Archive for the ‘Uncategorized’ Category

Pension shakeup

Tuesday, March 19th, 2019

The past week, and who knows for how long into the future, has been a crazy week for politics in the UK. Brexit is challenging the way manage our democracy and it will be interesting to see how matters are resolved to observe the results of the EU referendum and cope with the apparent splits amongst members of parliament.

And yet, last week, a press release was issued by the Department of Works and Pensions implying that pension scheme investment managers, the folks that determine the size of our pension pots, are being short-changed by the UK financial investment industry, and as a result, the growth in our pension fund investments is being held back.

The title of the press release says:

Radical shake-up of advice to pension schemes will benefit savers and boost £1.6 trillion pension assets

A radical reshaping of financial advice services used by pension schemes for long-term investment strategies will benefit millions of savers and boost the nation’s £1.6 trillion retirement assets, under plans unveiled by the government today (12 March).

This is an extraordinary admission that our pension savings are not being invested in the most effective way to maximise the long-term interests of contributors.

The press release goes on to say:

Opening up the market for financial advice services used by pension schemes will help trustees get better value for money, boost members’ retirement funds and reduce employers’ shortfalls, according to ministers.

 

A Competition and Markets Authority (CMA) probe into investment strategy advice accessed by pension schemes found trustees were often denied clear information which would help them when weighing up options – hitting retirement incomes.

 

Now the government is acting to:

 

  • improve competition in financial advice services used by trustees of both defined contribution (used by the majority of pension savers) and defined benefit pension schemes
  • ensure better disclosure of fees and performance
  • encourage closer trustee engagement when buying such services
  • enable more effective monitoring of compliance by The Pensions Regulator

 

Let’s hope that this initiative is effective in boosting pension investment activity.

No tax when you sell your home?

Monday, March 18th, 2019

The private residence relief allows you to sell your home without paying any capital gains tax (CGT) on the profit you make on the sale.

If only life was that simple. Unfortunately, there are occasions when CGT may be payable. For example, if part of your home has been used exclusively for your business a proportion of any gain would be taxable based on the percentage of your home used for your business. Note the use of the word “exclusively” here. If you have a home office that doubles as your study or a spare bedroom there is no exclusivity and, in most cases, there would be no CGT to pay.

Complications also occur if you are absent from your home for extended periods, basically, the extended absences may mean that part of gains on sale would be taxable. Notable exceptions to this are:

  • If for 12 months you do not occupy a new home when you acquire it, because you are not able to sell your old home, or you need to carry out refurbishment, you can treat up to the first 12 months as if the house had been your only or main residence in that period. In exceptional circumstances, HMRC may allow you to treat a longer period (up to a total of 2 years) in the same way. The same treatment applies when you buy land to build a house.
  • If you are absent, live elsewhere due to the demands of your job, this should not affect your eligibility to claim private residence relief.

Under present tax rules the final 18 months of you home ownership always qualifies for the private residence CGT relief even if you are not living in the house when it is sold. This is a useful concession if there are delays between you moving out – to take up residence in a new home – and the old home sale completes at a later date.

Many other factors may also affect the tax-free status of your home including letting your home for extended periods or developing part of your garden for sale.

If you need confirmation that your future home sale will be tax-free, please call and make an appointment. We will need a potted history of your residence in the house with full details of any absences for whatever reason.

Spring Statement 13 March 2019

Thursday, March 14th, 2019

The following comments were written on the 13th March 2019 immediately following Philip Hammond’s presentation of the 2019 Spring Statement to Parliament. In theory, the Government uses the Spring Statement to respond to the most recent forecasts made by the Office of Budget Responsibility (OBR).

In a nut-shell, the OBR forecast that:

  • the UK economy will continue to grow, and
  • Government borrowing, and therefore interest payments, will continue to fall.

Unfortunately, the Brexit debate has compromised the Chancellor’s position and he has found himself in a three-legged race, bound to a Brexit process that delivers no certainty and which makes real forecasting of the UK’s future economic position almost impossible to predict.

If further votes on the Brexit debate take us into a no-deal situation on the 13th March, it looks as if we will see an emergency budget delivered next month, whereas a postponement of the 29 March 2019 deadline would provide breathing space: time to fully consider his options. Readers will no doubt have followed the Brexit votes in Parliament that followed the Spring Statement.

Whatever the outcome, Brexit is proving to be the glue that is holding back real planning – and perhaps real progress – on the part of the Treasury to manage the UK economy in our best interests.

However, what follows is a short summary of the points Philip Hammond did raise today.

Employment

  • Since 2010 there are more than 3.5m more people in work.
  • Employment is forecasted to increase by a further 600,000 by 2023.

Public finances

  • Debt fell last year and is forecast to fall continuously to 2023-24.

Tech and the new economy

  • In response to a government sponsored consultation, moves are afoot to update competition rules and increase competition in the digital economy.
  • The tech market place will be encouraged to allow smaller firms to participate.
  • Regulation may be introduced to make users’ personal data portable. For example, transfer lists of friends to new platforms and search engine histories to new search engines.

Border access

  • From June 2019, citizens of a number of non-EU countries will be able to use e-gates at UK airports and border crossing points.
  • The process of abolishing landing cards will also commence from June 2019.

Clean growth

  • Government is to explore schemes to encourage energy efficiencies for smaller businesses.
  • Developers will need to build in increases in biodiversity.
  • The decarbonisation of gas supplies is to be increased by using green gas suppliers.
  • From 2025 new homes will need to meet new low energy standards.

Housing and infrastructure

  • The government is on track to increase housing supply to its highest level since 1970 by the end of this parliament with an average of 300,000 properties a year.
  • A number of new steps were set out in the Spring Statement including the use of the Housing Infrastructure Fund and the Affordable Homes Guarantee Scheme to help the supply of more new homes across the country.

 

National Living and National Minimum Wage changes

  • The government has tasked the Low Pay Commission to make recommendations for changes to these rates to apply from April 2020. A response is required by October 2019.

Hampered by Brexit uncertainties, the Chancellor made no tax changes, his next round of changes will have to wait until the next Autumn Budget 2019, or April 2019 if we pursue a no-deal Brexit.

All eyes are now fixed on parliament and its attempts to achieve a workable Brexit solution that will have cross-party support.

Holiday entitlement

Tuesday, March 12th, 2019

According to government sources if you work a five day week, you are entitled to 5.6 weeks’ paid holiday a year. This is known as our statutory or annual leave entitlement.

At first sight, 5.6 weeks looks to be an odd number of days, but it refers to a normal working week of five days. Accordingly, the 5.6 weeks translates to 28 working days.

Interestingly, an employer can include bank holidays as part of your annual leave entitlement.

What about part-timers?

Part-time workers are still entitled to 5.6 weeks, but this will be reduced to reflect the number of days a week that they work. For example, if you work a three day week you would be entitled to at least 16.8 days leave in a year (3 x 5.6).

What if I work 6 days a week?

The goal posts to not shift if you work more than 5 days a week. The statutory limit of 28 days still applies.

These paid leave entitlements apply to “workers”. A person is defined as a worker if:

 

  • they have a contract or other arrangement to do work or services personally for a reward (your contract doesn’t have to be written),
  • their reward is for money or a benefit in kind, for example the promise of a contract or future work,
  • they only have a limited right to send someone else to do the work (subcontract),
  • they have to turn up for work even if they don’t want to,
  • their employer has to have work for them to do as long as the contract or arrangement lasts,
  • they aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client.

 

A final definition. An employee is a worker with an employment contract. This contract may define other benefits that are not available to worker with no employment contract.

Register your trade mark

Thursday, March 7th, 2019

As we take steps to disentangle ourselves from the EU and make our mark in the wider global economy this may be a good time to consider any brand recognition marks you may be using and give serious consideration to getting them registered.

There is a formal registration process linked to the gov.uk website, see https://www.gov.uk/how-to-register-a-trade-mark/apply

A summary of what you can and cannot register are set out below:

Your trade mark must be unique. It can include:

  • words
  • sounds
  • logos
  • colours
  • a combination of any of these

Your trade mark cannot:

  • be offensive, for example contain swear words or pornographic images
  • describe the goods or services it will relate to, for example the word ‘cotton’ cannot be a trade mark for a cotton textile company
  • be misleading, for example use the word ‘organic’ for goods that are not organic
  • be a 3-dimensional shape associated with your trade mark, for example use the shape of an egg for eggs
  • be too common and non-distinctive, for example be a simple statement like ‘we lead the way’
  • look too similar to state symbols like flags or hallmarks, based on World Intellectual Property Organization guidelines

It is advisable to search the trade marks’ database before you send your application to check if anyone has already registered an identical or similar trade mark for the same or similar goods or services.

You can ask the holder of an existing trade mark for permission to register yours. They must give you a ‘letter of consent’ – you must send this letter with your application.

Loans to employees

Wednesday, March 6th, 2019

A reminder that if your business makes a loan to your employees or their relatives this can create tax problems for both employees and employers. And please don’t forget that the term “employee” includes directors, and also that loans to family members may be caught.

For example, the employer will have an obligation to report a beneficial loan to HMRC (and pay Class 1A NIC) and the deemed benefit would be a taxable benefit in kind for the relevant employee. A beneficial loan is one that is interest free or the rate charged is below the “official rate” and the benefit is the difference between these interest rate charges.

Fortunately, not all loans create a tax problem, certain loans are exempt from this reporting obligation. These could include loans employers provided:

  • in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),
  • with a combined outstanding balance due from an employee of less than £10,000 throughout the whole tax year,
  • to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out – the official rate for 2018-19 is 2.5%,
  • under identical terms and conditions as those provided to the public (this mostly applies to commercial lenders),
  • that are ‘qualifying loans’, meaning all the interest charged to the loan account qualifies for tax relief.

Loans written off also create a National Insurance Class 1 charge for the employee. They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC from the employee’s salary, on the amount written off for tax purposes.

Calculating the taxable benefits for chargeable loans can be somewhat complex and readers are advised to take advice if they are unsure of their tax and NIC responsibilities.

Limitations of tax relief when you sell your home

Wednesday, March 6th, 2019

It is a commonly held point of view that when you sell your home you won’t pay any tax, and in particular, that you won’t pay any Capital Gains Tax on the difference between the purchase and sales prices.

Unfortunately, there are circumstances when this is not true. For example, you may have some tax to pay if you have let all or part of your house for part of your period of ownership.

There is also a restriction on the amount of land you can sell as part of your home/garden tax-free. Presently this is 5,000 square metres (just over one acre). And if you sell your home and retain part of the garden to sell at a later date, the subsequent sale of the land will attract a Capital Gains Tax charge.

You may also incur a tax cost when you sell your home if you have used part of the property exclusively for business purposes – this would not include non-exclusive use, such as using a spare bedroom or study as a part-time home office.

Issues may also occur if you sell your UK home while you are non-resident for UK tax.

If you are unsure of the tax status of your home for tax purposes, by all means call to discuss your options.

Last call for VAT traders to prepare for new filing regulations

Wednesday, March 6th, 2019

As we have mentioned before in this newsletter, VAT returns filed for periods commencing on or after 1 April 2019, may need to be filed using the new Making Tax Digital (MTD) protocols. The new filing obligations will apply to VAT registered businesses with turnover above the current VAT registration limit, £85,000.

To comply with MTD firms will need to file their returns – for periods commencing on or after 1 April 2019 – using software that can link with HMRC’s MTD servers.

Readers affected, and who have not yet considered their options, should take advice, and quickly. We can offer advice on the use of appropriate software, but time is running out. Avoid last minute challenges and call now to discuss your options.

Changes to minimum wage rates

Wednesday, March 6th, 2019

From April 2019, minimum pay rates will increase as set out below.

  • National Living Wage (NLW) rates for workers aged 25 and over – from £7.83 to £8.21 per hour.
  • National Minimum Wage rates:
    • workers aged 21–24 — from £7.38 to £7.70 per hour
    • workers aged 18–20 — from £5.90 to £6.15 per hour
    • workers aged 16–18 — from £4.20 to £4.35 per hour
    • apprentice rate — from £3.70 to £3.90 per hour.

The accommodation offset rate will rise to £7.55.

This should mean that a full-time worker aged 25 and over on the NLW will receive an annual pay increase of £690.

Employers are reminded that these rates are not optional. HMRC police the National Minimum Wage and NLW regulations and employers found to be in breach will be subject to penalties and have to repay any arrears to affected employees.

Tax Diary March/April 2019

Wednesday, March 6th, 2019

1 March 2019 – Due date for Corporation Tax due for the year ended 31 May 2018.

2 March 2019 – Self assessment tax for 2017/18 paid after this date will incur a 5% surcharge.

19 March 2019 – PAYE and NIC deductions due for month ended 5 March 2019. (If you pay your tax electronically the due date is 22 March 2019)

19 March 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2019.

19 March 2019 – CIS tax deducted for the month ended 5 March 2019 is payable by today.

1 April 2019 – Due date for Corporation Tax due for the year ended 30 June 2018.

19 April 2019 – PAYE and NIC deductions due for month ended 5 April 2019. (If you pay your tax electronically the due date is 22 April 2019)

19 April 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2019.