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 - October 2016


Welcome to the October 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


HMRC reorganisation AGAIN!


Since the merger of the VAT office and the Tax office back in 2005 there have been over a dozen major reorganisations of the new combined
department HM Revenue and Customs (HMRC). This is basically happening once a year and yet another one is in the process of being implemented.

Even the government is a bit taken back at HMRC's need to do this on such a regular basis and the chairman of the Treasury raised the question. The response from HMRC and I quote "These changes will help us to become an organisation that is truly focused on customers, providing great customer service and designing policies, products and processes with customers in mind." This is simply PR spin that says absolutely nothing and does not answer the question as to why the constant upheaval in their department is happening. I would also point out that taxpayers are not customers. Customers have a choice and can walk away but taxpayers cannot and have to deal with the inadequate service currently on offer from HMRC. I cannot see that this will Improve anytime soon.

The tax credits service was outsourced to a US firm Concentrix on a payment by results contract but we understand that this company's contract is not being renewed. The company incorrectly withdrew tax credits from hundreds of claimants. One such claimant was a teenage mother, who was wrongly accused of being married to a 74 year old man who turned out to be dead. You couldn’t make this stuff up!!

Offshore tax evaders

A new online disclosure, The Worldwide Disclosure Facility (WDF) has been put in place to give offshore tax evaders one final chance to come forward and settle their unpaid taxes. Under the WDF any tax evaders that come forward will have to pay the tax due plus interest plus a minimum tax penalty of 30%. In addition, they could still face criminal prosecution.
This does not look very appealing and the future is looking very bleak indeed for offshore tax evaders.

HMRC are currently receiving an unprecedented amount of data on offshore accounts and the new Common Reporting Standards (CRS) coming into force next year will increase this tenfold. The CRS will help provide HMRC with taxpayers Information from tax authorities from around the world. By September 2018 more than 100 jurisdictions will be sharing information with the UK. International co-operation through global transparency is making the world a much smaller place tax wise and tax evaders will soon have nowhere to hide.

In the 2014/2015 tax year HMRC secured 26.6bn by tackling tax evasion and over 2.4bn was from offshore evasion. Approximately 90 individuals are currently facing criminal investigations with a total fraud value in excess of 748m.

If tax evaders have not taken advantage of the WDF by September 2018 a new set of tougher sanctions will apply. These have not been finalised yet but penalties could be linked to the underlying assets with a minimum penalty being 100% of the tax due. In addition, criminal prosecution could be made more likely.

On the 30 September 2016 The International Tax Compliance Regulations came into force. These impose on professional firms the legal requirement to remind their UK clients of their obligations to declare gains and income, in particular from overseas. This is one more example of the government getting its message across.

If you have issues you need to talk to us without delay.

Liquidating a company – is it a capital gain?


One of the anti-avoidance measures being introduced by the latest Finance Bill potentially changes the way that certain payments to shareholders will be taxed. This may result in payments following some company liquidations being taxed as dividends instead of capital gains.

The Government is concerned that the new higher rates of income tax that have applied to dividends since 6 April 2016 may tempt some shareholder/directors to extract value built up within their companies in a capital form, rather than paying out the retained profits as dividends. This is because capital gains are generally taxed at a lower rate than income, possibly as low as 10% where entrepreneurs’ relief is available.



For example, a higher rate taxpaying shareholder receiving £100,000 on the liquidation of his company would pay £32,500 (32.5%) if the antiavoidance applies, whereas CGT would be just £10,000 (10%) if entrepreneurs’ relief is available. Consequently, new stricter rules are being introduced to apply to transactions on or after 6 April 2016.

When is a liquidation taxed as income?

For the new anti-avoidance rules to apply, the company being wound up must firstly be a close company and the individual must have held at least a 5% interest in the company (ordinary share capital and voting rights). A further condition is that the individual (or connected person) continues to carry on thesame or a similar trade or activity to that carried on by the wound-up company within the two years following the distribution.

It must also be reasonable to assume, having regard to all of the circumstances that the
arrangements appear to have tax advantage as one of the main purposes.

ADVISORY FUEL RATE FOR COMPANY CARS

These are the suggested reimbursement rates for employees' private mileage using their company car from 1 September 2016. Where there has been a change the previous rate is shown in brackets.


Engine Size

Petrol

Diesel

LPG

1400cc or less

 

10p

 

7p

1600cc or less

 

 

9p (8p)

 

1401cc to 2000cc

 

13p (12p)

 

9p (8p)

1601 to 2000cc

 

 

10p

 

Over 2000cc

 

20p (19p)

12p (11p)

13p

 

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

VAT Implications of Employee Mileage Claims
Note that where employers reimburse their employees 45p per mile for using their own cars they are able to reclaim input VAT based on the amounts shown in the table.

In the case of a 1600cc diesel car that would be 1.5 pence per mile. (9p x 20/120). Such a claim needs to be supported by a receipt from the filling station.


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.