If, like me, you follow Scottish football with the same enthusiasm a hamster has for tank warfare   – you may have missed the tax debacle north of the border. Before I go into what it all actually means – a word of warning. You can be pretty sure Rangers FC are not the only professional football club in the UK to have set one of these up. It could be your club next – so best be careful what you smirk at.

The history of the whole case is quite simple. About 11 years ago, the Rangers FC board of directors decided to have a scheme setup, whereby they could pay some Directors/footballers via an employee based trust. I say some – in reality we are talking about nearly all of them. The way this works is not unusual and there are many instances where the scheme is fine and being operated within understood tax limits. Basically, Rangers FC transferred money to the trust (so the money is no longer owned by Ranges FC) and the trust then “loans” it to the playing staff or Director. As the loan is repayable, the person concerned is taxed only on the notional interest the loan may have attracted. For example – you could be “loaned” £100,000 from the trust and only pay tax on the £2500 interest the loan could have earned.

So far – you are probably reading this thinking – “What a scam!! Why aren’t we all doing it??”. Well, there is a problem. The system only works if there is no contractual obligation to make a loan. The moment you have what is essentially a contract of employment, telling you to request a loan for appearance money – it is no longer really a loan. At that point it should be classed as part of your employed duties.

And that – ladies and gentlemen – is what the HMRC case is all about. HMRC argument will be the loans were made as a part of the individuals normal daily work and not as some sort of entrepreneurs investment scheme.

Another point to remember. The trust has been making “loans” to the individuals concerned. Who is to say the trust will not recall the loans now HMRC have come sniffing around for their due and proper??

The far-reaching consequences of this case are huge. HMRC are effectively looking for upwards of £25,000,000 in unpaid tax and national insurance. If HMRC prove their  case to the tribunal, they could require Rangers FC to pay the missing tax before any appeal is made. That would almost certainly lead to Rangers FC going into administration. My guess is Rangers FC are only the start of something bigger. It seems unlikely that Rangers FC are the only professional club in the UK to use an EBT for their football stars and Directors. In all seriousness – if the case goes the way of HMRC, we could see quite a different football landscape in 10 years time.

Matthew Durrant

Any business in the UK with a turnover of more than £73,000 must be registered for VAT. This means adding on 20% VAT to your normal sales invoice and paying the 20% VAT over to the VAT office. However, there is a scheme called “The Flat Rate Scheme” for VAT that was designed by HMRC to make life easier and smoother for small business. It is available for any VAT registered business in the UK with a turnover less than £150,000 per annum and simplifies your quarterly VAT return. You pay over a fixed percentage of your total sales invoices, rather than the 20%. On the flip side – you don’t claim input VAT, but this is taken into account when calculating the flat rate percentage. Have a look at the calculation below for a comprehensive example of how the VAT flat rate scheme works. If you would like a 3rd party check of this information, please visit the HMRC VAT Flat Rate Schemewebsite.

How is the VAT Flat Rate Scheme Calculated?

Once you have become VAT registered, you will be required to file a VAT return every three months. These days the VAT return must be filed online and it is also prudent to ensure you have a direct debit setup for the VAT office. Let’s have a look at how the VAT you pay will be calculated. For this example, we are going to assume you have raised only a single invoice in the quarter and it is for £10,000 + VAT.

Your invoice has a net value of £10,000 +VAT  £2,000

Gives you a total gross invoice value of £12,000

Let’s assume you are a management consultant and this is your first year of being VAT registered. You can see from our Rates guide below – you have a flat rate % of 14%. As this is your first year – you receive a 1% discount! So your flat rate % is going to be 13%

The calculation will be as follows.

£12,000 x 13% = £1560

You have probably by now already spotted that your client will have paid you £2,000 in VAT, but you will only pay over £1560 to the VAT office. Under the Vat flat rate scheme, the balance (in this case £440) is profit for your business.

VAT Flat Rate Scheme Rates

Have a look at the rates page for an activity that best describes your business and feel free to contact us for any further information. To find out the correct % for the VAT flat rate scheme applicable to your business, have a look at the list below. Alternatively, give us a call as the different categories can sometimes seem a little bit ambiguous. Please note  – we have only included the most popular categories.

And then for about 17 years the letter S disappeared from view until the iPhone 3Gs was released. For somebody of 40 years old, these are exciting times, as we can all go mad about the letter S once again. If your Smartphone doesn’t have a letter S, I would suggest you  pop along to your phone provider and demand an upgrade. Sure – you will get the same thing you had before, but without the letter S -  you may as well get your Mum to choose your phones for you. Not having that special letter on your phone means you are the 80’s version of a downwardly mobile office junior. Apparently.

Regards
Matthew Durrant

Dave Oxton, Owner.

Theist : You’re not answering my question
Atheist : Well, you’re not answering my question.
Theist : People like you don’t like being proved wrong.
Atheist : Actually – it’s people like you that don’t like being proved wrong.
Theist : Well I’ve got a book that proves I’m right.
Atheist : Funny that – I also have a book, and it proves that I am right.

And so on and so on and so on.

Without spending time here getting into the arguments. It does illustrate that for many issues there may not always be an absolute right answer or an absolute wrong answer. Take for example the most popular question we get asked – what expenses can I claim?? This is not always just a list as it will be different for everyone. The example I always give to people is a pop star (years ago I used Posh Spice as an example, but that seems inappropriate now).  A pop star would have a requirement to look good on camera and under studio lights. This is their job and has a bearing on how much income they receive, obviously – it helps to sell records. They may have to bear the cost of the make-up they use and this would be tax deductible. The term you are looking for is “wholly and exclusively” – the makeup is going to be used for the purposes of promoting records and is therefore wholly and exclusively used in the course of earning an income. This is not the same for a management consultant.

However, a management consultant can  claim expenses relating to the business of management consultancy (shocking isn’t it). An example of this could be an annual subscription to the institute of certified management consultants. A pop star would not be able to claim that, even if they wanted to.

So rather than thinking about your company expenses as a generic list – try and think of it as a list of expenses that are applicable to your business and how it runs.

Regards
Matthew Durrant

AWR will create a heavy burden of administration through the supply chain for Umbrella Companies, Recruiters and the End Clients.

In order to avoid the administration burden and additional cost of providing the information of the pay levels and benefits of their employees to Umbrella Companies and Agencies the End Clients may look to reduce or cut contracts to less than 12 weeks for contractors working through an Umbrella Company and favour taking on contractors who run their own Ltd Company and fall outside IR35. Contractors who are genuinely in business and are outside IR35 will not be subject to AWR.

If you are working through an Umbrella Company this may be a good time to think about setting up a Limited Company. If you would like to know more about AWR and how it will affect you or want to set-up a Limited Company please call us on 0800 8404014 and ask to speak to one of our Partners.

You can find full guidance on AWR at http://www.bis.gov.uk/assets/biscore/employment-matters/docs/a/11-949-agency-workers-regulations-guidance.pdf

1.       Worst riots in the history of London.

2.       USA loses its AAA rating for the first time ever.

3.       FTSE100 loses more than 100 points for 4 days in a row.

4.       Petrol prices have gone down for the first time in a year??

Am I the only one that can see the irony of petrol prices going down just as people have started throwing petrol bombs at the police? And why doesn’t it pour down with rain when we need it? During any sporting or music event, you can guarantee the UK will be covered in a cloud of rain  that goes on for days and creates a mud bath for everyone to enjoy. I can envisage if the Capital had been covered in rain (as usual) over the last four days, nobody would be looting on the streets.

I did hear one very eloquent, but ill-informed,  local resident to Hackney blaming the rioting/looting on government cuts and taxes not being high enough for the rich? Where do we get these people from – are they bred in special laboratories? I can really imagine a group of hooded youths sitting around their den arguing the 50% tax rate isn’t high enough and the borrowing deficit should be tackled by increasing our public spending.

If they compacted the last 6 weeks into a film- it would be slammed by the critics as being unrealistic and too far-fetched. You really couldn’t make it up.

Regards
Matthew Durrant

Chris Arscott, Director.

Chris Hines, Director

Physically I don’t believe you can determine which is which. It has nothing to do with beards or handbags and has more to do with how they search for their income. If you see one in the street, don’t be frightened – neither class is more likely to harm you than the other. Unlike Lions and Tigers – all part of the genus Panthera, but I would fancy a Lion could beat a Tiger if it came down to it.

So how do you tell them apart?

Firstly – have a look at the contacts on their mobile phone. If it has lots phone numbers of agents, they are a contractor. If it has phone numbers of project managers – they are a freelancer. If they won’t let you look at their phone, rub them under the chin very gently and it should drop into your hand.

Secondly – ask them if the journey to work was difficult this morning. If they look puzzled, they are a freelancer – as freelancers tend to work from home. Instead, you may get a reply that the roads were full of potholes or the train was packed – this makes them a contractor, as contractors tend to work at the clients site. 

Thirdly – ask them what they feel about IR35. If they shrug their shoulders, it is almost certain they are a freelancer. It really only affects Contractors and they have far more interest in IR35 due to it being designed around the principle of a disguised employee.

Regards,
Matthew Durrant