HMRC criticised over decision to keep IR35 reforms in Finance Bill

HM Revenue & Customs (HMRC) has been criticised over its decision to keep IR35 reforms in the Finance Bill 2017 amidst concerns that the new rules “have not been reviewed in detail ahead of the General Election”.

The news comes after the Government dropped a series of upcoming changes from the Bill earlier this week, including HMRC’s flagship Making Tax Digital (MTD) project.

A total of 72 out of 136 clauses were dropped from the Bill, but hotly contested changes to IR35, which were introduced on 6 April 2017, were kept in.

The new rules have effectively shifted the responsibility for making sure that contractors are paying the correct PAYE and National Insurance Contributions (NICs) from the contractors themselves onto the agencies or public sector bodies that hire them.

However, one minor last-minute amendment was confirmed following the breaking Finance Bill news – which will now see that private sector retail businesses serving the NHS, such as pharmacies and opticians, fall out of scope of the new IR35 rules.

The Association of Chartered Certified Accountants (ACCA), amongst other bodies, has slammed the Government’s missed opportunity to drop the unpopular reforms altogether.

It said that that new off-payroll framework should have been shelved alongside MTD.

It added that the reforms had been “rushed through” without “the appropriate time allocated for consideration” ahead of the snap General Election.

The comments follow concerns raised by the Scottish National Party regarding the accuracy of HMRC’s Employment Status Service (ESS) – an online tool designed to help contractors determine their IR35 status under the new regime.

Kirsty Blackman, SNP MP for Aberdeen North, said: “People have told me that no matter what information they have put in, they have always been told that they have to pay more tax than they were expecting”.

In response to the criticisms, financial secretary to the Treasury Jane Ellison, has said: “I am surprised by what she says, but let us ask HMRC to look at the practical issues she raises”.

HMRC has insisted that the tool “is working correctly and has been extensively tested”.

Making Tax Digital dropped from Finance Bill ahead of General Election

In a surprise move, the Government’s hotly contested Making Tax Digital (MTD) project has been dropped from Finance Bill 2017 – the last Bill to be debated in the House of Commons prior to the snap General Election.

The controversial plans, which were initially due to be phased in from April next year, would have forced millions of businesses and self-employed taxpayers to submit quarterly tax updates to HM Revenue & Customs (HMRC).

However, on Thursday 25 April, the Government decided to shelve HMRC’s digitalisation plans – alongside numerous other changes initially proposed in the Finance Bill – before Parliament adjourns for the General Election.

Commentators have suggested that, following this surprise decision, MTD is now likely to be delayed by at least a year – and may even be scrapped altogether.

Anita Monteith of the Institute of Chartered Accountants in England and Wales (ICAEW), said: “This is a sensible decision by Government. Making Tax Digital plans remain controversial and need more scrutiny by those who will be affected, and most importantly proper parliamentary debate – a clear roadmap as to how MTD will work in practice is needed”.

The snap election will also see plans to cut the tax-free dividend allowance from £5,000 to £2,000 dropped, as well the reduction in the money purchase annual allowance for people over the age of 55.

What company directors need to know about new anti-money laundering rules coming this June

The Government has warned companies to be aware of important anti-money laundering rule changes coming this summer.

From June 26, people with significant control (PSC) will no longer be updated on the confirmation statement (CS01). Directors should instead inform Companies House on forms PSC01 and PSC09 about any changes.

Directors have 14 days to update their register and a further 14 days to send the information to Companies House.

Notably, the changes mean that DTR5 companies are no longer exempt from reporting requirements to hold information about their PSC.

From 24 July, Scottish limited partnerships (SLPs) will also need to register PSC information with Companies House. Scottish partnerships (SPs) will have to follow suit if all partners are corporate bodies.

SLPs and SPs will need to review the register at least once a year, and have 14 days to confirm any changes.

Companies House said SLPs and SPs can apply for a restriction so that their information is not disclosed on the public register.

Almost half of SMEs think Making Tax Digital will overcomplicate tax, study reveals

A new study suggests that almost half of small and medium-sized enterprises (SMEs) believe that the Government’s Making Tax Digital (MTD) project will overcomplicate tax.

The study, carried out by cloud software company Pandle, quizzed 1000 SMEs and found that more than two thirds (63 per cent) of firms are ‘prepared’ for the change, which will begin to be phased in from April 2018.

However, 48.3 per cent of respondents said that they were worried that MTD would overcomplicate their tax affairs.

Meanwhile, an additional 13 per cent of businesses said that they do not believe they are ‘tech savvy’ enough to navigate MTD systems.

Once introduced, Making Tax Digital, a mandatory tax overhaul currently in its testing stage, will see the end of paper tax returns and the introduction of quarterly digital reporting to HM Revenue & Customs (HMRC).

The project is currently under trial, but will officially roll out between April 2018 and April 2020, depending on your circumstances and reporting obligations.

An independent analysis of how much the transition to MTD will cost for the average user has suggested that businesses should expect to pay around £2,770 – a figure far higher than the £280 initially estimated by the Government.

However, this analysis, which was carried out by the Centre for Economics and Business Research (CEBR), has stressed that costs will “vary considerably” for businesses of different shapes, sizes and structures. It is important to seek situation-specific advice.

Employers cutting it fine in setting up workplace pension, says study

Almost one in six businesses are applying for a workplace pension after their staging date has passed, according to new research from Aviva.

The study notes that this trend is on the rise, rising from 14 per cent the previous quarter (Oct – Dec 2016).

Year-on-year, that figure has jumped from just one per cent.

Likewise, a record-low number of companies are making preparations more than two months in advance, sitting at just 25 per cent.

The study claims that companies dragging their feet are putting themselves at risk of a fine or are limiting themselves when it comes to choosing a pension scheme – as not all providers will take on “late stagers”.

Andy Beswick, MD Business Solutions at Aviva, said: “While some of these numbers are disappointing, it’s not unexpected. SMEs tend to be less well-resourced and aren’t blessed with large HR departments or budgets to help them through their auto-enrolment journey.

“What the figures do highlight is that there is still work to be done to make business owners aware of their obligations. As an industry, we’ve been talking about auto-enrolment since the early 2000s and implementing it for over four years now. But to thousands of employers and employees, it is still a brand new concept and we need to make sure people aren’t getting left behind.”

Around 500,000 small and medium-sized enterprises (SMEs) are due to set up a workplace pension this year.

IPSE urges contractors to check IR35 status with HMRC

The Association of Independent Professionals and the Self Employed (IPSE) is calling upon UK contractors to use the Government’s new IR35 status tool to ensure that they are paying the correct amount of tax.

The calls follow important IR35 changes which took effect on 6 April 2017, and now see public sector organisations, such as recruitment agencies, responsible for determining the IR35 status of their contractors.

This effectively means that, if the public sector organisation deems a contractor to be inside IR35, that contractor will be taxed in the same manner as an employee – which in many cases can result in an inappropriate amount of tax incurred.

IPSE has warned that many contractors are finding themselves placed in incorrect tax brackets due to the new rules. It says that contractors should consult HM Revenue & Customs (HMRC) to ensure that they are paying the correct amount of tax.

The group is urging contractors to make use of HMRC’s Employment Status Service (ESS) – a new online tool which was released in March in a bid to provide greater clarity around the IR35 status of contractors.

Chris Bryce, IPSE chief executive said: “We urge all contractors in the public sector to complete the test and take the results to their client.

“This is the only way contractors can get fairness and clarity. HMRC has said it will stand by the results of their ESS tool and IPSE intends to hold them to this”.

HMRC consultation seeks views on flat rate mileage and fuel expenses

Following Spring Budget 2017, HM Revenue & Customs (HMRC) has launched a new consultation into the taxation of employee expenses.

The consultation is the latest stage of a four-year Government review programme, carried out in collaboration with the Office of Tax Simplification and geared at bringing benefits and expenses taxation into line with modern working practices.

Laid out as a ‘call for evidence’, its primary purpose is to seek views on whether flat rate expenses such as Approved Mileage Allowance Payments (AMAPs) are still appropriate in today’s working world.

HMRC is seeking evidence in the following areas:

  • Current employer practices on employee expenses.
  • Current tax rules on employee expenses.
  • The future of employee expenses.

Travel data analysts and fleet industry bodies are calling upon small and medium-sized enterprises (SMEs) and fleet operators to respond to the call for evidence, which comes shortly after flat rate travel and subsistence payments were abolished last year.

Reports suggest that HMRC has no explicit plans to abolish AMAPs or the current advisory fuel rates (AFRs). However, the Revenue’s review does bring into question whether such rules are ‘fit for purpose’ in the modern economy.

The consultation, entitled Taxation of employee expenses call for evidence, can be accessed here and will run until 11:45pm on 12 June 2017.