Tag Archive | "ICAEW"

What do you know about Tax Avoidance schemes? Really?

The government takes a hard line on Tax avoidance, this much we know. But it’s not only individuals who face the wrath of HMRC if they try to sweep a little of their income under the carpet.

The tax man is well aware of promoters of tax avoidance – or even evasion – schemes, too. They’ve even got a ditty little acronym for them: POTAS.

Just in case the tax man misses the odd scheme, it also has guidance on DOTAS. This tells you of your ‘obligation’ to bring such schemes to the government’s attention.

The two pieces of legislation are very much a double act, with the former referencing the latter heavily. Whilst both are extensive, it’s not a bad idea to familiarise yourself with the main points, which you can find on ICAEW.

Isn’t ‘grassing’ on my umbrella/accountant biting the hand that feeds me?

If you believe the person responsible for your bookkeeping is trying so hard to retain your business that they’re crossing the line, you can voice your concerns to the tax man.

And this is the moral dilemma that many contractors face. On the up side, the more of your income an umbrella company or an accountant can help you retain, the better, right? Well, not always; specifically not, when you get caught.

If you come under scrutiny from HMRC, as a contractor, it’s likely that the government will place you under the supervision of the IR35 team. There’s no use pleading ignorance, either.

Yes, you may have ultimate faith in your accountant to play by the book. But there’s no harm in keeping abreast of the most poignant matters pertaining to how much tax or NICs you pay. It will, after all, be you paying PAYE if you’re caught inside IR35.

Isn’t IR35 dead?

How long the IR35 team has left to run is the source of much industry debate. Its effectiveness in handling larger claims has been brought into question.

Likewise, industry commentators have noted the capacity of the IR35 team to handle only 250 cases at a time. That, in itself, is reason to suspect that Supervision, Direction and Control may be the legislation contractors need to concern themselves with most in the near future.

Whether it is SDC or IR35 you have to worry about, the tax man will always be on the lookout for tax avoidance. And the whole point of this article today is this:
when appointing an accountant or umbrella company, ask them if they’re a government-monitored promoter of a tax avoidance scheme.

The legislation exists to protect clients; as such promoters must disclose details to you if you ask. If they are monitored, they must tell “clients, potential clients and intermediaries” about their status. If you fall into that subset, be sure you know what you’re letting yourself in for if you appoint them to do your accounting!

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TAXTools 5 Update: Small Biz Basics for the DIY Accountant

There are a gazillion reasons why contractors hire accountants to take care of their finances. Most have enough keeping up with change in their own industry, let alone any ‘helpful’ modifications HMRC makes to UK taxation laws.

But not all self-employed people see the value in outsourcing this element of running their business.

They’d much rather paw through their own expenses, receipts and time sheets. Having their comings and goings laid out across the dining room helps them visualise how their business is doing.

And depending upon their hourly rate (if it’s low enough), this method may even save them a few bob each month in the process. And that’s fine.

A little knowledge can be dangerous (that’s a good thing)

Today’s post is predominantly for those who prefer to do their own accounts.

But even those who value their free time above their paperwork may find some useful tax-saving hints, too. It doesn’t hurt to keep abreast of what you can and can’t claim against:

  • expenses;
  • NICs relief
  • CGT;
  • and income tax.

You could even take your own contractor accountant to task by knowing the tax relief basics. If you don’t feel they’re claiming everything they should on your behalf, there’s no harm in asking the question.

Just don’t tell them I put the idea in your noggin, right? Deal.

TAXTools: ICAEW‘s helping hand for small business

The ICAEW has long provided an invaluable resource for small businesses: TAXTools. In five complete sections relating to working with HMRC, they are:

  • contact information;
  • bespoke toolkits;
  • making payments;
  • lodging complaints;
    • and the one we’re talking about today:
  •  rates, allowances and reliefs.

Whilst items 1-thru-4 may change upon different administration, it’s item 5 that’s the most dynamic. With every budget, what businesses can and can’t claim seems to change. In line with George Osborne’s recent budget, ICAEW has updated that document.

TAXTools 5: updated for 2014/15 & 2015/16

Rather than catalogue the changes verbatim here, here’s the jump to the information TAXTools 5 for tax years 2014/15 and 2015/16. The link will open in a page and you can download your own copy of the document or bookmark the page.

TAXTools 5 in itself is split into five comprehensive categories; namely:

  • Business Tax;
    • this includes everything from vehicle benefits to Corporation Tax, Capital Allowances (not “Gains” – see below) to R & D relief, and more;
  • Indirect Taxes;
    • Stamp Duty and VAT;
  • National Insurance;
    • what you should be paying and what you can claim;
  • Personal Tax;
    • The most extensive coverage, listing Capital Gains to Child Benefit, Income Tax to Inheritance Tax, Pensions to Venture Capital trusts – you get the picture…
  • HMRC & ICAEW data;
    • Useful HMRC web pages and further illustration of how ICAEW can help you, including their contact info.

Why post this info? Isn’t it self-defeating?

Many may question why I’ve popped this information here. Especially when it seems to contradict the purpose of the website. Why offer accountancy services and provide a link enabling contractors to do it all themselves?

icaew taxtools wordcloudWell, I talk from experience.

Most contractors will take one look at all of the information contained herein and switch off.

It either doesn’t interest them and/or it’s beyond their remit.

But quite frankly, it’s often neither of those that’s the real reason they’re not interested.

They’ve got better things to with their time and money they’ve worked so hard to earn than crunch numbers. Especially ones that, if they get wrong, could land them in all sorts of bother with the taxman.

Try and figure all of this information out and try to implement it on top of the day-to-day running of their business? “No thank you, sir” is their rebuff.

That’s why they leave it to accountants who know their contracting business inside out. Perhaps you should consider their lead, too. Just sayin’ :).

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Minister: accountants regulated by professional organisations

The Treasury minister has said that accountants found recommending or participating in tax-avoidance schemes need to be regulated by their professional organisations when asked in a recent interview if these accountants should lose their right to practice.

David Gauke called it ‘interesting’ to compare an accountant caught red-handed to a convicted drink driver, implying that both may lose their right to participate in the activities that led to their ruin. However, the Government does not want to usurp the authority of any professional organisations that oversee the accountancy profession, the Treasury minister added, stating that professional bodies have the option of taking the right to practise away from accountants that fail to live up to the standards of a particular organisation.

It may very well come to be that the circumstances surrounding certain actions, such as participating in tax-avoidance schemes, are currently below the standards of a particular professional body, Mr Gauke said. In such an instance the expectation may indeed be to strip the accountant of his right to practise, a suggestion the Institute of Chartered Accountants in England and Wales welcomed.

The ICAEW’s tax faculty head, Frank Haskew, commented that removing the right to practise from accountants is something that the Institute will be examining over the coming years. With such a nuanced issue, it is highly difficult to look at it as simply black and white, Mr Haskew remarked, adding that it will take some time to draw the line between an acceptable consequence and an unacceptable one.

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Accountants promoting tax avoidance chastised

Accountants promoting aggressive tax avoidance schemes have been publicly chastised by the chief executive of the largest accountancy body in the UK, despite the alienation it has caused with some of the industry body’s members.

The Institute of Chartered Accountants in England and Wales’ chief executive, Michael Izza, has had nothing but criticism for accountants who recommend such rigorous tax avoidance measures to their clients. Such schemes have become into the public eye after it became widely known that comedian Jimmy Carr has been using a tax avoidance measure known as K2 to funnel his earnings overseas.

The fact that the K2 scheme is technically legal does little to deter Mr Izza’s ire, remarking that those in the accountancy profession have a duty to eschew any obviously artificial tax dodges. The public has little patience with a legal loophole, the chief executive said, adding thataccountants cannot do anything that can bring disrepute to the profession.

While Mr Izza’s statements were praised by some ICAEW members, others have taken issue with the strong stance taken by the chief executive. It’s not an accountant’s place to make decisions for their clients, detractors say, and that tax professionals are only required to present a full range of options.

Prime minister David Cameron has also spoken out against the K2 scheme, calling out Mr Carr in particular by stating that it was ‘morally wrong’ of him to use the tax avoidance measures. Mr Carr has since ceased using the K2 scheme.

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Free business advice clinic being held in Cambridge

Small and medium sized businesses can look forward to a free business advice clinic being held in Cambridge on 26 June, hosted by the Institute of Chartered Accountants in England and Wales.

The ICAEW-hosted event will cover topics including better business finance, exporting, business growth, and access to finance.  Any and all are welcome to attend the event, being held at 6pm at Quy Mill Hotel, for free advice tailored specifically for SMEs.

Part of the Institute’s Business Advice Service Week, an initiative that was launched in autumn of last year, the event is one of many that were designed to increase private-sector driven recovery prospects by offering a leg up to start-ups and SMEs across the UK. BAS Week events are not only localised in Cambridge but are available wherever the nearest ICAEW office is; whether it be an internationally-known adviser or a small, local firm, SMEs and start-ups can take advantage of free advice sessions with a chartered accountant ICAEW member.

ICAEW East England regional director, Pippa Bourne, commented on the Institute’s new scheme, remarking that it’s not the sole responsibility of the government to aid businesses to endure and prevail.  Chartered accountants need to recognise that they have responsibilities to offer guidance to facilitate these goals as well as a matter of public interest, Ms Bourne added.

The 26 June event will have a focus on the presentation of finance proposals for small businesses looking to foster growth.  The event, which begins at 6 pm, will have ‘SME advice clinics’ available from 7.30 onward.

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Are Osborne’s targets for HMRC too ambitious?

The ICAEW has warned the Chancellor of the Exchequer, George Osborne, that the standard of service at HMRC could drop if its headcount decreases in line with his remit.

Lin Homer, the chief executive of the Revenue recently published a letter outlining what Osborne expects the department to achieve during the current tax year. The letter, which ran to five pages, laid out five priorities. As well as delivering costs and improving tax collection, the Chancellor wants the Revenue to improve its services for business and individual customers, implement RTI and reform tax policy.

Paul Aplin, the ICAEW chairman of the tax faculty, said he was concerned at the Chancellor’s high expectations. Mr Osborne has said he wants an additional £17 billion collected this year, but at the same time he wants the Revenue’s headcount cut. This could have a damaging affect on the level of service HMRC provides to contractor accountants and members of the general public.

He went on to say that for the tax system to operate effectively HMRC needs more resources and if they were effectively deployed, the department would become self-funding.

Aplin also warned against implementing RTI before it was fully tested. He pointed out that it was an ambitious project that was being launched to a strict timetable and it had to work as intended when it does launch.

HMRC launched an initial RTI pilot scheme recently and is itself trying out the system in the hope of identifying, and remedying, potential problems before the scheme becomes mandatory.

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Should voters have more say in tax legislation?

Accountants will be interested to hear that David Gauke recently said what they have known along – politicians struggle to understand tax law!

The exchequer secretary to the Treasury made his comment to delegates attending a conference about tax policy-making at the Said Business School in Oxford. He was rather put on the spot when he was asked whether MPs fulfilled their role in formulating tax legislation after experts found that professional tax experts should be providing parliamentarians with more support.

Mr Gauke explained that MPs could cope with income tax, but once you get into technical areas, including the majority of the Finance Act, they rely on external bodies such as the CIOT, ICAEW and PwC. Considering our MPs come from a diverse range of backgrounds, that is hardly surprising.

Gauke also commented on confidentiality in tax, saying he thought companies should explain their tax policies and associated figures if they are in the public domain.

Christopher Peter Wales and Christopher John Wales, two experts at the Said Business School, presented a report showing that the government should take more time to consult with the electorate when it formulated tax policy. The report took three months to research and included interviews with treasury and tax advisors in 10 countries including Germany, Ireland, Sweden and the UK. It also recommended that external academics should review significant changes to tax policy to challenge whether they would meet their objectives and be of value.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Should banks have a separate accounting regime?

Contractor accountants may be interested to learn that Andrew Haldane has called for a separate accounting regime for UK banks.

Haldane is the executive director for financial stability at the Bank of England. He recently told the ICAEW that the current bank accounting rules do not take enough consideration of the ambiguities associated with assets and liabilities.

A fair accounting system would recognise that balance sheets for banks differ from other organisations due to the uncertainties surrounding the valuation of assets and the mismatched maturity of liabilities.

Banks have a more complex asset portfolio and the risks surrounding the valuation of those assets are completely different than they are for non-financial entities. And it is these differences that support a separate regulatory and resolution regime for banks, he added.

The head of the financial services faculty at the ICAEW, Ian Coke, agreed that changes were needed but warned that providing banks with their own accounting regime would prompt other sectors to demand their own regime as well. Furthermore, it could look as if the banks are attempting to become less transparent at a time when they are already coming under increasing criticism.

He went on to say that Haldane’s proposals for disclosing a range of valuations are complex and could be hard to understand.

In January 2010, Lord Turner called for banks to have a separate accounting regime and the issue has been discussed several times before that. Almost every industry can highlight complexities that are unique to their own particular sector, so would it really be fair to change the rules just for the banks?

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Will accountants for contractors use ICAEW’s new business advice service?

Contractor accountants may be interested to learn that the Institute of Chartered Accountants in England and Wales recently launched a business advice service.

The service, which is being administered by SOSCA, covers Dorset, Hampshire and south Wiltshire and was launched on the day Business Link closed down local services.

The aim of the service is to provide small businesses and start-ups with the financial and business advice they need to enable them to play a part in the economic recovery. Owners of small businesses can contact local firms on a range of issues and they will be under no obligation to use that firm in the future.

In excess of 350 ICAEW practices will offer a free initial consultation under the business advice scheme.

Henry Flint, the president of SOSCA, explained that he had a business background and a lot of companies are in desperate need of good advice at the moment. The Business Advice Service provides them with a place to obtain impartial free advice and will fill the void left by the closure of Business Link. He went on to add that he was keen to see member firms provide help to local business owners.

The deputy president of ICAEW, Mark Spofforth, said small business owners need the best advice if they are to get through the fragile recovery. BAS will provide the opportunity for SMEs to have a free consultation with a chartered accountant to discuss their concerns. ICAEW Accountants can offer advice on issues such as starting a business, financial and taxation matters and restructuring.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Changes to micro business reporting requirements move closer

Contractor accountants may be interested to learn that the UK’s smallest businesses may soon be exempt from certain EU accounting regulations.

A recent vote in the European Parliament resulted in the decision to let member states decide which Fourth Company Law Directive obligations to impose on their SMEs.

The ICAEW’s head of reporting faculty, Dr Nigel Sleigh-Johnson, said the vote to exempt micro-businesses from the obligation to prepare and file annual accounts under EU laws is a step in the right direction, and something some UK organisations have been fighting for for almost three years.

The coalition has already started looking at alternative ways micro businesses could report in the future, but a lot more work needs to be done to ensure the final outcome will not have any adverse affects.

One major concern about the proposals to reduce reporting requirements is that banks and suppliers will still want to see financial information and therefore micro businesses will still need to demonstrate sound financial management.

The European Council still needs to approve the proposal, but that should just be a formality.

In order to qualify for the relaxed reporting rules, firms must satisfy at least two out of three criteria. They should have no more than €0.5 million in assets, their turnover must be less than €1 million and they should employ a maximum of 10 members of staff.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Are contractor accountants a healthy bunch?

Contractor accountants may be interested to hear that the world of finance is a healthy world, at least in the eyes of Bupa.

Bupa recently conducted research that discovered that finance workers are less likely to contract serious health problems than those who work in manufacturing, technology, transport and utilities.

Nearly three-quarters of the workers in the utilities sector were found to be overweight compared to 55% of those working in finance. Only 5.1% of finance professionals are likely to develop high cholesterol levels, compared to 10.1% of transport, storage and distribution workers.

Bupa Health and Wellbeing’s assistant medical director, Dr Peter Mace, said these results prove that working long hours doesn’t automatically lead to an unhealthy lifestyle. He also went on to explain that people can improve their lifestyle and one way of doing this is to understand their health profile and use it as motivation to make positive changes.

Meanwhile, the ICAEW has launched a guide entitled ‘International Trade: An Accountants Guide’ to support the coalition’s exporting for growth campaign.

Lord Green, the trade and investment minister, said that members of the ICAEW are bound to have SMEs in their portfolios and they will understand the way they work. The government wants to see the UK’s export levels increasing to match the EU average of 25%, and as well as providing SMEs with advice, accountants may be able to introduce them to new overseas contacts.

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HMRC gives out wrong information claims ACCA’s Roy-Chowdhury

Chas Roy-Chowdhury, the head of taxation at ACCA, claims that HMRC is giving out incorrect advice about the possibility of a refund of VAT in cases of personal insolvency.

Earlier this year, the Revenue lost a case against Paymex, a debt advice business, and as a result the supervisory role of practitioners in personal insolvency cases is now VAT exempt.

However, last month HMRC published guidance on reclaiming VAT and it contained what Roy-Chowdhury says is a “veiled threat” warning practitioners that they should not dig too deeply into the past. If an independent practitioner does not want to disturb the past, the Revenue will not do so either and it is totally up to the IP whether or not to claim a VAT refund.

Mr Roy-Chowdhury said HMRC needs to set the record straight so that IPs understand their position regarding tax. He believes the latest guidance goes against that issued by recognised professional licensing bodies in the summer.

He said the licensing forces, including CIMA, ICAEW and IPA, should unite and seek discussions to clarify the problem with the Revenue. Furthermore, he estimates that HMRC could owe hundreds of millions of pounds to insolvency practitioners in VAT refunds.

The Paymex case centred around an Individual Voluntary Arrangement and Roy-Chowdhury believes the VAT exemption could apply to insolvency procedures that work in a similar way – such as a Company Voluntary Arrangement. But, HMRC is not proactive when it comes to clarifying whether IPs with a supervisory role in corporate administrations are also exempt.

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Will contractor accountants sit new qualification?

The AAT, ICAEW and Manchester Metropolitan University have got together and launched a low cost accountancy qualification which it hopes will enable more people to take up the profession.

The new programme starts in January next year and will be delivered through MMU’s business school. Students will be required to attend two three-hour weekly sessions. The programme is flexible, there are multiple entry points and students will gain a recognised qualification once they have completed each stage. The entire course costs £15,000 but this is based on current fee levels.

Students will be able to obtain an AAT qualification, as well as a BA (Hons) in professional accountancy after three years nine months. A further two years of study will complete the ACA qualification from the ICAEW and a masters degree in professional accountancy.

AAT president, Hilary Lindsay, said that making accountancy an affordable career choice will lead to a larger pool of talent to support future economic growth.

PwC has applauded the decision to launch the part-time course, saying the combination of higher education and professional skills development will ensure its graduates receive favourable treatment from the firm.

Meanwhile, the Professional Oversight Board has said that audit qualifying bodies should improve the way they award exemptions from some professional examinations. Furthermore, all supervisory bodies must strengthen the process for approving people who are allowed to sign audit opinions.

In particular, the report singled out the ACCA as an organisation that needs to ensure applicants are competent to do their job when initial audit experience was obtained some years ago. The board also said that the ACCA has already implemented some significant changes into its final audit examination and these will be reviewed to establish whether the exam is now sufficiently challenging.

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Cost saving ideas can win the day for contractor accountants

Contractor accountants may want to consider working alongside their clients to come up with cost saving measures after the ICAEW said this year promises to be extremely difficult financially for many companies.

The combination of low consumer confidence and public sector spending cuts will have a considerable impact on their revenue generating ability, the Institute warns.

ICAEW’s head of enterprise, Clive Lewis, said that despite the recent decrease, inflation is still high, but this is only one of many pressures facing companies at the moment.

In order to offset increased costs, the Institute has put forward a number of suggestions which could interest accountants, such as whether profit margins can be increased. It also suggests re-examining the fundamentals of products and services but warns against switching to cheap materials which could damage a brand and affect sales.

A lot of suppliers are offering incentives and there could be benefits to changing. There are now new suppliers with competitive prices in the market place and things could have changed significantly since a company’s supplier base was last reviewed.

Businesses should also tackle overheads such as energy costs, human resources and space. Significant improvements can be gleaned by more effective organisation of workloads and workspaces.

Leveraging the power of technology enables employees to work better, reduces the need for meetings and cuts down on communication costs, the Institute advises and companies can further cut down by taking advantage of all the tax allowances and reliefs they are entitled to.

KPMG recently reported that businesses could see £90bn added to their costs as the savings they made during the recession get wiped out. 80% of business leaders say the cost of finance is outstripping their cost-cutting efforts, whilst 76% blame salary inflation.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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