IR35 Reform Delayed

It was announced this evening that the IR35 reforms that were due to come in on 6 April have now been delayed by a year.

Chief Treasury Secretary Steve Barclay made the announcement as part of measures put in place to protect the economy during the Coronovirus outbreak

HMRC Insolvency Powers from April 2020

From 6th April 2020 new measures regarding insolvency will be introduced by the 2019-20 Finance Bill meaning HMRC will have increased powers.

It is proposed that Finance Bill 2019-20 will contain measures to ensure that from 6 April 2020 where a company becomes insolvent with unpaid tax liabilities which it holds in trust to pay to HMRC, these liabilities will take priority over other unsecured or floating charge creditors.  

Taxes that a company holds in trust for HMRC include VAT, PAYE Income Tax, Employee’s National Insurance Contributions and Construction Industry Scheme deductions.  Other company tax liabilities such as Corporation Tax and Employer’s National Insurance Contributions will not be affected by the measure.  HMRC will remain below preferential creditors.

Diane Dunion, Partner from Begbies Traynor Stoke has helped to expand on what exactly this means for businesses:

“The draft legislation proposes to amend The Insolvency Act 1986, giving HMRC priority in the recovery of VAT and certain other debts owed to HMRC in insolvency proceedings; by creating a new category of creditor for the purpose of the distribution of assets. 

When a business enters formal insolvency proceedings, the order in which assets are distributed is prescribed by law.  Currently, HMRC ranks as an unsecured creditor.  The introduction of the legislation will allow HMRC to rank as a “secondary preferential” creditor, which places them in a better position on the creditor hierarchy.

However, HMRC will remain an unsecured creditor, for taxes levied on businesses such as Corporation Tax and Employer NIC.

The Explanatory Note to the Legislation notes that “the Government does not believe it is fair that taxes paid by employees and customers should be diverted to other creditors, when these are only held temporarily by businesses whose role is to transfer these payments to the Government. The Government view is that this is a fair approach that balances the interests of creditors and the Exchequer, which relies on these taxes to fund public services.”  

Monies collected in respect of those taxes paid by employees and customers, are essentially held on trust for HMRC.  On that basis and in the event of formal insolvency proceedings, these funds will be paid over to HMRC – to “benefit the wider population by being utilised for their original purpose” (i.e. to fund public services).”

The new finance bill will also allow HMRC from 6 April 2020 to make directors and other persons involved in tax avoidance, evasion or phoenixism jointly and severally liable for company tax liabilities, where there is a risk that the company may deliberately enter insolvency. It is designed to prevent individuals benefitting from avoidance or evasion through the insolvency of their business when unable to pay its debts to HMRC.

The conditions for a joint liability notice are:

  • Insolvency is underway for the company or there is serious threat of insolvency
  • A company has entered into tax avoidance arrangements, or engaged in tax evasive conduct.
  • The person either was responsible for the company/LLP (perhaps as a director or shadow director), enabled the avoidance or evasion or benefited from it
  • A tax liability is expected to arise from the avoidance or evasion and there is a serious possibility that some or all of that tax will not be paid

The new rules will also allow HMRC to issue a joint liability notice to individuals whose companies have been involved with repeated insolvency or non-payment of tax with limited liability

There is a common misconception that directors/members will not be personally liable for anything, because their business has limited liability (either Limited Company or Limited Liability Partnership).  This is not always the case and more people may find themselves held accountable for their actions as a result of the changes.

HMRC News

From April 2020, private sectors will need to check whether contractors need to pay income tax and national insurance contributions. Which means shifting the responsibility to the organisation rather than the contractor.

 

If you are wondering whether you’ll be affected by this or would like more information, then please call us on 01782 479699 to speak with one of our construction industry tax specialists.

 

#Contractor #HMRC #PrivateSector #Business #IR35 #Contractors #IncomeTax #NationalInsurance

I have a limited company, what accountancy services would I need?

We offer the following services for limited companies:

  • Statutory accounts preparation
  • Company secretarial services
  • Corporation tax return preparation
  • Payroll
  • PIID
  • CIS contractor returns
  • VAT return preparation
  • Help with HMRC enquiries
  • Tax investigations insurance
  • Research & development claims
  • Capital allowances claims on commercial building
  • Tax efficiency reviews
  • Business restructuring
  • IR35 contractor reviews

For more information, please click here to contact us.

What is subsistence?

Subsistence is the accounting term used to describe food & drink and other incidental costs of travel such as accommodation. It is an allowable deduction when incurred by an employee or office holder in conjunction with a qualifying business journey such as business travel & overnight stays.

All claims must be backed up by receipts, unless you have agreed a scale rate system with HMRC.

From April 2019 there are some changes due in the area of subsistence for employees which we will take a look at along with some of the questions we most frequently get asked. Please note that the rule for employees are different than the self employed and so people can fall foul of this.

What is changing on 6th April 2019:

  • The employer will have to have a system in place to check the employee has undertaken a qualifying journey.
  • Employers will no longer need to check receipts where HMRC scale rates are used both in terms of UK and overseas scale rates

The Finance Act 2019 will put all of HMRC’s benchmark scale rates on a statutory footing.

Can I reimburse my employee for their lunch?

When they are travelling on business, entertaining customers, or when lunch is provided at a conference or meeting to ensure continuity of work it is ok to do so. For example if you have a training day and order pizza in for the staff then that would be deductible as it will ensure continuity of work.

How much can I reimburse for subsistence?

There is no upper limit however an employer can only reimburse expenses if there are actual expenses incurred. It can reimburse round sum amounts using scale rate payments

Can I claim VAT back on subsistence?

Yes provided the employee gives you a VAT receipt

If you are unsure about subsistence payments and would like more advice please call us on 01782 479699.

Do I Need A Tax Adviser?

11Quite often people think they need an Accountant & may not have heard of a Tax Adviser. Premier Tax Solutions is a Firm of Chartered Tax Advisers registered with the Chartered Institute of Taxation based in Stoke-on-Trent. Tax Advisers are trained in accounts & tax and pass rigorous exams over a number of years specifically designed around the tax legislation.

Tax Advisers are experts in Tax and keep up to date with the changing tax laws. We use our knowledge & experience to provide advisory & consultancy services to clients; ensuring they are as tax efficient as possible. We ensure they claim all allowances available & any qualifying expenditure which will save them tax.

There are 2 main areas of tax:

  • Corporate – Working with limited companies
  • Personal – Working with private individuals, the self employed & also partnerships

Here at Premier Tax Solutions we are all fully qualified tax professionals. Have a look at our video to see who we are & what we can do for you:

From the small one man band to a larger limited company or LLP we can make sure you are as tax efficient as possible. We prepare your accounts from a tax efficiency point of view, rather than ticking boxes in a compliance exercise. We actively look for ways to save you tax year after year. We offer a fixed fee service to all clients and hold meetings with you so that we can get to know you & your business and be able to advise you during the year, not just after year end. With competitive pricing & expert tax knowledge your accounts & tax affairs will be in very safe hands.

If it is that you need a tax consultant we have years of experience dealing with specialist areas of tax such as HMRC enquiries, trusts & estates, capital gains tax, inheritance tax, capital allowance claims and R&D claims to name a few.

Get in touch with us to see how we can save you tax & protect your assets on 01782 479699.

Special thanks goes to Craig at Magic Shirt Limited for producing our video!

The dividend tax reform: How the new rates affect you

10Welcome to another Premier Tax Solutions post about updates from the UK Summer Budget 2015. As promised, this post is about one of the biggest shock announcements – the dividend tax reform, and how it affects you.

How dividends were taxed

Previously, a limited company would declare a dividend, which was the ‘net’ dividend amount. A ‘notional tax credit’ would then be calculated and added on, resulting in the ‘gross’ dividend, which was the amount on which an individual was taxed. However, the individual would only ever receive the ‘net’ figure.

Below are the old dividend tax rates:

  • 10% within the basic rate tax band;
  • 32.5% within the higher rate tax band; and
  • 37.5% within the additional rate tax band.

The ‘notional tax credit’ was then deducted as tax that was deemed to have been paid, even though no one actually paid it anywhere.

If you were a basic rate taxpayer, you would effectively receive dividends tax-free, because what you received was the ‘net’ dividend. The ‘notional tax credit’ was calculated as 10% of the ‘gross’ dividend, and as an individual you were taxed at 10% on the gross amount, bringing you right back where you started!

But what if you’re NOT a basic rate taxpayer?

Here’s where it gets more complicated: if the tax rate for the higher rate band was 32.5% and the ‘notional tax credit’ was 10% of the ‘gross’ dividend, then you would be taxed at 25% on the ‘net’ dividend. Confused?

New rules on dividend tax

In the UK Summer Budget 2015, the Chancellor announced a reform to simplify the rules on dividend tax. There is now no longer any ‘notional tax credit’, which also puts an end to ‘net’ and ‘gross’ dividends. Instead, there will be just one amount, which is declared by the limited company, and the individual receiving it will be taxed on that amount at the following new rates:

  • 0% on the first £5,000 of dividend income;
  • 7.5% on the amount of dividend falling within the basic rate tax band;
  • 32.5% on the amount of dividend falling within the higher rate tax band; and
  • 38.1% on the amount of dividend falling within the additional rate tax band.

So are you better or worse off? Or do you require further explanation? If you are a company director or are in receipt of dividend income, and would like someone to explain what all this means for you personally, give the friendly tax experts at Premier Tax Solutions a call on 01782 479 699. We’re always happy to help!