Category Archives: Tax

HMRC tightens the net on offshore tax avoidance

Put simply, HMRC and other tax authorities worldwide are getting tougher on individuals, trustees and companies not paying the right amounts of tax. They are increasing their focus on tax compliance both onshore and offshore in a bid to ensure all tax payers are paying the right amount of tax.

HMRC has more data sharing facilities than ever before and data is already flowing into the UK from sources such as the US FATCA arrangement, Crown dependencies and overseas territories arrangement. The introduction of the common reporting standard from September 2017 means data will also be flowing in from over 50 countries already signed up to the exchange of information agreement. In addition, HMRC can now collect and handle large amounts of data via their computer system ‘Connect’ which as the name suggest, connects with lots of external sources of information such as the land registry, banks and other financial institutions, the DVLA and many more. All this global and national transparency means HMRC has access to more data than ever before and is using this to ensure taxpayer compliance in all areas.
UK taxpayers with offshore interests will soon be subject to new reporting obligations with severe penalties if they fail to comply. To assist taxpayers in understanding their obligations and to offer a way to correct past irregularities HMRC introduced the Worldwide Disclosure Facility – WDF.

It opened on 5 September 2016 and runs until 30 September 2018.  It has been introduced to enable taxpayers to disclose UK tax liabilities that relate wholly or partly to an offshore issue. That is, income arising outside the UK, assets situated or held outside the UK, activities carried on wholly or mainly outside the UK or funds connected to a UK liability transferred outside the UK.

Changing rules over recent years, particularly in relation to residence and domicile could now mean that even if you have taken advice in the past, this may now not be correct. As a first step, taxpayers with complex international tax affairs should review their position and, if need be, ask for a health check to be undertaken. If a disclosure is then required the WDF can be used.
To encourage and drive tax compliance this facility will offer taxpayers a final chance to clear up issues from the past and avoid the highest rate of penalties that HMRC can impose.

A key part of the WDF is known as the Requirement to Correct – RTC

The RTC requires taxpayers to disclose any outstanding UK tax related to offshore matters up to 5th April 2017. Taxpayers will have until the end of September 2018 to do this and if they do so, tax interest and penalties will be paid under the current rules. If this deadline is not met, additional penalties known as Failure to Correct penalties will be added to the settlement which will be a minimum of 100% of the outstanding tax. There will also be an asset based penalty for serious cases of 10% of the value of the asset on top of other penalties.

There are also separate further penalties which can be applied for offshore tax depending on the jurisdiction of the asset. This could be up to a further 200% of the tax not paid and depends on the jurisdiction of the territory.

Penalties generally under the disclosure agreements will be less severe if the disclosure is unprompted by HMRC and there has been no deliberate attempt to conceal the tax.
The message is therefore clear, if you believe you may have a requirement to disclose a previously undeclared source of income, either in the UK, overseas or both, you should use the current disclosure facilities available to ensure a better financial outcome and you should do it now. The penalties for being found out if you do not will be severe.

If you would like to discuss any related issues or need further advice or guidance please get in touch with Julie Walsh on Julie.walsh@pmm.co.uk or 01254 679131

Taxing times deliver opportunities

 

 

 

 

 

 

 

Every industry is being threatened by technological advancements, regulation changes and the challenge of finding and recruiting great staff. The accounting and tax industry isn’t immune, currently we are facing a multitude of problems;

  1.  Information flows that have become automated and confidentiality further restricted.
  2.  Regulations tightened both by government and by our own regulatory bodies.
  3.  Automation is improved within every business in the market and also within our clients
  4.  Recruiting bright and competent people becomes ever harder

In lots of ways it is healthy for the economy as a whole to allow technology to automate tax compliance. Perception suggests, there is little net benefit to the world from a tax return, often the stated opinion of my engineering and nursing friends.

It is however, fundamental to our society that the right type of tax is paid and that people are confident that the accurate amount of tax (and no more) is also paid. Ensuring the first and supporting the second is what we at PM+M do and will continue to do so.

Dealing with the environment we trade in, we see the key challenges to sustaining our business for the future to be:

  1. Building and developing relationships with clients who require human intervention in their tax processes. As automated as we can make it, tax is still a complex requirement
  2. Recruiting and developing a team with a broad range of ages and backgrounds to secure succession and communicate well with the varying cultures of our clients
  3. Retaining technical competence as the volume of legislation grows (and making sure we have all the necessary specialists either in house or reliably available elsewhere)

And most importantly;

4. Maintaining the culture of our firm and our partnership, after all there is no point in     running a firm if you can’t bring everyone on your journey.

One of the great things about a growing tax team that occupies 20% of your headcount, is that you can have your say to directly influence  the journey of the business, ensuring we all grow and succeed in an exciting period of evolution.

Our first and most important step has been to set out, by committing to a vision for our business, not because consultants told us to or because we thought it was trendy, but because asking ourselves and our team to commit to being “the best North West firm of finance professionals” allows us to drive change with integrity throughout the team. Those changes and the reinforcement of great things we have done that haven’t changed allow you to deal with the challenges the world throws at you.

The next key step was to re-emphasise to everyone within our team how important our culture and values are. We are hugely proud of the culture we have built and of our values of quality, achievement, fun and doing the right thing.

Based on our values, we are building a firm of bright and inspiring people who want to make a difference. We have committed to trusting in people and particularly trusting in youth – recruiting apprentices and graduates and investing in professional training, coaching/mentoring and interpersonal training. We have given our people at all levels freedom to express their personality and build fantastic relationships with clients.

The effect of our decisions, commitment, vision and values: A great motivated team; higher sales than ever; strong relationships with clients at all levels; and great quality and technical capacity.

We have now hit the point that our need is not how to manage and deal with individuals challenged by technology and regulation, it’s how to continue to lead them to continued growth and success – we need more leaders and particularly tax partners.

Feel free to call us if you are interested in joining us on our journey, we would love to hear from you.

Do I qualify for research and development tax credits?

What are research and development tax credits?

Research and development (R&D) tax credits are a government tax incentive for UK companies, especially small and medium sized enterprises (SMEs), designed to encourage investment in innovative products, processes and services.

The government announced in March 2017 at the Spring Budget its commitment to R&D tax incentives going forward, which is particularly helpful and reassuring post Brexit. There will be an additional £4.7 billion invested by 2020-21, which will include improving awareness of the R&D scheme amongst SMEs, as it is widely accepted by HM Revenue and Customs (HMRC) that only a small proportion of SMEs undertaking qualifying R&D have claimed the tax relief. This represents a significant opportunity for SMEs undertaking innovative activities that have yet to claim R&D tax credits.

What is it worth?

R&D tax credits are extremely valuable for SMEs and are worth the equivalent of up to 33% of a company’s R&D expenditure being available as a cash repayment from HMRC or reductions of tax bills.

What type of work qualifies for R&D?

Whilst the Government plans to increase certainty and simplicity around making R&D claims, currently HMRCs R&D conditions are very broad. Therefore, SMEs in most sectors and industries can potentially qualify for R&D tax relief.

If you are not sure if the project you are undertaking is scientifically or technologically feasible or you don’t know how to achieve the desired outcome, it is likely that your project will qualify for R&D tax relief. This is even the case where you have incurred expenditure but your project has not been successful.

The type of project work could include creating new products, services or in-house processes. It could also include significantly changing or adapting your current products, services or processes.

Basically, if you are doing something that your competitors are not doing and would be impressed by, there is a reasonable chance that it could qualify as an R&D activity.

What costs qualify?

The main cost is usually the salaries of people engaged in the R&D activity, including employer’s national insurance and any pension contributions. Other allowable costs typically include consumables, sub-contractor’s costs, software and some utility costs if these can be directly related to the R&D activities.

How we can help?

Here at PM+M we have a wealth of R&D experience and have made hundreds of successful claims on behalf of our clients. Each client and R&D project is unique, so at PM+M we offer a no obligation meeting with a member of our tax team. This allows us to understand your business and the type of project(s) you are working on, with a view to assisting you in starting to identify any qualifying R&D activities.

Below is a summary of our most recent R&D claims made on behalf of our clients:

  • Mattress manufacturer – unique mattress designs improving comfort and reducing heat retention. This claim resulted in a £50,000 tax refund from HMRC.
  • Classic Car Company – the company redesigned a continuation model of a 1950’s racing car which involved a complete overhaul of the internal setup of the car for safety purposes and making it road worthy. The claim resulted in a £60,000 tax refund from HMRC.

If you would like to discuss R&D or if you have questions, please contact Jonathan Cunningham (jonathan.cunningham@pmm.co.uk) or Claire Astley (claire.astley@pmm.co.uk)

2020 Vision For Making Tax Digital

 

 

 

An announcement yesterday from HM Treasury delayed the timetable for the Making Tax Digital (MTD) initiative imposing quarterly tax returns on businesses. The change in policy has been driven by concerns from business owners and professional bodies regarding the pace of the proposed changes. The new timetable gives business owners until 2020 to adapt to keeping digital records and updating HMRC for other taxes. Those businesses below the VAT threshold will be able to voluntarily file digitally for other taxes should they chose to do so.

From April 2019 businesses with turnover above the VAT threshold (currently £85,000) will have to keep digital records for VAT purposes only, filing returns with an MTD compatible software. Critically however businesses will not be asked to keep digital records, or to update HMRC quarterly until at least 2020.

The government’s original plan, laid out in the March 2015 Budget, required unincorporated businesses with turnover above the VAT threshold to submit quarterly returns to HMRC from April 2018 and those with lower turnover to follow suit from April 2019. Limited companies of all sizes we due to follow these rules from April 2020.

If you would like to discuss any Cloud Accounting requirements or find out about how Making Tax Digital will affect your business, please contact Jill Morris (jill.morris@pmm.co.uk)

Tax confusion due to Finance Bill changes

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The original Finance Bill 2017 published in March amounted to 762 pages and contained draft legislation on a whole range of tax changes which were due to take effect from 1 April this year for companies and 6 April this year for individuals.  However, the imminent general election has caused all that to change.

Vast swathes of legislation have been dropped from the Bill –  72 out of 135 clauses and 18 out of 29 schedules have been dropped.  The volume of the bill has effectively decreased by over 80%. This is to allow time for the Bill to be debated and passed before parliament shuts down in the run-up to the General Election.

This has caused confusion and uncertainty for many taxpayers who were expecting to be affected by tax changes taking effect from 1 or 6 April or who were hoping to use the new legislation to carry out tax planning transactions.

Some of the key pieces of legislation removed from the Bill were:

  • Making tax digital – the Government has reaffirmed its commitment to making tax digital but it is not known whether the intended start date of 1 April 2018 will be delayed.  This is an enormous project and uncertainty for taxpayers is increasing as we get nearer to 1 April 2018 with no clear idea of what the requirements of the new system will be.
  • Changes to corporate loss relief – new rules were due to take effect bringing increased flexibility for brought forward tax losses and restrictions on the use of losses for large companies.  It is not now clear when those rules will take effect and this is causing uncertainty for many companies as to their tax position.
  • Restrictions to corporate interest deductibility – due to commence on 1 April 2017 but now uncertain.
  • The relaxation of the Substantial Shareholdings Exemption which allows the tax-free sale of qualifying shareholdings by companies – a major widening of these rules was due to commence on 1 April 2017 and a number of groups of companies were planning to restructure their holdings utilising the new rules.
  • The reduction of the dividend allowance from £5,000 to £2,000 due in 2018/19 – as yet there is no indication that this will change.
  • The £1,000 tax-free allowance for property and sundry income which was due to come into effect on 6 April 2017.
  • First year allowances on electric vehicle charging points – due from 1 April 2017.

Assuming no major surprises in the election result, it is expected that the government will legislate at their earliest opportunity at the start of the new parliament.  However, it is unlikely that such legislation will be retrospective in respect of the proposals due to start on 1 April 2017 but this has not been confirmed.  In the meantime, our advice is to hold fire on any planning under the new rules and keep a close eye on developments.

For further advice on any of the above issues contact Claire Astley on Claire.astley@pmm.co.uk or Jonathan Cunningham on jonathan.cunningham@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

 

 

 

 

 

Tax Year End Planning For Individuals

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The tax year end is fast approaching, so the PM+M tax team have put together some useful tips for individuals who need some guidance with their tax planning.

Tax planning can be complicated but the PM+M team are here to help. To download our individual tax planning helpsheet, click on the button below. Should you have any questions, please do not hesitate to call a member of the tax or wealth management teams on 01254 679131.

HELPSHEET

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.