HMRC have published the following fact sheet regarding the wide ranging changes to the taxation of dividends from April 2016:

From April 2016 the Dividend Tax Credit will be replaced by a new tax-free Dividend Allowance.

The Dividend Allowance means that you won’t have to pay tax on the first £5,000 of your dividend income, no matter what non-dividend income you have.

 The allowance is available to anyone who has dividend income.

 Headline rates of dividend tax are also changing.

 You’ll pay tax on any dividends you receive over £5,000 at the following rates:

• 7.5% on dividend income within the basic rate band
• 32.5% on dividend income within the higher rate band
• 38.1% on dividend income within the additional rate band

 This simpler system will mean that only those with significant dividend income will pay more tax.

 If you’re an investor with modest income from shares, you’ll see either a tax cut or no change in the amount of tax you owe.

 Dividends received by pension funds that are currently exempt from tax, and dividends received on shares held in an Individual Savings Account (ISA), will continue to be tax free.

From April 2016 you have to apply the new headline rates on the amount of dividends you actually receive, where the income is over £5,000 (excluding any dividend income paid within an ISA).

 The Dividend Allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive.

Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance.

 All company directors that have a dividend policy that favours dividends over salary should take tax planning advice as soon as possible as they may need to change the mix of dividends v salary from April next year.

 The clock is ticking…

There are now a number of ways that charities can encourage donations by promoting the various tax schemes available.

Over the last five years the government has brought in a range of changes to the tax system to make it simpler for charities to make the most of tax reliefs, so that more money can go to good causes.

It’s now easier for charities to receive gift aid

Charities online, a system that helps charities to claim gift aid faster, was introduced in 2013. Instead of having to submit paper claims for tax reliefs through the post, charities can now submit them online.

Almost 95% of charities now use charities online to claim gift aid. The majority of claims are processed within five working days, down from around 15 days.

It’s now simpler for charities to receive government support on small donations

If someone donates a small amount of money to a charity – for example, by giving it to a charity vendor in a high street – it’s often not possible (or practical) for the donor to provide formal consent for gift aid to be claimed on that donation.

Through the gift aid small donations scheme charities can now claim a gift aid-style top-up on these small donations, up to a limit of £5,000 per year. This limit will increase to £8,000 per year from April 2016.

An outreach team now helps charities claim tax relief

To date, HMRC’s outreach team has delivered face-to-face presentations to over 650 represented charities to spread awareness, increase take-up, and help charities to successfully claim tax relief.

Works of art donated to the nation now receive tax relief

The cultural gifts scheme was introduced in 2013 and allows taxpayers to pay a tax bill by donating eligible works of art to the nation.

People donating to charity in their will can now benefit from a lower rate of inheritance tax

If people leave at least 10% of the net value of their estate (its worth, minus any debt, other liabilities and reliefs) to charity, then 36% inheritance tax can be paid instead of 40%. This was introduced in 2012.

Local amateur sports clubs can now claim gift aid on donations too

The government has amended the law so that local sports clubs registered as community amateur sports clubs can receive corporate gift aid, to help these clubs to benefit their local communities.

A new tax relief has been created to encourage investment in social enterprises

The social investment tax relief scheme has been created to encourage people to invest in social enterprises, including charities.

Individuals making an eligible investment will be able to deduct 30% of the cost of that investment from their income tax liability.

 If you're late telling Companies House about changes to your officer's details, it could come at a cost.

Searches of company officers account for 47% of all public searches of our database, but only 53% of companies notify Companies House within the legal timescale when their officer details have changed.

 Filing your documentation late can affect your credit standing as this is one of the indicators to your company’s reliability. If your bottom line is being affected it makes sense to keep your documentation up to date.

 You must tell Companies House about changes to your officers within 14 days of the change.

Make sure that you let Companies House know when your company officers change as soon as possible. The reliability of the UK register is part of the reason why it’s held in such high regard – making the UK one of the most trusted places in the world to do business. People want to know that the companies they’re dealing with are in good standing and keeping company information up to date is key to that.

The speed of online filing and ease of access means you can immediately update your company information as soon as decisions are made, so there’s every reason to take advantage of this. There’s a role for every company to have a positive impact on the economy by filing on time.

 Companies House require information updates on a range of issues. These include:

• directors and company secretaries, e.g. new appointments, resignations or changes to their personal details
• changing your company name
• changing your registered office address
• changing your accounting reference date
• changing where your company records are kept, if different from your registered address
• which records you’ll keep at an alternative address
• changes to your company’s share structure, e.g. if you issue new shares
• details of any new mortgages it has or mortgages it has paid off

 Some of these changes require the filing of formal resolutions, and in most cases, as noted above, notification forms can be filed online.

If you are self-employed (as a sole trader or in partnership) you will normally make two payments on account of your self assessment tax liability at the end of January and July each year.

Normally, these payments on account are based on your total self assessment dues for the previous tax year. So, for 2015-16, you will be making payments on account at the end of January and July 2016, based on your total liabilities for 2014-15.

As long as your taxable income does not change significantly, year on year, this system will ensure that your tax liabilities are settled by the on account payments you make (plus or minus small differences if your income varies slightly).

But what happens if you know that your income for 2015-16 is going to be much lower than 2014-15? In this case any payments on account based on the previous tax year’s income will likely result in an overpayment of tax.

If your income is likely to be lower in 2015-16 you should elect to reduce the payments on accounts that you make January and July next year. Your advisor should be able to estimate the amount due, and the necessary reduction in your payments next year. In this way you can avoid overpayments of tax and minimise the cash flow impact on your business cash flow or savings.

If the opposite applies, your taxable income is likely to be more in 2015-16, there is no obligation to offer a higher payment on account. However, you will need to reserve funds to cover any underpayment for this year which will be payable 31 January 2017. 

 1 September 2015 – Due date for Corporation Tax due for the year ended 30 November 2014.

 19 September 2015 – PAYE and NIC deductions due for month ended 5 September 2015. (If you pay your tax electronically the due date is 22 September 2015.)

 19 September 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2015.

 19 September 2015 – CIS tax deducted for the month ended 5 September 2015 is payable by today.

 1 October 2015 – Due date for Corporation Tax due for the year ended 31 December 2014.

 19 October 2015 – PAYE and NIC deductions due for month ended 5 October 2015. (If you pay your tax electronically the due date is 22 October 2015.)

 19 October 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2015.

 19 October 2015 – CIS tax deducted for the month ended 5 October 2015 is payable by today.

  31 October 2015 – Latest date you can file a paper version of your 2015 Self Assessment tax return.

If you own property in the EU you may be advised to revisit your Wills and make sure that you are not affected by the automatic succession rules that apply in many countries. For example, in France it is the usual practice to ensure that property is left to children rather than the surviving spouse.

Recent changes in EU law and practice mean that you can now nominate the jurisdiction that you wish your EU property to be ruled by. This may mean a change to your current Will in the UK, or by creating a second Will to cover your EU property.

 In effect, citizens are able to choose whether the law applicable to their succession should be that of their last habitual residence or that of their nationality.

If you are concerned about the annual cost of a VED license you may want to consider your car replacement options before the new VED regime starts April 2017. It will apply to all cars first registered after 1 April 2017.

From this date, VED will still be based on CO2 emissions, but the present generous rates for low CO2 vehicles will largely disappear. The only exception is zero emission vehicles which will continue to have a £0 charge.

VED will be split into two bands: a starter band, which will apply for the first year, and a standard rate, which will apply to subsequent years of ownership.

The rates gradually increase for the initial starter band. For emissions between 1 to 50g/km the starter rate is just £10. At the other extreme, cars with a CO2 rating in excess of 255g/km, the starter rate is a significant £2,000.

Owners of all vehicles with a CO2 emission rate in excess of 0g/km will then pay an annual, standard rate of £140 for the second and subsequent years of ownership.

Finally, cars with a list price above £40,000 will pay a supplement of £310 a year for the first 5 years at which the standard rate is applied. i.e. the annual standard rate for these vehicles will be £450 not £140.

The Government is undertaking a review of the Sunday Trading legislation. The review aims to deal with the concerns of larger high street retailers, who are concerned that they cannot compete effectively with online retailers unless they are open seven days a week at normal opening hours.

The Government is consulting on plans to give local areas the power to allow large shops to open for longer on Sundays.

The reforms would give metro mayors and local authorities the power to determine Sunday trading rules that reflect the needs of local people and allow shops and high streets to stay open longer and compete with online retailers.

Local authorities would have the discretion to zone which part of their local authority area would benefit from the longer hours, allowing them to boost town centres and high streets.

The existing Sunday trading laws were introduced more than 20 years ago before high-street shops faced competition from online retailers. The law currently prevents large stores from opening for more than 6 hours. Small shops covering less than 3,000 sq ft can open all day.

The Government is committed to giving the UK’s major cities the power to compete for international tourism while increasing consumer choice. Paris has recently extended Sunday trading opening hours in areas of international tourism, and Dubai and New York shops open into the evening 7 days a week.

As we mentioned in last month’s newsletter, from April 2016, the present dividend tax credit of 10% is being abolished and is being replaced with an annual dividend allowance of £5,000.

To recap, dividends received in excess of the £5,000 allowance will be taxed at increasing rates according to your highest rate of Income Tax:

• 7.5% if you are a basic rate taxpayer
• 32.5% if you are a higher rate tax payer, and
• 38.1% if you are an additional rate tax payer.

These changes will make a difference to all limited company shareholder/directors who presently receive a small salary and large dividends. Many will be paying more tax as a result.

We recommend that all affected readers undertake a review of their tax position from April 2016 so that they are aware of the financial impact on their personal disposable income.

But what about tax payers who receive significant dividend income from diverse investments and do not, necessarily, run their own company?

If your dividend income is likely to exceed the £5,000 limit you could consider the following actions to minimise any additional dividend tax:

1. Make sure you use the ISA limit to transfer high dividend yield shares into this tax free environment.
2. Each person will be entitled to the £5,000 relief so spouses could consider equalising their share holdings in an attempt to make the most of their individual £5,000 allowance.
3. As the additional tax, on dividends received in excess of the £5,000 limit, is at higher rates for higher rate and additional rate income tax payers, consider transferring shares to a lower taxed spouse to restrict tax to the lower 7.5% rate.
4. If you are a higher or additional rate tax payer and you have significant dividend income, you could look for ways to reduce your overall taxable income and therefore reduce an additional dividend tax charge. For example, by deferring withdrawals from a drawdown pension.

If it is likely that you will be crossing the £5,000 Rubicon next year, now is the time to plan an effective tax mitigation strategy. Please call if you would like our assistance.   

Britain is set to attract the production of more films like The Theory of Everything, Gravity and Avengers: Age of Ultron after the Chancellor of the Exchequer, George Osborne announced a new higher rate of film tax relief has been given the go ahead.

Under the new plans the £1.4 billion film industry will receive a tax credit of 25% on all qualifying expenditure bringing it in-line with TV tax relief. This means a British film costing £40 million will receive an additional £1 million towards productions costs from the change.

The Chancellor announced the scheme, which will be backdated to apply from April 2015, whilst visiting the set of Agatha Raisin, a new British TV series being filmed in Wiltshire that is benefiting from the government’s high-end TV tax relief. Under the scheme the government provides a tax credit of 25% on qualifying British TV productions.

Chancellor of the Exchequer George Osborne said:

“British made films are watched and celebrated all over the world – last year alone we saw eight British made films nominated for an Oscar.

A key part of our long term economic plan is supporting our creative industries that contribute billions to the economy and provide millions of jobs.

We want to see more films, like Gravity and Avengers: Age of Ultron, made in Britain and that’s why we’ve made our film tax relief even more generous.”

The government’s film tax relief has supported almost £8 billion of production expenditure since its introduction, including films such as Oscar winning Gravity, Maleficent and Harry Potter. It supported 222 films in 2014 alone. In the March 2015 Budget, the government announced that it would further support the film industry by increasing the rate of film tax relief to 25% for all qualifying productions. Previously, the rate was 25% for the first £20 million of qualifying expenditure and 20% for spending above this threshold. The scheme has just been given State Aid approval by the EU which means it can now go ahead as planned.