Smart contracts

As blockchain technology continues to evolve, we are hearing more and more about so called “smart contracts”.

Smart contracts utilise blockchain technology in order to self-execute. A smart contract is an agreement between two people in the form of computer code. They run on the blockchain, so they are stored on a public database and cannot be changed. The transactions that happen in a smart contract are processed by the blockchain, which means they can be sent automatically without a third party. This means there is no other party to rely on in order to execute the contract.  The transactions only happen when the conditions in the agreement are met, so there are no issues with trust, people being available outside of office hours, etc.

Smart contracts can be used where transparent and immutable records are useful. This is why the technology has already found wide adoption in financial services. There is value in ensuring that records of financial transactions are kept verifiable and safe from tampering and fraud.

Companies that have started using blockchain technology include IBM, which has partnered up with companies such as Nestle and Unilever, along with stores such as WalMart in order to manage inventory of certain products.

At such a very early stage in the development of smart contracts i is difficult to know all the potential benefits smart contracts will bring to businesses. As with any new technology, smart contracts will mature, and we should begin to see shifts in how business is done as the technology becomes more main-stream.

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Client relationships

It costs considerably less to maintain an existing client relationship versus winning a new client.

Creating more successful relationships with your existing clients depends on developing a broader and deeper relationship.

Business is personal – people choose to do business with people that they like. Those that develop successful, long-term relationships with their clients tend to become a trusted adviser to those clients. If you become a trusted adviser to your key clients, they are likely to come back to you for more business, send you referrals, seek your advice on strategic issues and pay their bills on time.

It takes a lot of time and effort to make client relationships work year after year. As such, you should ensure that you are focusing on developing the right relationships. Start by focusing on your key clients – those that send you the most work, have the potential to send more business your way and, most importantly, are profitable.

Once you have identified your key clients, create a 12-month plan which focuses on how you are going to develop that relationship. Focus on how you can add value, from the client’s perspective.

Schedule regular catch up meetings or calls with your client. If applicable, offer some free training sessions for their staff. Most importantly, make sure you understand your client’s expectations and ensure that you always deliver to, or exceed those expectations.

Focus on moving from being reactive to being more proactive. Your clients will value this and your business relationship should continue to prosper as a result.

Simplification of Inheritance Tax

The Office of Tax Simplification (OTS) have been tasked with carrying out a review of Inheritance Tax (IHT) with a view to simplifying how the tax operates. IHT is perceived to be complicated and currently yields a relatively small amount of tax compared to income tax and national insurance.

There are a number of reliefs and exemptions currently available which may be withdrawn or simplified as a result of the review. Major changes to the tax are probably a year or so away and we will keep you updated as the review progresses. It may be necessary to review your Will and plans for passing on your business and estate when we see any new rules.

Making Tax Digital delayed further

HMRC have confirmed that no further MTD for business changes will be brought in before 2020 at the earliest.

The Treasury set out its revised priorities for current digital transformation projects, to make room for the additional demands on its resources of work to upgrade customs systems in preparation for Brexit.

The HMRC statement notes that the convergence of business taxes from the current range of IT systems onto a single system will now happen at a slower pace. This will slow the creation of the single account for all business customers.

For individuals, the introduction of further digital services will be delayed, with progress on simple assessments and real time tax code changes put on hold for the time being.

Note that the introduction of VAT reporting under MTD is still scheduled to commence in April 2019 for those VAT registered businesses with turnover over the £85,000 VAT registration threshold.

IR35 – Extended to private workers?

OFF-PAYROLL RULES (IR35) TO BE EXTENDED TO PRIVATE SECTOR WORKERS?

As mentioned in the Autumn Budget, the Government has opened a consultation into a possible extension of the rules that currently apply to “off-payroll” workers in the public sector to the private sector. This consultation is being undertaken at the same time as the consultation into employment status.

The IR35 rules introduced in 2000 are intended to ensure that people working through a Personal Service Company (PSC) who would have been employees if they had been engaged directly, pay broadly the same Income Tax and National Insurance Contributions (NICs) as if they were employed. However, it is estimated by HMRC that only 10% of individuals working in this way apply the rules properly, costing the Exchequer hundreds of millions of pounds in lost tax revenues every year.

IS IT WORKING IN THE PUBLIC SECTOR?

In April 2017, the Government reformed the rules for engagements in the public sector, and early indications are that this has resulted in an increase in public sector compliance. The April 2017 change requires the public sector body or agency, not the worker, to decide whether or not the IR35 rules apply and then deduct income tax and national insurance from payments to the worker.

There are however concerns that many of such workers are being treated as quasi-employees incorrectly. The consultation document states that there is evidence that some public authorities did have difficulties implementing the reform, both understanding the new rules and resolving disputes with contractors. HMRC have introduced the Check Employment Status for Tax service (CEST) software on their website to assist employers in reviewing workers’ contracts.

OPTIONS BEING CONSIDERED FOR THE PRIVATE SECTOR

As well as the possible extension of the rules that currently apply to the public sector, the consultation is requesting views on other options.

One alternative would be to require engagers to carry out due diligence into labour providers in their supply chain to ensure that they are compliant with employment and tax laws. This is already a requirement for gangmasters and other labour providers.

One suggestion apparently rejected was to create a new corporate structure referred to as a “freelance limited company” that would offer a simplified tax treatment, limited liability, a restriction on the frequency of dividend payments, and a requirement for the worker to be paid a minimum salary.

Another proposal rejected was to introduce a flat-rate withholding tax, similar to the Construction Industry Scheme for off-payroll engagements.

The consultation period ends in August and it is anticipated that the Chancellor will make an announcement about future proposals in the Autumn Budget.

June / July 2018 Important dates

Date What’s Due
1/06 Corporation tax for year to 31/8/17 (unless pay quarterly)
19/06 PAYE & NIC deductions, and CIS return and tax, for month to 5/6/18 (due 22/06 if you pay electronically)
1/07 Corporation tax for year to 30/9/17 (unless pay quarterly)
5/07 Last date for agreeing PAYE settlement agreements for 2017/18 employee benefits
5/07 Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2017/18
06/07 Deadline for forms P11D and P11D(b) for 2017/18  tax year
19/07 PAYE & NIC deductions, and CIS return and tax, for month to 5/7/18 (due 22/07 if you pay electronically)
31/7 50% payment on account of 2018/19 tax liability due