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.
Would you Want an Accountant in No. 10?
Boris Johnson chose the anniversary of my graduation as the day to resign as leader of the Conservative Party. I don’t think it was in any way a celebration of that auspicious occasion. But you never know!
Nadhim Zahawi is apparently remaining as the newly appointed Chancellor. It will be interesting to see what future tax policy looks like. Will the forthcoming changes to Corporation tax now go ahead? After all, that is an increase in taxation. Will the Health and Social Care Levy remain in place or will the employee levy be removed so that only employers have to pay it. Who knows? I don’t suppose anyone in No. 11 knows either at this stage.
Accountants are resourceful and quick to take advantage of any opportunity, or at least some are.
Accountants, or at least politicians with accounting credentials, are already circling Number 10 like vultures. Qualified management accountant Liz Truss is reportedly launching her leadership campaign as is former Chancellors Rishi Sunak. As I write this Sajid Javid and current Chancellor Nadhim Zahawi have not yet shown their hands but are expected to do so by the time you read this.
It is interesting to see that within such a short time of being appointed as the new Chancellor, Nadhim Zahawi publicly told the Prime Minister to “do the right thing and go now”. It’s almost chilling in its nature.
So, less than a day in the new job as Chancellor, Zahawi said in a letter posted on Twitter: “The country deserves a government that is not only stable but which acts with integrity. Prime Minister, you know in your heart what the right thing to do is, and go now.”
Was he not a part of that government that was not quite so stable and seemingly lacked integrity?
Apparently, according to some reports, Zahawi has been ‘secretly working’ on a Tory leadership bid for months. Looking at the rather fancy post put out by Sunak to support his candidacy, it looks like he has been doing the same. Nest of vipers?
Is this the integrity that they instil into a new government?
Zahawi inherits a cost-of-living crisis and is likely to face pressure to cut taxes.
If he becomes the new prime minister or even if he remains as Chancellor, can we trust him? Boris did and look what happened.
So, looking back at Rishi Sunak’s time as Chancellor, what will be his legacy?
Sunak delivered his first Budget in March 2020, before having to rip it up weeks later when the Covid pandemic forced the government to lock down the country and announce a number of support schemes including the furlough scheme and Covid loans. And of course, there was the non dom scandal involving his wife who is the daughter of one of the richest men in India.
I don’t have a vote but if I did, I might prefer one of the other candidates.
Dogs at work
The UK has always been a nation of pet lovers, and recent statistics show the number of pets has risen significantly.
Should dogs be allowed in offices? Over the last few years, we have had a number of dogs in our offices from dalmatians to spaniels and various other breeds.
There is a move to introduce “bring your dog to work “days. Not so sure about that.
You probably need to have a policy on such matters. We have many policies in our Employment Handbook, but I must admit we do not have one on dogs at work. Such a policy would help to alleviate concerns over dogs in the office and make behavioural expectations clear. But what sort of thing would you need to include in that policy? Here are some suggestions.
Is it safe and sanitary to have a dog in your work place?
Is it legal? Consider that dog may cause harm to others (either as a trip hazard, allergies or its behaviour) and could breach your duty of care. Also, check of relevant rental and insurance agreements.
How pet-proof is your workplace? Consider the following.
- How will you deal with pet hair, extra cleaning?
- Is there a location nearby for the dog to relieve itself?
- Where will they be, is there space and will they be secured?
- Can they access food or food waste?
- Can they be prevented from entering kitchens or other food preparation areas?
Lots to think about.
Can you Reduce the Pay of Home Workers?
Apparently, according to a recent survey, around 10% of companies plan to reduce the pay and benefits for staff now working from home.
A law firm has recently given its employees the option to work from home full-time in return for a 20% reduction in pay. The justification for offering these home workers reduced pay appears to be that these workers potentially have the benefit of living in less expensive parts of the UK and also they no longer expend time and money on commuting.
This can lead to issues with recruitment and retention, damaging the organisations prospects for future success. It can also leave remote workers with the impression that they are less valued than office-based staff, creating a two-tier workforce that may find it difficult to work together.
Offering remote workers reduced pay or benefits is likely to have a detrimental impact on morale, job satisfaction and your organisation’s reputation as a good employer, particularly given the current desire for home working. You will therefore need to carefully balance the positives and risks of this course of action.
You also need to consider the business reasons for reducing the salary of those looking to be based permanently from home, and how such a scheme would be implemented, to reduce the risk of claims for constructive unfair dismissal and discrimination.
Flexible Benefit Packages
Many employers permit employees to take advantage of salary sacrifice and other tax exemptions but you need to check that their implementation meets the tax rules.
The provision of each benefit within the package should be reviewed to ensure the conditions for that specific tax exemption are met. For example, the trivial benefit exemption only applies if the benefit is not a reward for services. This is difficult to achieve if the benefit is part of the employee’s reward package.
In order to avoid unexpected PAYE tax and national insurance bills later on, you should check the operation of your flexible benefit plans carefully and, if necessary, take advice to ascertain whether the tax implications of the various benefits are being correctly reported.
Flexible benefit packages should also be reviewed whenever there is a change in the benefits legislation.
New Tax Residence Indicator Tool
HMRC has launched a new tool to help you determine your tax residence status. The tool applies the statutory residence test (SRT) rules to help determine your residence status for tax purposes.
The tool is suitable for most people whose affairs are straightforward and covers the:
- automatic overseas tests
- automatic UK tests
- sufficient ties tests
You will find the tool by searching the HMRC website.
Alternative ID for Government Gateway
If you have been unable to transact digitally with HMRC because you do not have the necessary ID, HMRC is now able to accept GB driving licences which will allow more of you to set up government gateway accounts.
You can now select two items from the following list:
- tax credit claim details
- P60 or most recent payslips
- UK passport details
- information held on your credit file (such as loans, credit cards or mortgages)
- your self-assessment tax return (in the last three years)
- GB driving licence (DVLA-issued) or NI driving licence (DVA-issued)
Kate Forbes Maternity
The Scottish government has confirmed that deputy first minister John Swinney will take on responsibility for the finance and economy portfolio when cabinet secretary Kate Forbes starts her maternity leave in July
Kate Forbes is expecting her first child at the end of July. Swinney will take on the finance and economy portfolio from July 16 while retaining his deputy first minister role and responsibility for Covid recovery. Some of his other current responsibilities will move portfolios.
CGT and Crypto Assets
More than half of investors in cryptocurrency have limited or no understanding of capital gains tax and associated tax liability on crypto transactions
Understanding of capital gains tax (CGT) was mixed with 34% of owners stating they had a good understanding, but 37% knew little or nothing and 22% were not familiar with it at all, according to research commissioned by HMRC.
The research found that 10% of the population had invested in crypto, up from the 5.7% figure released by the Financial Conduct Authority last year. Over half said they invested in crypto as they saw it as a ‘fun investment’.
The main use of crypto assets is therefore for investment purposes, so they are generally within scope of CGT.
Rise in National Insurance Threshold
The increase in the National Insurance contributions threshold came into effect from 6 July.
From that date employees and self-employed people will pay National Insurance contributions on less of their income or profits.
The threshold increased to £12,570 from 6 July 2022, equalising the NICs and income tax thresholds for the first time, and potentially pointing towards a merger of income tax and NICs into a single threshold.
The rise in the threshold will cut tax by an average of £330 per worker although the introduction three months into the new tax year means that the actual average saving will be £267.
Following the introduction of health and social care levy, employees will pay National Insurance at 13.25%, representing a 1.25% surcharge on employees and employers from 6 April 2022. The effect of this is that it will offset the additional NIC payable through the Health and Social Care Levy for many workers.
However, the tax burden is still at its highest for 40 years, as the base tax-free allowance has been frozen for three years until 2025-26.
Regulators are cracking down on individuals who have abused Covid-related support schemes.
179 UK company directors have already been banned from running companies for defrauding Government support schemes like furlough and CBILs.
The pace of investigating is picking up as more Covid-related fraud cases are uncovered.
Directors convicted of fraud can also face custodial sentences and be made personally liable for debts of the company, particularly in cases where they have used business loans for personal spending.
Directors who think they may be affected need to carefully consider their options. Self-reporting can be the best way to mitigate the risk of prison.
Fraudulent activity during the pandemic included some directors setting up new companies to claim Covid bounce back loans, as well as companies vastly inflating their revenue to increase the size of loans they received.
Abuse of the furlough scheme included employers pretending to furlough workers without actually doing so and making claims, making claims for non-existent employees or misrepresenting hours worked.
An online hair and beauty business director wrongly claimed a £50,000 bounce back loan when his company had ceased trading. He has been disqualified as a director for 10 years. The business was established in 2013 and operated as an online retailer for hair and beauty products.
Despite company accounts showing that the company had ceased trading in 2019 and had shut down its website, the director applied for a £50,000 bounce back loan in May 2020 on behalf of the company.
Businesses were only eligible for support through the bounce back scheme if they had been adversely impacted by the pandemic lockdown, meaning online only retailers such as this could not apply. In addition the company’s turnover was inflated to increase the size of the loan.
This case was picked up when the company went into voluntary liquidation.
The former owner of a Folkestone hotel has been jailed after committing a £473,097 tax fraud involving non-payment of employee national insurance contributions. He was found guilty and has been sentenced to three years in prison.
The Hotel in Folkestone was facing financial difficulties when the director started withholding national insurance payments for employees instead of paying them to HMRC. The fraud went on for four years.
The director was a chartered accountant and had owned the hotel for over 40 years until the business went bankrupt and a liquidator was appointed, which is when the matter came to light.
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.