From January 2013 advisers are preparing to dump their unprofitable clients, if you have investments worth less than £500k this could be you.
This story was covered in the Investors Chronicle this week.
Currently IFA’s and advisers are paid commission but from January they must charge fees, typically starting from £250 per hour.
The new regime is called the Retail Distribution Review (RDR).
Lloyds Bank have already said that they will stop their mass market advice from November, Barclays have already pulled out of face to face advice.
Where will you get your advice?
Currently the maximum pension payments allowed per year are £50,000 this for Employee and Employer payments, however, if your net relevant earnings (NRE) are below £50,000 your personla payments will be capped at the higher of your employment income or £3,600. (Carry Forward may be available)
NRE excludes Dividends and if your personal pension payments exceed the NRE then you will need to declare the over payment on your self assessment return and pay tax on it.
This can be a big issue for company directors-shareholders who often take a large part of their income in dividends.
The solution to this is for the company to make employer contributions. Employer contributions count towards the £50,000 limit but are ignored for the NRE cap.
The attached link is useful article on this subject
But there are further explanation on Accountingweb, Skandia, Indicator Tips & Advice Tax (4 October 2012)
That’s exactly what happened at London Black Cab maker Manganese Bronze
The company blamed the accounting mistake on its new IT system, which meant losses, dating back several years, had been understated by £3.9m.
Coventry-based Manganese Bronze saw its shares fall 34% after saying it expected “substantially higher” losses for the first half of the year.
Manganese said a combination of “system and procedural errors” meant a number of transactions and balances were not transferred to the new IT system when it was introduced in August 2010.
Basically Invoices went missing during the transfer between systems.
If you are changing accounting system:
1. Choose your new software carefully and ask for references
2. Have a migration plan
3. Makesure your data is safe, secure and correct before you switch
4. Test the new system before your go live
5. If necessary parallel run the systems
Earlier this year there were a number of press articles such as
So what is BPRA and how does it work?
BPRA is a form of Government Aid given as a Tax Break in certain areas of the country for the renovation and reuse of commercial property.
You can purchase property for your own use or invest in a scheme with others.
Investors might in theory invest £100k but but scheme might borrow 75% leaving the investor to put in only 25%, but the investor will get 100% tax relief on the £100k (“initial allowance”).
BPRA will be available until March 2017 when its likely to be withdrawn, it could also be capped from 2014.
Its a complicated high risk investment and authorised advisors need to able to advise on unregulated collective investment schemes.
If you sell the investment within 7 years a tax charge will be triggered (“balancing charge”) effectively withdrawing the “initial allowance” this tax charge can also be triggered by death.
Income Tax on Profits and Capital Gains on sale will apply.
Its a popular theme. Earlier this week Danny Alexander said to the wealthy ‘we are coming to get you’.
When it comes to tax dodgers and moving money and assets overseas he may have a point but what about mansion tax covered in the same speach. Is a tax on property the way to go?
France now want their top earners to pay 75% tax!!
But will this just lead to businesses and individuals moving to lower tax countries?
Will the UK be a winner, the UK Government want us to have the lowest corporation tax rate in Europe and we are moving towards a main rate of 20%.
Bartercard has many charity members who all love getting donations http://belmontmail.co.uk/ZFF-YPOC-E24SJ4HO59/cr.aspx
But often charities and those making donation fail to claim the cash back relating to the donations, for example:
25% tax refunds in cash http://www.direct.gov.uk/en/MoneyTaxAndBenefits/ManagingMoney/GivingMoneyToCharity/DG_10015097
This means that for every £1 donated, you can claim an extra 25 pence.
Individual Tax Relief
If you pay higher rate tax and make a donation through Gift Aid you can claim some tax back too.
Corporation Tax Relief
When your company makes a qualifying donation to a charity the amount paid is treated as a ‘non-trade charge’ – this means your company can make a claim in its Company Tax Return to set the amount of the donation against its taxable profits.
I have seen some great articles on this recently for example ‘Tips & Advice Tax’ (Indicator Issue 22 September 2012)
A few years ago the tax rules were updated and the government added one aimed at ensuring those who took “reasonable care” in preparing their tax returns shouldn’t be penalised if the return is incorrect.
But HMRC don’t always remember the “reasonable care” rule for example J R Hanson and HMRC (H and HMRC) as reported in ‘Tips & Advice Tax’ Article HMRC overzealous on penalties.
H incorrectly applied a capital gains tax deduction he wasn’t entitled too and was hit with penalty for £14000, however, H used an accountant to prepare the returns and he had shown reasonable care so HMRC lost the case.
In addition under current rules HMRC could not pass the penalty to his accountant, so that means the accountants PI cover remains intact.
Here are some tips on how to show you have taken reasonable care:
1. You must supply your adviser with all the information that is relevant, don’t hold back information
2. Check your tax return agrees with the information you supplied
3. Ask about entries you don’t understand and keep records of the answers, you don’t need to become an expert you just need to keep notes
There are cases where reasonable care hasn’t been a successful defence for example Mr Waseem Shakoor v HMRC  highlight by www.rossmartin.co.uk as they point out in the this case the taxpayer didn’t follow the the 3 steps above and it was commented at the Tribunal that this was:
“a case of shutting one’s eyes to what either was or ought reasonably to have been seen as incorrect advice – if, indeed, any such advice was actually given –a matter upon which we entertain significant doubt.”
Pay Day by Pay Day Tax Relief also know as Pay Day Relief Models have been used by Umbrella Companies and Employment Businesses but I have no doubt other business have used them too.
Basically the employer applies for Dispensations for Expenses and then without a valid employee claim reduces the employees pay to cut PAYE and NI costs.
There is a great example to be found on the Ross Martin website
HMRC issued a further statement in August
Its worth reading to makesure your procedures are HMRC Compliant
HMRC campaigns and task forces are on going and Compliance checks are becoming common.
So its worth knowing that you can appoint an extra advisor to help you answer the inspectors questions, its quick and easy to to arrange using this link
Its a temporary authorisation that does not cancel or amend permanent authorisations ie your normal advisers/accountants
HMRC have also issued new Fact Sheets for Compliance Checks and Penalties
Sometimes we all need a little help and specialist advice can be invaluable
This case involves a Project Manager who tried to limit his liability on a Construction Project
The Trustees of Ampleforth Abbey Trust v Turner & Townsend Project Management Ltd  EWHC 2137 (TCC)
In summary the dispute was between the Project Manager and the employer over the building of new boarding accomodation the quality of work was not disputed but there were delays.
The Employer claimed that if the Project Manager had acted with care and skill, it would have ensured the Contractor execute the building contract (rather than letters of intent) and that would have produced a more advantageous outcome in the dispute with the Contractor for delay, as the Contractor would have been liable for liquidated damages.
When submitting its fee proposal for this project, the Project Manager attached its standard terms and conditions, including a limitation of liability which had not formed part of the Project Manager’s appointment on two earlier projects at the college. A limitation on liability incorporated into the Project Manager’s retainer, on this third project was found to be unenforceable as it did not meet the requirement of “reasonableness” as set out in the Unfair Contract Terms Act (UCTA) 1977.
Had the limitation been enforceable, the Project Manager’s liability would have been limited to the amount of its fee, which totalled £111,321. The Employer was instead awarded damages of £226,667.
The case has been circulate and written up by Law Now
Well worth a read