THE 2015 CHANCELLORS PRE-ELECTION BUDGET JOHN GREEN ANNE WILSON LISA KENNERY NADEEM HUSSAIN

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1 THE 2015 CHANCELLORS PRE-ELECTION BUDGET JOHN GREEN ANNE WILSON LISA KENNERY NADEEM HUSSAIN

2 JOHN GREEN Director

3 BLACKBURN & DARWEN BUSINESS SURVEY 2014: THE RESULTS Performance and Prospects

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5 ANNE WILSON Senior Tax Manager

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7 HISTORY REPEATING ITSELF? Married couple s allowance Children Deeds of variation 10 years of pension changes

8 COMPANY CARS Fell out of fashion when rules changed in 2002 based on emissions Manufacturers have caught up lower emissions and hybrid vehicles Private fuel do the sums Enhanced capital allowances for low emission vehicles extended to 2018

9 EXAMPLE Porsche Panamera SE Hybrid Range Rover Vogue SE BMW 5 Series M Sport Active Hybrid List Price 89,000 83,000 51,000 Fuel Consumption (mpg) Co2 (g/km) Benefit in Kind (2015/16) Tax Payable (at 40%) Capital Allowances (in first year) 8,010 30,710 13,770 3,204 12,284 5,508 89,000 8,300 5,100

10 EMPLOYMENT TAXES & NIC Statutory exemption for trivial benefits in kind guidance to published Voluntary payrolling of benefits in kind from April 2016 maybe restricted to certain benefits Employers NIC abolished all workers under 21 earning up to 42,385 Employers NIC abolished for apprentices under 25 earning up to 42,385 Class 2 abolished in the life of the next parliament and Class 4 to be reformed

11 CAPITAL ALLOWANCES Annual investment allowance on first 500k ends on 31 December 2015 Announcement in Autumn Statement not expected to return to 25k Enhanced capital allowances for energy saving and water efficient technologies list to be updated

12 CAPITAL ALLOWANCES: EXAMPLE Annual investment allowance Company year-end 31 March ,000 x 9/12 = 375,000 25,000 x 3/12 = 6,250 Maximum relief if expenditure pre 31 December 2015 is 381,250 But Maximum relief if expenditure post 1 January 2016 is 6,250

13 CAPITAL ALLOWANCES: EXAMPLE Annual investment allowance Company year-end 31 March ,000 x 9/12 = 375, ,000 x 3/12 = 25,000 Maximum relief if expenditure pre 31 December 2015 is 400,000 But Maximum relief if expenditure post 1 January 2016 is 25,000

14 SAVINGS Tax free savings from April for basic rate 500 higher rate No relief for additional rate Interest paid gross from April 2016 tax collected via coding from 2017 Flexible ISAs and Help to buy ISA

15 CAPITAL GAINS TAX Entrepreneurs relief anti-avoidance Goodwill on incorporation Associated disposals 5% withdrawal Management Companies and JV relief denied Normal Holdcos not affected

16 PENSIONS No change to contribution levels Bring forward unused pension premium relief Lifetime allowance reduced to 1m from 6 April 2016 transitional protection Lifetime allowance indexed from 6 April 2018 Contributions can be used to take income below 100k to avoid loss of personal allowance

17 SALARY SACRIFICE Salary sacrifice for pension contributions NIC saving for employer and employee Ensure paperwork is in order

18 SALARY SACRIFICE Bonus of 20k sacrifice for pension contribution Employer saves 2,760 in NIC, employee saves 400 in NIC Employer increases the contribution to the pension fund by 2,760 Pension fund receives 22,760 Cost to employer after CT relief = 18,208

19 SALARY SACRIFICE Employee receives bonus of 20k net of tax and NIC = 11,600 Employee makes net pension contribution of 11,600 Employee reclaims higher rate tax relief of 2,900 Pension fund receives 14,500 including basic rate tax relief Cost to employer after CT relief = 18,208

20 GOODBYE TAX RETURNS HELLO DIGITAL TAX ACCOUNTS? View and manage tax affairs online One account to cover all taxes HMRC will provide information from PAYE banks etc. Will the software cope?

21 LISA KENNERY Payroll Manager

22 WHERE HAVE WE BEEN? Stakeholder pension schemes Introduced in 2001 Employers with 5 or more employees What did the employer legally have to do?

23 WHY CHANGE? People are living longer!

24 WHAT IS AUTOMATIC ENROLMENT? Pension Act 2008 All UK employers Phased Requirement Key Requirements Know your Staging date Use of postponement

25 ASSESSMENT OF WORKERS When to Assess Pre-assessment, costing purposes Staging Date Ongoing New workers Those not already in the qualifying pension scheme Re-assessment What to Assess Workers age Qualifying earnings Identifying relevant pay reference period Identify what is payable in the period Compare against earnings trigger

26 CATEGORY OF WORKERS 2014/15 Qualifying earnings 10, ,000 Eligible Non- Eligible 5,772 Entitled SPA SPA-74 Age Eligible You must auto enrol this category Entitled This category may join. The employer does not have to contibute Non-eligible This category may opt in, if they do the employer must contribute

27 PHASED CONTRIBUTION LEVELS When Employer Employee Total Your staging date Sept % 1% 2% Oct 2017 Sept % 3% 5% From Oct % 5% 8%

28 OTHER KEY REQUIREMENTS Deduction of the pension contributions EE & ER Information sent to pension provider each pay period Communications to employees Audit log Declaration of compliance

29 COMMON PRACTICAL ISSUES Existing pension scheme Qualifying workplace pension Ensure setup correctly to cope with Auto Enrolment Software Middleware is there a need? Payroll/Pension provider Communication between all parties involved

30 CONSEQUENCE OF NON-COMPLIANCE Fines from the regulator Stage 1 A compliance/unpaid contribution notice Stage 2 - Fixed penalty of 400 Stage 3 - Escalating daily penalties

31 HOW DOES THE FUTURE LOOK? Contributions levels Following Australia Pots follow member Funds under certain thresholds to move with workers.

32 NADEEM HUSSAIN Head of Tax Services

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34 PENSIONS FREEDOM AND CHOICE Contribution levels restricted to 40,000 p.a. Lifetime allowance will fall to 1m from 2016 From April 2015, ability to access 25% tax free cash (as before) plus income at marginal rates On death pre age 75, family can access remaining fund free of tax On death post age 75, family can access remaining fund at marginal rate of tax What does it mean for estate planning?

35 ESTATE PLANNING In general terms, if pension fund not needed leave undrawn Not chargeable to IHT on death of member, could pass tax free to family or trust Death benefit trusts still relevant Speak to your IFA!

36 PENSION DEATH BENEFITS NEW RULES Age 75 Uncrystallised and crystallised fund (before age 75) Fund available as lump sum without tax deduction (excess above lifetime allowance taxed at 55%) Beneficiary access to pension fund flexibly, at any age, free of tax Uncrystallised and crystallised fund (after age 75) Lump sum to beneficiary less 45% recovery charge Beneficiary access to pension fund flexibly, at any age, taxable at marginal rate

37 CONSIDERING PENSION DEATH TRUSTS Benefits from Pension fund Spouse takes only what is needed Tax 0%/45%, marginal dep. on date of death Remainder stays outside estate Spouse nominates cascading benefits Benefits via trust Benefits pass to Trust Tax 0%/45%, trustee rate dep. on date of death Trust monies outside of estate Original member establishes future beneficiaries Original member has no control over future beneficiaries Pension Death Trusts become more about control than taxation

38 HMRC ENQUIRIES & INVESTIGATIONS (THE LAST 5 YEARS) Widely acknowledged poorer standards of customer service at HMRC Focus on tax avoidance and evasion Targeted campaigns at specific industries Disclosure facilities to minimise likely penalties and period the enquiry covers. New facility to be introduced in 2016

39 HMRC ENQUIRIES & INVESTIGATIONS (THE LAST 5 YEARS) Increased penalty rates Naming and shaming Targeted enquiries CONNECT information from banks, government departments, overseas Tax schemes practically non existent

40 HMRC ENQUIRIES & INVESTIGATIONS (THE LAST 5 YEARS) The avoidance of taxes is the only intelligent pursuit that still carries reward -John Maynard Keynes

41 THE OFFSHORE DIMENSION Any foreign bank accounts Offshore companies holding UK residential properties Non UK domiciled individuals Remittance basis charge rising to 90,000 p.a.

42 SDLT CHARGES Residential Non-Residential First 125,000 0% First 150,000 0% Next 125,000 2% Next 100,000 1% Next 675,000 5% Next 250,000 3% Next 575,000 10% Above 500,000 4% Above 1.5m 12% Notes 1. Multiple dwellings relief to apply? 2. Companies buying personal residence on properties with value > 500k 15%

43 STRATEGIC ISSUES FOR OWNER MANAGED BUSINESSES Review structure of the business Does it support future plans? Review salary / dividends payment structure Protection from business risk Any plans for sale / MBO Shares for key people Maximise reliefs Research & development Patent box Capital allowances AIA Enhanced Integral features Review areas at risk of tax enquiries

44 STRATEGIC ISSUES FOR OWNER MANAGERS Review entitlement to Entrepreneur Relief Any non trading assets? Review entitlement to Business Property Relief Any surplus cash? Sales / succession / MBO plans Understanding pension fund choices Contributions Access Wills and Estate Planning Don t rely on Deeds of Variation Review areas at risk of tax enquiries

45 JOHN GREEN Director

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