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Latest News From CKLG Accountants

Saving Inheritence Tax (IHT) for non-residents

October 22, 2014

When you emigrate from the UK you will retain your UK domicile for at least three years, possibly longer - until you have made a settled decision to make the new country your permanent home. While you have UK domicile your entire estate remains subject to UK inheritance tax (IHT), even if you are resident for tax purposes outside the UK.

You can reduce the value of their estate which is exposed to IHT by investing in UK Government securities (Gilts) issued after 29 April 1996. These gilts are not subject to IHT if held by non-residents, irrespective of the holder’s domicile. Ask our IHT experts about the domicile and IHT rules.

IHT treatment of gilts

Please contact us for more information on reducing Inheritance Tax for non-residents.

Late filing RTI penalties

October 21, 2014

If you employ 50 people, and you file your RTI returns late after 6 October 2014, you will receive an automatic late filing penalty of £300 or £400. Smaller penalties of £100 or £200 will apply other employers (those with up to 49 employees) who file RTI returns late, but only from 6 March 2015.

HMRC will warn you that an RTI return is late by way of an electronic message within the PAYE online system. You need to go to the PAYE online section of the HMRC website to read those electronic messages, or view them using the PAYE desktop viewer (PDV) software.

PAYE penalties and appeals helpsheet

Understanding CIS

October 7, 2014

A common misunderstanding of the Construction Industry Scheme (CIS) is that CIS tax should only be deducted from labour costs charged by subcontractors. This is not the case, but it may work out like that in practice. In fact as a contractor you must deduct the following cost items listed on the subcontractor’s invoice before applying the appropriate rate of CIS tax (20% or 30%) to the net invoiced amount:

  • VAT charged;
  • CITB levy paid;
  • materials;
  • consumable stores;
  • fuel used - except for travelling;
  • plant hire; and manufacturing or prefabricating materials.

If you don’t deduct the right amount of CIS tax you remains liable for that tax to HMRC, unless HMRC make a direction for the CIS tax to be paid directly by the subcontractor. How to make deductions under CIS 

Creative tax relief

September 22, 2014

Does your company produce: films, high-end TV programmes including animation, computer games, theatre or ballet shows? If so, you may be able to use one of the new creative industry tax reliefs to produce a payable tax credit and improve your cash-flow. 

To qualify for the tax relief your product has to be certified as “British” by the British Film Institute. “High-end TV” is essentially quality drama; not news, current affairs or quiz shows. The product must be intended for release to, or to be broadcast to the general public, and not produced for training or advertising purposes. Our tax experts are happy to provide guidance on any of these new tax reliefs.

Overview of creative industry tax reliefs

Form confusion

September 18, 2014

The HMRC form R40 is used to reclaim tax deducted from interest, dividends or other investment income. It is not a self-assessment tax return (form SA100 and variations).

If you send HMRC a completed R40 that shows significant income, they may ask to submit a self-assessment form (on paper or online) for the same tax year. You may think you have told HMRC all they need to know on the form R40, but you will need to repeat that information as requested for the self-assessment form. We can help you with this. Don’t ignore a request to submit a self-assessment form, as you can be liable for a penalty if you don’t submit it on time.

Form R40

HICBC accusations

September 16, 2014

If you receive a letter from HMRC telling you to amend your 2012/13 tax return and pay the high income child benefit charge (HICBC), don’t assume that letter is correct. HMRC didn’t check the relevant facts about each family before sending those letters, such as whether:

  • child benefit was actually received  by the family in 2012/13;
  • the higher earner had already paid the HICBC; or
  • the taxpayer’s adjusted net income exceeds £50,000.

“Adjusted net income” is not the same amount as headline figure of taxable income. Deductions must be made for trading losses, gift aid donations and pension contributions. We can check the figures for you.

Adjusted net income guide

NICs on rental income

September 15, 2014

Class 2 National Insurance Contributions (NICs) are not due on rental income, unless the letting business is a trade such as a hotel. However, someone inside HMRC believes that buy-to-let landlords should be classified as self-employed traders and has been issuing demands for the past six years of class 2 NICs.

If you receive a demand from HMRC for class 2 NICs and/or a questionnaire about your letting activities, contact us to review the facts. Our tax experts can help you decide whether class 2 NICs are due on your buy-to-let profits.

Rashid v Garcia [2002] UKSC SpC348

VAT flat rate scheme

September 12, 2014

The VAT flat rate scheme for small businesses is simple. The trader chooses the trade sector that best fits the majority of their business activities, then applies the flat rate for that sector to their gross sales in order to calculate the VAT to pay to HMRC. The trader should review the appropriate trade sector on the anniversary of joining the scheme each year.

If you use the flat rate scheme, or are about to apply, we can help you to work out the most apppropriate trade sector and record the reasons for your choice. HMRC are keen to shoe-horn all sorts of businesses into “management consultancy”:14%, when possibly “business services not listed elsewhere”: 12% would be more appropriate.

VAT Notice 733: Flat rate scheme for small businesses

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