Keep up to date with all the latest tax and financial news from CKLG
Latest News From CKLG Accountants
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 hereHist 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.
Auto-enrolment for Businesses
September 14, 2016
Our guide to staying compliant with auto-enrolment.
Auto-enrolling employees into a workplace pension scheme is a legal requirement for all businesses, from those employing hundreds to those with 1 or 2 people on the payroll.
Over 6 million workers have been enrolled since 2012, with a further 1.8 million due over the next 2 years as the process turns to smaller employers.
The Pensions Regulator has warned that while the majority of companies are complying with the process, a rise in non-compliance is expected from smaller employers who have not prepared properly.
So far 2016 has matched these expectations with 806 fixed penalty notices (bringing the total since 2012 to 2,234) and 96 escalating penalty notices (making the total 127) being issued in the first quarter.
Non-compliance with auto-enrolment can lead to daily fines of up to £10,000 for businesses with 500 or more employees. So it is important that all businesses know exactly what is required of them.
To find out more, please click 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.
Investors’ relief extended for unquoted trading companies
July 25, 2016
This a new Captial Gains Tax (CGT) relief designed to provide a 10% tax rate for investors in unquoted trading companies. The investor must hold his shares for at least 3 years and must not be an employee or director of the company when he subscribes for those shares.
This condition has now been relaxed slightly. The investor can become an unpaid director of the company he invests in. He must not receive any remuneration for his duties as a director, but he may be paid reasonable expenses.
We can advise you how you can qualify for investors’ relief, please speak to our tax planning advisers on 01223 810 100
Entrepreneurs’ relief changes for retiring partners
July 22, 2016
Entrepreneurs' relief provides a 10% rate tax on gains made when you dispose of an asset you owned personally but used for the trade carried on by your partnership or company. This is called an ‘associated disposal’, as you must dispose of at least 5% of the partnership or company at the same time as the asset sale.
This condition has been relaxed slightly for retiring partners. Such an individual may make an associated disposal (perhaps sell the property the partnership uses), at the time he finally exits from his partnership. His last portion of his partnership may amount to less than 5%, but entrepreneurs’ relief will still apply to the associated disposal.
We can help you plan for retiring from a partnership, please speak to our tax planning advisers on 01223 810 100
Stamp Duty Land Tax Second Homes
July 21, 2016
The property market has always been one of hostility; determined strongly by supply and demand. Tax has had very little influence over the property market, but the impact has increased significantly since the Chancellors budgets in 2015 and 2016.
Most individuals are only concerned about one tax when it comes to owning a home; Stamp Duty Land Tax (SDLT). This is levied on property purchases over £40,000, at rates of 2%, 5%, 10% and 12% depending on the purchase price.
The calculation of this tax changed from December 2014, moving towards a ‘banded’ system. SDLT will only be payable on the portion of the consideration which falls within each band (rather than tax being due at one rate on the entire value), much like Income Tax.
Moreover, SDLT is expected to generate higher revenues for the government in the future, as the rate of SDLT on second properties has been increased. For all residential property purchases completing on/after 1 April 2016, an additional 3% SDLT charge applies if the person owns more than two or more residential properties at the end of the day of the transaction, and is not replacing a main residence. Therefore, if you buy a house before you are able to sell your old house, you will be subject to the additional 3% (due within 30 days of completion). However, you are able to reclaim this within 3 months of the sale of the previous main residence, or within 12 months of the filing date of the return, whichever comes later.
This will of course affect cash flow when it comes to buying property.
If you need any assistance on the tax aspects of your property transactions, please contact CKLG Accountants.
2016 Tax and Budget Update
July 14, 2016
'Creating and Preserving Wealth' seminar overview
Katie Holmes Director at CKLG Accountant presented a review of significant tax changes announced in the last Budget, focusing on tax changes to Income Tax, Capital Gains and Inheritance Tax.
“The most significant impact to income tax is the introduction of a new £5,000 Dividend Allowance from April 2016.Under the new system, the dividend tax credit has now been abolished.”
Katie covered the impact of changes to the property rentals Wear & Tear allowance and increased Stamp Duty rates for second homes and buy-to-let properties. “For all residential property purchases completing on/after 1 April 2016 an additional 3% SDLT charge applies if, at the end of the day of the transaction, the person owns more than two or more residential properties and is not replacing a main residence."
"By 2020 HMRC will have moved to a fully digital system for accounting and tax reporting” – Katie addressed this topic briefly, stressing “but until more information is released we remain in the dark about how this will work in practice.”
Moving on from Income Tax “it had been widely speculated that Capital Gains Tax might be one of the areas that the government potentially looked to increase. It was notoriously left out of the governments “triple tax lock” pledge in the general election so that speculation was not unfounded, however, instead we had a shock reduction.”
Katie also touched upon the Governments manifesto to increase the Inheritance Tax Nil-Rate Band to £1M in total for a married couple who own their own home. “After the election it was announced in the Summer Budget in 2015 that the new Residence Nil-Rate Band for Estate of less than £2M was going to be introduced in stages, not reaching £175,000 until 2020/21.”
A couple key points for you to take away
- If you have a property portfolio, do you need to give thought to how the many changes could affect your portfolio? We talked about mortgage interest, wear and tear being replace with renewals basis, changes to CGT and SDLT.
- If you have any control over the level of your dividend income is that any planning, you could be doing take advantage of the new dividend allowance or to mitigate increase tax from the withdrawal of the tax credit.
- Revisit your wills to make sure they are compatible with the new Inheritance Tax Residence Nil Rate Band
“Overall, it’s fair to say that the interaction of many of the points we have spoken about today are adding layers of complexity to the tax system. It’s getting more and more difficult for people to know where they stand so please do speak to us to get further advice.”
Creating and Preserving Wealth: Life after Brexit
July 14, 2016
The sun may have shining for our Annual ‘Creating and Preserving Wealth’ Seminar, in association with Money Matters Wealth Management at the Newmarket Jockey Club on June 28, but the mood was one of uncertainty, concern and reserved optimism. No prizes for guessing the ‘hot topic’ of conversation.
Global Market Reaction Post-Brexit - Presented by Stephanie Flanders, JP Morgan Asset Management
Our guest speaker Stephanie Flanders delivered an optimistic but cautious review of the market’s reaction to Britain’s vote to leave the EU on June 23. Her theme was that however bad things might seem for the UK right now, the global economic recovery would continue and that Britain’s current situation would get better.
“Although this is an earthquake for the UK politically, and will effective us economically, like any earthquake, it will depend how close you are to the epicentre; we alone will not be able to tank the global economy."
She warned that Britain was in for a period of uncertainty and that the Pound would inevitably drop further during the course of our recovery. “The economic outcome for the UK is lower GDP and higher inflation.”
When questioned by the audience on whether she thought the ‘divorce’ from the EU would be ugly or amicable she said "there is a massive trade surplus with the EU - why would they deprive themselves of that? However, it has always been a rather loveless union."
You can view Stephanie’s full presentation below.
What is a Follower Notice?
July 11, 2016
The tide has most definitely turned against tax avoidance schemes. Where a case concerning a tax avoidance scheme comes to court HMRC generally win. This allows HMRC to issue a ‘follower notice’ to taxpayers who have used the same or similar scheme.
If you receive a follower notice you must take corrective action to settle your outstanding tax dispute with HMRC, or alter your tax return or claim, to reflect the fact the tax avoidance scheme didn’t work. If you don’t take the corrective action within 90 days of receiving the follower notice a penalty of up to 50% of the tax due can be imposed. We can advise what to do if you receive a follower notice, and help you appeal against any penalty raised.
For a fact sheet on Follower Notices please click here!
HMRC is making class 2 NIC errors
July 8, 2016
If you are self-employed you should now pay your class 2 NIC alongside your income tax bill, rather than separately by direct debit or cheque. Commercial tax return software has been amended to incorporate this change which applies from 2015/16, but the HMRC computer hasn’t been fully updated.
If you have already submitted your 2015/16 tax return, you may have received an unexplained tax refund of £145.60, which is the class 2 NIC due for 2015/16. It’s important that your NIC record is corrected and you pay the class 2 NIC due in order to build up qualification for the full state pension. We can help you sort out the class 2 NIC mess created by the HMRC computer.
For Class 2 NIC problems reported to HMRC click here.
Three-day grace period for RTI filing
July 4, 2016
The full payment submissions (FPS) under Real Time Information (RTI) are supposed to be sent to HMRC on or before the date the employees are paid. However, as long as you file the FPS within three days of that payment date, you won’t get a penalty. This concessionary three-day grace period will apply until 5 April 2017.
HMRC will monitor employers who regularly file late within the three-day grace period and may warn them that a penalty could apply. Note HMRC concessionary grace period for late filing doesn’t give you any legal protection as it’s not written into law. We can help you challenge any penalties you receive under RTI.
How to apply for SEIS approval
June 29, 2016
The Seed Enterprise Investment Scheme (SEIS) is a version of EIS designed for very small companies to attract investors with generous tax reliefs. However, although the size of company which can use the SEIS scheme was scaled back, the complexity of the rules was not.
The two schemes have very similar conditions, so a company that uses SEIS can easily go on to use EIS to raise funds. However, if the company applies for approval to use EIS, it cannot then use SEIS in another round of funding. It’s important to use the right forms to apply for SEIS and EIS approval. We can help you with that.
For more information, please click here!
Capital Gains Tax Planning
June 9, 2016
A guide to capital gains tax and allowances for 2016/17.
Selling something you own for more than you originally bought it for is the basis of doing ‘good business’ in terms of both personal and business finance.
Depending on the profit that an individual or organisation makes on the sale of their asset, they may become liable to pay capital gains tax (CGT).
There have been a number of changes introduced to CGT and its allowances and reliefs for the 2016/16 tax year.
Individuals and businesses who may be planning on selling assets in the near future should be aware of what their CGT liability is likely to be.
CGT is applied on the profit (or ‘gain’) that may occur when an asset is sold (or ‘disposed of’) after it has increased in value.
CGT is a tax applied to the gain, not the total amount of money that the buyer gives you as part of the sales process.
For example, you buy an antique table for £7,500 and sell it for £18,000. Your gain here is £10,500.
Budget 2016 saw significant cuts to the main rates of CGT. As of April 2016, the rates for CGT are:
basic rate taxpayers: 10% (from 18%)
higher rate taxpayers: 20% (from 28%).
Disposals of residential property that does not qualify for private residence relief and carried interest are taxed at the previous rates.
You pay CGT at the higher rate on the portion of any gains that make you exceed the basic rate threshold.
Annual exempt amount
Every individual is entitled to a tax-free allowance, which means that they are not entitled to pay CGT on their overall gains for that year if they fall under £11,100 (£5,500 for trusts).
Reclaim VAT on purchases
May 30, 2016
As a VAT registered trader you can reclaim the VAT you incur on goods and services which will be used to make sales that attract VAT. Goods or services which are used for non-business activities, or for generating VAT-exempt sales, can’t be included in a VAT claim, unless the partial exemption rules apply.
This is the foundation of the VAT system, but HMRC may question whether costly purchases are related to VATable sales, and thus whether the VAT on those purchases can be reclaimed. In a recent case HMRC attempted to block the repayment of VAT paid on the purchase of single farm payment entitlements (SFPE). The taxpayer won this argument. If you have your VAT reclaim challenged by HMRC, we can help
To find out more about HMRC v Frank Smart & sons please click here.
Reconcile VAT Returns and Accounts
May 26, 2016
If you complete your own VAT returns and accounts, do you check that the total of sales on the VAT returns reconciles with the sales shown in your annual accounts? If there is a discrepancy between your VAT returns and the business accounts, HMRC may ask you to explain the difference.
If you can’t explain any differences HMRC will send you a bill for the extra VAT due. To avoid such difficulties ask us to check that your VAT returns are complete, before submitting them.
Repayment of CIS Tax
May 24, 2016
If your company has had CIS tax deducted from payments due on invoices, you can off-set that CIS tax against PAYE and other CIS tax the company deducts from people/ firms it pays. This set-off is achieved through the RTI and CIS systems. Any excess CIS tax can be set against other tax liabilities the company has, such as corporation tax or VAT, or reclaimed directly from HMRC.
The refund claim must be made in writing to HMRC, but we can help you with that. HMRC will compare the CIS deductions it has recorded as having been made against the company’s invoices and repay the excess tax if there are no discrepancies.
CIS repayment claims helpcard can be found here.
Apply for Gross Payment Status
May 23, 2016
For businesses registered under the construction industry scheme (CIS) to receive payment for their work without deduction of tax, they must apply for and retain gross payment status. The tax compliance standards needed have recently been simplified so, as long as you have filed all your CIS and business tax returns on time, and paid the business tax when due, CIS gross payment status should be granted. If you are looking for assistance then we can help you apply for and keep CIS gross payment status for your business.
CIS regulations for gross payment status can be found here.
Managing Employee Expenses
May 20, 2016
From the 6th of April 2016, where employees are reimbursed valid business expenses, those refunds are exempt from tax and NIC and are not required to be reported on the end of year form P11D. Meals taken while travelling can be claimed at standard benchmark rates.
However, all employers should periodically check a random sample of employees’ expense claims to see if a valid business expense was incurred. A receipt is not necessarily required, but some contemporaneous record would be needed. If you are needing help managing employee expenses, call us and we can help you understand what records are required!
How to reclaim VAt on purchases
May 10, 2016
As a VAT registered trader you can reclaim the VAT you incur on goods and services which will be used to make sales that attract VAT. Goods or services which are used for non-business activities, or for generating VAT-exempt sales, can not be included in a VAT claim, unless the partial exemption rules apply.
This is the foundation of the VAT system, but HMRC may question whether costly purchases are related to VATable sales, and thus whether the VAT on those purchases can be reclaimed.
In a recent case HMRC attempted to block the repayment of VAT paid on the purchase of single farm payment entitlements (SFPE). The taxpayer won this argument. If you have your VAT reclaim challenged by HMRC, we can help.
Planning for your retirement
May 4, 2016
Planning for your retirement is important and the first thing you should do is work out how much income you will need to support your lifestyle once you retire.
Income tax is still levied when an individual retires. All income, bar the standard state pension is liable for income tax. Tax is due on personal and company pensions. The personal allowance for the tax year 2016/17 is £11,000 per annum. Any income exceeding the allowance will be taxed.
When withdrawing money from a personal pension pot the first 25% is tax-free. Once the initial 25% has been taken the remainder will be paid as income and will be taxable.
We can help you plan for retirement, please contact us on 01223 810 100 for advice.
Reducing inheritance tax with gifts or money
May 3, 2016
Gifting assets or money can reduce inheritance tax, however, some gifts made when you are alive may still be liable for inheritence tax, when you die, for example, if you die within 7 years of making a gift, it will be liable for inheritence tax though the rate is reduced for gifts made between 3 and 7 years of death.
Gifts to your spouse or civil partner are not liable for inheritence tax as they are not counted as part of your estate. When they die they will be included in their estate. In addition, some gifts are exempt from inheritence tax. These include:
- cash gifts to family and friends (subject to strict annual limits)
- regular cash gifts such as Christmas or birthday presents from your income can reduce the value of your estate
- gifts to dependents requiring your support.
Please contact us on 01223 810 100 for more information and advice on inheritence tax and estate planning.
Inheritance Tax and Estate Planning
May 2, 2016
Inheritance tax (IHT) is tax levied on a person’s estate when they die and is an essential element of estate planning. If done correctly it can reduce the amount of Inheritance tax paid on an estate.
The current IInheritance tax threshold is £325,000. If your estate is worth less than the threshold it will not be subject to Inheritance tax. The current Inheritance tax rate of 40% is levied on anything above the threshold. A reduced rate of 36% is applicable if a person leaves more than 10% of their estate to charity.
It’s possible to transfer any unused nil-rate band to a spouse or civil partner.
From 6 April 2017, an additional nil-rate band of £100,000 will be introduced when a main residence is passed on death to direct descendants. The ‘main residence nil-rate band’ will increase by £25,000 each year until it reaches £175,000 in 2020, after which it will increase in line with the consumer prices index. This nil-rate band is also transferrable to a spouse or civil partner.
April 29, 2016
Valuing your estate
Calculating the value of your estate is straightforward. You calculate the total value of your assets and subtract the total value of your liabilities. The assets you should consider are:
|Other Properties e.g. holiday homes Loans||Loans|
|Money in banks, building societies and
Premium Bonds Overdrafts
|Stocks & Shares|
|Cars and Motorbikes|
|Other personal possessions|
This valuation will help you work out whether your beneficiariesbeneiciaries will have to pay inheritance tax (IHT). The valuation will also help you to ensure that your estate is divided equitably between your beneiciaries.
Contact us for advice on estate planning.
Running a company car scheme
April 28, 2016
Our guide to setting up a company car scheme and the tax implications of doing so.
A company car is often seen as a perk that can benefit both employers and employees, provided you plan and budget accordingly. Important questions to ask yourself if you are planning to introduce a company car scheme include;
- what kind of car should you choose?
- how are you going to fund it?
- how many employees will use it?
- what is the estimated annual mileage?
We would advice you to consider these questions, before making a initial decision.
Download the complete company car scheme guide - providing you with all the essential information you need to know when planning a company car scheme and the effect it will have on your income tax bill.
Changes to Dividend Tax 2016/17
April 26, 2016
On 6 April 2016, the 10% dividend tax credit was abolished and replaced with a new dividend tax allowance of £5,000 per year. This allowance does not reduce total income for tax purposes and only applies to dividend income.
Dividend income exceeding the £5,000 allowance and the personal allowance for income tax will be taxed at the following rates:
- basic rate taxpayers: 7.5%
- higher rate: 32.5%
- additional rate: 38.1%.
Dividends paid within pensions funds and those received in shares from ISAs will stay tax-free. The £1,000 savings allowance (£500 for higher rate taxpayers) due to come into effect in April 2016 excludes dividend income.
No tax will be deducted at source; it will be paid through self-assessment. How the changes affect your tax planning will depend on your individual circumstances and other sources of income.
Please contact our Business Services Team on 01223 810 100 to discuss your how the changes to dividend tax credit will affect your tax position.
Stamp Duty supplement on a 'granny annex'
April 19, 2016
When you buy a residential property and end up owning two or more homes, you must pay a 3% stamp duty land tax (SDLT) supplement on the purchase. Where a home has an annex which can be occupied independently from the main building, such as a“granny annex”, the SDLT supplement could apply, as the whole property could be considered to be two dwellings.
David Gauke, Secretary to the Treasury, clarified this matter in the House of Commons stating, 'the SDLT supplement won’t apply to properties that are replacing a main home, and where the annex to the new home can’t be sold separately and is worth less than one third of the main property'.
An amendment will be made to the Finance Bill 2016, and HMRC will publish further detailed guidance before the Finance Bill is passed in July 2016.
Please contact our Private Client Team on 01223 810 100 for more advice on Proptery Tax
April 18, 2016
If you reach state pension age on or after 6 April 2016 you should receive the new single-tier state pension in place of the old style basic retirement pension. For 2016/17 the single-tier pension is worth up to £155.65 per week, and the basic state pension is £119.30 per week. However, the basic state pension can be topped-up by pension credits or expanded by other entitlements.
To qualify for the full single-tier pension you need to have made or received credits for NIC for 35 full tax years. If you have at least 10 years of contributions on your NI record you will receive at least some of the single-tier pension. Those people who contracted out of NIC for the second state pension may receive less than the full amount of single-tier pension.
Contant our Private Tax Team on 01223 810 100 for pension tax advise.
Tax Rates, reliefs and allowances for 2016/ 2017
April 14, 2016
Make sure you are fully aware of any changes to UK tax rates, reliefs and allowances affecting you and your business for 2016/ 2017.
Capital Gains Tax relief for long-term investors
April 13, 2016
A new form of capital gains tax (CGT) relief will be available for gains made on ordinary shares issued by unquoted companies from 17 March 2016.
Investors who subscribe for those shares will pay CGT at 10% on any gains they make on disposal, if they hold the shares for at least three years, counting days from 6 April 2016 onwards.
This looks like an attractive way to reward investors in small trading companies, where the investor doesn’t already qualify for entrepreneurs’ relief.
However, the investor won’t qualify for this new CGT relief if he is an employee or director of the company he invests in, or is related to any employee or officer of that company.
Contact our business services team for advice on whether you will qualify for entrepreneurs’ relief or investors’ relief on any planned disposal of shares.
Small Business Rate Relief
April 6, 2016
The business rates payable on commercial properties can be a huge burden for small businesses. Where the rateable value of the property is no more than £6,000 the business rates bill can be reduced to zero on a claim for small business rate relief (SBRR). This upper limit for Small Business Rate Relief will be doubled to £12,000 from April 2017.
Also where the rateable value of the building is between £12,000 and £15,000 a tapered SBRR will apply.
We can help you check how much you should be paying in rates for your business premises. There are many exceptions and special reliefs for particular types of businesses, contact our Business Services team for advice.
Director’s loan corporation tax charges
April 3, 2016
If you borrow money from your company, even as an over-drawn director’s account, the company may have to pay a corporation tax charge equivalent to 25% of the loan. For loans taken out on and after 6 April 2016 this charge will increase to 32.5%.
The corporation tax charge can be avoided if the loan is repaid within 9 months after the end of the accounting year in which it was advanced. It is essential to know exactly what you owe the company and what it owes to you, to avoid this tax charge becoming due, and to reclaim the tax charge after the loan is repaid.
We can help you plan your business finances an corporation tax calculations more effectively, please call the business services team today on 01223 810 100 for advice.