In March 2014 the European Commission published a report entitled Macroeconomic Imbalances United Kingdom 2014. The text includes a few observations on the UK property market that have been greeted with less than enthusiasm by the UK Government.

The report includes the following introduction:

“The United Kingdom continues to experience macroeconomic imbalances, which require monitoring and policy action. In particular, developments in the areas of household debt, linked to the high levels of mortgage debt and structural characteristics of the housing market…”

The report points out that:

• House price inflation continues to outstrip the Consumer Price Index by a wide margin.
• The main driver of house price inflation is demand for properties outstripping supply.
• The Government Help to Buy scheme and continuing low interest rates have increased availability of mortgage funding.
• House price inflation is highest in London and the South-East. Property owners in other areas of the UK would be particularly vulnerable to interest rate increases.

Recommendations to deal with the potential over-heating in the UK property market include:

• Increase the supply of housing.
• Reform of the Council Tax system
• Release of more land for development

The concluding statement of risks associated with the property market are reproduced below:

“In conclusion, levels of activity remain below previous peaks.  Nevertheless, house prices are rising and the increase in prices and level of activity is likely to be reflected in rising levels of mortgage debt (and that rise is occurring from an already elevated base). The main risk on the demand side is households' vulnerability to a rise in the cost of borrowing while the response of the authorities has mitigated risks associated with an excessive lowering of credit standards. The main risk on the supply side is that reforms to the planning system and other initiatives to increase supply do not deliver increases in new housing of the amount required, or do so sufficiently quickly, to forestall further rises in house prices and mortgage indebtedness.”

You can get small business rate relief if you only use one property and its rateable value is less than £12,000.

Until 31 March 2015 you’ll get 100% relief (doubled from the usual rate of 50%) 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.

If you have more than one property you could get small business rate relief if the rateable value of each of your other properties is less than £2,600. The rateable values of the properties are added together and the relief applied to the main property.

You will need to contact your local council to apply for small business rate relief.

If your property has a rateable value below £18,000 (£25,500 in Greater London) you are considered to be a small business. Even if you don’t qualify for small business rate relief, your business rates will be calculated using the small business multiplier instead of the standard one. This is the case even if you have multiple properties.

The multiplier shows the percentage (pence in the pound) of the rateable value that you pay in business rates. A list of current multipliers is on the Valuation Office Agency (VOA) website.

A member of the one of the UK’s biggest tobacco smuggling gangs, who fled to Spain to avoid prison, has been returned to the UK to begin his sentence.

John Sabin, 58, from Doncaster, was part of an eight-strong gang that transported millions of smuggled cigarettes across the north of England to warehouses, storage yards and farms with the intention of selling them at a profit and evading duty.

He escaped justice after being convicted for his part in a £26 million tobacco smuggling operation which involved more than 150 million illicit cigarettes and tonnes of low-quality tobacco. He was subsequently sentenced in his absence to two years and nine months in prison.

Sabin was added to HM Revenue and Customs’ (HMRC) list of Most Wanted tax fugitives. After a public appeal for help by HMRC last month, he was tracked down by Spanish police to Malaga, on the Costa del Sol, where he was working in a bar.

HMRC’s specialist Fugitive Unit worked with the Spanish police and Interpol to return Sabin to the UK. He appeared at Derby Crown Court yesterday (15 May 2014) and was sentenced to an additional three months in prison for absconding and has now begun his time in jail.

Jennie Granger, Director General Enforcement and Compliance, HMRC, said:

“John Sabin thought he could flee the country to avoid paying for his crimes. He was wrong. We have tracked him down and, in co-operation with the Spanish authorities, have brought him before the UK courts so justice can be served.

Tobacco smuggling of this size is organised crime on a global scale. It supports criminality within our communities and denies our country millions of pounds of vital revenue every year to fund public services.

We really appreciate the role that the public and other law enforcement agencies play in helping us to bring people like Sabin to justice and would encourage anyone with information about any of HMRC’s Most Wanted tax fugitives to come forward.”

As well as his jail term, Sabin also faces having to repay the illegal proceeds of his criminal activity. Four other members of his gang have already been ordered to pay back over £480,000.

 1 June 2014 – Due date for Corporation Tax due for the year ended 31 August 2013.

 19 June 2014 – PAYE and NIC deductions due for month ended 5 June 2014. (If you pay your tax electronically the due date is 22 June 2014.)

 19 June 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2014.

 19 June 2014 – CIS tax deducted for the month ended 5 June 2014 is payable by today.

 1 July 2014 – Due date for Corporation Tax due for the year ended 30 September 2013.

 6 July 2014 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

 19 July 2014 – Pay Class 1A NICs (by the 22 July 2014 if paid electronically).

 19 July 2014 – PAYE and NIC deductions due for month ended 5 July 2014. (If you pay your tax electronically the due date is 22 July 2014.)

 19 July 2014 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2014.

 19 July 2014 – CIS tax deducted for the month ended 5 July 2014 is payable by today.

At present, taxpayers who own more than one property used as residences by them, can make a formal election to determine which of their properties should be considered their private residence for tax purposes.

The election needs to be based on the facts – how has each property been used as a private residence – and HMRC has a right to challenge an election if it looks as if the taxpayer has never really taken up residence in a property and is simply trying to obtain a tax advantage.

HMRC is presently consulting on a range of issues that affect owners of residential property in the UK. One of the changes they have under consideration is to scrap the present right to make an election, and to give HMRC the right to determine private residence status based on “demonstrable” evidence.

 If this change is enacted it could take effect from as early as April 2015.

 Home owners with more than one property should consider their options now. 

HMRC has proposed to relax the current online filing of VAT returns. They are going to improve the telephone filing service by making it possible for taxpayers to ring HMRC rather than making an appointment for HMRC to ring them. They are also providing: a dedicated line, and providing a service outside normal working hours. The service will be more widely publicised and guidance provided.

The change of approach has been largely due to recent tax cases that have challenged the mandatory online filing process for most taxpayers. In one case the judge found that requirement breached the human rights of those who were unable to file online because they were computer illiterate due to age, or had a disability that made using a computer accurately very difficult or painful, or they lived too remotely for a reliable internet connection.

 VAT registered traders should be able to take advantage of non-online filing if they are:

• elderly,
• disabled,
• in a remote location where internet access is not available,
• unable to file online for any other reason

The changes should provide those groups with telephone filing, or paper filing alternatives.

On 9 April 2014 HMRC published details of their latest campaign to encourage taxpayers to declare and pay unpaid tax on second incomes.

HMRC will expect settlement of any taxes due four months from the date of declaration of untaxed income sources to HMRC.

The types of income highlighted by HMRC include:

• consultancy fees, for example, providing training
• organising parties and events
• providing services like taxi driving, hairdressing or fitness training
• making and selling craft items
• buying and selling goods, e.g. at market stalls or car boot sales

If you have undeclared income, making use of this disclosure opportunity should reduce any penalties HMRC may charge you. If you don’t make a voluntary declaration, and are discovered by HMRC, then the penalties you will be charged will be much higher.

• If you make a voluntary disclosure penalty rates are 0%, 10% or 20% depending on the circumstances.
• If you don’t make a voluntary disclosure these rates can rise to 100% of the tax underpaid.
• If the non-disclosure involves offshore liabilities the penalties can increase to 200%.

Our previous government enacted legislation that removed the personal allowance for certain high income earners. The present government has made no change to this process. Basically, for every £2 your income exceeds £100,000, your personal allowance is reduced by £1.

Take, for example, the case of Joe Smith who has income for 2014-15 of £100,000 and a personal tax allowance of £10,000 – this leaves income subject to tax of £90,000 and a tax bill of £29,627.

Joe’s best friend, Charlie, has income of £120,000. Based on the £1 reduction for every £2 of income over £100,000, Charlie has lost entitlement to his personal allowance of £10,000 and his tax bill amounts to £41,627.

Charlie’s extra tax, compared to Joe’s, is £12,000. His income is £20,000 higher than Joe’s and accordingly, his marginal rate of tax on this amount is 60% (£12,000/£20,000).   

This 60% Income Tax rate can be avoided. For instance, Charlie could pay a net contribution into his pension of £16,000 (gross premium £20,000) and this will reduce his taxable earnings to £100,000 saving him £8,000 in Income Tax – Charlie also receives 20% tax relief at source of £4,000 – the combined tax saved is therefore £12,000.

There are other strategies that can be employed to similar effect. If your income is likely to exceed £100,000 for the first time this tax year please call so we can discuss your options in more detail.

 There are a number of assets that you can sell at a profit without paying capital gains tax (CGT) on the sale. They include:

• Any car that is owned personally, and not by a business.

• Personal possessions worth up to £6,000 each. For example jewellery, paintings or antiques.

• Stocks and shares you hold in tax-free investment savings accounts, such as ISAs and PEPs.

• UK Government or 'gilt-edged' securities, for example, National Savings Certificates, Premium Bonds and loan stock issued by the Treasury.

• Betting, lottery or pools winnings.

• Personal injury compensation, and

• Foreign currency you bought for your own or your family's personal use outside the UK.

Of course, if you make a loss selling any of the above, the losses would not be available to set off against other gains for CGT purposes.

There are also certain reliefs that you can claim to mitigate or defer CGT. These include:

• Business Asset Roll-Over Relief – This applies when you dispose of some types of business asset, which you intend to replace. You may be able to 'roll-over' or postpone the payment of any CGT that would normally be due.

• Incorporation Relief – If you incorporate your business, that is, you transfer your business to a company CGT may not be due at that time.

• Gifts Hold-Over Relief – You may be able to get this relief if you give away a business asset. You can postpone all or part of your gain until the asset is sold or disposed of by the person you gave it to.

• Disincorporation Relief – When a business is transferred from a limited company to the shareholders, it is known as disincorporation. The shareholders continue the business in an unincorporated form – as a partnership or sole trader.

If you are thinking of selling assets that you are concerned may result in a tax charge please contact us for an opinion. Often there are planning opportunities that can be legitimately employed. The key is to plan the transaction carefully to maximise use of reliefs available.

HMRC have had recent successes in the courts that have neutralised tax schemes utilising charity tax reliefs. Here’s what they have to say on the GOV.uk website:

HM Revenue and Customs (HMRC) successfully challenged the tax avoidance scheme used by Nicholas Green and designed by Afortis Limited as part of an ongoing crackdown on charitable tax relief abuse. The First-tier Tribunal ruling and its impact on similar schemes could make sure over £35 million of tax is paid.

Under the scheme, shares were listed on the Channel Islands Stock Exchange at a value significantly more than their real worth. The shares were then gifted to charity at the inflated value. The scheme was designed to allow Mr Green to claim tax relief on the amount that the shares had been listed for, rather than on the much lower amount that the shares were worth.

The tribunal ruled that the relief claimed should be reduced significantly from that claimed by those using the scheme.

This latest decision follows HMRC’s defeat of another scheme using charitable reliefs, promoted by NT Advisors, at a tax tribunal last week.

Nicky Morgan, Financial Secretary to the Treasury, said:

“The government wants to encourage more people to give to charity and has provided tax relief to incentivise this, but we will not tolerate abuse of the system. This case is further evidence of HMRC’s tough action to tackle tax avoidance schemes that seek to abuse charitable giving tax reliefs.

“Taxpayers entering into these arrangements are not only damaging their own reputations, they are harming the reputations of charities that may not be aware they are being used to avoid tax. Anyone thinking of getting involved in a tax avoidance scheme does so at their risk and should know that HMRC will pursue them in collecting the tax that is due.”