Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
Is your accountant looking stressed?
40% of chartered accountants have admitted to feeling too emotionally drained to work, according to the result of new research which shows many feel isolated and unable to speak about their feelings.
The study conducted by CABA, the wellbeing charity for chartered accountants, paints an alarming picture of stress levels across the profession. It also highlights that COVID has aggravated an already worrying mental health pandemic that shows little sign of abating.
The study found that 30% of the respondents had recently felt isolated, while more than half had felt emotionally challenged. A further 21% say they either never or rarely feel optimistic about the future.
When asked the cause of this distress, one in three cited either their work, career or studies, while one in five put it down to lockdown and the impact of COVID-19. A further 14% put it down simply to feeling constantly under pressure.
We all have different ways of coping with stress and anxiety. However, there are also times when we find ourselves not coping as well as we might like.
This is an interesting study but does not seem to fit with the accountants that I know. Indeed, it was predominantly a survey of accountants south of the border, which may help to explain some of the results.
Accountants are Attractive and Seductive
Since the 1990s, there has been a growth in the availability of academic research on the image of the accounting profession in society as seen through popular culture and media. Films, novels, advertisements, song lyrics and comic books have all become the focus of study.
Each image of the accountant is interesting in the way it reflects that moment in time and the prevailing perception of the profession.
A recent study of changing images of accountants since the 1940s shows that since the 90s the accountant has become an attractive and seductive character, in contrast to the previously caricatured stereotype of the stale or uninviting accountant.
In France, the research discovered that the accountant is presented as someone who is good-looking, talented and has affairs, being highly appealing to members of the opposite sex.
Previously accountants in pop culture had quite a narrow focus, but now they have more of a full, well-rounded life, with friends and a back-story of their own.
In the USA the researchers discovered that accountants have increasingly been portrayed in more positive than negative roles since the beginning of the 21st century and have become symbolic superheroes. Accountants have progressively become functional sidekicks and listened-to advisers. They are now portrayed as being helpful to the superhero in overcoming their difficulties.
Needless to say, that I liked this research although I am not sure Helen, my wife and business partner, would recognise me in the above descriptions.
HMRC Personal Liability Notices
A Personal Liability Notice is usually issued where HMRC has evidence of deliberate and concealed inaccuracies, and suppressing sales would fit the definition of deliberate/concealed. It is a tool often used by HMRC where a company, which owes VAT, is liquidated. It allows HMRC to secure the assessed VAT personally from the Director in the form of a penalty based on 100% of the VAT liability in the company.
Directors do have a fiduciary duty to run the business correctly and in compliance with the law. Where HMRC can identify significant and deliberate failings by the director, such as suppressing sales, HMRC will issue a VAT liability and penalty on the company, but then also a PLN on the director personally.
If the company is liquidated, the VAT assessed and penalty goes with the liquidated company, but the PLN sticks with the director personally.
Unpaid Vehicle Excise Duty hits £30M
According to the data recently shared by a car insurance company, the top 10 areas of car tax avoidance owed a total of nearly £31M in unpaid car tax in 2020.
Belfast was found to be the worst offender for the avoidance of the tax with almost 40,000 drivers chased up for £5.7m worth of payments in 2020.
Birmingham saw the second-highest number of enforcement actions. Manchester was third highest.
The areas which saw the lowest numbers of car tax evasion were the postcode areas with small populations, with West Central London, Shetland, and the Hebrides recording 216, 312, and 342 enforcement actions respectively in 2020. Combined the figure of unpaid tax reached only £130,500.
Workers on tax credits warned to check claim
The Low Incomes Tax Reform Group (LITRG) is urging working tax credit claimants to check their position carefully after the ending of certain coronavirus tax credit easements.
These special rules ended from 1 October for some people.
In response to the coronavirus pandemic, HMRC introduced easements for tax credit claimants. This included special rules for working tax credit claimants who could not work their normal hours because of the impacts of the pandemic – essentially allowing their tax credits to continue uninterrupted by treating them as working the same hours as they were before the pandemic.
These special rules were in place until 30 September 2021 and were replaced by a complex series of rules for claimants who were still not able to resume their usual working hours because of the pandemic.
For people in this situation, the new rules mean that the point at which a claimant needs to notify HMRC about their situation depends on whether they expect their hours to return to the level needed to claim working tax credit by 25 November 2021. If they do expect to reach the required level by 25 November, you do not need to do anything immediately, and only need to tell HMRC on 25 November if your hours do not return to the required level.
Poor Return on MTD
HMRC’s Making Tax Digital (MTD) programme was expected to generate £470m in additional revenue but has failed to reach the forecast level.
A recent report stated that the additional revenue from Making Tax Digital for 2020-21 was 45% lower than originally expected.
However, the report also says that by 2027-28, Making Tax Digital should raise an additional £2.9bn for the tax authority.
The new forecast has been published in the National Audit Office’s most recent report that considers HMRC’s 2020-21 accounts.
The Covid-19 pandemic appears to have significantly reduced tax revenues and made it more difficult for HMRC to take enforcement action. Now that the initial impact of the pandemic has eased, normal tax compliance levels should be restored including Making Tax Digital.
HMRC’s strategy currently aims to make it ‘easier to get tax right’ and provide a better experience for taxpayers and businesses. The tax authority also wants to work on reducing the tax gap and increasing the benefits for businesses to ensure greater resilience and responsiveness in times of crisis.
Sky Presenter loses IR35 Case
Dave Clark worked as a freelance Sky presenter and commentator, primarily working on darts coverage for the broadcaster.
The First Tier Tribunal has ruled that Clark was effectively an employee of Sky and was therefore liable for income tax and national insurance contributions, estimating that a tax bill of £281,084.48 was now due. This was related to tax liabilities from 2012 to 2018.
The case involved the presenter’s personal service company, Little Piece of Paradise (LPPL), and focused on whether the presenter should have been regarded as an employee.
Every two years, Clark signed a new agreement with Sky to provide ad hoc broadcasting services, primarily as a presenter and usually for around 64 days a year. The Sky contract with Little Piece of Paradise stated that Clark would provide his services as a commentator, presenter, interviewer, guest, or other participant in the making of any editorial, programme or video whether in vision or audio and whether in a studio or on location, live or recorded during the assignment.
He was paid an annual fee of between £155,000 to £160,000 for his services.
Clark was given overall control of his presenting duties, which involved him presenting in his own words. He had to make his own notes and scripts for certain sections and reference to them while on-air, but large sections of the programme would be ad-lib.
In terms of the working arrangements, Clark was not treated as a staff member and did not possess any pass for entry into Sky premises. If a meeting was arranged by Sky for Clark to attend, he would receive an email with details for access. To gain access, he would need to either present the email at the reception, or scan the QR code, or enter the booking reference at the ‘check-in stands.
Clark enjoyed no employment related benefits and protection such as: sick and holiday pay, paternity or similar leave entitlements, pension or redundancy entitlement, protection against unfair dismissal or third party liability, no access to Sky offices, or training, and no requirement to operate within the staff handbook.
The income received by Mr Clark’s from Sky for his services for Sky was over 98% of his total income and as a result he was therefore economically dependent on Sky. He was also paid on a monthly basis regardless of whether he had work every month.
The DIY Dilemma and VAT Recovery
One way of recovering VAT without operating a business is where you build a residence, usually to live in, but occasionally to sell, and reclaim the VAT on the expenses incurred under what has become known as the Self Build Scheme.
In a recent case, a couple had bought a derelict farmhouse in 2014. They immediately set about reconstructing the house and adding an extension. The front and back walls were demolished but the side walls had to be left as a condition of planning permission. Extensive underpinning was thus needed and all in all the work dragged on for five years from 2014 to 2019.
A claim for the VAT incurred on materials was made via the DIY housebuilding scheme, but HMRC refused the refund.
For the DIY scheme to apply you must be constructing a building designed as a dwelling. The construction of a building does not include the conversion, reconstruction, alteration or extension of an existing building, unless the extension creates a new dwelling. So, in general, if any of the existing building remains, you have failed the test and are not constructing a dwelling.
There are some exceptions so that if part of the old building is being left standing, you must ensure you fulfil the conditions of the exceptions if you want to be able to claim back your VAT.
In this case, the fact that the two end walls were left standing meant they did not fall within the exceptions and so could not claim back any of the VAT incurred.
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 firstname.lastname@example.org.