Featured

New Core Hours and the Right to Disconnect

Working from home brings brilliant flexibility, and when deadlines are approaching, I am certainly guilty of burning the midnight oil. When EBM Accounting was in its pilot phase, it was around my main job and I was only available for clients out of hours. Since it became my main job in 2019, it has been more school-hours based. Of course, school hours went out the window in 2020. Since we all decamped to work from home or be furloughed (or worse) in March 2020, the line between work and home has become blurred for many.

Let’s be honest, this has been brewing for a while. In the late 1990s mobile phones really arrived (Nokia 3210 anyone?) and by 2003 the BlackBerry phone meant there was no escape from your emails either. At least Smartphones meant we could upgrade from Snake and FM radio. I’ve spoken before about Rest and Shorter, the books by Alex Soojung-Kim Pang which describe how habits like starting early, daily exercise and focussing in short bursts are more effective and sustainable than longer hours. I’m a huge fan of these ideas which can utilise the skills and ideas of more people who can’t or don’t want to work full time and improving work/life balance for everyone involved.

The Right to Disconnect has been in place in France for four years, and now the union Prospect is calling for similar laws in the UK. This gave us the nudge we needed to review our own working hours. So our core working hours will now be 9.30-14.30, and we will get back to our clients as soon as possible outside these hours.

Further Reading: Strategy and Rest – harness the power of rest Right to disconnect: ensuring a fair work-life balance | Prospect

Featured

What is Off-Payroll Working?

The accounting treatment formerly known as IR35.

Back in 1999, when the Millennium Bug was the issue of the day and Gordon Brown was the Chancellor, there was a huge rise in IT contractors hired on a project basis to address the concern that the lights would go out on 1 January 2000. At the time it was advantageous to set up as a limited company (often called a Personal Service Company or PSC) and invoice the customer for the project. This often resulted in a lower tax bill for the contractor and saved the customer the responsibilities of being an employer, including providing employment rights and paying employer’s national insurance. Everyone wins, except the Treasury.

Inland Revenue Press Release 35 (IR35) was born, but for many contractors it was still possible to contract through a PSC within the rules. A new plan was needed, and the much less catchy Off Payroll Working (OPW) rules were finally extended from the public sector to medium and large organisations in April 2021.

By this point the gig economy had well and truly arrived, with organisations utilising the “self-employed” to deliver to their customers, resulting in a lack of employment protection for workers and employment taxes for the Treasury. Cue some big legal cases (think taxis and food deliveries) which are still subject to appeal. If in doubt, assume you need to put people who work for you on the payroll, gov.uk has some good guidance here.    

In the intervening two decades there have been plenty of changes to Income and Corporation Taxes meaning the advantages of trading through a limited company have generally reduced. In preparation for OPW, organisations (Hirers) have broadly followed one of two approaches:

  1. Employ contractors directly, using fixed term contracts where there is a short-term need (e.g. projects and parental leave cover).
  2. OPW contractors are deemed employees, so are paid as employees for tax purposes but are legally not employees. Needless to say this results in some pretty wacky accounting. Umbrella companies (Intermediaries, sometimes also agencies) have stepped up to bridge the gap across these choppy waters, charging the Hirer for the contractors services and employing and paying the contractor. If you are considering crossing this bridge, do your research first.

Convoluted accounting and tax schemes aren’t our area of expertise. So here are our top tips:

  1. Use the gov.uk CEST Tool to Check Employment Status for Tax if you are a contractor or using contractors. Save the result in the event this is queried by HMRC.
  2. If you think you should be employed directly, ask if you can be taken on as a fixed-term contractor. If you feel pressured to sign up to legal and tax practices that you do not understand and/or feel comfortable with, be brave and walk away.
  3. If you are employed as a contractor, you can use the CEST Tool and request a Status Determination for Tax (it is the Hirer’s responsibility to issue). Deemed employees are not legal employees so ensure your rate reflects this and any additional time and costs needed to ensure you comply*. Get in touch with a specialist accountant, who is a member of a recognised Institute with professional indemnity insurance.

*Marginal tax rates are a whole other blog, but as a rule of thumb add 50% to your rate as a basic rate taxpayer, and 75% to your rate as a higher rate taxpayer to ensure you are not out of pocket for costs wholly and exclusively relating to your contract which you will not be reimbursed for.

e.g. £200 tax advice for a contract: £200 + 50% = add £300 (less 20% basic rate tax + 12% national insurance) = £204 net payment £200 + 75% = add £350 (less 40% basic rate tax + 2% national insurance) = £203 net payment

Further Reading

CEST https://www.gov.uk/guidance/check-employment-status-for-tax

ACAS https://www.acas.org.uk/checking-your-employment-rights

Employment Status https://www.gov.uk/employment-status

 

Ask Emily

Do I need to use accounting software to file my returns?

The short answer is probably not, at least at the moment. You can file self assessment tax returns, corporation tax, accounts and run payroll with free HMRC software, you can even send paper returns for self assessment if you prefer it (watch out for the earlier deadline though). There is a wealth of information available on the government website, including HMRC manuals for specific taxes. It’s in the government’s interest to make it as easy and accessible as possible to follow the rules and pay anything you owe.

The big exception is Making Tax Digital VAT which started in April 2019. If your business is over the VAT threshold of £85,000, you need to use MTD software to file, and there’s no free HMRC software to help you do it. There is low-cost bridging software though, which can convert your records from Excel.

VAT was the first on a roadmap of taxes the government plans to digitise, next in line are smaller VAT-registered businesses, income tax and corporation tax. From April 2020, capital gains from UK Residential Property need to be reported and paid within 30 days, and this is reported through the government’s digital service.

Coronavirus Schemes

The government has responded to Coronavirus with a raft of schemes in recent weeks to support businesses, employees and the self employed. The guidance is changing all the time so check the gov.uk website for the latest advice or give us a call to talk through. Here are some key Furlough Facts

Self Employed

You should be contacted directly by HMRC and paid in June, check the link to see what you’re eligible for. As it’s going to through automatically, current guidance suggests you shouldn’t need your accountant to do anything.

https://www.gov.uk/government/news/chancellor-gives-support-to-millions-of-self-employed-individuals

Employers

Need to continue to process payroll for furloughed staff, the online portal through which the claims will be processed is due to go live at the end of April. Furloughed staff can’t continue to work for the business, check the link for details.

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

VAT & Self Assesment

VAT returns are due as normal but payments due between 20 March 2020 and 30 June 2020 are automatically deferred until 31 March 2021. Self assessment payments due on 31 July 2020 are also deferred until 31 March 2021. You don’t need to contact HMRC, remember to cancel your direct debit.

https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19

ICAEW Hub

Please see below more general advice (regularly updated by ICAEW), including grants and loans available:

https://www.icaew.com/insights/coronavirus