Category Archives: Chartered Accountants

Making Tax Digital (MTD) removed from Finance Bill 2017

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Following the Prime Minister’s announcement of a general election, legislation to implement the Making Tax Digital (‘MTD’) initiative has been removed from the Finance Bill 2017.  MTD is the plan for businesses to submit quarterly uploads of accounting information to HMRC, with the first wave of businesses due to be affected from 1 April 2018.

Although postponed for the short term, there has been no change to the MTD proposal, and it is likely that the initiative will return following the general election as part of the Government’s commitment to a fully digital tax system.

As a result of the deferment, it is not known whether HMRC will push back the implementation date of 1 April 2018 for unincorporated businesses with a turnover above £85,000.

We will continue to follow the progress of MTD and keep you up to date with any changes. As always if you have any queries please do not hesitate to contact one of our dedicated MTD advisers.

If you have any concerns or if you would like any more information, please contact our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

The Importance Of Right To Work Checks

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A client recently faced a Home Office enquiry into the status of one of their non-EU employees. It was resolved (eventually) with a positive outcome for our client, however, the reality could have been very different. It brought to the surface the significant risk that the business may have needed to amend its strategy for growth in the UK market had it not been able to recruit the required expertise from outside the EU. Of course, the realities of the UK labour market post-Brexit could still impact on this.

All businesses should review their HR and employment policies and processes on a regular basis, especially where it relates to Sponsored Migrant Workers (SMW’s), and I discussed this with Jane Carroll, Partner at Solutions for HR, based in Bury.

Jane commented “Under UK immigration rules, it is a criminal offence to employ a person who is not entitled to work in the UK, therefore before employing any candidate it is essential that you ensure he or she has the right to work here. The easiest way to do so is to check all job applicants’ documents as part of your normal recruitment process – whether you believe candidates to be migrants or not. The necessary documents will depend on a candidate’s individual circumstances. You must ensure that the documents are valid.” Employers should not underestimate their obligations during the recruitment and on-boarding to the HMRC, and to effectively ‘police’ the movements of all SMW’s during their employment.

Jane continued to say that there is a useful online service which allows users to quickly check that the specific circumstances allows someone the right to work in the UK. This includes determining whether the vacancy could be filled by anyone in the EU. The site is anonymous and asks five simple questions to give an immediate answer. The test can be found at: https://www.gov.uk/legal-right-work-uk.

If someone you wish to employ is not permitted to work in the UK without restriction, they will need to apply to work under a points-based system and are likely to require a certificate of sponsorship from an employer. As such, to employ workers under the points-based system, you will need to register as a sponsor.

Jane warned that you can be sent to jail for up to five years and receive an unlimited fine if you know or should have known that you employed someone who doesn’t have the right to work in the UK.

The advice is to safeguard yourself and your business by carrying out the correct right to work checks on employment, but to also ensure robust HR administration processes to flag up visa expiry dates to ensure rights to work remain valid.

If you would like to revisit your processes or seek advice, please contact Helen Clayton at helen.clayton@pmm.co.uk or call 0161 641 8684.

Who Wants To Work Forever?!

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Hardly a month goes by without the Government releasing another report on pensions and the past few weeks have been no exception. Analysis by the Department of Work and Pensions has suggested that people under the age of 30 may not get a pension until age 70. A second report by John Cridland CBE for the Department for Work and Pensions has recommended that those under the age of 45 may have to work a year longer to age 68.

The root cause of the problem is that life expectancy seems to be ever increasing with the average retiring worker now spending twenty plus years in retirement. When the State Pension was first introduced in 1908, retirement age was set at 70. However, only one in four people reached that age and life expectancy was only 79.

So, how do you avoid working until you are 70? Of course, the answer is to save more! As a rough rule of thumb take the age you start your pension and halve it, and this is the percentage of your salary you should set aside each year until you retire.

The above is of course simple in theory but much more difficult in practice, as life, children and mortgages get in the way! It is always better to be saving something rather than nothing and the magic of compound growth should not be ignored. For example, if you save £100 per month for thirty years and with an average growth of 6%, you should have a retirement fund of £104,608.

For further information on pension planning contact Antony Keen, PM+M Wealth Management Director, by phone on 01254 604303 or by email at antony.keen@pmm.co.uk.

Making Tax Digital (MTD) Update

shutterstock_508146895Following the spring budget, the chancellor has announced that MTD for unincorporated businesses and landlords with an annual turnover between £10,000 and £85,000 will now take effect from April 2019 as opposed to the original implementation date of April 2018. This delay will no doubt be a welcome postponement for smaller businesses.

Unincorporated businesses and landlords who have turnover exceeding £85,000 will need to submit quarterly returns digitally to HM Revenue & Customs from April 2018. There is no change to the scheduled start date of April 2020 for limited companies.

If you have any questions on how MTD will affect you, please do not hesitate to contact one of our dedicated MTD team.

Andrew Cowking - New Website
Andrew Cowking
Partner
Email: andrew.cowking@pmm.co.uk 
Telephone: 01254 679131

Julie Walsh - New website
Julie Walsh 
Tax Manager
Email: julie.walsh@pmm.co.uk
Telephone: 01254 679131

Jill Morris - New Website
Jill Morris
Run My Business Director
Email: jill.morris@pmm.co.uk 
Telephone: 01254 679131

Lucy O Gorman - New wesbite
Lucy O’Gorman
Run My Business Manager
Email: lucy.ogorman@pmm.co.uk
Telephone: 01254 679131

 

 

 

 

 

The Chancellor makes a U-turn on National Insurance Tax Rise

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Plans to increase National Insurance (NI) levels for self-employed people announced in the Budget last week have been dropped.

A pledge to not increase NI was made in a manifesto back in 2015. The Chancellor broke that pledge last week during the Budget but, after the announcements last week, Philip Hammond has had a change of heart by announcing “There will be no increases in…rates in this Parliament.”

What does this mean?

This is great news in the short term but this almost certainly won’t be the end of the story.

This leaves a rather curious situation entering the build up to the Autumn Budget. There’s obviously no way of predicting what the Chancellor will have in store for us, but the Treasury may be facing a new problem – the increase in NI rate was due to raise over £2bn by 2022. We can expect some changes in the Autumn as it was heavily briefed that the rise in NI was a way to pay for social care and business rate support spending commitments.

It’s worth noting that there’s no backtrack on dividend allowance reduction.

On your marks, get set, LEGO!

Last week was a busy one at PM+M! On top of the Spring Budget (you can find our commentary here), the team attended the UK Praxity Conference in Coventry, the Red Rose Awards and took part in a regional event as part of National Apprenticeship Week. Kath Rigbye (HR + Talent Manager), Neil Welsh (Financial Adviser) and Faye Hughes (Marketing + Business Development Manager) upped sticks and headed to Darwen Aldridge Community Academy for the day to take part in the HIVE Skills Showcase.

Over 800 pupils from across Blackburn with Darwen attended the showcase to meet businesses who are committed to helping young people secure a bright future. During the showcase, the PM+M team engaged with students and gave them an insight on what they can expect from a career in financial services. The team also gave a sneak preview of some of the tasks they would be expected to take part in as part of our apprenticeship assessment day. It wasn’t just the students that got involved, however. Neil and Faye’s competitive sides came out – and they weren’t happy being beaten by pupils from QEGS!


The event marked the launch of our annual School Leaver Programme which offers 4 apprenticeships to school leavers aged 16-18. All our vacancies are now live on the PM+M website. Applications must be submitted by Friday 24th March and successful candidates will be invited to attend our assessment day on Thursday 20th April.

“My apprenticeship has been very interactive. I have learnt to use multiple skill sets in my daily tasks and work alongside a range of motivating and inspiring colleagues. PM+M is an uplifting work environment that has allowed me to harness new skills and engage with the wider workforce as part of my training role. I feel more responsible and my understanding of the finance industry has improved massively. I am lucky to have stepped foot into an exciting career path in a bright and integrated team.” – Bahiya Hussain (Wealth Management Apprentice studying for the CII Certificate in Financial Services)

SCHOOL LEAVER BUTTON

Salary Sacrifice Changes From April 2017

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New rules are coming in on 6 April 2017 for certain benefits in kind where they are provided by salary sacrifice.

If you provide benefits to your employees in exchange for salary sacrifice or have a flexible benefits package where your employee can choose a benefit or cash, or where you provide benefits but offer your employee a cash alternative then you need to know about these changes.

Benefits impacted are those which are currently taxable, like cars and white goods, and those currently tax exempt, like mobile phones and workplace parking.

You don’t need to do anything if your employees are only sacrificing salary for:

  • Pensions or pensions advice,
  • childcare vouchers,
  • workplace nurseries,
  • directly employer contracted childcare,
  • cycle to work or
  • ultra-low emission company cars (emissions of or under 75 g CO2 / km).

The new rules start on 6 April 2017. Salary sacrifice contracts entered on or before 5 April 2017 will be protected up until the contract hits a trigger point. From 6 April 2017, the normal trigger point is when the salary sacrifice contract renews, auto-renews, starts, ends or is modified or changed. At this point you must use the new rules. This should align with your normal contractual arrangements.

If an employee starts a contract on or after 6 April 2017, then you will need to immediately use the new rules for that employee. This will apply to any new recruits who adopt the arrangements.

For a better understanding of what is changing and what you need to do next, please click the button below to view our help sheet.

HELPSHEET

PM+M Helps East Lancs Box Co. Limited Secure Six Figure Lancashire Growth Fund Grant

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L-R: Andrew Cowking (PM+M), David Ingham, Peter Ingham, Amy Ingham & Neil Harrison

Andrew Cowking and the PM+M team have helped East Lancashire Box Co. secure a £120,000 grant from the Lancashire Growth Fund which will see the creation of 12 new jobs.

East Lancashire Box Co. was established in 1981 and is headquartered in Rishton near Blackburn. It manufactures bespoke cardboard box packaging and products. It offers a complete service, from initial concepts to the final product and handles all elements of design, print and production. The company’s product range is visible on the shelves of all the major supermarkets both within the UK and overseas.

The grant will be used to purchase new equipment including a state-of-the-art printer and a die cutter. The aim is to create a colour printing facility under one roof in 16,000 sq ft of new production space at the Junction 7 Business Park in Clayton-Le-Moors with the capacity to meet current and expected demand. The 12 new jobs will include apprenticeship and production positions.

Andrew Cowking – partner at PM+M – handled the forecasts for the grant application whilst Neil Harrison of The Harrison Partnership coordinated all elements of the grant application process, which was completed in just over 3 weeks from starting the application to the making of the offer.

Peter Ingham – director of East Lancashire Box Co. – said: This is a significant investment for the company and is an exciting milestone in our history. The grant will help to support our growth plans and will ensure that we are able to develop our offering and provide a bespoke service to all our customers – from small businesses to multinationals.

Andrew Cowking added: “East Lancashire Box Co. is a forward thinking family-owned business and one of the region’s most entrepreneurial companies. We were delighted to help them secure the grant and we look forward to seeing how it aids their expansion over the coming years.”


Buy-to-let – the new rules are coming

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If you cast your mind back to the 2015 summer budget, you may remember the significant changes that will impact all landlords. The implementation date of these changes is drawing ever closer and it will eat into landlords’ profits and, in some cases, may wipe them out completely.

With the slashed tax relief and added stamp duty, you may feel that someone has got it in for buy-to-let landlords. The question is what can you do about it?

What does the loss of tax relief mean?

This is one of the biggest changes to buy-to-let and now means that people buying to let residential property will no longer be able to claim tax relief on their mortgage interest payments at their marginal rate of tax. Before the changes this meant that basic rate taxpayers would get 20% tax relief, but those at a higher rate would receive 40% or 45% in tax relief.

What’s changing?

The changes mean that the tax relief will be a flat rate of 20%. Basic rate taxpayers, in most cases, will not see any changes, but those on higher incomes will find themselves losing much more in mortgage interest payments.   Also, more landlords may find themselves unexpectedly moving up into the higher rate tax bracket because of the way the new rules work.

To provide some perspective, here’s an example:

A landlord with a £150,000 buy-to-let mortgage on a property worth £200,000, with a monthly rent of £800, would currently have a net profit after tax of around £2,160 a year. With the lower tax relief, the net after-tax profit would be reduced £960.

Overall, the higher the interest you pay, the more you will feel the changes.

However, the full impact of the new rules is not felt immediately, as these changes will be gradually phased in from 6 April 2017, with transitional rules in place until April 2020. During the transition, the amount of interest directly deductible from rents will reduce and the proportion deducted as a fixed 20% credit will increase. This means in the transitional period landlords will be able to claim:

Tax year Interest deductible from profits Interest at fixed basic rate credit
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%

Income tax on property gains!

New rules announced last year, designed to target non-resident companies and individuals from escaping UK tax on profits made from the sale of UK properties, could inadvertently impact UK landlords. The new rules seek to charge the profits on selling UK property to UK income tax rather than CGT when the ownership of the property is more in the nature of a trade than a fixed investment.

When the changes were announced, there was widespread concern that UK landlords could be affected.

HMRC have now addressed this by releasing a 64-page guidance document to help clarify how they will seek to operate the rules.  In the guidance, they state that the new rules will not apply to businesses which buy properties in order to generate rental income, even if these businesses also enjoy an uplift in market value of the property. So the average UK buy-to-let landlord should not be subject to income tax on the gains he makes when he sells properties which were acquired for letting.

Whilst this is good news, it is only HMRC guidance and not law. For those particularly concerned about this new legislation, the position can be clarified with HMRC under their non-statutory clearance application process.

 

 

Inheritance Tax And The New Residence Nil Rate Band

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Much of my time is spent advising clients on inheritance tax, both the current liability on their estates, and what can be done to address it. It’s an emotive subject, with many clients feeling aggrieved that the wealth they have created over their lifetime is being taxed again on death.

In response to this, the former Chancellor, George Osborne introduced additional measures to potentially reduce the tax take for the treasury, and allow people to pass on more of their money to their families on death.

On death, if you leave assets to anyone other than your spouse, inheritance tax is paid at a rate of 40% on any assets you hold above the nil rate band; this currently stands at £325,000 each (£650,000 for couples).

It has long been the objective of the Conservative Party, to increase the point at which inheritance tax becomes payable by couples to above £1 million. The simplest way to address this would have been to increase the nil rate band to £500,000 each. However, for political and financial reasons this was not the solution George Osborne devised.

An additional nil rate band was created of up to £175,000 each, relating to the family home.  This will be phased in over 4 years from 6 April 2017, starting at £100,000 each and increasing by £25,000 per year over 3 years. This is in addition to the existing nil rate band. Thus, if you as a couple have a home worth £350,000, you may eventually be able to pass on a joint estate of £1 million without being subject to inheritance tax.

This all sounds good news but it should be noted that not everyone will qualify.  Here are a few key points:

  • If your estate is worth more than £2m your entitlement to the residence nil rate band starts to disappear;
  • The rules stipulate that homes must be passed on to direct descendants, by which it means children and grandchildren;
  • I’ve had to inform clients who are leaving all their assets to nephews and nieces that they won’t get this additional relief;
  • Step-children and adopted children are counted in the definition as children so that is welcome;
  • If leaving the property into a trust, it must be one that creates a fixed entitlement to the property to a direct descendant, it can’t be wholly discretionary;
  • If one spouse doesn’t use their residence nil rate band, it can be passed on to the other spouse to use on the second death in the same way as the ‘normal’ nil rate band;
  • It can only be claimed against one property so two properties totalling £350,000 may require you to claim this relief against the higher value property only; and
  • There are also a myriad of rules relating to downsizing, which will probably require further revision by the Government to ensure they work in the way intended.

Inheritance tax is an area where many people will require advice. If you wish to receive advice on the Residence Nil Rate Band or any other inheritance tax matter, please get in touch.

Written by Richard Hesketh
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Richard Hesketh 
Client Manager
Email: richard.hesketh@pmm.co.uk
Direct: 01254 604340

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Jane Parry 
Managing Partner & Head of Tax
Email: jane.parry@pmm.co.uk 
Direct: 01254 604329

 
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PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.