As the new financial year approaches, we want to ensure we keep our clients and candidates up to date. UK tax is a constantly shifting landscape, often due in no small part to confusingly grey legislation, so we spoke with Jovan Pavlicevic, commercial director at forest accountants, to get a view on the detail.
According to Pavlicevic, this tax season, as the new financial year rolls over HMRC is announcing a series of new rules. Each new piece of legislation has been through consultation, and it's now clear what HMRC are trying to achieve... times are tough, and so the belt is being tightened.
LLP salaried partner rulesThe LLP structure traditionally favoured in the legal and accounting sectors has been under scrutiny for some time, and HMRC are now making it clear that this is a structure they are keen to regulate more tightly. There are three conditions being highlighted:
1 - disguised salary
2 - significant influence, and
3 - capital contribution
More detail falls under each of the conditions, but in a nutshell: At present a member of an LLP is automatically treated as being a self-employed partner, rather than an employee of the LLP. The changes mean that LLP members who were previously salaried members (and presumed self employed with the inherent tax efficiencies) will now be classed as employees - with the inherent taxes applied. The result is significantly higher taxes and compliance costs, with many businesses in these sectors requiring a radical restructure.
Offshore, onshore, unsure?Continuing on the theme of chasing down unpaid NIC, two more matching pieces of legislation are coming into effect on the same day. The offshore employment intermediaries act, and its onshore cousin, subtitled: targeting false self employment. HMRC expect to recoup hundreds of millions of pounds' worth of NIC, particularly focusing on employer's NI. The offshore legislation introduces ERNI for the first time to those employment intermediaries based outside the UK, and the onshore legislation is aimed at squarely at sectors where false self employment is rife.
So what does it all mean?
The UK is in for a price shock. Put simply, the Government is going broke, so a number of tax advantages that were previously available are being shut down. The cost of employing is going up substantially - compulsory auto enrolment pensions being a further driver. With the way the new legislation is structured, HMRC are stating clearly that avoidance would be foolish, so the market, and we as consumers, will have to cope with that increased pressure on employers in the form of higher costs.
There are other areas where changes are being introduced, but this is an introduction to a couple of key points. Forest is an ICAEW member firm chartered accounting practice, and FCA regulated firm of financial advisers. Should you wish to discuss the impact of any of the above changes on your own financial situation they can be contacted on 0845 459 4099.
As always eNL’s experienced team of consultants are on hand to discuss any ways in which we can assist you with career or recruitment needs arising out of the above changes. To specifically discuss working as a temporary lawyer and the payment options available to you please contact our locum division on 0121 454 1004.