VAT

VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.

The VAT system is policed by HMRC with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules.

We highlight below some of the areas that you need to consider.

It is however important for you to seek specific professional advice appropriate to your circumstances.

What is VAT?

Scope

A transaction is within the scope of VAT if:

• there is a supply of goods or services
• made in the UK
• by a taxable person
• in the course or furtherance of business.

Inputs and outputs

Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.

The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them.

However the input VAT suffered on the goods and services purchased can be deducted from the amount of output tax owed. Please note that certain categories of input tax can never be reclaimed, such as that in respect of third party UK business entertainment and for most business cars.

Points to consider

Supplies

Taxable supplies are mainly either standard rated (20%) or zero rated (0%). The standard rate was 17.5% prior to 4 January 2011.

There is in addition a reduced rate of 5% which applies to a small number of certain specific taxable supplies.

There are certain supplies that are not taxable and these are known as exempt supplies.

There is an important distinction between exempt and zero rated supplies.

• If your business is making only exempt supplies you cannot register for VAT and therefore cannot recover any input tax.
• If your business is making zero rated supplies you should register for VAT as your supplies are taxable (but at 0%) and recovery of input tax is allowed.

Registration – is it necessary?

You are required to register for VAT if the value of your taxable supplies exceeds a set annual figure (£82,000 from 1 April 2015).

If you are making taxable supplies below the limit you can apply for voluntary registration. This would allow you to reclaim input VAT, which could result in a repayment of VAT if your business was principally making zero rated supplies.

If you have not yet started to make taxable supplies but intend to do so, you can apply for registration. In this way input tax on start up expenses can be recovered.

Taxable person

A taxable person is anyone who makes or intends to make taxable supplies and is required to be registered. For the purpose of VAT registration a person includes:

• individuals
• partnerships
• companies, clubs and associations
• charities.

If any individual carries on two or more businesses all the supplies made in those businesses will be added together in determining whether or not the individual is required to register for VAT.

Administration

Once registered you must make a quarterly return to HMRC showing amounts of output tax to be accounted for and of deductible input tax together with other statistical information. All businesses have to file their returns online.

Returns must be completed within one month of the end of the period it covers, although generally an extra seven calendar days are allowed for online forms.

Electronic payment is also compulsory for all businesses.

Businesses who make zero rated supplies and who receive repayments of VAT may find it beneficial to submit monthly returns.

Businesses with expected annual taxable supplies not exceeding £1,350,000 may apply to join the annual accounting scheme whereby they will make monthly or quarterly payments of VAT but will only have to complete one VAT return at the end of the year.

Record keeping

It is important that a VAT registered business maintains complete and up to date records. This includes details of all supplies, purchases and expenses.

In addition a VAT account should be maintained. This is a summary of output tax payable and input tax recoverable by the business. These records should be kept for six years.

Inspection of records

The maintenance of records and calculation of the liability is the responsibility of the registered person but HMRC will need to be able to check that the correct amount of VAT is being paid over. From time to time therefore a VAT officer may come and inspect the business records. This is known as a control visit.

The VAT officer will want to ensure that VAT is applied correctly and that the returns and other VAT records are properly written up.

However, you should not assume that in the absence of any errors being discovered, your business has been given a clean bill of health.

Offences and penalties

HMRC have wide powers to penalise businesses who ignore or incorrectly apply the VAT regulations. Penalties can be levied in respect of the following:

• late returns/payments
• late registration
• errors in returns.

Cash accounting scheme

If your annual turnover does not exceed £1,350,000 you can account for VAT on the basis of the cash you pay and receive rather than on the basis of invoice dates.

Retail schemes

There are special schemes for retailers as it is impractical for most retailers to maintain all the records required of a registered trader.

Flat Rate scheme

This is a scheme allowing smaller businesses to pay VAT as a percentage of their total business income. Therefore no specific claims to recover input tax need to be made. The aim of the scheme is to simplify the way small businesses account for VAT, but for some businesses it can also result in a reduction in the amount of VAT that is payable.

How we can help

Ensuring that you comply with all the VAT regulations is essential. We can assist you in a number of ways including the following:

• tailoring your accounting systems to bring together the VAT information accurately and quickly
• ensuring that your business is VAT efficient and that adequate finance is available to meet your VAT liability on time
• providing assistance with the completion of VAT returns
• negotiating with HMRC if disagreements arise and in reaching settlement
• advising as to whether any of the available schemes may be appropriate for you.

If you would like to discuss any of the points mentioned above please contact us.

Dismissal Procedures

There have been many changes to employment law and regulations in the last few years. A key area is the freedom or lack of freedom to dismiss an employee.

An employee’s employment can be terminated at any time but unless the dismissal is fair the employer may be found guilty of unfair dismissal by an Employment Tribunal.

In November 2011, the qualifying period for unfair dismissal increased from one to two years continuous service for employees who joined on or after 6th April 2012. However, there is no length of service requirement in relation to ‘automatically unfair grounds’.

We set out below the main principles involved concerning the dismissal of employees including some common mistakes that employers make. We have written this factsheet in an accessible and understandable way but some of the issues may be very complicated.

Professional advice should be sought before any action is taken.

The right to dismiss employees

Reasons for a fair dismissal would include the following matters:

• the person does not have the capability or qualification for the job (this requires the employer to go through consultation and/or disciplinary processes)
• the employee behaves in an inappropriate manner (the company/firm’s policies should refer to what would be unreasonable behaviour and the business must go through disciplinary procedures)
• redundancy, providing there is a genuine business case for making (a) position(s) redundant with no suitable alternative work, there has been adequate consultation and there is no discrimination in who is selected
• the dismissal is the effect of a legal process such as a driver who loses his right to drive (however, the employer is expected to explore other possibilities such as looking for alternative work before dismissing the employee)
• some other substantial reason.

Claims for unfair dismissal

Upon completion of the required qualifying period, employees can make a claim to an Employment Tribunal for unfair dismissal within three months of the date of the dismissal and if an employee can prove that he/she has been pressured to resign by the employer he/she has the same right to claim unfair dismissal or constructive dismissal.

In addition to the increase in qualifying period, the government has also introduced plans for details of claims to be submitted to ACAS where the parties will be offered pre-tribunal conciliation before proceeding to a Tribunal. However, there is no obligation of either party to take it up. Since 29 July 2013 the government has introduced fees for claimants bringing tribunal claims.

There are two levels of claim, depending on the complexity of the case. For straightforward claims with one claimant there will be two fee points, an issue fee of £160 and a hearing fee of £250, for more complex claims (including unfair dismissal and discrimination claims) these figures rise to £230 and £950, for multiple claims the fee per claimant is discounted on a sliding scale. The tribunal may order the fees to be repaid to the claimant if he or she is successful with his or her claim. Fees are also payable for appeals submitted to the Employment Appeal Tribunal. These are £400 on submitting a notice of appeal and a further £1200 hearing fee. Claimants can benefit from the remission system which provides a complete exemption for those on certain state benefits and partial remission on a sliding scale for those on low incomes.

If the claim proceeds to Tribunal and the employee wins his/her case the Tribunal can choose one of three remedies which are:

• re-instatement which means getting back the old job on the old terms and conditions
• re-engagement which would mean a different job with the same employer
• compensation where the amount can be anything from a relatively small sum to a maximum cap of 12 months’ pay, which will apply where the amount is less than the overall cap. Where the dismissal was due to some form of discrimination the award can be unlimited.

If the dismissal is demonstrated as being due to any of the following it will be deemed to be unfair regardless of the length of service:

• discrimination for age, disability, gender reassignment, race, religion or belief, sex, sexual orientation or marriage and civil partnership
• pregnancy, childbirth or maternity leave
• refusing to opt out of the Working Time Regulations
• disclosing certain kinds of wrong doing in the workplace
• health and safety reasons
• assertion of a statutory right.

Statutory disciplinary procedures

The Employment Act 2008 introduced the ACAS Code of Practice which saw a change to the way employers deal with problems at work. It also saw the removal of ‘automatic unfair dismissal’ related to failure to follow procedures. Tribunals may make an adjustment of up to 25% of any award, where they feel the employer has unreasonably failed to follow the guidance set out in the ACAS Code.

The ACAS Code of Practice sets out the procedures to be followed before an employer dismisses or imposes a significant sanction on an employee such as demotion, loss of seniority or loss of pay.

The ACAS Code does not apply to redundancy or expiry of a fixed term contract.

Standard procedure

Step 1	Employers must set out in writing the reasons why dismissal or disciplinary actions against the employee are being considered. A copy of this must be sent to the employee who must be invited to attend a meeting to discuss the matter, with the right to be accompanied
Step 2	A meeting must take place giving the employee the opportunity to put forward their case. The employer must make a decision and offer the employee the right to appeal against it.
Step 3	If an employee appeals, you must invite them to a meeting to arrive at a final decision

There may be some very limited cases where despite the fact that an employer has dismissed an employee immediately without a meeting, an Employment Tribunal will very exceptionally find the dismissal to be fair. This is not explained in the regulations but may apply in cases of serious misconduct leading to dismissal without notice. What this means in practice awaits the test of case law.

Modified procedure

Step 1	Employers firstly set out in writing the grounds for action that has led to the dismissal, the reasons for thinking at the time that the employee was guilty of the alleged misconduct and the employee’s right of appeal against the dismissal
Step 2	If the employee wishes to appeal against the decision, the employer must invite them to attend a meeting, with the right to be accompanied, following which the employer must inform the employee of their final decision. Where practicable, the appeal meeting should be conducted by a more senior or independent person not involved in the earlier decision to dismiss.

The only occasions where employers are not required to follow the ACAS Code of Practice are as follows:

• they reasonably believe that doing so would result in a significant threat to themselves, any other person, or their or any other person’s property
• they have been subjected to harassment and reasonably believe that doing so would result in further harassment
• because it is not practicable within a reasonable period
• where dismissal is by reason of redundancy or the ending of a fixed term contract
• they dismiss a group of employees but offer to re-engage them on or before termination of their employment
• the business closes down suddenly because of an unforeseen event
• the employee is no longer able to work because they are in breach of legal requirements eg to hold a valid work permit.

Common mistakes that employers make

For many the regulations have caused some confusion and practical difficulties. Some of the most common mistakes include:

• not applying the procedures to employees with less than the qualifying period of continuous service for unfair dismissal (ie two years ). Whilst such employees are often unable to claim unfair dismissal (unless the reason for their dismissal is one of the automatically unfair reasons for which there is no qualifying period of employment such as pregnancy), they may be able to bring other claims such as discrimination with compensation increased accordingly
• failure to invite employees to disciplinary hearings in writing or supply adequate evidence before the disciplinary hearing. The standard procedure requires the employer to set out the ‘basis of the allegations’ prior to the hearing
• excluding dismissals other than disciplinary dismissals (eg ill-health terminations)
• not inviting employees to be accompanied
• not including a right of appeal
• not appreciating the statutory requirement to proceed with each stage of the procedure without undue delay
• failure to appreciate that an employee may have right to appeal even if it is requested verbally rather than in writing and is after a timescale set down by the employer
• not appreciating that paying an employee a lower bonus for performance related reasons could potentially amount to ‘action short of dismissal’ by the employer
• failure to treat as a grievance any written statement/letter (for example a letter of resignation) which raises issues which could form the basis of a tribunal claim to which statutory procedures apply. This means that the employer must be alert to issues being raised in writing even if there is no mention of the word grievance.

How we can help

We will be more than happy to provide you with assistance or any additional information required so please do contact us.

Managing Absence

Recent surveys indicate that the adverse impact of absence on business profitability today is significant, with thousands of man hours lost every day. Recent statistics show that an average of 7.6 days are lost each year per employee with a median cost of £595 per employee. Approximately two-thirds of working time lost to absence is accounted for by short-term absences of up to seven days.

We consider below the main principles of effective absence management.

Good absence management procedures

The majority of businesses surveyed (94%) confirm that tightening of policies to review attendance has a major influence on controlling levels of absence, particularly when three fifths of all absence is for minor illness of less than five days duration.

The difference between short and long-term absence

When managing sickness absence issues, employers need to distinguish between short-term and long-term absences. Where the absence consists of short but persistent and apparently unconnected absences then, after suitable investigation, disciplinary action may be appropriate. However, this is not a suitable course of action in relation to longer-term sickness absence management.

Short term absence procedures

There are a number of key steps in managing short-term absence.

• Establish a clear procedure that employees must follow, for example, the use of a return to work interview with line management and completion of self-certification forms even for one day of absence. This will ensure that everyone is aware that monitoring takes place and there is a complete record of absence.
• Establish a system of monitoring absence and regularly review this for emerging trends. Frequent absences could perhaps be evidence of malingering but on the other hand could be a symptom of a deeper problem. Tangible statistics can provide useful warning signals to prompt early action and avoid problems in the future.
• Return to work interviews should always be undertaken by the individual’s immediate line manager, which will ensure that clear reasons for taking time off from work emerge. This will give managers the opportunity to get to the root cause of an absence which could be a symptom of a deeper problem.
• If the issues are personal and not work related, the employer should decide on the amount of flexibility he or she is prepared to give to enable the individual to address their issue.
• If there may be an underlying medical condition the employer should consider requesting a medical report to support the level of absence; there may be a hidden underlying condition and links to disability discrimination may not be immediately apparent.
• All employees should be made aware that any abuse of the sick pay provisions will result in disciplinary action.
• If there is no good medical reason for the absences the employee should be counselled and told what improvement is expected and warned of the consequences if no improvement is seen.
• If there are medical reasons for the absence, consider any links to the Equality Act 2010, for example, does the absence relate to hospital appointments or treatment required; if so, the employer is required to make reasonable adjustments which includes allowing time off for treatment.
• If the situation reaches a stage where the employee is to be dismissed and there is no defined medical condition, it may be on the grounds of misconduct. Here the employer must be able to show that a fair procedure has been followed taking into account the nature and length of the illness, past service record and any improvement in the attendance record.
• If the employee has a recognised medical condition that is not a disability but the absence rate is unacceptably high, it may be possible to dismiss fairly for some other substantial reason after following the due process. Again length of service and the availability of suitable alternative employment are relevant factors to consider before reaching a decision.

Long-term absence procedures

The key steps in managing long-term absence include:

• absence procedures, monitoring and return to work interviews are as important as in the case of short-term absence
• it is always prudent to gather medical advice to assess whether the employee’s condition amounts to a disability and also the capability of the employee to undertake their role going forward
• it is important to be specific about the information required from the medical report for example the nature of the illness, the ability of the individual to undertake their role, having provided a detailed description of responsibilities, the length of time the illness is likely to last, and any reasonable adjustments that would ease the situation
• upon receipt of the medical evidence a process of consultation and discussion should take place with the individual (welfare visit) subject to any recommendation of the doctor
• it is important to listen to the employee’s proposals for their return to work
• if the cause of the illness is work related, the root cause should be investigated. Employers should discuss ways to reduce the influencing factors, for example, increased support, training or reallocation of duties. Could the employee return to work on a staged basis or on a part time basis for a short period?
• ensure all steps are recorded in writing to confirm what is expected of the employee and also what steps the employer is going to take, so there is no confusion and all actions taken are seen to be reasonable
• if the employee is to be dismissed it is likely to be on the basis of capability, however care will be needed to ensure all the requirements of the Equality Act 2010 have been considered and to demonstrate that a fair procedure has taken place.

Health and Work Service

The Government plans to introduce a new Health and Work Service (HWS), which is expected to be available by the end of 2014. The HWS will make independent expert health and work advice more widely available to employers, employees and general practitioners.

Definition of disability

The definition of what constitutes a disability can be split into three parts:

• the employee must be suffering from a physical or mental impairment
• the impairment must have a substantial effect on the ability to carry out normal day-to-day activities, which would include things like using a telephone, reading a book or using public transport. Substantial means more than minor or trivial
• the effect must be long-term, in other words have already lasted for at least 12 months or be likely to last that long.

The Equality Act 2010 includes new protection from discrimination arising from disability. This includes indirect discrimination, associative discrimination and discrimination by perception.

Discrimination arising from disability

A person discriminates against a disabled person if:

• a person treats a disabled person unfavourably because of something arising in consequence of the disabled person’s disability, and
• a person cannot show that the treatment is a proportionate means of achieving a legitimate aim.

However, this does not apply if a person shows that they did not know, and could not reasonably have been expected to know, that a disabled person had the disability.

Reasonable adjustments

If a medical report identifies a disability, in accordance with the Equality Act an employer has a duty to make reasonable adjustments. This is quite broad and may mean physical adjustments to premises or the provision of equipment to assist the employee in carrying out their duties. It can also mean adjustments to the role itself by removing certain duties and reallocating them, changes in hours or place of work, or the provision of further training and supervision. It may also include transferring to any other vacant post subject to suitability.

In other words quite a number of steps are required of an employer if they are to establish a fair dismissal for capability in relation to an employee who has been absent for a long term of sickness.

How we can help

Please contact us if we can provide any further assistance or additional information.

Trusts

What are trusts?

Trusts are a long established mechanism which allows individuals to benefit from the assets without assuming the legal ownership of those assets so that others (the trustees) have day to day control over the assets. A trust can be extremely flexible and have an existence totally independent of the person who established it and those who benefit from it.

A person who transfers property into a trust is called a settlor. Persons who enjoy income or capital from a trust are called beneficiaries.

Trusts are separate persons for UK tax purposes and have specific rules for all the main taxes. There are also a range of anti-avoidance measures aimed at preventing exploitation of potential tax benefits.

Types of trusts

There are two basic types of trust in regular use for individual beneficiaries:

• life interest trusts (sometimes referred to as interest in possession trusts and in Scotland known as life renter trusts)
• discretionary trusts.

Life interest trusts

A life interest trust has the following features:

• a nominated beneficiary (the life tenant or life renter in Scotland) has an interest in the income from the assets in the trust or has the use of trust assets. This right may be for life or some shorter period (perhaps to a certain age)
• the capital may pass onto another beneficiary or beneficiaries.

A typical example is where the widow is left the income for life and on her death the capital passes to the children.

Discretionary trusts

A discretionary trust has the following features:

• no beneficiary is entitled to the income as of right
• the settlor gives the trustees discretion to pay the income to one, some or all of a nominated class of possible beneficiaries
• income can be retained by the trustees
• capital can be gifted to nominated individuals or to a class of beneficiaries at the discretion of the trustees.

Inheritance tax consequences

Importance of 22 March 2006

Major changes were made in the IHT regime for trusts with effect from 22 March 2006. The old distinction between the tax treatment of discretionary and life interest trusts was swept away. The approach now is to identify trusts which fall in the so-called ‘relevant property’ regime and those which don’t.

Relevant property trusts

Trusts which fall in the relevant property regime are:

• all discretionary trusts whenever created
• all life interest trusts created in the settlor’s lifetime after 22 March 2006
• any life interest trust created before 22 March 2006 where the beneficiaries were changed after 6 October 2008.

If a relevant property trust is set up in the settlor’s lifetime this gives rise to an immediate charge to inheritance tax but at the lifetime rate of 20%. If the value of the gift (and certain earlier gifts) is below £325,000 no tax is payable. Discretionary trusts set up under a will attract the normal inheritance tax charge at the death rate of 40%.

Relevant property trusts are charged to tax every ten years (known as the periodic charge) at a maximum rate of 6% of the value of the assets on each tenth anniversary of the setting up of the trust. Historically by careful planning the value could often be maintained under the taxable limit, for example by the use of multiple trusts. The Government will introduce new rules to target avoidance through the use of multiple trusts and has issued draft legislation on this issue following consultation.

Finally there is an ‘exit’ charge if assets are appointed out of the trust.

Benefits of a relevant property trust

Whilst the inheritance tax charges do not look attractive, the relevant property trust has a significant benefit in that no tax charge will arise when a beneficiary dies because the assets in the trust do not form part of a beneficiary’s estate for IHT purposes. There can be significant long-term IHT advantages in using such trusts.

Trusts which are not relevant property

Within this group are

• life interest trusts created before 22 March 2006 where the pre-2006 beneficiaries remain in place or were changed before 6 October 2008
• the trust was created after 22 March 2006 under the terms of a will and gives an immediate interest in the income to a beneficiary with strict conditions as to what happens to the property at the end of the interest; or
• the trust is created in the settlor’s lifetime or on death for a disabled person.

In these circumstances a lifetime transfer into a life interest trust will be a potentially exempt transfer (PET) and no inheritance tax would be payable if the settlor survived for 7 years. Transfers into a trust on death would be chargeable unless the life tenant was the spouse of the settlor. There is no periodic charge on such trusts. There will be a charge when the life tenant dies because the value of the assets in the trust in which they have an interest has to be included in the value of their own estate for IHT purposes.

Capital gains tax consequences

If assets are transferred to trustees, this is considered a disposal for capital gains tax purposes at market value but in many situations any capital gain arising can be deferred and passed on to the trustees.

Gains made by trustees are chargeable at 28%.

Where assets leave the trust on transfer to a beneficiary who becomes legally entitled to them, there will be a CGT charge by reference to the then market value. Again it may be possible to defer that charge.

Income tax consequences

Life interest trusts are taxed on their income at 10% on dividends and 20% on other income. Discretionary trusts pay tax at 37.5% (dividends) and 45% (other income).

Income paid to life interest beneficiaries has an appropriate tax credit available with the effect that the beneficiaries are treated as if they receive the income as the owners of the assets.

If income is released at the trustees’ discretion from discretionary trusts, the beneficiaries will receive the income net of 45% tax. They are able to obtain refunds of any overpaid tax and if they pay tax at 45%, they will get credit for the tax paid.

Could I use a trust

Trusts can be used in a variety of situations both to save tax and also to achieve other benefits for the family. Particular benefits are as follows:

• if you transfer assets into a trust in your lifetime you can remove the assets from your estate but could act as trustee so that you retain control over the assets (always remembering that they must be used for the beneficiaries)
• a transfer of family company shares into a trust in lifetime (or on death) can be a way of ensuring that the valuable business property relief is utilised
• by putting assets into a trust you can give the beneficiary the income from the asset without actually giving them the asset which could be important if the beneficiary is likely to spend the capital or the capital could be at risk from predators such as a divorced spouse
• trusts (particularly discretionary trusts) can give great flexibility in directing benefit for different members of the family without incurring significant tax charges
• if you want to make some IHT transfers in your lifetime but are not sure who you would like to benefit from them, a transfer to a discretionary trust can enable you to reduce your estate and leave the trustees to decide how to make the transfers on in later years. It also means that the assets transferred do not now hit the estates of the beneficiaries.

How we can help

This factsheet briefly covers some aspects of trusts. If you are interested in providing for your family through the use of trusts please contact us.

We will be more than happy to provide you with additional information and assistance.

Legal Working in the UK

In line with the Immigration, Asylum and Nationality Act 2006, it is a criminal offence to employ anyone who does not have an entitlement to work in the UK, or undertake the type of work you are offering. Any employer who does not comply with the law may be facing a fine of up to £20,000 per offence. Further, if employers knowingly use illegal migrant labour it could carry a maximum 2 year prison sentence and/or unlimited fine.

We provide an overview of the documentation required to ensure that your business does not fall foul of the law.

The rules

The increasing trend of illegal immigrants entering the UK has led to a rise in forged documentation, as well as grounds for certain employers to take advantage of cheap labour.

To combat this, the Home Office reviewed the law in this area and regulations were introduced on 1 May 2004.

Documentation requirements

An employer must obtain and retain a certified copy of any one, or combination of the original documents included in List A or List B. Those validated from List A will require no further checks, however, documents provided from List B must be followed up at least once every 12 months.

List A

• an ID Card or British passport identifying the holder is a British citizen; or
• an ID Card or EEA national passport or national identity card identifying the holder as a national of the EEA or Switzerland; or
• a registration certificate or document certifying permanent residence issued by the Home Office to a national of a EEA country or Switzerland; or
• a permanent residence card issued by the Home Office or Border and Immigration Agency to a family member of a national of a EEA country or Switzerland; or
• a current Biometric Immigration Document (Biometric Residence Permit) issued by the Home Office indicating their right to stay indefinitely in the UK or has no time limit on their stay; or
• a current passport endorsed to show the holder is exempt from immigration control, is allowed to stay indefinitely in the UK or has no time limit on their stay

Or a combination of the following:

An official document giving the person’s permanent national insurance number and name, plus:

• a current immigration status document issued by the Home Office with an endorsement indicating that the person named in it can stay indefinitely in the UK, or has no time limit on their stay; or
• a full UK birth certificate or a birth certificate issued in the Channel Islands, the Isle of Man, or Ireland; or
• a full adoption certificate issued in the UK which includes the name(s) of at least one of the holder’s adoptive parents; or
• an adoption certificate issued in the Channel Islands, the Isle of Man, or Ireland; or
• a certificate of registration or naturalisation stating that the holder is a British citizen.

List B

• a current passport endorsed to show that the holder is able to stay in the UK and is allowed to do the work in question provided it does not require the issue of a work permit; or
• a current Biometric Immigration Document issued by the Home Office which indicates that the holder is able to stay in the UK and is allowed to do the work in question; or
• a current residence card (including an Accession Residence Card or a Derivative Residence Card) issued by the Home Office to a family member of a national of a European Economic Area country or Switzerland; or
• an Application Registration Card issued by the Home Office stating the holder is permitted to take employment, when produced in combination with a Positive Verification Notice from the Home Office Employer Checking Service; or
• a current Immigration Status Document issued by the Home Office with an endorsement indicating that the person named in it can stay in the UK and this allows them to do the type of work you are offering when produced in combination with an official document giving the person’s permanent national insurance number and name issued by a Government agency or previous employer.

The points-based system

The Government has introduced a merit-based points system for assessing non-European Economic Area (EEA) nationals wishing to work in the UK. The system consists of five tiers, each requiring different points. Points will be awarded to reflect the migrant’s ability, experience, age and when appropriate the level of need within the sector the migrant will be working.

The five points-based system tiers consist of:

• tier 1 – highly valued skilled workers with exceptional talent, for whom no job offer or sponsoring employer is required, for example doctors, scientists and engineers;
• tier 2 – skilled individuals with proven English language ability who have a job offer, to fill gaps in the UK labour force, for example nurses, teachers and engineers;
• tier 3 (currently suspended) – low skilled workers filling specific temporary labour shortages, for example construction workers for a particular project;
• tier 4 – students;
• tier 5 – youth mobility and temporary workers, for example musicians coming to play in a concert.

Sponsorship

Under tier 2 the employer sponsors the individual, who makes a single application at the British Embassy in his or her home country for permission to come to the UK and take up the particular post. The individual’s passport will be endorsed to show that the holder is allowed to stay in the UK (for a limited period) and is allowed to do the type of work in question.

UK based employers wishing to recruit a migrant under tiers 2 or 5: Temporary Workers will have to apply for a sponsor licence.£To gain and retain licences employers are required to comply with a number of duties, such as appointing individuals to certain defined positions of responsibility, having effective HR systems in place, keeping proper records and informing the UK Border Agency if a foreign national fails to turn up for work.

There is a charge of £1,545 (£515 for charities and for employers with no more than 50 employees) for a licence to sponsor tier 2 migrants. This fee buys a four-year licence.

Once an employer has obtained its sponsorship licence, it can access an online system operated by the UK Border Agency through which it can issue its own certificates of sponsorship to potential migrant workers. The UK Border Agency determines the number of certificates to be allocated to a particular employer. Each certificate of sponsorship takes the form of a unique reference number to be provided by the employer to its potential recruit, who will then be able to apply for entry clearance into the UK at the British Embassy in his or her home country.

The fee for each application for a certificate of sponsorship for a tier 2 worker is £184.

Employers that do not hold a licence cannot recruit non-EEA workers.

Identity cards

Identity cards for foreign nationals are currently issued to some categories of foreign nationals from outside the European Economic Area (EEA) and Switzerland. Other immigration applicants continue to receive a sticker (vignette) in their passport.

With effect from 1st January 2014 EEA nationals from Bulgaria and Romania who wish to work in the UK no longer need an accession worker card or registration certificate.

Since July 2013, EEA nationals from Croatia were able to move and reside freely in any EU State. However, the UK is applying transitional restrictions and as such Croatians wishing to work in the UK will need to obtain an accession worker authorisation document (permit to work). Therefore, employers will need to make document checks to confirm if the Croatian has unrestricted access to the UK labour market as they are exempt from work accession or they hold a valid work authorisation document allowing them to carry out the type of work in question before starting employment.

If you are licensed to sponsor skilled workers or students from outside the EEA or Switzerland under the points-based system, you can use a migrant’s identity card – which provides evidence of the holder’s nationality, identity and status in the UK – to check their right to work or study here.

Checking procedures

The following checks must also be taken to ensure that each document also relates to the prospective employee in question: ensure that any photograph and date of birth is consistent with the appearance of the individual if more than one document is produced ensure that the names on each are identical. Otherwise further explanation and proof will be necessary, for example, a marriage certificate check expiry dates. Follow-up checks must be conducted on the expiry date.  When a Certificate of Application or an Application Registration Card is presented as evidence as right to work or the employee has no acceptable documents because they have an outstanding  application to the Home Office or appeal against an immigration decision, the follow-up verification check is required 6 months after the date of the initial check carry out ongoing checks on individuals who joined on or after 29 February 2008 and who have been granted only limited leave to remain and work in the UK take copies of original documents only, sign and date to certify before employing an individual who requires a tier 2 visa, be prepared to demonstrate that a recruitment search has been carried out according to the requirements under tier 2 of the points-based system where a recruitment agency is used to recruit an overseas national, ask the agency to prove that it has carried out all the necessary checks on the individual to ensure that he or she has the right to work in the UK

To ensure that there is no discrimination, it is recommended that all potential employees are asked to produce original documents indicating they have the right to work in the UK.

If you have any doubts as to whether documents are genuine or sufficient to prove an employee’s entitlement to work in the UK you are encouraged to access the Employer Checking Service, which is provided through the Border and Immigration Agency’s Employers’ Helpline – 0300 1234 699.

How we can help

We will be more than happy to provide you with assistance or any additional information required. Please do not hesitate to contact us.

National Minimum Wage

The National Minimum Wage (NMW) was introduced on 1 April 1999 and is reviewed each year by the Low Pay Commission.  Any changes normally take place on 1 October. There have already been a number of instances of employers being penalised for not complying with the legislation. HMRC are the agency that ensures enforcement of the NMW.

We highlight below the main principles of the minimum wage regulations.

Please contact us for further specific advice.

What is the National Minimum Wage?

There are different levels of NMW, depending on your age and whether you are an apprentice. The rates are given in the following table:

	Rate from 1 October 2014	Rate from 1 October 2015
the main rate for workers aged 21 and over	£6.50	£6.70
the 18-20 rate	£5.13	£5.30
the 16-17 rate for workers above school leaving age but under 18	£3.79	£3.87
the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship	£2.73	£3.30

The apprentice rate applies to:

• apprentices under 19
• apprentices aged 19 and over, but in the first year of their apprenticeship.

If you are of compulsory school age you are not entitled to the NMW.

In addition, there is a fair piece rate which means that employers must pay their output workers the minimum wage for every hour they work based on an hourly rate derived from the time it takes a worker working at average speed to produce the work in question. The entitlement of workers paid under this system is uprated by 20%. This means that the number reached after dividing the NMW by the average hourly output rate must be multiplied by 1.2 in order to calculate the fair piece rate.

There are no exemptions from paying the NMW on the grounds of the size of the business.

Key questions

Who does not have to be paid the National Minimum Wage?

• The genuinely self-employed.
• Child workers – anyone of compulsory school age (ie. until the last Friday in June of the school year they turn 16).
• Company directors who do not have contracts of employment.
• Some other trainees on government funded schemes or programmes supported by the European Social Fund.
• Students doing work experience as part of a higher education course.
• People living and working within the family, for example au pairs.
• Friends and neighbours helping out under informal arrangements.
• Members of the armed forces.
• Certain government schemes at pre-apprenticeship level, such as:

• in England, Programme Led Apprenticeships
• in Scotland, Get Ready for Work or Skillseekers
• in Northern Ireland, Programme Led Apprenticeships or Training for Success
• in Wales, Skillbuild

• Government employment programmes.
• European Community Leonardo da Vinci, Youth in Action, Erasmus and Comenius programmes.
• Share fishermen.
• Prisoners.
• Volunteers and voluntary workers.
• Religious and other communities.

Please note that HMRC have the power to serve an enforcement notice requiring the payment of at least the NMW, including arrears, to all family members working for a limited company.

What is taken into account in deciding whether the NMW has been paid?

The amounts to be compared with the NMW include basic pay, incentives, bonuses and performance related pay and also the value of any accommodation provided with the job.

Overtime, shift premiums, service charges, tips, gratuities, cover charges and regional allowances are not to be taken into account and benefits other than accommodation are also excluded.

What records are needed to demonstrate compliance?

There is no precise requirement but the records must be able to show that the rules have been complied with if either the HMRC or an Employment Tribunal requests this to be demonstrated. Where levels of pay are significantly above the level of the NMW, special records are not likely to be necessary.

It is recommended that the relevant records are kept for at least six years.

Normally there is not likely to be any serious difficulty in demonstrating compliance where employees are paid at hourly, weekly, monthly or annual rates but there may be difficulties where workers are paid on piece-rates and where, for example, they work as home-workers.

Where piece rates are used, employers must give each worker a written notice containing specified information before the start of the relevant pay period. This includes confirmation of the ‘mean’ hourly output and pay rates for doing their job.

What rights do workers have?

Workers are allowed to see their own pay records and can complain to an Employment Tribunal if not able to do so.

They can also complain to HMRC or to a Tribunal if they have not been paid the NMW. They can call the confidential helpline 0800 917 2368.

What are the penalties for non-compliance?

Enforcement notices can be issued if underpayments are discovered and there can be a penalty equivalent to twice the hourly amount of the NMW for each worker that has been underpaid multiplied by the number of days that enforcement notices are not complied with.

There could also be a maximum fine of £20,000 for having committed a criminal offence.

Employers who refuse to pay the NMW may also face a fine in excess of £200 for every worker they underpay. Employers have to pay back arrears they owe to workers and those who refused to pay up could be penalised.

How we can help

We will be more than happy to provide you with assistance or any additional information required. We also offer a full payroll service – please contact us if you would like more information.

Sources of Finance

The financing of your business is the most fundamental aspect of its management. Get the financing right and you will have a healthy business, positive cash flows and ultimately a profitable enterprise. The financing can happen at any stage of a business’s development. On commencement of your enterprise you will need finance to start up and, later on, finance to expand.

Finance can be obtained from many different sources. Some are more obvious and well-known than others. The following are just some of the means of finance that are open to you and with which we can help.

Bank loans and overdrafts

The first port of call that most people think about when trying to obtain finance is their own bank. Banks are very active in this market and seek out businesses to whom they can lend money. Of the two methods of giving you finance, the banks, especially in small and start-up situations, invariably prefer to give you an overdraft or extend your limit rather than make a formal loan. Overdrafts are a very flexible form of finance which, with a healthy income in your business, can be paid off more quickly than a formal loan. If, during the period you are financing the overdraft, an investment opportunity arises, then you could look to extend the options on your overdraft facility to finance the project.

Many businesses appreciate the advantages of a fixed term loan. They have the comforting knowledge that the regular payments to be made on the loan make cash flow forecasting and budgeting more certain. They also feel that, with a term loan, the bank is more committed to their business for the whole term of the loan. An overdraft can be called in but, unless you are failing to make payments on your loan, the banks cannot take the finance away from you.

Many smaller loans will not require any security but, if more substantial amounts of money are required, then the bank will certainly ask for some form of security. It is common for business owners to offer their own homes as security although more risk-averse borrowers may prefer not to do this. Anyone offering their house as security should consult with any co-owners so that they are fully aware of the situation and of any possible consequences. Another source of security may be the Enterprise Finance Guarantee Scheme. Start-up business unable to provide any other form of security may be able to get a guarantee for loans up to £1,000,000. Under the scheme, you pay a 2% premium on the outstanding balance of the loan, and in return, the government guarantees to repay the bank (or other lender) up to 75% of the loan if you default.

Savings and friends

When commencing a new business, very often the initial monies invested will come from the individual’s personal savings. The tendency of business start-ups to approach relatives and friends to help finance the venture is also a widespread practice. You should make it clear to them that they should only invest amounts they can afford to lose. Show them your business plan and give them time to think it over. If they decide to invest in your business, always put the terms of any agreement in writing.

Issue of shares

Another way of introducing funds to your corporate business is to issue more shares. This is always a welcome addition to business funds and is also helpful in giving additional strength to the company’s balance sheet. However, you need to consider where the finance is coming from to subscribe for the new shares. If the original proprietor of the business wishes to subscribe for these shares, then he or she may have to borrow money in a similar way to that discussed above. Typically, however, shareholders in this position are often at the limit of funds that they can borrow. Therefore, it may be necessary to have a third party buy those shares. This may mean a loss of either control or influence on how the business is run. An issue of shares in this situation can be a very difficult decision to make.

Venture capital

Approaching venture capital houses for finance will also mean an issue of new shares. The advantage of going to such institutions is the amount of capital they can introduce into the business. The British Private Equity and Venture Capital Association offers useful free publications (www.bvca.co.uk). Because of the size of their investment, you can expect them to want a seat on your Board. They will also make available their business expertise which will help to strengthen your business, although inevitably this will come with an additional pressure for growth and profits.

On a smaller scale, the government has introduced various tax-efficient schemes for entrepreneurs to invest in growing businesses. The current schemes available are called the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCT). We have separate factsheets providing detail in these areas.

The SEIS scheme is designed to help small, early-stage companies to raise equity finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies. It complements the EIS which continues to offer tax reliefs to investors in higher-risk small companies. SEIS is intended to recognise the particular difficulties which very early stage companies face in attracting investment, by offering tax relief at a higher rate than that offered by the EIS.

Retained earnings and drawings

Since ultimately the well-being of a business is connected with the cash flow of that enterprise, if a proprietor would like more liquidity, then it is sometimes necessary to re-examine the amount of money they are withdrawing from the business for their personal needs. In this way, additional funds earned by the business can be retained for future use.

Other finance

Other possible sources of finance are outlined below.

Factoring

Factoring provides you with finance against invoices that your customers have not yet paid. Typically you can receive up to 85% of the value of the invoice immediately and the balance (less costs) when the customer pays.

Hire Purchase (HP)

This is used to finance the purchase of equipment. Your business buys the equipment but payments of capital and interest are spread over an agreed period.

Leasing

This is a method of financing equipment you do not need to own. It is often used for vehicle finance. The equipment is rented rather than owned and the rental payments spread over several years. There can also be the option to fix maintenance costs as part of the agreement (contract hire).

Matching

It makes sense to match the finance you are seeking to the purpose for which it will be used.

• Working capital – overdraft or factoring
• Equipment and vehicles – fixed-term loan, HP or leasing
• Property – long-term mortgage
• Development / start up – investment finance

How we can help

We have the expertise and the contacts to help you at all stages of your business development and to help you finance the business along the way. If you have any questions or proposals, please contact us as we would be happy to discuss them with you.

Homeworking Costs for the Self-Employed

Over the last ten years technology has advanced massively. It was not so long ago that mobile phones were the size of a brick. Now emails and the internet can be accessed on the move. However, whilst technology has moved on, travelling has become more and more difficult. Homeworking has become the answer for many but how have the tax rules kept up with these changes?

Your status is important

The tax rules differ considerably depending on whether you are self-employed, as a sole trader or partner, or whether you are an employee, even if that is as an employee of your own company. One way or the other though, if you want to maximise the tax position, it is essential to keep good records. If not, HMRC may seek to rectify the tax position several years down the line. This can lead to unexpected bills including several years’ worth of tax, interest and penalties.

This factsheet focuses on the position of the self-employed.

Wholly and exclusively

The self-employed pay tax on the profits that the business makes or their share of those profits. So, the critical issue is to ensure that costs incurred can be set against that profit. For day to day overheads, those costs generally have to be incurred ‘wholly and exclusively’ for the purposes of the trade to be tax deductible. What does this really mean in practice? Well, HMRC have issued a lot of guidance on the matter which is summarised below.

Use of the home

If the self-employed carry on some of their business from home, then some tax relief may be available. HMRC accept that even if the business is carried on elsewhere, a deduction for part of the household expenses is still acceptable provided that there are times when part of the home is used solely for business purposes. To quote:

‘If there is only minor use, for example writing up the business records at home, you may accept a reasonable estimate without detailed enquiry.’

So that there is no confusion, wholly and exclusively does not mean that business expenditure has to be separately billed or that part of the home must be permanently used for business purposes. However, it does mean that when part of the home is being used for the business then that is the sole use for that part at that time.

HMRC accept that costs can be apportioned but on what basis? Well, if a small amount is being claimed then HMRC will usually not be too interested. In fact, HMRC seem to accept that an estimate of a few pounds a week is acceptable. However, if more is to be claimed then HMRC suggest that the following factors are considered:

• the proportion in terms of area of the home that is used for business purposes
• how much is consumed where there is a metered or measurable supply such as electricity, gas or water and
• how long it is used for business purposes.

What sort of costs can I claim for?

Generally, HMRC will accept a reasonable proportion of costs such as council tax, mortgage interest, insurance, water rates, general repairs and rent, as well as cleaning, heat and light and metered water.

Other allowable costs may include the cost of business calls on the home telephone and a proportion of the line rental, in addition to expenditure on internet connections to the extent that the connection is used for business purposes.

So how does this work in practice?

As already mentioned, if there is a small amount of work done at home, a nominal weekly figure is usually fine but for substantial claims a more scientific method may be needed.

Example Andrew works from home and has no other business premises. He uses a spare room from 9am to 1pm and then from 2pm until 6pm. The rest of the time it is used by the family. The room represents about 10% of the total area of the house. The costs including cleaning, insurance, council tax and mortgage interest are about £8,000. 10% = £800 and 8/24 of the use by time is for business, so the claim could be £267. Electricity costs total £1,500, so 10% is £150 of which 8/24 = £50. In addition, a reasonable proportion of other costs such as telephone and broadband costs would be acceptable. The key to Andrew’s claim will be that he keeps the records to prove the figures and proportions used.

Equipment costs

For self-employed businesses, the depreciation of assets is covered by a set of tax reliefs known as capital allowances. For equipment at home, such as a laptop, desk, chair, etc, capital allowances may be available on the business proportion (based on estimated business usage) of those assets. So, if Andrew uses his laptop solely for business, the whole cost will be within the capital allowances rules.

What about travel costs?

Another consequence of working from home is the potential impact on travel costs. The cost of travelling from home to the place of business or operations is generally disallowed, as it represents the personal choice of where to live. The fact that the individual may sometimes work at home is irrelevant.

Where an individual conducts office work for their trade does not by itself determine their place of business, so although many may be able to claim tax relief for the costs of working from home, far fewer will be able to claim travel costs of going to and from their home office.

Of course, this principle presupposes that there is a business or operational ‘base’ elsewhere from which the trade is run. Normally, the cost of travel between the business base and other places where work is carried on will be an allowable expense, while the cost of travel between the taxpayer’s home and the business base will not be allowable.

However, where there are no separate business premises away from the home, travel costs to visit clients should be fully allowable. The crux of the matter is where the business is really run from.

And finally

Capital gains tax contains a tax exemption for the sale of an individual’s private home, known as principal private residence relief (PPR). Where part of the dwelling is used exclusively for business purposes, PPR relief will not apply to the business proportion of the gain. However, HMRC make clear in their guidance that ‘occasional and very minor’ business use is ignored.

Be reasonable

As you can see, all things are possible but the key is to be clear about the rules, keep good records and be sensible about how much to claim.

How we can help

If you would like any help about obtaining tax relief on the costs of homeworking or other expenses, please contact us.

Money Laundering – High Value Dealers

The Money Laundering Regulations 2007 (the Regulations) apply to a number of different businesses which include (amongst others) accountants and auditors, tax advisers and dealers in high value goods. The Regulations contain detailed procedural anti-money laundering requirements for those affected.

HMRC have been given the responsibility for supervising High Value Dealers. We outline below the main requirements of the Regulations and the registration process.

Which businesses are affected?

Businesses that meet the definition of a High Value Dealer (HVD) are affected by the Regulations.

A business is defined as a HVD where it deals in goods and accepts cash equivalent to €15,000 or more in any currency. This applies whether the transaction is executed as a single transaction or in several instalments which are linked.

Businesses that only occasionally accept such transactions are included. Businesses that do not accept large amounts of cash or deal in services are not affected.

It is anticipated that the businesses most affected will be those that deal in high value or luxury goods, works of art, cars, jewellery and yachts.

However, the regime applies to everyone who accepts sufficiently large amounts of cash for goods and any business could potentially be registerable.

If a HVD does not intend to accept high value payments it should have a written policy to this effect and ensure that employees and customers are aware of this policy.

How will my business be affected?

If your business does deal in goods and does accept large cash payments then you are required to:

• put anti money laundering systems in place so that you can identify and prevent money laundering and report any suspicious transactions (see below)
• register with HMRC
• pay an annual registration fee based on the number of premises through which you trade
• report any changes through the registration year

If you are unsure whether you will sell goods for this amount and do not register, you will be obliged to refuse any payments in cash equivalent to €15,000 (or more) or insist upon payment by another means.

Background to the requirements

Why was this regime introduced?

The aim of the regime is to help protect society and to combat money laundering and the criminal activity which underlies it, including terrorism.

As money launderers have resorted to more sophisticated ways of disguising the source of their funds, new legislation and regulation aimed at catching those involved became necessary.

The primary legislation is predominantly contained within the Proceeds of Crime Act 2002 and the Terrorism Act 2000.

What is money laundering?

Money laundering is the process by which criminally obtained money or other assets (criminal property) are exchanged for ‘clean’ money or other assets with no obvious link to their criminal origins.

Criminal property

Criminal property represents the proceeds of criminal conduct. This includes any conduct wherever it takes place, which would constitute a criminal offence if committed in the UK. It not only includes, for example, drug trafficking, tax evasion, fraud, forgery and theft but also any other criminal offence committed for profit.

It is important therefore to remember that money laundering now includes the proceeds of any crime and not simply the more traditionally associated crimes such as drug trafficking and prostitution.

Under the legislation there are three principal money laundering offences covering criminal activity and two related money laundering offences:

• concealing, disguising, converting, transferring or removing (from the United Kingdom) criminal property
• making arrangements which facilitate the acquisition, retention, use or control of criminal property by or on behalf of another person
• acquiring, using or possessing criminal property
• failure to disclose knowing or suspecting or having reasonable grounds for knowing or suspecting that another person is engaged in money laundering or terrorist funding
• revealing that a disclosure of suspicion of money laundering has been made or that an investigation into money laundering offences is being carried out, or considered, where this is likely to prejudice an investigation. This is known as ‘tipping off’.

HVDs must be aware of how these actions could affect their business, for example, as the proceeds of crime are spent (or laundered) within their business.

The importance of the regime

The law imposes very severe penalties on anyone involved in money laundering. The Regulations require HVDs to adopt anti money laundering procedures to protect themselves against abuse by money launderers and the risk of prosecution.

The registration process

HMRC form MLR100 must be completed. HMRC will then send a certificate showing an MLR number.

Registration is required where a business:

• accepts the equivalent of €15,000 or more in cash for a single transaction or in instalments which are linked or
• takes a policy decision to carry out such transactions.

Every legal entity through which a HVD business is run must be registered. An initial fee of £110 is payable for each HVD trading premises that is required to be registered. Annual renewal fees are also payable.

Businesses that fail to register could be liable to a civil penalty if they carry out a HVD transaction.

What anti money laundering policies and procedures are required?

Your business should establish and maintain policies and procedures relating to:

• customer due diligence
• reporting
• record keeping
• internal control
• risk assessment and management
• the monitoring and management of compliance
• the internal communication of these policies and procedures

Customer due diligence (CDD)

HVDs must establish the identity of any customer who makes a total cash payment equivalent to €15,000 or more for a single transaction or linked transactions.

Establishing identity requires you to be satisfied that your customer is who they claim to be by obtaining evidence of their name, address and date of birth. For further information on CDD procedures please refer to the Money Laundering and Proceeds of Crime factsheet.

Appoint a Money Laundering Nominated Officer (MLNO)

This is a very important role within a HVD business and should be performed by a suitably senior person. The main roles of the MLNO should be to:

• establish the necessary procedures to implement the requirements of the Regulations
• receive and review reports of possible money laundering from others involved in the business
• decide whether to report to the National Crime Agency (NCA).

NCA

The NCA is the government body to which all suspicions of money laundering should be reported via the NCA website (www.nationalcrimeagency.gov.uk)

There will be times when an internal report of suspected money laundering is received by the MLNO, where the transaction is not yet complete. Under these circumstances there are specific NCA procedures to follow and you must wait until NCA gives consent for the transaction to go ahead.

Training your staff

All customer facing staff in the business must be trained to be aware of:

• the law regarding money laundering offences and terrorist financing
• how to recognise and deal with suspicious transactions
• Staff should be trained regularly on this subject and training should be repeated to ensure that staff knowledge is maintained and they are competent to apply CDD procedures. The ongoing training should ensure that staff are aware of changing money laundering practices.

Managing the risk

HVDs should:

• have a system in place to record all transactions of €15,000 or more on their accounting system and make them identifiable
• have policies and procedures in place concerning the acceptance of these large transactions.

Record keeping

The records that must be kept are:

• a copy of, or the references to, the evidence of the customer’s identity obtained under the CDD procedures
• the supporting evidence and records in respect of the business relationships and occasional transactions which are the subject of CDD measures or ongoing monitoring.

In relation to the evidence of a customer’s identity, businesses must keep the following records:

• a copy of the identification documents accepted and verification evidence obtained, or
• references to the evidence of a customer’s identity.

How long must the records be retained for?

• Evidence of customer’s identity must be kept for 5 years beginning on the date on which the occasional transaction is completed or the business relationship ends.
• Records of transactions must be kept for 5 years beginning on the date on which the transaction is completed.
• All other records must be kept for 5 years beginning on the date on which the business relationship ends.

Failure to comply

Businesses may be liable to a civil penalty for failing to comply with a registration requirement. There is no upper limit on the amount of penalty. Penalties will be for an amount that is considered appropriate for the purposes of being effective, proportionate and dissuasive.

Failing to comply with responsibilities under the Regulations could lead to either prosecution or a civil penalty. Conviction under the Regulations can incur up to two years imprisonment and / or an unlimited fine.

How we can help

The new regime brought about significant change for those businesses that deal in goods and are prepared to accept large cash payments.

If you would like to discuss any of the issues raised above please do contact us. We are able to provide comprehensive assistance with regulation and HMRC matters such as:

• HVD registration
• design and implementation of anti money laundering policies and procedures
• VAT registration and deregistration
• completion of VAT returns.

Health and Safety

It is very likely that owners and managers of many smaller businesses are not aware of just how demanding health and safety regulations can be.

We provide an overview of these below and highlight some practical tips and processes on how your business can remain (or become!) compliant.

Legislation governing health and safety

The main statutes are:

• The Health and Safety at Work 1974 (HSWA)
• The Management of Health and Safety at Work Regulations 1999 (Risk Assessment)
• Regulatory Reform (Fire Safety) Order 2005
• The Health and Safety (Consultation with Employees) Regulations 1996
• Safety Representatives and Safety Committee Regulations 1977
• Corporate Manslaughter and Corporate Homicide Act 2007

There are many other regulations relating to specific areas of health and safety, for example, manual handling, safety signs, employment of children, display screen equipment, control of substances hazardous to health, reporting of incidents, control of noise and first aid. There are also approved codes of practice (ACOPS) which provide practical advice on compliance and have special legal status.

Minimum requirements

A business with at least five employees must have all of the following in place to avoid problems with a health and safety inspector:

• a written health and safety policy, which should be specifically tailored for the employer
• assessments of risks from workplace activities
• records of any significant findings from such assessments
• consultations with employees or their representatives on health and safety matters
• health and safety training programmes
• employer’s liability insurance, evidence of which is on display
• health and safety posters on display
• a competent person appointed to assist with health and safety responsibilities.

Sanctions for Non-Compliance

If inspectors arrive from either the Health and Safety Executive (the HSE is responsible for factories, farms and building sites) or the local authority (responsible for offices, shops, hotels and catering) and find a business in breach of health and safety regulations there are a number of types of enforcement action they can take, in increasing order of severity, as follows:

• offer advice, either face to face or in writing
• issue a warning, highlighting a failure to comply with the law
• serve an improvement notice
• withdraw approvals to undertake certain activities
• vary licensing conditions or exemptions
• issue formal cautions (a formal statement of an offence having been committed, acknowledged by the recipient)
• serve a prohibition notice (to stop activities in order to prevent serious personal injury)
• prosecute at the magistrates or Crown Court. This may lead to fines from £5,000 up to a maximum of £20,000 in the lower courts and unlimited fines in the Crown Court and/or up to 2 years imprisonment.

At the same time employees may take civil actions against their employer if they suffer injury or illness and the employer has breached the Management of Health and Safety at Work Regulations 1999.

Why managing health and safety makes sense

In addition to avoiding legal sanction, statistics in 2011/12 show:

• 1.1 million working people were suffering from a work-related illness.
• 173 workers killed at work.
• 111,000 injuries were reported under RIDDOR.
• 212,000 reportable injuries (over 3 day absence) occurred (LFS).
• 27 million working days were lost due to work-related illness and workplace injury.
• Workplace injuries and ill health (excluding cancer) cost society an estimated £13.4 billion (in 2010/11)

Accidents and ill health can be very damaging to business because, in addition to personal injury claims and the direct costs, productivity can be severely compromised. The less visible costs are many and varied and include increased overtime working and temporary labour, stress and more staff absence, production delays, repairs to equipment, costs of management time, customer dissatisfaction and loss.

These are compelling reasons why it makes sense to manage health and safety proactively.

Five-step process to managing health and safety

The HSE has produced ‘Successful health and safety management’ (HSG65) which is an excellent guide on how to plan for and audit health and safety.

It suggests a five-step process as set out below.

Step 1
Set your policy. This demonstrates to staff that you take health and safety issues seriously, have identified the risks associated within your business, have assessed those risks and will continue to eliminate or control them.

Step 2
Organise your staff. The effectiveness of your policy depends upon the involvement and commitment of your staff.

Step 3
Plan and set standards. This involves setting health and safety objectives, identifying hazards, assessing risks and implementing standards of performance.

Step 4
Measure your performance. This is about looking at whether your assessments are showing an improvement or the same issues are repeating themselves. Regular inspections and checks should be made to ensure your standards are being met.

Step 5
Learn from experience. If things have gone wrong, this is about reviewing how effective your procedures are and then making changes to improve the effectiveness of these policies and procedures.

Practical tips

The following are some practical actions you could and should be taking today:

• removing items from the work area such as cables and other loose items, which can cause tripping and slipping accidents
• repairing torn carpets and broken edges on staircases to avoid the risk of serious falls
• making sure that workstations are stable, don’t give off a reflective glare and ensuring there is suitable seating and hand and foot-rests so that staff maintain good posture whilst working
• insisting that staff take regular breaks, particularly if working for long stretches at a VDU screen
• undertaking regular fire drills and ensuring first aid training is updated regularly
• keeping the first aid box(es) fully stocked and readily available
• ensuring that health and safety signs are kept relevant and up to date, including the display of non-smoking signs at each staff entrance
• setting up a system to regularly check all electrical appliances and fire extinguishers
• ensuring that staff are aware of the potential risks of performing certain tasks and checking that they are fit to undertake those tasks or know how to do them safely.

How we can help

Health and safety is an important, if sometimes neglected, area. To help you meet your responsibilities we have provided a simple checklist that you may wish to complete to identify areas within your business that need attention.

Please contact us if you would like any additional information.