News & Legal
- IR35 - Medium and Large Private Companies - Effective 6th April 2020
- Making Tax Digital- What does it mean? - Effective April 2019
- GDPR - General Data Protection Regulation - Effective 25 May 2018
- Money Laundering - effective 26 June 2017
- Restricting Finance Cost Relief for individual landlords -effective 6th April 2017
- Automatic Enrolement - Effective Now
- PSC - Persons of Significant Control - Effective Now
- Bribery Act - Effective now - See HPBS Ltd Policy
IR35 - new rules and how does it affect contractors and companies?
As a general guide, the legislation does not apply to companies with a turnover of less than £10.2M or a balance sheet value of 5.1M or less than £50 employees. There are rules that apply for companies that breach these thresholds in two consecutive years. Please contact HPBS Ltd for more information.
If the company is not small then it has to be shown to have taken reasonable care in its assessment of the status of the worker. Most companies will use the CEST (Check of Employment Status) tool provided by HMRC. https://www.gov.uk/guidance/check-employment-status-for-tax
HMRC will stand by the results of this determination.
So who pays the tax and what has to happen now?
Well, if the contract is within IR35 then the short answer is the feepayer. i.e. The person that remunerates the contractor. It could be the client, or end agent. In simple language the contractor will become an employee of the fee payer. The payment made will be on the net of VAT amount, if the contractor raises an invoice.
The situation on expenses is slightly more complex when the client determines the net pay. Please contact HPBS Ltd for further information.
The key things that non-small companies should be concerned about are ensuring their processes and controls are amended to meet the requirements of the changes. Things to consider include what to do about auto enrolment, holiday pay, RTI return requirements and the apprentice levy. Further , "disagreement processes" should be set up in HR, payroll staff should be trained, and potentially software reviewed. Please contact HPBS Ltd for further advice in this area.
Making Tax Digital - What does it mean
If you are VAT registered then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts). If you are not VAT registered then digital record keeping is optional. However, these business owners can gain updated income tax estimates whenever they want, which will help with cash flow forecasting.
If you are VAT registered and do not yet use software to record your VAT information (invoices to customers and from suppliers) you need to start planning for MTD. The new implementation date is April 2019. More information can be found on GOV.UK.
- Only VAT registered businesses will need to keep digital records and only for VAT purposes.
- They will only need to do so from April 2019.
- Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original dates had implementation from April 2019).
General Data Protection Regulations
The regulation applies if the data controller or processor or the data subject (person) is based in the EU.It also applies to organisations based outside the European Union if they collect or process personal data of EU residents.
Personal data is any information relating to an individual, whether it relates to his or her private, professional or public life. It can be anything from a name, a home address, a photo, an email address, bank details, posts on social networking websites, medical information, or a computer’s IP address
The reporting of a data breach is not subject to any de minimis standard and must be reported to the Supervisory Authority within 72 hours after having become aware of the data breach (Article 33). Individuals have to be notified if adverse impact is determined (Article 34). In addition, the data processor will have to notify the controller without undue delay after becoming aware of a personal data breach (Article 33).
The following sanctions can be imposed:
- a warning in writing in cases of first and non-intentional non-compliance,
- regular periodic data protection audits,
- Up to 4% of the annual worldwide turnover
Money laundering is the process of making illegally-gained proceeds appear legal (i.e., "clean"). Typically, it involves three steps: placement, layering, and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the "dirty money" appears "clean."
What you need to do ?
- Conduct a money laundering and terrorist financing risk assessment
- Implement systems, policies, controls and procedures to address money laundering and terrorist financing risks and meet the requirements under the regulations
- Apply your policies, procedures and controls across your firm’s group structure (if relevant)
- Adopt appropriate internal controls
- Provide training to staff
- Apply for approval if you are the beneficial owner, officer or manager of a firm
- Comply with new customer due diligence, enhanced due diligence and simplified due diligence requirements
- Comply with requirements relating to politically exposed persons
- Ensure your record keeping and data protection systems, policies and procedures meet the requirements of the regulations
- Comply with new obligations relating to record keeping and the provision of information about beneficial ownership if you act as a trustee of a relevant trust
Restricting Finance Costs Relief for Individual Landlords
Mortgage interest relief is being restricted over a phased period and being replaced with deductions that restrict the relief to basic rate tax. The rules are fairly complex and there will be a need to ensure clear records are maintained to make use of carry forward relief. Also note that the wear and tear allowance of 10% has now been retired. In its place is "Replacement of domestic items relief". Again the rules here are complicated and it is very important the costs of furniture and white goods are clearly recorded.
Auto enrolement is now in effect. However, if you are a single company drector with no employees you do not have to enrole.
There is the option to opt in or opt out for employees. Employer contributions will increase in 2018 to 2.0% (supplemented by 0.6% contribution for the governemnt) and 3% in 2019.
Anyone holding more than 25% of the capital of a compant must be registed as a person having significant control.
A person has significant control over an LLP if one or more of the specified conditions are satisfied.
- more than 25% of the assets on a winding up,
- holding more than 25% of the voting rights, and
- the right to appoint or remove the majority of management.
There are also 4th and 5th conditions , which are -
- X has the right to exercise, or actually
exercises, significant influence or control over LLP or
- The trustees of a trust or the member of a firm that, would do so if they were individuals, and X has the right to exercise, or actually exercises, significant influence or control over the activities of that trust or firm.
Anyone meeting these requirements should be recored in a PSC registed held at th companies registered office.
The Bribery Act became effective April 2011 and affects all UK Companies, partnerships and individuals. Those prosecuted could receive 10 years in jail and unlimited fines.
All organisations - including companies, charities and professional firms will need to put anti-corruption policies and procedures in place. Organisations that do not do so could be liable for any bribery carried out by employees, even if those organisations did not order the activity or the offending party is an outsourced employee.
Businesses should consider setting out clear anti bribery policies, training for employees, rigorously investigate any allegations and take action against any individuals involved.
The policy for HPBS Ltd is shown below:
"The Company prohibits: the offering, the giving, the solicitation or the acceptance of any bribe, whether cash or other inducement to or from any person or company, wherever they are situated and whether they are a public official or body or private person or company by any individual employee, agent or other person or body acting on the companies behalf in order to gain any commercial, contractual or regulatory advantage for the company in a way which is unethical or in order to gain any personal advantage, pecuniary or otherwise, for the individual or anyone connected with the individual.
Payroll - RTI Changes how does it affect you?
You still operate PAYE in the same way but you must submit the payroll information you keep to HMRC on or before the day you pay your employees.You use a Full Payment Submission (FPS) to do this.
Your payroll software will generate the new reports you need and submit payroll information online. These include details of:
- the amount you paid your employee(s)
- deductions, such as Income Tax and National Insurance contributions (NICs)
- starter and leaver dates if applicable
You need to include the details of all employees you pay, including those who earn below the NICs Lower Earnings Limit (LEL), for example students.
You no longer submit end-of-year forms P35 and P14 and the starter and leaver process is simplified. You continue to give your employee a form P45 (employee parts) when they leave but you no longer send forms P45 (part 1) or P46 to HMRC. Instead you must report all starter and leaver information via your payroll software each time you pay someone.
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Senior Accounting Officer