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Per pupil funding has fallen significantly, research reveals

Research has shown that today’s schools have, on average, been allocated less per pupil in real terms compared to previous years.

The figures, published by the School Cuts coalition, show that schools received an average of £4,630 per pupil in 2018/19 – £59 less than what they received in 2017/18.

Alarmingly, this is on average £369 less per pupil when compared to 2015/16.

The coalition, which features some of the UK’s leading school bodies, said schools are in “much greater difficulty than previously thought”.

It said that schools have to buy new textbooks, fund extra curricula activities, budget for building repairs and pay teacher and support staff pay rises even though they have significantly less cash than last year.

The figures show that schools require an additional £2.7 billion a year to restore per-pupil funding to its 2015/16 level.

Commenting on the report, Geoff Barton, General Secretary of the Association of School and College Leaders, said: “These stark figures show the dire reality of the funding crisis in our schools.

“What they don’t show is the human cost – the reduced opportunities for students as schools are forced to cut subjects and activities, increase class sizes and scale back learning and mental health support.”

Mary Bousted, Joint General Secretary of the National Education Union, added: “It is no wonder that schools are increasingly struggling to provide pupils with basic essentials and having to ask parents to fill the gap.”

At The Fish Partnership, we can help schools and academies to ensure that they are tax-efficient and financially fighting fit. To find out more about our sector-specific services, please contact us.

Academy trusts increasingly facing scrutiny over executive pay levels

In recent weeks, Eileen Milner, the Chief Executive of the Education and Skills Funding Agency (ESFA), has penned damning letters to a number of academy trusts asking them to ‘justify’ executive pay.

The request applies to academies which pay at least one individual salary of £150,000 or more, or two or more salaries of between £100,000 and £150,000.

The letter follows a study which found that many of the 92 academy trusts with staff on £100,000 to £150,000 were classed as “small”.

Industry publication Schools Week, which published the figures after issuing a Freedom of Information (FoI) request, found that 56 of the 92 academy trusts had fewer than 10 schools, and 11 had just one each.

In her correspondence, Ms Milner has clarified that academy trusts should have a “clear process” and “rationale” for the salaries set, including for all non-teaching staff posts.

“Whilst I recognise the excellent work carried out by many trusts to deliver high-quality education to children, trusts have a responsibility to ensure value for money and that salary and other remuneration payments are transparent, proportionate, reasonable and justifiable.

“The Education and Skills Funding Agency (ESFA) has a responsibility to ensure that best practice is exemplified in the system to ensure this accountability,” the letter says.

Trustees have been asked to outline the role and responsibilities of the executive in question, as well as the level of challenge he or she has faced, for example, academically, financially or geographically.

In addition, the ESFA expects remuneration committees to show that it has scrutinised and approved all other benefits such as eligibility to participate in the Teachers’ Pension Scheme, travel, accommodation, bonuses, notice periods and holiday entitlement.

Academies included in the latest round of assessment are required to respond by 20 July 2018.

At The Fish Partnership, we understand the day-to-day challenges schools and academies face. We can help your academy with a wide variety of tax and financial matters. To find out more, please contact us.

Schools need to take advantage of more effective pupil premium strategies

Schools with the most effective pupil premium strategies can account for every pound spent, according to new research.

The National Governance Association (NGA) published the findings after polling more than 875 trustees and governors and studying 36 pupil premium strategies.

The report looks at how schools spend pupil premium funding, which is allocated to publically-funded institutions to raise the attainment of disadvantaged pupils of all abilities.

Failure to target support where it is most needed ranked among the most common shortcomings, the NGA said.

For example, the majority of schools identify family life, low attendance and social and economic barriers as hurdles to success, but the most common strategies centre around academic learning, such as literacy and numeracy support.

The NGA recommends that governing boards take a more holistic approach to their pupil premium spending to better address “specific barriers to learning that hold back pupil premium students”.

It further found that the best schools “account for every pound spent” –rather than use “rounded numbers or vague estimations”.

It also found that just 71.6 per cent of respondents’ schools ring-fence their pupil premium. While it is not a legal requirement to ring-fence the pupil premium, the NGA found that those that don’t may use the pupil premium to subsidise spending commitments that would usually be funded by the school’s core budget.

Emma Knights, Chief Executive of the NGA, said: “This report demonstrates how crucial the pupil premium is to the education of disadvantaged pupils, yet that it is hard for governing boards to consistently spend in a targeted manner.

“NGA suggests that the pupil premium should form part of the core school budget, which would provide more assurance about the future of the additional funding, while allowing schools more flexibility in using it.

“Schools should still be required to report on the progress and attainment of disadvantaged pupils. The gap is closing, but there is still much to do which is why the pupil premium remains hugely important.

“Governors and trustees are extremely committed, but do face challenges in effectively developing pupil premium strategies and therefore I hope these findings can accelerate their progress and that of their pupils.”

To find out more about the specialist tax and accountancy services The Fish Partnership can provide to schools and academies, speak to our team today!

Building contractors will have to comply with complex new VAT rules

Those working in the construction and building industry are being encouraged to get to grips with a new way of accounting for VAT.

From 1 October 2019, builders, contractors and other trades associated with the construction industry will have to change the way they invoice supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain.

Under the new Reverse Charge for construction services (RC) rules, a main contractor must account for the VAT on the services of any sub-contractor, while the supplier does not invoice for VAT.

It is then down to the customer (main contractor) to account for VAT on the net value of the supplier’s invoice and at the same time deduct that VAT – leaving a nil net tax position.

The complex new RC rules only apply to other construction businesses that then use them to make a further supply of building services, and not to end users, such as retailers, landlords or private individuals. The RC also does not apply to associated businesses.

Despite its title, the new legislation will apply to a wide range of services connected to the building trade, including:

  • construction
  • alteration
  • repairs
  • demolition
  • installation of heat, light, water and power systems
  • drainage
  • painting and decorating
  • erection of scaffolding
  • civil engineering works
  • associated site clearance
  • excavation
  • foundation works.

The legislation also includes a list of exempted works and services, such as:

  • professional services of architects or surveyors, or of consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape
  • drilling for, or extraction of, oil, natural gas or minerals, and tunnelling or boring, or construction of underground works, for this purpose
  • manufacture of building or engineering components or equipment, materials, plant or machinery, or delivery of any of these things to a site
  • manufacture of components for systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or delivery of any of these things to a site
  • signwriting and erecting, installing and repairing signboards and advertisements
  • the installation of seating, blinds and shutters or the installation of security.

Introduced after a long initial consultation period, the recently released draft RC legislation, explanatory memorandum and tax information and impact note are designed to combat missing trader VAT fraud in the construction sector’s labour supply chains, which HM Revenue & Customs (HMRC) has identified as a significant risk to the public purse.

The main challenge for those working in the trade will be identifying which customers are liable for the RC. This will require businesses to check VAT registration numbers and obtain evidence that a customer is an ‘end user’ or not, so that if VAT is due it is invoiced correctly.

This will create a significant new burden that many companies and sole traders may struggle with. Therefore, businesses affected by the new RC legislation are being encouraged to plan ahead to ensure that as suppliers they do not charge VAT incorrectly, or as recipients, they apply the RC correctly.

Failure to operate the RC correctly could lead to error penalties. Output VAT wrongly applied on an invoice will also be collected by HMRC, but will not be recoverable by the recipient.

Link: Reverse Charge for construction services

More than two-fifths of small business owners are still unaware of MTD

According to a new study, Making Tax Digital (MTD) is currently one of the biggest concerns for VAT-registered small business owners.

The research, prepared by Intuit QuickBooks, found that more than three-quarters of SME owners found the legislation challenging and difficult to understand.

It also reveals that 70 per cent were struggling to find the right new tools to help them comply, including 63 per cent of owners who weren’t sure which cloud-based software they would use.

Other concerns about MTD highlighted in the survey by SMEs include finding the additional time and managing the additional work.

This study shows that few SMEs are ready for the new MTD regime, which is due to come into effect in April 2019.

Under the current rules, VAT registered businesses with turnovers exceeding £85,000 will be required to maintain a digital record of their VAT transactions and submit their VAT returns using MTD-compliant software on a quarterly basis.

Worryingly nearly half (41 per cent) of small business owners are still unaware of MTD, with a further 22 per cent aware of what it is, but only planning to file taxes digitally if they are likely to incur financial penalties.

Accountants have also cited client education as their top concern in the lead up to MTD, with 29 per cent of those surveyed having concerns. This came just ahead of adapting their own practice to comply with MTD (27 per cent), and training clients on online software (27 per cent).

Link: Accountants to play MTD teaching role

A quarter of dads may be missing out on paternity pay, according to a new report

The TUC has launched a new campaign calling on the Government to extend paternity pay to more workers, after discovering that a quarter of fathers may be missing out.

It found that of the 620,000 new working dads last year, more than 140,000 did not qualify for paternity pay, which provides up to two weeks’ paid time off.

This figure, it has said, is the result of two factors, either self-employment or because the individual hadn’t been with their employer for long enough.

The current rules regarding paternity pay give working dads the opportunity to claim up to two weeks’ paid leave if they are expecting a child, or adopting, including through a surrogacy arrangement – as long as they have at least six months’ service with their current employer by the 15th week before the baby is due.

During this time and while on leave, a father’s employment rights, including any pay rises and paid holiday time must be protected.

Unfortunately, the current regulations do not cover self-employed workers or freelancers, unlike self-employed mums, some of whom are eligible for a maternity allowance.

The TUC said that to address this inequality in the pay arrangements for men, all new and working dads should be given the same rights.

It is also calling on the Government to address statutory paternity pay, which is just £145.18 a week – less than half what a person working 40-hours a week would earn on the National Living Wage (£313.12). The TUC argues that paternity pay should at least meet the National Living Wage of £7.83 an hour.

TUC General Secretary Frances O’Grady said: “It’s so important for dads to be able to spend time at home with their families when they have a new baby.

“But tens of thousands of fathers are missing out on this special time because they don’t qualify for paid leave – or because they can’t afford to use their leave.

“We need a radical overhaul of family pay. The current system is too complicated, pays too little, and excludes too many workers.”

Link: 1 in 4 new dads missed out on paternity pay over last 12 months, says TUC

Professionals call on Treasury not to lower VAT threshold before MTD and Brexit

The Low Incomes Tax Reform Group (LITRG) of the Chartered Institute of Taxation (CIOT) has called on the Treasury to resist pressure to reduce the VAT threshold from its current £85,000 until after the implementation of Making Tax Digital (MTD) and Brexit.

The call came after the Office of Tax Simplification (OTS) urged the Treasury to review the current threshold, prompting it to issue a call for evidence on the matter.

The level at which the VAT threshold is set is currently particularly sensitive as small businesses across the UK gear up for the introduction of MTD for VAT in April 2019, which will entail digital quarterly reporting using ‘designated software packages’. A lowering of the threshold would force even more businesses to comply with the new rules.

LITRG Chair, Anne Fairpo, said: “As VAT is based on a business’ turnover and not its profits, very many small businesses with low profits still find themselves having to deal with VAT on a day-to-day basis.

“We are hugely concerned that any lowering of the VAT threshold at this time could threaten seriously a small business’ ability to remain competitive in its marketplace if its trade is mainly with non-VAT registered customers.

“Lowering the registration threshold should only be considered if a smoothing mechanism can be incorporated into the VAT system to ease the tax cost and competition issues on crossing the threshold. Ideally, this should be in tandem with simpler VAT accounting and compliance requirements so that the additional administration a business must carry out on a day-to-day basis when it becomes VAT registered does not become too burdensome.

“We strongly believe that the prospect of a small business becoming a VAT registered trader is a daunting one for many and so may have the impact of stunting growth for some businesses.

“But if the threshold is set too low, this may entice some smaller businesses which might otherwise be compliant into the hidden economy. This is due to the overwhelming burden that they perceive VAT compliance to be and because they do not feel they can be competitive in their industry if they have to charge VAT.”

Link: Reduce the impact of crossing the VAT threshold before considering lowering it

Small businesses say the Government should simplify business rates

A survey has revealed strong support from the UK’s small business community for measures to simplify business rates.

A total of 71 per cent of the small businesses questioned said business rates should be simpler and have a greater degree of flexibility.

Meanwhile, 49 per cent of SMEs said the Government is doing too little to assist with business rate relief, with just 36 per cent satisfied with its efforts.

Of those questioned for the research, carried out by Close Brothers Asset Finance, 56 per cent had seen their bills increase in the last two years.

“The message from SMEs is clear that more needs to be done,” said Neil Davies, CEO of Close Brothers Asset Finance.

“Our study has found that it’s a nuanced picture out there and what I mean by that is that the call for clarity is not driven by cost concerns.”

Chancellor Philip Hammond has previously made concessions following concerns from SMEs. This includes bringing forward the next business rates revaluation from 2022 to 2021.

Link: SMEs want the Government to simplify business rates

UK’s tax gap continues to fall

Figures released by HM Revenue & Customs (HMRC) show that the UK’s tax gap – the difference between tax owed and actual receipts – is continuing to fall.

The Revenue has revealed that the tax gap for the 2016-17 tax year was 5.7 per cent, down from six per cent in the previous year and 7.3 per cent in 2005-06. It says that, had the tax gap not fallen, a total of £71 billion less tax would have been collected last year.

The figures show that of the total tax that was unpaid, the largest proportion was from small businesses, with £13.7 billion not paid.

According to HMRC, taxpayer error was nearly twice as likely as criminality to be the culprit for missing tax, with errors costing the Revenue £9.2 billion in lost income, while criminality cost £5.4 billion.

Meanwhile, Income Tax, National Insurance and Capital Gains Tax had the biggest tax gap at £7.9 billion. The VAT gap, on the other hand, has fallen from 12.5 per cent in 2015-06 to 8.9 per cent in 2016-17.

Mel Stride, Financial Secretary to the Treasury, said: “These really positive figures show that the tax gap is the lowest in the last five years, which reflects the hard work that HMRC and I have been doing to ensure we support businesses to pay the right tax at the right time and clamp down on tax evasion and avoidance.

“Collecting taxes is essential for funding our vital public services such as the NHS – indeed, had the tax gap remained at its 2005/06 level the UK would have lost £71 billion in revenue destined for public services, enough to build 200 hospitals.”

Jon Thompson, Chief Executive of HMRC, added: “The UK is the only country in the world to regularly publish their tax gap in detail and at 5.7 per cent, it remains at its lowest for five years. I am pleased that the downward trend shows HMRC and HM Treasury’s continued hard work to tackle evasion and avoidance is working.

“HMRC is also working hard to help taxpayers get their tax right by offering support and investing in digital services to improve businesses’ record keeping and reduce errors.”

The Revenue is now touting the forthcoming launch of its flagship Making Tax Digital programme as the latest weapon in its arsenal as it looks to reduce the tax gap further.

Link: Low tax gap results in £71 billion for UK public services