Archive for October, 2016

Why is 30 December an important filing date

Thursday, October 27th, 2016

If you are obliged to file a self-assessment tax return for 2015-16, and if you have underpaid tax for this year, and if some of your income (including private pension receipts) is taxed under PAYE, then you can apply to have your tax code number adjusted downwards in a future tax year to repay this underpayment by instalments. In effect, your future income tax deductions will be increased.

Many tax payers will find this a palatable option as HMRC would be collecting the underpaid tax sometime in the future. For example, if you had an underpayment for 2015-16 of £2,400 HMRC would adjust your code number for 2017-18. Consequently, instead of paying the underpayment in one amount, on or before 31 January 2017, your income tax deductions from April 2017 would be increased by £200 a month until March 2018.

There are certain conditions that must be met in order to secure this deferred repayment option. HMRC will not allow the coded out payment process if this would unduly reduce your take home pay. There are also graduated limits on the amount of tax that can be recovered in this way.

What is certain, is that you must file your 2015-16 self-assessment tax return, online, before 30 December 2016 otherwise HMRC will not accept a claim to settle income arrears using this method.

Tax payers who have not yet filed their 2015-16 returns have the best part of two months, if they anticipate tax underpaid for the year, and want to spread the repayment cash flow over the tax year 2017-18.

10% corporation tax

Tuesday, October 25th, 2016

The UK already has plans in place to reduce corporation tax to 17%. Many small businesses will be intrigued by widespread publicity today that discloses the possibility of a reduction in the UK corporation tax rate to 10% if the EU does take a hard line in Brexit negotiations.

According to Reuters news agency:

The tax cut would be used to try and persuade the EU to grant "passporting" rights for financial services firms to continue operating across the EU…

If the government does act on this “threat” what are the likely consequences for small businesses?

Initially, we may see more self-employed business persons drawn into an incorporated structure, to take advantage of the lower tax rates (a 10% corporation tax rate would be half the present basic income tax rate) although many of these smaller business owners will need to withdraw all of their company profits to cover living expenses, in which case there would be no benefit. A lower corporation tax rate will likely benefit larger concerns who will be able to retain profits in their company at the lower 10% rate.

As far as the Treasury is concerned, a 10% rate would mean a direct loss of £20bn in corporation tax receipts. How will this be made up? More austerity, more quantitative easing, increases in other tax rates or fewer allowances?

The 10% rate may be no more than posturing, an attempt to influence the forthcoming Brexit negotiations. Whatever the outcome, it is larger, and possibly financial service firms who will be the major beneficiaries.

The halving of corporation tax rates will possibly lead to more legislative complexity if HMRC are instructed to minimise the loss of tax revenues to the Exchequer. If past experience is a guide to future expectation it will be smaller businesses that feel the pinch.

Business rates revalued

Thursday, October 20th, 2016

From 30 September 2016, anyone in England and Wales that pays business rates go online to check their new draft rateable value. From this they can estimate what their business rates will be from April 2017.

It only takes a couple of minutes to click, find and review a rateable value. If a ratepayer thinks the information held about their property is incorrect, they can ask us to update our records. To do this visit the Gov.uk website at https://www.gov.uk/correct-your-business-rates.

All you need to do is enter your postcode or street address.

All 1.96 million non-domestic properties in England and Wales have recently been revalued. These new rateable values are based on the rental value of properties on 1 April 2015, and will be used to calculate business rate bills from 1 April 2017.

Please note that various business rates relief are still available, but they are handled differently in all the regions of the UK.

If you qualify for:

·         Small business rate relief

·         Rural rate relief

·         Charitable rate relief, or

·         Enterprise zone relief.

You will need to apply to your local council.

The exempted buildings and empty buildings relief is automatically applied by your local council and some councils give extra discounts. For example, you may be able to get hardship relief or transitional rate relief if your business meets certain criteria.

If your premises are affected by local disruption, you may get a temporary reduction in your business rates (e.g. flooding, building or road works).

Contact the Valuation Office Agency (or your local assessor in Scotland) to find out if you can claim.

Dividend tax reminder

Tuesday, October 18th, 2016

From 6 April 2016, any dividends you receive up to £5,000 are tax-free. Dividends received in excess of this amount will be taxed as follows. If they form part of your:

·         Basic rate tax band – taxed at 7.5%

·         Higher rate tax band – taxed at 32.5%

·         Additional rate – taxed at 38.1%

Last year, up to 5 April 2016, dividends received that fell into your basic rate tax band were covered by a tax credit. Accordingly, tax payers with dividend income in excess of the new £5,000 limit will be paying more tax on their dividend income 2016-17.

Readers should also note that for 2016-17:

·         Dividends that fall within your personal tax allowance do not count towards the £5,000 dividend allowance.

·         If your dividends fall under the £5,000 allowance, there is no need to tell HMRC unless you are registered for self-assessment.

·         If your dividends received are between £5,000 and £10,000 you should tell HMRC by ringing their helpline, ask them to adjust your tax code, or enter the details on your tax return if you are required to file.

·         If your dividends are over £10,000 you should be registered for self-assessment. For the tax year 2016-17, you have until 5 October 2017 to register with HMRC.

There are still advantages to maintaining a high dividend, lower salary strategy if you are a director/shareholder of a small limited company. However, it is worth revisiting the calculations on an annual basis to ensure you are optimising the various allowances available.

Companies House filing deadlines and penalties

Friday, October 14th, 2016

A reminder that you will have to pay penalties if you don’t file your accounts with Companies House by the appropriate filing deadline. Generally speaking, accounts will need to be filed nine months after a company’s financial year end.

The penalties for private limited companies are set out below. The penalties apply after the expiry of the various periods listed (after the filing deadline has expired).

 

 

Up to 1 month

£150

1 to 3 months

£375

3 to 6 months

£750

More than 6 months

£1,500

Penalties for public limited companies are different.

The penalty is doubled if your accounts are late two years in a row.

You can be fined and your company struck off the register if you don’t send Companies House your accounts or annual return.

Appeal against a late filing penalty

If you want to appeal a penalty you must give a reason why you couldn’t file your accounts on time.

You must prove the circumstances were both out of your control and made it impossible for you to meet the deadline, if, for example, a fire destroyed your records a few days before your accounts were due.

According to Companies House you can’t appeal by claiming:

  • your company is dormant
  • you can’t afford to pay
  • it was your accountant’s (or anybody else’s) fault
  • you didn’t know when or how to file your accounts
  • your accounts were delayed or lost in the post
  • the directors live or were travelling overseas

You can send a letter to the address on the front page of the penalty invoice that Companies House send you, or send an email including the penalty reference to enquiries@companies-house.gov.uk. You should get a response within ten working days and the penalty will not be collected while your appeal is being considered.

Lifetime ISA – further details issued

Wednesday, October 12th, 2016

Following consultation the government has issued further details of the new Lifetime ISA account which is expected to be available from April 2017.

In summary the account will be available to adults under the age of 40 and individuals will be able to contribute up to £4,000 per year and receive a 25% bonus from the government. Funds, including the government bonus, can be used to buy a first home at any time from 12 months after opening the account and can be withdrawn from age 60 completely tax free.

The new Lifetime ISA is designed to allow flexible saving for first time buyers and those wishing to save for their retirement.

Further details of the new Lifetime ISA are as follows:

  • Any savings an individual puts into the account before their 50th birthday will receive an added 25% bonus from the government.
  • There is no maximum monthly contribution and up to £4,000 a year can be saved into a Lifetime ISA.
  • The savings and bonus can be used towards a deposit on a first home worth up to £450,000 across the country.
  • Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together.
  • Where an individual already has a Help to Buy ISA they will be able to transfer those savings into the Lifetime ISA in 2017/18, or continue saving into both. However only the bonus from one account can be used to buy a house.
  • Where  funds are withdrawn at any time before the account holder is aged 60 they will incur a 25% government charge applied to the amount of the withdrawal. This returns the government bonus element of the fund (including any interest or growth on that bonus) to the government with a small additional charge applied.
  • After the account holder’s 60th birthday they will be able to take all the savings tax free.

Internet link: GOV.UK technical note

National Minimum Wage Rate

Wednesday, October 12th, 2016

The National Minimum Wage (NMW) is a minimum amount per hour that most workers in the UK are entitled to be paid. NMW rates increases come into effect on 1 October 2016.

  • the rate for 21 to 24 year olds will increase by 25 pence to £6.95 per hour
  • the rate for 18 to 20 year olds will increase by 25 pence to £5.55 per hour
  • the rate for 16 to 17 year olds will increase by 13 pence to £4.00 per hour
  • the apprentice rate will increase by 10 pence to £3.40 per hour.

The mandatory National Living Wage (NLW) applies for workers aged 25 and above. This is £7.20 an hour.

NLW and NMW rates will in the future be uprated every April starting in April 2017.

Penalties

Penalties may be levied on employers where HMRC believe underpayments have occurred and HMRC may ‘name and shame’ non-compliant employers.

National Living Wage hits small business costs

According to research, 47% of small business owners blame increased wages following the introduction of the NLW as the main contributor to rising costs.

The research, carried out by the Federation of Small Businesses (FSB), revealed that a third of FSB members claim that the NLW has led to a small increase in their wage costs while one in five have said that their staff costs have increased significantly. Although 59% of FSB members absorbed the increased costs through reduced profitability, 35% have increased prices, 24% reduced staff hours and 23% cut investment.

Updated guidance

HMRC have updated their guidance on payroll reporting including what employers should include on the Full Payment Submission (FPS) and Employer Payment Summary (EPS) returns.

Please contact us if you would like help with your payroll.

Internet links: ACAS article FSB press release Payroll guidance

Tax Free Childcare

Wednesday, October 12th, 2016

HMRC have announced further details of the new Tax Free childcare scheme which is to be introduced in 2017.

To be eligible, families will have to have all parents in work and each expecting to earn at least £115 per week and less than £100,000 a year and not be already receiving support through Tax Credits or Universal Credit.

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).

HMRC are asking childcare providers to register for the scheme as soon as possible.

Tax-Free Childcare will be launched from early 2017. The scheme will be rolled out gradually to families, with parents of the youngest children able to apply first. Parents will be able to apply for all their children at the same time, when their youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.

The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until April 2018.

The existing system of employer supported childcare provides an income tax and national insurance contributions (NIC) relief. The maximum relief is an exemption from income tax and NIC on £55 a week. This relief is per employee so if both parents are in employment the maximum exemption is £110 per week. In the new scheme the limit is per child.

Throughout September and October 2016, letters are being sent to regulated and approved childcare providers asking them to sign up online for Tax-Free Childcare. Only childcare providers registered with a regulator (such as Ofsted) can receive Tax-Free Childcare payments.

The government will make more information available, including details of how parents can sign up, later this year.

Internet link: GOV.UK tax free childcare

Autumn Statement plans

Wednesday, October 12th, 2016

The Chancellor of the Exchequer, Philip Hammond, will present his first Autumn Statement to Parliament on Wednesday 23 November 2016.

The Chancellor recently met with representatives from British business and business groups to listen to their views ahead of the Autumn Statement. The events, which took place at the Treasury and Downing Street, also provided the opportunity for discussions regarding leaving the EU.

The Chancellor said:

‘My message to businesses is clear: in our negotiations to leave the EU, we will work hard to get the best deal for Britain and that includes ensuring that British companies can continue to trade with the single market in goods and services.’

Carolyn Fairbairn, Director General of the CBI, commented:

‘Business wants the openness of the UK’s economy to be preserved – specifically access to markets, skills and trade – and to see an ambitious Autumn Statement that drives investment and growth, and delivers jobs and prosperity for all of the UK’s regions.’

We will keep you up to date with pertinent announcements from the Autumn Statement.

Internet links: GOV.UK News Gov.UK News

Cherie Blair leads failed High Court bid

Tuesday, October 11th, 2016

The removal of mortgage interest relief from tax deductibles for the UK’s buy to let landlords is set to begin its remorseless impact on landlord’s cash flow from April 2017.

For Steve Bolton and Chris Cooper, this tax change was step too far. They approached Cherie Blair QC, to argue for a judicial review of the legislation in the High Court.

The judge was not impressed and refused permission for leave to proceed.

The Rental Landlords Association vice-chairperson, Douglas Haig, was at the hearing. He said:

“Whilst it is now being judged as a legal tax that doesn’t make it a just or fair tax and the Government still doesn’t seem to fully understand the impact it will have on housing supply and economic activity.

“While landlords will be affected the real losers with be the tenants as living costs continue to increase.”

Bolton and Cooper issued a joint statement following the hearing:

“It has completely missed the opportunity to protect tenants, landlords and the housing market from the disastrous consequences of Section 24.

“Sadly it will be tenants who are hit hardest; they are set to see unprecedented rent increases over the coming months and years, which will be a very clear and direct consequence of this ludicrous legislation.

“For many, it will also mean the loss of their homes because vast numbers of landlords will be forced to exit the market.

“Hard-working, responsible landlords will have their pension plans in ruins, but the large corporations and the wealthiest in society, who can buy property without the need for mortgage finance, are systematically excluded from this unfair tax policy.”