Archive for August, 2015

Higher rate of film tax relief has been given the go ahead.

Wednesday, August 26th, 2015

Britain is set to attract the production of more films like The Theory of Everything, Gravity and Avengers: Age of Ultron after the Chancellor of the Exchequer, George Osborne announced a new higher rate of film tax relief has been given the go ahead.

 

Under the new plans the £1.4 billion film industry will receive a tax credit of 25% on all qualifying expenditure bringing it in-line with TV tax relief. This means a British film costing £40 million will receive an additional £1 million towards productions costs from the change.

 

The Chancellor announced the scheme, which will be backdated to apply from April 2015, whilst visiting the set of Agatha Raisin, a new British TV series being filmed in Wiltshire that is benefiting from the government’s high-end TV tax relief. Under the scheme the government provides a tax credit of 25% on qualifying British TV productions.

 

Chancellor of the Exchequer George Osborne said:

 

“British made films are watched and celebrated all over the world – last year alone we saw eight British made films nominated for an Oscar.

 

A key part of our long term economic plan is supporting our creative industries that contribute billions to the economy and provide millions of jobs.

We want to see more films, like Gravity and Avengers: Age of Ultron, made in Britain and that’s why we’ve made our film tax relief even more generous.”

 

The government’s film tax relief has supported almost £8 billion of production expenditure since its introduction, including films such as Oscar winning Gravity, Maleficent and Harry Potter. It supported 222 films in 2014 alone. In the March 2015 Budget, the government announced that it would further support the film industry by increasing the rate of film tax relief to 25% for all qualifying productions. Previously, the rate was 25% for the first £20 million of qualifying expenditure and 20% for spending above this threshold. The scheme has just been given State Aid approval by the EU which means it can now go ahead as planned.

Benefit in kind changes

Monday, August 24th, 2015

From 6 April 2016 HMRC are introducing an exemption from paying tax and National Insurance contributions (NICs) on qualifying paid or reimbursed expense payments to employees. This means that where an employee is entitled to claim a fully matching tax deduction (i.e. if they incur a business expense they can claim it back from their employer) employers will no longer need to apply for a dispensation, or report those expenses on form P11D. All other non-allowable expenses will still be subject to tax and NICs as they are now. Employees will still be able to claim tax relief from HMRC in respect of non-reimbursed expenses.

This new exemption will not, however, apply to expenses or benefits in kind provided under a relevant salary sacrifice arrangement. This includes any arrangement where employees give up the right to receive earnings in return for tax free expenses payments, or where the level of their earnings depends on the amount of any expenses payment. After 5 April 2016 any expenses payments you pay to employees under these arrangements will need to be paid after deducting tax and NICs.

 All current dispensations agreed with HMRC will no longer apply after 5 April 2016.

 Advisory Mileage Allowance payment (AMAP) and Advisory Fuel Rates (AFRs)

If you have employees who travel for work purposes (excluding normal commuting) in their own vehicle you will still be able to reimburse them using the AMAP rate. (Currently, up to 45p per mile for the first 10,000 business miles and 25p per mile thereafter.) Employees receiving less than the AMAP rates for business travel will still be able to claim Mileage allowance relief (MAR) on the difference. Employees carrying out business travel in a company car, and not getting employer provided fuel, will still be able to receive fuel payments based on our AFRs. Employees can claim a tax deduction for non-reimbursed fuel costs using the existing rules.

 

Couple banned from acting as directors

Thursday, August 20th, 2015

Mark and Janet Styler have been disqualified from acting as directors for six years for withdrawing funds from Window & Conservatory Options Limited after they had been told the company was insolvent and could not afford to continue the level of payments to them.

The company, which began trading in March 2009, sold and installed double-glazing and conservatories to domestic customers throughout the Tameside, Peak District and Derbyshire areas.

An insolvency service investigation found that:

  • In June 2011, Mr & Mrs Styler approved accounts which showed that the company was insolvent. At the time, accountants warned them about the risk of continuing to trade and that their level of drawings from the company exceeded the profits, as they owed the company £95,862
  • The directors received draft accounts on 6 February 2012 for the period ending 30 September 2011, which showed the company was still insolvent. The accountants again warned the directors about their level of drawings of £133,448 for that year
  • A few days later, on 10 February 2012, the directors instructed new accountants to re-do the 2011 accounts. The new accountants amended the accounts based on information provided by Mr & Mrs Styler. The revised accounts showed that the company remained insolvent. However, the amount that the directors owed to the company had disappeared
  • From 11 February 2012 to 17 September 2013 the directors received further payments of £172,715.50 from the company
  • The directors ignored the warnings and continued to withdraw funds from the company, and as a result the company could not make payments to its creditors. On 27 September 2013 the company was placed into Liquidation

Commenting on the disqualification, Cheryl Lambert, Chief Investigator at the Insolvency Service, said:

Directors who abuse limited liability and use company funds to meet their personal expenses can expect to be investigated by the Insolvency Service and enforcement action taken to remove them from the market place. Mr & Mrs Styler repeatedly ignored warnings from professional advisors and used company funds as their own.

Taking action against Mr & Mrs Styler is a warning to directors of their responsibilities and requirements to act for the good of the company and its creditors.

Paid too much or too little tax

Tuesday, August 18th, 2015

 HMRC have issued a press release advising tax payers that they are sending out annual statements for the tax year to 5 April 2015.

The statements are styled P800 forms and summarise income and allowances for the year and the calculation of tax due and tax paid. If you have over paid tax the statement will trigger a repayment in most cases. If you have underpaid, HMRC will generally adjust your PAYE coding to recover the amount due during the tax year 2016-17. If this is not practical you will get a request to make a payment. HMRC have also acknowledged that is cases of financial hardship they will negotiate extended repayment terms.

 Here’s what HMRC published to their website:

“This year, if you’ve paid too much or too little tax, we’re making the process as easy as possible for you.

We will tell you how we’re collecting any underpayment, or we’ll give you a cheque if we owe you money.

There is no need to contact us unless you think the details we’ve used are wrong.

What you need to do

If you get a P800 tax calculation, please check the details are correct.

You can:

  • compare the figures used with your own records, such as your P60, P11d, bank statements or letters from the Department for Work and Pensions (DWP)
  • use the HMRC tax checker to check how much tax you should have paid

You don’t need to do anything if the calculation is correct.

If you’ve underpaid tax

If you haven’t paid enough tax, we’ll usually change your tax code for the next year to collect the money you owe. This happens automatically so you won’t need to do anything and don’t need to contact us.

Sometimes we can’t collect the money you owe through your tax code, for example, if you’re now out of work. In this case, we’ll write to you explaining how to pay the money you owe.

If you’ve overpaid tax

If you have paid too much tax, we will automatically send you a cheque within 14 days of receipt of your P800. You won’t need to do anything and don’t need to contact us.”

However complex your tax affairs, it is advisable to check the P800 form when it arrives.

HMRC takes back control of IT services

Thursday, August 13th, 2015

HM Revenue and Customs (HMRC) announced earlier this month that it will bring some existing IT services under its direct control, while it continues to plan the transition to a new IT delivery model following the ending of the Aspire contract in 2017.

These changes will ultimately enable HMRC to make savings of up to 24 per cent on its £800m annual IT budget by 2020-21 while maintaining consistent delivery of services to customers.

Mark Dearnley, HMRC’s Chief Digital and Information Officer, said:

“We have an ambitious digital vision – to transform our IT services and use the data we hold in smarter ways, so we can deliver world-beating digital services for our customers and colleagues.

The changes we’re announcing today will allow us to maintain consistency of service for customers while we plan for the future which, as now, will include a mixed model of both internal and external delivery using multiple partners.”

HMRC also announced that Capgemini would be providing ‘test and release’ services until 2020, to provide vital quality assurance during the digital transformation.

HMRC has already launched online services that are quicker, lower cost and have tax compliance and security built-in. New Personal and Business Tax Accounts – which work like online bank accounts, allowing customers to deal with all their tax affairs in one place – will be available to ten million personal customers and five million businesses respectively by early 2016.

The UK tax authority has a network of Delivery Centres – hi-tech innovation hubs, based across the UK – which developed an online tax credit renewals service used this year by more than 750,000 tax payers. Apparently, customer satisfaction rates have reached 90 per cent.

HMRC to extend data gathering powers

Friday, August 7th, 2015

HMRC has had considerable success in using third party data to better target compliance activity and to tackle the hidden economy. A current consultation by HMRC proposes that these data gathering powers be extended in order to combat tax evasion. We have extracted the following comments from the formal consultation document.

Many businesses use intermediaries to handle transactions and route custom through to their businesses. With the development of the digital economy, there has been a proliferation of such business models.  Intermediaries operate across many industries, for example for restaurants supplying take away food; for hotel bookings; or to enable ticket resale for events. These intermediaries provide a framework for smaller businesses to trade.

Where a business is using an intermediary to offer goods and services, HMRC believes that the intermediary will be able to provide valuable information that can identify sellers that have not registered with HMRC or who have not declared the full value of their sales. Using such data will allow HMRC to match data received with registration data and compliant business’ tax returns, helping to identify unregistered businesses and target resources more effectively on the

non-compliant. This will support the growth of compliant businesses, protecting them against unfair competition from a minority who do not register for and pay the tax they owe.

 The types of intermediary which are likely to hold such data include:

  • Advertising boards or platforms provide a service where advertisements for goods or services are displayed with the intention of linking a supplier with a potential customer.
  • App stores provide a platform to advertise applications for devices such as smart phones or tablets. Customers set up a store account with a connecting payment method attached.  Some apps also provide in-app purchases which are paid for via the app store.
  • Booking and Reservation Intermediaries facilitate a booking or a reservation of goods or services, and may facilitate taking of deposits or other payment in respect of the goods or services booked and or reserved.

 These increased powers will provide HMRC with much needed information to better target taxpayers who may not be declaring all their income.

 The powers will also be an additional compliance burden for the organisations that provide the information to HMRC.

HMRC roadside fuel testing

Wednesday, August 5th, 2015

Treasury Minister Damian Hinds visited Belfast and Newry recently as HM Revenue and Customs (HMRC) unveiled new roadside fuel testing equipment to tackle the trade in illicit diesel.

The hi-tech equipment has been introduced to allow officers to test vehicles at the roadside for the presence of the new fuel marker, which was introduced into supplies intended for use in agriculture and construction industries in April. The new marker is resistant to laundering techniques known to be used by criminal gangs and significantly improves HMRC’s capability to detect fraud.

Previously, the test for the new marker was completed at a laboratory, leading to a delay in identifying illicit fuel and further action being taken. The new equipment will now be installed in 49 HMRC Road Fuel Testing Unit vehicles throughout the UK and used to analyse fuel samples taken at the roadside and at retail premises, starting in Northern Ireland.

Exchequer Secretary to the Treasury, Damian Hinds, said:

“I am delighted to see first-hand the new roadside testing equipment in action. Together with the new marker it will play an important part in the fight against fuel fraud.

“At a time when the government’s priority is cutting the deficit, it is unacceptable that criminals are cheating the system. The new marker and testing equipment are part of the significant investment we have made in HMRC to tackle avoidance, evasion and fraud to make sure all businesses and individuals contribute to the tax revenue that is used to fund vital public services.”

Illicit diesel is estimated to make up 13% of the market share of diesel in Northern Ireland and costs the taxpayer around £80 million each year in lost taxes.

The government will monitor the success of the marker during the first six months, to make sure it is delivering results in the fight against fuel fraud. HMRC will publish an evaluation in the autumn.

Tax Diary August/September 2015

Monday, August 3rd, 2015

 1 August 2015 – Due date for Corporation Tax due for the year ended 31 October 2014.

 19 August 2015 – PAYE and NIC deductions due for month ended 5 August 2015. (If you pay your tax electronically the due date is 22 August 2015)

 19 August 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2015.

 19 August 2015 – CIS tax deducted for the month ended 5 August 2015 is payable by today.

 1 September 2015 – Due date for Corporation Tax due for the year ended 30 November 2014.

 19 September 2015 – PAYE and NIC deductions due for month ended 5 September 2015. (If you pay your tax electronically the due date is 22 September 2015)

 19 September 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2015.

 19 September 2015 – CIS tax deducted for the month ended 5 September 2015 is payable by today.

Tapered pensions annual allowance

Monday, August 3rd, 2015

 Legislation in Summer Finance Bill 2015 introduces a tapered reduction in the annual allowance from 6 April 2016, for those with an ‘adjusted income’ of over £150,000.

The ‘adjusted income’ definition adds-back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.

To provide certainty for individuals with lower salaries who may have one off spikes in their employer pension contributions, a net income threshold of £110,000 will apply. If the individual’s net income is no more than £110,000 they will not normally be subject to the tapered annual allowance. However, anti-avoidance rules will apply so that any salary sacrifice set up on or after 9 July 2015 will be included in the threshold definition. The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000, up to a maximum reduction of £30,000.

All pension input periods open on 8 July 2015 are closed on that date, with the next pension input period running from 9 July 2015 to 5 April 2016. All subsequent pension input periods will be concurrent with the tax year.

To prevent retrospective taxation, individuals will have an £80,000 annual allowance for 2015-16, but subject to a £40,000 allowance for savings from 9 July 2015 to 5 April 2016. To achieve this, the 2015-16 tax year will be split into two notional periods: 6 April 2015 to 8 July 2015, the ‘pre-alignment tax year’ and 9 July 2015 to 5 April 2016, the ‘post-alignment tax year’. All individuals will have an annual allowance of £80,000 for the ‘pre-alignment tax year’. Where this amount has not been used in the ‘pre-alignment tax year’, it will be carried forward to the post-alignment tax year, subject to a maximum of £40,000. In addition, any unused annual allowance from the previous 3 years can be added to these amounts in the normal way.

The transition arrangements for 2015-16 mean that taxpayers who paid sizeable pension premiums in the period to 8 July 2015 (perhaps in anticipation of Budget changes) may be able to have a second bite at the cherry.

As readers will appreciate these are complex changes. Taxpayers who feel they may be affected should take professional advice.

Small business changes

Monday, August 3rd, 2015

 Some of the key changes that will impact small businesses in particular are set out below:

  • Taxation of dividend income from April 2016. The present 10% dividend tax credit is being abolished from April 2016. In its place an annual dividend tax allowance of £5,000 is being introduced. Dividends received will be free of further charge to Income Tax up to this limit. Above the £5,000 limit dividend income will be taxed as follows:
  • Basic rate tax payers at 7.5%
  • Higher rate (40%) tax payers at 32.5%, and
  • Additional rate (45%) tax payers at 38.1%

 Shareholder directors of small companies that pay limited salaries and high dividends may be affected by this change and should review their dividend strategy.

  • National Insurance Employment Allowance. From April 2016 the present £2,000 allowance is being increased by 50% to £3,000. The Chancellor has also announced that the allowance will be withdrawn for one person shareholder/employee companies.
  • Annual Investment Allowance (AIA). The annual limit for this generous tax allowance, presently up to £500,000 of qualifying expenditure can be written off against taxable profits, was due to revert to £25,000 from 1 January 2016. It has been confirmed that the £25,000 limit will instead increase to £200,000 with no further changes currently tabled.

 It was also announced that Corporation Tax rates would fall to 19% in 2017 and 18% in 2020.

 A number of counter measures will also be introduced to curb tax avoidance. This continues HMRC’s strategy to root out and penalise businesses that continue to misuse tax legislation in a way not intended by parliament.

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