Archive for December, 2015

Tax helpline for those affected by recent flooding

Thursday, December 17th, 2015

Readers affected by the recent floods, particularly in the north-west of England, should take note that HMRC has created a support line. If your business was affected you should call HMRC as they will be sympathetic to requests to extend tax payments while the clean-up operation continues.

The helpline will enable anyone affected to get practical help and advice on a wide range of tax problems they may be facing. This includes the following issues:

  • agree instalment arrangements where taxpayers are unable to pay as a result of the floods
  • agree a practical approach when individuals and businesses have lost vital records to the floods
  • suspend debt collection proceedings for those affected by the floods
  • cancel penalties when the taxpayer has missed statutory deadlines

The helpline is in addition to other HMRC telephone contact numbers.

The helpline is 0800 904 7900. Opening hours are Monday to Friday, 8.00 am to 8.00 pm; Saturday and Sunday, 8.00 am to 4.00 pm, excluding bank holidays.

Advice has also been posted by the British Insurance Brokers’ Association on insurance claims processes. They say claimants should:

  • Contact their insurer or insurance broker and inform them before conducting any emergency repairs
  • Leave dangerous work such as fixing the roof to professionals
  • Turn the power off, if safe, in a flooded home
  • Ensure homes are safe and secure before leaving to prevent further loss
  • Keep damaged items for evidence of a claim, including samples and photos of carpets, and receipts for any emergency work


Draft finance bill clauses published

Tuesday, December 15th, 2015

HMRC has issued the following information regarding the publication of draft clauses of the Finance Bill 2016:

New draft tax legislation has been published (9 December 2016) to implement policies published at Summer Budget and Autumn Statement 2015.

It has also published new tax consultations and responses to policy consultations which took place over the past year.

Finance Bill 2016 continues the government’s commitment to stop tax evasion, tackle tax avoidance and ensure companies pay their fair share of tax through:

  • clamping down on tax avoidance and ensuring multinationals pay their fair share of tax by stopping the use of hybrid mismatch arrangements
  • introducing a new tougher anti-offshore tax evasion regime, which will include new criminal and civil sanctions
  • introducing new measures to improve large business tax compliance, including a new requirement that large businesses publish their tax strategies and special measures powers to tackle a minority of large businesses that persistently engage in aggressive tax planning

One of the main priorities of this government is to ensure the British tax system is simpler and more effective for taxpayers.

This Finance Bill will build on the excellent progress made under the previous Parliament by establishing the Office of Tax Simplification (OTS) on a statutory basis and outlining its core functions.

To support hardworking savers, Finance Bill 2016 will implement a personal savings allowance that will mean as of 6 April, 95% of taxpayers will pay no tax on the first £1,000 of savings income if they are a basic rate taxpayer, and the first £500 if they are a higher rate taxpayer.

Finally, our vital creative sector will be further benefit from an increase in the rate of tax relief orchestras can claim to 25% of qualifying expenditure.

David Gauke, Financial Secretary to the Treasury, said:

The government is committed to creating a tax system that is easy to understand, simple to engage with and hard to evade. It is essential that it successfully supports investment in business, as well as those who work hard and save.

That’s why I am pleased to be announcing draft legislation that will help us deliver on this commitment to taxpayers.

The consultation on the draft legislation will run until Wednesday 3 February, with the final details being confirmed in Budget 2016 and finally introduced in Finance Bill 2016.

Readers might be interested to learn that the draft clauses and explanatory notes publication for the Finance Bill 2016 runs to over 600 pages…


Training for employees and franchisees

Friday, December 11th, 2015

Employers who pay for their employees and sub-contractors to attend training courses may be interested in the following directive from HMRC, issued July 2015.

The cost of food and accommodation provided for employees attending training courses for the purpose of the trade is not disallowable under the legislation. However, if food and accommodation are provided as part of training given to any other person free of charge then the cost is entertainment and is disallowable.

Traders may provide training for people who are not their own employees. Examples would be self-employed sales staff or commission agents. Although the training itself (such as the cost of speakers or hire of a room) is an allowable expense, any food or overnight accommodation provided for the attendees is disallowable entertainment.

This principle was confirmed in the VAT case of Customs and Excise v Shaklee International, where the point at issue was the food and hotel costs of residential courses organised by a sales organisation for its distributors. Similarly, the cost of any food or overnight accommodation provided at recruitment or selection events for prospective self-employed sales staff or commission agents is disallowable entertainment. This is because, prior to their selection, they are unlikely to be directly involved with the trade, are not under any obligation to provide, and are in fact not providing, proper and sufficient quid pro quo.

Traders may also provide training for their franchisees. In many such cases the (usually lump sum) payment made for the franchise secures a commitment by the franchiser to provide training. In this event, the training is not provided free of charge and any food and accommodation provided is part of the cost of the training and is not disallowable under the legislation. However, any hospitality over and above that which is included in the terms of the franchise is disallowable under the legislation.


National Living Wage

Tuesday, December 8th, 2015

HMRC has issued the following information regarding the imminent launch of the NMW 1 April 2016. Firms are advised to take simple steps now as poll reveals 93% of bosses support initiative, with majority believing it will boost productivity and retain staff.

Britain’s bosses are urged to take 4 simple steps to be better prepared for the introduction of next year’s (2016) new NLW, on the day that the statutory instrument is laid to write it into law.

Businesses are being advised to prepare early for the changes on 1 April 2016, when the new wage will become law, and make sure they follow these 4 simple steps:

  • know the correct rate of pay – £7.20 per hour for staff aged 25 and over
  • find out which staff are eligible for the new rate
  • update the company payroll in time for 1 April 2016
  • communicate the changes to staff as soon as possible

Employers can find out more by visiting

The advice coincides with a new poll which revealed 93% of bosses agree the new wage is a good idea, with 88% believing it will lead to higher productivity and 83% saying it will make staff more loyal to their firm.

Business Minister Nick Boles said:

“The government’s new National Living Wage will provide a direct boost to over two-and-a-half million workers in the UK – rewarding and providing security for working people.

I am urging businesses to get ready now to pay the new £7.20 rate from 1 April 2016. With just under 4 months left, there are some easy steps employers can take to make sure they are ready.

By taking these measures, companies will be able to properly reward their staff and avoid falling foul of the law when it takes effect.”

The new survey conducted for the Department for Business, Innovation and Skills (BIS) asked 1,000 employers across Britain about the NLW. When asked if they thought the new rate would be good for businesses, many respondents identified a range of positive impacts:

  • 93% of all bosses agreed the National Living Wage was a good idea
  • 88% said it would make staff more productive
  • 83% believed it would make staff more loyal towards their employer
  • 86% said it would boost staff morale
  • 82% believed customers were likely to return if the business paid the right rates of pay

Despite the popular support for the measure, the poll also revealed that many firms were yet to take key steps to be prepared:

  • only around 45% had updated payroll to take account of staff aged 25 and over on 1 April 2016
  • just 39% had communicated the upcoming changes to staff
  • only 29% had looked online for more information about National Living Wage entitlement

This comes despite 63% of bosses saying they knew who in their business should be getting the new National Living Wage.

The new National Living Wage is a key part of the government’s plan to continue to move to a higher wage, lower tax and lower welfare society, building a more productive Britain and giving families the security of well-paid work.


Tax Diary December 2015/January 2016

Monday, December 7th, 2015

 1 December 2015 – Due date for Corporation Tax due for the year ended 28 February 2015.

 19 December 2015 – PAYE and NIC deductions due for month ended 5 December 2015. (If you pay your tax electronically the due date is 22 December 2015.)

 19 December 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2015.

 19 December 2015 – CIS tax deducted for the month ended 5 December 2015 is payable by today.

 30 December 2015 – Deadline for filing 2014-15 Self Assessment online to include a claim for under payments (under £3,000) be collected via tax code in 2016-17.

 1 January 2016 – Due date for Corporation Tax due for the year ended 31 March 2015.

 19 January 2016 – PAYE and NIC deductions due for month ended 5 January 2016. (If you pay your tax electronically the due date is 22 January 2016.)

 19 January 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2016.

 19 January 2016 – CIS tax deducted for the month ended 5 January 2016 is payable by today.

 31 January 2016 – Last day to file 2014-15 Self Assessment tax returns online.

 31 January 2016 – Balance of Self Assessment tax owing for 2014-15 due to be settled today. Also first payment on account for 2015-16 due today.


Repaying employers for private fuel

Monday, December 7th, 2015

Company car drivers should be giving consideration to the issues raised in this article if they are provided with fuel for private mileage by their employers.

With no repayment to compensate for private fuel provided, employees will suffer a significant car fuel benefit in kind charge. Depending on the type of vehicle you drive the annual car fuel benefit charge could be between £1,105 and £8,177; if you pay tax at the basic rate this would add between £221 and £1,635 to your annual tax bill.

It’s worth comparing this tax charge with the cash cost of reimbursing your employer for private mileage.

To do this multiply the private mileage you have logged (or estimate that you will use) in the tax year 2015-16 by the approved advisory fuel rate for your vehicle as published by HMRC. These generally change every three months.

Let’s say that you drive a 1600cc petrol engine car with a fuel scale charge of £4,000. The current advisory fuel rate for this vehicle type is 14p per mile.

In the above example, if your private mileage is up to 5714, (and you are a basic rate tax payer) it will pay you to reimburse your employer as the cash cost of the payment will be less than the benefit in kind tax charge. (£5714 x 14p = £800)

If you are a higher rate tax payer the argument for a repayment of private mileage is even more compelling. 


Help to buy ISAs are available from 1 December 2015

Monday, December 7th, 2015

The following information is extracted from the Government’s help sheet:

  • New accounts will be available for 4 years, but once you have opened an account there’s no limit on how you long you can save for.
  • Accounts will be available through banks and building societies from Autumn 2015.
  • You can make an initial deposit of £1,000 when you open the account – in addition to normal monthly savings.
  • There is no minimum monthly deposit – but you can save up to £200 a month.
  • Accounts are limited to one per person rather than one per home – so those buying together can both receive a bonus.
  • Only available to individuals who are 16 and over.
  • The bonus is available to first time buyers purchasing UK properties.
  • Minimum bonus size of £400 per person (a minimum of £1,600 savings are required to qualify for any bonus).
  • Maximum bonus size of £3,000 per person.
  • The bonus will be available on home purchases of up to £450,000 in London and up to £250,000 outside London.
  • The bonus will be paid when you buy your first home.

Two further points to be considered. Savings can be withdrawn for any other purpose, but then no bonus is payable, and there are complications if you want to open a Help to Buy and a Cash ISA in the same tax year.


A 30th December 2015 filing deadline

Monday, December 7th, 2015

One of the more obscure filing deadlines for Self Assessment purposes relates to a claim to have your tax underpaid for a year recovered by an adjustment, an increase, in the PAYE stopped from your salary in a future tax year.

 For underpayments year to 5 April 2015, the filing deadline is fast approaching, 30 December 2015.

 You will not be able to request this type of settlement if:

  • you don’t have enough PAYE income for HMRC to collect it
  • you’d pay more than 50% of your PAYE income in tax
  • you’d end up paying more than twice as much tax as you normally do

Underpayments that are agreed to be settled in this way for 2014-15 will be adjusted in your code number for 2016-17.


Landlords despair

Monday, December 7th, 2015

On the 8 July 2015, George Osborne announced a number of changes to the taxation of property businesses. Without a doubt the most impactful change is the loss of higher rate tax relief for finance charges, which includes mortgage interest. What he didn’t explain was the not so gentle push of many landlords, who were previously basic rate tax payers, into the higher rate tax band.

Consider the fate of Joe who has built his property rental business by maximising the use of low interest rate mortgages – in accountant speak he is highly geared.

He has built up his rental business profits (after deducting costs excluding mortgage interest) to £120,000 a year. All his mortgages are interest only and the annual interest charges are £100,000. He is content to manage on the modest £20,000 income that this provides as he is in the business for the long term – nursing long term growth in the capital value of his property portfolio.

Up to the tax year 2016-17 he can deduct the £100,000 from the £120,000 and pay tax on the difference. For 2016-17 this will amount to just £1,800.

After 5 April 2017, new legislation will disallow an increasing percentage of the mortgage interest as a business expense, until by 2020-21 none of the £100,000 will be allowed as a deduction when computing tax payable. At a stroke, and with no change in property income and outgoings, Joe’s taxable profits from his property business will increase from £20,000 to £120,000.

In this way Joe will become a higher rate tax payer and lose much of his personal tax allowance as his income exceeds £100,000.

Relief for his mortgage interest payments will be given by a basic rate tax credit. For 2020-21 this will amount to £20,000 (£100,000 x 20%).

Unfortunately, even with this tax credit taken into account, Joe’s Income Tax liability for 2020-21 will rise to £19,500 (based on current information available). This is a massive increase and it will consume most of Joe’s property business cash flow.

Fortunately, there is time to plan. We will be working with all our property business clients to mitigate the downside effects of these tax changes. Readers who would like our support should call for an initial consultation sooner rather than later.


Stamp duty land tax change for second home buyers

Thursday, December 3rd, 2015

Individuals, who are considering the purchase of a second home, or a buy-to-let property, would be advised to complete their purchase before 1 April 2016. From this date new rates of stamp duty land tax (SDLT) will apply.


In his autumn statement, George Osborne announced the following change:


“Higher rates of Stamp Duty Land Tax (SDLT) will be charged on purchases of additional residential properties, such as buy to let properties and second homes, with effect from 1 April 2016. The higher rates will be 3 percentage points above the current SDLT rates. The government will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute. The tax receipts will help towards doubling the affordable housing budget. This will help first time buyers.”


Further clarification from the Treasury seems to indicate that these changes will include a new 3% band of SDLT on property purchased in excess of £40,000 up to £125,000.


The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.