Archive for the ‘Property’ Category

Business rates appeal proposals are a ‘barrier to justice’

Tuesday, October 13th, 2015

The Enterprise Bill is currently going through Parliament. Part of the Bill reforms the business rates appeals system. The government’s changes have been criticised by rates experts and business groups, amid concerns that the changes will act as a ‘barrier to justice’.

The Valuation Office Agency (VOA), which is part of HMRC, is responsible for compiling and maintaining non-domestic rating lists. Currently officers of the VOA are prevented from sharing the information they collect about properties and ratepayers with local government. This means that businesses have to provide the same information twice to the VOA and local government. It can also mean that the properties have to be inspected by both the VOA and the local authority.

The Bill therefore allows the VOA to disclose information to a ‘qualifying person for a qualifying purpose’ such as a local authority.

The changes have been criticised by some people. They say the legislation will act as a ‘barrier to justice’ for businesses seeking to appeal.

Transparency around how business rates or tax on commercial property is measured has long been called for by small businesses. Critics of the bill claim that it has failed to address this issue, as it permits the VOA to share rate measurement information with local authorities but not with individual businesses.

Jerry Schurder, former chairman of the Royal Institution of Chartered Surveyors said:

‘In business rates, your own liability depends not on your own property but what’s being paid by lots of other people and you have no right to obtain that information. In any other tax, the taxpayer has the relevant information to make an appeal but not on rates.’

Meanwhile John Allan, national chairman at the Federation of Small Businesses, commented:

‘While we support moves to make it easier to navigate business rates appeals, we have concerns around the proposals in the Bill.

Their primary aim seems to be reducing the number of appeals by making the process more difficult, rather than by addressing the underlying issues, in particular making the appeals system and the VOA more transparent.

If increased transparency is not delivered, then confidence in the business rates system will continue to be undermined.’

 

Read more about the legislation – click here

Read the full article – click here

Annual Tax on Enveloped Dwellings (ATED) updated procedures

Wednesday, September 9th, 2015

Since 2013 a range of measures have been introduced to discourage the holding of residential property in the UK via companies, partnerships and collective investment schemes. In summary, these measures are:

  • Stamp Duty Land Tax (SDLT) is payable at 15% on the acquisition on or after 20 March 2014 of properties costing more than £500,000
  • an Annual Tax on Dwellings (ATED) applies at a fixed amount depending on value and
  • Capital gains tax (CGT) at 28% is payable on a proportion of gains for the period that the property has been subject to ATED.

There are specific reliefs and exemptions for certain types of properties.

Changes in limits

Prior to 1 April 2015 the lower property value threshold for ATED was a value of more than £2m on 1 April 2012, or at acquisition, if later. With effect from 1 April 2015, residential properties valued at more than £1m and up to £2m on 1 April 2012, or at acquisition if later, were brought into the charge.

From 1 April 2016 another new valuation band comes into effect for properties valued at more than £500,000 but less than £1 million.

The threshold for ATED-related CGT disposal consideration has also reduced from £2m to £1m from 6 April 2015 and will further reduce to £500,000 from 6 April 2016.

ATED Procedures

ATED is reported and the tax paid through an annual return. The return periods run from 1 April to 31 March each year.

Normally an ATED return must be made within 30 days of the date on which the property first comes within the charge to ATED for any chargeable period. Where the property is within the scope of ATED on 1 April each year, the return must be filed by 30 April in the year of charge. Payment of the tax is due with the return.

There is a special rule for properties coming within the scope of ATED from 1 April 2015 under the lower threshold of £1m detailed above. The rule is that returns for the chargeable period beginning 1 April 2015 must be filed by 1 October 2015 if the property was held on 1 April 2015 or within 30 days of acquisition if this is later. Payment of the tax is due 31 October 2015.

The chargeable person must submit an ATED return for any property that is within the scope of ATED for the relevant chargeable period. There are reliefs available which may reduce the liability in part or to zero. However, all claims for reliefs must be made in a new ‘relief declaration return’ and these new returns to claim relief have now been made available.

Returns for properties falling within the lower band of £500,000 are due for the chargeable period 1 April 2016 to 31 March 2017. The normal filing dates apply to properties within this new band. For example, if you hold a property valued at more than £500,000 on 1 April 2016, you must file your return and pay the tax by 30 April 2016.

Returns

In addition, a new ‘relief declaration return’ is introduced. Broadly, for each type of ATED relief being claimed, the company can submit a relief declaration return stating that a relief is being claimed in respect of one or more properties held at that time. No details are required of the individual properties or the number of properties eligible. Where a property is acquired in-year which also qualifies for the same type of relief, the existing return is treated as also having been made in respect of that property.

A normal ATED return will still be required in respect of any property which does not qualify or ceases to qualify for a relief i.e. where tax is due.

ATED and the reliefs available are a complex area. Please contact us if you would like specific advice.

More information is available from the Government Website

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.

Confirmation of income for mortgage purposes

Tuesday, May 12th, 2015

Are you self employed and wanting to go for a mortgage – well we have some news!!

Many mortgage lenders now request a copy of the official HMRC tax calculation (SA302) as confirmation of income.

As the result of lobbying from the accounting profession, there has been a change of heart.

From January 2015, self-employed individuals with a self assessment online account can provide proof of their income by downloading copies of their Tax Calculation and their Tax Year Overview from the HMRC online service, which will be the evidence they need to support a mortgage application.
As our clients agents, we can print these documents on our clients behalf; these are acceptable to support your loan or mortgage application. There is still a conflict between planning to minimise income for tax purposes and declaring a higher level of income to support a mortgage application so let us know if you are planning to apply for a new mortgage.

The Conservatives Tax Policies

Tuesday, May 12th, 2015

Now that the outcome of the recent election has been confirmed we thought we’d take this opportunity to recap the Conservatives pledges on tax policies.

As announced in the Budget, the Conservative Party promise to increase the tax-free Personal Allowance to £12,500 and the 40p Income Tax threshold to £50,000.
The Conservatives will pass a new law so that nobody working 30 hours on minimum wage pays Income Tax on what they earn. At £8 an hour that would be £240 a week, or £12,480 a year. They also state that there will be no increases in VAT, National Insurance contributions or Income Tax.

The Manifesto states that they will set a new, significantly higher and permanent level for the

The Conservatives also pledged to take the family home out of tax for all but the richest by increasing the effective Inheritance Tax threshold for married couples and civil partners to £1 million, with a transferable main residence allowance of £175,000 per person in addition to the existing £325,000 nil rate band. This will be paid for by reducing the tax relief on pension contributions for people earning more than £150,000.

Let’s see how all of the above pledges transpire over their coming term in power.

Some of the Budget changes March 2015

Thursday, April 2nd, 2015

Following last week’s Budget, the government has published the Finance Bill 2015. The bill implements tax changes announced at Budget 2014, Autumn Statement 2014 and Budget 2015.

It includes action by the government to support hardworking families keep more of their hard-earned money by:

  • increasing the personal allowance by an extra £400 to £11,000 from April 2017 so that a typical rate taxpayer will be £905 better off compared to 2010, and an individual on the National Minimum Wage working up to 30 hours a week will not pay any income tax
  • exempting children from Air Passenger Duty so that, taken together with measures introduced in Finance Act 2014, a family of four flying to Australia will save £194

The bill also contains key policies to make the UK more competitive for business, such as:

  • supporting investment in the crucial UK oil and gas industry through cutting the Supplementary Charge by 12%, cutting the Petroleum Revenue Tax from 50% to 35% and introducing two new allowances
  • increasing the tax credits available for large and small businesses investing in research and development
  • a new tax relief to promote the production of children’s TV in the UK, and further support for high-end TV and film tax.

Finally, the bill legislates to create a fairer tax system, by clamping down on tax avoidance and ensuring that banks contribute their fair share. This includes:

  • introducing a new Diverted Profits Tax of 25%, aimed at multi-national companies that artificially shift their profits offshore to avoid paying UK tax
  • putting a stop to unfair tax avoidance – raising nearly £2.5 billion by 2019/20 to support the economic recovery
  • increasing the bank levy and introducing new rules for banks – raising nearly £8 billion over the next 5 years

David Gauke, Financial Secretary to the Treasury, said:

The government is committed to supporting hardworking families and backing business. That is why we are making it easier for them to keep more of their hard earned money and access the help they need to grow.

The legislation published today builds on our efforts to create a stable tax system that supports our long-term economic plan.”

The measures contained in the bill were announced by the Chancellor at Budget 2014, Autumn Statement 2014 or Budget 2015.

First time buyers savings plan

Friday, March 27th, 2015

If you are a first time buyer a new savings scheme introduced in the Budget last week is well worth considering.

Nick named the Help to Buy ISA, the ISA will allow you to save up to £200 a month, and if you fulfil the various conditions set out below, the Government will boost your savings by 25% when you purchase your first home. This is how it will work:

 

  • new accounts will be available for 4 years, but once you have opened an account there’s no limit on how you long you can save for
  • accounts will be available through banks and building societies from Autumn 2015
  • you can make an initial deposit of £1,000 when you open the account – in addition to normal monthly savings there is no minimum monthly deposit – but you can save up to £200 a month
  • accounts are limited to one per person rather than one per home – so those buying together can both receive a bonus
  • only available to individuals who are 16 and over
  • the bonus is available to first time buyers purchasing UK properties
  • minimum bonus size of £400 per person
  • maximum bonus size of £3,000 per person
  • the bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London

 

The Government bonus will be paid when you buy your first home.

New rules to safeguard value for money in workplace pensions

Thursday, February 12th, 2015

From April, people automatically enrolled into a workplace pension will see their charges capped at 0.75%, unless they have chosen a more expensive option. The details are set out in draft regulations laid before Parliament on 4 February 2015.

For an average earner currently paying into a fund with a charge of 1.5%, this new cap could save them around £100,000 over the course of their working life. Over the next decade, the default fund charge cap will transfer around £200 million from the pensions industry to savers.

Minister for Pensions Steve Webb said:

Today is an excellent day for pension savers. It is vital that workplace pension schemes are run in the interests of their members and that their hard-earned savings are not eaten away by excessive charges.

Over 5 million people have now been automatically enrolled into a workplace pension and by 2018 millions more will be saving for the first time, or saving more. This is why we are building a pensions system that these workers can save into with confidence – and not see their money disappear in opaque charging structures.

There is an understandable buzz around what April will bring for those retiring now, with the unprecedented pension freedoms coming in. But these reforms show we are also determined to help the pensioners of tomorrow – people working hard and saving hard for their families’ future.

The next stage of the government’s work to ensure full disclosure of costs and charges throughout the value chain is also set out in the February paper – with the plan to publish a joint call for evidence with the Financial Conduct Authority in spring 2015.

Most of the updated draft regulations will come in to force on 6 April 2015, subject to Parliamentary approval.

Staff loans for would be tenants

Wednesday, February 11th, 2015

Housing Minister Brandon Lewis announced recently government-wide support for a new scheme that will become available to thousands of potential tenants.

The minister said he was determined to “create a bigger, better private rented sector”.

All of Whitehall has now agreed to offer deposit loans to staff looking to take up new tenancies in the private rented sector, following in the footsteps of the Department for Communities and Local Government. This includes the Home Office, Ministry of Defence, Department for Work and Pensions, HM Revenue and Customs and the Department of Health.

More help for tenants

The scheme, which works in the same way as a staff season ticket loan, will allow employees to borrow some of their salary upfront in order to pay for rental deposits, which is then repayable from salary payments over up to a year. It is available to be taken up in both the public and private sectors.

The Department for Communities and Local Government last October became the first government department to roll the scheme out to its staff, with ministers pushing other parts of government and the public sector to follow suit. The department is working with the Department for Business Innovation and Skills to increase availability across the private sector.

Brandon Lewis said:

With millions of people across the country renting their home we are determined to create a bigger, better private rented sector that is fair to tenants.

Today’s move will mean thousands of people will be offered a helping hand to rent privately through season ticket style loans from their employers.

I hope to see more employers in the public and private sector joining the scheme in the near future.

The tenancy deposit scheme can be adapted by different employers to suit their needs, but generally employees are offered interest-free loans to pay their deposits when they move into a privately rented home, which are then paid back through their salary over the course of up to a year.