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The accountancy practices previously known as Churchills Chartered Accountants and Groves & Co are now practicing under the combined name of Churchill Groves. The combined practice will work in the Burntwood office.
Churchills Chartered Accountants was formed in 1995 by Mike Tomlinson and Ian Brown and until Mike's retirement in March 2018 they continued to run the new practice. At about the same time Groves & Co was being set up by Jackie Groves in Burntwood. Although no longer working full time both Mike and Jackie will continue to act in a consultancy role for the new practice.
We all believe in giving our clients a comprehensive, efficient and cost effective service. We also believe in plain speaking. We won't try to bamboozle you with jargon - it's just not our style!
Ian trained and qualified with a large independent practice in the West Midlands before taking up a 2 year contract in the British Virgin Islands with KPMG. He returned home to work with KPMG, Moores Rowland and Grant Thornton (where he met Mike) and then spent 4 years working in the computer industry. In 1995 he rejoined Mike who had branched out on his own and worked with him until Mike's retirement in March 2018. During the early years of the practice he lectured in accountancy and auditing at the West Midlands School of Accountancy. Outside of work he plays squash and racquetball and is a keen walker and cyclist.
Mike trained and worked with Grant Thornton for 26 years. Following promotion to partner he worked in computer auditing, corporate recovery, corporate finance and general practice where he specialised in the music industry. He is a keen sportsman and plays golf, badminton and 'veterans' hockey. Mike was born and trained in Manchester and can often be seen on the terraces watching Manchester City with his grandson.
Jackie trained as an Internal Auditor with the National Coal Board and qualified as a Chartered Certified Accountant in 1976. Following a short career break, after the birth of her daughter, she took a part time job with Hednesford Raceway before moving to a local Chartered Accountant's practice for 9 years. Having grown up in the Burntwood area since the age of 11, Jackie decided in 1993, to form her own practice, Groves & Co, to provide the locality with a friendly, fully qualified accounting service.
Here at Churchill Groves we firmly believe that you are only as good as your last job so it's always nice to be able to post references and testimonials from satisfied clients.
For further recommendations please have a look on the Best of Cannock website through the link below.
Ian has turned the painful experience of dealing with accountants into a joy, his knowledge, experience, practical approach and commitment are everything you could ask for when engaging a expert. I would recommend Ian and Churchill's without hesitation. He has delivered a great service into Disklabs for the last 10 yrs.
Working collaboratively for a shared client, Ian and I developed a partnership which has lasted over five years. On every project we've worked on, he's been as bright as a button when it comes to all things financial. I strongly recommend Ian, who's input and insight will positively contribute to any small or medium sized business looking for a strategic business adviser or hands-on accountant.
I have known Ian Brown for some 20 years both as a business colleague and lately as a service provider. I have, and will continue, to recommend all my friends and business associates to Ian as a reliable, honest, efficient and reasonably priced accountant. He's easy to get on with and knows his stuff, plus for any of the more complex accountancy issues he always knows a "man that can". I look forward to using Ian's services for many years to come.
See some of the latest news stories that we think you might find of interest to you and your business:
Most COVID support scheme grants are treated as taxable income in the same way as other taxable receipts and need to be reported to HMRC. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax. This means that if you received a support payment during the COVID pandemic, this may need to be reported on your tax return. This applies to the self-employed, partnerships and businesses.
The treatment extends to support measures including the following:
HMRC’s guidance is clear that whether or not any tax is paid will depend on the business profits of the grant recipient (taking into account the grant and other business income and expenditure under normal tax rules), any other taxable income they may have and any personal or other allowances to which they are entitled.
HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims that they were not entitled to. There is no requirement to report COVID welfare payments made by a council such as those to help with council tax payments and housing benefit.
Loans, such as Bounce Back Loans or those from the Coronavirus Business Interruption Loan Scheme (CBILS), are not COVID-19 support payments.
|Employment & Payroll|
The Chancellor of the Exchequer, Rishi Sunak confirmed that the government has accepted in full the proposals of the Low Pay Commission for increasing minimum wage rates from 1 April 2022. This puts the government back on track to reach their minimum wage target of two-thirds of median earnings by 2024.
The new National Living Wage (NLW) rate of £9.50 will come into effect on 1 April 2022 and represents an increase of 59p or 6.6%. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The threshold is expected to further reduce to 21 by 2024. The increase represents a pay rise of over £1,000 for someone working full-time and earning the NLW.
The hourly rate of the NMW (for 21-22 year olds) will increase to £9.18 (a rise of 82p or 9.8%). This increase narrows the gap with the NLW and leaving this age group on course to receive the full NLW by 2024.
The rates for 18-20 year olds will increase to £6.83 (a rise of 27p) and the rate for workers above the school leaving age but under 18 will increase to £4.81 (a rise of 19p). The NMW rate for apprentices will increase by 51p to £4.81.
As with the Spring Budget 2021, much of the detail for the Autumn Budget had been leaked to the press prior to the official report to parliament, 27th October 2021.
But we now have all the details and, as usual, there is much to consider. The following Budget summary is split into two sections:
Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.
Income Tax 2022-23 to 2025-26
No increase in rates and the higher rate threshold is frozen at £37,700 through to April 2026. For the same period, the personal tax allowance is also frozen at £12,570 (£12,570 2021-22) and will apply to all regions of the UK.
In what many commentators consider to be a “stealth tax”, wage earners benefitting from annual increases in their earnings up to April 2026 will find themselves paying tax on the full value of any increases. This is because, with personal allowances and the higher rate thresholds frozen until April 2026, any increases in earnings will be taxed and, in some cases, this may push earnings into the higher rate tax bands.
Regional variations to Income Tax rates may apply in Wales and Scotland.
Income Tax and dividend income
The current £2,000 dividend tax-free allowance is unchanged.
As announced 7 September 2021, the tax rates payable on dividend income will increase in line with the 1.25% increase in certain NIC contributions. The rates that will apply in all regions of the UK from 6 April 2022 are:
Starting rate for savings
The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2022-23.
Reform of Basis Periods for self-employed and partners
The basis on which profits are taxed in a tax year are to be changed from the account’s year ending in a tax year to the actual profits arising in a tax year. Self-employed sole traders and partners who already have a year end at the end of the tax year will experience no change in their basis of taxation.
For affected traders with year ends other than the end of March or 5 April, there will be a transition to an actual basis during 2023-24 and the new rules will come into force from 6 April 2024.
The reform will include greater flexibility on the use of overlap relief in the transition year and provisions to reduce the impact of transition profits on allowances and profits.
Boris Johnson announced – earlier this year - a 1.25% increase in certain National Insurance Contributions from April 2022. This is ring-fenced to provide funding for health and social care. From April 2023, this NIC increase will be withdrawn and replaced by a new Health and Social Care Levy at the same rate.
The government will use the September Consumer Prices Index figure of 3.1% as the basis for uprating National Insurance limits and thresholds, and the rates of Class 2 and 3 National Insurance contributions, for 2022-23.
This excludes the Upper Earnings Limit and Upper Profits Limit which will be maintained at 2021-22 levels, in line with the higher rate threshold for Income Tax.
Lifetime Allowance for pension pots
From April 2021 to April 2026 the pensions lifetime allowance will remain frozen at £1,073,100.
Capital Gains Tax
Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, there are two changes worth mentioning:
The second change is welcomed as the 30 days reporting window was a tight reporting timeline in which to gather all the relevant data to make a submission to HMRC and to pay any taxes due.
No change in Corporation Tax rates until April 2023. For the financial year beginning 1 April 2022, the rate will remain at 19%.
As announced earlier this year, from 1 April 2023, there will be two rates of CT.
Corporation Tax and banking companies
From 1 April 2023, the rate of surcharge on banking companies will be 3% and the surcharge allowance increased from £25m to £100m.
Corporate Tax – R&D Relief
R&D tax reliefs will be reformed to support modern research methods by expanding qualifying expenditure to include data and cloud costs. This will effectively capture the benefits of R&D funded by the reliefs through refocusing support towards innovation in the UK, and target abuse and improve compliance. These changes will be legislated for in Finance Bill 2022-23 and take effect from April 2023.
Museums and Galleries Exhibition Tax Relief
The sunset clause in this relief is extended for a further two years until 31 March 2024.
Cultural Relief changes
Theatre Tax Relief and Museums and Galleries Tax Relief
Rates will increase from 20% (for non-touring productions) and 25% (for touring productions) to 45% and 50% respectively from 27 October 2021.
From 1 April 2023, the rates will fall to 30% and 35%, with a return to 20% and 25% on 1 April 2024. As mentioned above, the Museums and Galleries Tax Relief will expire after 31 March 2024.
Orchestra Tax Relief
From 27 October 2021, the relief will increase from 25% to 50%, reducing to 35% from 1 April 2023, and returning to 25% from 1 April 2024.
Reliefs for investments in qualifying assets
The temporary “Super-deduction” and a 50% first year allowance – that were introduced April 2021 – will continue to apply to qualifying expenditure up to 31 March 2023.
The super-deduction allows businesses to remove 130% of qualifying expenditure as a deduction from taxable profits.
Annual Investment Allowance
The existing Annual Investment Allowance (AIA) was due to reduce to £200,000 (from the present £1m) from 1 January 2022. This date has been changed. The £1m of AIA relief will now revert to £200,000 from 1 April 2023.
Business owners thinking about high-value investments in qualifying assets will now have more time to consider their timing of capital acquisitions.
Reform of loss relief rules for Corporation Tax
The government will legislate in the Finance Bill 2021-22 to amend the loss relief rules to ensure that the legislation continues to work as intended for companies adopting International Financial Reporting Standard (IFRS) 16. The changes will have retrospective effect from 1 January 2019.
Van and car benefit changes
This measure increases the van benefit charge and the car and van fuel benefit charges by the Consumer Price Index from 6 April 2022. The flat-rate van benefit charge will increase to £3,600; the multiplier for the car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.
No changes to present rates and allowances. These are all frozen at current levels until April 2026.
This means the nil-rate band will continue to be £325,000 and the residence nil-rate band at £175,000, for this period.
There will be no changes to the 20% rate. The £85,000 registration limit and the £83,000 deregistration limit will remain at these levels until 31 March 2024.
The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions was increased to 12.5% from 1 October 2021. This rate will remain until 31 March 2022 when it will revert to 20%. This acknowledges the disruption and financial hardship suffered by this sector during the COVID pandemic.
VAT rules in Freeports
From 3 November 2021, the government will introduce new elements into the VAT free zone model for Freeports. They are:
Business rates changes
The business rates multipliers are frozen for a second year until 31 March 2023. The small business multiplier is set at 49.9p and the standard multiplier at 51.2p. Different rates apply in London and in Wales. The freezing of the multipliers will mean that your business rates will not increase in 2022/23.
Eligible retail, hospitality and leisure properties will benefit from a 50% relief in their business rates for 2022/23, subject to a cap of £110,000 per business.
A relief is also being introduced for improvements to business properties which will delay the start date of higher business rates triggered by the improvements for 12 months. The government are to consult on how to implement the relief, which will take effect from 2023 and will be reviewed in 2028. If you are planning improvements to your business premises, this may benefit you.
From 1 April 2023 until 31 March 2035 a targeted business rates exemption will apply for eligible plant and machinery used in onsite renewable energy generation and storage, and a 100% relief will be available for eligible heat networks. This is to support the decarbonisation of non-domestic buildings.
From 2023, business rate revaluations will take place every three years rather than every five years.
Transitional relief for small and medium-sized businesses is extended for one year, which will restrict bill increases to 15% for small properties (i.e. those with a rateable value of up to £20,000 or up to £28,000 in Greater London), and to 25% for medium properties (i.e. those with a rateable value of up to £100,000).
Increasing the normal minimum pension age
The earliest age at which pension savers can access their pensions without incurring an unauthorised payments tax charge is changing.
From 6 April 2028, the normal minimum pension age is increasing from 55 to 57.
To compensate for the recent withdrawal of the £20 a week UC payment, the government is to decrease the amount it reduces UC payments when a claimant works more hours. Presently, for every £1 earned UC payments decrease by 63p. From 1 December 2021 at the latest, this will be lowered to 55p for every £1 earned.
Duties and Miscellaneous taxes
ISA investment limits for 2022-23
The limits set for 2022-23 are:
National Living Wage increases
The NLW will increase to £9.50 per hour (previously £8.91) from 1 April 2022.
The full changes to the National Minimum Wage rates from 1 April 2022 are as follows:
The trivial benefits in kind (BiK) exemption applies to small non-cash benefits, for example a bottle of wine or a bouquet of flowers, given occasionally to employees.
Although the benefit is defined as ‘trivial’, employers should remember that this can be an efficient way to provide small rewards and incentives to employees. The main requirement is that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.
The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions. There is no requirement to let HMRC know once the benefit meets the necessary criteria.
The tax exemption applies to trivial BiKs where the BiK:
The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year. The £300 cap doesn’t apply to other employees. If the £50 limit is exceeded for any gift, the total value of the benefit will be taxable.
If a company has stopped trading and has no other income then the company is usually classed as dormant for Corporation Tax purposes.
A company is usually dormant for Corporation Tax if it:
HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.
Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and according to Companies House. A company defined as 'small' by Companies House can instead file 'dormant accounts' and doesn’t have to include an auditor’s report.
A dormant company must also ensure they deregister for VAT within 30 days of the company becoming dormant and close any unused PAYE schemes. A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or wants to retain use of a company name, brand or trademark.
|Capital Gains Tax|
In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated based on the original cost when the asset was first owned by the spouse or civil partner.
There are a few exceptions that couples should be aware of when the relief does not apply. This relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.
There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.
The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding the tax rules or because of deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.
Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax for UK gains and 200% for offshore liabilities together with possible criminal investigation.
Taxpayers that come forward will benefit from better terms and lower penalties for making a disclosure. Landlords that make an accurate voluntary disclosure and have taken ‘reasonable care’ are likely to face the lowest penalties. There are higher penalties where you did not take reasonable care if you deliberately misled HMRC regarding offshore liabilities.
There are three main stages to taking part in the campaign, notifying HMRC that you wish to take part, preparing an actual disclosure and making a formal offer together with payment. The campaign is open to all individual landlords renting out residential property. That includes landlords with multiple properties and single rentals as well as specialist landlords with student or workforce rentals.
We would like to remind readers that existing legislation is in place to ensure that COVID support grants are treated as taxable income in the same way as other taxable receipts. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax.
This treatment extends to the Self-Employment Income Support Scheme (SEISS), the Coronavirus Job Retention Scheme (CJRS), the Coronavirus Statutory Sick Pay Rebate Scheme, any coronavirus business support grant scheme and any other support scheme payments.
HMRC’s guidance is clear that whether any tax is paid will depend on the business profits of the grant recipient (taking into consideration the grant and other business income and expenditure under normal tax rules), any other taxable income and personal and other allowances to which they are entitled.
The taxing of the COVID support payments is based on the fact that these payments are designed to substitute various income streams for businesses and individuals affected by the pandemic and hence should follow the same tax treatment.
HMRC also has the power to recover payments and charge penalties where claimants have made support grant claims to which they were not entitled.
The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 30 September 2021. The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked subject to a monthly maximum of £2,500 until the scheme ends. The CJRS will also continue in its present form for employers until the end of June 2021. As the economy reopens and demand returns, the government will introduce employer contributions towards the cost of unworked hours of 10% in July and 20% in August and September.
The Chancellor, Rishi Sunak also confirmed that the Self Employed Income Support Scheme (SEISS) will continue for a fourth and fifth grant. The fourth grant covers the period from 1 February 2021 to 30 April 2021 and the fifth and final grant will cover the period from May onwards. The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.
The SEISS scheme will also be extended to the newly self-employed who filed a 2019-20 tax return by midnight, 2 March 2021.
More has been disclosed, leaked, of this year’s Budget announcements than in previous years. But we now have the details and there is a lot to consider. The following Budget summary is split into four sections:
Please call if you need to discuss how these changes may affect your business or tax affairs in the coming months.
COVID-19 related support measures for UK businesses
The Treasury is to continue the two existing major support schemes in an attempt to hold back a significant increase in unemployment rates as business owners grapple with the effects of COVID-19 disruption. Details are set out below.
Coronavirus Job Retention Scheme
This scheme, nicknamed the Furlough Scheme, was due to end 30 April 2021. It is now being extended to 30 September 2021.
The judgement must be that there will be enough control over COVID by autumn 2021 to stimulate demand and give employers more confidence to retain staff. The Chancellor has obviously crunched the numbers and considers employment support in this way a more attractive strategy than increasing unemployment costs.
In more detail:
Self-Employed Income Support Scheme (SEISS)
There has been much criticism of this scheme as it has not been possible for self-employed businesses that commenced trading during 2019-20 to claim.
To counter this, the following changes to SEISS have been announced.
£5bn of funding is being allocated for these grants. They will support businesses obliged to close during much of lockdown. The grants will consist of:
Business rates holiday continued
This year, government will continue with the 100% business rates holiday for the first three months of the 2021-22 financial year, in other words, through to the end of June 2021 for the retail, leisure and hospitality sectors.
For the remaining nine months of the year, to 31 March 2022, business rates will still be discounted by two thirds, up to a value of £2 million for closed businesses, with a lower cap for those who have been able to stay open.
Exemption for COVID-19 related home office expenses
The temporary Income Tax exemption and Class 1 National Insurance Contributions disregard for employer reimbursed expenses that cover the cost of relevant home office equipment is extended and will have effect until 5 April 2022.
Exemption for reimbursement of antigen test costs
The government will legislate in Finance Bill 2021 to introduce a retrospective Income Tax exemption for payments that an employer makes to an employee to reimburse for the cost of a relevant coronavirus antigen test for the tax year 2020-21.
A new Recovery Loan Scheme
The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance between £25,000 and up to £10 million per business once the existing COVID-19 loan schemes close. This will provide further support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.
Once received, the finance can be used for any legitimate business purpose, including growth and investment.
The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.
The scheme launches on 6 April 2021 and is open until 31 December 2021, subject to review. Loans will be available through a network of accredited lenders.
Reduced rate of VAT
The temporary reduced rate of 5% for hospitality, holiday accommodation and attractions will be extended until 30 September 2021. This is a welcome bonus for this sector badly affected by COVID lockdown restrictions.
This will be followed by the introduction of a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it will revert to the 20% standard rate.
Other support measures
Other measures outlined in the Budget include:
Support for the UK housing market
Support will include a mortgage guarantee scheme that will help home buyers purchase properties up to £600,000, and an extension to the existing stamp duty holiday that was due to end 31 March 2021.
Mortgage guarantee scheme
The government will underwrite 95% of the risk of default. It will apply to home acquisitions up to £600,000 and set deposits required to 5%.
Stamp duty holiday
The present £500,000 threshold for paying Stamp Duty Land Tax (SDLT) was increased on a temporary basis and was due to end 31 March 2021.
The nil rate band will continue to be £500,000 for the period 8 July 2020 to 30 June 2021. From 1 July 2021 until 30 September 2021, the nil rate band will be £250,000. The nil rate band will return to the standard amount of £125,000 from 1 October 2021. This applies to England and Northern Ireland only. The devolved administrations have not announced any further extension beyond 31 March 2021 when this summary was written on Budget Day.
A 2% SDLT surcharge, above existing rates, for non-UK residents purchasing residential property in England and Northern Ireland is to be introduced from 1 April 2021.
Many of the tax changes announced are for a fixed period, generally, from April 2021 to April 2026. This does provide welcome certainty for businesses. Announcements made include:
Income Tax 2021-22 to 2025-26
The basic rate threshold is increasing to £37,700 for 2021-22 (2020-21: £37,500) and then frozen until April 2026. For the same period, the personal tax allowance is set at £12,570 (2020-21: £12,500) and will apply to all regions of the UK.
Taxpayers who will benefit from annual increases in their earnings up to April 2026 may find themselves paying tax at the higher rates if these increases breach the £37,700 annual basic rate limit.
Regional variations to Income Tax rates apply in Scotland and may apply in Wales.
NIC Upper Earnings limits and Upper Profits limits will also remain at a fixed amount until April 2026 and will be based on the Income Tax higher rate threshold of £50,270.
Starting rate for savings
The band of savings income that is subject to the 0% starting rate will remain at £5,000 for 2021-22.
Lifetime Allowance for pension pots
From April 2021 to April 2026 the pensions lifetime allowance will be frozen at £1,073,100.
Cycle to work scheme change
The government will legislate in Finance Bill 2021 to introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.
The change will have effect on and after Royal Assent of Finance Bill 2021 and be in place until 5 April 2022, after which the normal rules of the exemption will apply.
Van benefits for zero carbon emissions
The government will legislate in Finance Bill 2021 to reduce the van benefit charge to zero for vans that produce zero carbon emissions. The change will have effect on and after 6 April 2021.
Capital Gains Tax
Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being. Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount. This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and £6,150 for trustees of most settlements.
As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.
From 1 April 2023, there will be two rates of CT.
Carry back of trading losses
The present provisions that restrict the carry back of tax losses is being relaxed, temporarily, extending the period over which incorporated and unincorporated businesses may carry-back trading losses from one year to three years.
This extension will apply to a maximum £2,000,000 of unused trading losses made in each of the tax years 2020-21 and 2021-22 by unincorporated businesses. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.
The £2,000,000 cap will be subject to a group-level limit, requiring groups with companies that have capacity to carry back losses in excess of £200,000 to apportion the cap between its companies. Further detail on the group limit will be published in due course.
R&D tax credit cap to be introduced
For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a company can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and National Insurance contributions liability, in order to deter abuse.
Enterprise Management Incentives
As announced on 21 July 2020, the government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed or working reduced hours because of coronavirus (COVID-19) continue to meet the working time requirements for EMI schemes.
The change will apply to existing participants of EMI schemes and it also allows employers to issue new EMI options to employees who do not meet the working time requirement as a result of COVID-19. This measure will have effect until 5 April 2022.
Major new investment reliefs
A new “super-deduction” and a 50% first year allowance are to be introduced that will allow businesses to increase the tax relief they can claim for qualifying investments in plant and other equipment. It will apply to expenditure between 1 April 2021 and 31 March 2023.
The super-deduction will mean that assets will qualify for tax relief based on 130% of the actual cost of expenditure incurred.
Assets that qualify for the special rate relief will qualify for the 50% first year allowance.
The existing Annual Investment Allowance £1m limit will continue to be available until 31 December 2021.
In an attempt to reposition the UK as a global player a raft of tax incentives are to be provided to the eight freeport locations in England announced in the Budget. They will include enhanced structures and buildings allowances.
No changes in the present rates and allowances that are all frozen at current levels until April 2026.
This means the nil-rate band will be £325,000 and the residence nil-rate band at £175,000 for this period.
There be no changes to the standard 20% rate.
The £85,000 registration limit and the £83,000 deregistration limit will be frozen until 31 March 2024.
The recent increase in benefits of £20 per week is to be extended for a further six months.
Working Tax Credit claimants will receive equivalent support via a £500 one off payment.
There will be no increases in duty on alcoholic drinks or fuel.
Vehicle excise duties will see a small increase in line with the Retail Prices Index (RPI).
Air Passenger Duty long haul rates will also increase in line with RPI as will gaming duty and Landfill Tax.
ISA investment limits for 2021-22
The limits set for 2021-22 are:
National Living Wage increase
The NLW will increase to £8.91 per hour from 1 April 2021.
There will also be new reforms to the immigration system that will help ambitious UK businesses entice top talent. These reforms will include a new unsponsored points-based visa to attract highly skilled migrants and a new, improved visa process for scale-ups and entrepreneurs.
Help to Grow schemes
Two new Help to Grow schemes are set to launch by the autumn to help support 130,000 small and medium sized businesses. The Help to Grow: Management scheme will help small and medium sized businesses get world-class management training with the government contributing 90% of the cost.
In addition, the Help to Grow: Digital scheme will help small businesses develop digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software, worth up to £5,000 each.
Single contactless payments
Our final comment on the Budget seems to anticipate a coming consumer spending bonanza. The legal limit for single, contactless payments is increasing from £45 to £100.
A further reminder that new VAT rules for building contractors and sub-contractors will come into effect from 1 March 2021. The new rules were originally expected to commence from 1 October 2019, but an initial 12 month delay was announced. The start date was then delayed for a further 5 months until 1 March 2021 due to the impact of the coronavirus pandemic.
The new rules will make the supply of most construction services between construction or building businesses subject to the domestic reverse charge. The reverse charge will only apply to supplies of specified construction services to other businesses in the construction sector.
This means that from 1 March 2021, sub-contractors will no longer add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers. This is known as the Domestic Reverse Charge. However, there is no loss of cashflow as the deemed output VAT can be deducted as input VAT subject to any existing restrictions; in this way the two entries on VAT returns cancel each other out.
This change will mean that contractors will have to alter the way that supplies from sub-contractors are treated by their accounting software.
HMRC’s guidance states that, for invoices issued for specified supplies that become liable to the reverse charge, the VAT treatment for invoices with a tax point:
It’s official. We are in lock-down 3 in England, Scotland following suit and the other regions expected to enforce similar restrictions.
What now for businesses directly affected by these measures, predominantly the hospitality and entertainment trades?
Lock-down would probably be better described as locked-out for these business sectors. Businesses that depend on social mobility are basically cut-off from their customers by COVID restrictions and there are no obvious ways for a pub or hotel to entertain its customers online.
There are still local authority support grants that may cover certain fixed costs and furlough has been extended to the end of April 2021. But this state sanctioned support will not cover all costs and affected businesses face the prospect of funding losses for yet another extended period. Many may decide that enough is enough and call it a day.
Planning is vital. Choose your next course of action, don’t get pushed into making decisions.
Clearly, economic activity will be depressed by this further period of lock-down and this may have adverse effects across many business sectors in addition to those mentioned above. All businesses would benefit from a planning review and in particular, clarifying your challenges, the effects on your finances and the choices you therefore face.
We can help. Please call if you would like to discuss your options.
Fraudsters are continuing to target taxpayers with scam emails in advance of the 31 January deadline for submission of Self-Assessment returns. In fact, over the last year, HMRC received more than 846,000 reports about suspicious HMRC contact.
A number of these scams purport to tell taxpayers they are due a tax rebate or tax refund from HMRC and ask for bank or credit card details in order to send the refund. The fraudsters use various means to try and scam people including making contact by phone calls, texts or emails. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.
HMRC’s dedicated Customer Protection team to identify and close down scams but is advising customers to recognise the signs to avoid becoming victims themselves. For example, genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.
If you think you have received a suspicious call or email claiming to be from HMRC you are asked to forward the details to firstname.lastname@example.org and texts to 60599. If you have suffered financial loss you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.
The Prime Minister, Boris Johnson speaking at a press conference on Saturday night, 31 October 2020, confirmed widespread expectations of a second national lockdown in England to help stem the growing resurgence of the coronavirus. The Government was faced with significant concerns that if they took no action, the NHS could be overwhelmed with death rates far exceeding those seen in the first lockdown.
The four week lockdown came into effect on Thursday 5 November and applies until Wednesday 2 December 2020. This lockdown will close pubs, restaurants, entertainment venues, hotels and non-essential shops and people will be advised to work from home if possible. In a marked departure from the first spring lockdown, schools, colleges and universities remain open. The exit strategy from this lockdown remains unclear and there are fears that the lockdown could continue beyond this period if the infection rate does not reduce significantly.
We have set out below the most up-to-date support measures available to businesses following the announcement of these new restrictions.
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme will be extended until the 31 March 2021. The most recent update (further extending the life of the scheme) was announced by the Chancellor Rishi Sunak when delivering his fourth Winter Economic Plan to the House of Commons on 5 November 2020.
The Chancellor confirmed that employees will receive up to 80% of their salary for hours not worked. There will be a review date of the CJRS in January 2021 which may see employers taking on an increased financial contribution if the economic and health outlook of the country show signs of improvement.
It had been announced that the CJRS would be replaced by the Job Support Scheme (JSS), a scheme that would have topped up wages for people returning to work on reduced hours. The introduction of the JSS has now been put on hold.
A bullet-point summary of the main details of the CJRS extension announced is set out below:
It has also been confirmed that mortgage payment holidays will no longer end as planned on 31 October 2020. Borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.
It had been previously announced that businesses in England that are forced to shut as a result of a lockdown will be eligible for grants of up to £3,000 per month payable every two weeks. Businesses will be eligible to claim after two weeks of closure.
The amount businesses will be able to claim from their local authority depends on their rateable value:
Further support for businesses
The government is providing an additional £1.1bn to Local Authorities in England, distributed on the basis of £20 per head. These payments are designed to help Local Authorities to support businesses more broadly.
Self Employed Income Support Scheme Extension (SEISS)
The Government has also confirmed that there will be additional help for the self-employed during Lockdown 2.0.
It had previously been announced that the grants for the self-employed would be based on 40% of previous qualifying earnings for the months of November, December and January. The November figure was then increased to 80%. It has now been confirmed that the self-employed will receive 80% of average trading profits for the entire three month period. This will increase the grant for the three months to a maximum of £7,500 made available to those who meet the eligibility requirements.
It has also been confirmed that the claims window for the grant is being brought forward from 14 December to 30 November to allow payments to be made more quickly.
An additional second grant will be made available from 1 February 2021 to 30 April 2021. The level of this second grant amount is subject to review and will be set in due course.
Government-backed loan schemes
The deadline for applications for government-backed loan schemes and the Future Fund have been extended until 31 January 2021.
It will also be possible for businesses to ‘top up’ existing Bounce Back Loans should they need additional finance. This will apply to businesses who borrowed less than their maximum allowance.
There has also been an increase in the upfront guarantee of funding for the devolved administrations from £14 billion to £16 billion. This uplift will continue to support workers, business and individuals in Scotland, Wales and Northern Ireland.
Job Retention Bonus
The Job Retention Bonus was meant to provide a £1,000 bonus payment to employers that brought back employees that were furloughed under the CJRS from November 2020 to January 2021. Following the extension of the CJRS, it has been confirmed that the Job Retention Bonus will not be paid in February. The government will instead redeploy a retention incentive at the appropriate time.
The government has published detailed new guidance for employers on the regulations and legal obligations relating to running internal workplace coronavirus (COVID-19) testing programmes, i.e. those which are outside of the NHS Test and Trace service. The guidance covers:
The guidance emphasises that the NHS Test and Trace service is for those who are displaying symptoms of coronavirus or who have been advised to take a test by a medical practitioner or public service, so employers must not advise any staff without symptoms to get a test from the NHS Test and Trace service. However, they may offer alternative private provision in accordance with this guidance.
Public Health England (PHE) has updated its guidance to increase the minimum self-isolation period for those with symptoms of coronavirus from seven to ten days, starting from when symptoms first begin. In addition, those who test positive for coronavirus but who are not experiencing symptoms must stay at home for at least ten days starting from the day the positive test was taken, and if they then develop symptoms during this self-isolation period, the ten days must restart from the date their symptoms first appear.
To correspond with the extended self-isolation period, the Statutory Sick Pay (General) (Coronavirus Amendment) (No. 5) Regulations 2020 came into force on 5 August 2020. The regulations have amended the Statutory Sick Pay (General) Regulations 1982 to confirm that an employee self-isolating in accordance with the updated PHE guidance will be deemed incapable for work and so entitled to statutory sick pay (SSP) for the duration of the extended minimum ten-day period for which they are now required to self-isolate.
The Chancellor, Rishi Sunak continued with his campaign to support the business and jobs community today, 8 July 2020, as firms engage with the disruption caused by the coronavirus outbreak and the measures taken to control infection.
The main thrust of his announcements during his Summer Economic update concerned his nominated Plan for Jobs 2020, details are listed below.
He also announced measures to support the hospitality and tourism industry including a novel voucher scheme and a temporary reduction in VAT. Again, details are provided in the following update.
In an attempt to boost the flagging property market Stamp Duty is being temporarily reduced in England and Northern Ireland. Separate announcements on this topic are awaited for Scotland and Wales who have their own Stamp Duty regimes.
Details of these announcements follow:
As we manage the cautious steps to emerge from lock-down, still wary of COVID-19, the new incentives announced by Rishi Sunak should be welcomed.
As more details emerge on the various schemes announced today they will be published accordingly.
As our readers will be aware, the Coronavirus Job Retention Scheme (CJRS), has been extended until 31 October 2020. There are a number of important changes to the way the scheme works that will start to come into effect from 1 July 2020, when employers can bring back furloughed employees to work part-time, for any amount of time and any shift pattern.
For any periods starting on or after the 1 July, the maximum number of employees that employers can claim for cannot be higher than the maximum number they claimed for in a previous period. For example, if the highest single claim for periods up to 30 June was for 100 people, then employers cannot claim for more than this number in later periods.
The government will continue to pay 80% of costs for normal hours not worked up to the £2,500 cap during the month of July. From August 2020, employers will be expected to start contributing towards furloughed employees wage costs by paying employers’ NIC and pension costs for any normal hours an employee does not work. There will be further reductions in government support to 70% of capped wages in September and to 60% in October before the scheme is closed.
On Friday afternoon, in the Government's daily news briefing, the Chancellor outlined how the Coronavirus Job Retention Scheme will operate moving forward to allow for employees to return to work part time. Following that announcement, self-employed workers got a boost when it was revealed that they will be able to get Government assistance for a further three months. The new details are outlined below.
Self-Employed Income Support Scheme (SEISS)
No doubt due to recent lobbying by the press and other interested support groups, the Chancellor has extended the SEISS for a final three-month period to 31 August 2020.
This means that the self-employed who are eligible to claim will have received six-months financial support from government.
As before, applicants will have to wait until the last month of the claim period, August 2020, to make a claim.
A bullet-point summary of the changes is set out below:
If you are eligible to make a claim for this second grant under the scheme you will still be subject to the same rules regarding eligibility. You will need to confirm that your business has been adversely affected by the Coronavirus outbreak.
If you did not claim for the first quarter, to May 2020, as your business at that time was not adversely affected, but will be affected in the quarter to 31 August 2020, it will be possible to claim for the second quarter.
And finally, claims for the first quarter (March-May 2020) will close 13 July 2020.
Coronavirus Job Retention Scheme (CJRS)
As previously announced, the CJRS has been extended to 31 October 2020 and will be changed to a flexible arrangement from 1 July 2020 to allow employees to resume part-time working.
The Chancellor and his advisers will be gritting their teeth as drawing a line in the sand by tapering and then closing the CJRS on 31 October 2020 will force the hand of employers to consider their options. It is likely that redundancies will start to climb from that date as will the number of the unemployed.
A bullet-point summary of the changes announced is set out below:
The above changes to a flexible approach cloak a raft of detail that government is not publishing until 12 June 2020. Those responsible for making CJRS claims will need to wait for these further clarifications as they will explain how employers should calculate claims.
We will be integrating the changes into our payroll services when they are available and will contact clients if further details regarding part-time working are to be introduced.
Clearly, there are planning considerations. Please call if you have employees on furlough and you need to consider your options; for part-time working up to 31 October and longer-term considerations after this date.
HMRC’s guidance on the Coronavirus Job Retention Scheme has recently been updated. HMRC will reimburse 80% of furloughed workers' wage costs, capped at £2,500 per month per employee. The scheme will run for at least 3 months, backdated from 1 March 2020, but will be extended if necessary.
Company directors and other office holders can be furloughed under the scheme. However, only PAYE income - generally salary - can be furloughed, and so the common practice of taking most of directors' earnings as dividends will limit a director's claims to salary only.
The guidance is clear that where one or more individual directors are furloughed this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
Under the scheme no work can be undertaken by furloughed employees who remain technically employed by the company. In many scenarios, especially for sole directors, this would be untenable as all business would have to be technically suspended.
The guidance does make it clear that company directors can do what is reasonably necessary to fulfil the statutory obligations they owe to their company. These actions are not specified but do not include any work undertaken to generate commercial revenue or provide services to or on behalf of their company.
These measures also apply to salaried individuals who are directors of their own Personal Service Company (PSC). Salaried Members of Limited Liability Partnerships (LLPs) are also entitled to be furloughed but should refer to the terms of their LLP agreement in the first instance.
The Chancellor, Rishi Sunak, outlined a raft of further measures last night to support the UK’s ailing businesses, those affected by the forbidding COVID-19 outbreak. The list that follows summarises his announcements in the order they were announced:
To clarify, the previous two bullet points mean that all businesses in the retail, hospitality or leisure sector – shops, pubs, theatres, music venues, restaurants etc – will have no rates to pay for 2020-21, and if the rateable value of their property is below £51,000, they may also be able to claim a cash grant of up to £25,000.
The Chancellor also hinted that there would be further support for incomes and jobs. Perhaps an increase in statutory sick pay or increased access to State Benefits. Watch this space.
What is not clear is how we claim for the various loans and grants on offer. We offer the following suggestions although the actual processes finally agreed may differ from these:
Although not part of the Chancellor’s presentation, Chief Secretary of the Treasury, Steve Barclay, made a further announcement to parliament last night (17 March 2020). The government are postponing the roll-out of draconian IR35 measures to the private sector that would have affected the tax status of many incorporated contractors across the UK. This a welcome change as it will defer much disruption in this sector until the worst aspects of the COVID-19 outbreak have passed. The new rules are now slated to come into effect from 6 April 2021, a year later than planned.
Our best wishes to all who are directly affected by this unprecedented outbreak. And please get in touch if you need more information or support.
If your total assets exceed £325,000 then the excess will usually be subject to Inheritance Tax (IHT) at 40% when you die. A reduced rate of IHT of 36% applies where 10% or more of a deceased’s net estate is left to qualifying charities or Community Amateur Sports Clubs (CASCs).
The net value of an estate is the total value of its assets (gross value) after deducting the following:
If you are considering making a charitable legacy this can make the process very tax efficient and significantly reduce the 'cost' of your charitable donation. It can also be a worthwhile exercise to review your will and see if your estate will qualify for this relief, especially if you are at or near the 10% limit.
Remember, the 'net estate' value on which the 10% figure is based is after all relevant deductions. So, if the value of your net estate was £100,000, the estate would have to pay IHT of £40,000 (£100,000 x 40%). If a charitable legacy was left of £10,000, then the remaining chargeable assets in the estate of £90,000 would pay IHT of £32,400 (£90,000 x 36%). This represents a saving in IHT of £7,600.
It can sometimes be a complex procedure to ensure that an estate qualifies for the reduced rate of IHT. The value of certain charitable gifts (such as a piece of land) must be calculated to establish whether or not the 10% test is met. It is possible for an election to be made that the estate does not pay the reduced rate of IHT. This could happen where the administrative costs, such as valuing assets, outweigh the benefit of the reduced rate of tax.
The Chancellor of the Exchequer, Sajid Javid has announced that he is planning to hold his first Budget on Wednesday, 11 March 2020.
This announcement follows a turbulent period in Parliament that saw the Autumn 2019 Budget pencilled in for 6 November 2019 and then cancelled as Brexit was delayed. The Budget traditionally took place in the spring but was moved a few years ago to the autumn. It remains to be seen if the Budget schedule will move back to the autumn and if we will have another Budget later in 2020.
The Chancellor said:
'With this Budget we will unleash Britain’s potential – uniting our great country, opening a new chapter for our economy and ushering in a decade of renewal.'
This will be the first Budget after the UK left the EU and we are likely to see many new measures being announced. We are also told that at the Budget, the Chancellor will also update the Charter of Fiscal Responsibility with new rules, to help HM Treasury take better advantage of the current low interest rates.
The Treasury has also confirmed that the opportunity to submit representations for the Budget is now available. A Budget representation is a written representation from an interest group, individual or representative body to HM Treasury with the aim of commenting on Government policy and / or suggesting new policy ideas for inclusion in the Budget. Any submissions should be sent to HM Treasury by 7 February 2020.
Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in March.
The 31 January is not just the final date for submission of your Self-Assessment tax return but also an important date for paying tax. It is the final payment deadline for any remaining tax due for the 2018-19 tax year and any payment on account due for 2019-20.
If you miss the filing deadline then you will be charged a £100 fixed penalty if your return is up to 3 months late, regardless of whether you owed tax or not.
If you do not file and pay before 1 May 2020, then you will face additional penalties and interest. A daily penalty of £10 per day, up to a maximum of £900 (90 days) will be charged from 1 May 2020. Further penalties then apply if your return is still outstanding for more than 6 months after the 31 January filing deadline. From 1 August 2020 you will be charged a penalty of the greater of £300 or 5% of the tax due. If your return still remains outstanding one year after the filing deadline, then further penalties will be charged from 1 February 2021.
You can appeal against any penalties that have been issued and HMRC has said that they will treat those with genuine excuses, leniently. However, you need to act fast and the excuse must be genuine and HMRC can of course ask for evidence to support any claim. An appeal must usually be made within 30 days of receipt of the penalty.
If you do not have the necessary funds to make payment you should be pro-active and contact HMRC as soon as possible. Pretending the problem does not exist will not make the problem go away and will likely make matters worse.
If you are an employee and use your own money to buy things you need for your job, you can sometimes claim tax relief for the associated costs. It is usually only possible to claim tax relief for the cost of items used solely for your work.
You may also be able to claim tax relief for using you own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business related mileage.
Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. The approved mileage allowance payment rates are available where you use your own car on a business trip. Where the approved mileage rates are used, the payments to you are not regarded as a taxable benefit.
Where an employer pays less than the published rates, you could claim tax relief for the shortfall using mileage allowance relief. For all cars the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. The approved mileage rates are 20p per mile for bicycle travel and 24p per mile for motorcycle travel.
There is an additional passenger payment you can receive of 5p per passenger per business mile from your employer. This is available if you carry fellow employees in your car or van on journeys which are also work journeys for your colleagues.
We would be happy to help you review any vehicle related expenses to understand any tax relief that may be available.
|Capital Gains Tax|
Entrepreneurs' Relief (ER) can be valuable relief when selling your business, your shares in a trading company or your interest in a trading partnership. Where ER is available, Capital Gains Tax (CGT) of 10% is payable. This rate applies to qualifying lifetime gains of up to £10 million.
However, it is important to remember that there are qualifying conditions that must be met to ensure you are eligible to benefit from the lower 10% rate.
If you are selling all or part of your business, then both of the following must apply in order to qualify for relief:
If you are selling shares in the business you must be an office holder or employee of the company, own at least 5% of the company and have at least 5% of the voting rights for at least 2 years before you sell your shares. You must also be entitled to at least 5% of either the profits that are available for distribution and assets on winding up the company or the disposal proceeds if the company is sold.
The company must also be a trading company or the holding company of a trading group. If the number of shares you hold falls below 5%, because the company has issued more shares, you may still be able to claim ER. The rules are different if your shares came from certain Enterprise Management Incentive (EMI) schemes.
There is also a sister relief called Investor’s Relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for ER.
Now is the time that many businesses are planning a Christmas celebration for staff as well as possibly for partners/spouses, clients and prospective clients.
The cost of a staff party or other annual entertainment is generally allowed as a deduction for tax purposes. If you meet the various criteria outlined below, then there is no requirement to report anything to HMRC or pay tax and National Insurance. There will also be no taxable benefit charged to employees.
VAT incurred on Christmas parties for your staff can be recovered subject to the usual rules. If staff partners/spouses or clients are also invited to the event, the input tax has to be apportioned as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees make a contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.
It is important to pay attention to the nuanced tax rules to ensure that your party is tax exempt.
|Value Added Tax|
Important changes to the VAT rules for building contractors and sub-contractors are coming into effect from 1 October 2019. In a nut-shell, if you are subject to the Construction Industry Scheme (CIS) and if you are registered for VAT, from the 1 October 2019 you may need to change the way you account for VAT on supplies between sub-contractors and their contractor customers.
At present, sub-contractors registered for VAT are required to charge VAT on their supplies of building services to contractors. From 1 October, this approach is changing and sub-contractors will not add VAT to their supplies to most building customers, instead, contractors will be obliged to pay the deemed output VAT on behalf of their registered sub-contractor suppliers.
This does not mean that contractors, in most cases, are paying their sub-contractors’ VAT as an additional cost. When contractors pay their sub-contractors’ VAT to HMRC, they can claim back an equivalent amount as VAT input tax; subject to the usual VAT rules. Accordingly, the two amounts off-set each other.
The change is described as the Domestic Reverse Charge (DRC) for the construction industry. It has been introduced as an increasing number of sub-contractors have been registering for VAT, collecting the VAT from their customers, and then disappearing without paying the VAT collected to HMRC.
However, the change to DRC may create cash flow issues especially if you use the VAT Cash Accounting Scheme or the Flat Rate Scheme. We recommend that all affected CIS readers contact us so we can help you make the necessary changes to your invoicing and accounting software and reconsider the use of VAT special schemes if your continued use would adversely affect your cash flow.
|Capital Gains Tax|
Entrepreneurs' Relief (ER) can be a valuable relief when selling your business, your shares in a trading company or your interest in a trading partnership. Where ER is available Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. CGT on the disposal of chargeable assets is usually chargeable at 20%. There are a number of qualifying conditions that must be met in order to qualify for Entrepreneurs' Relief.
There is a lifetime limit that means that you can qualify for ER more than once, subject to an overriding total limit of £10m of qualifying capital gains. There are time limits that must be met to make a claim. To qualify for relief you should be either an officer or employee of the company and own at least 5% of the company and have at least 5% of the voting rights. There are also other qualifying conditions that must be met in order to qualify for the relief.
In a recent change, the minimum period during which certain conditions must be met in order to qualify for ER increased from one to two years (from 6 April 2019). If you are looking to sell your business, you need to be mindful of meeting all the necessary conditions in order to qualify for ER.
There is also a sister relief called Investor’s relief which has a separate £10 million lifetime cap. This is useful for investors who do not meet the officer or employee requirement for ER.
The new National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2019. The NLW first came into effect on 1 April 2016 and is the minimum hourly rate that must be paid to those aged 25 or over. The new rate for the NLW is £8.21 which is a 38p or almost 5% increase over the previous year.
The hourly rate of the NMW (for 21-24 year olds) increased to £7.70 (a rise of 32p). The rates for 18-20 year olds increased to £6.15 (a rise of 25p), and the rate for workers above the school leaving age but under 18 increased to £4.35 (a rise of 15p). The NMW rate for apprentices increased by 20p to £3.90.
Penalties may be levied if you get this wrong
It is important that you ensure that you have adopted the new rates as there are significant penalties for employers who are found to have paid workers less that they are entitled to by law. If you have underpaid an employee, you must pay any arrears immediately. There are penalties for non-payment of up to 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment can be up to £20,000 per employee and employers who fail to pay face a possible 15-year ban from being a company director as well as being publicly named and shamed.
There are a number of reasons why you may need to register with HMRC to submit a tax return. This includes if you:
If you need to complete a tax return for the first time, you should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a return needs to be filed.
So, if you had income that necessitated you registering for Self Assessment in the 2018-19 tax year, you will need to notify HMRC by 5 October 2019.
HMRC publishes a list of taxpayers who would usually be required to submit a Self Assessment return. The list includes:
In certain limited circumstances HMRC can also ask you to complete tax returns for other reasons.
Need help registering for Self-Assessment?
If you are unsure if you need to register, or would like assistance with the formal registration process, please call.
|Employment & Payroll|
New legislation comes into force from 6 April 2019 which requires all employers to provide an itemised payslip to all workers, i.e. not just to employees, and to show hours on payslips where the pay varies by the amount of time worked.
The government has now published guidance to help employers with the new rules on showing the hours on payslips, which includes several useful example case studies. The guidance is non-statutory and has no legal effect on the interpretation of the legislation, but it will assist employers to better understand it.
The new rules apply to payslips covering pay periods which begin on or after 6 April 2019.
The annual Capital Gains Tax (CGT) exemption for individuals is £11,700 for 2018-19. A husband and wife each benefit from a separate exemption. Same-sex couples who acquire a legal status as civil partners are treated in the same way as married couples for CGT purposes.
CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT applies (18% and 28%) to gains on the disposal of residential property (apart from a principal private residence).
The usual due date for paying CGT to HMRC is the 31 January following the end of the tax year in which a capital gain was made. This means that CGT will be payable for any gains made during 2018-19 on or before 31 January 2020. The usual way to report a gain is to complete the relevant sections of the Self Assessment tax return.
HMRC also offers a 'real time' Capital Gains Tax service that allows taxpayers to report any gains and pay straight away. Using this service would obviously mean paying any CGT due before the official deadline so we would assume that the use of this service would only be appealing under limited circumstances. Taxpayers using this service must wait for HMRC to issue a payment reference number before making payment.
There are also special payment and reporting requirements if you live abroad and sell a UK residential property, and you must inform HMRC within 30 days of the sale. The notification must be made whether or not there is any non-resident CGT to be paid. Any non-resident CGT that is due must also be paid within 30 days of the conveyance date. There are penalties for late payment, and we would strongly advise that you monitor any CGT due and ensure the relevant payment deadlines are met.
HMRC has issued an updated version of their online guidance on Genuine HMRC contact and recognising phishing emails and texts. The guidance provides a current list of genuine messages from HMRC. This includes email messages, text messages and telephone contacts from HMRC.
HMRC is currently carrying out compliance checks for midsized businesses, charities and public bodies by way of a compliance check interview over the phone. If you are unsure if a request is genuine you can ask the HMRC staff member to send an email while you are on the call to confirm their identity. Their email address should have their name and end in @hmrc.gsi.gov.uk. You can also call the relevant HMRC general enquiry helpline to check if a request is genuine. HMRC may also ask for business records to be sent by post or electronically, by a secure platform.
Until December 2018, HMRC is also working with Populus, an independent research agency to carry out stakeholder engagement research. First contact will be by email with follow up contact by email and telephone. Populus may send further emails to stakeholders or telephone them to encourage them to take part in the research.
Although these communications are genuine, taxpayers should still be wary of receiving messages that are purported to come from HMRC. Fake email and text messages can appear to be genuine, but clicking on a link from these messages can result in personal information being compromised and the possibility of computer viruses affecting your computer or smartphone. If you are unsure as to the validity of any message it should not be opened until the sender can be verified.
Churchill Groves understands that your privacy is important to you and that you care about how your personal data is used and shared online. This privacy statement describes how and why we collect and use personal data provided to us. We may use personal data provided to us for any of the purposes described in this privacy statement or as otherwise stated at the point of collection.
Personal data is any information relating to an identified or identifiable living person. Churchill Groves Chartered Accountants processes personal data for a number of purposes and the means of collections, lawful basis of processing, use and retention periods for each purpose may differ.
We take the security of all the data we hold very seriously. We use reasonable and appropriate physical, technical and administrative procedures to safeguard the information we collect and process. We have a framework of policies, procedures and training in place covering data protection, confidentiality and security and regularly review the appropriateness of the measures we have in place to keep the data we hold secure.
When and how we share personal data and locations of processing
We will only share personal data with others when we are legally permitted to do so. When data is shared, Churchill Groves put contractual arrangements and security mechanisms in place to protect the data and to comply with our data protection policy.
Personal data held by us may be transferred to:
Data Controller and contact information
The data controller is Churchill Groves. If you have any questions about this privacy statement or how and why we process personal data please contact Melanie Brown at:
Churchill Groves Chartered Accountants
4 Cannock Road
Your rights and how to exercise them
Individuals have certain rights over their personal data and data controllers are responsible for fulfilling these rights.
Access to personal data
You have a right to access any personal data held by us as a data controller. This right may be exercised by emailing us at email@example.com. In accordance with applicable law we may charge for a request for information. We will respond to any requests for information within the legally required time limits.
Amendment of personal data
To update personal data submitted to us, you may email us at firstname.lastname@example.org. When practically possible, once we are informed that any personal data processed by us is no longer accurate we will make corrections.
Withdrawal of consent
Where we process personal data based on consent, individuals have the right to withdraw consent. We do not generally process personal data based on consent as we can usually rely on another legal basis. To withdraw consent to our processing of your personal data please email email@example.com.
Other data subject rights
As well as the rights of access and amendment individuals may have other rights in relation to the personal data we hold, for example the right to erasure, to restrict or object to our processing of personal data and the right to data portability. If you wish to exercise any of these rights please send an email to firstname.lastname@example.org.
We hope you won’t ever need to but if you do want to complain about our use of personal data please send an email to email@example.com. We will look into and respond to any complaints we receive. You also have the right to lodge a complaint with the Information Commissioner’s Office.
|Autumn Budget statement||Budget Summary|
The Prime Minister announced at the Conservative Party conference that the end of austerity was in sight. Recent tax revenues have exceeded expectations, and although there was an expectation that these declarations and indicators would herald a relaxation of fiscal policy, the Chancellor is mindful of the potential fallout next year when we leave the EU, with or without a deal. The Chancellor mentioned he would consider a Spring Budget in the event of a ‘no deal’ Brexit.
And so, prudence seems to have directed his thinking.
The remainder of this update confirms tax and other changes announced that will affect businesses and other taxpayers from next year.
Personal Tax and miscellaneous matters
Personal Tax allowance
The personal Income Tax allowance for 2019-20 will be increased to £12,500 (2018-19 £11,850). It will remain at this increased level for two years.
Changes to personal tax allowances will apply to the whole of the UK.
Income Tax bands, rates and the dividend allowance
The Income Tax bands for 2019-20 have been increased. They are:
As a result, the higher rate threshold will increase to £50,000 from April 2019. There is no change in Income Tax rates and the tax rates applied to dividend income.
Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.
Earlier payments of Capital Gains Tax (CGT)
UK residents will be required to make a payment on account for CGT due on a residential property sale. The new regulations will also affect disposals by non-UK residents.
The changes will apply from April 2019 for non-UK residents and April 2020 for UK residents.
Capital Gains Tax Private Residence Relief changes
From April 2020, the government intends to make two changes to the Private Residence Relief:
CGT Entrepreneurs’ relief
Two changes are coming into effect:
The first measure will have effect for disposals on or after 29 October 2018.
The second measure will have effect for disposals on or after 6 April 2019, unless a business ceased before 29 October 2018.
Inheritance Tax: changes to the nil-rate band
From 29 October 2018, amendments to the residence nil-rate band will provide certainty as to when a person is treated as “inheriting” property and clarify the “downsizing” rules.
Rent-a-room relief change cancelled
The expected change to require shared occupancy to qualify for rent-a-room relief is not to be introduced.
For 2019-20, the ISA limit will remain at £20,000. The limit for Junior ISAs and the Child Trust Fund is to be increased to £4,368.
Limit on pensions’ savings to be increased
The life time limit on pension savings is to be increased in line with inflation to £1,055,000 for the 2019-20 tax year.
Stamp duty first time buyers’ relief in England
This relief is being extended to cover the purchase of qualifying shared ownership property and will be effective for transactions on or after 29 October 2018 and will be backdated to 22 November 2017.
The first £300,000 of an initial share purchased will not be liable to SDLT based on the market value of the property. The remainder of the value over £300,000 will be charged at 5%. No SDLT will be chargeable on the associated lease. Relief is not extended to further shares purchased and will not apply to purchases of property valued at over £500,000.
Tobacco duty increases confirmed
The rates for duty for all tobacco products increased by inflation plus 2% from 6pm, 29 October 2018.
Hand-rolling tobacco also rose by an additional 1% above this increase, to 3% above the RPI from the same date.
Duties on beer, wine and spirits
There are to be no increases to the duty charged on beers, spirits or cider, except for certain ciders treated as high strength for duty purposes.
Wines and high strength sparkling cider drinks will see duty increased in line with inflation from 1 February 2019.
Vehicle excise duty
The VED rates for cars, vans and motorcycles is due to increase by reference to the RPI from 1 April 2019.
Fuel duty increase frozen
Duty increase is frozen for the ninth consecutive year.
Air passenger duty (APD) increases
Travellers should note that APD will increase in line with inflation for long-haul flight passengers only. The new rates will apply from 1 April 2020.
Business Tax changes
Corporation Tax rates to remain at 19% for the financial year beginning 1 April 2019.
Employment Allowance reform
From 2020, the government will legislate to restrict access to the £3,000 NIC Employment Allowance, to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers will have their contributions aggregated for this purpose.
Annual Investment Allowance increased
The Annual Investment Allowance (AIA) is to be increased from the present £200,000 to £1m from 1 January 2019 to 31 December 2020. It is then presumed that this will return to the £200,000 limit. This should provide a welcome boost to business investment during the Brexit transition period.
Please note that not all capital purchases qualify for this relief. Please call for clarification of what is covered if you are considering a significant acquisition.
R&D tax credit claims to be restricted
From 1 April 2020, the amount of payable tax credit that can be claimed under the R&D SME tax relief scheme will be limited to three times the company’s total PAYE and NIC payments for the period. Any loss that cannot be surrendered can be carried forward and used against future profits.
The government will consult with interested parties on this issue.
The changes recently made to IR35 arrangements in the public sector are to be rolled out to the private sector. The changes will come into effect from April 2020 and small firms will be exempt. Firms that have concerns that they may be affected should contact us for more details.
Car and van fuel benefit charge increases
For 2019-20, these will increase by reference to the September 2018 Retail Prices Index.
A new 2% digital services tax
From April 2020, the major social media, search engine and online retailers will be subject to a 2% tax on revenues generated from UK users of their services. The Chancellor did indicate that if an internationally recognised levy was introduced, that the UK may fall into line in place of this 2% UK tax.
At last, rates relief for High Street retailers
In a much anticipated announcement, smaller retailers in England, occupying shop premises with rateable values under £51,000, should benefit from a cut of one-third in their business rates bills for 2 years from April 2019.
They should also benefit from £675m to be spent on improvements by councils to help transform high streets, the redevelopment of empty shops as homes and offices and the repurposing of old and historic buildings.
In a humorous exchange, the Chancellor also announced 100% business rates relief for public lavatories.
For those readers who are concerned about the environment they will be pleased to note that the government is to consider introducing a tax on the production and importing of plastic packaging from April 2022.
The charge will apply to plastic packaging that does not contain at least 30% recycled plastic.
Changes to the apprentices’ levy
From April, larger employers will be able to invest up to 25% of their apprenticeship levy to support apprentices in their supply chain. Additionally, some smaller employers will pay half what they currently pay for apprenticeship training: a reduction from 10% to 5%. The government will fund the remaining 95%.
Charities small trading exemption increase
The limits that exempt small scale trading by charities from UK tax are to be increased from the current £5,000 – where turnover is under £20,000 – and £50,000 where turnover exceeds £200,000. These £5,000 and £50,000 exemptions are to be increased to £8,000 and £80,000 respectively.
The changes will apply from 6 April 2019 for unincorporated charities and from 1 April 2019
A new structures and buildings allowance (SBA)
This will provide tax relief for qualifying capital expenditure on new non-residential buildings where all contracts for the physical construction works are entered into on or after 29 October 2018.
Relief will not include the cost of land or dwellings.
Tax relief for electric charge points to be extended
The present first year allowances available for the installation of electric charge points is to be extended for four years, until the end of the financial year 2022-23.
Reduction in tax writing down allowance
The special rate of writing down allowance is being reduced from 8% to 6% from April 2019.
Supposedly, this is intended to closer align tax depreciation with commercial depreciation rates.
The Finance Bill will contain a number of measures that will continue to improve HMRC’s campaigns to reduce the impact of tax avoidance schemes.
Tax to be protected in insolvency
From 6 April 2020, the government will change the insolvency rules so that taxes collected on behalf of employees and customers, primarily employees PAYE and NIC and customers VAT, will be treated as a preferential creditor on winding up rather than distributed to other creditors.
Company loss relief loop-holes to be closed
Most of the changes will apply from April 2019 and will prevent relief for carried forward losses being claimed in excess of that intended by legislation.
The changes will include:
VAT: reverse charge process to be extended to construction services
This change, to extend the reverse charge process to the building and construction industry is due to come into effect from 1 October 2019.
This will place the onus for dealing with the VAT charge due on subcontractors’ bills to the main contractor.
This will cause accounting rather than cash flow issues for main contractors as they will add entries to their VAT returns to pay the subcontractors VAT, but then deduct the same amount as input VAT on the same return.
The aim is to stop subcontractors adding VAT to their bills and then disappearing without remitting the VAT to HMRC.
VAT registration threshold – no change
The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.
The 2017-18 tax return deadline for taxpayers who continue to submit paper Self-Assessment returns, is 31 October 2018. Late submission of a Self-Assessment return will become liable to a £100 late filing penalty. The penalty usually applies even if there is no liability or if any tax due is paid in full by 31 January 2019.
We would recommend that anyone still submitting paper tax returns, consider the benefits of submitting the returns electronically and benefit from an additional three months (until 31 January 2019) in which to submit a return.
Taxpayers with certain underpayments in the 2017-18 tax year can elect to have this amount collected via their tax code (in 2019-20), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts, and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.
Daily penalties of £10 per day will also take effect if the tax return is still outstanding three months after the filing date up to a maximum of £900. If the return still remains outstanding further higher penalties will be charged from six months and twelve months late.
Taxpayers that received a letter informing them that they have to submit a paper return after 30 July 2018, have an extended deadline which runs for three months from the date they received the letter to submit a paper return.
The maternity allowance is a financial benefit for pregnant women who are self-employed, who are working but do not qualify for statutory maternity pay (SMP) or who have recently stopped working. The maternity allowance is paid directly by the Department for Work and Pensions for up to 39 weeks for qualifying applicants. An application must be made for the maternity allowance using the Department for Work and Pensions - Maternity Allowance claim form (MA1).
The amount of maternity allowance payable (if any) depends on eligibility. It can range from £145.18 a week or 90% of your average weekly earnings (whichever is less) for 39 weeks, £27 a week for 39 weeks or £27 a week for 14 weeks.
If you are self-employed you must have paid Class 2 National Insurance for at least 13 of the 66 weeks before your baby is due in order to get the full amount of maternity allowance. If you haven't paid Class 2 National Insurance, you will receive just £27 a week for 39 weeks assuming all the other eligibility conditions are met. You may be able to make extra National Insurance payments to qualify for the higher rate.
If you are an employee (and don’t qualify for the SMP) you may be able to get the maternity allowance if in the 66 weeks before your baby is due you were:
SMP on the other hand is a weekly payment payable to qualifying employees by their employer at:
Your employer may also offer further additional benefits which includes higher maternity payments, however this is at their discretion and is not legally required.
|The EU General Data Protection Regulation (GDPR) came into force on 25 May 2018, along with most of the provisions in a new Data Protection Act 2018 (including those provisions relevant to processing in the employment relationship). The previous Data Protection Act 1998 has now been repealed. The new data protection laws give people more control about how their personal data is used, shared and stored and they require organisations to be more accountable and transparent about how they use such data.
As well as producing a wide range of new and updated guidance for organisations to assist them with their GDPR compliance, which is all available on its website, the Information Commissioner’s Office (ICO) has launched a long-term campaign, “Your Data Matters”, to help people understand why their personal data matters and how they can take back control.
The ICO’s resources for organisations include:
The Data Protection (Charges and Information) Regulations 2018 also came into force on 25 May 2018 and they have introduced a new data protection charging structure for data controllers. There is no longer a requirement to pay the ICO a notification fee. Instead, there are three tiers of charges which apply unless all processing undertaken by the data controller is exempt. For very small organisations with no more than ten members of staff or which have a maximum turnover of £632,000, the fee is £40, organisations with no more than 250 members of staff or which have a maximum turnover of £36 million must pay £40 and larger organisations must pay £2,900. The fee is reduced by £5 for paying by direct debit.
There are now just 3 weeks to go until the new data protection regulations become law on 25 May 2018. The new provisions known as the General Data Protection Regulation (GDPR) represent a step change in data protection regulation, that will impose much stricter controls over the way that businesses collect, store and manage the personal data of customers, suppliers, staff and other contacts. For many businesses, the new rules are more onerous than the current Data Protection Act (DPA) rules.
New requirements, not in the present Data Protection Act 1998, include:
The GDPR is an EU-wide initiative and as the UK will continue to be part of the EU when the new rules enter into force, the provisions will apply in the UK as elsewhere in the EU. It is expected that the GDPR will remain UK law after Brexit. However, there may be changes to ensure there are no gaps in the UK’s data protection regime.
If you have not already begun to prepare for the GDPR, we would strongly recommend that you make a start. The Information Commissioner's Office (ICO) has published a number of documents to help businesses prepare for the changes.
As a general rule there is no CGT payable on the disposal of a property which has been used as the main family residence. Conversely, an investment property which has never been used will not qualify for relief. This relief from CGT is commonly known as private residence relief (PRR).
It is increasingly common for taxpayers to own more than one home and there are a number of issues that home owners should be aware. An individual, married couple or civil partnership can only benefit from CGT PRR on one property at a time. However, it is possible to choose which property benefits from a CGT exemption when it comes to be sold by making an election.
This must be done by nominating one property as your main home by writing to HMRC and specifying (with the full address) which home you want to nominate. All owners of the property must sign the letter. If you want to nominate a home you must do this within 2 years on every occassion your combination of homes changes. You must have also lived in the house as your main or only residence at some point in the past.
There are special rules for overseas property and for non-UK residents. It is important to carefully consider the timing and frequency of changing an election. We would be happy to help you consider your position and ensure the optimum tax structure for your needs.
If a property has been occupied at any time as an individual’s private residence, the last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold.
One of the most often used and valuable of the capital gains tax (CGT) exemptions concerns the sale of the family home. As a general rule there is no CGT on a property which has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief.
Taxpayers are usually entitled to full relief from CGT where all the following conditions are met:
The last 18 months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. This means that a qualifying property that is rented out for up to 18 months before being sold will remain eligible for full private residence relief. If the property has been let for more than 18 months the seller will be entitled to private residence relief for the time they lived in the property in addition to the last 18 months of ownership. Any further gain will be liable to CGT.
Prospects for growth, especially for productivity have been downgraded, but the Chancellor was bullish in his forecasts for investment and the Government’s intention to sort out the slow pace of house building in the UK. A few non-tax comments of note were:
Our summary of a selection of specific tax changes and other budget announcements for 2018-19 and future years follow.
Personal Tax and miscellaneous matters
Personal Tax allowance
The personal allowances for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.
Income Tax bands, rates and the dividend allowance
The Income Tax bands for 2018-19 have been increased. They are:
There is no change in Income Tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.
The Scottish parliament sets the basic rate limit for Scotland meaning that higher rate taxpayers may pay more tax in 2018-19.
Marriage Allowance extended
There is a small increase in this allowance to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer.
From 29 November 2017, the Government will also allow Marriage Allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.
Changes will be made to ensure that payments from an offshore trust intended for a UK resident individual do not escape tax when they are made via an overseas beneficiary or a remittance basis user. This will take effect from April 2018.
Abolishing Stamp Duty Land Tax for certain first-time buyers
With immediate effect, first-time buyers will pay no stamp duty on homes costing no more than £300,000.
First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660 on the average first-time buyer property.
80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.
National Living Wage (NLW) and National Minimum Wage (NMW) increases
From April 2018, the NLW will increase from the present £7.50 per hour to £7.83 per hour.
From the same date, the NMW rates will also increase to:
Fuel duty no change
For 2018, the fuel duty will remain frozen, for the eighth consecutive year.
New railcard for the 26 to 30 age group
No doubt to win back the support of the younger generation, the government will work with the rail industry to introduce a new railcard from Spring 2018.
Duty frozen for most alcoholic drinks
The duty on beer, wine, cider and spirits to be frozen. However, cheap, high strength cider will be subject to a new band of duty from 1 February 2019.
Duty on tobacco products to increase
The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation, with effect from 6pm, 22 November 2017.
Universal Credit (UC) changes
In response to recent adverse publicity the Government has agreed to various changes that are intended to ease the financial hardship for new claimants. They include:
Pension lifetime allowance increased
The lifetime allowance will increase to £1,030,000 from April 2018.
Diesel Vehicle Excise Duty (VED) change
From April 2018, the first year VED (car tax) rate for diesel cars that don't meet the latest standards will go up by one band. The Chancellor emphasises this is cars only, and that the money will go to a new Clean Air Fund.
Business Tax changes
Corporation Tax changes
Although there is no change to the rate of Corporation Tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.
£64m for construction and digital training courses
The new funding will be split as to:
Legislation has been revised to be more compatible with commercial arrangements for allocating shares of profit, and to avoid additional administrative burdens for taxpayers. The changes will have effect for the tax year 2018-19 and subsequent tax years.
Business rates changes
From April 2018, business rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.
Rates revaluations will now be undertaken every 3 years rather than the present 5 years. This will start after the next rates revaluation due during 2022.
Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.
Venture Capital Schemes
Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’.
Incentives to encourage VCTs towards higher risk investments will include:
EIS and VCTs will also see increased limits for investments in knowledge-intensive companies:
The Government will legislate to:
The changes will have effect on and after 6 April 2018. This measure is subject to normal state aid rules.
R & D expenditure credit increase
The Government will legislate to increase the rate of the R&D expenditure credit from 11% to 12%, to support business investment in R&D.
This change will have effect on and after 1 January 2018.
Diesel car supplement increase
The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).
This change will apply to all diesel cars registered on or after 1 January 1998 that do not meet the Real Driving Emissions (Step 2) standards.
As existing self-assessment tax filers will be aware, the deadline for online submission of your 2016-17 self-assessment tax return is 31 January 2018. This is also the date that the payment is due for the balance of any self-assessment liability for 2016-17, and the due date for any payment on account due for the current 2017-18 tax year.
There are penalties for late self-assessment returns including an automatic £100 penalty for submitting a late return even if there was no tax to pay or the tax due was paid on time.
The following additional penalties apply to self-assessment returns that are filed late:
If you are struggling to meet the 31 January 2018 filing deadline we can help.
The filing deadline for taxpayers with certain underpayments in the 2016-17 tax year, and who want to apply to have tax collected through their tax code (in 2018-19), is even earlier - 30 December 2017.
Completing your 2017 tax return will also ensure that you know how much you will need to pay HMRC at the end of January 2018.
The Chancellor has announced that the Autumn Budget 2017 will be held on Wednesday, 22 November 2017. The announcement was made on the GOV.UK website and included a video message from the Chancellor, Philip Hammond. In the video, the Chancellor said that the budget will 'set out our thinking on how to keep the economy strong and resilient and fair. An economy that works for everyone'.
This will be the first Budget to take place in November following the government’s decision to switch to a new cycle with the annual Budget taking place in the autumn. In order to commence the new schedule we have the unusual scenario of two Budget dates in 2017.
The Budget cycle will then continue annually from autumn 2018. Each spring also starting in 2018 there will be a Spring Statement. The government retains the option to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.
Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor’s speech in November.
This Budget is likely to bring a number of important announcements as the government negotiates Britain’s exit from the EU, deals with rising inflation and an uncertain economic outlook.
As a general rule, the fall-back position for couples who live together with their spouse or civil partners is that property income held in joint names is divided 50:50. This is regardless of the actual ownership structure. However, where there is unequal ownership and the couple want the income taxed on that basis a notification must be sent to HMRC together with proof that the beneficial interests in the property are unequal. This is done using Form 17 published by HMRC.
A Form 17 declaration can only be made by spouses or civil partners that are living together and who own property in unequal shares and who wish to be taxed on income arising in the same proportion. Couples that are separated or in some other type of union cannot make a Form 17 declaration. The declaration is only valid if both partners agree. If one spouse / partner does not agree then the income will continue to be treated on a 50:50 basis even if the ownership structure is different.
A Form 17 declaration stays in place until there is either a change in the status of the couple, i.e. separation or divorce or a change in the ownership structure. If either of these occur the 50:50 income split will reapply.
There are a number of scenarios where a form 17 cannot be used. These include where a husband and wife or civil partners own property as beneficial joint tenants, if the property is let as furnished holiday accommodation and for partnership income.
Where property is held in unequal shares, making a form 17 declaration can be advantageous if the majority owner of the property pays tax at a lower marginal rate than their partner. We would be happy to review any jointly owned property holdings of readers to see if any tax savings are possible using this planning option.
A new timetable for the introduction of Making Tax Digital (MTD) has been announced. The new regime was due to start from April 2018, but was delayed by the snap general election earlier this year. The government now appears to have listened to concerns that the roll-out of the MTD was moving too fast. The original proposals would have required most businesses to upload quarterly figures to HMRC.
Under the new implementation plan these obligations have been substantially changed. They are:
As VAT returns are already submitted on a quarterly basis, the change of pace of MTD implementation means that all businesses and landlords will have at least two years to adapt to the changes before being asked to keep digital records for other taxes.
HMRC’s MTD pilot tests will be extended to pilot MTD/VAT for businesses later this year, with a more extensive testing phase starting in the Spring of 2018. This means that there will be far more time to test the system and iron out any issues before the system goes live.
Director shareholders are wont to ensure that they pay the lowest amount of tax and NIC consistent with their obligations under the relevant legislation. For many years, director shareholders have followed a high dividend, low salary extraction strategy. This tended to reduce Income Tax and NIC contributions. The dividend changes that came into effect in April 2016, took some of the shine off this strategy, but taking dividends in preference to salary is still effective. Presently, there is an annual tax-free limit of £5,000 and dividends drawn in excess of this amount are taxed at 7.5%, 32.5% or 38.1%, it all dependent on where the dividend income slots into the basic, higher or additional rate Income Tax bands. Also, dividends continue to be exempt from a National Insurance Contributions (NIC) charge.
Planning note: It is important to remember that dividends can only be taken from retained profits, if your company has no retained profits you cannot take dividends. There are also other profit extraction options: paying interest on any funds directors may have loaned their company is one, or re-examining tax-free benefits. Further, director shareholders looking at implementing the high dividend, low salary strategy should ensure that they take at least a minimum salary to ensure that they maintain sufficient contributions for State Pension purposes. This is currently, 2017-18, a minimum of £157 per week or £8,164 per year.
We can help you examine your options and advise you on a suitable strategy to fit your circumstances. Please call to discuss.
Employers are reminded that the deadline for submitting the 2016-17 forms P11D, P11D(b) and P9D is 6 July 2017. P11D forms are used to provide information to HMRC on certain benefits and expenses that employees and directors receive during the tax year such as company cars, loans and private medical insurance.
Since 6 April 2016, employers may register on a voluntary basis to report and account for tax on certain benefits and expenses via the RTI system rather than by submitting Form P11D at the tax year end. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments. Employers making online submissions will need to correct any problems with the forms before being able to file electronically. Employers who submit paper forms with errors will receive the forms back to be corrected and re-submitted.
Where no benefits have been provided from 6 April 2016 to 5 April 2017 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or complete the '2016 to 2017 Employer - No return of Class 1A' form. A 'no return to make' form is available online. Employers are also required to provide, for each employee for whom a form P11D is due, a statement of the information shown on the employee’s form. The statement should also be provided by 6 July 2017.
|Spring 2017 Budget||Budget Summary|
Budget Statement 8 March 2017
Pundits are mixed in their interpretation of the prospects for the UK economy as we approach the formal Brexit disengagement. They are keen to see encouragement for industry to invest and export rather than more of the same debt fuelled consumer expenditure. Has Philip Hammond succeeded in meeting these demands, and will he be able to bank any hard-won savings for this financial year?
Our summary of a selection of specific tax changes and other budget announcements for 2017-18 and future years follow.
Personal Tax and miscellaneous matters
Personal Tax allowance
The personal allowances for 2017-18 is £11,500 (2016-17: £11,000).
The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,150 in 2017-18. Couples can only make a claim if one partner has spare personal tax allowance and the other is a basic rate tax payer.
Income Tax rate bands
The levels for 2017-18 are:
If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).
The threshold at which the 45% rate starts is unchanged at £150,000.
For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).
Dividend allowance to be reduced
From 6 April 2018, the tax-free dividend allowance of £5,000 is to be reduced to £2,000. Director shareholders of small companies that have adopted the strategy of minimising salary and maximising dividends will likely pay more Income Tax on their dividend income because of this change.
Capital Gains Tax (CGT)
There are no changes to the basic CGT rates for 2017-18. The CGT on the disposal of chargeable assets, apart from residential property, remains at:
The higher rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt. The annual exempt amount for 2017-18 is £11,300 (2016-17: £11,100).
Money Purchase Allowance reduced to £4,000 from £10,000
This will restrict the amount of tax relieved contributions that can be made by an individual, into a money purchase arrangement, who has accessed their pension savings from April 2017.
Reminder for non-doms to be bought into the IHT net
A reminder, that from April 2017, Inheritance Tax will be charged on all UK residential property even when indirectly held by a non-domiciled person through an off-shore structure.
Duty on wine, beer, spirits and alcohol will increase in line with the Retail Prices Index from 13 March 2017. These measures will typically add 2p to the price of a pint of beer, 1p to the price of a pint of cider, 36p to a bottle of whisky and 10p to a bottle of wine.
Tobacco duty rates
Changes to excise duties mean that a pack of twenty cigarettes will increase by an average of 35p, an additional 17p per 10 grams of cigars, and a 35-gram pouch of tobacco by 42p.
There will be no increase in fuel duties. At the end of 2017-18 this will be the 7th year fuel duty has been frozen.
New National Savings investment clarified
From April 2017, individuals aged 16 years or older will be able to invest in the new NS & I Investment Bond. It will be available for one year from April 2017. Minimum deposit is £100, maximum deposit allowed £3,000. The rate of interest applied is 2.2%.
Lifetime ISA previously announced
From April 2017, any person aged from 18 to 40 will be able to save into a new Lifetime ISA until the age of 50.
Up to £4,000 can be saved each year and savers will receive a government bonus of 25% – that is a bonus of up to £1,000 a year.
Some or all of the money can be used to buy a first home, or it can be kept until age 60.
Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.
After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 25% charge.
ISA limit from April 2017
The ISA savings limit for 2017-18 is confirmed as £20,000.
Business tax changes
Corporation Tax rate
The main rate of Corporation Tax from 1 April 2017 will be reduced to 19%. A further reduction has been announced to 17% from 1 April 2020.
NIC increases for the self-employed
To narrow the perceived imbalance in NIC charges for the employed and self-employed, Philip Hammond announced increases in the self-employed Class 4 NIC contributions.
The increases are:
The earlier increase is timed to coincide with the cessation of Class 2 contributions.
Business rates increases
In response to the negative publicity regarding increases in business rates in England, particularly for retailers, the Chancellor has stepped in with help for smaller businesses.
There are three areas of relief announced:
1. Small businesses that find they are losing Small Business Rates Relief from April 2017, will have any annual rates increase capped at the higher of £600 or the transitional relief cap.
2. Local authorities will be funded to provide an element of discretionary relief, and
3. Public houses with a rateable value of up to £100,000 will benefit from a fixed £1,000 business rate discount – subject to State Aid limits if multiple properties are owned. This discount is available for one year from April 2017.
Local authorities will be fully compensated for any loss of income because of these measures.
Making Tax Digital
The Chancellor announced a one year deferral from Making Tax Digital for Business for unincorporated businesses and landlords with turnovers below the VAT threshold. This means that businesses, self-employed people and landlords with income of less than the VAT threshold will not have to start quarterly reporting until 2019.
Changes to trading and property income allowances
The two previously announced £1,000 tax-free allowances for small scale trading or letting will still be introduced from April 2017, but will now include restrictions if the income or rents are generated by dealings with companies or partnerships of which the recipient is a participator or partner.
Loss relief reform
Legislation is to be introduced to reform the rules governing corporate losses carried forward from earlier periods. The changes will:
Corporation Tax relief for museums and galleries
Rates for 2017-18, already announced, are 25% for touring exhibitions and 20% for non-touring exhibitions. Following consultation, the draft legislation is to be amended to allow for exhibitions that have a performance element, but where the live performance is not the main focus of the exhibition.
VAT registration and deregistration limits
From 1 April 2017:
Avoidance and evasion
The government will continue to challenge and seek to overturn artificial arrangements whose sole purpose seems to be a reduction of tax.
Making Tax Digital (MTD) is likely to be the most wide ranging change to the UK tax system since the introduction of Self Assessment many years ago and will fundamentally change the way businesses, the self-employed and landlords interact with HMRC. The introduction of MTD over the coming years will see HMRC move towards a fully digital tax system by 2020. The introduction of MTD was first announced as part of the March 2015 Budget measures.
A number of consultations were launched in the summer of 2016 and HMRC has now published its responses to the consultation documents together with draft legislation.
HMRC has confirmed that under MTD:
HMRC is still reviewing a number of areas including the exemption threshold and deferring changes for some small businesses with final decisions to be announced before legislation is introduced later this year. There has been a lot of pressure on HMRC to increase the exemption threshold to a more reasonable figure such as the VAT threshold.
In April 2016, the eligibility to claim the employment allowance was removed from limited companies with a single director and no other employees. This measure was 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.
We wanted to remind anyone still receiving the employment allowance, that is no longer entitled to do so, should ensure that they stop claiming the allowance. This can be done by selecting 'No' in the ‘Employment Allowance indicator’ field when submitting an Employment Payment Summary (EPS) to HMRC. HMRC can charge interest and penalties on any overpaid employment allowance and is likely to take a stronger stance in enforcing this over the coming months.
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.
The employment allowance (currently £3,000 per year) is available to most businesses and charities to be offset against their employers Class 1 NIC bill. The allowance can be claimed as part of the normal payroll process. An employer can claim less than the maximum if this will cover their total Class 1 NIC bill. Eligible employers that have not yet done so can still claim for the current 2016-17 tax year (as well as make a backdated claim for one further tax year).
The Finance Bill 2017 draft legislation was published on 5 December 2016. The Bill contains the legislation for many of the tax measures that have been announced by the government. The Bill is open for comment until 1 February 2017 with the final details being confirmed in the spring Budget 2017.
The majority of the measures in the Bill were announced as part of the Autumn Statement on 23 November 2016 as well as changes announced at Budget 2016 which have not already been enacted. The Bill is likely to receive Royal Assent in the summer of 2017 with most measures taking retrospective effect from the start of the new tax year on 6 April 2017.
The March 2017 Budget will be the last to be held during springtime with a second Budget taking place next year in autumn 2017. The Budget cycle will continue from autumn 2018 and beyond. There will be some transitional changes as the new timetable is introduced.
From April 2017, the personal tax allowance is due to increase from the present £11,000 to £11,500. From the same date, the amount you can earn at the basic rate of tax will rise from £43,000 to £45,000. The Chancellor also committed to increasing the basic personal allowance to £12,500, and the higher rate tax threshold to £50,000, by 2020-21.
Other measures include the retention of the starting rate of savings Income Tax band at its current level of £5,000 for 2017-18, indexing the personal allowance in line with the Consumer Price Index once the £12,500 figure has been reached and increases to the ISA, Junior ISA and Child Trust Fund subscription.
There will also be changes to business tax, non-domicile rules, National Insurance thresholds alignment from April 2017 as well as the abolition of Class 2 NICs from April 2018.
The deadline for submitting 2015-16 Self Assessment tax returns online is 31 January 2017. Taxpayers should also be aware that payment of any tax due should also be made by this date. This includes both the payment of any balance of Self Assessment liability for the 2015-16, plus any payment on account due for the current 2016-17 tax year.
Any taxpayers that are filing online for the first time should ensure that they register to use HMRC's Self Assessment online service as soon as possible. Once registered it can take up to seven working days for an activation code to be sent by mail. All filings should now be made online as the deadline for submitting paper returns for 2015-16 has expired. There are penalties for late Self Assessment returns including an automatic £100 penalty for submitting a late return even if there was no tax to pay or the tax due was paid on time.
Last year 2,044 taxpayers took the time to file their tax return online on Christmas Day and a record-breaking 24,546 taxpayers filed their tax returns on New Year's Eve. There were even 600 taxpayers up and down the country who took the time to submit their return between midnight and 10am on New Year's Day! Plan early and try to avoid working during this holiday period!
Taxpayers with certain underpayments in the 2015-16 tax year can elect to have this amount collected via their tax code (in 2017-18), provided they are in employment or in receipt of a UK-based pension. The deadline to apply to have tax collected through your tax code is 30 December 2016.
The new incumbent at number 11 Downing Street, Philip Hammond, had his first opportunity to show us what he had in mind for the UK economy when he presented his Autumn Statement on the 23 November.
The usual rash of speculation pointed to easing the predicament of the "just managing", encouragement for businesses to invest, and an easing of the previous Chancellor's aims of reducing our national debt mountain. And of course, his comments need to be considered in the light of our impending withdrawal from the EU.
One announcement that did surprise MPs was the switch to an Autumn Budget and a Spring Statement. This will mean that after the March 2017 budget and Finance Bill future budgets will be delivered in the autumn, the first taking place in autumn 2017 with the first Spring Statement the following March.
The notes set out below point to the tax and other business issues Mr Hammond has disclosed.
Announcements for businesses
£23bn National Productivity Investment Fund (NPIF)
This will provide additional spending in areas that are aimed to increase productivity. For example, transport, digital communication, housing and R & D.
There are also a number of additional funding schemes being floated to support:
The development of the next generation of driverless cars and other renewable fuel technologies Investment in transport infrastructure The trial of 5G networks and full fibre broadband initiatives Increases in R & D support
Employer shareholder schemes &ndash tax benefits withdrawn
Legislation will be enacted to remove the Income Tax reliefs on the receipt or buy-back of shares issued to an employee under an employee shareholder agreement made on or after 1 December 2016. It also removes the Capital Gains Tax (CGT) exemption relating to shares received as consideration for entering into an employee shareholder agreement on or after the same date. Shares received under agreements made before that date are not affected. Corporation Tax reliefs for employer companies are not affected.
Corporation Tax changes reaffirmed
The reduction to 17% will go ahead as previously announced by 2020.
Rural rate relief doubled
Businesses in rural areas with a population under 3,000 will benefit from a doubling of rate relief from 50% to 100% from April 2017. Businesses that will benefit are:
A village shop or post office with a rateable value of less than £8,500, and A public house or petrol station with a rateable value up to £12,500.
VAT flat rate scheme changes
HMRC are to introduce an additional test that will determine the flat rate percentage used by traders. It would seem that HMRC presently considers the benefits obtained by certain businesses to be excessive and not in accord with the intentions of Parliament.
Traders that meet the new definition of a "limited cost trader" will be required to use a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.
For some businesses - for example, those who purchase no goods, or who make significant purchases of goods &ndash the outcome of the test will be self-evident. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.
Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.
100% tax allowance for provision of electric vehicle charging points
This new capital allowance will have effect for expenditure incurred on or after 23 November 2016. It will expire on 31 March 2019 for Corporation Tax and 5 April 2019 for Income Tax purposes.
It will provide a 100% first-year allowance (FYA) for expenditure incurred on electric charge-point equipment.
National Living Wage
From April 2017, the National Living Wage (NLW) for the over 25s is being increased to £7.50 per hour. This is an increase from the current NLW rate set in October 2016 of £7.20 an hour. For the over 25s, this will represent a wage increase of just over 4%.
The National Minimum Wage (NMW) will also increase from the same date to:
For 21 to 24 year olds &ndash from £6.95 to £7.05 per hour For 18 to 20 year olds &ndash from £5.55 to £5.60 per hour For 16 to 17 year olds &ndash from £4.00 to £4.05 per hour For apprentices &ndash from £3.40 to £3.50 per hour
The government will also be spending an additional £4.3m to ensure that employers are complying with their legal obligation to pay the NMW.
National Insurance thresholds
From April 2017, the National Insurance thresholds for employees and employers will be aligned at £157 per week. There will be no cost to employees and the maximum cost to business will be an annual £7.18 per employee.
Announcements for property owners
New home builds
Funding of £1.4bn is being provided to build up to 40,000 affordable homes by 2020-21. These will include properties for rent or shared ownership. The government are also allocating £1.7bn to speed up the construction of homes on public sector land.
Additionally, funding of £2.3bn will support infrastructure projects &ndash new roads and water connections - to provide services for up to 100,000 new homes in areas with the most need.
Agent's letting fees
In a welcome move for tenants, not so good for landlords, upfront renters' fees charged in England are to be banned. At present tenants are being charged an average of £223 for these fees.
The government will be consulting with interested parties.
Tax increase enveloped dwellings
The Annual Tax on Enveloped Dwelling will increase in line with inflation from April 2017.
Announcements for individuals
Personal tax allowance
From April 2017, the personal tax allowance is due to increase from the present £11,000 to £11,500. From the same date, the amount you can earn at the basic rate of tax will rise from £43,000 to £45,000.
The Chancellor also committed to increasing the basic personal allowance to £12,500, and the higher rate tax threshold to £50,000, by 2020-21.
Salary sacrifice schemes to be taxed more fairly
From April 2017, most salary sacrifice schemes will be taxed as if cash income. There were some notable exceptions:
Pension payments, pensions advice, childcare, cycle to work and ultra-low emission cars will be exempt. Schemes in place before April 2017 will be protected for one year, and Schemes for cars, accommodation and school fees will be protected for up to 4 years.
These three points do offer opportunities to benefit from this strategy if implemented before the end of the current tax year.
Reimbursing employers for benefits in kind
It has been confirmed that the promised legislation to allow employees to reimburse their employers for benefits provided, and thereby avoiding a tax charge, will be included in the Finance Bill 2017. Employees will need to make the reimbursement before 6 July following the end of the tax year.
Money purchase annual allowance (MPAA)
The MPAA that can be saved into a pension is to be reduced from £10,000 to £4,000 from April 2017. This measure has been put in place to prevent inappropriate 'double tax relief' by those aged 55 and over who have already taken money from their pension pots. The government will consult on the details of the change.
Changes to in-work benefits
To lessen the impact of benefit reductions, changes are proposed to Universal Credits that reduce the rate at which benefits are lowered when claimants start work. This should allow claimants to retain an extra 2p for every £1 they earn.
At present, the Universal Credit taper reduces benefits received by 65p for every £1 earned above an income threshold. This will be reduced to 63p from April 2017.
Car insurance premiums to drop?
The crack down on spurious whiplash claims is to continue. It is hoped that this will reduce premiums by up to £40 a year.
Insurance premium tax (IPT) increase
IPT will increase from 10% to 12% from 1 June 2017. Undoubtedly this will increase insurance premiums although it is up to insurance companies to determine if they pass on the increase.
Fuel duty frozen
For the seventh year, fuel duty is not to be increased. This could, on average, save drivers £130 a year.
New National Savings Bond
From spring 2017, the NS&I will be offering a new three-year investment bond with an indicated rate of 2.2% gross. The bond will be available to the over 16s with investments available from £100 to £3,000.
Pension scams under the microscope
Interested parties will be invited to consult on ways to deal with pension scams, including cold-calling about pension issues.
Bank fines given to charities
More than £102m of LIBOR banking fines are to be given to various projects that support armed services personnel and their families. Charities that support children's hospitals, air ambulances, museums and memorials will also benefit.
The latest statistics on the uptake of the Government's flagship Help to Buy schemes were published on 29 September 2016. The figures show that over 185,000 homes have been bought since the schemes were first launched in October 2013.
Some of the headline figures include:
81% of scheme completions have been made by first-time buyers the average house price was £191,000, this is significantly below the national average 95% of Help to Buy completions took place outside of London
The average house price to income multiple under the mortgage guarantee scheme is capped at a 4.5x ratio to ensure responsible lending. The London Help to Buy scheme was launched in February 2016 and is helping London residents to buy a new home with a 5% deposit and a mortgage as low as 55% for first time buyers as well as homeowners looking to move to a newly built home with a price tag of up to £600,000. There were 935 completions in London between 1 February 2016 and 30 June 2016.
The press release from HM Treasury also highlighted the success of the Help to Buy: ISA scheme launched in December 2015. The scheme allows savers to claim a government bonus of 25% on monthly savings of up to £200 on savings towards their first home. The bonus translates to an extra £50 added to every £200 saved up to a maximum governmental contribution of £3,000 on £12,000 worth of savings. More than 650,000 accounts have been opened since the scheme was launched.
Economic Secretary to the Treasury, Simon Kirby, said:
'Through the Help to Buy schemes, we have helped 185,000 people buy a house. And hundreds of thousands have taken advantage of the ISA, with its generous government bonus, to move towards their dream of owning their own home.'
Uber, the company which enables users to book and pay for a cab using a smartphone app, has appeared before an employment tribunal following claims by two of its drivers that it is acting unlawfully by not offering them employment rights such as holiday pay and the National Minimum Wage. Uber categorises its drivers as self-employed contractors and therefore it does not provide them with employment rights and benefits. However, a case against Uber has been taken by 19 drivers who argue that they are, in reality, workers and not self-employed contractors. Two test cases, backed by the GMB union, have now been heard at the Central London employment tribunal. The tribunal's judgment is likely to have an impact for the thousands of Uber drivers in the UK.
Uber's legal position is that the drivers can pick their own hours and work completely flexibly and that it is a technology company, not a taxi company, which simply puts customers in contact with drivers. Passengers pay Uber directly for the journey through the app and then a percentage of that payment is passed on to the driver. Lawyers for the GMB argue that Uber exerts significant control over its drivers, in respect of the hours they work and what they earn, and the terms and conditions of their work mean that they are not self-employed rather, they are "workers".
UK employment law currently recognises three general categories of employment status: employees, workers and the self-employed. Workers have fewer rights than employees but they are still entitled to a number of key rights, including the National Minimum Wage, holiday pay, working time rights (e.g. rest breaks and maximum weekly working hours), pension auto-enrolment, protection from discrimination and the right not to have unauthorised deductions made from their wages. In relation to wage deductions, the drivers have also alleged that Uber frequently deducts sums from their pay, including when customers make complaints, and that these deductions are unlawful. The employment tribunal will now need to consider whether the drivers factually satisfy the legal definition of worker as set out in the various pieces of applicable legislation &ndash how a relationship is labelled is not decisive of its real legal status.
Although not a stranger to litigation elsewhere, this is the first time that Uber has faced legal action in the UK over the issue of whether its drivers are self-employed or workers. If the drivers' claims succeed, and subject to any appeal, it means they will potentially be entitled to the range of employment rights and benefits available to workers.
Successful claims against Uber are also likely to open the floodgates to similar claims against other companies that categorise their workforce as self-employed, such as some courier and delivery companies. Indeed, Deliveroo has apparently amended its contracts with its cyclists in order to try and deter claims by inserting a clause to the effect that the cyclists agree they will not present a claim to the employment tribunal or any civil court in which they contend that they are either an employee or a worker and, if they do so, they will indemnify Deliveroo against any costs and expenses that it incurs in defending its position. However, whilst such a clause might prove to be a useful deterrent, it is highly unlikely to be legally enforceable.
Now that the UK has voted to leave the European Union by 52% to 48%, the government will, in due course, inform the European Council of its intention to leave the EU in accordance with Article 50 of the Treaty on European Union. This notification then triggers a two-year period for the negotiation of the terms of a member state's withdrawal. It seems that this will not happen before October 2016, when the current prime minister, David Cameron, says he will step down and leave it to his successor to invoke Article 50 and negotiate the UK's withdrawal terms. Unless an agreement is reached by all of the EU member states to extend the two-year period for negotiation, the UK will cease to be a member state of the EU at the end of that two-year period, even if withdrawal terms have still not been agreed.
As far as employment law is concerned, the position can be summarised as follows:
As long as the UK is still an EU member, it remains bound by EU treaties, directives, regulations and case law and therefore it is "business as usual" for employment law for now. Once the UK has left the EU, which will not be for at least two years, the extent to which the UK government can then amend or repeal EU-derived employment legislation will depend on which trade model with the EU is eventually agreed and what its future relationship with the EU is going to consist of &ndash that position will not start to become clear for some considerable time yet. EU-derived employment laws include discrimination, certain family-friendly rights, working time, agency workers, collective redundancy consultation and acquired rights under TUPE. If no agreement is reached on its future relationship with the EU, there will be no obligation for the UK to adopt or apply new EU directives and regulations once it has left the EU. If, however, the UK instead joins the European Economic Area (EEA), it is likely to have to maintain most EU-derived employment legislation and implement new EU directives and regulations. The extent to which any EU-derived legislation can be amended or repealed will therefore be dependent on what is achievable in the context of whatever new relationship with the EU is negotiated. In any event, EU employment law has been implemented into UK legislation, so the government would have to take a positive decision to amend or repeal its own legislation &ndash this process will not happen automatically. Brexit has no impact at all on entirely domestic legislation that has not come from the EU, such as the right to claim unfair dismissal and the national minimum wage. It seems likely that, at least in the short to medium term, most of the statutory provisions will be retained and indeed some of them are unlikely to ever be repealed, such as substantive discrimination laws and family-friendly rights, particularly as many of the UK provisions in those areas either pre-date or gold-plate the relevant EU directives. As far as EU case law is concerned, the UK would no longer remain bound by decisions of the Court of Justice of the European Union (CJEU) once it leaves the EU, but it remains to be seen whether the UK courts and tribunals will continue to regard those decisions as being of persuasive authority to the extent that the UK ends having to maintain the EU-derived employment legislation that they relate to. In addition, many of those decisions have been relied on by UK courts and tribunals in making their own decisions and the UK now has its own binding case law on many of the issues. So, the UK courts and tribunals would then need to take a decision on whether to follow existing UK case law or overturn it. There is also the possibility that new legislation could be passed by the UK government to reverse some of the earlier case law. Even if some EU-derived employment laws are eventually amended or abolished, to the extent that employers have incorporated those provisions into employees' employment contracts, they would remain contractual entitlements and so would still be valid, unless and until the employer can vary them, which will normally require employee agreement.
The Low Income Tax Reform Group (LITRG) aims to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes. The LITRG has recently published a press release urging anyone who has not yet filed their online Self Assessment tax return with HMRC for the year ended 5 April 2015, to do so as soon as possible.
Taxpayers that have not yet filed their 2014-15 Self Assessment returns will have been charged an automatic £100 penalty for late submission. The penalty applied from 1 February 2016 even if no tax was due or the tax due was paid on time.
However, taxpayers who were meant to file online by 31 January 2016, and have still not filed their 2014-15 return, are reminded that they will face far greater penalties. A daily penalty of £10 per day, up to a maximum of £900 (90 days) is being charged from 1 May 2016.
Further penalties then apply if the return is still outstanding for more than 6 months after the 31 January 2016 filing deadline. From 1 August 2016 taxpayers will be charged the greater of £300 or 5% of the tax due. If the return is outstanding one year after the filing deadline, further penalties will be charged from 1 February 2017.
We echo the comments of Anthony Thomas, LITRG Chairman who said:
'We would strongly urge anyone with an overdue return to submit it as soon as possible and to do so online as a paper return for 2014/15 will already attract the maximum £1,000 penalty. You can then appeal against the fines by writing to HMRC to explain why the return has been filed late.'
HMRC has been taking a more pragmatic approach in respect of taxpayers that file a late return. This approach may apply to those that have a reasonable excuse for filing a Self Assessment return late. However, taxpayers must have had a good reason for sending in a late return.
The marriage allowance came into force on 6 April 2015 and allows lower earning married individuals to share part of their personal tax-free allowance. The marriage allowance is available to married couples and those in a civil partnership where a spouse or civil partner doesn't pay tax or doesn't pay tax above the basic rate threshold for Income Tax (i.e. one of the couple earns less than £11,000 in 2016-17). There is a different marriage allowance for those born before 6 April 1935.
The allowance allows the lower earning partner to transfer up to £1,100 (2015-16: £1,060) of their personal tax-free allowance to a spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer doesn't pay more than the basic 20% rate of Income Tax. This could result in a saving of up to £220 for the recipient (20% of £1,100) or around £18.33 a month.
The take-up of the allowance was less than expected in the last tax-year. However, couples that were also eligible for the allowance last year can backdate their claim to 6 April 2015. An application for the marriage allowance can be made online or by telephone. The application must be made by the non-taxpayer who is transferring their allowance.
The new National Living Wage was introduced 1 April 2016. From that date the National Living Wage premium will replace the National Minimum Wage (NMW) for those aged 25 or over. The National Living Wage has been set at £7.20 per hour. This represents an increase of 50p over the current NMW rate. The NMW will continue to apply for those aged under 25. The current NMW rates are apprentices £3.30 per hour, under 18s £3.87 per hour, 18 &ndash 20 £5.30 per hour over 20s £6.70 per hour.
Over a million workers in the UK are set to benefit from the increase. Many employees will see their pay packets rise by up to £900 a year. According to government statistics, this will be the largest annual increase in a minimum wage rate across any G7country since 2009 in cash and real terms. Employees that are eligible should see their pay increase automatically from next month.
Businesses must also be prepared for this change and a new four-step guide has been published on the living wage website (livingwage.gov.uk) reminding employers to carry out the following steps:
Check you know who is eligible in your organisation. Take the appropriate payroll action. Let your staff know about their new pay rate. Check your staff under 25 are earning at least the right rate of National Minimum Wage.
The change will represent an increase of some 7.5% in the wage bill for employers with significant numbers of workers aged over 24 earning the NMW.
A few surprises in the latest budget announcements that include: tax allowances for micro-business owners, a levy on soft drinks manufacturers, a reduction in the rates of Capital Gains Tax and a doubling of business rates relief for smaller concerns.
Our summary of these and other tax changes for 2016-17 and future years follows.
Personal Tax and miscellaneous matters
Personal Tax allowance
From 2016-17, there will be one Income Tax personal allowance regardless of an individual's date of birth.
For 2016-17 the allowance is set at £11,000, and For 2017-18 at £11,500
Income Tax rate bands
The Chancellor confirmed his intention to remove taxpayers from the higher rate of Income Tax by increasing the levels at which taxpayers start to pay higher or additional rate taxes. The levels for the next two years are:
For 2016-17 - £43,000 For 2017-18 - £45,000
If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).
The threshold at which the 45% rate starts is unchanged at £150,000.
For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).
Capital Gains Tax (CGT) reduction
From April 2016, CGT on the disposal of chargeable assets, apart from residential property, is reduced to:
10% from 18% on disposals that form part of the basic rate band. 20% from 28% on disposals that form part of the higher rate band.
The existing rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt.
Entrepreneurs' relief extended to include investors
Entrepreneurs' relief (ER) will be extended to external investors in unlisted trading companies. This new investors' relief will apply a 10% rate of CGT to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals, that were newly issued to the claimant and acquired for new consideration on or after 17 March 2016, and have been held for a period of at least three years starting from 6 April 2016. A person's qualifying gains for this investors' relief will be subject to a lifetime cap of £10 million.
Entrepreneurs' relief on disposal of goodwill relaxed
Legislation will be introduced in Finance Bill 2016 to allow ER to be claimed in respect of gains on goodwill where the claimant holds less than 5% of the shares, and less than 5% of the voting power, in the acquiring company. This 'holding condition' will replace a previous requirement that the claimant must not be a 'related party' in relation to the company.
Relief will also be due where the claimant holds 5% or more of the shares or voting power if the transfer of the business to the company is part of arrangements for the company to be sold to a new, independent owner.
Miscellaneous pension changes
A number of minor changes are being included to the pension's tax rules to ensure that they operate as intended following the introduction of pension flexibility in April 2015. The changes will:
remove the requirement that a serious ill-health lump sum can only be paid from an arrangement that has never been accessed replace the 45% tax charge on serious ill-health lump sums paid to individuals who have reached age 75 with tax at the individual's marginal rate enable dependents with drawdown or flexi-access drawdown pension who would currently have to use all of this fund before age 23 or pay tax charges of up to 70% on any lump sum payment, to continue to access their funds as they wish after their 23rd birthday remove the rule on paying a charity lump sum death benefit out of drawdown pension funds and flexi-access drawdown funds where the member dies under the age of 75 because the equivalent tax-free payment may be made as another type of lump sum death benefit enable money purchase pensions in payment to be paid as a trivial commutation lump sum enable the full amount of dependent's benefits to be paid as authorised payments where there are insufficient funds in a cash balance arrangement when the member dies
These changes will apply from the day after the Finance Bill 2016 receives Royal Assent later this year.
The duty on beers, spirits and most ciders will be frozen this year. The duty rates on wine will increase by RPI inflation from 21 March 2016.
Tobacco duty rates
Duty rates on all tobacco products will increase by 2% above the retail price index with a further 3% increase on hand-rolling tobacco, which will rise by 5% above RPI.
The changes to tobacco duty took effect from 6pm, 16 March 2016.
There will be no increase in fuel duties. At the end of 2016-17 this will be the 6th year fuel duty has been frozen.
The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,100 in 2016-17 and £1,150 in 2017-18.
From April 2017, any person under 40 will be able to save into a new Lifetime ISA.
Up to £4,000 can be saved each year and savers will receive a government bonus of 25% &ndash that is a bonus of up to £1,000 a year.
Some or all of the money can be used to buy a first home, or it can be kept until age 60.
Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.
After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.
ISA limit to rise April 2017
The present ISA savings limit of £15,240 will rise to £20,000 from April 2017.
Small business tax changes
Corporation Tax rate
The main rate of Corporation Tax from 1 April 2016 remains at 20%.
From 1 April 2017 the rate is set to reduce to 19% From 1 April 2020 to 17%.
New stamp duty rates for commercial property acquisitions
From 17 March 2016, the way in which stamp duty is calculated on commercial property acquisitions will be changed. Instead of higher rates being applied to the total cost on a slab basis, the following rates will apply on a graduated basis.
The rates are:
Up to £150,000 no stamp duty is due From £150,001 to £250,000 the rate is 2% Above £250,000 the rate is 5%
Buyers of commercial property worth up to £1.05m will pay less stamp duty as a result of this change.
Business rates reductions
A 100% relief is currently available if a business occupies a property with a rateable value of £6,000 or less.
From April 2017, small businesses will be able to claim a similar 100% relief if they occupy property with a rateable value up to £12,000. Taper relief will apply for properties valued between £12,000 and £15,000.
It is estimated that this will mean 600,000 small businesses will no longer pay business rates.
Non-monetary transactions are taxable
From budget day, 16 March 2016, any trading or property income received in non-monetary form have to be included as income for tax purposes. This confirms previous tax cases on this issue.
Insurance premiums to rise?
The standard rate of Insurance Premium Tax is being increased from 9.5% to 10% from 1 October 2016. This will likely result in increased premiums.
The increase in the tax will be used to fund new flood defences.
Employer's NIC on termination payments
From April 2018, certain employee payoffs, for example termination payments in excess of the tax free £30,000 where Income Tax is also due, will be subject to an employers' National Insurance charge.
For employees, payments up to £30,000 will remain tax free and they will not suffer an additional National Insurance charge.
Class 2 NIC to be abolished
The Class 2 NIC charge is to be abolished from April 2018. The self-employed will continue to pay the existing Class 4 contributions from this date. Class 4 contributions will be reformed such that the self-employed can continue to build entitlement to the State pension and other contributory benefits.
Two new tax allowances
The Chancellor has introduced two new tax allowances for micro-business owners. The £1,000 exemption from tax will apply to:
People who make up to £1,000 from occasional jobs such as selling goods they have made, and The first £1,000 of miscellaneous income from property, for example renting a driveway.
Incorporated property businesses to pay increased stamp duty
In an attempt to create a level playing field, the Chancellor has clarified, by amending legislation, that individuals are subject to the 3% SDLT supplement if they purchase more than one property, and companies on all residential property purchases even the first such purchase. Here's what the Budget notes say on this issue:
"If, at the end of the day of the transaction, an individual owns 2 or more properties and has not replaced their main residence, the higher rates will apply. Purchasers will have 36 months to either claim a refund from the higher rates, or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence. Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property. Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates. Furthermore, small shares in recently inherited properties will not be considered when determining if the higher rates apply."
Zero-emission van's benefit change deferred
Existing legislation, that applies the level of the van benefit charge for zero-emissions vans at 20% of the charge for conventionally fueled vans has been extended to the tax years 2016-17 and 2017-18.
This defers the planned increase to 40% of the van benefit charge for conventionally-fueled vans to 2018-19.
The van benefit charge for zero emission vans will be 60% of the van benefit charge for conventionally fueled vans in 2019-20, 80% in 2020-21 and 90% in 2021-22.
From 2022-23, the van benefit charge for zero emission vans is 100% of the van benefit charge for conventionally-fueled vans.
Diesel fuelled company cars' 3% supplement retained
The 3% supplement that is added to the benefit in kind calculation for drivers of diesel fuelled company cars was due to expire 5 April 2016. The Finance Bill 2016 will now include a provision that retains this supplement indefinitely.
Trivial benefits in kind
Where the cost of providing a qualifying, "trivial benefit" for an employee is less than £50, it will no longer be required to disclose this as a benefit in kind from 6 April 2016.
There is an annual cap of £300 if the payments are made to directors or other office holders of a small company, or their employees who are relatives or members of their household.
Travel expense claims
From 6 April 2016, it will no longer be possible for workers engaged through an employment intermediary to claim for home to work travel expenses.
This regularises the established principal in the UK tax system that such regular commute costs between home and work cannot be claimed for tax purposes.
EIS, SEIS and VCTs: exclusion of energy generation
Investments in companies that engage in energy generation activities will be excluded from the tax advantaged Enterprise Investment Schemes, Seed Enterprise Scheme and Venture Capital Trusts. This will affect shares or holdings issued on or after 6 April 2016.
Use of home for business purposes by partners
The simplified expenses regime has been fully extended to include partnerships from April 2016. Where more than one property is used by partnerships for business and as a home then any claim for the simplified expense deduction for all such properties will be allowed.
VAT registration and deregistration limits
From 1 April 2016:
Registration threshold increased to £83,000 Deregistration threshold increased to £81,000
Larger company measures
Closing tax avoidance loopholes
In response to increasing demands from a number of directions the Chancellor has endeavoured to close a number of loopholes used by multinationals to avoid paying tax in the UK, on profits earned in the UK. They include:
Rules to prevent multinationals avoid paying tax in any of the countries they do business, an avoidance technique called hybrid mismatches. Introducing rules to increase the tax take when companies make outbound royalty payments. Generally, these are fees paid for using intellectual property such as patents and copyrights. Ensuring that offshore property developers are taxed on their UK profits.
The oil and gas industry
A £1bn tax support package has been announced that will effectively abolish Petroleum Revenue Tax &ndash a tax on profits from oil fields approved before 1993 &ndash and by dramatically reducing the supplementary charge on oil and gas extraction.
Soft drinks levy
From April 2018, manufacturers of soft drinks will be subject to a levy based on the sugar content of their products.
The basic rate will apply to drink with a sugar content in excess of 5 grams per 100 millilitres, with a higher rate for drinks on more than 8 grams per millilitre.
The levy will not apply to milk-based drinks or fruit juices.
The Treasury will use the proceeds of the levy to double the primary PE and sport premium. They will increase money provided to schools for this purpose to £320m per annum.
As part of the Summer Budget measures, the government announced the introduction of a new dividend allowance from April 2016. The new allowance will replace the current non-refundable dividend tax credit of 10% and will mean significant changes to the way dividends are taxed. The new dividend allowance means that no tax will be due on the first £5,000 of dividend income received regardless of the amount of non-dividend income.
However, dividends in excess of the £5,000 allowance will be taxed at the following new rates based on which band of taxation the recipient's dividend income fits within:
7.5% for basic rate tax payers 32.5% for higher rate tax payers, and 38.1% for additional rate tax payers.
These changes leave 2015-16 as the last tax year to benefit from the current tax treatment on dividends that has been in place for many years. A standard rate taxpayer receiving a dividend in 2015-16 would not have any further tax to pay as any dividend income within the standard rate band is taxed at 10% with a corresponding 10% tax credit. For higher rate taxpayers an additional 22.5% is due when the non-refundable 10% tax credit is taken into account and for additional rate taxpayers 27.5% is due after the tax credit.
There are a number of planning opportunities that should be considered as the current tax year draws to an end. This includes ensuring that the maximum tax efficient dividend is paid in 2015-16. This is the last opportunity for dividends to be withdrawn as part of the basic rate band with no additional Income Tax charge. Family run companies should also look at how they are structured to ensure optimum use of the £5,000 allowance from 2016-17.
Taxes due on dividends for 2016-17 will be collected on 31 January 2018 as well as a payment on account for 2017-18.
The Employment Allowance was launched in April 2014 for all eligible businesses and charities. The allowance is offset against the employer's Class 1 secondary National Insurance Contributions (NICs) and can be claimed through the regular payroll processes.
The Employment Allowance will rise to £3,000 (from £2,000) in April of this year. This means that businesses will be able to employ 4 people earning the new National Living Wage without having to pay any employer's Class 1 secondary NICs. The move will also remove some 90,000 employers from paying NICs.
HMRC has also recently published a policy paper confirming that from 6 April 2016 eligibility to claim the Employment Allowance will be removed from limited companies with a single director, and no other employees. This measure could affect up to 150,000 limited companies and 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.
HMRC has issued a news release reminding taxpayers to file their online Self Assessment returns before the 31 January 2016. More than 85% of taxpayers submitted their returns online last year and the figure is expected to grow again this year. The deadline for submitting paper returns expired at the end of October.
The 31 January is also the payment due date for both the payment of any balance of Self Assessment liability for 2014-15 plus any payment on account due for the current 2015-16 tax year. There are penalties for late filings and late payment.
Taxpayers that are filing online for the first time should ensure that they register to use HMRC's Self Assessment online service. Once registered it can take up to seven working days for an activation code to be sent by mail.
Ruth Owen, Director General, Personal Tax, HMRC said:
'The 31 January deadline will soon be here. And while it's tempting to put completion of your tax return to the bottom of the 'to do' list at this time of year, it's not something I would recommend, if you want to avoid a last minute rush in January. We have improved our online services again this year to help our customers get their tax right quickly, simply and securely.'
Hot on the heels of the Autumn Statement, the Chancellor has announced that the 2016 Budget will be held on Wednesday, 16 March 2016. This will be the Chancellor's eighth Budget address. Following the Conservative election victory a Summer Budget was held in July 2015.
However, this will be the first full Budget for the Tories and is expected to build on announcements made as part of the emergency Budget and Autumn Statement in a bid to run an overall budget surplus by 2020. The Budget includes economic and fiscal forecasts as well as tax changes for the coming and future years.
Details of all the Budget announcements will be made on a special section of the GOV.UK website which will be updated following completion of the Chancellor's speech next March.
Autumn Statement 25 November 2015
The autumn statement is an opportunity for the government to review and declare it's spending for the next year. Most of the press commentary, prior to the Chancellor's comments today, involved speculation on which areas of government would suffer the biggest cuts. Now we know...
Major opposition to cuts in tax credits and the police budget seem to have paid off as the previously announced cuts in tax credits have been abandoned and there are to be no cuts in the police budget.
The major changes that affect individuals and businesses are set out below:
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.
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
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:
Commuters will be able to buy part-time season tickets on selected routes, and 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 &ndash 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 &ndash estimated falls of £40 to £50 a year can be expected.
Earlier this month, a major extension to the shared parental leave and pay rules was announced when the Chancellor said he will extend shared parental leave and pay to working grandparents.
The planned changes will increase flexibility and choice in parental leave arrangements and support working parents with the costs of childcare during the first year of a child's life. The new rules are set to come into force in 2018 with a consultation on the changes being launched in the first half of 2016.
It is thought that around 2 million grandparents have given up work, reduced their hours or have taken time off work to help families who cannot afford childcare costs. The new system would allow grandparents to help care for their grandchildren without fear of losing their jobs.
Under the current rules (since April 2015) working parents have significant choice as to how they share the care of their child and take time off work during the first year of their child's life, known as shared parental leave. The rules apply equally for children that have been adopted.
Mothers must take at least two weeks of maternity leave immediately after birth, but after that working couples can share up to 50 weeks of shared parental leave and up to 37 weeks of statutory shared parental pay. The changes could significantly help parents, especially single mothers who don't have a partner to share leave with.
Taxpayers that continue to submit paper Self Assessment returns are reminded that the deadline for submitting the 2014-15 return is 31 October 2015. Late submission of a Self Assessment return will become liable to a £100 late filing penalty. The penalty will apply even if there is no liability or if any tax due is paid in full by 31 January 2016.
We would recommend that anyone still submitting paper tax returns consider the benefits of submitting the returns electronically and benefit from an additional three months (until 31 January 2016) in which to submit a return.
Taxpayers with certain underpayments in the 2014-15 tax year can elect to have this amount collected via their tax code (in 2016-17), provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts and the amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000. The deadline to apply to have tax collected through your tax code is 31 October 2015 for a paper return and 30 December 2015 for electronic submissions.
Taxpayers that receive a letter informing them that they have to submit a paper return after 30 July 2015 have an extended deadline which runs for three months from the date they received a letter to submit the paper return.
A mother and son have both been disqualified from acting as company directors for a combined period of 20 years for submitting annual financial accounts containing false information. They also submitted false VAT returns to HMRC.
An investigation by the Insolvency Service found that the mother and son, Mr & Mrs Hawkes, who were both directors of F G Hawkes (Western) Limited signed annual accounts for the period ended 31 July 2009 and the year ended 31 July 2010 on 30 April 2010 and 28 April 2011 respectively. They signed the annual accounts knowing that they contained false information. The Company went into administration on 3 October 2011 with an estimated deficiency of £26,705,170.
A disqualification order has the effect that without specific permission of a court, a person with a disqualification cannot:
act as a director of a company take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership be a receiver of a company's property.
Investigators also discovered that Mr and Mrs Hawkes caused the company to submit false VAT returns to HMRC for the quarters ending between April 2010 and April 2011 leading to an under declaration of VAT owed of at least £1.5m.
Commenting on the disqualification, Sue MacLeod, Chief Investigator at The Insolvency Service, said:
'The signing of documents knowing they contain misleading information which may be relied upon by third parties, and submitting false VAT returns is serious misconduct, which the Insolvency Service will investigate with a view to removing you from the market place.'
The Chancellor will have pleased many businesses with his announcement that the Annual Investment Allowance (AIA) is to be set permanently at £200,000 for all qualifying expenditure on or after 1 January 2016. The limit is currently £500,000 but was set to revert to its original limit of £25,000 from 1 January 2016. Legislation will be introduced in the Summer Finance Bill 2016 to institute this change.
The AIA was first introduced in 2008 and is designed to give 100% first year tax relief for qualifying expenditure on plant and machinery. It can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Partnerships or trusts with individuals and companies in the business structure do not qualify for the AIA.
Businesses thinking of incurring large items of capital expenditure over the coming months should ensure that any purchase is properly timed to take advantage of the current £500,000 AIA limit. However the £200,000 limit is a very generous allowance and will cover the annual capital expenditure spend of many small and medium sized businesses.
The Chancellor said that this is 'a major, permanent boost to the incentives for long-term investment by small and medium sized firms in Britain.'
The Chancellor has confirmed that there will be a second Budget this year. The new Tory Government are anxious to start implementing many of the policies that were included in their manifesto. The Summer Budget will take place on Wednesday, 8 July and the Chancellor has stressed that it will be a Budget for working people.
Unusually, the date for the Budget was announced on a Saturday and the main commentary was provided by the Chancellor writing a piece in the Sun newspaper. He said: 'On the 8th of July I am going to take the unusual step of having a second Budget of the year &mdash because I don't want to wait to turn the promises we made in the election into a reality.'
As part of the Summer Budget, new forecasts for the economy and public finances will be published and we will get more information on the Government's proposed £12 billion in spending cuts. The Government is also expected to legislate for their manifesto promise not to increase Income Tax, VAT or National Insurance this Parliament. The Budget could also include some unexpected bad news as historically Governments have tended to batten down the hatches at the start of a parliamentary term and leave the big giveaways for later.
However, we do expect the Chancellor to keep the Tory's promise to increase the personal allowance to £12,500 by 2020-21 and the 40p Income Tax threshold is also set to hit £50,000, both, by the end of the current parliament. We may also see increases in the Inheritance Tax thresholds.
Tax avoidance will be a further target for action. The Chancellor commented 'We'll crack down hard on tax avoidance and aggressive tax planning by the rich &ndash because everyone should pay their fair share.'
The Government will be keen to ensure that the new Finance Act receives Royal Assent before the summer parliamentary recess which is expected to begin towards the end of July.
Employers will not incur automatic PAYE filing penalties for delays of up to three days with effect from March 2015. HMRC has said that going forward late payment penalties will continue to be reviewed on a risk-assessed basis rather than being issued automatically. However, there is no change in the filing deadlines and PAYE filings should still be made on or before the relevant payment date.
In addition, to prevent unnecessary penalties being issued, HMRC will close around 15,000 PAYE schemes that have not made a PAYE report since April 2013 and which appear to have ceased. The affected schemes will be notified about the planned closure and what to do if they are, or should be, operating PAYE.
Employers who have received an in-year late filing penalty for the period 6 October 2014 to 5 January 2015, and were three days late or less should appeal online by completing the 'Other' box and add 'Return filed within 3 days'. HMRC has also published a discussion document examining other potential improvements to the way in which penalties apply and for failing to pay what is owed or to meet deadlines for returns or registration. The consultation is open for comment until 11 May.
Nearly all VAT registered businesses must submit VAT returns online and make any payments due electronically. VAT registered businesses can file VAT returns using either HMRC's free online software or using commercially produced software. In either case, businesses must have already registered and enrolled for the VAT Online service in order to submit a VAT Return online. HMRC has recently updated the list of commercial software providers that have been successfully tested with HMRC and can be used to submit VAT returns online.
HMRC guidance includes information on what figures should be included in each of the boxes 1 to 9 on a VAT return. The guidance also confirms which boxes within an online VAT return are calculated automatically. Businesses that submit VAT returns should ensure that no box is left blank. For online VAT returns a minus sign should be entered before the figure for negative amounts and 0.00 in boxes were 'none' or 'not applicable' would have been entered on a paper VAT return. Businesses should ensure that they keep a copy of the submission receipt reference number when a return is filed.
HMRC recently agreed to relax the rules that allow businesses to file by telephone if they can satisfy HMRC that it is not practical to file returns electronically due to their age, disability, computer illiteracy, remoteness of location, or any other reason. If telephone filing is similarly impracticable, affected VAT registered businesses may submit paper returns.>
The new marriage allowance came into force on 6 April 2015 and allows some couples to share part of their personal tax-free allowance. The marriage allowance is available to married couples and those in a civil partnership where a spouse or civil partner doesn't pay tax or doesn't pay tax above the basic rate threshold for Income Tax.
The new allowance will allow the lower earning partner to transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner. The marriage allowance can be used when the recipient of the transfer doesn't pay more than the basic rate of Income Tax. This could result in a saving of up to £212 for the recipient (20% of £1,060) or around £17.66 a month.
There is a webpage on GOV.UK where one person in a couple can register their interest to receive the new marriage allowance. The registration details can only be completed online and it should take no more than three minutes to enter all the required details. Once submitted, HMRC will then confirm the expression of interest by email.
The next step will be receiving a further email from HMRC inviting couples who have registered an interest to apply. HMRC began sending the emails on 20 April and will continue to do so until 29 May 2015. Taxpayers will be asked to use the new GOV.UK Verify service before applying. There will also be an option to contact HMRC by phone. HMRC will only be sending emails to those that had registered their interest in the scheme.
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