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 - December 2016


Welcome to the December monthly tax newsletter.  These newsletters are designed to keep you informed of the latest tax issues.

Happy Christmas everyone and let's hope for a prosperous New Year.

Peter McDaid
CTA ATT TEP

Director



Autumn Statement

This will be the last as the Chancellor Philip Hammond announced that the cycle of an Autumn Statement and a Spring Budget is to stop and there will now only be an Autumn Budget. There will be a budget next March but thereafter the budgets will be in the Autumn. The plan in future is that the various tax changes will be announced in the Autumn and the legislation will be enacted in the following Summer. This gives everyone time to give some consideration to the proposed changes and may result in better constructed legislation. It will also make it easier to carry out tax planning in advance in anticipation of the changes.

We were not expecting that many tax announcements in the Autumn statement and many that were made we already knew about. He could not afford too many giveaways as he expects the economy to have a bumpy ride during the BREXIT transition.

Key announcements

For Individuals

Personal allowance to increase to £11,500 in 2017/18, rising to £12,500 by 2020/21

Higher rate tax threshold to increase to £45,000 in 2017/18, rising to £50,000 by 2020/21

The Employer (primary) and employee (secondary) National Insurance thresholds will be aligned and from April 2017 this will be raised to £157 a week.

The National Minimum Wage will in April 2017 increase from £7.20 to £7.50.

The ISA limit will, in April 2017, increase from £15,240 to £20,000.

For Companies/businesses

The current 20% corporation tax rate is planned to fall to 19% from 1 April 2017 and then to 17% on 1 April 2020. The government is committed to keeping the UK corporate tax rate the lowest in the G20 and there is talk of a rate as low as 15% in the future.

Insurance Premium Tax is to increase from 10% to 12% from 1 June 2017. This will be the third rise in insurance tax in two years. It will add £15 a year to the average motor insurance premium and £2.50 a year to the average house insurance premium.

“ABUSE” OF THE VAT FLAT RATE SCHEME

The VAT flat rate scheme is a simple scheme that enables small businesses to calculate and pay their VAT based on a flat rate percentage of total takings rather than deducting input tax on purchases and expenses and deducting that from total output tax on sales in the period. HMRC believe that the scheme is being abused by certain traders who have minimal costs who charge 20% VAT to their customers and then pay a lower percentage over to HMRC.

The flat rate percentage varies depending on the nature of the trade, ranging from 4% for food retailers up to 14.5% for IT consultants and labour only construction workers.

A new 16.5% rate will apply from 1 April 2017 for businesses spending less than 2% of their turnover or less than £1,000 per year on goods, excluding capital goods, food, vehicles and fuel. Any business affected will almost certainly be better off returning to the normal VAT system with effect from that date.

If you are currently using the flat rate scheme please contact us to check whether this change is likely to affect your business.




SALARY SACRIFICE RULES TO BE TIGHTENED UP

Many employers now provide flexible remuneration packages that allow employees to give up some of their contractual salary in exchange for benefits in kind. This can have the effect of saving tax and national Insurance contributions for both the employee and employer, particularly where the benefit provided is exempt from tax.

These tax and NIC advantages are to be withdrawn from 6 April 2017. Arrangements involving pensions, childcare, Cycle to Work and ultra-low emission cars will be excluded; existing arrangements will be protected for a transitional period until April 2018, and existing arrangements for cars, accommodation and school fees will be protected until April 2021.

The Chancellor has announced a wider review of the taxation of benefits, with the intention of making this area ‘fairer and more coherent’. This appears likely to have a significant effect on any employee who is in receipt of benefits from their employer.

TERMINATION PAYMENTS TO GO AHEAD

As announced in March, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer’s NIC. The unlimited employee NIC exemption on payments related directly to termination is maintained.

Currently, Payments In Lieu Of Notice (PILONs) that are included in the employment contract are treated as taxable earnings, but non-contractual PILONs are not and can be included in the £30,000 tax free figure. From April 2018, all PILONS will be taxable regardless of whether they are contractual or not.

In addition, the foreign service relief which applies to foreign service and exempts a relevant proportion of a termination payment is to be removed.

PENALTIES FOR CARELESS ERRORS IN ACCOUNTING RECORDS

Where additional tax is payable as a result of an HMRC enquiry and it is shown that the additional tax is due to poor accounting records, the maximum penalty that can be imposed is 30% of the additional tax for failure to take reasonable care. Where the error is deliberate, the penalty will be between 20% and 70% of the extra tax due, rising to 100% where the matter is deliberate and concealed by the taxpayer.

It is also possible to have the penalty suspended if the introduction of internal controls or additional checks can minimise the risk of the error recurring.

We can negotiate lower penalties on your behalf as the penalty can usually be reduced if we tell HMRC about the error. HMRC may make further reductions depending on the quality of the disclosure and if we help HMRC work out what extra tax is due.


TAX DATES AND PAYMENTS

Date

What’s Due

19 December

PAYE & NIC deductions, and CIS return and tax, for month to 05/12/16 (due 22/12 if you pay electronically).

 

30 December

Deadline for filing 2015/16 tax return online in order to request that HMRC collect outstanding tax via the 2016/17 PAYE code.

2017

1 January

 

Corporation tax payment for year to 31/3/16 (unless quarterly instalments apply).

19 January

PAYE & NIC deductions, and CIS return and tax, for month to 05/01/17 (due 22/01 if you pay electronically).

31 January

Self-Assessment tax return for 2015/16 due, together with balancing payment and 50% payment on account of 2016/17 tax.


If you have any questions about this newsletter please contact us, we are happy to help. 

If you would like to see a particular topic covered please do give us a call or email us.