Tuesday 15 November 2016

Effective date for CGT, VAT on pre-registration assets, New deemed domicile rules

Last week we drew a lesson from an accountant who should have known the law when advising a client about CGT. HMRC has back-tracked on claims for repayment of VAT relating to assets acquired before registration. Also, just in case your American clients are thinking of staying the UK, we have a brief review of the changes to the deemed domicile rules from April 2017.

This is an extract from our topical tax tips newsletter dated 10 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

New deemed domicile rules

All the rules you know about domicile and deemed domicile for UK tax purposes will be rewritten with effect from 6 April 2017. The new law will extend the deemed domicile treatment to all UK taxes, not just IHT.
UK residents who enjoy non-dom status will be deemed to be UK domiciled, if they have lived in the UK for at least 15 of the preceding 20 tax years. Also any UK residents who were born in the UK with a UK domicile (former domiciled resident or FDR), but have chosen to adopt a foreign domicile, will have their domicile of choice ignored for tax purposes. Those FDR taxpayers are treated as UK domiciled from 6 April 2017 however long they have been UK tax-resident.
These changes mean the remittance basis will no longer be available to many people who live in the UK, so those individuals will be taxed on all their worldwide income and gains, whether or not the offshore funds are remitted to the UK. The remittance basis remains (and doesn't have to be claimed) for individuals with less than £2,000 per year of unremitted foreign income or gains.
The years to count for the 15/20 test are all years of UK residence, including split years and years when the individual was aged under 18. To shake off the deemed domicile treatment for income tax and CGT the taxpayer will have to become non-resident for six entire tax years. However, only four tax years of non-residence will be required to shift deemed domicile for IHT purposes.
You need to talk to all your non-domiciled clients about these changes as soon as possible, as transactions undertaken before 6 April 2107 could undermine transitional reliefs available from that date. Our expat taxation experts can help you understand the implications for your clients.

This is an extract from our topical tax tips newsletter dated 10 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 8 November 2016

Simple assessments, NI for offshore workers, Professional conduct


Every week we endeavour to find three practical tax points which are relevant to your practice. This week we have uncovered a new form of tax assessment which can be issued for 2016/17 onwards, and changes to the NIC regulations for overseas and offshore workers. We also alert you to a new version of the tax advisers' code of conduct: Professional Conduct in Relation to Taxation (PCRT).
This is an extract from our topical tax tips newsletter dated 3 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Simple assessments 

Do you remember how personal tax worked before self-assessment? The Inland Revenue would raise an estimated tax assessment; the taxpayer would appeal, a taxreturn would be submitted and eventually the figures would be agreed, then the taxwould be paid. HMRC seem to have turned the clock back to pre-SA days with a new power to raise 'simple assessments', from 15 September 2016 (FA 2016, Sch 23, s 167). 
A simple assessment is made by HMRC not by the taxpayer, so it is the opposite of a self-assessment made alongside a SA tax return. HMRC can raise a simple assessment when it has information that the taxpayer has received income or gains which are not taxed under PAYE, but that taxpayer hasn't submitted a SA tax return for the year, and is not due to submit a SA tax return. 
HMRC envisage that simple assessments will be used where the taxpayer's main source of income is taxed under PAYE, but he also has up to £10,000 of other taxable income or gains. This income threshold is not set in the legislation. 
The taxpayer will have 60 days to query the simple assessment or such longer period as HMRC allow. The tax due will be payable by 31 January after the tax year end, or if the simple assessment is issued after 31 October following the tax year, the tax will be payable three months after the date of the assessment. The taxpayer will not have to make payments on account after receiving a simple assessment, as would be the case when making a SA tax return. 
It is likely that any explanation of the tax demanded on a simple assessment will only be available in the taxpayer's personal digital tax account, which you may not have access to. There is no guidance available from HMRC about how simple assessments will work in practice, but HMRC does have the power to raise them for 2016/17 and later years. 
If you come across a simple assessment, do contact one of our personal tax experts for guidance.
This is an extract from our topical tax tips newsletter dated 3 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 1 November 2016

Trivial benefits, VAT on market stalls, Taxable employee expenses

There are many influences which add to the constant changes for the UK tax system, but the top three are; new tax legislation, rulings in tax cases, and alterations in HMRC practice. We had examples of each of these last week; new rules about trivial benefits enacted by FA 2016, VAT treatment of market stalls decided by an Upper Tax Tribunal, and changes to the P11D proceeds effective from 6 April 2016.

This is an extract from our topical tax tips newsletter dated 27 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Trivial benefits 

For years HMRC has applied a concessionary tax exemption for trivial benefits provided by employers to their employees. This exemption has been given statutory backing in ITEPA 2003, ss 323A-323C, introduced by FA 2016, s 13 with effect from 6 April 2016. 
The new rules are actually very generous. The employer can provide a trivial benefit to any employee without having to justify his reason, on as many days in a tax year as he wishes, although there is a cap on the value of benefits provided to close company directors and their families (see below). 
If the benefit meets the following three conditions it can be paid with no tax or NIC for employee or employer, and business can claim tax deduction for the cost. The benefit must: 
a) cost no more than £50; 
b) not be a reward for services or in any way contractual; and 
c) not be cash or voucher which can be exchanged for cash. 
In theory the employer could provide a £50 gift voucher to every employee on every working day of the year, but that is likely to be seen as a reward for services, so it would break condition b) above. 
HMRC have provided some detailed guidance on these new rules which includes examples of the wide range of situations in which the trivial benefit exemption can be used. It is certainly worth reading to help answer clients' questions in this area. 
Directors and office-holders of close companies are only permitted to receive up to £300 of trivial benefits per tax year. That total includes the value of trivial benefits provided to the director's family members. This allows the company to buy six £50 gift vouchers to give to the director/shareholder at intervals (they must be separate gifts), who is then free to spend or distribute those gift vouchers as he wishes.
This is an extract from our topical tax tips newsletter dated 27 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 25 October 2016

Maternity Allowance, Intermediaries reporting, VAT on meals

Last week we had three examples of how ordinary people and businesses are not well served by our incredibly complex tax system. We explained how self-employed women may lose their entitlement to the maternity allowance, and how employers can be fined for not telling HMRC that nothing was paid. We also had a cautionary tale of a business which was set up to help housebound individuals but was hit with a VAT bill.

This is an extract from our topical tax tips newsletter dated 20 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Intermediaries reporting 
Since 6 April 2015 employment agencies and employment intermediaries have been required to report payments to workers they place with third parties, or find work for, if those workers are not paid under PAYE. We outlined the conditions for this reporting requirement in our newsletter on 9 July 2015. 
Note that personal service companies (PSC) who supply only one worker are not considered to be employment intermediaries for this purpose, so don't have to report. If the PSC supplies more than one worker it will fall under this reporting requirement, if it also doesn't operate PAYE on all the workers' payments. 
The report must include details of: 
  • The agency's name, address and postcode; 
  • The worker's name, address, NI number (if held) UTR number; 
  • The worker's engagement and payment details, including the customers' details in most cases; and 
  • why PAYE was not applied 
The report must be submitted online using a report template provided by HMRC, which essentially is a spreadsheet in the form of a ODS or CVS file. There may be commercial software available which can do this. 
The report can be submitted for periods to suit the agency, but it must be supplied at least for every quarter in the tax year, within one calendar month of the end of the reporting period. For the quarter to 5 October 2016 the report must arrive with HMRC by 5 November 2016. 
If the agency has not supplied any workers in the period it must submit a nil report by the deadline. Many employment intermediaries are not aware of this requirement. 
HMRC has the power to issue stiff penalties for late reports.
Our employment tax experts can advise on how to appeal these penalties and how to meet the reporting requirements.

This is an extract from our topical tax tips newsletter dated 20 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>





The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 18 October 2016

MTD: quarterly reporting, MTD: software and costs, State pension top-ups

We generally don't discuss tax proposals which are still at the consultation stage in this practical tax update, but we are making an exception this week to answer some key questions about the Making Tax Digital (MTD) proposals. We also have some good news about topping-up a state pension.

This is an extract from our topical tax tips newsletter dated 13 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

State pension top-ups

Only individuals who have paid sufficient NIC for the requisite number of tax years can qualify for the maximum state pension. The number of tax years required depends on when the individual attained state pension age (SPA). Those that reach SPA on or after 6 April 2016 need to have paid NIC for 35 full years, but where the individual was contracted out for any part for their working life they may receive less state pension than they were expecting.
You can help your clients budget for their retirement by using the online state pension checker facility. Where NICs have been missed for certain tax years, the missing amounts can often be replaced using voluntary NIC payments, as detailed in the excellent guide from Royal London.
This top-up facility is particularly useful for individuals who have retired before they reach SPA or have missed contribution years by living overseas. Spouses and civil partners of members of the armed forces, who accompanied their partners when posted overseas, can apply for NI credits toward their state pension for tax years back to 1975/76.

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 11 October 2016

Requirement to send HMRC leaflet, CGT for non-residents, VAT responsibilities of online markets

We live in an interconnected world; your UK-based clients may have investments in other countries, and non-resident clients may have invested in UK property. We have tips on actions required in respect of both categories of investor. Clients who run online marketplaces also need to know about new VAT rules, which will impact their businesses.

This is an extract from our topical tax tips newsletter dated 6 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

VAT responsibilities of online markets 
From 15 September 2016 online marketplaces (such as Ebay and Etsy) can be held jointly and severally liable for VAT which remains unpaid by overseas businesses which sell through those sites. 
The basic VAT rule is that overseas retailers must pay UK VAT on goods they sell which are stored within the UK at the point of sale. This rule has always applied, but it has not been enforced effectively. Hence overseas suppliers have been able to undercut UK traders on price. 
In VAT terminology an overseas supplier which has no place of business in the UK is referred to as a non-established taxable person (NETP). The NETP must register for VAT from its first sale in the UK, as there is a zero VAT registration threshold for such supplies. 
Any NETP whose home base is outside the EU can now be required to appoint a UK-based VAT representative, which may in turn be made liable for any unpaid VAT due by the NETP. However, the online marketplace through which the NETP sells its goods can also be made liable for the VAT due to be paid by the NETP. HMRC say it will normally pursue the overseas business first before issuing a notice for joint and several liability for VAT to the online marketplace. The marketplace business will be given a 30-day warning to allow it to take action against the errant trader to either secure the VAT due, or ban the trader from the site. 
Businesses who run online marketplaces need to ensure that all traders who are based outside of the UK provide evidence of their VAT registered status. 

This is an extract from our topical tax tips newsletter dated 6 October 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 4 October 2016

Savings allowance, Marriage allowance, Pensions annual allowance


Last week we reviewed three forms of allowances which are available to individual taxpayers. The savings allowance looks straightforward, but it contains two alarming cliff edges. The marriage allowance should be simple, but in many instances the HMRC computer produces the wrong answer. The pensions annual allowance is now tapered for higher earners, based on a different definition of income than applies for the other allowances!

This is an extract from our topical tax tips newsletter dated 29 September 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Savings allowance 
There is currently no HMRC guidance available on the interaction of the personal allowance, savings rate band (SRB), savings allowance, and different categories of income. This is a shame, as taxpayers need to appreciate how their savings will be taxed in the current tax year. 
From 6 April 2016 savings income (includes interest but not dividends) is taxed at 0% if it falls with the taxpayer's savings allowance or SRB. The level of the savings allowance is determined by the taxpayer's adjusted net income, not by reference to their highest marginal tax rate.
Adjusted net income is the taxpayer's total taxable income before deduction of the personal allowance, but after deduction of losses, and after the thresholds have been expanded to give higher or additional rate relief for gift aid donations and pension contributions. Thus a basic rate taxpayer may have a savings allowance of £500 rather than £1000.
Example:
Colin's adjusted net income before deduction of his personal allowance is £32,050. As his basic rate band threshold is £32,000, his savings allowance is £500 rather than £1,000. Colin's tax liability is £4,110, calculated as follows:
image
If Colin makes a gift aid donation of £40 net, (£50 gross), either within 2016/17 or before he submits his 2016/17 tax return, his basic rate band threshold is increased to £32,050. As his adjusted net income now lies within his basic rate band, his savings allowance set at £1000. Colin's tax liability is reduced to £4010, saving £100
 
This is an extract from our topical tax tips newsletter dated 29 September 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>