I have the same problem using QuickBooks OnLine. Company gets sales details from 3 separate platforms. Previously used to just take the monthly totals and enter into QBO. Now have to download CSVs for all entries - but these come in different formats. So I then have to copy and paste details into a different CSV to get them to fit the QBO input function to record all individual sales.
The trouble with this is that the records will no longer be MTD compliant as you will not have a digital link to the full transactions when submitting the VAT return. You would need to import the full transactions list into Xero rather than simply posting the totals.
Thanks John. As the records are maintained on QBO it would be a bit of a chore to download all details to a separate spreadsheet for submission by another method - particularly when QBO is intended to handle the VAT return submission process under MTD. The sales details can be imported to QBO easily enough but with hundreds of sales each month you then have to go through each one to clear payment. A batch payment processing function would help. I have messaged QuickBooks but there response is that QBO does not provide for this but it would be useful for their tech team to consider.
I've been using QuickBooks Online for a particular company. The trouble is that sales records are held on different platforms. In the past we have downloaded details and just posted the monthly totals. Under MTD I see that this is not acceptable as the digital link between the full sales details would not be there. QBO does have an import function which allows sales details to be imported from a csv spreadsheet. It does not record the full invoice details but covers the essential areas such as name, dates of invoice, due dates, amounts and tax rates. However, when inputted this creates individual invoices and, as there is no batch payment processing function, we have to click each individual invoice to record payment. I've messaged QuickBooks about this and they have indicated that they will look at this. Anyone else have a similar experience and solution? Speaking to others I am aware that there are many businesses with this type of problem.
I would explain to him that, if he is unlucky enough to get an enquiry by HMRC, the first thing an HMRC investigator is going to ask for is the business records including all bank statements. Usually this can be confined to the business bank account but HMRC will be looking for a reason to inspect any personal bank account statements as well. They won't accept "edited" statements.
With the smaller business it is, of course, a question of how much work do they want done to prepare the accounts. You don't want to burden them with additional costs for unnecessary work. But they should know that these are documents containing details relating to the business and he should be prepared for these to be examined if required.
As a footnote, in the last HMRC enquiry case I acted on the client had not provided bank statements to the accountant. When all deposits to the bank account were totted up they were in excess of the declared sales figure. The business owner could not prove where the additional funds had come from. You can guess the rest!
Ah - remember the old days. HMRC used to send out paper Tax Returns. The taxpayer would pass it to the accountant who would fill it in and get the client to sign it. It would then be sent back to HMRC by post. HMRC would hire an army of staff to process the details manually onto their system with the potential for making transcription mistakes. Would you believe it, some bright spark said "I know, we can get the taxpayer to do this job for us and get rid of lots of our clerical staff at the same time". Only one problem, how do they get the taxpaying public to co-operate? Well better give them the means to do this so they don't kick up a fuss about having to pay for the "service" they used to receive from HMRC. How about free filing software?
Unless they have found something wrong with the current Tax Return which requires amendment as a result of their enquiries I would doubt that they have sufficient evidence to prove a "discovery". They would need this if they want to open up enquiries into previous years. I would ask the inspector to confirm that he is satisfied with the correctness of the Tax Return under enquiry and whether he has any information to suggest that previous Tax Returns are incorrect. If he cannot point to anything wrong, ask him to close the enquiry.
I would not do any work, or provide any information outside of the tax year under enquiry unless the inspector has demonstrated that he has a statutory right to this. To do so would involve your client in additional and unnecessary fees and may give rise to a professional complaint against you. If you do not feel confident enough to deal with the inspector on this issue you must refer to a specialist in these matters. Any HMRC enquiry needs careful handling in order to keep it from spiralling into unrelated or inappropriate areas.
You don't give any details of the company structure. Assuming that he is the sole director and shareholder he can decide what he wants to pay in salary and dividends, subject to having sufficient reserves etc. HMRC cannot dictate what level of salary he pays himself - even NMW does not apply unless he has an explicit employment contract with the company.
As has been pointed out, if it is a "personal service company" then IR35 comes into play and HMRC can substitute a deemed employment payment.
If it is a husband and wife company or there are other shareholder/directors then a little more circumspection is required. In particular where there are relatives involved you need to beware of the settlements legislation. But, as has been shown with Arctic Systems, this is not insurmountable.
There may, of course be other reasons why he wishes to take a larger salary. Particularly if he wises to obtain tax relief on personal pension contributions or has other employment related expenses.
In your query you say that "the orchestra source a deputy". I presume, therefore, that the orchestra choses who it wishes to perform in your client's place. This is not a case of your client providing a deputy if she has no control over who that person is or the terms on which they are engaged. The contract for the engagement of the deputy is between that person and the orchestra. The orchestra then make a deduction from your client's salary to cover the amount they pay to the deputy - your client does not pay them directly.
If this is the case, the orchestra is being disingenuous if they expect your client to be the "principal" here. If your client engaged the deputy directly she would be responsible for their performance as well as other matters such as health and safety and employer's liability. This seems to me to be simply a matter of the orchestra making another engagement with another performer and then reducing the amount they pay your client. If an employer makes a deduction from an employee's salary they should only apply PAYE and NIC to the net amount paid.
I think that she should contact her Musician's Union representative for clarification of the practice and whether there has been any negotiation or agreement on the treatment of this action.
It is a pity that, as agents, we cannot access online details of payments made - as we can with Self Assessment and Corporation Tax. It has just taken me a year to obtain a repayment which arose because HMRC had incorrectly allocated payments and then demanded further payment which the client unwittingly paid. A formal complaint had to be made to get someone senior to look at it. They have now agreed to reimburse the additional costs which we had to charge the client to pursue this.
My answers
I have the same problem using QuickBooks OnLine. Company gets sales details from 3 separate platforms. Previously used to just take the monthly totals and enter into QBO. Now have to download CSVs for all entries - but these come in different formats. So I then have to copy and paste details into a different CSV to get them to fit the QBO input function to record all individual sales.
The trouble with this is that the records will no longer be MTD compliant as you will not have a digital link to the full transactions when submitting the VAT return. You would need to import the full transactions list into Xero rather than simply posting the totals.
Thanks John. As the records are maintained on QBO it would be a bit of a chore to download all details to a separate spreadsheet for submission by another method - particularly when QBO is intended to handle the VAT return submission process under MTD. The sales details can be imported to QBO easily enough but with hundreds of sales each month you then have to go through each one to clear payment. A batch payment processing function would help. I have messaged QuickBooks but there response is that QBO does not provide for this but it would be useful for their tech team to consider.
I've been using QuickBooks Online for a particular company. The trouble is that sales records are held on different platforms. In the past we have downloaded details and just posted the monthly totals. Under MTD I see that this is not acceptable as the digital link between the full sales details would not be there. QBO does have an import function which allows sales details to be imported from a csv spreadsheet. It does not record the full invoice details but covers the essential areas such as name, dates of invoice, due dates, amounts and tax rates. However, when inputted this creates individual invoices and, as there is no batch payment processing function, we have to click each individual invoice to record payment. I've messaged QuickBooks about this and they have indicated that they will look at this. Anyone else have a similar experience and solution? Speaking to others I am aware that there are many businesses with this type of problem.
I would explain to him that, if he is unlucky enough to get an enquiry by HMRC, the first thing an HMRC investigator is going to ask for is the business records including all bank statements. Usually this can be confined to the business bank account but HMRC will be looking for a reason to inspect any personal bank account statements as well. They won't accept "edited" statements.
With the smaller business it is, of course, a question of how much work do they want done to prepare the accounts. You don't want to burden them with additional costs for unnecessary work. But they should know that these are documents containing details relating to the business and he should be prepared for these to be examined if required.
As a footnote, in the last HMRC enquiry case I acted on the client had not provided bank statements to the accountant. When all deposits to the bank account were totted up they were in excess of the declared sales figure. The business owner could not prove where the additional funds had come from. You can guess the rest!
Tax Returns
Ah - remember the old days. HMRC used to send out paper Tax Returns. The taxpayer would pass it to the accountant who would fill it in and get the client to sign it. It would then be sent back to HMRC by post. HMRC would hire an army of staff to process the details manually onto their system with the potential for making transcription mistakes. Would you believe it, some bright spark said "I know, we can get the taxpayer to do this job for us and get rid of lots of our clerical staff at the same time". Only one problem, how do they get the taxpaying public to co-operate? Well better give them the means to do this so they don't kick up a fuss about having to pay for the "service" they used to receive from HMRC. How about free filing software?
No fishing
Unless they have found something wrong with the current Tax Return which requires amendment as a result of their enquiries I would doubt that they have sufficient evidence to prove a "discovery". They would need this if they want to open up enquiries into previous years. I would ask the inspector to confirm that he is satisfied with the correctness of the Tax Return under enquiry and whether he has any information to suggest that previous Tax Returns are incorrect. If he cannot point to anything wrong, ask him to close the enquiry.
I would not do any work, or provide any information outside of the tax year under enquiry unless the inspector has demonstrated that he has a statutory right to this. To do so would involve your client in additional and unnecessary fees and may give rise to a professional complaint against you. If you do not feel confident enough to deal with the inspector on this issue you must refer to a specialist in these matters. Any HMRC enquiry needs careful handling in order to keep it from spiralling into unrelated or inappropriate areas.
Salary v Dividends
You don't give any details of the company structure. Assuming that he is the sole director and shareholder he can decide what he wants to pay in salary and dividends, subject to having sufficient reserves etc. HMRC cannot dictate what level of salary he pays himself - even NMW does not apply unless he has an explicit employment contract with the company.
As has been pointed out, if it is a "personal service company" then IR35 comes into play and HMRC can substitute a deemed employment payment.
If it is a husband and wife company or there are other shareholder/directors then a little more circumspection is required. In particular where there are relatives involved you need to beware of the settlements legislation. But, as has been shown with Arctic Systems, this is not insurmountable.
There may, of course be other reasons why he wishes to take a larger salary. Particularly if he wises to obtain tax relief on personal pension contributions or has other employment related expenses.
In your query you say that "the orchestra source a deputy". I presume, therefore, that the orchestra choses who it wishes to perform in your client's place. This is not a case of your client providing a deputy if she has no control over who that person is or the terms on which they are engaged. The contract for the engagement of the deputy is between that person and the orchestra. The orchestra then make a deduction from your client's salary to cover the amount they pay to the deputy - your client does not pay them directly.
If this is the case, the orchestra is being disingenuous if they expect your client to be the "principal" here. If your client engaged the deputy directly she would be responsible for their performance as well as other matters such as health and safety and employer's liability. This seems to me to be simply a matter of the orchestra making another engagement with another performer and then reducing the amount they pay your client. If an employer makes a deduction from an employee's salary they should only apply PAYE and NIC to the net amount paid.
I think that she should contact her Musician's Union representative for clarification of the practice and whether there has been any negotiation or agreement on the treatment of this action.
PAYE payments
It is a pity that, as agents, we cannot access online details of payments made - as we can with Self Assessment and Corporation Tax. It has just taken me a year to obtain a repayment which arose because HMRC had incorrectly allocated payments and then demanded further payment which the client unwittingly paid. A formal complaint had to be made to get someone senior to look at it. They have now agreed to reimburse the additional costs which we had to charge the client to pursue this.