Topic: Uncategorized

Good news for Sunderland

Prime Minister Teresa May was full of praise for the announcement from Nissan, and its continuing investment in their Sunderland plant, earlier this week. She said:

This is fantastic news for the UK. Nissan is at the heart of this country’s strong automotive industry and so I welcome their decision to produce the Qashqai and a new model at their Sunderland plant.

It is a recognition that the government is committed to creating and supporting the right conditions for the automotive industry so it continues to grow – now and in the future. This vote of confidence shows Britain is open for business and that we remain an outward-looking, world-leading nation.

The government will continue to work closely with employers and investors in creating a global Britain, a country where there are new opportunities for jobs and rewarding careers. Families across the north-east will be delighted at this news today and I share in their enthusiasm for what this means not just for them, but for the whole of the UK.

Nissan, as well as other major investors in the UK, have been watching the progress of the Brexit process with keen interest, and in particular, how will a hard Brexit affect their export sales from the UK, to the EU.

No UK trade agreement with the EU, post Brexit, would leave Nissan facing a 10% World Trade Organisation tariff. In any event, Nissan seem to have been reassured that the UK government is backing the UK automotive industry. What is not clear, is if any financial risks for Nissan are being underwritten.

Other players in the UK’s automotive sector will no doubt be queuing up to receive the same “reassurances”. 

Why is 30 December an important filing date

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

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

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

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

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.

Cherie Blair leads failed High Court bid

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.”

Are you paying rates on second homes or empty property

You may like to check out the following points. In many cases it would seem that local authorities have overall control over who can, or cannot, claim for reduced rates.

Second homes

You may pay less Council Tax for a property you own or rent that’s not your main home.

Councils can give furnished second homes or holiday homes a discount of up to 50%. Contact your council to find out if you can get a discount – it’s up to them how much you can get.

Empty properties

You’ll usually have to pay Council Tax on an empty home, but your council can decide to give you a discount – the amount is up to them. Contact your council to ask about a discount.

Your council can charge up to 50% extra Council Tax if your home has been empty for 2 years or more (unless it’s an annexe or you’re in the armed forces).

When you don’t pay Council Tax

If you’re selling an empty property on behalf of an owner who’s died, you only start paying Council Tax 6 months after you get probate.

Some homes don’t get a Council Tax bill for as long as they stay empty. They include homes:

  • of someone in prison (except for not paying a fine or Council Tax)
  • of someone who’s moved into a care home or hospital
  • that have been repossessed
  • that can’t be lived in by law, for example if they’re derelict
  • that are empty because they’ve been compulsory purchased and will be demolished

You may get a discount if your home is undergoing major repair work or structural changes, for example your walls are being rebuilt.

If your property’s been refurbished

Your council will tell you when you have to start paying Council Tax if you’ve been carrying out major home improvements on an empty property or building a new property.

You’ll get a ‘completion notice’ that tells you the date you must start paying Council Tax.

If your property’s derelict

Your property’s only considered derelict if it:

  • isn’t possible to live in it, for example because it’s been damaged by weather, rot or vandalism
  • would need major structural works to make it ‘wind and watertight’ again

You can apply to get a derelict property removed from the Council Tax valuation list. Follow the process for making a formal challenge to the VOA.

Football agent loses tax appeal

In a recent tax case, Jerome Anderson v HMRC, the First-Tier Tribunal denied a football agent relief for trading losses. The judges’ arguments centred on the issue of whether he was carrying on a trade, and if he was, was it on a commercial basis with a view to making profits?

There is already legislation in place that restricts any relief for trading losses if the trade is not commercial. The facts of the case were as follows:

  • Mr Anderson (Mr A) worked successfully as a football agent for many years, representing a number of big name players such as Dennis Bergkamp and Thierry Henry. 
  • In January 2009 Mr A paid £3 million to Bafana, a soccer academy in South Africa, through a scheme marketed by a Jersey company.
  • In return for the money paid he was able to choose three players from the academy, securing an interest for himself in any future transfer fees.
  • Bafana went into administration in 2011 and Mr A received no significant income.
  • Mr A claimed trading losses of £3 million in his 2008/09 tax return.

HMRC disallowed the losses.

Despite Mr A’s arguments that his activities under the Bafana scheme constituted a trade, and that he was more than a passive investor, the court agreed that the losses should be disallowed. Evidence pointed to a scheme to avoid tax rather than a genuine commercial undertaking.

Claiming back pre-registration VAT

The good news is you can reclaim VAT added to certain expenditure that was paid out prior to your business registration for VAT. HMRC’s instructions on this issue confirm:

There is a time limit for backdating claims for VAT paid before registration. From your date of registration, the time limit is: 4 years for goods you still have, or that were used to make other goods you still have, and 6 months for services. It may also be possible to improve matters by backdating registration in some cases – although you would need to take into account potential output tax liability on sales not previously liable to VAT.

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including: invoices and receipts, a description and purchase dates and information about how they relate to your business now.

You can’t reclaim VAT for:

  • anything that’s only for private use
  • goods and services your business uses to make VAT-exempt supplies
  • business entertainment costs
  • anything you’ve bought from other EU countries (you may be able to reclaim VAT charged under the electronic cross-border refund system)
  • goods sold to you under one of the VAT second-hand margin schemes

You will need to reduce your claim if goods or services have a mix of business and private use. There are also special rules for reclaiming VAT on single pieces of computer equipment, aircraft, ships and boats costing more than £50,000; or land and buildings costing £250,000 or more (before VAT).