Archive for July, 2015

Offshore tax evaders and their advisers will face even tougher sanctions

Tuesday, July 28th, 2015

 The new regime to crack down on offshore evaders, which HM Revenue and Customs (HMRC) will consult on from 16 July, includes:

  • a new criminal offence for offshore evasion – so in the worst cases it’s no longer possible to plead ignorance in an attempt to avoid criminal prosecution
  • a new criminal offence for corporates who fail to prevent tax evasion or the facilitation of tax evasion on their watch
  • increasing the financial penalties faced by evaders – including, for the first time, linking a penalty to the value of the asset hidden offshore
  • new civil penalties on those who facilitate evasion so they will face the same penalty as the tax evader
  • publicly naming both evaders and those who enable evasion

Speaking at HMRC’s Stakeholder Conference in London, Financial Secretary to the Treasury, David Gauke, said:

“Time’s up for people who don’t pay their fair share of tax by hiding their money offshore. People, who evade tax, facilitate or turn a blind eye to tax evasion will now face powerful criminal and civil sanctions under our tough new regime.

We’ve already seen over 90 countries across the world sign up to automatically exchange information on taxpayers. This, together with our new sanctions, will mean there is nowhere left to hide for offshore tax evaders.”

In the last few years there has been huge progress in tackling offshore tax evasion. HMRC has already collected over £2 billion from previously undisclosed offshore income through agreements with Switzerland, Liechtenstein and the Channel Islands. As announced in the March 2015 Budget, these offshore disclosure agreements will close early (31 December 2015) and be replaced by a tougher last chance facility ahead of the automatic exchange of tax information with over 90 countries, including tax havens, from 2017.

The Small Business, Enterprise and Employment

Thursday, July 23rd, 2015

The Small Business, Enterprise and Employment Act has now received Royal Assent and is expected to be implemented to the timescales set out below.

The measures that affect companies aim to:

  • reduce red tape whilst increasing the quality of information on the public register
  • enhance transparency and ensure the UK is seen as a trusted and fair place to do business

All companies will be affected by at least some changes, as the measures will change legal requirements on companies, including what they file with Companies House – which will impact companies’ systems and processes.

It is currently expected that changes will be implemented in three stages – those with the highest impact being delivered in the final stage. Changes to the implementation schedule may still happen during and following the passage of associated secondary legislation through Parliament.

26 May 2015 – Bearer shares

Share warrants to bearer (known as ‘bearer shares’) were abolished. Any existing share warrants will need to be surrendered within 9 months

October 2015 –

Date of birth

Partial suppression of date of birth on the public register: suppressing the day element for directors and People with significant control (PSC).

Accelerated strike-off –

The time it takes to strike companies off the register will be reduced.

Statement of truth

Replacement of the ‘consent to act’ procedure. When a new director is appointed on the company record, the company files a ‘statement of truth’ confirming that the person has consented to act as a director. This will be incorporated into the filing and will not require a separate statement. See also: the new director disputes procedure.

December 2015

Director disputes

A simpler way to get falsely appointed directors’ details removed from the register. As part of this, Companies House will write to all newly appointed directors to make them aware that their appointment has been filed on the public register and explain their statutory general duties.

Registered office disputes

A new process to provide a remedy where a company is using an address for its registered office but never had authorisation.

January 2016

People with significant control (PSC)

Companies will need to keep a register of people with significant control (‘PSC register’) from this point, in preparation for the need to file this information at Companies House from April 2016.

April 2016

Check and confirm

A requirement to ‘check and confirm’ the company information and notify changes if necessary at least once every 12 months. This will replace the current obligation to file an annual return.

People with significant control (PSC)

Companies will need to keep a ‘PSC register’. This information will be filed at Companies House on incorporation and updated at ‘check and confirm’.

Additional information

Companies will be able to deliver certain categories of optional information to the registrar.

Company registers

Private companies will be able to opt to keep certain information on the public register only, instead of statutory registers. This will apply to the registers of members, directors, secretaries, directors’ residential addresses and the PSC register.

Directors misconduct

The disqualified directors’ regime will be updated and strengthened.

Statement of capital

Simplification of the statement of capital and consistency throughout the Act.

October 2016

Corporate directors

A prohibition on appointing corporate directors will be introduced with some limited exceptions. Any company with an existing corporate director will need to take action, to either explain how they meet the conditions for an exception or give notice to the registrar that the person has ceased to be a director.

Update for landlords

Tuesday, July 21st, 2015

On 17 July 2015 HMRC published a consultation document that outlines the changes to the way tax relief will be given for replacement of furnishings in let residential properties.

 The present wear and tear allowance (10% of rents) has a number of inconsistencies:

  • The allowance can be claimed even where the landlord incurs no actual replacement costs.
  • The allowance is not available to landlords who let part furnished and unfurnished property.
  • The allowance is restricted to 10% of rents even when actual replacement costs are higher.

 To remedy these points HMRC are considering the following changes from April 2016. The following notes are reproduced from their consultation document:

 Scope of the new replacement furniture relief

2.3  The relief will apply to landlords of unfurnished, part furnished and furnished properties. The relief will not apply to ‘furnished holiday letting’ businesses (FHLs) and letting of commercial properties, because these businesses receive relief through the Capital Allowances regime.

2.4  The new replacement furniture relief will only apply to the replacement of furnishings. The initial cost of furnishing a property would not be included.

2.5  Under the new replacement furniture relief landlords of all non-FHL residential dwelling houses will be able to claim a deduction for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use in the dwelling house, such as:

  • movable furniture or furnishings, such as beds or suites,
  • televisions,
  • fridges and freezers,
  • carpets and floor-coverings,
  • curtains,
  • linen,
  • crockery or cutlery,
  • beds and other furniture

2.6  We believe that limiting the scope of the allowance to items that are provided for the tenant’s use in the dwelling house that is being let removes  any opportunity to claim the cost of larger items used for the purpose of the property rental business, for example, cars.

2.7  Fixtures integral to the building that are not normally removed by the owner if the property was sold would not be included because the replacement cost of these would, as now, be a deductible expense as a repair to the property itself.

Fixtures include items such as:

  • baths,
  • washbasins,
  • toilets,
  • boilers,
  • fitted kitchen units

2.8  Landlords will no longer need to be concerned with whether the item being replaced is a fixture (and therefore a repair to the property) or not. In either case, the cost can be deducted from their rental income to arrive at the profits of their property rental business.

2.9  Landlords will no longer need to decide whether their property is sufficiently furnished to claim the new replacement furniture relief, as they had to when claiming the Wear and Tear Allowance. This is because the new relief will apply to all landlords of residential dwelling houses, no matter what the level of furnishing.

The consultation will run from 17 July to 9 October 2015. We would be happy to forward to HMRC any ideas that landlord readers may have regarding this issue.

Jamie Harrison update – 27th/28th June, Anglesey

Monday, July 13th, 2015

Jamie Harrison at Anglesey June 2015This race meet at Anglesey’s circuit was the Wirall 100 Club’s 100th meeting and attracted a strong field of riders.

Saturday 27th June

Qualifying

Saturdays racing was held on the coastal circuit and qualifying took place in the morning. Jamie steadily built the pace up and ended up in 4th position, which was a great result and with the new grid formation at Anglesey being three on a row it meant that Jamie was actually positioned just behind the rider pole position on the outside.

Race 1

The start to the first race didn’t start too well, as Jamie ended up in 9th position coming out of the second corner. He did however manage to make up a couple of places on the first lap, but then found himself held up for a couple of laps behind another rider that was fast down the straights but slower in the corners.
He eventually made a move up on the inside, and set off chasing the others and finally finished the race in 4th position.

Not a bad start.

Race 2

Jamie started the second race in 4th position, and this time was able to get a better start and held onto his position.

The riders in pole and second place were leading with a one second lead on Jamie, so were pulling away.

Jamie was very close to the rider in third position, and was running very similar lap times, but despite several attempts he just couldn’t quite make the pass and finished the race in 4th position, just 0.5 of a second behind the third place rider.

Race 3

The third race was the ifm-moto.com senior where both the 600cc and 1000cc bikes go head to head with the grid formed by fastest laps from the first races of the day.
Jamie started this race in 7th place, and after a good start was up to 4th place by the end of the first lap with the rider in 5th place right behind him.

The rider in 5th place kept making some wild passes, where he would get past Jamie but then run wide enabling him to hold his line and get back in front.

Jamie did his fastest lap of the day and finished the race in 4th position, a massive 2.5 seconds in front of 5th.

Sunday 28th September

Qualifying

Sundays racing was on the longer GP circuit Saturday night had seen rain so qualifying was on a drying track.

Due to the fact the track wasn’t fully dry the team decided to go out on full wet tyres but as the track dried out they started to overheat and Jamie’s lap times were getting slower, so by the end of qualifying he had ended up in 7th position.

Race 1

By the start of the first race the track had completely dried out. Jamie had a good start and after starting in 7th place was able to make his way up to 4th place after a couple of laps.

However after a few more laps he made a small mistake at the hairpin and braked too hard which meant that he ended up going wide and dropped back to 6th place. He managed to get back to 5th place but was struggling with getting the bike stopped and turned on the heavy braking areas of the GP circuit so couldn’t make it any further up the field and had to settle for 5th.

Race 2

Jamie started the second race in 5th position, and was able to get a good drive out of turn 3 onto the back straight and dived up the inside of two riders up to 4th.

With one of the other riders going out Jamie was up to 3rd place and with the bike feeling better he was lapping 1 second a lap faster than the previous race. He managed to hold onto his 4th position for the rest of the race and finish in that position.

Race 3

Race 3 was again the ifm-moto.com senior open.

In the first couple of corners there was a few wild moves going on by other riders, and just as Jamie was over taking a rider round the outside another one crashed right in front of them which spooked the rider Jamie was overtaking and saw him nearly take Jamie out.

Things settled down after that but Jamie just couldn’t run the pace of the front 3 riders and had to settle for 4th position.

Summer Budget Summary

Monday, July 13th, 2015

In this post we focus on tax changes announced in the Summer 2015 Budget which outlined the tax plans of the new Conservative government to be introduced over the next 5 years.

 

New “National Living Wage” Tax Credit Changes

The most radical announcement by the Chancellor on 8th July was a significant reduction in the amount the government plans to spend on tax credits and other State benefits. At the same time he announced that there would a new national living wage to be paid by employers, rising to £9 an hour by 2020. This strategy combined with the increase in the personal allowance to £11,000 for 2016/17, and eventually £12,500, means that employees will keep more of what they earn but the tax credits received to top up their income will be significantly reduced.

Employers will need to assess the impact of this change on the profitability of their business and we can help you consider this in more detail as there are other factors such the increase in the employment allowance to £3,000 next year and the planned reductions in the corporation tax rate that may also be relevant to your business.

 

Corporation Tax Rate to be cut to 18%

The current UK corporation tax rate of 20% is the lowest rate in the G20, the 20 major trading nations. This rate continues to apply until 2017 when it has been announced that the rate will be reduced to 19% and then 18% in 2020.

This appears to make trading via a limited company more attractive but note that there are significant changes to the taxation of dividends that take effect from 6 April 2016.

 

Changes to Taxation Dividends

The Chancellor has announced that from 6 April 2016 there will no longer be a notional tax credit associated with dividends received and the following rates will apply after a £5,000 tax free dividend allowance:

Basic rate taxpayers – 7 ½%
Higher rate taxpayers – 32 ½%
Additional rate taxpayers – 38.1%

This will mean that from 2016/17 individuals will be able to receive up to £17,000 tax free:

Personal allowance £11,000
Tax free interest £1,000
Tax free dividends £5,000

 

Impact of Changes to Dividend Taxation on Family Companies

A common strategy that we often advise to family company director/shareholders is that they extract profits from their company by way of dividends instead of paying themselves a salary. This is because there are no national insurance contributions on dividend payments and where the dividend income falls within the basic rate band (up to £42,385 for 2015/16) there is currently no income tax on dividends.

Where both husband and wife are directors and shareholders they will be able to pay themselves a salary of £11,000 each and then dividends of £5,000 each tax free. However the next £27,000 of dividends up to the new £43,000 higher rate threshold would be taxed at 7 ½ % resulting in income tax of £2,025 each being payable for 2016/17. Under the current rules there would be no tax on such dividends up to £42,385.

This measure has been introduced to counter tax-motivated incorporation to level the playing field between trading via a company versus an unincorporated business.

Note that dividends received in excess of the £43,000 higher rate threshold will be taxed at 32.5 % but without a notional credit thus increasing the effective rate from the current 25% to 32.5%.

 

 

Annual Investment Allowance set permanently at £200,000

The annual investment allowance (AIA) was due to be reduced from the current temporary level of £500,000 to just £25,000 from 1 January 2016.

The Chancellor has bowed to pressure from industry to stop tinkering with this allowance for expenditure on plant and machinery and set it at a permanent level so that businesses can plan their capital expenditure. He has decided on £200,000 for the new limit and businesses should consider bringing forward expenditure to before 1 January 2016 to benefit from the current higher allowance.

 

 

Buy to Let Landlords – Interest Relief to be Restricted to Basic Rate

The Chancellor announced that the amount of income tax relief landlords can get on residential property finance costs (such as mortgage interest) will be restricted to the basic rate of tax.

To give landlords time to adjust, the change will be phased in gradually over 4 years:

2017/18 – the deduction will be restricted to 75% of finance costs, with 25% being available as a basic rate tax reduction.

2018/19 – 50% finance costs deduction and 50% given as a basic rate tax reduction

2019/20 – 25% finance costs deduction and 75% given as a basic rate tax reduction

From 2020/21 – all financing costs incurred by a landlord will be given as a basic rate tax reduction.

 

Rent a Room Limited increased to £7,500

The current £4,250 limit for tax free rental income from lodgers is to be increased to £7,500 from 6 April 2016. The relief is only available where individuals rent out a room in their main residence and the allowance includes heating and other services provided to the lodger.

 

Pension Tax Relief Restricted for Higher Earners

As mentioned in the Conservative party manifesto, tax relief for pension contributions is to be restricted for those with income in excess of £150,000 a year. We were told that this is intended to fund the increase in the inheritance allowance for passing on the family home.

The current £40,000 pension annual allowance will be reduced by £1 for every £2 of income in excess of £150,000 down to a minimum of £10,000 at £210,000 of income. So, for example, where an individual has income of £170,000 in 2016/17, the £40,000 annual allowance would be reduced to £30,000.

Note also that, as already announced, the pension lifetime allowance is due to be reduced from £1.25 million to £1 million from 6 April 2016 with transitional protection for those with pension savings in excess of the new limit.

The Chancellor also announced in the July Budget that there would be a further review of pension savings and pensions taxation.

Contact us if you need advice on pension planning and how the new pension rules will impact on you personally.

 

Inheritance Tax and the Family Home

As mentioned last month the Chancellor has confirmed the introduction of an additional inheritance allowance that will be available in addition to the current £325,000 nil rate band which will, when fully phased in, allow a couple to pass on the family home tax free up to a value of £1,000,000. The additional allowance, which will also be transferrable to the surviving spouse, will start at £100,000 for 2017/18. The allowance will then increase to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21.

Unfortunately the Chancellor also announced that the inheritance tax nil rate band will be frozen at £325,000 until 6 April 2021.

The main residence nil band is subject to a taper where the amount being left is more than £2,000,000 with £1 of the family home allowance being lost for every £2 of estate value over £2,000,000. This clawback is based on the value of the estate before reliefs such as business property relief and agricultural property relief and may result in some additional complications and redrafting of Wills.

If this change is likely to affect your family circumstances you may wish to arrange a meeting with us to consider the impact on your Will and your family’s inheritance tax position.

 

Changes Affecting Non-Domiciled Taxpayers

The Chancellor announced a number of important changes to the tax treatment of individuals who are resident but not domiciled in the UK. Such individuals currently benefit from a number of tax advantages such as exemption from UK inheritance tax (IHT) on assets situated outside the UK and in some cases only being taxed on overseas income and gains if those amounts are remitted to the UK.

From April 2017, IHT will be payable on all UK residential property owned by non-domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure.

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

The government will also legislate so that from April 2017 anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed to be domiciled in the UK for all tax purposes. This is being reduced from the current 17 year deemed domicile rule for IHT.

Tax Diary – July, August and September

Monday, July 13th, 2015
01-JulCorporation tax for year to 30/9/14
06-JulForms P11D and P11D(b) for 2014/15 tax year, and where appropriate form P9D
06-JulForm 42 – shares issued to employees (see earlier)
19-JulPAYE & NIC deductions, and CIS return and tax, for month to 5/7/15 (due 22 July if you pay electronically); payment of Class 1A NICs for 2014/15 (22 July if you pay electronically)
31-JulSecond 50% payment on account of self-assessment income tax for 2014/15
01-AugCorporation tax for year to 31/10/14
19-AugPAYE & NIC deductions, and CIS return and tax, for month to 5/8/15 (due 22 August if you pay electronically).
01-SepCorporation tax for year to 30/11/2014
19-SepPAYE & NIC deductions, and CIS return and tax, for month to 5/9/15 (due 22 September if you pay electronically).

Top ten things to know about the new Tax-Free Childcare scheme.

Sunday, July 12th, 2015

The government has published more information about the proposed changes to their tax-free childcare scheme.  Here are the top ten things to know about the scheme…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Get rich quick scheme exposed

Friday, July 10th, 2015

Four London companies involved in selling “miracle” software guaranteed to make investors money trading on the London Stock Exchange, have been ordered into liquidation in the High Court on grounds of public interest following an investigation by the Insolvency Service.

The court heard how Direct Technologies Limited, D Corporation Ltd, Stock Market Charting Programs and Data Specialists Limited and On Demand Sales Consultants Limited raised at least £1m from the public who were duped into buying the software by false claims including those in fake testimonials, false online articles and in purported online magazines claiming to be an award winner alongside various global financial institutions such as a worldwide bank. It was also claimed and that their ‘DTL Direct Trader System’ incorporated:

  • 10 years of extensive past trading data on over 125,000 stocks
  • the ability to apply 251 internationally recognised charting formulae
  • the ability to download daily close of market data on all stocks listed on the London Stock Exchange
  • the application of more than three billion calculations each day to suit the user’s trading requirement
  • alerts for both profit taking and to stop loss situations
  • enable the user to make comprehensive trading decisions in only minutes each day
  • built in accounting package

Numerous related websites were identified by the investigation including https://dtl.info which had an “expert review page” on how to trade and make money and to become part of its “trading family”.

What can we expected from George Osborne\’s July Budget?

Wednesday, July 8th, 2015

There seems be a trend. Most of the key issues that will be disclosed this week seem to have been leaked to the press prior to the actual budget speech. For example:

  1. Inheritance tax (IHT): the government will fulfil its election promise and increase the tax free value that couples can leave to their families to £1m. Presently, the limit is £650,000. The change is reported to apply from April 2017.

At present estates for individuals are exempt up to half this value – £325,000 – the higher limit of £650,00 applies to married couples (and those in a civil partnership) where the first deceased spouse’s estate is not subject to IHT and their unused exempt amount is automatically transferred to the surviving spouse. Presumably the change in April 2017 will increase these limits to £500,000 and £1m.

  1. Tax relief on pension savings: at present contributions into pension schemes are deductible at the saver’s highest rate of tax. According to the Conservatives’ pre-election pledges, the changes to IHT set out above will be funded by the removal of this higher rate relief. Presumably, tax relief will be limited to the 20% basic rate.
  1. Tax credits: as part of the government’s continuing efforts to reduce public expenditure it is mooted that the present levels of tax credits are to be reduced. We will have to see which of the benefits, and by how much, these reductions will affect low income families.

 Next week we will highlight the actual changes announced. What we are unlikely to see are unexpected “give-aways”…    

Boost for charities

Tuesday, July 7th, 2015

The Cabinet Office launched an initiative on the 25 June that will provide grants to increase the sustainability of around 250 organisations working in the voluntary, community and social enterprise (VCSE) sector.

The fund, which will be delivered by the Big Lottery Fund, will provide grants that will enable recipients to implement organisational changes and access professional advice that might currently be out of their reach. It will give VCSEs access to a wider range of skills and support, with all grant recipients establishing a strong volunteering relationship with a local business. These cross sector relationships will help grant recipients to strengthen their resilience and long term sustainability.

The Local Sustainability Fund will be £20 million of government funding delivered over 2 years, and will be available to medium-sized VCSE organisations that deliver vital support to vulnerable and disadvantaged people. Alongside working with local businesses, recipients will also work with skilled advisors so that the fund generates maximum impact.

It is expected to help around 250 high-impact charities and social enterprises in England to secure sustainable futures for themselves, including supporting them to bid for public service contracts and to diversify their incomes. Eligible organisations will be able to apply for funding when the fund opens today. Details of how to apply will be on Big Lottery Fund’s website and will be widely circulated throughout the sector.

There are 2 elements to the first stage of the programme: an organisational diagnostic tool and an LSF eligibility checker. The diagnostic tool, which takes approximately 1 hour to fill in, can be completed by any organisation interested in their sustainability, regardless of whether they apply to the LSF. The tool allows organisations to understand their strengths and weaknesses better, and every organisation that fills it out will receive a sustainability report.

Once an organisation has submitted its sustainability report to the Big Lottery Fund, a selection of suitable applicants will be invited to make a more detailed application at the second stage.

It is expected that successful organisations will receive their first grant payment in March 2016. Average grant size is expected to be £70,000. Big Lottery Fund will be administering the Local Sustainability Fund on behalf of the Cabinet Office.