The government has made the following announcement regarding a new register they are creating to provide government with greater transparency on overseas companies. In short, the register will provide a:
- world-first public register will require overseas companies that own or buy property in the UK to provide details of their ultimate owners,
- £180 million worth of property in the UK has been brought under criminal investigation as the suspected proceeds of corruption since 2004,
- government will publish draft laws this summer and the register will go live by early 2021.
A world-first register revealing owners of overseas companies buying property in the UK will go live by early 2021 to crack down on criminal gangs laundering dirty money in the UK, the government has announced.
More than £180 million worth of property in the UK has been brought under criminal investigation as the suspected proceeds of corruption since 2004. Over 75% of properties currently under investigation use off-shore corporate secrecy – a tactic regularly seen by investigators pursuing high-level money laundering.
The Department for Business, Energy and Industrial Strategy’s register will require overseas companies that own or buy property in the UK to provide details of their ultimate owners.
This will help to reduce opportunities for criminals to use shell companies to buy properties in London and elsewhere to launder their illicit proceeds by making it easier for law enforcement agencies to track criminal funds and act.
Recently, in the House of Lords, the government committed to publishing a draft bill this summer and introducing it in Parliament by next summer. Following legislation, the register would go live by early 2021.
Business Secretary Greg Clark said:
We are committed to protecting the integrity and reputation of our property market to ensure the UK is seen as an attractive business environment – a key part of our Industrial Strategy.
This world-first register will build on our reputation for corporate transparency as well as helping to create a hostile environment for economic crimes like money laundering.
The register will also provide the government with greater transparency on overseas companies seeking public contracts.
As we have previously reported on this blog, HMRC will no longer accept payment of tax using a personal credit card. Also, payments cannot be made at the Post Office. The remaining options are to make payment by:
- A personal debit card,
- A business credit card,
- Bank transfer/online banking,
- Taking a payment slip to your bank or building society with a cheque made payable to HMRC and quoting the correct reference,
- Setting up a direct debit with HMRC,
- Sending a cheque to HMRC with a payment slip,
- By adjusting your tax code to recover the tax due. There are limitations to the use of this method.
You could set up a Budget Plan with HMRC to make regular payments in advance; unlikely to be a favoured option, and if cash flow is an issue, you might be able to pay off arrears by instalments. To do this you will need to contact HMRC and agree a plan. They will need to know:
- your reference number (for example, your 10-digit unique taxpayer reference or VAT reference number)
- the amount of the tax bill you’re finding it difficult to pay and the reasons why
- what you’ve done to try to get the money to pay the bill
- how much you can pay immediately and how long you may need to pay the rest
- your bank account details
They will also ask you about:
- your income and expenditure
- your assets, like savings and investments
- what you’re doing to get your tax payments back in order
HMRC will use this information to decide whether you should be able to pay immediately, or if you can’t, whether you’ll be able to get your payments back on track with more time.
You should also be prepared to be asked more in-depth questions if you’ve been given more time to pay before. In more complex cases HMRC may ask for evidence before they decide.
There is a temptation to consider that the National Minimum Wage (NMW) and National Living Wage (NLW) rates are a guide to the amounts you should be paying employees. In fact, they are the minimum rates you should use (unless you are covered by the exceptions listed below) and they are a legal requirement, one that has teeth.
We have reproduced below workers entitled to these rates, and those not entitled.
Workers entitled include:
- casual labourers, for example someone hired for one day
- agency workers
- workers and homeworkers paid by the number of items they make
- trainees, workers on probation
- disabled workers
- agricultural workers
- foreign workers
- offshore workers
- apprentices are entitled to special rates if under 19 or in the first year of their apprenticeship.
Those not entitled include:
- self-employed people running their own business
- company directors
- volunteers or voluntary workers
- workers on a government employment programme, such as the Work Programme
- members of the armed forces
- family members of the employer living in the employer’s home
- non-family members living in the employer’s home who share in the work and leisure activities, are treated as one of the family and aren’t charged for meals or accommodation, for example au pairs
- workers younger than school leaving age (usually 16)
- higher and further education students on a work placement up to 1 year
- workers on government pre-apprenticeships schemes
- people on the following European Union programmes: Leonardo da Vinci, Youth in Action, Erasmus, Comenius
- people working on a Jobcentre Plus Work trial for 6 weeks
- share fishermen
- people living and working in a religious community
- a student doing work experience as part of a higher or further education course
- of compulsory school age
- a volunteer or doing voluntary work
- on a government or European programme
- work shadowing
HMRC oversee the use of these rates and are entitled to visit your premises to check and see if you are complying with your NMW and NLW obligations. If they find you have short paid employees, you will have to compensate workers immediately and face possible fines for non-compliance. HMRC can also take an employer to court on behalf of employees.
If you are unsure of your obligations, we can check out what your position is and advise accordingly.
There are many businesses that benefit from not being VAT registered. In the UK, there is no obligation to register until your taxable turnover exceeds £85,000. For many smaller businesses, especially those that buy and sell goods and services in competition with larger concerns, charging their customers without the 20% VAT add-on can be a compelling advantage especially when they are selling to the public, who can’t reclaim the VAT they would otherwise be obliged to pay.
There is a temptation for traders who want to capitalise on this competitive advantage, to split off parts of their business into a separate trade if VATable turnover was likely to exceed the £85,000 registration limit. In this way, the two businesses could bill up to £85,000 each and therefore double their advantage in the market place.
Unsurprisingly, HMRC are not keen on this strategy and the disaggregation – business splitting – rules basically outlaw this attempt at avoiding VAT registration.
To challenge this type of arrangement, HMRC need to be able to prove that the two (split) businesses have “financial, economic and organisational links.” For their challenge to work, HMRC must prove that all three apply.
In practice, this still offers planning opportunity for smaller businesses, but to be successful achieving the necessary arms-length outcome can be difficult especially if family members are involved. There are other issues that need to be considered. For example:
- Separation of bank accounts and business records.
- Each business must be separately registered with HMRC and submit its own tax return.
- Customers should be convinced that they are dealing with two businesses.
- Any charges for goods and services between the split businesses must be conducted at arm’s length.
Traders who are approaching the registration threshold, and would like to consider splitting off part of their trade to a separate business, should undertake careful planning to avoid the disaggregation rules, if that is possible. Please call if you would like to discuss your options.
The week before Christmas we posted an article stressing the value of checking out the tax consequences of investing in new plant and equipment. We stressed the importance of timing.
But this is just one issue that should be considered before the end of the current tax year. Every business owner and individuals with significant earnings, should take time out to consider their planning options before 6 April 2018.
The 5th April may not seem to be a particularly important day, but at midnight on that day 90% of your options to make beneficial changes to your financial circumstances for 2017-18 disappear.
We all have obligations to abide by the law, but it is perfectly acceptable to organise your affairs to retain as much as you can of your hard-won earnings and profit, and still stay within the terms of the UK tax code.
Your planning options for 2017-18 fall into two main groups:
- Strategies to reduce the impact of taxation on your profits and earnings, and
- Strategies to avoid stepping into one or more of the tax “bear traps” that await the unwary tax payer.
- business is different, and every individual has unique financial circumstances. For these reasons it is dangerous to generalise about the possible benefits of tax planning; which is why we recommend year-end tax planning to all our clients and business prospects.
Timing, as the title of this article asserts, really is everything in this regard. If you have a business, or are concerned by the amount of tax you are paying, please call and organise a conversation with us so that we can consider your options for 2017-18. The clock is ticking.
1 January 2018 – Due date for corporation tax due for the year ended 31 March 2017.
19 January 2018 – PAYE and NIC deductions due for month ended 5 January 2018. (If you pay your tax electronically the due date is 22 January 2018)
19 January 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2018.
19 January 2018 – CIS tax deducted for the month ended 5 January 2018 is payable by today.
31 January 2018 – Last day to file 2016-17 self-assessment tax returns online.
31 January 2018 – Balance of self-assessment tax owing for 2016-17 due to be settled on or before today. Also due is any first payment on account for 2017-18.
1 February 2018 – Due date for corporation tax payable for the year ended 30 April 2016.
19 February 2018 – PAYE and NIC deductions due for month ended 5 February 2018. (If you pay your tax electronically the due date is 22 February 2018)
19 February 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2018.
19 February 2018 – CIS tax deducted for the month ended 5 February 2018 is payable by today.
This is also an appropriate time of the year to consider your capital gains tax position if you have already disposed (or are considering a disposal) of an asset subject to CGT before 6 April 2018.
Most of our readers will be aware that they can make chargeable gains of up to £11,300 in the tax year 2017-18 and pay no CGT. This exemption cannot be transferred to a future tax year or carried back to a previous tax year if it is not utilised.
Many will also remember that it is no longer feasible to sell shares before 6 April 2018 to crystallise a CGT loss or a gain that is covered by the above exemption if those shares, or part of them, are reacquired within 30 days of the disposal – this sell and buy-back activity is often described as “bed and breakfasting”.
However, it is still possible to reacquire holdings, within the 30 days period, if you use an ISA or self-invested personal pension (SIPP) to make the buy-back.
Transfers of chargeable assets for CGT purposes are exempt between spouses and civil partners. Also, the annual exemption is available to both parties. This combination means that couples may be able to share the gain on a disposal of assets and reduce their overall CGT charge.
This strategy, of transferring partial ownership to a spouse, can also reduce an overall CGT charge if the transferring partner/spouse is due to pay CGT at the higher 20% or 28% rate (as their gains fall to be taxed in the higher rate tax band) and the receiving partner/spouse would only be liable to pay CGT at the lower 10% or 18% (as their share of a transferred gain would fall into their free basic rate band).
The 10% and 20% rates apply from April 2016, but do not apply to disposals of residential property or carried interest – for these latter items, disposals are taxed at 18% to 28%, dependent on where the gains sit in the basic or higher rates bands.
And don’t forget, CGT is assessed and payable as part of your self-assessment. Any tax payable for 2017-18 will be due for payment 31 January 2019. On the same day you will also have to pay any other underpayment of income tax for 2017-18 and your first payment on account for 2018-19.
If you own assets that are subject to CGT on disposal and you, and possibly your spouse, are struggling to fully utilise your CGT annual exemption, or you would like to discuss ways to minimise any CGT payable, please call to discuss your options.
As we are approaching the end of yet another tax year, it is worth repeating our suggestion that highlights the cash benefit to company car drivers and their employers, of reimbursing the cost of fuel provided for private motoring. The rates have been updated for 2017-18.
Since the tax on private fuel provided with company cars is so high, many employers have an arrangement whereby they no longer pay for private fuel. In many cases this means that the employee must reimburse the employer for private fuel included in petrol bills paid by the employer.
Consider the following example for 2017-18:
If your private mileage is currently 560 miles a month, and you drive a 1900cc diesel engine car, the rate per mile to cover fuel charges as quoted in the latest rates published by HMRC is 11p per mile. Accordingly, you should repay £61.60 a month to your employer.
Based on the above example, if the vehicle’s list price when new was £25,000, and the car benefit charge rate was 28% (based on a 130g/km CO2 rating) the benefit in kind charge for the year would be £7,000. With no repayment of private fuel, there would also be a £6,328 car fuel charge. Both these amounts would be added to your taxable income for the year. If you were a higher rate tax payer the car fuel charge would cost you £2,513.20 a year in additional tax (£6,328 x 40%). This amounts to £210.93 per month.
If your actual private mileage proved, on average, to be 560 miles a month, you would therefore save £149.33 per month (£210.93 – £61.60).
Employers will also benefit as they will no longer be subject to a National Insurance charge on the amount of the car fuel benefit. In the above example, it would reduce NIC costs by £873.26 (£6,328 x 13.8%).
It is worth crunching the numbers. Obviously, the lower your private mileage, the more likely a repayment system will save you money, but you will need to act before the 5 April 2018.
From April 2018, the £5,000 tax-free dividend allowance is reducing from £5,000 to £2,000.
Does this mean that converting from self-employed to a limited company arrangement to save tax and NIC is no longer a viable option? Readers who have adopted this strategy will have likely seen a reduction in taxes due thus far, but the partial loss of the dividend allowance will reduce overall savings that can be made.
However, in most cases benefits will continue to accrue albeit at a reduced rate, and if profits are retained in the company, rather than withdrawn as salary or dividends, these benefits could still be significant.
- A company paying tax at 19% on its taxable profits can retain 81% to improve reserves and fund investment.
- A sole trader or partnership, paying income tax at 40% or 45% can only retain at best 60% or 55% of taxable profits.
- Sole traders or partnerships who are taxed at the basic rate of 20% will still be required to pay additional NIC on their profits and will not be able to retain funds at the same rate as a company.
Will be keeping an eye on the numbers for clients who have adopted this strategy and will discuss their options when we review their tax position during 2018.
Let us hope that 2018 presents opportunities to build our business interests and improve the financial position of our families. Certainly, there were many changes last year, not least the ongoing implications of the Brexit vote, that have proved to be challenging and not only for the politicians.
A reminder, as we look forward to the new year, that our actions in the future will be dictated to some extent by past changes. We have listed below just a few of these challenges, some of which we reported in length last year, and many of which will require action on our part in the coming year.
If you are in business:
- Deal with your obligations, if any, to comply with the General Data Protection Regulation – see the article we posted on this topic last month.
- Deal with your obligations, if any, to comply with the Criminal Finances Act 2017 – again, see the article we posted on this topic last month.
- Review your management accounts before the end of your current account’s year to make sure that there are no changes required before the end of the trading year. From a tax planning point of view this is essential as once your trading year or tax year end passes opportunities to save tax may be permanently lost.
- Are you aware of your obligations to pay tax (VAT, corporation tax, income tax or other National Insurance liabilities) during 2018. At the end of this month your self-assessment dues for 2016-17 and payment on account for 2017-18 fall for payment.
- Are you in the most effective VAT scheme for your size and type of business?
- If you are still recording your accounts on spreadsheets or handwritten records, have you considered using internet based accounts software? Come the day we are required to upload our accounts data to HMRC, under their Making Tax Digital program, using a computerised system that links with the tax office IT will make the job less of a chore.
- Look at salary sacrifice opportunities especially if your taxable income for 2017-18 will exceed £100,000 for the first time. Any strategy that shifts income into tax-free benefits could save you marginal tax at 60% if you have earnings between £100,000 and £123,000.
- Parents claiming child benefit should be wary if one partner’s earnings are likely to exceed £50,000 for 2017-18. A High Income Child Benefit Charge may apply. This could mean benefits being repaid to HMRC and the possibility that you may have to register for self-assessment for the first time.
- Check out your eligibility to pay more into your pension fund before 6 April 2018.
- Have you fully utilised your tax allowances for 2017-18? For example, your personal tax allowance £11,500; the capital gains tax exempt amount £11,300; and inheritance tax tax-free gifts allowances.
- Have you taken advantage of the £20,000 ISA limit?
Please call if you would like to review any of these or other planning opportunities for 2017-18. Don’t forget that once the year end passes any likely benefits that you could have benefitted from may be permanently lost.