MTD – Making Tax Digital

MTD – Making Tax Digital

You may have seen or heard about MTD. Certainly, it’s been advertised, advertised and advertised some more. I’m bored with seeing it in the press, hearing it on radio and even seeing adverts on primetime TV.

What is it?

  • It’s HMRC’s biggest change since self-assessment tax returns.
  • Some businesses have to supply data to HMRC digitally through dynamic data uploads.
  • It’s compulsory and started in April 2019.

What are Cogent doing about it?

  • Everything and nothing!
  • Everything – that has to be done for our clients to be compliant with the latest HMRC rules has been take care of.
  • Nothing – that any client has to do.

We are always up to date with regulations and try not to make a fuss and worry our clients.

So, when you hear colleagues taking about MTD or hear advertising, you can be confident and even a bit smug that Cogent has it in the bag.

Whatever IT is!!

Victor Korman
MD (managing director NOT made digital)
Cogent Accountants

Freelancers struggle to switch off while on holiday, according to new study

Around 43 per cent of freelancers said they have felt the need to hide holiday time from clients over fears that they may be considered unreliable, according to new data.

The study, conducted by HoneyBook, also found that 92 per cent of freelancers continue to work when they are on holiday.

Unsurprisingly, of those who work while they are meant to be off, 41 per cent admit to hiding their work from friends or a partner.

When asked, the majority of the 800 self-employed workers surveyed said they work on holiday because they felt that they had to.

During their time off, most male freelancers spent time indulging their hobbies, while women tended to use their time to take care of a child.

The trend of working during a vacation was more prevalent amongst older people (24 per cent) than amongst millennials (11 per cent) and Generation Z (9 per cent).

Self-employed workers get pay boost thanks to the minimum wage

New research has indicated that above-inflation increases in the national minimum wage (NMW) has helped to boost the pay of self-employed workers.

The Resolution Foundation has revealed that while self-employed people are not entitled to be paid the legal minimum wage, annual rises in statutory pay has had a direct impacton them.

When the NMW was introduced, some experts predicted that it would have a negative impact on employment, forcing more people into self-employment.

While there does appear to be a correlation between increases in the minimum wage and rising self-employment, it is not clear how the two are connected.

The report from the think tank said that self-employment has grown fastest in some higher-paying sectors like finance and publishing but has fallen in other lower-paying industries such as agriculture, care and sales occupations.

Nye Cominetti, Economic Analyst at the Resolution Foundation, said: “One of the fears about the introduction and ramping up of the minimum wage has been that it would push low-paid employees into self-employment, where they’d have fewer rights at work and no entitlement to a legal wage floor.

“But in fact, the minimum wage appears to have had more of an effect on the earnings of the self-employed than it has on driving up self-employment.

“Much like employee pay, self-employed earnings have grown fastest at the bottom since the introduction of the minimum wage 20 years ago.

“Today, the most common hourly pay rate for self-employed workers is the same level as the national living wage.

“With over a third of self-employed workers still in low pay last year, policymakers need to respond to the risks they face, including better statutory rights to help offset their highly volatile incomes, and more savings support.”

50-year-old message in a bottle washes up in Australia

A message in a bottle, thrown into the sea more than 50 years ago by a young British traveller, has washed up on the shores of Australia.

When 13-year-old Paul Gilmore threw his message over the side of a ship in 1969, little did he know that five decades later, nine-year-old Jyah Elliott would find it on Talia Beach in South Australia.

News of the find was shared by the boy’s mother, Carla Elliott, via Facebook in hopes of finding it’s author.

Paul Gilmore’s sister, Annie Crossland, eventually came forward but revealed that her brother was unavailable as he was once again at sea, this time enjoying a cruise in the Baltic.

It was revealed that the original message was dropped in the Indian Ocean during the family’s emigration to Australia in hopes of finding a new friend.

The letter gave the ship’s location as “1,000 miles east of Fremantle, Western Australia” the intended destination of the voyage and asked for the recipient to “Please Reply”.

He had sent six bottles from the TSS Fairstar, so others may one day wash up on another beach if they haven’t sunk to the bottom of the sea.

#StopTheOffPayrollTax Campaign Westminster Lobby Report – We Were There Because We Care!

A number of our Cogent team took time out from the office on Tuesday 9th July to visit the House of Commons and meet with their local MPs.

They had come to Westminster to join with dozens of freelance contractors on a Lobby Day for the STOP THE OFF-PAYROLL TAX Campaign ably organised by Contractor Calculator, a leading contractor website.

The new IR35 Off Payroll legislation is due to come into play in April 2020 and with draft legislation published by the Treasury on 11th July, it looks likely that there will be no change.

We and many industry commentators feel that MPs are not being given correct information by the Treasury/HMRC to be able to make a fair evaluation so we strongly support the STOP THE OFF-PAYROLL TAX Campaign. As the famous saying attributed to Edmund Burke says “the only thing necessary for the triumph of evil, is for good men to do nothing”.

This saying may seem extreme in relation to a tax, but we believe that whilst tax is accepted by all as necessary, a government must make taxation fair and not abuse this power. We were surprised that no other accountants came to Westminster to lobby for their clients’ interest. All our team have written to their MPs and encourage all of our clients to do so as well. A template letter to your MP can be found within our June Newswire.

Victor Korman, founder of Cogent, explained why they had come to Westminster: “At first sight, tax is not emotive. However, with this new tax, the Treasury and HMRC are determined to destroy this highly skilled and flexible workforce at a time when the UK can least afford to lose a resource that has helped UK business to be world leaders in IT and Engineering. This is something everyone should care about.

We can see how hasty tax decisions on Doctor’s pensions is hurting the NHS by creating longer waiting times for operations and major problems for GP practices. We are asking MPs to use their influence to ensure this is not another example of a hasty tax being brought in for short-term political gain that UK business will regret in the future.

We were very grateful to all the MPs for taking the time to come and see us and we trust that the genuine interest they took in this campaign will be shown in their influence in the Parliamentary process of this tax.”

Contractors begin preparation following publication of Government draft IR35 legislation

After much anticipation, the Government has now published it’s draft legislation for the off-payroll working (IR35) rules, which will be enforced in the private sector from 6 April 2020.

The latest policy document for the private sector shares a number of similarities with that already in force in the public sector.

However, it does introduce a few new changes of which contractors should be aware as they begin to prepare for the changes ahead.

Small businesses exemption

It was already known that the Government intended to introduce some form of exemption for small businesses, but this has now been confirmed in the draft legislation.

This will mean that contractors engaged by a company classed as ‘small’ in a tax year according to the Companies Act 2006 will need to continue operating IR35 as they currently do.

Contractors who are unsure of their client’s classification should ascertain with their client where the responsibility lies as early as possible.

Status Determination Statement’

The new legislation will introduce a new term for hiring organisations to provide IR35 decisions, referred to as a ‘status determination statement’ (SDS).

This statement must be provided by the client to contractors and must include both a decision and the reasoning behind the decision for including the contractor within the IR35 regime.

Where a client fails to do this, it will be seen as a failure by the client to fulfil their obligations, and thus the liability will sit with them until a suitable SDS is submitted to HM Revenue & Customs (HMRC).

This places the responsibility on the client to provide the IR35 determination as quickly as possible to both the contractor and HMRC.

Disagreement process

To reduce the number of client/contractor conflicts, the draft legislation has confirmed that under the rules, clients will have 45 days to consider and respond to any disagreements of a status decision with the reasoning behind their decision.

It is feared that this client-led process will essentially allow some employers to withhold their original decision with no further avenue for redress open to contractors – leading to a rise in employment ultimatums.

This differs drastically from the current system which allows a contractor to challenge the decision via HMRC or through an appeal heard at Alternative Dispute Resolution (ADR) and/or judge at a tribunal hearing.

Under the new client-led system, it will be down to clients with no previous IR35 experience and who may not be an impartial judge to make a decision, which offers little redress to contractors.

How you can prepare

Despite the best efforts of campaigners, including our team at Cogent, it seems likely that the IR35 legislation with go ahead in the form outlined above next year.

With this being the case, it is important that contractors take the following steps to help them prepare:

  • Discuss IR35 with your client – it is important that contractors open up a clear avenue of conversation with their client to see if they are aware of the new rules and how they intend to apply them next year.
  • Know your rights – Take time to learn about the various obligations your client faces and the rules that are in place to protect your work and self-employed status.
  • Build a portfolio of evidence – If you are concerned about a blanket approach to IR35 or you think you may have to challenge a determination in future then it might be worth collecting evidence for your current status so that it can correctly challenged at a later date

If you are struggling to get to grips with IR35 and would like to discuss your circumstance, why not speak to our team today.

Taxpayers’ bills delayed by payment on account errors

The Association of Taxation Technicians (ATT) has revealed that problems with HMRC’s IT systems earlier this year, relating to calculations for payment on account, mean that some taxpayers will not receive tax demands this month.

The glitches in the tax authority’s systems during the self-assessment tax return season also mean that calculations for payment on account on some returns may not be adjusted correctly.

It was apparently made clear at the time that HMRC’s systems had not processed payments on account for 2018/19 correctly. Unless affected taxpayers contacted HMRC to correct the position, they will not have received a demand in June or July for the second payment on account due by 31 July 2019.

Instead, those affected by this HMRC failure will need to pay their total 2018/19 self-assessment tax bill by the end of January 2020 and the ATT is advising them to set additional money aside to make sure their bill is covered.

Jon Stride, Co-Chair of the ATT’s technical steering group, said: “If a taxpayer does not make any payments on account during 2019, then their tax bill in January 2020 could be significantly larger than they are expecting and could come as quite a shock.

“Individuals who do not receive expected demands should either set aside the funds needed ready for next year or, if they wish, they can make a voluntary payment on account to HMRC of their July payment – and their January payment if that was also missed.”

The ATT has been told by HMRC that if no 2018/19 payments on account have been demanded, then the taxpayer will receive a demand from HMRC for the full amount of tax in January 2020.

Self-assessment taxpayers with annual tax demands of £1,000 or less, do not have to make payments on account, while those in the regime who have 80 per cent or more of their total annual tax collected at source, such as by PAYE, do not have to make payments on account either.

Forcing staff into the IR35 regime will lead to a loss of skilled workers, study suggests

New research has revealed that employers risk losing out on the skills and flexibility of contractors if they fail to give them the opportunity to continue operating outside the IR35 legislation.

The research carried out by Contractor Weekly found that 72 per cent of the 1200 independent workers surveyed would stop working on a particular project if their client attempted to force them under the IR35 regime.

The study follows the news that HSBC, M&G Investments and Morgan Stanley are all preparing to stop working with contractors who operate outside of IR35 or who set up alternative engagement models which would mean these businesses do not need to administer the rules.

Although it is unclear of the exact policy, the research suggests that many operators may refuse to work for companies that enforce an ultimatum on IR35.

As an alternative, 18 per cent said they would continue working on a specific project but only through an umbrella company. Incredibly only 10 per cent said they would be happy to accept any offer to go PAYE and become an employee.

Along with the fact that 91 per cent of independent professionals said they take particular pride in working this way, that very few of these workers have the intention of entering employment is something that private sector firms must take into account.

Medieval ‘lost’ chess piece sells for £735,000

Have you always suspected that the ancient tea cosy you inherited from your great grandmother could be worth thousands?

Well for one family, this odd scenario became reality when a chess piece stored in a draw turned out to be worth nearly three-quarters of a million pounds.

The unassuming chess piece was bought for £5 in 1964 by an antiques dealer and had passed down through the family.

They had no idea about it’s special significance until they took it to Sotheby’s auction house to be valued.

To their utter amazement the warder – equivalent to a rook on a modern chessboard – was discovered to be part of a set known as the Lewis Chessmen that was made from walrus ivory in the late 12th or early 13th century.

Having looked after it for more than 50 years, the antiques dealer’s family were “quite amazed” by it’s value and decided to put it up for auction where it achieved a price of £735,000.

The Lewis Chessmen was discovered on the Isle of Lewis in the Outer Hebrides in 1831, only 93 pieces were found and it was unknown where the remainder of the set lay.

It is thought that the pieces may have been buried by a merchant to avoid taxes after being shipwrecked.

Stop The Off-Payroll Tax: MP lobby day at Westminster on Tuesday 9th July – see details below

We will be there – We hope you will join us – Together we can make a difference

The Stop the Off-Payroll Tax is taking it’s message to Westminster on Tuesday 9th July and is calling on contractors and campaign supporters to join them at the event.

It is calling on workers within the sector to meet them at Westminster at 2.15pm and is asking them to contact their MP and inviting them to attend.

If you don’t know who your MP is or need their email, you can locate your MP here.

The leaders of the campaign are also calling on contractors to ask for meetings with their MPs as well as asking them to meet you in Westminster.

If you can’t join us or meet with your MP, the campaign is also looking for people to write to their MPs and put pressure on them to take action. To help you, you can find an email template here.

We want to see more MPs understanding this issue and showing their support, so if you haven’t already done so, please ask your MP to sign Early Day Motion 2379 opposing the Off-Payroll Tax. The EDM is here so please lobby your MP.

The campaign is hoping to collect a dossier of responses from MPs and has asked that those taking to email

Industry members, including our team at Cogent, have made representations to HMRC via the campaign, which aims to prevent the new rules for the private sector going ahead next year.

It is asking for a review of the current legislation, in order to work out how to recognise contracting fairly within the tax system.

A summary of all the responses to the HMRC’s consultation ‘Off-Payroll working rules from April 2020’, which are very critical of the ill-considered plans, can be found here.

As an industry likely to be severely impacted by these changes, now is the last time to have your say, so why not take part in this campaign to apply pressure on the Government.