Workplace pensions – Automatic enrolment!

‘The law on workplace pensions has changed. Under the Pensions Act 2008, every employer in the UK has a duty to put certain staff into a pension scheme and contribute towards it. This is called 'Automatic Enrolment'.

You may be a hairdresser, an architect or employ a personal care assistant, but if you employ at least one person you are an employer and you have certain legal duties.

The chart below shows that nearly half a million small businesses will need to arrange their pension scheme this year!

The Pension Regulator has issued 6,746 compliance, unpaid contributions notices and fines to date and 3,732 in the period October to December 2015!  Don’t be one of them - fines start at £400 and can be £50 daily for non- compliance!

So small business owners need to:

• establish a qualifying work place pension scheme,
• ensure the scheme has an appropriate default fund,
• issue statutory communications to all employees and
• enrol all eligible jobholders into the scheme.

Do you have the time to do all this and run your business?

Ask yourself “How do I choose the right pension scheme, is my payroll Auto Enrolment compliant, how are you going to tell your pension scheme what to collect and where to allocate contributions?”  If you’ve not done anything about preparing for Automatic Enrolment, talk to us; we can help you with our fully compliant payroll, workforce assessment and pension selection processes and help you avoid the wrath of the Regulator and get on with what matters most - Making your business a success!”

Will pension tax relief change again on budget day?

There has been a lot of speculation that the Chancellor may announce further major changes to tax relief on pension contributions in his March Budget, based on consultations with the pensions industry.  Under the current rules an individual’s contributions can save them tax at their highest marginal rate and also help them avoid losing their personal allowance (see above). So a £8,000 pension contribution by a higher rate taxpayer results in £2,000 (20%) being added to their fund by HMRC = £10,000 gross. The £10,000 gross contribution would then save a further £2,000 in tax, so the net cost would be just £6,000 if they are a higher rate tax payer.

It is understood that the Government is considering introducing a flat rate of pension tax relief of between 25% and 33%, which would be good news for basic rate taxpayers, but higher rate taxpayers would lose out. If say a 30% rate of relief was to be introduced, a £7,000 contribution would be topped up to £10,000 with no further relief.  It has also been suggested that it may not be possible in future to agree with your employer to sacrifice part of your salary in exchange for an additional tax free employer pension contribution. The starting date of these possible changes is uncertain but they may be effective from Budget Day!

Contact us for all your Tax & Accounting needs!
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Pension Allowance and Tax Saving!

Year end pension planning

Take advantage of the pension carry forward rules in order to benefit from any unused allowances from the previous three tax years.  This is generally the difference between the old £50,000 annual pension allowance and your pension input that year and can be added to your relief for 2015/16.

Note that the annual pension allowance is £40,000 for 2015/16 and 2016/17, although those individuals with income over £150,000 will have their annual pension allowance reduced by £1 for every £2 over £150,000.

To avoid losing pension relief brought forward from 2012/13 which lapses 5 April 2016, consider making an additional pension payment before 5 April 2016.  If your pension input was £24,000 in 2012/13 then there is £26,000 unused relief available to add to your 2015/16 allowance. You would need to make gross pension contributions of at least £66,000 (£40,000 plus £26,000) to avoid losing this generous relief.

Will pension tax relief change again on budget day?

There has been a lot of speculation that the Chancellor may announce further major changes to tax relief on pension contributions in his March Budget, based on consultations with the pensions industry.

Under the current rules an individual’s contributions can save them tax at their highest marginal rate and also help them avoid losing their personal allowance (see above). So a £8,000 pension contribution by a higher rate taxpayer results in £2,000 (20%) being added to their fund by HMRC = £10,000 gross. The £10,000 gross contribution would then save a further £2,000 in tax, so the net cost would be just £6,000 if they are a higher rate tax payer.

It is understood that the Government is considering introducing a flat rate of pension tax relief of between 25% and 33%, which would be good news for basic rate taxpayers, but higher rate taxpayers would lose out. If say a 30% rate of relief was to be introduced, a £7,000 contribution would be topped up to £10,000 with no further relief. It has also been suggested that it may not be possible in future to agree with your employer to sacrifice part of your salary in exchange for an additional tax free employer pension contribution.

The starting date of these possible changes is uncertain but they may be effective from Budget Day!

Personal Savings Allowance Updated!

From 6 April 2016 the amount of any Personal Savings Allowance you’re entitled to will be based on your adjusted net income.

For every £2 that your adjusted net income exceeds £100,000, the £10,600 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%.

From April 2016 HM Revenue & Customs (HMRC) is introducing a tax-free Personal Savings Allowance of £1,000 (£500 for higher rate taxpayers) for savings income or interest.

The new allowance means that most people will no longer pay tax on their savings interest.

More information at Adjusted net income Guidance

Proposal to restrict tax relief for travel expenses for IR35 workers!

One of the controversial measures included in the draft Finance Bill 2016 was the proposed restriction of the deduction for travel and subsistence expenses incurred by certain workers caught by the IR35 rules. This proposed change was consulted on during summer 2015 and, if enacted, will significantly restrict the tax relief available for those affected.

The original proposals have been toned down to a certain extent and will only apply if the IR35 rules apply to the engagement and there is supervision, direction and control (SDC) over the worker. This now seems to be the key test to determine whether the new rules will apply and ignores the other employment status factors. The examples in the consultation document seem to suggest that if there is no expertise within the end user organisation then there is likely to be limited SDC and the worker will be entitled to relief for travelling to the client’s premises.

Any tax debt arising from the deliberate misapplication of the rules is to be transferred ‘jointly and severally’ from the ‘intermediary company’ to its director(s). It would appear that the ‘engager’ will not now be liable, which was one of the proposals in the consultation. It is intended that these rules will be implemented where it can be shown that the ‘intermediary’ had knowingly failed to apply the rules correctly.

Please get in touch with us if these new rules are likely to have an impact on your business.

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Tax Charge On Annuity Sales!

The Government has confirmed that from 6 April 2017, tax restrictions for people looking to sell annuities will be removed, giving those with existing annuity, and anyone who purchases an annuity in the future, the freedom to sell their right to future income streams for an upfront cash sum.

Currently, people wishing to sell their annuity income face a 55% tax charge, or up to 70% in some cases. This charge is to be removed, so that people will only be taxed at their marginal rate.

Under the new changes, retirees will be able to take the annuity as a lump sum, or access the new flexible draw down products introduced in April 2015.

The Government is working with the Financial Conduct Authority (FCA) to develop appropriate steps to regulate the market. The FCA will consult in 2016 on proposed rules for the secondary annuities market.

To know on how the new secondary annuity market will work, requirement to seek financial advice, & Further information at HMRC Announcements

Tax Diary Of Main Events - February & March 2016!

UK Tax Deadlines for February & March 2016

Date	What’s Due
1 February	Corporation tax for year to 30/4/15
19 February	PAYE & NIC deductions, and CIS return and tax, for month to 5/2/16 (due 22 February if you pay electronically)
28 February	Surcharge of 5% on 2014/15 self -assessment tax still unpaid.
1 March	Corporation tax for year to 31/5/15
19 March	PAYE & NIC deductions, and CIS return and tax, for month to 5/3/16 (due 22 March if you pay electronically)

Contact us for all your Tax needs!
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Stamp Duty Land Tax Changes from April 2016!

Consultation on 3% SDLT Supplement on Second Homes from April 2016!

You should be knowing that you must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England, Wales and Northern Ireland. The current SDLT threshold is £125,000 for residential properties and £150,000 for non-residential land and properties.

HMRC are consulting on the details of the higher rates of stamp duty land tax (SDLT) on purchases of additional residential properties announced in the 2015 Autumn Statement.

The Government will include detailed rules in the Budget on 16 March 2016.
The higher rates will not apply if at the end of the day of the transaction an individual owns only one residential property, irrespective of the intended use of the property.

In line with the CGT rules there will be an 18 month period between sale of a previous main residence and purchase of a new main residence for the purpose of determining whether the higher rates apply.

To know more about Stamp Duty Land Tax, Exemptions and more, go to www.gov.uk

Contact us for all your Tax & Accounting needs!
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Collection Of Unpaid Tax Through Your Tax Code!

Remember that HM Revenue and Customs can collect tax debts by adjusting your Pay As You Earn (PAYE) tax code. HMRC refers to this as ‘coding out’. The effect of this is to recover the tax debt from your pay or pension, by increasing the amount deducted during the tax year. This applies if you have a debt with HMRC and:

• are an employee paying tax through (PAYE) and/or
• receive a taxable UK-based private pension.

This facility is available if your annual earnings are £30,000 or more. To do this, HMRC apply a sliding scale to your main PAYE income. The maximum amount that can be coded out is £17,000 where your earnings exceed £90,000 a year. These changes will only apply to underpaid Self-Assessment and Class 2 National Insurance debts and Tax Credit overpayments. Changes will then be reflected in your 2016/17 tax code.

Coding out the unpaid 2014/15 tax is only possible if you submitted your paper tax return by 31 October 2015 or file your tax return online by 30 December 2015. If you would like your outstanding tax collected through PAYE please ensure that we receive your tax information in good time to meet the 30 December deadline!


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Payrolling Of Benefits In Kind - HMRC Update!

Legislation to require employers to report 'Benefits in Kind' in real time as opposed to the end of year form P11D was included in the first Finance Act of 2015. However, there are concerns amongst accountants that this should not be mandatory until 2017/18 at the earliest, as many employers are only just getting to grips with real time processing of basic wages and salary data.

The new system will require employers to calculate the cash equivalent of the Benefit in Kind and effectively spread it over the tax year. The tax due on benefits will then be collected by adding a notional value to the employee’s payroll, rather than reporting the Benefits in Kind separately on the end of year form P11D.

End of Informal Payrolling process

If you have an existing informal payrolling arrangement with HMRC this will stop on 5 April 2016.

If you continue with this process the P11Ds you submit may be processed and your employees may be taxed twice on their benefits. To avoid this you should use the online PBIK service to register the benefits you’re payrolling. This means you’ll no longer need to submit P11Ds for payrolled benefits and expenses.

More about Payrolling Benefits in Kind online service

Please get in touch with us if you would like to use this system for 2016/17 as you will need to register with HMRC before 6 April 2016.
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Tax Relief Under The Enterprise Investment Scheme (EIS)

The Enterprise Investment Scheme allows unconnected investors to obtain a 30% set off against their income tax liability up to £1,000,000 investment each tax year. So a £10,000 investment reduces the investor’s income tax liability by £3,000.  In addition, provided those shares are held for at least 3 years, the gain on disposal of those shares is tax free.

However, as illustrated in a recent tax case, the capital gains exemption is only available where the investor has made a claim for income tax relief. In Ames v HMRC (2015) the taxpayer, Mr Ames, invested £50,000 in a new company but unfortunately had very little income that year so did not claim EIS income tax relief. When he sold the shares several years later for £333,000, he found that the exemption did not apply and the gain was taxable!

Note that Seed EIS for small start-up companies provides 50% income tax relief and the same CGT exemption when the shares are sold.

The connected persons rule means that existing employees, paid directors and their associates are not entitled to these reliefs. Shareholders with more than 30% of the company’s shares, together with their associates, are also excluded.

Note that these exclusions do not apply where the investor is merely seeking to defer capital gains tax via their EIS investment.

The rules for EIS and Seed EIS are very complex so please get in touch with us to discuss the tax implications if you are considering making such an investment.

Feel free to contact us for further advice.
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VAT On Mixed Supplies

Care needs be taken when invoicing if your business makes supplies, some of which are standard rates and others which are potentially zero rated or exempt for VAT.

A recent VAT Tribunal case has reinforced the rule established in the Card Protection Plan case that if the supply comprises a single service from an economic point of view it should not be artificially split.

In the recent case, a company provided marketing and promotional services including brochures and other publications. It was held that the supply of printed matter (potentially zero rated) was merely ancillary to the principal supply of marketing and promotional services so the entire services should follow the principal supply and be standard rated, even if separately invoiced.

Please get in touch with us if these rules potentially affect your business and you need advice on your invoicing.




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3 points to note on New Rules For Dividends From 2016/17

Summer Budget 2015 came up with the new taxation of dividends that will apply from 6 April 2016. Further guidance has now been published by HMRC setting out how the new rules will operate and it seems the rules don’t work as many people expected.

1. As previously reported, there will be no 10% credit against the tax on dividends which means there will be a 7½ % increase in the rate of tax on dividends once the £5,000 dividend allowance has been used up.

2. Currently dividends falling into the basic rate band are effectively tax free. However the £5,000 allowance needs to be taken into consideration in determining the rate of tax on your dividends.

For example if you have salary and other non- dividend income of £40,000 next year and £9,000 in dividends, the £4,000 of taxable dividends are taxed at 32.5%, not £3,000 at 7.5% then £1,000 at 32.5%. This is because the £5,000 is added to the £40,000 income pushing the taxable dividends into the higher rate band.

3. If you own your own company it may be beneficial to bring forward dividend payments from next year to save the additional 7.5%. However, it would be important to consider all of the tax implications of such actions so come and talk to us to discuss your options.




Feel free to contact us for further advice.
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Transfer Of Tax Losses

Where a company makes a trading loss that cannot be relieved against other profits that year, or the previous year, the unrelieved loss can be carried forward against future profits from the same trade that incurred the losses. This carry forward also applies where the trade is transferred to another company under common control (basically 75% common ownership before and after the transfer).

A recent case before the First Tier Tribunal has held that where the trade is transferred to another company under common control carrying on the same trade, the brought forward losses may be set against the future profits of the merged trade as it was successfully argued that the loss making trade was subsumed into the profitable trade. The two companies concerned were both trading as department stores and the similarity of the two trades and rebranding of the stores into the same trading name was seen to be critical.  In the particular case (Leekes Ltd v HMRC) the loss making trade was hived up following the acquisition of a competitor and merged with a profitable trade.

HMRC may yet appeal the court’s decision but it may be something to take into consideration if you are considering an acquisition or reorganising your group structure.

PJ
Feel free to contact us for further advice.
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