Issue 39

“Go sit upon the lofty hill and turn your eyes around,
Where waving woods and waters wild do hymn an autumn sound.”

Elizabeth Browning lived from 1806 to 1861 and we’d like to think that if she’d had a copy of the Square Circular with her in those days sitting upon the lofty hill she’d have been too fascinated to turn her eyes around to the waving woods and waters wild.  Hopefully, you‘ll find this issue of the Square Circular interesting enough to divert your attention from waving woods and waters wild.

If you want more details about any of the matters we’ve mentioned in this Issue, or indeed, about any of the matters we haven’t mentioned please do contact us on 0161 832 4841.

WHAT’S NEW?

First, a warm welcome to Jack Martinez who joined our accounts/audit team in September.

But with all respect to Jack, the really hot news happened at Hole 3 on the Dunham Forest golf course earlier this month.  That famous accountant/golfer or golfer/ accountant (not sure which comes first) “Tiger Berg” hit a hole in one.

Adrian was playing against a banker at the time.  There are rumours (untrue, we stress) that the banker’s back was turned at the time and that thick fog reduced visibility to inches (obviously untrue).  But bankers believe everything accountants tell them, don’t they?

SOME LESS HOT NEWS

The Chancellor’s Autumn statement is scheduled for 5 December.  Draft legislation for next year’s Finance Bill will be published a few days thereafter.

Nothing like as exciting as a hole in one.

EMPLOYMENT RIGHTS IN EXCHANGE FOR SHARES

Last month, the Chancellor announced plans for a new type of employment contract under which employees will forfeit their employment rights in exchange for shares in their employer’s company.  The proposal is due to come into effect in April 2013 and we have yet to see draft legislation on the subject. So, the proposals are a little sketchy at present.

The rights given up would concern matters such as unfair dismissal, redundancy and flexible working.  The shares acquired by employees would be CGT exempt on disposal although it is likely that income tax and NIC might continue to apply on the acquisition of these employment related shares.

Employers would have to think about whether they want their workforce as shareholders.  Owner managed companies usually prefer to open share ownership to selected key employees to whom they can grant options under HMRC approved share option schemes.  Employees would have to weigh up the sacrifice of their employment rights for shares which in many cases would be unmarketable.

We’ll have to wait and see whether the detailed legislation makes the concept more or less attractive. In the meantime, if you’re an owner managed company and want to get key employees more involved through share ownership we would recommend that you get in touch with us to discuss options such as EMIs.

ON THE SUBJECT OF EMPLOYEES……….

Payroll RTI (Real Time Information) had an honourable mention about 6 months ago in Issue 37 and in our recent Employers Bulletin.  Payroll administrators need to be prepared for it next April.  If we do your payroll we’ll obviously handle it all for you.  But if you do need any help give Jenny or Anne a call on 0161 832 4841.

STILL ON EMPLOYEES……….AUTO ENROLMENT

We mentioned this in Issue 38, our last issue, so why again?  Because it’s important that you’re prepared and don’t leave things to the last minute.

If you recall, it’s all about making pension arrangements for employees.  We told you that auto-enrolment will come into force on certain dates depending on how many employees you have.  We also told you that you’d need plenty of time to give the matter proper thought.  So, if for example, the size of your workforce is 50 and your staging date is April 2015 now’s the time to start thinking. And if your workforce numbers 250 and February 2014 is your staging date you should have started thinking already.

To assist in the thinking process we suggest you call Paul Stones on 0161 832 4841.

HICBC

Don’t ask! It stands for High Income Child Benefit Charge.  And yes, it’s something else we’ve told you about before; in the last Square Circular to be precise.

It’s all about how HMRC will claw back Child Benefit from people earning over £50,000 per year or rather how to use the tax system to penalise them so they won’t want to continue claiming. Tax commentators have already pointed to all manner of likely complexities in applying the charge.  It is thought that around 500,000 more people will have to complete self-assessment tax forms.

It doesn’t start till January, so what makes it topical now?  HMRC have sent out letters about it to people who it thinks will be affected.  To do this they have had to cross-match data on people claiming benefit with those at the same address. So people who have to pay HICBC may not get a letter and people who do have to pay it might not.  And if HICBC is to be avoided by not claiming the benefit it’s the benefit claimant who has to say so, not the recipient of the letter.  Funny old world!

If you’re affected and confused by it all or know someone in that position you’re welcome to call and ask us about it.

PARTY SEASON

Here’s a VAT tip for the upcoming Xmas party season.

Suppose your firm has booked a venue for an office party to which employees  and their spouses or partners are invited to attend.  Obviously, at no cost.  In such a case VAT input tax on the meals could only be claimed for the employees, not their spouses. As a result you’d lose about half your input tax.

What can be done to improve the situation?  Well, if you make a small charge for the meal to the guests, say £5, it enables you to claim VAT input tax on all the meals at the expense of declaring VAT output tax on the £5 received from guests.

Might help to make the party go with a swing.

WHILE ON THE SUBJECT OF VAT

Do you remember the article, “VAT’s History” in Issue 27 of the Square Circular in autumn 2009?  Of course you do; bet you’ve been thinking of nothing else since.

Briefly, it reminded you that unwanted options to tax (property transactions) could be revoked after 20 years.  Since the VAT option to tax property was introduced on 1 August 1989, the autumn of 2009 was an opportune time for a reminder.

It may be worth a review from time to time, so here’s another reminder.

NOT ANOTHER AMNESTY!

Yes, the latest this time is door to door salesmen.  Or to give it a proper name, the Direct Selling Disclosure Campaign.  Maybe it’ll take on the name, DSDC.

It follows the usual pattern.  Confess, calculate how much you owe, pay up (this time by 28 February 2013) and pay a reduced penalty of maybe 10% or 20% compared to penalties, possibly up to 100%, if HMRC catches you first.

Past amnesties cover offshore investors, medics, plumbers, restaurant owners, lawyers, hair and beauty, and tutors.  Wonder who’ll be next?

BRC

Which leads on nicely to the re-launch of HMRC’s Business Records Checks (BRC).  We have had something like this in the past. It’s now being re-launched between November 2012 and February 2013, region by region, starting in London and East Anglia and ending up in South Wales and the South West of England.  Of course, it’s just co-incidence that this project comes at an accountant’s busiest time of the year.

As a first step HMRC will identify businesses where they think the records may be inadequate.  If your business is one of those, the second step will be a phone call from HMRC.  They’ll ask a number of questions to assess your record keeping standards.  You’d be better at that point diverting their questions to us.  If your records are deemed inadequate you could well get a visit from a soft cuddly tax officer whose only objective is to give you advice on your business records.  If you do need their advice they’ll follow up three months later to make sure that you’re following the record-keeping advice they’ve given.

And, oh yes, we almost forgot.  If you’ve not followed their advice to make your records adequate, you’re likely to get a penalty.

AND FINALLY

“Taxation is just a sophisticated way of demanding money with menaces.”

(attributed to Terry Pratchett)