At Gorilla Accounting, we love to keep our clients up to date with the latest news from the accountancy world. It’s been a busy couple of months at Gorilla, what with a new year starting, tax return deadlines and many clients getting ready for the new tax year.
Three huge stories from the world of accountancy this month have been the cyber hacks on fellow accountancy firms, the news that Adrian Chiles has won his appeal against HMRC and a confirmation from HMRC regarding IR35 and hiring errors.
Each month going forward, we’ll do a monthly round up of industry news and company updates to keep you in the know.
Cyber Hacks
Cyber threats are a growing risk to businesses including accountancy firms, and cyber security is now part of the day job for accountants.
High-profile cyber security breaches have affected a number of firms including Brookson One, NW Accounting, SJD and Parasol. We are sympathetic to these firms as it’s coming at a real cost to their businesses. We want to reassure our clients that we take cyber security extremely seriously and have stringent processes in place to ensure this doesn’t happen to our business.
Accountants and other financial institutions are particularly attractive to cyber criminals. In fact, it is estimated that financial institutions are over 30% more likely to be targeted than other companies. As a profession, we deal with a high level of commercial data and sensitive financial information on a daily basis.
Accountants, both in practice and in industry, must therefore understand how to identify and respond to cyber security risks quickly and thoroughly to ensure no data is breached.
At Gorilla, we work collectively to ensure that our data is protected to the highest possible standard. We have our own in-house IT and security team and also work with independent specialists to prevent any breaches and we’ve conducted a comprehensive review of this in light of what has happened to other firms in the last few weeks.
In the past, the main risks of data breaches were from the loss or theft of data held in hard copy. Now that data is stored in different electronic formats and methods, we have evolved our security to ensure none can be obtained by third parties.
Our accountants at Gorilla are well placed to advise on the steps a business should take to protect themselves – and we take our own advice.
Unfortunately, the damage has been done and many business owners and locums have been left without access to information or their finances. According to Trustpilot reviews, payments have been severely delayed since the cyber hacks, some customers tax returns have had errors and people have complained of a lack of communication with these companies and their accountants.
If you have had issues, and need advice, Gorilla can help. You can contact us via our online form here or call 0330 107 9675.
Gorilla in the news…
You may have seen us in the news ourselves, as we have been discussing the cyber hackings that are going on in the industry.
You can read our take in the Freelance Informer, Express and National Cyber Security News.
Gorilla Director Daniel Fallows confirmed that no Gorilla customers have been affected and that we have been contacted by hundreds of contractors and SMEs who are concerned about being able to submit their HMRC self-assessment in time for the extended deadline.
Adrian Chiles vs HMRC
In a huge turn of events for the industry, Adrian Chiles has won his appeal against a £1.7million tax bill.
This is huge news as tax and legal experts across the UK have agreed the latest ruling highlights HMRC’s patchy record on IR35 rules for freelancers.
A lot of you will know Adrian Chiles from a number of high-profile TV programmes on both the BBC and ITV, including The One Show.
In a blow for the UK tax authority, they lost their case against the presenter in its pursuit of high-profile broadcasters, accusing them of working as “disguised employees”.
HMRC claim that companies such as Chiles’ Basic Broadcasting Ltd, who the appeal was against, reduce their tax bills by funneling their income through personal service companies. This is known as IR35.
What is IR35?
IR35, also known as ‘intermediary legislation’, was introduced in 2000 to tackle what is described as “disguised employment”. This prevents employers from taking people on as contractors rather than employees, to deliberately avoid paying Employer’s National Insurance Contributions or providing employment rights and benefits.
If you’re found to be within IR35, you must pay tax and National Insurance contributions in the same way as an employee.
According to HMRC, many people are not classifying themselves properly. This leads to economic losses of around £1.2 billion a year.
The case against Adrian Chiles
The tax tribunal against Adrian Chiles was for an income tax bill of £1,249,433 and a further £460,739 in national insurance contributions, covering the TV and radio presenter’s work for the BBC and ITV between 2012 and 2017.
HMRC claimed that Chiles was working for the BBC and ITV between those years, rather than as a “freelancer”, despite him working as a contractor through his own limited company since 1996.
The tax office argued he should have paid more tax as an employee of the broadcasters, where he worked on BBC programmes such as The One Show, Match of the Day 2 and The Apprentice: You’re Fired, as well as on Daybreak and as a football commentator at ITV.
The HMRC has pursued dozens of presenters over their IR35 status in recent years, including TV sports host Gary Lineker, whose £4.9mn tax battle continues, and broadcaster Lorraine Kelly, who won her case over a £1.2mn bill.
The Judge, Jonathan Cannan, allowed Chiles’ appeal, ruling the presenter was not a disguised employee of either the BBC or ITV. It was decided that he was in business on his own account and that there was no suggestion that he set out to avoid tax through his company.
If you do have questions about IR35, we can help. You can find more information regarding IR35 on our website, here, or you can speak to your dedicated accountant. Big changes are happening with IR35 determinations and if anyone self-employed is confused or needs clarity then we are here.
Also in the news this week…
Hiring errors are now allowing freelancers to escape tax payments.
It’s been revealed that HMRC have admitted that contractors can reclaim tax payments in full if IR35 rules are misapplied.
Tens of thousands of freelancers working in the private sector are now entitled to reclaim the tax they have paid if their hirer misapplies the new rules that govern the payment of contractors.
HM Revenue & Customs revealed the news to the Financial Times that it was “correct” that the revamped IR35 guidelines which came into effect last April, allow contractors to fully reclaim tax if their hirer has applied them wrongly. The hirer would then be liable for any tax due from the freelancer’s work.
IR35 was in place to ensure contractors paid the correct amount of tax – but in this twist of events, they could end up paying none at all.
Until last April, 180,000 contractors billed for their services through a “limited company”, which was assessed to see whether they were employed or self-employed for tax purposes.
Self employed contractors often paid corporate taxes rather than typically higher income tax and national insurance. As mentioned earlier, IR35 cracked down on the “disguised employees” who were avoiding paying the correct amount of tax by categorising themselves as self-employed. The government, through IR35, made it the responsibility of the hiring companies to assess contractors and be liable for any tax due if they were wrongly assessed.
However, they did not set out what would happen to the tax already paid by the contractors – which has now been clarified. HMRC has confirmed that miscategorised workers can reclaim any tax they have paid on income earned, if this is the situation they are now in.
Hiring businesses or public bodies may be able to get contractors to then reimburse them for paying their full tax – however this is only if it was covered in their contractual agreement. It is not clear if these indemnity contracts would be enforceable.
There are no figures to show how many contractors have reclaimed tax just yet, but if you have found yourself in this situation and need an accountant to mana
