Keep up to date with all the latest tax and financial news from CKLG

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Latest News From CKLG Accountants

HMRC Tax Investigations

May 11, 2017

HMRC use computer system called “Connect” to help it effectively target its tax investigations. Connect interrogates information from multiple sources to detect links, and then identifies anomalies between the figures the taxpayer declared on his tax returns and the income or assets shown by other sources of information. 

Last year HMRC used the Connect analysis and wrote to 10,000 individuals about interest which appeared to be missing from their tax returns for 2014/15. The Connect analysis may not always produce the correct answer, but if you receive a letter from HMRC querying your tax return, don’t ignore it. A simple letter can turn into a full-blown tax investigation if it is not handled with care.

Our Cambridge Tax Advisers can help you respond to any questions from HMRC, please contact us as soon as possible.


Disclosures to HMRC

May 9, 2017

Some people don’t realise that additional income they receive from rents, hobbies or a part time business, is taxable. There is an allowance of £7,500 which covers rent from letting rooms in your own home, but any additional income should be disclosed to the tax office.

If you need to make a disclosure of additional income, the first step is to notify HMRC using an online form or by telephoning: 0300 123 0945. We can do this for you. The next step is to complete a detailed disclosure form, which isn’t simple as HMRC want you to calculate the tax due. The final step is to pay the tax due, plus interest and any penalties.

Our Cambridge Tax Advisers can help you with all the steps of the disclosure process, but often the most difficult step is admitting you need to do something.


Amendments to the Finance Act

May 5, 2017

The longest Finance Bill in UK history was cut by 600 pages to allow it to be passed before Parliament was dissolved in advance of the General Election. A large number of tax reliefs did not make into the Finance Act 2017, so their implementation will depend on whether the new Government wants to reintroduce the measure.

The tax changes which are on hold until that new Government takes power include:

  • Digital reporting and record keeping (MTD) for Income Tax and VAT
  • Dividend tax rate for 2018/19
  • £1,000 tax free allowances for property and sundry income 
  • £500 tax free pensions advice 
  • Changes to taxation of terminations payments from April 2018
  • Reduction in money purchase annual allowance from £10,000 to £4,000
  • Power to tax capital gains made from UK land as Income Tax not CGT
  • Deemed domicile after 15 years to apply to all taxes 
  • Changes to substantial shareholding exemption 
  • Changes to EIS, SEIS, SITR and VCT schemes 
  • Restrictions on corporation tax losses
  • Tax relief for cost of museum exhibitions
  • VAT in relation to goods stored in UK warehouses

 


Family Tax Planning

May 3, 2017

Sharing income or gains around the family can reduce the marginal tax rates for the highest earners and make use of the allowances available to those on lower incomes. Taken together, this should result in a tax saving for the whole family. To be effective, the lower earner must own the investment, bank account or shares which produce the income or gain.

A family business can be used to share income by employing family members or by allowing each person to hold a share in the company or partnership. Transferring shares or property can create tax charges, so take advice before giving away assets. Married couples or civil partners can generally transfer assets between them without tax charges.

Where a spouse has a high income and holds valuable assets, tax can be saved by transferring assets into joint names.

Speak to our Cambridge Personal Tax Advisers today

 


New tax-free childcare scheme launches

April 25, 2017

The new tax-free childcare scheme launches on 28 April 2017. It is an online savings scheme where parents pay in funds to be used to pay for childcare provided by a registered childcare provider. For every £8 deposited by the parents, the Government will add another £2, up to a maximum of £2,000 per child per year (£4,000 where the child is disabled).

Parents of children aged under 2 will be invited to join first, and the scheme will be expanded during 2017 to those with children aged under 12 (or under 17 where the child has disabilities). Both parents must be in work and earn at least £120 per week, although each parent must have income of £100,000 or less. And you can join the tax-free childcare scheme if you are self-employed.


How to appeal PAYE penalties

April 18, 2017

Employers are required to send a full payment submission (FPS) to HMRC on or before the day the employees are paid, or an Employer Payment Summary (EPS) if no employees are paid. If you are late in submitting the FPS or EPS you may receive a penalty notice. Sometimes such penalties are raised in error.

If you receive a PAYE penalty which you believe is incorrect, you can appeal online or by using a paper form. The online method is quicker and easier, but you must select a reason for your appeal using the drop-down menu, and provide further facts to support the reason in the information box.

Completing this information box is now mandatory, our Cambridge Accountants can help you with any appeals.


Claim back overpaid Stamp Duty

April 10, 2017

If you bought a new home after 31 March 2016, you may have been charged the Stamp Duty Land Tax (SLDT) supplement at 3% of the full value. This supplement came into effect on 1 April 2016 to discourage people from buying second homes to let out, or use for holidays.  However, if you temporarily owned two homes, the charge was levied on your purchase of the second property.

Where your new property was a replacement for your main home, and you have since sold the first home, you can reclaim the 3% SDLT supplement you paid.

This claim can be done online or using the paper form SDLT16, and we can help with that.


Beware of making an early tax return

April 3, 2017

If you normally file your tax return quickly to report and pay the small amount of tax due on your state pension, please hold on to that form until the end of May 2017. HMRC are changing their approach this year, and may not need a tax return from you after all.

If you do not need to submit a tax return for 2016/17, the tax office should write to you by 31 May to tell you. If you don’t receive such a letter, but you think your tax affairs are so simple it’s not worth the hassle, you can ask to be removed from the list of those who need to do a return.

Do remember however that you must declare any new sources of income you have, or if you make taxable capital gains.

Contact our Cambridge Personal Tax Advisers for guidance.


SDLT when transferring property

March 30, 2017

SDLT when transferring property from an individual to a company

When a company acquires land or buildings it will pay Stamp Duty Land Tax: SDLT (LBTT in Scotland). The rates due on residential property are: 3%, 5%, 8%, 13%, or 15%, on bands of consideration which vary for SDLT and LBTT. 

This tax is payable even if the properties are transferred from an individual to a company he or she owns. Where a partnership of related individuals transfers properties to a company the partners control, the SDLT can be reduced to nil. However, the circumstances in which this exemption applies are very limited. 

Talk to our Cambridge Property Tax Advisers about the tax charges which may arise before you transfer properties to a company. 


Letting a property through a company

March 30, 2017

If you are planning to invest in residential property to let out the most tax efficient way to do this is probably through a limited company. The company will have to purchase the property using a mortgage and/ or funds you lend to it. On the other hand, the company will be able to set all of its finance costs against the rents it receives.

The company will pay tax on the profits it makes from letting at 19%, rather than at 20% to 45% if the profits arose in your hands. However, the income will be trapped in the company until it is paid out to you as dividends, interest or wages, when further tax charges are due. The company will also have to file its own tax return online and submit accounts to Companies House.

If you are looking to purchase a property to let or you already have a portolio of let properties, please contact us for advice on managing your properties within a company.


Changes to salary sacrifice arrangements

March 28, 2017

Swapping salary for benefits which are taxed at a lower rate is known as salary sacrifice. The law is to change to ensure the same tax is paid whether a benefit or salary is received, but at first will only apply to new salary sacrifice arrangements made from 6 April 2017 onwards. Existing arrangements will be caught if they are modified or renewed after that date, such as when a different company car is provided.

All salary sacrifice arrangements involving cars, vans, fuel, accommodation and school fees will come under the new rules from 6 April 2021. Other benefits, such as free car parking, will fall under the new rules from 6 April 2018. Some benefits won’t be affected at all, and these include pension contributions, subsidised meals and medical treatments.  

If you offer a salary sacrifice arrangement to your employees, we should discuss how these new rules will affect your business.


Making Tax Reporting Digital

March 23, 2017

Tax reporting is changing to a fully digitised process. Businesses and landlords will have to submit updates of income and expenses to HMRC at least quarterly. However, those with business or rental income of no more than £10,000 per year will be exempt from such quarterly reporting.
 
Other businesses will be required to send HMRC regular updates from the first accounting period that starts on or after:  

  • 6 April 2018 -  for unincorporated businesses with turnover exceeding the VAT threshold (£85,000 from 1 April 2017), excluding large partnerships.
  • 6 April 2019 –  for unincorporated businesses with turnover exceeding £10,000 but less than the VAT threshold.
  • 1 April 2019 – for all VAT registered businesses, for VAT-related reports
  • 1 April 2020 – for all companies to report income and expenses subject to corporation tax, and partnerships with turnover of £10 million or more.   

There are still many questions to answer about the practicalities, and it is possible that this timetable will change.


Tax rates, reliefs and allowances for 2017/ 2018

March 22, 2017

Make sure you are fully aware of any changes to UK tax rates, reliefs and allowances affecting you and your business for 2017/ 2018.

Download our Tax Card for 2017/ 18 

CKLG Tax Rate Card 2017

 


Tax Free Childcare changes

March 22, 2017

The Government supported savings accounts called “tax-free childcare” are due to launch in April 2017. Employees who use these accounts won’t be permitted to also receive employer provided childcare vouchers, which are tax free within limits.

The tax-favoured child care vouchers are to be phased out, so no new employees will be able to join such schemes from April 2018. In the meantime, there will be two alternative routes to subsidised childcare with different conditions, which will affect families in different ways.

We can advise you whether to continue to provide childcare vouchers though your company, please contact our Cambridge Business Tax Advisers to discuss your personal tax situation.

 


Changes to dividend allowance

March 17, 2017

If you receive dividends of £5,000 per year you will be affected by the cut in the dividend allowance from £5,000 to £2,000 on 6 April 2018. This is likely to have the greatest impact on owners of small companies, who extract most of the funds they need from the company as dividends. 

This tax change will cost you £225 per year (as basic rate taxpayer), £975 per year (as a higher rate taxpayer) or £1,143 per year (as an additional rate taxpayer).

If your family also receive dividends from your company, please contact our Cambridge Business Accountants to review your dividend strategy for 2018.


Self-employed national insurance u-turn

March 16, 2017

Self-employed individuals, who don’t trade through a company, currently pay class 2 and class 4 national insurance contributions (NIC). The Chancellor had planned to increase the main rate of class 4 from 6 April 2018, as class 2 will be merged into class 4 from that date. 

This caused such a fuss as it appeared to break a Conservative Party manifesto pledge not to raise the rates of income tax, national insurance or VAT in this Parliament, i.e. before May 2020. A u-turn followed, and class 4 NIC will not increase in 2018 or 2019 However, class 2 NIC will be abolished from 6 April 2018, which will save self-employed individuals £148.20 per year, at the 2017/18 rates.


Budget 2017: What does it mean for you and your money

March 9, 2017

The Chancellor Philip Hammond delivered his first and last Spring Budget yesterday, and the first of the 2 Budgets scheduled for 2017. From 2018 it is planned that there will only be one fiscal event each year being the annual Autumn Budget.  

The Chancellor stated that it was a Budget in which he was putting economic stability first. A ‘strong and stable platform’ for the forthcoming negotiations as the UK starts the formal process of exit from the European Union. He remains committed to eliminating the deficit but although the OBR still forecasts borrowing to be on an overall downward trajectory, there will still be a deficit throughout the next 5 years.

The anticipated tax rise was directed at the self-employed, with a controversial increase in Class 4 NIC from April 2018 of 1% and further 1% from April 2019. There was no major reform to the tax system but several changes that are set out in the small print of the reports that may affect you.

To help you see how Philip Hammond’s announcements yesterday may affect either you, your family, or your business, we have prepared a summary highlighting the key points.


Public sector contracts and IR35

March 8, 2017

The IR35 rules will be familiar if you offer your personal services through your own personal company. You decide if you are caught by IR35, and if so, your company pays the appropriate tax and national insurance.

From 6 April 2017, if your contract is with a public sector body, that body decides if you are within IR35. Where it decides you are within IR35, the fee payer (normally the employment agency) must deduct the tax and NI due from the invoiced amount, excluding VAT.

Essentially your personal company is ignored, and you are taxed as if you were an employee of the fee-payer, without any employment rights.  

These new rules are very complicated, so we should discuss how you maybe affected, please contact our Cambridge Business Accountants to discuss your personal situation.


Changes to the flat rate scheme

March 6, 2017

The flat rate scheme (FRS) is supposed to simplify VAT reporting for small businesses in the UK, but that simplification is removed from 1 April 2017. If you use the flat rate scheme, you will have to check whether the relevant goods you buy each quarter amount to more than 2% of your gross sales for that quarter, and at least £250.

Relevant goods excludes items acquired:

  • for resale, leasing, letting or hiring out if your main business activity doesn’t ordinarily consist of selling, leasing, letting or hiring out such goods.
  • that you intend to re-sell or hire out, unless selling or hiring is your main business activity.
  • for disposal as promotional items, gifts or donations.

If the 2% test is passed you can carry on using the flat rate percentage applicable to your trade sector. If your business fails the 2% test, you will have to pay 16.5% of your gross sales to HMRC as VAT. This will mean the Flat Rate Scheme is no longer economical to use.

Please speak to one of our Cambridge accountants to determine your VAT position. 


UK Business rate increases from April 2017

February 24, 2017

All properties used for business purposes are subject to business rates in the UK. This includes let holiday accommodation and guest houses. Although the tax is paid to the local authority, the multiplier (pence per £ of property value), is determined by central Government.

All premises subject to business rates were revalued in April 2015, and these values show some significant differences to the last revaluation which was undertaken in 2008

The April 2015 value will be used for setting the business rates payable from 1 April 2017. If you believe your business premises has been incorrectly valued you can appeal. Smaller properties are eligible for business rates relie

Please contact our Business Services Advisers Cambridge to discuss the impact of business rates increases on your small business. 


Workplace pension schemes

February 22, 2017

All employers in the UK are required to provide access to a workplace pension scheme, and their employees must be enrolled in that scheme (auto-enrolment), unless they specifically opt out. This applies even to the smallest companies, although where the company only employs its directors, it can apply for exemption from the Pensions Regulator. 

Employees must be ready to be enrolled in the workplace pension scheme by the “staging date”, which is set according to your PAYE scheme reference. Many small employers have a staging date of 1 March 2017 or 1 April 2017. If you miss your staging date you may receive a fixed £400 fine. However, you can apply for a six-week grace period to get your work place pension arrangements back on track.

Speak to one of our Small Business Accountants Cambridge on 01223 810 100 for more information about setting up a workplace pension for your employees. 


Year End Tax Guide 2016/ 2017

February 16, 2017

With the end of the 2016/17 tax year fast approaching CKLG Accountants Cambridge are pleased to be able to share with you our Year End Tax Guide. The Guide highlights the potential tax planning measures that you may wish to consider or take for yourself or your business before 5 April 2017.

  • Personal Allowances and Relief's
  • ISA's
  • Pension Contributions
  • Inheritance Tax
  • Capital Gains
  • Corportation Tax
  • Entrepreneurs’ relief

Download our Year End Tax Guide 2016/2017

Tax Planning Advice Cambridge


As always, our personal tax and business services team are on hand and would be delighted to assist you with any of your tax planning requirements.

Please contact us on 01223 810 100 to discuss your tax planning requirements with one of our Cambridge Tax Advisers