Tax Newsletter May 2015

Transcription

1 Tax Newsletter May 2015 This month s newsletter includes articles explaining the changes to Capital Gains Tax on private residences, highlights tax relief on the use of the home for self employed and the importance of being protected against a HMRC enquiry. Our next newsletter will be published Thursday, 4 June Our team regularly tweet with the latest tax news, tips and approaching deadlines follow us for the latest updates! Recognition of our tax expertise We are excited to share the news that we have been ranked as finalists in the prestigious Lexis Nexis Taxation Awards 2015 for Best Tax Practice in a Regional Firm with a decision anticipated on the winners on 21 May Our Executive Chairman Clive Stevens, commented; We are delighted our tax team has been recognised in these awards again. Providing clients with the highest quality service is our core value and I have personally thanked all our employees for their dedication and commitment. Testimonials from clients were provided as part of the judging process so we are particularly proud to have been shortlisted in this award. The above follows the firm s national success at the British Accountancy Awards 2014 where we won Training Team of the Year. It is through our fantastic training programme that our staff have become trusted advisers to clients. Watch this space! Tax changes for residential property From 6 April 2015 non UK tax residents will be subject to UK Capital Gains Tax (CGT) on the disposal of residential property, whether let out or used personally previously, such disposals were generally outside the scope of UK CGT. However the tax exposure relates to the post 5 April 2015 gain only and this can be calculated using a 5 April 2015 valuation or simple time apportionment. Where a property is occupied as the only or main home, Principal Private Residence Relief (PPR), which can exempt gains on property, may be available to non residents, but only if they meet an occupancy test i.e. they occupy the property for at least 90 days in a tax year. A PPR election determining which of two or more homes is the main home may be available. There are special rules for declaring gains, making the above election, and paying the tax. For more information, please ask for our factsheet Residential property and UK non residents. With regard to UK tax residents, the PPR election has not been withdrawn as originally feared but the availability of PPR relief may be restricted where the home is owned abroad. From 6 April 2015, a home located abroad can only qualify for PPR relief where the occupancy test mentioned above is met. This may affect those having a home in the UK, and a second home abroad which has been elected to be the main home for PPR purposes. For more information, please marketing@krestonreeves. com requesting a copy of one (or both) of our new free factsheets Residential property and non UK residents or Overseas property UK owners and private residence relief. If you wish to discuss how these changes may affect you personally please speak to your usual Kreston Reeves contact or call Nigel Moon on Self employed and working from home? As technology advances, it becomes increasingly easy to work from home and if you are self employed, you can claim tax relief on the costs associated with working at home. HM Revenue and Customs (HMRC) guidance states that a deduction is allowable provided part of the home is used solely for business purposes at that time. Even if most of the individual s trade is carried on elsewhere, a deduction can be claimed for the business proportion of household expenses. In general, where there is a dual purpose, tax relief is available on that part of the cost attributable to business use. The calculation of the tax deductible element can be time consuming and involves maintaining records of expenses incurred. The apportioning of expenditure can be done on an appropriate basis and there are no fixed rules. It will typically involve initially allocating the expenditure on, for example, the area of the room being used to the total size of the home, and then on the time that room is used for business purposes compared with non business use. Where the use is only minor, for example writing up the records for the business, HMRC may accept a reasonable estimate.

2 HMRC will however allow a fixed rate deduction where a home is used partly for business purposes for more than 25 hours per month. The deduction is to cover running costs such as heat, light, power, telephone and broadband/internet costs. The flat rates are based on the number of hours the home is used for business purposes each month as follows: Number of hours worked per month 25 or more or more or more 26 Flat rate per month If a claim is made based on the flat rates above, it does not prevent a separate claim for a business proportion of fixed costs such as council tax, insurance and mortgage interest. One word of warning however is where any part of a private residence is used exclusively for business use, a proportion of the capital gains exemption for private residences could be lost in respect of the area used exclusively for business purposes. Therefore it is important to ensure that there is some private use of the room, for example by other family members. For further information, please speak to your usual Kreston Reeves adviser or contact Jamie Hopkins on Tax changes from 6 April 2015 There were a plethora of tax changes that came into effect on 6th April 2015 and these are summarised as follows:- Personal Tax Individuals over the age of 55 have flexible access to their defined contribution pension savings The Income Tax Personal Allowance increases to 10,600 The higher rate Income Tax threshold increases to 42,385 The new Marriage Allowance comes into effect The starting rate of savings Income Tax reduces from 10% to 0% for savings up to 5,000 The cash ISA limit increases to 15,240 Child Trust Funds can now be transferred into Junior ISAs Spouses can now inherit their deceased partner s ISA benefits If an individual dies before the age of 75, they can now pass on their unused defined contribution pension savings free of Income Tax Beneficiaries of individuals who die under the age of 75 with a joint life or guaranteed term annuity can now receive any future payments from such policies free of Income Tax Employers will no longer have to pay employer NICs for employees under the age of 21 Class 2 NICs for the self-employed can now be collected through Self Assessment The Employment Allowance extends to include people employing care and support workers to look after themselves or family members A new annual remittance basis charge of 90,000 is introduced for non-domiciled individuals who have been resident in the UK in at least 17 of the last 20 years, and the charge paid by nondomiciled individuals who have been resident in the UK in at least 12 of the last 14 years has increased from 50,000 to 60,000 Non-UK resident individuals, trusts, personal representatives and narrowly controlled companies are now subject to Capital Gains Tax on gains accruing on the disposal of UK residential property Capital Gains Tax annual exemption amount has increased to 11,100 The Capital Gains Tax charge on disposals of properties liable to ATED extends to cover residential properties worth 1 million - 2 million The requirement that 70% of Seed Enterprise Investment Scheme money must be spent before EIS or VCT funding can be raised is removed The Fuel Benefit Charge multiplier for both cars and vans increases by RPI The Van Benefit Charge increases by RPI. In the Van Benefit Charge rate paid by zero emission vans is 20% of the rate paid by conventionally fuelled vans Tax Credit payments are stopped in-year where, due to a change in circumstances, a claimant has already received their full annual entitlement Corporate/Business Tax The Corporation Tax rate has been reduced to 20% The new Diverted Profits Tax has been introduced The bank levy has increased from 0.156% to 0.21% Air Passenger Duty has been restructured - abolishing bands C and D Hospice charities, blood bikes, search and rescue, and air ambulance charities will be eligible for VAT refunds Business rates changes (England only): - The business rates multiplier has increased from 48.2p to 49.3p (47.1p to 48.0p for small business multiplier). This includes the 2% inflation cap - The Small Business Rate Relief scheme has doubled for a further year - providing 100% relief for businesses with a single property with a rateable value of less than 6,000, and tapered relief with a rateable value of 6,000-12,000 - The business rates discount for shops, pubs, cafes and restaurants with a rateable value of 50k or below has increased from 1,000 to 1,500 The cultural test for high-end TV tax relief has been modernised and the minimum UK expenditure requirement for all TV tax reliefs has reduced from 25% to 10% A new tax relief on the production of children s television has been introduced The amount of banks annual profit that can be offset by carried forward losses has been restricted to 50%

3 Two new bands for the Annual Tax on Enveloped Dwellings (ATED) have been introduced Capital Gains Tax exemption for wasting assets will only apply if the corporate selling the asset has used it in their own business An investment allowance for North Sea oil and gas, replacing the existing offshore field allowances and simplifying the existing regime, has been introduced A reduced rate of fuel duty to methanol will apply - the rate is 9.32 pence per litre Fuels used to generate good quality electricity by CHP (Combined Heat and Power) plants for onsite purposes are exempt from the Carbon Price Floor Climate Change Levy main rates have increased in line with RPI The VAT registration threshold has increased from 81,000 to 82,000 and the deregistration threshold from 79,000 to 80,000 Scottish Government s Land and Buildings Transactions Tax (LBTT) will replace Stamp Duty Land Tax in Scotland The associated companies rules have been replaced with simpler rules based on 51% group membership The standard and lower rates of landfill tax have been increased in line with RPI If you need more information regarding any of these changes please speak to your usual Kreston Reeves contact on Director / partnership share protection The implications for your business should a director or business partner die can be extreme. If their ownership of the shares or of the business passes to their spouse or beneficiary through Will provision, this is where the problems can start. The appropriate measures need to be in place so that the ownership does not end up in the wrong hands, a competitor for example or possibly worse, in the hands of an inexperienced family member of the deceased who has very little understanding of how the business operates. By using a formal agreement that gives the option to both the continuing business owners and the deceased s beneficiaries for the purchase of the deceased s share of the business, this problem can be alleviated. This secures the ownership for the remaining individuals and ensures that money is available for the beneficiaries if either party requires this outcome. To discuss this in more detail, please contact Lee Hayward at Kreston Reeves Financial Planning Ltd on Reclaim VAT from mileage payments If you pay your employees a mileage rate for the business use of their personal vehicles, as long as you do not exceed the approved rates per mile, there is no necessity to report these payments to HMRC and the payment will not be treated as a taxable benefit. Employers and employees may also find the notes that follow instructive: 1. The maximum tax free rates per mile for the use of a car are: 45p per mile for the first 10,000 business miles and 25p per mile thereafter. 2. Employers are not obliged to pay these rates, but if they are exceeded the excess will need to be reported to HMRC as a benefit in kind. 3. If employers pay less than the 45p (25p) rates the employee can obtain tax relief on the difference by making a claim to HMRC. 4. Employers can reclaim the deemed VAT on the fuel elements of the mileage allowance payments by using the approved fuel rates. See table below. Advisory fuel rates per mile from 1 March 2015 are: 1400cc or less: petrol 11p; LPG 8p cc: petrol 13p; LPG 10p. Over 2000cc: petrol 20p; LPG 14p. Diesel rates are: 1600cc or less: 9p cc: 11p Over 2000cc: 14p Example: David is paid for a 200 mile business trip at 30p per mile (his annual business mileage claims are well below the 10,000 maximum). He runs a 1500cc petrol car. He can make a claim to HMRC to deduct 30 mileage allowance from his taxable pay (200 x 15p). His employer can recover VAT input tax on the fuel element (200 x 13p) x 1/6 = If you would like help to make back-dated claims to recover VAT if you are an employer; or make a claim if you are paid less than the 45p (25p) rate, please speak to Melanie Tragner on for further advice. Have HMRC connected with you yet? HMRC s growing reliance on the Connect database could mean an increasing number of innocent taxpayers face investigation Connect, which was first launched by HMRC in 2010, gathers data and information from multiple public and private sources, including banks, local councils and even social media, to help HMRC identify where tax avoidance and evasion may be an issue. As well as cross-referencing the information reported by taxpayers on their tax returns against information on their finances and lifestyle stored elsewhere, the database also highlights business s where turnover and reported profits are significantly lower then others in their industry.

4 Over 80% of all tax investigations undertaken by HMRC now follow potential leads generated through Connect, which is worrying, as innocent taxpayers could face an increased risk of a lengthy and complex tax investigation, because of the strict profiling analysis carried out by the database. The Connect database has already been central to a number of targeted campaigns carried out by HMRC. The recent crackdown on underpaid tax by buy-to-let landlords, for instance, is likely to have been driven by data obtained and stored from the Land Registry, as well as that provided by letting agents Particularly striking is the gathering of information from social media in an attempt to build a more comprehensive overview of taxpayers lifestyles. Online posts about luxury holidays or expensive cars could trigger increased scrutiny if HMRC decides, that on the surface the lifestyle does not fit with an individual s reported income. We have had a client asked where the source of Funds was coming from in respect of a bid he made for an auction item on Children in Need. However, the information processed by Connect may not always be entirely reliable or representative of an individual s circumstances, and there may well be alternative explanations, such as an individual receiving gifts from family or simply exaggerating his or her lifestyle. Whilst some taxpayers targeted as a result of leads generated by Connect may be guilty of tax evasion, many are more likely to be innocent, and as well as the financial cost of an enquiry, the time and emotional stress of having your business or your personal tax affairs raked over by HMRC should not be underestimated. Whilst you might not think you have done anything wrong, HMRC s computer system may think otherwise. This is why Kreston Reeves have for many years run a Fee Insurance Protection scheme which can give you peace of mind that we are with you all the way if you were enquired into, and that RISK is growing. To ensure you have the best support going and to find out more please contact Nick Alder, who is our specialist Tax Investigation Partner on nick.alder@krestonreeves.com or by phoning Over 65 and fed up with 0.5% interest on your savings? Those aged over 65 who have yet to take advantage of the Government s Pensioner Bonds (available since January) need to know that the opportunity closes on 15 May 2015 from which date the bonds will no longer be on sale. Each individual can invest up to 20,000 in such bonds with up to 10,000 into a one year bond (paying 2.8% p.a. interest) and up to 10,000 in a three year bond (which pays 4% p.a.). Interest on these bonds is taxable but in practice many will be able to enjoy their interest free from tax due to the new personal savings allowance introduced in the March Budget as shown by the following example: Mrs Gabriel invested 10,000 in a new 1 year bond on 12 May One year on she will receive 280 of interest on which she will pay nil tax as her total savings income for the year to April 2017 will be less than the new 1,000 threshold applying to her (as a basic rate taxpayer). Clearly time is of the essence for those aged over 65 who have yet to take advantage of these very competitive products. You can apply by phoning or online at com/65plus If you wish to discuss Pensioner Bonds or any other investments in more detail please speak to a Kreston Reeves Financial Adviser on Tax diary May/June May Due date for Corporation tax for companies required to pay their tax by instalments with a year end of 31 January, 30 April, 31 July, or 31 October 19 May PAYE and NIC deductions due for month ended 5 May (If you pay your tax electronically the due date is 22 May 2015.) 19 May Filing deadline for the CIS300 monthly return for the month ended 5 May May CIS tax deducted for the month ended 5 May 2015 is payable by today. 31 May Ensure all employees have been given their P60s for the tax year. 1 June Due date for Corporation Tax payable for the year ended 31 August June Due date for Corporation tax for companies required to pay their tax by instalments with a year end of 28 February, 31 May, 31 August or 30 November. 19 June PAYE and NIC deductions due for month ended 5 June (If you pay your tax electronically the due date is 22 June 2015.) 19 June Filing deadline for the CIS300 monthly return for the month ended 5 June June CIS tax deducted for the month ended 5 June 2015 is payable by today.

5 Kreston Reeves winners of Accountancy Firm of the Year award at the M&A awards Shortlisted in the Business and Financial Services category at the London Loves Excellence Awards Kreston Reeves achieved the One to Watch standard 2013 from Best Companies, the name behind The Sunday Times Best Companies to Work For list. Shortlisted as Mid Tier firm of the Year at British Accountancy Awards Winner of the Developing People for Business Success award at the Gatwick Diamond Business Awards Kreston Reeves have made every effort to ensure accuracy at the time of publication. Information may be subject to legislative changes. Recipients should note that information may not reflect individual circumstances and should, therefore, not act on any information without seeking professional advice. We cannot accept any liability for actions taken or not taken as a result of the information given in this factsheet. Kreston Reeves LLP (the Firm) is a Limited Liability Partnership registered in England and Wales with registered number OC Registered office: 37 St Margaret s Street, Canterbury CT1 2TU. Registered to carry on audit work in the UK and Ireland by the Institute of Chartered Accountants in England and Wales. Details about our audit registration can be viewed at for the UK and for Ireland, under reference number C A member of Kreston International A global network of independent accounting firms. Kreston Reeves Financial Planning Limited, which is wholly owned by the Firm, is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales with registered number Registered office: 37 St Margaret s Street, Canterbury CT1 2TU. Kreston Reeves Corporate Finance LLP is a Limited Liability Partnership registered in England and Wales with registered number OC Registered office: 37 St Margaret s Street, Canterbury CT1 2TU. Kreston Reeves Corporate Finance LLP is authorised and regulated by the Financial Conduct Authority. Website: enquiries@krestonreeves.com Kreston Reeves Tax Newsletter May 2015 Kreston Reeves