Government wants overhaul of student loans repayment system

The new government has promised to introduce an online service designed to prevent overpayments at the end of the student loan term.

The move comes after it was discovered that £300m was overpaid in student loans in the nine-year period from  2009-10 and 2017-18. More than 510,000 students continued to have deductions made even after they had paid off their loan, and while most of the overpayments were paid back, £28.5m remains unclaimed.

The new online service is set to go live this year and will allow graduates to access up-to-date information about their student loan balance.

The system will largely replace annual paper statements – although those who prefer the existing paper statements will still be able to receive them.

From April 2020, graduates will only need to start paying back their loans once they earn £26,575 – a third consecutive annual increase in the repayment threshold.

To stop students over-repaying their loans altogether, the government is also calling on graduates to switch to direct debit towards the end of their loan, rather than continue with automatic deductions from their salary.

Universities minister Chris Skidmore said: “The government is investing in the student loans system to make it as simple and easy for people to use as possible. I urge all graduates to use this new service and to join the direct debit scheme as they approach the end of their loan to ensure a smooth end and not repay more than they should.”

Review of contractor rules ‘must pave way for IR35 delay’

The Treasury’s recent announcement of a review into off-payroll tax rules (IR 35) is a great opportunity to reassess the ‘flawed’ legislation, according to the Federation of Small Businesses (FSB).

Responding to the government’s launch of its IR35 review, FSB National Chairman Mike Cherry said: “This important review presents an opportunity to reassess our flawed off-payroll legislation. We’ve already heard big corporations say they’ll pull the plug on contractors if planned changes to IR35 go ahead in April.

“We have to remember that we’re in a global competition for talent. We need to make the UK a better, not more restrictive, place to do business. At a time when skilled, flexible contractors are needed more than ever by employers, the switch in where responsibility lies for IR35 assessments will cause firms to shut out contractors.

“The official announcement of a manifesto commitment to review support for the self-employed is very welcome. We look forward to working with the Treasury to ensure that sole traders have access to the finance, connectivity and protections they need to thrive.”

Fifth MLD passed onto statute books

The EU’s Fifth Anti-Money Laundering Directive (5AMLD) came into effect on Friday 10 January 2020. Building on regulations brought in by 4AMLD in June 2017, the new legislation designed to better tackle the threats of money laundering and counter terrorist financing (CTF). Included in its scope are:

  • Stricter conditions for the issuing of e-money and prepaid cards.
  • A clampdown on virtual currency, bringing cryptocurrencies into scope for the first time.
  • Registers of ultimate beneficial ownership to be made publicly accessible.
  • Increased due diligence for individuals and businesses in high-risk countries.
  • New rules around electronic verification and customer due diligence.

Prepaid cards

5AMLD sets a lower limit monthly transaction limit for anonymous prepaid cards of €150 – previously is was €250. This means that firms will be required to carry out identity checks on customers using prepaid cards funded with more than €150. Anonymous remote or online transaction limits are reduced to €50.

Prepaid cards issued outside the EU are now prohibited unless they were issued in a territory enforcing legislation equivalent to the EU’s AML/CFT and ‘know your customer’ (KYC) standards. Obliged entities must review the way they handle prepaid card payments and put mechanisms in place to identify (and refuse) transactions using cards from non-EU sources.

Cryptocurrencies

The new legislation means providers of cryptocurrency exchanges must now register with the relevant financial authorities in their country of origin locations. This means they now face the same AML/CTF regulations as other financial institutions that already have to comply with 4AMLD. This means cryptocurrency exchanges will now have to perform customer due diligence and submit suspicious activity reports (SARS). Financial Intelligence Units now have the authority to obtain the addresses and identities of owners of virtual currency and, in so doing, to tackle the anonymity associated with the use of cryptocurrency

Beneficial ownership

4AMLD introduced a focus on ‘ultimate beneficial ownership’ (UBO) for tackling money laundering. 5AMLD tightens up these rules, and UBO lists must be made public by June 2021. Also, trusts (or any similar arrangement) must observe beneficial ownership regulations, and UBO national registers must be inter-connected at an EU level in order to facilitate the exchange of information between member states.

Increased due diligence

Companies that do business with customers from high-risk countries outside of the EU are, under 5AMLD, required to perform enhanced due diligence measures focusing on addressing the deficiencies in those countries’ AML protections and the money laundering risks they present. This means that firms must report transaction details with high-risk third countries to senior management and obtain approval prior to establishing or continuing those business relationships.

Electronic verification

The rules on the acceptable use of electronic verification methods in confirming a customer’s identity have been relaxed; firms can use this method as their sole basis of client verification, without the need for passports, driving licences and utility bills.

This means all financial services firms, solicitors, accountants, estate agents and now also letting agents not currently using electronic verification need to re-evaluate their you’re your customer procedures.

Nicola Sharp of business crime solicitors Rahman Ravelli said that those working in financial services will have to meet new requirements as 5AMLD targets areas that have so far not felt the force of previous directives.

She said: “Such obligations, it must be said, are not mere bureaucracy. Failing to meet the requirements of 5AMLD can mean fines up to a maximum of €5 million or 10% of annual turnover. When the resulting negative publicity is considered, along with the fact that individuals can be banned from running a regulated business and an organisation can be prevented from trading, the consequences of failing to meet 5AMLD’s requirements cannot be ignored.”

HMRC winding up petitions hit four-year high

More businesses were forced by HMRC to liquidate in the 12 months to September than at any point over the past four years, business advisory group Moore has revealed.

A total of 4,308 businesses were wound up last year following HMRC intervention. This was up 6% on the previous year to September, when 4,073 companies were forced to liquidate.

Any creditor of a business can apply to the courts for a winding-up petition if a sum of just £750 has been left unpaid for longer than three weeks. A winding-up order allows HMRC to liquidate the company and start the process of paying off creditors. HMRC is typically responsible for the majority of winding-up petitions although other businesses that are owed cash can also file an application.

Lucienne Parry, a partner at Moore, said: “Once a winding-up order has been made by the court, there is little that can be done by the business to prevent liquidation, unless you can pay the tax bill. Banks also tend to freeze the company’s bank account during this process, putting a stop to all trading.

“It’s unfortunate timing that, just as the economy struggles, HMRC gets tougher in its debt collection processes and tries to close down more businesses.”

“Everyone appreciates that it is one of HMRC’s jobs to collect any tax owed, but shutting down your debtors and undertaking a fire sale of their assets is only a short-term fix. It is not normally the way to maximise your collections for the long term.”

A spokesman for HMRC said: “We only initiate winding-up action as a last resort, where we believe this is the best way to protect both the interests of other taxpayers and creditors.”

“Anyone who anticipates payment problems should call us as early as possible as we have an excellent track record for supporting those with genuine problems.”

From April, HMRC will be a secondary preferential creditor, and this will likely increase winding-up petitions.

Pull the other one, says HMRC

HMRC has published a list of its ‘favourite’ bizarre excuses for not filing a tax following the 31 January Self Assessment deadline.

“To wrap up the decade and with two weeks to the deadline, HMRC has highlighted 10 of the most weird and wonderful ones we have received from customers who missed the deadline over the last ten years,” a spokesman said.

Its most bizarre excuses and questionable expenses claims for items, in reverse order, are:

  1. Caravan rental for the Easter weekend.
  2. I was up a mountain in Wales, and couldn’t find a post box or get an internet signal.
  3. My dog ate the post… again.
  4. Claiming £4.50 for sausage and chips meal expenses for 250 days.
  5. My hamster ate my post.
  6. I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land.
  7. A music subscription so I can listen to music while I work.
  8. Pet food for a Shih Tzu ‘guard dog’.
  9. A DJ was too busy with a party lifestyle, spinning the decks… in a bowls club.
  10. My mother-in-law is a witch and put a curse on me.

All the excuses and expenses listed above were, not surprisingly, unsuccessful.

Angela MacDonald, HMRC Director General of Customer Services, said: “Each year, we try to make it as easy and simple as possible for our customers to complete their tax returns and the majority make the effort to do theirs right and on time. But, we still come across some unusual excuses and expenses which range from problems with a mother-in-law to yachts set on fire.

“We always offer help to those who have a genuine excuse for not submitting their return on time. It is unfair to the majority of honest taxpayers when others make bogus claims.

“If you think you might miss the 31 January deadline, get in touch with us now – the earlier we’re contacted, the more we can help.”

Number of firms wound up by the taxman hits four-year high

More UK companies were forced into liquidation in the 12 months to September than at any time over the past four years, business advisory group Moore has revealed.

Some 4,308 businesses were wound up last year following HMRC intervention. This was an increase of 6% on the previous 12-month period when 4,073 companies were forced out of business.

Any creditor of a business can apply to the courts for a winding-up petition if a sum of £750 has been left unpaid for longer than three weeks. A winding-up order allows HMRC to liquidate the company and pay off creditors. HMRC is responsible for most winding-up petitions although other businesses that are owed cash can also file an application.

Lucienne Parry, a partner at Moore (formerly Moore Stephens), said: “Once a winding-up order has been made by the court, there is little that can be done by the business to prevent liquidation, unless you can pay the tax bill. Banks also tend to freeze the company’s bank account during this process, putting a stop to all trading.”

A spokesman for HMRC said: “We only initiate winding-up action as a last resort, where we believe this is the best way to protect both the interests of other taxpayers and creditors.

“Anyone who anticipates payment problems should call us as early as possible as we have an excellent track record for supporting those with genuine problems.”

New guidance on mobile phone taxation

International Association of Bookkeepers

HMRC has issued new guidance on the tax rules relating to employees’ mobile phones.

The ‘Guidance: Company mobile phones (480: Chapter 22)How to tax company mobile phones given to employees’ starts by explaining that there’s no charge to tax on a mobile phone given to an employee, or on any line rental or the cost of any private calls for that phone paid for by the employer, as long as these cannot be converted into money by the employee. Further, two connections to one number is deemed to be one phone, but two connections to two mobile phones is two phones.

Tax charges arise where a phone is given to a relative of an employee, or a member of the employee’s household, whether or not the employee has a company phone. Although, if the relative or household member is also an employee of that employer, then all bets are off and there’s no cross-taxation. Similarly, money paid by an employer to reimburse an employee for use of the employee’s own phone is taxable. No mention is given of that most heinous of crimes – that’s from a tax advisor’s viewpoint, not HMRC’s – an employer settling an employee’s mobile phone contract charge directly. Not only is a tax charge visited on the employee, but Employee’s NI also arises, maximising the tax payable.

However, should an employer decide to give an employee two mobile phones, one for use exclusively or overwhelmingly for business and the other only for private use, then no tax charge will arise. Conversely, should an employer give an employee two phones, each for business and private usage, then one of them will be taxable, with the employer and employee agreeing which of them is chargeable.

The guidance tries to deal with ever-advancing technology by indicating a kind of primary purpose test. If a device is primarily designed for use as a phone, then whether or not it has other functionality, it’s a phone for these purposes. Equally, if your tablet has a sim card and calls can be made on it, it’s not primarily a phone and therefore it doesn’t qualify for tax treatment as a phone. As phones get larger and tablets get smaller, I look forward to a future tax tribunal decision on whether one is the other or not.

Finally, the guidance mentions optional remuneration arrangements, such as old-school salary sacrifice schemes, and advises that if a phone is obtained in this way, then the income tax exemptions don’t apply.

  • Thanks to UHY Hacker Young for this article

National living wage to rise by 6.2% in April

The national living wage will rise by 6.2% to £8.72 in 2020, the biggest increase since its introduction in April 2016.

The government has estimated that almost three million UK workers will receive increases to their pay as a result of the increase, which will come into effect on 1 April 2020, and will result in an annual rise of £930. The new rates were recommended by the Low Pay Commission, an independent body that advises government on the national living wage and national minimum wage.

The national minimum wage is also set to increase across all age groups. This will see rises of:

  • 6.5% for those aged between 21 and 24 (to £8.72, up from £8.21)
  • 4.9% for 18 to 20 year-olds (to £8.20 from £7.70)
  • 4.6% increase for under 18s (to £6.45 from £6.15)
  • 6.4% for apprentices (to £4.15 from £3.90)

Micro-businesses work for 10 weeks a year on finances

UK micro-businesses spend 10 weeks of the year working on financial admin, according to a new report from digital bank Starling.

The report, Make Business Simple, shines a light on the practices of the UK’s 5.6 million micro-firms, which make up 96% of the business population, and encourage them to embrace new ways of cutting down time spent on financial admin.

By studying more than 1,000 UK micro-businesses, Starling found that the average firm clocks up 79 hours of labour each week, of which 15 are spent on finance admin tasks – a considerable 19% of total time, equating to just under 10 weeks of the working year. The research also found that the smallest firms are disproportionately impacted by this kind of work, with sole traders spending almost a third (31%) of their labour time on financial admin work, and companies with one to four employees devoting a quarter (25%) of their time to this area.

Micro-businesses in the study recognised this as an issue, with more than quarter (27%) stating that they spend too much time on financial admin, rising to almost half (46%) among firms with 5-9 workers. When asked what effect is has on the rest of the business, one in 10 (10%) believed it hampers growth while a fifth of micro-firms (21%) say that if they could reduce time spent on finances, they would divert the labour towards sales.

The most time-consuming finance task is accounting, which takes micro-firms 1.7 hours each week, equating to more than one week a year spent solely on keeping the books. Accounting was also seen as the most stressful part of running a business and was more likely than any other task to eat into downtime, with a third (32%) of micro-firm leaders stating this is the case.

When asked what could save time in this department, one in five (19%) firms felt that being able to see and access all of their finances in one place could be the solution, while one in six (16%) recognised the potential benefit of having an accounting system integrated with their bank account.

Study reveals shocking workplace stress statistics

Some 10% of UK workers are considering switching jobs as a result of stress, a new survey has found.

The study, by office supplies retailer Cartridge People, found that more than one in 10 Brits are currently thinking of leaving their job due to stress and more than one in 10 women have actually left a job in the past year due to stress.

It’s been reported that over 15 million days are lost every year due to employees suffering from work-related stress. Additionally, over 500,000 people in the UK feel ill as a result of their level of work-related stress. There are a growing number of reasons why. In addition to internal factors within a business that have a history of causing stress levels to rise such as a difficult work environment or an unhelpful boss, the impact of external factors such as Brexit are now starting to become a cause of stress.

“Looking into the reasons we’re stressed at work, the main one that stands out is workload, with a staggering 53% of women and 43% of men attributing that with why they’re stressed in the workplace,” said John Flanagan, Managing Director at Cartridge People.

“We can all find implementing new systems in work a stressful experience and so it’s no surprise to see technology the next highest cause of stress. Some 18% of men said they were stressed out by technology in their office or workplace while 23% of women said this was what made their stress level rise. At an unprecedented time of political uncertainty, we asked those who took part in our study whether Brexit was a reason they were stressed in work. The amount of UK workers to say this was a cause of stress was 15%.”

It’s often said that going for a walk to ‘clear your head’ is a good coping mechanism and 39% admitted to having to go for a walk away from the office or workplace as a result of being stressed at least once a week. The number of those who need to relieve stress by going for a walk every day is 18%. In women, nearly a quarter said they’d go for a walk at least once a day (24%).

When those who took part in the study – which involved 1,066 people – were asked how often they visited social media websites (including Snapchat and WhatsApp) to counter feeling stressed, 20% said they would go online at least once a day. However, the statistics for the number of women visiting social media when stressed revealed that 30% would use social media daily to cope with stress and half of those would visit social media sites at least three times a day.

Neil Shah, from The Stress Management Society, said: “The first step to meaningful change is to effectively engage people, start by opening up a positive dialogue and to de-stigmatise the subject. Make it ‘ok to not be ok’, and that admitting that you are feeling mentally or emotionally compromised is not viewed as a sign of weakness – more a sign of strength by willing to ask for support.

“From an organisational perspective, establish a ‘wellbeing GPS’ approach. Just like a satnav you need clarity as to where you currently are on your wellbeing journey, have clarity regarding what success looks like (what does a wellbeing culture look like in your organisation?) and then creating a strategic approach to get you there. The journey starts by conducting a Wellbeing Insights Audit to establish what is the current cultural, commercial and risk management challenges to your organisation. It is imperative for employers to ensure that the wellbeing of their employees is being effectively measured and supported, with a clear people, culture and wellbeing strategy to guide it.”