Flooding relief for SA filing, ATED expanded, Trivial Benefits

If you or your clients have been struggling to file SA tax returns due to disruption caused by flooding or other extreme weather conditions, we have some good news for you. Looking ahead to April 2016; you need to warn clients about the expansion of the ATED charge, and explain the new rules for trivial benefits.

This is an
extract from our topical tax tips newsletter dated 28 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

ATED expanded 
The annual tax on enveloped dwellings (ATED) was restricted to properties worth over £2 million when it was introduced on 1 April 2013. From 1 April 2016 it will apply to residential properties worth over £500,000 which are owned by non-natural persons (companies and mixed or corporate partnerships). 
  
According Land Registry data collected in November 2015, the average price of a home in London is £506,724. If your client owns residential property through a company (or another vehicle), you need to check whether the ATED applies. 
  
Note the relevant value for ATED is not the value as at 1 April 2016, but the value at 1 April 2012. If the property was not held by the current owner on 1 April 2012, you must use the valuation at the date of acquisition. If you are not sure about the value at 1 April 2012 you can ask HMRC to undertake a pre-return banding check. 
  
However, you can’t ask for a banding check if the ATED charge will be reduced to nil by one of the reliefs. This is typical muddled thinking by HMRC. They provide a mechanism to make life easier (valuation check) but block the use of it if there is no tax to pay. HMRC doesn’t consider the cost of completing the ATED return to claim the relief. 
  
Don’t overlook the need to submit an ATED return. Where the property falls within the ATED regime because of its value and ownership, an ATED return must be submitted. If a relief eliminates the ATED charge you must submit a relief declaration return – there is a different relief declaration form for each type of relief claimed. 
  
The ATED return must normally be filed by 30 April within the year to which the charge relates: 30 April 2016 for 2016/17. However, there is generally an extension to 1 October for properties which fall within ATED for the first time due to a new banding. The Gov.uk website hasn’t been updated on this point yet. 
  
There are penalties for late submission of ATED returns which apply the same level of penalties as for late submission of self-assessment tax returns.
 
This is an
extract from our topical tax tips newsletter dated 28 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Share dealing losses, National living wage, VAT on telecoms services

Last week we examined a case concerning share dealing losses which provides hope to all day traders. You need to warn your clients about the NMW rate rise on 1 April 2016 and about a change in VAT treatment on wholesale telecoms services which applies from 1 February 2016.

This is an
extract from our topical tax tips newsletter dated 21 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

National living wage 
The national minimum wage (NMW) rate normally increases with effect from 1 October. Many employers will be geared up to include such changes in their annual pay reviews. However, the next rate change applies from 1 April 2016. 
  
In his Summer Budget on 8 July 2015 George Osborne stole the opposition’s clothes by announcing a “National Living Wage” of £7.20 per hour, to be gradually increased to £9 per hour by 2020. In fact the living wage is just another NMW rate, with all the same legal requirements. It must be paid to workers aged 25 and older for pay periods that fall on and after 1 April 2016. 
  
The NMW for those workers is currently £6.70 per hour, so a 50p per hour increase is significant. It will push the weekly wage for a worker on 35 hours up from £234.50 to £252, and cost the employer an extra £19.91 per week including employer’s NI. Where the worker is enrolled in a company pension under auto-enrolment the total cost to the employer will be higher. 
  
You can help your clients identify which employees should receive a pay rise from 1 April, and budget for this extra cost. Remember company owner/directors don’t have to pay themselves the NMW or living wage as long as they don’t have a contract of employment with their company. Family members living in the employer’s home also are not entitled to the NMW. 
  
The employment allowance is increasing from 6 April 2016 from £2,000 to £3,000 for most employers. One-man companies won’t qualify for the employment allowance in 2016/17. 
  
The extra £1,000 of allowance will be available to off-set the additional employers’ NIC payable on the compulsory wage increases for workers entitled to the living wage. However, the employment allowance can’t be used to off-set the cost of pension contributions, or the actual wage increase itself.  

This is an
extract from our topical tax tips newsletter dated 21 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


VAT MOSS, VAT flat rate scheme, Trust tax returns

This issue highlighted two VAT issues which affect small businesses; the ridiculous VAT MOSS rules, and the VAT flat rate scheme which should make life easier for small businesses but can trip them up. We also have news about incorrect penalties issued in respect of trust and estate tax returns.

This is an
extract from our topical tax tips newsletter dated 14 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

VAT MOSS 
All VAT MOSS returns must be submitted for calendar quarters, irrespective of the period for which the trader submits his domestic VAT returns. Thus the next VAT MOSS return must be submitted by 20 January 2015, for the quarter to 31 December 2015. 
  
This is just another example of how the VAT MOSS rules are a bad-fit for micro-traders. HMRC are starting to realise this, as they have issued new guidance on VAT MOSS for small traders. These are businesses with annual turnover below the UK VAT registration threshold, so they aren’t required to be registered for VAT in the UK. However, they must operate VAT MOSS. In theory just one international sale of an electronic service to a non-business consumer in another EU country brings the business within the VAT MOSS reporting regime. 
  
HMRC say they have analysed the VAT MOSS returns submitted so far. From this incomplete data HMRC have concluded that some people registered for VAT MOSS may not be in business. A person who is not “in business” doesn’t have to register for VAT MOSS as the supplies are not made in the course of a business. Problem solved!    
  
No, the problem is not solved. HMRC can’t accurately determine whether a trader is “in business” from three VAT MOSS returns, but they are writing to those people they believe aren’t “in business” suggesting the trader should deregister from VAT MOSS. If your client receives such a letter he will be confused, as HMRC is constantly telling people to declare all of their income for tax purposes. 
  
If you have advised your client to register for VAT MOSS, you will have already reviewed whether he is in business or not, and concluded that he is. If the international sales are merely part of a “hobby” and not part of a business, then you wouldn’t have advised the individual to register for VAT MOSS. 
  
For those small traders who decide to stay registered with VAT MOSS, a further concession is offered: they only have to retain one piece of evidence of where their customer is located. However, the trade needs to abide by the VAT laws of the country he is selling into. A concession applied by HMRC won’t necessarily be recognised by another EU tax authority.

This is an
extract from our topical tax tips newsletter dated 14 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Farmers and losses, SDLT supplement, HMRC communications

Business life doesn’t stop in January so everyone can concentrate on completing their tax returns – although you may like it to. Clients are busy trying to make a profit, or at least striving to avoid a farming loss for the sixth year running. We explain why this is so important in this week’s newsletter. Property owners need to act quickly to complete deals before the new SDLT supplement kicks in. We also have a timely warning about communications from HMRC.

This is an
extract from the first of our topical tax tips newsletters for 2016. It went out on 7 January
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

HMRC communications 
Where a taxpayer has appointed a tax agent HMRC is supposed to write to that agent, or at least copy-in the agent on any correspondence with the taxpayer. That rule is being broken again with “educational” letters being sent out by HMRC. 
  
The letter we have seen is addressed to farmers, reminding them that subsidies paid by the EU are taxable income and should be included on their SA tax return. It goes on to say the farmer should check their tax returns to see if the right amount of income has been declared. This will alarm some clients, and no-doubt prompt phone calls to you. 
  
Other communications, such as emails and texts supposedly from HMRC are obvious fakes. We know that HMRC doesn’t offer taxpayers refunds by email but it does send reminders to complete tax and VAT returns. It’s easy to be duped by the fraudsters. 
  
Finally, where you or clients have been affected by the floods, and as a result need more time to complete tax returns or make tax payments, there is help available. Access that help by calling the HMRC flood helpline: 0800 904 7900. To arrange time to pay a tax debt call before the debt becomes due.

This is an
extract from our topical tax tips newsletter dated 7 January 2016
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Liquidate the company, Renewals allowance, Payrolling of benefits

The Government
issued another 645 pages of draft tax legislation and notes last week.
We have picked out two issues from the draft Finance Bill 2016 which may
be relevant to your clients: whether to liquidate their dormant
companies and the new renewals basis for items used in let residential
properties. HMRC has also set a ridiculous deadline of 21 December 2015
to inform them about payrolling of benefits.

This is an
extract from our topical tax tips newsletter dated
17 December 2015 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Liquidate the company


Where a company is
liquidated the proceeds received by the shareholders are treated as
capital, after the costs of the liquidation are deducted. The
shareholders pay CGT on those proceeds at: 18%, 28%, or 10% where
entrepreneurs’ relief applies. This is a huge tax saving compared to the
dividend tax rates of: 7.5%, 32.5% and 38.1% which will apply to
distributions from a company in 2016/17.


 


The Government
wants to prevent business owners from achieving a “tax advantage” (tax
saving), by liquidating their company and starting up the same or
similar business in another vehicle. There are already anti-avoidance
rules which can be used against such phoenixing, which are explained in
HMRC’s Company Tax Manual at CT36850.


 


The draft Finance
Bill 2016 includes a new targeted anti-avoidance rule (TAAR) that goes
further than the current rules. If the TAAR comes into effect as drafted
it will tax the proceeds from the liquidation as income rather than as
capital, where all these conditions are met:


a)     a close company is wound-up and an individual (S) receives proceeds from the shares;


b)     within two years of that distribution S continues to be, or becomes, involved in a similar trade or activity; and


c)     one of the main purposes of the winding-up is to obtain a tax advantage.


 


Condition b) will
apply where the same or similar business is continued as a company, or
as a sole-trader or as partnership, even on a much diminished scale.


 


The TAAR is due to
apply to distributions made on or after 6 April 2016. Thus to be sure of
falling outside of the TAAR, the liquidation must be completed before
that date. Liquidations can take many months. If your client has a
company which he intends to liquidate to pay CGT on the funds it has
accumulated, he needs to act fast to avoid being caught by this new
TAAR.


 


Our tax experts can
advise you on whether a proposed transaction involving a company’s
shares will be affected by the draft anti-avoidance rules in Finance
Bill 2016.

This is an
extract from our topical tax tips newsletter dated
17 December 2015 (5 days before we publish an extract on this blog). it was the last one of 2015. You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Company cars and fuel, Tax free meals, Income verification

Last week we turned
our attention to employee benefits, in particular company cars and meals
taken while away from the normal workplace. The rules and rates for
taxation of both these benefits are changing from 6 April 2016, so you
need to inform your clients. We also shared news on the provision of tax
calculation statements by HMRC for mortgage purposes.

This is an
extract from our topical tax tips newsletter dated 10 December 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Company cars and fuel


As we predicted in
our newsletter on 12 November 2015 the 3% supplement for diesel powered
company cars is to be retained after 5 April 2016. As a result the
taxable benefit for using a diesel company car will increase in 2016/17
rather than decrease as had been expected.


 


This announcement
was made in the Autumn Statement on 25 November 2015, which will have
been too late for many tax rates and tables books published this year.
HMRC’s online calculator for car and fuel benefit currently doesn’t
cover 2016/17, but that may updated in January 2016.   


The percentage of
list price used to calculate the taxable benefit for all company cars
will increase by two percentage points from 2015/16 to 2016/17. This
includes cars with CO2 emissions under 51g/km, which will be taxed at 7%
of the list price, or 10% for a diesel car.


 


The maximum
percentage of list price used for the benefit calculation is now set at
37%. That level will be achieved by diesel cars with CO2 emissions of
185g/km or more in 2016/17. Petrol cars will achieve the maximum at CO2
emissions of 200g/km or more.


 


As around 81% of
company cars are diesel powered, you need to inform your clients of this
change so they are prepared for higher tax and class 1A NIC liabilities
in 2016/17. Look out for notices of coding for 2016/17 and check that
the correct taxable benefit for the company car has been included.


 


If a taxpayer has a
company car in most cases it is not economical to take free fuel for
private use, as the fuel used will cost less than the tax payable on the
fuel benefit. Instead of free fuel the taxpayer should claim the cost
of fuel used on business journeys, from his employer, using the advisory
fuel rates. Those advisory rates have been revised with effect from 1
December 2015, mostly downwards, but the old rates can be used for
journeys taken before 1 January 2016.

This is an
extract from our topical tax tips newsletter dated
10 December 2015 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Tax relief for travel and subsistence, R&D advanced assurance, Payment of SA tax

The Autumn
Statement contained little to concern small businesses in the near
future. The proposed change to tax relief for travel and subsistence
costs will be relatively limited, as we explain below. There is a new
R&D advanced assurance procedure which small companies should know
about, and we revisit the issue of paying SA tax in January, because it
is so important.

This is an
extract from our topical tax tips newsletter dated 3 December 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Tax relief for travel and subsistence


In our newsletter
on 15 September 2015 we outlined the proposed changes to tax relief for
travel and subsistence costs. The Government says a restriction on this
relief is needed to block abuse of the rules by a minority of employment
agencies and umbrella companies, and personal service companies were
set to be caught in the cross fire.


 


The good news is
the Government listened to responses to the consultation paper, and has
decided to restrict tax relief for travel and subsistence expenses only
for workers engaged through employment agencies, such as an umbrella
companies. This means those temporary workers won’t be able to claim
expenses for travelling to work, and won’t be due a lunch allowance
either. This change will take effect from 6 April 2016.


 


Individuals who
contract through their own personal service companies may be caught by
this change in the tax rules, but only where the contract they perform
falls under the IR35 rules. Thus if IR35 doesn’t apply, the contractor
can carry on as before, claiming a reimbursement of travel and lunch
costs from his own company.


 


This will be a big
relief to many contractors, as the IR35 rules rarely apply to genuine
contractors who are in business on their own account, and who can
provide substitutes to complete their contracts. There is a lot more to
IR35 that those two conditions. Our employment tax experts can help you
advise clients on that complex piece of legislation.


 


You should also
advise clients that the IR35 rules are under review and may be tightened
up from April 2016 or from a later date.

This is an
extract from our topical tax tips newsletter dated
3 December 2015 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


PAYE debts, Tax payments or repayments, Non-resident landlords

Next week, once the dust has settled, we will analyse some of the most urgent tax changes announced in the Autumn Statement. In the meantime we have tips on how to deal with phantom PAYE debts, and a practical issue concerning the SA tax payments and repayments due in January. There are also new forms and new guidance for non-resident landlords.

This is an
extract from our topical tax tips newsletter dated 26 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Tax payments or repayments 
Helping clients with their tax affairs involves more than just computing the numbers. Many individuals need support with budgeting to pay their tax liabilities, and reminders about when and how to pay. 
  
January is probably the worst month in which to find the funds to pay tax bills. Many small businesses see a reduction in trade after Christmas, and the weather can discourage customers. New businesses may have to find 150% of their annual tax liability, if the individual was previously taxed under PAYE. These problems can lead to taxpayers reaching for their credit cards to pay the tax due.       
  
If they do pay by credit card, there is a non-refundable fee of 1.5% of the amount paid. Payments by debit card don’t attract a fee. But a debit card can’t be used if the funds or overdraft facility don’t already exist in the taxpayer’s bank account.   
  
A taxpayer facing a significant tax bill on 31 January 2016 may want to spread the bill over several credit cards. However, from 1 January 2016 HMRC will restrict the number times debit or credit cards can be used to pay the same tax bill. HMRC hasn’t indicated the maximum number of card transactions which will be permitted against each tax bill. 
  
If the taxpayer needs to spread their self-assessment tax bill over several months, the HMRC budget payment plan should be considered. But this requires forward planning as all self-assessment debts must be paid before starting on a budget payment plan. 
  
When your client is really stuck for funds, they can to ask HMRC for a time to pay arrangement before the due date for the tax arrives (or you can do this for them), by calling the business payment service: 0300 200 3825. 
  
Where your client is due a repayment of tax from their SA tax return, HMRC want to make that repayment electronically directly to the taxpayer’s bank account. This is only possible if the bank account number and sort code have been accurately recorded on the SA tax form. 
  
A new feature in the HMRC software for completing SA tax returns now checks that the bank sort code entered is a valid sort code, and that the format of the account number entered is correct. An error message will ask the preparer to check and amend the entries if a fault is detected. 
 
This is an
extract from our topical tax tips newsletter dated 26 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Topical tax tips: Company cars, EBTs and football, VAT and golf

In last week’s newsletter we disguised the practical tax points as articles concerning; fast cars, football and golf. More seriously, we looked at how the tax charge for using a company car for private journeys will change in the future, the implications of the HMRC win against Murray Group Holdings Ltd, and VAT repayments for golf clubs.

This is an
extract from our topical tax tips newsletter dated 12 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

EBTs and football 
Even if you have no interest in employee benefit trusts (EBTs) or football, you will have seen the coverage of HMRC’s win against Murray Group Holdings Ltd (owners of the former Rangers FC) in the Scottish Court of Session. But what does that mean for other taxpayers? 
  
An EBT is a structure which in recent years has been used as a means to avoid PAYE and NIC on employees’ earnings. In simple terms the employer places funds in the EBT, the EBT moves those funds to sub-trusts which are ear-marked for particular employees and their families. The sub-trust makes a loan to the employee, which it has little or no expectation of ever being repaid. Thus the employee receives the funds, and if the planning worked, the employee would be taxed only on the benefit in kind of receiving an employment-related loan. 
  
HMRC always argued that the payment by the employer to the EBT was consideration for the services of the employee, and hence should be taxed as the employee’s pay. HMRC lost this argument at the First-tier and Upper Tribunals, but it succeeded with a slightly different argument at the Court of Session. If you are interested in how this happened read the blogs: EBT and Rangers FC parts 1 and 2. 
  
Lots of companies, even quite small ones, used EBT schemes in the past. HMRC will interpret the Murray Group Holdings case as evidence that none of those EBT schemes worked, even if the facts were slightly different. HMRC offered companies who had used an EBT before April 2011, an opportunity to settle the tax and NIC due with minimal penalties. That opportunity is still there, but the penalties will not be minimal as the deal will have to be negotiated individually between the company and HMRC. 
  
Where the company does not voluntarily settle with HMRC it should expect to receive a follower notice which invites the company to alter its tax returns, in this case PAYE returns. If the issue is already the subject of a tax enquiry the company should expect to receive an accelerated payment notice, which demands that the tax is paid within 90 days. 
  
For any of those outcomes the company will need expert tax investigations advice. Our experts are happy to help with that.

This is an
extract from our topical tax tips newsletter dated 12 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>


Pension contributions, Scottish taxpayers, R&D assurance

There is a major restriction to tax relief for pension contributions coming into effect on 6 April 2016, which your clients may need to prepare for. Employers and individuals also need beware of the introduction of the Scottish rate of income tax, which will have repercussions far south of the Scottish border. Finally we have some good news for small innovative companies as claiming R&D tax relief should become easier very soon.

This is an
extract from our topical tax tips newsletter dated 5 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Pension contributions 
From 6 April 2016 the annual allowance (AA) for pension contributions will be cut from £40,000 to a minimum of £10,000. The Government says this change will only affect “top earners”, but that is misleading. 
  
Individuals with “adjusted income” in excess of £150,000 will have their AA tapered down by £1 for every £2 over that income threshold, until a minimum AA of £10,000 is achieved. If pension contributions are made which exceed the tapered AA for the year, an annual allowance charge will apply on the excess contributions at the taxpayer’s highest rate of income tax.    
  
To avoid an unwelcome AA charge the taxpayer needs to calculate his adjusted income before making large pension contributions in the tax year, but that may prove to be impossible. 
  
Adjusted income comprises: all of the taxpayer’s taxable income, including income from property, interest, and dividends, plus any pension contributions made by the individual’s employer on his behalf, (F(no.2)A 2015, Sch 4, Pt 4). Anyone with a variable income will find it very difficult to calculate their adjusted income before the end of the tax year. For example professional partnerships, even those with a year end of 30 April 2016, will take eight or nine months to approve and finalise the partners’ profit shares for 2016/17. 
  
High earning employees should to talk to their employers to ensure that where their pension contributions are matched by an employer’s contribution, the total does not exceed their tapered AA. The individual may need to opt out of the company pension scheme and negotiate compensation for that opt-out.   
  
Your client may also consider transferring income-generating assets such as property or shares to a lower-earning spouse/civil partner before 6 April 2016. Remember a transfer to an unmarried partner will trigger a disposal subject to capital gains tax. 

A third option is to maximise pension contributions in 2015/16 by making use of any unused AA brought forward from the previous three tax years.
 
The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week. Y
ou can obtain future issues by registering here>>>