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Latest News From CKLG Accountants

CGT on second homes

December 17, 2014

The profit you make when you sell your main home is normally free of capital gains tax (CGT). If you have two or more homes you can nominate the one which will be CGT-free, and change that nomination at any time. You can even nominate a second home which is situated outside of the UK.

However, from 6 April 2015 it will not be so easy to nominate an overseas property to be your CGT-free home, if you are resident for tax purposes within the UK. You will have to spend at least 90 midnights in the overseas property before it can be eligible to be nominated as your CGT-free home for any period form 6 April 2015 onwards. This will apply even if you have already nominated that property as your CGT-free home. There will be no change to the rules for nominating UK properties as a CGT-free home. 

Conclusions of consultation on CGT for non-residents


Job related expenses

December 16, 2014

As an employee you may claim tax relief for job-related expenses, such as subscriptions to professional bodies which you are required to belong to maintain the qualifications needed for your job. Such tax relief is often provided through your PAYE code. 

HMRC are writing to a sample of taxpayers to check if the professional subscriptions or other job-related expenses including in their PAYE codes are still correct. If you get such a letter, don’t panic. It does not represent the start of a tax enquiry. You should reply to HMRC on the simple form enclosed with the letter. If you have any doubts about how to respond please ask us.

HMRC querying claims for expenses


Splitting for VAT

December 9, 2014

Once your business is VAT registered it must charge VAT on all its sales which are subject to VAT, irrespective of who its customers are. HMRC will impose a penalty if you split your business into parts to avoid charging VAT on sales to certain customers. Buy that is what HMRC is suggesting UK businesses should do, to avoid charging VAT to their UK customers from 1 January 2015. 

This advice only applies to UK businesses which have turnover under the VAT registration threshold (£81,000), but who need to be VAT-registered in order to use the VAT-MOSS system to account for VAT due on sales of digital services made to non-business customers in other EU countries. HMRC is suggesting that the small UK business should operate through two legal entities, for example: a company and a sole-trader. The entity that is registered for VAT in the UK should only deal with overseas customers and charge VAT in the country where the customer is situated. The other entity which is not VAT registered should only deal with UK customers. If you want to explore this solution to the VAT-MOSS mess, talk to us without delay. 

Q&A about VAT-MOSS


Autumn Statement 2014

December 4, 2014

In yesterday’s Autumn Statement, Chancellor George Osborne, with both eyes fixed firmly on the 2015 election, announced measures to boost small businesses, encourage savers and to reform stamp duty land tax. He recognised small businesses as ‘the lifeblood’ of our economy. This is also true of the next generation, and the abolishment of the National Insurance ‘employment tax’ on the wages of young apprentices under the age of 25 should help businesses to provide more work place opportunities for them.

The Chancellor announced that although UK growth is better than expected, the deficit is now not forecast to be eliminated until 2019. This means that it is the private sector that needs to drive the UK’s economic growth throughout the next Parliament if the anticipated deficit reduction is to be achieved in line with the revised forecasts published by the OBR yesterday.

To help you see how George Osborne’s announcements may affect either you or your business, we have prepared a summary highlighting the key points. You can reach this by clicking here.

We hope that you find this information useful, and if you have any questions or would like to discuss how any of the changes may have an impact on your business or your own personal circumstances please contact us on 01223 810100.


Cash basis and capital allowances

December 3, 2014

If you wish you can use the cash basis, instead of the accruals basis to draw up accounts for your unincorporated business. Under the cash basis you account for cost of items when they are paid for, so you can’t claim capital allowances (CAs) for the assets you buy, as a full deduction has been given when you paid for the item. 
 
However, the cost of a car can’t be deducted under the cash basis, so CAs for cars used for the business should be claimed, subject to a restriction for any private use of the vehicle. There are a number of confusing rules about capital allowances which have been claimed for assets that you hold when you start to use the cash basis.
 
Our tax experts can talk you through those rules if they apply to your business. 
 
 

Let property – furniture

December 2, 2014

If your let residential property is fully furnished you can claim a wear and tear allowance (10% of the net rents), each year to cover the cost of replacing furniture and furnishings such as carpets and curtains. 
 
If the property is unfurnished or partly furnished, you can’t claim the wear and tear allowance. Instead you need to claim renewal of “implements, utensils or tools” used for the rental business. The taxman interprets this to mean only low-value items can be claimed as renewals, but the law makes no reference to the value of things that qualify for this tax relief. 
 
Talk to us about what you can claim for the cost of replacing or repairing furniture and fittings in your let property.   
 

Let property – fixtures

December 2, 2014

If you repair or replace items fitted to your let residential property (such as a fitted kitchen) with items of the same quality, the cost is treated as a repair which can be deducted from the rental income.

Where the replacement is of a higher quality, the 
whole cost of the new work must be treated as a capital improvement, the cost of which can only be deducted from the proceeds of selling the property. You can’t apportion the total cost between; “make good as per original” and “improvement added”.

However, where the replacement is superior because modern materials are a more energy efficient or durable, the cost is still treated as a tax deductible repair.

Capital improvement or repair for let property


State pension changes

November 27, 2014

People who reach state pension age (SPA) on and after 6 April 2016 will receive the new flat rate state pension worth around £150 per week. However, each person’s exact entitlement will depend on how many “qualifying years” he or she has accrued by the time they reach their SPA. On 6 April 2016 the SPA will be 63 for women and 65 for men, but the SPA will be set at a higher age for people born later.

A qualifying year is a full tax year of national insurance contributions or national insurance credits (or combination of these two). Note that:

  • individuals will need a minimum of 10 qualifying years to receive any of the flat rate state pension; and
  • the full flat rate state pension will only be given where the individual has 35 qualifying years, the current maximum is 30 years.

We can advise you how to build up more qualifying years for your state pension, please call us on 01223 810 100 to discuss your options.

DWP notes on flat rate state pension


Employment allowance

November 25, 2014

You may have seen the TV adverts urging you to claim the employment allowance worth up to £2,000. Those adverts imply this is free money for your business, and the GOV.UK  website says you can use any used employment allowance to pay any tax liability.
 
Unfortunately both are wrong. The employment allowance cannot be set against any tax other than employer’s class 1 national insurance contributions (NIC) due in respect of wages or salary paid. If your business doesn’t pay employer’s class 1 NIC for the year, as the wages paid to its employees (including you) are too low, there is nothing to set the employment allowance against. You cannot claim a cash payment of £2000 if you don’t “use” the employment allowance in the tax year. 
 

Planning pay for 2015/16

November 20, 2014

Working out the starting salary for a new member of staff is quite tricky. Here are two things to take into account from 6 April 2015.

  1. From that date there will be no employer’s NI on the pay of employees aged under 21, up to the upper earnings limit (currently £817 per week).You will need to keep a sharp eye on the birthdays of your younger employees as the zero rate of employer’s NI will only apply if your employee is under 21 at the time he or she is paid.
  2. The threshold from which student loan repayments must be collected through the payroll will increase from £16,910 to £17,335 per year.

Employer Bulletin no.50: page 4 for NIC and page 11 for student loan thresholds


Company vans

November 19, 2014

If you have employees who use an electric van for private and business purposes, they currently pay no tax on the benefit of private use of that van. This will change from 6 April 2015, when the taxable benefit will be 20% of the normal van benefit charge (now £3,090).

The taxable benefit will increase each year by 20 percentage points, until electric vans are taxed as normal vans from April 2020. Using the van to get from home to work is not counted as a private journey.

You can use this email address (mailbox.zeroemissionvans@hmrc.gsi.gov.uk) to inform HMRC about employees who use zero-emissions vans, so their PAYE code can include the van benefit charge for 2015/16.

Employer Bulletin no.50 – see page 10 for Vans


RTI reports

November 18, 2014

Changes have been made the Employer Payment Summary (EPS) used to report set-offs of statutory payments or CIS tax against PAYE due.

Until recently the RTI computer couldn’t tell which month an EPS related to. This meant you had to submit your RTI reports in two stages: the FPS on or before the day employees were paid, then the EPS between 20th of the tax month and 19th of the following month. Now the EPS can be attributed to the current tax month or to the previous tax month, so it can be submitted at the same time as the FPS.

The EPS can also be used to report no activity for the payroll, for up to 12 months rather than 6 months.

Employer Bulletin no 50 – see page 3 for EPS improvements


Employer helpline

November 18, 2014

As an employer you have probably suffered the frustration of trying to contact HMRC through the employer helpline (0300 200 3200). Half the battle is trying to get the automated telephone answering system to understand what you are calling about. Here are a few tips to help you beat the system:

  • before your call think of the few words that describe why you are calling such as “Maternity Pay”, and speak those words when prompted;
  • call from an area with limited background noise;
  • avoid calling in the lunch hour or just after 9am;
  • speak at a steady pace, not rushed but not too slowly either.

Alternatively you can always call us, as we may be able to help with your payroll problem. 

How to beat the HMRC automated telephone system 


Tax summaries

November 17, 2014

Between now and Christmas most people taxed under PAYE will receive a tax summary through the post from HMRC. This is supposed to explain what tax you paid in 2013/14, how it was calculated, and how the money has been spent. If your tax position for 2013/14 has not been finalised, or didn’t pay tax for the year (perhaps because you have low income), you won’t receive a tax summary.

If you file a self-assessment return online, your personal tax summary should be available to view through the HMRC online services. You don’t have to do anything with the information on the tax summary. 

Facts about tax summaries


Minimising your personal tax liability

November 13, 2014

This guide is intended to help individuals with their financial and tax planning

Good tax planning is an essential component in personal financial planning. Everyone's situation is different and tax rates, allowances and legislation change every year. Without personal tax planning, you may pay more tax than you should.

Each member of your family is taxed as an individual and is entitled to his or her own allowances and exemptions. 

Income

Earnings etc.

Savings income

UK dividends

First £10,000 *

Tax free

Tax free

10%

Next £2,880

20%

10%/20%**

10%

Next £31,865

20%

20%

10%

Next £118,135***

40%

40%

32.5%

Above £150,000

45%

45%

37.5%

* The personal allowance is withdrawn by £1 for every £2 by which total income exceeds £100,000 (to £120,000).

** The first £2,880 of savings income is taxed at 10% provided taxable non-savings income does not exceed £2,880.

*** Where income exceeds £100,000 the personal allowance is withdrawn and so up to an additional £10,000 can be at a tax rate of up to 40%. In this instance, you should ignore the £10,000 income line in calculating your cumulative position on the table.    

Download our tax planning factsheet for more information


SME costs rise above inflation

November 12, 2014

The cost of doing business has continued to rise in 2014 despite the falling rate of inflation, research from the Forum of Private Business (FPB) has found.

The survey reveals that prices for micro, small and medium-sized businesses have risen 4.7% in 2014.

However, the Consumer Price Index (CPI) rate of inflation has fallen from 2.7% in September 2013 to 1.2% in September 2014.

According to the FPB:

  • 63% of firms have experienced an increase in business costs

  • 7 in 10 said their energy costs had risen

  • 65% reported a rise in transport costs

  • 76% said they were paying more for marketing

  • 65% said staff costs were more expensive.

The majority of surveyed firms expect the trend to continue, with 82% predicting further price rises and 16% expecting significant increases.

Phil Orford MBE, chief executive of the FPB, said:

"The major reasons for increases in prices are predominantly down to transport and energy prices rising. The economic outlook continues to improve but costs still remain an issue for our members.

"This is a timely reminder that despite all the talk of a need for above-inflation wage rises businesses continue to feel the strain of rising costs."


Middle-market firms consider reshoring

November 11, 2014

A quarter of middle-market firms in the UK are considering bringing back some business activities to the UK over the next 3 years, a study by GE Capital and Warwick Business School has found.

The research found that 26% of mid-market firms are looking to reshore at least some of their activities, potentially creating 378,000 jobs.

According to the report re-shoring could:

  • increase annual revenues by £3.8 million per firm

  • increase total revenues by £27.6 billion per year.

However, not all regions will benefit evenly from re-shoring:

  • 42% of surveyed businesses will re-shore to either London or the South East

  • London is the most popular destination, with 28% of surveyed firms reporting they will head to the capital

  • in contrast, Wales (1%) and Northern Ireland (2%) are the least popular.

The top 3 reasons for businesses wanting to re-shore business operations were:

  • management or control issues

  • the UK business culture

  • levels of productivity in the UK.

Professor Stephen Roper of Warwick Business School said:

"Historically, re-shoring activity has focused on regions outside London, yet our research indicates that mid-market firms see the value of being active in the Capital, despite the high costs associated with doing business here."

Talk to us about business planning. 


Small business banking faces competition probe

November 11, 2014

The Competitions and Markets Authority (CMA) will launch an in-depth market investigation into small business banking.

The full inquiry confirms its provisional decision of 18 July and will look at issues such as switching banks, the lack of smaller competitors to the big banks, and lending to businesses.

Potential outcomes of the probe could include the break-up of the biggest banks, more transparency over fees, and branch networks being split up.

Read the full story here


Death charge on pensions

November 4, 2014

The Chancellor has promised that the 55% tax charge where an unused pension pot is passed on at death will be abolished from 6 April 2015. As a result if an individual dies before the age of 75 he will be able to pass on his pension fund on death without a tax charge. The new owner of the pension fund will also have no tax to pay when they make withdrawals (known as drawdown) from the fund.

Where the deceased is aged 75 or more the person who receives the pension fund will pay tax at their marginal income tax rate on money they withdraw from that fund. These proposals are likely to radically change how individuals view pension savings as part of IHT planning. Our IHT and pension experts can guide you through the likely implications for you and your family.

Death charge on pensions to be abolished


Free Will writing

October 24, 2014

In November 2014 solicitors across the country are offering to write basic Wills for free in return for a charitable donation to Will Aid, which will distribute the funds raised to a number of UK and overseas charities. The participating solicitors can be contacted through the Will Aid website or by ringing 0300 0300 013.

This basic service will not cover IHT planning, so talk to us first about the most tax efficient ways to distribute your estate. 

Will Aid – free Will writing in November


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