If you owe more than £1,000 to HMRC the Summer Finance Bill will give HMRC the power to take it from your bank account!
According to an article on accounting web…
HMRC have said they will contact the taxpayer at least four times about the debt before commencing the DRD procedure. One of those occasions will be a face to face meeting with the taxpayer to establish that they have found the right debtor and calculated the debt correctly. This should avoid the situation where the HMRC letters have failed to arrive, or the taxpayer has not understood the liability.
There are penalties for banks who fail to comply with the notices issued by HMRC.
You pay National Insurance contributions to qualify for certain benefits including the State Pension.
You pay National Insurance if you’re:
- 16 or over
- an employee earning above £155 a week
- self-employed and making a profit of £5,965 or more a year
The Office of Tax Simplification is currently beginning a process of looking at merging National Insurance with Income Tax.
ACCA’s head of tax Chas Roy-Chowdhury warned that an alignment of NI and income tax rates would be crucial prior to a merger taking place.
Whilst This is Money reported…
Middle and high earners could see their tax bills jump under radical plans to merge income tax and National Insurance, a tax expert has warned.
People taking home £50,000 a year could be £230 worse off, but low earners on £20,000 would save more than £530, and those on £30,000 would come out around £380 ahead, according to snap research by Tilney Bestinvest on the potential tax shake-up.
Chancellor George Osborne wants to reduce ‘complexity’ in the tax system to make it clearer exactly how much people have to cough up, and has ordered the Office of Tax Simplification to see if there is a case for change.
This change is also likely to lead to changes to Pension tax relief reform, Your Money
The government has already announced a consultation on the pension tax relief system, and I believe that a merger of income tax and NI would likely result in the floated idea of a pension with ISA-like tax treatment. This is because at present, a basic rate taxpayer gets 20% tax relief on pension payments but surely this would increase to 32% under a combined system. It seems illogical to increase tax relief at a time when they are actually trying to reduce the cost to the Exchequer. An equal tax treatment of ISAs and pensions could be a prelude to merging the two, potentially drawing ISAs into some form of limetime allowance.
The chart (Figure 8) is an extract from the CIMA report on Improving Decision Making in Organisations, it demonstrates the huge potential to reduce costs by implementing systems and shows how the role of FD’s is changing to become business partners participating in decision making.
So how does ERP reduce cost and improve profitability
Top Tips for your ERP Implementation:
- Start by drawing up a specification of your requirements – what do you want to achieve with the new system, what is the scope of the system, where will cost savings be made, how could more information lead to better decision making?
- Get Buy In – its really important that the ERP system gets the support of the Senior Management Team and that key staff are given the chance to put forward their ideas and are involved in the project. People are often resistant to change and getting them involved early will breakdown barriers to change.
- Rationalise – changing systems is an ideal chance to look at how can you do things differently and stop doing things that don’t add value, this will also reduce potential customisation requirements
- Allocate time to the project – If you don’t allocate time to the implementation project you will regret it later but that doesn’t mean you need to do everything yourself, budget to bring in temps and consultants to help
- Measure the savings and benefits – make sure you achieve your goals
Below are details of the Dynamics NAV system I implemented in 2007
The Summer Budget 2015 was not great news for Landlords!
The 10% Wear & Tear allowance will end in April 2016 and landlords will only be able to claim for actual expenditure, this could have a ‘cap’ and restrictions, we await the full details. Many landlords will be disappointed at the loss of this useful tax relief.
From April 2017 tax relief on interest will be restricted so that by 2020 it will not be an allowable expense against profit but will attract 20% tax relief.
Motorbikes have a clear tax advantage over company cars because they are classified as plant and machinery. This is better for both employers and employees.
Capital Allowances are restricted on cars based on CO2 emissions and employees also get taxed on the benefit in kind based on CO2.
Motorbikes being plant and machinery aren’t restricted and you could use the Annual Investment Allowance to offset the cost.
The Benefit In Kind is assessed as 20% of the cost of the motorbike but there will also be a benefit in kind on fuel, repairs and insurance.
The company will also have to pay 13.8% Class 1A NI on the benefit in kind but that applies to most benefits including cars and motorbikes.
Would motorbikes be a viable option for your employees?
Until the Summer Budget 2015 when you purchased a business (not its shares) into a limited company from an unrelated party you could write off the goodwill (Intangibles) against your corporation tax but that has now changed and you can’t, another tax relief bites the dust!
The Policy Statement reads as follows…
In accounting terms, purchased goodwill is the balancing figure between the purchase price of a business and the net value of the assets acquired. Goodwill can therefore be thought of as representing the value of a business’s reputation and customer relationships.
This measure removes the tax relief that is available when structuring a business acquisition as a business and asset purchase so that goodwill can be recognised. This advantage is not generally available to companies who purchase the shares of the target company. The current rules allow corporation tax profits to be reduced following a merger or acquisition of business assets and can distort commercial practices and lead to manipulation and avoidance. Removing the relief brings the UK regime in line with other major economies,reduces distortion and levels the playing field for merger and acquisition transactions.
Intangibles acquired before 8 July 2015 will continue to be treated under the old rules, so a corporation tax deduction will continue to be available for amortisation, and any loss on disposal will be treated as part of the company’s trading profit or loss for the year of disposal.
Renting out a Room is a great way to earn some tax free cash and in the Summer Budget an increase in the tax free allowance was announced…
The government will increase the Rent-a-Room relief from £4,250 to £7,500 a year from April 2016. The value of this relief has been frozen since 1997, so this increase will allow individuals who rent a room in their main residence to do so tax free on income up to £7,500 to reflect increases in rent.
You can use the scheme if:
- you let a furnished room to a lodger
- your letting activity amounts to a trade, for example, if you run a guest house or bed and breakfast business, or provide services, such as meals and cleaning
You can’t use the scheme if the accommodation is:
- not part of your main home when you let it
- not furnished
- used as an office or for any business – you can use the scheme if your lodger works in your home in the evening or at weekends or is a student who is provided with study facilities
- in your UK home and is let while you live abroad
- the whole of your home, rather than a part of it
You can get further details in HS223
Finding a lodger shouldn’t be too difficult and websites like Spare Room can help.
Housing and home ownership are a top priority in the UK and last week new proposals were announced in the Productivity Plan (see page 11 section 9)
The UK has been incapable of building enough homes to keep up with growing demand. This harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home. The government will:
- introduce a new zonal system which will effectively give automatic permission on suitable brownfield sites
- take tougher action to ensure that local authorities are using their powers to get local plans in place and make homes available for local people, intervening to arrange for local plans to be written where necessary
- bring forward proposals for stronger, fairer compulsory purchase powers, and devolution of major new planning powers to the Mayors of London and Manchester
- extend the Right to Buy to housing association tenants, and deliver 200,000 Starter Homes for first time buyers
- restrict tax relief to ensure all individual landlords get the same level of tax relief for their finance costs
Automatic planning consent on Brownfield sites, when approved, follows a number of other important incentives such as the Starter Homes initiative 20% discount.
The 20% discount is achieved by waiving local authority fees for homebuilders of at least £45,000 per dwelling on brownfield sites.
At the heart of the Starter Homes initiative is a change to the planning system. This will allow house builders to develop under-used or unviable brownfield land and free them from planning costs and levies. In return, they will be able to offer homes at a minimum 20% discount exclusively to first time buyers, under the age of forty. Under the proposals, developers offering Starter Homes would be exempt from those Section 106 charges and Community Infrastructure Levy charges. The homes could then not be re-sold at market value for a fixed period – making sure that the savings are passed onto homebuyers.Gov.uk
To qualify first time buyers must be under the age of 40 and living in England.
Also the Help to Buy ISA for first time buyers where they could qualify for a £3,000 bonus
There is also the Help to Scheme where home buyers may only need a 5% deposit
The current dividend tax credit system is a bit confusing and works as follows
You want to pay a dividend of £900. Divide £900 by 9, which gives you a dividend tax credit of £100. Pay £900 to the shareholder – but add the £100 tax credit and record a total of £1,000 on the dividend voucher. The dividend is then shown gross on the tax return and then the 10% tax credit is deducted rates of tax are then applied as noted below.
Dividend tax rates before April 2016
||Effective dividend tax rate
|Basic rate (20%) (and non-taxpayers)
|Higher rate (40%)
|Additional rate (45%)
This will change from April 2016, see the table below
Dividend tax rates after April 2016
||Effective dividend tax rate
|Tax Free £5,000
|Basic Rate Tax Payers (20%)
|Higher Rate Tax Payers (40%)
| Additional Rate Tax Payers (45%)
But be warned!
While these rates remain below the main rates of income tax, those who receive significant dividend income – for example due to very large shareholdings (typically more than £140,000) or as a result of receiving significant dividends through a closed company – will pay more.
These changes will also start to reduce the incentive to incorporate and remunerate through dividends rather than through wages to reduce tax liabilities. This will reduce the cost to the Exchequer of future tax motivated incorporation (TMI) by £500 million a year from 2019‑20. The tax system will continue to encourage entrepreneurship and investment, including through lower rates of Corporation Tax. (HM Treasury Summer Budget 2015
The FRC have just published their Key Facts and Trends in the Accountancy Profession – June 2015
The Financial Reporting Council is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment. We promote high standards of corporate governance through the UK Corporate Governance Code. We set standards for corporate reporting, audit and actuarial practice and monitor and enforce accounting and auditing standards. We also oversee the regulatory activities of the actuarial profession and the professional accountancy bodies and operate independent disciplinary arrangements for public interest cases involving accountants and actuaries.
You can download the full report here FRC Key Facts
It compared ACCA, CIMA, CIPFA, ICAEW, CAI, ICAS, AIA and found CIMA grow its members by 16.9% between 2010 and 2014, well above the average of 10.3% and beating the growth rate of all the others.
23% (77,551 out of 335,552) UK accountants are CIMA members.
CIMA also had the biggest growth in Worldwide Students 28.8% between 2010 and 2014.
The sectorial employment data in figure 5 showed that 75,429 (97%) work in Industry & Commerce which is 28% of accountants in Industry & Commerce.