February 2006

Points to Ponder

This is now our fifteenth newsletter – produced during February 2006 and issued in March, to keep you up to date with some of the changes in Income tax, National Insurance and VAT along with compliance regulations for businesses. As we don’t write to all of you each month, we shall run the notes on a rolling three or four month basis, so if you think you have missed a month, just call and we can tell what points were covered. Don’t forget to keep us updated with any changes of address, including e-mail addresses. Please note our change of e-mail address above.

November 2004 – November 2005 – notes closed

December Newsletter

1. Stress at Work

After the annual festivities, beware of stress at work! This is now officially the greatest cause of lost working time.

2. New Year’s Resolutions

How about setting some realistic goals for your business as your New Year’s Resolutions?

3. e-Bay trading – the Revenue steps up the pace (Call Sue)

4. Corporation Tax changes (Call Angela or Sue)

As expected, the Chancellor has ended the Corporation Tax holiday for small companies, by taking away the nil tax on company profits of less than £10,000.

5. Health & Safety Policies and Risk Assessment (Call Sue)

Have you remembered this extra length of red tape?

6. Age Discrimination (Call Sue)

This legislation is now in force.

7. Making a will (Call Sue)

8. Revenue Seminar (Call Dave)

End of December Newsletter

No January news as the month has been eaten up by last-minute Self Assessment returns, so expect a bumper newsletter next month. Please make getting your records in earlier one of your resolutions!

February 2006 (we did promise a bumper issue, so here goes!)

1. Revenue seminar for the Construction Industry and worker-status in general.

This was well attended, although not everyone who promised to be there actually arrived, including one or two whose businesses may be most at risk with the promised Revenue reinforcement of worker status being high on the agenda. We organised this event at our expense to try and help keep you fully informed. As the actual changes to the scheme have been delayed for a year, we shall probably arrange another seminar this time next year.

In the meantime, the main emphasis of the meeting was on worker status. The two officers giving the talk have confirmed that HM Revenue and Customs are clear that labourers cannot be self-employed. Their definition of labourers extended to plant operators who did not supply their own plant; in fact, they didn’t consider ownership to be the major factor it once was. Control and supervision will be deciding factors; if a “master – servant” relationship is deemed to exist, HMRC will treat this as employment and there is NO APPEAL. Although this legislation has been in existence for years, it has never been over-rigorously enforced in the Construction Industry. However, the Government has found another source of income by imposing fines if businesses do not stick to the letter of the law.

You must have contracts with your workers that enforce their self-employed status. If you haven’t set these up already, please call and we can give you a basic template to use. We cannot guarantee that these are foolproof so you must carefully assess each member of your workforce as the wrong decision could prove very costly in the future. You will also have to verify with the Revenue that the workers you use are properly registered as self-employed. You will need their National Insurance numbers, address and UTR numbers.

Under the new CIS regulations, you will no longer be required to complete vouchers. Instead, you must give each subcontractor a certificate of what he has been paid and how much tax you have deducted each month. HMRC are issuing guidelines for the form these certificates should take, but they are not providing them – more paperwork and more cost involved for contractors. In addition, you will have to submit monthly returns on time, certifying that you have checked the status of your workers and that those you have listed for the month are genuinely self-employed. Even if you have not used any subbies, you must make a return. Failure to submit a return on time will incur a fine of £100.

If the Revenue decides at any stage that one or more of your workforce should have been employed, not self-employed, they have the right to fine you up to £3,000 for every month you made (in their opinion) a false declaration, plus the alleged lost National Insurance plus interest and penalties. As they have the right to check records back over six years, these fines could be astronomical.

Finally HMRC wants all returns made on-line. We can certainly carry this out for you, and can discuss what needs to be done, nearer the time. However, in view of the heavy-handed attitude it seems HMRC is determined to take, we strongly advise anyone intending to use sub-contractors to consider incorporation, in case something goes wrong.

Finally, the question of workforce status is not confined to the Construction Industry, so please, everyone, review your workers’ agreements. There is a tool on the HMRC website for you to check individuals’ status anonymously so, if you are unsure, run through the questions and answers on that.

2. SSP, SMP & SPP (Call Sue or Dave)

Even as a small employer, you are obliged to pay the above to your staff. Under new legislation coming into force next April, the periods of Maternity and Paternity leave and rates of pay are being increased. Don’t forget you may be able to make this work in your favour if you are a company and employ your spouse or civil partner.

3. Bullying at work

We’re back to the question of stress again, with bullying getting a large amount of the blame. ACAS has produced an on-line course to see if you need to take any action in this field. Access this at http://www.acas.org.uk/elearning/. Advice leaflets are available on line, or call ACAS on 08457 47 47 47. ACAS are very helpful and give impartial advice to both employees and employers.

4. Self-certification mortgages (Call Sue)

The FSA has carried out an “under cover” review of brokers and financial advisers arranging self-certified mortgages and have reached the conclusions that, although they found little actual fraud, insufficient care was taken to ensure applicants were really in a position to repay their requested mortgages. Self-certification is rather a misnomer, as you don’t actually certify everything yourself. You need confirmation from us, as your accountants, that your income is of a sufficient level to meet the repayments. We can only do this from the figures submitted to HMRC via your accounts and Self Assessment returns. We take our duty of care to you very seriously, so if we do feel that we cannot certify your application for a large mortgage, please believe that our decision is really in your best interests.

5. Tenancy Deposit Protection (Call Sue)

The Office of the Deputy Prime Minister is looking in to the need for legislation to cover rent deposits, the basis on which they are held and rights and responsibilities relating to these deposits. For those of you letting properties, please check the small print in the letting agent’s agreements with you and with your tenant and ensure that your right to withhold repayment of any part of the deposit in respect of unpaid rent or dilapidations when the tenant leaves, is fully covered.

6. Health and Safety In Construction (Call Sue)

The Health & Safety Executive is looking for small construction firms to volunteer to help in a pilot project to test a new Occupational Health Model. It covers advice on manual handling, hand and arm vibration, noise-induced hearing loss and skin infections. I presume that if small firms are proved to be at risk of inflicting the above work-place damage to their workforce, more legislation and attendant fines will follow! More bureaucracy, paperwork and costs. Let me know if you’re interested in helping the Government with this scheme.

7. The Smoking Ban

Smokers are the one group of people against whom you are still allowed to discriminate. Along with many other companies, we maintain a non-smoking office and are lucky that nobody in our company actually smokes. Andy gave up soon after he started working with us and has only admitted to one lapse so far! Dave gave up many years ago but still regards himself as a smoker who isn’t going to have a cigarette today. Other companies are not so lucky and lose large amounts of time to smokers’ comfort breaks. If a smoker smokes 10 cigarettes during working hours and is away from their work for 6 minutes for each cigarette, you are paying for an hour in which nothing is being done. Added to this, non-smokers can become resentful that they are working an hour more than smokers for the same pay. If you do operate a non-smoking policy in an office or workshop, check that you have made this clear to your insurers, as your premiums could be reduced in line with the reduced risk.

Businesses most likely to suffer from the ban are those in the licensed trade. Although I am pleased that I can start going to pubs and clubs again, once the ban is in force, the majority of customers wont be. At least now the ban is being extended to clubs, all licensed premises will be treated equally.

One thought; how much revenue is the Government likely to lose through reduced sales of cigarettes? More cigarettes are consumed by individuals in social situations – such as in pubs, than by smokers alone at home. Is this one reason the fines are being brought in in so many other areas?

8. VAT and Import Duty for Online Shoppers (Call Sue)

We’re back to e-Bay trading again but from the other side this time. If you buy from abroad, and your purchase is valued at more than £18, duties and VAT must be paid, even if the item is declared as a gift, new or used or for private use or resale. Even if the vendor has completed the Customs declaration correctly, you as buyer will be deemed the importer and taxes will be levied. You can also be fined if the vendor has made a false declaration. Be aware that what you bid for may not turn out to be such a bargain afterall.

9. Crimes against Businesses (Call Sue)

We recently attended a very informative talk given by a chartered accountant, employed by the Metropolitan Police as a forensic accountant – something I hadn’t heard of before. The areas of crime that he covered were cyber (computer crimes such as hacking, virus infections and data theft), identity theft, financial irregularities and payroll fraud. It is worth visiting the Met Police’s website for more information about this. Another area he didn’t mention, but most employers suffer from, is time theft. The employees concerned may not be aware that they are carrying this out but how much time is lost with personal phone calls and e-mails, text messaging and surfing the Internet? Have you a policy in force to cover this or are restrictions noted in your staff’s contracts of employment?

10. E-mails – you either love ‘em or hate ‘em (I need some help with them – please) (call Sue)

I am the first to admit that I have changed my attitude to e-mails, although I still hold strong views about their content. With the costs of post rising and the quality of delivery service diminishing, it is quicker and more cost-effective to use e-mails. But I do believe that e-mails should be to the same standard as a letter, properly laid out and spell-checked. Afterall, any e-mail we send represents our business and we do hope to always make the right impression. We print off and file sent and received e-mails so they do not save paper but certainly save time. On that basis, please can you make sure we have your up-to-date e-mail address by sending us a quick message?

Now this is where we need help; we would like to send this newsletter by e-mail and want to set up group e-mails. However, we don’t want most of the first page to show all the other addresses we are sending to, so could someone please explain what we have to do to stop this?

11. “Accountants and accountancy are boring” (call any of us!)

We’ve just read an article in an accountancy magazine that accuses most of the profession of being boring. It maintains that dull and dependable are OK, but boring is not. We’ve never found our work boring, certainly not when we have the chance to meet so many people in so many different professions. Not many practices can boast an Aborigine Story-Teller among their clients, or display a wonderful original painting by him on their office wall. Nor can many say that if any emergency arises, there is someone on our client base we can call on to help us. Hopefully this newsletter comes under the heading of “helpful and informative” and you don’t feel it deserves a “boring” label!

12. Offshore Tax (Call Angela)

This is yet another area where HMRC is stepping up its investigations. As UK taxpayers, you are obliged to declare your world-wide earnings, taxed and untaxed, including any interest received on offshore accounts and the source of the deposits in those accounts. UK banks running offshore accounts are now declaring any interest they pay on these accounts to the Revenue, so please do let us have any relevant information for your returns.

13. Basic Tax Planning (Call Angela)

We hate to say it, but another tax year is almost at an end. The majority of you have financial years ending 31^st March 2006, so now is the time for final tax planning. If you are considering any major purchases of equipment or vehicles, ensure you buy before the end of the tax year. Even if your purchases are on HP and you have only made the first payment, you will be able to claim at least 25% of the full cost against this year’s tax. If you are considering major changes in your business, please discuss them now, so that all opportunities can be maximised before it is too late.

14. Practice update

Now for news about us. Following our disappointment about being gazumped over the next door property, we have completed a major refurbishment on our office. We knew that space would still be very limited and thought about taking a second office some time in the future. We have been keeping an eye on properties in the area, but hadn’t thought about any expansion for a year at least. Out of the blue, a very suitable small office has turned up. Having looked at it and fallen for its potential, we are negotiating a new agreement with the owners. It’s in Ewell, on Chessington Road, with easy local parking and our plan is to move Angela and taxation and limited companies there while we expand our book-keeping, payroll and CIS services in Gilders Road. Our computer system will be linked, so you can call in to either office and your information will be available. We hope this move will increase our services without unduly affecting our fees! As soon as we have any more details, we shall let everyone know. However, following our let-down over 98 Gilders Road, I’m trying not to become too excited at this new prospect yet.

By the time this reaches most of you, Katerina will have left. Her recent house move made travelling extremely difficult and she is going to a chartered practise closer to where she now lives. This will also give her the opportunity to continue her studies and hopefully qualify as an auditor. We shall certainly miss her, but wish her every success in her career. She has promised to stay in touch and let us know how she progresses.

Well, we promised a bumper issue this month and hope the points included have been of some help. If you have any comments, we would welcome your feedback.