Top 10 study tips

International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

Studying for an exam can at times prove stressful and challenging. However, by putting in the hard work and dedicating time to preparing for your exams, you can soon be on the way to achieving high grades.

Government wants overhaul of student loans repayment system

International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

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’

International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

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

International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

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

International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

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

International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

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