2020 Innovation Training Limited Monthly Tax Webinar

Transcription

1 2020 Innovation Training Limited Monthly Tax Webinar Martyn Ingles 22 June 2015 Agenda Queen s Speech future tax legislation HMRC and other recent tax developments Recent tax cases Pension planning - income over 150,000 Proposed IHT family home allowance 1

2 The Queen Speech Summer Budget and Future Tax Legislation Queen s Speech Tax and Benefits Tax Lock No increases in income tax, NIC, or VAT in Finance Bill and NIC Bill Personal allowance = NMW x 30 hours p.w. Scotland Bill delegate powers to set Scottish income tax rate, air passenger duty, aggregates levy, share VAT revenue Full Employment and Welfare Benefits Bill freeze tax credits for 2 years from

3 Queen s Speech not mentioned Measures in Conservative Party manifesto to be included in Summer Budget? - 8 th July Pension Tax relief restricted if > 150,000 IHT additional IHT relief for family home Abolition of Class 2 NIC and merger with Class 4 increase self-employed rate to 12%? Scotland Bill Scottish Tax Powers Enable the Scottish Parliament to: set the thresholds and rates of income tax on earnings keep the first ten percentage points of standard rate VAT raised in Scotland (and 2 5% reduced rate) take responsibility for Air Passenger Duty and the Aggregates Levy 3

4 Scottish Taxpayer 1. a Scottish Parliamentarian; or 2. have a close connection to Scotland, either - having only a single place of residence, which is in Scotland; or - where more than one place of residence, their main place of residence in Scotland for at least as much of the tax year as it has been in another part of the UK; or Scottish Taxpayer 3. where no close connection to Scotland (or any other part of UK) exists through day counting. If the individual spends at least as many days in Scotland as elsewhere in the UK. HMRC provide guidance - similar to UK statutory residence test 4

5 HMRC announcements and other developments UKIP Donations now exempt from IHT Qualifying political party: One member elected at General Election and >150,000 votes cast for party 11 political parties now qualify Gifts during lifetime and on death exempt NB no relief for donations against business profits 5

6 Salary Sacrifices Updated HMRC Guidance Latest update May 2015 to include Auto-Enrolment Legal agreement between employer and employee To change terms of employment contract to reduce entitlement to cash pay in return for non cash benefit Signed before the arrangement takes effect Cannot reduce cash earnings below NMW Can affect certain State benefits e.g. tax credits Typically childcare vouchers, additional pension contribution Salary Sacrifice Examples Salary Sacrifice Non cash benefit 350 a week 50 Childcare vouchers 350 a week 100 Childcare vouchers 5,000 bonus 5,000 Employer pension contribution Tax consequence 300 subject to PAYE, NIC 250 subject to PAYE, NIC Excess over 55 taxable No PAYE or NIC due on pension contribution 6

7 Employment Allowance Scheme in HMRC Spotlight 2,000 allowance introduced 2014/15 Set against employer s NIC Numerous exclusions connected companies etc. Scheme used by employment agencies to set up multiple companies with different director/shareholders HMRC view is that it doesn t work Included in latest updated list of HMRC Spotlights Should have been disclosed under DOTAS Potential 1 million fine for promoter of scheme Employment allowance - exclusions Cannot set against NIC on deemed salary (IR35) Employed for personal, household or domestic work, If already claim the allowance through a connected company or charity If carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example: NHS services General Practitioner services the managing of housing stock for a local council 7

8 Advisory Fuel Rates 1 June 2015 Engine Petrol Diesel LPG < 1400 cc 12p 8p < 1600cc 10p p 9p p > 2000 cc 21p 14p 14p Annual Tax on Enveloped Dwellings (ATED) Applies to UK residential property owned by companies, partnerships with corporate members, and collective investment vehicles ATED rates increased previously applied to properties valued over 2 million at 1 April 2012 Starts at 1m MV for 2015/16-7,000 p.a. and 500,000 MV for 2016/17 (value at 1 April 2012) Numerous reliefs but still need to file a return 8

9 Do we need to file an ATED return Even if a relief applies still need to file a return: Property rental businesses Dwellings open to the public Property developers Property traders Dwellings used for trade purposes Farmhouses New ATED Relief Declaration Return Waiver of penalties for late 2013/14 returns Normal 100 late filing penalty to be waived where taxpayer provided a reasonable excuse HMRC will not challenge the excuse and focus on persistent late filers and tax evasion/avoidance Reasonable excuses: Death of partner shortly before the deadline Unexpected stay in hospital Computer software problems when preparing return HMRC online service issues Postal delays that couldn t be predicted 9

10 Recent Tax cases and Tribunal decisions Reasonable Excuse for late Return? Porter (t/as Crafty Creations) v HMRC (2015) FTT Ms Porter was late with her 2012/13 SA tax return HMRC online service issues unable to log onto HMRC website on 29 January 2014 Telephone and wrote to HMRC HMRC issued new login code and she filed online 5 March 2014 => 100 penalty FTT allowed the appeal reasonable excuse She was doing her best to comply with the legislation 10

11 Appeal against Suspended VAT penalty Automation Ltd v HMRC (2015) FTT Understated output tax for 3 successive quarters just one months outputs included Director did not notice the error! = careless Appealed to Tribunal to have penalty suspended but submitted late Late appeal allowed, but no suspension as there had been an earlier suspended penalty due to earlier careless error VAT Single or Multiple Supply Again Marketing Lounge Partnership Ltd v HMRC (2015) FTT Supply of promotional services, printed brochures, website and other services Argued that brochures should be zero rated HMRC argued that whole service should be standard rated as supply of promotional services Further consideration of Card Protection Plan case Is there economically a single service? If so - ancillary supplies treated same as principal supply Tribunal - a single standard rated supply 11

12 VAT Value of Staff Clothing French Connection Ltd v HMRC (2015) FTT FC supplied in-store staff with clothes from current range up to stated limit If they left they were charged 30% of the value FC did not account for VAT unless the employee left HMRC argued that VAT should be based on cost where annual value > 50 FC argued that these were overalls/ uniform Tribunal taxable supply, VAT due on cost to employer Dishonest Evasion Director Responsible? Mohammed Azam v HMRC (2015) FTT Mr A owned staff agency (Easy Recruitment Services Ltd) Supplied staff to Stubbins no PAYE or NIC on wages Easy told HMRC that staff employed by sub-contractor Also failed to account for VAT output tax HMRC assessed dishonest evasion penalty on Mr A Few records available, 587,000 paid by Stubbins and large cash withdrawals > 500,000 Mr A had sole and complete control of bank account Tribunal dismissed appeal dishonest evasion 12

13 Deeds of Variation effective for IHT, CGT? Vaughan-Jones & ors v Vaughan-Jones & ors (2015) Appeal to High Court on validity of D of V Entered into within 2 years of death Signed by all beneficiaries under original Will/ Intestacy Stands in place of original Will Send to HMRC (Capital Taxes Office) within 6 months Effective for CGT and IHT (but ineffective for IT) Tax Planning Opportunities 13

14 Pension relief to be restricted for high earners Conservative Party manifesto proposal Tax relief restricted for those earning over 150,000 p.a Normal 40,000 annual allowance restricted by 1 for every 2 over 150,000 10,000 annual allowance if income > 210,000 Increase contributions before 8 July 2015? Pension tax relief restriction Earnings Annual allowance Tax relief (max 45%) 150,000 or less 40,000 18, ,000 30,000 13, ,000 20,000 9, ,000 or more 10,000 4,500 14

15 Current Pension rules Annual allowance from 40,000 (was 50,000) Limit applies to employee and employer input Carry forward unused allowance 3 years Excess taxed at highest marginal rate Lifetime allowance 1,250,000 ( 1,000,000 from 2016) Tax relief continues at highest rate 2015/16 3 year carry forward Sybille pension input 60,000 in 2015/ / / /15 Annual allow 50,000 50,000 40,000 Pension input 25,000 30,000 32,000 Unused allow. 25,000 20,000 8,000 Set off firstly against 40, /16 allowance and then 20,000 unused allowance from 2012/13, 5,000 lost? Pay further 5,000 before 6 April

16 Proposed IHT Family Home Allowance Additional 175,000 IHT relief for family home No IHT on transfer of family home < 1,000,000 = ( 325, ,000) x 2 Like NRB transferred to surviving spouse if unused Taper relief by 1 for 2 over 2,000,000 before IHT reliefs e.g. BPR, APR May need to review client s Will s and estate planning wait until 8 July 2015 Proposed IHT Family Home Allowance Taper relief by 1 for 2 over 2,000,000 before IHT reliefs e.g. BPR, APR Family home 900,000, business worth 5m would mean no Family Home relief! Couple with 2m home plus 1m savings owned jointly = 1,500,000 Leave half share to spouse on first death On second death, estate = 3m, no relief 16

17 THE END Any Questions? 17