Archive for May, 2016

State benefits that are taxable

Thursday, May 26th, 2016

Many newly retired pensioners may not be aware that the State Pension they receive is taxable income. Also, the amount paid is not taxed at source. Although a pensioner’s State Pension may be covered by their annual tax-free personal allowance (£11,000 for 2016-17) and therefore potentially no tax would be payable, the situation is more complex if other private pensions and investment income are received. At the end of a tax year any tax collected by deduction from pensions may not be sufficient to clear liabilities.

The most common benefits that you pay Income Tax on are:

  • the State Pension
  • Jobseeker’s Allowance
  • Carer’s Allowance
  • Employment and Support Allowance (contribution based)
  • Incapacity Benefit (from the 29th week you get it)
  • Bereavement Allowance
  • pensions paid by the Industrial Death Benefit scheme
  • Widowed Parent’s Allowance
  • Widow’s pension

The most common state benefits you don’t have to pay Income Tax on are:

  • Housing Benefit
  • Employment and Support Allowance (income related)
  • Income Support – though you may have to pay tax on Income Support if you’re involved in a strike
  • Working Tax Credit
  • Child Tax Credit
  • Disability Living Allowance
  • Child Benefit (income based – use the Child Benefit tax calculator to see if you’ll have to pay tax)
  • Guardian’s Allowance
  • Attendance Allowance
  • Pension Credit
  • Winter Fuel Payments and Christmas Bonus
  • free TV licence for over-75s
  • lump-sum bereavement payments
  • Maternity Allowance
  • Industrial Injuries Benefit
  • Severe Disablement Allowance
  • Universal Credit
  • War Widow’s Pension
  • Young Person’s Bridging Allowance

If you do receive a bill at the end of the tax year make sure you check HMRC’s calculations, they have been known to get it wrong!

Small businesses take on more staff

Tuesday, May 24th, 2016

According to new government research published recently shows that almost a quarter (24%) of small and medium-sized (SME) employers had more people working for them in 2015 than in 2014.

The Small Business Survey 2015 is based on the views of more than 15,000 SMEs. Starting from this year, the survey will track the same businesses over time to better understand their needs as they grow and develop.

Only 1 in 10 reported a reduction in staff numbers, which is down from around 1 in 5 (21%) in 2010.

Small Business Minister Anna Soubry said:

This survey shines a light on the small businesses that drive our economy and employ millions of people across the country – and its good news that small firms continue to employ more people.

A strong economy underpins the success of our small businesses which is why this government continues to take the difficult decisions needed to keep our economy and businesses strong.

The survey also asked SMEs about their internet usage and found that 95% of employers use the internet for work, 76% have their own website, and 55% have a social media profile.

These results come as the government launches a call for evidence into the barriers businesses face when accessing superfast broadband, which can transform the way modern businesses work together, reach their consumers and target their export markets. This will feed into the wide-ranging business broadband review led jointly by the Department for Business, Innovation and Skills (BIS)and Department for Culture, Media and Sport (DCMS), announced in February 2016 by the Business Secretary.

The survey also shows 8 out of 10 (81%) smaller businesses which applied for finance secured all or some of what they asked for, echoing other recent studies that show the continuing improvement in the access to finance landscape. Bank overdrafts were the most commonly sought type of finance, while peer-to-peer lending and crowdfunding made up 5%.

Late payment continues to be a problem for almost a third (30%) of SME employers. The government is taking forward a number of measures to tackle this, by establishing a Small Business Commissioner through the Enterprise Act.

While the proportion of businesses experiencing higher turnover is similar to that found in the 2014 survey, medium-sized businesses are actually 3% more likely to report higher turnover than last year.

HMRC issues warnings and advice regarding fraudulent emails

Thursday, May 19th, 2016

There is a continuing misuse of emails and SMS messages that purport to be from HMRC asking questions about your tax and encouraging recipients to part with their personal information and bank details.

HMRC have recently issued guidance, intended to help taxpayers decide if an email from the tax office is genuine. Here’s what HMRC have said on this topic:

As well as spelling mistakes and poor grammar, there are a number of things you can look out for to help you recognise a phishing/bogus email.

Incorrect ‘From’ address

Look out for a sender’s email address that is similar to, but not the same as, HMRC’s email addresses. Fraudsters often have email accounts with HMRC or revenue names in them (such as ‘refunds@hmrc.org.uk’). These email addresses are used to mislead you.

However, be aware, fraudsters can falsify (spoof) the ‘from’ address to look like a legitimate HMRC address (for example ‘@hmrc.gov.uk’).

If you’re not 100% sure that the message has come from us don’t open it. If you do open the email and you’re in doubt don’t click on any links or downloads.

Examples of phishing and bogus emails

Personal information

Emails from HMRC will never:

  • notify you of a tax rebate
  • offer you a repayment
  • ask you to disclose personal information such as your full address, postcode, Unique Taxpayer Reference or details of your bank account
  • give a non HMRC personal email address to send a response to
  • ask for financial information such as specific figures or tax computations, unless you’ve given us prior consent and you have formally accepted the risks
  • have attachments, unless you have given prior consent and you have formally accepted the risks
  • provide a link to a secure log-in page or a form asking for information – instead we will ask you to log on to your online account to check for information

Urgent action required

Fraudsters ask for immediate action. Be wary of emails containing phrases like ‘you only have 3 days to reply’ or ‘urgent action required’.

Bogus websites

Fraudsters often include links to webpages that look like the homepage of the HMRC website. This is to trick you into disclosing personal/confidential information. Just because the page may look genuine, does not mean it is. Bogus webpages often contain links to banks/building societies, or display fields and boxes requesting your personal information such as passwords, credit card or bank account details.

You should be aware that fraudsters sometimes include genuine links to HMRC web pages in their emails, this is to try and make their emails appear genuine.

Common greeting

Fraudsters often send high volumes of phishing emails in one go so even though they may have your email address, they seldom have your name. Be cautious of emails sent with a generic greeting such as ‘Dear Customer’. Emails from HMRC will always:

  • use the name you’ve provided to us
  • include information on how to report phishing emails to HMRC

Attachments

Be cautious of attachments as these could contain viruses designed to steal your personal information.

The message is clear. If in doubt, do not respond to these emails, and do not provide any personal information requested by email. You could always call a HMRC helpline to clarify if an email is genuine, or discuss the email with your professional advisor.

UK tax to be simplified

Tuesday, May 17th, 2016

The UK has one of the most detailed tax codes in the developed economies. Readers might be amused, bemused, that the so-called Office of Tax Simplification (OTS) has launched a high level strategy consultation that aims to move its tax simplification agenda forwards.

The aim is to make our tax system easier to understand and therefore simpler to use.

Here’s what Angela Knight, chair of the OTS said:

“Some areas of tax will always be complex but the OTS aims to make using the system as easy as possible. Just as a mobile phone is a complicated piece of engineering but is pretty straightforward to make a call or send a text, so we intend for taxpayers to be able to manage their tax affairs with less hassle.

The world of work though is changing rapidly, whether it is what is often called the sharing economy or whether it is just that the Internet and e-commerce agenda has changed so much of what we do. The three strands of the OTS strategy are to consider the tax issues that are arising as the world of work changes; to address specific complex areas; and to play a greater role in the digital agenda. To support this, we also will be taking an active role in the public debate on tax.”

To deliver its strategy the OTS plans to:

  • set out how new trends and changes in business and employment (such as the sharing economy) will impact on tax
  • consider how to make tax simpler given these changes to how we work
  • reviews areas integral to these trends and identify difficult issues where an informed discussion is required
  • take the issues and options out for wide discussion and evidence gathering
  • encourage simplification to be built into tax policy making and implementation early on in the process
  • engage closely with HMRC on its important digital agenda

The OTS will shortly become a statutory body, with a new and broader remit. This high level strategy sets out the purpose and aims of the OTS; the work it does; how and with whom it will undertake its work; and its impact and influence.

The consultation aims to ensure tax becomes simpler, with the UK remaining attractive to business, and reflects the OTS new broader remit as a statutory body. The document is also intended to prepare the ground for the OTS stakeholder conference, which is planned for 18 July 2016.

Two thirds of large UK businesses experience computer hacking

Thursday, May 12th, 2016
  • Nearly seven out of ten attacks on all firms involved viruses, spyware or malware.
  • Record £1.9bn government investment to protect UK but industry must act to help protect themselves
  • New National Cyber Security Centre will launch in the autumn 2016

Britain’s businesses are being urged to increase protection from cyber criminals after government research into cyber security found two thirds of large businesses experienced a cyber breach or attack in the past year.

The research also shows that in some cases the cost of cyber breaches and attacks to business reached millions, but the most common attacks detected involved viruses, spyware or malware that could have been prevented using the Government’s Cyber Essentials scheme.

The Cyber Security Breaches Survey found that while one in four large firms experiencing a breach did so at least once a month, only half of all firms have taken any recommended actions to identify and address vulnerabilities. Even fewer, about a third of all firms, had formal written cyber security policies and only 10% had an incident management plan in place.

Minister for the Digital Economy Ed Vaizey said:

The UK is a world-leading digital economy and this Government has made cyber security a top priority. Too many firms are losing money, data and consumer confidence with the vast number of cyber-attacks. It’s absolutely crucial businesses are secure and can protect data. As a minimum companies should take action by adopting the Cyber Essentials scheme which will help them protect themselves.

Results from the survey are being released alongside the Government’s Cyber Governance Health Check, which was launched following the TalkTalk cyber-attack. It found almost half of the top FTSE 350 businesses regarded cyber-attacks as the biggest threat to their business when compared with other key risks – up from 29 per cent in 2014.

The Government’s Cyber Governance Health Check also found that:

only a third of the UK’s top 350 businesses understand the threat of a cyber-attack; only a fifth of businesses have a clear view of the dangers of sharing information with third parties; and many firms are, however, getting better at managing cyber risks, with almost two thirds now setting out their approach to cyber security in their annual report.

Both surveys form part of the Government’s rigorous approach to tackling cyber-crime, which will see £1.9 billion invested over the next five years.

The Government is encouraging all firms to take action: the 10 Steps to Cyber Security provides advice to large businesses, and the Cyber Essentials scheme is available to all UK firms. The Government is also creating a new National Cyber Security Centre offering industry a ‘one-stop-shop’ for cyber security support.

A new national cyber security strategy will also be published later in 2016 setting out the Government’s plans to improve cyber security for Government, businesses and consumers.

International tax transparency makes progress

Tuesday, May 10th, 2016

Chancellor of the Exchequer, George Osborne hailed the international expansion of a UK-led deal to automatically share information on the ultimate owners of companies as over 20 jurisdictions, including British crown dependencies, overseas territories and EU member states sign up.

Gibraltar, Isle of Man and Montserrat are amongst those joining the initiative led by the UK and launched with Germany, France, Italy and Spain at the G20 last week. As such their tax and law enforcement agencies will now exchange data on company beneficial ownership registers and new registers of trusts enabling more effective investigation of financial wrongdoing and tax-dodging.

The Chancellor of the Exchequer, George Osborne said:

Only a week after Britain launched this initiative with some of our closest European partners, it’s gaining the international support that will be vital to make it truly effective.

I welcome the early commitment made by Gibraltar, Isle of Man, Montserrat and Anguilla to participate and call on all of the remaining overseas territories and crown dependencies to do likewise.

It should be clear to all countries and tax jurisdictions that the world is moving firmly in the direction of greater tax transparency and the UK will continue to push for an internationally agreed blacklist for those that refuse to do the right thing.

The initiative will begin to explore the best way for countries to share this information, with a view to developing a truly global common standard in a two-step process leading to the interlinking of national registries

To date, since the launch 19 additional European countries have joined the pilot, the Netherlands, Romania, Sweden, Finland, Slovakia, Latvia, Croatia, Belgium, Ireland, Slovenia, Denmark, Malta, Lithuania, Cyprus, Bulgaria, Portugal, Estonia, Greece and Czech Republic.

On 14 April 2016, finance ministers from the 5 European countries launching the pilot wrote to their G20 counterparts urging progress towards a fully global exchange of beneficial ownership information. The letter recommended that the OECD, alongside the Financial Action Task Force should take a lead role in developing new single global standard for such exchange and for the interlinking of registers.

At the G20 meetings Chancellor of the Exchequer, George Osborne also called on the OECD to develop proposals for the listing of non-cooperative tax jurisdictions which do not meet international tax transparency standards, as well as options for coordinated counter-measures.

These latest actions build on strong action the government has taken since 2010 to revolutionise tax transparency and tackle tax avoidance and evasion. In this parliament alone the government will legislate for over 25 measures to make sure people do not get out of taxes due, together raising £16 billion by 2021.

Home owners may be caught by stamp duty increase

Friday, May 6th, 2016

From 1 April 2016, buyers of residential property that is not to be their main residence in England, Wales and Northern Ireland, will be liable for the higher rates of Stamp Duty Land Tax (SDLT). Basically any property subject to the higher rates, that costs more than £40,000, will be charged at the following rates:

 

Where applicable, the higher rates will be 3% above the standard rates of SDLT that apply to purchases of residential property. Each rate will apply to the portion of the consideration that falls within each rate band: Purchase price of property

Rate paid on portion of price within each band

Up to £125,000

3%

Over £125,000 and up to £250,000

5%

Over £250,000 and up to £925,000

8%

Over £925,000 and up to £1,500,000

13%

Over £1,500,000

15%

These higher rates will be charged even if a home owner buys a replacement for their main residence before their present home is sold. This could create cash flow problems for the buyer.

For example, a residential property purchased as a main residence for £250,000 after 1 May 2016 would be liable for a SDLT charge of £2,500. If their present home is not sold before they purchase a replacement, then the purchase will be subject to the higher rates of SDLT that would amount to £10,000.

It will be possible to reclaim the £7,500 additional SDLT but only if a previous main residence is sold within 3 years of paying the higher rates on a new main residence. A refund can be claimed by making an amendment to the original SDLT return. Repayments need to be claimed within 3 months of the sale of the previous main residence, or within 1 year of the filing date of the return, whichever comes later.

For house purchases in Scotland a similar situation arises. The purchase of a replacement home before the existing main residence is sold would be subject to an additional charge to Land & Buildings Transaction Tax. In Scotland, the 3-year period is reduced to 18 months.

Non competition clauses under the microscope

Thursday, May 5th, 2016

Business Secretary, Sajid Javid, has announced plans to look into employment rules that could be stifling British entrepreneurship by preventing employees from starting up their own business after leaving a job.

In a move designed to back even more small businesses and entrepreneurs across the country, the government is launching a call for evidence asking for views on what are known as ‘non-compete clauses’ – which can be written into employment contracts and can prevent individuals from competing against their former employer or working for a competitor for a set period of time, sometimes up to 9 months after leaving a firm.

The clauses are only enforceable in a court of law if it protects a legitimate interest and is reasonable. However, there have been suggestions that they can hinder start-ups from hiring the best and brightest talent, so the government is asking for views from individuals and employers on whether this type of practice is acting as a barrier to innovation and employment.

The move is the latest by the government to deliver on its pledge to make Britain the best place in Europe to innovate and start up a new business, with an Innovation Plan, setting out how the government can help make the UK a better place to turn ideas into new products and technologies, due to be published later this year.

The plan will look at a range of key areas, including how better regulation can drive innovation and opportunities to use the millions of pounds spent on public procurement every year to support new and exciting businesses. And today, UK businesses are being asked to give their ideas to feed into the new government Innovation Plan launched online today.

The government is asking businesses and entrepreneurs to give their views on whether clauses that prevent an individual from competing against their former employer are stifling opportunities to innovate and grow.

Known as non-compete clauses, these are provisions in a contract that prevent an individual from competing against their former employer and can include restrictions on individuals approaching former clients or working for a competitor for a set period of time, sometimes up to 9 months, after leaving a company.

Due to be launched shortly, the call for evidence will look for views from individuals and employers on whether this type of restrictive practice is acting as a barrier to innovation and employment and preventing British start-ups from prospering.

Tax Diary May/June 2016

Wednesday, May 4th, 2016

19 May 2016 – PAYE and NIC deductions due for month ended 5 May 2016. (If you pay your tax electronically the due date is 22 May 2016)

 19 May 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2016.

 19 May 2016 – CIS tax deducted for the month ended 5 May 2016 is payable by today.

 31 May 2016 – Ensure all employees have been given their P60s for the 2015-16 tax year.

 1 June 2016 – Due date for Corporation Tax due for the year ended 31 August 2015.

 19 June 2016 – PAYE and NIC deductions due for month ended 5 June 2016. (If you pay your tax electronically the due date is 22 June 2016)

 19 June 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2016.

 19 June 2016 – CIS tax deducted for the month ended 5 June 2016 is payable by today.

 

Good news for farmers

Wednesday, May 4th, 2016

Under new rules, initially announced in the 2015 Budget, farmers will be able to average their profits for Income Tax purposes from two years to five years.

This change will help farmers with fluctuating profits better manage risk and level out the impact of tax on their farming profits. For example, they may avoid paying tax at higher income rates in one year, when in the next few years they may have significantly lower profits.

In recent times market conditions, driven by the impact of global volatility, make it difficult to budget for tax costs.

Chancellor George Osborne is reported as saying:

“A resilient and thriving food and farming industry is fundamental to the success of the UK economy. This government recognises the challenges our farmers face from volatile markets and we are absolutely committed to supporting them.

Today’s reforms will provide farmers with additional security to plan and invest for the future, allowing them to spread profits over a longer period of time. Over 29,000 farmers can benefit from the changes, saving an average of £950 a year.

The fairer tax system for famers is among a number of reforms to taxes, National Insurance allowances and others measures coming into effect today to back hard work, support savers and economic security at every stage of life.”

As well as having the new option to average tax over five years, farmers will also retain the choice to average profits over two years. The dual option, announced in December, follows industry feedback in consultation over how to deliver the extension to five years. It became evident that the two-year option was well understood and had provided significant relief to farmers dealing with financial pressures and should be retained.

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