BEGIN:VCALENDAR VERSION:2.0 PRODID:-//wp-events-plugin.com//7.2.3.1//EN TZID:Europe/London X-WR-TIMEZONE:Europe/London BEGIN:VEVENT UID:210@careengland.org.uk DTSTART;TZID=Europe/London:20240514T140000 DTEND;TZID=Europe/London:20240514T150000 DTSTAMP:20240521T084346Z URL:https://www.careengland.org.uk/events/tax-strategy-and-planning-what-a re-the-latest-issues-impacting-the-care-sector/ SUMMARY:Tax Strategy and Planning: What are the latest issues impacting the care sector? DESCRIPTION:This webinar gave an overview of the key non-compliance risks i mpacting the care sector and how your business can effectively maximise av ailable tax reliefs and harness tax technology tools.\nBelow is a copy of the event recording\, contact details of the panel and an FAQ with further information from the session.\nThe care sector faces increasing levels of compliance and scrutiny from HMRC. In recent months\, we have seen HMRC s ignificantly step up its focus on the care sector over a range of tax and employment non-compliance issues\, including:\n\n Research &\; Develop ment claims (R&\;D)\n\n HMRC has highlighted the care sector as an are a of non-compliance due to the volume of unsubstantiated claims.\n\n\n VA T planning models\n\n HMRC have started investigating some of the more ag gressive VAT planning models in the sector with litigation on the horizon. To help with business confidence\, we give our view on where the red line s exist.\n\n\n Capital allowances\n\n This is a valuable tax relief for the care sector since the introduction of full expensing that gives a sign ificant amount of the tax relief in the year of expenditure. It is now mor e important than ever to seek specialist advice to ensure that all expendi ture that qualifies is correctly identified and documented.\n\n\n Employm ent tax\n\n Current key issues include the tax position on the provision of employee living accommodation and considerations around the workplace o f mobile care workers in relation to the employee travel expense rules.\n\ n\n NMW and holiday pay\n\n Given wage levels in the care sector and the recent increase in the National Living Wage\, care sector employers are a t high risk of non-compliance and some care providers have appeared on HMR C’s naming and shaming list.\n\n\n\nTax technology\nThis webinar also ga ve insight as to how tax technology tools can change the nature of how you manage your tax processes in house. These can be used to:\n\n manage you r risks\;\n improve visibility of your business to your key stakeholders\ ;\n increase automation and minimise manual processes within your finance teams.\n\nYou can watch a recording of the webinar below:\nhttps://youtu. be/M1YjPZ79mcU\n\nPlease contact the RSM UK panel if you have further ques tions:\n \;\n\n\n\n \;\n\nSuneel Gupta | RSM UK\nHead of Private H ealthcare\n \;\n\n \;\n\n \;\n\n\n\n \;\n\nScott Harwood | RSM UK\n\nIndirect Tax and VAT Partner\n\n \;\n\n \;\n\n\n\n  \;\n\nPeter Graham | RSM UK\n\nHead of Capital Allowances\n\n \;\n\n&n bsp\;\n\n\n\n \;\n\nRobert De La Rue | RSM UK\n\nTax Technology Partne r\n\n \;\n\n \;\n\n\n\n \;\n\nCharlie Barnes | RSM UK\n\nHead of Employment Legal Services\n\n \;\n\n \;\n\n[learn_more caption= "Questions &\; Answers"]\nWhere do you see the opportunities for busine sses in the care sector in terms of tax exposure?\nScott Harwood re VAT op portunities:\nFor care home providers\, the restructuring scheme is now we ll known\, where you can convert your business from providing tax exempt w elfare services to taxable services so you can reclaim your input costs/VA T tax. The sector has become more comfortable over the last 5 years and se en greater uptake\, with HMRC getting comfortable and many schemes being s igned off provided they aren’t pushing the boundaries. Good planning wit h full sight of HMRC can provide real benefit for the sector.\n\nAlso seei ng a lot around the VAT costs around temporary workforce. Even if you do t he restructuring scheme\, quite often you have a largely VAT exempt busine ss for self-funded individuals\, so mitigating VAT costs remains essential . Lots of opportunities for care operators\, eg to reduce the cost of temp orary staff by using direct engagement models\, buying in welfare services rather than welfare people\, and challenges to HMRC’s prior interpretat ion to VAT on construction work for care homes\, generally they get the ze ro rate on works but there’s still quite a lot of VAT cost in communal a reas. So good opportunities around VAT for care providers.\nCharlie Barnes re workforce legislation opportunities:\nPositive opportunity around the recent legislation introduced re holiday pay and how that is calculated fo r casual workers\, whether employed via an agency or directly\, which mean s that care providers can now roll up holiday pay at the rate of 12.07%. A recent Supreme Court case  had resulted in inflated holiday pay costs fo r casual workers and agency workers and a greater administrative burden on care provider payrolls. The new legislation simplifies the calculation pr ocess and mitigates the additional costs which arose from this case. The u se of agencies to supply temporary workers continues to provide some benef its in the models that Scott referenced.\nPeter Graham re capital allowanc es opportunities:\nGovernment has introduced generous tax reliefs for capi tal expenditure\, including super deduction which applied to expenditure f rom 1 April 2021 to 31 March 2023 – 130% tax relief for items such as ba throoms\, beds\, furniture and carpets. Whilst this relief has expired\, w e’re still helping clients with expenditure carried out in that period. It has now been replaced with full expensing - whilst only receive 100% re lief on the same expenditure\, essentially still receive same amount of ta x relief as super deduction as the tax rate has gone up to 25%. Important to go through your expenditure and make sure you’re not missing out on t hose tax reliefs. Capital allowances claims can be complicated\, so if you ’re involved in a construction project or extending your buildings\, it ’s important to analyse payments in as much detail as possible to optimi se for capital allowances. And there is also an opportunity for care home acquisitions\, especially when buying a not-for-profit organisation where you can potentially claim all the capital allowances on that acquisition. Important to get your adviser involved when you are making an acquisition to ensure maximising capital allowances. Always worth getting a second pai r of eyes looking at your capital allowances\, with our experience and vol ume of work in the sector\, we can quickly tell if you have the right leve l of claims or there is more that can be claimed.\nRob De La Rue: How can technology help businesses with their tax strategy?\nImpactful technologie s to improve efficiencies and automate are now readily available and affor dable to most businesses. This is not just AI\, automation technologies co mbined with the benefits of AI has brought about a tipping point and we ca n expect to see rapid change over the next 5 years. Rapid advancements hav e already been seen in the care sector such as AI enhanced diagnostics or improved booking systems for appointments\, case management and enhanced s hift booking tools. The technology behind these enhancements is also appli cable to finance teams and managing tax. A lot can be done to support abov e mentioned tax reliefs and underlying tax processes. It’s good to start with smaller projects\, a task in Excel that could be easier where tools\ , such as Alteryx\, can automate. This helps with controlling and managing processing tasks to free up time. Automation tools are no harder to use t han Excel once get to know them. Important to know how to introduce safely and this is where RSM can help.\nWhat are the key tax risks that should b e managed?\nCharlie Barnes: holiday pay and national minimum wage (NMW)\nT he biggest issue with NMW is the financial penalties (up to 200%) and nami ng and shaming enforced by HMRC\, who’s viewpoint is to represent the wo rkers. If they find that there has been an underpayment\, settlement with HMRC is not an option and a notice of underpayment is issued to the employ er setting out the arrears owed to all workers/ex workers\, which must be paid within 28 days along with the financial penalty. Risks are around com mon areas as set out in the naming and shaming list published by the Depar tment for Business and Trade. It’s also important to consider who is sup plying you with temporary labour and whether they are complying. Whilst yo u’re not liable\, you are associated with those suppliers and therefore should undertake the necessary due diligence of your supply chain.\n\nYou can control your own risks by including payroll controls to check that sal ary sacrifice arrangements are factored into your calculations It’s the post salary sacrifice payment considered for NMW. Have an up-to-date time and attendance recording system\, don’t rely on a manual process\, as re commended by HMRC. HMRC now follow up on inspections to check that you’v e implemented their recommendations. Need a top-down approach which is con sistent across your sites and training for all line managers. Policies and procedures should be built into internal mechanisms.\n\nWorth considering the impact of the new legislation introduced at the start of this year fo r your organisation.\n\nHoliday pay and entitlement reforms from 1 January 2024 - GOV.UK (www.gov.uk)\n\nEmployers must factor in regularly paid ove rtime for anyone employed on permanent basis for 4 weeks of holiday entitl ement each year. Opportunity to reflect on how much overtime is being work ed in your organisation\, whether it must be included in the holiday pay c alculation\, and whether it may be worth engaging more temporary workforce rather than more overtime.\nScott Harwood: VAT risks\nThere are two main risk areas for the care sector currently. First\, around temporary workfor ce. HMRC is building their investigation team on the temporary market\, se eing many investigations around recruitment business\, care homes or umbre lla agencies. HMRC are finding a lot of fraud or borderline fraud cases\, for example in small providers and mini umbrellas. HMRC is focusing heavil y on processes and checks within businesses\, and considering introducing statutory due diligence checks for when using umbrella agencies in your su pply chain. HMRC is now using their powers more\, including the corporate criminal offence\, where there is risk to you if you’re knowingly enteri ng into fraud and do not have sufficient due diligence checks. If recruite rs aren’t charging you VAT\, it is important to ask why to avoid any acc usations of complicity.\n\nSecondly\, around the restructuring scheme with VAT savings for welfare providers\, there are cases where boundaries are being pushed too far. It’s not just as simple as removing the CQC link t o your organisation\, you need to liaise with your commissioners\, ensure contracts march\, so everything needs to be aligned. We are seeing it bein g done too aggressively retrospectively and HMRC are starting to challenge this in the courts. So\, do take advantage of these planning areas\, but it’s important to do it properly.\nPeter Graham: R&\;D risks\nHMRC ha s a strong focus on tackling R&\;D non-compliance. Nursing and care hom es coming under a lot of scrutiny\, as the sector has been targeted by les s scrupulous providers submitting claims with low technical merit. We are seeing more businesses in the sector targeted by HMRC on the validity of t heir claims. There are valid claims\, but it’s important to speak to a p rofessional adviser to check your claims are robust and can be supported.\ nRob De La Rue – how technology can help manage governance and tax risks :\nWe are seeing lot of activity in this area. Care is a highly regulated sector in a highly regulated economy. Managing tax risk increasingly invol ves risk management of tax processes. For example\,\n\ncorporate criminal offence (CCO) rules impose an automatic criminal penalty for the company i f somebody working in the organisation (including contractors etc) helps a third party to commit tax fraud. The only protection available in this ci rcumstance is to ensure you have a defence file prepared and which demonst rates that you have undertaken appropriate risk reviews and have compliant policies\, training and procedures in place to guard against the facilita tion of tax fraud. You should also consider your supply chains to ensure t hose companies working with you have similar levels of robust controls.   These rules apply to all UK businesses regardless of size.\n\nIn addition to the CCO rules\, there are additional requitements such as the UK Senior Accounting Officer regime for larger businesses with revenues over £200m or those with large amounts of assets.  If you work in a large business where these could apply\, then it is important to review and understand th e full range of tax governance regulations which could apply.\n\nTax gover nance regulations are an increasing focus area of HMRC and a common review area in M&\;A due diligence reviews.\n\nHaving a good process and good technology around the management of risk will help make compliance much e asier and reduce the likelihood of unexpected costs later on.  For exampl e\, Governance Risk and Compliance (GRC) systems such as RSM InSight 4GRC can be set up to help manage risk registers\, track actions\, and demonstr ate your processes. These systems work across operational and tax risks.  It is for this reason we created RSM Tax InSight\, which helps organisati ons keep on top of all their internal and external tax processes whilst at the same time brining the power of GRC technology to simplify the process and reduce the time it takes to professionally manage tax risk in a busin ess.\nWhat about the future tax landscape?\nScott Harwood:\nMaking tax dig ital is in place. In other jurisdictions\, such as Italy and China\, there is real-time transactional reporting to authorities\, which is what HMRC want to work towards. Currently you just submit returns via an API link\, but HMRC really want full transactional oversight so they can use AI big d ata to correlate transactions with tax returns and corporate tax.\nRob De La Rue:\nThere is a wider government roadmap on Making Tax Digital. VAT ha s gone first\; income tax is next which is due to land around 2026 and the n corporation tax is expanded probably from at least 2030.  We expect thi s direction of travel to continue regardless of the outcome of the forthco ming elections.  This trend also mirrors a wider shift in approach to mor e real-time tax reporting as new technology facilitates more detailed and faster tax returns to be delivered.\n\nWith advent on new technologies\, i t’s also in the interest of businesses to become more digital to gain ef ficiencies and focus their time on higher value tasks.  Whilst forthcomin g regulations are important to note\, it is this opportunity which is real ly driving businesses to explore how to use technology to streamline their tax requirements – well ahead of the mandatory deadlines.\nScott Harwoo d:\nOur clients have reported real benefits from automation to save time a nd increase efficiency/accuracy. It’s worth thinking ahead and putting s ensible steps in readiness.\nCharlie Barnes:\nThe direction of travel for NMW is that it will increase again. The government has asked the low pay c ommission to keep National Living Wage set to 2/3 of median earnings – b ased on current wage inflation that equates to a projected 6% increase. No lowering of the National Living Wage (NLW) threshold though (currently 21 ). The Labour party have said they will link NLW to cost of living\, so we could see age threshold reducing and increases of greater than 6%. Statut ory enforcement will continue with potential for increased government fund ing and wider remit to cover holiday pay. Ultimately\, compliance is not g oing to diminish. On a positive note\, this should create a more level pla ying field and rogue operators will be found out.\nPeter Graham:\nThe shad ow chancellor has already confirmed Labour won’t change the full expensi ng regime or the current £1m annual investment allowance which gives busi nesses certainty.\nAudience questions\nQuestion for Scott: Please can you comment on how HMRC are viewing the use of the VAT nursing exemption on te mporary staff through direct agency relationship vs umbrella companies?   Isn't the VAT liability an issue for the agency and not the care provider in terms of who is responsible for accounting for the VAT?\nScott Harwood: \nThe nursing concession is another area of investigation by HMRC\, they t hink some recruitment businesses have been applying this too widely. Conce ssions must be read and applied narrowly. Whose risk is it? The risk will be whoever applies it\, for example nursing agency must apply correctly\, but they may draw on information that you give them as a customer which co uld potentially put you into the realm of joint and several liability on a VAT footing or potentially more in the corporate criminal offence\, if yo u have misinformed your supplier then you have failed on the correct proce ss and encouraged misapplication of VAT. This is a due diligence check in your supply chain that must be done. Umbrella companies can’t use the nu rsing concession. What is acceptable is if the agency payrolls the worker and then provides nursing concession on eligible supplies of staff.\nWe ar e currently going through a R&\;D claim however we have not obtained an y funding from this claim. a company appointed has obtained this claim and now HMRC are investigating us. has anyone had this issue and what should we do next? \nPeter Graham:\nIt sounds like the R&\;D repayment hasn ’t been paid to the claiming company. The company that has done the clai m should pass that on. Important to establish if it’s a valid claim in t he first place and seek some advice. If claim is valid\, you should be abl e to defend it with documentation to back up what has been claimed. If the R&\;D refund is going direct to the R&\;D agency firm and not you t hat is something you should be cautious about.\nWhat is constitutes an R&a mp\;D breach and what is a valid claim?\nWe have seen valid claims where t he company has implemented bespoke software or technology but there are ve ry few scenarios that would qualify in the sector. We have seen lots of ex amples where it’s clear it doesn’t qualify for R&\;D which is why t he sector has been targeted.\nWe are having trouble getting HMRC written a pproval of our vat welfare scheme\, despite notifying them of our process and having had a VAT inspection raising no issues. But some LAs are reques ting written approval before we can progress. How can we get written appro val from HMRC? Also\, lots of ICB's are hiding behind NHS England guidance stopping them from novating contracts. However\, none of them will supply the guidance\, which I understand\, is that it is allowed provided that t he necessary due diligence processes are in place - but it seems ICB's are too stretched to set up and approve said processes - even when we prepare all necessary novation contracts for them. Any advice?\nScott Harwood:\nW e know HMRC have been reviewing and signing these off\, it can be dependen t on the officer you get\, some will be familiar and will process it\, oth ers will ask more questions. If it’s been done properly\, HMRC should\, in general\, have no problem with it but have the right to ask questions i f they feel something is untoward.\n\nCare England have released a list of Local Authorities who are currently accepting restructuring scheme propos als. They are free to make the decision on who they contract with. Communi cation is important\, have conversations with relevant Local Authorities t o keep them informed. Without this you may have a commercial dispute. If g etting it is getting stuck with your commissioner\, speak to your adviser who may be able to escalate.\nAlso\, re contract restructuring: we have be en advised (twice - 2019 and 2023) by large prof services firm to avoid in PE backed business unless a structure such as opco/propco is already in p lace\, i.e. not undertaking a company reorganisation to be able to achieve it. Is this what was meant by "don't push the boundaries too much" discus sed earlier in the call?\nScott Harwood:\nYes\, they can take this risk po sition\, and we know HMRC are looking to challenge that particular area wh ich is why they have attached a risk to it.\nLots of ICB's are hiding behi nd NHS England guidance stopping them from novating contracts. However\, n one of them will supply the guidance\, which I understand\, is that it is allowed provided that the necessary due diligence processes are in place - but it seems ICB's are too stretched to set up and approve said processes - even when we prepare all necessary novation contracts for them. Any adv ice? \nScott Harwood:\nThere is still some misinformation in the NHS sect or. Whilst we understand HMRC with NHS England have got comfortable with c ertain parameters\, there are some ICBs we know that have not been made aw are of that and have own thoughts on this. We have seen some more aggressi ve structures\, where people are pushing the boundaries too far. It is a w elfare planning scheme not a healthcare planning scheme\, so be careful no t to stray into that area which ICBs often fund as well. Again\, whilst we ’ve got guidance\, it doesn’t mean everything is pre-approved\, must f eel right for the commissioner.\n\n \;\nrsmuk.com\nThe UK group of com panies and LLPs trading as RSM is a member of the RSM network. RSM is the trading name used by the members of the RSM network. Each member of the RS M network is an independent accounting and consulting firm each of which p ractises in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administ ered by RSM International Limited\, a company registered in England and Wa les (company number 4040598) whose registered office is at 50 Cannon Stree t\, London EC4N 6JJ. 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(rsmuk.com)\n\nHMRC targets care providers regarding non-compliant R&am p\;D claims | RSM UK\n\nTo receive RSM’s dedicated healthcare insights v isit our preference centre and select ‘healthcare’: https://news.rsmuk .com/preference-centre/ ATTACH;FMTTYPE=image/jpeg:https://www.careengland.org.uk/wp-content/upload s/2024/04/14May-Webinar-Graphic-Tax-strategy-RSM.png CATEGORIES:Care England,Care England Members END:VEVENT BEGIN:VTIMEZONE TZID:Europe/London X-LIC-LOCATION:Europe/London BEGIN:DAYLIGHT DTSTART:20240331T020000 TZOFFSETFROM:+0000 TZOFFSETTO:+0100 TZNAME:BST END:DAYLIGHT END:VTIMEZONE END:VCALENDAR