The Blog

What the 2019 loan charge means for taxpayers now it’s in place

What the 2019 loan charge means for individuals now it’s in place

Announced in the 2016 Budget, the 2019 loan charge has been developed by HM Revenue and Customs (HMRC) to clamp down on the use of loan schemes in recent years and to nudge those who used those scheme to settle.

According to HMRC, an estimated 50,000 people are believed to have used loan schemes or ‘disguised remuneration schemes’ which will be affected by the loan charge.

Historically, some firms entered into arrangements which allowed a company to reward its employees via a loan made by a third party, often an employee benefit trust, with the company receiving a corporation tax deduction and the loan not being taxable in the hands of the recipient.

But in recent years, HMRC believe that scheme providers have exploited various parts of the existing legislation, which has enabled some individuals to avoid paying Income Tax and National Insurance at an estimated cost to HMRC of £3.2billion.

In HMRC’s words, it ‘has never approved these schemes and has always said they don’t work.’ And it has implemented the loan charge in an effort to put a stop to loan schemes.

Industry-wide impact

Implemented on April 5 2019, the loan charge applies to anyone who has used a relevant loan scheme over the last 20 years.

The vast majority of those affected by the charge work within business services, which includes IT consultants and management consultants, and construction workers. This breakdown, taken from the HMRC website, illustrates where the impact of the charge will be felt:

Business services – 65%
Construction – 10%
Engineering – 4%
Medical and education services – 3%
Accountancy – 2%
Dentistry – 2%
Retail distribution – 2%
Other professional and technical services – 2%
Social and community services – <2%
Recreational services – <2%
Other financial activities – <2%
Other transport and storage – <2%

Repayment options

The options for anyone affected by the loan charge were to:

1. Repay the loan – before April 5, 2019.
2. Try to voluntarily agree to settle – any income tax and interest, before April 5, 2019.
3. Pay the loan charge – in many cases this option is likely to be more expensive than settling.

The charge is calculated by adding the amounts taken as tax-free loans over the relevant years together and taxing them as earned income in one year (2018–19) at the marginal rate of tax. The tax bills for people who have repeatedly used schemes will be higher than those who have used them once.

HMRC has stressed it wants to help people who have previously used loan schemes to get reach a settlement. It is offering flexible payment options for those who may find it difficult to pay the resulting tax liability.

For anyone who is currently in the settlement process, but has not finalised their Settlement with HMRC, as long as there are no delays caused by the taxpayer HMRC have confirmed that they will settle with the taxpayer despite the fact we have gone past the 5 April 2019, the date where the Loan Charge was triggered.

For everyone else details of relevant outstanding loans will need to be reported to HMRC and the Loan Charge paid.

There is still significant pressure for the Loan Charge legislation to be looked at again. It remains to be seen if there will be any changes implemented, or whether the change of Treasury Minister has any impact on the matter.

A turning point for Liyla

Liyla’s story

On Thursday 18th April we had a fundraising day for Liyla Cooper – the granddaughter of our lovely PA, Carol Cooper. 

Liyla has a rare genetic syndrome called ‘Angelman Syndrome’. It is a complex disorder which primarily affects the nervous system. Characteristic features of this condition include delayed development, intellectual disability, severe speech impairment, and problems with movement and balance (ataxia).

After seeing dramatic progress with her walking over the past few months the family are trying to collect funds for special physio sessions called Bobath Physio, costing £97 each time. Her story hit the local newspapers as her determination to walk couldn’t go unnoticed. 

Fundraising Day at Ormerod Rutter

We were keen to help the family by having a fundraising day throughout all our offices at Droitwich, Bromsgrove, and Kidderminster. All the staff here at Ormerod Rutter got involved with a charity bake sale as well as donating £2 each for a dress down day in blue and yellow – to match the ‘Angelman syndrome’ logo. 

One of our staff members took the time to hand make a teddy bear as a gift for Liyla, which was very well received!

On Instagram, we received heart-warming messages from people all over the world who are aware of Angelman syndrome. Rachel from Dubai said ‘Congratulations, what lovely support for Liyla! My daughter Leah, who is 20, also has the condition. We wish you all the best.’ 

We had lots of donations for a raffle from local companies including Aztec Aqua Park at Upton Warren, Marriotts Little bakery in Malvern and Droitwich Back and Neck clinic. We would like to say a massive thank you to all those local companies that got involved in Liyla’s fundraising day, including our generous clients who donated to her just giving page from all over the country. 

In total, we raised £677

We loved having Liyla here, she walked confidently in front of our staff members with the help of her loving family. Despite any obstacles in her way, she is a happy, determined little girl with a beautiful smile that touched our hearts!

From everyone here at Ormerod Rutter we wish Liyla and the family all the best.

A helping hand

The Bobath Physio has been a huge turning point for Liyla to help her walk; If you would like to read more on her story and donate to her page please follow the link –

Why do i need an accountant?

Your questions – answered: ‘Why do I need an accountant?’

This is a question most business owners find themselves thinking about, especially when they’re first starting out.

This is either because they’re aware of the fact many other businesses employ the services of an accountant or using an accountant has been recommended to them, or both.


Here’s our answer to this frequently-asked key question:

Using an accountant provides businesses with peace of mind that their financial affairs are in order, up to date and comply with the latest industry regulations and HMRC’s requirements (which can come with hefty penalties if ignored or missed).

Accountants are responsible for making sure individuals and companies maintain clear and accurate records of their financial performance. They also keep businesses updated on changes to the tax law, such as Making Tax Digital, and help them make the relevant adjustments so that their financial records adhere to the latest guidance.

While accountants may help businesses in areas, such as book-keeping and payroll, self-assessment and VAT returns on a day-to-day basis, they are also on hand to help business owners make informed decisions about their future direction.

Many leading accountants provide strategic financial planning and tax-saving advice that enable companies to save money. They can also help business owners make more money too by advising on the right wealth-building strategies.

Overall, their role is to implement efficient systems and offer proactive, hands-on support throughout the year that helps businesses grow financially stronger.

So many businesses organisations don’t use an accountant because they think it’s easier for them to take care of their financial affairs themselves or want to save money which, in some instances, may be the case.

However, with over 35 years’ experience of providing accounting and financial services, we’ve found that having an accountant in your team is always the best route. Especially when business owners become too busy to stay on top of their business’ financial affairs or find that taking care of their accounts is preventing them from spending valuable time on their business.

Are you unsure about whether or not you need an accountant? The quickest and easiest way to find out is by getting in touch with us for an initial consultation.

It’s free of charge, there’s no obligation to use our services and it will help you see why so many businesses (potentially including yours) do need an accountant. To arrange your free consultation, contact us on 01905 777600 or

Brexit and Withholding Taxes on Interest, Royalties and Dividends

The UK leaving the EU may have an impact on the way that you treat payments and receipts of interest, royalties and dividends for tax going forward. The EU has a number of directives in place aimed at reducing tax burdens within the single market, notably withholding taxes.

Current Position

The EU Interest and Royalties Directive exempts most payments of interest and royalties between associated companies in member states from withholding tax where the recipient is the beneficial owner of the income. The Directive supersedes international double taxation treaties between member states and has therefore become relied upon.

The EU Parent-Subsidiary Directive eliminates withholding tax on dividends between associated EU companies


Post Brexit Position

UK Companies will lose access to the benefits of both Directives once the UK leaves the EU and therefore you will need to rely on the provisions on the individual tax treaties to remove the requirement to deduct withholding tax.


After Brexit UK companies will be required to deduct withholding tax at 20% on interest payments unless:
• HMRC has authorised gross payments
• The tax treaty in place with the relevant member state reduces the withholding tax to nil
Whilst the UK has 27 tax treaties to fall back on not all provide for a nil rate of withholding tax on interest and/or royalties, and some only reduce the rate of tax with the member state.


Royalties can be paid gross of withholding tax without prior clearance from HMRC if it is reasonable to believe that the payment at the time is entitled to relief under the treaty, otherwise withholding tax is 20%.

It is also important to note that treaty relief will only be granted when the interest and royalties are paid on an arm’s length basis in accordance with the Transfer Pricing guidelines.


The impact of losing the EU Parent-Subsidiary Directive in respect of dividends is mixed.
UK Law states that withholding tax isn’t required to be deducted from dividends paid by a UK Company.
However, where UK companies have relied on the Directive to eliminate withholding tax on dividends received from EU subsidiaries you will need to check the withholding tax rate in the relevant tax treaty with that member state

Action To Take Now

• Identify all payments of interest and royalties made to and received from EU associated companies
• Identify which rely on the EU Directive in order to mitigate withholding tax obligations
• Review the terms of the UK Tax Treaties with the relevant member state to confirm if withholding tax is reduced to nil
• Analyse existing arrangements with HMRC and identify applications to claim treaty relief that need to be made
• Review transfer pricing documentation to ensure that payments are on an arm’s length basis
• Consider alternative funding arrangements if loans are not on an arm’s length basis

For more information or if you have any queries please give one of our team a call on 01905 777600.

Spring Statement 2019

Chancellor Philip Hammond delivered this year’s Spring Statement during what is an uncertain time for the economy and businesses.

Our summary below provides an overview of the latest measures, and includes updated forecasts for the UK economy and public finances, as published by the Office for Budget Responsibility. The Chancellor pledged to bring forward the £700 million reforms for business apprenticeships, and also announced that a £26.6 billion ‘deal dividend’ would be made available to help boost the economy, providing a Brexit agreement can be reached.

We also look ahead to some of the key tax and business changes coming into effect in the new tax year.

For advice on any of the topics covered in our Spring Statement summary, and how they may have an impact on your business or personal finances, please give us a call on 01905 777600

Click here to download

MAKING TAX DIGITAL: A guide for businesses


MAKING TAX DIGITAL: A guide for businesses

Everything you need to know about MTD 

Click here to download

Five facts about Making Tax Digital

Five facts about Making Tax Digital


Making Tax Digital (MTD) is almost upon us.


From 1st April this year, it will be compulsory for all businesses with a turnover of more than £85,000 to keep digital records for VAT purposes.


Of course, MTD has been piloted amongst half a million businesses over the last year, but we will soon start to see the initiative being rolled out on a more permanent basis.


However, moving the entire UK tax system online is no easy feat, which is why there have been numerous updates issued about its overall aim and progress since it was unveiled by the Government.


Here are five key facts to help bring you up to speed on all things MTD:


FACT 1: You’ll have to submit tax returns more frequently


Once MTD is in force, you’ll no longer be required to submit your tax returns annually. Instead, you’ll be expected to submit reports every three months from April next year.


Each time you submit a return, you’ll be able to see how much tax you owe, according to HMRC’s calculations. More frequent returns may be another thing to have to think about, but it’ll help make sure you stay on top of your tax affairs all-year round, not just every 12 months.


FACT 2: The next 12 months are key


From April this year, MTD for VAT will apply to all customers, apart from those that have been deferred.


It will then apply to deferred businesses from October this year. Deferred businesses are defined as being trusts, ‘not for profit’ organisations that are not set up as a company, VAT divisions, VAT groups, those public sector entities required to provide additional information on their VAT return (Government departments, NHS Trusts), local authorities, public corporations, traders based overseas, those required to make payments on account and annual accounting scheme users.


It’s anticipated that MTD will be extended to sole traders and businesses with an income of between £10,000 and £85,000 from April 2020.

FACT 3: Not everybody has to comply with it


MTD applies to the vast majority of taxpayers, but not all of them. These businesses include:


  • Self-employed individuals and unincorporated businesses with an annual turnover of less than £10,000
  • Charities
  • Community amateur sports clubs
  • Insolvent organisations


FACT 4: You can still use spreadsheets


As the name suggests, MTD is about making all tax affairs digital. And this involves asking businesses to stop using hard copy accounts and switching to digital ways of working instead.


Originally, the use of spreadsheets wasn’t permitted by HMRC however, certain HMRC-approved spreadsheets are now accepted. The important thing is that they are in a format that can be submitted online.


We’re in the process of implementing a dedicated MTD submissions service for our clients, which we will be rolling out to clients for submitting VAT returns from April this year. In the meantime, feel free to ask us about the service and how it can help make sure that your business is MTD compliant.


FACT 5: It does matter to most businesses 


As we’ve addressed in points 2 and 3, MTD does apply to most businesses, with the exception of only a small cluster of organisations.


Once in full force, businesses will be accountable for submitting more frequent tax returns and having more regular tax correspondence with HMRC. What was once a while off, is now on the verge of taking effect and what some companies first thought won’t apply to them, most probably will at some point.


If you are uncertain about whether MTD applies to your business and if you’re ready for it, check out this page –  – or get in touch with us via the contact details below.


Making Tax Digital is a key part of the Government’s plans to make it easier for individuals and businesses to get their taxes right and stay on top of their affairs. While the scheme will apply to all businesses above the VAT threshold, smaller businesses will not be required to use it, although they can choose to use it on a voluntary basis.


If you would like to learn more about Making Tax Digital and the impact it’s likely to have on your business, or find out more about our dedicated submissions service, contact Mike Brown, Software Support Manager, on 01905 777600 or

Sage: Missing VAT return transactions advice

Sage: Missing VAT return transactions


Being the industry-leading independent chartered accountants that we are, we were recently notified by Sage of an issue relating to VAT returns.


Like many other accountants, we use software systems, such as Sage, to carry out our day-to-day work, which includes completing VAT returns for our clients.


Sage got in touch with us to inform us that a technical glitch their end means VAT transactions for 31 March 2019 aren’t currently appearing. It was crucial they flagged the issue to us, as it’s important HMRC are provided with full and accurate accounts at all times. Missing information can cause delays and lead to penalties.


Fortunately, there are a couple of quick fixes that are available for Sage versions 23, 24 and 25 that can be applied to work around the problem, which we’ve already implemented. They include:


  1. Installing the latest update – by visiting and following the instructions there.


  1. Manually correcting the date range – when running your VAT return for the period ending March 2019. This can be done by clicking ‘Use custom date range’, followed by ‘Use whole months.’ This will change the VAT period end date to 31 March 2019.


We acted on the notification immediately and haven’t been impacted by the issue. If you’d like to find out more or have any queries about your Sage 50 accounts software, feel free to contact us on 01905 777600 or

Payslip legislation changes: What do they mean for employers and employees?

Payslip legislation changes: What do they mean for employers and employees?

The law relating to providing payslips is set to change very shortly.

From April 6, new legislation, known as the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No 2) Order 2018, will come into force, making it compulsory for employers to:

  1. Provide all of their workers with itemised printed or electronic payslips.
  2. Make sure the payslips they issue state the total number of hours worked where an individual’s pay varies according to the hours that have been worked.

Employers currently have a statutory duty to provide their workers with payslips. However, from April 6, they will also be required to provide payslips to external employees, who are outside of their immediate workforce.

Who will receive payslips from April 6 who didn’t used to?

 Under the new payslip legislation, ‘workers’ are considered as being individuals who:

 “Have entered into work under a contract of employment or any other contract, whether express or implied and whether oral or in writing, whereby the individual undertakes to do or perform personally any work or services for another party to the contract whose status is not by virtue of the contract that of a client or custom of any profession or business undertaking carried on by the individual.”

‘Workers’ are classed as contractors, and other types of ‘non-employee’ workers. For instance, casual, agency, freelance, seasonal and zero-hours contract workers.

When do hours need to be included on payslips?

 If workers carry out ten hours’ work one month and then 20 the next month, their payslips will have to state the number of hours they’ve worked.

However, if a worker completes the same amount of work every month, in exactly the same amount of hours, then the number of hours do not need to be stated on their payslips.

 The hours can be shown as a single total of hours or broken down into separate figures for different types of work or different rates of pay.

Including this information on payslips means it will be easier for variable-time employees to reconcile their pay with their working hours. It will also make it more straightforward for them to establish whether they are being paid the national minimum wage by their employers.

Where do I find out more?

 HMRC has published guidance on the new legislation, which can be found here –

Alternatively, for more advice about the forthcoming payslip legislation and making sure your payroll processes are set up to accommodate the new requirements, contact us on on 01905 777600 or

Your R&D Questions Answered

Is your company involved in scientific and technological innovation?  Then you could be missing out on an invaluable tax relief.


What is R&D?

R&D takes place where you are carrying out a project that seeks to achieve an advancement in overall knowledge or capability in a field of science, or your taking a risk to solve a technological uncertainty.  Is your company developing a new product, process or service, or improving an existing one?


What tax relief can my company get?

Small and medium sized businesses will be able to deduct up to a further 130% of their qualifying expenditure from taxable profits.

This will either reduce your tax liability or create trading losses that you can either utilise in future years, allocate to other group companies or surrender for the R&D Tax Credit of 14.5% to generate an amount repayable to the company.


What if my company is large?

If your company has a head count of more than 500, and either your turnover is more than €100m or your balance sheet is more than €86m then your R&D claim will fall under the Research & Development Expenditure Credit (RDEC) Scheme.  An RDEC Tax Credit is worth 12% of your qualifying R&D expenditure.  This credit is taxable at the corporation tax rate of 19%. The 12% credit is then offset against your tax liability; A loss-making company could receive a repayable amount. The credit is effectively worth 10p for every £1 you spend on R&D.


What costs can I claim the extra relief on?

  • Staff costs of those involved in the project, including wages, Class 1 NIC and pension contributions
  • Externally provided workers
  • Sub-contracted R&D
  • Consumable items including water, heat and power consumed in the project
  • Costs of producing prototypes


What should I do now?

A claim for R&D is made on your Corporation Tax Return and if you haven’t already made a claim you can still make a back dated claim within the 12 month anniversary of the filing date of your company Return.

So if you think that you may be missing out give us a call on 01905 777600 or email us

VAT and Brexit

“Deal or No Deal??”

As Noel Edmunds would say. But what are the implications if the UK exits the EU with no deal in place?

At the moment, the UK has (finally) settled into a trade regime with the EU that has become quite familiar (with one or two areas of possible exception!).

Most transactions in goods or services between businesses established in separate EU Member States are VAT free, allowing for free movement of goods, less administration and, quite frankly, less hassle.

In August of last year, when the possibility of exiting the EU with no deal was very much a  “back-stop” H M Revenue & Customs issued some guidance on what the fundamental changes would be to EU trade in the unlikely event that no deal was reached. This can be found at https: // businesses-if-there’s-no Brexit-deal.

The problem is we are now in January 2019 and no deal has yet been reached.

So what does that mean for you if you import or export goods or services?


Importing goods from the EU

 As from the 29 March 2019 goods imported from the EU will be treated in the same way as goods imported from outside of the EU. This would normally mean that a UK business would have to pay VAT upon arrival or under a Deferment Scheme- which would necessitate an increase in the level of financial security payable to HMRC and would involve delays in recovering any VAT incurred.

HMRC has therefore said that it will therefore allow UK businesses to account for VAT through their UK VAT returns rather than having to pay the VAT up front or defer it. How long they will allow this to happen is not clear. Interestingly, they will also allow this treatment for imports of goods from outside of the EU- which is a clear advantage.

The completion of Customs declarations and the payment of “any other duties” will still be required and more details on this can be found in the “Trading with the EU if there is no Brexit deal” technical Notice on HMRC’s website. This may well mean that Customs and/or Excise Duty will become payable on goods entering the UK from the EU making them more expensive to purchase.

It is very likely that a UK business importing goods from the EU will need an EORI Number (Economic Operator Registration and Identification scheme number) which is currently required for imports of goods from non-EU countries. HMRC have said they will announce further details on this in due course.


Importing services from the EU

 At the moment a UK business does not normally pay VAT to an EU supplier but must “self-account” for any VAT payable and recoverable under the “reverse charge” rules.

This is unlikely to change under current proposals.


Exporting goods to businesses in the EU

 The main change here will be the lack of any need for the completion of an EC Sales List.

All UK businesses will need to keep full commercial and official (HMRC) evidence to show that the goods have left the UK and provided they have that, zero-rating may be retained. They are also likely to be required to complete a Customs Declaration when the good leave the UK and the customer is likely to have to pay Customs and/or Excise Duty when the goods arrive in the EU making them more expensive to buy.

Again, and EORI number is likely to be a requirement.


Distance Selling

 Currently, if a UK business supplies and delivers goods to “consumers” elsewhere in the EU (ie, private individuals and possibly some charities and not for profit organisations etc) it must apply UK VAT to those sales until a certain turnover threshold is reached when it must then register for VAT in the EU country of arrival.

This rule will no longer apply. All such sales will be zero-rated in the UK (subject to obtaining and retaining commercial and official evidence of removal of the goods from the UK) and it is likely that any EU registrations that have been put in place as a result of the Distance Selling Rules will need to be cancelled.

Goods stored in the EU for sale in that country

 UK businesses who store their goods elsewhere in the EU (for example, in a warehouse) are likely to be required to register for VAT in the EU country concerned.

Exporting services to businesses in the EU

Again, under current rules provided the EU business supplies its’ EU VAT number or alternative evidence of being “in business” no UK VAT need be charged (in most cases). This is unlikely to change.

Mini One Stop Shop (MOSS”)

 At present suppliers of intra-EU digital services to consumers elsewhere in the EU can register for MOSS in the UK as an alternative to having to register in each EU country of delivery. If no Brexit deal is reached, this Scheme will no longer be available to UK businesses.

UK businesses will either have to register for VAT in each EU Member State or register with HMRC for the MOSS “non-Union” Scheme as soon as possible. Further details on the non-Union MOSS Scheme can be found on the HMRC website.


The HMRC Guidance referred to above gives additional information on other areas that may be affected.

 However, I think it is safe to say that whether we leave the EU with a deal or without one, change is on the way and any business importing from or exporting to the EU should prepare for that change-when we know exactly what it is!

What is IR35?

What is IR35?

In most professions, it’s not uncommon for businesses to outsource certain tasks or services to external suppliers.

From a tax and accounting perspective, it’s a process that’s always been relatively straightforward. However, things have become more complex as a result of IR35, which was first implemented almost 20 years ago.

IR35 is the reference term given to a specific area of tax legislation which also now gets referred to as the ‘off-payroll working rules’

Why was it introduced?

IR35 guidance was introduced by the Government in 2000 to help prevent contractors, or ‘disguised employees’ fraudulently claiming to be contractors to gain tax and National Insurance Contributions (NICs) advantages.

It is possible for contractors who do not comply with the rules to pay significantly less income tax and NIC than an equivalent employee. HMRC currently estimates that the cost of non-compliance could reach £1.3 billion a year by 2023/24.

Who does it apply to and when does it apply?

IR35 applies to contractors who work through their own limited companies.  These tend to be Personal Service Companies (PSC’s). IR35 does not apply to self-employed individuals.

All ‘relevant engagements’ in which a contractor provides services to a client through a limited company are governed by IR35. If the work that’s being carried out is considered as being the same as if the contractor were employed by the client, then IR35 is likely to apply.

If IR35 does apply, what does this mean for employers and contractors?

  • Employers – are responsible for paying Employer’s NICs and paying across to HMRC all PAYE tax and NIC deductions made from contractor payments.
  • Contractors – should expect to be taxed like a normal employee, with Employee’s NICs and Income Tax deducted from their pay. Significant changes took place from 6th April 2017 whereby the vast majority of limited company contractors working for public sector clients became “deemed employees” of the public sector body or engaging agency. As at 6th April 2017 the public sector body became responsible for deciding whether or not IR35 applied. Where it did then PAYE tax and NIC was automatically deducted from payments made to the contractors by the public body or engaging agency.

Forthcoming changes 

In the 2018 Budget, it was announced that legislation relevant to IR35 would be amended further to extend the guidance relating to the public sector into parts of the private sector by April 2020.

This would mean that, from 6 April 2020, all medium and large businesses will be responsible for deciding whether IR35 applies to the contractors who work for them. Where it is determined that the rules do apply, the business, agency, or third party that pays a contractor’s company will need to deduct income tax and employee NICs and pay employer NICs.

Does IR35 apply to me?

While IR35 may have been in existence for many years, it is not always 100 per cent clear for contractors or clients to clarify if it applies to them or not.

Some contractors who are clearly governed by IR35 have found working under an umbrella company to be the most effective and compliant route however, this doesn’t mean it’s the best option for everybody.

HMRC has developed an online checking facility to help contractors check their employment status (the CEST) and, don’t forget, it’s also possible to seek guidance and advice from your accountant. Here at Ormerod Rutter, we have a dedicated tax specialist, Anthony Middleton, who monitors all of our clients’ tax investigations and deals with Corporation Tax, Income Tax enquiries and IR35 queries.

For more information about IR35 or guidance on whether or not your work is governed by it or not, contact us on 01905 777600 

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