Chartered Tax Advisers
Old Bishops' College

T: 01992 642024


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  TAX E-NEWS - Monthly Updates November 2014

Welcome to our monthly tax newsletter designed to keep you informed of the latest tax issues.

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

Part 2

As advised in last month's newsletter, the Chancellor, in his March 2014 Budget, announced that there would be significant changes to allow individuals to have greater access to their pension funds.

From 6 April 2015 you will be allowed to withdraw 100% of the funds held within the pension scheme. The first 25% will still be tax free and the remaining 75% will be subject to a tax charge which will depend on your marginal tax rate.

You can take as much or as little of the pension fund as you want and stagger the draw down over a number of years to minimise the tax liability arising.

You may recall the Press suggesting that some individuals may decide to spend their pension pot on a Lamborghini! The occasional person may well do just that but it is after all their money and they should be in a position to do whatever they like with it. Treating people like adults and giving them control over their money has to be a good thing. I am sure that the majority of people who have been prudent enough to save for their retirement will not change their nature and will continue to be cautious and sensible with their money.

We have a number of small companies many which over the years have accumulated sizeable retained profits which are doing nothing but sitting in corporate bank accounts earning a pittance of interest. It would seem to us that a good option now is to make sizeable pension payments out of these funds.
Depending on both the company's and the individual's circumstances, profit levels etc. it should be possible to obtain 20% tax relief on annual contributions of up to £40,000 per individual.

If you wish to explore this option please take professional advice so that all relevant factors can be considered to evaluate if this is a valid option for your business.

Another suggestion with regard to pensions is that an individual over 55 could make a contribution into a pension scheme and then immediately withdraw 25% of the fund tax free. Unfortunately from 06 April 2015 there are anti-avoidance rules to limit “recycling” which state that where an individual’s fund is in draw down, a maximum of £10,000 may be paid in each year for the purpose of obtaining tax relief. Again despite the anti avoidance rules, depending on individual circumstances, this option may be worth considering.

A further thought on this subject, with me being the cynic that I am, is that the current regime with regard to tax relief on pensions is very generous indeed. My suspicion is that whichever party gets into power next year may take action to restrict that tax relief obtainable on pension contributions. I expect that there is a window of opportunity here which may be seriously curtailed in the 2015 Autumn statement

Property in Spain
We have historically advised individuals, when they buy property in France, to hold the property via an offshore company. This prevents a conflict between French civil law and English common law which means that on the death of the owner an impasse can arise and the inheritance of the property is left in limbo.

Having had a recent experience with a client who died owning property in Spain and, as a result being enmeshed in Spanish law and its punitive inheritance tax, we would now suggest that serious consideration be made for all UK individuals to hold their Spanish property via an offshore company. The shares in the company can be left in a UK Will and there is no impact from Spanish law and tax.

Employment allowance
The employment allowance of £2,000 became available from 06 April 2014. Eligible employers can reduce their employer Class 1 NICs liability by up to £2000. When employers pay employees they will normally pay Class 1 employers national insurance at 13.8% and employees will pay 12%. The £2000 can only be set against the employer’s national insurance (13.8%) liability.

I would assume that if businesses have professional help in preparing their payroll there should not be a problem but if businesses are preparing their own payroll then please double check that this has been claimed or you could miss out.

Beneficial Loan
Since 1994 there has been a £5,000 exemption on loans made to employees by their employer. The intention here was for this to cover season ticket loans for commuting. There was no taxable benefit on the employee and there was no national insurance charge on the employer.

For 2014/2015 onwards this exemption has been increased to £10,000. This can also be applied to existing loans carried forward from previous years.

Please note that the official rate of interest which is used to calculate the benefit on loans greater than £10,000 has been reduced from 4% to 3.25%

Medical Costs
Medical insurance paid by employers on behalf of their employees is taxable, reportable on forms P11d and subject to Class 1A national insurance at 13.8%

There are however tax exemptions if the employer pays for:
1) the employees’ eye tests.
2) health screening and medical checkups

We understand that a further tax exemption amounting to £500 will shortly be introduced for any payment made by the employer on behalf of the employee in respect of medical treatment which has been recommended by an occupational health service. More details to come.

The suggested reimbursement rates for employees’ private mileage in their company cars are reviewed each quarter on 1 March, 1 June, 1 September and 1 December. The following rates apply from 1 September 2014, with the previous quarter’s rates shown in brackets:

Engine size Petrol Diesel LPG
1,400cc or less 14p   9p
1,600cc or less   11p (12p)  
1,401cc to 2,000cc 16p   11p
1,601cc to 2,000   13p (14p)  
over 2,000cc 24p 17p 16p

If you reimburse your employees the tax free amount of 45p a mile (25p after 10,000 miles) for using their own car for business purposes, 20/120ths of the above amounts can be reclaimed as input VAT by your business e.g. a petrol engine car over 2,000 cc = 24p x 1/6 = 4p VAT a mile.


Date What's Due
1 Nov Corporation tax for the year to 31/10/2014
19 Nov PAYE and NIC deductions, CIS return and tax for month to 5/11/2014 (due 22 November if you pay electronically)
29 Nov Corporation tax for the year to 28/02/2014