BOOKKEEPING - A RECESSION

PROOF BUSINESS?

The magazine of International Association of Bookkeepers

BOOKKEEPERTHE

July / August / September 2018

Automatic enrolment and ongoing duties – what your clients need to know

Keeping your cash flow up to date

IAB awards to launch in August

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International Association of BookkeepersSuite 5, 20 Churchill Square, Kings Hill, West Malling, Kent, ME19 4YU

Phone: +44 (0)1732 897750Email: membership@iab.org.ukWebsite: www.iab.org.uk

Twitter: @IABinfoFacebook: IABBookkeepers

Contents

3 Janet’s welcome A message from the chief executive and the IAB Awards.

4 News items A selection of news items including: ‘Alpha male’ culture

deters women in finance, plumber wins workers’ rights battle against Pimlico Plumbers, recruitment firm bosses posed as staff to stop workers getting pensions.

7 MTD: Let’s make things better, not harder

An update from Clear Books on Making Tax Digital (MTD) and a MTD-ready online spreadsheet product they have developed to make compliance easy and affordable.

8 Automatic enrolment and ongoing duties – what your clients need to know

The Pensions Regulator provides guidance on what your clients need to do to ensure they comply with the legislation including re-enrolment.

9 Word from Sarah: Bookkeeping – a recession proof business?

In her regular feature, Sarah Palmer tackles the issues that matter.

10 HMRC news The latest updates from HMRC.

12 AGM update: the election results

Update on the AGM which took place on 21st June.

13 Keep up to date by attending the IAB’s latest seminars

Further seminars have been announced covering a range of topics including Making Tax Digital, tax and payroll updates, automatic enrolment and much more.

14 IAB member case study A case study provided by Johann Goree MIAB about how

he started his own bookkeeping practice in 2017 and how he has grown his business.

15 Keeping your cash flow up to date

Tips from the Federation of Small Businesses (FSB) on keeping on top of cash flow to keep your business healthy.

16 The secret bookkeeper A regular feature from a bookkeeper recalling real life

experiences of having your own bookkeeping practice.

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2 | The Bookkeeper

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Let me thank those of you who took the trouble to get in touch and say how much they enjoyed the new format of our magazine. We are glad you like it.

Congratulations to our Council members who have been re-elected for another year and to Nicola Bate who has been elected to join Council for the first time. Don’t forget you too can become a Council member so if you are interested please let us know.

One of the major topics in this issue is MTD (making tax digital) are you ready? The first

step in the MTD timetable is VAT. Read more about some key MTD facts and how to comply with ClearBooks’ solution.

Of course we have our regular slots from Sarah Palmer and the Secret Bookkeeper. Don’t forget you too can share your story and we would really like to hear from you.

Our May seminar was a great success and we have two more coming up in the Autumn. Don’t forget to book as spaces are limited.

This year some of the awards categories will enable people to nominate themselves for an award and provide references or testimonials to support the nomination.

The awards categories are:• Bookkeeper of the Year• Accountant of the Year• Payroll Professional of the Year• Small Business Mentor of the Year• Student of the Year• Tutor of the Year

The IAB is holding its annual awards ceremony on Thursday 6th December

2018 at the prestigious House of Commons and nominations will open in August.

The awards celebrate and champion the critically important contributions that bookkeepers, payroll professionals, accountants and enterprise mentors make to the success of millions of micro and small businesses.

I hope you enjoy reading this edition and I look forward to meeting some of you at the seminars or at our annual awards ceremony in December. Nominations for our awards will open later in the year so look out for further communications from us and you could be a winner.

Janet JackChief Executive

Winning an IAB Award is excellent recognition of hard work and commitment and can be a real benefit to someone’s career. This year you could be a winner! Further communications will be sent out when the nominations are open.

The awards website is in the process of being updated but check back in August for further information about the criteria for the different categories and instructions on how to submit a nomination.

Welcome to our new magazine,THE BOOKKEEPER, we hope you like it!

Watch this space: IAB Awards to launch in August www.iab.org.uk/awards

The Bookkeeper | 3

More flexible working and the restructuring of bonuses are needed to

help women in finance to progress to senior levels. Added to that, firms need to abolish their ‘alpha male’ culture, the Treasury committee has recommended.

MPs said their inquiry into women in finance indicated culture is the overwhelming reason that women said they do not want to get involved at the senior levels of the financial services sector, which becomes a self-reinforcing barrier.

The committee’s report suggested the alpha male culture in some organisations is evident in bonus negotiations, where it is perceived that men argue more forcefully for bonuses than women and recommends performance bonuses should be assessed against clearly objective and formulaic criteria.

There is also evidence that flexible working can be perceived as a ‘female’ approach to working, and can adversely affect career progression. While long working hours based in the office can be unnecessary, particularly with modern technology, a culture of ‘presentee-ism’ persists. To remove any stigma associated with flexible working, more senior men should lead by example by working flexibly.

Now that a large gender pay gap has been confirmed in the financial services sector by firms reporting their data, firms should be required to publish their strategies for overcoming their gap and supporting the progression of women. The report called for

Mobile phones should to be switched off at 10pm if you want to prevent mood

disorders and stay happy, says Professor Daniel Smith of Glasgow University. His study found that people who spend the night checking social media or watching TV are more likely to suffer from problem such as neuroticism and bipolar disorder, and rate themselves less happy and more lonely. It seems that modern life is scrambling our natural rhythms that dictate that daylight is time for activity and darkness is time for sleep.

details of partner remuneration and pay rates at group subsidiaries should be included in gender pay gap data and not excluded, as happens currently.

Firms should re-examine promotion policies and practices to ensure that unconscious bias is eliminated at every stage. This will avoid potential applicants being deterred and help avoid groupthink. The report also called for wider promotion of the shared parental leave scheme, which it said had a very low take up, as part of efforts to ensure women who go on maternity leave can reintegrate into the workforce at the same level of role as previously.

The report included a call to action for financial regulators and the Treasury, which it said should lead by example and continue to improve their representation of women at senior positions and reduce their gender pay gaps.

Finally, the report pointed out that gender diversity is only one aspect of the diversity agenda. Firms should widen their diversity initiatives and consider the representation of other forms of diversity within their organisations. The Treasury should extend its focus to other forms of diversity in finance, and should start by understanding its own treatment of employees from diverse backgrounds.

Nicky Morgan MP, chair of the Treasury committee, said: “The reporting of gender pay gaps at financial services firms confirms that a large gap exists between men and women

working in finance, in part due to significantly more men than women in higher earning and more senior positions.

“The benefits of gender diversity are highlighted in the report, including better financial performance, reduced groupthink and more open discussions.

“The next step must be for firms to set out how they will abolish their gender pay gap and support the progression of women. Firms should focus on changing the culture in financial services firms, which remains a deterrent for women, especially the bonus culture.”

‘Alpha male’ culture deters women in finance

Switch it off!

4 | The Bookkeeper

NEWS ITEMS

A plumber has won a legal battle for working rights in a Supreme Court ruling

expected to have huge ramifications for freelance workers.

Gary Smith had worked solely for Pimlico Plumbers for six years. Despite being VAT-registered and paying self-employed tax, he was entitled to workers’ rights, the court ruled.

The ruling will be closely scrutinised by others with similar disputes, many of whom work for firms in the so-called gig economy.

An employment tribunal was “entitled to conclude” that Smith was a worker, the court ruled. As a worker he would be entitled to employment rights, such as holiday and sick pay.

Senior staff at a national recruitment agency tried to save money by

impersonating their temporary workers to opt them out of their workplace pension scheme.

Workchain Ltd owners and directors Phil Tong and Adam Hinkley encouraged five senior staff at the company to get the temporary workers out of the scheme so the company could avoid making pension payments on their behalf.

Financial controller Hannah Armson, HR and compliance officer Lisa Neal and branch managers Martin West, Robert Tomlinson and Andrew Thorpe then worked together to opt workers out of the NEST pension scheme using its online system.

The Supreme Court ruling means that an employment tribunal can now proceed to examine Smith’s action against Pimlico Plumbers as a worker, including a claim that he was unfairly dismissed.

However, Tim Goodwin of law firm Winckworth Sherwood cautioned that the ruling may not apply to other complaints. “Even with a high level decision like this, to a degree the issue of employment status in the gig economy is up in the air. The government is consulting on this issue, and may bring forward legislation. So it’s quite possible that Parliament may overrule this decision within the next few months or years.”

TUC General Secretary Frances O’Grady said the case had exposed “how widely sham self-employment has spread”. She said the

Derby-based Workchain (formerly known as Smart Recruitment UK Ltd), which has offices in towns and cities across the Midlands and the neighbouring counties, would have been able to avoid paying pension contributions if the offence had not been detected.

A joint investigation into Workchain involving The Pensions Regulator (TPR), the Employment Agency Standards Inspectorate, Derbyshire Constabulary and Nottinghamshire Constabulary was launched after NEST reported its concerns about Workchain to TPR in May 2014.

Darren Ryder, TPR’s Director of Automatic Enrolment, said: “Workchain’s directors saw

TUC wanted the government to act quickly to “crack down on bogus self-employment”. At the moment it is up to an individual to prove that they are employed and entitled to workers’ rights.

The TUC wants the ‘burden of proof’ to be reversed so workers benefit from rights “unless the employer can show they are genuinely self-employed”.

In February, the government promised to overhaul employment rights to improve conditions for millions of workers, including those in the gig economy.

The proposed changes include stricter enforcement of holiday and sick pay rights, and higher fines for firms that breach contracts or mistreat staff. It is currently consulting on the proposals.

denying their temporary workers pensions as a quick and easy way to save the company money.

“Both they and their senior staff thought nothing of misusing NEST’s online portal. Thanks to the vigilance of NEST, their attempt to cheat the automatic enrolment system failed.

“Automatic enrolment is not an option, it’s the law and the law is clear – no one can opt a worker out of a pension scheme, even if the worker agrees. Those who try to avoid their pension responsibilities in this way face prosecution.”

TPR prosecuted Workchain, the two directors and five senior staff for an offence of unauthorised access to computer data, contrary to section 1(1) of the Computer Misuse Act 1990. This is the first time that TPR has launched prosecutions for this offence.

All of the defendants pleaded guilty to the offence when they appeared for the first time at Derby Magistrates’ Court on 7 June. District Judge Jonathan Taaffe committed the case to Derby Crown Court for a sentencing hearing which was scheduled to take place on 28 June 2018.

Plumber wins workers’ rights battle against Pimlico Plumbers

Recruitment firm bosses posed as staff to stop workers getting pensions

The Bookkeeper | 5

A shortage of talent is becoming a key concern with the financial services sector,

with half (49%) of senior leaders citing finding skilled candidates as the biggest worry over the next 12 months, according to new research.

Other worries included tightened regulatory controls (cited by 42% of respondents), implementing new business processes (35%), market instability, bank recapitalisation, and training and developing existing employees (all 32%).

The research, from Robert Half Financial Services, revealed that new technologies such as Blockchain and automation are less of a worry, with many optimistic about their potential – only 13% and 6% fear their impact respectively. Cybersecurity is also low on the list, with just 28% concerned about this issue.

The firm polled 100 senior leaders in the UK financial services industry as part of an international study on hiring trends and career ambitions in the modern workplace.

Matt Weston, UK managing director at Robert Half, said: “Process, regulatory and geopolitical change are creating the perfect storm for the financial services sector to develop and grow. In a time of uncertainty, banks and other financial services firms need to be confident they can access the skills they need to help them through this current period of change and beyond.”

The survey results show that 27% of respondents are worried about staff retention, suggesting that companies are putting in place policies and options to ensure employees continue to build a career with them.

Weston said: “With only a finite number of skilled professionals, providing current staff with the means to grow and develop new skills provides tangible benefits to the business as a whole, including plugging skills gaps. Staff provided with such opportunities are more motivated, productive and loyal which has a positive impact on any organisation.”

HMRC is reminding parents that they are able to use the tax-free childcare scheme

to pay for holiday clubs after it was revealed that a third of parents (31%) feel stressed trying to arrange childcare for the school holidays.

The poll by YouGov for HMRC also found that around a third of parents (30%) worried about balancing their job and school holiday childcare and more than half (54%) admitted they look forward to their children returning to school in September.

Parents, including the self-employed, can apply online for tax-free childcare, part of the government’s childcare choices offer, for children who are under 12.

For every £8 parents pay into their childcare account the government will add an extra £2, up to £2,000 per child per year, or £4,000 for a disabled child. This top up is added instantly and parents can then send electronic payments directly to their childcare providers.

Over 58,000 registered childcare providers including school, football, art and tennis clubs have signed up to the tax-free childcare scheme. Parents that pay into their account regularly can ‘save up’ their allowance and use it for childcare during school holidays.

HMRC is encouraging parents to sign up to tax-free childcare before the end of June in time for next term.

Chief Secretary to the Treasury Liz Truss said: “Organising childcare for school holidays is important for parents. Tax-Free Childcare and 30 hours free childcare help make things easier by cuttings thousands of pounds from the childcare bills of working parents. So I hope families across the country visit the Childcare Choices website to take advantage of the offer available from the Government, and enjoy the holidays.”

Financial services leaders worry about skills shortage

Tax-free childcare available on school holiday clubs

6 | The Bookkeeper

NEWS ITEMS

Bookkeepers have reacted to Making Tax Digital in one of three ways. Some have

taken immediate action, getting ready for the change straightaway. Others have started slowly, educating themselves about the change and the options available to them. The last group however, is doing the ostrich - they’ve got their heads in the sand. One industry professional commented, “I’ve been ignoring anything MTD related.”

The sentiment amongst some bookkeepers and accountants is clear, most are dismayed at a new regulation which appears inconvenient, complex and uncertain.

Fast MTD facts:• Small businesses earning more than

£85,000 are affected from April 2019• They must keep records digitally (Excel

is not a compliant digital record-keeping platform by itself)

• They must submit returns digitally to HMRC (e.g. directly from accounting software)

• MTD-ready software will meet HMRC requirements to send standard 9 box submissions digitally

• The current HMRC portal for VAT returns will no longer work for affected businesses

• Current penalties for late submissions are likely to be applied to those who are not ready in time

Clear Books creates an MTD solution to make things better rather than harderAs a UK-based accounting software provider, Clear Books has taken a unique approach to MTD. Unlike its internationally-based peers, Clear Books has created a new online accounting alternative as well as ensuring its current product is compliant.

Its London-based CEO Ruth Fouracre explained, “In response to MTD, we’ve created an online spreadsheet called Clear Books Micro. The spreadsheet is available free for small businesses and means they can continue to enter data into a familiar spreadsheet interface.”

Here’s how it works;

Getting ready doesn’t have to break the bank - IAB/Clear Books Partnership Launch SpecialClear Books Micro is free for small businesses, and accessing the data in the MTD-ready Clear Books Practice Edition only costs £5 per month.

For IAB members, Clear Books is offering a special promotion to celebrate our new partnership. Members will receive 10

subscriptions completely FREE until 2019. To take advantage of the offer simply email sales@clearbooks.co.uk requesting a no-obligation product demonstration. If you choose to buy, the discount code to use is “IABFREE”.

Terms: This offer is for 10 Clear Books Practice Edition subscriptions. You’re

agreeing to a minimum 12-month subscription term. The terms start on the date you submit this acceptance form and end 12 months from this date. The offer is available until 31 July 2018. To use the offer, we will issue you with an electronic voucher code that you can use up to 10 times. You must enter this voucher code when you set up your client subscriptions. For subscriptions to be set up, there must be a Direct Debit or Credit Card mandate in place. This method of payment will not be charged for any subscriptions that form part of the offer until on or after 1st January 2019. From 1 January 2019 we will charge your payment method at the prevailing rate for Clear

Books Practice Edition monthly subscriptions (currently £5/month) for 10 subscriptions to your registered payment method. The total cost to you will be £350 (as the subscription starts in July). After the contract end date, the subscriptions will convert to standard rolling Clear Books Practice Edition monthly subscriptions covered under our standard terms. If you wish, you may cancel the subscription at this time by calling your Account Manager.

MTD: Let’s make things better, not harderClear Books has built an MTD-ready online spreadsheet to make compliance easy and affordable

The Bookkeeper | 7

Guest article

Every employer has automatic enrolment duties. They need to assess their staff, enroll them into a workplace pension scheme

if they meet certain criteria, write to them to tell them what they’ve done, maintain a payment of pension contributions into their pension scheme and complete and submit a declaration of compliance with The Pensions Regulator.

However, an employer’s workplace pension duties do not stop with declaring compliance. And with TPR conducting spot checks on employers across the country to make sure they are complying with their duties, it’s important you are aware what your employer clients need to do on a regular and ongoing basis to ensure they comply with the law.

Research published by The Pensions Regulator shows the majority of employers do not have any difficulty with ongoing duties. The analysis shows that automatic enrolment is ‘business as usual’ for employers, and that it’s easier than they thought it would be. Most micro employers said they spend around half an hour each month meeting their duties and two thirds did not use outside help. Those who did said it cost them around £42 per month to use an accountant or auditor to help them.

What are your clients’ ongoing duties?Your clients will need to ensure that they pay and maintain regular contributions into their chosen pension, monitor the age and earnings of their staff and enrol eligible staff, process any requests to join or leave the scheme, and keep and maintain accurate records. They’ll also need to re-enrol eligible staff into an automatic enrolment pension scheme every three years. Let’s take these in turn:

1. Pay and maintain regular contributions into the pension Employers need to calculate and pay the employer contributions

to their staff’s pension scheme on an ongoing basis. In addition, they’ll need to calculate staff contributions, make the necessary deductions from payroll and transfer their contributions to the pension scheme.

They’ll have agreed what these rates are and when to pay them with their chosen pension scheme. By law, your client and their staff have to make minimum contributions into the scheme, and they should be aware that these minimum contribution levels increased on 6 April 2018 and are due to increase again in April 2019 (see below).

Date effective

Employer minimum contribution

Staff contribution

Total minimum contribution

Current until 5 April 2019

2% 3% 5%

6 April 2019 onwards

3% 5% 8%

2. Monitor the age and earnings of all staff Employers will need to monitor any changes in age and earnings

of their staff to identify if they become eligible for automatic enrolment. They’ll also need to check eligibility of any new members of staff on the day they start work. Should staff members become eligible (for example by turning 22, or by meeting the earnings thresholds), then they’ll need to be put into a pension scheme and contributions paid to it. Payroll software should be able to support clients with this.

3. Process requests to opt in, join or leave the scheme, and keep and maintain accurate records.

Opt in/join: If any staff write to their employer asking to join their workplace pension scheme, they must be put into it within a month of the request being received. Employers will have to pay into the pension scheme unless they are aged 16-74 and earn less than £503 a month or £116 per week.

Opt out: If any staff choose to leave the pension scheme

within one month of being put into it, employers need to stop taking money out of their pay and arrange a full refund of what has been paid to date. This must happen within one month of their request.

Keeping records: Staff records need to be kept up-to-date,

including who’s been enrolled and when, information about the pension scheme, and the contributions being paid. These records must be kept for six years, except for requests to leave the pension scheme which must be kept for four years.

4. Re-enrolment Every three years, all staff who either opted out of their workplace

pension scheme or have ceased to become members need to be re-assessed and re-enrolled if they meet certain criteria. Employers will need to write to them to tell them what they’ve done – and then they’ll need to re-declare their compliance to The Pensions Regulator.

Further information on ongoing duties can be found on The Pensions Regulator’s website.

Useful links:Business advisers: www.tpr.gov.uk/knowing-your-clients-ongoing-duties Employers: www.tpr.gov.uk/ongoing-duties

Automatic enrolment and ongoing duties – what your clients need to know

8 | The Bookkeeper

As bookkeepers we are especially well positioned to observe the financial

climate and from what I see I believe we are heading back into recession. I have had a few clients already affected by a downturn in business, one who provides training to the corporates (employee training is always a first to be cut in uncertain times) and my estate agents are showing signs of a slow down. Combine this with the typical early recessions markers, such as a rise in fuel prices and it seams fairly obvious to me that the economy is only going one way.

It is with mixed emotions that I acknowledge this, a recession is clearly not what we want as a country but I have to say a recession is actually favourable to a bookkeeping company. I set my practice up nine years ago in the height of one of the worst recessions we had seen in a long time. My business grew and flourished and it is with hindsight I understand why. In hard times people “trade down” and as a bookkeeper I picked

up many clients who were looking to save money on their accountancy bill. We all know that bookkeepers can provide many of the services of an accountant and at a lower cost, but it is not until money is tight that clients will actually embrace that concept.

In 2008 the Governments Debt to GDP was 35.4% by 2017 that had risen to 85.3%. The reality is that the age of austerity is not over and with those statics the government has not got the ability or resources to support small business. I believe this time round it is going to be much worst, in 2008 many small businesses had assets to sell such as property, this time the only real asset a business holds will be its debtors list. With that in mind I have pushed credit control as a new offering to existing clients.

The reality is all companies still need payroll and financial services, recession or not. I also know, though experience, that money will be found to pay for those services but

what changes is that people will question the value of what they receive for their spend. What we need to understand as bookkeepers is, business owners will happily employ our services BUT only if they understand what value we can add to their business. We know we can add plenty but we must work on our message, and in doing so we can only improve our own businesses.

Maybe a recession is a good thing – only nimble, efficient and financially sound businesses survive and I actually think that the bright future for the UK economy, post Brexit, can only happen if constructed on solid foundations.

Think – “What value can I add” and you will be well on the way to a great business, recession or not.

Love to know your thoughts,Sarah Palmer, FIAB, owner of Women Who Count

Bookkeeping – a recession proof business?

The Bookkeeper | 9

Sarah PalmerWord from Sarah

Latest HMRC figures show an estimated £33bn tax gap in the UK tax gap in

2016-17, amounting to 5.7% of total theoretical tax liabilities and the same level the previous year, with small businesses responsible for 41% of the tax not collected.

Of the total tax gap, which is the difference between the amount of tax that should, in theory, be paid to HMRC, and what is actually paid, £13.5bn is down to income tax, National Insurance and capital gains tax owing, and £11.7bn to VAT.

Avoidance accounts for £1.7bn of loss, compared with £5.9bn due to failure to take reasonable care, £5.4bn due to criminal attacks, and £5.3bn because of legal interpretations. There has been a long-term reduction in the overall tax gap, from 7.3% in 2005-06 to 5.7% in 2016-17.

Lucy Brennan, partner at Saffery Champness, said: “Clearly, a large part of the tax gap problem remains a worrying lack of understanding amongst taxpayers about their obligations, and the tax system.

“This year, failure to take reasonable care, together with plain and simple error, has taken almost £10bn from the public purse. HMRC believes everyone should get their tax return right, and we are no longer seeing them accept that innocent errors have no penalty. If one has been careless the penalty for unprompted disclosure is 0% to 30% of the tax due, while prompted disclosure is 15% to 30%.”

With only 5% of the tax HMRC thinks is being underpaid is due to tax avoidance, law firm Pinsent Masons says HMRC is increasingly shifting the focus of its inquiries away from tax avoidance schemes towards more technical disputes over businesses’ interpretation of the law.

Catherine Robbins, partner at Pinsent Masons, said: “Very few businesses are engaged in tax avoidance schemes now and as HMRC hunts for new sources of revenue, it is increasingly coming down hard on basic, almost routine errors.

“HMRC is increasingly challenging companies’ interpretation of the UK’s extremely complex tax rules. It is putting significant resource into areas like

employer tax compliance, where it is very easy for businesses to make mistakes.”

There are also predictions that HMRC is likely to come after SMEs and individuals to boost their tax take, as HMRC’s figures show that small businesses and individuals are thought to have underpaid a combined £17.1bn of tax in 2016-17, half of the total.

In addition, the underpayment of personal taxes has increased by 17% in the last year, up from £2.9bn in 2015-16 to £3.4bn in 2016-17.

Kevin Igoe, managing director at specialist insurer PfP, said: “There is a danger that HMRC may form a low opinion of tax returns from small businesses, which means that around a fifth of SMEs are at immediate risk of tax investigations.”

HMRC have updated guidance on the Help to Save scheme to include information

about Universal Credits.

‘Help to Save: what it is and who it’s for’ explains about the Government saving scheme which supports working people on low incomes to build their savings. Over four years, regular savers can deposit up to £50 a month and receive up to £1,200 in tax-free bonuses. The guidance has been updated to add information about Universal Credit

at section 2 (Who Help to Save is for). The Help to Save scheme is open to UK residents who are claiming Universal Credit and have a household or individual income of at least £542.88 for their last monthly assessment period (though note that payments from Universal Credit are not considered to be part of household income).

For more go to www.gov.uk/government/publications/help-to-save-what-it-is-and-who-its-for/the-help-to-save-scheme.

HMRC update: Help to Save guidance

Tax gap shows avoidance activity in decline, says Revenue

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HMRC is increasingly challenging companies’ interpretation of the UK’s extremely complex tax rules

10 | The Bookkeeper

HMRC NEWS

HMRC is considering an overhaul of the penalties regime for late payments by businesses and individuals for corporation tax, income tax and self assessment.

The measure proposes a points-based penalty system for late payment, and two changes to the way that interest is charged and repaid for VAT, with the VAT changes coming into force from April 2020. There is no date for the launch of the points-based system.

From 2020, late payment penalties will consist of two penalty charges: one charge based upon payments and agreements to pay in the first 30 days after the payment due date, and another charge based on how long the debt remains outstanding after the 30 days.

However, if a ‘time to pay’ agreement is not agreed then the payment window will only be 15 days. There will be no penalty if payment in full is made before end of the 15-day period.

If a time to pay agreement is made but the taxpayer then breaks the deal and fails to pay, a second penalty will also be charged.

As with existing penalties there is a ‘reasonable excuse’ clause, with the usual provisos that inability to pay and reliance on a third party are not acceptable excuses.

Although the VAT penalties will take effect from April 2020, the government has not confirmed yet when the income tax and corporation tax penalty system will come into force.

HMRC said: “The changes will ensure that people who pay late can avoid a penalty if they take action to make arrangements to pay, and that those that do not will receive a penalty that is proportionate to both the value of the debt and the amount of time it is outstanding for.

“The measure is designed to encourage those who cannot pay to agree a time to pay arrangement as quickly as possible and only penalise those who do not.”

Both the first charge and second charge will be notified to the customer and any amounts shown as payable on the notice will be required to be paid, or appealed, within 30 days of the date of that notice.

HMRC plans points-based overhaul of penalties for late tax payments

Staff numbers at HMRC have fallen by over 2,000 since the UK voted to

leave the European Union, despite the department’s crucial role in preparing for the new customs regime after the UK leaves the EU.

The headcount figures, which were revealed in a parliamentary answer from Treasury minister Mel Stride to Labour MP Jenny Chapman recently, show that the tax

department employed 67,450 in June 2016, the month of the referendum.This rose to steadily to a peak of 70,015 a year later in June 2017, but has declined nearly every month since to now sit at 65,287 in the latest figures, which are for the month of April 2018.

A spokesperson for HMRC said: “HMRC is committed to playing its part in making the UK’s exit from the EU a success.

“HMRC currently has around 1100 people working on EU Exit, most in planning and preparatory roles. We are doing further recruitment at the moment, including for operational roles, which will be needed in due course.”

The figures come as the government continues to debate the options for a future customs relationship with the EU that would avoid a hard border between Northern Ireland and the Republic of Ireland. The government has published a white paper based on HMRC’s work setting out two possible options for customs after Brexit – a highly streamlined customs partnership and a new customs partnership. The first of these would seek to negotiate a continued waiver from the EU on the requirement to submit entry and exit summary declarations for goods being moved between the UK and the EU, while the second option could see the UK acting in partnership with the EU to operate a regime for imports that aligns precisely with the EU’s external customs border, even if goods enter the UK first.

HMRC chief executive Jon Thompson has indicated he would need up to 5,000 extra staff to deal with post-Brexit work.

HMRC cut staff numbers by over 2,000 since Brexit referendum

The Bookkeeper | 11

HMRC NEWS

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HMRC are under investigation by the Information Commissioner following a

complaint that it breached data protection laws by saving taxpayers’ voices without consent.

The privacy watchdog Big Brother Watch alleges that HMRC has collected 5.1 million taxpayers’ voiceprints without their consent.

Callers to HMRC are required to repeat the phrase “My voice is my password” on an automated line before being able to access services. Big Brother Watch claim this amounts to “being railroaded into a mass ID scheme” as callers are not given the choice to opt in or out.

The watchdog submitted Freedom of Information requests revealing the government department has acquired 5.1 million voiceprints.Big Brother Watch said: “HMRC has refused to disclose which other government departments the voice IDs have been shared with, how the IDs are stored and used, whether it is possible to delete a voice ID, which legal territory the data is kept in, how much the scheme has cost taxpayers, or the legally-required ‘privacy impact assessment’.”

After members of the public raised concerns, Big Brother Watch say they tested the system and found there is no option for callers to opt out of the ID scheme, or have their voiceprint securely deleted.

Big Brother Watch claims the process amounts to collecting biometric data “by the back door”.

“Taxpayers are being railroaded into a mass ID scheme that is incredibly disturbing. The tax man is building Big Brother Britain by imposing biometric ID cards on the public by the back door,” said director Silkie Carlo.

‘The rapid growth of the British database state is alarming. These voice IDs could allow ordinary citizens to be identified by government agencies across other areas of their private lives. HMRC should delete the five million voiceprints they’ve taken in this shady scheme, observe the law and show greater respect to the public.”

An Information Commissioner’s Office spokesperson said: “We have received a complaint about HMRC’s voice ID scheme and will be making enquiries.”

HMRC under investigation for alleged breach of data protection rules

The IAB’s AGM, which took place on 21 June, saw Nicola Bate MIAB AIAAP being elected to Council. Congratulations to Nicola and also to Sue Renaut FIAB, Jenny Coffin MIAB AIAAP and James Sheppard MIAB, who were re-elected to stay on the Council. Sue Renaut FIAB was elected as the Council Chair and Juan Carlos Venegas MIAB FIAAP was named Vice Chair.

If you are interested in standing for Council next year then please look out for information that will be released later this year in future editions of The Bookkeeper and the monthly e-newsletters.

AGM update: the election results

Nicola Bate MIAB AIAAP

Sue Renaut FIAB

Jenny Coffin MIAB AIAAP

James Sheppard MIAB

Juan Carlos Venegas MIAB FIAAP

12 | The Bookkeeper

HMRC NEWS

IAB EVENTSKEEP UP TO DATE BY ATTENDING THE IAB’S LATEST SEMINARS

The IAB has arranged two further seminars covering a range of topics including: Making Tax Digital, tax and payroll updates, automatic enrolment and much more!

The events will take place in Bristol on Thursday 18th October and London on Thursday 1st November 2018 and are an excellent way to gain updates for your own business and your clients or the business you are employed by.

Reasons to attend:1. Keep up-to-date and find out more about key legislation and developments affecting you, your clients or your

employer. This includes an update on Making Tax Digital. 2. Gain Continuing Professional Development (CPD) points3. Network with fellow IAB members4. If you have your own bookkeeping practice or are thinking of becoming self-employed, then gain guidance on how to

price your services and earn what you’re worth.

Please find the full details of the seminars below:

IAB London seminarDate: Thursday 1st November / Time: 9:30am – 4:15pmVenue: The Montague on the Gardens, 15 Montague St, Bloomsbury, London WC1B 5BJ.

Programme: To view the programme please visit: www.iab.org.uk/pub/IAB_London_seminar_programme_-_1st_November_2018.pdf. A summary of the programme can be found below:

Additional information:

For further details about the seminars please contact the membership team: membership@iab.org.uk or 01732 897750

To book please visit: www.iab.org.uk/event/iab-bristol-seminar-2. This also has the costs for attending. Please note there is limited complimentary car parking available at this venue. We cannot guarantee parking as it is on a first come first served basis. There are public pay and display car parks close by. Temple Meads train station is within easy walking distance of the venue.

To book please visit: www.iab.org.uk/event/iab-london-seminar-2. This also has the costs for attending. Please note there is no parking available at this venue and the nearest underground station is Russell Square.

• Making Tax Digital• AMLCC and Money Laundering Regulations update• The cloud and new digital technologies

• Payroll update• How to price your services if you have your own

bookkeeping practice

• Automatic enrolment• Payroll update• Making Tax Digital

• Tax update• How to price your services if you

have your own bookkeeping practice

IAB Bristol seminarDate: Thursday 18th October / Time: 9:30am – 4:15pmVenue: DoubleTree by Hilton Bristol City Centre, Redcliffe Way, Bristol, BS1 6NJ

Programme: To view the programme please visit: www.iab.org.uk/pub/IAB_Bristol_seminar_programme_-_18th_October_2018.pdf. A summary of the programme can be found below:

The Bookkeeper | 13

14 | The Bookkeeper

Q: Could you explain a bit about your practice and how it has grown?

A: I operate JGBC, and I specialise in supporting micro, small and start-up businesses to become more educated about their finances and to find more effective ways of working, in turn, increasing efficiency and profits. I do this by utilising my business management and bookkeeping skill sets and experiences. I aim for my clients to see these three key benefits.

1. Decreased costs and increased profits/ capital to reinvest

2. More time to either spend on new projects or out of the business

3. More confident with businesses financials, past current and future

The plan was to run the business while in full-time employment until the company was earning enough to replace my wage, this I expected to take two years. Instead, I handed in my notice in October 2017 due to the business growing faster than planned.

Q: How did your bookkeeping career begin and what made you choose bookkeeping as a career?

A: Before starting my own business, I worked as a finance manager for a large residential outdoor activity company. I had a lot of friends and ex-colleagues that had set up their businesses in the area, and were often struggling with both their bookkeeping and knowledge of running a business. I would spend much time advising them and decided that I would love to do this for a living.

Q: What do you enjoy most about your work? A: There are two main parts of my work I

love. One is the enjoyment I get from

supporting my clients and their businesses. I have amazing clients. I don’t work with people I don’t think I can

At the IAB we are always keen to hear from members and share their stories about their careers and successes. Here is a case study provided by Johann Goree MIAB about how he started his own bookkeeping practice in 2017 and how he has grown his business. He also gives his advice for anyone looking to become a bookkeeper or start their own practice.

If you have a story to share and would like to feature in a future edition of The Bookkeeper we would love to hear from you. Please contact Kelly Orford: kellyo@iab.org.uk.

help or work with and this has led to a few clients being released over the last eighteen months.

The second part I love about my job is the work-life balance I have achieved. When I’m not supporting my clients, I’m a community councillor and enjoy going for long walks with my dog and camera, living in the foothills of the Scottish Highlands means I’m literally on the doorstep of the most beautiful trails.

Q: What has been the biggest obstacle in your career so far, and how did you overcome it?

A: The biggest obstacle I have faced so far is keeping focused. I often have ideas that are either new or evolutions of prior plans that would lead to me focusing on things that aren’t priorities. I have found two solutions to this problem. One is the CRM software AccountancyManager which helps me see what’s due and when so I keep everything prioritised. The second solution is in the form of my mentor. My mentor Kris McCulloch from the Bookkeepers Alliance has proved a fantastic sounding board for my ideas and helps me think them through and see them from a different perspective before implementing them.

Q: What has been your most significant success, or the moment you’re most proud of (professionally and personally)?

A: I have had many successes over the last eighteen months. The company is rapidly growing, I have great clients and have received some fantastic reviews.

I think my proudest moment was winning the “startup bookkeeper” award at the UK Bookkeepers Conference in June 2017. The reason this meant so much was that my peers within the Bookkeepers Alliance had nominated me for it.

Q: What are your plans for the future?A: I plan to carry on growing the business

and discovering tools to allow me to support my clients carry on developing and understanding their business.

I don’t have a document named “Business Plan” instead I have a plan for my business. This plan is in my head and changes regularly in line with the changing environment my company is operating within. At this point, I don’t know what the business will look like in a years’ time I may have employees I may not I may cap the growth to a level I can handle on my own but I may not. As long as I can maintain a lifestyle that I enjoy, then I’m happy to watch it evolve.

Q: What three pieces of advice would you give to anyone looking to become a bookkeeper or start their practice?

A: 1. Have the confidence to try new ideas. If I

get an idea for a service or a package that excites me, then I usually have planned, designed adverts and launched it within 24 hours.

2. Keep up with the changing industry and environment both in regards to policies and technology. Our industry is fascinating at the moment with all the new technology coming in, but this does mean our roles, in my view, are changing. My clients have grown to expect more than just data entry and processing from me. They know they will get that and support to understand and action the information that the data provides.

3. Don’t do it alone. There’s some fantastic support out there in the form of different groups and organisations like the IAB. I wouldn’t be where I am today without the support I receive from The Bookkeepers Alliance members and my mentor Kris McCulloch.

IAB member case study

Johann Goree MIAB

The Bookkeeper | 15

It’s important to keep on top of cash – whether it’s paying suppliers for goods or

services or making sure there won’t be any issues with paying any employees at the end of the month, there’s nothing more important than cash flow to keep your business healthy.

A major cause of headaches, for both businesses and individuals, is when customers, clients, or others don’t pay money they owe. Despite letters and phone calls they may fail to meet their financial obligations and can leave their creditors feeling frustrated and out of pocket. For many small businesses, this can make the difference between their business surviving or going under.

So to make sure your business stays healthy, ask yourself the following questions:• Do you have sufficient finance available to

meet any commitments when they are due?• Are you confident your finances will

remain in a strong position for the foreseeable future?

• Do you have, and update regularly, a cash flow forecast to ensure you stay within your financing facilities?

• Are your major customers paying you promptly and not putting you under pressure to extend payment terms?

• Is your product or service so vital to your customers that they will pay your invoices first if they have to choose who to pay?

• Are you confident that your customers are not having financial difficulties that might make them pay you late, or not at all?

• Are you implementing good credit management practice?.

It’s always worth planning your cash flow requirements carefully, allowing for differences in the payment terms you receive from your suppliers and those you give to your customers. You should look to regularly update the cash flow forecasts to ensure you stay within your financing facilities. Monitor your plan as much as you can so you can spot any variances and if you think you might have a cash flow problem then make sure you talk to your bank immediately. The

This article has been provided by the Federation of Small Businesses (FSB) and contains guidance for monitoring the cash flow for your business, your clients’ businesses or the business you are employed by.

earlier you discuss this with them, the earlier they can assist you with what options are available to you.

If you can’t pay a supplier on the due date, talk to them as soon as you know you cannot do so. Again, earlier communication allows for all options to be explored and gives more of a degree of flexibility. Don’t forget, early communication is key – if you avoid talking to suppliers, your bank and other parties, you might find supplies or finance have been withdrawn or legal action has started and things will quickly escalate.

And when it comes to getting back money that’s owed to you, ask yourself the following questions:• Is there likely to be a dispute about the

amount of the debt?• Has the debtor got means to pay?• Does the debtor have assets in the UK?• Are there other businesses or individuals

who are overdue to pay you money? • If so, why is that? • Is the position getting better or worse? • What do you do yourself to try and collect

the money you’re owed? Try and Collect the Money You’re Owed You should always contact a person who owes you money that’s overdue – after all, they may simply have forgotten or be busy themselves with other tasks and you can ensure you have provided your customer with all the information they require in order to settle an outstanding invoice.

So what should you do if you still aren’t being paid yourself by the people you’ve worked for?We explain how to deal with this situation and keep your cash flow up to date.

Assess your current cash positionThe first step you should take as a business owner is to assess your current cash position and ask yourself some questions: If there is a reason for non-payment, then whether it’s valid or not, you’re better to know sooner rather than later.

You should phone for best results but there’s nothing to stop you sending letters and texts.

If that doesn’t work, you need to think about what to do next. That means either:• writing off the debt, accepting you won’t

be paid; • waiting longer, which rarely ends with the

payment you want;• or involving a third party, either a debt

collection business or a solicitors’ firm.

How FSB can help with your overdue debtIf you elect to use a third party, it might seem like there are many variables to consider when you’re deciding who to select.FSB’s Debt Recovery service, included in the Business Essentials package, is here to make sure all your needs are covered in a comprehensive, effective, and easy to understand way. Benefits of this service include: Up to 20 solicitors’ letters FREE per annum; Access to discounted and fixed legal fees; An easy to use online portal which is available 24/7.

Join FSB:For IAB members that wish to join FSB as a Business Essentials member, a £30 discount is available (terms and conditions apply)*. The £30 registration fee will be waived for all IAB members (quote code IAB915). This promotion is provided by the Federation of Small Businesses (FSB).

To find out more or to join FSB please phone: 0808 2020 888†You can also visit: www.fsb.org.uk

*FSB Business Essentials membership starts from £142.50 per annum with a £30 registration fee in the first year. Please see the website for full details of subscription rate bands. Until 5.00pm on the 31/12/2018 the registration fee will be waived for all full members joining over the telephone or online and quoting the code IAB915. Code must be quoted during the telephone joining process or inputted during the online joining process. †Calls are normally free of charge from UK landlines but charges may apply from mobile phones. Lines open 8am – 6pm weekdays, closed Bank Holidays. Registered Office: National Federation of Self Employed and Small Businesses Limited, Sir Frank Whittle Way, Blackpool Business Park, Blackpool, FY4 2FE.

Keeping your cash flow up to date

All the following stories are true (names and figures have been changed to protect individuals).

Welcome to The Stupidly Cheap Bookkeeping Company, Anne speaking, how may I help?”. The only word they hear is STUPID. It’s enough to make anyone leave on the spot.

‘‘

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The Bookkeeper | 16

What’s in a name? Everything. What you name your business will reflect directly

on your success - not to mention your marketing. I found this out by using a really stupid name for my bookkeeping practice. I’d love to reveal it, but I can’t because this column is anonymous - the idea being that the authors of this column can spill the beans without getting covered in them.

However, for purposes of illustration, let’s just say the name I chose was “The Stupidly Cheap Bookkeeping Company”. You can see the intention - it’s a low cost service. So the target audience is going to be people who want to pay the minimum possible price.

And that’s the first part of the problem. It’s bound to attract the worst kind of client -

people who want you to do everything and not pay you because they’re broke. And it did. Hint: always get paid up front when taking on a new client.

But there’s a worse problem. Imagine picking up the phone every time it rings and saying “Good Morning, Welcome to The Stupidly Cheap Bookkeeping Company, Anne speaking, how may I help?”. The only word they hear is STUPID. It’s enough to make anyone leave on the spot. The ‘Cheap’ part of it now sounds stupid too. I’ve no idea what I was thinking (not that this was the actual name of course...).

So what do you call yourself? You have two options: 1) go personal and use your own name, or 2) think of some corporate or friendly type name. Most bookkeepers I know use their initials (eg. ‘ABC Bookkeepers’), which is fine but perhaps a little boring these days.

Or you could go geographic and use your town as part of the name Eg. Bolton Bookkeepers (apologies if there’s one of

those already). This is excellent for local marketing. People know what you do and where you do it.

That’s what I chose when I finally got around to changing my ‘stupid’ business name. It also worked wonders for local search engine optimisation (SEO). Grab yourself a Wordpress site, a nice theme, some low cost hosting (I recommend Krystal.co.uk - I have no connection with them by the way, they’ve just been the best of all the hosting solutions I’ve tried - and they’ve been around longer than almost anyone else too - my due diligence paid off when I found them).

If I hadn’t chosen to use a geographical name for my service, I would have used my full name instead - followed by ‘Bookkeeping’. It has a very high trust factor, which is also why it’s vital you have an online presence. If people can’t find you online, you’ll not only lose business, you’ll get considerably less trust (and when it comes to looking after other people’s books, that’s top of the list - along with IAB membership of course).