Tax

HMRC Property Sales Campaign

Posted by: edwinsmith on March 8th, 2013

HMRC have introduced a campaign in March for individuals to bring their tax affairs up to date by voluntary disclosing profits (income or capital gains) arising from property sales or rental income (from UK or abroad) which have not been declared to HMRC. The voluntary disclosure needs to be made by 6 September 2013 to enable individuals to take advantage of the best possible terms offered by HMRC – for full details HM Revenue & Customs: Property sales campaign

After 6 September HMRC will use information it holds to target those who should have made a disclosure under the campaign.

HMRC are able to obtain information from various sources on property transactions (Banks, Land registry, Property purchase documents, Property websites etc) to help with tax investigations.

This campaign will in the main affect individuals who have not declared income on second properties but in some circumstances the disposal of your main residence may incur a capital gain.

If you sell your own home property then the profit arising from the sale will be exempt (private residence relief) from capital gains tax as long as it’s been your only home or main residence and you have used it as your home and nothing else. If these conditions apply for the whole time of your ownership of the property then the disposal does not need to be declared to HMRC.

If there have been other uses of your main residence or the property has not always been your home (main residence) during ownership then further advice will be required on the amount of private residence relief available.

If you wish to take part in this campaign then you have until 9 August 2013 to notify HMRC by completing a notification form DO1 (Property Sales) - Property Sales Campaign Notification Form.

Once HMRC have received notification they will send you a letter with a Disclosure Reference Number (DRN) and a Payment reference number. These will enable you to complete the Property Sales Campaign disclosure form. The disclosure form must reach HMRC by 6 September 2013 and the payment of tax made at the same time as disclosure - DO2 (Property Sales) - Property Sales Campaign Disclosure Form.

If you are likely to have a problem paying the tax in full before the disclosure and payment deadline then you should contact HMRC who may agree a payment arrangement to spread the amount of tax due. The arrangement should be in place before the deadline.

If you don’t take part in the campaign and HMRC subsequently discover undisclosed property income then they can start a criminal investigation and will charge full penalties.

Please contact us for further advice on these matters.

Filed under: HMRC campaigns, Tax

Capital expenditure and the 2013 Annual Investment Allowance

Posted by: edwinsmith on February 15th, 2013

The Annual Investment Allowance, AIA, was reduced on1 April 2012 for and 6 April 2012 for income tax from £100,000 to £25,000. The draft Finance Bill 2013 includes a measure to increase the AIA from 1 January 2013 for two years to 31 December 2014 to £250,000. The AIA enables small and medium size businesses to claim full tax relief on most plant and machinery.

There are now two changes within a year so the transitional rules for businesses with a chargeable period that spans both dates above are complex. If your business is in this category then please contact us for more information. If your accounting period ended after 6 April 2012 and on or before 31 December 2012 please see our earlier article on how the changes in April 2012 affected your allowance.

To determine the amount of the AIA available to a business, two calculations need to be performed. Firstly, a calculation to evaluate the overall maximum AIA that may be claimed for the whole period and secondly to evaluate any cap for expenditure incurred in each of the notional periods that the accounting period is divided into to take account of the different amounts of AIA.

For periods ending on 31 December 2012, the transitional rules mentioned in our earlier article will apply. For businesses with a year end of 31 December 2013 the AIA will be £250,000. For businesses with an accounting periods ending in 2013 other than 31 December, the accounting period will be divided into two or three notional periods to make up the chargeable year:-

Firstly, a notional accounting period beginning before1 April 2012and ending on 31 March 2012 / 5 April 2012 – period A
Secondly, a notional period commencing on1 April 2012/6 April 2012 and ending on31 December 2012– period B
Thirdly, a notional period commencing on1 January 2013 through to the end of the accounting period – period C

For accounting periods divided into two notional periods, the maximum AIA will be calculated by taking the number of months in period B at the AIA rate of £25,000 and adding the number of months in period C at the AIA rate of £250,000. A cap will then apply for period B such that the maximum AIA is calculated as if the 2013 rate was not introduced, so that the rate of £25,000 applied for the whole period. There is no cap for period C other than the overall maximum.

For example a company with an accounting year end of 31 March 2013 will have a maximum available allowance of £81,250 (£18,750 for period B and £62,500 for period C). For any capital expenditure incurred in the nine months to 31 December 2012the allowance will be capped at £25,000. There is no cap for period C, the three months to 31 March 2013, subject to the overall maximum of £81,250. So a business which has purchased equipment costing £30,000 in the nine months to 3 1 December 2012 will only be able to claim an allowance of £25,000 for that period but will be able to incur capital expenditure of £56,250 in the three months to31 March 2013 if they wish to use their maximum AIA of £81,250 in full.

These rules are based on the draft 2013 bill which has yet to receive Royal Assent so there may be some changes yet. The transitional rules for when the AIA reduces from 1 January 2015 will also be complex when the chargeable period straddles 31 December 2014and we will write another article on this at the beginning of 2014 assuming the reduction is not delayed to a later date. If you would like further information please contact us.

Filed under: Self Assessment, Tax

Pension payments before 5 April 2013?

Posted by: edwinsmith on February 8th, 2013

From 6 April 2011 the rules changed on tax relief on pension savings. The annual allowance, which is the maximum amount of pension saving that benefits from tax relief each year per individual, became £50,000 (£40,000 net of basic rate tax). If you have been saving in a registered pension scheme since 6 April 2008 and your pension savings were less than £50,000 per annum in any of the tax years since then, then you will have an unused annual allowance to carry forward from that year/years. Unused allowances can only be carried forward for three years so the unused allowance from 2009/10 will not be carried forward after 5 April 2013. There is a strict order in which you use up your annual allowance. You use the current tax year annual allowance first, then use your unused annual allowance from earlier years, using the earliest tax year first.Hence, to use any unused allowance of 2009/10 you must have pension savings in excess of £50,000 for the current year. The annual allowance is set to reduce in 2014/15 from £50,000 to £40,000 together with the lifetime allowance.

If however, you have not been a member of a registered pension scheme in earlier years then you will not have unused annual allowance to carry forward.

Any member can make contributions up to the ‘basic amount’ of £3,600 (£2,880 net of basic rate tax). Contributions above this amount on which a member can claim relief in any tax year is subject to the member not exceeding the lifetime allowance, currently £1.5 million, and is the lower of:

the amount of the individual’s relevant UK earnings (broadly salary, self employment and other earned income) that are chargeable to income tax for the tax year, and
the annual allowance, currently £50,000 (£40,000 net of basic rate tax).

If you are self-employed, contributed into a pension scheme in 2011/12 and have made no contributions so far in the current tax year, then your payments on account for 2012/13 are based on your 2011/12 position. If your 2012/13 total income is similar to 2011/12 and you do not make a pension contribution by 5 April 2013 then you may have a large balancing payment of tax due by 31 January 2014 together with a higher payment on account for 2014/15.

Your pension savings in a tax year is the total of the increase in value for each scheme of which you are a member.

For personal pensions, the increase in value is the amount you have contributed in the period, grossed up to cover the basic rate tax added by HM Revenue & Customs (HMRC), for example if you pay £500 a month into a personal pension, this is grossed up to £625 a month and your pension savings for that scheme will be £7,500.

For workplace pension schemes, the value of contributions made by your employer is also included in your pension savings. Where the scheme is a money purchase/defined contribution scheme, the increase in value for the period is the gross amount you have contributed out of your pay together with amounts contributed by your employer. For defined benefits schemes, the amount of your pension savings is the increase in the value of your promised benefits over the pension input period ending in the tax year. The valuation is based on a notional ‘capital ‘ value broadly based on 16 times the amount of annual pension achieved to date and any additional separate lump sum . Your pension scheme administrator will be able to provide you with a pension savings statement if you think your savings will be over the £50,000 allowance.

Please note that your payment should be received by your pension saving scheme by 5 April to obtain tax relief in 2012/13.

There are a number of wrinkles in the general situation set out above that may apply in particular unusual situations, so you should always check with us before making decisions.

Filed under: PAYE, Self Assessment, Tax

Direct Selling Campaign – just a month to go

Posted by: edwinsmith on January 31st, 2013

The Direct Selling Campaign, as included on our news feed in September 2012, will close on 28 February 2013.

This campaign is focused on those who are selling directly to customers such as door to door for example. You might call yourself an agent, a consultant, a representative or perhaps a distributor and your selling may involve leaving brochures for later collection, demonstrating products in the home or at a party organised by the homeowner.

Even if you only sell to friends and family, it makes no difference. Tax may still be due on any earnings you generate.

Your disclosure and the payment of any tax must be made by 28 February.

HMRC are writing to direct sellers to make them aware of the campaign now. After the deadline, HMRC will start to make contact with those who did not come forward, where HMRC believe that they owe tax.

On 7 February, HMRC (@HMRCgovuk) is holding a live Twitter question and answer session between 1pm and 2pm.

If you know you need to make a disclosure under the Direct Selling Campaign, then complete the Direct Selling Campaign disclosure form today. If you need any assistance or more advice on your own circumstances then please contact us.

Filed under: HMRC campaigns, Self Assessment, Tax

HMRC changes employers PAYE accounts office

Posted by: edwinsmith on January 18th, 2013

HMRC have recently written to employers about the payment of PAYE/NIC liabilities from 6 April 2013. The letter notifies the employer about a change in the payment details, which means that all employers (with effect from the month 1 2013/14 payment) will now make payment to the Accounts Office Cumbernauld account.

Employers should not change the account office details until they make the month 1 tax payment for 2013/14 but should make sure that any memorised transactions within their banking arrangements are amended accordingly from this payment.

The specific account details are included on the letter sent to employers or can be found on the HMRC website.

Filed under: Employers, National insurance, PAYE, Tax

PAYE code notices – ‘autocoding’

Posted by: edwinsmith on January 11th, 2013

“Auto-coding” was introduced for Self Assessment tax returns for 2010-11 and uses the information of other income and deductions from the submitted tax return to calculate and issue a revised tax code automatically for the current tax year.

The process is intended update the tax codes sooner ensuring that you pay the right amount of PAYE tax throughout the tax year.

The types of income, allowances and reliefs which can be included in your PAYE tax code are listed on the HMRC website.

It is possible to request that HMRC do not attempt to collect tax due on other income sources through the PAYE code when submitting the self assessment tax return.

In some cases, more than one PAYE code will be issued throughout the year, which can happen when the code is reviewed manually by HMRC. Commonly individuals who receive benefits in kind, or who have underpaid tax in previous years may have manual adjustments made to their PAYE tax code.

Your accountant will not automatically receive a copy of your PAYE coding notice when issued, and so if you have received a new PAYE code and are unsure whether the entries are correct or would like to make a change to entries, please contact us for guidance.

Filed under: PAYE, Self Assessment, Tax

2012 Autumn Statement

Posted by: edwinsmith on December 6th, 2012

The Chancellor delivered the Autumn Statement on 5 December 2012 and the following announcements were made that affect tax rates and allowances etc.

Corporation Tax

The main rate of corporation tax will be cut a further 1 % from April 2014 to 21%.

Business Tax (Companies and self employed)

There will be a temporary but significant increase in the Annual Investment Allowance from £25,000 to £250,000 for two years to support new investment in plant machinery by small and medium sized businesses. It would appear the increase applies for two years from 1 January 2013.

Please contact us before taking any action as transitional rules will apply on the change from £25,000 to £250,000 in the period 1 January 2013 - to 31 March 2013 for corporation tax and to 5 April 2013 for income tax.

Income Tax

A further increase of £235 in the personal allowance for individuals in April 2013 taking it to £9,440 for the 2013/14 tax year.
The higher rate threshold will be increased by 1% rather than inflation in 2014-15 and 2015-16.
From 2014-15 there will be reductions to tax relief available on pension contributions. The lifetime allowance for pension contributions will be reduced from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000.

Capital Gains Tax

The annual exempt amount for capital gains will be increased by 1% each year in 2014-15 and 2015-16.

Inheritance Tax

Inheritance tax nil rate band will increase by 1% in 2015-16 from £325,000 to £329,000.

Other measures announced include the following:

Cancelling the 3.02 pence per litre fuel duty increase planned for 1 January 2013, deferred to 1 September 2013.
Working age tax benefits (excluding disability and carers benefits) will be up rated by 1 % for three years from April 2013.
State pension will increase by 2.5%.
New tax avoidance legislation will be introduced.
A Business bank will be created to provide finance and support for smaller businesses.

For full details see 2012 Autumn Statement

Please contact us if you require further information and assistance.

Filed under: Audit, Budget Report, PAYE, Self Assessment, Tax

Revised advisory fuel rates 1 December 2012

Posted by: edwinsmith on November 30th, 2012

H.M. Revenue and Customs (HMRC) have published the latest advisory fuel rates relating to mileage payments for business travel in company cars. These are as follows:

Engine size	Petrol	LPG
1400cc or less	15p	11p
1401cc to 2000cc	18p	13p
Over 2000cc	26p	18p

Engine size	Diesel
1600cc or less	12p
1601cc to 2000cc	15p
Over 2000cc	18p

The only change this quarter is the increase of 1p per mile for LPG engines sizes of 1400cc or less and over 2000cc. There are no changes to the petrol or diesel rates.

The new rates will be effective from1 December 2012. However for the first month employers may continue to use the previously published rates if they choose to.

These rates will be reviewed again in February 2013 and any changes made will be effective from 1 March 2013. The revised fuel rates will be published on the fuel rates page on the HMRC website when they are released.

Advisory fuel rates can be used to calculate the following:

Reimbursement to employees of fuel used for business travel in a company car
Repayment by employees of fuel used for personal travel in a company car
Allowable input VAT on business mileage claims

A more detailed explanation of the use of these rates is on the HMRC website.

The rates applying for earlier periods are also on the HMRC website.

If you have any questions regarding the use of advisory fuel rates or mileage payments please contact us.

Filed under: Employers, Tax, VAT

Making a Will

Posted by: edwinsmith on November 28th, 2012

This post is to introduce you to the importance of making a will in the first instance. If you have made a will, when was the last time you reviewed it? Our preferences do change over time and so decisions we have made in the past may not now be appropriate. If you have not been introduced to the concept of dying tidily, please read to the end of this article to find out more.

Why make a will?

There is no requirement in law to make a will so why should you make one. There are a number of reasons. Primarily, making a will ensures that your estate is distributed to relatives, friends or organisations in line with your own wishes and not the rules of intestacy.

You can choose the best people to be executors of your estate as well as appointing guardians of any children and providing directions as to burial or cremation etc.

Dying intestate

Should you die without a valid will in place, your estate will pass following the intestacy rules. These are a fixed set of rules which must be followed in order to determine who has an entitlement to your estate and how much can be passed to that individual. These rules are designed to meet the likely wishes of the average person. No family is typical and so this may be entirely inappropriate depending upon the specific circumstances.

If you are not married but live with your partner, your partner will have no automatic rights to inherit from you on your death if you die intestate. Jointly owned property, depending upon how it is owned (see below) may automatically pass. Some other examples of assets which may not pass under the rules of intestacy may be pensions and life assurance policies written into trust.

Jointly owned property

Property held with another person can be held either as Joint Tenants or Tenants in Common.

Property held as Joint Tenants will automatically pass to the other owner on death of one owner. The property is said to pass by right of survivorship. This happens despite any provisions you may have made in your will for that specific property. Jointly held bank accounts usually pass in this way.

Property held as Tenants in Common is property owned by two or more people who each hold a share of the property. In this case, you as a part owner can choose to dispose of your share to any person with no agreement required from the other owner. Therefore, when a co owner dies, the right of survivorship does not apply and so the share passes under that persons will or pursuant to the rules of intestacy.

How do I make a will?

There are a number of formal requirements to be observed when drawing up a will. You may also wish to ensure that it is efficient from a tax perspective.

It is also important to ensure it will actually achieve your wishes as poor wording can sometimes be ineffective.

Although we can provide tax advice relating to a will, we cannot draft the document for you.

Does my will last forever?

You can change an existing will by executing a codicil which is effectively an addendum or appendix. A codicil must observe the same legal formalities of a will.

However, it is considered tidier to replace the existing will altogether. In these circumstances care must be taken to ensure that it is clear that all previous wills are revoked otherwise on death it may be necessary to consider the contents of all previous wills.

Marriage automatically revokes an existing will, unless the existing will expressly states that it is made in contemplation of marriage to a particular person. If it does, then marriage to that named person would not revoke the will.

Summary

If you do not have a will, now is the time to think about making one. If you do not already have a professional to assist you, then we can provide you with a recommendation.

If you have made a will, then perhaps this is the time to review it. This is especially important if your family circumstances have changed since the last will was executed.

If you are a client, ask your advisor about our ‘Die Tidily’ document which is a template document we have created to record important aspects of your financial affairs. The completed document may be useful to your executors in helping them deal with your affairs following your death.

Please contact us for additional information

Filed under: Tax

Christmas gifts and parties

Posted by: edwinsmith on November 16th, 2012

Just a reminder of the tax implications of Christmas parties and gifts - the implications for employees and employers can be found on our earlier news article tax on Christmas gifts and parties.

Expenditure on business entertaining and gifts is not generally an allowable expense against profits for tax relief in a business. However, an employer can obtain tax relief on a staff entertainment event such as a Christmas party or sporting event so long as the entertaining is wholly and exclusively for the purposes of the trade and is not merely incidental to entertainment which is provided for customers or others who are not employees. ‘Employees’ is extended to include retired members of staff and the partners of existing and past employees.

Whether or not the entertaining is incidental will depend on the nature of the occasion. If the employer would not have paid for the entertaining had the guest not been present, then the event is business entertainment and the entertainment of the employee is incidental to this. The total cost of the guest and the employee would not be allowed as a deduction against profits.

Gifts tend to follow the same rules as business entertaining and are not allowable as a deduction against profits. One exception to this is small gifts carrying a conspicuous advertisement and which fulfil the following conditions:

The gift is not food, drink or tobacco, nor is it a token or voucher exchangeable for goods.
The cost of the gift (together with the cost of any other such gifts to the same recipient in the relevant tax period) does not exceed £50.

Examples of allowable gifts are diaries, pens and mouse mats with the advertisement on the gift itself, and not just on the wrapping.

The above is a summary of some of the rules on gifts and business entertainment. If you would like more information then please contact us.

Filed under: Employers, PAYE, Tax

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