Author: Steve Bicknell

Progressive Property Approved Accountant, Business Expert and Trainer/Speaker with Redcliffe Training, MBL Seminars and UK Training ►MD ► Bicknell Business Advisers ✸ family business providing accountancy, tax, and consultancy services to SME's and Start Ups - Xero, Sage One, QuickBooks, Freeagent, Kashflow, Hammock, Dext - Receipt Bank ✸ www.bicknells.net www.stevejbicknell.com

How does Principle Private Residence Relief work?

One family house for sale

Principle Private Residence Relief (PPR) is useful relief that saves you capital gains tax (18% for basic rate tax payers and 28% for higher rates tax payers) on your main residence, but how does it work, lets take a basic example

Property Purchase Date 30/04/2001
Property Purchase Price £100,000
Date Moved Out 30/10/2010
Letting Start Date 01/11/2012
Date Sold 31/10/2014
Sale Price £200,000

Capital Gains tax calculation

Sale proceeds 31/10/2014 £200,000
Cost (assuming no improvements) -£100,000

Gross capital gain £100,000

Reliefs available
Principle Private Residence Relief

Actual Occupation 9.5 Years
Started 30/04/2001
Ended 30/10/2010

Plus last 18 Months of Ownership 1.5 Years
The Property was empty prior to letting
Up to 18 months could be by ‘absence for any reason’

Total period where private residence relief is
available 11.0 Years

Total Period of ownership 13.5 Years

Principle private residence relief
£100,000 x (132 mths/162 mths) £81,481

Gain after principle private residence relief £18,519

Letting Relief
01/11/2012 to 31/10/2014 2.0 Years

Lettings relief is to lower of
£40,000 statutory maximum
£81,481 the principle private residence relief in this example
The gain for the letting period

Gain attributable to letting 2/13.5 x £100,000 £14,815
This is the lowest figure

Capital gain after reliefs £3,704

Annual Exemption for 2014/15 £11,000

So in this example there is no tax to pay

For further details see the HMRC Helpsheet 283

For gains on sales prior to 6 April 2014, PPR is available for the last three years of ownership of a property that has been a main residence at any time.  This is the case regardless of whether or not it has been occupied during the last three years of ownership.

But as a result of the 2014 Budget, from 6 April 2014 the automatic exemption from tax on gains in relation to the final years of ownership is now restricted to cover the last 18 months rather than three years.

steve@bicknells.net

 

What are Dispensations and Scale Rate Allowances?

Pay

Its nearly time to prepare your P11D’s, here is a link to the 2014-15 P11D

You’ll need to submit an end-of-year form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

The form will either be a P9D or a P11D, depending on the expense or benefit.

You may need to submit form P11D(b) to report the amount of Class 1A National Insurance due on all the expenses and benefits you’ve provided. You should do this if:

  • you’ve submitted any P11D forms
  • you’ve been sent a P11D(b) form by HMRC

If you don’t submit any P11D forms, you can tell HMRC that you don’t owe Class 1A National Insurance by completing a declaration.

Due by 6th July 2015.

As an employer, you can apply for a dispensation on some expenses and benefits you provide for your employees. This means you won’t need to report them to HM Revenue and Customs or pay tax or National Insurance on them. Here is a link to apply for Dispensations.

There are also Benchmark Scale Rates which can be paid tax free, alternative you can claim the actual costs

Description Amount (up to)
Breakfast rate £5
One meal (5 hour) rate £5
Two meal (10 hour) rate £10
Late evening meal rate £15

steve@bicknells.net

What is the optimum tax efficient salary 2015-16?

Entrepreneur startup business model

Many small business owners ask this question, typically they are a sole director and share holder and want to decide from a tax and NI perspective what the optimum salary is (the rest of their income coming from dividends).

The new lower earning threshold for National Insurance is £5,824 per year (£112 per week) for 2015-16, there is an advantage to paying above this level so that you will earn credits towards a state pension. Its expected in current terms that a years credit is worth £225 pension per year for life. Employees start paying NI when earnings are above £155 per week)

The Employment Allowance of £2,000 has been continued into 2015-16 which means you won’t have to pay any employer National Insurance contributions at all if you usually pay less than £2,000 a year.

The personal tax free allowance for 2015-16 is £10,600.

So assuming you aren’t a higher rate tax payer and you haven’t used up the employment allowance on other staff, £10,600 would be the optimum salary because:

Saved Corporation Tax at 20% = £2,120

Employee NI 12% on (£10,600 – £155 x52) = (£304.80)

Saving £1,815.20

Beyond this point income tax is payable at 20%

steve@bicknells.net

Trivial Benefits £50 exemption deferred

Businessman looking at a small present with a magnifying glass

It had been proposed that there will be a new statutory exemption for trivial benefits up to a limit of £50 from from 6 April 2015, this measure is not included in the first Finance Bill of 2015, it has been deferred until after the election.

The £50 tax exemption would have been on items such as birthday and Christmas gifts. The legislation would have also introduced an annual cap of £300 in some circumstances.

So we are stuck with the old rules for now

An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).

http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm

There are some non taxable benefits you be interested in….

HMRC Helpsheet 207 – Non-taxable payments or benefits for employees

http://www.hmrc.gov.uk/helpsheets/hs207.pdf

steve@bicknells.net

Abolition of under 21 NI

hübsche brünette studentin

From 6th April 2015 every employer with employees under the age of 21 will no longer be required to pay class 1 secondary NI on earnings below the upper earnings limit (£815 per week).

In line with the change, HMRC are introducing 7 new National Insurance Table Letters to be used from April 2015 to cater for these employees as follows:

Three of the new letters (V, I and K) will be removed in April 2016 in line with the ending of ‘contracted-out’ status in relation to salary-related occupational pension schemes. [Brightpay]

steve@bicknells.net

How do Help to Buy ISA’s work?

Help to Buy ISA

 

Top 10 facts and rules…

  1. Its only available to ‘First Time Buyers’
  2. ‘First Time Buyers’ can only have one Help to Buy ISA with one provider
  3. You can pay in £1,000 when you open the account and then save a maximum of £200 per month
  4. The maximum government bonus is £3,000 (but you can lower amounts of bonus if you have less than £12,000)
  5. The scheme will run for 4 years from the date it opens (Autumn 2015)
  6. Couples can have a Help to Buy ISA each which means if they don’t want to wait 4 years could save £12,000 in 25 months where as a single saver would need 55 months
  7. Unlike ISA’s where you open one per year, the Help to Buy ISA will continue for 4 years
  8. You can withdraw funds but if its not to buy a home then you won’t get the bonus
  9. More than 100,000 homes have now been bought with government backed schemes
  10. You will be able to get them at banks and building societies

Money Saving Expert has some useful Q&A including this one….

A first-time buyer is someone who does not and has never owned an interest in a residential property, either inside or outside the UK.

Many people have said “I owned a property previously but now rent”, “I have a shared ownership property” or “I have inherited a property” can I still open a Help to Buy ISA? And the answer is NO – you have to be a first-time buyer to open one.

steve@bicknells.net

Will you have a week 53 payroll year end in 2015?

Close up of payslip

Monthly payrolls never have a week 53 but weekly, fortnightly and for-weekly paid employees will have a week 53 if the process date is Sunday 5th April 2015. If it falls on any other day you don’t have a week 53 this year.

In the ‘Tax week number’ field of your FPS, put:

  • ‘53’ if you pay your employees weekly
  • ‘54’ if you pay them fortnightly
  • ‘56’ if you pay them every 4 weeks

If you make a mistake

If you find a mistake in your final FPS of the year, what you need to do depends on the type of mistake and when you find it.

Mistake When What to do
Wrong payments or deductions By 19 April Send an additional FPS with corrected year-to-date figures, and enter ‘0’ in ‘Pay in this period’
Wrong payments or deductions After 19 April Send an EYU showing the difference between the amounts on the wrong FPS and the correct year-to-date amounts – don’t give the year-to-date amounts
Wrong payment date By 5 April Send an additional FPS with the correct payment date – put ‘0’ in ‘Pay in this period’ and give the year-to-date figures

How will FRS102 affect your tax position?

junge frau lernt für eine prüfung

FRS102 will affect us all, even small companies will be subject to a version of FRS102.

Its not just a reporting standard it will affect your tax position too, for example

Intangible Assets and Goodwill

Under FRS102 these assets will have a maximum life of 5 years where as UK GAAP allowed them to have an infinite useful life.

Distributable Reserves

There are various FRS102 changes that can effect these but one specific one is deferred tax which will be calculated on investment properties.

Operating Leases

Leases incentives will be spread over the entire life of the lease rather than to first break clause.

Asset Reclassification

Some assets such as Websites and software development could be reclassified as Intangible

Have you assessed the changes for your business?

FRS 102 is effective for periods beginning on or after 1 January 2015.

steve@bicknells.net

How to Improve Profits with Auto Enrolment

Auto Enrolment
In 2012, the UK law on workplace pensions changed forever. By law, employers must now enrol their employees in a pension scheme and contribute towards that scheme. Every employer with at least one staff member now has new duties. These responsibilities include placing those employees who meet certain criteria into a workplace pension scheme where these employers, must also contribute towards the pension.

Employers are experiencing information overload when it comes to their new AE obligations. 1.2m small and micro businesses are set to start staging from June 2015. A large portion of these employers may lack the knowledge and resources to be able to process these AE tasks. Research by The Pensions Regulator reports that only 60% of employers due to stage between June 2015 and Nov 2015 have begun to plan for their Auto Enrolment duties, with a significant decline of 52% reported among employers due to stage in 2016.

The Opportunity
The big question remains, will you help your clients prepare for Automatic Enrolment?? Whether you are a payroll professional or accountant, this change to the law will mean that your payroll clients may come to you to seek advice on the easiest way to fully comply. Automatic Enrolment is presenting accountants with a unique opportunity to offer additional services to existing clients thus bringing in new business. If accountants decide they do not want to take on this type of work then they run the risk of losing business.
Bright Pay 1
Accountants will need to take time to consider the AE opportunity for their business. This AE platform presents a stepping stone for them to increase turnover, acquire new customers and build a lasting relationship with your current client base. To achieve this increased revenue, it will be essential that your payroll clients know that you are open for Auto Enrolment business. Make sure you have the correct tools and processes in place to streamline AE and increase profits. By taking the opportunity to identify payroll systems that reduce costs and resources and maintaining a strong level of best practice, then accountants will reap the rewards. It further provides a competitive edge to you over other accountants who refuse to provide AE as a service to their clients. Savvy accountants are already capitalising on auto enrolment and it has become a viable and profitable part of their practice.

Auto Enrolment Webinars
BrightPay has joined forces with Accounting for Growth to help accountants with payroll clients. The AE webinars are specifically tailored to support accountants in processing Auto Enrolment efficiently.

On the 24th March Patrick McLoughlin will present ‘Using Auto Enrolment to attract your Ideal Clients’ where he will give you practical and helpful tips to attract new business. Patrick’s presentation will help you to avoid the fee bargainers and focus on clients happy to pay premium fees for a premium service. Business owners are crying out for more information and help to comply with the legislation. You will never find a market more receptive to your support and services.

Paul Byrne from BrightPay will present ‘Embrace Auto Enrolment to increase Profits’. With the tsunami of auto enrolment staging dates ready to hit the UK’s small businesses, accountants are deliberating whether to embrace auto enrolment and whether it is worth the time and effort. Discover how all Bureaus can benefit financially from Auto Enrolment. Find out how and why AE should be a chargeable service.

Register today for our webinar to take the stress, hassle and pressure out of dealing with payroll clients.
Free Registration – Book your place here.
Written by Karen Bennett – BrightPay, auto enrolment software.