Archive for November, 2015

Autumn Statement 25 November 2015

Thursday, November 26th, 2015

Announcements for businesses

Support for smaller businesses

The Chancellor reported that the UK’s small and medium sized enterprises now employ 15.6 million people, up from 13.7 million in 2010. Over the last two years the number of small businesses employing someone other than the owner has grown by 100,000.

The government understands that small businesses need tailored support. Already, Start-Up Loans have provided £180 million of funding to 33,600 entrepreneurs and in the last Parliament, the government cut the cumulative burden of regulation by over £10 billion.

Other support for smaller businesses that have previously been announced include:

  • From April 2016 the Employment Allowance will rise to £3,000, benefiting over 1 million employers, and helping many businesses take on their first employee.
  • The cancellation of the planned September 2015 fuel duty increase means a small business with a van will have saved £1,357 by the end of 2015-16 compared to plans inherited by the government at the start of the last Parliament.
  • The government will meet its commitment to 75,000 Start-Up Loans by the end of this Parliament.

Apprenticeship levy

Earlier this year it was announced that three million new apprenticeships would be created by 2020. To fund this target a levy is to be made on large employers.

The details of this levy have now been quantified.

The apprenticeship levy will commence in April 2017 at a rate of 0.5% of the employers’ pay bill. To exclude smaller employers a £15,000 allowance can be claimed. In this way only employers with a pay bill in excess of £3 million will contribute to the levy.

In some cases this levy may cancel out the intended reductions in Corporation Tax for larger employers.

Small business rate relief

English firms can claim the small business rates relief if they only use one property and its rateable value is less than £12,000. This relief was due to end on 31 March 2016.

The Chancellor has announced today that the relief will be extended for a further year. Businesses will now get 100% relief until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.

The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.

Car benefit diesel supplement

The 3% supplement added to the benefit in kind charge for drivers of diesel powered company cars is to continue beyond April 2016 and will now cease to apply from April 2021.

Announcements for home owners

London help to buy loan scheme

The present help to buy loan scheme that applies across the UK, provides a 20% contribution from government, requires a 5% deposit from the buyer, with the balance funded by a 75% mortgage.

As house prices are running at much higher levels in London, from early 2016 qualifying buyers in London will still need to find a 5% deposit, but government will contribute up to 40% with the required mortgage funding dropped to 55%.

These government equity loans will now be available until 2021.

Help to buy shared ownership scheme to be extended

Shared ownership allows families in England, on lower incomes, to buy an interest in their home and rent the rest. People can buy between 25% and 75% of a home in this way.

The rent charge won’t be more than 3% of the non-purchased part of the property.

The qualifying income limits are to be changed. Current restrictions will be lifted from April 2016. Anyone who has a household income of less than £80,000 outside London, or less than £90,000 inside London, will be able to participate.

First time buyers’ starter homes discount

200,000 new homes are to be designated Starter Homes and developers will be able to offer them to first time buyers aged under 40 at a 20% discount.

Stamp duty increase for second homes and buy-to-lets

From 1 April 2016, individuals buying a second home or a buy-to-let property will face an extra 3% stamp duty charge above the current stamp duty land tax rates.

Housing Association tenants

Rights to buy to be extended to Housing Association tenants during 2016. Potentially, this could give 1.3 million households the opportunity to buy their own home.

Capital Gains Tax (CGT) on sale of residential property

From 2019, the government intends to require a payment on account, within 30 days of a sale, of any CGT due on the disposal of a residential property.

This will not apply where no CGT is payable, for example if covered by Private Residence Relief.


Announcements for individuals

Tax credits

As announced in the introduction to this statement the intended reduction in tax credits next year has been withdrawn. For 2016-17:

  • The rate at which a claimant’s award is reduced over the income threshold, will remain at 41% of gross income.
  • The income threshold will remain at £6,420.
  • The income threshold for child tax only claimants will remain at £16,105.
  • The income disregard will reduce from £5,000 to £2,500.

As the other elements that make up the payment of tax credits are also unchanged claimants should find their benefits from this source unchanged from April 2016, unless their personal circumstances or income levels have changed.

The Chancellor did comment that tax credits are being phased out in any event and replaced by universal credits.

Basic state pension increase announced

From April 2016, the basic weekly state pension will increase to £119.30, an increase of £3.35.

Part-time rail season tickets and money back…

Two new features to be introduced:

  1. Commuters will be able to buy part-time season tickets on selected routes, and
  2. Commuters will be able to claim money back if a train is more than 15 minutes late.

VAT raised on sales of women’s sanitary products

The UK is unable to zero rate VAT on these products under existing EU rules. Whilst representations are being made the Chancellor is to redirect the VAT revenue raised to selected women’s charities.

George Osborne said:

“300,000 people have signed a petition arguing that no VAT should be charged on sanitary products. We already charge the lowest 5% rate allowable under European law and we’re committed to getting the EU rules changed.

Until that happens, I’m going to use the £15 million a year raised from the Tampon Tax to fund women’s health and support charities. The first £5 million will be distributed between the Eve Appeal, SafeLives, Women’s Aid, and The Haven – and I invite bids from other such good causes.”

Warm home discount scheme extended

The present £140 discount from electricity bills for certain low income households is to be extended and can be claimed from suppliers to 2020-21.

Minor whiplash claims to be curtailed

In an attempt to curtail exaggerated whiplash claims the government is ending the right to claim cash compensation.

More injuries will be able to go to the small claims court as the upper limit is to be increased from £1,000 to £5,000.

This may reduce the cost of insurance for motorists – estimated falls of £40 to £50 a year can be expected.

Business tax changes confirmed

Monday, November 23rd, 2015

The Summer Budget changes formally completed their progress through the legislative process and received royal assent on 18 November 2015.

We have summarised in this posting the main changes to business tax that are now enacted:

  1. Corporation tax rates will be reduced to 19% from 1 April 2017 and 18% from 1 April 2020.
  2. A new clause, not included in the Summer Budget, was added to the finance act. Any restitution interest paid by HMRC after 21 October 2015 will be taxable at a special 45% tax rate. No reliefs, such as losses, can be set off against this tax. It is likely that this new tax charge will be challenged in the courts.
  3. Tax relief is no longer available for the amortisation of goodwill acquired or created by a company on or after 8 July 2015.
  4. The annual investment allowance has been set at a new permanent level of £200,000. This new limit will apply from 1 January 2016.

Business tax measures that were not in the act, but will likely be introduced in future finance bills include:

  1. Large businesses will be required to publish their tax strategy and a voluntary code of practice will be introduced setting the standards that need to be observed.
  2. Larger companies, turnover in excess of £20m, will be required to speed up the payment of their corporation tax. Payment will need to be made in the third, sixth, ninth and twelfth months of their accounting period. Legislation is expected to introduce this change for all accounting periods starting after 1 April 2017.

Finally, there are a number of measures that were included in the summer finance bill that have been withdrawn and are now subject to consultation. They are:

  1. The abolition of the £8,500 threshold for benefits in kind.
  2. The introduction of a payrolling facility so employers can report and pay tax from benefits in real time.
  3. The replacement of the benefits in kind dispensation with an exemption for certain expenses.
  4. HMRC is also exploring changes to the IR35 legislation to make it more effective from the exchequer’s point of view.

This week, 25 November, George Osborne will be outlining his plans in the autumn statement.

New tax free child care scheme

Thursday, November 19th, 2015

 A reminder that delays created by legal action to block this new scheme mean that it will not be rolled out until early 2017, a year later than planned.

A top ten summary of the benefits of the new scheme are reproduced below:

1. You’ll be able to open an online account

You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK. Tax-Free Childcare will be launched from early 2017.

2. For every 80p you or someone else pays in, the government will top up an extra 20p

This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

3. The scheme will be available for children up to the age of 12

It will also be available for children with disabilities up to the age of 17, as their childcare costs can stay high throughout their teenage years.

4. To qualify, parents will have to be in work, earning just over an average of £50 a week and not more than £150,000 per year

The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.

5. Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it

Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.

6. The scheme will also be available for parents who are self-employed

Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level.

The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. If you currently receive Employer-Supported Childcare then you can continue to do so

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. Parents won’t be able to register for Employer-Supported Childcare after Tax-Free Childcare is introduced, but those already registered by this date will be able to continue using it for as long as their employer offers it. However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

8. Parents and others can pay money into their childcare account as and when they like

This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.

It’s also not just the parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

9. The process will be as simple as possible for parents

The process will be light-touch and as easy as possible for you. For example, you’ll re-confirm your circumstances every three months via a simple online process; and there will be a simple log-in service where parents can view accounts for all of their children at once.

10. You’ll be able to withdraw money from the account if you want to

If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.

Rent hikes likely as landlords come to grips with tax changes

Tuesday, November 17th, 2015

Over the next few years changes announced by George Osborne in the Summer Budget 2015 may have profound effects on the level of rents and the availability of rental accommodation in the UK.

 From April 2017, landlords will see an increase in their annual tax bills. The increase may be significant in some cases.

 Why should we be concerned?

Many landlords are content to break even initially – rents received equal outgoings including mortgage repayments – the idea being that they benefit from rising property values, and an increasing cash surplus as mortgages as paid down. Any increase in their tax may mean that their annual outgoings exceed their rents received.

 So what is changing?

From April 2017, the government has declared its intention to deny private landlords higher rate tax relief on their finance costs to purchase residential property for letting. Instead of claiming tax relief at 40% or 45% on mortgage and other finance costs they will be restricted to a basic rate tax credit of 20%.

The change may not sound that punitive but many landlords who presently pay tax at the basic rate on all their income may suddenly find themselves higher rate tax payers with no change in income and outgoings.

This is because the largest expense for landlords with hefty mortgages is mortgage interest. Increasingly, from April 2017, this deduction will be disallowed in favour of the basic rate tax credit. Consequently, on paper at least, their profits will increase. Once the income (before mortgage interest) exceeds the basic rate tax band higher rate taxes at 40% will kick in.

 From a cash flow point of view this will leave many landlords with an unpalatable choice: increase rents or sell their buy-to-let property.”

If this analysis is correct, neither option for landlords will be good news for tenants. Whilst an increase in properties to the private sector may be desirable many let properties are still beyond the reach of many first time buyers. And who wants to pay more rent?

Dividend Tax changes April 2016

Monday, November 16th, 2015

 It was bound to happen some time…

At present there are considerable savings in National Insurance contributions to be made if a minimal amount is paid as salary and any balance of a remuneration package is paid as dividends (particularly for shareholder directors of private limited companies).

From April 2016, the NIC status of dividends is not changing and therefore this strategy is still valid. Unfortunately, the income tax position of dividend income is changing and this may have a direct impact on the overall savings in NIC and income tax that can be achieved.

 What’s changing?

From 6 April 2016, the way dividends are being taxed will change. The 10% tax credit is being abolished and each individual will have available a flat rate dividend allowance of £5,000. Any dividends received by an individual in excess of £5,000 will be taxed as follows:

  • 7.5% if your dividend income is within the standard rate (20%) band
  • 32.5% if your dividend income is within the higher rate (40%) band, and
  • 38.1% if your dividend income is within the additional rate (45%) band

 Without the tax credit, a dividend income of £30,000 received in 2016-17 would create the following, additional income tax liabilities.

 Comparison of tax payable on dividend income of £30,000:

 

 

Income tax due if dividend received  is £30,000

2015-16

2016-17

Dividend is within the standard rate band

Nil

£1,875

Dividend is within the higher rate band

£7,500

£8,125

Dividend is within the additional rate band

£9,167

£9,525

 Based on these figures:

  • if your dividend income is within the standard rate band you would have extra tax to pay for 2016-17 of £1,875;
  • if your dividend income is within the higher rate band you would have extra tax to pay for 2016-17 of £625, and
  • if your dividend income is within the additional rate band you would have extra tax to pay for 2016-17 of £358.

As you can see, this new tax on dividends will impact standard rate tax payers the most. In all cases any tax liabilities for 2016-17 will be collected 31 January 2018. At the same time, HMRC will also add 50% of the tax liability to your first self assessment payment on account for 2017-18, also due 31 January 2018 with a further 50% due at the end of July 2018.

We advise all readers to take professional advice to see how these changes will affect their personal tax for 2016-17. You will not need to pay addition tax due until 31 January 2018, but there may be planning options that could be employed to lessen the blow.

Emails from the tax office

Friday, November 13th, 2015

Generally speaking, HMRC will communicate with you by sending a letter or calling you. It will never ask for personal details by email. Accordingly, you can disregard any emails you receive from HMRC that do ask for personal information, particularly bank details, as they will likely be scams…

However, HMRC is starting to send out more information by email. In particular:

Employer Bulletin 56 – email

HMRC sends informational emails several times a year to employers who have registered to receive them. These emails never ask you to provide personal or financial information.

The latest batch of emails issued by HMRC was sent 14 October 2015. The emails are titled ‘Important information for employers’ and refer to Employer Bulletin 56. The emails include links which direct recipients to pages on the HMRC website, including advice about online security.

PAYE notices and reminders

If you’ve set up email reminders and notifications using one of the options available in HMRC’s PAYE Online Service you’ll automatically get sent an email when there’s something new for you to view.

HMRC has also started to send electronic reminders if you don’t send your payroll submissions on time, or you’re late making payments to HMRC.

You may also receive email warning notices if HMRC hold records for you, and where you have yet to submit any PAYE reports to HMRC in real time. These messages will inform the employer that they need to act now to avoid incurring penalties, and they should either advise HMRC if they no longer employ anyone, or start reporting in real time.

VAT emails

 VAT Returns – email reminders

HMRC will send an email to customers to remind them when their VAT return is due if they have registered to receive email reminders. The emails are entitled ‘Reminder to file your VAT Return’ and contain links to a further information page and a link to the sign in page on GOV.UK. These emails will never ask you to provide personal or financial information.

VAT Registration – email

HMRC will send an email to customers who have registered for VAT using HMRC online services. HMRC will use the email address customers have provided to advise that they need to log into their online tax account in order to view a message in the secure messaging area. These emails will never ask you to provide personal or financial information.

Appeal against HMRC penalties

Friday, November 6th, 2015

 You can appeal to HMRC against a penalty for:

  • Late filing of a return
  • Paying tax after the due date
  • Failing to pay all the tax you owe
  • Unable to demonstrate that you have kept adequate records to underpin your tax returns
  • Filing an incorrect return

Your penalty will be cancelled or amended if you have a reasonable excuse.

The latest definitions of what does, and what does not constitute a reasonable excuse are set out below.

What counts as a reasonable excuse

A reasonable excuse is normally something unexpected or outside your control that stopped you meeting a tax obligation, for example:

  • your partner died shortly before the tax return or payment deadline
  • you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
  • your computer or software failed just before or while you were preparing your online return
  • service issues with HM Revenue and Customs (HMRC) online services
  • a fire prevented you from completing your tax return
  • postal delays that you couldn’t have predicted

You must try to send your return or payment as soon as possible after your reasonable excuse is resolved.

What’s unlikely to be a reasonable excuse

The following aren’t usually accepted as a reasonable excuse:

  • you relied on someone else to send your return and they didn’t
  • your cheque bounced or payment failed because you didn’t have enough money
  • you found the HMRC online system too difficult to use
  • you didn’t get a reminder from HMRC

If you have a disability

If you have a disability and claim to have a reasonable excuse that prevented you from meeting a deadline, HMRC will consider whether you made a reasonable effort to meet your obligation on time.

R & D boost for smaller businesses

Wednesday, November 4th, 2015

In a major boost for pioneering small businesses, the Financial Secretary to the Treasury, David Gauke, recently launched a new plan outlining how government will make it easier for small businesses investing in research and development to claim tax relief.

The two-year plan, which is a response to an HMRC consultation, aims to increase take-up of research and development (R&D) tax relief through raising awareness of the relief amongst small businesses and making it easier for them to apply.

The tax relief, which encourages companies to invest in costly new product development, helps companies reduce the amount of corporation tax they pay on profits by offsetting them against any investment in research and development. Latest statistics for 2013-14 show more than 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but the government wants to go further.

Financial Secretary to the Treasury David Gauke said:

R&D is crucial for the long-term growth of the UK economy. Over 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but we need to go further to support pioneering small businesses.

That’s why we’ve published a document setting out our plans to increase awareness and make it easier for people to apply.

The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief’, was published 28 October 2015 and sets out that:

  • From November, small companies – with a turnover under £2 million and fewer than 50 employees – will be able to seek advance assurance on R&D tax relief. This will give them greater certainty and enable them to plan their finances effectively.
  • HMRC will explore ways to improve its communication around R&D tax relief, including looking at ways to use data and work with other government agencies to identify companies that have carried out R&D but have not claimed relief.
  • Interactive guidance will be developed with stakeholder involvement

HMRC evaluation shows that each £1 of tax foregone by R&D tax relief stimulates between £1.53 and £2.35 of additional R&D investment. SME R&D relief works by way of super deduction, allowing companies to reduce profits liable to corporation tax by 230 per cent of their qualifying R&D expenditure. In 2013-14, businesses received £1.75 billion in R&D tax relief, an increase of almost £750 million since 2009-10.

R & D boost for smaller businesses

Wednesday, November 4th, 2015

In a major boost for pioneering small businesses, the Financial Secretary to the Treasury, David Gauke, recently launched a new plan outlining how government will make it easier for small businesses investing in research and development to claim tax relief.

The two-year plan, which is a response to an HMRC consultation, aims to increase take-up of research and development (R&D) tax relief through raising awareness of the relief amongst small businesses and making it easier for them to apply.

The tax relief, which encourages companies to invest in costly new product development, helps companies reduce the amount of corporation tax they pay on profits by offsetting them against any investment in research and development. Latest statistics for 2013-14 show more than 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but the government wants to go further.

Financial Secretary to the Treasury David Gauke said:

R&D is crucial for the long-term growth of the UK economy. Over 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but we need to go further to support pioneering small businesses.

That’s why we’ve published a document setting out our plans to increase awareness and make it easier for people to apply.

The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief’, was published 28 October 2015 and sets out that:

  • From November, small companies – with a turnover under £2 million and fewer than 50 employees – will be able to seek advance assurance on R&D tax relief. This will give them greater certainty and enable them to plan their finances effectively.
  • HMRC will explore ways to improve its communication around R&D tax relief, including looking at ways to use data and work with other government agencies to identify companies that have carried out R&D but have not claimed relief.
  • Interactive guidance will be developed with stakeholder involvement

HMRC evaluation shows that each £1 of tax foregone by R&D tax relief stimulates between £1.53 and £2.35 of additional R&D investment. SME R&D relief works by way of super deduction, allowing companies to reduce profits liable to corporation tax by 230 per cent of their qualifying R&D expenditure. In 2013-14, businesses received £1.75 billion in R&D tax relief, an increase of almost £750 million since 2009-10.

Tax Diary November/December 2015

Monday, November 2nd, 2015

 1 November 2015 – Due date for Corporation Tax due for the year ended 31 January 2015.

 19 November 2015 – PAYE and NIC deductions due for month ended 5 November 2015. (If you pay your tax electronically the due date is 22 November 2015.)

 19 November 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2015.

 19 November 2015 – CIS tax deducted for the month ended 5 November 2015 is payable by today.

 1 December 2015 – Due date for Corporation Tax due for the year ended 28 February 2015.

 19 December 2015 – PAYE and NIC deductions due for month ended 5 December 2015. (If you pay your tax electronically the due date is 22 December 2015)

 19 December 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2015.

 19 December 2015 – CIS tax deducted for the month ended 5 December 2015 is payable by today.

 30 December 2015 – Deadline for filing 2014-15 Self Assessment online to include a claim for under payments (under £3,000) be collected via tax code in 2016-17.

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