June 2018

tax tips & finance e-newsletter

In this issue

Making Tax Digital for VAT
Making Tax Digital - Future Developments
Simplification of Inheritance Tax
Requirement to Correct
Leadership Skills

Making Tax Digital for VAT

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.

This includes unincorporated businesses, companies, LLPs, and charities. Businesses registered for VAT but with turnover below the VAT threshold can opt in and file their VAT information via MTD if they wish.

Businesses above the threshold will be required to maintain digital records and will need to submit VAT information to HMRC using an appropriate third party commercial software. At this time it is not anticipated that there will be any free software available. Businesses below the threshold will still be able to submit their VAT return through HMRC’s online portal.

When choosing a commercial software, care should be taken to ensure it does the following, as a minimum:

  • Keeps and preserves records in digital form.
  • Is able to generate a VAT return from the digital records.
  • Provide HMRC with VAT data on a voluntary basis.
  • Receive information from HMRC via the API (application programme interfaces) platform. This will allow HMRC to send ‘nudges’ to the businesses.

The use of spreadsheets will be permitted although they will need to be combined with third-party commercial software, using APIs, to ensure a seamless flow of data from the business to HMRC (and vice versa), in order to meet the requirements mentioned above.

The requirement to keep data digitally does not mean that invoices have to be stored digitally. Paper invoices and records can still be kept, so long as certain data is stored digitally.

This includes:

  • Your business name.
  • The address of your principle place of business.
  • Your VAT registration number.
  • A record of any VAT accounting schemes in use.

For each supply made/received you make you must record:

  • The time of supply.
  • The value of the supply.
  • The rate of VAT charged.

This is all part of the first phase of MTD and further changes are expected in April 2020 affecting Income Tax. Being prepared as early as possible for MTD is the best course of action.

We are Platinum Partners with Xero - the global leader in cloud accounting software. Further details on how Xero will benefit you and your business can be found here.

If you have any questions about Making Tax Digital or need any help, please contact your usual Partner.

Making Tax Digital - Future Developments

Apart from MTD for VAT 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.

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. We have a dedicated Trust and Estate Support Services department that can assist you.

Trust and Estate Support Services

Requirement to Correct

HMRC have in recent years encouraged taxpayers, by way of various campaigns, to disclose their tax liabilities if they have not previously done so.

Offshore non-compliance has been one area in particular that has been targeted and the current focus by HMRC on offshore tax disclosure has resulted in the ‘Requirement to Correct’ (RTC) legislation, the aim of which is to compel UK taxpayers to report to HMRC previously undisclosed offshore tax liabilities up to 5 April 2017. The deadline for which is 30 September 2018. RTC affects liabilities to Income Tax, Capital Gains Tax and Inheritance Tax.

For offshore tax liabilities up to 5 April 2017 that are not disclosed by this date UK taxpayers will face a ‘Failure to Correct’ penalty, which will result in a tougher set of penalties of up to 200% of the undisclosed tax liability, with a minimum penalty of 100%.   There can also be an additional penalty based on the value of the assets connected to the failure to correct.

More countries are signing up to Automatic Exchange of Information Agreements including the Common Reporting Standards (CRS). By 30 September 2018, when more than 100 countries will be able to exchange data on financial accounts by way of CRS, HMRC will be receiving direct from other countries much more information in respect of previously undisclosed financial accounts.

A correction of undisclosed tax liabilities can be made in a variety of ways including using HMRC’s digital disclosure service and submitting the outstanding tax returns.

For further information on RTC please contact your usual Partner or our Tax Partner, Kevin Hancock.

Leadership Skills

The best business managers and leaders create a vision of the future that is compelling and motivates employees to want to achieve it. Great business leaders help the members of their team to connect what they do with the business’s overall strategy and its impact on customers.

Communication and Relationships

Communication is an essential leadership skill for any business manager. It is important to communicate with your people often and in a variety of different ways. Whether one-to-one conversations, team meetings, email or phone calls, communication is key.

Regular communication helps to build relationships across the business and also helps to build trust. As a manager, you should lead by example and communicate regularly with your team members, management team, your customers, suppliers, others in the industry and the wider community.

The stronger the relationships you can build the better you will be able to lead people.

Integrity

In order to be a successful business leader you need to be honest, transparent and have a high degree of integrity. The key is to do what you say you are going to do. Some people might be happy to sit back and watch from the side-lines, but great leaders like to get involved in making things happen. In order to become a successful leader you need to persevere, drive your people forward and be accountable. If the buck stops with you, then own it.

Strategic problem solving

Ultimately, leaders are recruited, trained, and chosen to solve problems and to take advantage of new strategic opportunities in the market. This requires good analytical abilities and excellent people skills. At times it is necessary to focus on being tactical; however the best leaders maintain a strategic outlook and don’t lose sight of the bigger picture.

Innovation

In order to succeed in business it is important to focus on innovation.

If you stand still, your competitors will overtake you. Innovation can take many forms – perhaps you wish to focus on hiring people with a different skill-set or you want to utilise technology in order to drive efficiency across the business. The best business leaders are innovative people who come up with new and better solutions to problems.

As a manager it is therefore important to continuously develop your technical and professional expertise, stay up to date on new trends in different markets and consider how new concepts can be adopted in order to improve your business.