Keep up to date with all the latest tax and financial news from CKLG
Latest News From CKLG Accountants
Tax free gifts for employees
November 28, 2016
If you are interested in rewarding your workforce, it might be useful to know that employers can now give their employees any number of tax-free gifts in a tax year, as long as each gift meets all of these conditions:
it isn’t cash and it costs no more than £50;
it isn’t voucher which can be exchanged for cash;
it isn’t a reward for services or in any way contractual.
This exemption could, for exampe, be used to thank staff with a team meal or drinks (as long as the cost is no more than £50 per head). However, please note that there is a £300 annual limit for gifts made to the company’s director or members of his family.
If you would like to find out more about what kind of benefits you can offer your staff, this draft HMRC guide on trivial benefits will help you.
VAT responsibilities of online markets
November 25, 2016
Running an online marketplace can be extremely advantageous; however, there are a number of things you need to be aware of if you don't want to be hit by unexpected expenses. For example, you can be held jointly and severally liable for VAT which remains unpaid by overseas businesses which sell through your website, regardless of what kind of goods you sell. Overseas businesses, who store goods in the UK but otherwise don’t have a base here, are required to register for VAT in the UK.
To protect your businesses from VAT debts incurred by overseas traders, ask all the traders on your site for evidence of their business address. Where that is outside of the UK, make sure you ask for evidence of their VAT registered status in the UK.
For more detail, take a look at this government guide.
How to top up your state pension
November 21, 2016
You may not be aware of this, but not everyone will receive the full state pension. If you have not paid National Insurance Contributions (NIC) for certain periods because you were not working, or lived abroad, you won’t receive the full amount. You may be able to fill those gaps by making voluntarily class 3 NIC - this will definitely be useful if you stopped working before reaching state pension age.
If you reached state pension age before 6 April 2016 and you already receive some state pension, even the full amount due, you can top-up that amount by paying a lump sum as class 3A NIC. We can help you calculate how much you need to pay and whether it will be worthwhile.
Click here for the Royal London Guide on how to top up your pension.
How to avoid an auto-enrolment penalty
November 18, 2016
The introduction of auto-enrolment means that, If you employ anyone earning over £10,000, you must arrange for those employees to be automatically enrolled in a pension scheme. Ignoring this obligation, or not realising it applies to you, could be a costly mistake as you might receive a penalty of at least £400!
There are permissible exemptions from auto-enrolment - for example, companies which only employ the owner/directors. If an exemption applies to your business, then you must tell The Pensions Regulator (TPR) which exemptions you are taking advantage of. Otherwise, once you have chosen a pension scheme and enrolled employees, you need to submit a declaration of compliance to TPR. If you would like help arranging auto-enrolment for your business then we can help you with all of this administration.
The online declaration of compliance can be found here.
Self-employed may lose maternity allowance
November 11, 2016
If you are self employed and pregnant then you are able to claim maternity allowance, but there are a number of rules you will need to be aware of. Firstly, to claim an allowance worth up ro £139 per week, you will need to have been working for at least 26 weeks within the 66 weeks before the baby is due. That self-employed work must have generated weekly profits of £30 or more, and class 2 National Insurance Contributions (NIC) must also have been paid for 13 weeks of that 66 week period.
The snag is that class 2 NIC is now paid 9 months after the tax year end, alongside Income Tax on the 31st of January. Therefore, If you want to claim the maternity allowance you need to pay the class 2 NIC voluntarily in advance. If you are self employed and pregnant, then let us know so we can take care of this for you.
To get a maternity allowance claim form, click here!
Inheritance tax and the residence nil-rate band
November 9, 2016
The rise in property prices throughout the UK means that even those with modest assets may find that their estate exceeds
the £325,000 nil-rate band for inheritance tax (IHT).
The percentage of properties sold for more than £325,000 has doubled since the current nil-rate band was set in 2009, research by Saga Investment Services has found. Given that house prices increased by 5.8% in the year to September 2016 and the nil-rate band will remain frozen until the end of 2020/21, an increasing number of homeowners could finnd that their estate is liable for IHT when they die.
Fortunately there are a number of ways individuals can minimise their IHT liability, such as giving to charity and making use of gift exemptions.
If this concerns you, please talk to us about your Inheritence Tax Planning requirements.
Recovering VAT on your company car
November 7, 2016
Being able to recover the VAT you have paid on a car that you bought for business use is really handy but two conditions must be met:
* the vehicle must be used exclusively for business purposes; and
* it is not made available for private use.
To meet the second condition, the business owner must prove that the car is never available to be used for a private journey. It is irrelevant whether the car is actually used for a non-business journey. This condition can be met easily, you just need to ensure that all potential drivers in the business have signed a contract that forbids any private use of the car.
If you would like to know more about recovering VAT on business purchases, then please get in touch!
To read a case study on this issue, please click here.
Problems with marriage allowance
November 3, 2016
If you are a taxpayer whose highest rate is no more than 20%, and you are married or in a civil partnership, you can decide to transfer 10% of your personal allowance to your partner. The recipient of this “marriage allowance” should be given a reduction in tax of £212 for 2015/16, or £220 for 2016/17.
However, there have been many examples of the HMRC computer adding £212 to the taxpayer’s bill, instead of deducting that sum. Some taxpayers have found they are worse off by making a claim for the marriage allowance, which naturally should not be the case. If HMRC has made an error with your claim, let us know, and we can help you challenge mistakes made by HMRC.
If you would like to know more about Marriage Allowance, then please click here.
Profit forecasts set to change for landlords
October 28, 2016
As a landlord you are currently able to deduct all of the interest and finance charges you have to pay in regard to your let properties, from the rents you receive, before tax is calculated on the net profit. From the 6th of April 2016 only 75% of those finance costs will be deductible for tax purposes, and from April 2020 none of the finance costs will be deductible.
This will significantly increase the tax you pay on your rental income, meaning that you may end up paying more tax than your net profits after paying the mortgage costs. There are three ways to avoid such a disaster; sell the property, reduce the loans, or let it as furnished holiday accommodation. If you are worried about how this might affect you then we would be happy to discuss what your options are.
The HMRC guidance on changes for landlords can be found here.
Historical contractor loans
October 24, 2016
Years ago, it was common for many skilled contractors to route their UK contracts through off-shore companies to increase their take-home pay. The individual would be paid a modest salary plus a loan, which was allegedly not taxable income.
The law was changed in late 2010 to ensure such loans don’t provide a tax advantage, and HMRC offered a settlement opportunity to those who used such schemes to pay the tax and NIC due.
If you were drawn into such a scheme, and you haven’t faced up to the tax which is due, you should consider doing so, as you may receive a tax demand from HMRC. If you are worried about this, then we can help you work out what you need to pay and negotiate payment terms with HMRC.
For more information on contractor loans schemes, please click here for the HMRC information.
Union Customs Code
October 17, 2016
If you import or export goods, you need to be aware of the Union Customs Code (UCC) which came into effect on 1 May 2016. The most significant change is that you need to provide a financial guarantee (security) to HMRC for the potential customs duties due.
If your business holds Authorised Economic Operator (AEO) status, you don’t have to provide that guarantee. If you don’t hold AEO status, then you might find it worthwhile applying. Any AEO authorisations already in place will continue to apply until their expiry date, which is normally three years.
For HMRC's guidance on the UCC, please click here.
Companies buying shares from directors
October 14, 2016
When the older generation is looking to retire from the family company, but they want to be paid for their shares, a neat solution is for the company to buy back its shares from those individuals. The shareholders will pay capital gains tax at 20% or 10% on the profits they make on selling their shares if all of the following apply:
* seller has held the shares for at least five years and is UK resident;
* the purchase is for the benefit of the trade;
* company is unquoted and is trading or holding company of a trading group;
* seller’s shareholding (including associates’ holdings) is substantially reduced or eliminated by the purchase; and
* seller and his associates are not connected with the company immediately after the purchase.
We can help the retiring generation receive value from their company and minimise the tax payable, but we need plan the structure of the transaction in advance.
An HMRC helpsheet on purchasing your own shares can be found here.
Worldwide income disclosure
October 10, 2016
HMRC has launched new worldwide disclosure facility, to encourage people to declare any worldwide income and gains which are subject to UK tax. However, there are no special penalty reductions available with this disclosure opportunity, only a threat of more penalties if a full disclosure is not made by 30 September 2018.
After that date new legislation will come into effect which will impose a requirement on taxpayers to declare any UK tax liabilities relating to offshore interests. If the taxpayer fails to correct their UK tax declaration in respect of offshore interests, penalties will be imposed. Please talk to us if you are concerned about tax which may be due on your offshore income or gains.
To find out more about the new worldwide tax disclosure facility, click here for HMRC information.
NI numbers validation
October 3, 2016
In June 2016 the DWP started to issuing new NI numbers containing the prefix ‘KC’, but HMRC’s RTI computer doesn’t recognise those numbers as valid NINOs. The RTI computer will be fixed by 15 November, but if your employee presents with a ‘KC’ NI number before that date, you should report the following on your RTI returns:
* leave the National Insurance number field blank;
* complete the employee address field; and
* don’t request a new NINO, but continue to apply PAYE codes as normal.
An explanation of KC codes and how to deal with them can be found here!
Entrepreneurs’ relief on the sale of business premises
September 30, 2016
A gain made on the disposal of a building which has been used by your business won’t necessarily qualify for entrepreneurs’ relief (ER), which reduces the tax rate to 10%. It depends on whether your business is a partnership, a company, or if you operate as a sole-trader.
As a partner or shareholder you can claim ER on the gain, however, you will need to reduce your business involvement by disposing of at least 5% of the partnership interest or company shares at the same time as the sale. As sole-trader you need sell the property with part or all of the business, or after the business has ceased to trade. Talk to us before you sell your property, to check what tax rate is likely to apply on the gain.
Trading or capital gain from a property
September 26, 2016
Property dealers and property developers hold their properties as stock, and aim to make a profit from selling developed properties. The profits are taxed as trading income, and are thus subject to corporation tax or income tax.
If you buy the occasional property (not regular dealing), and hold it while market improves, you could be treated as a property dealer under a new law that came into effect for sales on and after 5 July 2016. This means you could pay income tax at rates of up to 45% on gains made when selling your property, rather than capital gains tax at 20% or 28%. Talk to us about the long term plans you have for your properties.
Information note on new tax on land and buildings can be found here.
Use Enterprise Investment Scheme to defer Capital Gains Tax
September 2, 2016
If you have made a significant capital gain you can defer payment of the tax due by subscribing for EIS shares up to 36 months after you made the gain. A similar acquisition of EIS shares up to 12 months before you made the gain can also be used to defer the tax due.
It’s wise to take independent financial advice before making an investment under EIS, as those shares can only be issued by an unquoted company, which must also meet a number of conditions. The deferred gain will become subject to capital gains tax when you dispose of the EIS shares, irrespective of how long you have held those shares. We can advise you on how to mitigate capital gains tax in number of ways, please take a look at our tax planning and advice services to get an idea of how we can help.
Procedure for EIS claims use can be found here.
Tax Refund for 2015/2016
August 29, 2016
If your main source of income is taxed under PAYE, and you don’t submit an annual tax return, HMRC will check whether the right amount of tax has been deducted. If you are due a tax refund, or need to pay more tax, then you should receive a statement on form P800. This year the P800 will direct you to sign into your online personal tax account and submit your bank details in order to receive any tax refund due to you. If we are authorised to receive the tax refund on your behalf, you won’t be able to use the online tax refund service. If you take no action within 45 days of receiving the P800 statement, the tax refund will be issued to you by cheque.
Click here for how to sign up for personal tax account.
VAT Annual Accounting
August 24, 2016
If you want to complete only one VAT return a year, instead of four, you can apply to use the VAT annual accounting scheme. However, you must agree to pay nine monthly instalments towards your VAT liability, based on the VAT you reported for the previous year.
If you don’t pay the VAT as due, HMRC will unilaterally take your business out of the annual accounting scheme, and will write to inform you of the date you must leave the scheme. From that point you must submit quarterly VAT returns and make quarterly payments of the VAT reported on those returns. Make it easy for your business by letting us help you keep on top of your VAT obligations!
For more information on VAT notice, read this government guide.
Password problems with HMRC.
August 22, 2016
When you login to HMRC’s online services to send a VAT or PAYE return, you need to enter a user ID and a password. In the past your computer may have remembered these details for you. However, the Government gateway login page has recently changed, which means you need to type in the whole of your password.
If you can’t remember your password, or where you wrote it down, you need to apply for a new password which will take 2 to 10 days to arrive. If you mistype your password you will be locked out of the HMRC online services for 2 hours. We can lift this stress from your shoulders by doing VAT and PAYE submissions on your behalf.
Service updates for HMRC Online can be found here.
Student loan deductions
August 19, 2016
To correctly deduct student loan repayments from your employee’s pay, you need to know whether the individual has a plan 1 or plan 2 loan. Repayments for those loans start at annual pay of £17,495 for plan 1 and at £21,000 for plan 2.
The ex-student should know which type of loan they have, but you should get this confirmed in writing by asking the new employee to complete a starter checklist. If the student doesn’t know which type of loan they have, you should assume it’s a plan 1 and make deductions at 9% of pay over the lower pay threshold.
VAT flat rate scheme
August 16, 2016
You can apply for the VAT flat rate scheme online as part of the process of registering your business for VAT. The system will ask you to enter a free text description of your business activity. If that doesn’t match one of the trade categories for the flat rate scheme, the computer suggests a category.
Be very careful about accepting the computer’s suggestion as it may not give the best result for your business. An incorrect category may mean you pay over more VAT to HMRC than is due for your type of business. We can help you with your VAT registration and application for the flat rate scheme.
Incorporating a business
August 15, 2016
Businesses tend to grow from sole traders or partnerships into companies. Incorporation can be an expensive transition as taxable gains arise on the transfer of the value of the business, including goodwill, to the company.
There are tax reliefs that can be used to either hold-over the gains, or reduce the tax to 10%, but the conditions are sometimes difficult to meet. You may be happy to pay the CGT in full at 20% on any gains that arise on incorporation, and leave the amount due for the business assets outstanding within the company to drawdown as you please with no further tax to pay. We can help you chose the most suitable tax reliefs to use.
Ben and Nic Start Racing
August 12, 2016
This week our clients, Ben Saxton and Nicola Groves, race in the Nacra 17 competition in Brazil. Day 4 of sailing provided challenging conditions (described as 'brutal' by sports writer Andy Rice), with periods of high wind followed with flat calm. Ben and Nic showed that they were equal to the task and we are delighted to announce they finished in second place! We continue to wish them luck as the preliminaries go on!
Click here to get the Telegraph's roundup of the sailing competition
When to reclaim VAT on goods
August 8, 2016
When you order equipment designed specifically for your business you may be asked to pay a deposit, which can amount to a considerable sum including VAT. Although the VAT is due to the supplier, you can’t reclaim that VAT until the goods have been supplied.
The law is clear that you have to receive the goods, or some form of service, in return for your money before you can reclaim the VAT. If for some reason you don’t receive the goods, you can’t reclaim the VAT you have paid upfront, unless the contract says the ownership of the goods passed at an earlier point. We can help you check your VAT position for any large purchases.
Lending money to your company
August 5, 2016
If you lend funds to a company, including to your own company, you would generally expect to be paid interest on the loan. When the company pays you interest it should deduct income tax at 20%. The amount of tax deducted should be reported quarterly to HMRC on a form CT61, which we can help you with.
The interest you receive may well be covered by your savings allowance for the year (£1000 or £500) or your savings rate band (£5000), in which case there will be no tax due on that interest. By including the interest received on your tax return you can reclaim the 20% tax deducted by the company.
New form for PAYE code
August 1, 2016
HMRC are trailing new formats of the form P2 which inform taxpayers of their PAYE code. The new format doesn’t show you how that code has been calculated. To discover that information, you need to log on to your personal digital tax account on GOV.UK. We can’t currently access your personal digital tax account, even if we have permission from you to do so.
If you receive a P2 notice which you can’t understand, please send us a copy as we may be able to advise you whether your PAYE code is correct.
Don't know what a PAYE code is? Click here!
Companies House filing changes for annual returns
July 29, 2016
The annual return submitted by companies to Companies House each year has been replaced by a new document called a 'confirmation statement' from 30 June 2016. The new ‘confirmation date’ - when the confirmation statement is due to be made up to, will fall exactly a year after the last made-up date of the company’s annual return
The confirmation statement must be submitted within 14 days of the confirmation date, which is much tighter than the 28 days permitted for submission of the company’s annual return.
We can help you meet all of your statutory filing deadlines, please contact our Business Services team for details.