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 - November 2016


Welcome to the November monthly tax newsletter.  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



Right to work checklist!

If you are taking on a new employee, you need to be aware of the new rules that came in to force on the 12 July 2016 which means that an employer commits an offence if he employs an illegal worker. There is a possible civil penalty of up to £20,000 per employee and if an employer knowingly employs an Illegal worker it will be treated as a criminal offence with up to 5 years imprisonment and/or an unlimited fine for the employer.

If an employer carries out the necessary checks he will have a statutory excuse against liability of the civil penalty. This is only valid if the employer does not knowingly employ an illegal worker.

It is not possible to establish a statutory excuse by outsourcing the checks to a third party such as an independent payroll company.

The necessary checks can be broken down into:
- Obtain original versions of one or more acceptable documents (e.g. passport).
- Check the document's validity in the presence of the holder.
- make and retain a clear copy and record the date the check was made.

The Home Office has produced a checklist document which can be downloaded using the link below:

https://www.gov.uk/government/publications/right-to-work-checklist

We strongly suggest that you carry out these checks on all new employees without exception using and retaining the checklist as proof.

Investing for Children

As soon as a child or grandchild is born he/she is a legal person and can hold investments and where relevant can pay tax. He/she is entitled to an annual tax free personal allowance of currently £11,000.

As a parent the first thought might well be to transfer some of your savings in to the child's name to utilise their personal allowance and save tax. Unfortunately, the tax man has thought of that and any investment income derived from assets gifted to a child when the child is under 18 will always be taxed on the parent. If interest arising on these investments is below £100 it is ignored for these purposes and will be treated as the child's income. Grandparents, other relatives, godparents and anyone else do not have this restriction and have complete freedom to transfer or make investments to the child subject to inheritance tax rules.

Given the length of time that investments placed in the name of the child would normally be allowed to grow and mature this could be a very worthwhile exercise in providing for their future. Providing a nest egg to pay for their first car (plus insurance), university fees/costs, funding a gap year, a deposit on their first house and even their pension, by planning ahead a parent could save money in the long term.

The only downside is that unless formal legal settlements (trusts) are used, which can be expensive, when the child reaches 18 they will have immediate access to the funds. A parent or other relative should weigh up the pros and cons of this.

One way of investing for a child is via Junior Individual Savings Accounts (ISAs). A child who is under 18 and living in the UK can on an annual basis have funds (cash or stocks/shares) placed in a Junior ISA up to a current limit of £4,080 p.a. Like normal ISAs these funds grow tax-free inside the ISA wrapper. Once the child reaches 18 all such funds are transferred to the adult ISA scheme and he/she will have immediate access.






Investing for Children - continued.

My favourite option is, as soon as a child is born, to pay contributions into a junior pension scheme. The annual limit is £3,600 and as the government automatically tops it up by 20%, the actual payment made is only £2,880.00. Consistently doing this on an annual basis for the first few years of a child’s life should with the length of time ahead result in a very sizeable pension pot of which 20% has been paid for by the government.

Taxpayers fear HMRC failings leave them open to investigation

Completion of self-assessment tax returns is complex and an untrained lay person has a high risk of innocently leaving out some information or forgetting to declare something. This leaves them open to investigations and tax penalties. A new HMRC survey shows that only 48% of individuals believe that HMRC have systems in place to stop or help prevent taxpayers making mistakes. The design of the tax form could be made far more straightforward. Accountants have not completed these forms manually for years and pay for expensive software to generate the tax returns.

HMRC could allocate far more resources to answering the telephone so that questions or unclear areas can be explained. Again, in the survey only 43% of individuals surveyed had a positive experience on the telephone. I am surprised it is that high as whenever I telephone HMRC I can wait for sometimes half an hour or more before having my call answered. In addition, on wading through numerous options one can get the message ‘all our operators are busy’ and then to be automatically cut off. Somewhat frustrating to say the least!

I understand that HMRC are allocating substantial resources to online media such as Twitter, Facebook, LinkedIn and YouTube.

This has to be a positive step for the younger tech savvy mobile generation. However, I do feel that HMRC should firstly ensure that adequate well trained staff operate their helplines so that taxpayers can get through to them in a reasonably short amount of time and have their questions answered.

Gifts to Staff

From 6 April 2016, new rules were introduced to allow employers to provide their directors and employees with certain “trivial” benefits in kind, tax-free. So, this exemption will generally apply to small gifts to staff at Christmas or on their birthday.

There are of course a number of conditions that need to be satisfied to qualify for the exemption as follows:
- the cost of providing the benefit does not exceed £50.
- the benefit is not cash or a cash voucher
- the employee is not entitled to the benefit as part of any contractual obligation.
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties.

Not exactly generous but it is something!


TAX DATES AND PAYMENTS



Date What's Due
1 October

 

Corporation tax for year to 30/12/15

5  October
Deadline for notifying HMRC of chargeability for 2015/2016 if not within Self Assessment and receive income or gains on which tax is due.
19 October
PAYE & NIC deductions, and CIS return and tax for month to 05/10/2016 (due 22 October if you pay electronically).


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.