June 28th, 2012

Bad news for the self employed. Good news for accountants

The Government must be feeling a bit guilty at the moment. After the Jimmy Carrgate scandal accountants have been getting a bad press for promoting legal, but ‘morally repugnant’, tax avoidance schemes. So, with the possibility of this line of work drying up how are we going to pay for the golf clubs and comedy socks in the future?

Enter the Universal Tax Credit. Disappointingly, this isn’t a tax break available across the Universe but a new ‘simple’ tax credit to replace a number of existing tax credits. I’ve had a brief read of the draft legislation and it looks like it could be fertile ground for accountants – which in this case means bad news for the self employed.

Some of the key points are:

– A monthly reporting requirement to the DWP. Yep. I did write monthly.
– A seven day deadline for filing the monthly report. Yep. I did write seven days.
– A different basis of calculating income to that used for income tax. Yep – you get the idea.
– A new term – ‘reasonable’ – applied to whether expenses are deductible.
– A 12 month start up period which could mean quarterly interviews to explain why you’re not making much money.

I think many self employed people will simply not bother claiming the UTC – it’ll be seen as too much hassle on top of all the other red tape they have to deal with (high fives all round at the Treasury). There’ll also be a real opportunity for savvy accountants to earn some fees from steering clients through a tax system that’s been made too complicated for them to deal with it themselves. Phew, now where’s my Homer Simpson sock catalogue?

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Universal tax credit

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Director

John manages a wide portfolio of owner managed businesses and oversees the smooth operation of the firm’s payroll department.

After obtaining his degree in mathematics from the University of Liverpool, John joined Jonathan Ford & Co in 2004 and qualified as a chartered accountant four years later. John likes to keep abreast of developments in tax and accounting and is responsible for the mentoring of junior staff.

Outside of work, John enjoys keeping fit and is a Liverpool FC season ticket holder.

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