News

In a month’s time, 5 April 2020, the 2019-20 tax year expires. After this date many of the options to utilise allowances and claim reliefs to reduce tax for 2019-20 will disappear.

A number of the reliefs to consider are listed below. This is by no means an exhaustive list. Any numbers quoted refer to the tax year 2019-20.

• Have you utilised your £12,000 tax-free allowance for Capital Gains Tax purposes?
• You are entitled to make a number of small gifts that will not be taxed under the Inheritance Tax rules.
• Have you reviewed your pension contributions for 2019-20? According to the pundits, higher rate tax relief may be reduced in the budget next week. In which case, 2019-20 may be the last year to claim those higher rate reliefs.
• If you and your married partner are basic rate tax payers and one of you has not earned enough to cover their basic Income Tax personal allowance – £12,500 for 2019-20 – it may be possible to transfer part of the unused allowance to their partner. Check out the Marriage Allowance.
• Do you have an opportunity to draw up to £2,000 tax-free from your company in dividends? No additional tax to pay. Only applies to the first £2,000 in dividends you take.

The above list does not include other strategies for business owners and many more complex options for high income earners. Please call if you would like us to review any last minute options for you.

The Insolvency Service has issued a warning that fraudsters have been contacting investors in insolvent schemes claiming to be from the Official Receiver’s office or to have been appointed by the Official Receiver to help recover funds for a fee.

These approaches are always fraudulent.

Official Receivers or any agent legitimately instructed to act on their behalf will never ask you to pay a fee to get some or all of your investment back.

The Official Receiver can only make a return to you as a creditor in failed schemes if it is possible to identify and sell any remaining assets owned by the liquidated company you bought your investment from. All too often businesses of this nature have few if any, assets left to repay creditors and it can take several years to undertake complex asset recovery work and complete a liquidation.

Paying a fee will not make you a priority creditor, meaning you get paid faster or increase the chance of you getting any money back.

If you are asked to pay a fee to get your money back someone is attempting to scam you.

The Official Receiver does not charge investors a fee to get money back and does not employ anyone else to do this on their behalf.

You should report all fraudulent contact from individuals, stating they can get your lost investments back for a fee, to the Official Receivers. You can also report these approaches to Action Fraud.

As we approach the end of yet another tax year it is worth reflecting on the role of HMRC in our tax affairs.

Without a doubt, HMRC, tax legislation and its application, will continue to ensure that you pay your taxes. You can rely on HMRC to pounce if they feel that you have underpaid tax. Unfortunately, they may not be so active if there are allowances and reliefs that you could claim to reduce your expose to tax.

The UK tax code, the wealth of legislation that dictates our liability to tax, is amongst the most complex in the global community. Accordingly, tax payers will rarely understand or appreciate the extent to which their activities are creating liability to tax. Unfortunately, in most cases ignorance of the law is no excuse for not complying with the law.

Without reaching a detailed and informed opinion about any significant change in our personal circumstances: our investments, pensions arrangement, business or employment situation, we run the risk that at some stage we will receive the dreaded “brown-envelope” from HMRC.

Very often it is too late to counter these after-the-fact challenges – the planning required to minimise exposure to tax has to be done before the event, before you make the changes.

Our commitment is to ensure that our clients pay just as much tax as is required by legislation, and not a penny more. We are also committed to ensuring that our services are cost effective; that the value or monetary savings we achieve exceed the investment in our time.

Please remember, if you are about to make any change in your personal or business circumstances and you are unsure if the change will impact your tax position, pick up the phone.

Since the launch of the Dormant Assets Scheme in 2011, £600m has been transferred from High Street banks and building societies to various good causes. The funds have come from bank accounts that are classified as dormant: where banks are unable to trace the account holders

The scheme is to be expanded.

The government is consulting on expanding the scheme to the following sectors:

• Insurance and pensions
• Investment and wealth management
• Securities

Assets proposed to be within the scope of the expansion include:

• Dormant insurance policy proceeds
• Dormant share proceeds
• Dormant unit proceeds
• Dormant distributions and proceeds from investment assets
• Other dormant security distributions

Customers – account holders – will always be able to reclaim the same amount they would have had if their assets were never transferred, as they do in the current scheme, and companies would continue to participate on a voluntary basis.

There are over 30 participating firms including HSBC Bank plc, Lloyds Banking Group, Nationwide Building Society, Royal Bank of Scotland, The Co-operative Bank plc.

The definition of a dormant bank or building society account is in the Dormant Bank and Building Society Accounts Act 2008: an account is ‘dormant’ at a particular time if the account has been open throughout the period of 15 years ending at that time, but during that period no transactions have been carried out in relation to the account by or on the instructions of the holder of the account.

Participating firms also agree with the Reclaim Fund Ltd, which administers the scheme, to undertake tracing exercises before transferring dormant accounts.

Under the scheme, funds are held by Reclaim Fund Ltd (RFL). RFL is authorised and regulated by the Financial Conduct Authority and holds sufficient money to cover any reclaims while distributing the surplus to The National Lottery Community Fund for social or environmental initiatives across the UK.

The government have announced a £1,000 business rates discount for public houses

The relief announced 27 January 2020, will be available to public houses with a rateable value of less than £100,000 and will apply for one year from April 2020.

Central government will reimburse local authorities that adopt this scheme.

Extracts from the January announcement are reproduced below.

The cut is on top of previously announced plans to slash the bills of small shops by 50%.

As many as 18,000 pubs are expected to benefit from the discount.

The relief will come on top of an extended retail discount, which smaller pubs are also eligible for. Those eligible for both reliefs will get up to £13,500 off their annual bills.

The £13,500 discount is based on a pub with a rateable value of £50,000, generating an annual rates bill of around £25,000. Applying the 50% retail discount reduces the bill by £12,500. The pub would then receive the additional £1,000 pubs relief.

From April this year:

• small shops and cafes will see their bills halved as the retail discount, currently a third off, is extended to 50%

• music venues and cinemas will become eligible for the retail discount

• a £1,500 discount for local newspapers office space will be extended for a further five years

The pubs relief will apply to pubs with a rateable value below £100,000 subject to eligibility. Pubs with a rateable value of below £51,000 already get a one-third reduction in their rates bill through the retail discount. The £1,000 discount is in addition and will apply after the retail discount.

Following the resignation of Sajid Javid last week, there has been much speculation on how this will affect the direction of the budget to be presented to parliament next month.

Rishi Sunak, who replaces Sajid, is stepping into the Chancellor’s role with little experience but does seem to have “rising star” status as far as number 10 is concerned.

What can we expect from the forthcoming budget?

Infrastructure and the NHS seem to be the two major areas for investment. HS2 and other rail improvements in the North are likely to be beneficiaries as will carbon capture and other climate related projects, for example, improving the energy efficiency of homes, schools and hospitals.

The government has already said it will not be increasing any of the major taxes and has recently published details of an increase in the NIC threshold, to £9,500.

Corporation tax was due to reduce to 17% (from the present 19%) from April 2020. However, Boris Johnson, during the recent election campaign, did say that this intended increase would be dropped, and the rate maintained at 19%.

There is speculation that higher rate tax relief will be trimmed for contributions into private pension funds.

A cross-party group of MPs has called for a reduction in the rate of inheritance tax, from 40% to 10%, together with a reduction in many of the inheritance tax allowances and reliefs.

1. rates are another target for relief in an attempt to support beleaguered High Street businesses. Additional support has already been announced for retailers and pubs.

Meanwhile, back at number 11 Downing Street, Rishi Sunak will be burning the midnight oil to prepare himself for his dispatch-box presentation on 11 March. We will be reporting on the outcome of his disclosures in due course.

In a recent news story published to the Government website it was announced that a new breathing space period will freeze interest, fees and enforcement for people in problem debt, with further protections for those in mental health crisis treatment.

The article is reproduced below:

Millions of people with problem debt, including those facing mental health problems, will be helped by the government to get their finances under control, new figures released on Time to Talk Day (Thursday 6 February) show.

A 60-day breathing space period will see enforcement action from creditors halted and interest frozen for people with problem debt. During this period, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.

As well as this, those receiving mental health crisis treatment will receive the same protections until their treatment is complete, in acknowledgement of the clear impact problem debt can have on wellbeing.

The impact assessment for breathing space, published today, forecasts that it will help over 700,000 people across the UK get professional help in its first year, increasing up to 1.2 million a year by the tenth year of operation.

Of this, 25,000 to 50,000 people in mental health crisis treatment are expected to benefit from breathing space every year.

As well as covering debts like credit cards and loans, breathing space will cover a wide range of government debts.

Creditors will also benefit from introducing breathing space, with over £400 million in extra repayments expected in the first year, as individuals get the support they need to get their payments back on track.

The announcement builds on previous government work to alleviate the impact of problem debt, including reforming regulation around consumer credit, widening access to professional debt advice and helping build individual financial resilience.

There are certain gifts you can make that will not create a capital gains tax (CGT) charge, but care should be taken as there are exceptions. This article outlines some of the more common issues that need to be considered.

Gifts to your spouse or civil partner

Ordinarily, you will not pay CGT if you gift assets – that would normally create a charge to CGT if sold elsewhere – to your spouse or civil partner.

The major exception to this rule is if you were separated and did not live together at any time during the tax year in which your gift was made (the tax year ends 5 April).

Another exception is if you gave them goods to sell-on as part of their business activity.

When the receiving partner subsequently sells the gifted item, they will pay CGT on the difference between the sales proceeds less the cost when the asset was first purchased. For example, If Jon buys shares for £1,000, keeps them for two years and then gives them to his civil partner Tim – when the shares are worth £5,000 – and Tim subsequently sells the shares a year later for £10,000; Tim’s CGT charge will be based on a gain of £9,000 (£10,000 less the original cost £1,000).

For this reason, it is recommended that the person gifting assets should provide evidence of the original purchase as this will be needed to calculate the amount of any future capital gain.

Gifts to a charity

You should not have to pay CGT if you gift a chargeable asset to a charity.

However, you may create a CGT charge if you sell an asset to a charity for more than you paid for it or less than its market value.

The CGT gain would be worked out based on the amount the charity pays you rather than the value of the asset when sold.

Planning options

If you are considering making a significant gift it is always advisable to check out any tax consequences before transferring ownership. Aside from CGT, there may also be stamp duty or inheritance tax complications. Please call so we can help you consider your options.

Most property owners who let property under the Furnished Holiday Let (FHL) tax rules, submit their income and expenditure details on their tax return each year.

This article considers occupancy, and the need to review occupancy of FHL properties each year.

If your FHL business accounts year is the end of the tax year, 31 March (5 April), we suggest that you take out your calculator and booking diary before this date. If you do not meet HMRC’s criteria you may lose some or all of the valuable tax concessions for which FHL businesses qualify.

Here’s HMRC’s summary of the occupancy regulations:

The pattern of occupation condition

If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition isn’t met so your property won’t be a FHL for that year.

Availability conditions

Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year.

Don’t count any days when you’re staying in the property. HMRC don’t consider the property to be available for letting while you’re staying there.

The letting condition

You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year.

Don’t count any days when you let the property to friends or relatives at zero or reduced rates as this isn’t a commercial let.

Don’t count longer-term lets of more than 31 days, unless the 31 days is exceeded because something unforeseen happens.

The averaging election – if you’ve more than one property

A period of grace election – if your property reaches the occupancy threshold in some years but not in others.

If your initial run-through of the number crunching indicates that you may not meet the requirements to qualify as an FHL on one or more properties, please call so that we can help you check your calculations and see if the averaging rules apply in your favour.

1 February 2020 – Due date for Corporation Tax payable for the year ended 30 April 2019.

19 February 2020 – PAYE and NIC deductions due for month ended 5 February 2020. (If you pay your tax electronically the due date is 22 February 2020)

19 February 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2020.

19 February 2020 – CIS tax deducted for the month ended 5 February 2020 is payable by today.

1 March 2020 – Due date for Corporation Tax due for the year ended 31 May 2019.

2 March 2020 – Self assessment tax for 2019/19 paid after this date will incur a 5% surcharge.

19 March 2020 – PAYE and NIC deductions due for month ended 5 March 2020. (If you pay your tax electronically the due date is 22 March 2020)

19 March 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2020.

19 March 2020 – CIS tax deducted for the month ended 5 March 2020 is payable by today.