Archive for October, 2014

Tax avoidance scheme users ordered to pay up

Thursday, October 30th, 2014


HM Revenue and Customs has sent notices to tax avoidance scheme users to pay over £250 million of disputed tax under the Accelerated Payments regime introduced in this year’s Finance Act.

The Financial Secretary to the Treasury, David Gauke, told MPs scrutinising the National Insurance Contributions Bill that over 600 Accelerated Payment notices had been sent since late August.

Despite recipients having 90 days to pay the tax demanded in the notices, avoidance scheme users have already begun to contact HMRC to arrange to make payments, covering over £25 million of disputed tax.

Many more users are also choosing to contact HMRC about settling their tax affairs rather than wait to receive an Accelerated Payment notice.

Financial Secretary to the Treasury David Gauke said:

Accelerated Payments are changing the economics of avoidance by removing the cash-flow advantage that avoidance scheme users have had until now. It is only fair that those who use avoidance schemes should have to pay their tax upfront, like the vast majority of other taxpayers who don’t try to shirk their responsibilities.

Jennie Granger, Director General of Enforcement and Compliance, HMRC, said:

HMRC is making good progress in tackling marketed avoidance as today’s figures illustrate. If anyone is concerned about being able to pay the notice they should contact us as soon as possible to discuss their options.

By January 2015, HMRC will be issuing 2,500 Accelerated Payment notices per month and it is on track to deliver notices to 43,000  tax avoidance scheme users, covering £7.1 billion of disputed tax, by the end of March 2016.

Are your workers employed or self-employed

Tuesday, October 28th, 2014

There can be savings, particularly for employers, if a worker can be paid as a self-employed person. This is particularly so in the construction industry where most workers are engaged by contractors as self-employed subcontractors.

What many contractors fail to realise is that they are required to reach a judgement on a worker’s tax status based on a rigid framework determined by HMRC. It is not sufficient to base this judgement on what produces the best tax and National Insurance outcome.

Getting this status issue wrong will likely result in an uncomfortable examination of engagement contracts by HMRC and expensive catch up payments if it is determined that certain self-employed sub-contractors are actually employees.

How then should a contractor make this judgement: employed or self-employed? We have listed below HMRC’s published criteria:

 Common indicators of employment

  • The contractor has the right to control what the worker has to do – where, when and how it is done – even if the contractor rarely uses that control.
  • The worker supplies only his or her own small tools.
  • The worker does not risk his or her own money and there is no possibility that he or she will suffer a financial loss.
  • The worker has no business organisation, for example, a yard, stock, materials, or workers. (These examples are not exhaustive.)
  • The worker is paid by the hour, day, week or month.


Common indicators of self-employment

  • Within an overall deadline, the worker has the right to decide how and when the work will be done.
  • The worker supplies the materials, plant or heavy equipment needed for the job.
  • The worker bids for a job and will bear the additional cost if the job ends up costing more than the worker's original estimate.
  • The worker has a right to hire other people who answer to him or her and are paid by him or her to do the job.
  • The worker is paid an agreed amount for the job regardless of how long it takes.


To make a decision on an individual case, you will need to consider all the details, and your overall judgement should not rely solely on the above notes. Determining status can be a complex process and one that should be undertaken rigorously.

What is the statutory minimum holiday entitlement?

Thursday, October 23rd, 2014

Paid annual leave is a legal right that an employer must provide. Almost all workers are legally entitled to 5.6 weeks’ paid holiday per year (known as statutory leave entitlement or annual leave). An employer can include bank holidays as part of statutory annual leave.

Self-employed workers aren’t entitled to annual leave.

Most workers who work a 5-day week must receive 28 days’ paid annual leave per year. This is calculated by multiplying a normal week (5 days) by the annual entitlement of 5.6 weeks.

Part-time workers

Part-time workers are also entitled to a minimum of 5.6 weeks of paid holiday each year, although this may amount to fewer actual days of paid holiday than a full-time worker would get.

For example a worker works 3 days a week. Their leave is calculated by multiplying 3 by 5.6, which comes to 16.8 days of annual paid leave.

Statutory paid holiday entitlement is limited to 28 days. Staff working 6 days a week are only entitled to 28 days’ paid holiday and not 33.6 days (5.6 multiplied by 6).

Bank holidays

Interestingly, employers do not have to give bank holidays or public holidays as paid leave. An employer can choose to include bank holidays as part of a worker’s statutory annual leave.

Pay when you are paid

Wednesday, October 22nd, 2014

Apart from the retail trade and internet traders most of us send an invoice when we provide our goods or services to customers and then wait for the period of credit to expire before we get paid.

During this waiting time we still have our own bills and wages to pay so the working capital we have to accumulate to finance monies owed by customers can be considerable.

And then, of course, there is VAT…

If we sell or provide standard rated supplies and are registered for VAT we have to add 20% VAT to our invoices.  The VAT added, in normal circumstances, has to be paid over to HMRC (less any VAT input tax we have been invoiced by suppliers) on a quarterly basis.

Accordingly, it is possible that we have to pay over VAT to HMRC before we receive the equivalent payment from our customers.

Acknowledging this injustice, especially for smaller concerns, HMRC allow registered traders to use their Cash Accounting Scheme (CAS). Simply put, if you qualify to use CAS you only have to pay VAT added to your invoices when your customers pay you. On the flip side, any VAT charged to you by suppliers can only be reclaimed from HMRC when you pay your supplier.

The scheme is only available if your expected taxable supplies in the next year will be £1,350,000 or less. Taxable supplies are defined as the value excluding VAT of standard, lower and zero-rated supplies you make.

There is no formal election required to use CAS but it is well worth crunching the numbers to ensure that you get a positive cash flow impact from doing so!

Jamie Harrison update – 4th and 5th Oct, Cadwell Park

Tuesday, October 21st, 2014

Following Jamie’s accident at the Croft Circuit in August, and his bike being out of action, he hadn’t planned on attending the meeting, however at the last minute he was offered the use of another bike from a friend.

The weather on the Saturday was cold and wet and he decided that as he hadn’t ridden the bike he was using before he opted to sit out the days races and wait for the sunshine which was forecast on Sunday.

Due to the fact that Jamie had missed the qualifying, and races, on the Saturday he had to start from the back of the grid for the first two races, which were the Allcomers and the 1300 Fourstroke.

He did however manage to work his way up and finish 3rd in the first Allcomers race and finished 2nd in the 1300 Fourstroke race.

In the second Allcomers rate he also had to start from last place, but again he was able to steadily move through the field over the 10 laps to finish in 3rd place.

The next race was the last race of the day, and the season, and it was the 1300 Fourstroke.

Jamie started in 2nd place, but after a bit of a bad start he went down to 5th place. However he continued to make steady progress throughout the race and ended up finishing in second place.

Jamie’s lap times were slow compared to his ‘normal’ race times normal, but this was mainly due to him being on an unfamiliar bike and not being fully fit.

Overall though he was happy with the results.

Jamie Harrison update – 16th and 17th August, Croft Circuit, Derby Phoenix

Tuesday, October 21st, 2014

Jamie and the team made the long trip north for round three of the Derby Phoenix championship and after having no racing for six weeks he was raring to go.

Allcomers Qualifying was first on Saturday morning and after coming in mid way through the session to make some suspension changes to cope with the bumpy track at croft he went back out and set pole position.
Lap times were good and he was nearly 2 seconds a lap faster than the second place rider.

Race One

Race one was for the 1300cc fourstrokes and Jamie was starting from 3rd on the grid. Having missed the last round he was happy with that position as the grid positions were from championship positions.

The race started well and Jamie was able to progress to second place. After a couple of laps he decided to make a move around the outside coming into the complex, and then tried to make a break but the pit board two laps later showed he was being closely followed.

On the second to last lap he was over taken going into tower but as he headed for the next corner he could see a back marker coming up so positioned himself on the outside and was then able to pass both bikes and was back in the lead.

Onto the last lap he encountered a few more back markers but made sure he got to them first and he ended up crossing the line 0.9 seconds in front to take the win.

Race Two

Race two was the allcomers, and although Jamie started from pole in third position he was soon able to work his way up to second.

Jamie remained in second place and then as he was going round turn two the backend of the bike stepped out and flicked him up out of the seat and he landed on the tank, and although it looked as though he was going to save it the bike went again and flicked him high up over the top and off the bike, rolling him until he came to a stop against the tyre wall.


Disaster Strikes

Unfortunately after a trip to Darlington A&E it was discovered that Jamie has dislocated his collar bone so will be out of action for at least 6 weeks.

Reclaiming pre-registration VAT input tax

Friday, October 17th, 2014

If you have been trading for some time before you register your business for VAT don’t forget to consider your option to reclaim VAT on goods and services purchased prior to your registration date.

For example, if you are required to register for VAT from 1 January 2014, you only need to pay VAT on taxable supplies you make from that date. However, if you had bought goods or services prior to 1 January you may be able to reclaim the VAT you paid on them. You can generally reclaim VAT on goods you bought up to four years before you registered for VAT, and services you bought up to six months before you registered.

You can reclaim VAT on goods you bought or imported no more than four years before you were registered for VAT if all the following are true:

  • the goods were bought by you as the entity that is now registered for VAT (for example, the individual, business or organisation)
  • the goods are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply
  • the goods are still held by you or they have been used to make other goods you still hold

You can't reclaim VAT on any of these goods:

  • goods that you've completely used up before you registered for VAT (such as petrol, electricity or gas)
  • goods that you have already sold or supplied before being registered, or have used to make goods you have sold or supplied before being registered
  • goods that relate to supplies you make that are exempt from VAT

The word 'goods' includes goods that are intended for resale, and also goods that you keep as assets, such as computer systems, shop fittings, office equipment and furniture, tills, vans and other equipment. It also covers anything else you've bought that isn't a service, so it includes consumables such as stationery.

You can reclaim VAT on services you bought during the six months before you registered for VAT if both the following are true:

  • the services were bought by you as the entity (for example, the individual, business or organisation) that is now registered for VAT
  • the services are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply

You cannot reclaim VAT on any of these services:

  • services that relate to goods you disposed of before you were registered for VAT – for example, repairs to a machine you sold before you were registered
  • services that relate to goods or services you supply that are exempt from VAT

Examples of services you might have paid for when starting your business are legal and accountancy fees, services relating to setting up your computer and other equipment, and fees and services relating to your premises.

Don’t forget that if you make a claim to recover past VAT paid, the input tax recovered will effectively reduce the cost of goods and services that you have claimed tax relief on in past years. This will effectively increase your taxable profits in the year you make your claim. Even taking this tax adjustment into account it is still worth making a claim.

Clamp-down on use of hybrid mismatches

Tuesday, October 14th, 2014

The government has announced a clamp-down on the decade-long use of ‘hybrid mismatches’, a technique commonly used by multinational companies to significantly reduce their tax bills.

It is the latest in a series of steps the government has taken to tackle aggressive tax planning and is expected to bring tens of millions of pounds per year of additional revenue into the Exchequer once implemented.

Hybrid mismatch arrangements exploit differences between countries’ tax rules to avoid paying tax in either country, or to obtain more tax relief against profits than they are entitled.

The UK has worked with G20 and OECD member countries as part of the BEPS project to agree a solution that prevents companies from taking advantage of this and proposals were endorsed by G20 Finance Ministers at their meeting in Cairns last month.

More information on the steps the government would like to take will be published when a consultation on the implementation of rules to prevent hybrid mismatches is included as part of the Autumn Statement on 3 December.

Construction industry tax penalties

Monday, October 13th, 2014

 If any of your Construction Industry (CIS) returns are filed one day late, HMRC will charge an initial fixed penalty of £100.

 Additionally, if they have still not received that return:

  • two months after the date it was due, they will charge a second fixed penalty of £200
  • six months after the date it was due, they will charge a further penalty of £300 or 5% of any liability to make payments, that should have been shown in the return
  • 12 months after the date it was due, they will charge a second further penalty. The amount of this penalty will depend on why your return was late. The amount charged will be either £300 or 5% of any liability to make payments, or a ‘higher’ penalty of up to 100% of any liability to make payments, or a minimum penalty of £1,500 or £3,000.


There are also occasions when HMRC will consider a reasonable excuse for not filing a CIS return, and if they accept your reason for the late filing then penalties will not be applied.

HMRC will not normally accept that lack of funds to pay (unless due to circumstances outside your control) or reliance on someone else to file your returns, as a reasonable excuse.

To further complicate matters there are circumstances when penalties may be capped at a lower amount.

Obviously, the best way to avoid penalties is to file your CIS returns on time. If you are presented with a bill for penalties it is well worth getting your tax advisor to check it out for you, and if necessary, appeal.

UK broadband voucher scheme overhauled

Sunday, October 12th, 2014

Businesses are being urged to take advantage of a scheme to get faster, cheaper broadband.  The government is overhauling its plans for getting ultra-fast broadband to UK businesses after disappointing take-up of its current scheme.

As reported by the BBC only £7.5m out of a possible £100m has so far been spent, with just 3,000 businesses taking up vouchers.  As reported by the BBC:

‘Initially the government had expressed hope of reaching 200,000 small businesses.

With a March 2015 deadline for the money to be spent, the government is keen to galvanise interest.

Changes aimed at making it easier to get the money include a redesigned website and a more streamlined process of applying for a grant.

Other changes include:

  • Qualifying businesses no longer need to fill in an application form but can access the government grant with a call to a pre-approved broadband supplier
  • Businesses that already have a different supplier in mind need only to fill in a form to get their quote approved
  • Suppliers can also apply to BDUK (the group overseeing the process) with a set of eligible connection costs, cutting the need for businesses to apply at all
  • Once a broadband package has been approved, suppliers can market them to eligible businesses with no more need for forms or rubber-stamping.’

As reported by the BBC, Sajid Javid, Secretary of State for Culture, Media and Sport said:

‘This is a golden opportunity for businesses to take advantage of better broadband. The grant takes away the costs of installation, which are normally charged up front or added to monthly charges.’

Internet link: BBC news