Showing posts with label compliance. Show all posts
Showing posts with label compliance. Show all posts

Thursday, March 21, 2013

HMRC finds it hard to police IR35 Compliance

Despite a six-fold increase in IR35 investigations during the first half of this tax year, HM Revenue and Customs has failed to turn up any compliance failures by contractors, according to data obtained by tax and accounting group Bloomsbury Professional. HMRC ramped up its investigation into "disguised employment" after it was alleged that a number of senior public sector figures had illegitimately received income through personal services companies to avoid liability to personal income taxes and national insurance contributions.

During the first six months of the tax year, 193 new investigations were launched but these have yet to yield a single penny for the tax man. This is despite a massive hike in enforcement activity, up from 59 investigations for the full tax year 2011/12. Martin Casimir, Managing Director at Bloomsbury Professional, commented: “HMRC has been stung into action by a handful of very high profile cases where individuals and employers may not be IR35 compliant. Ordinary contractors and freelancers are now dealing with the fallout.”

Tuesday, November 15, 2011

Dividends: dos and don'ts

Distributable profits

Dividends must be paid out of distributable profits and directors must prepare relevant accounts to confirm the position. If it later transpires there are not enough distributable profits and relevant accounts were not prepared then the dividend is illegal and repayable, and should be disclosed as such.

Monday, November 14, 2011

Know your overseas shopping limits

If you are going abroad to do Christmas shopping, or buying goods online from non-EU countries, you need to know how much you can buy before you have to pay import duty or VAT. Rules can be complex and easy to overlook. Here is a quick summary to ensure that you stay on the right side of the law:

Arriving in the UK by commercial sea or air transport from a non-EU country, you can bring in up to £390 worth of goods for personal use without paying customs duty or VAT (excluding tobacco and alcohol, which have separate allowances, and fuel). Arriving by other means, including by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270. Above these allowances and up to £630, there is a duty flat rate of 2.5 per cent.

Monday, April 4, 2011

Tougher penalties for late filers

The new HMRC penalty regime for late filing and late payment of self assessment income tax begins on Wednesday (6 April). As a result, a tax return filed six months late could attract a penalty of at least £1,300. In the past, being late to file your tax return would generate a fine but that fine would be waived is no tax was due. Not anymore!

The new sanctions are:
  • Just one day late: an initial penalty of £100, even if there is no tax to pay or all tax owed has been paid.
  • Three months late: an automatic daily penalty of £10 a day up to a maximum of £900.
  • Six months late: further penalties charged of the greater of 5% of tax due or £300.
  • Twelve months late: the penalty will be the greater of 5% of tax due or £300. In serious cases, a higher penalty of up to 100% of the tax due could be charged.
The penalties are on top of the interest HMRC will charge on outstanding amounts, including unpaid penalties, until payment is received.

Sunday, February 27, 2011

What is IR35?

The IR35 legislation was introduced by HMRC in April 2000 and is intended to combat tax avoidance. Any contractor that is deemed to be employed (rather than self-employed) is said to fall under IR35. In that case the contractor is required to extract all the money out of his limited company as salary (instead of dividends) and to pay both the employee and employer Class 1 National Insurance (23.8% of gross salary, to increase to 25.8% next year). Moreover, since April 2007, after the introduction of the Managed Service Company (MSC) legislation, contractors can only receive dividends if they operate their own personal Limited Company. If they receive payment through an intermediary then they can only receive payment via PAYE, which means paying income tax and both employee’s and employer’s national insurance, even if they fall outside of IR35.

It's easy to understand why a number of contractors want to ensure that they do not fall inside of IR35. HMRC has put together a number of simple questions that one can answer which will help determine the IR35 status. If you answer "yes" to the following then it is likely you will be deemed a "disguised employee" and will therefore fall inside IR35:
  • Do you have to do the work yourself?
  • Can someone tell you at any time what to do, where to carry out the work or when and how to do it?
  • Will you work a set amount of hours?
  • Can someone move you from task to task?
  • Are you paid by the hour, week or month?
  • Will you receive overtime pay or bonus payment?

Sunday, February 13, 2011

How to choose the right accountant

Choosing the right accountant is more difficult than choosing the right camera. You don't have reviews you can refer to. And what works for some companies will not work for others. So here are 10 tips to get you on the right track.

1. Ask around

This is not necessarily different than with anything else. While past performance is no guarantee of future results, happy clients is always a good sign. Beware however that asking friends or family is not the same as hiring them. Because someone if your wife's nephew, it is no guarantee that you will get great service. And if things go wrong, your personal life will be impacted as well. Not a good idea!

2. Check qualifications

There are a number of valid accounting qualifications: ACA, ACCA, CIMA, ICAEW etc... But don't discount experience. Someone who went to Cambridge, with past CFO experience but without a formal accounting qualification will definitely be a better option than someone fresh out of school! Also remember that not everyone in a practice will have the same qualifications and that most probably the junior staff doing your work won't be qualified at all. Also look at specific business knowledge. Do they have clients in your line of business?

Tuesday, February 8, 2011

SMEs face potential penalties on accuracy of records

HMRC are planning a programme of checks that will review the adequacy and accuracy of records kept by small and medium-sized enterprises. The programme will use existing law regarding both record-keeping requirements and penalties for failure to comply, with sanctions imposed for significant failures. The Revenue says it conducted a random enquiry programme that indicated poor record-keeping is a problem for 40% of SMEs. The department has issued the consultation document Business Records Checks to discuss the implementation of a new programme. The campaign would begin in the second half of 2011, with around 200,000 small businesses being selected for one of the new checks. HMRC expect to raise £600 million over its first four years.