Tax Zone

Welcome to the Tax Zone. This area of the site is dedicated to keeping you updated on changes to tax legislation and its effects on financial planning. Here you will obtain detailed analysis on the budget, hints & tips and planning opportunities resulting from any changes made. This is intended to be a valuable resource for all our clients who wish to keep up-to-date and have a desire to take control of their financial affairs.

The Partnership always acts in the best interest of our clients. We work hard to ensure you receive the right advice and information enabling you to make the decisions that are best for you.

The content on this website is purely for information purposes only. Decisions should not be taken based solely on the content of the website and advice from a suitably qualified individual should be sought first.

Summer Budget 2015 - 08/07/15

budget
Chancellor George Osborne delivered the first Conservative Budget for 18 years. Unconstrained by being part of a coalition administration, Mr Osborne set out a broad plan of action which seeks to define the political and economic landscape to 2020 and beyond. In fiscal terms he remains constrained by current the state of the deficit and has to make changes against a more febrile economic environment, as a result of the continuing Greek crisis, than he would have liked.
As ever, this is a very political Budget from a Chancellor who not only wants to complete deficit reduction for economic reasons but who is a true believer in the smaller state. This first Budget is important as it sets in train the reductions in welfare spending as well as across a number of other spending departments. These will be eye-watering for some, though perhaps over a slower trajectory than expected. Crucially, further constrained by a self denying pledge not to cut schools, health and international development budgets and an election pledge to not increase VAT, NI or income tax his options are narrowed. Indeed his party has been clear that some benefits, notably for those for pensioners, are sacred cows. This has left Mr Osborne with stark options for cutting and reforming.
The Budget set out well established themes: promoting a high wage, low tax country; a one nation budget with a focus on reforming welfare; and driving an infrastructure plan with an emphasis on a northern powerhouse and a focus on tackling weak productivity. There was a strong focus on welfare reforms, although other spending cuts will be detailed in the autumn Spending Review. As ever with Mr Osborne there were a number of surprises: the focus on reforming non-dom tax status, the introduction of a levy on large firms for apprenticeships and his ‘rabbit out of the hat’ the National Living Wage – expected to be £9 by 2020.
CLICK HERE for our budget summary prepared in partnership with our governing body the Association of Chartered Certified Accountants (ACCA).
CLICK HERE for the budget policy briefing prepared by the Chartered Insurance Institute (CII).

Budget Summary - 2015/16

Budget 2015/16 - Summary, Tax Rates & Allowances
A full summary of the latest budget along with financial tips, updates in rates & allowances and planning points to be considered.
Please CLICK HERE for full summary and tax tables.

Payroll coding from 06 April 15

The tax year is coming to an end and it is time to prepare the final payroll processes such as submitting the Final Payment Summary (FPS), issuing P60's to staff, completing P11d's etc.

If you are running your payroll in-house, you will need to be sure that the tax codes are correctly adgusted for the change in tax free allowances and that your software has been updated accordingly.

Please CLICK HERE for guidance on how to transfer to the new tax year along with new PAYE codes.

If you haven't done so already, please CLICK HERE to order your P60 forms for 14/15 from HMRC.

VAT MOSS

A guide to
VAT Mini One Stop Shop (MOSS)

A SIMPLE GUIDE TO VAT MOSS
This is a basic guide prepared by the Technical Advisory Service of ACCA for members and their clients. It is an introduction only and should not be used as a definitive guide, since individual circumstances may vary. Specific advice should be obtained, where necessary.
The European Union (EU) place of supply VAT rules will change for specific supplies from 1 January 2015. The changes impact Business to Customer (B2C) supplies of broadcasting, telecommunications and e-services (digital services) often referred to as ‘BTE’ supplies by changing the place of supply to where the customer is located. This is a complete reversal of the current situation which is determined currently by where the supplier is located.
Background
VAT MOSS was unanimously agreed by the member states in 2008, and has long been anticipated, so why is it being introduced? Currently intra-EU supplies of digital services to non-business customers are subject to VAT in the member state where the supplier belongs. From 1 January 2015 the place of supply will change to where the customer belongs. 
The place of supply rule changes could lead to a digital services supplier having to register in each member state they make supplies and suffer the administrative burden that comes with it: that’s a potential of 28 VAT registrations. The VAT MOSS will be implemented from 1 January 2015, giving the supplier an option of registering in just one member state and accounting for any VAT due to any member states through a single VAT MOSS return. 
This should remove the incentive for businesses to locate offshore and level the playing field for all digital service suppliers. The aim is to reduce the administrative burden and associated costs of multiple VAT registrations.
There will be additional changes to the place of supply rules to align with other member states and to close minor loopholes used by certain anti-avoidance schemes.
This is the reason for VAT Mini One Stop Shop (MOSS); it saves having to register for VAT in every EU member state, where you supply broadcasting, telecommunications and e-services. Businesses may opt to use VAT MOSS for digital services made from 1 January 2015 and can be registered for VAT MOSS from 20 October 2014.
Defining digital services
This is an evolving sector and the list below is not exhaustive:
  • broadcasting includes the supply of television or radio programs to a schedule by the person that has editorial control of those programmes
  • telecommunications includes the services of sending or receiving signals by wire, radio, optical or other systems and includes fixed and mobile telephony, fax and connection to the internet
  • e-services includes video on demand, downloaded applications, music downloads, gaming, e-books, anti-virus software and on-line auctions.
At this stage it is worth noting who is not affected by the changes:
  • if you supply broadcasting, telecommunications and e-services, digital services to businesses only (including those who are self-employed) then these changes do not affect you
  • if you are a business supplying digital services to consumers, these changes will affect you, so you need to start planning for them now
  • if you supply digital services to a mix of businesses and consumers, then these changes affect you as far as the supplies to consumers are concerned
  • if your customer does not provide you with a VAT Registration Number (VRN), and you have no other information that suggests that your customer is in business and VAT registered, you can treat this as a B2C supply 
  • if you supply consumers through an online store or gateway, and the online store or gateway is acting in its own name, then they will normally be considered to be supplying the consumer. This means that the online store or gateway will be responsible for declaring and paying any VAT due. You will be treated as supplying the store and so will be making a business to business (B2B) supply, rather than a B2C supply. If this is the case, these rule changes do not directly affect you.
Who is making the supply?
It is normally easy to determine who is making the supply, however in certain circumstances it is not so clear especially when supplied via an internet portal, gateway or marketplace. Care must be taken to determine whether the digital service is made to the customer or the platform. For example if the platform sets the general terms and conditions, authorises payment, delivery and does not clearly state the name of the supplier on the receipt or invoice then the platform is making the B2C supply even if the platform is only the agent.
Customer status
When determining the customer’s status it is normal practice to obtain the VAT registration number, though there are alternative forms of evidence confirming business status. Certain EU countries will only accept a VAT registration number as proof of business status and it is up to the supplier to accept alternative evidence as a customer cannot convert a supply to a B2B supply unless they have provided the relevant VAT registration number.
The place of supply of digital services
It is important to identify the customer’s establishment, which may be a permanent address or their usual place of residence. Article 12 and 13 of the VAT Implementing Regulations defines permanent address and usual residence. In some circumstances it is relatively easy to determine the place of supply of digital services, for example:
  • through a telephone box/kiosk would be where the telephone box/kiosk is located
  • on board transport travelling through various EU member states would the place of departure for the customer
  • through a customer’s telephone landline would be where the landline is located
  • through a mobile phone would be where the country code of the SIM card
  • through a digital decoder would be the customer’s postal address or where the decoder is sent or installed.
If a particular situation does not fit into one of the examples in reaching their decision of where the place of supply is, they are required to obtain and retain two pieces of non-contradictory evidence, for example:
  • the billing address of the customer
  • the internet protocol address of the device used by the customer
  • location of the bank account
  • the country code of SIM card used by the customer
  • the location of the customer’s fixed landline through which the service is supplied
  • other commercially relevant information.
In order to determine the place of supply HM Revenue & Customs (HMRC) has recommended a three stage process:
1. determine whether a supply is a digital service 
2. determine the place of supply
3. once point 1 and 2 are established determine whether an exemption exists as defined by the member state.
Transitional rules
The rules will come in from 1 January 2015 however, there will be some transitional rules particularly in relation to annual subscriptions.
Invoicing
Invoices need to be raised in accordance with each member state where the customer is located, however most member states like the UK do not require VAT invoices to be issued for cross-border B2C supplies.
Exchange rate
The Member State of Identification (MSI) is the state in which you have registered for VAT MOSS. If you invoice a customer in a currency other than your MSI the conversion rate used will be the one published by the European Central Bank (ECB) on the last working day of the calendar quarter.
Registering for the VAT MOSS Schemes
There are two types of VAT MOSS schemes, Union and Non-Union. Already registered in the EU, you can use the Union VAT MOSS online service from 1 January 2015.
For businesses that have no EU establishment and make supplies to the EU of digital supplies there was only the VAT on E-Services (VoES) registration available. From October 2014 there will be the non-Union VAT MOSS for supplies from 1 January 2015.
Registration is open to B2C digital suppliers from 20 October 2014 in any member state where you have a business establishment.
Similar to group VAT accounting, VAT MOSS will be available to groups, with the representative member registering and only one member of the group being allowed to register for VAT MOSS. On applying for VAT MOSS, any application must state that they are a member of the group. Other members of the group as with normal VAT groups will be able to use the VAT MOSS.
Due to the complications and different treatments of VAT groups across the member states, it has been agreed that when a VAT group registers for VAT MOSS any ties with VAT group members in other member states will be broken, only for VAT MOSS purposes. Also is a member of a VAT group has or will have a fixed establishment in another member state, those ties will be broken, only for VAT MOSS purposes. In this instance any supplies from that fixed establishment cannot be declared on the VAT MOSS return.
For further details on how to register for VAT MOSS please view guidance from GOV.UK
De-registration
A business can voluntarily deregister at any point, however you will not be allowed to the join the scheme again in any member state for two calendar quarters. In addition once a business chooses a MSI then the minimum period it needs to be used for is two years unless the business structure changes in such a way that an immediate change is required.
To remain in the scheme a business needs to comply with the legal requirements of its use, such submitting declarations and making payments on time. For example, not making full payment within 10 days for three consecutive quarters would be a breach of the rules.
VAT MOSS returns
VAT MOSS returns and payment need to be submitted within 20 days of each quarter, the reporting periods are:
  • 1 January to 31 March
  • 1 April to 30 June
  • 1 July to 30 September
  • 1 October to 31 December.
There will be no flexing of the due date even if it falls on a bank holiday. If there is a period which resulted in no sales then nil returns will be accepted.
On the VAT MOSS return you will need to include the digital supplies at standard and reduced rates and Commission will be publishing a full list of VAT rates in the EU’s website.
There are no additional requirements to complete EC Sales Lists in connection with to B2C digital service supplies. As there is no de-minimis therefore even low value sales will need to be declared.
Correcting returns and records
Unlike UK VAT returns corrections to the VAT MOSS returns will be made to the original return. The time limits for making amending returns will depend on each member state and as the VAT MOSS rules are not meant to override the national rules. Each return can be amended up to three years in accordance with Regulation 967/2012, Article 61 paragraph 2.
VAT MOSS records are expected to be kept for a period of 10 years and any request to see or audit records will be coordinated through your chosen MSI. Record keeping penalties will be deal in same way as other penalties by your chosen MSI.
If your payment is not received within 10 days after the due date then a reminder will be sent.
Penalties
There will be special coordination between member states from 1 January 2015, in addition there will be greater coordination with non-EU jurisdiction though bi-lateral Treaty arrangements.

HMRC fuel rates from 01 June 14

The HMRC advisory fuel rates have been amended for travel from the 01 June with full details available by clicking HERE.

If an employee is provided with a company car and the company pays the fuel, a fuel benefit arises which can be very costly to both employee and employer. Many businesses come to an agreement with their employees so that the business is reimbursed for fuel used by the employee for personal use (this includes travelling from home to place of work). This process avoids the fuel benefit charge for both parties.

HMRC advise the fuel cost the employees are to repay their employers based upon the size of the engine. These rates are updated regularly.

Please note that to ensure the fuel benefit is avoided, good records need to be kept which fully support any personal usage. We recommend that you keep a log of the mileometer recording all business and personal mileage the vehicle travel. A copy of our mileage log can be downloaded by clicking HERE.

Feel free to contact us if you have any questions or require any assistance.

P.S. Dont forget that a VAT regisitered business will need to adjust for any VAT claimed on the petrol cost.

Tax allowances and rates - 2014/15

A pdf file is available for download. Please CLICK HERE for the tax allowances and rates for the tax year 2014/15.

Budget Summary - 2014/15

Here it is Ladies & Gentlemen. Hot off the press, the budget summary for 2014/15 including the latest rates, allowances, tax and financial planning tips.

Many of the changes revealed were re-announcements from the Autumn Statement of little more than three months ago. Nevertheless, the improving economic landscape did allow the Chancellor to spring a few surprises. 
The Budget highlights include:
  • The personal allowance will be increased to £10,000 in 2014/15, and the higher rate threshold by £415 to £41,865.
  • A new tax-free childcare scheme, from autumn 2015, to provide 20% of childcare costs up to £10,000 per child per year, for children under the age of 12.
  • The new single-tier pension will now be introduced from April 2016.
  • An employment allowance of £2,000 for businesses and charities to set against their employer NICs from April 2014.
  • A single rate of corporation tax of 20% for companies from April 2015. 
  • Stamp duty is to be abolished for shares listed on exchanges (e.g. AIM) from April 2014.
  • A limited one year extension of CGT reinvestment relief for seed enterprise investment schemes (SEIS).
  • Measures to increase the supply of low-deposit mortgages for credit-worthy households including a government-backed mortgage guarantee scheme from January 2014.
  • Specific anti-avoidance measures alongside the new general anti-abuse rule (GAAR).
We trust that you find the Budget Summary useful, and that it is a helpful basis for a discussion with us about your financial future.
Please CLICK HERE to download your copy.

Construction workers to be targeted

construction-370x229

Labour has announced that should they get back into government, they will be looking very closely at those working in the construction industry.

They will of course be focussing on IR35 (if you trade through a company) and the never ending employment V self-employment status.

If you feel your tax position is contentious, we would recommend the following:-

1. Have your contract with your customers reviewed. If you do not have one, you will need to obtain one. This is the first document that is likely to be inspected.

2. It is highly recommended that you appoint your accountant/agent to represent you. This will of course generate an additional cost to you. If you are unable to pay this additional fee, you should consider taking out the ‘Tax Investigation Service’.

3. Should your IR35 tax position be altered by HMRC, this is likely to generate additional tax liabilities, penalties and interest charges. If you cannot pay these, it is worth considering taking out ‘IR35 Tax Loss Insurance’

CLICK HERE for more reading.

Changes result in unexpected IHT bill

inheritence tax

Many business owners could be affected by a change in Inheritance Tax legislation. It is very common for business owners to fund their business by obtaining loans secured against their property. Due to the level of security offered by the owner, they are often able to negotiate very low interest rates making the loan a very cheap source of finance.

Historically, the loan value on the estate would be offset against the value of the property that is a chargeable asset and therefore reduce the value subject to IHT. Changes within the budget have meant that the loan is now to be offset against the value of the business only. In many circumstances, the value of the business is not chargeable to IHT so the changes result in a reduced value of a non-chargeable asset. Overall, the value of the chargeable estate is not reduced by this loan, meaning that there may be an unexpected tax bill.

What to consider:-

• If the tax is to be paid, you may wish to ensure there are liquid assets that can be sold to have the cash to pay the bill.

• Are we happy knowing that the heirs may have to sell the family home or other precious asset to fund any payment?

• As you have identified a potential tax bill, you could look at setting up a whole-of-life insurance policy that will cover the tax liability

• Considering the IHT nil rate band is in real terms reducing year-on-year, is it time to review my estate planning, wills and insurance policies?

Class 2 NI payment requests

HMRC are currently issuing Class 2 NI payment request letters. Class 2 NIC is paid when trading as a self-employed individual or as a partnership. You should note that should payment not be received in time, they may pass the debt to a collection company thereby substantially increasing the cost.

Should you no longer be trading as self-employed or through a partnership, let HMRC know when you ceased being liable to this tax so they can update their records and correct the value of the debt owing (if any).

Tip - Many people in recent years have incorporated their business as the trade grows. In many circumstances, they forget that Class 2 NIC is being paid via direct debit. This is easy to do as the amount is £2.65 (12/13) per week.

Check your bank statements for this. You may be due a refund.

From company to self-employed

The transition from company to self-employment is not seen often. Generally you see individual incorporating their business into a company with the main motivation being to limit exposure to taxes and personal liability.

We are however living in a very difficult time regarding business and wealth which has seen many owner managed businesses wishing to dis-incorporate to take advantages of the lower compliance costs and the ease of record keeping.

Historically, a number of 'exit charges' existed when transferring the business trade and assets out of a company. These being the realisation of balancing charges on plant and machinery and the realisation of capital gains on the goodwill (value of the business over and above the fair value of assets).

New, higher limits now exist making it easier for small businesses to extract assets and goodwill from their companies. Our governing body, the Association of Chartered Certified Accountants have prepared a detailed article which i would like to share with all those considering dis-incorporation. Please CLICK HERE to read further. 

Planning tip - The date you transfer assets will be very important. the balancing charges/allowances may determine when is best to dis-incorporate so you can either defer any tax liabilities or accelerate any tax relief.

Always seek help from a chartered registered firm of accountants before before taking any action.

Income tax calculated on a cash basis

From this tax year onwards, some small businesses are allowed to calculate their income tax based upon a cash basis. This may be beneficial for those who have fluctuating debtors (customers who owe you money) as you will only be paying the tax when you have received the cash.

The original intention of this change by the government was to simplify the tax regime and make it easier for businesses to budget for their tax liabilities. We support this very strongly, however, what was meant to be simple has in fact become very complicated with many accountancy practitioners refusing to prepare financial statements in this method.

We will be helping clients with this but would recommend caution before applying these new rules. We always act in the best interests of our clients and we give them the necessary advice to assist them in making their decision.

The GOV.UK website has prepared a very useful and easy to understand guide to the new tax system. To browse through the guide, please click HERE.

Feel free to contact us or request a call back on the site if you wish to discuss any of these issues.

Tax allowances & rates - 2013/14

A pdf file is available for download. Please click the link to obtain the tax allowances and rates for the tax year 2013/14.

Budget 2013 - 20/03/13

Please click me to download a copy of the Budget Summary 2013.

Many announcements made were anticipated but there were some surprises regarding tax relief despite the economic constraints. A fairly mixed reaction to this years budget. Whatever your view, our summary provides an interesting read. Some points of interest may include:-

  • Bolt can now run at the London Anniversary Games without suffering high taxes.
  • Pension contribution limits continue to fall. Planning in this area is vital to ensure you maximise return on the investment.
  • Tax free allowance increasing in 14/15.
  • Tax free child care scheme changing.
  • A single tier government pension and the removal of state second pension.
  • AIM shares soon to be incorporated into ISA's making them very tax efficient.
  • Businesses of a certain size can calculate their income tax on a cash basis.
  • Government helping remove the deposit barrier of purchasing a home.

and many more....

Please email us if you or request a call back if you wish to discuss how the budget affects you.

Tax allowance & rates - 2012/13

A pdf file is available for download. Please click the link to obtain the tax allowances and rates for the tax year 2012/13.

Tax allowances & rates - 2011/12

Please click the link to obtain the tax rates and allowances for the tax year 2011/12.

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