IR35 – Off-payroll changes to be reviewed

The expansion of the off-payroll rules to the private sector will be reviewed, says Chancellor Sajid Javid.

In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors’ net income cut significantly.

From 6 April 2020, new tax rules will use the 2017 changes as a starting point for the extension to businesses in the private sector. Responsibility for operating the off-payroll rules will be transferred from the individual to the organisation, agency or third party engaging the worker. Only medium and large organisations will be subject to this change.

Speaking on BBC Radio 4’s Money Box programme, the Chancellor said: ‘We have promised a review of how we can help the self-employed with things like mortgages and pensions.

‘One thing in particular I want to look at again are the proposed changes to IR35. I want to make sure that the proposed changes are right to take forward.

‘We have made it clear . . . that we are on the side of self-employed people. We will be having a review, and it makes sense to include the proposed changes to IR35 in that review.’

The Chancellor’s promise came just a week after HMRC updated its Check Employment Status for Tax (CEST) tool. The update is the tool’s first, and means that if an engager does not know a worker, the tool will not ask questions about their circumstances.

DELAY 17% RATE OF CORPORATION TAX

Corporation tax is scheduled to be reduced from 19% to 17% from 1 April 2020.

However, in a speech to the CBI on 18 November Boris Johnson announced that, if elected, the Conservative Party would keep the rate at 19% to provide an extra £6 billion for the NHS.

Despite Jeremy Corbyn telling the CBI that the Labour party is “not anti-business” the party have previously announced that they would reverse the recent cuts in corporation tax. Note that the rate of corporation tax was 28% back in 2010 at the end of the last Labour government.

GET ON YOUR BIKE! USING THE CYCLE TO WORK SCHEME

The government has recently announced that the previous £1,000 limit on the cost of a bicycle provided under the cycle to work scheme has been removed. This will apply where the employer uses a firm authorized by the Financial Conduct Authority (FCA) to hire out cycles to employees who use them to commute to work.

Note that where the cycle is provided under a salary sacrifice arrangement there continues to be no taxable benefit if the amount paid by the employee is within HMRC approved limits. Note that where the bicycle is transferred to the employee after 6 years HMRC accept that value is negligible.

SALARY SACRIFICES

The provision of a bicycle to employees under the governments cycle to work scheme is an exception to the general rule introduced from April 2017 where the amount taxable is the greater of the salary foregone and the taxable benefit as set out in the tax legislation.

Other exceptions to the general rule include employer pension contributions and childcare vouchers.

 

Please get in touch for further details.

 

Executing your strategy

Having a good strategy is one thing, executing it well can be a huge challenge.

Many business owners and managers are familiar with the scenario – you arrange a strategy day with your team, capture the outputs and create a strategic plan. Everyone goes back to the office, the strategy paper gets filed and that is the last you see of it until next year’s strategy day. The hardest part of any business strategy is implementation.

Once you have created your strategy, you need to start engaging with your organisation. The communication process is key and needs to be two-way. You need to create a mechanism for people in your firm to feed back their view.

Once you have your feedback and have finalised your strategic plan, the next step is to start creating tangible objectives.

Each objective should have a dedicated owner (who is responsible and accountable), a deadline and regular updates on progress towards each goal should be provided at, for example, a monthly meeting.

Tracking and reporting are key components of executing any strategy. Monthly updates should be provided by the people responsible for each objective and should include a quantitative measure of progress and a short commentary to add background information about progress to date, expected timeline for delivery, resources required for the next stage, and so on.

Performance management is also key to successfully implementing your strategy. Your team need to be accountable and you need to create a connection between the strategic objectives of the business and your team member’s day jobs. Each person on your team should have a set of objectives which cascade from the overall company objectives that are set out in your strategy document. Aligning the objectives of each individual with the overall goals of your business ensures that your whole team is working towards the same common goal. You should measure and reward people for their contribution to achieving the firm’s strategy. This encourages the right behaviours among your team.

Executing your strategy isn’t a process. It is about developing a culture in your firm where everyone is working towards a common set of goals. At the end of each year, you should evaluate your strategy, keep the bits that are working well and update those parts that haven’t been so successful.

GIFTS TO CHARITY

Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.

For example where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing the net cost of their donation to £15.

Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will taxed on the shortfall.

Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell the donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations.

It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.

The Future of Work – Are The Robots Taking Over?

 There is a lot of jargon out there around “the future of work”. What does it really mean for businesses?

There is a lot of buzz around trends like artificial intelligence (AI), machine learning, blockchain, remote working, agile working, augmented reality (AR) and various other new concepts.  As technology improves we have new opportunities to automate tasks.

If we leverage new technology effectively, it will free us up to focus on other tasks. Understanding the future of work involves understanding how automation will play out and how that will affect the way we work in the years to come.  There are two levels of automation at play.  Assisted Intelligence, where systems and technology help us to perform a task. A good example is how GPS helps us to navigate to a destination. Autonomous Intelligence is where the technology takes the task off our hands entirely. For example – a driverless car, which navigates itself to its destination without any input from a human driver.

In any business, some tasks are completed by people and some by machines / technology. The future of work is concerned with the ever-increasing amount of work that needs to be done and the fact that work is becoming more complex. For example, due to increasing levels of regulation, businesses need to comply with increasingly complex rules such as GDPR or changes to taxation. Rather than hire more and more people, which is expensive, businesses need to leverage technology in order to get everything done, while still managing costs.

So, the future of work is all about machines and technology taking repetitive tasks off our hands so that we are freed up to do the work that machines aren’t good at. This includes leadership, creativity, innovation and collaboration. In order to make this transition successfully, businesses need to become learning organisations. In a learning organisation, the firm needs to focus on nurturing talent and developing new skillsets in order to create a more successful business. The future of work looks set to be interesting, challenging and full of opportunity, for those who embrace change.

CHRISTMAS GIFTS OF UP TO £50 TO EMPLOYEES

Remember that certain gifts to staff at Christmas are tax free if structured correctly. Ever since April 2016 employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free.

The rules were brought in as a simplification measure so that certain benefits in kind do not now need to be reported to HMRC, as well as being tax free for the employee. There are of course a number of conditions that need to be satisfied to qualify for the exemption.

Conditions for the exemption to apply

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

This exemption will generally apply to small gifts to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.

Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company, the exemption is capped at a total cost of £300 for the tax year.

Please feel free to contact us if you are considering taking advantage of this exemption

Do you need a desk for everyone in your office?

Office space is expensive. Do you really need to have a dedicated desk for each and every employee?

Recent years have brought a lot of changes to the office environment, particularly as technology develops and the next generation of employees has come through to management. This new generation of managers brings new thinking about the modern office environment and what it should be.

For example, if a workforce of 100 has, on average, only 80 people in the office on a given day, those 20 empty desks take up space and are not being efficiently utilised. A hefty portion of business overhead is dedicated to office building space and maintenance. By trimming furniture and hardware costs, some of that wasted space can be better used as a meeting or project development space, saving money and benefiting the bottom line.

If your employees hot-desk, they tend to socialise more. Employees who sit beside someone different every day interact more, converse with a greater number of departments, and can find inspiration where it wasn’t possible to before. More interaction with a wider variety of people can lead to greater company cohesion and increased collaboration.

Employees will tend to optimise the space around them for productivity and might select a space that meets their needs for any given day. If they have conference calls on their schedule, they may gravitate towards a small meeting room or less-crowded alcove. If they are collaborating with colleagues on a specific project, they may choose to work in a room with presentation software and large screens, rather than huddling around a single desk.

When your office design allows for employee flexibility, your workers who thrive on mobility and independence are happier and more productive. They will find a way to optimise their office set-up for each and every day.

So, perhaps modern businesses are better off having flexible, open and collaborative offices rather than relying on the more old fashioned approach of assigning each employee a fixed desk. As an added bonus, the business may be able to reduce office overhead costs as office space can be used more efficiently.