Keep up to date with all the latest tax and financial news from CKLG
Latest News From CKLG Accountants
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!
Auto-enrolment for Businesses
June 27, 2016
A 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!
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.