Category Archives: Hints and Tips

Looking forward to ATED

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If you own residential property in a company and its worth more than £500,000, then you may need to comply with the Annual Tax on Enveloped Dwellings (ATED) rules.

The rules require an annual tax return to be submitted by 30 April covering the forthcoming year.  The ATED charge for the forthcoming year must also be paid on that date.

Who needs to file an ATED return?

ATED returns must be filed and an ATED charge paid every year by non-natural owners of residential properties located in the UK, where the property is worth more than £500,000, and one of the reliefs or exemptions has not been claimed for the property.

A non-natural person can be defined as one of the following:

-       Any company wherever it is registered;
-       A partnership where one or more of the partners is a company;
-       A collective investment scheme.

There are exemptions from the charge, for example for properties which are commercially let, but there is still a requirement to submit the annual ATED return and claim the exemption, even if you have nothing to pay.

The rates

The new rates have recently been revealed for the chargeable year beginning 1 April 2017. The charge for the period will need to be paid by 30 April 2017.

Property value £ 2016/17 £ 2017/18 £
500,001 – 1,000,000 3,500 3,500
1,000,001 – 2,000,000 7,000 7,050
2,000,001 – 5,000,000 23,350 23,550
5,000,001 – 10,000,000 54,450 54,950
10,000,001 – 20,000,000 109,050 110,100
Over 20,000,000 218,200 220,350

The valuation band is determined by the properties’ market value as at 1 April 2012. If the owner acquired the property since that date, the value to use is the open market value at the date of acquisition.

If the property falls within 10% of a valuation band, the owner can apply to HMRC for a pre-return banding check. These checks can take at least 30 days to process, so it is best to apply as soon as possible.

For more information on ATED or if you’re worried about the above rates, please get in touch with our tax team by emailing tax@pmm.co.uk or by calling 01254 679131.

 

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

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.

The PM+M tax team will be hosting seminars in Blackburn, Burnley and Bury to provide answers and insights into what buy-to-let landlords can do to protect their position.

For more information or to book a place, please click the button below or call 01254 679131.

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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.

Trumping the market!

shutterstock_353116961The vote is in and Donald Trump has been voted President, words perhaps few people expected to read this morning and a deja vu feeling of Brexit!

Whilst investors and markets would undoubtedly have preferred the more stable influence of Hilary Clinton, Trump as President might not be a disaster. It is worth noting that the power of the President’s Office is limited by the Constitution, through the chambers of Congress and the Supreme Court. The Federal Reserve also remains independent.

So what does Trump mean for investors?  Initially, as we saw with Brexit, markets are likely to be volatile and we have already seen falls in the Asian markets overnight; the FTSE is currently down 1.2%. During volatile markets, and especially when you may be showing some short-term losses on investments, it is tempting to sell and wait for the markets to improve before reinvesting.

It is perhaps useful to look at market patterns and history before making the decision to sell.  According to Fidelity International, an investor who invested in the FTSE All Share Index for the last fifteen years, but missed the best ten days would have achieved an annualised return of 1.46%, against 5.69% by those investors that remained invested. Missing the best forty days reduced your annualised return to -5.62!

Often the largest returns are achieved shortly after these falls, so the message is simple. Provided you have a clear investment strategy and review process in place, you should hold your nerve and investments, and over the medium and longer term you will be rewarded.

Like a game of Top Trumps, if you hold the quality cards you win over the longer term.

For a review of your pension and investments, please contact Antony Keen by emailing antony.keen@pmm.co.uk or by calling 01254 679131.

Women and Work Life Balance – The Key to Success

shutterstock_362157116A recent survey by North West Insider on Women in Business provided some interesting results that show the workplace is changing – or is it the attitudes of individuals too? The survey was focused towards women but both genders could respond.

  • 58% of women said that their work-life balance is good or excellent which compares to 37% of men.
  • 42% of boards were made up of less than a quarter of women
  • Both men and women cited job satisfaction, financial reward and a good work-life balance as measures of career success.

PM+M has just been named as one of the Top 10 employers by Accountancy Age and I’ve been interested in how all these KPIs and responses tie in.

25% of our partner group is female and we are led by our Managing Partner, Jane Parry.  I don’t perceive we have an imbalance with only 25% being female.  We certainly have a significant proportion of our management team and rising stars who are female so succession shouldn’t be an issue.

For me on a personal level, the key priority, from my fellow partners and colleagues of all levels, is the trust aspect.  It’s how I feel – it’s the trust I believe they have in me to do my job to the best of my ability whilst I also get the most out of my life with my young daughter, running a home and having time for me.  I know this sounds idealistic but, in general, I do seem to get the balance.  It takes some self-discipline, it takes the confidence to say no and it also takes me to finally believe that perfection is just not possible.  I’ll give it a damn good try though!

The key strengths here at PM+M, which were confirmed in the Accountancy Age survey, include strong and varied communication channels, providing routes for employees of all grades to contribute to change, mutual trust and individuals really understanding their roles and contributions and how this impacts on the firm, their colleagues and clients.  There are so many reasons why and where people find job satisfaction and so there is no one answer to it.  Increasingly, it is down to engaging everyone who wants to be in the intricacies of the business (you’ll never get everyone engaged in every aspect but you need to make it as accessible for as many as possible of all ages and levels of responsibility).  Who says the older more experienced have the best ideas and who says the best ideas are the biggest and most radical?

Helen Clayton – Partner + Head of Corporate Services

Tax Deadline Extension For Flood Victims

shutterstock_356163935With the tax return deadline looming, HMRC have issued guidelines to those affected by recent flooding. Businesses and individuals who are unable to complete their tax returns online by the 31 January deadline as a result of flood damage should contact the HMRC. A new deadline will be agreed directly with the taxpayer by HMRC and fines will apply if this new deadline is missed.

Failure to contact HMRC to alert them of a late filing due to flooding will result in a fine, but those who miss the deadline will have the opportunity to appeal. HMRC will also agree to payment in instalments if taxpayers are unable to pay as a result of the floods.

Please be advised that this is not an indefinite suspension of self-assessment penalties, but a recognition by HMRC that many businesses and individuals are being affected by adversities beyond their control.

Full details are available on the Accountancy Age website. If you require more information and think you may need to apply for an extension, please get in touch with our tax team by phone on 01254 679131 or by email at tax@pmm.co.uk.

UK Company Ownership Register Postponed

shutterstock_178654685Back in April, we blogged about legislation being introduced in January 2016 that will require public disclosure of major interests in UK companies. This has now been postponed until April 2016, and additionally, companies will have until June 2016 to file the information with Companies House. This information will then have to be updated at least once every 12 months.

The information that will need to be submitted in compliance with The Small Business, Enterprise and Employment Act 2015 (the Enterprise Act) will be available to the public and must include details of anyone with an interest of 25% or more in the business.

The Government’s target of clamping down on money laundering and tax evasion may have significant commercial issues for many businesses in the UK. Companies may be reluctant to disclose this seemingly sensitive information. It is not uncommon to seek to keep an investment confidential, especially in an early stage business which may shake up a market or upset existing customers or suppliers.

Come June 2016, anyone who doesn’t take reasonable steps to comply with the new rules or anyone who hasn’t filed the information with Companies House may be convicted of a criminal offence, with the penalties including a possible prison sentence and disqualification from being a director. Persons of Significant Control will also be responsible for disclosing any interests or shares they may have in a directly or indirectly competing company to their current employer or fellow directors.

If you have business interests which could be affected by the impending Enterprise Act, please contact David Gorton (Senior Partner & Head of Corporate Services), who specialises in business structuring, at david.gorton@pmm.co.uk or call 01254 679131.

Invoice Financing For SMEs

Invioce FinanceMany SMEs have been held back by Britain’s late payment culture for far too long and, as a result, the Government’s plans to relax invoice financing rules early next year are highly anticipated.

From early 2016, The Department for Business, Innovation and Skills (BIS) is banning contractual “non-assignment” clauses used by bigger businesses which effectively prevent SME suppliers from accessing funds through invoice finance.

Currently 44,000 businesses have access to invoice financing. This means that they are able to fund working capital and gain access to the cash they need straightaway instead of waiting to receive payment for an invoice, which can often be beyond agreed credit terms.

Unpaid invoices are often the biggest asset an SME has and invoice financing is an important means of funding working capital. Any restriction on access to funding, intentional or not, hampers growth and when combined with a late payment culture still prevalent in many large businesses, the effects can be devastating for an SME.

Although invoice financing isn’t right for every business, SMEs have found it incredibly difficult to establish reasonable terms with larger companies. The Government plans to introduce a new Late Payments Commissioner to deal with supply chain bullying as well as a conciliation service designed to assist small businesses in settling late payment issues and disputes.

Larger businesses should start to ensure that they’re compliant with the new rules and take this opportunity to be more transparent and open about their payment terms. SMEs will soon have new options to help them grow and plan ahead with greater confidence by knowing they will have the cash in place to move their businesses forward.

For more information on how your business can raise alternative finance, please contact Jim Akrill at jim.akrill@pmm.co.uk or call 01254 679131.

More Phishing Emails – A Growing Problem

shutterstock_223094779We’ve previously blogged about an increase in the number of phishing emails targeting individuals and businesses in and around the North West.

The new scam poses as an email from one of your contacts and requests a money transfer of around £5,000. In some cases emails have been sent to a company’s finance team, appearing to be from a colleague. A general rule of thumb is that all emails requesting any personal information or money transfers should be cautiously investigated and verified before any action is taken.

For more information on identifying  phishing scams or to report a scam, we advise you to contact Action Fraud on 0300 1232040.