The Chancellor announced the creation of a NICs Employment Allowance in the 2013 Budget. This is planned to start on 6 April 2014 and moved a step closer to becoming law with the First Reading of the Bill on 14 October 2013.

HMRC have published the following background information about the scheme:

“In the March 2013 Budget, as part of its strategy to encourage business growth, the Government announced that it will introduce an employment allowance of £2,000 a year for all businesses, charities and CASCs to offset against their liability for Class 1 secondary NICs.

To keep the process as simple as possible for employers, the employment allowance will be delivered through standard payroll software and HMRC’s Real Time Information (RTI) system. HMRC will add a facility to the RTI Employer Payment Summary (EPS) referring to the employment allowance in the form of a “yes/no” indicator and payroll software providers will do the same. HMRC will amend its basic PAYE tools to have an EPS facility to help those employers who do not have such a facility on their software.

To claim the allowance, the employer will have to signify his intention to claim by completing the yes/no indicator just once. The employer will then offset the allowance against each monthly Class 1 secondary NICs payment that is due to be made to HMRC until the allowance is fully claimed or the tax year ends. The following tax year, the allowance will be available as an offset against a Class 1 secondary NICs liability as it arises during the tax year.

The employment allowance will apply per employer, regardless of how many PAYE schemes that employer chooses to operate, so each employer can only claim for one allowance. It will be up to the employer which PAYE scheme to claim it against.”

Sir Richard has decided to leave the UK and live in his holiday home. He wants more time to surf, kite surf, play tennis and stay limber practising pilates. He says that his decision is not dictated by tax considerations. His personal wealth is estimated to be £3.5bn which means he can spend several million pounds a year for the next 50 years and still be a wealthy man.

He’s done all the right things to justify a non-resident tax status in the UK; sold his family home in the UK, albeit to his children, and the implication is he will run his global empire from Necker Island, part of the BVI group. He will still pay tax in the UK on his earnings made in the UK. According to the Sunday Times, Virgin Group Holdings is controlled by family trusts based in the British Virgin Islands. Income tax rates in the BVI will not present tax planning problems for Sir Richard, they are 0%.

Hopefully, we have not seen the last of Sir Richard on home turf. He can revisit the UK for a certain number of days each tax year without unbalancing his non-residence tax status.

A number of trade associations have issued warnings to their members recently. They are concerned that HMRC are making an issue of business mileage recording. Apparently, employers are failing to keep adequate records of mileage for employees who have the use of company vehicles.

Self-employed business owners can also be caught out by the same issue. If you are a sole trader or partner in a business and have the use of a business vehicle for a mix of private and business mileage you should keep a record of your total mileage for the tax year and your total business mileage. Any claim for vehicle running costs, or a claim for capital allowances, should then be adjusted to remove any private use element, using the mileage data collected.

HMRC are still running a business record check campaign. Business owners should take steps to regularise their record keeping ensuring that they are compliant with legislation. If you have any doubts about the systems you presently use to record mileage, or any other aspect of your business record keeping, please call and we will undertake a review on your behalf. A few adjustments to your present routines may be preferable to an uncomfortable audit by HMRC and possible additional tax bills, penalties and interest payments.
 

We have enough information about the UK’s economic woes to keep us depressed for many years to come. Every week we are told why sustainable recovery from recession and its after effects is just round the corner. The problem is the “corner” is mobile, always just out of reach.

Which is why the current round of speculation about the UK economy is encouraging:

• We are told that thus far in the current fiscal year, the growth in tax receipts exceeds the growth in Government spending.
• The Bank of England is more optimistic about estimates for growth next year.
• Independent advisors are talking about real growth of 3% for 2014.

So are we getting closer to the elusive corner?

Back in the real world there is no doubt that many, structurally weak companies, have dropped by the wayside in recent years. Successful companies are working hard to expand, but carefully. Retaining profits and managing cash flow has become the mantra rather than maximising turnover and borrowings.

If the pundits’ present optimism proves to be realistic perhaps the next step for businesses is to seriously consider sustainable investment. The tax incentives are there: R & D relief, high levels of tax allowances for plant and equipment purchases. We must not become a nation of hoarders, especially, of our capital. Carefully planned and monitored investment may become the order of the day.

Let’s hope that the economists are correct and the numbers for the next year bear out the early glimmers of optimism. Time to talk up prospects for growth…

It has been announced that the new Single-Tier State Pension will start, subject to Parliamentary approval, April 2016.

The original proposals for the new system were outlined in a White Paper published January 2013. At present the changes are speculative and will need to be agreed by Parliament. However, readers may be interested to read the following notes that summary some of the provisions set out in the White Paper.

• Persons reaching the State Pension Age after the proposed single-tier scheme starts will receive the new flat rate payment. This was set at £144 per week in the White Paper.

• The single–tier pension will be increased each year by at least the percentage average earnings have increased in the previous year.

• If you are already over the State Pension age when the new scheme starts 6 April 2016 you will continue to receive your State Pension in accordance with the existing rules.

The new pension will be fairer to the lower paid, the self-employed and carers, as all persons reaching the State Pension Age after 6 April 2016 will receive the same amount.

One of the major accountancy bodies, the Association of Certified Accountants, has reminded home based entrepreneurs that they can make a valid claim, for tax purposes. The ACCA’s head of tax, Chas Roy-Chowdhury, reflected:

“The rise in start-ups from the home is good news for the economy, but whether these home-based entrepreneurs are aware that, for example, they can deduct tax for the electricity they use in the room where they do most of their work is another matter.

Unless you are trawling through HM Revenue & Customs website, you may not know that even costs of hiring a cleaner can be deducted from your tax bill for the work they have done in the ‘business room’ of your home.”

However, business owners were advised to look before they leap into claiming.

“It is not always straightforward and it will not always be clear what can and cannot be allowed,” said Mr Roy-Chowdhury. “Getting it wrong could land you in hot water with HM Revenue & Customs, so it’s worth going over what is allowed and what isn’t”.

Home based businesses can claim reasonable costs for using a room in their house for business purposes. The costs could include: cleaning, electricity, water, heating and even decorating expenses. In some circumstances, house repairs can be tax deductable too.

If you do work from home, check out what you can validly claim.
 

If you own the property that you trade from, for example a hotel or guest house, the purchase price of the property may have included the cost of certain integral features that it may be possible to submit a claim for capital allowances.

 The Finance Act 2012 included provisions that affect the ability to make such a claim and we are now in a transition period ending in April 2014. Accordingly, we recommend that if you think you may be affected to contact us to discuss how the change in rules will affect you and whether a “late” claim for capital allowances can be made if you have not already made a claim.

 What sort of integral features can you claim for?

 The rules that define what can be claimed vary from business to business. Usually, it should be possible to claim for items that are used in the running of the business. For example: heating systems, security systems, general power, and fire alarms.

 HMRC defines integral features, eligible for plant and machinery allowances, as:

1. An electrical system (including a lighting system),
2. A cold water system,
3. A space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
4. A lift, an escalator or a moving walkway,
5. External solar shading

HMRC’s guidance goes on to say that:

 “…the new definition does not extend to any asset whose principal purpose is to insulate or enclose the interior of a building, or to provide interior walls, floors or ceilings which are intended to remain permanently in place.”

 What are the advantages of making a claim?

 A back dated claim for capital allowances will reduce your tax bills, possibly for a number of years, and if tax has already been paid for those years then you should receive refunds.

 Further, if you fail to make this type of claim it may affect the valuation of your business in the event of a future sale since the ability of a purchaser to claim allowances may be restricted.

 If you have never explored the possibility that tax allowances may be locked away in the cost of the building you own, and trade from, we would be happy to take a look on your behalf. Time is running out. As mentioned above, you should consider this before April 2014.

 From 6 April 2014 the pensions’ lifetime allowance will be reduced to £1.25 million from the present level of £1.5 million. If you have already built up pension savings of more than £1.25 million or have planned to do so in the expectation that the lifetime allowance would not reduce from the 2013-14 level, there is a new form of protection called “Fixed Protection 2014” (FP2014).

The legislation for FP2014 applies from 6 April 2014 and broadly follows that for the existing fixed protection which was introduced when the lifetime allowance was reduced from £1.8 million to £1.5 million in 2012-13.

 If you expect your pension savings to be more than £1.25 million (including taking into account past benefits crystallised) when you come to take any benefits on or after 6 April 2014 you can use FP2014 to help reduce or mitigate the lifetime allowance charge. FP2014 will allow you to crystallise benefits worth up to £1.5 million without paying the lifetime allowance charge, although the ability to accrue future benefits is very limited.

The application form for FP2014 is available since 12 August 2013 and must be submitted electronically or in paper form by 5 April 2014. However, HMRC will not send out any FP2014 certificates before November 2013.

We will be happy to speak with any pension savers who may be affected: those who have, or intend to have, pension savings in excess of £1.25m.

The acronym stands for Annual Tax on Enveloped Dwellings. The tax was introduced in April 2013 to discourage ownership of property in an “envelope” that could avoid payment of Stamp Duty Land Tax on a subsequent sale.

 ATED is a tax on companies and so-called Non-Natural Persons (NNPs) who have an interest in a residential property in the UK that was valued at £2m or more on 1 April 2012, or with a purchase price over £2m if acquired on or after 1 April 2012.

 A Non-Natural Person is an owner who is not an individual and includes certain partnerships and collective investment schemes.

 The ATED tax due for 2013-14 depends on the property value:

• £2,000,001 to £5m – £15,000
• £5,000,001 to £10m – £35,000
• £10,000,001 to £20m – £70,000
• Over £20m – £140,000

For the first year, 2013-14, the ATED return was due by 1 October 2013 and the tax is due to be paid by 31 October 2013. For subsequent years the ATED return and payment is due by 30 April in the year of assessment. Thus, for 2014-15 the return and payment will need to be made by 30 April 2014.

 The tax is only due for the period of ownership in a tax year.

 A dwelling might get relief from ATED if it is:

• Let to a third party on a commercial basis and isn't, at any time, occupied (or available for occupation) by anyone connected with the owner.
• Open to the public for at least 28 days per annum. If part of a property is occupied as a dwelling in connection with running the property as a commercial business open to the public, the whole property is treated as one dwelling and any relief will apply to the whole property.
• Part of a property trading business and isn't, at any time, occupied (or available for occupation) by anyone connected with the owner.
• Part of a property developers trade where the dwelling is acquired as part of a property development business the property was purchased with the intention to re-develop and sell it on and isn't, at any time, occupied (or available for occupation) by anyone connected with the owner.
• For the use of employees of the company, for the company's commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 10 per cent. The employee's duties must not include services for any present or future occupation of the property by someone connected with the company. The relief is also available where a partner in a partnership does not have an interest of more than 10 per cent in the partnership.
• A farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker or their surviving spouse or civil partner.
• A dwelling acquired by a financial institution in the course of lending.
• Owned by a provider of social housing.

 There are also a number of exemptions from the tax, most significantly, charitable companies using the dwelling for charitable purposes.

HMRC was given new powers from 1^st September 2013 to request information from UK’s merchant acquirers – the companies that process card payment transactions.

This will enable HMRC to data-mine information on all credit and debit card payments made over the last four years.

It would seem likely that HMRC will use their Connect software to make connections within the data obtained that will forward investigations into taxpayers’ affairs.