MARCH 2017 OVERVIEW
This time last year Philip Hammond was the Foreign Secretary: then came Brexit, Theresa May as Prime Minister, George Osborne’s opportunity to spend more time with his family – or on the after-dinner speaking circuit – and Mr Hammond’s move into 11 Downing Street.
He delivered his first Autumn Statement in November of last year – and promptly announced that it would be his last Autumn Statement. “No other major economy makes hundreds of tax changes twice a year and neither should we,” he said, declaring that in future he would deliver his main Budget in the autumn. This means that 2017 will see two Budgets before the traditional Spring Budget gives way to a Spring Statement from 2018.
So here we are at the last Spring Budget – at least until we get a new Chancellor. But with Philip Hammond looking certain to remain Chancellor at least until the next General Election in 2020 (let’s discount the rumoured possibility of a snap General Election for now) we should probably get used to the idea of the Autumn Budget.
The Economic and Political Background
Theresa May has committed herself to triggering Article 50 – and beginning the formal process of Britain’s withdrawal from the EU – by March 31st. That is 23 days from Budget day and, despite minor setbacks for the Government in the House of Lords, the Prime Minister appears to still be on course for that deadline. She certainly has enough parliamentary support, with the recent vote on Brexit in the Commons going overwhelmingly in her favour.
However, it was not just UK politics that the Chancellor would have been concerned with as he was penning his speech. There’s a new man in the White House, promising radically different economic policies, and this year will see potentially pivotal elections in Holland, France and Germany. With another Budget due later in the year, there could have been some temptation for the Chancellor to delay major decisions: by the autumn he will know the result of the European elections, he’ll know how Donald Trump’s policies have started to play out and – most importantly – he’ll know how the early Brexit negotiations have progressed.
Economically, the news for the UK economy has largely been good since the Autumn Statement, with positive growth recorded in both the manufacturing and service sectors. This was reflected in the Bank of England’s last Quarterly Bulletin, when the Bank forecast growth of 2% for this year. This was an increase on the 1.4% growth predicted in November, and just 0.8% in the immediate aftermath of Brexit. “There have been relatively few signs of the slowdown the committee expected,” the Bank admitted.
There are always plenty of predictions and rumours ahead of the Budget and this year has been no exception. Speaking on the The Andrew Marr Show, the Chancellor trailed his plans for investment in technical training – in a bid to address the UK’s productivity gap which was such a recurring theme of his predecessor’s Budgets. There will also be moves to address the social care problems in the UK, and to ease the concerns of shops, pubs and restaurants about forthcoming increases in business rates.
Sadly, tax rises were also rumoured, with many papers saying the Chancellor wanted to build a ‘Brexit War Chest.’ The Telegraph suggested that the Chancellor would reject extra borrowing in favour of tax rises, with the national insurance contributions for the self-employed and duties on alcohol apparently in his sights…
Following the usual pleasantries of Prime Minister’s Questions, the Chancellor rose to speak at 12:37pm, armed only with his notes and a glass of water. The days of Chancellors steadily sipping brandy throughout their speeches seem long gone…
Given the Bank of England’s recent Quarterly Report, his opening remarks couldn’t be anything but positive. The UK economy was, he said, “continuing to confound the doubters, with robust growth.” The deficit was coming down and the economy “provided a strong and stable platform for [the] Brexit negotiations.” We were, he said, “building the foundations of a stronger, fairer, more global Britain.”
The Economy and the Numbers
With a nice touch of self-deprecating humour, ‘Spreadsheet Phil’ apologised to the Commons and said he needed to start “with the spreadsheet bit.”
In 2016, the UK had the 2nd fastest growing economy in the G7 (behind Germany) and – in line with the Bank of England’s forecast – the Office for Budget Responsibility had upgraded this year’s growth forecast from 1.4% to 2%. However, growth was then downgraded to 1.6%, 1.7% and 1.9% in subsequent years, before returning to 2% in the financial year 2021/22.
Inflation was forecast to be 2.4% in 2017/18, falling to 2.3% in 2018/19 and then 2% (the Bank of England’s target rate) in subsequent years.
Turning to public borrowing, he forecast that annual borrowing in 2016/17 would be £51.7bn, some £16.4bn lower than had been originally anticipated. Borrowing was then forecast to total £58.3bn in 2017/18 followed by £40.8bn the following year, then £21.4bn and £20.6bn in 2020/21. This would see public sector net borrowing fall from 3.8% of GDP in 2015/16 to 2.6% this year, then 2.9%, 1.9%, 1% and 0.9% in subsequent years, reaching 0.7% in 2021/22.
The Chancellor made the point that employment growth had been spread around the UK and that – despite the rise in inflation – “real wages continued to rise.”
Despite this good news though, the total UK debt remained at almost £1.7tn – which meant that the country was spending £50bn a year on interest: “more than we spend on defence and policing combined.” Therefore – as had been widely trailed before the Budget – he wouldn’t be borrowing for any additional spending; he would instead be relying on tax rises and tackling abuses and evasion.
Personal Taxation and Allowances
One of the key themes running through Philip Hammond’s speech was ‘fairness.’ In the Autumn Statement, he’d tackled what he dubbed ‘middle class tax perks’ and now he turned his attention to the self-employed and those trading through limited companies. It was only right, he said, that those doing the same work for the same pay, “should pay roughly the same tax. A strong society,” he added, “needs a fair tax system.” He therefore introduced two specific measures:
|What||A reduction in the tax-free dividend allowance for shareholders and directors of small private firms from £5,000 to £2,000
|From April 2018|
|Comment||As above, this is a move designed to provide ‘fairness’ and reduces a tax perk that had been enjoyed by those trading through limited companies and by private investors. The Chancellor said that HMRC estimated the cost of people working through companies at £6bn a year: “It’s not fair and it’s not affordable,” said the Chancellor. The move is expected to raise £2.63bn by 2021/22.
|What||The main rate of Class 4 National Insurance contributions for the self-employed will increase from the current rate of 9% to 10% in April 2018 and to 11% in April 2019
|When||From April 2018|
|Comment||Some experts had been forecasting that this rate could jump from 9% to 12%, so the self-employed may be feeling relatively relieved. It is another move designed to ensure fairness in the tax system: the Chancellor said that, along with the abolition of Class 2 contributions, it would raise £145m by 2021/22 at an average cost to those affected of 60p a week. The Class 4 rate is levied on profits above £8,060 per year, up to profits of £43,000. Profits over £43,000 are taxed at 2%.
Previously announced in 2016, Class 2 National Insurance, a separate, flat-rate contribution paid by self-employed workers making a profit of more than £5,965 a year, is to be scrapped from April 2018.
The Chancellor also announced – it’s almost mandatory in a Budget speech – further action on tax avoidance and evasion which would, he said, raise an additional £820m of tax receipts. This will include action to stop businesses converting capital losses into trading losses and the introduction of UK VAT on roaming telecoms services outside the EU.
Beyond those measures, the Chancellor simply confirmed plans both longstanding and previously announced.
|What||An increase in the tax free personal allowance to £11,500 and the higher rate threshold to £45,000|
|Comment||This had previously been covered in the Autumn Statement but the Chancellor again confirmed the measure was due. He also reaffirmed the now long-standing commitment to raise the personal allowance to £12,500 by the end of the parliament in 2020 and to take the starting point for higher rate tax to £50,000 in the same period.|
Pensions, Savings and Investments
|What||The introduction of a 25% tax charge on Qualifying Recognised Overseas Pension Schemes (QROPS)
|When||For transfers requested on or after March 9th 2017
|Comment||Transferring a UK pension to a QROPS (done by someone retiring abroad) means that the person retiring can transfer their pension to the relevant country’s tax regime and – in many cases – then benefit from more favourable tax treatment on their tax free cash and/or income. The Government will now introduce a 25% charge on transfers to these arrangements, although there will be ‘exceptions where people have a genuine need to transfer their pension.’ The ‘genuine need’ will need further clarification and examination. Explaining to HMRC why you have a ‘genuine need’ to live in the Seychelles could be a tough one…
|What||New NS&I savings bond
|Comment||In the Autumn Statement, the Chancellor announced the introduction of a new, “market leading” savings bond, to be sold through NS&I. He confirmed that this bond will be introduced in April 2017 and will pay a rate of 2.2% over a term of 3 years with a maximum investment limit of £3,000.|
|What||Increase in the ISA limit
|Comment||As already announced, the ISA limit will again increase, this time to £20,000 from April 2017.|
Business and Business Taxation
The Chancellor stressed that he wanted the UK to “be the best place in the world to start and to build a business.” As expected, there were two specific areas that he identified as needing help, starting with a formal discussion paper on the future of the North Sea oil and gas industry.
There would also be consultations on how best to tackle the digital part of the economy – something felt very keenly by high street retailers who now find themselves competing with online retailers working from out-of-town warehouses. These premises have a fraction of the overheads of the high street, especially with regard to business rates. However, the Chancellor said that business rates raise £25bn a year and simply could not be abolished. Instead, he announced measures for making the impact of previously announced changes to business rates less painful for some.
|What||Mitigating the impact of business rates changes for some businesses|
|Comment||The business rates changes are here to stay but the Chancellor announced three measures in an attempt to help businesses to cope with any increases:
● A cap for companies coming out of business rate relief
● A £1,000 discount for pubs up to a rateable value of £100,000 – which would apply to 90% of the pubs in the country
● A £300m discretionary fund will be made available to local authorities, enabling them to help businesses impacted by the changes
The cap means that business rate costs cannot rise by more than £50 a month when a business comes out of rate relief. Taken together, the announcements amounted to a total of £435m in rate relief, said the Chancellor, and – having protected the nation’s pubs – he paused and took a sip of his water.
|What||The introduction of digital administration for tax reporting will be delayed for a year for firms below the VAT threshold
|When||Delayed until April 2019
|Comment||The Chancellor recognised the burden that the move to new digital, quarterly tax reports may put on small firms and thus delayed the introduction for some firms. The move, the Chancellor said, would cost the Revenue £280m in the relevant year.|
On International Women’s Day, the Chancellor announced three specific measures he introduced as targeted at women (although one equally applies to both women and men and technically the Prime Minister had stolen his thunder earlier in the day…).
|What||£20m for victims of domestic abuse and violence
|When||Over the current Parliament
|Comment||The Prime Minister revealed this move on Mumsnet, saying, “Tackling domestic violence and abuse is a key priority for this Government.” It is a measure that it’s impossible to disagree with and the Chancellor said that this took spending on domestic abuse and violence to over £100m over the Parliament.
|What||£5m for the return to work scheme|
|Comment||This money is intended to help women - and men – return to work after lengthy career breaks. It’s a move that is intended to address the so called ‘motherhood penalty’.
Finally, the Chancellor recognised that next year would be the 100th anniversary of the 1918 Representation of the People Act, which gave the vote to about 8.4m women. He promised a further £5m to mark the occasion.
Alcohol, Tobacco, Gambling and Fuel
Again, there were very few changes from the Chancellor: with the rumours of tax rises, many people must have been worrying about the cost of their Friday night pint or bottle of wine…
There will be a new minimum excise duty on cigarettes, based on a packet price of £7.35 – this will mean a packet of cigarettes costing 35p more. Other than that, there were no further increases in duty on alcohol or tobacco other than those already announced, meaning that duty on beer, wine, cider and spirits will increase in line with inflation.
Vehicle excise duty rates for hauliers and the HGV Road User Levy remain frozen for another year.
The Country’s Infrastructure
The Autumn Statement had been heavy on infrastructure projects – and in its Quarterly Report, the Bank of England praised the impact of that investment – but in this Budget much less stress was placed on infrastructure. The Chancellor did allocate £90m to alleviate “transport pinch points” in the North of England and £23m to the Midlands for the same purpose. He also announced a £690m competition fund for English councils to tackle urban congestion and £270m for new technologies such as robots and driverless vehicles.
There was also £350m to the Scottish government, £200m for the Welsh Assembly and £120m for the new Northern Ireland executive – and, of course, the obligatory rallying cry of “stronger together.”
Finally – and again as had been anticipated – the Chancellor acknowledged the problems of the NHS and the looming crisis in social care, caused by the constantly increasing number of people over the age of 75. He committed £1bn in 2017/18 to social care and a total of £2bn over the next three years: many had hoped and expected that the figure would be higher.
He promised a green paper on the problems of funding social care – although he indicated that it would not include a ‘death tax’ – and pledged £100m to GP triage services within A&E departments in time for next winter.
Education and Training
In many ways, the meat of the Chancellor’s speech came with his plans to reform education and training, specifically with a view to overcoming the productivity gap, as he conceded that the UK was 35% less productive than Germany and 18% behind the productivity of the average of the G7 countries.
There would be an extra £300m for PhD students, specifically in STEM (Science, Technology, Engineering and Maths) subjects.
As had been widely trailed, the Chancellor then turned his attention to technical skills, where he announced several specific measures:
- An investment of £500m in technical education for 16-19 year olds, and the introduction of ‘T-levels,’ the technical equivalent of A-levels.
- Free transport (based on the free school meals qualification) as many pupils will travel much longer distances than average to attend specialist schools and colleges.
- With universities and private schools being encouraged to sponsor free schools, the Chancellor said that these moves would lead to the creation of 110 new free schools, on top of the 500 already pledged by 2020.
- To slightly ironic cheers from the Opposition, given the recent review of education funding, the Chancellor announced a further £216m investment in school estates over the next three years.
- Finally, he also announced the extension of maintenance loans to all students studying to doctoral levels and pilot schemes to test approaches to lifelong learning, recognising that many of today’s students will change career paths many times in their life.
Listening to a Budget speech from beginning to end is never easy going, but Philip Hammond was in a buoyant mood – and his jokes are certainly better than his predecessor’s. Hopefully, his speechwriter is paid a bonus for the ‘driverless vehicle’ reference to the Opposition which drew the loudest laughs from the Conservative benches.
The speech itself – as many suspected – was about a plan for the future as much as it was about specific measures. We can expect a lot more heavy detail when he delivers his second Budget of the year in the autumn. For now, the Chancellor declared that the Government would, “continue with its plan to make Britain the best place in the world to do business.” He was determined to, “look forwards not backwards and invest in the UK’s future.” With that, he commended his Budget to the House and to the nation, “confident in our strength and clear in our determination.”
The UK’s unemployment rate is at 4.8% and 2016 was a recording breaking year for unemployment as it was down by over 100,000 people. Last year also produced more ground breaking facts and figures including:
- Having kept 31.8 million people in work, up by 2.7 million since 2010
- Almost 15 million women in work, which is a record high
- Long-term unemployment is at the lowest it has been since 2008, fallen to 418,000
- Youth unemployment fell 350,000 since 2010 to 587,000
- 41% of the 420,000 people now receiving Universal Credit are now in work
Secretary of State for Work and Pensions, Damian Green has announced that the past year will be one to be remember as there were so many records made. He said there is an all-time high of employment with more women, older workers and ethnic minority groups in work than ever before. However, even though the labour market is on the up, there is still more to do according to Rachel Smith, CBI Principal Labour Market Adviser. She has advised that even though the unemployment levels have seen a slight drop, employment levels have remained more or less the same. Therefore there is a mixed picture of the labour market, as well as the rise of inflation which is hitting workers’ pay packets harder.
Since the 1st April 2016 HMRC introduced higher rates of Stamp Duty Land Tax (SDLT) for purchases of additional residential properties. They have recently announced an online service where property owners can apply for a repayment of higher rates of SDLT for any other properties owned, only if the property sold was previously a main home.
The reason for the changes
The higher rates were introduced mainly to target purchases of buy to let properties or second homes. However, there are some anomalies to this rule and some will have to pay the additional charge even though the property purchased will not be a buy to let or a second home. The higher rates are three percentage points above the normal rates. The rules for the higher rates include:
- If you already own or partly own a property and transact to purchase another property without disposal of the first
- If at the end of a purchase transaction you own two or more residential properties
There is also a 36 month rule including the following details:
- If a new main residence is purchased before disposing of a previous main residence, the higher rate will be payable. But you will have 36 months to dispose of the previous main residence and claim a refund
- Purchasers will have 36 months between selling a main residence and replacing it with another before having to pay the higher rates
- If you have inherited a small share in a property within the 36 months prior to a transaction will not result in higher rates as it is not considered an additional property
The new online system will include a refund process which will help those who were affected by the higher rate tax, only if the SDLT paid was on a property was a previous main home.
If you have any further questions regarding your Stamp Duty Land Tax, contact us on 0161 456 9666 or email@example.com.
For more information: GOV.UK SDLT repayment of Higher Rate
The Information Commissioner’s Office (ICO) recently revealed large fines for two national charities for breaching the Data Protection Act. They investigated the RSPCA and the British Heart Foundation. The investigation explains that the two charities were secretly screening millions of their donors so they could target them for more money. This practice breaches the Data Protection Act as the personal data wasn’t held in accordance with the legislation.
The charities were also known to trace and target new or lapsed donors by using personal information from other sources. Furthermore, they traded personal data with other charities in order to create a pool of donor data which was available for sale. This was clearly a breach of the legislation as the donors weren’t informed so could not give their consent or object.
Media reports about the pressures on donors to contribute sparked the ICO into investigating different charities. The Information Commissioner fined the RSPCA £25,000 and the British Heart Foundation £18,000.
The ICO can investigate and take action against any organisation or individual that collects and keeps personal data. All processing of data must comply with the eight regulations of the Data Protection Act, otherwise it could result in a penalty of up to £500,000.
The Data Protection Act specifies the eight principles in which to make sure personal data is:
- fairly and lawfully processed
- processed for limited purposes
- adequate, relevant and not excessive
- accurate and up to date
- not kept for longer than is necessary
- processed in line with an individual’s rights
- secure and
- not transferred to other countries without adequate protection
For more information: ICO news
HMRC have recently published details of a system designed to tackle the use of avoidance schemes. This measure will be used to target some self-employed people who avoid paying income tax and NIC’s on their income, as well as tackling the existing use of schemes involving loans with a new charge on outstanding loans taken out as part of avoidance arrangements.
There are many disguised remuneration avoidance schemes currently on the market but are commonly based on terms that are unlikely to produce a return. The Budget 2016 announced that legislation would be put in place in the Finance Bill 2017 to tackle the perceived tax avoidance by the self-employed.
The Finance Bill 2017 will introduce legislation surrounding charges applied to any balance disguised remuneration loans made after 5th April 1999, used by the self-employed as part of the avoidance arrangement. It will also include measures designed to counter arrangements that are intended to secure a deduction from income, where the deduction is used to provide a benefit or loan to the individual or anyone connected to them. Broadly speaking, the legislation will set out the principals in how the repayments of outstanding loan amounts will be paid.
When the Finance Bill is announced, your Stockport accountants, IN-Accountancy will keep you up to date with new and changes to legislation.
HMRC may have to take action to include corporation tax into their tax avoidance crackdown, as £1.8bn is owed in late corporation tax payments from businesses across the UK. The tax avoidance campaign, which has been running for several years now, has netted £400 million in tax receipts from 2016 alone.
The amount owed in corporation tax over the years has increased from £1.52bn in 2014 to a high of £1.8bn in 2016. Research suggests this is because SME’s are increasingly facing difficulties with cash flow strains. The number of companies leaning on government finance platforms for funding help in order to pay their overdue tax bills is rising. This is because HMRC have the right, in severe cases, to seize assets if companies run the risk of late payments.
If you are an SME you needn’t worry as Stockport accountants, IN-Accountancy suggest there are now alternative finance options such as invoice finance, peer-to-peer lending and crowdfunding which could work for your company rather than dipping into cash reserves or taking out business loans. If you have any questions regarding any corporation tax issues or another other tax matters please contact your us on 0161 456 9666 or firstname.lastname@example.org
Following on from an earlier guide to business expenses, it’s worth knowing some more about claiming expenses and the importance of how you record them.
As Contractor Accountants in Manchester, we are often asked about business expenses we are often asked about the use of rented offices, company cars and even if contractors can pay their partner as a business.
What costs cannot be claimed as an expense?
Any costs that are not exclusively for the use of your business cannot be claimed as business expenses. These include such costs as medical expenses, client entertainment, gym membership and childcare.
How do I claim business expenses?
If you are a limited company contractor, then claiming expenses is straight-forward. If you pay for the expense yourself, then you need to complete a bank transfer from your business account to your personal account to cover the cost. If you take the expense straight out of your business bank account, then you need to make a note of it so that you can accurately assess your profit at the end of the financial year.
How should I record my expenses?
We cannot emphasise enough the importance for contractors to keep clear and detailed business records. Whether you pay for an expense yourself or through your company bank account, then you must keep some proof of purchase. HMRC demand that you keep expense receipts and invoices for a minimum of 6 years in case they decide to investigate you. The receipt/invoice should show a detailed breakdown of the purchases and include a separate VAT calculation if included.
How do I make pension contributions?
You can make personal pension contributions or employer contributions through your limited company, and both ways of contributing can be advantageous to you from a tax perspective depending on your circumstances. The team at In Accountancy are not authorised to give you any advice on which pension to invest in, but we can help with informing you of the potential tax relief involved.
Can I pay my partner a salary?
Technically yes, you can pay your partner a salary, but in reality, this can be hard to justify to HMRC. For example, if your partner carries out general administration duties for you then HMRC would expect this to not take more than a couple of hours a month to be paid at an appropriate hourly rate.
Can I rent an office to work in?
If you wish to rent somewhere to work that isn’t part of your home then this can be done, but it is best to ensure that this is essential for the running of your business, that the agreement you sign is in the name of your limited company and that the rent is paid from your business account and not your personal one.
Can I buy a company car?
In general, company cars are not an economical option for owner-managed companies as the same person will end up paying both the employee and the employer taxes! Company cars are only tax efficient if you are an employee of a company that you do not own shares in or if the car is particularly environmentally friendly.
For more information on business expenses and our contractor accountant’s services, please call our experienced team on 0161 456 9666 or email us at email@example.com
You may not be aware that for every referral we receive, we donate £50 to Francis House Hospice when we are engaged to provide services. The hospice cares for children and young adults with a short life expectancy. They need over £3.6 million in charitable donations each year to continue to provide their services. All you need to do is pass the contact details of your friend, colleague or family member by ringing 0161 456 9666 or email firstname.lastname@example.org. There is no limit to the number of people you can refer to us. We will donate for each new introduction upon our appointment.
We also have a handy Tax App that is free to download for both Android and iPhones at http://www.in-accountancy.co.uk/taxapp-page/
Businesses with an annual payroll cost of less than £3 million, will not have to pay the New Apprenticeship Levy which will be introduced in April 2017.
Accountancy firms in Stockport like, IN Accountancy, are advising those employers subject to the new charge, that it will be 0.5% of an employer’s pay bill. There is, however, an annual allowance of £15,000 and it will be given on a pro-rata basis throughout the tax year.
The HMRC guidance confirms employers will need to report their liability each month and from the start of the tax year if:
- their previous tax year annual pay bill was more than £3 million, including any connected companies or charities
- they believe, for this tax year, their annual pay bill will be more than £3 million, including any connected companies or charities
If an employer’s annual pay bill (including any connected companies or charities) unexpectedly increases to more than £3 million, the employer will need to start reporting when this happens.
Annual pay bill explained
An employer’s annual pay bill is the sum of payments to employees that are subject to employer Class 1 secondary National Insurance Contributions. As well as reporting employees who are subject to NIC’s, they will also have to include payments to employees where there are no employer NIC’s such as:
- employees earning below the NIC lower earnings
- apprentices under the age of 25
- employees under the age of 21
Your Apprenticeship Levy liability should be reported each month on the Employer Payment Summary (EPS) and should include:
- the Apprenticeship Levy you owe to date in the present tax year
- the annual amount of Apprenticeship Levy allowance which has been allocated to that PAYE scheme
Employers don’t have to report Apprenticeship Levy if they haven’t had to pay it in the current tax year.
If you have any questions regarding the Apprenticeship Levy or other payroll matters please contact us on 0161 456 9666 or email@example.com
For more information: GOV.UK apprenticeship levy
Nothing is certain but death and taxes and Stockport accountants, IN-Accountancy certainly agree, however there may be exceptions when it comes to inheritance tax (IHT). In certain situations there is a way to escape IHT completely on death, but it’s an escape that no-one wants!
Last goodbye’s together?
A general law describes that where two or more people have died, but in a circumstance in which it is impossible to determine the order of death, they are normally presumed to have died in order of age, i.e. the younger to have survived the elder, this is called the commorientes rule.
Due to IHT rules and without an alleviating clause the potential effect of the commorientes rule could double (or multiple) IHT charges on such deaths. The IHT legislation states that where it isn’t clear which persons have survived the other, they should be assumed to have died at the same instant. Therefore, in the case of a married couple where their wills state the passing of estates to each other, the elder spouse’s nil rate band will be essentially unused, and the younger spouse’s estate can benefit from it.
Case study example
Stephen and Caroline are married and live in Warrington, Stephen is 45 and Caroline is 40. Their estates are worth £500,000 each. In a tragic car accident, they died simultaneously in September 2016. Stephen is deemed to have died first, so his estate would pass to Caroline however for IHT purposes, Stephen and Karen are assumed to have died in the same instant. Therefore, Stephen’s estate is exempt from IHT and £500,000 goes to the children. Only Caroline’s estate of £500,000 is subject to IHT and with the inclusion of both spouse’s nil rate bands, their assets are worth £1.1 million which is passed onto their children.
Further IHT rules regarding survivorship and other clauses in wills, state the different potential problems of double (or multiple) IHT charges on successive deaths. This rule applies to deaths which follow within a short period of one another rather than simultaneous. The rule states that if the a person holds the property for a period of no more than six months before death, then the beneficiary is entitled to the property under the same IHT position under the commorientes rule.
The new ‘making tax digital’ initiative has brought in a lot of changes, so here are some top tips on how to make your VAT payments less painful. One of the main introductions is a mandatory policy for both quarterly VAT returns and payments to be made electronically. The policy stipulates that the payments must be received by HMRC, and not just sent, seven days after the end of the month following the end of the VAT period. For example, if your VAT return period ends on 31st November, HMRC must have received your return and payment by 7th January.
Tip 1 – Be wise about your payment method
There is a multitude of ways of making electronic payments such as Direct Debit, internet/telephone banking and Bank Giro Credit payments. However, the best way to ensure payments are made on time is to set up a Direct Debit so that payments will automatically be taken from your account. Then all you have to do is make sure your VAT return is submitted on time. Whereas other payment methods require involvement and a knowledge of processing times.
Tip 2 – Make sure you have the money
It can be difficult collecting enough money together for your quarterly VAT return. One method to ensure you have enough is to work out the output tax each month and how much input tax you claim, and then net the amount off so you are aware of your liability. Then transfer the money into a savings account so you will have the money available. You can also use this method for your corporation tax.
Tip 3 – Spread payment with annual accounting
If your turnover is under £1,350,000 you can use annual accounting. This method allows you to pay in monthly instalments, based on the previous year’s VAT liability. Once nine monthly payments have been made, each of 10% of the estimated liability, the final balancing payment of the actual VAT due has to be paid when the annual VAT return is submitted. By choosing the annual accounting method, the return has to be submitted two months after the end of the period, rather than the normal one month. You can also write to the VAT man if you think the VAT you owe is going to be significantly more or less than the estimated amount.
Tip 4 – Make sure you pay your VAT on time to avoid penalties
If you can’t pay your VAT return and payments on time, contact HMRC’s Business Payment Support Service and arrange a payment schedule, by doing so you will avoid any penalties for late payments.
For more information regarding VAT returns and payments, contact your Stockport Accountants, IN-Accountancy on 0161 456 9666 or firstname.lastname@example.org