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Budget 2017

A SIMPLE GUIDE TO THE BUDGET 2017
This is a basic guide to the Budget 2017.  It is an introduction only and should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.

A stronger, fairer, better Britain were the themes of the Budget. You can read the individual measures below.

Marriage allowance
This applies from 6 April and allows for the transfer of £1,150 of a personal allowance to a spouse or partner.

Self-employed National Insurance Contribution
The main rate of Class 4 NIC’s will increase (from the current rate of 9%) to 10% from April 2018 and to 11% from April 2019.

Dividend Allowance
The tax-free dividend allowance was introduced from April 2016 so that the first £5,000 of dividend income would be tax free.

The tax-free dividend allowance will be reduced from £5,000 to £2,000 from April 2018.

Corporation tax
The corporation tax rate will be reduced from 20% to 19% for the 2017/18 tax year and to 17% by 2020.

Annual Investment Allowance
The annual investment allowance of £200,000 per annum remains available for companies and for unincorporated businesses.

Making tax digital
Rollout beginning April 2018; however for unincorporated businesses with a turnover below the VAT registration threshold there would be a delay of one year to the introduction of quarterly reporting.

UK Deemed Domicile
Individuals who are not domiciled in the UK will be deemed to be UK domiciled for tax purposes if they are either resident in the UK for 15 of the past 20 tax years, or if they are born in the UK with a UK domicile of origin and return to the UK having obtained a domicile of choice elsewhere

VAT

2016/17           2017/18
Standard rate               […]

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Negligent director and national insurance

National insurance contribution reversal for an alleged negligent director
FIRST TIER TRIBUNAL CASE
ANTHONY PETER BROUGHTON-HEAD Appellant
– and –
THE COMMISSIONERS FOR HMRC Respondents
The Tribunal determined the appeal on 6 February 2017

Abstract:

Negligent director – balancing of evidence – accruing national insurance years for pension purposes – reinstating contribution years.

Introduction:

Mr Broughton-Head appealed against the decision of HMRC in relation to the payment or non-payment of Class 1 National Insurance Contributions (NICs) between 1985 and 1991. The appeal related to the tax years 1986 to 1989 as they were important to the appellant in respect of his pension.

The appeal was against a decision which stated the the taxpayer had paid nil national insurance contributions during the tax years 1985 to 1991 and he was accused of being a negligent director.

Background:

The Social Security (Contributions) Regulations 1979 makes provision for the treatment for the purposes of contributory benefit of late paid or
unpaid Class 1 contributions. Where the late payment or failure in making payment is shown not to be attributable to the negligence on the part of the primary contributor, the primary contribution is to be treated as duly paid.

The appeal was against the previous decision that the appellant was a negligent director. He was the director of a company called Broughton- Head Timber Ltd (Timber), which was wound up on 19 January 1994.

The Insolvency Section of HMRC investigated matters and concluded that he was a negligent director and that no contributions had been paid for the tax years 1986/87, 1987/88 and 1988/89. The appellant’s contributions for those tax years were removed from his record. Case details regarding the contributions were not available.

The appellant requested HMRC in September 2014 to reverse the removal of the contributions from his national insurance records, which HMRC refused to […]

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An Overview of Inheritance Tax

When planning out their estates, many people forget about inheritance tax. They bequeath their belongings to their loved ones, and they don’t think about their heirs having to pay that inheritance tax on both property and money that is inherited. Even less people think about it these days because it’s not been in the headlines recently.

It is important to understand that just because the UK has this inheritance tax doesn’t mean that certain groups of people aren’t exempt. That is why it’s important to know the specific laws that surround this type of tax. Currently the inheritance tax threshold is £325,000 per person or £650,000 for a married couple. This is only valid if the first person to die leaves their entire estate to their partner. Everything over this is subject to a 40% levy.

Inheritance tax needs to paid within 6 months of the person dying otherwise there will be interest to pay on the estate. Most people don’t realise that you can pay inheritance tax over 10 years on things that are difficult to sell such as houses and certain types of shares.

If you aren’t sure if the inheritance tax applies to you or your beneficiaries, then it’s time to find out. For starters, there are things that people can do to keep those inheritance taxes out of play. Yes, that’s right, you can take care of it all beforehand so that heirs aren’t having to pay extra taxes.

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National Insurance Contributions In The UK

What are National Insurance contributions in the United Kingdom and who has to pay them? How do taxpayers pay it? How much do they have to pay?

1. What Are They- National Insurance contributions are paid by people. They pay them in order to qualify for various benefits, such as State Pension. Some other benefits include a state pension, maternity allowance and bereavement benefits.

2. Who Makes The Contributions – National Insurance are payable by employees, employers and the self employed. For example, if you are an employee who earns more £155 per week,  you may be liable. If you are self employed and your net profits were £5,965 or more in a tax year, you may have to pay them. UK citizens and residents need to have a National Insurance number before they can make contributions.

3. How Much Do You Pay- There are various factors that play a role in how much is payable towards National Insurance. Generally, the amount payable will depend on your profits if you are self employed. For the employed, the national insurance contributions depends on the pay . Rates may change when the tax year changes.

People who tend to pay less include those who are a widow or a married woman with a certificate of election. Having a valid a valid small earnings exemption may result in less national insurance.  People also pay less if they have more than one job.

Aside from the above, there are  a number of National Insurance rules. These include directors of a company, as well as landlords who run a property business. If you fall into either of these categories then you may want to consult a small business accountant who has specialised knowledge in these […]

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The Services That Are Provided By An Accountant

The job of an accountant is to keep track of numbers that primarily are the result of business activity. Keeping track of day to day transactions such as sales, inventory, discounts, taxes and the like can get very detailed and if not recorded and made into some kind of sense, could cause a business to fail for lack of proper information.

In addition staying up to date on the value of assets, or that which is owned by a company, and liabilities, or that which is owed by a company is also very valuable information.

Nowadays the day to day transactions are usually captured by computer with point of sale devices in a retail operation and by invoices in various other businesses. The computer then compiles the data that is received into reports that tells the business owner how well the business is doing , is not doing, and from that information accurate business decisions can be made.

Taxes must be paid too, such as payroll taxes for employees which must be withheld from employee’s wages and sent to the government.  Income taxes also have to be paid by the business on its taxable profits.

The overall health of a business entity is determined on a daily basis, and the job of the accountant is to keep track of all of the financial transactions so trends can be established. If the trends are good, they can be continued, but if they are bad, appropriate changes can be instituted. Without proper accounting procedures, a business could be in deep trouble and not even know it.

Proper accounting is really the measure of whether the business is operating in a healthy manner, or whether there are problems. A good accounting system, run […]

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Self Assessment & PAYE tax gap narrows

Self assessment & PAYE tax gap narrows
The UK’s tax gap, which is the difference between tax collected by HMRC through self assessment, disclosure schemes and tax investigations and the amount of tax owed has narrowed to 6.4%. This is welcoming news for both the Treasury and the economy as a whole. Much of the gap will relate to avoidance and evasion.

Despite this fall, from 6.6% in 2012/2013, there is still a staggering £34bn to be collected, showing there is still much to be done, says ACCA (the Association of Chartered Certified Accountants).

Chas Roy-Chowdhury, ACCA head of taxation, stated:

“It is a huge credit to the staff at HMRC that they have managed to lower the tax gap despite constant cuts to their budget. However with £34bn still uncollected, and the government struggling to meet its borrowing target the Chancellor should reconsider his decision to cut HMRC’s resources.

Corporate tax avoidance may be falling but there is still a sizeable amount lost due to innocent mistakes and evasion. It is in these areas where more resources for HMRC could be best deployed. In helping guide those who want to pay the right amount of tax and in investigating those who are determined not to pay tax.

We should also remember that these figures include £1bn collected from accelerated payment notices. Those are a one off catch-up from historic schemes that won’t be repeated – and there is always the risk that even some of those amounts will have to be returned, as taxpayers are challenging HMRC’s approach in this area.”

Pension Relief – availing the opportunity

Pension Relief – availing the opportunity
Although the government has announced that pension relief will be reduced from April 2016, there is still a window of opportunity to utilise any unused relief’s from the last three years.

Pension relief  is the amount that can be paid into a pension fund in any single year tax free. It currently stands at £40,000, however from April 2016 that will fall to £30,000 for everyone. Tax payers who pay income tax at 45% will find this pension relief amount even lower. However, what some people may not realise is that unused contributions from the last three years can be carried forward.

Chas Roy-Chowdhury, ACCA head of taxation, said: ‘£40,000 or even £30,000 may sound like a lot of money to pay into a pension fund but that includes both employer and employee contributions, and for anyone with more than one pension fund it is the total amount spread over the multiple schemes.”

“It is very disappointing the government has chosen to reduce the amount people can save tax free for their retirement. It is another blow to creating a nation of savers – as the Chancellor and Prime Minister pledged to do after being elected in 2010. I would urge everyone that is able to use their full allowance every year, to check whether they have unused allowance from previous years. If you are unsure check with your pension provider, they will be happy to provide you with a statement of contributions for each year.”

“Those hit hardest, again, will be those just entering the workplace. Not only will they have a reduced yearly allowance but also a reduced lifetime allowance. The government seems to be targeting younger workers and making it more […]

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The Summer Budget- ACCA responds

The Summer Budget- ACCA responds
The ACCA’s Head of Taxation, Chas Roy-Chowdhury, has commented on the Summer Budget delivered by George Osborne.
Inheritance Tax

“The Chancellor should have been bolder in his first Budget in a Conservative majority government. The change to inheritance tax is a positive step, although he could have just removed the primary residence from the scope of the tax entirely. This would have made it a level playing field for all. He has introduced a highly complex system of relief tapers and carry forwards.”

“Many people imagine a house worth £1million to be a mansion but in the South East, and especially London, that is not the case.”

Living Wage

“We welcome that he took the opportunity to incentivise employers to pay the living wage. During the election campaign he and the Prime Minister spoke about raising wages for all but a commitment to eventually raising the minimum wage. This is the right direction at £9 per hour and increasing the NIC relief to £3,000.”

Corporation Tax

“It was a very pleasing and important message to send to the global business community to continue to reduce corporation tax. Although a reduction to 18% by 2020 will be welcome Mr Osborne could have gone further by continuing the 1% per year reductions throughout this parliament. We are in a competitive global market and the more we can do to encourage all businesses to the UK, the better the long-term tax yields will be.”

Fiscal Drag

“We welcome the rise in the 40% tax threshold, something the Chancellor has wanted for some time. Over the past five years, he has restricted the personal allowance increase to basic rate taxpayers and on many occasions lowered the level at which the 40% rate came in. If […]

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Amending MOSS VAT Returns

Guidance issued on MOSS VAT Returns by HMRC
HM Revenue and Customs (HMRC) has updated its guide on its Mini One Stop Shop (MOSS) scheme. The guide explains how businesses can correct VAT MOSS returns.

The MOSS was introduced to simplify compliance with the January 2015 change to EU place of supply rules, which have required companies that provide broadcasting, telecommunications, or electronic services to account for VAT in the location of the consumer. Businesses have to file a MOSS VAT Return 20 days after the end of each calendar quarter.

The first deadline was 20th April and the next deadline is 20th July. HMRC has said that businesses can amend their VAT MOSS Returns by submitting a correction to the original return using the online service.

Changes to MOSS VAT Returns can be made up to 3 years and 20 days after the end of the relevant period.

In order to reduce VAT liabilities businesses should ensure that their bank details are up to date before correcting a return.

Speak to Avery Clifton about amending Moss VAT Returns

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Tim Healy v HMRC – Claim for renting a flat

Crackdown on duality of purpose – Tim Healy v HMRC
The decision in Tim Healy v HMRC [2015] TC04425 , published in June 2015  has shown how tax payers should demonstrate that their expenses are solely for the purpose of the trade.
The Claim

In this case, an actor failed in his claim for tax relief for renting a flat whilst working away from home. He inadvertently claimed the three bedroom flat was required not only required for business use, but to accommodate guests as well, which meant that the expense was not “wholly and exclusively incurred” for the purpose of his business.

In 2012 the case was heard by the First Tier Tribunal  and had decided in the actor’s favour. In 2013 HMRC appealed to the Upper Tribunal on the grounds that the law had been misinterpreted and the case was sent back to the First Tier Tribunal.

The Facts of the Case
The facts of the case were that Mr Healy was an actor based in Cheshire and was casted in a West End musical. When the show went live in March 2005 , he rented a flat in London as it was cheaper than renting a hotel.  The rent was for a 12 month contract with a 6 month break clause. He terminated the lease when he finished the musical contract.

HMRC disallowed the rental expenditure on the basis that the rental term was for a year, stating that a taxpayer cannot obtain tax relief on rental accommodation as the costs of living are private costs.
The Law
Section 34 of the Income Tax (Trading and Other Income) Act 2005 states that:

(2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion […]

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