To May’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
Please contact us for advice on your own specific circumstances. We’re here to help!
Automatic enrolment for pensions
To encourage workers to start building up retirement benefits, the Pensions Act 2008 introduced certain reforms requiring all employers to offer workplace pension schemes and to enrol eligible workers into their schemes. These reforms are commonly known as the ‘automatic enrolment’ provisions. Automatic enrolment is currently being phased in, starting with the largest UK employers – eligible employees should have been enrolled by 1 February 2018 at the latest. By October 2018, all existing employers will be required to offer workplace pensions to eligible workers.
Broadly, ‘eligible workers’ are workers who:
– are aged between 22 and state pension age;
– earn over the earnings threshold, which is currently £10,000 a year; and
– work, or ordinarily work, in the UK and have a contract of employment, or who have a contract to provide work and/or services personally. – read more>>
Tax-free savings update
Although interest rates for savings generally remain low, there are still a few tax-efficient savings opportunities on offer, with increased savings thresholds taking effect from 6 April 2018. – read more>>
HMRC launch consultation on employee expenses
As confirmed the Spring Budget 2017, HMRC have launched a consultation on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer. The main objectives of the consultation, which will run until 12 June 2017, are to understand:
– if the current rules or their administration can be clearer and simpler;
– whether the tax rules for expenses are fit for purpose in the modern economy; and
– why the cost to the exchequer of the tax relief for expenses which are not reimbursed has increased.
Expenses form an integral part of the tax system as tax relief can be claimed on eligible expenses. However, the cost of providing this relief is significant – HMRC state that the tax relief on expenses which employers do not reimburse and employees then claim from HMRC costs the Exchequer £800m per year, and there has been a 25% increase in claims between 2009-10 and 2014-15. – read more >>
VAT Flat rate scheme: changes take effect
The VAT flat rate scheme (FRS) is used by many small businesses to help simplify their VAT reporting obligations. Businesses could often gain a cash advantage from using the scheme, but this advantage has been significantly curtailed from 1 April 2017, particularly in relation to service-related businesses. Whilst the FRS continues to operate, many businesses will no longer find it economical to use.
Broadly, the FRS is a simplified VAT accounting scheme for small businesses, which allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. When using the FRS, the business ignores VAT incurred on purchases when reporting VAT payable, with the exception of capital items which cost £2,000 or more. If the business incurs few expenses, and it operates in a sector with a relatively low FRS percentage, it will pay out less VAT to HMRC under the FRS than it would outside the scheme. Historically, many businesses have registered for VAT voluntarily before their turnover reached the VAT registration threshold, so they could make use of the cash advantage offered under the FRS. – read more >>
IPSE urges public sector contractors to take the HMRC’s new ESS test to avoid tax uncertainty
Are you a contractor working in the public sector? Are you aware of the new IR35 changes introduced in the Spring Budget? If not, then it might be in your interest to look at the latest advice issued by the Association of Independent Professionals and the Self-Employed (IPSE) and check your.
So why is the IPSE advising contractors working in the public sector to check their IR35 returns? Well, it claims confusion has arisen following the public sector rule changes introduced in the Spring Budget, 2017. As a result of these changes, public sector organisations are the ones who must now determine the IR35 status of each of its contractors; rather than the individual contractors themselves. – read more >>
New Dividend Tax Allowance is causing problems for contractors and freelancers submittingonline
Are you a freelancer or a contractor working via a Personal Service Company? Are you having difficulties filing your 2016-17 tax return, particularly since the introduction of the new Dividend Tax Allowance? Well, if the research by the Freelancer and Contractor Services Association (FCSA) is to be believed, then you are not alone. The FSA has claimed that since the new dividend tax allowance was implemented, many UK freelancers and contractors have struggled to file their self-assessment tax returns. – read more>>
May Question and Answer
Q. My company owns a car which is used during the day by various employees for business travel only. However, since there is no overnight parking facility at our business premises, one of my employees takes the car home each night and parks it outside his house. He does not use the car privately. Am I correct in assuming that no taxable benefit arises?
A. Unfortunately not. To qualify for exemption under the pool car rules, the vehicle must not normally be kept overnight on or near the residence of any of the employees. In addition, home to work mileage is counted as private use, so if the car is being taken home every night by the same employee then the private use is unlikely to be considered merely incidental. It is unlikely that HMRC would accept that no taxable benefit arises in this case.
Q. My elderly mother-in-law has an income of around £18,000 a year, which is made up of state retirement pension, widow’s pension and attendance allowance. Should she be paying any income tax on this?
A. Attendance Allowance is a weekly amount of state benefit paid to qualifying individuals to help them with personal care because they are physically or mentally disabled and aged 65 or over. It is paid at two different rates depending on the level of care needed. It is however, a tax-free state benefit. If the widow’s pension is a War widows pension, it will also be exempt from tax, but if not, then it will be taxable (note that Bereavement Allowance replaced widow’s pension some years ago and new claims are no longer accepted). The state retirement pension is taxable but your mother-in-law should be entitled to the personal allowance of £11,500 for 2017/18, which she can off-set against this.
Q. I recently entered into a contract to sell my former trading premises. The sale agreement was unconditional, with a deposit being paid by the purchaser of £25,000. The balance was due to be paid in two equal annual instalments. However, the buyer has now told me that he has fallen on hard times and will not be able to proceed with the purchase. Under the terms of our agreement, he has forfeited his deposit and I have therefore kept this money. Can you please confirm the capital gains consequences of this?
A. If a disposal is made under an unconditional contract, the date of disposal is the date the contract is made. It is not the later date when the asset is conveyed or transferred to the purchaser. For land and property in England and Wales therefore, this is usually the date of exchange of contracts as opposed to the completion date. However, where the disposal (completion) does not in fact occur following the sale agreement, then no disposal in fact takes place for capital gains purposes. The forfeited deposit you kept will be treated as a capital sum received under an Option which is subsequently abandoned, which means it is treated as a one-off receipt in the year.
May Key Tax Dates
2 – Last day for car change notifications in the quarter to 5 April – Use P46 Car
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/5/2017
31 – Deadline for copies of P60 to be issued to employees for 2016/17