Autumn Budget 2017

Yesterday saw a budget that focused, as expected, on housing and a stormy economic forecast. Our full summary is available on our website, but the key tax developments are summarised below.

Personal Tax Rates and Allowances

The personal allowance is currently £11,500 and will increase to £11,850 in April 2018. The higher rate threshold similarly increases from £45,000 to £46,350. Phillip Hammond reaffirmed his commitment to raise these thresholds to £12,500 and £50,000 respectively by 2020.

 National Insurance for the self-employed

 After the embarrassment of Mr Hammond’s U-turn earlier this year after attempting to abolish Class 2 National Insurance and increase Class 4, it was announced that in order to give sufficient time for a more popular proposal to be devised, there will be a delay of one year before any reform.

Capital Gains Tax

 After unfavourable consultation, the proposal for a 30-day window between Capital Gains arising and the tax being due has been deferred until April 2020.

 Research and Development

 Large companies claiming relief for research and development under the RDEC scheme will see their credit increase from 11% to 12% as part of plans to help the economy grow after Brexit.

Corporation Tax

Indexation Allowance – a long standing relief for companies making capital gains will be frozen from 01 January 2018. This allowance protected companies from gains that arise as a result of inflation and as a result no relief will be available for inflation accruing after this date. This move is perhaps unsurprising, with property investors more often operating through a limited company as a result of this allowance and the increased taxation of landlords in recent budgets.

 Stamp Duty

 With the youth vote rocketing in the last election, the government has decided to act further on the concerns that first time buyers are struggling to get on to the property ladder. Stamp duty will be abolished immediately for first time buyers purchasing properties worth up to £300,000. Those buying their first houses in expensive areas such as London will pay no stamp duty on the first £300,000 of properties costing up to £500,000.

 Value Added Tax (VAT)

 The VAT registration threshold will remain at £85,000 p/a for two years from April 2018. This will come as a relief for many, as some predicted this could be lowered to nearer the EU average of £25,000.

Making Tax Digital (MTD)

 As announced in July, no business will be mandated to use MTD until April 2019, and then only for VAT obligations. The scope of MTD will not be widened until April 2020 at the earliest.

The above are only the areas that I feel will be relevant to the majority of our clients, other areas and greater detail can be found on our website, click here. 

Please contact us on 0116 242 3400 if you have a specific query.

Matt Smith.

HMRC’s Worldwide Disclosure Facility (WDF)

This is a facility that the Inland Revenue introduced in 2016 which allows the voluntary disclosure of any UK tax liabilities that relate to offshore income or assets, which have not previously been disclosed to the UK tax authorities, to be declared.

This includes:

  • Income arising from a source outside the UK
  • Assets situated or held outside the UK
  • Activities carried on wholly or mainly outside the UK
  • Where the funds connected to unpaid tax are transferred outside the UK

Which years?

  • The facility applies to all tax years up to and including 2015 to 2016.
  • If HMRC has sent you a tax return for that year, or any tax year from 2013 to 2014 which is still outstanding, you must complete the return and you must not include these tax years on this disclosure form.

 

By contacting the Inland Revenue, rather than the Inland Revenue contacting you, the penalty regime will be less harsh.

 

If you think that the above applies to you then please get in touch with us as soon as possible so that the Inland Revenue can be notified. 0116 2423400

Julia Harrison, Tax Manager 

What is the VAT cash accounting scheme?

What is the VAT cash accounting scheme?

The VAT cash accounting scheme is a useful tool for many small businesses, as you only pay the VAT on your sales to HMRC once you have received payment yourself.

However, you may only reclaim VAT on your purchases from HMRC when payment of the invoice has been made.

You can join the cash accounting scheme if your turnover is less than £1.35m, and can continue to use the scheme until your turnover reaches more than £1.6m.

Your business should be eligible to use the scheme if you meet the threshold requirement, unless your VAT affairs are not up-to-date, you have been convicted of a VAT offence or have been penalised for evading VAT over the past 12 months.

What is the advantage of using cash accounting?

Clearly the main benefit of joining this VAT scheme is in the cash flow benefits it provides. If you have a late paying client for example, you will not have to account for the VAT on any outstanding sales invoices until you have been paid. In fact, if you incur any bad debts, the VAT will never need to be paid to HMRC.

What is the disadvantage of using cash accounting?

There may be some disadvantages, depending on your situation.  For example, as you cannot reclaim the VAT on any purchases you make until payment is made, this could cause cashflow problems if you buy a substantial amount of stock on credit.

Joining the cash accounting scheme

You do not need to inform HMRC if you want to join the scheme. However, you must start at the beginning of a new VAT quarter.

You can also leave the scheme at the end of any VAT quarter, if necessary, or if your taxable turnover reaches the £1.6m mark.

If you would like any assistance on joining, leaving or any further information on the cash accounting scheme, then feel free to contact  the office on 0116 242 3400.

Tom Luckett,  Accounts & Tax 

Applying for a Mortgage? SA302’s are no more. A Tax overview is what you need.

HMRC’s form SA302 is a tax calculation produced when you have filed your Self-Assessment Tax Return online.

It is a calculation for a particular tax year showing your income, your tax allowances, the amount of tax you’ve already paid and what tax, if any, you still owe or which should be repaid to you.

If your Tax Return has to be amended and it affects the tax payable, HMRC will send you a revised SA302 showing the up to date position for that particular year.

If you are asked to provide evidence of your income, for example if you’re applying for a mortgage, and you have been paying through self-assessment, you are likely to be asked for an SA302 for one or more tax years.  Another document you may also be asked to produce is a tax year overview.  This is a simple summary or statement of the tax due and tax you’ve paid during the tax year.

If you have filed your own tax return online, you can access your HMRC account and print off both the SA302 and tax year overview as required.

HMRC have been encouraging taxpayers to obtain a copy of the ‘Tax overview’ and ‘Full Calculation’ from the online service for some time and, from 4 September 2017, they have confirmed that they will no longer send paper SA302s to agents on behalf of their clients.

There are a number of lenders that will accept the tax overview and printed calculation in place of a paper SA302 and HMRC are working on educating other lenders to increase acceptance so that, once the SA302’s are no more, mortgage advisors will be happy with these documents instead.

If you don’t know where to start getting your tax year overview or tax calculation, most accountants, including torrwaterfield, use commercial software to produce tax returns for their clients.  This automatically generates a tax calculation which is roughly equivalent to a form SA302.  The majority of mortgage providers have agreed with HMRC to accept this Tax Calculation and the Tax Year Overview which your accountant can print off for you.

For a complete list of mortgage providers and lenders who accept Tax Year over views please click here. 

If you would like any assistance on this, then please contact the office on 0116 242 3400.

James Yarnall, Accounts & Tax 

Late registration for VAT can be costly to your business.

Registering for VAT is a must if your turnover reaches a certain level; it’s part of your role to ensure that your business is suitably prepared and aware of when the registration needs to be made.

The VAT registration threshold is £85,000 – meaning that once your turnover crosses this level, in a 12 month rolling period, you may have to register for VAT. This can be a big change for a business and needs serious consideration as to the effects it can have.

A failure to comply with the HMRC rules to register on time can lead to penalties which soon tally up and leave you considerably out of pocket.

The penalty is worked out as a percentage of the VAT due, from the date when you should have registered to the date that HMRC either receive your notification or become fully aware that you were required to be registered. The rate of penalty depends on how late you were in registering:

If you registered: Then the penalty rate will be:
not more than 9 months late 5%
more than 9 months but not more than 18 months late 10%
more than 18 months late 15%

There will always be a minimum penalty of £50.

If you feel that your business could be approaching the VAT turnover threshold then get in touch so that we can help. 0116 2423400

Brook Lucas, Accounts & Tax

Did you look after your Grandchildren this summer?

Get paid to babysit!

Did you look after your Grandchildren this summer?  If they are aged under 12 you could be missing out on the chance to boost your future State Pension.

Top Grandparent facts:

  • 1 in 4 working families and 1 in 3 working mothers use Grandparents for childcare
  • 63% of all Grandparents with grandchildren under 16 help out with childcare
  • 1 in 5 Grandmothers provide at least 10 hours a week of childcare
  • the proportion of Grandparents who are of working age is set to grow as the retirement age gradually rises

Half of Britain’s 7 million working-age Grandparents have a Grandchild under the age of 16 and could qualify for Class 3 National Insurance credits for looking after children aged under 12 – which can be used to top up their income in retirement.

Applications for NI credits for caring for children under 12 need to be made to HM Revenue & Customs.  Applications need to be made in, or after, the October following the end of the tax year in which the caring took place.

Grandparents who have cared for their Grandchildren during the tax year 2011/12 are still able to apply for their credits now.

There is no minimum condition for the number of hours of care in a week as long as the credit is transferred for a full week.

This scheme will benefit women, and the self-employed who currently cannot qualify for state second pension.

If you have any questions or want to discuss this further then please get in touch 0116 2423400

Georginda Hare, BookkeeperGeorginda Hare BC.JPG

The Employment Allowance

What is employment allowance?

Employment Allowance is a National Insurance credit that is offset against Class 1 Employer’s NI. The maximum amount that can be claimed in each tax year is £3,000, although you can still claim if you pay less than £3,000. When it was first introduced in 2014 you could claim up to £2,000 but it increased to £3,000 in April 2016.

Eligibility

You can claim if:

  • You are a business, including sole traders and partnerships, or charity paying Employers Class 1 NI.
  • You can claim if you employ a care or support worker.

You can’t claim if:

  • You are a director and the only employee.
  • You employ someone for domestic work e.g. Cleaner or Gardener
  • You are a business that does more than half of your work in the public sector, for example the NHS.
  • If you have more than one employer PAYE reference, you can only claim against one of them.

How to claim Employment Allowance?

You would claim through your Payroll software and tick the box next to the “Eligible for Employment Allowance”. This will then send an EPS (Employer Payment Summary) to HMRC to let them know you’re eligible and to start claiming it.

In Sage 50 Payroll:

  • Go to “Company” on the left hand menu.
  • Then “Settings”.
  • Tick the box as shown.

If you use HMRC’s Basic PAYE tools:

  • Select the relevant Employer in the menu on the homepage.
  • Then select “Change employer details”.
  • Tick “Yes” in the “Employment Allowance indicator”.
  • Send an EPS as normal.

Stopping your claim:

You only need to stop your Employment Allowance claim if you stop being eligible. You do not need to stop your claim manually if you reach the £3,000 limit before the end of the tax year, this doesn’t make you ineligible. If you do stop this claim before the end of the tax year, any credit you have already been given will be removed and you will have to pay any Class 1 NI due.

When to claim?

You can claim at any time in the tax year. If you claim late and you don’t use your Employment Allowance against Class 1 National Insurance you have already paid to HMRC you can ask them to offset it against other liabilities e.g. Corporation Tax and VAT. If you have no outstanding liabilities you can also ask them to refund it directly to you.

If you were eligible, you can claim unused Employment Allowance for up to 4 previous years. Currently you can claim back the allowance from when it was first introduced in 2014.

If you need any further guidance HMRC’s employer guide to Employment Allowance is a very useful resource https://www.gov.uk/government/publications/employment-allowance

If you have any questions on the above or would like any more information, please feel free to contact us on 0116 242 3400.

Polly Dennis, Payroll Apprentice

Tax Calendar

The following Tax Events are due on 19th July 2017:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th April 2017 to 5th July 2017.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

PAYE Student loan and CIS deductions due for the month to 5th July 2017.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.  

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. In year interest will be charged if payment is made late. Penalties also apply.

Class 1A NIC due for 2016/17.

This deadline is relevant for employers who have provided their employees with benefits for 2016/17. These benefits should have been reported by the 6th July and the amount of the Class 1A employer only NI liability due calculated on the form P11D(b).

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 21st July 2017 unless you are able to arrange a ‘Faster Payment’ to clear on or by Saturday 22nd July. Interest will be charged if payment is made late. Penalties may also apply. 

We have a Tax Calendar on our website so you never miss a deadline to see future deadlines please visit our calendar  https://www.torrwaterfield.co.uk/resources/tax-calendar 

New £10 Note

New £10 Note

It has recently been revealed that the new £10 note will have the face of the famous writer Jane Austen featured on the front.

Production of the new note began last August, however it is due to be launched on the 200th anniversary of Jane Austen’s death, July 18th, and all notes are to be issued during September 2017.

The current £10 note is the oldest Bank of England bank note which is currently still in circulation and, due to developments in technology, the security features can now be updated.

New features

The new note will be made of the same polymer materials as the £5 note.

It will be slightly bigger than the polymer £5 note, however it will be smaller than the current £10 note that is still in circulation.

The polymer notes are being introduced as they are cleaner, more secure and also much more durable than the old notes.

There has been no date released for when the old £10 notes will leave circulation, however I am sure that this will be announced closer to the time.

Over 20 countries currently issue polymer banknotes which include Australia, who introduced them in 1998, New Zealand, Mexico, Singapore and Canada who introduced them in 2011.

September 2017 is nearly upon us, so just bear in mind that these new notes will be replacing the old notes shortly.

For more information please see The Bank of England website here or contact us.

Jessica Cooper, Accounts & Tax 

New Lifetime ISA

The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from today (6 April 2017). HMRC have produced a helpful guide on the account. Some of which is reproduced below:

Opening a Lifetime ISA

You can open a Lifetime ISA if you’re aged 18 or over but under 40.

As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.

Saving in a Lifetime ISA

You can save up to £4,000 each year in a Lifetime ISA. There’s no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.

The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.

Example – you could save:

£11,000 in a cash ISA

£2,000 in a stocks and shares ISA

£3,000 in an innovative finance ISA

£4,000 in a Lifetime ISA in one tax year.

Your Lifetime ISA won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your Lifetime ISA.

Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

Government bonus

When you save into your Lifetime ISA, you’ll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.

Withdrawals

You can withdraw the funds held in your Lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.

A withdrawal charge will not apply if you’re:

using it towards a first home

aged 60

terminally ill with less than 12 months to live.

If you die, your Lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.

Transferring a Lifetime ISA

You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge.

If you transfer it to a different type of ISA, you’ll have to pay a withdrawal charge.

Saving for your first home

Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.

You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.

If you’re buying with another first time buyer, and you each have a Lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their Lifetime ISA without incurring a withdrawal charge.

Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.

If you have a Help to Buy ISA, you can transfer those savings into your Lifetime ISA or you can continue to save into both – but you’ll only be able to use the government bonus from one to buy your first home.

You can transfer the balance in your Help to Buy ISA into your Lifetime ISA at any time if the amount is not more than £4,000.

In 2017/18 only, you can transfer the total balance of your Help to Buy ISA, as it stands on 5 April 2017, into your Lifetime ISA without affecting the £4,000 limit.

If you would like to discuss any of this further then please get in touch.  0116 2423400 or info@torrwaterfield.co.uk