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SPRING 2016

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Your quarterly update on significant technical developments and what’s new at Mercia to keep you at the leading edge of client services.

FRS 102 - A summary of issues affecting seven sectors in particularWe’re now well into 2016 and across the nation… Read more.

Two review services to help you transition to FRS 102The next few months may prove particularly challenging… Read more.

Dividend changes aheadIn a big change for many clients, the Government has announced that rates of tax on dividend income will be increased… Read more.

Inside this issue...

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www.mercia-group.co.uk 2VISION SPRING 16

Changes in financial reporting

Seven sectors…We’re now well into 2016 and, across the nation, accountants are sharpening their pencils and brushing

up on their double-entry ready for the onslaught of a new accounting regime. FRS 102 has, of course, a

number of issues that impact businesses of all types - for instance, any business with a loan will need to

carefully consider how to apply the dreaded financial instruments section of the new standard. However in

this download, we’ll summarise some of the specific issues affecting seven sectors in particular.

RetailSector in briefFrom large high-street and out-of-town chains to smaller, independent shops, the retail sector is a key part of the UK economy. Online retail continues to prove a significant disrupter to the market across the range of goods and services we buy.

Likely impact of FRS 102 Low

Key FRS 102 issues

Operating lease incentives

Employment benefits

Foreign currency

Revenue

SummaryMany retailers will see relatively little difference in their FRS 102 accounts. The most significant issue for profits may be the changes to the spreading of operating lease incentives, such as initial rent-free periods. Under old GAAP, such incentives were spread over the initial rent period, whereas the new standard requires such incentives to be spread over the entire lease term. This will mean lower initial profits, which will then increase in comparison to old GAAP once market rent is payable. The same is true for lessors, e.g. plant hire companies.

Retailers can employ significant numbers of staff, and accruing for short-term benefits such as annual leave (which was best practice under old GAAP) is now required. Retailers who have expanded via acquisition can sometimes find that staff are under a variety of legacy terms

including differing holiday years, which can further complicate the scenario.

Retailers who import or export will be familiar with translating foreign currency transactions into sterling for their accounts. In general terms, the approach under FRS 102 mirrors that under old GAAP, but there are some notable exceptions, particularly a ban on the use of ‘contract rate’ translation.

Finally, revenue recognition is (for most retailers) straightforward and while this is unlikely to change under FRS 102, the inclusion of a number of practical examples covering the sale of goods in the Appendix to section 23 of the standard should provide further clarity and avoid confusion.

ManufacturingSector in briefFrom clothing to heavy industry, manufacturing still accounts for a significant proportion of the British workforce, despite huge pressures from emerging markets.

Likely impact of FRS 102 Moderate to high

Key FRS 102 issues

Property, Plant & Equipment (PPE)

Intangibles (R&D)


Foreign currency

Inventories

Government grants

SummaryThere are several potential issues for manufacturers. Firstly, whether we’re talking factories or plant, there are some key differences for tangible fixed assets (now known as Property, Plant and Equipment or PPE). The useful life on such assets is no longer limited to 50 years (as was usually the case under FRS 15) but can be longer, and residual values are calculated using current, rather than historic



prices. Revaluation remains an option but fair value, rather than existing use value, must be used to revalue PPE. What’s more, there are important ‘deemed cost’ transition options in para 35.10 to consider on transition.

Manufacturers who invest heavily in R&D will be able to treat qualifying costs as assets in much the same way as under SSAP 13 (and the FRSSE), though there are minor differences between the regimes.

Like retailers, manufacturers may have entered into significant operating leases (or, in some cases, may lease equipment to customers). Incentives received or given under such leases are now spread over the entire lease term, rather than the period beyond which market rent is payable.

As for retailers, manufacturers transacting in foreign currencies (eg. for the purchase of raw materials) will generally find the approach under FRS 102 familiar, though the ‘contract rate’ method is no longer available.

Stock (or ‘inventory’) is also generally familiar under the new standard. Very few manufacturers adopted a ‘last in first out’ (LIFO) approach to valuing stock, but should note that this is now prohibited in FRS 102.

Finally, manufacturers who benefit from government grants must choose whether to continue recognising these on an accruals basis or on a ‘performance’ basis as the conditions for earning the grant have been met.

FarmingSector in briefIn 2014, British farmers contributed over £10 billion to the UK economy. While the majority of farms are small businesses, there are some large multinationals in the sector too. Many farms also operate in ancillary sectors such as tourism and property management.

Likely impact of FRS 102 Moderate

Key FRS 102 issues

Investment properties


Biological assets & agricultural produce

Government grants

SummaryFarms with tenanted properties may be treating these already as investment properties, but this is even more likely to be the case under

FRS 102. As such, properties must be recognised at fair value each year,

although (unlike SSAP 19) if obtaining such values incur ‘undue cost or effort’ there is an option to treat at depreciated cost less

impairment. This is likely to be of particular interest to farms for whom such properties are often a minor component of the business. Any revaluations will incur deferred tax.

Farm buildings and land will generally be treated as they were under FRS 15/FRSSE, under either a cost or revaluation model. The latter is a more lenient option than previously, and does not require a fixed five-year valuation cycle. Plant and equipment used in and around the farm will also generally be treated as they were under old GAAP. Note however that useful lives of assets are not limited to 50 years as was generally the case before, and this may mean more careful analysis of the life of separate components (as a much longer life may be applicable to farmhouses than outbuildings, for instance).

The biggest (potential) difference for agricultural businesses is the treatment of biological assets - living plants and animals - and agricultural produce at fair value rather than cost. It must be stressed that this is an optional treatment, and that if opted for (as opposed to using cost) this will be an irrevocable choice. Thus most farms are likely to continue cost-accounting for such assets.

To finish, government grants are similarly subject to a choice - in this case, between accruals and ‘performance’ models. Recognising grants in income when the farm has ‘performed’ its obligations is more similar to charity accounting and may have its uses.

Financial servicesSector in briefNot just in the South East, but in several other parts of the UK, financial services employs many thousands of people and contributes hugely to the economy as a whole. Whilst the sector is dominated by global banking, investment and insurance firms, there are plenty of smaller brokers and dealers in this highly regulated industry.

Likely impact of FRS 102Low (for most), high (for a few)

Key FRS 102 issues


Financial instruments

Revenue

SummaryLike many urban businesses, financial service companies frequently lease their property and so are subject to the same lease incentive issues as retailers and manufacturers (see above).

Financial institutions which hold investments and other financial instruments will need to pay close attention to sections 11 and 12 of FRS 102 which outline recognition, measurement and disclosure. They’ll also need to refer to section 34 which outlines additional disclosures for such entities on their holdings and sources of risk. However the majority of firms, who act as brokers and/or advisers, may



find that this issue affects them indirectly, if at all, so there’s no reason to panic.

Revenue recognition for services (including financial services) has been covered by UITF 40 and FRS 5 until now. Happily, the principles in section 23 are largely consistent with old GAAP and should not present too many challenges to most smaller financial services firms.

Firms which issue insurance contracts will need to look outside FRS 102 to its sister standard, FRS 103. This is a stopgap standard, consolidating the existing guidance in FRS 27 and the now-discontinued Insurance SORP, pending finalisation of IFRS 4.

Property & constructionSector in briefThe property sector experiences both the highs and lows of the economic cycle and, while property prices have recovered strongly in recent years, construction remains weak. The sector includes large UK housebuilders as well as very small property managers and local building firms.

Likely impact of FRS 102 High

Key FRS 102 issues


Property, Plant & Equipment (PPE)/Inventory/Revenue

Borrowing costs


Financial instruments

SummaryIn general terms, it is the treatment of assets that has changed the most significantly under FRS 102, and the property and construction sector is all about assets being built or managed. So as you might expect, there are a number of changes for this sector.

Property managers are used to revaluing to open market value and this principle remains under FRS 102, though the term ‘fair value’ is substituted. From now on, however, deferred tax will be recognised on the timing differences arising when these fair value gains are brought in. The gains (and tax) will be shown in profit or loss rather than being treated as ‘other comprehensive income’, though they remain unrealised and therefore non-distributable.

Property which is being constructed or held for sale by developers is treated as inventory and the ‘long-term contract’ approach to accounting previously enshrined in SSAP 9/FRSSE is retained (albeit in the ‘revenue’ section of the standard). As we’ve noted for other sectors, there are differences for any property held for use as ‘property plant & equipment’ (PPE), with potentially longer useful lives and a new approach to revaluation.

Borrowing costs incurred in construction can be capitalised (as under old GAAP) or expensed as incurred, but it’s worth noting that on transition, any previous borrowing costs can

be left as they were.

Landlords should note that any incentives offered to tenants on property they lease will now be recognised over the entire lease term. However on transition, any existing leases’ incentive treatment can be retained for ease. There are also more onerous disclosures for lessors, including details of purchase options and escalation clauses on the properties leased.

Finally, many property businesses are heavily-geared and are thus especially affected by the financial instruments changes in FRS 102.

Tourism and leisureSector in briefA key and growing sector of the economy with particular importance to several of the UK’s regions.

Likely impact of FRS 102 Moderate

Key FRS 102 issues


Revenue

Foreign currency

Heritage assets

SummaryHoliday rental companies will treat their properties as investment properties under old GAAP and, on transition to FRS 102, will face the same issues as property firms (see above).

Revenue recognition in the leisure industry (especially holidays and travel) can prove problematic under old GAAP, with careful consideration as to whether a business is acting as principal or agent. Whilst the revenue section of FRS 102 is shorter than its equivalent in FRS 5, the principles are retained and significant changes in approach are not expected.

Firms operating overseas, or dealing with foreign tourists, will usually have experience in handling foreign currency transactions and these will largely be treated in a similar way under FRS 102.

FRS 102 will replace the existing suite of FRSs, the most recent of which (FRS 30) covered heritage assets which are of particular relevance to tourism and leisure. Whilst small entities were exempt from the standard, the eventual



introduction of FRS 102 for such entities will require them to consider whether the additional requirements (in section 34) apply to them.

Transport & logisticsSector in briefWith ever-busier infrastructure, transport and logistics comprise around 5% of GDP and include businesses of all sizes, from global courier firms to local hauliers.

Likely impact of FRS 102 Low

Key FRS 102 issues


Revenue

Foreign currency

SummaryPPE includes depots and vehicles, and will in most cases be treated in the same way as under old GAAP, although attention should be paid to useful lives and residual values.

Revenue recognition for goods in transit is usually not especially challenging under old GAAP and should likewise be straightforward under FRS 102. There are several pertinent examples in the Appendix to section 23 of the standard.

For firms operating international transport, foreign currency translation will remain an issue although as noted for other sectors, in most cases the approach will be consistent with that under old GAAP.

The next few months may prove particularly challenging, as you assist your clients with the move to FRS 102. Here are two ways in

which we can help.

Contact either David Southern or Belinda Auchimovicz on 0116 258 1200 or at [email protected]

For Northern Ireland contact Brendan Howard on 028 3083 5558 or at [email protected]

www.mercia-group.co.uk/newukgaap#reviews

From £240 per hour plus VAT From £270 per hour plus VAT

Before the transition - FRS 102 Impact Analysis Surgery

Our FRS 102 Surgery is a consultation service allowing you to discuss your client’s circumstances and the likely transition issues with a member of Mercia’s technical team. This service will:

• outline the transition process;

• highlight the areas likely to be affected by the new Standard; and

• identify accounting options available, where applicable, for your client.

After the transition - FRS 102 Financial

Statements ReviewHave you already transitioned your client to FRS 102, but want to make sure the financial statements disclosures are correct?

A financial statements review typically takes one hour, and will be followed by a written summary of observations made as a result of the review.

NEW



Dividend changes aheadIn a big change for many clients, the Government has announced that rates of tax on dividend income will be increased for 2016/17 to 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. The 10% dividend tax credit will be abolished, which means that it will no longer be necessary to gross up the dividend. This will allow clients to receive more cash up front. However, it may leave some with an unexpected tax bill many months later.

In the short term, it may be that some clients wish to accelerate the payment of dividends into 2015/16 to avoid these increased charges.

All taxpayers will receive a tax-free dividend allowance of £5,000 for 2016/17 before the new dividend rates of tax apply. This may mean that some clients will see a reduced liability on dividends next year.

Clearly, for owner-managers in particular, it is advisable for advisers to discuss their extraction policy with them before the end of 2015/16.

HMRC have given a number of examples to help explain the new rules which may come in useful when talking to clients:

Example 1

“I receive less than £5,000 per year in dividends”.

From April 2016 you won’t have to pay tax on your dividend income as it is within your new Dividend Allowance.

Example 2

I receive dividends of £600 from shares invested in an ISA”.

As is the case now, no tax is due on dividend income within an ISA, whatever rate of tax you pay.

Example 3

“I have a non-dividend income of £6,500, and a dividend income of £12,000 from shares outside of an ISA”.

With a Personal Allowance of £11,000, £4,500 of the dividends are under the threshold for tax. A further £5,000 comes within the Dividend Allowance, leaving tax to pay at Basic Rate (7.5%) on £2,500.

Example 4

“I have a non-dividend income of £20,000, and receive dividends of £6,000 outside of an ISA”.

You won’t need to pay tax on the first £5,000 of dividends due to the Dividend Allowance, but will pay tax on £1,000 of dividends at 7.5%.

Example 5


Of the £18,000 non-dividend income:

• £11,000 is covered by the Personal Allowance;

• the remaining £7,000 to be taxed at Basic Rate.

Of the £22,000 dividend income:

• the Dividend Allowance covers the first £5,000;

• the remaining £17,000 of dividends to be taxed at the Basic Rate (7.5%).

Example 6


Of the £40,000 non-dividend income, £11,000 is covered by the Personal Allowance, leaving £29,000 to be taxed at basic rate.

This leaves £3,000 of income that can be earned within the basic rate limit before the higher rate threshold is crossed. The Dividend Allowance covers this £3,000 first, leaving £2,000 of Allowance to use in the higher rate band. All of this £5,000 dividend income is therefore covered by the Allowance and is not subject to tax.

The remaining £4,000 of dividends are all taxed at higher rate (32.5%).’

Clearly, the best strategy for this year and next is a very personal decision, so make sure you talk to your clients as soon as you can.



Welcome to the Spring edition of Vision

HMRC has revealed the Top 10 worst tax return excuses for 2014. They include:

‘I had an argument with my wife and went to Italy for 5 years’. To read more, click here.

If you would like any help in this area, or if you have any comments about Vision, please contact Mark Morton by email at [email protected] or call 0116 258 1200.

) AUDIT AND ACCOUNTANCY 8-9

• Draft amendments to FRS 101, FRS 102 and FRS 103

• BIS consultation: Deregulatory changes for Limited Liability Partnerships (LLPs) and qualifying partnerships

• BIS consultation: EU audit directive and regulation - implementing the requirements

• Legislation update

• ICAEW update

• Other publications

) TAXATION 10-12

DIRECT TAXES• Revenue and Customs Briefs Direct Taxes

• Pension Schemes Newsletter 73

• Changes to the advisory fuel rates from 1 December 2015

• HMRC introduce Advance Assurance for R&D

• Tax helpline available to support people affected by severe weather and flooding


• Agent Update 51

• Employer Bulletin 57

• HMRC Trusts and Estates Newsletter: December 2015

• PAYE: employer expenses and benefits exemption


INDIRECT TAXES• Revenue and Customs Briefs Indirect Taxes

• VAT Notes 2015 Issue 4

) PUBLICATIONS 13

) GENERAL 13

• Charities update

• Pensions update

• FCA update

) TRIBUNAL CASES 14-15

• TC04788: Dr Sharat Jain December 2015 First-tier Tribunal - more travel problems

• Krisna Moorthy [2016] UKUT 0013 TCC Upper Tribunal October 2015 - termination troubles

) INTERESTING ARTICLES 16

) IT NEWS 17

) IT TECHNICAL TIPS 18-20

Audit & TaxTechnical Update

No responsibility for loss occasioned to any person acting or refraining from action as a result of the content or omission of material from this newsletter can be accepted by the authors or company.


https://www.gov.uk/government/news/hmrc-reveals-top-10-worst-tax-return-excuses-for-201314

mailto:mark.morton%40mercia-group.co.uk?subject=


AUDIT AND ACCOUNTANCY

Draft amendments to FRS 101, FRS 102 and FRS 103

In November and December 2015 the FRC issued for consultation:

• FRED 62: Draft amendments to FRS 102 Financial Reporting Standard applicable in the UK and Republic of Ireland - Fair value hierarchy disclosures;

• FRED 63: Draft Amendments to FRS 101 Reduced Disclosure Framework - 2015/16 cycle; and

• FRED 64: Draft amendments to FRS 103 Insurance Contracts - Solvency II.

FRED 62 proposed limited amendments to FRS 102 that are only relevant to financial institutions and retirement benefit plans. The proposed amendments require disclosures of categorisation of fair value measurements by levels consistent with the fair value hierarchy set out in IFRS 13, rather than the fair value hierarchy set out in s11 FRS 102. Although amendments have been proposed to s34 FRS 102 (Specialised Activities), no amendments are proposed to the FRS 102 fair value hierarchy itself at this stage. The FRC has indicated that revision of the FRS 102 fair value hierarchy will be considered as part of the first triennial review of the standard.

FRED 63 represents the FRC’s annual review of FRS 101 to ensure consistency with IFRS. Proposed amendments include disclosure exemptions in relation to IFRS 15 Revenue from Contracts with Customers.

FRED 64 proposes amendments to FRS 103 to reflect changes in the regulatory framework, specifically the commencement of Solvency II, which will affect accounting periods ending after 1 January 2016. An entity may, however, choose to continue to apply existing accounting policies.

Reference: www.frc.org.uk

BIS consultation: Deregulatory changes for Limited Liability Partnerships (LLPs) and qualifying partnerships

In November to December 2015, The Department for Business, Innovation and Skills (BIS) consulted on changes to financial reporting requirements for LLPs and qualifying partnerships. The proposed changes will amend regulations to maintain consistency with the updated financial reporting framework for companies. Proposed changes include:

• increasing the small and medium LLP accounting exemption thresholds in line with changes made for companies;

• changes to the accounts disclosure and filing requirements for small LLPs; and

• the introduction of the micro-entity regime for qualifying partnerships and LLPs.

It is anticipated that regulations will be made by summer 2016 and that the new framework will apply for financial years commencing on or after 1 January 2016, though the question of whether early adoption should be permissible was asked as part of the consultation.

Reference: www.gov.uk

BIS consultation: EU audit directive and regulation - implementing the requirements

Between October and December 2015, the BIS consulted on changes to the regulation of UK auditors required to implement Directive 2014/56/EU and Regulation 537/2014. The new Directive amended Directive 2006/43/EC and applies to all audits, whereas the Regulation applies to audits of Public Interest Entities (PIE).

The consultation, which included draft regulations, covered areas such as the definition of a PIE, requirements for PIE auditor rotation and tendering and the underpinning legislation needed for the FRC to introduce necessary changes to Ethical and Auditing Standards.

The Government’s intention is that the implementing regulations should come into force for accounting years beginning on or after 17 June 2016.

Reference: https://www.gov.uk

Legislation update

The Deregulation Act 2015 (Commencement No.3 and Transitional and Saving Provisions) Order 2015 (SI 2015/1732)

SI 2015/1732 brings into force specified provisions of the Deregulation Act 2015. This includes amendments to Chapter 4 Part 16 Companies Act 2006, which sets out the notification requirements that apply on auditor resignation, removal and, in some cases, non-re-appointment. Affected provisions have effect in relation to financial years beginning on or after 1 October 2015.

The Small Business, Enterprise and Employment Act 2015 (Commencement No. 3) Regulations 2015 (SI 2015/2029)

SI 2015/2029 brings into force specified provisions of the Small Business, Enterprise and Employment Act 2015. This includes commencement provisions for a new Part 21A and Schs 1A and 1B Companies Act 2006, which require companies to hold a Register of People with Significant Control from 6 April 2016. Companies will also need to send the information to Companies House with their confirmation statement, which replaces the annual return, or on incorporation from 30 June 2016.

Reference: www.legislation.gov.uk


https://www.gov.uk/government/consultations/eu-audit-directive-and-regulation-implementing-the-requirements


ICAEW update

TECH 16/15 AAF: Solicitors Regulation Authority (SRA) Accountants Rules: interim guidance for reporting accountants following changes to the accountant’s report requirements

The ICAEW has prepared interim guidance for reporting accountants following changes to accountant’s report requirements for accounting periods ending on or after 1 November 2015. The guidance summarises the changes made and the practical impact on work performed by the reporting accountant.

Reference: www.icaew.com

New and updated helpsheets and guidance

The ICAEW has issued and updated the following helpsheets and FAQs:

• Introductions to financial advisors (September 2015);

• Modifying the audit report (October 2015); and

• Charities - financial reporting and scrutiny (October 2015).

They have also published a suite of New UK GAAP helpsheets and FAQs covering FRS 102 and The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI 2015/980).

Reference: www.icaew.com

Other publications

The FRC has published:

• Annual Report: Corporate Reporting Review;

• Staff Education Note (SEN) 16 - Financing Transactions and amendments to SEN 13 - Transition to FRS 102 and SEN 02 - Debt Instruments - Amortised Cost;

• Discussion Paper: UK Board Succession Planning;

• FRC Letter: Year-end advice to preparers - smaller listed companies;

• Audit Committee Chairs Survey: 2015 results;

• Financial Reporting Lab Project Report: Disclosure of dividends - policy and practice;

• Review of the UK Audit Firm Governance Code Feedback statement and proposed revisions;

• Clear and Concise: Developments in Narrative Reporting;

• Audit Quality Thematic Review: Firms’ audit quality monitoring; and

• Annual Report: Developments in Corporate Governance and Stewardship 2015.

Reference: www.frc.org.uk

AUDIT AND ACCOUNTANCY



TAXATION

DIRECT TAXES

Revenue & Customs Briefs Direct Taxes

Revenue and Customs Brief 2 (2016): deduction of Income Tax at source from payments of peer-to-peer interest 8 January 2016

This Brief contains details of the current position on HMRC’s obligation to deduct income tax at source on interest paid on peer-to-peer loans.

Reference: http://goo.gl/RLGShC

Pension Schemes Newsletter 73October 2015

This Newsletter contains articles on a variety of topics including the Scottish Rate of Income Tax; the annual allowance; pension flexibility; and the lifetime allowance reduction - protecting pension savings.

Reference: Taxation, 29 October 2015, page 4 and http://goo.gl/1HPdOf

Changes to the advisory fuel rates from 1 December 201527 November 2015

The advisory fuel rates have been changed with effect for all journeys undertaken on or after 1 December 2015.

Engine size Petrol Diesel LPG

1400cc or less 11p (11p) 7p (7p)

1401cc - 2000cc 13p (14p) 9p (9p)

Over 2000cc 20p (21p) 13p (14p)

1600cc or less 9p (9p)

1601cc - 2000cc 11p (11p)

Over 2000cc 13p (13p)

Reference: Taxation, 10 December 2015, page 5 and http://goo.gl/5KTsdM

HMRC introduce Advance Assurance for R&D30 November 2015

From November 2015 HMRC are introducing Advance Assurance for companies that claim R&D tax relief.

If a company carries out R&D for itself or other companies, it could qualify for Advance Assurance. This means that for the first three accounting periods of claiming for R&D tax relief, HMRC will allow the claim without further enquiries.

Reference: http://goo.gl/G34rWo

Tax helpline available to support people affected by severe weather and flooding8 December 2015

The helpline number is 0800 904 7900 and will enable anyone affected to get practical help and advice on a wide range of tax problems they may be facing. HMRC will also:

• agree instalment arrangements where taxpayers are unable to pay as a result of the floods;

• agree a practical approach when individuals and businesses have lost vital records to the floods;

• suspend debt collection proceedings for those affected by the floods; and

• cancel penalties when the taxpayer has missed statutory deadlines.

Reference: Taxation, 28 January 2016, page 4 and http://goo.gl/RrDkMP

Pension Schemes Newsletter 74 December 2015

This Newsletter contains articles on a variety of topics including Autumn Statement 2015; lifetime allowance reduction; Double Taxation/Certificate of Residence requests; pension flexibility; and annual allowance reporting regulations.

Reference: Taxation, 17 December 2015, page 4 and http://goo.gl/TO8RYI

Agent Update 51December 2015 - January 2016

This Update contains articles on a variety of topics including the Autumn Statement and Spending Review; Agent Online Self Serve (AOSS) - Prototype Screens; Agent Account Managers in HMRC; the National Living Wage; and National Minimum Wage offenders named and shamed

Reference: Taxation, 14 January 2016, page 5 and http://goo.gl/XDjudG

Employer Bulletin 57December 2015

This Bulletin contains articles on a variety of topics including the Autumn Statement; reporting PAYE information ‘on or before’ paying your employees; exclusion of Single-Director Companies from the Employment Allowance; simplifying employee benefits and expenses; and casual or short term employees.

Reference: Taxation, 14 January 2016, page 4 and http://goo.gl/HmhPXW

HMRC Trusts and Estates Newsletter: December 2015

This Newsletter contains articles on a variety of topics including Inheritance Tax: error, penalties and the Hutchings case; Inheritance Tax legislation - Finance (No. 2) Act 2015; and Finance Bill 2016.

Reference: http://goo.gl/Megulh



PAYE: employer expenses and benefits exemption27 January 2016

HMRC have issued an employers’ exemption form for employers who want to apply for a new bespoke scale rate for reporting non-taxable expenses and benefits.

Reference: http://goo.gl/AAyThu

Pension Schemes Newsletter 75 January 2016

This Newsletter contains articles on a variety of topics including inheritance tax treatment of pension scheme drawdown funds on death; pension flexibility; the Scottish Rate of Income Tax; lifetime allowance reduction; and the annual allowance.

Reference: http://goo.gl/EUzdHi

INDIRECT TAXES

Revenue & Customs Briefs Indirect Taxes

Revenue and Customs Brief 17 (2015): deduction of VAT on pension fund management costs

26 October 2015

This Brief follows on from Briefs 43/2014 and 8/2015 which set out the position of HMRC following the decision of the CJEU in Fiscale Eenheid PPG holdings BV cs te Hoogezand (C-26/12) (PPG). This case concerned an employer’s entitlement to deduct VAT paid on services relating to the administration of defined benefit pension schemes and the management of their assets.

Reference: http://goo.gl/1s5xK8

Revenue and Customs Brief 18 (2015): VAT grouping rules and the Skandia judgment

30 October 2015

This Brief confirms the UK VAT changes resulting from the Skandia judgement and provides details of which other member states operate ‘establishment only’ VAT grouping.

Reference: http://goo.gl/hghdnu

Revenue and Customs Brief 19 (2015): VAT - supplies of sporting service by non-profit making bodies (2)

2 November 2015

This Brief provides an update following the judgment by the Court of Justice of the European Union in Bridport & West Dorset Golf Club. HMRC announced that it was considering whether clubs would be unjustly enriched if claims were refunded in full and this Brief reports the conclusion of that work.

Reference: http://goo.gl/2ZqawU

Revenue and Customs Brief 20 (2015): aggregates levy: liability of filler used in the manufacture of asphalt

27 November 2015

This Brief clarifies HMRC’s policy concerning the interpretation of aggregates levy industrial and agricultural processes relief code 018 in relation to asphalt.

Reference: http://goo.gl/XOCSZH

Revenue and Customs Brief 21 (2015): VAT zero-rating - liability of residential caravans

1 December 2015

This Brief announces a legislative amendment for caravans, which ensures that sales of caravans designed for all year round occupation continue to benefit from the VAT zero-rate. This follows the publication of a revised British Standard (BS 3632:2015) upon which the VAT zero-rate relies.

Reference: http://goo.gl/Jzktvc

Revenue and Customs Brief 22 (2015): changes to VAT regulations following judgment in the case of Le Credit Lyonnais (C-388/11)

11 December 2015

This Brief gives notice of changes to UK legislation following the decision of the Court of Justice of the European Union in Le Credit Lyonnais. Partly-exempt businesses with establishments both within and outside the UK will need to be aware of these changes. Financial institutions, such as banks and insurers, are most likely to be affected.

Reference: http://goo.gl/5gVKrR

Revenue and Customs Brief 23 (2015): VAT grouping rules and the Skandia judgment

11 December 2015

This Brief provides further information on HMRC’s position, as announced in Revenue and Customs Brief 18 (2015), on the UK VAT changes resulting from the Skandia judgment in relation to VAT grouping.

Reference: http://goo.gl/wcvFlb

Revenue and Customs Brief 1 (2016): VAT - domestic reverse charge for businesses wholesaling telecommunications services

15 January 2016

This Brief announces the introduction of a domestic reverse charge on telecommunication services with effect from 1 February 2016. It provides details of what is covered by the domestic reverse charge and what is excluded.

Reference: http://goo.gl/kRL3Z4

TAXATION



Revenue and Customs Brief 3 (2016): review of VAT grouping provisions following the Larentia + Minerva and Marenave (C-108/14 and C-109/14) and Skandia (C-713) judgments

14 January 2016

This Brief informs interested parties of the UK Government’s decision to launch a consultation on the VAT grouping provisions and highlights the planned approach.

Reference: http://goo.gl/O46Ofm

Revenue and Customs Brief 4 (2016): VAT MOSS - Simplifications for businesses trading below the VAT registration threshold

8 January 2016

This Brief announces details of a further simplification to the evidential requirements for supporting decisions on the place of taxation for businesses that fall below the UK’s VAT registration threshold.

Reference: http://goo.gl/tMUIDC

Revenue and Customs Brief 6 (2016): registered dealers in controlled oil - plant and equipment hire companies

29 January 2016

This Brief explains the changes to the registration requirements for plant and equipment supplying companies who supply controlled oil as part of the hire or sale.

Reference: http://goo.gl/LWIvsy

Revenue and Customs Brief 7 (2016): reminder of withdrawal of the VAT Misdirection Extra Statutory Concession 3.5 in cases of VAT liability change

1 February 2016

This Brief contains a reminder that the misdirection class concession no longer exists. It also gives notice that with effect from 1 August 2016 HMRC will no longer routinely consider requests not to pursue the tax due.

Reference: http://goo.gl/ChjKYv

VAT Notes 2015 Issue 428 January 2016

These Notes contains articles on a variety of topics including the Alcohol Wholesaler Registration Scheme.

Reference: http://goo.gl/S30ARo

TAXATION



PUBLICATIONS

DIRECT TAXES

Updates:

CA72A National Insurance: application for deferment of payment of Class 1 National Insurance contributions

CA5610 National Insurance: application for refund of Class 4 National Insurance contributions

CC/FS1a General information about compliance checks

CC/FS1b General information about checks by compliance centres

CC/FS1c Compliance checks: large and complex businesses

CC/FS7a Compliance checks: penalties for inaccuracies in returns or documents

CC/FS7b Compliance checks: penalties for not telling HMRC about an under-assessment

CC/FS9 Compliance checks: The Human Rights Act and penalties

CC/FS10 Compliance checks: suspending penalties for careless inaccuracies in returns or documents

CC/FS11 Compliance checks: penalties for failure to notify

CC/FS12 Compliance checks: penalties for VAT and Excise wrongdoing

CC/FS13 Compliance checks: publishing details of deliberate defaulters

CC/FS27 Compliance checks: Alcohol Wholesaler Registration Scheme

CIS302 Construction Industry Scheme: individual registration for gross payment

P50 Income Tax: claiming tax back when you have stopped working

P53 Income Tax: repayment claim when small pension taken as a lump sum

P55 Flexibly accessed pension payment: repayment claim (tax year 2015 to 2016)

P85 Income Tax: leaving the UK - getting your tax right

R43 Income Tax: claim to personal allowances and tax repayment by an individual not resident in the UK

INDIRECT TAXES

Updates:

3 Bringing your belongings, pets and private motor vehicles to UK from outside the EU

6 Merchandise in baggage

41 Alcoholic Ingredients Relief

104 ATA and CPD Carnets

143 A guide for international post users

144 Trade imports by post - how to complete customs documents

147a Pool Betting Duty

162 Cider production

163 Wine production

175 Motor and heating fuels - relief from Excise Duty: oils used to generate electricity

179 Motor and heating fuels - general information and accounting for excise duty and VAT

196 Excise goods - registration and approval of warehousekeepers, warehouse premises, owners of goods and registered consignors

226 Beer Duty

451a General Betting Duty

452 Machine Games Duty

453 Gaming Duty

457 Bingo Duty

458 Lottery Duty

600 Classifying your imports or exports

700/12 How to fill in and submit your VAT Return

700/56 Insolvency

701/14 Food

718/1 The VAT Margin Scheme on second-hand cars and other vehicles

702 Imports



GENERAL

Charities update

The Charities Commission for England and Wales has published:

• a corporate report: Tackling abuse and mismanagement 2014-15;

• a consultation on a new version of CC20 Charity fundraising: a guide to trustee duties;

• an Accounts monitoring review: High governance costs; and

• updated guidance for fee-charging educational charities.

Reference: www.gov.uk

Pensions update

Guidance on implementation of amendments to FRS 102

In January 2016 the Pensions Research Accountants Group (PRAG) issued guidance on implementation of amendments to FRS 102. PRAG noted that it is not republishing the SORP but the additional guidance should be read in conjunction with it.

The guidance illustrated limited areas where amendments to FRS 102 affect the presentation of pension scheme financial statements, including disclosures in relation to departures from FRS 102 and related party transactions.

Reference: www.prag.org.uk

FCA update

FRC Standard: Providing Assurance on Client Assets on the Financial Conduct Authority

In November 2015, the FRC issued a new Standard: Providing Assurance on Client Assets to the Financial Conduct Authority (FCA).

The standard follows a recent overhaul of the FCA’s client assets (CASS) regime for investment business. The standard replaces the existing guidance for auditors on FCA assurance engagements concerning client assets currently found in APB Bulletin 2011/2 and FRC Bulletin 3. The new standard increases emphasis on understanding the client’s business model, on developing risk-based responses and on testing controls relevant to implementing CASS rules. It also requires that reasonable assurance engagements on CASS are subject to Engagement Quality Control Review and that auditors conducting assignments under the new standard are subject to the (proposed) new FRC Ethical Standard.

The standard is effective for reports to the FCA with respect to client assets for periods commencing on or after 1 January 2016. Earlier adoption is allowed.

Reference: www.frc.org.ik


https://www.gov.uk/government/organisations/charity-commission

http://www.prag.org.uk

https://frc.org.uk/News-and-Events/FRC-Press/Press/2015/November/FRC-publishes-standard-on-providing-assurance-on-C.aspx


TRIBUNAL CASES

TC04788: Dr Sharat Jain December 2015 First-tier Tribunal - more travel problems

In addition to being employed by the NHS and carrying out private medical work, the taxpayer undertook work providing medical reports for litigation purposes for a number of agencies. HMRC opened an enquiry into the return for 2010/11 in October 2012. The taxpayer deducted various travel and subsistence expenses in calculating his taxable earnings, which HMRC deemed not to be deductible, and also accounted for these earnings on a receipts basis.

As part of the business, the taxpayer sees clients for an initial consultation before preparing the reports. The taxpayer lives in Kent. The consultations are carried out at two hospitals, The Spire in Washington, Tyne & Wear and the BMI Manor in Bedford. The taxpayer visits each hospital once a month, seeing clients during one day at the Spire and over two days at the BMI Manor on each visit. He stays overnight at local hotels in both cases.

The taxpayer prepares the reports at his home. Each report takes between two and three hours to prepare and additional administration is also carried out at home but the taxpayer has two secretaries, not at his home, to help him.

The agency contracts provide for set fees and stipulate payment dates ranging from 180 to 270 days after the work has been carried out. Payment may be withheld if the report is not prepared to the required standard but does not depend on the outcome of the litigation.

HMRC argued that the costs of travel and subsistence from home to Washington and Bedford were not allowable.

The Tribunal referred to two historic cases on wholly and exclusively. The first was Newsom v Robertson (H M Inspector of Taxes) 1952 33 TC 452, where a barrister claimed the costs of travel between home and chambers on the basis that his home was his place of business. The Court of Appeal found that travel between the barrister’s chambers and home had a dual purpose, to carry out further work but also to ‘eat, sleep and pursue domestic avocations’. The second was Horton v Young [1971] 3 All ER 412, the only reported case in which travel to and from the taxpayer’s home has been found to satisfy the statutory test and be deductible. In this case, Mr Horton was a bricklayer who worked on various building sites depending on the particular contracts he entered into from time to time. On the facts, his business base was found to be his home, there being no other place that could properly be called his place of business. His work was itinerant and it was found that all journeys he made from his home to various building sites were wholly and exclusively for the purpose of carrying on his trade.

S34 ITTOIA 2005 applies to subsistence:

‘(1) In calculating the profits of a trade, a deduction is allowed for any reasonable expenses incurred on food or drink for consumption by the trader at a place to which the trader travels in the course of carrying on the trade, or while travelling to a place in the course of carrying on the trade, if conditions A and B are met.

(2) Condition A is met if

(a) a deduction is allowed for the expenses incurred by the trader in travelling to the place, or

(b) where the expenses of travelling to the place are not incurred by the trader, a deduction would be allowed for them if they were.

(3) Condition B is met if

(a) at the time the expenses are incurred on the food or drink, the trade is by its nature itinerant, or

(b) the trader does not travel to the place more than

occasionally in the course of carrying on the trade and either

(i) the travel in connection with which the expenses are incurred on the food or drink is undertaken otherwise than as part of the trader’s normal pattern of travel in the course of carrying on the trade, or

(ii) the trader does not have such a normal pattern of travel.’

HMRC argued that the Spire and the BMI Manor were the taxpayer’s ‘places of business’ and so, following the Samadian case, his travel expenses from home to them were not deductible.

The Tribunal stated:

‘We find that Dr Jain’s home was a place of business for the purposes for the medical report business and that he carried out the bulk of the work there. However, that does not mean that the Spire and the BMI Manor could not also be places of business. Whether they are is a question of fact. There is no statutory definition of ‘place of business’. In Dr Jain’s case there is a degree of predictability and regularity in his visits to the Spire and the BMI Manor. We accept that he does not have to see patients in these (or any) hospitals, but it is not the nature of the facilities he uses but the regularity of his visits that indicate whether a particular location is a place of business.

Dr Jain’s visits to these hospitals are for a different purpose and less frequent than those in the Samadian case. In addition, the work he does at home after the on site visits seem to be more extensive than in the Samadian case. Notwithstanding this, we are mindful of the Upper Tribunal’s comments on the desirability, in the interests of the rule of law, that like cases by treated alike. Here, we find sufficient similarity in the regularity and predictability of Dr Jain’s visits to the Spire and the BMI Manor as to make them places of business.

…it follows that costs of travel between them and his home (even though it is also a place of business) are not incurred wholly and exclusively for the purposes of the business…

As a result, the subsistence costs are not deductible either, since they cannot be said to be incurred wholly and exclusively for the purpose of the business, having the dual purpose of providing nourishment.’

In addition, income should be accounted for in accordance with GAAP.

The appeal was dismissed.

Reference: Taxation, 14 January 2016, page 7



TRIBUNAL CASES

Krishna Moorthy [2016] UKUT 0013 TCC Upper Tribunal October 2015 - termination troubles

Each year the employer held an AGM which took place overseas and the company’s vice-presidents were automatically invited. The taxpayer was one grade below a vice-president and the ‘tradition’ was that people at the taxpayer’s grade who were invited three times to the AGM could expect to be promoted to vice-president. The taxpayer received his third invitation in summer 2008.

In 2009, certain employees, including the taxpayer, were called to a meeting at which they were told that there was to be a restructuring, that there would be fewer senior jobs and that they would have to apply for those jobs. Those who were not successful might be made redundant. The taxpayer was not successful in obtaining one of the new posts and in March 2009 he was told that he was to be made redundant. He received statutory redundancy pay of £10,640, from which no tax was deducted.

Following his dismissal, the taxpayer commenced proceedings in the Employment Tribunal alleging unfair dismissal and age discrimination. In January 2011 the parties engaged in mediation, which agreed to pay ‘…an ex gratia sum of £200,000 by way of compensation for loss of office and employment…’, without admission of liability.

The taxpayer argued that the £200,000 was not taxable as it had been paid to settle a discrimination claim, to compensate him for not being selected for a particular post and/or to protect his former employer’s reputation.

HMRC argued that the payment was taxable as a termination payment, other than the first £30,000 and a further £30,000 representing compensation for injury to feelings.

The Tribunal (TC03952: Krishna Moorthy First tier Tribunal August 2014), having reviewed the facts, stated:

‘Whether or not the payment was also to compensate Mr Moorthy for discrimination, unfair dismissal, injury to feelings, redundancy and/or financial loss is immaterial. It is likewise

irrelevant whether or not Jacobs made the payment partly or entirely to protect its reputation. The payment can be any of these things, or all these, but because it is “directly or indirectly in consideration or in consequence of, or otherwise in connection with” the termination of Mr Moorthy’s employment, it falls within ITEPA s 401. It is therefore unnecessary for us to respond to (the) arguments on how the £200,000 should be apportioned.’

The Tribunal found that:

• the payment of £200,000 fell within s401 ITEPA 2003 i.e. it was received directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of the employment;

• the £30,000 exemption was reduced to £19,360 by virtue of a statutory redundancy payment of £10,640 made in the previous tax year; and

• the Tribunal had no jurisdiction to allow the further relief of £30,000 deducted by HMRC.

The taxpayer appealed on the grounds of:

• whether the entirety of the settlement payment fell within s401 ITEPA 2003;

• whether ‘injury’ in s406 ITEPA 2003 includes injury to feelings; and

• what was the effect of the concession made by HMRC that £30,000 of the settlement payment should be treated as damages?

The Upper Tribunal held that the sum was paid in connection with the termination of the employment and was not within the exemption for ill health. Finally:

‘In this case, however, the closure notice clearly stated that the offer to treat the further £30,000 as not taxable was a concession made in order to try to reach agreement.’

The appeal was dismissed.

INTERESTING ARTICLES

The Nordic Audit

Considers Scandinavian proposals for a small companies’ auditing standard and whether we need something similar in the UK.

Reference: Economia, November 2015, page 74

Micro-entities: the new standard

Considers some of the key simplifications available when reporting as a micro-entity under FRS 105 and views on the micro’s regime.

Reference: By all Accounts, January 2016, page 18

A new standard

Looks at the tax impact of FRS 102.


Hungry for cash

Looks at the new rules on direct recovery of debt.


Topping up

Looks at the new rules for Class 3A NIC.




IT NEWS

The latest IT news for the accountancy profession. Remember - this is your IT newsletter. Contributions, short cuts and ideas for future articles are always welcome.Please contact Mike Rees by email at [email protected] or phone 0116 258 1200.

Ethical smartphone - the Fairphone 2

Fairphone has launched the Fairphone 2, which is now shipping to the UK. Fairphone is a social enterprise and all the components and raw materials are ethically sourced.

The Fairphone 2 is an Android (Lollipop) smartphone and is designed to be easy to upgrade and repair through its modular design. In particular, the display can be replaced in about 30 seconds. Company details and full phone specification can be found at www.fairphone.com/

Priced at about £400, the phone is also available on a monthly contract from £25/month from the Co-operative Mobile phone shop www.thephone.coop/fairphone/

Draft Investigatory Powers Bill

The draft Investigatory Powers Bill was published in autumn 2015.

It is designed to govern the use and oversight of investigatory powers by law enforcement and the security and intelligence agencies. There are three objectives:

• To consolidate the existing powers which are currently available to the various security agencies.

• To overhaul the way these powers are authorised and overseen.

• To include provisions for the retention of records in order to identify the communications service a device has been connected to.

During December a Joint Select Committee was appointed to consider the draft Bill and held a consultation period consisting of both oral evidence and written submissions. The Committee’s report is due to be published in spring 2016.

EU agrees final draft text for new data protection regulations

Just before Christmas the new EU General Data Protection Regulations (GDPR) were finally agreed in the penultimate stage of the EU legislative process. The final step is for the full EU Parliament to adopt these changes.

The end result for the UK is that the new laws and regulations will replace the 1998 Data Protection Act and will be implemented over a two year transition period. The final compromise document can be found here (it’s over 200 pages!) - www.statewatch.org/news

In the next edition (subject to final ratification of the GDPR by the EU) we will be flagging up some of the main changes and how they are likely to affect both organisations and individuals.

Ofcom produces new code of practice for Business Broadband speeds

Ofcom has produced a new code of practice which aims to provide business customers with accurate and transparent speed information on standard business broadband services. The two major provisions of the code are that, from September 2016, ISPs will be required to:

• provide estimates of expected download and upload access speeds as early as possible in the sales process and before the customer has agreed to purchase a service; and

• offer customers a right to exit the contract without penalty if download speed falls and remains below a minimum guaranteed access line speed.

http://media.ofcom.org.uk/news/2016/Clarity-for-businesses-baffled-by-broadband-speeds/

http://stakeholders.ofcom.org.uk/binaries/telecoms/cop/bb/business_broadband_code_2016.pdf


mailto:mike.rees%40mercia-group.co.uk?subject=

http://www.fairphone.com/

https://www.thephone.coop/fairphone/

http://www.statewatch.org/news/2015/dec/eu-council-dp-reg-draft-final-compromise-15039-15.pdf






IT TECHNICAL TIPS

TECH TIPS - EXCELThis is the second in a three-part series in which Mike looks at the Excel IF formula.

The basic syntax of the IF formula and some examples were covered in the first part. In this part the IF And/IF Or options are considered and finally, in part 3, Nested IF formula.

Where would an And/Or be used?

In order to avoid writing complicated nested IF formulae, the And/Or functions can often be used. These are particularly useful where multiple conditions all have the same True or False argument.

The multiple conditions can be tested in one of two ways, either where ALL conditions have to be True (this is an And) or where ANY of the conditions must be True (this is an Or).

And/Or

And - every condition in an And will be tested and only if ALL conditions are met is the condition True, otherwise the condition is False.

Or - every condition in an Or will be tested and if ANY of the conditions are met then the condition is True, otherwise the condition is False.

The syntax

The syntax is identical for both And and Or.

And(Condition1, Condition2, Condition3……etc up to a maximum of 255 conditions)

Or(Condition1, Condition2, Condition3…..etc up to a maximum of 255 conditions)

Testing the logic of And/Or

The basic logic of a formula can be tested before it is inserted into an IF by simply typing it into a cell. The outcome will be displayed as either TRUE if the condition is met or FALSE if the condition is not met.

For example, an OR formula is used in column C to test the transaction type code (in column B) to see whether it is a journal debit (JD) or a journal credit (JC).

A B C

6 JD TRUE

7 JD TRUE

8 JC TRUE

9 SI FALSE

10 PC FALSE

The OR formulae

A B C

6 JD =OR(B6="jd",B6="jc")

7 JD =OR(B7="jd",B7="jc")

8 JC =OR(B8="jd",B8="jc")

9 SI =OR(B9="jd",B9="jc")

10 PC =OR(B10="jd",B10="jc")

If Or

In this example, from a list of transactions we want to show which ones are journals. If the transaction is a journal then the word “Journal” is displayed, otherwise the words “Not a journal” are displayed. The transaction type codes in this example are JD for a debit journal and JC for a credit journal, so there are in fact only two possibilities that equate to a journal, either JD OR JC.

A B C

6 Journal JD

7 Journal JD

8 Journal JC

9 Not a journal SI

10 Not a journal PC

A B C

6 =IF(OR(B6="jd",B6="jc"),"Journal","Not a journal")

JD


JD


JC


SI


SI

If And - example 1

In this example we are looking for all journals which have not been posted using a tax code of T9.

So, two conditions have to be True, the transaction type must be a journal and the tax code must not be a T9 and, if that’s the case the text, “not posted to T9” should be displayed.

A B C D E

6 Journal JD T9 0050

7 Journal JD T0 2201 not posted to T9

8 Journal JC T1 2310 not posted to T9

9 Not a journal SI T1 4000

10 Not a journal PC T1 9999



IT TECHNICAL TIPS

The IF AND formulae to achieve this are in E6:E10 below.

A B C D E

6 Journal JD T9 0050 =IF(AND(A6="Journal",C6<>"T9"),"not posted to T9","")

7 Journal JD T0 2201 =IF(AND(A7="Journal",C7<>"T9"),"not posted to T9","")

8 Journal JC T1 2310 =IF(AND(A8="Journal",C8<>"T9"),"not posted to T9","")

9 Not a journal

SI T1 4000 =IF(AND(A9="Journal",C9<>"T9"),"not posted to T9","")

10 Not a journal

PC T1 9999 =IF(AND(A10="Journal",C10<>"T9"),"not posted to T9","")

If And - example 2

In this more complicated example with a Bank Interest calculation, there are a number of different interest rates to apply depending on the amount overdrawn.

For example, for overdrawn balances between 0 and -£9,999 one interest rate might apply and another more punitive interest rate if the overdrawn balance is -£10k or plus.

So in tabular form we might have the following scenario:

Bank overdraft rates*

Balances Annual Interest Rate

Between 0 and -£9,999 19%

-£10,000 or higher 25%**

*These rates and values are for illustrative purposes only.

** This rate is only charged on the excess of the balance over -£10k.

This is where the rates are in this worksheet:

A B C

14 Interest rate Balances Max. interest

15 19% 9999.99 158

16 25% 10000

Here are the closing bank balances and, in row 32, the interest calculations.

A B C D

30 Closing Bank 20000 -25000 -5000

31

32 Interest 0 471 79

A B

30 20000

31

32 =ROUND(IF(B30<0,IF(AND(B30>=-$B$16,B30<0),B30*-($A$15/12),(B30+$B$15)*-

($A$16/12)+$C$15),0),0)

=ROUND(IF(B30<0,IF(AND(B30>=-$B$16,B30<0),B30*-($A$15/12),(B30+$B$15)*-($A$16/12)+$C$15),0),0)

Using other logical formulae with IF

ISBLANK - returns True if the cell is blank, otherwise False. It can be very useful to test whether a cell is blank and, if so, perform some additional logic.

For example:

A B

1 =ISBLANK(A1)

2 JD =ISBLANK(A2)

3 JD =ISBLANK(A3)

4 01/02/2016 =ISBLANK(A4)

A B

1 TRUE

2 JD FALSE

3 JD FALSE

4 01/02/2016 FALSE

ISBLANK can be used in conjunction with an IF. For example, we might have a simple progress checker for tax returns. In the example below the “Date filed” (column B) is tested to see if it is blank and, if so, the text “Outstanding” is displayed in column C, otherwise the text “Complete” is displayed.

A B C

1 Client Date filed on-line

Tax return

2 ABC Co Ltd

=IF((ISBLANK(B2)),"Outstanding","Complete")

3 DEF Co Ltd

15/01/2016 =IF((ISBLANK(B3)),"Outstanding","Complete")

4 GHI Co Ltd

=IF((ISBLANK(B4)),"Outstanding","Complete")

A B C


Tax return

2 ABC Co Ltd

Outstanding

3 DEF Co Ltd

15/01/2016 Complete

4 GHI Co Ltd

Outstanding

Not - Not reverses the argument. So, if the evaluated condition is True, then False is returned and vice versa. Sometimes, it is easier to use a Not if there are a lot of variables to evaluate and only one or two are the exception.

In the example below, which just examines the basic operation of the Not, cell B1 contains the value 5 and cells A1:A4 contain a selection of Not formulae.

A B

1 =NOT(B1<5) 5

2 =NOT(B1>5)

3 =NOT(B1<=5)

4 =NOT(B1>=5)



IT TECHNICAL TIPS

This is the outcome:

A B

1 TRUE 5

2 TRUE

3 FALSE

4 FALSE

A1 evaluates to True because B1 is not <5.

A2 evaluates to True because B1 is not >5.

A3 evaluates to False because B1 is <=5.

A4 evaluates to False because B1 is >=5.

If Not

Not is frequently used in conjunction with other formulae including If And/Or, ISBlank, etc. Not returns the logical reverse.

For example:

A B

1 999 5

2

3 TRUE

4 FALSE

In this example cell A3 performs a conventional logical test on cell A1 and because A1 is <1000 this condition is TRUE.

The opposite of this is the NOT formula in A4 which returns FALSE which is the logical reverse of the formula in A3.

A B

1 999

2

3 =(A1<1000)

4 =NOT(A1<1000)

Not equal to

It can be useful to test if a cell is not equal to something, rather than totally blank as per the example earlier. For example, with the progress checker for tax returns we could use an IF not equal to.

The formula in cells C2:C4 tests if cells B2:B4 is not equal to blank. If so the text “Complete” is displayed, otherwise “Outstanding” is displayed.

A B C


Tax return

2 ABC Co Ltd

=IF(B2<>"","Complete","Outstanding")

3 DEF Co Ltd

15/01/2016 =IF(B3<>"","Complete","Outstanding")

4 GHI Co Ltd

=IF(B4<>"","Complete","Outstanding")

Not ISBLANK

It can be useful to test if a cell is not blank and this is obviously the reciprocal to ISBLANK. In the example above we could have used a not IsBlank to achieve the same effect.

The formula in cells C2:C4 tests if cells B2:B4 are not blank. If so then the text “Complete” is displayed, otherwise “Outstanding” is displayed.

A B C


Tax return

2 ABC Co Ltd

=IF(NOT(ISBLANK(B2)),"Complete","Outstanding")

3 DEF Co Ltd

15/01/2016 =IF(NOT(ISBLANK(B3)),"Complete","Outstanding")

4 GHI Co Ltd

=IF(NOT(ISBLANK(B4)),"Complete","Outstanding")

Not this or that

Sometimes we need Excel to do something if a cell is Not this or that. So in a complete reversal of the example earlier with a transaction type code, we want to display “Not a journal” if the transaction type code is neither “jd” or “jc”.

A B

6 =IF(NOT(OR(B6="jd",B6="jc")),"Not a journal","Journal")

JD


JD


JC


SI


SI


PI


JD

XOR (Excel 2013 and above only)

The XOR function is an Exclusive Or. Although up to 254 conditions can be tested, we will concentrate on just two conditions to demonstrate this formula.

With the XOR and two conditions, TRUE is returned if either condition is true and FALSE is returned if both arguments are True or neither argument is True.

A B

1 999

2

3 TRUE

4 FALSE

5 FALSE

The XOR formulae used in the example above, can be seen here:

A B

1 999

2

3 =XOR(A1<1000,A1>1000)

4 =XOR(A1<500,A1>1000)

5 =XOR(A1<1000,A1>750)

A3 is TRUE because A1 is <1000, but not greater than 1000.

A4 is FALSE because A1 is neither <500 or >1000.

A5 is FALSE because A1 is both <1000 and >75.


train promote support

Mercia Group Limited, Best House, Grange Business Park, Enderby Road, Whetstone, Leicester LE8 6EPt 0116 258 1200 f 0116 258 [email protected]

Mercia Group Limited isthe approved trainer for

The Spreadsheet costs £50 (£45*) plus VAT

Planning for the new dividend regime?Incorporation Tax Calculator 2016/17The Incorporation Spreadsheet is an Excel spreadsheet which shows the tax savings that are available to clients if they are incorporated. It can also be used to compute for incorporated clients, the taxes payable under the new dividend regime.

It is therefore a useful tool to use for planning purposes for clients who are already incorporated and can reinforce the point to many clients that they are still saving tax by being incorporated.

It also caters for profit distribution between multiple director-shareholders (up to six).

www.mercia-group.co.uk/GetProduct/IncorporationSpreadsheet

We also have a client letter available: New Dividend Tax Regime.

For the full list of letters available please visit www.mercia-group.co.uk/ClientCommunications/ClientLetters

FAQsDoes it compare 15/16 with 16/17? No because it is difficult to compare as other aspects of the tax system have changed - mainly personal allowances and tax bands.

Does it cope with other types of income? No

Will there be a free update if the Budget changes the dividend regime? Yes

For more information contact [email protected]

*Mercia members (excluding CPD members) receive a 10% discount.

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