Smartphone cheque pay-in system gets Government approval

27 Jun 2014

Legislation is being planned to enable people to pay in cheques via their smartphones, rather than having to go in person to a bank.

Under a new system currently being trialled, customers will be able to photograph a cheque using a smartphone and then send it electronically. The new technology will allow cheques to be cleared in two days, rather than the current six, and banks believe that the system could actually be more secure than paying in physically.

During consultation the idea has been ‘broadly welcomed’ and will now be included in planned new legislation.

Barclays – who have run a successful trial of the system – claim that up to £300m of cheques in the UK are never paid in each year, in part due to the inconvenience for people of having to get to a bank during opening hours. Spokesman Steven Roberts said: “This is an opportunity to move cheques into the 21st Century, to reduce costs and make banking easier and more convenient for customers.

“We look forward to working closely with other banks, industry groups and the Treasury to make this a universal nationwide service as quickly as possible, so that all customers with a cheque to deposit can do so through their phone, tablet, branch or self-service device, regardless of who they bank with.”

Bank customers will still have the option of paying in paper cheques at bank branches, cash machines, post offices and by post.

Details of when the new imaging system will be available are yet to be finalised.

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Zero hours contract ‘exclusivity causes’ to be banned

26 Jun 2014

Business Secretary Vince Cable has announced that exclusivity clauses for workers on zero hours contracts are to be banned.  Such clauses tie people to one firm and prevent them from looking for additional work elsewhere to supplement their incomes.

An estimated 125,000 zero-hours contract workers are bound by exclusivity clauses and Mr Cable said that some “unscrupulous” companies had “abused” the flexibility offered by the contracts.

Zero hours contracts have become controversial, with some 1.4 million people working on contracts that do not guarantee a minimum number of hours, and some Unions and campaign groups wish to see them banned altogether.

However, Mr Cable has stated that zero hours contracts have a role to play in the labour market, being particularly suited to students and older people.  “For many workers this is a perfectly sensible arrangement. But a lot of people on the contracts aren’t sure what their rights are and we want to make them [zero-hour contracts] more transparent,” he said.

The move to ban exclusivity clauses comes after a consultation found widespread support across the political spectrum for the measure. John Longworth, director general of the British Chambers of Commerce, said: “Maintaining the UK’s flexible labour market is crucial to keeping unemployment down. Zero-hours contracts are vital for a successful jobs market, but they must be fair and work for all parties.

“The ban on exclusivity clauses, which bind workers to one firm, is a balanced way of addressing concerns. However, the Government must ensure that any further changes do not jeopardise business flexibility or employment opportunities.”

The Government will now consult on how to prevent employers evading the ban through measures such as offering one-hour fixed contracts.

Businesses raise concerns over new flexible working rules

25 Jun 2014

From 30 June, new rules come into effect meaning that all employees will be entitled to ask their employer for flexible working, regardless of the reason. Employers in turn will then have a legal obligation to answer that request and though they are not obliged to agree to the request, they must provide a valid written reason if they decide to decline it.

This is an extension of the current regulations whereby the right to request flexible working is reserved for parents and carers.

The Government has predicted that the changes will generate £475m of economic benefits through increased efficiency and employee satisfaction in its first 10 years. 

However, a survey by Citrix suggests that just one in 10 small and medium businesses see the changes as positive for their business. Only 43% of decision makers in SMEs support the rules, and only 11% think it will have a positive impact on their business, compared with 21% who predict it will have a negative effect. Almost half of respondents said they currently have no flexible working policy in place.

Commenting on the results, Citrix suggests there might be a “perception problem”, referring to a previous Regus study which found that 76% of those who do allow flexible working saw it as having a benefit to their business.

Research & Development Tax Relief

Research and Development Tax Relief 

In his Budget 2014 speech, Chancellor George Osborne announced, “If Britain isn’t leading the world in science and technology and engineering, then we are condemning our country to fall behind.” He recognised that investment in cutting edge Science, Technology and Engineering was vital in making the UK more competitive internationally.

He went on to revise the rate of the R&D tax credits for loss making small businesses from 11% to 14.5%.

So how does the R&D tax relief work?

HMRC will allow an extra 125% (30% for large companies) of identified costs to be written off against taxable profits. Therefore, if R&D expenditure of £100,000 is identified, HMRC will allow £225,000 to be included in the tax computation, giving an extra £125,000 of cost to be offset against taxable profits. The current corporation tax rate is circa 20% which equates to a £25,000 reduction in a tax liability.

However, loss making companies are not excluded from the benefits and tax credits can be claimed on the losses enhanced by the R&D expenditure instead of carrying the losses forward to offset against future profits.

To give you an example, if the R&D expenditure is £100,000, HMRC will pretend that a company has spent £225,000 as described above. If a company is loss making, HMRC will allow a company to surrender those £225,000 of losses for a cash payment of up to 14.5% which equates to £32,625.

Essentially, loss making companies can claim up to 32.63p in every pound spent on qualifying R&D expenditure.

So what expenditure does it relate to?

Identifying the costs associated with the R&D activity is often seen as a laborious and minimally beneficial process when the cost of gathering the information is compared to the tax benefit. In reality, HMRC encourage a pragmatic approach to gathering cost information. The expenditures allowed as part of the claim fall into 4 key categories: staff costs, consumables, subcontract labour and heat and power cost.

The opportunity?

R&D tax relief and tax credits are still among the most under-claimed tax incentives currently available.

The main reason behind the widespread failure of companies to take advantage of the reliefs is the misconception of what actually constitutes ‘research and development’ for the purposes of the HMRC legislation. Most company finance directors mistakenly believe that unless a scientist operating in a secret laboratory and dressed in a white lab coat is employed by the company, then R&D is not taking place. Indeed, a cursory glance at the current R&D legislation would undoubtedly suggest that this is a reasonable assumption to make.

R&D activity does not have to be ‘blue sky’ innovation, nor does it have to consist of creating new technologies. Instead, appreciable improvements to existing technology which would be regarded by those considered competent in the field (company employees, for example) to be ‘difficult’, are perfectly acceptable where the R&D legislation is concerned.

Therefore, the potential scope for successful R&D claims may well be greater than you think. Below is a list of the business sectors within which we are already making successful claims.

  • Aerospace & Defence
  • Alarms, CCTV
  • Automobiles & Parts
  • Banking and Finance
  • Chemicals, Paints and Adhesives
  • Clothing, textiles & fabrics
  • Construction & Building Materials
  • Electronic & Electrical
  • Engineering & Machinery
  • Food and Drink Producers and Processors
  • Foundries
  • Games Software Industry
  • Retailers
  • Health
  • Household Goods & Textiles
  • IT Hardware
  • Insurance Brokers (software development)
  • Land Remediation
  • Lighting
  • Marine
  • Manufacturing
  • Media & Entertainment
  • Personal Care, Cosmetics & Household
  • Pharmaceuticals & Biotechnology
  • Printing & Packaging
  • Property & Construction
  • Software Development
  • Telecommunications
  • Travel Industry
  • Transport
  • Waste Recycling
  • Water Treatment

 How far can a company go back?

Retrospective claims can be made for the past two accounting periods which can often result in a significant repayment of corporation tax, or if a company is loss making, a claim for R&D tax credits. It is therefore important to discover if a claim can be made as soon as possible so as not to miss out on any time limits. 

Our Programme of Support

Nunn Hayward LLP work in partnership with R&D specialist advisors, HowarthLynch, providing the best advice relating to this niche area of opportunity. From a brief initial telephone conversation, we can very quickly identify definitively whether a company is eligible to claim this valuable relief.

Working together, our pragmatic and practical approach enables us to maximise a claim and submit the necessary paperwork in a HMRC friendly format. The process is perceived as challenging, however, our tailored approach combined with our expertise in assisting many different types of businesses, in all industries, ensures seamless liaison with the tax authorities. Our 100% track record is a direct result of our robust reporting model, developed over the last 15 years and which is continually refined as a result of our close working relationship with Inspectors of Taxes.

This model underpins our ability to provide exactly what HMRC requires, query free. HMRC benefits are often received within as little as 4 weeks from submission of the claims.

THE NEXT STEP:

Call our offices and speak to one of our taxation advisors who will explain the simple procedure that will follow when you make a claim.

Telephone 01753 888211

Nunn Hayward LLP

 

 

http://www.nhllp.com

REGULATORS UNVEIL NEW GLOBAL REVENUE ACCOUNTING RULE SET

A global accounting standard designed to overhaul the way businesses record revenue on their books has been unveiled by regulators.

The Financial Accounting Standards Boards (FASB), which is responsible for writing book-keeping rules in the United States, and the International Accounting Standards Board (IASB), whose rules are used in over 100 countries, have established a simple, common approach designed to allow investors to make a comparison of how much companies from all over the world earn. compare more easily how much companies from all parts of the world earn. The standard is due to come into force in 2017.

As a result, companies will be able to recognise revenues in a way that shows the transfer of goods and services to customers that reflects the payment to which the company expects to be entitled. The revenue recognition standard “will eliminate a major source of inconsistency in Generally Accepted Accounting Practice (GAAP), which currently consists of numerous disparate, industry-specific pieces of revenue recognition guidance”, said Russell Golden, chairman of FASB.

The new standard is also intended to enhance disclosure of revenue, provide guidance for transactions that were not previously addressed comprehensively (service revenue and contract modifications for example) and improve guidance for multiple-element arrangements.

Expect to see much more on this over the next couple of years.

PENSIONERS LOSE ALMOST A THIRD OF INCOME TO TAX

Most pensioners are paying around 30% of their income to HM Revenue & Customs (HMRC), according to a report released on 30 May.

Life Insurance provider, Prudential, stated that the average household paid out around £6,400 in tax during 2011/12 from a gross income of £21,300. About £3,800 of the bill can be attributed to indirect taxes such as VAT and fuel duty.

While the top 10% of pensioner households with gross income of £47,992 or more pay 29% of their income out in tax, those at the bottom end of the income spectrum are paying a lot more.

The bottom tenth of pensioner households, receiving up to £8,259 gross income a year, pay 42%, or £3,599 in tax. The reason for this is that there is no sliding scale of income tax in retirement so everyone pays the same rate regardless of income. So those with less income pay proportionately more.

Dominic Grinstead, managing director of insurance provider, MetLife UK, said: “Pensioners need to think about the effects of direct and indirect tax on their retirement income and to plan accordingly. With 29% of gross retirement income being swallowed up by tax it is clearly a major factor to consider when planning for retirement”.

He went on to warn that pensioners should not only think about the effect of tax on their income, but the damage that inflation does over long periods of time, diminishing the spending power of the income. Inflation will have an effect on retirement – which can last 20 or even 30 years.  “It is clear that savers need to consider all retirement income solutions in order to achieve a degree of certainty”, said Mr Grinstead.

Retirement planning can’t start too early, so make sure you get advice.

Tax by Design

The director of the Institute for Fiscal Studies (IFS) has bitterly criticised the structure of the UK tax system.

In May, the director of the IFS, Paul Johnson, gave the annual Chartered Tax Adviser address. The essence of what he said grabbed a few press headlines in the national press but was deserving of more coverage.

Mr Johnson highlighted the “complexity and uncertainty” created by the poor tax policies introduced by the current coalition government “as well as those of its predecessor (and often earlier governments too)”. Among his criticisms were:

  • The existence of a 60% income tax band, which is created by the tapering away of the personal allowance once income exceeds £100,000. This band is now £20,000 wide, after which the marginal rate drops down to 40% for the next £30,000 before rising to 45%. As Mr Johnson said, “it’s hard to make much sense of that.” 

 

  • A trend “which has fundamentally altered the nature of our system of income tax, namely a continued increase in the number of higher rate taxpayers.” Mr Johnson noted that, “Numbers have risen from less than 2 million in 1990 to nearly 4 million in 2007 and well over 5 million by 2015”, and that the change “has never been announced or properly debated.” 

 

  • The structure of Stamp Duty Land Tax (SDLT), which Mr Johnson said was “one of the worst designed and most damaging of all taxes.” At the extreme, a £1 increase in the sale price of a home can now trigger an additional £40,000 SDLT bill.  

 

  • Sharp increases in income tax personal allowances have not been matched by the threshold for national insurance contributions (NICs), a tax on income in all but name. In contrast to the politician’s emphasis on the numbers removed from income tax, Mr Johnson remarked that there were now over one million low paid workers who pay NICs, but no income tax.

A former US Treasury Secretary once said that a tax system should look “like someone designed it on purpose.” There appears little chance of that happening in the UK soon, whatever the outcome of the General Election in less than a year’s time. All the more reason to take advantage of what allowances and reliefs are on offer.