HMRC gets inventive

16% jump in compliance take from investigations into payroll and expenses

HMRC continues to be inventive in its hunt for extra tax revenue – always searching for new areas to investigate. One recent trend we’ve spotted is an increasing crack down on payroll and expenses.

Crackdown on Payroll and Expenses

PenaltiesIts investigations in this area stretch from payment of self-employed contractors through to business expenses such as hotel bills which HMRC argues are hidden perks that need to be taxed. This new area of focus has put a growing number of businesses and individuals at risk of inquiries from the taxman.

The amount of additional tax collected by HMRC through investigations into payroll and expenses increased 16% last year to £819m, up from £705m in 2015/16.

Investigations into payroll and expenses could cover some pretty normal issues such as staff rewards, travel to and from work, and even health club subscriptions. These detailed inquiries into what can seem like small ticket items sit alongside broader brush inquiries into areas such as Corporation Tax and VAT.

Self-Employed Workers

A key area of focus for HMRC has been the increasing use of self-employed workers by businesses in the UK. HMRC believes the incorrect classification of workers by businesses means it is losing out on National Insurance Contributions each year.

To combat this, HMRC has set up specialist Employment Status & Intermediaries teams to help it with its payroll investigations into businesses.

SME Businesses being Targetted

HMRC is increasingly seeing businesses as a more productive revenue source than individual taxpayers. By targeting the payrolls of businesses, HMRC can investigate the affairs of multiple taxpayers at once – several birds, one stone.

Many of the businesses targeted by HMRC in its crackdowns are SMEs. These businesses are often viewed as an easier target by HMRC as they are unlikely to have the in-house resources to close down or limit tax investigations.

What you can do

Businesses need to be proactive and ensure that any discrepancies in their payroll or expenses can be accounted for. Failure to do so could result in costly investigations.

You can protect yourself against the cost of most tax investigations by subscribing to our Tax Investigation Service. To find out more contact us.

Tax Tips and News – May 2018

Welcome to May’s Tax Tips & News, our monthly blog designed to bring you tax tips and news to keep you one step ahead of the taxman.

This Month’s Tax Topics

  • Use gift Aid to save tax
  • Diesel car supplement increase takes effect
  • HMRC update guidance on managed service companies (MSCs)
  • When are tips taxable?
  • May questions and answers
  • May key tax dates

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

Please contact us for advice in your own specific circumstances. We’re here to help!
Read More

How to approve your tax return on our Document Portal

When our work is complete, login to our Document Portal to review and approve with a digital signature. The secure portal is your digital document safe and means no more delays or postage costs when submitting and receiving your files.

Step One – Login to the Portal

  1. Access the Document Portal by going to
    www.davisgrant.co.uk/portal
  2. Enter your email address.
  3. Enter the password you selected when you opened your account.

If you cannot login and need help please get in touch with our friendly team to assist.

Forgotten Your Password?
How to access our Portal for the first time.

Step Two – View the Return

You cannot approve a document until you have viewed it at least once…

  1. Select a Dashboard option or on desktop click Your Files from the menu.
  2. Navigate folders by pressing on the folder name. Documents awaiting your approval are typically stored in Documents to Approve.
  3. Simply select a document’s name to view or download it.

Step Three – Electronic Approval

  1. Go back to the file list and locate the relevant document.
  2. On desktop – press the Approve button.
    On mobile – press the small button next to the document name and then the Approve icon.
  3. To give final confirmation, sign the document by selecting Approve.

We will receive notification that you have approved the tax return and will take appropriate action. If you have any concerns please get in touch.

Payroll Update – Financial Year 2018/19

The new financial year began 6th April 2018. This means that new rates and limits are applied to you and your business. The changes are summarised below and we will be making changes based on the new rules as appropriate.

Minimum Wage

Take note of the new National Living Wage and the National Minimum Wage, they change every April. If we process your Payroll for you we will increase rates automatically on your behalf.

25 and over 21 to 24 18 to 20 Under 18 Apprentice
£7.83 £7.38 £5.90 £4.20 £3.70

If you need help paying your employees our expert team stand ready to help.

Pensions Contributions

Employers may be required to increase the amount of their contributions into their automatic enrolment pension. Staff members will have to make up whatever shortfall remains of the new total minimum contribution.

Date effective Employer
Contribution
Staff
Contribution
Total
Previously (until 5 April 2018) 1% 1% 2%
6 April 2018 to 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

Are you prepared to handle your pension responsibilities? Even if you only have a single employee the rules apply to you. Let us know if we can help.

Director Salaries

The salaries for Directors may be set at the primary threshold to be tax efficient. This has increased as outlined below and we will make adjustments if necessary.

Date effective Per Week Per Month Per Year
Previously (until 5 April 2018) £157 £680 £8,164
6 April 2018 to 5 April 2019 £162 £702 £8,424

Termination Payments

Please be advised that from 6th April 2018 all payments in lieu of notice (PILONs) will be both taxable and subject to Class 1 NICs. This change means the tax and NICs are no longer dependent on how the employment contract is drafted or whether payments are structured in some other form.

Need Advice?

If you have any questions or need any advice please let us know. Either reply to this email or get in touch.

Free Info from Our Resource Library

Tax and Employee Benefits

Most employers choose to recognise the ongoing commitment made by their members of staff by providing various benefits and rewards.

Whether that’s in the form of the Christmas party or it extends to benefits such as a cash bonus or flexitime, it all helps to ensure employees feel valued and motivated.

82% of workers feel motivated after receiving some form of recognition from their employers, according to research by the Rewards and Employee Benefits Association.

While that’s all good and well when it comes to looking after your staff, you also need to consider the tax implications of offering attractive employee benefits.

Taxable benefits

According to the most recent benefit-in-kind statistics published by HMRC in June 2017, 3.69 million people received £7.63 billion-worth of taxable employee benefits in 2014/15.

Employees and directors can receive benefits in kind as part of their employment, but these are not included in their salary.

You may need to report any expenses or benefits2 you provide to employees, while tax and national insurance contributions (NICs) may need to be paid to HMRC.

Private health insurance

Providing private medical and dental insurance, regardless of whether the policy covers just the employee or members of the employee’s family as well, was the most popular taxable benefit.

2.35 million workers – or 64% of all employees in receipt of benefits in kind – received private medical insurance in 2014/15.

As an employer, you will cover the cost of providing the private health insurance to your workforce and you must pay class 1A (employer-only) NICs at 13.8% on the taxable value.

If you are providing a group policy, as is commonplace, the costs should be split between the number of employees, who will have no NICs to pay.

Cars

Providing company cars was the second most popular taxable benefit in kind, with 950,000 workers in receipt of almost £4 million-worth of company cars in 2014/15.

Company cars are taxed according to their list price, with the amount of tax you have to pay depending on the emission levels of the car. So, the higher the emissions, the higher the tax you’ll have to pay.

The charge is capped at 37% of the list price and, as an employer, you also pay class 1A NICs on the amount charged to tax.

To enjoy a low-cost company car, the trick is to choose a cheaper, lower emission model and there are various incentives for picking an environmentally friendly option.

Childcare

As an employer that may provide childcare vouchers, it’s important to know the difference between the existing voucher scheme and the government’s new tax-free childcare scheme.

Childcare vouchers are provided by employers and offer annual savings of up to £933 per parent for those who joined the scheme after 6 April 2011.

Additional taxpayers who joined prior to this date have been able to save up to £1,370 a year.

The new tax-free childcare scheme offers parents the chance to claim annual savings per child.

The vouchers are worth up to £243 a month, regardless of how many children your employee may have, and are provided through salary sacrifice.

Even though the voucher scheme will be closed to new applicants from April 2018, you will still have ongoing tax, NICs and reporting obligations.

HMRC launched its tax-free childcare scheme in April 2017, offering eligible parents the chance to open an online account where for every £8 deposited, the government will add another £2.

For maximum donations of £8,000, the government top-up will be £2,000 for children under 12 or £4,000 for disabled children under 17.

The tax-free scheme, which was fully rolled out in February 2018, is open to parents who earn more than £120 a week.

However, you won’t be eligible if either you or your partner has a taxable income of more than £100,000.

Unlike childcare vouchers, which are only open to employers that offer the scheme, the tax-free scheme is open to all qualifying parents – including the self-employed.

Tax-free childcare will eventually replace the voucher scheme but until then, employees can continue to benefit from the exemption as long as you continue to offer the scheme.

The tax-free amount depends on when the employee joined the scheme and the employee’s marginal rate of tax.

For staff who joined your childcare scheme before 6 April 2011, the tax-free amount is £55 per week.

For workers joining on or after that date, it is:

  • £55 a week for basic-rate taxpayers
  • £28 per week for higher-rate taxpayers
  • £25 per week for additional-rate taxpayers.

You can continue to offer childcare vouchers through salary sacrifice without being caught by the new valuation rules.

Reporting

At the end of the tax year, you may need to inform HMRC of any taxable benefits handed out to staff over the previous 12 months.

Each taxable employee benefit will be calculated differently, depending on what type of expense or benefit you’ve provided.

Most taxable employee benefits will be deducted through payroll, as long as you’ve registered with HMRC before the start of the tax year.

Otherwise, you may need to submit the P11D and P11D(b) forms to HMRC for any member of staff who received taxable expenses or benefits.

This helps the Revenue calculate how much you need to pay in class 1A NICs, as well as how much PAYE is due from the employee on the benefit.

This is then normally collected from the employee by adjusting their tax code.

Non-taxable benefits

Did you know there are 39 non-taxable benefits you can provide to your employees in any given financial year?

Each benefit has certain conditions you need to meet to qualify for the exemption from paying any tax or class 1A NICs.

Trivial benefits

A trivial benefit exemption was introduced by HMRC in April 2016, meaning the employee benefit will be tax-free as long as it:

  • costs less than £50
  • is not cash or a voucher that can be exchanged for cash
  • is not a reward for services or in any way contractual.

Usually there are no limits as to how many trivial benefits you can provide to employees, although for directors or family members who are members of staff a £300 annual limit applies.

Socials and parties

Summer or Christmas parties which are open to all employees and cost less than £150 per head are treated as tax-free by HMRC.

The same tax-free threshold of £150 per head applies if you provide multiple parties or social functions for your workers.

For example, if you hold a summer barbeque that costs £50 per employee and a Christmas party costing £60 per employee (£110 in total) both events will be free from tax.

But if the summer barbecue costs £50 per worker and the Christmas party costs £120 per worker (£170 in total), the relief will only apply to one of the events while the other will be liable for tax.

Others

In addition to trivial benefits and work-related social gatherings, your employees may value several other popular non-taxable benefits. These include:

Benefit  Conditions (per employee)
Mobile phone One phone; employer has an ownership

contract with telecoms provider

Bicycle and safety gear Employer must retain ownership

 

Parking At or near workplace

 

Meals and refreshments Made available to all employees in

staff canteen

Eye test; glasses or lenses Required for working with computer screens
Medical treatment Up to £500 per tax year as part of a return to work plan
Health screening One per tax year

 

Pension contributions Within annual allowance limits

 

Relocation expenses Up to £8,000 per move, if connected to change of job
Work bus Used only/mainly to transport employees

 

If you need help submitting forms to HMRC or advice on providing benefits please contact us. Our friendly expert team is waiting to help. 

Get a PDF version of this information to print and share…

Big Changes to Data Protection Regulation GDPR

Big changes to data protection regulations

All businesses have a responsibility to protect people’s data and privacy. You are at risk of significant fines if you do not comply with new regulations coming into effect 25th May 2018.

General Data Protection Regulation (GDPR)

The new data protection law, GDPR comes into effect across the European Union on the 25th May 2018 and will affects most businesses. Regardless of Brexit the Government have confirmed their intention to bring the GDPR into UK law. This would replace the existing Data Protection Act.

‘If you are currently subject to the DPA [Data Protection Act], it is likely that you will also be subject to the GDPR.”
the Information Commissioner’s Office (ICO)

Why the change?

Penalties
Don’t risk serious non-compliance fines

Given the massive amounts of data collected in this digital age, regulators are keen to give individuals more control over who can hold their information and how it can be used.

The potential of penalties for non-compliance of €20 million, or 4% of your business’ annual turnover (whichever is higher) make clear just how seriously you need to take these responsibilities.

We strongly recommend you start planning now to make sure your business is compliant.

11 Actions to Take Now

1. Spread Awareness

You should make sure that everyone in your organisation is aware that the law is changing to the GDPR. They need to appreciate the impact this is likely to have.

2. Document the Information you hold

You should document what personal data you hold, where it came from and who you share it with. You may need to organise an information audit.

3. Communicate privacy information

You should review your current privacy notices and put a plan in place for making any necessary changes in time for GDPR implementation.

4. Review individuals’ rights

You should check your procedures to ensure they cover all the rights individuals have, including how you would delete personal data or provide data electronically and in a commonly used format. On the whole, the rights individuals will enjoy under the GDPR are the same as those under the DPA but with some significant enhancements.

5. Plan for access requests

You should update your procedures and plan how you will handle requests within the new timescales and provide any additional information.

6. Establish a lawful basis for processing personal data

You should identify the lawful basis for your processing activity in the GDPR, document it and update your privacy notice to explain it.

7. Seek Consent

You should review how you seek, record and manage consent and whether you need to make any changes. Refresh existing consents now if they don’t meet the GDPR standard.

8. Plan for Data breaches

You should make sure you have the right procedures in place to detect, report and investigate a personal data breach.

9. Data Protection by Design and Privacy Impact Assessments

You should familiarise yourself now with the ICO’s code of practice on Privacy Impact Assessments and work out how and when to implement them in your organisation.

10. Data Protection Officers

You should designate someone to take responsibility for data protection compliance and assess where this role will sit within your organisation’s structure and governance arrangements. You should consider whether you are required to formally designate a Data Protection Officer.

11. International

If your organisation operates in more than one EU member state (ie you carry out cross-border processing), you should determine your lead data protection supervisory authority.

Need Help?

The information given here is based upon guidance from the Information Commissioner’s Office (ICO). Davis Grant is not an expert in data protection.

Get full details from them at ico.org.uk or call the ICO helpline on 0303 123 1113 and select option to connect to staff who can offer support.

 

#techcityonsea with Davis Grant

Join us for #techcityonsea Live Event in Southend

Due to the impact of the weather this event has been re-scheduled for Thursday 12th April

Come to this event in Southend and learn how to get the government to help fund your business.

What you will learn

Don’t overlook the alternative ways in which you can fund your business – the UK government has committed to helping you to grow and succeed. Get your share of the billions in R+D tax credits available to innovative companies every year, learn how to use investment schemes (EIS/SEIS) to attract investors and claim back VAT your business pays by voluntarily registering. All of these measures will help your cash flow and give you the best chance of growing your business.

Why we are speaking

Over the past 5 years Davis Grant have reclaimed in excess of £1.5 million in R&D tax credits for their clients in most cases providing significant cash refunds. They boast a wide range of tech sector clients from bootstrapped startups, to venture-backed companies who are scaling or helping founders to exit the business. Our chartered certified experts are pulling from decades of experience backed by an Essex based firm established for over 60 years.

Thank you to The Hive Enterprise Centre for hosting and to everyone at Tech City on Sea for the opportunity. See you there!

Tax Tips and News – March 2018

Welcome to March’s Tax Tips & News, our briefing designed to bring you tax tips and news to keep you one step ahead of the taxman.

We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.

This Month’s tax topics…

  • IHT: know your limit
  • HMRC win IR35 appeal
  • Tax deductions for family members’ wages?
  • ISA limits update
  • March questions and answers
  • March key tax dates

Please contact us for advice in your own specific circumstances. We’re here to help!

Read More

Davis Grant invest in office refurbishment

If you visit Davis Grant over the next few weeks apologies that you will find a little cosmetic improvement work going on.

With roots in East London going back to 1949 the firm in it’s current form moved to Treviot House, Ilford in March 1990.

Ilford High Road has a long been a bustling business hub

Nearly 28 years later the Directors are investing in improvement works. The aim is to give you the best experience possible if you need to visit us and set the stage for the future of the firm.

Improvement works include:

  • New welcoming and warm reception area to relax in before your meetings.
  • Conference and Training rooms with large screens and technology to bring your numbers to life.
  • Sparkly new toilet facilities.
  • Fresh and bright decoration with an emphasis on natural light.
  • Comfortable and contemporary furniture.
  • Renewed air-conditioning throughout.
Empty Reception
Under Construction – Davis Grant’s new reception area

Plus there are further improvements that you may not see including a new team kitchen and removal of internal walls. By providing more open-plan workspace and option to hot-desk, we are working to develop our already strong collaborative ethos. Being open and collaborative is a big part of our identity!

Update to HMRC’s systems affecting Sage users

HMRC decommissioned the old version of their VAT portal on the 14th of February 2018. The Electronic Data Interchange (EDI) is no more, leaving older versions of Sage 50 unable to make online submissions directly.

Are you affected?

Only Sage versions 24 and above have been updated to use the new HMRC Government Gateway. If you have older versions of Sage software you will be unable to make submissions including VAT Returns, EC Sales lists, CIS Returns, RTI submissions, IR secure mailbox and CIS subcontractor validations. You will need to consider upgrading to the latest version.

We can help…

This frustrating move by HMRC and Sage has been made in the build-up to the launch of Digital Tax next year. This revolution in the way that tax information is submitted is potentially the most radical change the system has undergone EVER. We are getting ready and are recommending our clients move to a Cloud Accounting system sooner rather than later.

Get in touch with us to chat about the specifics of your situation and how we may be able to help.

Related Articles

Clear Benefits of Cloud Accounting

Digital Tax is Coming! (later than planned)