Topic: Uncategorized

There seems be a trend. Most of the key issues that will be disclosed this week seem to have been leaked to the press prior to the actual budget speech. For example:

1. Inheritance tax (IHT): the government will fulfil its election promise and increase the tax free value that couples can leave to their families to £1m. Presently, the limit is £650,000. The change is reported to apply from April 2017.

At present estates for individuals are exempt up to half this value – £325,000 – the higher limit of £650,00 applies to married couples (and those in a civil partnership) where the first deceased spouse’s estate is not subject to IHT and their unused exempt amount is automatically transferred to the surviving spouse. Presumably the change in April 2017 will increase these limits to £500,000 and £1m.

2. Tax relief on pension savings: at present contributions into pension schemes are deductible at the saver’s highest rate of tax. According to the Conservatives’ pre-election pledges, the changes to IHT set out above will be funded by the removal of this higher rate relief. Presumably, tax relief will be limited to the 20% basic rate.

3. Tax credits: as part of the government’s continuing efforts to reduce public expenditure it is mooted that the present levels of tax credits are to be reduced. We will have to see which of the benefits, and by how much, these reductions will affect low income families.

 Next week we will highlight the actual changes announced. What we are unlikely to see are unexpected “give-aways”…    

The Cabinet Office launched an initiative on the 25 June that will provide grants to increase the sustainability of around 250 organisations working in the voluntary, community and social enterprise (VCSE) sector.

The fund, which will be delivered by the Big Lottery Fund, will provide grants that will enable recipients to implement organisational changes and access professional advice that might currently be out of their reach. It will give VCSEs access to a wider range of skills and support, with all grant recipients establishing a strong volunteering relationship with a local business. These cross sector relationships will help grant recipients to strengthen their resilience and long term sustainability.

The Local Sustainability Fund will be £20 million of government funding delivered over 2 years, and will be available to medium-sized VCSE organisations that deliver vital support to vulnerable and disadvantaged people. Alongside working with local businesses, recipients will also work with skilled advisors so that the fund generates maximum impact.

It is expected to help around 250 high-impact charities and social enterprises in England to secure sustainable futures for themselves, including supporting them to bid for public service contracts and to diversify their incomes. Eligible organisations will be able to apply for funding when the fund opens today. Details of how to apply will be on Big Lottery Fund’s website and will be widely circulated throughout the sector.

There are 2 elements to the first stage of the programme: an organisational diagnostic tool and an LSF eligibility checker. The diagnostic tool, which takes approximately 1 hour to fill in, can be completed by any organisation interested in their sustainability, regardless of whether they apply to the LSF. The tool allows organisations to understand their strengths and weaknesses better, and every organisation that fills it out will receive a sustainability report.

Once an organisation has submitted its sustainability report to the Big Lottery Fund, a selection of suitable applicants will be invited to make a more detailed application at the second stage.

It is expected that successful organisations will receive their first grant payment in March 2016. Average grant size is expected to be £70,000. Big Lottery Fund will be administering the Local Sustainability Fund on behalf of the Cabinet Office.

Following on from our posting last week. HMRC has underlined its commitment to relaxing the issue of penalty notices, this time for employers having problems meeting the online filing of payroll information. Rather than issue late filing penalties automatically when a deadline is missed, HM Revenue and Customs (HMRC) will take a more proportionate approach and concentrate on the more serious defaults on a risk-assessed basis.

Late reporting penalties already apply to employers with 50 or more employees, so this ‘risk-based’ approach will apply to submissions that were late from:

• 6 March 2015 for employers with fewer than 50 employees, and
• 6 January 2015 for employers with 50 or more employees.

HMRC will continue to issue risk-based penalties for the tax year 2015-16.

HMRC does not want to charge penalties, but wants employers to report on time. It wants to help employers who are trying to do the right thing, rather than penalise them.

This move to issuing risk-based late filing penalties also continues HMRC’s strategy of adapting its approach, where necessary, before moving to the next phase of implementation.

This approach will enable HMRC to concentrate more resources on the more serious failures to comply, and to focus on educating employers about their filing obligations through targeted communications, webinars and Employer Bulletin articles.

It applies in addition to HMRC’s recent announcement that it will not be penalising minor delays of up to three days. HMRC will monitor both, and review by April 2016.

Even if employers do not get a penalty, they are required by law to file on time and if they do not may be charged a penalty on a future occasion. The deadlines for sending PAYE information stay the same, including the requirement to send PAYE information on or before the time that employees are actually paid or due to be paid.

Employers can appeal electronically using the Penalties and Appeals System (PAS) on HMRC Online. Employers who receive a late filing penalty notice for tax year 2014 to 2015 quarter 4 but who filed within three days of the reporting deadline may appeal and should use reason code A as set out in the online guidance on this issue.

From April 2015, persons aged 55 years or older, with defined contribution personal pension pots, can consider cashing in the value accumulated in their fund. Certainly, anyone considering this course of action should take professional advice from their independent financial advisor.

 The following steps are advised by the Pensions Wise website:

 Here are some next steps if you’re interested in taking cash:

 Cash in chunks:

• check with your current provider if they offer the option and what they charge – if they don’t offer it, you can transfer your pot but you might be charged
• check if your pot has any special arrangements attached to it that could mean you get a better deal, e.g. a guaranteed value at a certain time
• make sure you know how much tax you’ll pay on any money you’re planning to take out

 Taking your whole pot:

• check with your provider if you can take 25% tax free
• make sure you know how much tax you’ll pay on the remaining 75%
• if you want to reinvest the money, talk to a registered financial adviser first

 In the majority of cases, if you cash in your whole pension pot 25% of the amount received is tax free; the remaining 75% is treated as part of your taxable income for income tax purposes.

When the payment is made by your pension company they will estimate the income tax due and deduct this amount before sending you the balance. They will provide you with a P45 that shows the taxable amount refunded and the income tax they have deducted. These details will form part of your income tax assessment in the tax year that you cash in your policy.

It is important to realise that the amount of tax deducted may or may not cover the income tax due. It will have been based on an estimate of your total income when the payment is made. If you are a high income earner, subject to income tax at a marginal rate of 40% or 45%, or likely to be a higher rate tax payer if the taxable 75% of your cashed in fund is included, then take professional tax advice before spending or reinvesting your fund proceeds.

If you are an old hand at setting up a new business most of the content of this article will be a timely reminder of the issues you need to cover in your project to-do list. For first timers, use this article as a guide to see you through what can prove to be an exhilarating and challenging adventure.

 Planning and research

 Your planning and research should at least cover the following issues:

• What does it take to run your own business?
• What skills will you need?
• What do you know about your competitors?
• How much capital will you need to raise?
• What resources will you need, plant, equipment, computers etc?
• Could you start on a part-time basis and delay leaving the day job?
• Can you run your business from home?

 Also be aware that none of us operate in a vacuum. What special considerations do you need to look out for taking into account the present economic conditions?

 Red tape

 There is no doubt that at times you will just have to deal with it. Here are a few tips that may make the process less painful.

• Find out exactly what is required, what forms need to be filled in and when they need to be submitted.
• If you feel that a particular process is beyond your abilities find a professional advisor to help, the cost will generally be recovered by time that you are able to free up to work on your business.
• If you want to complete the online filing or form filling make sure you read the fine print…

Red tape seems to be a necessary evil in our highly organised society. If you do find yourself beating your head against a brick wall, save yourself the headache, get some help

 Tax planning

Whatever you do, don’t underestimate the UK tax system. Be very clear what your obligations are and the ways you can organise your business affairs to save tax. There is no point in planning for your tax liabilities after the event! The time to plan is before you act. This is a really important point. Tax specialists, us included, take no joy in advising tax payers that they could have saved themselves tax if only they had acted in a certain way at some time in the past. The tax system is riddled with deadlines that once passed, deny you tax saving opportunities.

From April 2016, the Scottish Parliament has devolved powers to set the Scottish Rate of Income Tax (SRIT). Within the last few weeks it has been widely publicised that this may mean a higher rate of Income Tax in Scotland as compared to the Income Tax rates in other parts of the UK.

 HMRC have also issued a technical statement that clarifies who will be subject to SRIT.

 According to the statement issued, a Scottish taxpayer will be defined using a simple test:

 “For the vast majority of individuals, the question of whether or not they are a Scottish taxpayer will be a simple one – they will either live in Scotland and thus be a Scottish taxpayer or live elsewhere in the UK and not be a Scottish taxpayer.”

Factor in the possibility that Income Tax rates in Scotland will be higher than the rest of the UK and tax payers living and working in the border areas may need to reconsider their living arrangements.

For example, a business person living and working in Edinburgh will pay the SRIT from April 2016. If they relocated their family home to say Berwick on Tweed, and continued to work in Edinburgh, they would pay the UK Income Tax and not be subject to SRIT.

Turning this example on its head; consider a person living in Scotland and working in England. They would be subject to SRIT even though their income was earned in England.

Does this mean the north of England will become the UK’s Monte Carlo as wealthy Scots seek to establish tax residence in England to avoid SRIT?

 On  Wednesday 8^th July, George Osborne will present his first budget of the new parliament.

 He has indicated that there will be no hikes in the major taxes: Income Tax, National Insurance, VAT and Corporation Tax. We shall see…

 What he will be revealing is how he intends to reduce public expenditure in order to meet his commitments to reduce our growing national debt.

 We will likely see further legislation to combat tax evasion and the re-introduction of the few issues that were dropped from the March 2015 Finance Bill in order to expedite matters before the general election.

HMRC have started the process of sending formal statements to taxpayers who may have under or over paid Income Tax for 2014-15.

In a recent press release they said:

“We are sending P800s that show an overpayment of tax first, followed by a cheque around a fortnight later. You don’t need to do anything.

The whole process should be completed in October.

This automated process ensures those who have had a change in circumstances during the last tax year (2014-15) that was not captured in their tax code have paid no more or less than they should. Any discrepancy could be because the taxpayer changed jobs, had more than one job for a time, a change of company car or received investment income that was not reported during the year.

The vast majority of PAYE taxpayers will have paid the right amount of tax for the year and will not be contacted by HMRC.”

We advise taxpayers who receive a statement, and they are unsure if the figures are correct, to take professional advice – get the numbers checked.

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

 6 July 2015 – Complete and submit forms P11D return of benefits and expenses and P11D (b) return of Class 1A NICs.

 8 July 2015 – The second Budget Day for this year.

 19 July 2015 – Pay Class 1A NICs (by the 22 July 2015 if paid electronically).

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

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

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

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

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

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

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

Its official, HMRC does not want to charge penalties!

HMRC have made the following announcement on their approach to the £100 late filing penalty for people sending in tax returns late:

“We want to focus more and more of our resources on investigating major tax avoidance and evasion rather than penalising ordinary people who are trying to do the right thing.

But it’s important to make clear that the deadline for appealing fines for 2013/14 tax year has now passed. Those who have already appealed will only be let off the fine if they’ve now sent in their return, paid the tax due, appealed and have a good reason for sending it in late.

This is part of our planned, proportionate approach to penalty appeals, particularly for small businesses and individuals.

The bottom line is that we don’t want to charge penalties, we just want the tax return and the tax in on time.

In addition, the more complete picture that digital technology gives us means, in the longer term, we want to move away from sending out penalty notices as a mechanical reaction to a single missed deadline. We will be able to track patterns of behaviour so we only focus on those who persistently fail to pay or send their tax returns on time.”

It will be interesting to see if HMRC’s consultation on this topic results in a change in the law.