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Business Loan Scheme

Fri, 01 May 2020 15:06:49 GMT

If you are a business owner there is a new business loan scheme that has been announced by the government.

The details that have been announced so far are:

• Businesses will be able to borrow between £2,000 and £50,000 (up to a maximum of 25% of the business’ turnover)

• Businesses will be able to access the cash within days

• The government will guarantee 100% of the loan (compared to the Coronavirus Business Interruption Loan Scheme where only 80% of the loan was backed by the government)

• The government will pay any interest and fees due for the first 12 months and no repayments from the business will be due during the first 12 months

• Loan terms will be up to 6 years

• The government are looking to agree low interest rates for the remaining period of the loan

• The application is meant to be a short and simple form filled in online

• The scheme will launch for applications on Monday 4th May, when we expect to be provided with further information.

The guidance says that you can apply for a loan if your business:

• Is based in the UK

• Existed on 1st March 2020

• Has been negatively affected by the coronavirus

• Was not an ‘undertaking in difficulty’ on 31st December 2019

• Have not already claiming the Coronavirus Business Interruption Loan Scheme (although you can arrange with your lender for this loan to be transferred into the Bounce Back Loan scheme until 4th November 2020).

If you would like to discuss your business circumstances with a member of our team, you can call us on 0808 169 9090 or fill out an Enquiry Form and we will contact you.

Capital Gains Tax Update - April 2020

Liamb@forthsonline.co.uk (Liam Bottomley) — Fri, 17 Apr 2020 14:13:57 GMT

As of 6 April 2020 two significant changes in legislation have come into effect for Capital Gains Tax. These changes are relevant for the sale of residential properties where the property was not your main residence.

30-day Capital Gains Tax Return

If you sell a residential property and make a gain over the tax free allowance (£12,300 for 2020/21), you will now need to report this gain to HMRC by submitting a Capital Gains Tax return within 30 days of the sale.

You will no longer be able to defer reporting and payment of Capital Gains Tax via your Self Assessment return, and any tax owed must be paid within the 30-day reporting and payment period.

Removal of Lettings Relief

This change will impact you if you rent out a property that you once lived in as your main residence.

Under the previous rules, if you once lived in the property and have since let it out, you could claim Lettings Relief to make up to £40,000 of the gain exempt from Capital Gains Tax.

The new rules state that you can only receive Lettings Relief if you still live in the property and rent out part of the property to a tenant. For the majority of landlords this will not be the case.

The removal of Letting Relief could have a significant impact on the amount of tax due if you sell a property you once lived in but then let out.

How we can help

The first change in legislation means that any Capital Gains Tax due on the sale of a residential property will need to be reported and paid to HMRC much sooner than under the previous rules.

The second change could result in a higher amount of Capital Gains Tax being due in particular circumstances.

Therefore if you are thinking of selling a residential property, we can estimate the potential Capital Gains Tax for you advance. On sale of the property we can also prepare and submit the Capital Gains Tax return to HMRC on your behalf within the 30-day deadline.

For more information or to discuss your circumstances with a member of our team, call us on 0808 169 9090 or fill out an Enquiry Form and we will contact you.

Business Continuity - Coronavirus Update

Mon, 16 Mar 2020 16:22:51 GMT

Here at Forths Tax we are continually reviewing information and guidance in relation to the coronavirus pandemic.

Our focus has been on ensuring that we have robust business continuity strategies in places to continue to service the needs of our clients, whilst heeding advice from experts and government to ensure the safety of clients, staff and the general public.

To this end we have developed stress tested and comprehensive home working contingencies for staff as required.

Throughout this difficult period our team will still be on hand to provide our normal level of service, and should you need to contact us for any reason, please do not hesitate.

If there is anything case specific, or generally, that you would like to discuss with us, please:

Call us on 0808 169 9090

Email us at enquiries@forthstax.co.uk

Fill out a Contact Form

Finally, we would like to send our best wishes in this challenging time.

The Forths Team

Festive Office Hours

Liamb@forthsonline.co.uk (Liam Bottomley) — Fri, 13 Dec 2019 10:07:55 GMT

Please note that the office will be closed from 2pm on Friday 13th December for our office party.

Monday 23rd Dec – 9am to 5.30pm

Tuesday 24th Dec – 9am to 4pm

Friday 27th Dec – 9am to 4pm

Monday 30th Dec – 9am to 5.30pm

Tuesday 31st Dec – 9am to 4pm

Thursday 2nd Jan – 9am to 5.30pm

Friday 3rd Jan – 9am to 5.30pm

IR35 Update

Liamb@forthsonline.co.uk (Liam Bottomley) — Mon, 11 Nov 2019 15:45:33 GMT

Quite simply, what is IR35?

IR35 is known as the intermediary’s legislation that initially came into force way back in April 2000. Essentially a law to collect taxes from contractors who were engaged through their own personal service companies and that HMRC believes should be directly employed

What’s new?

Prior to April 2018 in the public sector and April 2020 in the private sector, contractors were themselves responsible for determining their status and whether they would fall under IR35.

This led to a raft of HMRC IR35 challenges whereby the contractor had to prove to HMRC that they were in fact contracting and were not part of the employed workforce.

From April 2020 both Public and Private sectors and the “end client” (businesses) will now need to determine a contractor’s status. Whilst a relatively subtle change in legislation, this will cause lots of head scratching and soul searching amongst those businesses that use contractors.

We are already seeing in the public sector that the MOD, NHS and HMRC themselves are choosing to stop using contractors. No public body wants to be challenged over their use of contractors and put themselves at risk of a financial settlement and potential embarrassment.

It is only a matter of time until the we see the use of contractors constrict within the private sector. The rules that govern employment status are not an easy read and the deluge of high profile IR35 cases making their way through the tax tribunal has many business people wary of the potential for not only a financial settlement but also a long running and expensive HMRC challenge.

We are sure that Finance Directors and HR personnel are already planning to implement new checks and balances, sadly it is likely that a good proportion of private business, as already seen in the public sector, will make blanket decisions on the use of contractors rather than looking to introduce robust policies around the use of contractors.

But could this be the end of the contractor? We certainly do not believe it is. There is an army of people who are contracting within the public and private sector, who are happy to be contractors, they are flexible, hardworking and essential to UK companies. Genuine contractors will always have a place with in the private and public sector and provided that the correct proactive advice is sought, there is no reason to see their demise.

Our specialist tax advisers assist individuals and businesses in relation to the complexities of IR35 and its implications. To discuss your circumstances, contact us here .

IR35 - What You Need To Know

Fri, 07 Jun 2019 13:27:04 GMT

Ever since the introduction of PAYE and particularly so in the last twenty years, the rules surrounding what defines “employment” have greatly tightened. This tightening of the definition has been motivated by HMRC’s belief that a loss of tax revenue arises when workers are incorrectly classified as self-employed rather than as employees.

Ensuring that workers are correctly classified remains one of the most contentious issues facing businesses. From April 2020, all public sector and private sector employers will be solely responsible for the classification of the people who carry out work for the benefit of your business. HMRC have said that a failure to correctly classify a worker is likely to lead to financial penalties.

Likewise, contractors themselves are liable for declaring whether the work they carry out for a client falls within or out of the scope of the rules as defined by IR35.

Furthermore, HMRC has adopted a hard line approach to employment status. It regularly takes the workers and the companies they’re contracted to work at to the First Tier Tribunal where its record of success in correctly interpreting IR35 status has recently been thrown into question.

Bearing this in mind, this article will look to navigate a course through the whole employed versus self-employed minefield, paying particular focus on the approach by HMRC – from legislative definitions and compliance, through to disputes and the penalty regimes.

For businesses, understanding the approach of the authorities will help you to implement robust employment status procedures which may limit any potential risks in this area. For contractors themselves, it’s worth taking the time with every contract won to review it for IR35 purposes.

Why did IR35 come about?

Some view that the UK has an overregulated labour market , with employees generally being entitled to a great deal of benefits and employment rights from day one.

Whilst this is good for employees, there is a clear economic impact on employers, with National Insurance, pensions and holiday pay, for example, all increasing the payroll cost of full-time employees. This makes the use of self-employed workers an attractive option.

Why self-employed?

The common misconception is that self-employed staff are cheaper than employed staff. Of course, there is some economic benefit to using contractors including no Employers’ National Insurance, holiday pay, sick or maternity pay, and redundancy. However, for many employers, the primary benefits lie in the flexibility of contracted professionals.

Contractors also benefit from the arrangement, including the freedom to work on the contracts most desired, the significantly higher hourly rate, and more.

The status of workers

The employment status of workers is not a matter of choice nor is it defined by whether a worker has registered with HMRC as an employee or a contractor. Moreover, it is a matter of fact. There are three status tests which HMRC often use as a guide for identifying whether a worker is acting in a self-employed fashion (providing a contract for services) or whether they are to be treated as employees (operating under a contract of service). They are:

Control
Personal service
Basis of payment

The control test is usually considered indicative of employment when there exists a level of interference in how a job should be done and by whom.

Self-employed workers generally receive less interference from a contractor and can exert more control over how, where and when a specific job may be carried out.

However, the control test is open to differing views on interpretation, so care must be taken if you are relying on this status test as the sole method for establishing the employment status of workers. In particular, contractors should be looking to evidence instances of :

Interfering in how a job is done
Requiring workers to be available
Specifying what tasks are performed, and in what order

HMRC, following some high-profile legal challenges, now acknowledges that where a worker has the right to provide a substitute worker then this work cannot be under contract of service, i.e. cannot be classed as employment.

HMRC often cite the basis for payment as being a key factor in determining the employment status of workers and a major assumption is that self-employed workers are often paid a set price for a ‘job’ and must absorb any additional costs themselves should this job take longer or involve more work than was initially quoted.

By contrast, employees are typically paid a salary, or on a pro rata basis – for example per hour, week or month. Despite this distinction, there still remains some contention since it is not uncommon for certain self-employed construction workers to be paid by the hour or day. In general, the basis for payment test is held in a better light if factors such as the potential for financial loss or risk – which an employee would never have – are considered as well.

The following bullet points provide a brief summary of the most common employment status indicators:

Employed

The contractor has the right to control what the worker does, where, when and how – even if this right is not exercised;
The vast majority of the supplier and equipment needed to do a job is provided by the contractor (with exceptions in some cases where a worker supplies small tools only);
Worker does not risk his or her money, and there is no possibility of financial loss;
Worker has no business organisation, i.e. no yard, office, vehicles, staff or bank account;
Worker is paid by the hour, day, week or month.

Self-employed

Worker has the right to decide how and when the work is done within an overall deadline;
Worker has to pay for supplies and equipment needed to fulfil a contract;
Worker ‘bids’ for a job and must absorb any additional costs;
Worker has the right to hire additional workers who are paid by him;
Worker paid a fixed rate for the job regardless of actual time taken or costs to himself incurred.

Whilst this summary is by no means exhaustive, it should prove a useful checklist to ensure to use when considering your businesses future compliance.

HMRC enforcement

HMRC routinely investigate independent contractors, and in the past, has enjoyed a degree of success from conducting investigations into independent contractors.

Historically HMRC committed significant resources to policing employment status – more status inspectors, extra compliance teams, as well as extensive investment in online resources that can allow rapid cross-checking of businesses and red flag potential compliance risks; all as part of a wide-ranging compliance strategy to bridge the tax gap.

Given the rise in the number of self-employed and gig economy workers in the UK and HMRC’s belief that much of the key to closing the “tax gap” lies in getting the self-employed to pay the correct tax, it’s no surprise that HMRC is redoubling its efforts in this area.

There have been some high-profile cases either brought by HMRC or contractors arguing that the people contracted to perform a service (Uber taxi drivers, multi-drop parcel delivery drivers, and so on) are in fact employees and not self-employed. Do not be surprised to read of HMRC pressing for new investigatory powers to crack down on this further together with a government drive to further define what an “employee” actually is.

Against this backdrop, it is important to understand and manage the status of workers, both for now and for the future.

For employers, if you are unlucky enough to fall foul of an Employer Compliance Review then the first thing you should do is to have a quick look over any invoices you have from self-employed subcontractors. HMRC, in particular, will generally review these invoices as a first step of any compliance review, and typically look for the invoice to have some or all of the following characteristics:

Show the worker’s home address
Have consecutive numbering
Contain narrative that indicates ‘labour only’
The shown bank account is a personal bank account
The frequency of the invoices being issued: are they weekly, which could be problematic, or are they for a complete job?

Of course, invoices in this format are not indicative of employment or self-employment; however, if the invoices from your subcontractors are similar to this, then you should expect HMRC to investigate further. Similarly, it is highly likely HMRC will investigate any payments to individuals that have no supporting invoice.

For contractors, specifying in as much detail as possible why you are billing for your time is part of an overall defence against IR35, the basis of which is a contract. When examining your terms and conditions of supply, HMRC are likely to use the following benchmarks to decide IR35 compliance:

Who sets your working days and hours?
Are you paid by the hour, week, or the month regardless of how well you’ve done in that time?
Do you control where they work or do you?
Are you forbidden or restricted from providing labour to someone else? (especially to your client’s competitors)
Is your client able to “sack” you?
Do your clients have key performance indicators which measure and evaluate your output?
Is your client able to take disciplinary action against you if you do not start on or complete the work they’ve set out for you?
When your client sets a task, is it only you who can do it? (that is, you can’t contract the work out themselves to someone else)
Does your client provide you with the tools, equipment and/or data that you use to do your work?
Is your client obliged to provide you with work and are you obligated to make yourself available to do it?

The more your contract and your actions can demonstrate independence, the more robust your response to challenge can be.

What happens if I get it wrong?

For the contracting businesses, it is important to get the employment status right as you are required to make a declaration each month. This means that you will be vulnerable to any subsequent compliance check, with a potential risk for penalties which could reach £3,000 per month, not to mention having to be liable for unpaid taxes or National Insurance.

For contractors who have declared themselves outside IR35 but who are later found to be in it, there is a strong likelihood that HMRC will investigate all other recent contracts for non-compliance. You will need to calculate what your deemed employment payment is and then make a payment for that among. HMRC have an IR35 deemed payment calculator tool here .

HMRC does provide an online Employment Status Indicator (ESI) that contractors can use to reassure themselves on the status of their workers. It is anonymous, but the resulting report can be printed and retained on file as a method of defence against any future HMRC query into the employment status of the worker(s) in question.

Public sector contracts and private sector contracts

IR35 reforms covering contractor engagement with the public sector were introduced in 2017. Whereas previously contractors would declare their own IR35 compliance prior to the reforms, now it is the responsibility of the client to decide on IR35 status.

Many public sector clients err on the side of caution and declare their engagement with their contractors as within the scope of IR35 to avoid the fines and penalties discussed earlier in this article. Should a contractor be deemed as within the scope of IR35, either by the client or through self-declaration, the public sector body needs to:

calculate a deemed payment for the contractor;
inform HMRC;
issue the contractor with a worker ID number;
report any office holding duties or not (office holding duties will be classified as employment income);
send a P45 to the contractor upon the ending on the contract.

The same reforms will be introduced to the private sector from April 2020.

To discuss your circumstances and clarify your tax affairs, contact us today .

Self Assessment Tax Returns

Liamb@forthsonline.co.uk (Liam Bottomley) — Tue, 08 Jan 2019 12:05:41 GMT

Make sure you complete this on time!

Prior to the dawn of self-assessment, which was introduced in the tax year up to and including 1995/1996, the assessment of an individual’s tax liability was entirely the responsibility of the tax authorities. It was therefore possible for taxpayers to delay the assessment (and payment) of tax by withholding information from the authorities for as long as possible.

The introduction of the self-assessment system shifted the responsibility for assessment onto the taxpayer and made it much more likely that tax is assessed and paid on time.

About half the people who get tax returns do so because they are self-employed. Others may have income that hasn’t been taxed already such as freelance earnings, rental income, or interest that has been paid gross. Company directors automatically get a tax return as do those with complex tax affairs.

If you do owe income tax than the amount should be paid in a timely manner within the timescale specified otherwise you will incur fines.

If you require assistance with your self assessment / tax return, talk to our experienced team on 0808 169 9090, or email enquiries@forthstax.co.uk

Was it successful after introduction?

A report to Parliament in 2001, five years after the introduction of self-assessment, focused on the Inland Revenue’s progress in three main areas: identifying potential taxpayers, getting in tax returns, and carrying out enquiries.

Individuals who had not notified the Inland Revenue of taxable income and gains were described as ‘ghosts’ and ‘moonlighters’ operating in the hidden economy. The department’s intelligence work allowed for the collection of some £22 million of additional tax in 1999/2000 by identifying those people who were not registered for tax.

Around 90% were filed on time. The 10% that were not equated to a potential loss of between £150 million and £300 million from returns which remained outstanding after the automatic £100 penalties have been applied.

Using their then new powers, HMRC started to perform enquiries and inspections into a random sample of tax returns. Results from the first two years, while not providing a definitive view, nevertheless confirmed that substantial sums of money were at risk of non-collection through mistakes and omissions made on self assessment forms.

How is it performing today?

So does self-assessment really work? There may be some speculation that the current system leads to a large underpayments of tax on an annual basis.

Using data from audits covering tax returns for the years 1999 to 2009, an analysis showed that:

· 36% of self-assessment taxpayers have some under-reporting on their taxes. This rises to almost 60% among the self-employed .

· Most under-payments are less than £1,000. But, a small minority of taxpayers (less than 4%) owes more than £10,000 and account for nearly half of the missing tax revenue from self-assessment.

Arun Advani, Assistant Professor at the University of Warwick, Research Fellow at the Institute for Fiscal Studies, and author of the study said “Between errors and deliberate under-reporting, a significant share of self-assessment tax goes unpaid. Audits bring in tax directly, but also change taxpayers’ behaviour.”

Simple Assessment

Currently 11 million people complete a tax return every year. Simple Assessment is a new way of collecting tax and is designed to reduce the numbers of people who are currently completing self-assessment return.

HMRC issued a policy paper outlining just how the new Simple Assessment regime will work.

The rollout of the new system in September 2017 started with two groups:

· New state pensioners with income more than the personal tax allowance in the year 2016 to 2017.

· PAYE taxpayers who have underpaid tax and cannot have that tax collected through the tax code.

HMRC will now use the data it holds already so it can calculate what tax is due from taxpayers on the new system. From September 2017, people meeting the above criteria now receive a letter with their tax calculation. If the letter is correct, they need to do nothing at all and pay their bill.

If the taxpayer thinks that any information on the Simple Assessment is incorrect then they have 60 days to contact HMRC. Should someone miss their deadline, they should still contact HMRC to discuss their circumstances or financial penalties will be applied in line with current policy.

General self-assessment FAQ.

Three of the most frequently asked questions are,

Q: When do I pay my tax?

A: Payments can be made in two instalments on 31 January 31st of July each year. Any balance due is settled the following 31st of January.

Q: Does self-assessment mean that the Revenue does not assess my tax?

A: The Revenue will only raise assessments in rare cases, for example if there is an undue delay in submitting your tax return. They will continue to raise assessments where appropriate for settling your tax affairs for any years prior to self-assessment. Generally, HMRC-led tax assessments are a thing of the past. You will, however, receive statements of account from the Revenue.

Q: If I am self-employed, do I have to make up my accounts to 5th April every year, to coincide with the rest of the tax return information?

A: This is not obligatory, but the system makes it tax efficient in most cases to prepare accounts to 31st March or 5th April each year. This may depend on individual circumstances.

The replacement of the Self Assessment with Making Tax Digital.

HMRC is expanding its Making Tax Digital (MTD) income tax pilot to residential landlords with simple tax affairs. The scheme is open to the self-employed and residential landlords (or their agents) who want to opt out of the current self-assessment regime.

To join the pilot, you must be willing to keep digital records of your business transactions and then send Income Tax updates direct to HMRC via the new system. This must be done on a minimum of a quarterly basis using MTD-compliant software, instead of filing your normal self-assessment return.

In an effort to move away from the annual tax return, HMRC is seeking to introduce new Personal Tax Accounts. Every individual registers for their own PTA which allows them to view and manage the majority of their UK tax affairs online in a single place. The ultimate end goal of the introduction of PTAs is to replace the annual tax return altogether.

Self Assessment Advice – Contact Forths Tax

For assistance with your self assessment / tax return talk to our team on 0808 169 9090, email enquiries@forthstax.co.uk or fill out an Enquiry Form

Making Tax Digital (MTD)

Liamb@forthsonline.co.uk (Liam Bottomley) — Wed, 19 Dec 2018 10:02:13 GMT

Things you need to know about HMRC's new Making Tax Digital initiative...

HMRC intend to become one of the most advanced tax authorities in the world by enhancing the taxpayer experience and at the same time closing the tax gap. One of the ways in which they aim to do this is through the Making Tax Digital initiative, this will transform how HMRC deal with taxpayers.

Making Tax Digital (MTD) covers both individuals and businesses across a number of taxes. For VAT Registered businesses trading over the VAT registration threshold (£85,000), VAT is the first tax selected for digitalisation in the UK. This will take effect from 1 April 2019 for most businesses. MTD for other taxes will follow in April 2020 at the earliest.

For VAT registered businesses trading above the VAT Registration threshold there are three main digital components to MTD, these are as follows:

1. Requirement to keep digital records

Businesses will not be required to store each and every invoice and receipt digitally, however, transaction data will need to be stored digitally. This includes transactional listings and a digital VAT account from which the VAT return is prepared.

2. Digital links

VAT returns must be digitally linked to digital records, you can continue to use spreadsheets however, these must also be ‘digitally linked’ to the accounting systems. HMRC has announced a soft-landing period of 12 months, after this digital links must be in place from April 2020.

3. Digital submission

Currently, most businesses submit their VAT returns by manually entering figures into HMRC’s online portal. This option will no longer be available once Making Tax Digital comes into force, instead VAT returns must be submitted digitally via HMRC’s Making Tax Digital Application Programming Interface (API). Digital submissions of VAT returns will be required for most businesses for periods starting on or after 1 April 2019.

Our VAT experts have developed a system which will give you a simple way to manage and submit your VAT obligations without the need for you to install any new software. For more information please contact a member of our VAT Team on 0808 169 9090, email at enquiries@forthstax.co.uk or fill out an Enquiry Form .

Festive Opening Times

amy@sysmarketing.co.uk (Amy -) — Thu, 06 Dec 2018 10:36:44 GMT

Please see below for our opening times over the Festive Period....

We would like to wish you best wishes for the festive period. Our opening times are as follows:

Friday 21st December - 9am - 2pm
Monday 24th December - 9am - 4pm
Thursday 27th December - 9am - 5.30pm
Friday 28th December - 9am - 5.30pm
Monday 31st December - 9am - 4pm
Wednesday 2nd January - 9am - 5.30pm

If you have an enquiry out of office times, you can contact us here , or by emailing enquiries@forthstax.co.uk