Hammond’s Autumn Statement 2016: No more Autumn Statement?

In his first –and last– Autumn Statement, the new Chancellor outlined prospective plans for the British economy, in light of the decision to leave the EU. There was a great deal of interest surrounding the announcement, as it was also the first formal economic address of the Theresa May Government.

The statement was received positively by some, who felt that Hammond bore early Christmas presents: increases to tax allowances, the national living wage, and a new savings bond. It also included major overhauls of housing and benefits.

Autumn Statement 2016: Key Measures

The Autumn Statement is to be abolished. From 2017,  it will be replaced by an Autumn Budget; Spring Statements will begin in 2018.

Tax

  • Tax-free Personal Allowance is set to rise to £11,500 in April and £12,500 by the end of parliament.

  • The Basic Rate threshold will increase to £50,000 by 2020.

  • Corporation Tax is to fall to 17% as planned.

  • The National Living Wage will increase from £7.20 to £7.50 in April 2017.

  • Measures will be introduced to clamp down on tax avoidance schemes.

  • Insurance premium tax is set to rise from 10% to 12%.

  • Tax savings on salary sacrifice and benefits in kind are to be stopped.

  • Rural Rate Relief is to be increased to 100%, giving SMEs a tax break worth up to £2,900. 

  • The charges for Annual Tax on Enveloped Dwellings (ATED) will rise in line with inflation for 2017/18.

Savings

  • A new savings bond will be introduced by NS&I. Savers can deposit up to £3000, with an interest rate of 2.2% over three years. Two million account holders are expected to benefit.

Benefits

  • The Universal Credit earnings taper rate is set to fall from 65% to 63% from April 2017. The rate affects the amount of support paid out to workers on in-work benefits. This is expected to cost the economy £700m.

NI

  • NI contributions made by employers and employees are to be equalised at £157 per week from April 2017.

Public Finances and Spending

  • Borrowing will be higher due to lower growth. The Office for Budget Responsibility has forecasted that government borrowings will total £68.2bn this year. It predicts £59bn to be borrowed in 2017/18, subsequently falling to £46.5bn, £21.9bn, £20.7bn and reaching £17.2bn in 2021/22.

  • Public spending this year is to constitute 40% of GDP – down from 45% in 2010.

  • Plans for a Budget surplus by 2020 have been scrapped, in view of the uncertainty facing the economy and slower growth forecasts.

  • There is to be a £23bn fund for innovation and infrastructure over the next 5 years.

  • An additional £400m will be poured into venture capital funds, to help start-ups develop, and unlocking £1bn of new finance for growing firms.

  • From April 2017, there are to be restrictions for corporate interest relief.

  • Research and development (R&D) will see an extra £2bn a year in funding by 2020.

Motoring

  • Fuel duty rise has been frozen for the seventh year, at a cost of £850 million. This will save the average driver £130 a year.

Housing

  • A housing infrastructure fund of £2.3bn will be introduced for 100,000 new houses in areas of high demand.

  • £1.4bn is to be aimed at delivering 40,000 affordable new homes.

  • £1bn will be used to help upgrade Britain’s broadband to “full fibre” to benefit people in rural areas. £400m is to be used for the purpose of innovation.

  • Upfront fees to tenants, often imposed by lettings agents in England, are to be banned. This will happen ‘as soon as possible’, the chancellor said.

 

If you require any tax advice on changes on the budget, feel free to give us a call for a no obligation chat with one of our specialists!

Budget 2016: significant changes to tax announced

The Chancellor has delivered the budget for the 2017 financial year with some significant tax changes being announced. Here are some of the key changes to be aware of:

  • The higher rate threshold for income tax (the amount that individuals start paying tax at 40%) will increase to £45,000 from April 2017.
     
  • From April 2017, there will be a new £1,000 tax free allowance for property rental income.
     
  • Capital Gains Tax rates will be lowered to 20% for higher and additional rate taxpayers, and 10% for basic rate taxpayers. The rates are currently 28% and 18% respectively. The changes will be effective from the tax year 2016/2017. However, the lower rates will not apply to gains on the sale of residential property.
     
  • Corporation tax will be cut to 17% by 2020.
     
  • Class 2 National Insurance contributions will be scrapped from April 2018. From April 2018, individuals will only have to make Class 4 National Insurance contributions in respect of their self-employment income.
     
  • Stamp Duty Land Tax rates will be reformed  for commercial property from 17 March 2016. The current rates apply to the whole transaction value, but this will be reformed so that the rates apply to the value of the property over each band in a similar way to residential property. The new rates and tax bands will be 0% for the portion of the transaction value up to £150,000; 2% between £150,001 and £250,000, and 5% above £250,000.
     
  • Entrepreneurs’ relief will be extended to external investors in unlisted trading companies. This will remove the requirement to be an employee or hold 5% or more of the shares for unquoted shareholdings.

  • The rate of tax charged on loans to participators (currently 25%) will be 32.5% from 6 April 2016.

  • Non-residential property developers will be brought into the scope of UK tax on the profits earned from developing UK property, regardless of the residence of the company carrying on the trade. This will ensure that a non-resident is subject to tax on profits from a UK property trade.

Talking Tax

Next week we launch a series of tax events across the UK, with our experts and guest speakers breaking down a range of complex tax issues that may affect you in the coming months.

Topics covered will include:

 - the overhaul of the non-UK domicile legislation
 - buy-to-let landlords
 - Inheritance Tax
 - international offshore structures relating to UK property development
 - changes to dividends

There will also be a Q&A session, giving you the chance to speak directly to our Chartered Tax Advisors and experts.

All events start at 6.30pm, followed by drinks and canapés. To find out more, and RSVP please select your preferred location below. 

Please note these events have a limited capacity, and book up quickly. We encourage you to RSVP to avoid any disappointment.
 

Great news for property investors & developers!

Brandon Lewis,  Minister of State for Housing and Planning

Brandon Lewis, 
Minister of State for Housing and Planning

The Government has announced that it will make 'permitted development' permanent. Originally permitted development rights were due to expire in May 2016.

Permitted development rights have enabled offices to be converted to new homes without having to apply for planning permission.

In addition the Housing and Planning Minister Brandon Lewis today announced the government will expand the scheme to a allow offices to be demolished, not just converted, and extended to light industrial and launderettes for new homes.

The move will provide thousands of new homes, and make the best use of existing buildings including some that are underused and neglected – while at the same time protecting the green belt.

It is estimated that since they were first announced in 2013 over 4,000 conversions were given the go-ahead.

In addition those who already have permission will have three years in which to complete the change of use – ending potential uncertainty for developers and enabling the development of much needed homes.

Those areas that are currently exempt from the office to residential permitted development rights will have until May 2019 to make an Article 4 direction if they wish to continue determining planning applications for the change of use.

For clients who are property investors and developers this is creates a lot of new opportunities which Signature Tax can help with both in sourcing the deals, arranging the finance and working with our partners to structure the deals.

For further information contact Signature Tax on info@signaturetax.co.uk or 020 3815 707

Received an ‘accelerated payment notice’? – here are ten things you need to know:

An accelerated payment notice (APN) is a requirement to pay an amount on account of tax or National Insurance Contributions (NICs), issued to taxpayers that are involved in avoidance schemes disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) rules, or counter-acted under the General Anti Abuse Rule (GAAR).

The effect of the notice is to pay an amount calculated by HMRC relating to the tax advantage up front. This removes the cash flow advantage enjoyed by users of tax avoidance schemes.

Here are ten things you need to know if you have received an APN:

1. You must pay within 90 days
You have 90 days to pay the amount shown on the APN, unless you make representations, in which case the period may be longer. The payment doesn’t have to be made in one go as long as it is all paid by the due date.

2. Don’t ignore it
Failure to pay an APN by the due date could lead to late payment penalties or surcharges becoming due and potential enforcement action being taken to recover the tax or NICs. So make sure that you take action and pay the APN promptly.

3. Problems paying
If you think you will have problems paying the APN you should contact the HMRC telephone number shown on the notice, and they may be able to arrange a payment plan with you.

4. You may not get all your APNs at once
APNs are being issued on a scheme by scheme basis and so, if you are in a number of schemes, you may not get all of the APNs that HMRC plans to issue at the same time.

5. You can receive more than one APN
APNs are sent out for each year of the avoidance scheme you are in and for each type of tax involved. For example if you have used an employment scheme for two years and that scheme gives both a tax and national insurance advantage you may receive up to four APNs.

6. Paying the APN is not settling your tax affairs
The APN will only cover the tax or NICs advantage relating to the specific avoidance scheme covered by the APN. The amount shown may not be the final liability agreed, which may be larger or smaller than the amount of the APN. It will not include any interest, penalties or other tax that may be due in the year. Therefore when the enquiry or appeal is finalised, there may be additional amounts to pay.

7. Appeal rights
You have a right to make representations against the APN. You also have a right to appeal against the underlying tax or NICs that are in dispute.

8. You can object to an APN under specific circumstances
If you feel the amount quoted is incorrect or the conditions have not been met, you may make a representation which HMRC will consider. Representations should be made in writing to the address shown on the notice, within the 90 days before payment becomes due. If you do make a representation, HMRC will write to you setting out the results of their review. The response to your representation will tell you what you need to do next.

9. The amount due on an APN may be different to a settlement opportunity calculation
If you receive an APN at the same time as a settlement opportunity is in place, the value of the APN will not necessarily be calculated on the same terms offered in the settlement opportunity. Settlement opportunity calculations may also include interest and penalties, and will therefore, not necessarily be the same figure.

10. You can still settle your affairs after you’ve received an APN
If you want to settle your tax affairs and you’ve received an APN, you should contact HMRC as soon as possible. You must still pay the APN by the due date to avoid late payment penalties, but any payment received will be treated as a payment on account of the final liability and will stop the interest accruing on the underlying debt from the date it was received.

 

Keeping it in the family: changes to inheritance tax on the family home

One of the more welcoming announcements in the summer budget was the introduction of a new nil-rate band for inheritance tax on residential property. The relief will apply to family homes and will potentially increase the tax free element to £1 million.

How will it work?
In addition to the £325,000 nil rate band already available (the amount an individual can receive tax free) there will be an additional nil-rate band where a family home is passed on to the surviving children. This band will begin at £100,000 for the tax year 2017/2018 and increase gradually until 2020 to £175,000. However, the band will be scaled down where the value of an estate exceeds £2 million.

Where an estate consists of more than one property, there is flexibility to nominate the property that the additional band will apply to (provided the nominated property has been the residence of the deceased at some point).

Both nil-rate bands can be transferred between spouses, giving a potential relief of £1 million by 2020.

When will it be introduced?
Once the Finance Bill is passed, the measure will take effect from 6 April 2017.

Happy Eid!

Happy Eid to all those celebrating! 

VAT refund scheme - claims due by 30 September

If your business incurred overseas VAT in another EU country during 2014, you may be entitled to a refund through the ‘VAT refund scheme’. A claim must be made by 30 September 2015.

The claims can be made by businesses that:

  • Are not VAT-registered in the relevant EU country;
  • Don’t have a place of business in the EU country;
  • Make no supplies other than those relating to the transport of goods, and the recipient pays VAT on them.
 

WHAT CAN BE REFUNDED
A refund is available for the VAT incurred on most goods and services bought for the business. However, the amount that can be reclaimed depends on the other EU country’s rules for reclaiming VAT, and each EU country has set a minimum amount that can be reclaimed.

Refunds are not available where goods are brought into the UK from another EU country, or on goods bought for resale in the UK.

MAKING A CLAIM
Claims can only be made by the business or their accountants using the HMRC online VAT services. HMRC then pass the claim on to the respective EU country in which VAT has been incurred. 

Working in the creative industries..? Tax relief may be available.

If you work in the creative industries you could be entitled to specific tax reliefs. Also known as cultural industries, creative industries refers to a range of economic activities such as video games, design, new media, television and film production, theatre and orchestra.

The creative industries is now worth £76.9 billion per year to the UK economy, and the government is keen to encourage more creative business activity through a variety of tax reliefs. Specific tax reliefs already exist to encourage further investment in creative industries. These work in a similar way to the less specific R & D tax reliefs, but are often left unclaimed by businesses who are simply not aware of the potential tax savings.

What you could be claiming

Provided the company meets the requirements of a qualifying creative sector company, it could be entitled to:

  • An enhanced deduction from taxable profits or;
  • If it is loss making, a repayable tax credit.

The costs that are taken into consideration are those associated with, for example, pre-production, design and testing.  Therefore, it is just as important to retain the records of such expenditure if you are going to make a claim for the reliefs.

These reliefs are actively encouraged by the government and provide a great cash flow opportunity through potential tax savings.

Current Consultations - will you be affected?

HMRC are holding a number of consultations before new government legislation is enacted. This is your opportunity to provide any feedback on the following areas:

 

Wear and tear
Clarification has also been sought for changes to the wear and tear allowance announced in the summer budget. The government wants to scrap the nominal 10% relief for a ‘replacement furniture relief’, which will give relief based on costs actually incurred. The deadline for this consultation is 9 October 2015.

https://www.gov.uk/government/consultations/replacing-wear-and-tear-allowance-with-tax-relief-for-replacing-furnishings-in-let-residential-dwelling-houses


Large business tax compliance
This will focus on measures that will deter businesses from aggressive tax planning or refusal to co-operate with HMRC in an open way. The deadline for this is 14 October 2015.

https://www.gov.uk/government/consultations/improving-large-business-tax-compliance


Termination payments
The tax laws surrounding the treatment of termination payments is currently very complicated. This consultation looks at proposals that will replace the current rules with a simpler smaller initial exemption, that would depend on length of service. The consultation will end on 16 October 2015.

https://www.gov.uk/government/consultations/simplification-of-the-tax-and-national-insurance-treatment-of-termination-payments


Offshore tax evasion
The measures for clamping down on offshore tax evasion have been growing in the last couple of years. There is currently a four-part consultation on the issues regarding the strengthening of the powers to deal with evaders, focusing on new criminal offences and civil sanctions. The deadline for these consultations is 8 October 2015.

https://www.gov.uk/government/consultations/tackling-offshore-evasion

A full list of HMRC consultations can be found at:
http://bit.ly/1lYXgjx

Unpacking the changes for buy-to-let landlords

George Osborne announced significant changes in the recent budget for buy-to-let landlords. The changes will affect the amount of tax relief landlords are able to claim on their let properties.

Previously, landlords who had acquired a property that was financed by a mortgage, were able to deduct the costs of the mortgage interest when calculating their taxable profit. This left many people in a favourable position, as the interest element of a mortgage was usually quite considerable.

But for many, the relief will be clawed back. Osborne’s announcement means that the amount landlords are able to deduct will be restricted to the basic rate tax band (20%). As the majority of buy-to-let landlords are likely to be higher rate payers, this will affect a lot of people. The higher rate relief will be phased out gradually over a period of 5 years, until 2021 when relief will only be given at the 20% band. It is worth pointing out that this is exactly the same relief that a company would be entitled to, as it mirrors the current corporation tax rate.

The restrictions on claiming mortgage interest were announced in conjunction with changes to the wear and tear allowance. Previously, wear and tear could only be claimed if the residential letting was on a furnished basis. However, the new rules override the importance of whether a property is furnished or unfurnished, as all landlords of residential dwelling houses, no matter what the level of furnishing, will be able to claim the cost of replacing any furnishings. The downside is that the costs have to actually be incurred, whereas before, a flat 10% of the gross rent could be deducted from a furnished letting business.

There was also good news for those looking to rent rooms in their existing house. The ‘rent a room limit’ (the amount an individual can receive from renting a room in their house without paying tax) will increase from £4,250 to £7,000 from April 2016. So if you charge £583 per month for a room in your house, there will be no tax due at all on the rent.

Clearly, the politics behind these changes concerns the current housing shortages. Whilst the government wants to discourage wealthy landlords from profiting from this, it is more than happy for individuals to make use of the space in their existing homes.

 

UNSURE ABOUT HOW THE BUDGET WILL AFFECT YOU?

Later this year we’ll be hosting a series of seminars on the budget, giving you the opportunity to ask our tax specialists any questions you may have about how the changes will affect you. 
 

Accelerated Payment Notices are here to stay

A claim was made by 154 members of Film Limited Liability Partnership schemes which were promoted by Ingenious Media PLC, made a case to the high court for judicial review over the legality of accelerated tax payment notices.

The claim has failed, opening the way for a HMRC to issue a further estimated 64,000 APN’s to individuals who have participated in tax avoidance schemes, by the end of 2016.

The legislation enacted last year following the budget gave HMRC the power to make tax payers pay any disputed sums of tax before any case was heard. Should the tax payer ultimately win the case the money would be refunded with interest.

David Richardson, Director of Counter Avoidance at HMRC commented; “This is an important result, and good news for the vast majority of taxpayers who do not try to avoid paying their fair share of tax.

Those who use tax avoidance schemes need to know they can no longer hold on to the money while their affairs are investigated. They have to pay their tax up front like everybody else.

We expect to complete the issue of around 64,000 notices tax by the end of 2016 bringing forward £5.5bn in payments for the Exchequer by March 2020.

HMRC wins 80% of all avoidance cases that people litigate, and many more are settling before things get to that stage.”

In 2014/15, around 10,000 APNs were issued generating £568 million (net after refunding £28 million following legal challenges).

Congratulations Esmail Jasat, MAAT

Congratulations to our Business Development Manager, Esmail Jasat, who became a Full Member of the Association of Accounting Technicians (AAT) last week!

The MAAT qualification confirms that he is now a qualified accounting professional, as well as giving him a greater breadth and depth of knowledge across accounting, finance and tax. Esmail is now looking to start a Association of Tax Technicians qualification (ATT) in September which will build on his tax knowledge and enable him to progress further in this field.

Our Budget 2015 seminars launching soon...

Later this year we'll be hosting a special series of events across the UK, discussing the 2015 Budget.  A perfect opportunity to speak with our specialists on how the changes will affect you and your business.

Dates and locations to be confirmed but watch this space for more details soon.