The News Latest in Tax & Finance

HM Revenue and Customs (HMRC) has pocketed £32 million after demanding early payments of disputed tax from investors in suspected avoidance schemes.

The taxman says this equates to 99% of disputed tax from the first tax avoidance scheme users to be issued with accelerated payment notices.

HMRC said that 30 people were issued with the notices in late August demanding a total of £29 million in disputed tax.

Accelerated payment notices were introduced in July in the Finance Act 2014. They allow tax avoidance scheme users to pay disputed tax 90 days before HMRC challenges the individual’s scheme in court.

So far HMRC has issued 1,750 notices to collect £400 million in tax. Most of the notices have not reached the 90 day deadline.

Financial secretary to the Treasury David Gaulke (pictured) said the high proportion of money collected showed the notices were successful.

‘The high success rate for the first set of Accelerated Payments notices shows avoidance scheme users are having to face up to the reality that they should pay their tax upfront, like the vast majority of taxpayers,’ he said.

‘As we move into 2015 and HMRC ramps up the number of notices it sends out, thousands more will get the message that Accelerated Payments has changed the economics of tax avoidance.’

It goes without saying, if any of this concerns you individually or as a business please get in touch as early advice is critical.  Rose@totaltaxgroup.co.uk

It is always nice when one of the team decides to do something for charity, and this time it was Alex Duly (Rose's son) who as part of his Army Cadet physical training activities decided to run the 15 miles from our offices to his home. Many others may have thought this enough in itself but Alex decided to raise money for the Stars Appeal at the same time, which Total Tax was very pleased to support.

"I did this run for a couple of reason. Firstly as a challenge to myself, to see if I could run this distance in a good time. Secondly, to show how community-minded the cadets (and teenagers) can be. And lastly and most importantly, to help raise funds for an extremely good and important cause that has a need for funds."

Well done Alex

This morning, on asking my husband what he thought about George Osborne’s Autumn Statement, I was reminded of a quote I’d just read in The Week. It’s a Blair-ism from his autobiography, so don’t kill the messenger. Blair said “The single hardest thing for a practicing politician to understand is that most people, most of the time, don’t give politics a thought all day long”. The only reason my husband knows the Autumn Statement had been announced is because he married a Chartered Tax Adviser - a benefit I distinctly remember mentioning in our vows.

So I went on to ask what Autumn Statement headline had grabbed him the most? Was it the “Wallace and Gromit” tax relief for UK children’s TV or the abolition of air duty for those under 16, or even the £10K student loans for post-grad masters’? All of which could, possibly, interest him.

Looking up from his phone he answered “Osborne accuses BBC of ‘hyperbolic coverage’ of spending cuts”, directly quoting The Guardian’s rather shouty headline which he’d just read. It seems the marital advantage I bring to our partnership falls on deaf ears.

If you don’t give tax a thought all day long, but want a quick round-up of what the Government actually said they’d do for us in terms of taxation, please read on…

Kind Regards, Sophie White - Director

Stamp duty land tax 

(SDLT) on residential property is charged on the acquisition of an interest in land. Paid by purchasers, calculated with reference to the purchase price of the property it remains the most contentious aspect of the tax.

Under the old rules, SDLT on a property costing £250,000 was charged at 1% of the whole value, ie £2,500. If the property cost was £250,001, the SDLT would be charged at 3%, ie £7,500.

The effect of this rule in the housing market was to create an uneven distribution of property prices with a disproportionately high number of transactions below each rate threshold.

The new proposals abolish the step tax approach and introduce graduated rates which apply only to the part of the property purchase price that falls within each band. It will therefore be applied in the same way as different rates of income tax are applied to each band of income and should encourage flexibility on pricing at the rate thresholds: Use the calculator below to see how it effects you. HMRC Stamp Duty Calculator

Income Tax Personal Allowances

These increase to £10,600 for the 2015/16 tax year – higher than previously advised. Those born before 6 April 1938 will be entitled to a personal allowance of £10,660 (frozen at the 2012/13 rate). The proposal to restrict non-residents’ entitlement to personal allowances has been delayed.

The basic rate band limit will be £31,785 in 2015/16, taking the threshold for the payment of higher rate income tax to £42,385. The additional rate threshold remains £150,000, so more taxpayers will pay tax at 45% through fiscal drag.

There are no changes to the rates of income tax for 2015/16. For a full list see link below. Tax and tax credit rates and thresholds for 2015/16

Entrepreneurs’ Relief

From 3 December 2014, Entrepreneurs’ Relief will be restricted where an individual incorporates their trade, or their share of a trade operated through a partnership. HMRC draft legislation excludes certain goodwill from the definition of ‘relevant business assets’ so that Entrepreneurs’ Relief is only available to individuals on the disposal of relevant business assets.

Where an individual disposes of goodwill to a close company to which they are a related, that goodwill is not a relevant business asset and is not subject to Entrepreneurs’ Relief. If the company is not resident in the UK but could be considered to be a close company, it is considered to be a close company for the purposes of this new provision including whether the person is a related party.

Draft legislation contains anti-avoidance provisions that catches any arrangement where a main purpose is to circumvent the new legislation.

Research and Development tax relief

Three separate announcements have been made effective from 1 April 2015, as follows:

• an enhanced deduction under the SME scheme from 225% to 230%

• the above the line credit rate for large companies increases from 10% to 11%

• qualifying expenditure will be restricted so that the costs of materials incorporated in products sold are not eligible

A consultation will be launched in January 2015 on issues faced by smaller businesses when claiming R&D tax reliefs. An advance assurance scheme will be available to small businesses making their first R&D claim

Abolition of employer NIC for younger employees and apprentices

From 6 April 2015, employers will not have to pay secondary (employer) National Insurance Contributions (NIC) in respect of payments to an employee under 21 years old until those earnings reach the Upper Earnings Limit (currently £805 per week).

This exemption will be extended from 6 April 2016 to include apprentices under the age of 25. Employers would only have to pay secondary NICs in respect of payments made to apprentices under 25 in the unlikely event that the earnings reach the Upper Earnings Limit. This legislation is likely to be included in a National Insurance Bill.

ISA Allowances and allowances for surviving spouse

Annual ISA allowances increase from £15,000 to £15,240 for the 2015/16 tax year. The subscription limit for the junior ISA and child trust fund will be £4,080.

From 06/04/15, amounts held in an ISA at the time of death of an individual can now be used by a surviving spouse to invest into their own ISA. Although no Inheritance Tax Relief is payable on the transfer of assets between spouses on death, funds can now be reinvested in full into an ISA.

Pensions

The Chancellor confirmed recent announcements to abolish the 55% charge currently applicable at death to all pension funds held by a person who dies over the age of 75, and on crystallised funds held by those who die under the age of 75.

In terms of death benefits:

• when an individual dies before the age of 75, the pension fund, whether crystallised or not, may pass tax free to nominated beneficiary.

• when an individual dies over the age of 75, the pension fund, when withdrawn, will be taxed at the beneficiary’s marginal rate of income tax or 45% if funds are taken as a lump sum

This relaxation is now extended to include a concession for annuities. Some pensioners will have purchased a joint life or guaranteed term annuity. Income from these annuities is subject to income tax after the death of the pension holder. Proposals now mean income will be tax free for the beneficiaries, and that annuities may be passed to any beneficiary, not just to spouses and dependents.

Resident non-domiciles

Resident non-domiciles will see an increase in the annual Remittance Basis Charge (RBC).

• For those resident in 7 out of 9 tax years the RBC is £30,000 per tax year.
• For those resident for 12 out of the last 14 years the RBC is £60,000 per tax year.
• For those resident for 17 out of the last 20 years the RBC is £90,000 per tax year.

A consultation is also being proposed to make the election apply for a minimum of three years.

It’s thought these changes will be introduced in Finance Bill 2015, however it is only the first two which are likely to be legislated next year. It is unclear whether changes will be effective from 2015/16 or from 2016/17.

Creative sector tax reliefs

A number of creative sector tax reliefs have been introduced recently, including television tax relief, video game development relief and theatre production tax reliefs. These reliefs will be extended as follows:

• consideration is being given on whether to reduce the minimum UK expenditure requirement from 25% to 10% and to update the cultural test in respect of high-end television tax relief

• a new tax relief for the production of children’s television programmes will be introduced from 1 April 2015, at a rate of 25% on qualifying expenditure

• a consultation is to be launched exploring the introduction of an orchestra tax relief from 1 April 2016

More than 50 countries have pledged to share more information on individuals' tax status, marking the latest attempt to encourage transparency in global banking.

The UK, Jersey, Guernsey and the Isle of Man were among the 51 jurisdictions represented in Berlin as ministers signed a deal to share some details on bank accounts from 2017. A further 34 nations have said they will join in after 2018.

The agreement expands on a string of smaller agreements within the EU, which has shared certain data since 2005, and the US, whose Foreign Account Tax Compliance Act (FATCA) of 2010 was intended to catch American citizens hiding assets offshore.

“The fact that so many jurisdictions have agreed today to automatically exchange financial account information shows the significant change that can occur when the international community works together in a focused and ambitious manner,” said Angel Gurría, secretary general of the OECD, which is co-ordinating the agreement.

Mr Gurria added that the deal should "help to recover the trust the public today has lost" in finance since the global downturn.

The Treasury said the agreement will help it to gather more information on assets held overseas by British taxpayers.

"It was three years ago when, with my German colleague Wolfgang Schäuble, I launched a campaign for a new international deal to catch people who evade their taxes by hiding their money overseas," said Chancellor George Osborne. “I never expected that within such a relatively short period we would succeed in getting 51 countries to sign up to this agreement."

The leaders of the G20 countries will discuss the international efforts to jointly enforce tax rules at their meeting in Brisbane next month. The G20 and OECD are also working to end the practice of corporate "profit shifting", or artificially booking earnings overseas to take advantage of lower tax rates.

“Financial institutions will welcome efforts to achieve consistency in the obligations, both legal and regulatory, across the participating territories in which they operate,” said Jayne Newton, tax investigations director at law firm DLA Piper.

“However, differences do still exist, particularly when compared to FATCA and the European Union Savings Tax Directive. Whilst moves are afoot to iron out these differences, financial institutions still face significant challenges in developing commercial, robust and risk focussed procedures.”

Article courtesy of the telegraph

Poole based Worth Accountants merges with the Fordingbridge based Total Tax Group.

The Total Tax Group is an established and well regarded tax and accountancy practice, with business and personal clients across Hampshire, Wiltshire, Dorset and London. Their experienced and qualified team, headed by Sophie White, provides practical, client-focused accountancy services with a particular expertise in tax planning and business strategy.

Sophie says: ‘I first met Steve Worth over five years ago and we decided that this year was the right time for us to combine forces. Our shared business values and commitment to client service, along with Steve’s eventual retirement plans, has resulted in a perfectly timed business marriage’.

Clients of both practices will continue to deal with familiar faces as well as being introduced to new partners.

Steve says: ‘I’m confident that this merger gives us greater strength and depth, so we can continue to provide an ever better service. We’re a dedicated team of committed professionals, and we really believe we can make a difference to you and your business’.

HM Revenue and Customs is cutting down on the amount of information required for the bereaved to reclaim tax or pay tax when someone dies.

Back in 2012, HMRC gave a commitment to improve their service for bereaved customers.

One of the main changes it is now set to make is around form R27, which is for reclaiming tax or paying tax when someone dies.

As HMRC could not deal with about 50 per cent of forms at the first point of contact, the tax office stated it was clear they had placed a “heavy burden” on the personal representative.

Also, of the bereavement calls received, 34 per cent were about filling in the form and 15 per cent were to get an update on the progress of the form.

HMRC will now use real time information to obtain all the pay and tax information they need from bereaved customers, making the form R27 unnecessary and ready for removal on 13 October.

For PAYE customers, there will be an automated process, and for self assessment customers there will be what HMRC calls “a tailored service,” which includes letters that match the individual’s circumstances.

According to HMRC, removing the form means customers will get their tax affairs sorted quickly and need to contact the government department less.

Let's hope this all works out well. If though you need assistance with estate planning either before or after the event please do get in touch as we have lots of experience dealing with complex, and not so complex tax affairs.

New personal tax statements will set out out how much tax was paid in the previous year and how it contributed to public expenditure are about to land on doormats across the country.

Chancellor of the Exchequer George Osborne has announced that from October 2014 around 24 million people will receive a personal tax statement from HMRC setting out how much tax they paid in the previous year and how it contributed to public expenditure.

This is 4 million more people than previously announced at Budget 2012. The additional people are PAYE taxpayers who have had recent contact from HMRC setting out their tax calculation for an earlier tax year. These might be people with more complicated or changing circumstances such as a new job.

The statements are part of the government’s wider drive to make the tax system simple, easier to understand and more transparent.

The Chancellor said, "These tax statements represent a huge boost for tax transparency, showing people very clearly how much tax they pay and giving them a better understanding of where their money is spent."

At Budget 2012 the government announced that around 20 million taxpayers would from October 2014 receive a tax statement detailing how their 2013/14 tax year income tax and National Insurance contributions have been calculated, their average tax rates and how this contributed to public expenditure.

These 20 million taxpayers comprised the 8 million taxpayers who complete self-assessment returns online and will receive their tax statement online, and the 16 million PAYE taxpayers who received a tax coding notice from HMRC for 2013 to 2014.