Real Time Information - Coming, Ready or Not

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Real Time Information - Coming, Ready or Not

February 12, 2013 2013

For those employers who have had their heads "in the sand" for the last year or so about Real Time Information (RTI), this is really last chance saloon to get your house in order before RTI starts in, what, 53 days from now - that's less than 2 months for those without calculators ! Wink

HMRC confirmed yesterday that final letters are being sent out to the majority of employers starting from this week. This letter will confirm when each employer will be "invited" to start operating RTI for real. This is a non-refusal type of invitation though ! There is still some confusion about when the actual go-live date is so just to clarify, these letters will state that 6 April 2013 is the go-live date for the vast majority of employers. It is only the largest of companies (typically those with more than 5,000 employees) that will have a later starting date.

As part of this announcement, HMRC highlighted a "Business Readiness Checklist" for RTI. It doesn't seem to be a very useful checklist in our view but here's a link to it for those wanting a look.

We don't know of any clients or contacts who have received a letter at the time of writing this blog but we expect the letter to remind all employers of the need to do a Payroll Alignment the first time an RTI submission is made which is basically a match up of employee data held by the employer with HMRC's own records.

There should also be a reminder that certain businesses, typically those with more than 250 employees, will have to do an extra step in the process called an Employer Alignment Submission (EAS) shortly after receipt of HMRC's letter.

So, for some employers, RTI could start for real as early as next week with the EAS. Yell

Anybody who STILL needs to prepare for RTI needs to get a grip before it all goes horribly wrong for them.

Obviously we would more than happy to help anyone out in this situation so please don't be scared to pick up the phone. One warning though, ANY employer coming to us for help a few days before 6 April will be charged MUCH higher fees than normal - for leaving it so late and for giving us extra stress !! You have been warned....

PAYE penalties, CIS gross status, CIS deductions and RTI

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PAYE penalties, CIS gross status, CIS deductions and RTI

January 31, 2013 2013

We share some important messages to come from a batch of First Tier Tax Tribunal judgements to be published in the last couple of weeks from an employment tax perspective. Oh, and there's also a little bit on RTI at the end of this blog - needs must !!

First off is another very clear message (as if we actually needed it) that a lack of company funds is NOT a good enough reason to avoid PAYE penalties when making late payments of PAYE and National Insurance. Ten cases on this subject went through the FTT and all 10 went in favour of HMRC. What did the companies, and their accountants, expect ??

Next, in the case of East Midlands Contracting Limited v HMRC, there was another clear message that CIS contractors who regularly fail to keep up to date with tax payments (all taxes not just CIS and/or PAYE) will find it impossible to overturn HMRC's decision to withdraw gross payment status. The company in this case had absolutely not a leg to stand on.

Staying with CIS, a reminder in the case of Refit Shopfitting Services Ltd v HMRC that CIS deductions are due on all payments to subcontractors other than genuine materials. The contractor in this case had failed to make CIS deductions on travel and subsistence payments which was incorrect.

In Mr D V Thomas v HMRC, yet another reminder that it is absolutely critical with termination payment situations to ensure that a) the legal paperwork surrounding the terms of termination is complete and robust and b) that all parties have fully understood, and asked any questions that need asking, before parting company. The taxpayer lost his argument in this one as he failed to clarify things properly when he was "retired" by the employer.

Finally, RTI !!!! Just a gentle (okay maybe not so gentle) reminder that RTI is only 65 days away now !!!! Data, processes, software. We don't really need to say any more do we ??

Careful, careful when comparing fee quotes for tax advice

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Careful, careful when comparing fee quotes for tax advice

January 14, 2013 2013

A cautionary tale for companies in the market for tax advice based on a recent client experience.

It is perfectly normal for companies to obtain several quotes for tax advice when a specific project needs doing or they are just looking to appoint regular advisors. We all do it when shopping for other things both for personal and for business so no-one should have a problem with it really. In fact, we here at Optimum PAYE prefer prospective clients to obtain quotes and proposals from other firms, especially on larger PAYE related projects, as it gives us a perfect opportunity to demonstrate the value-for-money and expertise we can bring to the table which is, after all, what the whole firm is based on.

A client came to us recently and said that they were thinking of appointing a competitor for the project as there was not much of a difference in fees quoted and the competitor does other tax work for the client so it will probably just be "easier" sticking with them. Now, normally, we would be extremely disappointed to lose out on any project on fee charges alone, as we take huge pride in the fact that our fee rates are always better than the big boys. However, in this case we were not only disappointed but also bamboozled - this was a very large firm (not quite Big 4 but not far off), based in Central London who were saying that they were competing with Optimum PAYE on price despite us building in a generous first-time discount and NOT charging rates in line with London rates but keeping to the "Regional" scale (which is normally hugely different). And this from a firm who have always been 25-50% more expensive than us in the past. It didn't add up!!

There are only two likely scenarios to this other firm's fee quote:

1) They are "low-balling" i.e. taking a loss on the initial fee to get their foot in the door. This doesn't make sense though - big London firms don't tend to have to do this as there is more than enough work around without having to compromise to get it and also this firm was already "in" with the client across other taxes. Also, they would be taking a heck of a loss compared to what we know they would normally charge.

2) The fee quotes are not on a like-for-like basis i.e. one (their quote) does not cover as much ground as the other (ours).

 

It is point number 2 that is important here to consider. If one quote is cheaper than the other but does not cover as much scope, is this really meeting the client's needs? Sometimes, a reduced scope is appropriate, e.g. if the client has already done some work in pulling together base data or if internal resources have already done some technical analysis. However, for larger projects, cutting corners could be a disastrous move for the client in the long run whether this is relating to PAYE tax compliance or implementing some new tax efficient scheme.

What we said to this particular client, and the message we are saying here is this:

Check that the fee quotes you have obtained are on a like-for-like basis. If one quote is better value, ask yourself why is that ? Is the scope similar ? If one is clearly not as comprehensive as the other, why is that ? Is it clear why the scope is different or is the reduced scope vague ? Is the scope reduced only so that they can be competitive on fees, i.e. not actually thinking about the company's needs at all ? What does the company actually need to get the right tax advice and make whatever it is that needs doing completely robust ? Which scope and fee quote "feels" right ? Is one too good to be true (it usually works out that way) ?

Clearly cost is a very important factor when selecting tax advisors as it is in other purchasing decisions. But don't be blinded by figures. If you are truly comparing similar quotes then fine but make sure you know what you are comparing before making any decisions that could have a big impact on your business if you make the wrong choice.

Thankfully, we don't come across such a situation too often but we thought this was worth sharing.

 

** UPDATE ** The client in question that prompted this blog post did come back in the end to confirm the work with Optimum PAYE. Whether this was because the big firm's fee quote didn't stand up to scrutiny we will never know but we are just pleased the client made the right decision eventually. Smile

New Year PAYE Hangovers, Detoxing, Resolutions and Looking Forward

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New Year PAYE Hangovers, Detoxing, Resolutions and Looking Forward

January 08, 2013 2013

Well, that's us into another year and let's hope that 2013 brings us all good health, wealth and happiness. Smile

New Year is often a time for reflection, re-energising and renewed optimism and so let's think about this from an employer point of view with the theme, as always, on PAYE related matters.

Hangovers

No matter how much fun and non-work thinking went on over the last couple of weeks, some things are, unfortunately, still here when we all get back into work mode. The main things hanging over from last year include:

RTI - there is no hangover cure for this one, it is simply not going to go away

Child Benefit clawback - another one that is here to stay. Employers will be faced with many questions from staff over the coming months, and possibly HMRC when tax return season starts, not to mention all the coding adjustments needed. It could end up being very messy indeed!

IR35 and employment status - two areas that HMRC are threatening a lot and will continue to dominate many an employer's thoughts for some time yet

Detoxing

January is a perfect month to get back into shape. Or at least to start getting back into shape - it may take some longer than others to get there !

Some examples of where employers can start to improve their PAYE "health" include:

Getting their payroll and HR data "RTI ready" ASAP - RTI is less than 3 months away now Surprised !!!

Getting a PAYE Settlement Agreement for taxable employee benefits and payments in place even if it is "just in case"

Reviewing the P11D Dispensation and seeking an updated agreement from HMRC well before 5 April if necessary as it may be possible to backdate this to 6 April last year which could remove some risks when preparing P11Ds.

Resolutions

Many would argue that New Year Resolutions are a waste of time as most are broken before January is out. Humour us though !

Here's our 2013 suggestions for many employers out there:

We will not ignore PAYE compliance this year

We will try and seek advice on PAYE matters before we go ahead and do something silly or "clever". Or, if that's not possible, we will at least seek advice reasonably quickly after the event and not just when HMRC are "sniffing" about

We will not entertain any mad thoughts about swapping full-time employees into self employed workers

We will look at salary sacrifice again - and take notice what our advisors are telling us this year  e.g. not enough employees to make it worthwhile, it's a "no-brainer" for the pension scheme, getting HMRC approval, etc.

We will challenge our big-firm advisors the next time they send us a big fee invoice OR we will challenge our small-firm advisor when they take 5 days to provide us with an answer that may or may not be what we need. Following which we will give Optimum PAYE a call Laughing

Looking Forward

We are sure there will be many twists and turns on the PAYE side over the coming year and it is difficult to predict what may lie ahead for employers around this. Some areas that will possibly feature however are:

The OTS review of employee benefits and expenses and also termination payments with a view to simplifying these two tricky areas.Whether something actually happens around this once the review has been done remains to be seen though.

The debate around car mileage v car allowance payments as per the recent Total People tax case. We are still up in the air as to what is happening around this particular case and similar appeals but it is such a huge issue that more may be expected soon.

More late PAYE penalty charges. Recent cases reported through the Tribunals show that HMRC are winning most of the "reasonable excuse" cases just now and so we expect this to continue this year.

Complete merger of income tax and NI legislation - we are only kidding with this last one !!! It is on our (and everyone else's) wish-list but it ain't going to happen in 2013 that we can be sure of !! Maybe next year...or the next..or the next ???!


All the best for now....

At a glance: PAYE related bits from Autumn Statement 2012

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At a glance: PAYE related bits from Autumn Statement 2012

December 05, 2012 2012

We won't bore you with all the detail but here's a very quick overview of the main points we have noted from the various statements to be published following the Chancellor's Autumn Statement speech a couple of hours ago that will impact employers and employees:

No further action on Controlling Persons proposals

We have long said that new legislation is not needed as Office Holders are already covered by PAYE legislation.

Existing IR35 legislation will be tightened to ensure there is no ambiguity around Office Holders. This is a much simpler way to tackle the problem we believe than the Controlling Persons proposals that have now been scrapped.

Review into employee benefits and expenses and termination payments

The Office of Tax Simplification will be looking at these areas in due course to identify areas that could be made easier for all concerned.

That's us out of a job then ?! Only joking, the complexity in these areas is not going to go away any time soon.

Restriction in pension tax relief for the highest earners

No surprises here in that the Lifetime Allowance and Annual Allowance will be reduced in 2014/15 to £1.25m and £40,000 respectively.

Review of arrangements involving Offshore Employment Intermediaries

Again, no surprise this one. HMRC has made no secret of the fact that they are going after "dodgy" schemes that avoid tax or NIC on UK employment income.

There you have it. There's really no need to spout (loose link here to our picture of a Brussel SpRout !!!!) a thousand words or more on this. If you do need more information however on any of the above, you know where we are.

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