Abbey

Chartered Tax Advisers
Old Bishops' College
Churchgate
Cheshunt
Hertfordshire
EN8 9XP

T: 01992 642024

E: abbey@abbeyaccountants.com

Smiling businessmen and women

  TAX E-NEWS - August 2015


Welcome to our monthly tax newsletter designed to keep you informed of the latest tax issues. In this issue we have added a few extra items re the Summer 2015 Budget which we were not able to include in the last newsletter.

We hope you enjoy reading the newsletter; remember, we are here to help you so please contact us if you need further information on any of the topics covered.

Peter McDaid CTA ATT TEP
Director


TAX RAIDS AND PROSECUTIONS
Raids carried out by HMRC on business premises are increasing, 593 last year compared to 196 in 2010/2011. The number of prison sentences made for criminal tax evasion has also increased to 220 in 2014 compared to 171 in 2011. HMRC are being pressurised by the government and set targets to increase the number of prosecutions and are as a result allocating a great deal of resources to do so. They are no longer focusing solely on high net worth individuals or those guilty of serious tax evasion but targeting a very wide range of taxpayers. The question is why the change of policy on targeting? Surely the high net worth individuals and those guilty of serious tax evasion would generate the most return. Is it that normal taxpayers who commit minor infringements are easier targets and contribute to supporting good statistics?

HMRC PAYMENTS TO INFORMANTS
In 2014/2015 over 100,000 calls were made to HMRC reporting suspected tax fraud and a record £600,000 was paid out in rewards. This is an increase of 50% over the past year. The majority of informants are thought to be ex spouses or ex employees.

BIG BROTHER
The government intends to increase HMRC's powers to gather information from third parties in particular businesses that act as intermediaries or provide electronic payments services. This is with a view to tackling the hidden economy and HMRC will use sophisticated data mining techniques to analyse the information obtained and act accordingly.

TAX RETURNS
11 Million taxpayers completed a tax return last year, that is 1 in 3 taxpayers. Of those 11 million, 16% had absolutely nothing to pay and a further 8% had less than £50 to pay. Basically 24% of taxpayers are wasting their time and HMRC resources.

Employees who earn over 100K and company directors must complete tax returns even if they have no extra income or gains to declare. Self employed individuals who earn below the personal allowance (£10,600) and therefore have no tax liability have also to complete tax returns. Following the changes to child benefit in 2013 thousands of parents have been brought into the self assessment tax return net in order to report the high income child benefit claw back.

When you realise that there is a parallel annual reporting form for the tax credit system, the waste in time and resources for everyone involved is absolutely incredible.

MINIMUM WAGE
HMRC is expanding its compliance activities in this field and are analysing the smart data they hold to target businesses. Employers that have been underpaying their employees should ensure that they now pay their employees the minimum wage and make up the arrears calculated on current rates. They should also report this to HMRC using the online notification form (DO1) and the online disclosure form (DO2). Employers that report their underpayment of the minimum wage to HMRC will not have to pay a penalty (100% of the amount owed, up to £20,000 per employee) or be named on the list of employers not paying the minimum wage. The first campaign on this is targeting the hairdressing and beauty sector.

ANNUAL INVESTMENT ALLOWANCE (AIA) SET PERMANENTLY AT £200,000
The AIA for expenditure on plant and machinery was due to be reduced from the current temporary level of £500,000 to just £25,000 from 1 January 2016. The rate has changed frequently over the years but it has now been decided that as from that date it will be set at a permanent level of £200,000. This will enable businesses to better plan their capital expenditure.




CLASS 2 NATIONAL INSURANCE (NIC)
For self employed individuals (sole traders and partners) class 2 NIC at a rate of £2.75 a week was payable either monthly or at other time intervals throughout the year and was completely separate to the Self Assessment system. For 2015/2016 onwards Class 2 NIC will be payable within the Self Assessment system at the same time as the income tax/Class 4 NIC liability. This makes complete sense and reduces the red tape and administration for both HMRC and the self employed individuals.

INHERITANCE TAX (IHT) AND THE FAMILY HOME
A main residence nil rate IHT band allowance will be available in addition to the current £325,000 nil rate band which, when fully phased in, will allow a couple to pass on the family home tax free up to a value of £1,000,000. The additional allowance, which will also be transferrable to the surviving spouse, will start at £100,000 for 2017/18 then increase to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21.

The main residence nil rate IHT band is subject to a taper where the amount being left is more than £2,000,000 with £1 of the family home allowance being lost for every £2 of estate value over £2,000,000. This may well result in some complications in considering the family’s inheritance tax position and the drafting of Wills.

CORPORATE TAX RATE TO BE CUT TO 18%
The current UK corporation tax rate is now 20%. This rate continues to apply until 2017 when it has been announced that the rate will be reduced to 19% and then 18% in 2020.

RENT A ROOM” LIMIT INCREASED TO £7,500
The current limit of £4,250 for tax free rental income from lodgers is to be increased to £7,500 from 6 April 2016. The relief is only available where individuals rent out a room in their main residence and the allowance includes heating and other services provided to the lodger.

COMPANY CAR ADVISORY FUEL RATES
These are the suggested reimbursement rates for employees’ private mileage in their company cars and the rates that apply from 1 June 2015 are as follows:
Engine size petrol diesel  LPG
1,400 cc or less   12p              8p 
1,600 cc or less  10p 
1,401cc to 2,000cc   14p   9p 
1,601cc to 2,000cc  12p 
Over 2,000cc 21p   14p   14p 

TAX DIARY OF MAIN EVENTS FOR August/September 2015

Date What's Due
19 August PAYE & NIC deductions, and CIS return and tax for month to 05/08/15 (due 22 June if you pay electronically)
01 September Corporation tax for year to 30/11/14
19 September PAYE & NIC deductions, and CIS return and tax for month to 05/09/15 (due 22 September if you pay electronically)