New Inheritance Tax Rules, VAT Flat Rate & Advisory Fuel Rate 2017

Passing On The Family Home

New inheritance tax rules for passing on the family home start on 6 April 2017 and many people have a New Year’s Resolution to either make a Will or update their Wills. This new relief should be taken into consideration when drafting your Will and we can work with your solicitor to make sure it is tax efficient.

From 6 April 2017 a new nil rate band of £100,000 will be available on death where your residence is left to direct descendants. This is in addition to the normal £325,000 nil rate band and will increase over the next 4 years to £175,000 in 2020. You may recall that when this was originally announced in summer 2015 the chancellor said that a married couple should be able to pass on their family home worth up to £1 million free of Inheritance tax.  The rules are fairly complicated and HMRC have recently issued guidance on how the new relief will operate. We can review your personal circumstances to ensure that you take advantage of all relief that you are entitled to.

Downsizing To A Smaller Property

One of the features of the new inheritance tax rules for passing on the family home is that the relief is protected even when you downsize to a smaller property.

For example if a married couple currently live In a large house worth  £800,000 and downsize to a flat worth £300,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property.  They could even sell up completely and move into a rental property and get the inheritance tax relief!

This would very much depend on the timing of such planning and, as mentioned above, the rules are very complicated so contact us to discuss how this can apply in your family circumstances.

More on the New Higher Vat Flat Rate Percentage

As covered in the Autumn Statement newsletter a new VAT flat rate of 16.5% applies from 1 April 2017 for “limited cost traders”. This is being introduced as HMRC believe that the current system is being abused by some businesses providing their labour but who have very few costs.

The flat rate scheme was originally introduced as a simplification measure for small business as they merely pay a percentage depending on the type of business to their VAT inclusive turnover. For many businesses this process takes about 5 minutes but in future they may have to add up all the input tax on their expenses and deduct that from the output tax on their sales which will often take a lot longer!

Take for example a training consultant who bills his clients £100,000 a year, £120,000 inclusive of VAT. Using the flat rate scheme he currently pays 12% to HMRC = £14,400.  If the VAT inclusive cost of his goods for the year is less than £2,400 (2%) excluding capital expenditure, food, fuel, vehicle costs then he would have to pay £19,800 to HMRC!  It would almost certainly be beneficial for him to stop using the flat rate scheme.

If you are currently using the VAT flat rate scheme contact us to discuss whether the changes will apply to you.

Advisory Fuel Rate For Company Cars

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

Engine Size	Petrol	Diesel	LPG
1400cc or less	11p		7p
1600cc or less		9p
1401cc to 2000cc	14p (13p)		9p
1601 to 2000cc		11p
Over 2000cc	21p (20p)	13p	13p

Tax Free Allowances & Tax Relief Updates - 2017!

More Tax Free Allowances From 6 April 2017

In addition to the current £5,000 tax free dividend allowance and the personal savings allowance of up to £1,000 there will be two further tax free allowances starting from 6 April 2017. These will be a new £1,000 tax free allowance for self-employed income and a £1,000 rental income allowance.

These new allowances mean that individuals doing a small amount of self-employed work or receiving a small amount of rental Income will not need to report such income and consequently may fall outside self-assessment.

Note that the £1,000 allowances are the gross amounts that will be tax free each year. Where the gross income exceeds £1,000 there will be the choice of paying tax on the excess over £1,000 or deducting allowable expenses in the normal way.

For example Mr Nikon has a full time employment but also has a part - time photography business earning  £1,500 a year with £800 of business expenses. Rather than paying tax on the net profit of £700 the new system will mean that he will only be taxed on £500 (£1,500 less the £1,000 allowance). If his gross income was below £1,000 it would be tax free and would not need to be reported to HMRC, probably keeping him outside of self-assessment.

Don’t Forget “Rent A Room” Relief

Whilst on the subject of tax free allowances remember that there is a further £7,500 a year allowance deducted from rent received from lodgers where you rent out part of your main residence.

This allowance increased from £4,250 from 6 April 2016 so that now the first £7,500 rent from lodgers is tax free. Where income from lodgers exceeds £7,500 a year only excess is taxable.

Tax Free Childcare Accounts To Start 6 April 2017

New tax-free childcare accounts were announced in 2014 to replace the employer-provided childcare voucher scheme. Introduction has been delayed by legal disputes with organisations involved in administering the existing scheme, but the new accounts will at last be introduced on a trial basis in early 2017.

The new scheme will then be rolled out across the country based on the results of the trial. The rules are complex, but where both parents work and earn at least £115 per week, they will be able to put up to £8,000 a year into a special account which the Government will top up with 20p for every 80p contributed by the parents. This account can only be used to pay for childcare such as nursery fees.

It is anticipated that the new scheme will eventually replace the existing childcare voucher scheme which is only available to employees who work for organisations that offer such schemes. The new system will benefit the self-employed as well as those workers in organisations that currently do not provide childcare vouchers.

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

More bad news for public sector workers “off payroll”

In his Autumn Statement, the Chancellor announced that the Government will implement significant changes to the taxation of workers providing their services to the public sector through their own company or via an agency. These new measures have now been included in draft clauses to be included in Finance Act 2017 which were issued for consultation on 5 December 2016. If brought in, new rules will apply from 6 April 2017.

“Public sector” includes central and local government, the NHS, state schools, and bodies such as the BBC.

The new rules will put the onus on the public sector engager  or agency supplying the public sector  body to determine whether or not the IR35 personal service company and intermediary rules apply to the relationship, and if so deduct and pay over income tax and national insurance on behalf of the worker.

This will be a major change as currently the worker and his company/ intermediary has to determine whether or not IR35 applies.

A further change proposed from 6 April 2017 is that the worker will no longer qualify for a 5% deduction currently deemed to cover administration costs.

These changes come on top of restrictions to relief for such workers’ travelling expenses that came into effect from 6 April 2016.

Please contact us if these changes are likely to apply to you.

PJ | ☎ 020 8931 0165 | ☏ 0790 053 7459 | ✉ info@apjaccountancy.com

Should Your Business Build A Mobile App

The biggest and best businesses all seem to offer a mobile app of some sort. Whether booking a taxi, checking into a flight or checking your bank balance, it seems that the smartphone is now the “Swiss army knife” that everyone uses to do pretty much everything. So does this mean that you need to build an app for your business?

The first thing you need to think about before committing to building an app is what your needs are. Do you need an app to help you with marketing, sales or customer services? How would an app add value for your customers and streamline processes for your business? You don’t need to be a programmer to create an app as there are plenty of agencies and online DIY tools that you can use to create one. Here are a few things to think about before you decide whether or not to develop an app for your business:

Marketing

Your app reflects your firm’s brand, and that icon on a mobile device that is frequently looked at will help to build recognition of your brand. You can also use an app as a marketing tool to create “push notices” that deliver information about your business and its products or services to customers. For example, you could use an app to push special offers, updates, or announcements to your customers.

Accessibility

Do you want to create an app simply to make your business accessible to your customers 24/7? Apps make it easy to engage with your business because customers don’t have to switch devices. When your business crosses their mind, they simply tap the app on their smartphone.

Sales 

Could your business use an app to sell more products or services to your customers? Again, this depends on the type of business that you operate. For example, if you run a coffee shop, perhaps you could replace loyalty cards with an app. Alternatively you could allow your regular customers to place orders for future products or services directly from an app. This would speed up the sales process for your customers and also help to generate loyalty from customers who may keep coming back to buy more because it is so easy to do so using an app.

Customer service

Do you want to put your products or services at your customer’s fingertips? You could create an app that allows your customers to engage with you and your business in a matter of seconds. You could offer product support, help desk services, market updates or even a booking service, depending on the type of business that you operate.

CMA Report: Impact on SMEs & The "War on Talent"

CMA Report:

Many of us will have listened to the national TV and radio coverage on the Competition & Markets Authority’s (“CMA”) report on retail banking and how proposed changes will affect personal banking. It was all about making it easier to switch bank accounts and using common technology.

The initiative however also applies to SME’s. The report advocates:

• Better information about what different banks can offer a small businesses - comparison web sites

• The publication of SME lending product prices

• Standardised business account opening requirements 

• Soft search credit searches that do not affect credit ratings

• The secure sharing of information with potential lenders

The CMA have also decided that lenders must provide SME’s with the APR rate of products as they do with personal finance on products up to the value of £25,000.

The CMA’s orders come into force from the first quarter of 2017 and if you need advice on finance and banking arrangements, we can assist you in this process.

APJ Accountancy | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

The "War on Talent"

The "war on talent" seems to be raging on. Large businesses are competing to recruit the best graduates straight from university and many firms are prepared to pay well for the most experienced candidates. As a result, all businesses need to manage the talent they already have.  Talent management is often considered to be an HR matter but the management team in any business should be involved in managing the firm’s most valuable resource – its people. Start by identifying the high potential people in your firm and work towards developing them and retaining them in the business.

Talent Development.

Create a strategy to hire the best people and nurture them throughout their careers. Managers should set the tone and work to develop employee’s skills and knowledge to help them to realise their potential in the firm. Your firm’s talent development programme should include theory and practice as well as coaching and mentoring sessions for your high potential employees. If your team feels like they have an opportunity to develop at their current firm, they are less likely to look for opportunities elsewhere.

Learn from Others 

Consider what talent management looks like at other firms within your industry sector. What do the biggest international firms do well and what could you offer to your team members that would differentiate your firm from the competition? Even if you run a smaller business, you can learn from the market leaders and implement some of their ideas. 

Recognition and Reward

Consider the skills, knowledge and performance of employees and identify those who are high performers and/or exhibit leadership potential. Formal performance appraisals should happen at least annually and “top talent” within the business should be sufficiently challenged with objectives which will encourage them to perform, while retaining their commitment to the firm. The appraisal process should be transparent in order to avoid any potential conflict between employees.

Continuous Professional Development

Good businesses tend to promote a culture of life long learning. All members of your team should be offered access to and encouraged to take part in training courses, development opportunities, etc. Investment in continuous professional development should be viewed by the firm as an investment in the future of the business as today’s “top talent” are the business leaders of tomorrow.