Archive for the ‘Uncategorized’ Category

Ken Dodd has the last laugh

Wednesday, March 21st, 2018

According to recent press commentary, Ken Dodd married his long-time partner, Anne Jones, just two days before he died. With an estate estimated to be £7m, the executors were facing an Inheritance Tax bill of over £2m, but tying the knot means that assets transferred to Anne can now be made tax-free.

Many years ago, Ken brushed off tax evasion accusations by HMRC. He was accused of numerous counts of tax fraud, and although he settled tax arrears in full, including penalties, he was cleared by the jury in the court case of fraud.

Ken and Anne’s recent actions highlight the tax-free status of transactions between husband and wife, and civil partners. If the receiving spouse is domiciled in the UK, then any assets transferred on death or during life can be made with no liability to capital gains tax or inheritance tax.

As a bonus, Anne will see an uplift in the base cost of any assets subject to capital gains tax, that she receives from Ken’s estate.

For readers with significant estates, who find themselves in a similar position, being married, for tax purposes, is a compelling argument if you want to maximise the value of your after-tax estate for your family.

We offer advice on estate planning and would recommend that you consider your options sooner than two days from your expected demise. Being married is just one of many strategies that you can make to ensure your hard-won assets are protected from taxation on your death.

Making Tax Digital – a reminder for VAT registered traders

Tuesday, March 20th, 2018

From April 2019, certain self-employed businesses will be required to file VAT returns direct to their online personal tax accounts with HMRC. Eventually, all income and allowances will be kept in the digital account that HMRC are setting up to calculate your tax liabilities. HMRC are still hedging their bets, but it is unlikely that business accounts information will need to be uploaded before April 2020.

How will this affect your tax affairs?

It will shift the emphasis from reporting historical data on a tax return or VAT return, to uploading real-time data to your personal tax account.

Banks, building societies, pension providers and employers will be required to “push” information to HMRC. And you will be obliged, in most cases, to upload quarterly information to HMRC on the profitability of your business or property letting income business.

Q: How will I have to send information; all I have is a spreadsheet?

A: The upload will have to be done electronically and if you already use bookkeeping software that we have recommended, this facility will be in place in good time. If you haven’t considered the use of accounts software, please call. We can help you get everything ready before the upload obligations begin from April 2019 when VAT returns will need to be filed in this way.

Q: How will I know if the information I am sending means I will pay too much tax or VAT?

A: Once the changes are fully implemented, certainly not before April 2020, we will be offering a service to check your accounts data for you before it’s uploaded. This check will also include a review of VAT uploads. We will also check your personal tax account at least once a year (at the end of each tax year) to make sure that the income tax liability assessed is correct. The year’s end review will include a look at ideas to reduce your tax bill, if appropriate planning opportunities are available.

If you are likely to be affected by these changes and are still undecided which accounts software to use, please call so that we can get you prepared.

GDPR, 75 days to go

Monday, March 19th, 2018

A reminder that the General Data Protection Regulation is due to become law 25 May 2018. At the time of writing this blog, that’s 75 days to become compliant.

Why should you take the GDPR seriously?

Basically, because there are significant financial penalties for getting it wrong: fines of up to 4% of an organisation’s worldwide turnover. Which is why larger corporations are sitting up and taking notice of the GDPR; this new regulation places respect for the rights of an individual for privacy squarely at the feet of the UK business community.

Aside from the penalties that may be levied for non-compliance there are also compelling commercial reasons for getting to grips with GDPR. For example, your customers – to achieve GDPR compliance – will be required to make sure that any organisation that handles their personal data is also GDPR compliant, and that may mean you. If they ask you for confirmation that you are compliant, and you are unable to confirm, they may be obliged to seek an alternative supplier.

Accordingly, the GDPR will affect all our businesses. We will also need to respect it’s legal standing, as Brexit or no Brexit, the GDPR is being adopted into UK law.

New requirements, not in the present Data Protection Act 1998, include:

  • Reporting data breaches.
  • Cross-border considerations.
  • New rights for customers: need to inform them how you are using their personal data and their rights under the GDPR to request that personal data is deleted.
  • Need to demonstrate that your business is mitigating against risks of misuse of personal data.

Business owners and staff need to appreciate that from 25 May 2018, assessing and protecting customers, suppliers and staff personal data (essentially protecting their privacy) needs to be of paramount concern.

Spring Statement 2018

Wednesday, March 14th, 2018

As you would expect, the Spring Statement delivered by the Chancellor Philip Hammond, to Parliament on 13 March 2018, was peppered with party political jibes no doubt intended to lift the spirits of his own party and dismay the opposition parties.

There was very little “promised” in terms of new tax or other strategic items that we are used to in a Budget speech; we will need to wait until autumn 2018 for news of changes to government spending and changes to the tax code.

The new-style spring statements are intended to deliver:

  • An update on the health of the UK economy and Office for Budgetary Responsibility (OBR) forecasts,
  • An update on progress made since Autumn Budget 2017, and
  • Invitations for interested parties to give their views on proposed policy changes.

A summary of the matters that were disclosed follow:

1. Economy and fiscal forecasts

  • Indicators for GDP growth, manufacturing output, and employment are forecast to rise.
  • The indicators for inflation and government borrowing are forecast to fall.

The Chancellor’s message in this part of his presentation was upbeat but cautious. He would consider relaxing his expenditure criteria, but only if the positive indicators continued. His consistent message was “there is a light at the end of the tunnel, but caution is still required”.

2. Progress since Autumn Budget 2017 items cited included:

  • Housing challenges: progress is being made to meet housing needs by working with local authorities and other parties. Mention was made of the 60,000 first time buyers who have benefitted from the stamp duty concessions announced last year.
  • Helping households: cited increases in basic tax allowances at the last budget and increases in the National Living Wage to £7.83 per hour.
  • The Chancellor also announced that the next business rates revaluation will take place a year earlier than planned, in 2021, with further reviews every three years starting 2024.
  • Improving transport in English cities; plans to allocate the £1.7bn of funding announced in the Autumn Budget 2017. Half the funding has been allocated to Combined Authorities with mayors, the balance to cities across the UK via an invitation to bid.
  • Improving the UK’s digital connectivity. The aim is to roll out full-fibre to local areas.

3. Inviting views on future changes to the tax system.

These will include:

  • Reducing single-use plastic waste through the tax system. This will look at ways to reduce the impact of plastic waste in our environment such as disposable plastic cups, cutlery and foam trays. Some of the tax revenue raised will be used to fund research into new ways to encourage a more responsible use of plastic.
  • Making sure multinational digital businesses pay a fair share of tax. This is an ongoing attempt to ensure that the larger digital players pay tax in the UK on sales they make in the UK.
  • Seeking views on the role of cash in the new economy. Will cash become less relevant as digital payment processes become more widely used? This and the prevention of the use of cash to avoid tax and to launder the proceeds of criminal activity will be opened to a wider debate.
  • Supporting people to get the skills they need. Improving skills to benefit growth in the economy by investing in upskilling and retraining, especially by the self-employed.

As mentioned in our introduction today, there was much “padding” to the Chancellor’s presentation, but the overall impression was a “steady as you go” approach. It will be interesting to see how wider political issues, such as the forthcoming Brexit negotiations, will play their part in the shaping of future fiscal policy. Only time will tell.

Time to raid piggy banks

Thursday, March 8th, 2018

From the 1 March 2018, the old-style £10 notes featuring Charles Darwin, ceased to be legal tender. A recent announcement by Companies House suggests the following actions:

Time is ticking for the old paper £10 banknote. We’re advising all businesses to take ‘note’, as there’s just a few days left to spend your old ‘tenners’.

Figures from the Bank of England suggest there’s still £2.2 billion of old paper £10 notes in circulation. But, from midnight on 1 March 2018, these old paper notes will stop being legal tender. This means that from this date, you’ll no longer be able to spend the old paper notes, featuring Charles Darwin.

Changing your old banknotes

From 1 March, most shops and other businesses will only accept the new polymer or ‘plastic’ £10 notes, featuring Jane Austen. But, you’ll still be able to exchange any old paper tenners for free at the Bank of England, either by post or in person.

Some retailers, banks and building societies may choose to accept the old notes after this deadline. But, they don’t have to.

New polymer notes

Paper banknotes of £5, £10 and £20, are being gradually replaced by polymer ones, which are more secure and harder to counterfeit. These new banknotes also have raised bumps and dots, to help blind and partially-sighted users identify each banknote by touch.

They’re also more resistant to dirt and wear, so last longer. According to the Bank of England, this means they’re better for the environment, with a lower carbon footprint than the old paper notes.

Other banknotes

The old paper £5 note has already been replaced, and a new polymer £20 banknote will be issued in 2020. The Bank of England hasn’t confirmed if the £50 note will be replaced.

If you have petty cash boxes or a safe where old notes may be hoarded time to see if your bank will exchange them, if not, you will need to organise a trip to the Bank of England or check out their website at where you can pick up instructions on how to exchanges notes by post.

Massive fine for making VAT payment one day late

Tuesday, March 6th, 2018

In a recent case considered by the courts a company was fined £297,845 for being one day late in paying their VAT.

The case highlights the unpredictable, and seemingly harsh outcomes of HMRC’s VAT surcharging rules.

If you pay your VAT on time, whether quarterly or monthly, and you make sure that you file your VAT returns in good time, before the filing deadlines, you need have no fear of incurring VAT surcharge liabilities. They only arise if you are a late filer or late payer.

A key point to remember is that the VAT default surcharges increase each time a default occurs: from 2%, 5%, 10% and 15%. The only way to reset the penalty clock back to zero is to be free of default events for a complete calendar year.

In the case highlighted in this article, the company had various past default events and had reached the 10% penalty band. It’s VAT liability was £2,978,459, and therefore the penalty was £297,845.

Unfortunately, the company could produce no compelling excuse for the late payment and the court upheld the surcharge.

Whilst the outcome of this case was exceptional, £297,845 seems an extraordinary amount to pay for being one day late in settling a bill, it is a salutary reminder to file and pay VAT returns before the due dates so that you do not find yourself on the default surcharge treadmill. And if you do default, redouble efforts to file and pay on time for a full year to reset the default clock to zero.

New protection for company directors from identity fraud

Monday, March 5th, 2018

The Department of Business, Energy & Industrial Strategy issued the following announcement last week:

  • Company directors are twice as likely to be victims of identity fraud, research shows
  • New laws will allow directors to remove their personal address from the company register whilst still ensuring transparency at Companies House
  • Protection will help to ensure the UK continues to be one of the best places in the world to start a business – a key part of our Industrial Strategy

New laws to help protect company directors from identity fraud and personal harm will be introduced by the Government. The new laws will enable company directors to remove their personal addresses from the UK’s official company register on Companies House. Directors must still provide their business address as a legal requirement.

This comes in response to reports that fraudsters are using this publicly available information to pose as company directors to buy products online. There are also concerns the information is leaving company directors vulnerable to violence and intimidation.

They are twice as likely to be the victims of identity fraud, with company directors being victims in one in five recorded cases, according to research by fraud prevention organisation Cifas.

These new regulations will also help to ensure people feel safe when setting up a new business by protecting directors from identity fraud.

Currently, personal addresses can only be removed when Companies House and the relevant authorities judge there is a serious risk of violence or intimidation because of the company’s work.

The new laws will also ensure transparency in legal information as public authorities such as the police, the insolvency service and the pension regulator will still be able to access directors’ information, such as their personal address.

The laws will come into force by the end of summer 2018.

Tax and making loans to employees

Monday, March 5th, 2018

A reminder that making loans to your employees or their relatives can create tax problems for employees and employers. For example, the employer will have an obligation to report a beneficial loan to HMRC and the deemed benefit would be a taxable benefit in kind for the relevant employee. A beneficial loan is one that is interest free or the rate charged is below the “official rate” and the benefit is the difference between these interest rate charges. Further, the benefit would increase the employer’s Class 1A NIC bill at the end of the tax year.

Fortunately, certain loans are exempt from this reporting obligation. These may include loans employers provide:

• in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),

• with a combined outstanding balance due from an employee of less than £10,000 throughout the whole tax year,

• to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out – the official rate for 2017-18 is 2.5%,

• under identical terms and conditions as those provided to the public (this mostly applies to commercial lenders),

• that are ‘qualifying loans’, meaning all the interest qualifies for tax relief.

Loans written off also create a National Insurance Class 1 charge for the employee. They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC from the employee’s salary, on the amount written off for tax purposes.

Calculating the taxable benefits for chargeable loans can be somewhat complex and readers are advised to take advice if they are unsure of their tax and NIC responsibilities. Don’t forget “employees” includes directors and loans to family members may be caught.

Inheritance tax in for an overhaul

Monday, March 5th, 2018

The Office for Tax Simplification (OTS) has been tasked by government to review key aspects of the inheritance tax (IHT) legislation. According to information posted to the government’s website recently, the review would appear to be wide ranging. Issues to be examined include:

  • The process around submitting IHT returns and paying any tax, including cases where it is clear from the outset that there will be no tax to pay;
  • The various gifts rules including the annual threshold for gifts, small gifts and normal expenditure out of income as well as their interaction with each other and the wider IHT framework;
  • Other administrative and practical issues around routine estate planning, compliance and disclosure, including relevant aspects of probate procedure, in relation to situations which commonly arise;
  • Complexities arising from the reliefs and their interaction with the wider tax framework;
  • The scale and impact of any distortions to taxpayers’ decisions, investments, asset prices or the timing of transactions because of the IHT rules, relevant aspects of the taxation of trusts, or interactions with other taxes such as capital gains tax; and
  • The perception of the complexity of the IHT rules amongst taxpayers, practitioners and industry bodies.

We will be keeping a keen eye on the outcome of these deliberations as they could turn even the most basic IHT planning on its head. We will keep readers informed when the OTS publishes its report although it may be some time before any changes are enacted and have a direct impact on estate planning. The OTS doesn’t envisage publishing its initial report until the Autumn of this year.

Tax-free childcare support expanded

Monday, March 5th, 2018

From 14 February 2018, tax-free childcare is available to all remaining eligible families: parents whose youngest child is under 12. The new scheme aims to help working parents with the cost of childcare.

According to government, it is quick and easy to apply, and parents could save thousands of pounds each year. For every £8 parents pay into their childcare account, the government will add an extra £2, up to £2,000 per child per year. HMRC has been gradually rolling out tax-free childcare since April 2017.

Parents must each expect to earn (on average) at least £120 per week (equal to 16 hours at the National Minimum or Living Wage). If either parent is on maternity, paternity or adoption leave, or you're unable to work because you are disabled or have caring responsibilities, you could still be eligible.

However, if either you, or your partner, expect to earn £100,000 or more, you can’t get tax-free childcare. Also, you can’t use tax-free childcare at the same time as childcare vouchers, Universal Credit or tax credits. You can use it with the 15 hours and 30 hours schemes.

You can use tax-free childcare to help pay:

  • Registered childminders, nurseries and nannies
  • Registered after-school clubs and playschemes
  • Registered schools
  • Home careworkers working for a registered home care agency

Parents, including the self-employed, can apply online for tax-free childcare by visiting Childcare Choices at