Archive for the ‘Uncategorised’ Category

Are your bank deposits protected

Tuesday, November 21st, 2017

The Financial Services Compensation Scheme (FSCS) is the place to go if your bank or other regulated organisation is unable to pay claims against it.

For most of us this will mean that our deposits with banks authorised to hold deposits by the Financial Conduct Authority (FCA and the Prudential Regulation Authority (PRA) will be able to recover funds up to certain limits.

What are the current limits?

From the 30 January 2017, deposits with approved institutions are covered up to £85,000 per person.

Please note the following:

  1. All your eligible deposits at the same bank are added together and the total is subject to the £85,000 limit.
  2. The limit of £85,000 applies to each person. In the case of joint deposits, the £85,000 limit applies to both depositors.
  3. Deposits held in the name of business partnerships or similar groupings are treated as if made by a single depositor.

Additionally, from 3 July 2015, the FSCS will provide up to a £1 million protection limit for temporary high balances held with your bank. For example, funds held after:

  • The sale of a main residence.
  • A death.
  • The depositor’s marriage or civil partnership, divorce, retirement, dismissal, redundancy or invalidity.
  • The receipt of insurance benefits, or compensation for criminal injuries or wrongful conviction.

How long before I get my money back?

Reimbursement will be made in line with the following published time limits:

  • Up to 31 December 2018 – within 20 working days
  • From 1 January 2019 to 31 December 2020 – within 15 working days
  • From 1 January 2021 to 31 December 2023 – within 10 working days
  • From 1 January 2024 – within 7 working days

January 2018 and taxes to pay

Thursday, November 16th, 2017

January is the month when individuals and businesses are required to pay tax.

If your business is a limited company, and your tax year ends 31 March 2017, any corporation tax due for that year is payable 1 January 2018. Unlike your self-employed counterparts – see below – no payments on account are required for 2017-18.

If you are a self-employed business person, sole trader or in partnership, any underpayment of self-assessment tax, Class 2 and 4 NIC (for 2016-17) will be due for payment 31 January 2018. On the same date, tax payers in this category will need to make a possible payment on account for the tax year 2017-18. This is based, initially, as 50% of your actual liability for the previous year, 2016-17.

Which is why it’s worth taking a moment to consider what your financial results may be for 2017-18. If you consider that your self-employed profits, or other taxable earnings will be lower during 2017-18 (as compared to 2016-17) then you can elect to recalculate the payments on account for 2017-18.

We should always be on the lookout for ways to protect our hard-earned cash resources, which is why undertaking this simple review may help to take the sting out of the January tax payment.

You will also be glad to know, that if the results of this exercise show that your profits or taxable income have increased during 2017-18 (compared to 2016-17) it is not necessary to increase your payments on account for 2017-18. However, self-assessment taxpayers in this position should be aware that any shortfall between payments on account made and the actual liability for 2017-18 will still be payable, albeit later, on 31 January 2019.

If you feel that your earnings will be lower for 2017-18 we can help you crunch the numbers to see if a valid election to reduce your tax payments next year is a viable option. Every little helps.

Child benefit tax trap

Tuesday, November 14th, 2017

A family claiming the weekly Child Benefit (currently, £20.70 a week for eldest or only child and £13.70 a week for additional children) may get an unwelcome tax bill if either parents’ income exceeds £50,000 during a tax year.

A tax charge was introduced a number of years ago, known as the ‘High Income Child Benefit Charge’ (HICBC), if either parent had income over £50,000 and:

  • either partner received Child Benefit, or
  • someone else received Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.

It doesn’t matter if the child living with you is not your own child. The charge was introduced to recover Child Benefits from higher income earners.

You may not have considered the HICBC before if your incomes were below the £50,000 cap, but if your income for 2017-18 is likely to exceed this amount you should be aware of the following.

  • Before 6 October 2018, the parent with the higher income for 2017-18 (more than £50,000) will need to register to submit a self-assessment tax return and pay and HICBC due – unless they are already registered in which case they will need to enter the amount of Child Benefit received on the return and pay any tax due.
  • The parent with the higher income, even if they were not the person claiming the Child Benefit, will need to make this declaration.

1% of the Child Benefit received will be recovered by HMRC’s HICBC for every £100 the highest earner’s income exceeds £50,000. Accordingly, once the highest income exceeds £60,000 all the Child Benefits received will be reclaimed.

To avoid the charge, it is possible to decline Child Benefits in the first place. To summarise:

  • Parents where the highest income is below £50,000 will not be affected and can continue to claim Child Benefit with no tax claw back.
  • Parents where the highest income is above £50,000 but below £60,000 will be affected and will need to pay the appropriate HICBC.
  • Parents where the highest income is over £60,000 may be advised to decline future Child Benefit claims as all benefits received will be clawed back by the HICBC.

There are strategies that you could use to reduce your taxable income below the £50,000 or £60,000 thresholds as these are calculated net of any allowable deductions. Please call if you would like more advice regarding these deductions.

Abolition of self-employed NIC to be deferred

Friday, November 10th, 2017

The Low Incomes Tax Reform Group (LITRG) has welcomed a recent announcement by the Government that there will be a one-year delay before the removal of Class 2 National Insurance contributions (NICs) to enable consultation on the impact of its abolition on the self-employed with low incomes.

If Class 2 NICs were abolished, those with profits below the small profits threshold (currently £6,025) would currently have to pay Class 3 contributions, which are five times as much as Class 2 contributions, if they want to build up an entitlement to contributory benefits such as the state retirement pension. LITRG is keen for a way to be found for the low-income self-employed to continue to be able to make affordable savings towards their pension at a rate like the present Class 2, perhaps by introducing a lower rate of Class 3.

LITRG Chair Anne Fairpo said:

“We welcome the announcement by the Government that they intend to consult with organisations such as ours which have concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits. We look forward to working with the Government to lessen the risk of unintended consequences.

“The abolition of Class 2 NICs will be a significant change to how people contribute to qualify for certain benefits and the State Pension.

“We welcome the breathing space on this matter because of our concerns that the abolition of Class 2 was being rushed through without adequate further consultation, together with a lack of publicity and guidance for the people affected.”

The delay means the measures in the unpublished NIC Bill will now take effect one year later, from April 2019. This includes the abolition of Class 2 NICs, reforms to the NICs treatment of termination payments, and changes to the NICs treatment of sporting testimonials.

Smaller businesses to be drawn into the VAT net

Thursday, November 9th, 2017

The Office of Tax Simplification (OTS) published a report setting out a range of proposals for simplifying VAT. According to the OTS the tax is showing its age. What was meant to be a simple tax has become highly complex and it has not kept pace with changes in society.

The most significant issue identified in the report is the VAT registration threshold – the turnover level above which a business must enter the VAT system and charge VAT on its sales. At £85,000 the UK has one of the highest levels in the world.

By enabling many small businesses to stay out of the VAT system the high threshold is a form of simplification, but it’s an expensive relief, costing around £2bn per annum, and evidence strongly suggests that many growing businesses are discouraged from expanding beyond this point. The report looks at options for reducing the current ‘cliff edge’ effect resulting in a very visible bunching of businesses just before the VAT threshold, and an equally large drop off in the number of businesses with turnovers just above the threshold. Also examined are the advantages and disadvantages of lowering or increasing the threshold.

VAT has many ‘quirks’. For example, it is well known that a Jaffa cake is a cake (zero-rated) rather than a chocolate-covered biscuit (taxed at 20%). Less well known is that while children’s clothes are zero-rated, including many items made from fur skin, items made from Tibetan goat skin are standard-rated. And a ginger bread man with chocolate eyes is zero-rated but if it has chocolate trousers it would be standard rated. VAT zero rates cost over £45bn per annum to maintain. EU law limits options to make changes in this area but there is a longer-term opportunity to significantly improve the efficiency, simplicity and fairness of the UK VAT system.

The OTS report, will need to be examined in some detail. It will be interesting to see if we could achieve a real simplification of this complex tax or if, yet again, smaller businesses are required to absorb more red tape and tax burden while larger concerns with stronger lobbies and resources continue to avoid liability.

Clampdown on child maintenance cheats

Monday, November 6th, 2017

If a parent owes child maintenance, deductions to recover that debt can currently only be made from a bank or building society account held solely by them.

Unfortunately, a small minority of parents are cheating their way out of supporting their children by putting their money into a joint account with a partner.

New laws will be brought in to allow deductions to be made from joint accounts to recover child maintenance arrears.

It is believed that by closing this loophole this could stop many parents getting away with not paying their child maintenance each year – leading to more than £390,000 additional child maintenance being collected.

The recent government’s response to a public consultation on joint account deductions has been published. This sets out how deduction orders against joint accounts will work and the safeguards that will be in place to protect the other holder of the joint account.

These include:

  • a deduction order only being imposed on a joint account when the paying parent does not have their own account, or there is not enough money in their own account
  • only funds belonging to the paying parent being targeted, as before a deduction order is made on a joint account, data on that bank account will be collected and bank statements examined to establish which money in the account belongs to the paying parent
  • existing safeguards already in place for deduction orders for child maintenance will apply to this new power, including the maximum deduction rate on regular orders being set at 40% of the paying parent’s weekly income
  • both account holders will be given the right to make their case before a deduction order is made

The new power will come into effect early next year.

Paying self-assessment tax by instalments

Wednesday, November 1st, 2017

If you file your 2016-17 self-assessment tax return on or before 30 December 2017, you can elect to spread the repayment of any underpayment of tax for 2016-17 to the tax year 2018-19. This is done by amending your tax code for 2018-19 such that any arrears are repaid by increasing your tax payments each pay period.

There are caveats to the use of this facility, one of which we have already mentioned, that you need to file your 2016-17 return online by 30 December 2017 (if you still file a paper return the filing deadline has passed, 31 October 2017, and so this option would not be available unless you filed prior to this date).

There are two further limitations:

  • You owe less than £3,000 for 2016-17, and
  • You pay tax via PAYE on your employed earnings or on a private pension.

Additionally, you won’t be able to repay outstanding tax via your tax code if:

  • You would pay more than 50% of your PAYE income in tax, or
  • You would be paying more than twice as much tax as you usually do.

If you can use this scheme it would spread your tax repayments over a twelve-month period (6 April 2018 to 5 April 2019).

Carry back charitable donations

Wednesday, November 1st, 2017

One of the few remaining options to carry back tax allowable payments to a previous tax year is the facility to set off certain charitable donations made after 5 April 2017, to the tax year 2016-17.

Allowable donations have the effect of extending the amount of income you can earn at the basic rate of income tax – the donations extend the basic rate tax band. This can be a useful planning device if say your income for 2016-17 included a one-off boost that meant you paid higher rate tax (40%), but your income for 2017-18 would only be taxed at basic rate (20%). By carrying back any charitable donations made after 5 April 2017, you would decrease your higher rate tax liability for 2016-17.

You automatically qualify for basic rate income tax relief on your gift aid donations, you effectively pay a net of tax figure to the charity and they reclaim the deemed basic rate tax from HMRC. Accordingly, this carry back option will have no impact on your tax liabilities if you are a basic rate tax payer in both years. The carry back will also have no effect on the charities’ finances.

Taxpayers need to be careful when considering their options as you can only qualify for relief if your tax payments in a year equal or exceed the deemed basic rate tax credits deducted from your donations. HMRC notes confirm:

But for Gift Aid, you can also claim tax relief on donations you make in the current tax year (up to the date you send your return) if you either:

  • want tax relief sooner
  • won’t pay higher rate tax in current year, but you did in the previous year

You can’t do this if:

  • you miss the [filing] deadline (31 January [2018] if you file online [for 2016-17])
  • your donations don’t qualify for Gift Aid – your donations from both tax years together must not be more than 4 times what you paid in tax in the previous year.

If you feel that you may benefit from this strategy we would be delighted to check out the numbers for you.

Corporation tax payment deadline for March year end companies

Wednesday, November 1st, 2017

Many companies have adopted the end of March each year as their accounting year end date.

Corporation tax is payable by most smaller companies nine months and one day after the end of their accounts year end. Accordingly, companies that have adopted a 31 March date will need to pay any corporation tax liability for the year to 31 March 2017 on or before 1 January 2018; just a few weeks away.

The same dates also determine the payment of additional corporation tax if certain overdrawn director’s loans (at 31 March 2017) are not repaid before the end of the year. Additional corporation tax due will be based on 32.5% of any applicable director’s or shareholder loans affected by this ruling. The tax can be recovered, but there will be a delay. Repayments cannot be made until the effective payment date for the accounting year during which the loans were cleared. Effectively, if the loans are paid back May 2018, a refund will not be made until 1 January 2020.

Tax Diary November/December 2017

Wednesday, November 1st, 2017

1 November 2017 – Due date for corporation tax due for the year ended 31 January 2017.

19 November 2017 – PAYE and NIC deductions due for month ended 5 November 2017. (If you pay your tax electronically the due date is 22 November 2017.)

19 November 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2017.

19 November 2017 – CIS tax deducted for the month ended 5 November 2017 is payable by today.

1 December 2017 – Due date for corporation tax due for the year ended 29 February 2017.

19 December 2017 – PAYE and NIC deductions due for month ended 5 December 2017. (If you pay your tax electronically the due date is 22 December 2017)

19 December 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2017.

19 December 2017 – CIS tax deducted for the month ended 5 December 2017 is payable by today.

30 December 2017 – Deadline for filing 2016-17 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2018-19.