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Soft Landings: The inevitable result of poorly drafted law

Posted By Tony Margaritelli, 03 April 2020

As I was reviewing all the governments outpourings about the Covid-19 pandemic and the raft of initiatives that they had introduced some of which actually posed more questions than answers my mind drifted to shall we say better times when changes were introduced without the need for lockdowns etc.

 

New procedures or ways of working were introduced by HMRC with threats of dire consequences for failing to comply and of course monetary penalties featured large in their thinking.

 

Then as the day of introduction came we were given a new expression to get used to in the world of taxation “soft landing” Its seems that every procedural change of any significance emanating from HMRC ended up with a “soft landing” period of varying timescales. The longest one being I recall 4 years soft landing for following the introduction RTI.

 

Every announcement of a “Soft landing” was hailed by HMRC as being a help to businesses and or taxpayers., usually with expressions such as “we have listened to concerns raised and as a help to ******* we have introduced a soft landing period wherein fines and penalties will not be levied for failures”

 

To my mind every single “Soft landing” provision has been enacted not because businesses, taxpayers or accountants for that matter were doing something wrong or were unable to comprehend the change but because they HMRC were unable to deliver their part of the change.

 

A “Soft landing” is not something that is laudable or worthy of congratulation it is simply an admission of a failure on the part of HMRC to implement the necessary tech changes to make system changes work or to make the changes workable.

 

There ability to turn an abject failure into a PR exercise painting themselves as caring and considerate to the wishes of the taxpayer community has actually highlighted that the PR department is working at a better level than most other departments.

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Watch out for crooks and don’t park your ethics

Posted By Tony Margaritelli, 27 March 2020


These are sad and strange times and as small practice accountants we are doing everything we can to help not just our clients but the people that are behind the business and of course our own family, friends and staff.

Now more than ever we see people in dire financial straits through no fault of their own who are staring at the empty abyss of their bank balance and are justifiably worried and are looking for ways to be able to pay their bills.
Our Government mindful of the situation have announced a huge package of initiatives to help businesses and individuals get through this period which is to be welcomed. As we know money is being made available and with each announcement we are being told how much and who is eligible.

Now as Accountants we have been keeping an eye out for these announcements and have been making sure our clients are aware but likewise millions of taxpayers have also been keeping an eye out and have been accessing the relevant pages. What this means is that there are millions of people waiting to be contacted by HMRC or HM Gov about money that will be coming their way which is a very large pool of desperate people that fraudsters can fish in isn’t it.

We must do our best to get the message out to beware before giving any information or even clicking on any seemingly official email because it would be heart breaking to have clients or those close to us lose even more than maybe they have lost already.

When money is concerned it can bring out the worst in some people and the thought of getting something out of the government adds grist to their mill.

This means that some clients and thankfully they will only be a few will in touch with some outlandish requests for us to make what they may well call amendments to previous returns or payrolls often couched in terms like “you don’t mind do you?”

These requests are to be rebuffed and should not take a moment to dismiss for what they are. There is no need to ask a friend or colleague if they think it is ok or to ask if they are doing anything in these circumstances as if having someone else doing similar makes it right.

Don’t park your ethics at the back door is the order of the day and think what it says about you as an accountant if you have to even broach the question with your institute.    

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Self-employed: You know where you stand

Posted By Tony Margaritelli, 23 March 2020


These are troubled times; you don’t need me to tell you that. Everyone is looking to the Government for support and help and leadership to get us all through.

The government like governments throughout the world have put together a raft of initiatives to help keep people in work and to provide support to businesses to help keep their business afloat.

Are these measures enough? Are these measures timely and are they going to be effective? Time as they say will tell.

We have rates burdens being cancelled, vat payments being deferred, grants will be available for businesses that operate from premises and the loan guarantee scheme has had a new re-birth in the guise of the Coronavirus Business Interruption Loan. SSP is being extended and employers will be reimbursed like never before and the Coronavirus Job Retention Scheme will look to cover 80% of wage costs of those likely to be laid off as a result of the present situation.

So far so good and one can only hope that the systems are in place to deliver these initiatives speedily and above all else easily.

But what of the self-employed that don’t operate from premises and are not vat registered?  Well there is the deferral of their 31st July Payment on Account to 31st January 2021 and a helpline is available to contact HMRC to ask for a time to pay arrangement and that’s about it. The self-employed are being told that it’s the benefit system for them and that means Universal Credit and the maximum will be the equivalent of SSP so £90 odd a week.

When all these initiatives were being announced I thought surely not? they must be working on something better and it will be announced on Sunday for sure. But all we got was it’s “Operationally difficult” to come up with something for the self-employed. “Operationally difficult” will I think become a euphemism for “not really that important” how else can it be construed? How is a driving instructor or a motor mechanic or a hairdresser or a bookkeeper or an accountant going to react? will “operationally difficult” satisfy them?

Over the weekend lots of people have come up with all manner of ways to remove the supposed difficulty and I’m not going to add my tuppence worth to this particular debate because I shouldn’t have to. H.M. Government and HMRC are best placed to come up with a system that is fair and equitable and will allow the self-employed to keep indoors and not risk picking up or spreading the virus without worrying about having the wherewithal to feed their family.

The best they have come up with was to put you into the Universal Credit System. We have an expression that basically sums up the situation and that is “Where there’s a will there’s a way” but you actually need the will to look for the way don’t you. The self-employed may well be thinking of another expression “don’t **** down my neck and tell me it’s raining”  

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Some helpful links in these troubled times

Posted By Tony Margaritelli, 19 March 2020

At this moment in time the ICPA is operating a remote working policy and the staff are beavering away as usual only working from home and not in the office.

As part of our remote working I’ve been taking my share of the ‘phone calls as well as handing specific emails.

As you can imagine I’ve had lots of calls from members about what exactly the government are doing and how can members clients access the promised loans and grants. As ever, the devil as they say is in the detail and as I type on Thursday 19th March there is still no definitive information about to go about accessing or applying for the promised help which is a sad but not surprising fact and one I suppose we ought to get used to as our politicians seem perfectly happy to make pronouncement without actually having the processes ready before they make them.

Anyway, I helped as many callers as possible and I spotted that I was recommending some websites quite a lot so as they say on “Strickly” here they are in no particular order:

1) Struggling to get Accounts finalised  and lodged with Companies House? Checkout

https://www.gov.uk/guidance/coronavirus-guidance-for-companies-house-customers-employees-and-suppliers

The advice seems to be get in touch sooner rather than later to see if you can geta coronavirus extension

2) Wondering about school closures and what children are effected and which ones will get to stay in school and of course what about free school meals? Then it’s  

https://www.gov.uk/government/organisations/department-for-education

3) Clients struggling with their tax liabilities? Needing to sort out a time to pay? Check into

https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19

4) SSP, Staff off work what are the obligations etc etc? definitely the place to look is ACAS

https://www.acas.org.uk/coronavirus

5) The Governments own business support site which I’m thinking will become more used in the coming months

https://www.gov.uk/business-support-helpline

6) The very latest advice from HM Gov on what Businesses and Employers need to do

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/guidance-for-employers-and-businesses-on-coronavirus-covid-19

7) Contractor clients getting in touch about IR35? Here is a link to the announcement about it’s deferral

https://www.gov.uk/government/news/off-payroll-working-rules-reforms-postponed-until-2021

8) What exactly did the Chancellor promise? Here you are:

https://www.gov.uk/government/news/chancellor-announces-additional-support-to-protect-businesses

 

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Money Laundering: Why do I need to keep a record?

Posted By Tony Margaritelli, 17 March 2020

Sometimes I meet Accountants who ask me “I’m a sole trader so obviously all the Money Laundering procedures are down to me. Why do I have to write everything down?” I smile inwardly and say just imagine that you had a client under investigation by HMRC and they asked for a schedule of the Drawings in a given set of accounts. Not an unusual request is it? in fact you’d probably be surprised if they didn’t ask for the schedule so now imagine the response if you said something like “No need, I know what you’re looking for and I’ve checked the Drawings carefully and they are all private items and his cash availability is definitely sufficient to meet his lifestyle” You know full well what the response will be, that’s as soon they catch their breath.

So when it comes to fulfilling your obligations regarding Money Laundering without anything written down you are simply saying “trust me” It won’t and should not wash and frankly it will not wash.

So what are the most important pieces of a good money laundering practice strategy well for me and it’s by no means comprehensive nor practice specific but you need to have procedures in place that are written down, are understandable and are actually followed.

These procedures should as a minimum include record keeping, internal checks and of course Client due Diligence (CDD). Now when it comes to CDD accountants are getting caught out because they are working on behalf of a new client before the checks have been completed and documented which is completely incorrect. You must have fulfilled your CDD including a risk assessment BEFORE any work is undertaken on behalf of a new client, it’s that simple. You have to keep your eye open for any red flags that may come up during this process and don’t forget about PEPs.

Risk assessments on clients is one thing but some accountants have still not undertaken their own Practice Risk Assessment or it’s so old it was in pre-cloud days. Seriously your own Risk Assessment should be reviewed and noted as such on a regular basis and make sure it covers what your practice offers and how it will deliver. Training is another area that is often forgotten, I was going to say overlooked but I’ll settle for forgotten. Training is important and needs to be undertaken on a regular basis and it’s another record that needs to be kept else how will you be able to answer questions from your supervisor.

This is by no means an extensive list of the records that need to be maintained whatever the size of your practice but if on reading this you are thinking “Ummmmm” then maybe you should start checking the last time you made any amendments or even noted that none were needed.

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Coronavirus: advice for employers and employees

Posted By Croner-i, 06 March 2020

In case coronavirus (COVID-19) spreads more widely in the UK, employers should consider some simple steps to help protect the health and safety of staff.

It's good practice for employers to:

  • keep everyone updated on actions being taken to reduce risks of exposure in the workplace
  • make sure everyone's contact numbers and emergency contact details are up to date
  • make sure managers know how to spot symptoms of coronavirus and are clear on any relevant processes, for example sickness reporting and sick pay, and procedures in case someone in the workplace develops the virus
  • make sure there are clean places to wash hands with hot water and soap, and encourage everyone to wash their hands regularly
  • provide hand sanitiser and tissues for staff, and encourage them to use them
  • consider if protective face masks might help for people working in particularly vulnerable situations
  • consider if any travel planned to affected areas is essential

Employers must not single anyone out. For example, they must not treat an employee differently because of their race or ethnicity.

Sick pay

The workplace's usual sick leave and pay entitlements apply if someone has coronavirus.

Employees should let their employer know as soon as possible if they're not able to go to work.

Pay if someone has to go into self-isolation

The government has stated that if NHS 111 or a doctor advises an employee or worker to self-isolate, they should receive any Statutory Sick Pay (SSP) due to them. If the employer offers contractual sick pay, it’s good practice to pay this.

The employee must tell their employer as soon as possible if they cannot work. They should tell their employer the reason and how long they're likely to be off for.

The employer might need to be flexible if they require evidence from the employee or worker. For example, someone might not be able to provide a sick note ('fit note') if they've been told to self-isolate for 14 days.

Find out more about:

If an employee is not sick but the employer tells them not to come to work

If an employee is not sick but their employer tells them not to come to work, they should get their usual pay. For example, if someone has returned from China or another affected area and their employer asks them not to come in.

If an employee needs time off work to look after someone

Employees are entitled to time off work to help someone who depends on them (a 'dependant') in an unexpected event or emergency. This would apply to situations to do with coronavirus. For example:

  • if they have children they need to look after or arrange childcare for because their school has closed
  • to help their child or another dependant if they're sick, or need to go into isolation or hospital

There's no statutory right to pay for this time off, but some employers might offer pay depending on the contract or workplace policy.
 
The amount of time off an employee takes to look after someone must be reasonable for the situation. For example, they might take 2 days off to start with, and if more time is needed, they can book holiday.
 
Find out more about:

If employees do not want to go to work

Some people might feel they do not want to go to work if they're afraid of catching coronavirus.

An employer should listen to any concerns staff may have.

If there are genuine concerns, the employer must try to resolve them to protect the health and safety of their staff. For example, if possible, the employer could offer flexible working.

If an employee still does not want to go in, they may be able to arrange with their employer to take the time off as holiday or unpaid leave. The employer does not have to agree to this.

If an employee refuses to attend work, it could result in disciplinary action.

Find out more about absence from work.

If someone becomes unwell at work

If someone becomes unwell in the workplace and has recently come back from an area affected by coronavirus, they should:

  • get at least 2 metres (7 feet) away from other people
  • go to a room or area behind a closed door, such as a sick bay or staff office
  • avoid touching anything
  • cough or sneeze into a tissue and put it in a bin, or if they do not have tissues, cough and sneeze into the crook of their elbow
  • use a separate bathroom from others, if possible

The unwell person should use their own mobile phone to call either:

  • 111, for NHS advice
  • 999, if they’re seriously ill or injured or their life is at risk

They should tell the operator:

  • their symptoms
  • which country they've returned from in the last 14 days

If someone with coronavirus comes to work

If someone with coronavirus comes to work, the workplace does not necessarily have to close.

The local Public Health England (PHE) health protection team will get in contact with the employer to:

  • discuss the case
  • identify people who have been in contact with the affected person
  • carry out a risk assessment
  • advise on any actions or precautions to take

Find out more about PHE health protection teams on GOV.UK.

The process may be different in Scotland and Wales. For more advice, see:

If the employer needs to close the workplace

Currently it's very unlikely that an employer will need to close their workplace.
 
But they should still plan in case they need to close temporarily. For example, making sure staff have a way to communicate with the employer and other people they work with.

Where work can be done at home, the employer could:

  • ask staff who have work laptops or mobile phones to take them home so they can carry on working 
  • arrange paperwork tasks that can be done at home for staff who do not work on computers

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Revised HMRC Charter

Posted By HMRC, 06 March 2020

Working with you to get tax right

HMRC is here to collect the tax that pays for the UK’s public services. We do this by working in partnership with you.

We will help you meet your tax responsibilities and work with anyone you’ve asked to act for you. We will also help make sure you get any benefits, tax credits, refunds or other support you can claim. However, we will take firm action against the small minority who bend or break the law by not paying their tax.

What we want our service to be all about

Making things easy

We aim to ensure our services are as accessible as possible and that it is easy, quick and convenient to deal with us.

Getting things right

We aim to give you accurate, consistent and clear information. This will help you meet your obligations, understand your rights and what you can claim. When we ask for information, we rely on you to give us full, accurate and timely answers. If you disagree with us, we will inform you about options available to you and work with you to reach an appropriate outcome quickly and simply. If you are not satisfied with the service you have received, we will explain how you can make a complaint.

Being responsive

When you get in touch with us, we aim to answer your questions and resolve things first time, or as quickly as we can. We will also explain what happens next and when you can expect a response from us. If we make a mistake, we will put it right as soon as possible. Treating you fairly

We work within the law to make sure everyone pays the right amount of tax and gets their benefits and other entitlements. We trust you are telling the truth, unless we have good reason to think you’re not.

Being aware of your personal situation

We will listen to your worries and answer any questions clearly and concisely. We will be mindful of your wider personal situation, including offering you extra support if you need it.

Keeping your data secure

We will protect information we hold about you and treat it as private and confidential. And we will always use that information fairly and lawfully.

A word about respect

We will always treat you in line with our values of respect, professionalism and integrity. Our employees are people too, so please treat them in the same way. We take any threats, intimidation or harassment very seriously and will take appropriate action against any behaviour of this type.

Ways to respond in the consultation process

The consultation period will run from Monday 24 February to Friday 15 May 2020.

We welcome comments on any aspect of the revised draft charter and, or how HMRC uses its charter.

The list below may help you to structure your feedback:

•    do you think the draft charter sets the right standards for HMRC’s service to customers?
•    to what extent do you feel the draft charter sets out the areas which are most important to customers when interacting with HMRC?
•    how you would like to see HMRC measure and monitor how it is performing against the charter, including how it can best listen to feedback and take action on areas for improvement?

Email your views to: HMRC.Charter@hmrc.gov.uk.

Write to: HMRC Charter Team, Customer Insight and Design Directorate, 9th Floor, 10 South Colonnade, Canary Wharf, London E14 5AB


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Entertaining and promotion : What is deductible?

Posted By Croner-I, 06 March 2020

Q. Last year my client launched a new product and arranged a marketing event to publicise it. The expenditure was a mixture of food, drink, and promotional gifts and the hire of a conference center. I am preparing the tax computation for the company and so would any of this expenditure be disallowable?

A. When preparing the tax computation, you should adjust the trading profits by adding back disallowable items, such as any element of client entertaining as explained below.

Statutory background

The general rule is that no tax deduction is allowed in calculating the profits of a trade for expenses incurred in providing entertainment or gifts in connection with the trade (s1298 CTA 2009)

The term ‘entertainment’ is defined to include ‘hospitality of any kind’ and the expenses incurred in providing entertainment or a gift are defined to include ‘expenses incurred in providing anything incidental to the provision of entertainment or a gift’.

Establishing whether the costs are promotional or entertainment

HMRC’s view is that the food and drink costs are hospitality and so always disallowable under s1298 CTA 2009 – unless the hospitality provided is “minimal” (BIM45050).
In the case of Netlogic Consulting Ltd v HMRC (2005) SpC 477, the costs were split between food and drink provided and the cost of hiring the room. The courts found that the room hire was an allowable tax deduction because based on the facts of the case it was established that ‘the entertainment was incidental to the promotional purpose of the meeting, rather than the hire of the room being incidental to the provision of the entertainment’.

Check that the costs of advertising and marketing do not fall within the definition of entertaining. HMRC’s view at BIM45050 sets out to clarify the matter:
‘An example of allowable expenditure is an event arranged by a car manufacturer to allow potential customers to test drive new cars. However, if the manufacturer arranges a golf day at which test drives are available then only the direct costs of the test drives and of any publicity material provided are not disallowed by the legislation.
Similarly, the costs of a book launch at which food and wine are provided and where the author and invited guests are entertained together with journalists and booksellers is disallowable under the legislation. However, where any hospitality provided is minimal no disallowance need be made.’

Gifts provided at the event

If gifts were provided at the event there are four sets of circumstances within s1300 CTA 2009 (see BIM45065) which will not deny a tax deduction and relief will be due.

These are:
•    Case A is where the gift is of an item which it is the trader’s trade to provide, and the item is given away in the ordinary course of the trade in order to advertise to the public generally.
•    Case B is where the gift incorporates a conspicuous advertisement for the donor.

However, this relaxation does not apply if:

1.    the item consists of food, drink, tobacco or of any token or voucher exchangeable for goods; or
2.    the cost of the gift to the donor, taken together with the cost to him of any other such articles given by him to that person in the same ‘basis period’, exceeds £50. In calculating this total, the cost of such items as are referred to in (a) above (food, etc.) are ignored;

•    Case C is where gifts are provided for the trader’s employees unless gifts are also provided for others and the provision for employees is incidental to the provision for others; and
•    Case D covers gifts given to a charity, to the Historic Buildings and Monuments Commission for England, and to the Trustees of the National Heritage Memorial Fund
Exceptions

S1299 CTA 2009 provides an exception to the business entertaining rule that concerns the entertainment of employees. Staff entertaining is allowable, so long as it is wholly and exclusively for the purposes of the trade and is not merely incidental to entertainment which is provided for customers (see BIM45033 and BIM45034) This includes a staff Christmas party or other event open to all employees provided by the employer.

There may, of course, be other tax repercussions involving VAT input tax recovery and BIK issues for employees

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If everything is based on cost we'd all be driving a Wartburg

Posted By Tony Margaritelli, 19 February 2020

This is the answer my boss gave me many years ago when we were discussing a potential new client and I said something like “I don’t see how we can get them to come to us as they are paying so little at the moment”. The immediate response was “If everything is based on cost we’d all be driving a Wartburg” for those of you too young to remember the Wartburg it was a two stroke car from the old Eastern Europe built like a tank, it drove like one as well and frankly it only had one saving grace, if you can call it that and that was it was dirt cheap but still no one ever bought them.

As ever my boss was totally correct price cannot be the sole driver in any transaction, obviously it is of importance but when looking to acquire new clients we cannot let it dominate the proceedings and we cannot allow ourselves to reduce prices because a potential client queries the costs.

If we have a rate per job or a costing based on hourly rates then we should stick with those rates else we are on the slipper slope to ultimate problems as we try to complete work at a rate that is manifestly insufficient and that can only lead to arguments with clients as we seek to charge more or worse still to corners being cut as we try to complete the work quicker.

If a client wants to buy a Wartburg despite all our best endeavours to explain why they shouldn’t then send them to the Wartburg garage and leave them to it which worked for my old boss and has worked for me and will work for you as well.

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Be an Accountant to your Client not a Technician

Posted By Tony Margaritelli, 19 February 2020

Another filing deadline has come and gone and many of us will have been anchored to our keyboards in the last month or so as we filed Return after Return to the extent that we feel almost part of the machine and maybe that the machine, well definitely our program of choice is actually in charge of us.

Now that the rush is over and we again reflect on the recent past and any Accountant in Practice today is aware of the digital agenda that’s a simple statement of fact. The fact is they would have to be operating their practice in a vacuum to not know because the wall of noise about all things digital is all pervasive and is being driven by the need to sell software, expertise, systems, techniques all apparently making your practice more profitable, more efficient, more modern and more accessible to the new generation of clients.

We all have to read the sales pitch to begin with to decide whether for our practice that which is on offer is appropriate irrespective of the fact that the budget of the seller is such that we are subjected to the message multiple times across virtually every outlet. We are being subjected to so many people telling us how to run a profitable accountancy practice using all manner of coaching type skills with all sorts of marketing angles and not one of them can tell you how to answer the simplest of tax question a client, potential or otherwise may ask because that’s beyond their remit but WE need to be able to answer those questions.

Now let’s be honest the digital agenda has brought the accounting practice so much that is good and useful and long may it continue but I worry that by devoting the acres of space to all things tech we are downgrading the actual expertise of being an accountant to almost that of a simple technician who is in fact more salesman than accountant, more technician than tax expert and more computer dependent than numerically literate.

Accountants most hold on to the core values that client’s want them for which is to ensure that they pay the correct tax at the correct time and further that every legitimate means possible has been used to keep the overall tax liability to a minimum which means investing time and expertise in understanding the tax code both corporate and personal and both direct and indirect. We need to understand the nuances of payroll legislation and of course employment law as it may effect not only our staff but also our client’s staff. We need to understand Accounts and by understand I mean not just the relationships of the numbers to the overall profit but also the relationship of the numbers to the owner’s goals and business aims. We need now more than ever to fundamentally understand our client’s goals our clients reasons for being in business or being self-employed or simply why they need our services and then we need to deliver exactly the service they need not the service the software is prompting us to provide.

Now tech can most certainly help in myriad ways but nothing absolutely nothing no matter what the investment in terms of ££s can turn a bad accountant into a good accountant it can make a bad accountant a more productive bad accountant it can make a bad accountant a more profitable bad accountant but it cannot make a bad accountant a good accountant.

What makes a good accountant is that they can cut through the noise and invest their reading and CPE time in maintaining their expertise as an Accountant. My message to all the good accountants out there is to take on board all the messages about tech and techniques but don’t do that to the detriment of your core skills those skills that made you qualify as and practice as an Accountant

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