The Know. Medical. Nov Inside find out about... Payroll Matters... Tax Measures 2017/18. Cloud Accounting. healthcare. Healthcare Tax Manager

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1 in The Know Nov 2017 Inside find out about... Payroll Matters... Tax Measures 2017/18 Cloud Accounting Page 2 Page 4-5 Page 7 The Pension Shocker! What s A Doc To Do? April 2016 saw further changes to the annual allowance (AA) limit and despite industry experts predicting further cuts in the Autumn Budget this did not transpire when the Chancellor delivered his budget on 22 nd November. The AA limit, is currently 40,000, although individuals with high earnings (> 150,000) may see this reduced to 10,000. Whilst most doctors will believe they are not high earners, the rules for calculating the 150,000 are extremely complex. When coupled with the high inflation rate for 2017/18, we are seeing quite a few clients being affected by large tax charges. Those who are affected and do not engage a specialist medical accountant, may only find out about the tax charge in July At this time, it will be too late to take any steps to mitigate the tax liability. One of the complications to the calculations is the pension contributions paid during the tax year. As most doctors will be aware, payments are collected monthly from the practice, with a balancing amount being collected in the subsequent February, when the superannuation certificate is produced and the actual liability determined. The monthly deductions are calculated based on the estimate of pensionable pay submitted by the practice before the start of the tax year. So what s the problem? I can already hear you saying. For many practices the estimates of pensionable pay have not been processed and for those who have been fortunate enough to have them processed, many contain errors. Particular problems have been seen where partners join or leave a practice during the year. This matter has been raised and the response is that the outstanding contributions will be collected when the certificates are processed. However, for tax purposes, this will fall into a subsequent tax year (assuming the certificates are processed on time if not it could be two tax years late!) and this can have a By Claire Hebdige Healthcare Tax Manager Continued on Page 2 Telephone:

2 2 The Know in huge impact on someone s income for the purposes of the reduced annual allowance limit. Pension records A couple of years ago, NHS Pensions introduced a new computer system and undertook a data cleanse. At this time, pension records were updated and where employers had not provided information, the record was simply shown as nil, but experience has shown that issues continue, so that where certificates and forms are not being processed, no income is being shown for the year (or years) in question. This can be rather troublesome for those approaching retirement age. What can doctors do? Ensure that superannuation payments are collected in the correct tax year and if not, arrange for an additional one-off payment to be made to PCSE before the end of the tax year by bacs. Easier said than done? What s a Doc to do? The key thing is to check the pension record on an annual basis. This can be done by obtaining a copy of the latest Total Reward Statement and checking the earnings shown to forms/payslips. If there are any discrepancies, PCSE will need to be contacted to get these resolved. Whilst it is only a HMRC requirement to keep tax records for 6 years, it is recommended to keep copies of all type 1 and type 2 certificates, locum A & B forms, SOLO forms and payslips until retirement. Yes, we really do mean ALL forms! There is of course a solution to all of this! And that is, if you engage a specialist medical accountant they are likely to be regularly checking the pension record and annual allowance position for you. There! No more shocks! Contact: Claire Hebdige or Linette Hall claireh@ doddaccountants.co.uk or linette@doddaccountants. co.uk Payroll Matters Apprenticeship Levy From April 2017, all employers with a wage bill in excess of 3 million each year must pay the apprenticeship levy. This is reported and paid to HMRC together with the PAYE and NIC liabilities. Employers who use Iris GP payroll who have a wage bill below the 3m, should ensure that the software is set up correctly so deductions are not collected. This is not a problem for employers who process their wages through Sage. If you pay over the levy, you can create an online account to receive funds to spend on apprenticeships and pay the training provider. Those who don t pay over the levy will not be able to register for an account until at least NEST Pension NEST pension deductions are treated differently to NHS Pension contributions. The deductions are after tax, so gross and taxable pay should be the same figure (unless there is something else on which tax relief is being claimed). The employee contributions should be 80% of the intended contribution rate, so for example, if the employee contribution rate is supposed to be 1%, the deduction from the payroll should be 0.8%. The 80% contribution is then paid over to NEST with the employer contribution. NEST then add the extra 20% employee contribution (thereby giving the employee the 20% tax relief). Where the employee is a higher rate taxpayer, they will need to claim the additional tax relief by completing a tax return. It is also worth remembering to watch out for those who are not paying into the NHS Pension due to having pension protections in place and to ensure that they have completed their auto-enrolment opt out forms correctly, so they do not have to be automatically re-enrolled every 3 years and the payroll software correctly reflects this. Tax Measures for 2017/18 See page 4-5

3 in The Know 3 Widening Access Training The start of the academic year has seen a new flurry of practice managers contacting us to discuss how to deal with employees requesting tax and NI refunds under the Widening Access Training (WAT) scheme. WAT is a specific scheme aimed at broadening the professional knowledge of NHS workers and has been running since It is open to nurses, midwives, doctors, paramedics and health visitors. Whether the staff member will be eligible for relief will depend on a number of factors. The course The employees need to be enrolled on a full time course at a recognised college or university for at least one academic year (i.e. from 1 September to 31 August). They must also attend for at least 20 weeks in the academic year. If you are not sure whether the employee qualifies, it is best to ask the course tutor. Payments The exemption only applies to income paid by the practice to the employee to support them through their training. This is essentially what HMRC consider to be a scholarship. So, say the employee is paid 30,000 for the year and spends 3 days a week at college on a qualifying full time course and the remaining 2 days working in the practice, the earnings relating to the two days working at the practice would not be exempt. Income If the employee earns over 15,480 they can t claim the exemption, however, we have seen cases where HMRC have allowed refunds for those earning over this amount. HMRC need to be satisfied that the payments are for a training/scholarship allowance and where this is the case, the full amount of the payment can be exempted from tax. However, the rules for NI are much stricter and the 15,480 limit will be applied. Employment The person undertaking the training must also be in employment at the time of undertaking the course. Claiming the exemption If all the criteria are met, the practice can make the payments to the employee without deduction for tax and NI. Other considerations Claiming the exemption can lead to the employee needing to repay tax credits and them loosing state pension qualifying years. If the employee is worried about their state pension entitlement they should contact HMRC. Payments made for earlier periods If it comes to light that the employee met the criteria for an earlier period, how this is dealt with will depend on when the course started. Contact: Claire Hebdige or Helen Tyson claireh@doddaccountants.co.uk or HelenTyson@doddaccountants.co.uk

4 4 The Know in Short summary of some of the tax measures which have come into force for 2017/18 Loss of higher rate tax relief on buy to let mortgage interest The new rules will heavily restrict the tax relief on mortgage interest and can hit landlords very hard, especially those who have highly financed properties. The Government have announced that they are restricting tax relief on buy to let mortgage interest to 20%. Interest will no longer be an allowable deduction in computing your rental profits, and instead you will obtain a 20% tax credit on the interest which will be deducted from your annual tax liability. This will affect individuals who let residential property and claim a deduction for mortgage interest. Those who let commercial properties and/or furnished holiday let properties are not affected by these new rules, and neither are those who own properties through limited companies. The new rules are being phased in from April 2017 over three years so will not be fully in force until April Residence nil rate band The additional nil-rate band is being phased in from 6 April 2017, so that by 6 April 2020, a couple could leave 1m in their wills without any IHT being payable. The additional nil-rate band is available where a residence is passed on death to a direct descendant. The additional nil-rate band will be 100,000 in , 125,000 in , 150,000 in , and 175,000 in It will then increase in line with Consumer Prices Index (CPI) from onwards. Any unused proportion of the additional nilrate band will be able to be transferred to a surviving spouse or civil partner irrespective of when the first of the couple died. The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants. The qualifying residential interest will be limited to one residential property but personal representatives will be able to nominate which residential property should qualify if there is more than one in the estate. A property which was never a residence of the deceased, such as a buy-to-let property, will not qualify. Where an estate has a net value of more than 2m, the additional nil-rate band will be withdrawn at a rate of 1 for every 2 over this threshold. Making Tax Digital See page 6

5 in The Know 5 Tax-Free Childcare Working parents can now start applying for two new government childcare schemes launching this year Tax-Free Childcare and 30 hours free childcare. This means that working parents of children, who were aged under 4 on 31 August 2017, can now apply through the new digital childcare service for Tax-Free Childcare, and receive a government top-up of 2 for every 8 that they pay into their Tax-Free Childcare account. All parents of disabled children (under 17 years old) are now also able to apply for Tax-Free Childcare. In addition, parents of 2-3 year olds, who are eligible for a 30 hours free childcare place from September 2017, can apply through the childcare service and start arranging a place with their childcare provider. The Childcare Choices website provides information on the government s childcare schemes and explains how parents can preregister or apply. It also includes a childcare calculator to show eligible families how much they could receive. For parents across the UK, Tax-Free Childcare will cut childcare costs by up to 2,000 per year for each child under 12 years old, or 4,000 per year for disabled children under 17 years old. The programme will be rolled out through the year, with all eligible parents able to receive it by the end of From September 2017, working parents of three and four-year-olds living in England will also be entitled to the new 30 hours free childcare offer, worth around 5,000 per child. Parents will only need to make a single application for both schemes when their children become eligible. Changes affecting companies The new 19% corporation tax rate is now in place. Losses arising after 1 April 2017 can now be used flexibly against the company s income from any source. Employment tax changes The public sector has seen a huge change with responsibility for operating the personal service company (PSC) tax rules shifting to the public sector company (or agency or third party) paying the PSC. A very specific shakeup but with wide ranging repercussions! Changes to the way salary sacrifice operates for most benefits in kind has now changed significantly, with the tax and NIC benefits of salary sacrifice significantly restricted. New arrangements using salary sacrifice will see the benefit provided being subjected to the same tax as the cash income sacrifice for all but a very few select exclusions. LISA New Lifetime ISAs (LISAs) have been introduced for those between the age of 18 and 40. Individuals can save up to 4,000 per annum with the government topping their savings up by 25% on any contributions made before their 50th birthday. The money can be withdrawn tax free for one of two reasons: 1. The purchase of their first property (up to a maximum of 450,000) 2. To fund their retirement after the age of 60 Gifts From April 2016, there is no prescribed exemption for trivial benefits. A benefit will now be treated as trivial if it meets all the following conditions: The cost of providing the benefit does not exceed 50; The benefit cannot be cash or a cash voucher (but a high street voucher is fine); There must be no contractual entitlement to the benefit (including salary sacrifice); The benefit must not be in recognition of services performed by the employee as part of their employment. If all the criteria are met, the benefit will not need to be declared on a P11D. If however, the benefit exceeds 50, the amount is taxed, not just the excess. There is an annual cap for directors, such that all trivial benefits given must not exceed 300 in a tax year. This includes trivial gifts made to family members of the director (if not employees or directors in their own right). It is worth noting that the annual cap does not apply to other employees, so they can receive any number of trivial benefits during the tax year.

6 6 The Know in Making Tax Digital Making Tax Digital (MTD) is a government initiative that sets out a bold vision for a transformed tax system and an end to the annual tax return (as we know it!). The aim is to make tax administration more effective, efficient and easy for taxpayers, through the implementation of a fully digital tax system. The information is still quite vague, but what we know so far is: There will be quarterly reporting for VAT from 1st April 2019 and for tax from 1st April Businesses will be required to submit their returns through MTD compatible software e.g. cloud accounting. The VAT submission must be made by an end-to-end digital process, i.e. software to software interface. The method of submission for VAT is still under consultation, so watch this space. Some businesses may not have to file, so for example, businesses which are VAT registered but below the VAT threshold (currently 85,000). Businesses which are partially exempt (so any VAT registered medical practices) may have the deadline for filing online delayed until If a business is excluded from online filing, they can still choose to submit their return through MTD compatible software. HMRC guidelines have not yet been fully released and everything is still under consultation but as soon as we know more we will be sharing the information with you. Our Favourite Apps For Docs See page 8

7 in The Know 7 Cat Cloud accounting team Cloud Accounting Cloud Accounting is accounting software you access via the internet. Cloud Accounting packages offer the same security level as online banking and can be available from anywhere in the world (as long as there is an internet connection). So, if like many of our clients, you need to be able to work more than 9-5..Cloud Accounting can support you to do so. Packages range from only 9 per month and the monthly subscription fee also allows you to benefit from software support and automatic updates, which can be costly with desktop accounting packages. Dodd & Co have a specialist team of Cloud Accounting experts who can setup training with you. So what are the benefits of Cloud Accounting and why should you use it? Automatic bank feeds saves data inputting due to a read only copy of transactions being brought from your bank account which reduces time, duplicates and incorrect entries. Real time information can enable accountants to prepare accounts shortly after your year end, if you keep the data up to date. The reporting functionality can reduce the need for excessive spreadsheets. Cloud accounting software is deemed easy to use so you will be able to use the system quickly and efficiently in no time. If you can shop online you can use Cloud Accounting! You can process your payroll within Cloud Accounting therefore saving time by not running two systems or saving costs by not outsourcing the payroll. It can help accountants provide on-going business advice and tax planning due to the data being available in real time, not months after year end. Interested in how much time you can save? Give the Dodd & Co specialist Cloud Accounting Team (CAT) a call on

8 8 The Know in Our Favourite Apps For Docs It s easy to see why MyLocumManager was voted number 1 app by Top 10 Websites. This program has been designed by a locum for locums and is easy to use and well thought out. It allows you to schedule your upcoming jobs, produce invoices and pension forms and record expenses. Costs: Free 3 month trial, after which it will cost 12 per month. Expensify is a tool that allows expenses to be recorded on the go. You scan your receipts, then the package automatically analyses them. You can also automatically import expenses incurred on a credit card. It can be integrated with the popular cloud accounting packages. Costs: Prices range from free limited use to $9 (yes, dollars) per user per month. MileIQ is an app that records mileage automatically as it runs in the background of your smartphone. Swiping allows you to categorise the type of travel, e.g. business, personal, to clients etc. Costs: The first 40 drives each month are free or you can pay (equivalent of 3.75 per month) upfront to have unlimited drives or 4.49 per month. This newsletter is designed as an informative guide for clients and their advisors. The articles cannot deal with any particular point in depth and they should not be used as a substitute for full professional advice. Accordingly, no responsibility for any loss or damage can be accepted by Dodd & Co Limited as a result of any person or organisation acting upon material contained in this newsletter. Data Protection Policy: In future Dodd & Co Limited may contact you by mail, telephone, , fax or other means for marketing purposes. If you do not wish to receive further information on products or services, please write to: Data Controller, Dodd & Co, Clint Mill, Cornmarket, PENRITH, CA11 7HW. FIFTEEN Rosehill Montgomery Way Rosehill Estate CARLISLE CA1 2RW T: F: Clint Mill Cornmarket PENRITH CA11 7HW T: F: No 8 Willow Mill Fell View Caton LANCASTER LA2 9RA T: e: carlisle@doddaccountants.co.uk e: penrith@doddaccountants.co.uk e: lancaster@doddaccountants.co.uk