most trusted professionals’.

Free and subsidised meals – hospitality sector

Where a hotel or restaurant provides staff meals during their working hours, there is no tax charge if the meal is provided in either a canteen or at the workplace and the following four conditions are met:

The conditions are:

• that the meal provided is on a reasonable scale.
• that all the employer’s employees or all employees at one location can obtain either a free or subsidised meal or a free or subsidised meal voucher or token;
• that if the meal is provided in a restaurant, dining room of a hotel or other similar business, that a part of that area is designated for staff use only and the meals are taken in that area; and
• that the meal is not part of a salary sacrifice or flexible remuneration arrangement.

If all the above conditions are met, then tax relief can be obtained on a free or subsidised meal in the workplace.

If the conditions are not met, then the benefit of the free or subsidised meal must be reported on a P11D or the benefit processed through the payroll and the employer will have a Class 1A National Insurance liability to pay on the benefit.

The exemption will also apply to a meal provided to an employee by a third party. For example, if the employee is working at the premises of a third party on a temporary basis and that employer provides free or subsidised meals to all their employees.

Businesses in ‘significant financial distress

A recent study by Begbies Traynor identifies that 562,550 businesses in the UK were in ‘significant financial distress’ in the third quarter of 2021. This is just one assessment and is made on the basis of recorded debt recovery actions by creditors. As such it probably far underestimates the number of businesses under extreme financial pressure.

Despite the late summer economic boom, systematic problems remain, and many businesses will be encountering difficulties in paying back government Covid-19 loans. Add to this other issues such as inflation, energy costs, and labour availability, then you have a huge number of struggling businesses in a challenging trading environment.

There are likely to be significant geographical differences but it may be some time yet before we know the true extent of the problem.

It is also clear that HMRC is taking an ‘increasingly aggressive line in chasing debts’ particularly to those who have defaulted on time to pay arrangements.

Multi property buy to lets and CIS

CIS will apply to any businesses which spends over a certain amount on construction operations.

The amount that must be spent to warrant inclusion in CIS is £3m in any rolling 12-month period, with effect from 6 April 2021 (previously £1M over a 3-year period).

There are certain exceptions where the properties are used for the business itself.

The types of property included in this exemption are:

• offices;
• warehouses;
• nursing homes;
• leased property used by the business’s group, including property leased by one company to another within the same group; and
• any other facilities used for the business.

Incidental use of the property by third parties does not invalidate the exemption.

205% rise in prosecution of directors.

This trend is likely to be related to the Covid-19 support schemes, Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) all introduced to support struggling businesses.

Due to the time pressure to get support in place and volume of demand, banks failed to perform their normal due diligence procedures which made the schemes more susceptible to fraud with the National Audit Office stating that 60% of bounce back loan claims could be fraudulent or defaulted on.

There are reports of companies being incorporated by individuals purely to take advantage of the government schemes.

HMRC to contact SEISS claimants

HMRC is now writing to those who made a claim for one of the first three SEISS grants (which ran from March 2020 to January 2021), but who have either not submitted a 2019/20 return or whose return did not report income from self-employment or a partnership.

Tax data submitted by online platforms

There are currently proposals to require digital marketplaces to report sellers’ incomes to HMRC.

In the Spring Budget 2021, the Chancellor confirmed that the UK would be adopting the OECD’s reporting rules for digital platforms, which require websites and apps providing online sales platforms to report the incomes of sellers to the relevant tax authorities.

The application of the rules raises many concerns and could lead to considerable burdens being imposed, particularly on smaller operators.

There are considerable complexities, and this will add to the difficulties operators will experience. For example, operators will need to determine the residence status of sellers. Providing sellers with guidance on their tax obligations will inevitably lead to mistakes and misleading information being given.

Under the proposals, digital marketplaces must report income arising in a calendar year to HMRC and the sellers on 31 January following the year end. The timing of that data may not be entirely compatible with helping either party to manage their respective responsibilities such as sellers needing full data to complete their own tax returns. Data for a calendar year does not align with the tax year.

Other problems arise such as income received at a different time to when the goods are delivered or the service is performed and also that refunds are commonplace.

This means that there may be mismatches across different quarters or even different tax years which could cause tax authorities to raise unnecessary enquiries when the information they receive does not match up with that reported in sellers returns.

MTD phase 2

The next phase of Making Tax Digital (MTD) comes into play from April 2022 when the VAT filing regime will be extended to all VAT registered businesses.

After April 2022, at the end of each VAT quarter, businesses need to file their VAT returns using MTD-compatible tools and one of the trickiest technical issues during the first phase of MTD for VAT concerned the need to maintain “digital links” throughout the transaction reporting chain.

HMRC stipulate that there should be no re-keying or cutting and pasting of spreadsheet data into VAT reporting tools. Spreadsheets are still accepted as digital records and cash daybooks can be compiled using old fashioned paper and pen, but once the totals are entered into a digital system, they must be passed electronically through to the VAT return to maintain their integrity. 

Experience from the first wave confirmed that capturing transactions via smartphone snaps and bank feeds into cloud accounting software is the most scalable and economic way to bring clients into MTD. If you want to take advantage of these, get in touch.

The new points based MTD penalty regime will commence at the same time in April 2022. Starting from 1 April 2022, you will incur a points penalty for filing an MTD submission late. The quarterly updates will incur a penalty point, and a £200 cash charge will be triggered if you rack up too many points within a two-year period.

QuickBooks Desktop comes to an end in the UK

On Wednesday 20 October, Intuit emailed QuickBooks Desktop users to inform them, “We are writing to let you know that sadly we have taken the decision to discontinue QuickBooks Desktop and Desktop Support for our UK customers.

“We won’t be launching a 2022 edition of QuickBooks Desktop in the UK, but you will continue to receive full support until 31 January 2023.”

The decision is part of a strategy to prioritise the development of cloud applications that will help QB customers “future proof their business” as the wider world shifts to digital services. 

No QuickBooks Desktop UK versions will work after 31 January 2023 and you will need to go to QuickBooks Online or another software and export all your data out of your desktop version.”

An update to the 2021 edition will be released in the coming months to help customers download the data,

If you are currently using QB Desktop and want to move to QB Online, get in touch and we nay be able to offer you a good deal.

Questions?

If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.