Personal Service Company changes from April 2020

In the Autumn Budget the Chancellor announced that the “off payroll” workers rules that currently apply in the public sector would be rolled out to the private sector in 2020. The government have now issued a consultation paper that sets out proposed tax and national insurance changes that will impact on those supplying their services through personal service companies.

End users will be required to determine whether the rules apply to the services provided by the worker via his or her personal service company. This will be a significant additional administrative burden on the large and medium-sized businesses who will be required to operate the new rules. The current CEST (Check Employment Status for Tax) online tool would be improved before the proposed start date.

No change for “Small” Employers

“Small” businesses will be outside of the new obligations and services supplied to such organisations will continue to be dealt with under the current IR35 rules with the worker and his or her personal service company effectively self-assessing whether the rules apply to that particular engagement.

The definition of “small” has been widely awaited and the Government have confirmed that it intends to use the existing Companies Act 2006 definition. That is where the business satisfies 2 or more of the following features:

  • Annual turnover of £10.2 million or less
  • Balance Sheet total of £5.1 million or less
  • 50 employees or less

The new obligations to determine whether the rules apply, deduct tax and national insurance, and report payments under RTI will apply to the agency or intermediary making payments to the personal service company where the end user is large or medium-sized. There will be an obligation to pass details of the status determination up and down the labour supply chain.

The liability for tax and national insurance will be the responsibility of the entity paying the personal service company, however if HMRC are unable to collect the tax from that entity the liability will pass up the labour supply chain thus encouraging those entities further up the supply chain to carry out due diligence to police compliance.

Please contact us if you would like to discuss how the proposed changes are likely to impact on your business.

 


Tax changes bought forward by a year

As already announced, the personal allowance and the higher rate tax threshold increased on 6 April 2019. The personal allowance went up to £12,500 and the basic rate band to £37,500, which means that for most taxpayers the higher rate tax threshold is now £50,000. These thresholds were due to come into effect from 6 April 2020 but the Chancellor announced that the start date would be brought forward by one year.

Note that the limits will then remain the same for 2020/21.


Nicholsons and St Barnabas Hospice cement partnership

Fifty employees from Nicholsons were asked to nominate a Charity of the Year and then cast their votes. In a closely contested internal poll St Barnabas Hospice came out top. The charities nominated are often charities that staff, their families or someone they know have been involved with.

Gail Paton, a Director at Nicholsons, says

“We feel it is important for staff to have a say, and by asking for nominations gives everyone the chance to put their favoured charity forward This year we are looking forward to working in partnership with St Barnabas Hospice and to raise money to help them maintain this vital service across Lincolnshire. I have personally benefitted from the services offered by this charity and fully support our choice this year.”

Corporate Fundraiser for St Barnabas Hospice, Caroline Swindin says

“Fundraising is so rewarding, but it is also lots of fun and great for staff moral and brand awareness. I am really looking forward to seeing the team at Nicholsons’ do various fundraising. They have committed to dress down days, quiz nights and cake baking.

St Barnabas Hospice is a local independent charity that supports more than 10,500 people across Lincolnshire affected by life-limiting or terminal conditions. Not only do they offer high quality, compassionate end-of-life care and support to patients, but support to their families and carers too. Without support from Corporate Sponsors, such as Nicholsons the Hospice simply would not be able to do the work to the standard and capacity they do.


Purchasing additional holidays

Andrew Tomlinson – HR Broadcast – the purchase of additional holidays.

An employee benefit that is becoming increasingly popular, especially in larger organisations, is the buying or selling of annual holidays.

Please allow me to explain the current requirements as regards holidays. All employees who work five days per week are entitled to 5.6 weeks’ holiday under the Working Time Regulations 1998. This equates to 28 days’ leave per annum. Those who work fewer days per week are entitled to statutory holiday on a pro rata basis.

Many smaller employees only offer the statutory minimum holiday entitlement and for some employees this will be sufficient. For others it will not be enough. This might be because an employee has travel plans or other commitments etc. This is where the purchasing of additional days holiday may be a useful benefit to offer.

If you did this, how would this work in practice and why might it be a good idea to implement such a policy? In the event of an employee buying extra holiday from you, as opposed to you just giving them some extra days off, it will be something like a salary sacrifice arrangement. That means their annual salary will temporarily go down, but they will be taking more time off.

If you did implement such a scheme, the good news is that you, as the employer, will have plenty of discretion in how you allow employees to buy extra holiday. For example, you could have a one-off arrangement with an employee, or you could roll out a scheme to all staff. The latter has financial advantages for you; for each day of leave that you allow an employee to buy, you can save yourself one day of gross pay along with the employers’ NI that would have been payable. 

It is also good for the employee who buys additional holiday who will also benefit financially because they will save tax and NI on this perk. This is particularly advantageous for higher rate taxpayers. If you want to introduce a “buy extra holiday” scheme, I strongly recommend that you do not grant an open-ended entitlement and the amount of extra days that can be purchased on top of existing holiday entitlement is limited, e.g. to five or ten days.

You can also make this type of perk subject to a strict qualifying period of service, such as two years. That being said, bearing in mind the financial benefits, you can make it a day one perk if you wish but be careful with that.

As this scheme should suit you, there is no reason why you cannot set restrictions on when any extra leave purchased can be taken, e.g. you can prohibit additional leave during peak business and holiday periods. You can also still limit the maximum of amount of holiday that an employee can take at any one time.

To make your life easier, do not allow last minute or same year requests. Instead, require employees to submit a request to buy holiday say no later than one month prior to the end of your current holiday year in respect of the following holiday year. This will ensure you have adequate staffing levels plus you will only have to deal with applications once per year.

Ensure you have a robust policy in place to cover this subject. In the opening line I mentioned buying and selling. If your current entitlement is more than the statutory minimum you can allow employees to sell annual holidays back to you, provided they take at least the statutory minimum of holidays outlined above.

Head of Human Resource at Nicholsons Chartered Accountants Lincoln HR


Finance Tax 2018 – Business Tax

Employment Investment Incentive (EII) and Start-up Relief for Entrepreneurs

The Act aims to simplify the legislation provisions of the income tax reliefs for investment in corporate trades.

The amendments have introduced a range of changes to the process of the Employment Investment Incentive (EII) and the Start-up Relief for Entrepreneurs (SURE).

The most significant change being the move away from the current application process to a system whereby companies will now self-certify that they have met the conditions. It amends the trigger points in relation to when claims can be made, tying all claims to a requirement to have spent 30% of the money on a qualifying purpose rather than the various trigger points which currently apply under existing provisions. EII and SURE reliefs will be able to run until the end of 2021.

Intellectual Property

The Act has updated the rules for capital allowances on Intellectual Property. The update provides additional clarity on income arising when IP is acquired prior to 11 October 2017 and when IP is acquired from 11 October 2017 onwards.

The updates now require that the income received from the two different periods be treated as two separate income streams when calculating capital allowances.


Client manager appointed at Nicholsons

Newly appointed Client Manager, Graham Pogson has been with Nicholsons Chartered Accountants for over 18 years and is based at the firm’s Lincoln office. Graham joins five of his colleagues who have also been appointed as client managers within the firm.

Although Graham works closely with a variety of businesses offering help and support, his area of expertise is working within the agriculture and charity sectors dealing mainly with Limited Companies, Partnerships and Sole Traders.

Graham joined the firm in September 2000 as a junior accountant and is now a client manager. He has extensive experience in the preparation of all different types of accounts and enjoys visiting his clients at their premises to add a personal touch and help businesses to develop.  He is known for his attention to detail, which, coupled with a questioning, analytical mind, makes him an integral and crucial member of the Charity and agricultural team.

Experience is key with Graham as he has been a member of the audit team for 16 years where he helped managed the firm’s portfolio of audit clients, but since a change in legislation Graham now works more on the preparation of the annual accounts for these clients.

As a member of the Association of Accounting Technicians, Graham keeps up to date with any changes which will come in to affect through his continued professional development

When not out visiting his clients, Graham enjoys playing football and is a keen Lincoln City supporter.

 

 

 


Top Ten Tax Tips for Landlords

  1. Keep detailed records of your annual income and expenditure for your property rental business
  2. Claim all costs of running the property rental business, including mileage/travel costs if you physically collect the rents
  3. Consider operating your property rental business through a limited company, as tax rates may be lower
  4. Keep details of all capital costs of acquiring properties, such as legal fees, SDLT etc., as they will be needed when the property is sold
  5. If you have lived in the property for any period of ownership, document the dates so that exemptions can be claimed when the property is sold
  6. Bear in mind the extra 3% SDLT on any property purchase that is not your main residence
  7. Consider transferring properties to trusts as a way of passing on wealth to the next generation in a tax-efficient way
  8. If married or in a civil partnership, you may want to put properties into joint names, and make an election to vary the property ownership, and therefore the property income, from the standard 50/50 split to reduce your joint tax bill
  9. Beware that gifts of property to anyone other than your spouse could cause a Capital Gains Tax liability
  10. When selling a property, make sure you make best use of all annual allowances and basic rate tax bands, and those of your spouse/civil partner

There is no substitute of individual tax advice tailored to your own particular circumstances!

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