Another fantastic evening was spent up on the 18th floor of NZ House last week. The skies were clear, giving a far-reaching view over the city as our clients enjoyed some cold NZ beers and wines while networking, not to mention the delicious meat pies ;)
For those that could not make it, and those too distracted by the views to take notes, below is an in-depth look at the topics covered.
Greg Hanton, co-founder of No Worries Company Services, did the honor of opening the floor and welcoming our clients. He gave a brief history of the company, from its humble beginnings in a home office with advertising done on gumtree to where we are today with our spacious offices in Wimbledon Village and a brilliant customisable software package for our clients.
The remaining speakers were;
Candice Fourie, Managing Director at No Worries Company Services
Nicola Hayman, Legal Manager at Kingsbridge Contractor Insurance
Andrew Baird, Financial Adviser at Fortress Wealth Partnership LLP
Below are the detailed notes to the presentations that were given.
It has been 2 years since our last evening here at the penthouse and many things have changed….
· We have welcomed 3 more members to our NW team
· Our umbrella company has doubled in sized
· And we have successfully transferred all of our clients across to our new software platform so that the transition to MTD for our VAT clients has been seamless. 80,000 business that missed the Making Tax Digital (MTD) deadline this month.
And then, of course, there are the things that haven’t changed…
· There are still an extraordinary number of cranes blending into the London skyline
· We are still no closer to a Brexit deal than we were even 3 years ago
· And the HMRC are still pulling all resources to the common goal of getting more taxes paid
In recent months we have seen:
· Reports that the HMRC has clawed back an extra £1bn over the last year in an unprecedented crackdown on payment loopholes. HMRC’s focus on eliminating the use of tax avoidance schemes has seen fewer schemes are being launched and HMRC is sweeping up more of the taxpayers who have bought into these schemes.
· The HMRC has targeted GlaxoSmithKline contractors by sending out over 1,500 letters accusing them of being “disguised employees”.
· Sajid Javid has commissioned a review into the loan charge following pressure from campaigners who argue HMRC has been “devastating the lives of middle and lower-income individuals”, while failing to pursue any of the scheme promoters, or employers. Understandably, people who settled with HMRC over loan charge bills are feeling somewhat aggrieved at the prospect of penalties being reduced or even scrapped when they have paid their fair due
· Just last week it was reported that the HMRC has been writing to tenants of properties owned by overseas landlords informing them that they may have to help pay for their landlords’ tax bills by withholding rent.
Although you can fault HMRC’s targeting of tax avoidance, many of its methods are causing some alarm.
· In 2 separate cases brought to the First Tier Tribunal, appeal against corporation tax return late filing penalties were dismissed; with the FTT saying it was
1. up to the company, not its agent to ensure its tax affairs were up to date.
2. reliance on an adviser and software issues were not a reasonable excuse for a third successive late return.
I would just like to briefly touch on the off-payroll working rules that are to apply from 6 April 2020. I am not going to go into this too much, as I have already sent information out to all of our clients, and our guest speaker Nicola will go into more depth for you. But I do want to urge you to act if you have not already done so. April is around the corner and the contracting world as we know it is set to change. Get your reviews done and talk to your engagers.
And remember, if you are left with no choice but to go Umbrella then we are here to help you make the move across to our umbrella service, so that you can keep doing what you do best allow us to take care of your taxes, and compliance.
There are a handful of larger corporation that have already sent out notices to say that they will no longer be engaging any contractors, which is not what they are meant to be doing, seen as each engagement is meant to checked individually, but this has happened. We would like to know what you have been finding with your clients so far, and will be setting up a poll and questionnaire for all clients to partake in, in the coming weeks. This will be emailed out.
A few points to consider:
I know the LISA is old news, but I would like to urge you not to overlook it. If you yourself still qualify, or if you have a young adult in the family (18 to 40) — set up lifetime ISA. It can be opened any point up to the age of 40, and funds can be contributed up to the age of 50. You can put away up to £4,000 a year, and the government will put in £1,000. This obviously needs to be done by 5-Apr each year. It is less complicated than pension — and can be done on top of pension contributions. At 60 you could take out the funds to pay a massive pension contribution to get higher rate tax relief — but the tax relief rules on pension contributions are obviously unknown for then?!
If you have rental property income, you will already be aware that the Mortgage interest relief is falling each year to a point where no deduction will be available. This will obviously mean an increased tax liability and that you will potentially lose the personal tax allowance. But there are further points to bear in mind, which are often overlooked
· the marriage allowance which allows an individual to transfer part their personal allowance to a partner if both parties are basic rate taxpayers may be lost as the increased income figure for this test could push you into a higher rate
· the pension allowance reduces if your income is over £150k (£1 for every £2)
· it is possible that you may not be able to use tax free childcare as there is a limit in place — If either parent earns over £100k they cannot use the system
If this is no longer an attractive avenue for you, and you are looking to sell instead please make sure you carefully consider your situation. If you are selling a property that was initially your main residence, you will qualify for some personal residence relief. If you are transferring some of the ownership to your spouse, this needs to be done with great care. The property would need to be occupied as the main or only residence at the time of transfer in order for them to acquire the original acquisition date, base cost and occupation history for PRR on disposal.
Also, bear in mind that the new rules that come into force in April 2020 will change private residence relief so that only the last 9 months (previously 18 months) of ownership will be exempt. Experts have said that this means property investors could be better off selling now, despite the current weakness in the market.
One further change from 6 April 2020 — Capital Gains Tax due on the disposal of residential properties will be payable within 30 days of the completion date.
If you are looking to expand your business, and need funding in order to do so, you should consider loaning your limited company the required capital as an unsecured loan. The Money must be used for the business in order to qualify, this would be a commercial decision with minutes shown to this effect. And you would need a written agreement for the loan to carry interest at commercial rate. But this interest paid to your personal account could be tax-free if in the savings rate band.
Lastly, as I always do, I would like to remind you all to stay in touch, keep us posted with any changes. We can help you out with fabulous personal tax planning when closing down your limited company, depending on your circumstances and situations. But that tax planning needs to be done in advance, things cannot be changed after the fact. So get in touch with us as soon as you think something may be changing in your working world. The sooner the better.
I always like to end my talks with some good news. But there is honestly a little too much uncertainty at this point in time, to find a good news story that affects all of our clients. A small glimmer of hope to a hand full of our clients — in a move hailed as a ‘victory for common sense’, the government has announced a 12-month delay to the introduction of the domestic reverse charge VAT for construction services, citing industry concerns and Brexit as the reasons behind the postponement.
Nicola Hayman covered off the hot topic for the evening — Off-payroll working in the private sector — the IR35 reform.
The slides for this, as well as contact information can be found here.
Kingsbridge Contractor Insurance offer Legal Expense Cover should you find yourself being in the mist of an IR35 review with the HMRC. This cover requires that you have reviewed your contract/working conditions and are outside of IR35.
You could use the HMRC CEST tool for this (Though not a very reliable tool), or services such as IR35 Shield and Bauer & Cottrell.
A very good question raised by a client was — if my current contract is caught by IR35 will all my contracts be caught?
The answer to this is no. IR35 works on an engagement by engagement basis. So you could have 2 concurrent contracts with one being caught by IR35 and the other not. You are not personally caught, neither is your company, is it the engagement which is caught by IR35 and the income from only that engagement needs to be taxed differently.
If you would like a recap on previous emails that we have sent regarding this subject, please see the following links:
Andrew Baird (0208 042 2481 | Andrew.Baird@sjpp.co.uk):
Thank you all for coming, and to Candice, Greg and the team at No Worries and NZ House for hosting us.
I just wanted to come along tonight and give a little update on the state of play at the moment in the market. But while looking, about a week ago, at writing tonight’s little spiel I realised something. I might be completely wrong. And what I mean by that is that in a week’s time, we may be on a completely different path from where we are now.
If blondes really do have more fun, then Boris and Donald must be having an absolute blast from both sides of the Atlantic. However, both are facing their own trials and tribulations in the run-up to one of the most interesting periods economically and politically for quite some time.
As a room full largely of foreigners, I’m sure this is just what you want to hear. But Brexit means Brexit.
But does it mean Brexit right now? Despite Boris’s best attempts to ensure the UK doesn’t walk out of the EU with its tail between its legs, the fate of this Kingdom’s future is still up for grabs, as we head into the business end of the deal.
The Liberal Democrats have pledged to cancel Brexit and revoke Article 50 if they rise up in a general election. Labour, however, would seek another public vote on Brexit it would seem. SNP sides with the Lib Dems and states the UK should stay as a member of the EU.
On the other side of the coin, the Conservatives and the DUP believe in a hard-line of leaving the EU before the end of October.
But what does all of this mean for markets?
Well in terms of a volatile market, Brexit has already been taken into account in many ways. The initial shock of the 2016 referendum hit the pound hard, and Sterling suffered a severe drop. One that we have not entirely recovered from. More recent events have been priced in through our active management approach, and whatever happens on 31st October will probably give more stability to the UK currency.
USA vs China:
However, if you think the Brexit drama of the late is the main focus in the markets, think again. This ongoing war between the United States and China has waged on for almost the entire Trump administration and could have adverse effects on markets.
40% of global spending in 2018 was done by the USA and China. To put that in context, the UK made up just 3% of that same global spending last year.
Now in 2018, the S&P 500 was down -0.41%, while the Shanghai SE was down -23.72%.
Why? It was wasn’t from tariffs placed on trade or a breakout of nuclear war.
One tweet. Sent in May. @DonaldTrumpOfficial states the US will tax China heavily on imports to the US. Sent US stocks way up and Chinese stocks way down.
Jump forward to 2019. February. Again no taxes or war. Mr Trump tweets that he will meet with President Xi later in the year. Chinese stocks rise 31%.
This is proof that timing investments is not possible. And if anyone tries to tell you they know what is going to happen, no matter what topic, let alone the global economic events of today, they are wrong. They are lying to you.
As Mark Twain once said
“October is one of the peculiarly dangerous months to speculate on stocks. Others are July, January, April, September, November, May, March, June, December, August, and February.”
We can ponder and speculate as to our outcome in the short, medium and long term, but one thing remains true. No one can be sure. One thing we can sure of is the importance of investing through such turbulent times.
We cannot time the markets, because we simply do not know. All you have to do is look at the Global Financial Crisis of 2008.
If you had invested £100,000 in October 2007 in UK equities, by October 2008 you would’ve been down 41%.
The subsequent 2 years saw UK equities rise back into the black, and by October 2017, UK equity market was up 71%. That is a 112% swing from the low felt in 2008.
That pales in comparison to the 34% drop in UK equities by September 1987, which by September 1997, was up 217% — a 251% swing.
My point simply being that we will always be faced with threats to investing and market conditions that allow doubt to enter the investor's mind.
But by understanding your risk tolerance, your time horizon, and your options around investing efficiently and soundly with the help of financial advisers, you can weather such storms and look towards a brighter financial future. Hopefully with less Boris and Donald.
And how does all of this affect you?
One of the main focus’s clients have highlighted is planning for retirement. Those in PAYE roles have benefits not available to those in contractor roles. Pension-matching and Life-cover can be some of the most common, and often go unnoticed or unattended until people leave employment.
As a result, HMRC has made it more attractive for those contracting to save for their future.
Contributions to a personal pension from your limited company is entirely tax-free. Those
contributions are not liable to Income Tax, National Insurance contributions, nor any
Now we have clients in the room I’m sure, as well as many not here this evening. We have helped quite a number of No Worries clients find a solution to their financial queries or problems.
We have moved funds to NZ, Australia, and South Africa. So, if you are planning on staying or gearing up to leave, we can accommodate you and your goals. On that note, if there is more you would like to discuss, please let the team at No Worries know. They have my contact details.
There is no obligation or cost to having a chat and knowing more about your options and planning for your future.
I am happy to take any questions afterward over some warm pies and cold drinks.
And that folks, covers it off. A lot to digest, but at least we had the pies and beverages to help ;)