Author Archives: Martin Arthur

Budget 2017 – 22 Nov 2017 Chancellors Speack Key Points

Philip Hammond has delivered his second Budget as chancellor.

Here are the key points of his speech.

Housing

Stamp duty to be abolished immediately for first-time buyers purchasing properties worth up to £300,000
In London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by first-time buyers will be exempt from stamp duty
80% of all first-time buyers will not pay stamp duty
Long-term goal to build 300,000 homes a year by the mid-2020s
£44bn in government support, including loan guarantees, to boost construction skills
100% council tax premium on empty properties
Compulsory purchase of land banked by developers for financial reasons
Review into delays in permitted developments going forward
£28m for Kensington and Chelsea council to provide counselling services and mental health support for victims of the Grenfell fire and for regeneration of surrounding area
New homelessness task force

Alcohol, tobacco, gambling and fuel

Tobacco will rise by 2% above Retail Price Index (RPI) inflation while the minimum excise duty on cigarettes introduced in March will also rise, as will duty on hand-rolled tobacco
Duty on beer, wine, spirits and most ciders will be frozen
But duty on high-strength “white ciders” to be increased via new legislation
Vehicle excise duty for diesel cars that do not meet latest standards to rise by one band in April 2018
Tax hike will not apply to van owners
Existing diesel supplement in company car tax to rise by 1%
Proceeds to fund a new £220m clean air fund
Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped

Personal taxation

Tax-free personal allowance to rise to £11,850 in April 2018
Higher-rate tax threshold to increase to £46,350
Short-haul air passenger duty rates and long-haul economy rates to be frozen, paid for by an increase on premium-class tickets and on private jets

The state of the economy

Growth forecast for 2017 downgraded from 2% to 1.5%
GDP downgraded to 1.4%, 1.3% and 1.5% in subsequent years before rising to 1.6% in 2021-22
Productivity growth and business investment also revised down
Annual rate of CPI inflation forecast to fall from peak of 3% to 2% later this year
Another 600,000 people forecast to be in work by 2022

Brexit

£3bn to be set aside over next two years to prepare UK for every possible outcome as it leaves EU

Public borrowing/deficit/spending

Annual borrowing £49.9bn this year, £8.4bn lower than forecast in March
Borrowing forecast to fall in every subsequent year from £39.5bn in 2018-19 to £25.6bn in 2022-23
Public sector net borrowing forecast to fall from 3.8% of GDP last year to 2.4% this year, then 1.9%, 1.6%, 1.5% and 1.3% in subsequent years, reaching 1.1% in 2022-23.
Debt will peak at 86.5% of GDP this year, then fall to 86.4% next year; then 86.1%, 83.1% and 79.3% in subsequent years, reaching 79.1% in 2022-23.

Pensions, savings and welfare

£1.5bn package to “address concerns” about the delivery of universal credit
Seven-day initial waiting period for processing of claims to be scrapped
Claimants to get one month’s payment within five days of applying
Repayment period for advances to increase from six to 12 months.
New universal credit claimants in receipt of housing benefit to continue to receive it for two weeks

Business

VAT threshold for small business to remain at £85,000 for two years
£500m for 5G mobile networks, fibre broadband and artificial intelligence
£540m to support the growth of electric cars, including more charging points
A further £2.3bn allocated for investment in research and development
Rises in business rates to be pegged to CPI measure of inflation, not RPI
Income tax to be applied from April 2019 on digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction, raising about £200m a year

Education (England only)

£40m teacher training fund for underperforming schools in England. Worth £1,000 per teacher
8,000 new computer science teachers to be recruited at cost of £84m
Secondary schools and sixth-form colleges to get £600 for each new pupil taking maths or further maths at A-level at an expected cost of £177m

Nations/infrastructure/transport/regions/science

£320m to be invested in former Redcar steelworks site
Second devolution deal for the West Midlands
£1.7bn transport fund for city regions
£2bn for Scottish government, £1.2bn for Welsh government and £650m for Northern Ireland executive
Scottish police and fire services to get refunds on VAT from April 2018.

Health and social care

£2.8bn in extra funding for the NHS in England
£350m immediately to address pressures this winter, £1.6bn for 2018-19 and the remainder in 2019-20
£10bn capital investment fund for hospitals

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Personal Taxation Planning Guide 2016-17

We are here to help…

Make good use of us! This guide is designed to help you identify areas that might have a significant impact on your tax planning. Please consult us early for help in taking advantage of tax-saving opportunities. We will be delighted to assist you.

Tax Planning is a year-round activity, but it takes on even more importance as the year end draws near.

Since taking office, the new all-Conservative Government has already outlined a number of significant reforms to the tax rules, many of which may have an impact on your financial planning for 2016/17 and beyond.

As your accountants we can advise on how these changes will affect you, and suggest strategies to help boost your business’s profitability, reduce your tax liabilities and maximise your personal wealth. These may include:

  • taking advantage of the tax breaks available to you and your business
  • planning to extract profits from your business tax-efficiently
  • utilising tax-advantaged savings options (including pensions)
  • minimising the inheritance tax due on your estate.
  • Also consider, capital gains such as:

Assets acquired, sold or which have become of negligible value.

‘Wind-fall’ receipts from building societies / insurance companies.

Sales of shares acquired under Company share options.

  • Employment income and the production of P60, P11D, P45 and PAYE coding notices, however Professional Subscriptions and other expenses of employment paid personally need to be considered.
  • Please note that from 6th April 2016, all bank interest will be paid Gross and tax will be collected at the point of the tax return date, and paid over once all tax has been calculated by the due date. This will affect clients with high investment incomes from banks and building societies.

 

Planning and careful timing are crucial. In some cases, the timing of a transaction or investment determines when any reliefs impact on your tax payments or your tax code.

 

 

This help-sheet contains some key points to consider ahead of the year end, but don’t wait until 5 April! Sending us your accounting and personal records in good time means we have plenty of time to discuss planning opportunities and help you manage cash flow by giving you early warning of any tax payments due. And of course, good timing will help to ensure that you avoid any unnecessary penalties and interest levied by HM Revenue and Customs.

On Capital Allowances, remember the timing for the purchase of capital allowances and that ‘Greener’ investment is encouraged through specific 100% allowances available for some investments, including energy-saving equipment and low CO2 emissions (up to 75 g/km) cars.

Otherwise the general rate of annual writing down allowance is 18% on the reducing balance, with an 8% allowance for certain categories, including cars with CO2 emissions exceeding 130 g/km, long life assets and certain specified integral features of buildings.

 

The New State Pension 2016

The amount of state pension you get will change if you qualify for it on or after 6 April 2016. The basic and additional state pensions are going to be replaced by a flat-rate, single-tier state pension with a full level of £155.65 in April 2016.

The table below compares the current and new systems based on 2016/17 figures.

State pension: what’s changing?
  Qualifying years needed What you

get

Full level of state pension Deductions Contracting

out

Pension

credit

Before April 6 2016 30 Basic state pension plus additional state pension Basic state pension £119.30 Deduction for years contracted out of additional state pension (during transitional period) Yes Guarantee credit and savings credit
After April 6 2016 35 Single payment New state pension £155.65 Deduction for years contracted out of additional state pension (during transitional period) No – additional state pension no longer exists Guarantee credit

The additional pensions and ‘contracting out’ has been abolished, and so has part of the pension credit for those qualifying for the state pension on or after 6 April 2016.

To lift the burden of paying additional state pension to every worker, the government previously allowed pension savers to ‘contract out’ of the state second pension.

You paid less National Insurance and therefore didn’t get the additional state pension, and the money you saved in National Insurance was put into your workplace or private pension. Qualifying National Insurance years will also be increased from 30 to 35 years.

If you reach state pension age before the 6 April 2016 then the changes to the state pension will not affect you.

 

How much state pension will I get?

If you reach state pension age on or after 6 April 2016, your state pension figure will be calculated using the full level of new state pension of £155.65.

People might get more or less than the indicated full new state pension (eg their starting amount). Those that have built up a certain amount of additional state pension will get a higher amount, while those that were contracted out before 6 April 2016 for a significant time will probably get less.

This figure will be whatever is higher – either the amount you would get under the old system or the amount you would get had the new system been in place over the whole of your working life.

Exactly what you’ll get, which is based on your National Insurance record, will be no less than the amount you’d have received on the last day of the old scheme (5 April 2016). This assumes you have the minimum number of years on your National Insurance record to get any state pension (10 years).

What is Contracted out or contracted in?

Contracted out

If you’ve been contracted out, you’ve been making NI contributions at a reduced rate (in a DB scheme), or receiving a rebate into your pension pot (in a DC scheme).

The new system makes a reduction in the flat-rate pension in the same way a ‘contracted out-deduction’ has been made from your additional state pension under the old system.

If you’ve been contracted out but carry on working for a number of years after 2016, making full-rate NI contributions, you can carry on building up further state pension until you reach the full flat rate.

Contracted in

The new rules mean that no-one will lose any additional state pension they’ve accrued while contracted in. If you collect your state pension on or after 6 April 2016, the government will make two calculations.

The first will be your state pension entitlement under the old rules. The second will be the amount of state pension you are entitled to under the new post-April 2016 rules.

Whichever value is the highest is called your ‘starting amount’. If this is more than the full level of new state pension, you’ll get the higher amount.

A pension forecast

You can currently get a state pension forecast from the Department for Work and Pensions (DWP) at:

www.gov.uk/state-pension-statement or by calling 0345 3000 168.

The forecast gives you an estimate of what you can expect in terms of your state pension based on your National Insurance contributions.

Just note that those of you intending to retire abroad, you need advice as to which countries take the state pension and at what rate, and what their policy is regarding  getting the annual increases.

 

Inheritance Taxation (IHT)

 

Take advantage of IHT reliefs of up to 100%

There are a number of IHT reliefs available, perhaps most importantly relief on business and agricultural property, which effectively takes most of such property outside the IHT net. As always, there are detailed conditions, including a two-year minimum holding period, but business and agricultural property will generally attract 100% or 50% relief.

IHT exempt transfers between spouses

Transfers of assets between spouses or civil partners are generally exempt from IHT, regardless of whether they are made during a person’s lifetime or on their death. In addition, the nil-rate band may be transferable between spouses and civil partners. This means that if the bulk of one spouse’s estate passes, on their death, to the survivor, the proportion of the nil-rate band unused on the first death goes to increase the total nil-rate band on the second death.

Other exempt transfers include:

  • small gifts (not exceeding £250 per tax year, per person) to any number of individuals annual transfers not exceeding £3,000 (any unused amount may be carried forward to enhance the following year’s exemption)
  • certain gifts in consideration of marriage or civil partnership
  • normal expenditure out of income
  • gifts to charities

 

Lifetime gifts

A programme of lifetime gifts can also significantly reduce the IHT liability on your estate. As long as you survive the gift by seven years and no longer continue to benefit from the gift yourself, it will escape IHT. Gifts also have the advantage of allowing you to witness your family members benefitting during your lifetime.

A discount can also apply where lifetime gifts were made between three and seven years before death (note that the discount applies to the tax on the gift rather than the gift itself, so, as above, these ‘old’ gifts can significantly increase the final bill unless we have been able to cover them for you with an exemption or relief).

Trusts

Trusts can be used to help maintain a degree of control over the assets being gifted, especially useful in the case of younger recipients. Life assurance policies can be written into trust in order that the proceeds will not form part of the estate on your death. Talk to us about using trusts to meet your planning needs.

Your Will

Your Will is your ultimate opportunity to get money matters right. You should review your Will at regular intervals to ensure that it reflects changes in your family and finances, is tax-efficient, and includes any specific legacies you would like to give, including tax-free donations to charity.

 

 

Company Taxation

 

More ways to extract profit

You may also want to consider alternative means of extracting profit, which might include the following:

  1. Capitalisation

For those expecting to liquidate their company in the next few years, profits might be left in the company to be eventually drawn as capital.

Current rules allow retained profits distributed on liquidation to be subject to capital gains tax, with a potential tax rate as low as 10% if Entrepreneurs’ Relief is available. However, caution is advised as high cash reserves held without a clear business purpose or substantial investments can potentially jeopardise Entrepreneurs’ Relief or IHT Business Property Relief.

  1. Incorporation

As the above points suggest, incorporation may give some scope for saving or deferring tax than operating as a self-employed person or partner.

Of course, incorporation may not suit all circumstances, and the ‘IR35’ rules specifically counter the use of ‘personal service companies’ to reduce tax, but we will be pleased to discuss how incorporation might apply to you and your business.

  1. Tax‑free allowances

Tax-free allowances, such as mileage payments, apply when you drive your own car or van on business journeys. The statutory rates are 45p per mile for the first 10,000 miles and 25p per mile above this. If you use your motorbike the rate is 24p per mile, and you can even claim 20p per mile for using your bicycle!

  1. Pensions

Employer pension contributions can be a tax-efficient means of extracting profit from a company, as long as the overall remuneration package remains commercially justifiable. The costs are usually deductible to the employer and free of tax and NICs for the employee.

  1. Property

Where property which is owned by you is used by the company for business purposes, such as an office building or car park, you are entitled to receive rent, which can be anything up to the market value, if you wish.

The rent is usually deductible for the employer. You must declare this on your Tax Return and pay income tax, but a range of costs connected with the property can be offset. On the other hand, receiving rent may mean a bigger capital gains tax bill if or when you decide to sell the property, so care needs to be taken to weigh up the pros and cons

  1. Changes to Dividend Tax 2016/17:
  • From April 2016, notional 10% tax credit on dividends will be abolished
  • A £5,000 tax free dividend allowance will be introduced
  • Dividends above this level will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate)
  • Dividends received by pensions and ISAs will be unaffected
  • Dividend income will be treated as the top band of income
  • Individuals who are basic rate tax payers who receive dividends of more than £5,001 will need to complete self-assessment returns from 6 April 2016.

The Impact on this change:

  • The proposed changes raise revenue despite the so-called “triple lock” on income tax. Perhaps aimed at tax small companies who pay a small salary designed to preserve entitlement to the State Pension, followed by a much larger dividend payment in order to reduce National Insurance costs. It appears that the government is anti-small companies, preferring workers to be self-employed
  • These changes will affect anyone in receipt of dividends: most taxpayers will be paying tax at an extra 7.5% p.a. Although the first £5,000 of any dividend is tax free, in 2016/17
  • Upper rate taxpayers will pay tax at 38.1% instead of an effective rate of 30.55% in 2015/16
  • Higher rate taxpayers will pay tax at 32.5% instead of an effective rate of 25% in 2015/16
  • Basic rate taxpayers will pay tax at 7.5% instead of 0% in 2015/16

This measure will have a very harsh effect on those who work with spouses in very small family companies. For example, a couple splitting income of £100,000 p.a. could be over £5,000 p.a. worse off.

How does this work? Here are some examples of the ‘before and after’:

1a.          2016/17 example: the dividend allowance is within your basic rate tax band

  • If you are a basic rate taxpayer, and you receive all your taxable income in dividends you will be up to £2,025 worse off
  • The basic rate tax threshold for 2016/17 is £43,000 (personal allowance of £11,000, plus basic rate tax band of £32,000)
  • If a dividend of £32,000 is received it is taxable as follows, breaking it down into the different “slices”:
  • The first £5,000 – covered by your dividend allowance
  • The next £27,000 (the remainder of your basic rate band) – taxed at the new 7.5% = £2,025 tax due

1b.          Old dividend rules: this shows what would have been payable under the old rules (if they were in place in 2016/17)

  • If your gross dividend is £32,000 (including tax credit)
  • The first £32,000 falls into the basic rate band – taxed at 10% = £3,200
  • You receive a tax credit = £(3,200)
  • Tax is paid of £nil

The above examples assume that the taxpayer has other income which takes up their personal allowance.

 

2a.          Higher rate taxpayer £50,000 of dividends

  • A higher rate taxpayer will pay tax at 32.5% on any dividend income in excess of the new £5,000 dividend allowance and basic rate threshold, and an upper rate taxpayer will be taxed at the new 38.1% rate
  • If you are a higher rate taxpayer, and you receive £50,000 of income in dividends in 2016/17 you will be worse off by £2,575
  • If a dividend of £50,000 is received it is taxable as follows, breaking it down into the different “slices”:
  • The first £5,000 – covered by your dividend allowance
  • The next £27,000 – taxed at the new 7.5% = £2,025
  • The next £18,000 – taxed at 32.5% = £5,850
  • Total tax due = £7,875

 

2b.          Re-working 2016/17 for a higher rate tax payer under the current rules

  • If a dividend of £50,000 is received that is grossed up to £55,555 taxable as follows, breaking it down into the different “slices”:
  • The first £32,000 – taxed at 10% = £3,200
  • The next £23,555 is taxed at 32.5% = £7,655
  • You receive a tax credit = £(5,555)
  • Tax is paid of £5,300

The above examples assume that the taxpayer has other income which takes up their personal allowance.

 

 

Declaration and Voting of Dividends

In many small, family Companies the Directors may determine that a dividend should be voted and paid to Shareholders during and before the end of the Company’s Accounting Period.  Very often, drawings have been taken effectively ‘on account’ of such dividends because small Companies do not have the facility to provide an extremely accurate estimate of likely Results for The Period from which dividends will be payable.

In the above situations, it could be argued that a dividend was paid in the year it was formally Minuted and Voted, as opposed to being applied to the Accounting Period in which the sums ‘on account’ were drawn. In past years, with a notional tax credit of 10% being available, the application to one tax year or the next very often did not make any material difference to the tax liability arising.

With the provisions in the March 2016 Budget, this is no longer the case.  A dividend effectively confirmed for a year end 31 March 2016 being determined ONLY if and when Financial Accounts were finalised and approved at, say 30 September 2016, could be challenged by HMRC with an argument that it is a dividend for 2016/17, not 2015/16.

Not only could the above result in a higher personal tax bill for the Shareholders, but the drawings made without cover of dividend in the 2015/16 Accounting Period might give rise to taxation under section 455 which penalises Directors/Shareholders who overdraw their Directors Current Accounts.

Therefore, we encourage all such Companies to liaise with us as soon as, if not before, the year-end approaches. We can assist in reviewing the financial information and discussing dividend options at the earliest opportunity. We will always try offer assistance to our clients where ever possible in any area of the accounting and tax process. Please just contact us and make an appointment to discuss your opportunities or concerns with us.

 

 

 

 

Annual Employment Allowances (AEA) changes for 2016/17

An annual employment allowance for businesses and charities to be offset against their employers Class 1 NICs was introduced in April 2014. The allowance can be claimed as part of the normal payroll process through RTI using our Payroll services.

From April 2016, the maximum amount available increases to £3,000 (2015-16: £2,000) per year. For example, if an employer’s Class 1 NICs are £1,200 each month, in April and May the employment allowance used will be for the full amount and in June the remaining £600 would be used.

There are a number of excluded employers who cannot claim the employment allowance. For example, persons employed for personal, household or domestic work, such as a nanny or au pair and employment that is either wholly or mainly of a public nature. No allowance is available for deemed payments of employment income under the IR35 regime.

From April 2016, the eligibility to claim the employment allowance has been removed from limited companies with a single director and no other employees. This measure has been put in place to ensure that companies with a single director and no employees do not benefit from an allowance designed to help small businesses take on additional staff.

Change to Employment Allowance from 6 April 2016

From 6 April 2016, limited companies where the director is the only employee paid earnings above the Secondary Threshold for Class 1 National Insurance contributions will no longer be able to claim Employment Allowance.

The Secondary Threshold is set at £156 a week for the 2016 to 2017 tax year.

A company is no longer eligible for the allowance if:

  • only one employee (or director) in the limited company is paid above the Secondary Threshold
  • that employee is a director of the limited company

This means that companies with several employees, where the director is the only employee paid above the Secondary Threshold, will no longer be eligible for the Employment Allowance.

This change only applies to limited companies. If you’re self-employed, you won’t be affected by this change.

Stopping your Employment Allowance claim

If you are affected by these changes and at the start of the tax year your company is no longer eligible to claim the Employment Allowance, you should stop your claim. Select ‘no’ in the ‘Employment Allowance indicator’ field within your payroll software, and submit an Employment Payment Summary (EPS) to HMRC.

You must ensure you pay the full amount of employer Class 1 National Insurance contributions (NICs), without deducting the Employment Allowance.

These changes will not affect any claims made in previous years.

The additional employee test

If your company circumstances change and more than one employee or director earns above the Secondary Threshold, you’ll be eligible for Employment Allowance for the whole tax year.

This includes companies where:

  • all employees are directors where both earn above the Secondary Threshold
  • the company employs husband and wife directors where both earn above the Secondary Threshold
  • the company employs seasonal workers where one or more is an employee earning above the Secondary Threshold in a week
  • where you’re the only UK based employee of an international company that meets the other eligibility criteria, and you earn above the Secondary Threshold in a week

The decisive factor is that the additional employee(s) must be paid above the Secondary Threshold (£156 in the tax year 2016 to 2017).

Directors must be paid above the annual Secondary Threshold (£8,112 for 2016 to 2017, or pro-rata if the directorship began after the start of the tax year).

 

 

Remember tax doesn’t

have to be taxing:

 

  1. Should it be the case you have a property which is rented out, we will require full details of rents received and expenses incurred, for which you have receipts. if you have an Agent collecting the rent for you, they usually provide this. Also, if you have a loan on that property we need a statement from the Mortgage Lender confirming the amount of interest paid on the loan during the 2015/16 tax year i.e. period ending 5th April 2016. If you sell an investment/rental property, please let us know so that we can advise the best course of action.
  2. Land and Property Rental income. Profits from land / property rental businesses are subject to income tax. Expenses incurred wholly and exclusively in connection with the rental business may generally be deducted unless they are capital in nature.

 

  • At the end of the tax year it is good practice to review your records to ensure you are able to evidence property expenditure for tax purposes.

 

  • Finance Bill 2016 intention is to repeal the Wear and Tear Allowance provisions and make new provision for a deduction for the replacement of furnishings. The deduction is available for capital expenditure on furniture, furnishings, appliances (including white goods) and kitchenware, where the expenditure is on a replacement item provided for use in the dwelling. The amount of the deduction is the cost of the new replacement item, limited to the cost of an equivalent item if it represents an improvement on the old item (beyond the reasonable modern equivalent) plus the incidental costs of disposing of the old item or acquiring the replacement less any amounts received on disposal of the old item.
  • The result is from 6th April 2016 (2016/17) the 10% wear & tear allowance is abolished. Where you own a furnished rental property, your expenditure on furnishings will be claiming tax relief on the actual costs of the renewals.

 

  • If you are thinking about purchasing a buy-to-let property, an additional 3% loading on all existing to Stamp Duty Land Tax (SDLT) rates will be payable on second properties and buy-to lets.

 

 

  • Remember – from April 2017, buy-to-let landlords of residential properties will begin to see the phased reduction of tax relief on their finance costs thus significantly increasing the income tax burdens of many. Some landlords may ultimately find it uneconomical to retain their portfolios, particularly in circumstances where portfolios are highly geared. From a tax perspective, there is no “one-size-fits-all” solution to this problem.  Selling part of the portfolio in order to pay down mortgage debt may be a difficult decision – but the most pragmatic step to take.  Exploring the possibility of purchasing new buy-to let properties through companies, and analysing the tax costs of transferring existing properties to companies could also be considered.
  1. If you have a Student Loan and you earn in excess of £15,000 per year, then you will need to make repayments to the Student Loan Company. So that we can complete your tax return correctly we need to know whether you have such a loan outstanding and the amount of any repayments made during the 2015/16 income tax year.
  2. Could you also confirm if you are in receipt of Child Benefit, and the amount per week you receive, as we now need to record this fact on your return? A number of clients have asked us about the advisability of continuing to claim Child Benefit, particularly if you are earning in excess of £50,000, but our advice would be to continue to claim the benefit anyway as, if you need to return any of the benefit, this will be taken into account when we complete your return.

High Income Child Benefit Charge (HICBC) If you, your spouse or civil partner, or common law partner received Child Benefit during 2015/16 and either of you had an income in excess of £50,000 then the higher earner may be liable to pay the HICBC.  Where that person’s income exceeds £60,000 then all of the Child Benefit received may be repayable through Self-Assessment.  Check whether you or your partner is liable to pay the HICBC and include it in the appropriate 2015/16 tax return.

  1. Marriage Tax Allowance – if your partner does not have sufficient income to be liable to pay tax AND you only pay tax at the basic (20%) rate then it is possible for your partner to transfer part of their allowance to you. Unfortunately, we cannot do this for you as your partner is the one who has to make the application, not the tax-payer. This can be done online at https:www.gov.uk/marriage-allowance and you will need both your NI numbers and one of a range of different acceptable forms of ID for the non-taxpayer. If it is not possible to do this via the web, then they can ring the tax office on 0300 200 3300. Please bear in mind that this transfer can only be done between couples who are married or in civil partnership.
  2. If your spouse or civil partner pays tax at lower rates than you, consider whether any income can be transferred to them prior to the end of the tax year. For example, it may be possible to transfer a bank account, unconditionally, into your spouse’s name prior to the interest payment date if this falls before the end of the tax year. If you have children it may be possible to switch income from one spouse to another in this way so that the income of both spouses remains below the £50,000 threshold for the High Income Child Benefit Charge.
  3. The annual allowance on pension savings is currently £40,000 per annum. This is the annual limit on your pension savings without incurring an income tax charge. However due to changes introduced by the government in July 2015 to align pension savings with the tax year, it may be possible to contribute up to £80,000 in the 2015/16 tax year.
  4. The Tax Efficient investments. ISAs for 2015/16 the overall investment limit is £15,240. You may invest in any combination of cash or stocks and shares, provided that the amount invested does not exceed £15,240. There are several tax benefits attached to ISA’s:
  • Dividend and interest income is earned tax free.
  • Where investments are sold within a stocks and shares ISA any capital gains realised are tax free and do not use up your CGT annual exemption.
  • If your spouse or civil partner dies and you inherit their ISA, it will not lose its status and you may continue to enjoy the tax free benefits irrespective of its size.
  • From 6th April 2016 it will be possible to withdraw funds from your ISA and replace them at a later date without the replacement funds counting towards your ISA investment limit for the year, thus increasing the flexibility of ISAs as a savings vehicle.
  • It is possible to transfer your existing ISA from one provider to another without it losing its tax free status.
  • From 6 April 2017, the ISA limit goes up from £15,240 to £20,000.
  • The NEW Lifetime ISA will launch in April 2017 and is designed for first-time buyers and those saving for retirement. Anyone with a Help to Buy ISA will be able to roll it into this new Lifetime ISA.

How will it work?

An eligible adult can save up to £4,000 per tax year and receive a 25% state bonus.

This means that a person saving the full £4,000 in the first year will get an additional state bonus of £1,000.

How old can I be?

Anyone aged 18 to 40 can start a Lifetime ISA (from April 2017). You can pay into it until you’re 50.

 

 

 

 

 

March Budget 2016 Summary

 

Figures at a glance:

  • Corporation tax rate from 1 April 2016 @ 20%
  • 2016/17 personal allowance (PA) is £11,000
  • 2016/17 basic rate (BR) threshold is £32,000
  • 2016/17 higher rate (HR) threshold is £43,000

Key highlights:

  • Restricted relief for corporate interest expense from April 2017 coupled with a reduction in the rate of corporation tax to 17% from April 2020
  • Capital gains tax to be cut 28% to 20% from April 2016, with the exception of gains in respect of residential property and carried interest
  • Changes to the rates and bands applicable for stamp duty land tax on commercial property effective from midnight

Refocusing on capital gains tax (CGT):

One of the themes of the Budget has been to differentiate between gains realised on different categories of assets. Gains made as a result of investing in entrepreneurial business will suffer reduced rates of tax as compared to gains made from pure investment assets. For example, the government is extending entrepreneurs’ relief to outside investors in unlisted trading companies investing in newly issued shares purchased after 16 March 2016.  Provided the shares are held for at least 3 years from 6 April 2016, they will benefit from a 10% rate of tax with a separate lifetime limit of £10 million of gains.

There has been a reduction in the higher rate of capital gains tax (CGT) from 28% to 20%, with the basic rate falling from 18% to 10%, in relation to disposals made on or after 6 April 2016.

Types of property that do not qualify for the reduced CGT rates include residential property, Buy to Lets and ‘carried interest’. Such a move should help to encourage investment, and paradoxically it may also increase tax yields by making tax less of an issue in the context of selling investment assets.

Changes to Dividend Tax 2016/17: (see Company Taxation for the Impact this will have for all Shareholders taking Dividends from a company)

  • From April 2016, notional 10% tax credit on dividends will be abolished
  • A £5,000 tax free dividend allowance will be introduced
  • Dividends above this level will be taxed at 7.5% (basic rate), 32.5% (higher rate), and 38.1% (additional rate)
  • Dividends received by pensions and ISAs will be unaffected
  • Dividend income will be treated as the top band of income.
  • Individuals who are basic rate payers who receive dividends of more than £5,001 will need to complete self-assessment returns from 6 April 2016

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Summer Budget 8th July 2015

Summer Budget 8th July 2015

The Chancellor, George Osborne, opened his Summer 2015 Budget on 8 July 2015 with “A bold budget…with big ambitions”, then followed with “we shouldn’t go faster, we should go slower”. So what are we to make of this bold but slow Budget?

Osborne set out Parliament’s intentions to tackle tax evasion and other tax non-compliance by extending HMRC’s resource; a total of £60m to pursue more criminal investigations into wealthy individuals, those with net wealth between £10m-20m with, the aim of raising £600m in tax, a £300m fund for the non-compliance by small and mid-sized businesses, public bodies and affluent individuals with the aim of raising over £2bn in tax, and a further £36m to take on serious non-compliance by trusts, pension schemes and non-domiciled individuals.

The aim is for there to be nowhere for the tax evader to hide, and the government will require accountants and tax advisers, along with “financial intermediaries”, to notify their clients about the penalties for tax evasion and the various options available for full disclosure of all tax irregularities to HMRC (the Common Reporting Standard).

The agenda on evasion was set a number of years ago – and now HMRC has been given some financial muscle behind the strategy.

In addition to the backdrop of making sure the right amount of tax is paid by all there were changes in tax rules for business and individuals which could affect you, see below for more details.

Please call us if you’d like to talk through any of the Summer Budget announcements.

 

Kind Regards,

Martin Arthur

Accountancy Coop

 

 

 

 

 

Individuals

 

Tax Lock –  there is to be a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and NICs rates, ensuring that they cannot rise above their current (2015-16) levels.

 

Personal allowance increase – an increase the income tax personal allowance from £10,600 in 2015-16 to £11,000 in 2016-17. It will increase to £11,200 from 2017-18.

 

Higher rate threshold increase – an increase in the higher rate threshold from £42,385 in 2015-16 to £43,000 in 2016-17 and to £43,600 in 2017-18.

 

Dividend taxation – the abolition of the Dividend Tax Credit from April 2016 and the introduction a new Dividend Tax Allowance of £5,000 a year.  The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

 

 

 

 

Landlords

 

Reform of the Wear and Tear Allowance – from April 2016, the government will replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets. There will be a technical consultation before the summer.

 

Restricting finance cost relief for landlords – a restriction of the relief on finance costs for individual landlords of residential property to the basic rate of tax. The restriction will be phased in over 4 years, starting from April 2017.

 

Increasing the level of the Rent-a-Room relief – an increase in the level of Rent-a-Room relief from £4,250 to £7,500 from April 2016.

 

 

Business

 

Increasing the employer NIC Employment Allowance – an increase in the annual Employment Allowance from £2,000 to £3,000 from April 2016.

Corporation tax rates – A reduction in the corporation tax rate from 20% to 19% in 2017 and 18% in 2020.

 

Annual Investment Allowance (AIA) – an increase in the permanent level of the AIA from £25,000 to £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.

 

Dividend taxation – the abolition of the Dividend Tax Credit from April 2016 and the introduction of a new Dividend Tax Allowance of £5,000 a year. The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

 

Research and development (R&D) tax credits: universities and charities – the correction of an anomaly in the R&D tax credits legislation so that universities and charities are unable to claim the R&D Expenditure Credit (RDEC), in line with the original intention of the policy. This will apply to expenditure from 1 August 2015.

 

Restriction of corporation tax relief for business goodwill amortisation – the government will restrict the corporation tax relief a company may obtain for the cost of ‘goodwill’ (the reputation and customer relationships associated with a business). This will affect all acquisitions and disposals on or after 8 July 2015.

 

 

Pensions

 

Lifetime Allowance for pension contributions –

a reduction in the Lifetime Allowance for pension contributions from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1 million will be introduced alongside this reduction to ensure the change is not retrospective

 

 

Reduced Annual Allowance for top earners – a restriction in the benefits of pension’s tax relief for those with incomes, including pension contributions, above £150,000 by tapering away their Annual Allowance to a minimum of £10,000. This policy will come into effect from April 2016. And a consultation on whether and how to undertake a wider reform of pensions tax relief.

 

Non- domiciles

 

Eligibility of non-domicile status for UK born individuals – from April 2017, individuals who are born in the UK to parents who are domiciled here, will no longer be able to claim non-domicile status whilst they are resident in the UK.

 

IHT on UK residential property of non-domiciles, including non-domiciles who are not UK resident – new legislation to ensure that, from April 2017, IHT is payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure.

 

IHT and non-domiciles – the government will bring forward the point at which an individual who is classed as a non-domicile is deemed domiciled for inheritance tax purposes to 15 out of 20 years. It will also treat individuals who were born in the UK to parents who are domiciled here, as UK domiciled whilst they are in the UK. This aligns inheritance with the changes to the income tax and capital gains tax regime, taking effect from April 2017.

 

 

 

 

Inheritance tax and Trusts

 

IHT and the main residence nil-rate band – an introduction an additional nil-rate band when a residence is passed on death to direct descendants.  This will be £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21. It will then increase in line with CPI from 2021-22 onwards. Any unused nil-rate band will be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants. This element will be the subject of a technical consultation. There will also be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

 

IHT and the nil-rate band – the inheritance tax nil-rate band is currently frozen at £325,000 until April 2018. The government will continue to freeze the nil-rate band at £325,000 until April 2021.

 

 

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Analysis of the Summer 2015 Budget

Chancellor of the Exchequer George Osborne presented the post-election Summer Budget on July 8 – the first Conservative only ‘red briefcase’ speech since 1996.

 

He described it as a Budget for working people and a continuation of the Government’s aim of creating a ‘higher wage, lower tax and lower welfare’ country. It was crammed full of expected cuts and rises but also contained a good deal of surprises.

 

So what as your accountant and tax advisor, should we make of the Summer Budget of 2015 – basking in the sunshine or nervously awaiting a downpour?

 

As in all Budgets economic aspirations frame and drive the main changes.

 

For this Conservative government these centre around a commitment to keep debt falling as a share of GDP until a budget surplus of 0.4% is reached in 2019-20.

 

To help achieve that the Government has identified £12billion of annual savings from the welfare system, and the debate on whether the mix of benefit cuts combined with rises in personal allowances and changes to the “living” or should that be “enhanced minimum” wage will continue for some time to come. But more pertinently for us accountants, £5billion of increased revenue has also been identified from ‘tackling tax evasion, avoidance, planning and imbalances’ in the tax system.

 

That includes cracking down on tax avoidance from foreign companies in the UK, ensuring that investment fund managers pay full capital gains tax on their carried interest and ‘naming and shaming’ serial users of avoidance schemes.

 

On more prosaic business matters there was a crucial and largely unexpected change on corporation tax with the rate falling from the present 20% to 19% in 2017 and 18% by 2020. This should be a boon to UK firms both large and small.

 

However companies with profits over £20million a year may be less keen to hear that corporation tax payments dates will be brought forward “so tax is paid closer to the point at which profits are earned”.

 

Large firms may also shudder at the prospect of an apprenticeship levy to encourage more youngsters into the workforce and to plug the nation’s skills gaps.

 

Banks will be pleased by a gradual reduction on their bank levy rate but will also have to deal with a new 8% surcharge on bank profits from January 1, 2016.

 

But it is perhaps small businesses who have to be particularly wary of some of the Budget changes.

 

Small and medium-sized firms will be cheered by news that the Annual Investment Allowance will not fall to £25,000 but be set at £200,000 “both this year and every year”.

 

This will surely spur investment.

 

National Insurance contributions will also fall with the Government’s new Employment Allowance increasing by 50% to £3,000 from next year.

 

But owner-managed businesses who take a dividend as their company salary may be hit by the chopping of the Dividend Tax Credit from next April. It is being replaced by a new Dividend Tax Allowance of £5,000 a year with the rates on dividend income above that level set at 7.5% for basic rate taxpayers and 32.5% for higher rate taxpayers.

 

Dividends paid within pensions and ISAs remain tax-free.

 

Businesses will also face extra costs with the introduction of a National Living Wage for workers over 25 of £7.20 by April next year and over £9 by 2020. This could hit SMEs more than their larger rivals.

 

The ICAEW said the Budget would “inevitably mean more regulation and tax law that everyone, including me as your Accountant and tax advisor, will need to cope with. This is from a Government that wants to simplify the tax system and reduce the regulatory burden”.

 

There is sense in that argument but to be fair to the Government it also announced an intention to publish a business tax roadmap by next April outlining plans for business taxes over the rest of the Parliament and that is welcome guidance.

 

The establishment of the Office of Tax Simplification (OTS) on a permanent basis is another positive. It will advise the Government on how to deliver a simpler tax system.

 

The government will also consult in autumn 2015 on abolishing Class 2 NICs and reforming Class 4 NICs.

 

When it comes to individual taxation the Chancellor is committed to ensuring that people keep more of their hard-earned cash in their pockets.

 

As tipped he outlined plans to legislate a tax lock which would set a ceiling for the main rates of income tax, VAT and NIC. In short they will not exceed 2015/16 levels in the life of this Parliament.

 

Further good news for workers came with a planned rise in the tax-free personal allowance from £10,600 to £11,000 next year. This is part of a longer term aim to increase it to £12,500 by 2020 so it is likely that another climb may come next year.

 

The higher rate tax threshold, 40%, also climbs from £42,385 to £43,000 from next year. Again the longer term aim is to have a £50,000 threshold.

 

‘Non-doms’ however were in the Government’s cross-hairs, with those resident in the UK for over 15 of the last 20 years becoming obliged to pay full UK taxes on worldwide income and gains from April 2017.

 

Property also saw significant tax changes. The Government will retain mortgage interest relief for landlords on residential property but this will now be restricted to the basic rate of income tax.

 

However home owners renting out their attics or spare room to a ‘Roger the Lodger’ will be able to earn £7,500 tax-free from them each year.

 

Perhaps more striking were the changes to Inheritance Tax. From 2017 there will be an extra £175,000 inheritance tax allowance for those who leave their homes to their children or grandchildren, on top of the £325,000 standard inheritance tax allowance currently.

 

The threshold and new allowance are both twice as high for married couples and civil partners, meaning they will now be able to inherit up to £1million tax-free from each other.

 

Changes to pension taxation were also significant. Those earning over £150,000 will have their tax-free contributions allowance tapered away from its current £40,000 per year to a minimum of £10,000. The Government is also consulting on a novel ISA-style pension where savers would pay tax on the income they put in but not when they take it out.

 

This was a more complex and varied Budget than expected. Businesses and individuals, circumstances permitting, will welcome many of the changes but certainly for SMEs and owner-managers it may be worth spending more time than usual poring over the details to get a true grasp of the tax and regulatory changes.

 

Well… what else are summer evenings for?!

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The Summer Budget 2015 was surprisingly jam packed of tax and relief changes that will affect businesses

The Summer Budget 2015 was surprisingly jam packed of tax and relief changes that will affect businesses, many in a positive way, however, on some changes the jury is still out. The following is just a brief overview of the main items that I believe will affect SMEs and is not meant to be a full list of changes as some of the full budget is still being disseminated.

 

Overview of the market:

 

The current market overview was presented as positive with GDP growth forecast to be 2.3-2.4% per annum to 2017. One of the government’s favourite phrases was once again used when forecasting a surplus from 2020, that they will be “fixing the roof whilst the sun is shining” and will be building up reserves, however, that is still a long way off in 2020 and much can change in the next 5 years so I won’t be betting on a surplus just yet. Another positive factor was employment, with another buzz phrase of “full employment” mentioned, unemployment has continued to decrease and the Office for Budget Responsibility is forecasting approximately 1 million new jobs during this parliament, however, Mr Osborne has higher ambitions and is aiming for 2 million new jobs.

 

Personal Tax:

 

Lots of interesting changes in this area, with the main areas discussed listed below:

 

Personal Allowances – these will continue to increase each year with the Government aiming to reach £12,500 by the end of the parliament.

 

Higher Rate Thresholds – these are to be increased, however, if you look at the last 5 years figures these have been decreased in many years, which is demonstrated in the table below:

 

40% Threshold

 

2010    £43,875

2011    £43,875

2012    £42,475

2013    £42,475

2014    £41,450

2015    £41,865

2016    £42,385

2017    £43,000

2018    £43,600

 

Dividends – a major overhaul of how dividends are to be taxed has been announced with the abolition of the 10% dividend relief (which most people didn’t understand) and the introduction of a £5,000 tax free amount along with a basic rate of 7.5%. The full detail still needs to be disclosed but it appears that many business owners who are paid via a small salary with dividend mix, are likely to end up paying more tax. Once full details are disclosed full comparisons will be calculated.

 

Pension Relief – As already widely known, the Lifetime allowance will be reduced from £1.25m to £1m from April 2016 and the annual tax deductible allowance is to be gradually tapered to £10,000 per year for those with income over £150,000.

 

Property Letting by Individuals – This area was speculated upon pre-budget, and indeed some relief against mortgage interest is to be reduced for buy-to-let landlords, as the relief is to be for basic rate only from 2020/2021. At the moment it appears to just affect landlords that own properties personally and not via a property company.

 

Non-Doms – This area is to be tightened up, including the change that if anyone resident in the UK for more than 15 of the last 20 years will be UK domiciled from, April 2017.

 

Inheritance Tax – Standard nil rate band to remain at £325,000 (£650,000 per couple) until 2021.

 

Additional nil rate band when residence passed on death to a direct descendant.

 

2017/18 £100,000 2018/19 £125,000 2019/20 £150,000 2020/21 £175,000

 

Will allow a £1m residence to be left inheritance tax free. Relief also applies when property downsized. Phased out for estates exceeding £2m.

 

Vehicle Excise Duty – various changes including increasing the first year rate for many new cars.

 

Business Tax:

 

Corporation Tax – the rate is to continue decreasing from 20%, lowering to 19% in 2017 and 18% in 2020.

 

Employment Allowance – Current £2,000 allowance to increase to £3,000 from 2016 which reduces employer’s national insurance payments. However, allowance will not be available to single director companies whose sole employee is the director.

 

Tax Relief for Capital ExpenditureAnnual Investment Allowance is to be at a permanent limit of £200,000 from 1st January 2016, which gives more predictability for businesses. However, relief from goodwill and other intangible assets is to be abolished from acquisitions from Budget Day.

 

New National Living Wage – To be introduced at £7.20 per hour from April 2016 increasing to £9 per hour for 25s and over from 2020.

 

Conclusion: There are lots of changes for businesses to digest and not all positive. However, on balance many SMEs will certainly welcome the future decrease in corporation tax and the increase in employment allowance.

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Incorporations and goodwill all is not lost as at 3rd December 2014

Before we start please feel free to talk us at the Accountancy Coop before making any decisions regarding incorporation.

Entrepreneurs’ relief is no longer available on the incorporation of many businesses, but HMRC’s attitude to trade-related properties leaves the door ajar for some…

In recent years, a large number of businesses (particularly professional practices) have incorporated, giving them the opportunity to retain profits at corporation tax rates rather than paying up to 60% income tax on funds that have been retained in the business. But, the Autumn Statement included new rules to remove the ‘unfair tax advantage’ enjoyed by entrepreneurs when they incorporate.

How it was…

A sole trader or a partnership could formerly sell the business to a company and claim entrepreneurs’ relief (ER) on the disposal of goodwill and other chargeable assets. Subject to the payment of 10% capital gains tax (CGT), the resulting loan account could then be drawn down over a number of years without any further personal tax liabilities. As a result, the company would acquire goodwill and, to the extent this goodwill was created or acquired by the individual or partnership on or after 1 April 2002, it could, and can continue to, claim corporation tax relief for the goodwill, usually as it is amortised in the accounts.

 

But now…

The Government has apparently decided that the combination of ER for the founder and tax relief for the successor company smacks of tax avoidance. With effect from 3 December 2014, if you sell goodwill to a close company with which you are related, you cannot claim ER and will have to pay CGT at normal rates on it. Furthermore, the company will not be able to claim corporation tax relief on such goodwill acquired on or after that date.

But what is goodwill? Essentially, it is an accounting concept and may generally be defined as the excess of the value of an entire business as a going concern over the fair value of its net assets. So whilst it may no longer be permissible for professional practices (or any other business where the assets go home at night) to incorporate and claim ER, what about businesses with valuable net assets?

Until now, the received wisdom when considering apportionment of the price paid on a business purchase was to value tangible assets such as real estate at the lower end of the range of supportable valuations and hence increase the value of goodwill (thereby saving stamp duty land tax and increasing the subsequent corporation tax relief for goodwill amortisation). Following the Autumn Statement, proper consideration should now be given to property valuations, to recognise the contribution that each asset makes to the value of the business.

HMRC’s own view of goodwill in connection with trade-related properties changed in 2002 (funnily enough, when corporation tax relief for purchased goodwill was introduced). Its 2013 guidance notes on apportioning the price paid for a business transferred as a going concern concludes that some types of goodwill “are not really goodwill at all”, as they inherently form part of the value of the trade-related property and should be reflected in the property valuation.

The hotel, pub, restaurant, care home or petrol filling station from which a successful business trades must therefore have some inherent ‘goodwill’ of its own and the trading potential that each asset has must be recognised. Indeed, this is reflected in the guidance notes issued by the Royal Institute of Chartered Surveyors, whose methodology can result in values for buildings that leave little or nothing left to attribute to business goodwill.

It follows that, in many circumstances, it could still be attractive to incorporate a business by selling all the trade-related properties to the company at the Red Book existing-use value and claiming ER. Just remember to sell the actual goodwill for £1 (and claim hold-over relief).

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David reports from India

David reports from India

Much of the charity work here involves the ‘gypsy families’ known as ‘Lamanis’ in India, of which there are over 6 million, 2.25 million of whom live in Karnataka but many travel to Goa to find work and income to support their children.  It is a sad fact that the Lamani husband seems to disappear from view after one year of marriage, leaving the Mother to do everything for the children.

These Mothers get a half day off each week, but we managed to extend this to one day on Sunday 15 February 2015.  Utilising the donation from Accountancy Coop to fund part of the costs, a 35 seater coach was hired for that day to take the Mothers and the tiny children to a beautiful location named Agonda in South Goa.

As it was the day after Valentine’s Day, each Mother wore a red rose in her hair. Chicken biryani (the favorite), drinks, fruit, chocolate and ice creams were part of this wonderful day out…intended to show these Mothers how they deserve to, and should be, treated.

A reflection Lone Mother known to me for nearly 5 years was seen skipping along the beach, hand in hand, with her friend when ever seen her act with such joy, I was told her husband did not want to see her laughing and joking. That just about says it all…and why this fight to support the girl child and Mothers of India will go on.

 

I remarked that I had nCoop Generosity in India 1 Coop Generosity in India 2 Coop Generosity in India 3 Coop Generosity in India 4 Coop Generosity in India 5

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Some changes to be aware of for 2014 /15 – Class 2 NICS and SEE

Some changes to be aware of for 2014 /15

 

Class 2 National Insurance contributions (NICs) are becoming an annual charge for the majority of those who are self-employed for the 2015-16 tax year onwards.  As a result Class 2 liability will not be determined until the Self-Assessment return is filed.

Small Earnings Exception (SEE) Certificates – renewals and applications

The current SEE arrangements will no longer apply from 12 April 2015. In February 2015 HMRC wrote to all those who currently hold a SEE certificate to advise them of these changes.

As a result there is now no need to renew or apply for a SEE. All existing SEE certificates will cease to be valid from 11 April 2015.

Liability for Class 2 NICs will now be determined by the level of profits declared when a person files their Self-Assessment return.  If the level of profits doesn’t reach a Small Profits Threshold no Class 2 NICs will be due.

However, those below the threshold may pay Class 2 NICs voluntarily to protect their entitlement to certain benefits and State Pension as is the case now.

Class 2 NICs payments for 2014-15 tax year

Class 2 payment requests will be issued as normal in April 2015 to collect all Class 2 NICs to the end of the 2014-15 tax year.

Class 2 payments by Direct Debit

Direct Debits for the majority of self-employed persons will stop after collections have been made for the 2014-15 tax year. The last collection for the 2014-15 tax year will be made on 10 July 2015 since Direct Debits for Class 2 NICs are collected 4 months in arrears.

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Are you ready for Auto-Enrolment because The Pension Regulator is?

Are you ready for Auto-Enrolment because The Pension Regulator is?

Auto Enrolment commenced roll-out in 2012 and is not going away. If you employ staff now or plan to in the future you have new legal duties which including provide a workplace pension for your staff. The law on workplace pensions has changed: This is called Automatic Enrolment. It’s called this because it’s automatic for your staff – they don’t have to do anything to be enrolled into your pension scheme. But it’s not automatic for you. You need to take steps find the right scheme for your business and to make sure your staff are enrolled by specific deadlines. You will be expected to make contributions in to this workplace pension scheme and so will your staff. If you fail to comply with this law you will be in breech and liable to be fined. There are no exceptions to the rules.

 

Even if you have staff which do not met the pension rules requirements you are still legally obliged to maintain records proving you have complied with the workplace pension scheme process and these records must be retained for a minimum of 6 years. You should be planning up to 12 months ahead of your “Staging Date” for this major pension law change. You cannot just ignore this because The Pension Regulator will not.  All this will cost you valuable time and money to get it right. All indications are that businesses need good professional support to remain within the law both now and going forward in to the future.

 

Talk to us today Auto Enrolment is not going away. Please read the enclosed leaflet for further information. Suzie and Sara will be contacting you very soon to explain Auto –Enrolment and what you as employees need to do to comply with the new regulations.

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Autumn Statement 2014 & Budget 2015 (Key Points)

Autumn Statement 2014 & Budget 2015 (Key Points)

1 Income Tax personal allowance in 2016-17 and 2017-18

The government will increase the Income Tax personal allowance to £10,800 in 2016-17 and £11,000 in 2017-18. In 2016-17 the basic rate limit will be £31,900 meaning that the higher rate threshold above which individuals pay income tax at 40% will be increased to £42,700. In 2017-18 the higher rate threshold will be £43,300. The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold.

2 Income Tax personal allowance in 2015-16

As announced at Autumn Statement 2014, the government will increase the Income Tax personal allowance to £10,600 from April 2015. The basic rate limit will be £31,785 so the higher rate threshold above which individuals pay Income Tax at 40% will be increased to £42,385. The National Insurance upper earnings and upper profits limits will increase to stay in line with the higher rate threshold. The basic, higher and additional rates of Income Tax for 2015-16 will remain at their 2014-15 levels.

3 Income Tax: extending averaging period for farmers

The government will extend the period over which self-employed farmers can average their profits for Income Tax purposes from 2 years to 5 years. The government will engage with stakeholders later in the year on the detailed design and implementation of the extension. This measure will come into effect from April 2016.

4 Blind person’s allowance, married couple’s allowance and income limit for 2015-16

As announced at Autumn Statement 2014, the government will increase the blind person’s allowance, married couple’s allowance and the income limit by amounts equivalent to the Retail Prices Index (RPI) in 2015-16.

5 Non domiciles: increasing the remittance basis charge

As announced at Autumn Statement 2014, legislation will be introduced in Finance Bill 2015 making changes to the charges paid by non-domiciled individuals resident in the UK who wish to claim the remittance basis of taxation. From April 2015, a new annual charge of £90,000 will be introduced for individuals who have been resident in the UK in at least 17 of the last 20 years, and the charge paid by individuals who have been resident in the UK in at least 12 of the last 14 years will increase from £50,000 to £60,000.

6 Class 2 National Insurance contributions (NICs)

As part of the planned reforms to tax administration, the government will abolish Class

7 Help to Buy: ISA

The scheme will provide a government bonus to each person who has saved into a Help to Buy: ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum of £3,000 on £12,000 of savings. Further details are provided in the document “Help to Buy: ISA” which is published alongside the Budget.

8 A new Personal Savings Allowance

The government will introduce an allowance from 6 April 2016 to remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate taxpayers. Additional rate taxpayers will not receive an allowance. As part of these reforms, HM Revenue and Customs (HMRC) will introduce automated coding out of savings income that remains taxable through the Pay As You Earn system from 2017-18, with pilots starting in autumn 2015.

9 Lifetime Allowance for pension contributions

The government will reduce the Lifetime Allowance for pension contributions from £1.25 million to £1 million from 6 April 2016. Transitional protection for pension rights already over £1m will be introduced alongside this reduction to ensure the change is not retrospective. The Lifetime Allowance will be indexed annually in line with CPI from 6 April 2018.

10 IHT Deeds of variation

The government will review the use of deeds of variation for tax purposes.

11 Inheritance Tax changes to support the new digital service

As announced at Autumn Statement 2014, the government will make minor changes to legislation dealing with interest to support the introduction of the new Inheritance Tax (IHT) digital service announced in Autumn Statement 2013.

12 Capital Gains Tax entrepreneurs’ relief: contrived structures

– Joint Ventures and Partnerships

– Associated Disposal Rules

The government will deny entrepreneurs’ relief (ER) on the disposal of shares in a company that is not a trading company in its own right. The government will also prevent individuals from claiming ER on the disposal of personal assets used in a business carried on by a company or a partnership, unless they are disposed of in connection with a disposal of at least a 5% shareholding in the company, or a 5% share in the partnership assets. This affects disposals on or after 18 March 2015.

13 Capital Gains Tax entrepreneurs’ relief:

Restricting unfair tax advantages on incorporation

As announced at Autumn Statement 2014, the government has prevented individuals from claiming ER on disposals of the reputation and customer relationships associated with a business (‘goodwill’) when they transfer the business to a related close company. This affects transfers on or after 3 December 2014.

14 Capital Gains Tax entrepreneurs’ relief: deferral

As announced at Autumn Statement 2014, the government has allowed gains which are eligible for ER, but which are instead deferred into investments which qualify for the EIS or SITR, to remain eligible for ER when the gain is realised. This benefits qualifying gains on disposals that would be eligible for ER on or after 3 December 2014 that are deferred into EIS and SITR.

15 Capital Gains Tax for non-UK residents disposing of UK residential property

Following consultation the government has confirmed that from 6 April 2015 non-UK resident

individuals, trusts, personal representatives and narrowly controlled companies will be subject to Capital Gains Tax (CGT) on gains accruing on the disposal of UK residential property on or after that date. Non-resident individuals will be subject to tax at the same rates as UK taxpayers (28% or 18% on gains above the annual exempt amount). Non-resident companies will be subject to tax at the same rates as UK corporates (20%) and will have access to an indexation allowance. Full details were set out in the response document ‘Implementing a capital gains tax charge on non-residents – summary of responses’, published on 27 November 2014.

16 Capital Gains Tax:

Private residence relief (PRR) on properties located in other jurisdictions

The government will restrict access to PRR in circumstances where a property is located in a

jurisdiction in which a taxpayer is not tax resident. In those circumstances, the property will only be capable of being regarded as the person’s only or main residence for PRR purposes for a tax year where the person meets a 90-day test for time spent in the property over the year.

17 Capital Gains Tax: Annual Tax on Enveloped Dwellings (ATED)

As announced at Budget 2014, the government will extend the related CGT charge on disposals of properties liable to ATED with effect from 6 April 2015 to residential properties worth over £1 million and up to £2 million and with effect from 6 April 2016 to residential properties worth over £500,000 and up to £1 million.

18 Capital Gains Tax: wasting assets

The government will clarify that the CGT exemption for wasting assets only applies if the person selling the asset has used it in their own business. These changes have effect from 1 April 2015 for Corporation Tax on chargeable gains, and 6 April 2015 for CGT.

19 Corporation Tax rate

The government will legislate to set the rate of Corporation Tax at 20% for the financial year beginning on 1 April 2016.

20 Corporation Tax: restricting relief for goodwill

As announced at Autumn Statement 2014, the government will restrict the Corporation Tax relief a company may obtain for the acquisition of the reputation and customer relationships associated with a business (‘goodwill’), including customer information, when the business is acquired from a related individual or partnership. This will affect acquisitions on or after 3 December 2014.

21 Research & Development (R&D) tax credits: rates

As announced at Autumn Statement 2014, the government will increase the rate of the above the line credit from 10% to 11% and will increase the rate of the SME scheme from 225% to 230%, from 1 April 2015.

22 R&D tax credits: access

Following a consultation on improving access to R&D tax credits for smaller companies, the

government will introduce voluntary advanced assurances lasting 3 years for smaller businesses making a first claim from autumn 2015 and reduce the time taken to process a claim from 2016. The government will produce new standalone guidance aimed specifically at smaller companies, backed by a 2-year publicity strategy to raise awareness of R&D tax credits. HMRC will publish a document in the summer setting out a roadmap for further improvements to the scheme over the next 2 years.

23 Repeal of the late paid interest rules

As part of the review of the legislation on corporate debt announced at Budget 2013, the government will repeal rules concerning loans made to UK companies by a connected company in a non-qualifying territory.

24 VAT registration and deregistration thresholds

From 1 April 2015 the VAT registration threshold will be increased from £81,000 to £82,000 and the deregistration threshold from £79,000 to £80,000.

25 Deductible VAT relating to foreign branches

The government will no longer allow businesses to take account of foreign branches when calculating how much VAT on overhead costs they can reclaim in the United Kingdom. This measure will affect partly exempt businesses and they will have to implement the change from the beginning of their next partial exemption tax year falling on or after 1 August 2015.

26 Company Car Tax rates for 2019-20

The appropriate percentage of list price subject to tax will increase by 3 percentage points for cars emitting more than 75 grams of carbon dioxide per kilometre (gCO2/km), to a maximum of 37%, in 2019-20. There will be a 3 percentage point differential between the 0-50 and 51-75 gCO2/km bands and between the 51- 75 and 76-94 gCO2/km bands.

27 Company Car Tax rates for 2017-18 and 2018-19

As announced at Budget 2014, the appropriate percentage of list price subject to tax will increase by 2 percentage points for cars emitting more than 75 gCO2/km, to a maximum of 37%, in both 2017-18 and 2018-19. In 2017-18 there will be a 4 percentage point differential between the 0-50 and 51-75 gCO2/ km bands and between the 51-75 and 76-94 gCO2/km bands. In 2018-19 this differential will reduce to 3 percentage points.

28 Fuel Benefit Charge

From 6 April 2016 the Fuel Benefit Charge multiplier for both cars and vans will increase by RPI.

29 Van Benefit Charge

From 6 April 2016 the main Van Benefit Charge (VBC) will increase by RPI. As announced at Budget 2014, the government will extend VBC support for zero emission vans to 5 April 2020 on a tapered basis.

30 Making tax easier: the end of the tax return

The government will transform the tax system over the next Parliament by introducing digital tax accounts to remove the need for individuals and small businesses to do annual tax returns. Further details on the policy and administrative changes needed to deliver this will be published later in 2015.

31 Making tax easier: new payments process

The government will consult over the summer on a new payment process to enable tax and NICs to be collected through digital accounts, instead of self-assessment.

32 Simplification of employee benefits and expenses

As announced at Autumn Statement 2014, the government will simplify the administration of employee benefits and expenses. From April 2015 the government will provide a statutory exemption for trivial benefits in kind costing less than £50. Following technical consultation, an annual cap of £300 will also be introduced for office holders of close companies and employees who are family members of those office holders. From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion. It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling. The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice.

33 Simplified expenses: legislative amendments

The government will amend the simplified expenses regime introduced in Finance Act 2013 to ensure that partnerships can fully access the provisions in respect of the use of a home and where business premises are also a home.

34 Government response to the OTS review of tax penalties

In response to the OTS review of tax penalties, the government is consulting about changing the way in which penalties are applied. The current consultation will close on 11 May 2015.

35 Review of loan relationships and derivative contracts legislation

Following the review announced at Budget 2013, the government will make wide-ranging changes to update, simplify and rationalise the legislation on corporate debt and derivative contracts. These will include a clearer and stronger link between commercial accounting profits and taxation, basing taxable amounts on items of accounting profit or loss. It will also include introduction of a new relief for companies in financial distress and new rules to protect the regime against tax avoidance.

36 Simplifying the ATED administrative burden

As announced at Autumn Statement 2014, the government will introduce changes to the filing

obligations and information requirements with respect to properties within the ATED that are eligible for a relief. These changes will take effect from 1 April 2015.

37 Closing the Liechtenstein Disclosure Facility early

In advance of a new disclosure opportunity, the existing Liechtenstein Disclosure Facility will close at the end of 2015, instead of April 2016

38 Closing the Crown Dependencies Disclosure Facilities early

In advance of a new disclosure opportunity, the existing Crown Dependencies Disclosure Facilities will close at the end of 2015, instead of September 2016.

39 Serial Avoiders

The government will introduce legislation for tougher measures for those who persistently enter into tax avoidance schemes which fail (serial avoiders), including a special reporting requirement and a surcharge on those whose latest tax return is inaccurate as a result of a further failed avoidance scheme. The government will also look to restrict access to reliefs for the minority who have a record of trying to abuse them through avoidance schemes that don’t work and intends to develop further measures to name those who continue to use schemes that fail. Legislation will be introduced in due course that will widen the current scope of the Promoters of Tax Avoidance Schemes regime by bringing in promoters whose schemes regularly fail.

40 Capital Allowances

As announced on 26 February 2015, the government will introduce legislation, with effect from

26 February 2015, to clarify the effect of capital allowances anti-avoidance rules where there are transactions between connected parties or sale and leaseback transaction.

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