all 83 comments

[–]q_pop5[M] [score hidden] stickied comment (0 children)

Thank you very much /u/Harrison88 for hosting our second AMA.

Please remember to be civil, and don't dive in to answer questions before OP. The only second-level comments should be the AMA hosts. Further discussion past that point is absolutely encouraged.

[–]OwenWard 4 points5 points  (1 child)

Would you rather be a lion tamer?

[–]Harrison88[S] 2 points3 points  (0 children)

I'd rather be an RAF pilot or astronaut. Unfortunately I'm probably too old to start that so I get my thrills from jumping from on top of tax legislation with a parachute.

[–]_devilish 0 points1 point  (1 child)

Any pros cons to filing micro accounts over abv? I rarely see micro filings yet often the company is eligible to.

How do you handle, or used to handle the long 50+ hour weeks and would you still tell yourself Bigfour was worth it to your younger self.

How do you deal with the pressures of clients who actively seek evasion tactics with their tax, is it something that big accountancy firms 'deal' with and or protect themselves with being strict at the risk of losing the client.

[–]Harrison88[S] 0 points1 point  (0 children)

Clients prefer to disclose as little as possible to keep costs down and privacy up so abbreviated accounts preferred.

I work in tax rather than audit so I never dealt with those hours ;)

You do get clients who want to pay nothing or act certain ways. It's a case of filtering who you accept. There are money laundering obligations too. I don't think it's much of an issue for the big four these days either. There are specialist tax planning advisors who push the boat out with tax avoidance schemes. Not saying the Big Four don't but it attracts bad publicity. I personally don't agree with extreme tax planning or contrived structures.

[–]nattyprofessor1 0 points1 point  (1 child)

How hard is CTA? I'm doing the ATT-CTA pathway atm.

[–]Harrison88[S] 0 points1 point  (0 children)

Check my other replies :)

[–]zakkyb 0 points1 point  (4 children)

How much do you earn and what was your salary progression going through big4 and then into industry

[–]GordonCopestake15 0 points1 point  (0 children)

check out glassdoor instead

[–]Harrison88[S] 2 points3 points  (1 child)

I'm definitely not mentioning my personal salary haha.

Salary depended on location. Graduate in North West was around £21k seven years ago. South was around £7k more. Qualified salary was around £42k. You get materially more when you move in-house. Senior manager would expect to earn around £70-80k basic plus car, pension, bonus.

Tax pays more than finance/audit - guaranteed. There are usually more rings to moving up the finance chain too. I joined in house at a higher level than my finance colleagues who were my age.

[–]zakkyb 1 point2 points  (0 children)

Well that's boring

[–]iambubu 0 points1 point  (0 children)

Would also like to know this as currently studying accounting.

[–]pflurklurk366 2 points3 points  (3 children)

When you were at one of the Big Four firms and in-house, how many of the actual accountants were paid more than one million pounds a year (incl. bonus/pension) and what did they do?

[–]Harrison88[S] 0 points1 point  (2 children)

Most partners will earn around £650k. Office leads might earn a bit more and then I would expect regional partners to be earning more than a million. A partner may have around 3 senior managers, 4 managers and 5 analysts on their team. I'd imagine they have a buy-in loan to pay off too though.

[–]pflurklurk366 0 points1 point  (1 child)

Does in-house pay more?

[–]Harrison88[S] 0 points1 point  (0 children)

Not than a partner - although I don't know their net.

In-house director of EAME tax for example might earn £150k. Depends on the size of the organisation but there are a lot less Heads of Tax that are on £1m+ than partners I'd imagine. That's CFO money, even for the largest organisations.

[–]jaycent 0 points1 point  (1 child)

What would the main differences be between working in industry, compared to practise? Also, which do you prefer?

[–]Harrison88[S] 2 points3 points  (0 children)

With practice you are focused on technical solutions. In industry it is more about implementation and commerciality. I honestly believe moving in house was the best decision for my career. I don't think I would work with a partner who hasn't worked in house now because they will give out advice with no clue if it can actually be implemented. Clients want solutions that can work rather than generic ideas.

In-house also pays more and no timesheets (Wohoo!)

[–]barejokez13 1 point2 points  (1 child)

do you work with any clients operating BTL businesses? have there been an increase in amateur landlords setting up ltd companies to handle their properties, and would this help them avoid 2nd home stamp duty, keep claiming mortgage relief, etc?

[–]Harrison88[S] 0 points1 point  (0 children)

I don't sorry so limited experience on this one. I wouldn't imagine many one home landlords would be looking to incur more costs by setting up a LTD (~£1k in compliance fees pa). Multiple homes might do but it would restrict the number of lenders available. Transfer of ownership will also be classified as a sale and potential capital gain too.

Best talking to a specialist sorry!

[–]okaythiswillbemymain 1 point2 points  (3 children)

What are some financial tips and tricks you employ yourself?

[–]Harrison88[S] 3 points4 points  (2 children)

Sorry, the best bet for this is too look at the side bar. There is too much to cover otherwise.

If you're asking me personally - I use YNAB for budgeting, have an ISA (rates are low but I hold shares and I'm hoping it will grow), have an emergency budget of a few months salary, and contribute the maximum I can with my employer matched pension. That's about it!

[–]okaythiswillbemymain 0 points1 point  (1 child)

Thanks. Do you have a SIPP alongside your employer matched pension? Will you open a LISA?

[–]Harrison88[S] 1 point2 points  (0 children)

No SIPP or LISA. Concentrating on increasing the equity in my home first. I'm still young and have a lot I want to do. Might not be the most extreme planning for the future but I'm lucky enough to be on a defined benefit pension scheme and need flexibility while establishing the business.

[–]The_5_Laws_Of_Gold 1 point2 points  (1 child)

When does it make more sense to open LTD company and when is it better to trade in your own name.

[–]Harrison88[S] 1 point2 points  (0 children)

It depends what you are trying to achieve. There are benefits to operating through a limited company in that you have some limited liability (not unrestricted - lenders can request a judge to lift the veil of incorporation and most will require a personal guarantee anyway) and there are significant tax benefits for extracting profit/planning for the future. I would normally recommend people consider incorporation at around the £40k a year mark but this is dependent on your situation and other considerations.

Being a sole trader will save you a significant amount of money in accountancy fees due to the difference in the level of work involved for the accountant and admin time, but any serious small business or tradesman should consider incorporating to enable more flexibility on profit extraction.

[–]okaythiswillbemymain 1 point2 points  (5 children)

A sole trader, just like a business, must register for VAT if he has a income of more than £83k a year.

If a husband and wife team were selling goods, could they keep separate books and sell up to £160k's worth of goods per year without registering for VAT?

In addition, could someone create multiple companies to avoid registering for VAT?

[I'm also not looking to do this, but was discussing this with a friend last night]

[–]sometimesihelp7 0 points1 point  (0 children)

Just to expand a little on this on a slight tangent not covered by the subsequent thread:

A single person can operate multiple trades (reported in separate Self Employed forms for SA purposes) but for actual tax purposes their income, profit & VAT thresholds would apply to the combined trades. So if a single person had two separate sole trades each with a VAT taxable turnover of £45,000 then at the appropriate point that person would need to register for VAT and apply it as applicable across the board to those trades.

It's only when you start throwing Partnerships and Companies into mix that you can have multiple limits & thresholds for certain tax elements.

If they had a third role as a Partner in a separate, unrelated, Partnership then that entity would have it's own VAT limit. However the profits of a Partnership are not subject to Corporation Tax but are subject to Income Tax at the Partner level. So if you made £15k profit from each Sole Trade & £20k from the Partnership then you'd be paying Income Tax on your total taxable income of £50k.

Companies are different in that they can either pay you a salary (which you would also pay Income Tax on) or pay you dividends based on profits which are subject to their own tax rates depending on your Income Tax band.

Whilst in common nomenclature it's common to say Person A created a company to sell X it's actually very important from a legal & tax point of view to make sure you get the right entity type because they are all treated differently. A Sole Trader specifically isn't a Company (although they could also work for & own one) and two people selling goods together might actually be a Partnership (which is different to a Company). Conducting a trade or trading doesn't specifically mean someone is a Sole Trader it just means an entity, which could also be either a Partnership or a Company, has started or is undertaking commercial activity. Lastly a 'business' can mean any of the above entity types.

[–]Harrison88[S] 1 point2 points  (3 children)

If they both operate different trades then they will have their own VAT limits. If they operate the same trade and sell as one then they will be in a deemed partnership with a single VAT limit. This is where my partnership knowledge ends unfortunately...

For the company question, there is anti avoidance legislation which prevents such schemes. It's basically evasion. Add to the fact that your corporate tax limit is then shared between the group you would be paying more corporate tax than necessary. I don't personally see the benefit unless your main cost is employees and you sell to individuals.

[–]okaythiswillbemymain 0 points1 point  (2 children)

Thanks! If the companies are completely separate entities though, then there is no problem? So for some stupid examples, Person A and Person B create a company selling personalised golf clubs (and they don't want to register for VAT for as long as possible). Then Person A and Person C create a company selling gaming computers (and they don't want to register for VAT for as long as possible). Then Person A and Person B and Person C create a company selling curved glass, etc.

I'm not doing this by the way. Just wondering.

[–]Harrison88[S] 0 points1 point  (1 child)

If they all properly operate as separate businesses they would each have their own VAT registration limits. In reality, if you are purchasing goods you would want to test if you make more money by applying VAT and reclaiming under the standard or flat rate scheme.

[–]okaythiswillbemymain 0 points1 point  (0 children)


Honestly have no idea why I'm asking you these questions!

[–]okaythiswillbemymain 0 points1 point  (4 children)

In the UK, visitors from outside the EU can reclaim VAT on their purchases at the airport.

Can UK tourists do the same in countries like America/Australia/elsewhere? (Obviously not your field, but just wondering if you know of it).

Follow up; if you brought goods in from abroad in person, would import VAT and duty be due if you were looking to sell them?

[I'm not looking to do this, was just discussing this with a friend last night]

[–]Harrison88[S] 2 points3 points  (1 child)

You can reclaim the sales tax incurred outside of the EU if you plan on bringing it home. However, legally you must declare it when you return and pay import VAT and duties.

Note: I'm answering the quick ones now, long ones at lunch :)

[–]pflurklurk366 1 point2 points  (1 child)

Can UK tourists do the same in countries like America/Australia/elsewhere? (Obviously not your field, but just wondering if you know of it).

Many countries with sales tax offer sales tax refunds for tourists! For the U.S. that's up to individual states, but certainly everywhere else that likes to attract tourists will generally have some sort of scheme.

Follow up; if you brought goods in from abroad in person, would import VAT and duty be due if you were looking to sell them?

Duty: yes - duty-free limits apply only to personal use VAT: yes - as if you acquired them in the UK

[–]okaythiswillbemymain 0 points1 point  (0 children)

Thanks pflurklurk!

[–]atc 1 point2 points  (3 children)

Any tips for avoiding IR35 and do you think it's just a boogyman?

[–]Harrison88[S] 1 point2 points  (2 children)

The best time to negotiate your contract is at the start. If you already have a contract and it falls within IR35 you are better talking to your accountant to figure out next steps. To be honest, the company you're working for will tend to have more of an incentive to ensure you don't fall within IR35 as it will likely come back to bite them. They usually require contractors to use a limited company to engage with them. However, just because you operate through a ltd, doesn't mean you're safe.

Really you should look to ensure you don't meet the employee test. HMRC have an easy tool to check this. It is only a guide though so don't rely on it. You should also have any contracts reviewed by a proper IR35 specialist (which I am not). HM Government can change the legislation at any time and make a large part of the contracting population "employees". The Cameron's Gov looked to just make the tax treatment equal so contractors didn't receive as great a benefit. May's Gov looks to be promoting employee rights. Might be too early to tell though.

If you have an enquiry and they deem you to fall within the scope it will be expensive for all parties. Don't underestimate or think "it won't happen to me".

[–]atc 0 points1 point  (1 child)

Sounds like insurance is the way to go. Thanks!

[–]pepe_le_shoe1 0 points1 point  (0 children)

I don't think you can get insurance against getting taken to court for being subject to IR35. That said, there's at least one professional body that has this for its members, paid for by their membership fees? don't know if anyone would insure an individual for it.

[–]IndeedHowlandReed 1 point2 points  (15 children)

How hard are the CTA exams. My manager seems to want me to do them but I can't really be arsed. Also I had an interesting discussion with a tax colleague and he concluded that if a rental property ownership is split 99% parent 1% son. The rental income could be split 1% parent 99%son with no recourse for HMRC. I personally though the rental split would have to follow beneficial interest but arguably not. Thoughts?

[–]Harrison88[S] 0 points1 point  (14 children)

Very, but I found them a lot more structured thanks to it mainly being maths. Out of my class of 30, 9 people passed all of the exams first time. That's a group of graduates who beat a lot of other people to join who are studying full time with full time tutors.

The issue with CTA is that you pick a topic and the examiner can ask questions on any legislation relating to that topic. The syllabus is the legislation. You could take in the leg when I sat my exams and as long as you knew the basics, could read the leg and could find things quickly in the index then that could be the difference between pass and fail. I only passed one of the exams because I found the proforma and answered the 12 mark question.

I really enjoyed the CTA exams though. Much prefer them to stuffy CA exams with wordy answers ;)

[–]IndeedHowlandReed 0 points1 point  (13 children)

The Final CA exams of 3.5, 3.5 and 4 over a couple of days wasn't fun.

[–]q_pop5 0 points1 point  (11 children)

Just to throw a spanner in the works of the 99% 1% split comment above, there is still a £100 PA limit on income attributable to a minor child before it is taxed as parent's income anyway, so if the child in question was a minor it would be for nought.

[–]IndeedHowlandReed 0 points1 point  (10 children)

It was a discussion about adult Children, specifically university children, as we wouldn't want a parental settlement.

[–]pflurklurk366 0 points1 point  (8 children)

How did the son get the share in the property?

If it was gifted by the parent then I think, without knowing the full context, that is a settlement for ITTOIA purposes - after all, what reasonable, commercial purpose is there in gifting 1% of a property to someone, if not to settle income derived from it.

No spousal exemption!

[–]Harrison88[S] 0 points1 point  (3 children)

I read those rules as saying that they don't apply if the child is under 25 and would need to be required to re-assign the share back to the parent. Doesn't it also need to be repayable to the parent for it to be a settlement anyway?

[Settlement with retained interest] does not apply if—

(a) there are no circumstances in which the property or any related property can become payable or applicable as mentioned in that subsection during the life of a person other than— (i) the bankruptcy of the person, or (ii) the assignment or charging of the person’s interest in the property or any related property, and

(b) the person is alive and under 25 years old.

[–]pflurklurk366 0 points1 point  (2 children)

My reading is that there must be some way for the interest to devolve back upon the settlor apart from bankruptcy or assignment (whilst under 25).

If the true purpose of the "gift" was to use the child's tax allowances - then would an assignment of the beneficial interest have even taken place, or rather, does the son hold the beneficial interest in the property on resulting trust, and thus the exemption doesn't apply?

Otherwise I think we'd see every BTL landlord in the country using their adult children between 18-25's personal allowances!

[–]Harrison88[S] 0 points1 point  (1 child)

But that's the point, if you transfer to an 18-25 year old you must not "retain an interest" in the share of the property. They must assign it to you of their own free will.

I think.

[–]pflurklurk366 0 points1 point  (0 children)

I think we have to look at the totality of the arrangement.

As a paranoid tax inspector, I'd have to argue - why on earth would you transfer only 1% of a property as a gift? Why wouldn't you just gift the child money or have them jointly purchase 1% with you.

Would the transferor ever consider giving 1% as a gift to anyone else? I think not - so what other purpose of the transfer is there if only to use the child's tax allowances, to keep money in the family?

In that case, the beneficial interest has not been assigned in truth, only the legal interest.

On the flip side, 1% of the property might be a substantial amount of money and the transferor wants to give their child an asset that may appreciate. Maybe it's an inheritance. I think that also has a strong case.

So, definitely dependent on the specifics of how the property was acquired and the relationship, in my view.

[–]IndeedHowlandReed 0 points1 point  (3 children)

I don't believe the commercial purpose is required, as it is the 'right' of property owners to determine how the income is distributed, except where the owners are spouses, where it will be determined 50:50 unless a Form 17 is filed. I believe it is a matter of fact, was a gift made, if so, the distribution of profits can be distributed as they wished.

[–]pflurklurk366 0 points1 point  (2 children)

Perhaps me putting in the word gifted and commercial confuses the matter - what I meant is that, according to Lord Hope in the Arctic Systems case:

  • a transfer to be a settlement there needs to be an "element of bounty"
  • a donation to a spouse or child is traditionally expressed in a deed to be "in consideration of natural love and affection" rather than the donor's bounty
  • but, "it seems to me that the general effect of the cases is that, under the arrangement, the settlor must provide a benefit which would not have been provided in a transaction at arms' length"

Therefore, would a parent gift someone 1% of a property if it wasn't to his/her child/spouse? Isn't the true arrangement here to use the child's personal tax allowances - after all, if the parent wanted to gift the child income, he/she could do so using the regular payment out of income IHT exemption, after paying the required tax.

I would argue not, which means there is the required element of bounty, which means it's a settlement.

The question is then whether it falls within the exemption of s.625(3) which /u/Harrison88 mentioned: is there a possibility that the interest can devolve back on the settlor apart from the child assigning it, or he/she becomes bankrupt before 25.

If there is, then it's taxable, if not, then there is no deemed interest.

So, we are back to the precise circumstances of how the interest arose!

[–]IndeedHowlandReed 0 points1 point  (1 child)

I take your point regarding the Arctic systems, case and the property interest would have been gifted traditionally " in consideration of natural love and affection", and as I understood it, he did not believe the Arctic Systems case would hold here.

The strategy I've suggested is an adaptation, by Mark Ward (LLB CTA), on this article:


[–]pflurklurk366 1 point2 points  (0 children)

I think that is a situation where two people jointly agree to purchase a property and they contribute 1% and 99% of the consideration - in that case 1%/99% would have no problem, in my view.

If the parent bought the property and then transferred 1% to the child though, I think you throw up the question of the rationale behind the transfer.

If it's an outright gift in natural affection then, case closed - it's fine.

But the problem for me is, why would someone only transfer 1%. To me it looks suspicious, but then perhaps I am overly paranoid!

What are the benefits of having just 1% of a property:

  • you get to veto the tenants
  • 1% of the income interest

You can't enjoy extra security in tenure in reality, because you don't live there - it's a rental property.

The cost:

  • you are liable in future for higher rate stamp duty

If a parent wanted to gift value of 1% of the property, surely it's easier to just pay the child the money? Which leads me to argue that the essence of the transaction is just income shifting tax avoidance, which then falls within the settlement provisions as no true assignation of the beneficial interest has taken place.

[–]Harrison88[S] 0 points1 point  (0 children)

Sorry, I forgot about that bit in my reply. You can agree a different ownership share as it isn't a partnership but I would put it in an agreement. Watch the partnership rules where there is more than one or it is more commercial.

Note: this doesn't apply to capital gains - that's based on proportional ownership.

[–]Harrison88[S] 1 point2 points  (0 children)

It's that five hour exam that is the kicker. Hated audit too...

[–]GordonCopestake15 1 point2 points  (3 children)

What are the chances of an AI taking over your job in the next 5 years?

[–]Harrison88[S] 6 points7 points  (2 children)

If it were up to HMRC, probably 100%. They're pushing to scrap the tax return in favour of "making tax digital". What it really means is quarterly tax returns.

In reality, accountants aren't going anywhere. It's not just about knowing the law but also how to apply it. Without us HMRC would have a much greater battle as we tend to ensure a level of quality in the data being submitted. Without us you will get submissions like this one.

Basis of measurement and preparation of accounts

I don't really know what I'm doing with this account's thing. I spoke to a few people at companies house and asked for their help, they didn't really give a shit or seem very willing want to help... If there are any mistakes I'm sure Companies House will threaten me with further some sort of political money grabbing tactic. I have made a best effort at the today.

50% of the job is also advice for the clients. We're much needed stability for new businesses and a soundboard for their ideas.

[–]GordonCopestake15 3 points4 points  (1 child)

I think that is the first time I have laughed when reading abv accounts. Thank you

[–]samsam00003 1 point2 points  (0 children)

Accounting law gets more and more complex, what's more sole traders will soon have to file accounts four times a year. Accountants aren't going anywhere!

[–]pflurklurk366 0 points1 point  (1 child)

Why pilots? And what kind of weird arrangements do they need specifically?

[–]Harrison88[S] 0 points1 point  (0 children)

They tend to be more likely to fall within one of the criteria to submit a tax return (e.g. more than £100k income) and don't have the time/inclination to submit it themselves. I tend to offer more basic financial planning (not investment) advice to them and can identify additional reliefs too such as on uniform cleaning.

[–]wilf182 1 point2 points  (1 child)

Besides ISAs, what are other easily accessible tax efficient vehicles available to the general public.

[–]Harrison88[S] 0 points1 point  (0 children)

There are a range of new tax free allowances that launched this year, including the dividend allowance and interest allowance. Specific schemes also exist now and then like tax free bonds for pensioners. Take a look at the sidebar for more info.

[–]BlueBear45 1 point2 points  (5 children)

What are some really weird tax laws?

[–]Harrison88[S] 6 points7 points  (4 children)

Most of the weird ones come from the ambiguities in VAT legislation. For example, the well known "is Jaffa Cake a cake or a biscuit". VAT is due on chocolate-covered biscuits, but not on chocolate-covered cakes - so which is it? Jaffa Cakes are in fact a cake! Mainly because they have sponge, they go hard when stale rather than soft like biscuits do. VAT is due on eBooks, but not paper books. VAT is also due on clothes, unless they're for children. Pringles? VAT exempt because they contain less than 50% of potato.

Looking to avoid hide away some money from HMRC through some artificial schemes? You need to tell HMRC that you're hiding money from them so they can give you a special number to put on your tax return.

If you're born before 6 April 1938, you get an extra £60 of tax free allowance. (It used to be banded between ages and the difference much greater but they're starting to re-align and simplify.) Blind people also get an additional tax relief of £2,290 per year.

The highest rate of income tax was set during WWII where it hit 99.25%!

Might edit this if I think of any that are actually funny, rather just weird.

[–]mutatedllama1 0 points1 point  (2 children)

I thought the courts ruled that Pringles are in fact a potato snack: http://news.bbc.co.uk/1/hi/8060204.stm

Has there been a further court case since?

[–]Harrison88[S] 0 points1 point  (1 child)

Edit: it was overruled at High Court :)

[–]mutatedllama1 0 points1 point  (0 children)

It's a shame, really; I was looking forward to sharing that with people at work. I'd heard the Jaffa Cake one, but never the Pringle one.

[–]okaythiswillbemymain 0 points1 point  (0 children)

The highest rate of income tax was set during WWII where it hit 99.25%!

That's... interesting.