Accounting Standards compliant to EU standards.
There are some ironies. The Accountancy profession spent three years aligning its presentation of Corporate Accounts with the EU’s preferences, and the profession continues to operate with these new standards. Should the UK leave the EU, will those standards remain as they are or be tinkered with again? Who knows?
Making Tax Digital [MTD] – A good idea from Sweden?
During the past couple of years, the profession has also been preoccupied with preparing for Making Tax Digital [MTD].
MTD for VAT
Her Majesty’s Revenue & Customs [HMRC] took the soft option and applied MTD to VAT in the first instance, making it mandatory it only for those who, as at 1st April 2019 exceeded the registration threshold for VAT, the current threshold being £85,000. Those already registered, but below the threshold, could opt in rather than wait for the mandatory date, yet to be resolved.
MTD for Income Tax
Now the message is changing as the profession and the business community await the timeline to introduce MTD for income tax. When MTD for Income Tax is up and running, not only will accounts be filed quarterly; but income tax and national insurance contributions (NIC) will have to be paid quarterly too.
Those catered for by PAYE.
For those whose earnings are derived from wages or salaries through the PAYE system, MTD for Income Tax is already taken care of, as are pension contributions, where employees have opted in. I will return to this later.
The PAYE system now operates, so called Real Time Information [RTI]. This means that when employers run their payrolls weekly, fortnightly, monthly, etc the information immediately is lodged with HMRC and the net taxes, national insurance contributions and pension contributions paid over pretty smartly thereafter. Or, they should be!
Self-employed dilemma and impending burden.
For self-employed individuals, whether sole traders or in a partnership, there will be a need to identify and buy MTD compliant software in order to produce acceptable accounting information for HMRC. This is whether the trader does it or whether it is given to their accountants. Bearing in mind a significant number of self-employed people do not retain an accountant.
On behalf of our clients, we will be considering the options soon and will send advice out both by email and on the website. This will be generic information; but individual advice will then be given, as the need arises.
Pensions – Auto-enrolment – Nest and others - Pension late payments and Shortfalls
Those in employment will, by now, have opted in or out of an employer’s pension scheme. Many employers opted for the Government scheme because it is backed and under-written by the Government and because it was simple for both employers and employees to grasp and understand, in order to make the choice of opting in or out.
For those who have opted-in, the administration is under the control of HMRC’s RTI PAYE scheme and is administered in the business where they work. Employers can be prone to cash flow problems, however, and may find paying over Income tax and National insurance contributions [PAYE] difficult at times. The employee will not usually be aware of this, unless the business fails.
Under auto-enrolment, however, and certainly with the Government’s NEST pension scheme, employees receive default letters from NEST as soon as the employer is late in making over both the business’s and the employee’s contributions. This is a clear sign that either the employer’s administration is poor or, more worryingly, that they are in financial difficulties. Maybe both, they often go hand in glove. Watch out for these notices and act immediately. Employees need to let their employer know that they know contributions have not been paid.