Budget 2017 - Tax & Rate Updates!

Corporate Tax Measures

The Chancellor announced that the Government is committed to continue to have the lowest corporate tax rate of the G20 major trading nations.  As already announced the corporation tax rate reduces to 19% from1 April 2017 and then to 17% from 1 April 2020.

The corporation tax rate for small and medium sized companies trading in Northern Ireland will be reduced so that such companies can compete with those in the Republic where the rate is 12.5%.

The Government is also keen to continue to encourage investment in research and development (R&D) and the Chancellor announced that the R&D tax credit claim procedure would be simplified.

Tax Free Childcare Scheme Starts 2017

The chancellor also announced that the new tax-free childcare scheme is due to start in 2017.

The scheme will provide up to £2,000 a year in childcare support for each child under 12 where the parents save in a special account. If they save £8,000 the government will top up the account with 20% to a total of £10,000 which can then be used to pay for childcare costs.

Business Rates Relief For Small Businesses

There has been much lobbying from the small business sector to reduce business rates. The Chancellor stated that 600,000 small businesses currently benefit from small business rates relief.

He also announced that no small business that is coming out of small business rates relief will pay more than £600 more in business rates this year than they did in 2016/17.

In order to support the licenced trade from April 2017, pubs with a rateable value up to £100,000 will be able to claim a £1,000 business rates discount for one year.

Advisory Fuel Rate For Company Cars

These are the suggested reimbursement rates for employees' private mileage using their company car from 1 March 2017.

Engine Size	Petrol	Diesel	LPG
1400cc or less	11p		7p
1600cc or less		9p
1401cc to 2000cc	14p		9p
1601 to 2000cc		11p
Over 2000cc	22p (21p)	13p	14p (13p)

Where there has been a change, the previous rate is shown in brackets.

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

New Vat Limits

As mentioned earlier, the VAT registration limit increases by £2,000 to £85,000 from 1 April 2017. At the same time the de-registration limit increases to £83,000.

Contact us if you need more information or business help:
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Attack On Self-Employed In Budget 2017!

In his first Budget on 8th March, the new Chancellor Phillip Hammond announced that he would  level the playing field between employees and the self-employed by increasing Class 4 National Insurance Contributions (NICs) from 9% to 10% from 6 April 2018 and then to 11% from 6 April 2019. His justification is that the self-employed are now entitled to more generous state benefits than in the past and thus NIC rate should be increased towards the 12% Class 1 NIC employee rate.
Note that the flat rate Class 2 NIC contributions, currently £2.80 a week, cease on 5 April 2018.

The chancellor stated that only the self-employed with profits in excess of £16,250 will pay more national insurance.

Tax Free Dividend Allowance To Be Reduced To £2,000

The Chancellor also announced measures to limit the rise in tax-driven incorporation. The £5,000 tax free dividend allowance introduced by George Osborne will be reduced to just £2,000 from 6 April 2018. Mr Hammond claimed that many smaller owner-managed businesses have incorporated as limited companies mainly for tax reasons. Typically the director/shareholders of such businesses have paid themselves in dividends and paid less tax than similar unincorporated businesses.

Currently, once the dividend allowance has been used the remaining dividends are taxed at 7.5%, 32.5% and then 38.1% depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate. There are rumours that these dividend rates may also be increased in future years.

Although the cut in the tax-free dividend allowance is clearly aimed at owner managed companies, it will also impact on those with substantial share portfolios. Mr Hammond reminded us in his speech that the annual ISA investment limit increases to £20,000 from 6 April 2017 and that dividends on shares held within an ISA continue to be tax free.

Start Of Digital Reporting Delayed For Smaller Businesses

The Government is committed to the "Making Tax Digital" (MTD) project which is scheduled to start in April 2018 with the first quarterly updates being submitted by the self-employed and property landlords in July 2018.

Many business owners, professional advisors and the Treasury select committee had

expressed concerns about the timescale for the introduction of MTD. The Chancellor announced that there will be a one year deferral in the start date to 2019 for self-employed businesses and property landlords with gross income below the VAT registration limit.

Contact us if you need more information or business help:
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

New Tax Rules Starting April 2017!

New Rules For IR35 Workers In The Public Sector Start  6 April 2017

There are significant changes that commence on 6 April 2017 for workers in the public sector supplying their services via their own personal service companies or other intermediaries.

From 6 April 2017 the public sector employer or agency that engages the worker will have to review the employment status of the worker and decide whether or not to deduct tax and national insurance from payments to the worker even though he or she invoices for the services through their own company.

An online tool called “The Employment Status Service” is expected to be made available by the end of February 2017 and can help them make that decision. The tool can be used if the worker uses either an employment agency, or other third-party to get work.

These changes come on top of the restrictions on the tax deductibility of travelling expenses for IR35 workers that came into effect on 6 April 2016.

Please contact us if you want to discuss whether or not these rules affect you or your organisation.

Making Tax Digital To Start In April 2018 

Legislation to introduce Making Tax Digital (MTD) will be included in the Finance Bill 2017 and despite many objections that it was too soon, the new system of quarterly reporting will commence in April 2018 for the self-employed and property landlords.

There were 1200 responses to the consultation documents issued in summer 2016 and a number of changes have been made to the original proposals.

Much of the detail will be introduced by secondary legislation and there will be further consultation on a number of measures but the key proposals are:

Businesses will be allowed to use spreadsheets to keep their accounting records.

Businesses eligible for three line accounts will be able to submit a quarterly update with only three lines of data (income, expenses and profit).

Free software will be available to businesses with more straightforward affairs.

Businesses will not have to make and store invoices and receipts digitally.

There will be no late filing penalties in the  first year of the new system.

The deadline for finalising taxable profit for a period will be the earlier of:

• 10 months after the last day of the period of account, or
• 31 January following the year of assessment in which the profits for that period of account are chargeable

Businesses and property landlords with a turnover up to £150,000 will be able to prepare accounts on a cash basis

Digital quarterly reporting for companies and larger partnerships will not be introduced until April 2020. These changes will have a significant impact on how you keep your business accounts and communicate with HMRC. Please contact us to discuss the impact of these changes on the way that you keep your accounts.

New Company Loss Relief Rules Start On 1 April 2017

New rules that will allow greater flexibility in the way that companies obtain relief for losses will apply to losses incurred from 1 April 2017 onwards.

These rules have been introduced to encourage  companies to diversify as the losses may be available to offset against profits of another activity in a future period and even those of a company in the same group.

The proposed new rules were consulted on last summer and are included in the latest Finance Bill.

Although there will be greater flexibility for “new” losses arising after 1 April 2017, “old” trading losses incurred prior to that date  will continue to be restricted and will only be available to be offset against future profits from that same trade. The new rules are very complicated and we will of course work with you to ensure that your company obtains relief for  losses in the most advantageous way.

Buying A Company With Losses 

The new flexible loss relief rules coming into effect from 1 April 2017, will make the purchase of a loss-making company attractive. For many years there has been anti-avoidance to block the use of such losses and it is proposed that these rules will continue to apply.

The draft clauses in Finance Bill 2017 will continue to block such losses where within a five year period there is both a change in the ownership of the company and a major change in the nature or  conduct of the trade carried on by the acquired company.

Don’t Lose Your Personal Allowance!

For every £2 that your adjusted net income exceeds £100,000, the £11,000 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

The restriction applies between £100,000 and £122,000 adjusted net income. Another way that you could avoid this trap would be to agree with your employer to sacrifice some of your salary in exchange for a tax free benefit in kind. These rules are changing from 6 April 2017 but employer pension contributions and childcare vouchers will continue to be effective.

Preparing for Tax Season UK 2017?

Tax season is to start. Be prepared in advance to save money on Tax using these tips below:

Have You Used Your 2016/17 ISA Allowance?

Your maximum annual investment in ISAs for 2016/17is  £15,240.  Your investment needs to be made before 6 April 2017.  In addition, have you thought about investing for your children or grandchildren by setting up a Junior ISA? In the 2016/17 tax year, you can invest £4,080 into a Junior ISA for any child under 18.

Consider Other Tax Efficient Investments

If you are looking for investment opportunities, have you considered the Enterprise Investment Scheme (EIS)? These investments in certain qualifying companies allow you to set off 30% of the amount invested against your tax bill as well as capital gains tax (CGT) deferral.  An even more generous tax break is available for investment in a qualifying Seed EIS company where income tax relief at 50 per cent is available. In addition, it is possible to obtain relief against your 2016/17 capital gains. Both EIS and Seed EIS also provide a CGT exemption when the shares themselves are sold after 3 years.  Note however that qualifying  EIS and Seed EIS companies tend to be risky investments so professional advice should be taken. A 30% income tax break is also available by investing in a Venture Capital Trust.

Year End Capital Tax Planning

Have you used your 2016/17 £11,100 annual capital gains exemption?  Consider selling shares where the gain is less than £11,100 before 6 April 2017. Also, if you have any worthless shares, consider a negligible value claim to establish a capital loss. You may even be able to set off that capital loss against your income under certain circumstances.

As far as inheritance tax (IHT) planning is concerned, all individuals have a £3,000 annual allowance which means that gifts up to that amount each year are exempt from IHT. If you haven’t used your £3,000 allowance from 2015/16 you can make gifts of up to £6,000 without the gift being liable to IHT.

Also, consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT. Gifts out of your surplus income are not subject to IHT if properly structured.

Buy New Equipment Before 6 April?

If you are running a business and making up accounts to 5 April, consider buying plant and machinery to take advantage of the Annual Investment Allowance (AIA) of £200,000.  The AIA provides a 100% tax write off for equipment used in your business. This tax relief extends to fixtures and fittings within business premises such as electrical, water and heating systems. There is also 100% tax relief if you buy a new car that emits no more than 95g CO2 per kilometre and an increasing number of cars now fall below that limit.

Contact us if you have any questions or need business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

New Tax Rules Starting April 2017!

New Rules For IR35 Workers In The Public Sector Start  6 April 2017

There are significant changes that commence on 6 April 2017 for workers in the public sector supplying their services via their own personal service companies or other intermediaries.

From 6 April 2017 the public sector employer or agency that engages the worker will have to review the employment status of the worker and decide whether or not to deduct tax and national insurance from payments to the worker even though he or she invoices for the services through their own company.

An online tool called “The Employment Status Service” is expected to be made available by the end of February 2017 and can help them make that decision. The tool can be used if the worker uses either an employment agency, or other third-party to get work.

These changes come on top of the restrictions on the tax deductibility of travelling expenses for IR35 workers that came into effect on 6 April 2016.

Please contact us if you want to discuss whether or not these rules affect you or your organisation.

Making Tax Digital To Start In April 2018 

Legislation to introduce Making Tax Digital (MTD) will be included in the Finance Bill 2017 and despite many objections that it was too soon, the new system of quarterly reporting will commence in April 2018 for the self-employed and property landlords.

There were 1200 responses to the consultation documents issued in summer 2016 and a number of changes have been made to the original proposals.

Much of the detail will be introduced by secondary legislation and there will be further consultation on a number of measures but the key proposals are:

Businesses will be allowed to use spreadsheets to keep their accounting records.

Businesses eligible for three line accounts will be able to submit a quarterly update with only three lines of data (income, expenses and profit).

Free software will be available to businesses with more straightforward affairs.

Businesses will not have to make and store invoices and receipts digitally.

There will be no late filing penalties in the  first year of the new system.

The deadline for finalising taxable profit for a period will be the earlier of:

• 10 months after the last day of the period of account, or
• 31 January following the year of assessment in which the profits for that period of account are chargeable

Businesses and property landlords with a turnover up to £150,000 will be able to prepare accounts on a cash basis

Digital quarterly reporting for companies and larger partnerships will not be introduced until April 2020. These changes will have a significant impact on how you keep your business accounts and communicate with HMRC. Please contact us to discuss the impact of these changes on the way that you keep your accounts.

New Company Loss Relief Rules Start On 1 April 2017

New rules that will allow greater flexibility in the way that companies obtain relief for losses will apply to losses incurred from 1 April 2017 onwards.

These rules have been introduced to encourage  companies to diversify as the losses may be available to offset against profits of another activity in a future period and even those of a company in the same group.

The proposed new rules were consulted on last summer and are included in the latest Finance Bill.

Although there will be greater flexibility for “new” losses arising after 1 April 2017, “old” trading losses incurred prior to that date  will continue to be restricted and will only be available to be offset against future profits from that same trade. The new rules are very complicated and we will of course work with you to ensure that your company obtains relief for  losses in the most advantageous way.

Buying A Company With Losses 

The new flexible loss relief rules coming into effect from 1 April 2017, will make the purchase of a loss-making company attractive. For many years there has been anti-avoidance to block the use of such losses and it is proposed that these rules will continue to apply.

The draft clauses in Finance Bill 2017 will continue to block such losses where within a five year period there is both a change in the ownership of the company and a major change in the nature or  conduct of the trade carried on by the acquired company.

Don’t Lose Your Personal Allowance!

For every £2 that your adjusted net income exceeds £100,000, the £11,000 personal allowance is reduced by £1. Pension contributions and Gift Aid can help to reduce adjusted net income and save tax at an effective rate of 60%.

The restriction applies between £100,000 and £122,000 adjusted net income. Another way that you could avoid this trap would be to agree with your employer to sacrifice some of your salary in exchange for a tax free benefit in kind. These rules are changing from 6 April 2017 but employer pension contributions and childcare vouchers will continue to be effective.

Tax News UK - February 2017!

Making Tax Digital To Be Delayed?

The Treasury Select Committee has reviewed the proposals for the introduction of “Making tax digital” (MTD) and have agreed with the various professional bodies that if the new systems are introduced too quickly there could be a disaster. It would significantly increase burdens on small businesses. In their report they comment that the overall benefits of  mandating the digitising of record keeping and quarterly reporting, as is currently envisaged, have yet to be proven.

The Select Committee further note that the cost to business of introducing MTD, as well as the continuing costs of maintaining digital records and submitting quarterly updates are of further concern to the Committee, as is the availability and functionality of the free software that has been promised.

At the time of writing we are awaiting the Government response to  the November 2016 consultation and we will keep you updated about the implications for your business. Remembers that the proposals as they are currently drafted will apply to property rental businesses as well as trading businesses.

Do You Have Enough Shares To Qualify For CGT Entrepreneurs’ Relief?

Entrepreneurs' Relief reduces the rate of CGT to 10% on the first £10 million of gains on the disposal of qualifying business assets. This would include sole traders disposing of their business and partners disposing of their interest in a partnership carrying on a business. With many businesses operating as limited companies these days it is important to appreciate that not all shareholdings qualify for this generous relief.

Shareholdings qualify for Entrepreneurs' Relief provided the company is a trading company or the holding company of a trading group. There are additional conditions that the shareholder is an officer or employee of the company and holds 5% or more of the company's ordinary share capital and votes. All of these conditions must be satisfied throughout the twelve months up to the date of disposal.

A couple of recent tax tribunal cases have considered the 5% test and the HMRC view is that most shares except for certain preference shares need to be considered. Always contact us first if you are considering issuing additional shares in your company as it may have a detrimental effect on other shareholders' entitlement to CGT Entrepreneurs' Relief.

Shareholders Must Also Be Officers Or Employees

In order to qualify for CGT entrepreneurs' relief on the disposal of shares, the shareholder must have been an officer or employee of the trading company or group throughout the twelve months up to the date of disposal. Although there is no minimum  number of hours, it is important that there Is evidence that this condition is satisfied, so for example the employee/ director should not resign before the disposal of shares takes place.

HMRC are known to request such evidence and recent tax tribunal cases have resulted in Entrepreneurs' Relief being denied .

New Government Savings Scheme Starts In April 2017

From April 2017,adults under the age of 40 will be able to open a Lifetime ISA (LISA) and pay in up to £4,000 each tax year. They will be able to continue making contributions up to the age of 50. The government will add a 25% bonus to these contributions. This means that individuals who save the maximum will receive a £1,000 bonus each year from the Government.

The tax-free funds, including the Government bonus, can be used to help buy a first home worth up to £450,000 at any time from 12 months after first saving into the account. The funds, including the Government bonus, can be withdrawn from the LISA from age 60 tax-free for any purpose. LISA holders will also be able to access their savings if they become terminally ill.

If savers make withdrawals before age 60 for other purposes a 25% charge will apply  to the amount of withdrawal. This returns the bonus element of the fund (including any interest or growth on that bonus) to the Government.

“Help to Save”, aimed at supporting people on low incomes to build up their savings will follow in 2018. That scheme will add a 50% Government bonus on savings up to £50 a month for up to four years. Help to Save will be available through NS&I to any adult who is receiving working tax credit or universal credit with minimum household earnings equivalent to 16 hours a week at the National Living Wage.

Don’t Forget Your 2016/17 ISA Allowance

The current ISA allowance is £15,240, rising to £20,000 for 2017/18. Remember that there is no longer a 50% restriction on the amount that you can invest in a cash ISA; the £15,240 annual limit covers all ISA investments which could be in shares, bonds, cash or certain other investments.

And Make Pension Payments Before 6 April

The current annual pension limit remains at £40,000. In addition, unused relief from the previous three tax years may be utilised once the current £40,000 limit has been used. However, the relief from 2013/14 will lapse on 6 April 2017.

If, for example, you have £10,000 unused allowance from 2013/14 you would need to make pension contributions of at least £50,000 by 5 April 2017 to avoid losing your 2013/14 relief. Remember also that pension savings continue to qualify for higher rate tax relief and may help to reduce your payments on account.

Property Sales – Trading Or Capital Gain?

In the December edition of this newsletter we flagged up that new anti-avoidance legislation in Finance Act 2016 will tax certain transactions in UK land as trading transactions instead of capital gains.

Just before Christmas, HMRC issued guidance to clarify the scope of the new rules. The legislation as enacted in Finance Act 2016 was drafted in such a way that it could be interpreted as catching certain disposals by buy to let landlords. The HMRC guidance states that the new rules do not apply to businesses which acquire and repair properties in order to generate rental income, even if those businesses also enjoy capital appreciation from those properties. So the average buy-to-let landlord should not be subject to income tax on the gains he makes when he sells properties which were acquired for letting.

The HMRC guidance also makes it clear that the new transactions in UK land rules are directed at businesses which conduct a trade consisting of property development or property dealing.

This is a complex area and you should contact us so that we can help you ensure that the sale is treated correctly for tax purposes.

Scottish Income Tax Rates And Thresholds

The Scottish Government has the devolved power to set certain tax rates, principally income tax and land transaction tax (equivalent to SDLT in England and Wales). Although it proposes to freeze the basic, higher and additional rates at 20%, 40% and 45% respectively, the thresholds will not be the same as the rest of the UK.

The higher rate income tax threshold will increase by inflation to £43,430 in 2017/18. Whereas the higher rate threshold for the rest of the UK will be £45,000.

Scottish income tax applies to Scottish taxpayers who are UK resident but who live for most of the year in Scotland. Where they work is irrelevant but workers who live in Scotland are liable to Scottish income tax on their non-savings income. If you employ staff who live in Scotland they should have a special PAYE code so that the correct tax is deducted. This will be particularly important when there is a lower, higher rate threshold in Scotland.

On the land and buildings transaction tax (LBTT), the equivalent of stamp duty land tax in the rest of the UK, rates have been kept on hold for 2017/18 at their current 2016/17 levels.

Contact us if you have any questions or need business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Latest UK Tax News & Updates!

Income Tax Not CGT On Property Sale

Finance Act 2016 brought in new rules to ensure that overseas property traders and developers are subject to UK income tax or corporation tax when they dispose of UK properties from 5 July 2016. However the way in which the legislation is drafted may catch some buy-to-let landlords.

The new rules treat UK property sales/development of land as part of a trade and therefore potentially taxed at income tax rates up to 45% instead of the 28% rate that would apply to capital gains. There would also be class 2 and class 4 national insurance contributions due if the transaction is deemed to be part of trading.

The transaction is taxed as trading if:
a) One of the main purposes in acquiring the land was to realise a profit on its disposal; or
b) One of the main purposes in acquiring the property which derives its value from land was to realise a profit on its disposal; or
c) The land is held as trading stock; or
d) One of the main purposes of developing the land was to realise a profit on its disposal when developed

There will be no change in tax treatment for individuals or partnerships already operating as property dealers or developers.

However, it is felt that those buy-to-let investors who acquired a property with a view to ultimately selling on at a profit may be brought within the scope of the new rules by condition (a).

100% Tax Relief For Low Emission Cars To Continue 

Currently 100% capital allowances are available when a business buys a motor car with CO2 emissions of no more than 75 grams per kilometer. Legislation has now been passed to reduce the threshold to just 50 grams from April 2018 but also to continue the tax relief for 3 years until 2021.

Normally motor cars only receive a writing down allowance at the rate of 18% or 8% on a reducing balance basis, which means it can take several years to get tax relief for the cost of the vehicle. The cost of a low CO2 car can therefore be immediately written off against business profits.

Note: The motor car must be new and bought either for cash or on hire purchase to get the 100% tax relief.

Where the car is provided for use by a director or employee of the business then there would be a Benefit in Kind taxable on the individual based on the CO2 emissions and original list price of the car.

Another 100% Tax Relief Ends Next Year - Act Soon 

Currently the business premises renovation allowance provides 100% tax relief for the cost of renovating a commercial property located in one of the 2,000 or so designated disadvantaged areas, provided it has been out of commercial use for at least 12 months. The premises should then be brought back into commercial usage or rented out to a business to use within its trade or profession. Unfortunately this generous tax break is due to end in April 2017 so get in quick if you are considering renovating such a property. It may be an office block, factory or warehouse that you already own or a property on the market that has been out of use for at least 12 months.

Typical qualifying costs would include building works, architectural and design services, survey and engineering costs, planning application costs and other statutory fees. The works must now be completed within 36 months of the expenditure being incurred as many renovation projects involved the payment of certain costs in advance.

Provided the premises are retained for at least 5 years there is no claw back of the tax relief given.

Proposed Changes To UK Domicile Rules

Where an individual is resident but not domiciled in the UK there are special rules that apply to that person's overseas income and capital gains.  Plus only their UK assets are charged to inheritance tax. The government has been consulting this summer on possible changes to the rules from 6 April 2017.

Currently the UK domicile rules provide that where an individual’s father is non-domiciled then his children automatically take on the father’s domicile (domicile of origin). However, it is proposed that from 6 April 2017, an individual is deemed domiciled for income tax and capital gains tax  if he meets either of two conditions:

• was born in the UK and has a UK domicile of origin. The individual must also be UK resident in the tax year under consideration.
• must have been UK resident for tax in at least 15 out of the 20 years preceding the tax year under consideration.

The 15/20 year rule will also replace the current 17/20 year rule that currently applies for inheritance tax so that there is a common definition for all three taxes.

Inheritance Tax Implications Of New Domicile Rules

Individuals who are domiciled in the UK are subject to inheritance tax (IHT) on their worldwide assets wherever situated. Non-UK domiciled individuals are currently only subject to IHT on their UK assets.

Classic planning for non-doms was to hold UK assets, particularly UK houses, through an offshore trust or company. The consultation on proposed changes suggests that such a structure will be ineffective in future with the underlying UK house being chargeable to IHT.

These changes are extremely complex so please contact us if they are likely to affect you.

Penalties for Careless Errors in Accounting Records

Where additional tax is payable as the result of an HMRC enquiry and it is shown that the additional tax is due to poor accounting records, the maximum penalty that can be imposed is 30% of the additional tax for failure to take reasonable care. Where the error is deliberate, the penalty will be between 20% and 70% of the extra tax due, rising to 100% where the matter is deliberate and concealed by the taxpayer.

We can negotiate lower penalties on your behalf as the penalty can usually be reduced if we tell HMRC about the error. HMRC may make further reductions depending on the quality of the disclosure and if we help HMRC work out what extra tax is due.

It is also possible to have the penalty suspended if the introduction of internal controls or additional checks can minimise the risk of the error recurring.

We can of course work with you to introduce procedures to minimise the risk of errors in your accounting records so that such penalties do not arise in the first place.

Contact us if you need more information or business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Christmas is Coming - New Rules for Gifts to Staff!

From 6 April 2016 new rules were introduced to allow employers to provide their directors and employees with certain “trivial” benefits in kind, tax-free.

The new rules are a simplification measure so that certain benefits in kind will not need to be reported to HMRC, as well as being tax free for the employee. There are of course a number of conditions that need to be satisfied to qualify for the exemption.

Conditions for the exemption to apply:
• the cost of providing the benefit does not exceed £50
• the benefit is not cash or a cash voucher
• the employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
• the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

So this exemption will generally apply to small gifts to staff at Christmas or on their birthday.
Prior to this change in the rules, the benefit in kind would have had to be reported on the employee’s P11D form at the end of the year, or alternatively the employer would have dealt with the tax and national insurance under a PAYE settlement agreement. Under such an arrangement a £50 Christmas turkey to a higher rate taxpayer could end up costing the employer nearly £95!

Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company, the exemption is capped at a total cost of £300 in the tax year.

Please feel free to contact us if you are considering taking advantage of this new exemption.

-PJ 
☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

UK Tax Changes: October-November 2016!

Changes To Farmers Averaging:

From 2016/17 onwards farmers now have the option to smooth out their profits over two or five tax years as the result of a change in Finance Act 2016.

Farmers’ and market gardeners’ profits often fluctuate wildly from one year to the next and the tax rules for many years have allowed them to average their profits in order to smooth out those fluctuations.

It is expected that there could be even greater fluctuations as the result of changes to subsidies and support payments following Britain’s exit from the EU so 2 or 5-year averaging will need to be carefully considered. We can of course assist you in this decision process.

Paying 20% Instead Of 28% On The Sale Of Property:

The latest Finance Act has retained the 28% CGT rate for sales of residential property, whereas the general rate was reduced to 20% for higher rate taxpayers.

It has been suggested that it is possible to reduce the rate from 28% to 20% by deferring the gain temporarily into qualifying EIS company shares.

The tax planning opportunity arises because reinvesting the property gain in Enterprise Investment Scheme (EIS) company shares defers the gain until the shares are sold when the gain comes back into charge at the general rate of CGT, currently 20% for a higher rate taxpayer.

There is no minimum holding period for EIS deferral relief, however where the investor is seeking income tax relief and CGT exemption on the sale of the shares they need to be an unconnected investor and retain the EIS shares for at least 3 years.

The reinvestment in EIS shares must take place during the period of 12 months before to 36 months after the date of disposal of the property.

Shares in EIS qualifying companies are risky investments and specialist investment advice should be taken. There is also a chance that HMRC may block this tax planning strategy in the future.

Advisory Fuel Rate For Company Cars:

These are the suggested reimbursement rates for employees' private mileage using their company car from 1 September 2016. Where there has been a change the previous rate is shown in brackets.

Engine Size	Petrol	Diesel	LPG
1400cc or less	10p		7p
1600cc or less		9p (8p)
1401cc to 2000cc	13p (12p)		9p (8p)
1601 to 2000cc		10p
Over 2000cc	20p (19p)	12p (11p)	13p

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

VAT Implications of Employee Mileage Claims:

Note that where employers reimburse their employees 45p per mile for using their own cars they are able to reclaim input VAT based on the amounts shown in the table. 

In the case of a 1600cc diesel car that would be 1.5 pence per mile.  (9p x 20/120). Such a claim needs to be supported by a receipt from the filling station.

Contact us if you need business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Brexit: The Facts And Our Approach To Helping Clients!

Introduction

The initial economic and emotional response to the UK’s vote to exit the EU is now behind us, leaving much conjecture and ambiguity. One certainty is that we will continue to work closely with our clients to inform, manage and where possible, mitigate the risks they may face

Key milestones in the BREXIT process are:

•          UK notification to the European Council of its intention to withdraw from the EU under Article 50 of the Treaty              on European Union. This is not expected to take place in 2016 but, once Article 50 is triggered, the UK will leave               the EU two years later (unless all other EU member states agree to an extension of that period).

•          European Council’s adoption by consensus of the guidelines for the EU mandate to negotiate and complete the             Withdrawal Agreement. The timescale for the negotiation is not set and may well take longer than the original                 two year Article 50 time-frame.

•          Trade deals with EU and non-EU countries as they fall due. Non-EU country trade deals are already being         discussed now but Germany and France have publicly stated that the EU trade deal negotiation will not           commence until Article 50 is triggered by the UK. It is expected that the negotiations will take place during the    post Article 50 notification, thus allowing quicker resolution post the conclusion of the Withdrawal Agreement.     If new trade deals are not negotiated in the two year period (and any extension) then the UK could potentially have to fall back on World Trade Organisation trade principles until the trade deals are finalized (which impose              tariffs on certain good and services etc).

Next steps

We will continue to monitor the situation, and provide insight and updates as set out above. You can expect timely information, advice and solutions to best place you to manage the risks your business will face

Please call us and we’d be delighted to discuss the above further.

PJ - APJ Accountancy

☎ 020 89310165

☏ 07900537459

✉ info@apjaccountancy.com

Seed EIS Relief Denied

The Enterprise Investment Scheme (EIS) and the recently introduced Seed EIS provide generous tax breaks for investors who subscribe for shares in qualifying companies provided the correct procedures, and in particular the correct forms, are used to claim tax relief.

Seed EIS provides income tax relief of 50% of the amount invested and EIS 30% relief, both given by way of a deduction from the investor’s income tax liability. Furthermore there is an exemption from capital gains tax when the shares are sold after 3 years.

In a recent case before the Tax Tribunal, tax relief for Seed EIS investors was denied by HMRC and the Tribunal as the directors had filled in the wrong HMRC forms! They tried to save costs by not using professional advisers - a very costly mistake!

Contact us for all your accounting and taxation needs:
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

New Rules For Buy-To Let Landlords - August 2016!

The 2016 Finance Bill sees the introduction of important tax changes for property investors that were originally announced in the 2015 Budget.

From 6 April 2016 onwards, there are important tax changes affecting the replacement of furnishings for buy to let landlords. 6 April 2017 will see the start of mortgage interest being restricted to basic rate only.

Wear and tear allowance abolished

Until 5 April 2016 landlords who were letting residential property on a fully furnished basis were able to claim a 10% "wear and tear” allowance towards the cost of the depreciation of furnishings. This simple allowance was an alternative to claiming a deduction for the actual cost of replacing furnishings which was a concession that applied up until April 2013.

So for example, where the gross annual rent was £9,000 there would have been an allowable deduction of £900.

This change seems to be inconsistent with the government's stated desire to simplify the tax system.

The new relief for replacement of furnishings in property businesses

Up until April 2013 it used to be the case that where furnishings were replaced in a property rental business there was deduction for the cost of the replacement items in arriving at rental profits.

This was never a statutory deduction and was accepted by HM Revenue and Customs on a concessionary basis. That concession was controversially withdrawn at relatively short notice in 2013 so for a three year period, unless landlords were eligible for the "wear And tear" allowance there was no relief for furnishings.

As the result of extensive lobbying by the accounting profession, and the residential landlords association, the relief has been restored on a statutory basis from 6 April 2016 by the latest Finance Bill.

The new relief provides a deduction for the actual cost of replacing furniture, furnishings, appliances and kitchenware for the use of the tenant in the let property.

Note that there is no allowable deduction for the initial fitting out of the rental property, just the cost of replacement Items. Furthermore the allowable tax deduction applies on a like for like basis so if there is any significant Improvement then the tax relief will be restricted. So, for example, where a washing machine is replaced with a washer/dryer costing £600, tax relief would only be available for the cost of the equivalent washing machine costing say £400.

No renewals relief for other businesses

Although the renewals basis has been reintroduced for rental businesses from April 2016, it has been withdrawn for other trading business. This relief was previously referred to as the "loose tools" deduction.

Consequently there is no longer relief for the replacement or alteration tooling. In future HMRC would expect such expenditure to be dealt with through the capital allowances rules, most likely by making a short life asset claim.

No change for Furnished Holiday Lettings

The above changes to the renewals basis do not apply where the property rental business falls within the definition of a qualifying furnished holiday lettings (FHL) business.

Such businesses continue to qualify for capital allowances when plant and machinery used In the course of that business is acquired and would benefit from the100% write off under the Annual Investment Allowance rules.

There are strict conditions for the property business to qualify as FHL, the most important condition being that the property is let for at least 105 days (15 weeks) in the tax year, and comprises a series of short term lets.

Note that under the capital allowances rules, relief is not just available for replacing assets but also for the initial furnishing of the holiday property.

Interest relief restriction starts 6 April 2017

As previously announced the current deduction available for mortgage interest and other finance costs starts to be phased out from 6 April 2017.  In 2017/18 only 75% of finance costs will be deductible in arriving at rental profits, the remaining 25% will only qualify for basic rate tax relief.

In 2020/21 there will be no deduction against rental profits for finance costs, just a basic rate tax reduction. This will not only affect higher rate taxpayers but will also have the effect of pushing some landlords into higher rates of tax.

Currently where a buy to let landlord has £10,000 a year net rental profits after deducting £30,000 mortgage interest, in  2020/21 his rental profits would increase to £40,000.

If his other income is £25,000 a year, the rents would currently be taxed at basic rate 20%. Assuming his other income stays the same, his taxable income would increase to £65,000 with a significant portion being taxed at the 40% higher rate. The £30,000 mortgage interest would only qualify for a £6,000 (20%) set off against the 2020/21 tax liability.

Note again that the restrictions do not apply to any part of the amount borrowed for the commercial letting of furnished holiday accommodation. Furthermore, the restriction does not apply to loans for property development trades, or loans secured on a let dwelling house which are applied for the purposes of a trade.

If you have any questions, please feel free to contact us: 
APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com