My Digital Account Desert Island Discs

Here at My Digital Accounts, we felt the best way for you to get to know us would be our version of Desert Island Discs

We each chose three recordings, a book and a luxury item we would take with us if we ever ended up stranded on a desert island

But also chose our favorite John Whelan quote we frequently hear around the office

John Whelan

John Whelan

Three recordings:

Complex – Gary Numan / Atmosphere – Joy Division/ Positivity 4th street – Bob Dylan

Book:

1984 George Orwell ‘This is such a prophetic book and you see something new each time you read it

Luxury item:

The Robot from Ex Machina

Quote:

‘It’s not what happens to you… it’s how you react to it that will determine success’

Katie Allen

Katie Allen

Three recordings:

Just the way I’m feeling – Feeder / One – Swedish House Mafia / Ono Tomorrow – Orsen 

Book:

Truckers, Terry Pratchett 

Luxury item:

Pan or Kettle 

Quote:

‘It’s going to go viral!’

James Pringle

James Pringle

Three recordings:

The Ricky Gervais Show / P.I.M.P – 50 Cent / Acceptable in the 80’s – Calvin Harris

Book:

The Survival Handbook, Collin Towell

Luxury item:

Abacus

Quote:

‘James, one day this will all be yours’

Josh Bramhall

Josh Bramhall

Three recordings:

Viva la Vida – Coldplay / Never Walk Alone – Gerry and The Pacemakers / ‘The Warm up’ Max Rushden and Barry Glendenning

Book:

The Circle, Dave Eggers 

Luxury item:

Subea Easybreath Surface Snorkelling Mask 

Quote:

‘Did you know Josh’s dad played over 500 football league games’

Matt Jennings

Matt Jennings

Three recordings:

Beer – Reel Big Fish / The Impossible Dream – Andy Williams / Dr Dre ft.  Forgot about Dre – Eminem 

Book:

The Complete Sherlock Holmes by Arther Conan Doyle

Luxury item:

Machete

Quote:

‘If you aim for the stars, you might just land on the moon’ 

Hannah Powell

Hannah Powell

Three recordings:

Enjoy the Silence – Depeche Mode / Dancing Queen – Abba / Huggin and Kissin – Big Black Delta 

Book:

The Silmarillion, J.R.R. Tolkien

Luxury item:

A fishing net

Quote:

‘Kiss the Badge’ 

Dan Moss

Dan Moss

Three recordings:

Be True – Commix / Home – Above and Beyond / Divenire – Ludovico Eivenire

Book:

The selfish gene, Richard Dawkins

Luxury item:

Nuclear submarine

Quote:

‘Do you know what would be powerful’

Hannah Brady

Hannah Brady

Three recordings:

I Wanna Be Adored – The Stone Roses / Sheila – Jamie T / Kevin Hart ‘What Now’ set

Book:

The Fantastic Mr Fox

Luxury item:

A Brita Filter

Quote:

‘You can’t play a violin without some tension’

Chris Lindsay

Chris Lindsay

Three recordings:

Chesney Hawkes – The One and Only / Fools Gold – Stone Roses / Who Wants to Live Forever? – Queen

Book:

A brief history of time, Stephen Hawkins String Theory

Luxury item:

A swiss army knife

Quote:

‘Strategic Disloyalty’

Autumn Statement October 2018

Autumn Statement October 2018

Recruitment Industry and Accounting Provider Soundbites

The below summary includes direct ‘lifts’ from the Chancellor’s Announcement (the blue boxes) for ease of reference. The My Digital Accounts Comment is an initial view and is subject to change following more detailed consideration and additional information such as Guidance Notes and Draft Legislation which will be published in due course

 

  nnnnnnnnnnnnnhhhhh   

 


Personal Service Companies (PSCs)


1)Off Payroll Engagement in the Private Sector (‘IR35’) will be introduced in April 2020

The off-payroll working rules (IR35 reform) which were implemented in the public sector in 2017 will be extended to the private sector BUT will only apply to large and medium sized businesses from April 2020

A summary of responses to the consultation on Off-payroll working in the private sector has been published:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752160/Off-payroll_working_in_the_private_sector_-_summary_of_responses.pdf 

Clearly, many points raised have given the government and HMRC pause for thought and a further Consultation will be published, followed by legislation in Summer 2019.

 

My Digital Accounts Comment: There is clearly a nod to some of the issues identified in HMRC’s largely discredited CEST tool with enhancements to the tool now promised next year. The statement that the new rules will ”only apply to SMEs and large companies” presumably means the rules will only affect End Clients or Agencies with turnover exceeding £10.2m and over 50 employees? The anti-avoidance rules in this area will need to be carefully constructed.

This measure, when introduced, will be the biggest change in the taxation of the temporary labour market ever! Recruitment Agencies will not be comfortable taking the risk of paying a limited company ‘gross’ and End Users are unlikely to want to help with the assessment. Accountants with PSC clients in the temporary labour market would be well advised to consider setting up an Umbrella company


Self- Employment


2) Employer’s National Insurance Allowance

The £3,000 employment allowance will be removed for larger employers (effectively those with over 50 employees).

My Digital Accounts Comment: Despite the Autumn statement in 2017, mentioning that “there is evidence that some employers are abusing the EA” (presumably a reference to the rise of micro-umbrella structures), there is no specific reference to targeting such structures in this Budget and the above reform does nothing to prevent this abuse. The Chancellor did not revisit his aborted statement from March 2017 regarding applying National Insurance on payments to self-employed workers. That said, there was a reference to the Taylor report, implying that consultation on this issue will continue.

3) Auto-Enrolment for the Self-Employed?

Following the successful introduction of auto-enrolment (though it remains to be seen what sandals in this area await future generations) and following one of the conclusions in the Taylor Report, it seems as though pensions for the self-employed will become mandatory in April 2020

My Digital Accounts Comment: This a predictable move but the mechanics of how it will operate need to be fleshed out. It would seem that “Engagers” (yet to be defined) will have to withhold an element of the payment to self-employed workers. It will be interesting to see the look on your plumber’s face when you deduct 5% from his bill for his “pension payment”

4)Reverse Charge for VAT in the Construction Industry

This has been widely consulted on and, as expected, will be introduced in October 2019. Effectively, the End Client will withhold VAT from the supply chain and pay it directly to HMRC on behalf of suppliers.

My Digital Accounts Comment:
Although widely predicted due to HMRC’s view of the prevalence of fraud in the construction supply chain, this will have a massive cashflow effect on those supplying construction workers. We can expect financial pressure in this sector and, perhaps, a spate of liquidations in the run up to Christmas 2019?


Other Points affecting Umbrella Companies and recruitment Agencies 


5) Further erosion of the Corporate Veil

This Budget has brought an additional attack on the historic Victorian principle of limited liability. Going forward, the directors of businesses which fail may well be pursued personally for company debts when a company is declared insolvent.

My Digital Accounts Comment: There are many examples of where insolvency rules are abused and “phoenixing” is used to avoid, for example, HMRC debts but there are also many examples of where a companies fail for legitimate commercial reasons. This is an area where HMRC will be handed a weapon which could have far reaching and negative consequences for entrepreneurship.

6) VAT on Prepayments.

Traditionally, prepayments do not attract VAT but the implication here is that VAT will be charged where the payment is never

My Digital Accounts Comment:This is an intriguing paragraph which could relate to structures developed to frustrate fundamental tax principles – for example, the 2% limited cost trader rules for Flat Rate VAT, where “direct costs” are incurred but never paid for (hence a “VAT loss” is not incurred in a FRV registered company, but the company still meets the direct cost threshold).

 7) Making Tax Digital (MTD) for VAT will be introduced in April 2019.

MTD is the ‘buzzphrase’ for an initiative to ensure that companies maintain their accounting records in real-time. Think of Payroll RTI for VAT and Corporation Tax! The idea is to ensure that a VAT return ties in to the underlying accounting records and remove the ability to ‘manipulate’ VAT returns outside of a software system. My Digital Accounts are participating in the HMRC MTD development programme and we can confirm that it is nothing to be afraid of!

My Digital Accounts Comment: We will hear a lot more about Making Tax Digital after Christmas as HMRC have a full-blown marketing campaign prepared. Any business above the VAT threshold, using bespoke or paper-based systems (including accountants) should begin considering whether their current arrangements, and software, are fit for the new MTD rule. So-called “Bridging Software” (not linked to underlying transactions will be allowed until April 2020.


 

HMRC to step up communications on MTD

Knowledge gap still a problem

One of the more surprising statistics published last month from ICAEW suggested that over 40% of businesses that will be affected by Making tax digital in April, are still not aware of it. As we have addressed previously on whose responsibility is the Making Tax Digital knowledge gap, accountants, software providers and HMRC themselves are responsible for closing this gap in the run up to mandation in April 19.

HMRC attempting to close the Gap

HMRC’s communication timeline suggests that they will step up their education of stakeholders in the back end of this year. They will use a variety of channels to try and get the message out there including YouTube clips, trade press, local radio and social media. The first set of eligible businesses can also expect a letter informing them of the changes towards the end of the year with the remaining deferred businesses (exempted charities and trusts) being sent a letter in the first quarter of next year. Clearly HMRC recognise that more must be done and this schedule will go some way to getting the message to those affected.

Time for preparation

With only 100 days to go until the legislation comes into force, now is the time to start preparing. Accountants in particular are already running out of time to find solutions for their clients. It has been estimated that it takes an average of 8-11 hours to migrate a client to a cloud accounting package. For a small practice with 50 “spreadsheet” clients, the total time to get them on to an MTD platform is approximately 60 man days. There is a less time-consuming way to get these clients MTD compliant and bridging software could be a way of avoiding this lengthy migration process.

My Digital Accounts offers a suite of MTD compliant solutions for MTD, whether it be a full bookkeeping package or bridging software for spreadsheets, get in touch. We can help you join the pilot scheme prior to April 19 which is the most effective way to prepare.

This weeks blog has been bought to you by Dan Moss

HMRC separates the wheat from the chaff in time for MTD public beta

Public beta announcement

This week on the 16th October, HMRC announced that the making tax digital pilot was being extended into public beta. This means that more than half a million businesses will be able to use software to submit Making Tax Digital (MTD) compliant VAT returns ahead of the new rules coming into force in April 2019.

Some not for profit organisations deferred

HMRC have deferred the mandation of MTD for a small number of categories, they announced;
trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (such as Government departments and NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users. We will be writing directly to all customers within this group to inform them before the end of 2018.”

Although they have deferred MTD for this small number of organisations, the functionality to file MTD compliant VAT returns will be in place prior to April. Organisations that fall into any of the above categories will not be mandated until the 1st October 2019.

Software choices published

There are now over 70 suppliers listed on the HMRC’s website who have demonstrated a prototype to HMRC. These companies are not yet ready to use now and just because your software supplier is on the list does not mean that you can join the public pilot. HMRC have helpfully provided a second list, which separates the wheat from the chaff and lists 23 companies that are ready for you to join the pilot. If your software provider is asking if YOU are ready for MTD, make sure THEY are ready by checking the list.  Some of the more vocal providers on MTD are noticeable by their absence.

Ask your provider to join the pilot

Don’t wait until next year to think about Making Tax Digital. Ask your provider if they you can join the pilot. There is only a maximum of two quarterly VAT periods left before the mandatory changes in April. The only way to practice submitting MTD compliant returns is by joining the pilot.

My Digital Accounts provides a suite of MTD compliant solutions, whether you want to use a full accounting package or continue using your spreadsheets, get in touch now to discuss how you could benefit from joining the pilot scheme.

This weeks blog has been bought to you by Dan Moss

My Digital Accounts & FCSA Event – Lets get ready to grumble!

Last Thursday, 11th October, My Digital Accounts and FCSA hosted an event at Brabners Headquarters in Manchester. Speakers on the day included Lee Hawksworth of HMRC, Robert Woodward of Saffrey Champness, Emma James from Brabners and our very own John Whelan.

The event opened with Emma and Robert skilfully navigating the guests through recent legislation changes and predicting what October 29th will bring. The afternoons speakers (and dancers!) looked at HMRC’s plans to become world leaders in term of digitalisation of how they monitor

and collect taxes… there was no mention of Brexit at any point!

The big learning from the day was that there is only a short time left before Making Tax Digital goes live for VAT, with only two VAT quarters left before HMRC shut down the old submissions gateway! Can anybody that was in attendance remember the 3 crucial questions that you should be asking your current software supplier?

The event was attended by FCSA Accredited Members, those aiming to achieve the Accreditation, Recruitment Agencies and friends and clients of My Digital Accounts. We are already looking forward to the next joint event with Julia and the FCSA team – please leave song suggestions for Johns next ‘dancing presentation’ in the comments section!

 

MTD for VAT, what is a digital link?

MTD for VAT, what is a digital link?

Image result for chain gif

Can spreadsheets be used for MTD?

HMRC’s MTD (Making Tax Digital) initiative comes into force in April 2019. With 9 months to go, there were still many questions unanswered for those following its developments and HMRC attempted to answer these questions in a VAT notice published in July 18.

HMRC’s vision of Making Tax Digital probably envisioned that accounting via spreadsheets would become a thing of the past following their legislation. The inevitable backlash from excel users, accountants and businesses alike, forced HMRC to concede that spreadsheets will have to remain part of the MTD ecosystem. It is not just blind stubbornness on the part of excel users, there are many legitimate reasons for wanting to retain spreadsheets for VAT preparation; companies in VAT groups, businesses with more than one accounting system, and small businesses with no need to invest in a full accounting package being just a few.

The concession by HMRC to accept spreadsheets came with a number of caveats, all VAT returns who qualify under MTD must be filed by the new MTD API’s (application programming interfaces) and crucially, data transfer between software programs, applications or products must be digital, a term that they call a ‘digital link’. This meant that if businesses wanted to carry on using their spreadsheets for their VAT returns, they would still need to use software for the submission and that copying and pasting figures into a VAT return for submission was no longer an option. What was not clear to many was what a digital link is.

What is a digital link?

Copying and pasting either within a spreadsheet, program or between programs is not allowable as a digital link. The July notice from HMRC clarified what exactly constituted a digital link:

A digital link includes linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked.

HMRC will accept a digital link as:

  • emailing a spreadsheet containing digital records to a tax agent so that the agent can import the data into their software to carry out a calculation (for instance, a Partial Exemption calculation)

  • transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to an agent to import that data into their software

  • XML, CSV import and export, and download and upload of files

  • automated data transfer

  • API transfer

From the examples that HMRC give, a digital link is not obvious, the emailing of a spreadsheet constituting a digital link may surprise some for example.

MTD soft landing period

HMRC have added another complication into the mix, although it may come as a big relief to some. They have allowed a further 12 months for digital link to be in place from April 19. This means that for the first year of MTD copy and paste within spreadsheets and across applications is allowable.but of course there is another exception… the exemption does not apply for data being imported into the software that will eventually file the return. This means that copy and pasting figures into a VAT return within software, will not be allowed. An import of a spreadsheet into bridging software for example will be necessary, even within the first year. It is hard not to wonder whether the office for tax simplification were on holiday when these rules were being put in place.

What is VAT Bridging software for MTD?

Bridging software is an application that does not contain any underlying accounting transactions. It allows you to carry on using spreadsheets and import them to populate the VAT return for submission. Importing a spreadsheet with only 9 figures copied and pasted from manual calculations that go on to populate the 9 VAT box figures will be completely compliant for the first year of MTD. Accountants and businesses will need to be careful that from April 2020, these 9 figures will need to link back to the underlying transactions using any of the digital links given as examples by HMRC.

My Digital Bridge is bridging software for spreadsheet users. For chance to take part in the HMRC pilot scheme for MTD prior to April 2019 for free, register your interest here.

This weeks blog was bought to you by Dan Moss

HMRC remove the mask for disguised remuneration

What is Disguised Remuneration?

HMRC define disguised remuneration (DR) as:

…tax avoidance schemes claim to avoid the need to pay Income Tax and National Insurance contributions. They normally involve a loan or other payment from a third-party which is unlikely to ever be repaid.

These schemes can be used by employers and individuals alike. With the IR35 reforms in the public sector, many contractors, faced with a reduced income were sold the dream and convinced of the legitimacy of these contractor loan schemes, that meant their take home pay was in excess of 85%.

Double Whammy!

These schemes primarily work by paying a small salary and loan the balance of the income to the contractor on the proviso that when the person leaves, the loan is written off. However what most contractor’s are unaware of is that as soon as the loan is written off, it becomes taxable in full. If the loan is not written off, the scheme provider can recall the loan at any time, and if this loan is not declared on the contractor’s tax return as income there is the risk of being hit for the double whammy of a tax bill and fine on top of the loan repayment.

Removing the Disguise

HMRC are combatting these schemes by making it mandatory that all outstanding DR loan amounts are reported as part of the month 12/week 52 FPS for 2018/19 and in any Earlier year updates that are sent for all employees and ex-employees.

“We’d have gotten away with it if it hadn’t have been for you pesky kids!”

It appears that with this change the noose is tightening for these types of contractor loan schemes that have been prevalent in the Umbrella market place and were allowed to thrive due to the previously slow response time from HMRC. This is great news for compliant umbrella companies and for the sector as a whole; which attracts a lot of bad press all drawn from companies running tax avoidance schemes.

Lets hope those pesky kids at HMRC keep up the good work and continue to unmask the villains!

Whose responsibility is the Making Tax Digital knowledge gap?

The right direction

In principle it is hard to argue with HMRC’s overriding vision of a more technology led tax system. Many public sector bodies have already implemented systems to bypass manual processes, a great example being the abolition of tax discs for motor vehicles by the DVLA in favour of online registration and tracking. As with HMRC’s new making tax digital (MTD) initiative the primary motive is centred around compliance, however, this does not mean that there are not benefits that businesses can take from it, automation being the most significant.

Research confirms many businesses are not ready

HMRC’s own research shows that 85% of businesses file their VAT returns via their government gateway. It is not only anecdotal evidence that suggests that many of these businesses will be surprised to hear that the majority will no longer be able to submit their VAT returns in this way come April 2019. Research from ICAEW shows that 40% of affected businesses are not even aware of MTD. In addition to this, 25% of businesses use paper records of which 13% fall within the MTD remit.

HMRC

Some of the figures are clearly worrying and there is a hope that HMRC increase their efforts to reach out to those that still have no knowledge of MTD as we approach the deadline. So far publicity around making tax digital has been restricted to the accounting and software community, this approach may account for the knowledge gap at present for businesses.

Accountants

Figures show that 30% of businesses will be submitting VAT returns through accountants. There is an expectation from businesses that their accountants will keep them informed on developments such as making tax digital will be communicated to them. Accountants who embrace MTD early could make a competitive advantage if they position themselves as MTD experts. Accountants must make sure that they are engaging with software providers who are MTD ready. Joining the live pilot scheme for MTD prior to April 2019 will allow accountants to gain an appreciation of the changes before mandation and give them the confidence to speak knowledgably about the process to their clients.

Software Providers

Software providers who are actively engaging in MTD are probably the closest to HMRC as they collaborate with them to develop the changes needed for the software to be compliant. This makes them probably the best placed to empower accountants with knowledge of MTD to go on and inform businesses responsibly. Software providers who are not already engaging in the MTD pilot are behind as April 19 approaches and accountants and businesses who are using software which is not MTD ready should consider whether they have the right partner going forward

The options for businesses

Accounting software

There are many businesses that will trade in their spreadsheets for software ahead of MTD. MTD for businesses already using accounting software will have little impact on their operations providing they have picked a software provider that is MTD savvy. Despite the worry that many businesses may not be ready for April, those that have prepared by engaging with the right providers will find the transition relatively easy and may wonder what all the fuss has been about.

Spreadsheet ‘Bridging software’

HMRC have conceded that there is can still be a place for spreadsheets in the new MTD world. All VAT returns captured under the MTD remit will still need to use the MTD API’s (Application programming interface’s that allow software to ‘talk’ to HMRC), so in some way or another software must be part of the solution. Bridging software is designed to bridge the gap between spreadsheets and HRMC and soften the impact of MTD on businesses that are not yet ready or have no interest in signing up to accounting software. Bridging software will allow a spreadsheet to be uploaded to software which will populate a VAT return for submission. This, HMRC has agreed, will thereby retain the ‘digital link’ between the VAT figures and the underlying transactions.

Work still to do

ICAEW’s research shows that there is still a lot of work to bridge the knowledge gap for a large proportion of businesses. HMRC, accountants and software providers will all be instrumental in minimising any disruption of MTD on businesses come April 19. A wise choice in software, whether it be accounting software or bridging software, should make the transition much less painful come mandation.

If you are looking for any assistance with Making Tax Digital and your bridging software options get in touch at 0161 925 6162 opt 2.

My Digital Accounts Defeats Making Tax Digital Uncertainty

With a nod to Roy Lichtenstein 1923-1997

We have submitted our first Making Tax Digital compliant VAT return!

Why

We wanted to embrace HMRC’s Making Tax Digital initiative so that our clients can adapt to the new legislation early and remain ahead of the curve. We have managed to become one of the first UK companies to release MTD compatible software ahead of the mandatory change in April 2019

Demonstrating that the change is not an unreasonable HMRC initiative, we started (and finished) the process within 64 days. Although this is an achievement to celebrate, we wanted to show what it is possible with an “early adopter focus”

What

If you have  followed our blog, you will see that we  commenced our Making Tax Digital Journey on the 4th of June and by day 17 we had successfully tested HMRC’s API’s and had started implementing our own database design to meet the MTD requirements And By Day 47 we were ready submit our first tax return and, after securing HMRC authorisation, submitted our first MTD VAT return on day 64!

Going Forward

From today eligible My Digital Accounts customers can subscribe to the MTD pilot. HMRC’s MTD VAT platform allows accountants, and their clients to:

Access VAT data held by HMRC, including current and future obligations, view up to date liabilities outstanding and payments made to (and rebates from) HMRC

It has been a great journey and, whilst we want to celebrate our success, the road was not quite as rocky as some would have you believe!

Day 44 – Making Tax Digital

 

17th July 

Our demo to HMRC has been completed successfully. We are now in a position to apply for our production credentials required to submit live VAT returns as part of the controlled go live pilot.

A separate application to be admitted to the pilot will be made once we have the production credentials.

The VAT registration numbers (VRN’s) of all test clients taking part in the pilot will be checked by HMRC for eligibility in the pilot scheme.

At least two successful submissions to HMRC need to be accepted. These are planned for the next week on a pre-agreed submission date with HMRC.