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 - June 2017


Welcome to the June tax newsletter. We hope you enjoy reading and find it useful. These newsletters are designed to keep you informed of the latest tax issues.

Please contact us if you need further information on any of the topics covered.

Peter McDaid
CTA ATT TEP
Director




 POST ELECTION COMMENT

The Conservative government is going to form a minority government and their failure to obtain an overall majority may affect the tax policies contained in their manifesto.

We know that the hue and cry re the proposed triple lock on pensions and also the means testing on the winter fuel payments should result in these not being implemented.

Although not a tax, there was also an uproar about the proposal regarding the payment for care home fees. The proposal is to increase the asset threshold above which an individual is required to pay towards their own care from £23,250 to £100,000. This will mean that this amount would then be available to be passed to future generations of the family. For many families paying for social care has become a bigger issue than inheritance tax. This to me seemed reasonable but the way it was presented gave entirely the wrong impression and I suspect the whole scenario will be revisited.

My expectation is that with Mr Hammond remaining as Chancellor there will be a continuity of the thinking and logic from the previous government. As such, I suspect the missing parts of the Finance Bill 2017, that were removed as a result of the snap election, will now be reintroduced. This covers items like making tax digital, the new deemed domicile rules and the restriction in the dividend allowance from £5,000 to £2,000. There is always hope that they might have a change of heart on the latter item.

Looking at the Conservative manifesto they have made a commitment to keep the UK corporate tax rate at the lowest rate in the G20 major trading nations.

The Conservatives appreciate how important this will be when we leave the European Union to continue to attract and encourage overseas investment in the UK.

Their aim is to have a corporation tax rate of 17% by 2020.

They have also promised to increase the personal allowance to £12,500 and the higher rate band to £50,000 also by 2020.

In the manifesto it states that there will be further anti-avoidance measures to close the "tax gap" - the gap between the tax that should be collected and what is actually collected. This will include measures to combat false self-employment in the so-called "gig" economy which will not only strengthen such workers' rights but also ensure that the correct amount of income tax and national Insurance is paid.

Whether the minority government is sustainable or Mrs May can remain as Prime Minister in the short to medium term, and the outcome of the Brexit negotiations could all to varying degrees have a profound impact on tax policies. We will of course keep you updated as this develops.

STATE PENSION TOP UP

We strongly recommend that everyone checks their state pension position. An individual can easily do this using the following link:

https://www.gov.uk/check-state-pension

If there is a shortfall or gaps in your national insurance contributions (NICs) history you can pay additional sums to rectify the position.

The cost of topping up the state pension is heavily subsidised by the government which means that it can be very good value for money.

To qualify for the new single tier state pension an individual needs 35 years of NICs and this will give a weekly pension, at the state pension retirement age, of currently £159.55 a week. Each missing year of contributions reduces the weekly pension by 1/35th.

If time has been spent off work raising children under 12 this will be deemed to be a period of full NIC but only if it has been correctly recorded. I assume that if child benefit has been claimed the DSS records would show the correct position.


STATE PENSION TOP UP continued

If you reach pension age after the 06 April 2016 you fall under the new system and the payment of a sum of £741 buys you a missing a year. This gives you an amount of state pension of £237 a year which is a 32% annual return. You only need survive just over three years from your pension age date to get your money back.

If you have already reach pension age before the 06 April 2016 you fall under the old system and the payment of £741 for a missing year will generate an extra annual state pension of £212.

It is only normally possible to buy missing years in the previous six-year period. However, if you are under the new system it will be possible to buy missing years from 2006/2007 to 2012/2013. After that the normal six-year rule will apply.

The subsidisation of the top up of state pensions is a very costly exercise for the government and as such it may be one that they could be curtailed at very short notice.

HMRC COMPUTER ISN’T ALWAYS CORRECT

HM Revenue and Customs have acknowledged that their software and some commercial software used by accountants doesn’t always come up with the right amount of tax payable! You may have seen this reported in some newspapers such as the Daily Telegraph.

This arises because the tax system of different income tax personal allowances, dividend allowances and savings rates has become more complicated rather than getting simpler!

These anomalies only arise in certain limited circumstances depending on the combination of dividends, interest and other income and we can assure you that we will check that our software calculates the correct amount of your tax.

We will ensure that where the HMRC computer system comes up with a different figure any anomalies are resolved.

RENT A ROOM RELIEF

Just a reminder that you can rent out a bedroom and the rent a room relief will apply. This is a tax-free allowance amounting to £7,500. In the March 2017 budget, the government stated that it plans to consult on proposals to redesign the scheme to support longer term lettings.

HMRC WARNING

Taxpayers are being warned to ignore scam text messages from HMRC asking recipients to fill in their details online. A typical hoax text is:

You have an outstanding tax refund of £750.00 for tax year 2016/2017. Please fill out the following form to process your refund.

HMRC have stated that they would never send notifications of a tax rebate or ask you to disclose personal or payment information.

These scams are getting more and more common and clever. The same logic applies to emails and telephone calls. One of our clients has recently received a telephone call purporting to be from HMRC debt collection asking for immediate payment of money and threatening imprisonment for non-payment. Luckily enough he was not taken in but the message is ALWAYS BE ON YOUR GUARD.


TAX DATES AND PAYMENTS


Date What's Due
1st July

Corporation tax for year to 31/08/2016 (unless paid quarterly)

5th July Last date for agreeing PAYE settlement agreements for 2016/2017 employee benefits.
6th July Deadline for forms P11D and P11D(b) for 2016/2017 tax year.
19th July PAYE & NIC deductions, and CIS return and tax for month to 05/07/2017  (due 22 June if you pay electronically).
31st July 50% payment on account of 2017/2018 tax liability due.