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 - May 2016


Welcome to our monthly tax newsletter designed to keep you informed of the latest tax issues
We hope you enjoy reading the newsletter and 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

2014/2015 TAX RETURNS OUTSTANDING?

If your personal tax return for the 2014/2015 is still outstanding as from the 1st May you are being charged £10 a day penalty on top of the standard £100 penalty and the 5% surcharge on unpaid tax. If you are in this situation you need to take action now.

MAKING TAX DIGITAL – TOO SOON?

HM Revenue and Customs (HMRC) receive more and more information online from employers, pension funds, banks and other third party institutions. It is proposed that this information will be compiled and used to calculate individuals’ tax liabilities which they will be able to view online. We now learn that by June 2016 every individual and 5 million small businesses will get access to their own digital tax account. Over the next four years HMRC expects a full range of services to be available to taxpayers through their digital tax accounts.

The next big step in 2018 will be the introduction of quarterly reporting of income and expenditure by businesses and landlords.

It has now become apparent that HMRC will require particular software to be used for these digital accounts and an ICAEW survey has found that 75% of all businesses and 82% of sole traders will have to change their existing record keeping systems to comply with the new digital requirements.

The government claim that these digital accounts will result in large savings for businesses but this appears totally implausible. I believe it is quite the opposite and that the businesses will bear the brunt of the increase costs in time and money on the implementation and running of these new digital systems.

Having to basically do four quarterly reports to HMRC will obviously increase the time/work spent in reporting to HMRC. In addition, the expectation is, that at some point, payment of the tax/NIC liabilities will be required to be made on a quarterly basis as well.

PAYING INTEREST ON DIRECTORS LOANS IS BETTER THAN DIVIDENDS NOW?

The new 32.5% rate on dividends received by higher rate taxpayers means paying interest on directors’ loan account credit balances can, in certain circumstances, now be more tax efficient than paying dividends once the new £5,000 dividend allowance has been used. Unlike bank interest the company is still required to deduct 20% basic rate income tax and pay this over to HMRC quarterly with form CT61. Remember that higher rate taxpayers can receive £500 interest income tax free from 6 April 2016.

For the avoidance of doubt this can only apply to director loan accounts where there is a credit balance.

EMPLOYMENT ALLOWANCE IS NOW £3,000 BUT NOT FOR SINGLE DIRECTOR COMPANIES

For the last two years there has been a £2,000 allowance available to employers to set against their employers National Insurance liability for the year. This increased to £3,000 from 6 April 2016 and no action is required if you claimed the allowance for 2015/16. However, from 6 April 2016, limited companies where the director is the only employee paid earnings above the Secondary Threshold for Class 1 National Insurance Contributions (£156 a week) will no longer be entitled to claim the Allowance.

HMRC has now issued guidance stating that if more than one employee or director earns above the Secondary Threshold, the company will continue to be eligible for Employment Allowance for the whole tax year. This other employee could be the director’s spouse or partner. The HMRC guidance is not consistent with the legislation however and we hope to clarify the matter so that you don’t miss out.


INHERITANCE TAX PLANNING USING THE NEW LIFETIME ISA

Budget 2016 announced a new “Lifetime ISA” that will be available to those aged between 18 and 40 from 6 April 2017. The Government will add 25% to the amount saved subject to a maximum of £4,000 a year (plus £1,000 from the Government). It seems there will be no requirement that the savings come from the person named on the account so parents, grandparents or other relatives could make payments into the account.

Where you have excess income and have concerns about inheritance tax (IHT), what about taking advantage of the exemption for normal expenditure out of income by committing to regular payments into the account. £4,000 a year would save you £1,600 IHT, so £2,400 net turns into £5,000 gross, per recipient!

SUPPLYING DIGITAL SERVICES TO CUSTOMERS IN OTHER EU COUNTRIES?

The VAT ‘place of supply’ rules changed on 1 January 2015 where digital services are supplied to non-business customers. The place of supply changed from where the supplier was based to where the customer is located as some companies were avoiding UK VAT.

This rule change had serious implications for small businesses supplying digital services such as software downloads to non-business customers. Where those customers are in other EU countries the UK trader may be required to register for VAT in that country and charge that country’s VAT rate on the supply. This is because unlike the £83,000 UK threshold many EU countries have a zero threshold. To simplify compliance with the EU VAT rules HMRC introduced the VAT Mini One Stop Shop (MOSS). Please contact us for further assistance if this may apply to your business.

PARKING FINES

It has always been clear that parking fines are not deductible for tax purposes and a recent Tribunal case G4S Cash Solutions (UK) Ltd. v HMRC has removed any doubt.

AUTO ENROLMENT PENSIONS

The implementation of an auto enrolment pension scheme by an employer results in a minimum of total contributions amounting to 2% of salaries being made. This is 1% by the employer and 1% by the employee. The rate of these contributions were scheduled to be increased in October 2017 (5%) and October 2018 (8%). These increases have been delayed for 6 Months i.e. April 2018 (5%) and April 2019 (8%). This is simply to align the increases to the beginning of the tax year.

STAMP DUTY LAND TAX (SDLT)

The new SDLT additional rate of 3% that came into force on 1st April 2016 for second properties resulted in a stampede of transactions before the deadline. HMRC had expected higher SDLT receipts of £30M for the four months running up to this deadline but what they actually received was £482M higher than normal!

I am afraid that if you have not managed to complete the property transaction on a second property by the deadline you have missed the boat and the extra 3% SDLT will unfortunately be payable.

TAX DATES AND PAYMENTS


Date What's Due
19 May

PAYE & NIC deductions, and CIS return and tax, for month to 5/5/16 (due 22 May if you pay electronically)

1 June Corporation tax for year to 31/08/15
19 June PAYE & NIC deductions, and CIS return and tax for month to 05/06/2016 (due 22 June if you pay electronically).

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