Archive for August, 2016

Child benefit changes

Wednesday, August 31st, 2016

If you’re a parent and receiving Child Benefit, you need to inform HM Revenue and Customs of your child’s educational status before 31 August.

If you are receiving Child Benefit and Child Tax Credits and your child is 16 , you need to update HM Revenue and Customs of your child’s educational status before 31 August, otherwise payment will stop. The reminder comes as many students across the country receive their GCSE results today.

You must contact HMRC to confirm the eligibility of your 16 child if they are:

  • continuing in full-time, non-advanced education
  • moving into employment
  • undertaking approved training

If a young person leaves full-time education or training, for example, to start full-time work or because their course has ended, parents must report this change straight away to prevent an overpayment, which they will have to pay back.

Nick Lodge, Director General of Benefits and Credits, said:

This is an exciting time for teenagers and their families as they decide which path they want to choose next. But it’s important that customers let us know what education their son or daughter is undertaking after they turn 16 so that we can ensure they receive the correct benefits.

This can be done simply and quickly using the Personal Tax Account which is available 24 hours a day, seven days a week. That means that parents can let us know their child’s education status at a time that suits them ahead of 31 August.

What is Bona Vacantia

Thursday, August 25th, 2016

Bona Vacantia is a Treasury Solicitor’s department that manages unclaimed estates. This includes not only the estates of individuals who die without any heirs, but also the residual assets of limited companies that are liquidated or otherwise wound up.

Many small company directors may not know that if they apply to strike off their company from the Companies House active list, any assets still owned by the company when the removal process is completed will be claimed by this department.

This often happens if directors forget to close bank accounts for the company, or transfer other assets out of the company before it is struck off.

Assets may include, but are not limited to:

  • land and interests in land in England and Wales
  • bank accounts
  • other forms of cash (such as insurance policies, tax refunds or sums paid into court)
  • copyrights
  • trademarks
  • patents and other intellectual property
  • the benefit of mortgages where sums are owed to a dissolved company
  • the benefit of other assets or agreements that the company entered into

Incredibly, if you make a genuine mistake, and forget to transfer an asset before winding up a company, there is no guarantee you can get it back. The Bona Vacantia department say:

“It is the responsibility of the directors and shareholders to deal with the property and assets of a company before it is dissolved. Bona vacantia can be avoided by ensuring assets or property are transferred or dealt with before a company is dissolved.

You should ensure this happens as the role of the Treasury Solicitor is not to correct mistakes or negligence.

If you are a former member, shareholder or liquidator of a company and you want to get an asset back from the Crown you will need to restore the company or buy it from BVD for open market value.

There is no guarantee that BVD will sell it back to you or at all – they may want to sell it on the open market if that would get better value for the Crown.”

Going digital

Tuesday, August 23rd, 2016

The government have backed down from their proposal to dump a new raft of compliance activity (red tape) on smaller businesses. In their efforts to digitise each businesses’ records with HMRC it was intended that firms be required to keep their books and records online and update HMRC’s data quarterly.

 

Having consulted with various trade bodies, notably the FSB – Federation of Small Businesses – this requirement has been lifted; at least from the smaller firms. Here’s what the FSB and government sources have to say:

The Financial Secretary to the Treasury, Jane Ellison MP, said:

“We are committed to a transparent and accessible tax system fit for the digital age, and Making Tax Digital is at the heart of these plans. This new system will make the UK’s tax administration more efficient and straightforward, and will offer businesses greater clarity when it comes to paying their tax bills.

By replacing the annual tax return with simple, digital updates, businesses will be able to concentrate on putting people and profit, not paperwork, first.”

Mike Cherry, FSB National Chairman, said:

“Today’s announcement by the Financial Secretary to the Treasury Jane Ellison MP on quarterly tax reporting proposals is incredibly important. Together with the Chief Secretary David Gauke MP, we have seen real dialogue with the business community. The government has listened to FSB representations on behalf of small businesses up and down the UK.

Removing small firms and the self-employed with modest turnovers altogether from the proposals will now mean that in addition to the 1.6 million small businesses and landlords that were already excluded, as a result of these changes announced, a further 1.3 million small firms and landlords will no longer be in scope. This means that half of the UK’s 5.4 million small businesses will not be affected by quarterly tax reporting. The expansion of cash accounting, a longer lead-in time for implementation and the offer of direct financial assistance will also help.

FSB will be submitting new evidence into the consultations announced today, and look forward to working with the government and contributing to its Making Tax Digital agenda.”

Edward Troup, Executive Chair, HMRC, said:

“Making Tax Digital represents very significant change. It will bring the tax system into the 21st century and help make HMRC one of the most digitally-advanced tax administrations in the world. Going digital will abolish the annual tax return as we know it by 2020, replacing it with a personalised digital service through which taxpayers will be able to send and receive information to HMRC at the click of a button.

There is still a lot to design and develop, and it’s important that we do this hand-in-hand with our customers and their representatives; these consultations are the next step in this process.”

HMRC wins major tax avoidance cases

Thursday, August 18th, 2016

One tax avoidance scheme, by Ingenious Film Partnership, tried to use artificial losses arising from investments in a range of movies, including the blockbusters Avatar, Life of Pi and Die Hard 4.

Users of the Ingenious scheme were given the opportunity to settle on similar terms nearly four years ago and now face big bills for interest and legal fees on top of the £434 million in unpaid tax resulting from the scheme.

Director General of Enforcement & Compliance Jennie Granger said:

“These were some of the biggest films of all time, and the schemes involved people claiming far more in tax than they invested in the first place. We always say that if something is too good to be true then it probably is. And in this case the long legal battle will mean that investors face even bigger bills for interest and legal costs.”

The second scheme saw Icebreaker attempt to create artificial losses from investments in limited liability partnerships.

For both schemes users claimed more in tax relief than they had invested.

The Icebreaker decision is HMRC’s second win against the scheme, following a victory in the First Tier Tribunal in 2014. The total tax at stake was £134 million.

This means that HMRC has now secured more than £1.2 billion in disputed tax from wins in avoidance litigation since the beginning of April.

It also comes on the back of HMRC’s continued success tackling tax avoidance through the Accelerated Payments regime. In the two years since the legislation was introduced, more than £2.5billion has been paid on Accelerated Payment Notices, and more than 50,000 notices have been issued.

Buy to let red tape

Tuesday, August 16th, 2016

Beset by a range of potentially, disastrous tax changes (primarily the withdrawal of finance charges as an allowable deduction – reduced instead to a basic rate tax credit), landlords of buy-to let residential accommodation also have to contend with a growing list of red-tape. We have listed below a number of compliance issues that are backed by legislation. Failure to comply with these can lead to penalties. Obligations include:

 

·         Building and landlord insurance

·         Gas Safety Certificates

·         Energy Performance Certificates

·         Electrical Installation Reports and Certificates

·         Smoke detectors on each floor

·         Carbon monoxide detectors if required

·         Copies of tenants references

·         Tenants agreement to receive communications by email

·         Proof that tenant has right to rent in the UK (copy passport for example)

·         Household inventory

·         Register your property business with HMRC

·         Tenants contact details

·         Protect deposit within 30 days of receipt

·         You are required to respond to written complaints within 14 days of receipt, in writing

·         Inform tenants prior to a property inspection

Provide tenant with:

·         How to Rent – the checklist for renting in England

·         Guarantors Agreement – if required

·         Assured Shorthold Tenancy Agreement

·         Information regarding Deposit Protection Scheme

·         Serve the correct form of notice to end tenancy

·         Tenant should sign a list of deductions made from rent deposits

·         Return whole or balance of deposit at end of tenancy

This list is by no means complete. Landlords that use the services of letting agents will no doubt have these points covered as part of their contract with the agent.

We live in interesting times

Thursday, August 11th, 2016

The Bank of England’s Monetary Policy Committee voted on 4 August to reduce their base rate to 0.25%.

This is good news for individuals and businesses about to borrow money, as it should mean that the interest rate applied will be lower.

Certainly, the interest rates charged by HMRC for late payment of taxes are linked to the base rate and will be cut accordingly. These reductions will apply from 15 August 2016 for quarterly instalment payments, and from 23 August 2016 for non-quarterly instalment payments.

The rate reduction is being made in tandem with a package of measures to provide additional monetary stimulus. As part of their published reasoning for their actions the Bank of England have said:

“The cut in Bank Rate will lower borrowing costs for households and businesses.  However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates.  In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate.  This monetary policy action should help reinforce the transmission of the reduction in Bank Rate to the real economy to ensure that households and firms benefit from the MPC’s actions.  In addition, the TFS provides participants with a cost effective source of funding to support additional lending to the real economy, providing insurance against the risk that conditions tighten in bank funding markets. 

 

The expansion of the Bank of England’s asset purchase programme for UK government bonds will impart monetary stimulus by lowering the yields on securities that are used to determine the cost of borrowing for households and businesses.  It is also likely to trigger portfolio rebalancing into riskier assets by current holders of government bonds, further enhancing the supply of credit to the broader economy.”

Home based travel costs

Wednesday, August 10th, 2016

Doctor Samadian works from home and has contracts with a number of private and NHS hospitals.

As he has a home-based office, from where he runs and administers his business, he has claimed for the costs of travel as follows:

·         from his home/work base to his various, contracted private hospital clients;

·         from the NHS hospitals, where he was an employee, to the private hospitals.

HMRC considered that the claims were not bona fide business costs and sought to disallow them. Dr Samadian appealed.

The case, when heard by the First Tier Tribunal (FTT), decided that neither of these circumstances qualified the travel costs as incurred “wholly and exclusively” for the purposes of a trade, and Dr Samadian’s appeal was denied.

The case was then heard, on appeal, by the Upper Tier Tribunal, who upheld the decision of the FTT.

This seems to be an odd conclusion by the courts. Essentially they are saying that:

·         Travel expenses for journeys between home (even where the home is used as place of business) and places of business are treated as non-deductible (other                than in very exceptional circumstances).

·         Travel expenses for journeys between a location which is not a place of business and a location which is a place of business are not deductible.

If applied to all self-employed persons who worked from home this would seem to deny tax relief on travel costs that they believe are expended solely for business purposes.

Good news for exporters

Thursday, August 4th, 2016

The UK’s 5 major high street banks have signed up to work with the new Department for International Trade to revolutionise the way businesses access international markets.

Barclays, HSBC, Lloyds, NatWest and Santander are getting behind the government’s drive to populate a new and unique Directory of Exporters. The Directory will link UK companies with contacts from around the world. Potential customers and buyers from global markets will be able to search for companies from across the whole of the UK which are ready to supply the products, services and skills they need.

The directory heralds an incredible opportunity for the UK economy and is part of wider government plans for a more digital service that will provide a world-leading platform for British businesses and the UK economy. The government and banks see this unique collaboration as the critical first stage in creating a ground-breaking service, aiming to make the UK the easiest place in the world from which to start exporting. Further details of the service will be revealed as the offer develops in advance of its launch in November 2016.

Business customers of the 5 banks will be encouraged to join the directory and take advantage of this exciting opportunity to promote themselves in lucrative global markets.

Announcing the partnership at an event in London on the 21 July, Secretary of State for International Trade, Dr Liam Fox, said:

“The new Department for International Trade is perfectly placed to bring together the whole of government, industry and our extensive overseas network to help UK businesses win lucrative deals. We want to help UK businesses scale up and take advantage of the global appetite for British goods and services, as well as to demonstrate that there has never been a better time for international companies to partner with UK suppliers.

The first of its kind, this directory will deliver a unique and new route to global markets, promoting British goods and services on an unprecedented scale. With this kind of creativity and collaborative working between government and industry, I’m confident that we can make the whole of the UK a beacon for open trade around the world.”

Tax free Childcare

Wednesday, August 3rd, 2016

This new scheme will be rolled out to parents next year. The scheme will be made available gradually to families, with parents of the youngest children able to apply first. You’ll be able to apply for all your children at the same time, when your youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.

 

In the meantime, HMRC are gearing up to advise childcare providers to register to use the scheme.

 

The top ten things that parents should know about Tax-free Childcare have recently been updated and are reproduced below:

 

1.      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.

 

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, and each earning around £115 a week and not more than £100,000 each per year.

 

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

 

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.

 

7.      If you currently receive Employer-Supported Childcare then you can continue to do so; you do not have to switch to Tax-Free However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported 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. A bespoke online process will be provided.

 

10.  You’ll be able to withdraw money from the account if your circumstances change or you no longer want to pay into the account. If you do make withdrawals, the government will withdraw its corresponding contribution.

Tax Diary August/September 2016

Tuesday, August 2nd, 2016

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

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

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

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

1 September 2016 – Due date for Corporation Tax due for the year ended 30 November 2015.

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

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

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

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