HMRC have raised over £500m in unpaid tax and penalties! 1

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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

 

 

HMRC continue to target small businesses – are you ready for a visit? 1

I want you

According to recent reports HMRC has increased the number of small business investigations and they continue to be seen as soft targets.

About 7% of tax inspections are random, the majority are triggered because HMRC believes that something is wrong.

What can you do to reduce your chances of being selected:

1. File your tax returns on time and pay what you owe – If you file late or at the last minute HMRC will think you are disorganised and as such there are more likely to be errors in the return

2. Declare all your income – HMRC get details of bank interest and other sources of income, sometimes they test them and match them to returns

3. Use an accountant – Unrepresented taxpayers are more likely to be looked at, mainly because many of them don’t know what they are doing

4. Trends – if your business doesn’t match the profile of similar business in the same sector or your results suddenly fluctuate it could raise concerns at HMRC, for example, if you suddenly request a VAT refund

You might also consider tax investigation insurance, FSB include tax investigation insurance as a member benefit, they also have some great advice if you do get selected

steve@bicknells.net

Time to prepare for tax year end April 2016 1

Fotolia_91134201_XS Advice

Now you have filed your April 2015 Return (50% will have been filed in January 2016) you only have 2 months left to take action to save tax on your April 2016 tax return.

What should you be doing right now to save tax?

Contribute to your Pension

Transitional rules, for 2015/16 only, mean that there’s an annual allowance of £80,000, although only £40,000 of this can be used between 9 July 2015 and 5 April 2016. You may also have unused annual allowances from the three previous tax years.

These Transitional rules are to align PIP’s (Pension Input Periods) with the Tax Year.

Pensions have huge tax saving advantages

How a family pension scheme will save you tax

Optimise your 2015/16 Salary

You can’t carry forward any unused personal allowances so generally the optimum salary will be £10,600

What is the optimum tax efficient salary 2015-16?

Take Dividends now

When you take dividends has never been more critical due to changes in the Summer Budget 2015, so if you have distributable reserves you might want to take more dividends this tax year.

Dividend tax rates before April 2016

Tax band Effective dividend tax rate
Basic rate (20%) (and non-taxpayers) 0%
Higher rate (40%) 25%
Additional rate (45%) 30.56%

 

This will change from April 2016, see the table below

Dividend tax rates after April 2016

Tax band Effective dividend tax rate
Tax Free £5,000 0%
Basic Rate Tax Payers (20%) 7.5%
Higher Rate Tax Payers (40%) 32.5%
 Additional Rate Tax Payers (45%)  38.1%

 

Capital Gains Tax Allowance

Each year individuals get a capital gains tax allowance, this year its £11,100. If you have capital gains it could worth phasing them to use up the capital gains tax allowance.

Here are some great blogs on how you could transfer a personally owned property or sell shares in a property company to take gains in stages

https://stevejbicknell.com/2014/08/13/how-do-you-give-away-property-in-stages/

https://stevejbicknell.com/2015/08/24/5-reasons-why-you-need-a-property-investment-company/

Other Ideas

steve@bicknells.net

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Buy to Let interest relief tax saving ideas 3

To Let

Restriction of Mortgage Interest Tax Relief

The governments’ plan is to restrict individuals on claiming mortgage interest as a cost against their property investment income, for individuals it will work as follows

2017/18 75% of the interest can be claimed in full and 25% will get relief at 20%

2018/19 50% of the interest can be claimed in full and 50% will get relief at 20%

2019/20 25% of the interest can be claimed in full and 75% will get relief at 20%

2020/21 100% will get only 20% relief

For a 20% tax payer that’s fine but for higher rate taxpayer its a disaster that will lead to them paying a lot more tax

These rules will not apply to Companies, Companies will continue to claim full relief.

What could a Property Investor do to reduce the impact of these changes?

Here are a few ideas….

  1. Pension Contributions – Pension Contributions currently receive tax relief at your rate of tax – 20% to 45% – so if you are a 40% tax payer you would need pay half the value of your 20% restricted interest into your pension to mitigate the extra tax
  2. Change of Use – would your Buy to Let be able to be converted to a Furnished Holiday Let? or anther type of commercial property on which the restriction won’t apply
  3. Increasing the Rent – Could you charge more to cover the extra tax?
  4. Spouse Income Tax Elections – If the property is jointly held HMRC assume a 50/50 split of the income but you can change that using Form 17 this might be useful if one of you is a basic rate taxpayer and the other a higher rate taxpayer
  5. Tax Deductible Expenses – Many landlords overlook expenses at the moment but they could become a lot more important, for example, use of your home, motor expenses, computers, travel and subsistence, phone costs etc

What do you plan to do when the changes take effect?

steve@bicknells.net

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Are you ready for the changes to employee expenses? 1

Pay for woman.

From April 2016 all employee expense Dispensations agreed with HMRC will cease to apply!

You will need new systems for checking expenses, HMRC will be supply examples.

Expenses which are not covered by benchmark scale rates are likely to paid and taxed via the payroll with the employee claiming relief through P87 and Self Assessment SA100.

Expenses

Are you ready for the new regime?

steve@bicknells.net

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10 most common online self assessment issues Reply

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The deadline of the 31st January 2016 is fast approaching for filing 2014/15 Self Assessments online, thousands will probably file late and 50% will leave filing until January.

Here are 10 of the most common problems, issues and errors that come up.

  1. Not leaving enough time to register for Self Assessment – It can take 20 working days (this is usually 4 weeks) to complete the registration process, then for online returns, allow 10 working days (21 if you’re abroad) to register because HM Revenue and Customs (HMRC) posts you an activation code.
  2. Lost Login details – Your account will be locked for 2 hours if you enter the wrong user ID or password 3 times.If you’ve lost both your user ID and password:
  3. Leaving it too late to get help – If you need help from an accountant don’t leave it too late as they will need to carryout AML and other checks before they can file your return, they will also need your UTR
  4. Failing to complete all the parts of the return – For example leaving out PAYE information
  5. Failing to press ‘submit’ – you would be surprised how many people complete the return and then stop without submitting or leave submission and then forget to do it
  6. Missing out details of your Pension Provider
  7. Failing to check the calculation – Most people do a rough calculation of what they owe but fail to check the HMRC calculation only to find out they have made a mistake
  8. Using invalid characters such as # ‘ ” in boxes where these are not allowed
  9. Not paying the tax they owe by 31st January
  10. Failing to explain where estimates and provisional sums have been used

 

steve@bicknells.net

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5 million paid the wrong tax last year – is your tax code right? Reply

Tax Refund Green Blue Horizontal

As reported last year by the Telegraph

Five million people may have been billed incorrectly by HMRC.

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

Among those most likely to be affected are veterans who have taken a civilian job after leaving the Armed Forces, but who also draw a military pension. Pensioners with two pensions and those who have continued to work part-time after retirement are also more likely to be hit.

Taxpayers, who must complete their self-assessment tax returns before Jan 31, are being warned to check their paperwork again to make sure they are not affected.

Problems arise because various tax offices around Britain are failing to share information about taxpayers’ incomes on a central database.

People with more than one income, whether from pensions, PAYE employment or a mixture of the two, are being allocated their personal tax-free allowance multiple times. It means the tax codes issued for their various income sources are incorrect, so not enough tax is taken. Often the mistakes are discovered by HMRC years later, leading to unexpected tax demands. Telegraph

If you think your Tax Code is wrong you should tell HMRC as soon as possible using online form P2

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

You can check how your tax using this HMRC link

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

The most common tax code for tax year 2015 to 2016 is 1060L (£10,600 being the annual income tax free allowance for 2015/16) – in 2014 to 2015 it was 1000L. It’s used for most people born after 5 April 1938 with one job and no untaxed income, unpaid tax or taxable benefits (eg company car).

steve@bicknells.net

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10 ways to pay less VAT 1

3D Vat button block cube text

Here are my top 10 ways to pay less VAT

1 Choose the best VAT Scheme for your business

Standard VAT Scheme – on this scheme the VAT is based on tax points from invoices

Flat Rate Scheme – try our calculator

Flat Rate Calculator 2

VAT Cash Accounting Scheme – if your turnover is below £1.35m you can account for VAT on a Cash basis, this is particularly helpful if your customers pay you on slower terms than you pay your suppliers

Annual Accounting Scheme for VAT – if your turnover is below £1.35m you could join the Annual Scheme and complete one return for the year but you make either 9 interim payments or 3 quarterly interim payments

Retail VAT Schemes – These are specific schemes aimed at mainly at shops and help to overcome the issues of mixed vat rate goods

VAT Margin Scheme – The margin scheme relates to second hand goods and accounts for VAT on the margin, for example on the sale of cars

2 Claim Pre-registration VAT

When you register for VAT, there’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have
  • 6 months for services

Be careful not to over claim – see this blog for details https://stevejbicknell.com/2015/06/24/preregistration-vat-confusion/

3 Property Investors might benefit from a Development Company

Property Development is a trade, where as Property Investment isn’t – renting out a residential property is a VAT exempt supply.

If you are planning significant building work, setting up a Development Company or using a building contractor might save VAT.

Assuming you employ a builder…

The VAT Rules are in VAT Notice 708 Buildings & Construction

Your builder may be able to charge you VAT at the reduced rate of 5 per cent if you are converting premises into:

  • a ‘single household dwelling’
  • a different number of ‘single household dwellings’
  • a ‘multiple occupancy dwelling’, such as bed-sits, or
  • premises intended for use solely for a ‘relevant residential purpose’

As your builder will be VAT registered, they reclaim the VAT they are charged and then charge you VAT at 5%.

If your business is property rental and you do the work yourself, you can’t take advantage of the 5% rate.

If your Development Company is VAT registered you can reclaim all the VAT.

4 Do you need to charge VAT on Intercompany Charges

There are situations where one company is VAT registered and other related companies are either partially exempt or not registered for VAT, so in these circumstances not charging VAT is an advantage.

The following are not Taxable supplies for VAT:

Common Directors – Notice 700/34 (May 2012)

Joint Employment – Notice 700/34 (May 2012)

Paying a Bill on behalf of an associated business

Insurance

5 Use VAT Groups for Business Acquisition Costs

Basically HMRC disallow Input VAT relating to Investments.

The most well known example of this was when BAA purchased Airport Development Investments Limited in June 2006, the decision was upheld by the Court of Appeal in February 2013.

The BAA VAT group sought to recover the VAT (£6.7m) incurred on the acquisition costs but recovery was refused by HMRC on the basis that they considered ADIL had not made onward taxable supplies, had not demonstrated any intention to make taxable supplies and was not a member of the VAT group at the time costs were incurred.

BAA used an SPV (Ferrovial) to purchase ADIL but did not bring the SPV into the BAA VAT Group until September 2006, 3 months after the acquisition.

The lessons to learn from this are:

  1. Once you have successfully made the acquisition join a VAT Group immediately and make it clear in correspondence that the SPV intends to join the VAT Group at the earliest opportunity
  2. Consider not using an SPV
  3. Buy the Assets instead of the Shares
  4. Show that the SPV will make taxable management charges
  5. Consider the scope of the advisors work, HMRC may disallow advice focussed on passively holding shares

6 How Hotels save VAT

Here are some VAT examples for Hotels – HMRC Reference:Notice 709/3 (October 2011) :

The Long Stay Rule

If a guest stays in your establishment for a continuous period of more than 28 days, then from the 29th day of the stay you should charge VAT only on that part of the payment that is not for accommodation.

VAT Exempt Meeting Rooms and Refreshments

Hiring a room for a meeting, or letting of shops and display cases are generally exempt, but you may choose to standard-rate them by opting to tax, see Notice 742A Opting to tax land and buildings.

VAT on Deposits

Most deposits serve as advanced payments, and you must account for VAT in the return period in which you receive the payment. If you have to refund a deposit, you can reclaim any VAT you have accounted for in your next return.

Normally, if you make a cancellation charge to a guest who cancels a booking, VAT is not due, because it is compensation.

7 VAT on Pool Cars

When you buy a car you generally can’t reclaim the VAT. There are some exceptions – for example, when the car is used mainly as one of the following:

  • a taxi
  • for driving instruction
  • for self-drive hire

If you lease a car for business purposes you’ll normally be able to reclaim 50 per cent of the VAT you pay. But you can reclaim 100 per cent of the VAT if the car is used exclusively for a business purpose.

8 Use a Tronc for Tips

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

9 Get your TOGC right – Transfer of a Going Concern

Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate. A transfer of a business as a going concern for VAT purposes (TOGC) however is the sale of a business including assets which must be treated as a matter of law, as ‘neither a supply of goods nor a supply of services’ by virtue of meeting certain conditions. Where the sale meets the conditions then the supply is outside the scope of VAT and therefore VAT is not chargeable.

It is important to be aware that the TOGC rules are mandatory and not optional. So it is important to establish from the outset whether the sale is or is not a TOGC.

The main conditions are:

  • the assets must be sold as part of the transfer of a ‘business’ as a ‘going concern’
  • the assets are to be used by the purchaser with the intention of carrying on the same kind of ‘business’ as the seller (but not necessarily identical)
  • where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer
  • in respect of land which would be standard rated if it were supplied, the purchaser must notify HMRC that he has opted to tax the land by the relevant date, and must notify the seller that their option has not been disapplied by the same date
  • where only part of the ‘business’ is sold it must be capable of operating separately
  • there must not be a series of immediately consecutive transfers of ‘business’

The TOGC rules are compulsory. You cannot choose to ‘opt out’. So, it is very important that you establish from the outset whether the business is being sold as a TOGC. Incorrect treatment could result in corrective action by HMRC which may attract a penalty and or interest.

10 Choose the best time to register for VAT

You may decide to voluntarily register to reclaim VAT you have paid out to set up you business or you might decide to wait till you have to register to gain a competitive advantage.

You must register for VAT if:

  • your VAT taxable turnover is more than £82,000 (the ‘threshold’) in a 12 month period
  • you receive goods in the UK from the EU worth more than £82,000
  • you expect to go over the threshold in a single 30 day period

steve@bicknells.net

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10 ways to pay less Property Tax (Investors) 3

Mosaïque de logements

Here are my top 10 ways that property investors can save tax

1 Property Investment Companies

  • Restriction of Mortgage Interest Tax Relief – this doesn’t apply to companies
  • Corporation Tax Rates – falling to 18% by 2020
  • Capital Gains Tax – Capital Gains Tax indexation
  • Stamp Duty – lower on share sales
  • Inheritance Tax (IHT) and Potentially Exempt Transfers planning – better with shares

Further details in our blog https://stevejbicknell.com/2015/08/24/5-reasons-why-you-need-a-property-investment-company/

2 Commercial Property should be in a Pension Scheme

Self Invested Personal Pension (SIPP) Schemes and Small Self Administered Schemes (SSAS) can invest in commercial property, no tax on the rental income, no capital gains, you only pay tax when you draw your pension.

You also get tax relief on money paid into your Pension.

3 Claim tax deductible expenses

Claim allowable expenses

  • Mortgage or Loan Interest (but not capital)
  • Repairs and maintenance (but not improvements)
  • Decorating
  • Gardening
  • Cleaning
  • Travel costs to and from your properties for lettings or meetings
  • Advertising costs
  • Agents fees
  • Buildings and contents insurance
  • Ground Rent
  • Accountants Fees
  • Rent insurance (if you claim the income will need to be declared)
  • Legal fees relating to eviction

If the property is furnished claim for Wear & Tear, you can claim 10% of the rent each year

Claim for repair and advertising expenses incurred in getting the property ready for renting

4 Use a Property Development Company to Save VAT

Property Development is a trade, where as Property Investment isn’t – renting out a residential property is a VAT exempt supply.

If you are planning significant building work, setting up a Development Company or using a building contractor might save VAT.

Assuming you employ a builder…

The VAT Rules are in VAT Notice 708 Buildings & Construction

Your builder may be able to charge you VAT at the reduced rate of 5 per cent if you are converting premises into:

  • a ‘single household dwelling’
  • a different number of ‘single household dwellings’
  • a ‘multiple occupancy dwelling’, such as bed-sits, or
  • premises intended for use solely for a ‘relevant residential purpose’

As your builder will be VAT registered, they reclaim the VAT they are charged and then charge you VAT at 5%.

If your business is property rental and you do the work yourself, you can’t take advantage of the 5% rate.

If your Development Company is VAT registered you can reclaim all the VAT.

Get your existing business or your property development company to convert the property and then sell it to another company that you own (may be an SPV)  will be a  VAT Zero Rated transaction. The other company then carries on the rental business.

5 Principle Private Residence Relief and Lettings Relief

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.

You may also qualify for lettings relief after you have moved out.

6 Give away your Property in Stages

As long as the home you give away is your main home, Capital Gains Tax won’t be payable.

However, if you give away a second home, Capital Gains Tax may be payable if the property has increased in value between when you first owned it and when you gave it away.

If you sell your second home and give the money to your children, the gift won’t be included in your estate for Inheritance Tax purposes, provided you live for 7 years after you make the gift.

It is possible to to gift property in stages.

Your solicitor will draw up the required documents to conveyance a percentage of the property and register the transactions with the Land Registry.

In order to calculate the capital gain you will need to know the acquisition cost and any reliefs such as PPR.

Giving away your property in stages could save you from having to pay capital gains tax.

7 Claim Capital Allowances and Claim Tax Relief on Integral Features

FA2008 introduced a new classification of integral features of a building or structure, expenditure on the provision or replacement of which qualifies for WDAs at the 10% special rate. The new classification applies to qualifying expenditure incurred on or after 1 April 2008 (CT) or 6 April 2008 (IT).

http://www.hmrc.gov.uk/manuals/camanual/CA22300.htm

The rules on integral features apply where a person carrying on a qualifying activity incurs expenditure on the provision or replacement of an integral feature for the purposes of that qualifying activity. Each of the following is an integral feature of a building or structure –

  1. an electrical system (including a lighting system),
  2. a cold water system,
  3. a space or water heating system, a powered system of ventilation, air cooling or air purification, and any floor or ceiling comprised in such a system,
  4. a lift, an escalator or a moving walkway,
  5. external solar shading

Only assets that are on the list are integral features for PMA purposes; if an asset is not one of those included in the list, the integral features rules are not in point.

However, Plant and Machinery includes….

other building fixtures, such as shop fittings, kitchen and bathroom fittings

Many businesses have never claimed capital allowances for these items.

8 Consider Joint Ownership

If you own property personally you could double up your tax free Capital Gains Tax Allowance if you switch to owning property jointly with your spouse.

9 Check if you qualify for relief from ATED

Most residential properties (dwellings) are owned directly by individuals. But in some cases a dwelling may be owned by a company, a partnership with a corporate member or other collective investment vehicle. In these circumstances the dwelling is said to be ‘enveloped’ because the ownership sits within a corporate ‘wrapper’ or ‘envelope’.

ATED is a tax payable by companies on high value residential property (a dwelling).

There are reliefs that might lead to you not having to pay any ATED. You can only claim these by completing and sending an ATED return.

A dwelling might get relief from ATED if it is:

  • let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • open to the public for at least 28 days per annum, if part of a property is occupied as a dwelling in connection with running the property as a commercial business open to the public, the whole property is treated as one dwelling and any relief will apply to the whole property
  • part of a property trading business and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • part of a property developers trade where the dwelling is acquired as part of a property development business the property was purchased with the intention to re-develop and sell it on and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner
  • for the use of employees of the company, for the company’s commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 10%, the employee’s duties must not include services for any present or future occupation of the property by someone connected with the company, the relief is also available where a partner in a partnership does not have an interest of more than 10% in the partnership
  • a farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland, a former long-serving farm worker or their surviving spouse or civil partner
  • a dwelling acquired by a financial institution in the course of lending
  • owned by a provider of social housing

10 Take dividends this tax year

When you take dividends has never been more critical due to changes in the Summer Budget 2015, so if you have distributable reserves you might want to take more dividends this tax year, try our Dividend Calculator  to see how much difference it could make.

Dividend tax rates before April 2016

Tax band Effective dividend tax rate
Basic rate (20%) (and non-taxpayers) 0%
Higher rate (40%) 25%
Additional rate (45%) 30.56%

 

This will change from April 2016, see the table below

Dividend tax rates after April 2016

Tax band Effective dividend tax rate
Tax Free £5,000 0%
Basic Rate Tax Payers (20%) 7.5%
Higher Rate Tax Payers (40%) 32.5%
 Additional Rate Tax Payers (45%)  38.1%

 

The new rules are easier to follow, the 10% tax credit in the current rules is hard for most people to follow.

There is a Dividend Allowance factsheet which helps to explain how dividend tax will be calculated.

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.

So far we don’t know how much more!

steve@bicknells.net

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Beware of letting your accounts become a shambles Reply

Unhappy office worker on the phone, isolated on white

It’s not uncommon for Directors and Senior Employees to get behind with their expense claims and paperwork, they are busy people trying to build their businesses and sometimes the paperwork gets put to one side.

But lets consider the recent HMRC case against the Directors of RSL (NorthEast) Ltd. Mr White was Director of RSL and he had a company credit card which he used for business and personal expenses, he travelled extensively on company business. Unfortunately RSL became insolvent, so HMRC assessed Mr White on credit card expenses as a benefit in kind.

Mr White appealed on the basis that he had lent the company large amounts of his own money and any credit card expenses were just a reimbursement.

HMRC argued…

  • Section 203(2) ITEPA does not grant any right to retrospectively make good a benefit. Income tax is an annual tax, and the value of the benefit depends upon what is made good in that tax year.”
  • “Any “rewriting” [to reflect the money reimbursed to RSL] would have a retrospective effect on the Company accounts.” HMRC implied that this would not be allowed.

HMRC won the case, but mainly because the accounts were in a terrible shambles!

What can we learn from this?

  1. Keep good records, don’t put off doing your accounts!
  2. If you do get behind you do a have a ‘reasonable time to make good’ as noted in HMRC’s manuals http://www.hmrc.gov.uk/manuals/eimanual/EIM21121.htm

steve@bicknells.net

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