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Tax tables 2014-15

Posted by: edwinsmith on May 9th, 2014

The latest version of our tax tables document has been published on the publications and useful links page.

 

HMRC – Second incomes campaign

Posted by: edwinsmith on April 28th, 2014

HMRC have introduced another campaign that targets individuals who supplement there main source of income (usually employment) with an additional income from working for themselves that has not previously been declared and taxed .

This would be classed as a second income for the purposes of this campaign and would include income from activities such as:

  1. Consultancy fees –training, property plans etc.
  2. Organising parties and events
  3. Providing services like taxi driving, hairdressing or fitness training
  4. Making and selling craft items
  5. Buying and selling goods eg market stalls, car boot sales, eBay trading etc

The purpose of the campaign is to provide an incentive for individuals to make a voluntary disclosure of a second income in order to obtain best possible terms from HMRC.

If HMRC discover by their own means an undisclosed second income then penalties incurred by the individual may be higher and the individual could face criminal prosecution.

An individual will have 4 months (from the date of HMRC receiving notification) to calculate and pay the tax owed but if more time is needed to pay then a call to the HMRC help line (0300 123 0945) should be made.

HMRC can be notified by completing D01 - Second incomes campaign notification form  and follow instructions on submission of form (either online or post).

Once acknowledgement has been received by HMRC then complete D02 Second incomes campaign disclosure form and follow instructions on submission of form (either online or post).

Full details of campaign including a helpful video on what is deemed a second income can be found at HMRC second incomes campaign.

Please contact us if you require any assistance or advice concerning the second incomes campaign.

 

Tax codes and Class 2 NIC underpayments

Posted by: edwinsmith on April 16th, 2014

Some taxpayers will have received tax codes for 2014/15 which contain a reduction to their personal allowances for class 2 national insurance underpayments. Relevant taxpayers should have received correspondence from HMRC last year regarding the outstanding liabilities asking for payment. Taxpayers were advised that if payment was not subsequently made, then the collection would be made via a salary, pension or other PAYE income by making an appropriate adjustment by the PAYE code.

There is still the opportunity to make payment and if the debt is paid, HMRC will amend the tax code.

An individual can contact the HMRC National Insurance contribution helpline on telephone: 0300 200 3505 for information on how to make a payment.

If you need any additional advice then please contact us.

 

Filed under: National insurance, PAYE, Tax

Private Residence Relief (Capital Gains Tax) – Reduction in final period exemption

Posted by: edwinsmith on April 4th, 2014

A change announced in the 2013 Autumn Statement and to be introduced in 2014 Finance Bill will be to reduce the final period for which Private Residence relief can be given for capital gains tax.

Previously as long as the property has been your only or main home at some point during your period of ownership, the last three years (36 months) have always qualified for relief even if you did not live there in that period.

From 6 April 2014 the final period exemption will be reduced from 36 months to 18 months.

In recognition that a person moving into a care home may take longer to decide to dispose of their former home, the period will remain a 36 month final period for this group of people.

This measure will not have effect where contracts for the sale of the property are exchanged on or before 5 April 2014 and completed on or before 5 April 2015.

In addition to the above change we understand HMRC are apparently reviewing the tax payer’s ability, with one or more homes, to nominate which property is to be to be treated as the main home. You are entitled to private residence relief on one home. It’s possible that after consultation HMRC may decide to remove a tax payer’s ability to nominate a property from next year.

For further details on the Private Residence relief for capital gains see our previous article which is subject to above changes - Private residence relief from capital gains tax.

If you require any further tax advice on capital gains tax in respect of selling a property and private residence relief please contact us.

Dates and deadlines: April 2014

Posted by: edwinsmith on April 1st, 2014

Dates and deadlines: April 2014

1 April: Corporation tax payment for a company not within the instalment regulations: year ending 30 June 2013.

Reduction in main rate of corporation tax to 21%.

5 April: End of month 12 for PAYE (RTI). All FPS (Full Payment Submissions) due if taking advantage of concession. This concession ends on this date for employers with less than 50 Employees.

2013/14 tax year end.

6 April: Start of new tax year 2014/15.

Start of new PAYE (RTI) reporting concession for existing employers with less than 10 employees.

7 April: Online VAT return due to be filed and electronic payment of VAT due to be cleared into HMRC bank: quarter ended 28 February 2014.

10 April: Direct debit VAT payment will be taken: quarter ended 28 February 2014.

14 April: Submission of forms CT61 together with payment of tax due: quarter ended 31 March 2014

19 April: CIS monthly return deadline: month ended 5 April 2014.

19 April: Cheque payments for PAYE/NI, student loan, CIS  to be cleared into HMRC bank: month ended 5 April 2014.

Final EPS submission including Employer end of tax year 2013/14 declarations should be submitted to avoid late filing penalty.

22 April: Electronic PAYE/NI etc payments to be cleared into HMRC bank: month ended 5 April 2014.

30 April : Company tax return CT600 due to HMRC: years ending 30 April 2013.

30 April: Company accounts (Private Limited Co) due to be filed: years ending 31 July 2013.

30 April: Company accounts (Public Companies) due to be filed: years ending 31 October 2013.

1 May : Corporation tax payment for company not within the instalment regulations: years ending 31 July 2013.

 

2014 Budget

Posted by: edwinsmith on March 20th, 2014

The key announcements in the 2014 Budget are as follows:

PERSONAL TAXATION

Income Tax

From 6 April 2015, the personal allowance for those born after 5 April 1948 will be increased by £500 from £10,000 to £10,500.

The basic rate limit threshold will be reduced to £31,785 for 2015/16 from £31,865.  The personal allowance and basic rate limit will be £42,285, a 1% increase on 2014/15 £41,865 as previously announced in the Autumn statement 2013.

For people born on or before 5 April 1948 there is no increase in the personal allowance, currently £10,500 with a higher allowance of £10,660 for those born before 6 April 1938.

Legislation will be introduced in the Finance Bill 2014 so that a spouse/civil partner can transfer part of their personal allowance to the other spouse/civil partner. For 2015/16 £1,050 of the personal allowance will be transferable from an individual whose income is below the personal allowance or who is liable at the basic rate, dividend ordinary rate or starting rate for savings. The receiving spouse/civil partner is eligible to receive the allowance if they are liable to tax at the basic rate, dividend ordinary rate or starting rate for savings. For 2016/17 the amount transferable will be 10% of the personal allowance.

For 2015-16 the main rates of income tax will remain at the 2014/15 rates - 20% basic rate, 40% higher rate and 45% additional rate.

From 6 April 2015 the starting rate of tax for savings will reduce from 10% to nil. The maximum amount of taxable savings income that can be eligible for the starting rate will also increase from £2,880 to £5,000. When combined with the increase in the personal allowance, this means that savers will not be liable for tax on any interest if their total taxable income is less than £15,500. The eligibility requirements to enable an individual to have their interest paid gross will change to accommodate the new provisions.

ISA

From 1 July 2014 all ISAs will reform in to a simpler New ISA (NISA) with the overall annual subscription limit increasing to £15,000, £4,000 for Junior ISAs. There will be changes so that the full amount subscribed can be in cash and a wider range of securities will be eligible to be included.

Company Car Tax rates 2017/18 and onwards

For 2017/18 and 2018/19  there will be an increase in the appropriate percentage for company cars emitting more than 75g of carbon dioxide per kilometre of two percentage points to a maximum of 37 per cent.

Van Fuel Benefit Charge 2015/16

The van fuel benefit charge will increase by inflation in 2015-16 based on the increase in the September 2014 Retail Price Index (RPI).

Company Car and Van Fuel Benefit Charge 2015/16

The rate of fuel benefit charge for company cars and fuel benefit charge for company vans will also increase in line with inflation (based on RPI) for 2015-16. The increase will be based on the September 2014 RPI figure.

Pensions

Changes to the limits from 27 March 2014 to drawdown, trivial commutation and small pots will affect the benefits to be taken as pension income drawdown and taxed lump sums.

The government has also announced a consultation document to consider proposed changes from April 2015 to allow greater flexibility for withdrawing from pension contribution schemes.

These changes will have a major effect on retirement options and strategies and we will produce a separate article on this in the next month or two. Please speak to us in the meantime.

CAPITAL TAXATION

Seed Enterprise Investment Scheme – Capital Gains Reinvestment Relief

Legislation will be introduced in Finance Bill 2014 to make permanent the capital gains tax (CGT) relief for reinvesting gains in SEIS shares without time limit. The relief will apply to half the qualifying re-invested amount.

BUSINESS TAXATION

Research and development tax relief for small and medium sized companies

From 1 April 2014 the rate of research and development payable tax credit will be increased from 11% to 14.5% for loss making small and medium sized enterprises.

Class 2 National Insurance process simplification for the self-employed

Legislation will be introduced to simplify the administrative process for the self-employed by using Self Assessment to collect Class 2 NICs alongside income tax and Class 4 NICs. The intention is for this to apply from April 2016.

Annual Investment Allowance

The maximum annual amount increases on 1 April 2014 for corporation tax and 6 April 2014 for income tax from £250,000 to £500,000 for the period to 31 December 2015. From 1 January 2016 it will revert back to the original annual maximum of £25,000.

VAT

Registration and deregistration limits

From 1 April 2014, the taxable turnover threshold which determines whether a person/entity must be registered for VAT will increase to £81,000 (currently £79,000).

The deregistration threshold will increase to £79,000 (currently £77,000).

The registration and deregistration threshold for relevant acquisitions from other EU Member States will also be increased to £81,000 (currently £79,000).

Changes to the rules on prompt payment discounts

To bring the UK in line with European law from 1 April 2015 businesses will need to account for VAT on the amount received for a supply. Currently HMRC accept VAT calculated on the prompt payment discount figure even if the discount is not taken. A consultation process will take place to implement the new rules. However, this will apply to telecommunications and broadcasting services where there is no obligation to provide a VAT invoice from 1 May 2014.

EXCISE DUTY

From 6 pm on Thursday 19 March 2014 the following changes will take effect:

Tobacco duty – 2% above the rate of inflation

The following increases are effective from 24 March 2014:

Alcohol duty – inflationary increase on duty for wine and made-wine, and sparkling cider of a strength exceeding 5.5%. The duty rates on beer will decrease by 6% for low strength beer, 2% for the standard rate of beer duty and 0.75% overall for high strength beer. The duty rates on spirits, ordinary cider and perry have been frozen.

The exemption cut-off will change for vehicle excise duty on 1 April 2014 for vehicles registered before 1 January 1974. This will change annually so that vehicles over 40 years old will be exempt from vehicle excise duty.

OTHER DUTIES

There are proposed reductions to bingo duty and a higher machine game duty.

 

A document containing the tax rates applying for 2014-15 will be available for download from our website downloads page in due course.

Printed tax tables are also being produced and if you would like to receive a copy then please contact us.

Please contact us at Edwin Smith if you would like to discuss any of the measures announced in the 2014 Budget in more detail or to apply any changes to your specific circumstances.This article is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this web page.

PAYE RTI end of tax year 2013/14 and changes for 2014/15

Posted by: edwinsmith on March 10th, 2014

End of tax year 2013/14

One of the changes that arose from the introduction of PAYE Real Time Information (RTI) for 2013/14 was the ending of the requirement for employers to submit forms P35 and P14 following the end of the tax year. The payroll details are now submitted in real time under RTI.

However there are questions similar to those included on the P35 declaration that need to be answered and submitted with the final submission - HMRC - Final  submission what to report

For many employers the final submission will be the final Full Payment Submission (FPS) informing HMRC of the last employee payment in the tax year ending 5 April 2014.

The software used by some employers may be prompted to submit the answers to questions on the declaration for ‘Final Submission for the tax year’ using the Employer Payment Summary (EPS). Employers who have not made any employee payments in Month 12 (6 March 2014 to 5 April 2014) will need to use an EPS anyway to make the final submission for the tax year.

The final submission should be made on or before the date of the employer’s last employee payment or by 19 April 2014 if sending an EPS. Penalties may be charged for late submission.

Forms P60 should be provided to employees who are still working for their employer at 5 April 2014. The employer has until 31 May 2014 to provide this form.

If employers have any expense payments or benefits to declare for 2013/14 then Forms P11d, P9d and P11d(b) should be submitted to HMRC by 6 July 2014 to avoid possible penalties.

2014/15 (from 6 April 2014)

There are some changes under the PAYE/NIC and RTI regulations that will apply from 6 April 2014 as follows:

Employment Allowance - The Employment Allowance will be introduced on the 6 April 2014 and will give eligible employers a reduction of up to £2,000 in their employer Class 1 NICs liability for 2014/15 ( Edwin Smith article -  Employers Allowance ).

Change of bandings for Reporting ‘hours worked’ for employees -

From 6 April 2014 there will be an increase to the number of bandings from 4 to 5 relating to normal weekly hours worked by employees. The revised bandings will be:

A) up to 15.99 hours

B) 16 to 23.99 hours

C) 24 to 29.99 hours

D) 30 hours or more

E) Other.

It is very important that an accurate figure is provided as the number of hours is used to support claims to benefits and Tax Credits. The employer needs to make sure that they do not simply carry forward previous selections made into 2014/15 ‘hours worked' bandings which may no longer be appropriate due to the changes.

Micro employers’ concession – the concession that applied in 2013/14 for employers with less than 50 employees will end on 5 April 2014 but will be replaced by a new concession applying to existing micro employers with less than ten employees. The concession will continue the relaxation of the RTI reporting rules for these employers until April 2016 so that FPS reports can be made on or before the last payday in the tax month.

From 6 April 2014 all other employers including new employers (with less than ten employees) will be expected to report each time they pay their employees.

Late reporting - From April 2014, it will be possible to tell HMRC the reason why a particular payment is being reported after the payment date by making an entry in the new ‘Late Reporting Reason’ data field on the FPS.

There is one change for 2014/15 that takes effect this month and it is for:

Employers running payrolls in advance of paydays in new tax year – HMRC have made changes to their software to enable employers who run their payroll in advance of actual payday to make a submission (either FPS or EPS) from 6 March in respect of payments to employees on or after the commencement of the new tax year on 6 April 2014.

If you require further information or assistance regarding PAYE (RTI) or payroll then please contact us.

Revised advisory fuel rates 1 March 2014

Posted by: edwinsmith on February 28th, 2014

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 14p  ↔ 9p 
1401cc to 2000cc 16p  ↔ 11p ↔
Over 2000cc 24p  ↔ 17p  ↑

 

Engine size Diesel
1600cc or less 12p ↔
1601cc to 2000cc 14p 
Over 2000cc 17p ↔

 

The changes this quarter are highlighted in red above.

The new rates will be effective from 1 March 2014. 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 May 2014 and any changes made will be effective from  1 June 2014.  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:

  1. Reimbursement to employees of fuel used for business travel in a company car
  2. Repayment by employees of fuel used for personal travel in a company car
  3. 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, PAYE, Tax, VAT

Capital allowances on expenditure on let property

Posted by: edwinsmith on February 25th, 2014

Carrying on from our previous article on repairs to let property, this article sets out guidelines for capital allowances on expenditure on let property. There are different tax rules depending on the type of property being let as below.

Residential properties - capital allowances on plant and machinery are not generally available on assets in residential accommodation. See our previous article on wear and tear allowance Tax relief on wear and tear of furniture – let property that may be claimed for furniture and equipment provided with a furnished residential letting.

Furnished holiday properties – capital allowances may be claimed on plant and machinery such as furniture, furnishings etc in the let property as well on equipment used outside the property (like vans and tools). This is because the letting of furnished holiday properties is treated as a trading activity provided certain criteria are met.

Commercial properties – capital allowances may be claimed on some items of plant and machinery if a commercial property is being let – like a shop, garage or lockup.

For the relevant type of property letting capital allowances are available for plant or machinery used or provided for use for the purpose of a rental business. Examples include:

  1. Fixtures in a let property
  2. Tools used for maintenance
  3. Office equipment used in running the rental business
  4. Vehicles

Capital allowances are calculated for a rental business as they are for a trade. Hence they are subject to the ‘wholly and exclusively’ rule and allowances on cars costing more than £12,000 are restricted.

Plant and machinery is not defined in the capital allowances legislation apart from ‘integral features’. There is legislation which details that most buildings, parts of buildings and structures are not plant and machinery and parts such as walls, doors, windows, mains services, waste disposal systems are specifically included as not being plant and machinery. Where items are not specifically mentioned in the legislation or guidance, HMRC will apply the following tests to the item:

  1. Is the item stock in trade?
  2. Is the item the business premises or part of the business premises (the premises test)?
  3. Is the item used for carrying on the business (the business use test)?

If the answers to 1 and 2 are no, and yes to 3, the item is plant.

The legislation also includes lists of assets that can be considered as plant and machinery but they would still need to pass the above tests. These included wash basins, sinks, sanitary ware, cookers, washing machines, sound insulation provided to meet the requirements of the qualifying activity, fire and burglar alarm systems, moveable partition walls etc.

Assets qualifying under the above rules would be eligible for the annual investment allowance and would go into the ‘main pool’ for capital allowances purposes attracting an annual writing down allowance of 18%.

Integral features were introduced in to the legislation to give allowances on the provision or replacement of main features such as electrical, cold and hot water systems. These assets are also eligible for the annual investment allowance but are included in a ‘special rate pool’ where the annual writing down allowance rate is lower than the main pool rate at 8%. The definition includes:-

  1. an electrical system (including a lighting system),
  2. a cold water system,
  3. a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
  4. a lift, an escalator or a moving walkway,
  5. external solar shading

If the expenditure on an integral feature represents the whole, or more than 50% of the cost of replacing  the feature, either all at once or within any period of 12 months, such expenditure is treated as capital  expenditure on the replacement of an integral feature for capital allowance purposes. The person incurring the expenditure is deemed to own the plant and machinery. If the expenditure is deemed to be capital then there can be no relief as an expense against the trading income from the qualifying activity.

This area of capital allowances on expenditure on features in a property is not well defined in the legislation. Please contact us if you require further advice concerning tax implications of let properties.