Autumn Statement 2014

Yesterday, George Osborne presented what was possibly the most important Autumn Statement of his time as Chancellor.

Many of the changes outlined were, as expected, highly political and therefore may not be relevant to the majority of taxpayers. Those measures will not be explored here as we will focus on the items that are more likely to be relevant to you.  Our full round-up of the Autumn Statement can be found here.

Personal Tax

From 6 April 2015 the personal allowance (tax free amount for individuals) will increase from the £10,000 it is currently, to £10,600.  The Chancellor had previously announced in March’s budget that the allowance would be £10,500 which in real terms is worth £20 to each person.

At the same time, the income level at which higher rate tax becomes payable will increase from £41,865 to £42,385 which is worth £104 to higher rate taxpayers.

Married couples and civil partners can transfer 10% of their unused personal allowance to their spouse, if neither are a higher or additional rate taxpayer.  This means the transferrable amount will increase to £1,060 for 2015/16 – potentially a benefit of £212 to couples in those circumstances.

ISAs were repackaged into NISAs in July 2014 and from 6 April 2015 the maximum tax free investment increases £240 from £15,000.  George also announced that surviving spouses will be able to invest inherited ISA funds from their deceased partner into their own ISA and maintain the tax free status.

Peer-to-peer loans are something that is increasing in popularity, particularly due to low levels of bank lending and the economy being in a position where growth is possible.  Unfortunately, not all businesses that are lent to will prosper and could result in the loan debt “going bad” for the lender.  From 6 April 2015, individuals will be able to obtain relief for these losses against any peer-to-peer income they have.

Major changes are ahead for pensions! A lot of this was announced previously by the Chancellor and the theme is that you will have choice and flexibility over what you do with your pension.  There is no longer a requirement to purchase a lifetime annuity.  There is an option to allocate part of a pension fund into a “flexi-access drawdown account” from which any amount (which would be subject to tax) can be taken at any time, or to take a series of lump sums directly from the pension fund.  The rules relating to pensions are complex so we recommend you speak to an independent financial advisor.  If you do not have a financial advisor, please get in touch and we will introduce you to our preferred advisors.

Business Tax

In line with the plan that has been in place for a number of years now, from 1 April 2015 the main rate of corporation tax will be reduced from 21% to 20% – this means that effectively we will have a flat rate of corporation tax across all sizes of company.

Relief on research and development for companies will increase from 225% to 230%.  While this increase is fairly insignificant, it serves as a reminder that huge tax breaks are available for companies undertaking R&D activities.  This is a highly specialist area and we can help you to maximise the amount you could claim under the scheme.  R&D relief may be available to you if you work on projects that are aiming for a technological or scientific improvement on what is already out there.  If you think you may qualify for this generous relief, please get in touch.

One of the major announcements for those in the construction industry is improvements to the operation of the Construction Industry Scheme (CIS).  We welcome the proposals to simplify and improve the compliance and turnover tests that will allow more subcontractors to access and keep gross payment status (this is to receive money from their contractors without CIS deduction).  For companies, getting a refund of the CIS suffered is a lengthy process, so it will be a great thing if more subcontractors can be paid gross.

From 6 April 2015 self employed persons will pay their Class 2 National Insurance along with their income tax and Class 4 National Insurance through their tax return, based on the number of weeks of self employment.  For those that wish to spread the cost (currently Class 2 NI can be paid monthly by direct debit), HMRC will retain a facility for this.  Those with income of less than the relevant threshold will no longer have to apply for an exception, reducing the paperwork burden on self employed people with low income.

One of the announcements that could have a detrimental effect on small business is the abolition of corporation tax relief for goodwill on incorporation.  Currently, when a sole trader or partnership transfers their business to a limited company, the goodwill in the business is sold to the company.  The company then gets corporation tax relief as the goodwill is written off over the years, and the individual(s) pay capital gains tax at the Entrepreneur’s rate of 10% of the sale proceeds (after deducting the annual exemption).  Both of these preferential treatments are being taken away – companies will no longer get corporation tax relief and individuals won’t get Entrepreneur’s Relief so will pay Capital Gains Tax at 18% or 28%, depending on their level of income.  The justification for this is that the Government feel the old system was unfair to businesses that had always operated as companies.

Employment Taxes

From 6 April 2015, employers will no longer have to pay Employer NIC on employees aged under 21 on amounts paid to them under £42,385 per annum.  As most 21 year olds are paid much less than this, this is a real saving for employers that would ordinarily have to pay 13.8% on earnings over approximately £150 per week.

Another Employer NIC break was announced for apprentices up to 25 years old on earnings in the same way as above, however this will not come into force until 6 April 2016.

The Employer Allowance which can be offset against the first £2,000 of Employer NIC remains in force for next year.  If you have not yet claimed the allowance for the current tax year, please contact us, it’s not too late!

Capital Taxes

As mentioned in the Business Taxes section, a major change that affects small businesses going forward is the removal of Entrepreneur’s Relief when transferring from a sole trade or partnership to a limited company.

A positive step in this area is that gains which are eligible for Entrepreneur’s Relief but are deferred through Enterprise Investment Scheme or Social Investment Tax Relief will remain eligible for the Entrepreneur rate when the gain is realised.

Another, and probably the headline announcement of the Autumn Statement is the major reform of Stamp Duty Land Tax (SDLT).  From today (4 December 2014) each new SDLT rate will be payable only on the proportion of the property value which falls within each band.  This is a huge step in the right direction as it removes the distortion in the current system, where the amount of tax due jumps at each at the thresholds.  Where contracts have been exchanged but not completed on or before 3 December 2014, the purchaser will have the option of the old or new structure.  Anyone purchasing a property under £967,000 (which is the majority of buyers) will benefit from these changes.  For example, a purchase of £130,000 will give a saving of £500, and a purchase at £275,000 will give a saving of £4,500!  This is great for buyers and sellers alike – while the buyers benefit from the lower tax, sellers will benefit too as buyers will no longer be put off purchasing just above one of the limits, as the cliff edge approach will no longer apply.

Other Matters

A major headline that was expected was the devolution of many tax powers to Scotland.  The Chancellor went further and announced proposals for devolution to Northern Ireland and Wales also, albeit not as devolved as Scotland.

A particularly relevant announcement is the Direct Recovery of Debts (DRD) powers given to HMRC.  Under this they will be able to recover outstanding debt directly from the bank accounts of taxpayers.  As scary as that sounds, we are assured there are a number of safeguards in place to protect taxpayers including a minimum debt limit of £1,000, a guarantee that all debtors will receive a face-to-face visit from HMRC before the debt is considered for DRD, that HMRC will not take any more debt than would leave the taxpayer with less than £5,000 in the bank and thankfully, the option of appeal to County Court.  HMRC say they will use this power only in a small minority of cases (approximately 17,000 per year out of 400,000 debt cases – around 4%).  If you are struggling with tax debt, please get in contact with us – we can help you work with HMRC to come to an agreement which would hopefully avoid them resulting to these powers.

Mark and Mike’s Half Marathon 2014

Mark Torr and Mike Waterfield completed Leicester’s Half Marathon on 26.10.2014 supporting torr waterfield’s chosen charity of the year ‘Keep The Beat’. They completed the half marathon in 2 hours and 6 minutes crossing the line together. It would be great if you would congratulate their sucess and make a donation small or large; it’s all going to a great charity that fully deserve it. You can donate via the just giving website here or if you prefer you can donate by SMS, simply text: ‘MMLM47’ followed by the amount you wish to donate to ‘70070’.

eg,  To donate £10:                         To donate £20:

MMLM47 £10  to 70070           MMLM47 £20  to 70070 Marathon correct

Many thanks for your kind support.

National Minimum Wage Changes from 1 October 2014

From 1 October 2014 the National Minimum Wage will increase as follows:

• £6.50 an hour for workers aged 21 or over – previously £6.31
• £5.13 an hour for workers aged 18 to 20 – previously £5.03
• £3.79 an hour for workers aged 16 to 17 – previously £3.72
• £2.73 an hour for apprentices under 19 or in their first year – previously £2.68

If you are paying any employees with reference to the National Minimum Wage you will need to amend the hourly rates accordingly.

Annual Tax Summary
HMRC will be sending Personalised Tax Summaries to around 24 million UK taxpayers from October 2014 onwards.
The new tax summary is only for information. You and your employees don’t need to contact HMRC to check it.
The Annual Tax Summary includes information about personal taxes that either:
• HMRC have records for e.g. through PAYE or
• reported on a tax return

If you have any questions on either of the above issues, please do not hesitate to leave a comment and we will answer any queries.

VAT and Prompt payments discounts

Businesses which currently offer prompt payment discounts (PPD) to their customer need to be aware that there are some changes ahead to the rules.

Currently under the UK law VAT is payable on the net amount after deducting the discount, whether or not the customer takes advantage of the PPD and pays promptly.

For Example if you sell some goods for £1000 plus VAT and offer 5% discount if the customer pays within 10 days then VAT is charged at 20% on £950 being £190, rather than 20% of £1,000 which is £200. Even if the customer takes 30 days to pay and therefore does not qualify for the PPD, the amount due will be £1,190.00.

This rule regarding PPD is in the process of being changed and from 1 April 2015 VAT will be due on the amount the customer actually pays. So using the above example if the customer fails to take advantage of the PPD he would need to pay the full £1,000 plus VAT of £200.

The buisness making the supply will have to issue a credit note to account for the PPD where this is taken up. So using the same example if the customer takes up the discount then the credit note would be for £50 plus VAT.

Apparently PPD have been widely used by suppliers of telecommunications and Broadcasting services and so the use of PPD to reduce VAT due has already been blocked in those sectors from 1 May 2014. This applies where the customer cannot recover the VAT Charged.

If your business currently offers PPD you may need to change your invoicing procedures from April 1 2015 and the government are going to consult on the implementation of the change. We will you keep informed of the details of the changes and when further detailed guidance is made available.

To read the official notes by HMRC please click here 

HMRC Scams

Over the past week we have seen the following HMRC scams against one of our clients and an employee.

The first one –

A client received a phone call from HMRC’s debt collection, they wanted payment of an outstanding £2k VAT liability.  The bailiffs and police were going to come out in 2 hours to seize assets unless the balance was paid.

It turns out that the client was not even registered for VAT!!

The second –

Or employee received  the following email to his personal email address:

Dear Taxpayer,

*Refund Amount : GBP 351.51.

>> Your *Refund Reference Number is: Ref/12213/2013 <<

NOTE: If you’ve received an Income Tax ‘repayment’ it will either be following a claim you’ve made or becouse HM Revenue & Customs ( ) has received new information about your taxable income or entitlement to allowances. The refund may come through your tax code or as a payment and could relate to the current tax year or earlier years.

An Income Tax repayments is a refund of tax that you’ve overpaid.So, if you’ve paid too much tax for example through your job or pension this year or in previous years HMRC will send you a repayment.

Click Here To access the form for your tax refund

Sincerely,
HMRC Tax Credit Office

HMRC Scam

 

  He clicked on the ‘click here’ link to see

What info they wanted.  If he was to fill out this form and click submit.  I’m sure they could purchase lots of stuff using his credit card.

Please be careful HMRC will never send details of a tax rebate, or ask you to disclose information, by email. Report scam emails here:

 

Payroll A Timely Update

2013-14 Payroll Year End

Due to the introduction of RTI submissions this year the year end submission is more straightforward and therefore the deadline is now 19 April 2014. Please note that if your pay day is a Saturday then you will have a Week 53 for Saturday 5 April 2014 which must be processed before the year end is processed.

Don’t forget that if you suffer CIS tax from your customers, this should be shown on your RTI submissions.

If we process your payroll for you, we will take care of this.  If you process your own payroll using Sage or the HMRC Basic PAYE tools then you must do an additional submission for the year end.  Please contact me if you have any queries.

HMRC guidance notes: www.hmrc.gov.uk/payerti/end-of-year/tasks.htm

PAYE Penalties

HMRC have deferred the commencement of automatic penalties for RTI as follows:

  •        Employers who are late sending their ‘in year’ submissions won’t be charged late filing penalties as long as they bring themselves fully up to date by 5 October 2014.  (However a penalty will be raised if the above year end is not submitted by 19 May 2014 being one month after the deadline date.  This would amount to £100 per month late for up to 50 employees.)
  •        Employers who are late with their ‘in year’ payments won’t be charged automatic late payment penalties until April 2015. In the meantime HMRC will assess penalties to be applied after the tax year end and this will be based on the number of times the monthly payments have been made late.

In addition to current late payment penalties, daily interest will be charged on late ‘in year’ payments from April 2014.

It is important that you have systems in place NOW so that you don’t fall foul of penalties later in the year.

HMRC guidance notes: http://www.hmrc.gov.uk/payerti/reporting/late-reporting.htm

National Insurance – £2,000 employment allowance

From 6 April 2014 the Government will introduce an allowance of up to £2,000 per year for many employers to be offset against their employer Class 1 NIC liability. The legislation confirming the introduction of this allowance is contained in the National Insurance Contributions Bill 2013.

This allowance is limited to the amount of Employers Class 1 NIC that the employer pays. Please contact me if you have any questions concerning this.

HMRC guidance notes: www.hmrc.gov.uk/nicsemploymentallowance.

The Budget 2014

On Wednesday 19 March 2014, George Osborne presented his latest 

Budget.  No one was expecting this to be a particularly revolutionary budget and whilst the cynical among us may have the opinion that this budget is a political one, designed to influence the “on-the-fence” voters ahead of next year’s election, there is something in the budget for everyone (even if it is only a little something).

Personal tax

The personal allowance (amount you can earn before paying any income tax) is being increased to £10,500 from April 2015.  This is a modest 

increase from the £10,000 allowa

n reality it won’t be that noticeable.nce in place from next month, but representing a saving of £100 to taxpayers.  While an admirable move, i

Married couples and civil partners will be allowed to transfer unused 

personal allowances of up to £1,050 from April 2015 where neither couple is a higher-rate taxpayer – this is worth up to £

210.  This is no surprise as it was announced in the 2013 Autumn Statement.

The limit for tax-free ISAs is being increased to £15,000 in July 

2014…..yes, July, we aren’t sure why!  And there will no longer be a restriction on how much is cash and how much is stocks/shares – the full £15,000 can be in cash.

Another sweetener for savers (of course, this is not a bribe from the 

Chancellor) is that the premium bond investment limit will increase to 

£50,000 from £30,000 – firstly it will go up to £40,000 in June (oh look, a different month for a change to be brought in!) and then up to £50,000 in either 2015 or 2016, they don’t seem to have d

ecided yet – it could all be theoretical, depending on whether they are still in power in 2016!

Business tax

Again, not another surprise as this was announced a while ago, but the full corporation tax rate from April 2015 will be 21%, compared to the small companies rate of 20%.  The rates will be aligned at 20% for all company sizes from April 2015 so fingers crossed we will no longer have to worry about the cumbersome “associated company” rules.

You may recall that the Annual Investment Allowance for expenditure o

n plant and machinery was increased to £2

50,000 for two years from January 2013…. well the good news is that is being further increased to £500,000 from April 2014 to December 2015.  The transitional rules on the change between the two allowances will be (as always) ridiculously complicated so if you are planning on investing a significant amount in equipment in the coming months, please CONTACT US in advance so you don’t fall foul.

Many companies that undertake Research & Development activities m

ake taxable losses due to the favourable treatment of the expenses incu

rred.  Where these losses cannot be offset against past or future taxable profits, they can be surrendered for cash at 14.5% of the loss from April 2014 (up from 11%).  While not as beneficial as offsetting against profits of 20% (if at the small companies rate), the cash injectio

n is a real benefit to these companies.

Employment taxes

Two incentives have been included in the budget in an apparent e

ffort to stimulate employment.  Again, George seems to have got a bit carried away (perhaps he was excited) as these have already been announced!  Firstly, there will be a credit for the first £2,000 of Employer’s NIC from April 2014 – this has to be shared between related employers (such as two companies with the same directors) and will probably require you ticking a box on your payroll software whether to claim it or not!  Secondly, there will be no Employer’s NIC from April 2015 on employees under 21 (except those on high incomes).

We have had RTI (Real Time Information) for reporting payroll information to HMRC for a while now and HMRC have been very generous in their lenient approach to late submissions.  Of course all things

 have to come to an end, and from October 2014 they will start applying penalties if RTI submissions are not made on time.  In addition, from April 2014 HMRC will charge daily interest on late payments on PAYE/NI where they haven’t so far.

A full overview of the Budget can be found on our website, click here.

Katie Kettle Colour

Autumn Statement 2013

On Thursday 5 December, Chancellor George Osborne gave his 2013 Autumn Statement outlining a number of developments in key areas of tax.

Personal Allowance for 2014/15

For those born after 5 April 1948 the personal allowance will be increased from £9,440 to £10,000. When the current Government came into power in 2010 the personal allowance was £6,475 so there has been a significant increase.  This means that for most individuals, their first £10,000 of income will be free of tax.  The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 will continue. The reduction is £1 for every £2 of income above £100,000. So for this year there is no allowance when adjusted net income exceeds £118,880. Next year the allowance ceases when adjusted net income exceeds £120,000.

Transferrable Personal Allowance

The Transferable Tax Allowance will enable spouses and civil partners to transfer a fixed amount of their personal allowance to their spouse.  The option to transfer will be available to couples where neither pays tax at the higher or additional rate. If eligible, one partner will be able to transfer £1,000 of their personal allowance to the other partner. The transferor’s personal allowance will be reduced by £1,000. It will mean that the transferee will be able to earn £1,000 more before they start paying income tax.  For those couples where one person does not use all of their personal allowance the benefit will be up to £200. 

Corporation Tax Rates

The main rate of corporation tax will be 21% from 1 April 2014. The current rate is 23%. From 1 April 2015 the main rate of corporation tax will be reduced to 20% and unified with the small profits rate. The small profits rate will therefore remain at 20% until then. This means that from 1 April 2015 all companies will pay the same rate of corporation tax.

National Insurance – £2,000 Employment Allowance

The Government will introduce an allowance of up to £2,000 per year for many employers to be offset against their employer Class 1 National Insurance Contributions (NIC) liability from April 2014. The allowance is limited to the employer Class 1 NIC liability if that is less than £2,000. It is expected that the allowance will be claimed as part of the normal payroll process. Employer’s payment of PAYE and NIC will be reduced each month to the extent it includes an employer Class 1 NIC liability until the £2,000 limit has been reached.

Employer NIC Exemption for Under 21s

From April 2015 the Government will abolish employer NIC for those under the age of 21. This exemption will not apply to those earning more than the Upper Earnings Limit, which is £42,285 per annum for 2015/16. Employer NIC will be liable as normal beyond this limit.

Capital Gains Tax – Private Residence Relief

A gain arising on a property which has been an individual’s private residence throughout their period of ownership is exempt from CGT. There are deemed period of occupation rules which may help to provide an exemption from CGT even if the individual was not living in the property at the time. The final period exemption applies to a property that has been an individual’s private residence at some time even though they may not be living in the property at the time of disposal. From 6 April 2014 the final period exemption will be reduced from 36 months to 18 months.

For more detail on the measures outlined above and additional announcements made by the Chancellor, please click here for our full report on the 2013 Autumn Statement.

New Dock centre hosts inaugural innovation seminar with Torr Waterfield to inspire Leicester businesses

Join us at Dock on Tuesday 15th October for a free seminar to encourage Leicester businesses to explore innovation as a potential route to future expansion and export.  ‘Supporting Leicester Innovation’ is the first major event to be hosted at Leicester new Dock with presentations by ourselves and colleagues from Pera Technology and Serjeants.

Darran Thacker, from UK and European patent attorneys Serjeants LLP, will give an introduction to intellectual property and how it can be used to support business development and growth, while Dr Mark Wareing of Pera Technology, will talk about how companies can access public and private finance to fund New Product Development. 

In addition, our own Tom Simpson will speak about practical solutions relating to taxation and accountancy including the lucrative tax reliefs available for Research and Development and the Government’s recently launched Patent Box initiative.

Dock, Leicester’s new hub for high-tech and innovation businesses, part of Pioneer Park on Exploration Drive, offers a range of workspaces including laboratory and workshops for up to 55 businesses, as well as conference and exhibition facilities. 

Tuesday 15th October from 8.30am until 10.00am with registration and a buffet breakfast from 8.00am onwards, followed by a tour of Dock’s new facilities.

To reserve a place, please call Serjeants on 0116 233 2626 or email mail@serjeants.co.uk. www.serjeants.co.uk

The National Three Peaks Challenge – 36 Days to Go!

The countdown has begun and there are only 36 days till the challenge commences. The whole team have been incredibly busy over the last few weeks cramming in as much training as they can. The team have practised Scafell Pike  whilst also filling their weekends with various other gruelling hikes. The team members involved are Matt Green, Tom Simpson, Mike Waterfield, Stuart Caney, Matt Smith, Bev Atkins, Julia Harrison, Tom Luckett, Becky Edwards along with some of their partners and friends. 

photo (2)Team member Stuart Caney has been putting in lots of training,

“I have previously walked to the top of both Snowdon and Scafell Pike, so I know what I am letting myself in for… and I am NOT looking forward to it!

For a bunch of accountants who sit behind a desk all day, this is going to be a really tough challenge!

We have all been training hard, clocking up a lot of miles and trying to incorporate as many hills as possible along the way (we recently walked the ‘3 peaks of Charnwood’… same thing, right?)

Hopefully all the training will pay off and we will all A) survive, and B) get round in less than 24 hours.” 

The next team practice is Mount Snowdon which will be the 9th June. Here are some pictures from the Scafell Pike hike and a few from other hikes the team have been on.

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It would be great if you could show our team some support  and make a donation small or large, its all going to a great charity who fully deserve it. You can donate by text or online.

To donate by SMS, simply text: ‘BAMB11’ followed by the amount you wish to donate to ‘70070’. 

eg,  To donate £5:                                To donate £10:
       BAMB11 £5  to 70070                    BAMB11 £10  to 70070

or donate through Virgin Money Giving;

http://uk.virginmoneygiving.com/team/bamboozlehikers

Many Thanks for your kind support.