I have a client who went from issuing his own invoices to a form of self billing. He's one of these just barely self-employed staff, so fills out something akin to a time sheet for which the customer generates an invoice.
Prior to this method the payments he received were often a pigs breakfast, they'd miss bits off then add them to later payments, so doing his bank recs was a headache. Under the new system they generate the invoices and make the payment at the same time, so fewer errors that are visible to me. There could of course still be missing items, but from my point of view the invoices and payments match!
On the other hand we had an issue when he registered for VAT that they didn't factor it in to the self-billing invoices up on time and we had to get them to redo an invoice.
The advantage to the customer is that they know they will get an invoice in the format they want, likely digitally integrated straight into their system, particularly useful if you deal with small traders who issue questionable invoices! You can also ensure that the correct rates of VAT are applied - e.g. energy companies can do self billing for feed in tariff payments - part of which has no VAT added and part that does.
I have had plenty of less positive experiences with some types of e-invoicing systems - these could be seen as self-billing systems, as the invoice is effectively still raised in the customer's system, but unlike the systems above where the customer does most of the work they force the supplier to do a significant amount of the AP work for the customer, which can be an absolute pain in the backside. Some of these outsourced systems even have the gall to charge suppliers per invoice! So beware of these.
These are a particular pain for anybody larger than a micro-entity as in all likelihood you still have to raise an invoice in your own system, so you end up duplicating the work.
I can't wait for clients to get on their high horse when looking at fees, well you charge me £x per year and it only takes 10mins now from 40 mins, was reported in the 'Sun/Times/Guardian'.
I want the fee reducing by three quarters......
Have to have a good response ready I suppose, how about:
"But now I'm submitting/reviewing 12 monthly returns rather than one yearly one so......."
Or we could talk about value based pricing until their eyes glaze over and they give up!
Loss of work for accountants? I think not.
I wouldn't worry about a loss of industry for accountants - digital self assessment returns have been around for years, yet there are still plenty of people who want nothing to do with them. Indeed I have qualified accountants as clients (who don't work in practice, or in tax) who pay me to do their returns for peace of mind.
It's speculation on the detail of course, but I suspect the sort of person who is happy to manage all of their own accounting software, interfacing to HMRC and/or go into the HMRC system and enter their own details would probably also happily do their own annual return - so no loss of business there.
The idea of PAYE details populating directly to the HMRC portal and being viewable by taxpayers and agents is long overdue, it always irritates me that I have to call to get copies of PAYE details. Whether or not the portal will actually work is another matter entirely!
Can't really see the monthly real time concept working very well for a lot of businesses. Businesses that basically just bill for a consultant's time in a fairly consistent manner may work, but anybody operating on the accruals rather than cash basis, with capital allowances, stock adjustments, etc. I just don't see it working.
On the subject of reducing complexity - most of the complexity in completing a tax return isn't actually shown on the return - it's working out what to put into the return. The self-employment pages only show a few figures, the real accounting and tax work is figuring out how much these figures should be - is that entertainment allowable? What proportion of interest on that shared use building is for business? What is the capital allowance for that car etc?
A simplified reporting model won't solve that, unless it is linked to an extension of the cash accounting model, perhaps in a flat rate VAT style - e.g. you are a mechanic, so you can deduct a flat rate of 60% of income as expenses etc.
Not much detail yet of course - so it remains to be seen what any of this will really mean in practice.
May not will....
What makes you say that? They will collect the extra and it could be onerous if you are not prepared.
In the link you provided it states the following:
Each employer you have will give credit for the full £16,910 threshold. So if you earn £18,000 a year in each of your separate jobs, that is £36,000 in total, so each employer takes 9% of£ 1,090.
We do this to keep the calculation straightforward for employers.
It then mentions that HMRC may send you a tax return to complete and in the example above you would then have more to pay, but it then states:
If HMRC don’t send you a tax return, you’ll not have to make further repayments beyond those already taken by your employers.
So if HMRC don't send you a tax return and you don't fill one out for any other reason you wouldn't have to make any additional payments. So based on the link provided I stand by my comment that in practice they may not collect the extra due, not that they definitely will not of course. I'm not basing this on any HMRC guidance, just interpreting the guidance on the link posted.
Self Assessment Anomaly
petersaxton wrote:Jeh1 wrote:
Student loan office are very helpful too
Your link refers to NIC calculations.
see page 14
So in practice they may not bother collecting the extra due.
As a slightly off topic aside I noticed something when filling in my own tax return this year, regarding student loan deductions. Normally when making SL payments they are calculated from your gross income and paid from your net - i.e. they don't account for things like pension deductions, where you would get income tax relief.
When I came to fill in my tax return I noticed that the extra SL deductions on account of my business profits were lower than I had anticipated, the reason being that you enter the values from your P60 after accounting for pension deductions and this is what fed through to my final calculation. So although I didn't receive relief from SL deductions based on pension contributions under PAYE I did via my self assessment.
I suppose historically they haven't worried much as it just means you have more SL outstanding and it will likely be paid off at a later date. It could be a little more significant in future though, now that students are having much higher loans, with a higher repayment threshold, leading to many more people never paying off their loans.
It's an HMRC guide rather than statute or case law, but check out section 5.4 and 5.5 of guide 490:
Your situation sounds like the one in 5.5 - they have to live somewhere and this rented accommodation will be their only dwelling.
If the contractor had retained their original dwelling, had kept most of their possessions there and went back at the weekends then the rental property would be accommodation linked to travel to and from a temporary workplace, but not I think in the situation you have given.
Have a look at the following far more comprehensive reply from cfield on a similar recent query:
shaun king wrote:@pauljohnson I think you will find Germany is effectively Zero
pauljohnson may have been looking at the distance selling thresholds, rather than the normal thresholds,easily done as if you Google "European VAT thresholds" the distance selling thresholds come up first!
1 Year could be enough - if done correctly.
Silver Birch Accts wrote:
I mentioned I would spend the rest of the year obtaining the right knowledge and it will be my intention to maintain the required knowledge regardless of my membership. So for the sake of argument, let's just assume I have that side of things covered.
Above qoute from the OP Bunga.
I have 40 years years experience and I supect many reading this have similar.
You never know it all, hence CPD and reading everyday such things as AccountingWeb, yet Bunga has allowed until Christmas to aquire the font of all knowledge. I may have got the wrong end of the stick but I find Bunga's attitude somewhat arrogant and possibly dangerous.
You are correct to a point, but I think the 40 years reference is a bit misleading, clearly you don't need 40 years experience to setup your own practice, though equally setting up with no knowledge/experience is not ideal either.
Also I think "font of all knowledge..." is over egging it a bit, there are some 15-20k pages of tax legislation in this country, but if you aren't preparing accounts for a bank, or oil company you can safely discount several hundred pages, so it's a question of what you specialise in and knowing your limits. Knowing your limits should apply to pretty much any firm though, indeed practicing in areas in which I am competent is a key condition for my practicing certificate, as I imagine it is for other institutes.
I agree with your point in general though, a year of just doing ACCA courses will likely not be enough. I'm not an ACCA member and don't keep track of what courses they offer, but I suspect most of them are going to be aimed at maintaining existing knowledge and going through new development, they won't be covering the basics that you need to be able to do compliance work for small businesses.
I too came from industry and setup my own practice without any practice experience, which I agree is a bit of a stretch in general. In my case though I obtained full ATT membership and did a tremendous amount of reading and research before starting. I am a bit of a freak in this respect though, currently studying for the CTA qualification and I'd be hard pressed to fully explain why I'm doing it!
I also accepted the fact that to start with every job would take 2-3 times as long as it would for somebody with practice experience, as I would be checking and double checking the rules and I factored this in as a learning curve. You really do need to know your limits though, I turned down a few engagements when I first started out, as I just couldn't be confident I had the experience to deal with them.
I only use 12pay for small employers and haven't used CIS, so this isn't a recommendation as such, but I understand that the software is capable of more than 250 employees and has a CIS module.
Check out the following HMRC page:
In particular the calculator:
The 5% comes off the total and is in addition to any eligible travel expenses (and other expenses that could be claimed if the worker had been an employee). The calculator shows you the order to go in.
If you've made the appropriate deductions, having treated the 95% residue as salary, then there won't be any deemed payment (when I asked a question a while back the conclusion was that you would want to make sure everything goes through payroll, as you get the employers NI allowance that way).
The only slightly tricky bit is working backwards to find the appropriate amount of salary such that pay+NI = 95% of residue, mostly due to rounding etc.