Year: 2016

When do you need a certificate for 5% VAT on building work?

Interior construction site

Building work can be charged at 5% in the following circumstances:

  1. Renovating residential property that has been empty for more than 2 years
  2. Where the number of dwellings is being increased such as converting a house into flats
  3. Converting a commercial building into residential
  4. Converting a house into an HMO

VAT Notice 708 has the exact details and whether or not the 5% rate can be used is a matter of fact not opinion. HMRC will not give specific clearance, they will refer you to the rules and ask you to check the rules with your builder for your project.

The property owner doesn’t issue a certificate (as would be needed to Zero Rating), its for the builder/developer to determine whether and on what the 5% VAT rate can be applied.

The only exceptions (when a reduced rate certificate would be needed) are

(a) a home or other institution providing residential accommodation for children

(b) a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disablement, past or present dependence on alcohol or drugs or past or present mental disorder

a hospice

residential accommodation for students or school pupils

residential accommodation for members of any of the armed forces

a monastery, nunnery or similar establishment or

an institution which is the sole or main residence of at least 90 per cent of its residents

and will not be used as a hospital, prison or similar institution or an hotel, inn or similar establishment.

steve@bicknells.net

www.stevejbicknell.com blog smashes through 300,000 hits!

Blog 300000

http://www.stevejbicknell.com has now had over 300,000 views, nearly 200,000 unique visitors and on Sunday reached a new daily views high of 1,396 views in a single day!

I think that’s pretty impressive for a Tax and Accounting Blog!

Looking at phone

We have over 7,000 followers and our most popular day is Tuesday and the best time is 1pm, which is interesting as last year it was Wednesday at 10am.

Our top 3 blogs of all time are:

  1. https://stevejbicknell.com/2012/04/07/a-quick-guide-to-vat-on-sandwiches-takeaway-food-cakes-and-pasties/
  2. https://stevejbicknell.com/2013/01/31/self-assessment-payment-shipley-or-cumbernauld/
  3. https://stevejbicknell.com/2012/12/15/when-should-you-charge-vat-on-inter-company-recharges/

January 2016 has had the highest monthly number of hits at 12,000

So why do people read my blog?

  1. Useful Content – I learned a long time ago that if you want followers and readers you have to write about things that will interest as wider audience as possible. My blog is about Accounting and Tax, which you might think is boring but it does affect everyone, we all pay tax! and there is plenty to blog about.
  2. Accurate Content – Its important to get the content right but even if you do make a mistake you can bet your life someone will tell you. Fortunately most readers are very helpful and will also contribute suggestions.
  3. Regular Posts – you have to post regularly, I post 2 or 3 times a week, I prepare them in advance and schedule them
  4. Variety – I try cover a wide variety of topics and my audience appreciate it, I even get special requests
  5. Pictures – Blogs without pictures, charts and graphics are boring
  6. Share – Post your blogs every where on Social Media and encourage others to do the same
  7. Pick a good title – The title will be found by search engines so try to think about what someone might search for
  8. Video – You Tube has plenty and most people would love you to link to their video as it will increase their hits as well as yours
  9. Infographics – I love infographics and I try to create my own when I have time
  10. Keep it simple – Lets face it Tax is complicated, so I try not to make the blogs too complicated otherwise I will lose followers

steve@bicknells.net

BBA-small

How will the Residential Nil Rate Band (IHT) work? 5 key points

Contemporary house with pool

The new rules come into force in April 2017.

The current nil rate band for Inheritance Tax is £325,000. Which can be transferred between spouses, so basically £650k for a couple.

The maximum amount of RNRB per person will be phased in so that it is:

  • £100,000 for 2017 to 2018
  • £125,000 for 2018 to 2019
  • £150,000 for 2019 to 2020
  • £175,000 for 2020 to 2021

It will then increase in line with CPI for subsequent years.

Key points to note:

  1. It is transferable between spouses – A claim will have to be made on the death of a person’s surviving spouse or civil partner to transfer any unused proportion of the additional nil-rate band unused by the person on their death, in the same way that the existing nil-rate band can be transferred.
  2. The qualifying residential interest will be limited to one residential property but personal representatives will be able to nominate which residential property should qualify if there is more than one in the estate. A property which was never a residence of the deceased, such as a buy-to-let property, will not qualify.
  3. If the net value of the estate (after deducting any liabilities but before reliefs and exemptions) is above £2 million, the additional nil-rate band will be tapered away by £1 for every £2 that the net value exceeds that amount. The taper threshold at which the additional nil-rate band is gradually withdrawn will rise in line with CPI from 2021 to 2022 onwards.
  4. You need to be a linear descendant to benefit – A direct descendant will be a child (including a step-child, adopted child or foster child) of the deceased and their lineal descendants.
  5. Downsizing is catered for – legislation in Finance Bill 2016 will provide that where part of the main residence nil-rate band might be lost because the deceased had downsized to a less valuable residence or had ceased to own a residence on or after 8 July 2015, that part will still be available provided the deceased left that smaller residence, or assets of equivalent value, to direct descendants. However, the total amount available will not exceed the maximum available residence nil-rate band. The technical details of how the additional nil-rate band will be enhanced to support those who have downsized or ceased to own their home will be the subject of a consultation to be published in September 2015 ahead of the draft Finance Bill 2016.

steve@bicknells.net

Permitted Development VAT Zero Rating – new rules

foreman builder and construction worker with blueprint in indoor apartment

VAT and Construction are never simple!

But on the 3rd May 2016 HMRC have tried to simplify Permitted Developments with Revenue & Customs Brief 9/2016 

Under the PDR scheme, persons seeking to obtain planning permission to convert certain types of non-residential property (such as agricultural buildings or office accommodation) to residential dwelling(s) can make a PDR application, rather than a full planning application.  This acts to hasten the application process for claimants and is being increasingly adopted by planning authorities in England.

Here is an extract from Revenue & Customs Brief 9/2016…

To zero-rate the sale of all newly converted dwellings (from non-residential buildings) or to make a valid claim under the DIY House Builder Scheme, the newly converted building must meet the requirements of a building ‘designed as a dwelling’. Further information can be found in Section 14 of Notice 708: buildings and construction (14 August 2014).

One of the conditions is that the developer, builder or DIY House Builder Scheme claimant must be able to demonstrate that statutory planning consent (SPC) has been granted in respect of that dwelling and that its construction has been carried out in accordance with that consent.

In addition, part of the conditions for some supplies of construction services to be eligible for the reduced rate of VAT of 5% for the conversion of a non-residential building into a dwelling requires individual SPC. Further information can be found in Section 7 of Notice 708: buildings and construction (14 August 2014).

Following the introduction of PDRs, individual SPCs will no longer be required for some developments making the meeting of this condition difficult.

HMRC is clarifying its policy concerning the VAT treatment of works where an individual planning application is not necessary because statutory planning consent has been granted though PDRs.

HMRC will continue to require evidence to be produced that the work is lawful in order for the zero or reduced rate of VAT to apply or for a claim to be eligible under the DIY House Builder Scheme. Where the builder, developer or DIY House Builder Scheme claimant establishes that the conversion is covered by a PDR and individual SPC is not required, they must be able to evidence it by at least 1 of the following:

a) Written notification from the LPA advising of the grant of prior approval. or
b) Written notification from the LPA advising that prior approval is not required. or
c) Evidence of deemed consent (ie evidence that you have written to the LPA and your confirmation that you have not received a response from them within 56 days) and evidence that the development is a permitted development. This will include all of the following (where the documents have been created), plans of the development, evidence of the prior use of the property (eg evidenced by its classification for business rates purposes etc.), confirmation of which part of the planning legislation is relied upon for the development and a lawful development certificate where one is already held.

Developments carried out under a PDR must still meet the appropriate building standards. Should any circumstances arise where building control is not required, evidence from the local authority confirming this should be provided.

steve@bicknells.net

Photos can be bad for Business!

Woman with cocktail in the beach bar during tropical vacation

Do you think photos are important? would you use a photo like this on Linked In?

https://d28wbuch0jlv7v.cloudfront.net/images/infografik/normal/chartoftheday_3509_b2b_marketers_choose_linkedin_over_facebook_n.jpg

What does your head shot say about you? Using a photo taken at a wedding or on holiday with a glass of wine in your hand, or one taken 20 years ago, maybe sending out the wrong message and costing you thousands in lost opportunties.

How you present yourself matters, with social media you are your own brand.

For example lets say you are an accountant.

  • Accountants love Blue, 66% of accountants will choose blue and 55% of the top accounting practices use Blue in logos
  • Accountants need to seen as experts
  • They are reliable, organised, trustworthy and accurate

So would you choose this accountant? is being funny a skill you want in an accountant?

Or this accountant? Much more professional possibly a little too serious?

Your image really matters in battle to win clients!

Here are some tips for headshots from Louise Jolley..

Having your photograph taken against a white or grey background, gives a nice clean image but how about in your work environment, telling the story about what you do? Make sure that the photograph is a high resolution (300 dpi), which will be suitable for print as well as web and if it shows your whole body, make sure that is looks great as a head and shoulders crop too.

If your business is selling products on the web, taking them yourself is not advisable. You might think you are saving money but a properly lit shot is worth it’s weight in gold. If you were opening a physical shop, then you would want the best fixtures and fittings, to show off your products, using stock photos and camera phones snaps looks cheap and doesn’t encourage prospective customers to part with their hard earned cash.

Using stock photos on your website, doesn’t tell the story of your business and makes it too generic. Having bespoke images of your business and photographs of you and your team at work, makes it more personable and people buy from people that they can relate to.

Louise takes some fantastic photos take a look at this one (more at http://www.louisejolleyphotography.com/   info@louisejolleyphotography.com)

LJ Photo 1

Good photography will make a huge difference to your business.

Don’t let bad photography cost you opportunities!

steve@bicknells.net

Who should get your tips? or should we stop tipping?

Tip jar

Over 150,000 business are in the Hospitality Sector and they employ over £2m staff, tipping is common place, so the government launched a consultation on 2nd May 2016 which will run till 27th June 2016 to seek opinions on tipping, gratuities, cover and services charges.

The Government wants everyone to be paid fairly so the proposals focus on:

Option 1:
Ensure transparency to consumers that discretionary payment for service is just that – ‘discretionary’.
Option 2:
Ensure workers receive a fair share from discretionary payments for service.
Option 3:
Increase transparency for consumers and workers regarding the treatment of discretionary payments for service.
Troncs can save you Tax

If your employees receive tips directly from your customers and are allowed to keep them, then you do not need to do anything for PAYE tax or NICs. There are no NICs due on the money, and the tax due is the employee’s responsibility. Your employees should declare the money to HMRC, who will usually adjust their tax code to collect any tax due.

A tronc is an arrangement for pooling and distributing tips and service charges and the person who operates the tronc is known as a troncmaster. If your employees use a tronc you must tell HMRC who the troncmaster is so that they can set up a PAYE scheme for the tronc.

http://www.hmrc.gov.uk/helpsheets/e24.pdf

Tips are outside the scope of VAT when genuinely freely given. This is so regardless of whether:

• the customer requires the amount to be included on the bill
• payment is made by cheque or credit/debit card
• or not the amount is passed to employees.

Restaurant service charges are part of the consideration for the underlying supply of the meals if customers are required to pay them and are therefore standard rated.
If customers have a genuine option as to whether to pay the service charges, it is accepted that they are not consideration (even if the amounts appear on the invoice) and therefore fall outside the scope of VAT.
Further information is available from: Notices 700 The VAT guide and 709/1 Catering and takeaway food

steve@bicknells.net

Hooray! we have now paid our tax – Tax Freedom Day was 2nd June 2016

tax free icon, red round glossy metallic button, web and mobile app design illustration

According to the Adam Smith Institute

Taxpayers worked 154 days this year to pay their taxes, four days longer than 2015

  • Tax Freedom day falls four days later than it did in 2015
  • Brits work 154 days of the year solely to pay taxes; every day from 1st January to 2nd June
  • Tax receipts projected to be 42.27% of net national income this year
  • Government needs to cut spending and keep tax reform a priority
  • Adam Smith Institute calling on government to raise National Insurance Threshold to help lowest paid in society

This is first time in 15 years that Tax Freedom Day has moved into June!

Whilst net national income has increased by £34.6bn from 2015, government has actually gobbled up £35.4bn more in taxes, meaning the government has actually left Britons £1bn worse off than last year, a reminder that tax reform must remain a priority.

Director of the Adam Smith Institute, Dr Eamonn Butler, said:

“The Treasury hates Tax Freedom Day because they don’t want us to know how much tax we really pay. They conceal the tax burden with stealth taxes that we don’t even realise we’re paying.

“But it’s shocking that the government takes over two-fifths of the country’s earnings – and then borrows more. We work longer for the government than mediaeval serfs had to work for their Lords!

“It is absurd that people on the minimum wage are liable for National Insurance Contributions, which raise their cost to employers and make it harder to move from benefits into work. The poor are also worst hit by regressive taxes like excise duties on what they buy.”

Tax Freedom Day is designed to reveal to the public how much they really pay out in taxes, which Britain’s lengthy tax code can often obscure. ASI calculations include direct taxes like income tax and national insurance, as well as indirect taxes like VAT and corporation tax.

steve@bicknells.net

Is your tax code correct? millions are wrong!

Tax Refund Green Blue Horizontal

Money Saving Expert reported last week

Revealed: 3.2m tax codes WRONG – check if you’re owed £1,000s

The National Audit Office found a huge number of tax code errors – our unique calc can check if you’re a victim

You’ll find your tax code on:

  • your pay slip
  • your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
  • form P60 – you get this at the end of each tax year
  • form P45 – you get this when you leave a job

You can check your tax using this HMRC link

https://www.gov.uk/check-income-tax

If you think you code is wrong you can inform HMRC using this online form

https://online.hmrc.gov.uk/shortforms/form/P2

Check the following carefully:

  1. P60 – you get this at the end of each tax year
  2. P45 – you get this when you leave a job
  3. PAYE Coding Notice
  4. P11D Expenses and benefits
  5. P9D Expenses payments and income from which tax cannot be deducted
  6. Bank and Building society statements
  7. Pension Tax Deductions

Is your National Insurance correct?

Unlike Income Tax which is cumulative and assessed across all earnings, National Insurance starts from zero on each individual employment and you also pay National Insurance on Self Employed earnings.

So if you are a Director of multiple businesses paid as an employee its easy to see how you could over pay and you might not even realise because National Insurance is not shown on your Self Assessment Return.

You can also over pay National Insurance if you are a part time employee with multiple employers and irratic earnings, this because National Insurance is calculated on a weekly/monthly basis, not a cumulative basis and its by employer.

What you need to do

Write to HM Revenue and Customs confirming:

  • your National Insurance number
  • why you’ve overpaid
  • the tax year(s) you’ve overpaid

You should include your P60 or a statement from your employer showing the tax and National Insurance for each year you’re claiming for.

You should apply within 6 years of the tax year you’re claiming for.

HM Revenue and Customs
Payment Reconciliation
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

steve@bicknells.net

HMRC have raised over £500m in unpaid tax and penalties!

HMRC Undeclared 8169099509_3860d7f26c

Taskforces are specialist teams that undertake intensive bursts of activity in specific high risk trade sectors and locations in the UK. The teams will visit traders to examine their records and carry out other investigations.

HM Revenue and Customs (HMRC) taskforces have recovered more than £500 million since they were launched five years ago.

The targeted bursts of enforcement activity have brought in progressively higher amounts every year, and the total now stands at more than £540 million. This includes nearly £250 million raised in 2015-16 alone, almost double the previous year’s yield.

Since 2011, HMRC has launched more than 140 taskforces targeting sectors that are at the highest risk of tax fraud including the retail sector, the tobacco industry and the adult entertainment industry.

Jennie Granger, Director-General for Enforcement and Compliance at HMRC, said:

The message is clear: if you try to cheat on your tax, we are going to catch you. A small number of people still think they can cheat the tax system; these figures prove we can track them down and take back what they owe.

We have increasing levels of intelligence, and use state-of-the-art digital tools to help us to identify and target high-risk areas.

Taskforces are just one strand of HMRC’s compliance strategy, which brought in a record £26.6 billion in 2014-15, up 43% from 2011-12.

Nearly 50 new taskforces were launched last financial year, including ones targeted at property, partnerships and hidden wealth. In 2015, a single taskforce focused on Income Tax led to 45 arrests for tax evasion and fraud.

Money brought in through taskforces in previous years:

Year Taskforces yield
2011-12 £24.3 million
2012-13 £47 million
2013-14 £85 million
2014-15 £138.1 million
2015-16 £248 million

Here are 6 tips should you be get an enquiry:

1. Establish Enquiry Type

It is important that the type of enquiry is established. If it is an Aspect Enquiry make sure it is fully dealt with. Remember HMRC needs a reason to extend an enquiry from aspect to full – challenge any extension where necessary.

2. Choose the Best Adviser

Does your accountant have experience of dealing with enquiries and investigations? do you need a specialist to help? do you have tax insurance or FSB membership?

3. Revenue Manuals

These manuals are a good source of information – particularly if the HMRC asks for something and you are wondering whether this should be allowed. We have seen the enquiry manual being quoted successfully to HMRC a number of times.

4. Reduce your risk by filing and paying on time

Events such as late returns or a poor compliance record can increase the likelihood of an investigation.

Once the investigation has started the standard of record keeping becomes important.

5. Own up to your mistakes

I you know of mistakes and errors its much better to declare them at the start of the enquiry.

6. Be Accurate

Or “tell the truth”. Be sensible in what the Inspector is told. Do not be tempted to say the first thing that comes to mind just to satisfy HMRC.

steve@bicknells.net

 

 

Don’t ignore work place pensions – the regulator will fine you!

I want you

The fine for small employers with 1 to 4 staff who fail to comply with an EPN is £50 per day and for those with 5 to 49 it is £500 per day.

The Pension Regulator statistics for the first quarter of 2016 show that the number of fixed penalties were 806 compared to the penalties for the whole year of 2015 which were 1,250, so penalties are increasing, partly due to increasing numbers of small businesses being required to enrol.

Staging Dates

 

 

Charles Counsell, Executive Director for automatic enrolment, said: “Most employers comply on time and we continue to see compliance rates in the high nineties. Others need a nudge and are prompted to meet their duties when one of our notices comes through their letterbox.

“It’s simply not fair for staff not to receive the pension contributions they are legally due. But failing to act also means an employer risks clocking up a significant penalty until they put things right.

“Our message remains that if things aren’t going well, then talk to us; don’t ignore us.”

steve@bicknells.net