Member Since: 18th Jun 2009
1st May 2020
Have you read the report? It so easy to generalise on something like this. The House of Lords report is excellent and so is the article above.
29th Apr 2020
I have just finished reading the whole sobering report from the House of Lords committee and it is excellent. Anyone ignoring the contents is just sticking their head in the sand. The usual culprits in the continuing IR35 20 year saga are HM Treasury and HMRC. Both only focus on tax and by ignoring the wider impact on the economy, I'm afraid their heads are well and truly in the sand.
The wider picture demands a status of 'worker' (or any equivalent name), similar to the self employed. The self employed, the gig economy workers and contractors have long enjoyed an NI advantage over the employed and the gap is too large. All that is required is to narrow this gap whilst, providing a discount for loss of employment and benefit rights.
The self employed pay 20% tax and 9% NI. Contractors pay 7.5% dividend tax and 19% Corporation Tax. Employees pay 20% Tax and 12% NI plus their employer pays 13.8% NI. When reaching the higher rate tax threshold, self employed NI drops to 2% and tax doubles to 40%, Dividend tax increases to 32.5%. Employees also have their NI drop to 2%, but their tax also doubles to 40%.
For someone earning less than £50000, there is an advantage being self employed over being a contractor. When incomes rise to £100000 as a contractor, this advantage disappears completely. The differences either way at varying levels of income could be smoothed out.
As an example, if the self employed paid 12% NI and Contractor's paid 12% dividend tax that would level up the field between them. Maybe the engaging client could also pay a levy, say 5%, to cover the lack of employer's NI, but respect the lack of employment rights. Alternatively the self employed and contractors could pay a higher level of NI, say 17% up to the standard rate limit.
The introduction could be phased over three to five years, as happened with Auto Enrolment. I hasten to add that this is only an example and there are many ways of solving this problem without the nonsense of reforming the broken IR35 model. And that is the conclusion of the House of Lords committee, not just mine.
31st Mar 2020
I am sure like all practices you have a mix of clients in terms of their financial strength.
There are those that are prudently managed and have the resources to survive for at least three months without any government intervention. There are those that have always been tight for cash and who have now seen their turnover fall off a cliff. Others work from home or have started to work from home and can continue, so are not unduly affected at the moment (maybe until their clients pull the plug on their work). Some clients have never managed their finances well, whatever advice is being given and they may not survive.
One thing all of these client groups have in common, is that despite all of the announcements, none of them have yet received a penny of the promised grants. No £10K grants for small business rates, or £25K hospitality etc grants yet. No 80% furlough money and no self employed support. As for director/shareholders who survive on low salary and dividends, well they are on their own.
We have given cancelled fees for three months to those most in dire need, but that won't help them survive. We have also provided free time to advise clients and to disseminate the government announcements. I'm not sure what else we can do in these harrowing times?
31st Mar 2020
Liberty Accounts have given a free fee period to all of their charity clients until the end of May, when they will review it. Got to applaud that action, because charities are being hit hard.
30th Mar 2020
Just had an email from HMRC cancelling the direct debit for a client. They obviously do not have the facility to just not process the payment. I have had a client already contact me not wanting to take advantage of the deferral and I don't either.
16th Dec 2019
The new CEST tool is still inaccurate as far as establishing employment status, because it can't and probably never will be capable of following case law. What is needed is simplifications of the tax system to cover tax and employment status.
There are two points of view raised, with the low paid and with highly paid contractors, but the newer status of 'worker' also needs to be considered for the low paid. Again, I don't think the CEST tool is the answer for these two groups at opposite ends of the employment spectrum, who face different issues and have different resources to challenge their status.
I can't imagine any low paid employee, such as a leaflet distributor, filling in the CEST tool and trying to hand it to an Employer to insist that they are taxed under PAYE. With the very low paid, it is often the unwillingness of the engager to incur the costs of running a payroll, rather than avoiding Employer's NI that is the issue. The only thing that will work here is if the Employer is forced to operate a payroll by HMRC with the employment and tax status pre-determined as 'worker'. This would cover all engagements where there is no obligation to provide continuous work, such as occasional leaflet distributors or seasonal workers.
The low paid need protecting from being classified as self employed against their will. They won't have the resources to challenge their status, nor the funds needed to keep accounts and complete self assessment tax returns.
For someone classified as a 'worker', the employer has to operate a payroll under PAYE, but does not provide the benefits of employment, although they do pay Employer's NI. This gives both the worker and the employer engagement flexibility.
Highly paid contractors are shunted down the route of forming limited companies because the engager wants to avoid Employer's NI, auto-enrolment pensions and other staff benefits. These contractors have now been hit by the new dividend tax, which is a 7.5% penalty that begins to bridge the gap with Employer's NI. Why not just increase the dividend tax for Close Companies and do away with IR35 altogether? IR35 has time and time again been set aside by the tax tribunals, although not in every case. It is a complete waste of resources for all concerned. It is best avoided by reforming the taxes due from Close Companies. Why not increase the Dividend Tax so it matches the Self Employed NI rate of 9%?
The simplification for the low paid would make enforcement by HMRC easy for any worker who complained about being forced into self employment. The simplification for IR35 would avoid clogging up the tax tribunals and give certainty to all.
13th Nov 2019
You are right and others have said, I was reacting to HMRC advice, rather than the law. I am aware that HMRC have stated, until recently, it was also compulsory for directors to file and that wasn't backed by law either. Serves me right for trusting HMRC and not checking this.
11th Nov 2019
When you earn over £100K Self Assessment Tax Returns are compulsory. I defy any non-accountant to get it right first time they ever have to complete one. I have had many clients of European origin, never mind UK citizens who make a complete pigs ear of it. Tax doesn't have to be taxing, but it is.
11th Nov 2019
As a foreign national earning over £300K, he should have sough the advice of an accountant. I am certain that if I was on the German version of the Clapham Omnibus, I wouldn't have tried to find my way through the German system without taking professional advice.
Having said that, I do believe that HMRC should have taken this into account and suspended the penalty. This would surely have been enough to ensure the taxpayer took advice in future. Also, his employer ought to have advised him to take advice.
25th Jun 2019
If you find a £10 note in the street you should take it to the police. Most people would recognise that the cost of travelling to the police station, the paperwork involved for the police and the likelihood of anyone ever turning up to collect it, means it is not worth doing.
Under MLR though, there is no de-minimis limit and so you will always get SARs where modest amounts are involved and that is how you clog up the system. The categorisations are Money Laundering for criminal or terrorism purposes. A suspicion of £10 take from the till in a cash business, whilst illegal doesn't warrant reporting, but it has to be and then the SAR is ignored anyway. Why don't the authorities recognise the 80/20 rule like most normal people?