The title of this Issue of the Square Circular sparked off some debate as to whether we’re still in Winter or if it’s now Spring. If you’ve seen a daffodil or heard a cuckoo, please do let us know.
You can probably see that the seasons are a bit mixed up from our What’s New article. But hopefully our comments on tax avoidance, tax planning and the other miscellaneous points will be crystal clear.
If you want more details about any of the matters we’ve mentioned in this Issue, or indeed, about any of the matters we haven’t mentioned please do contact us on 0161 832 4841.
Budget Day will be Wednesday 20 March.
Time was, when that would have been an exciting piece of news. You’d wait all year for the Budget in the Spring (sometimes as late as the beginning of April) and then go mad trying to “do stuff” before 5 April. Nowadays, you get an Autumn Statement at the beginning of winter with draft legislation in the winter for the Spring Budget and Finance Bill. Seasons aren’t what they used to be. What’s more, much of the legislation isn’t going to apply anyway until next year.
Confusing, but at least it’s had the effect of turning panic into planning.
Are you fed up yet with the tax avoidance debate? Do you get annoyed when the lines between dishonest evasion and legal avoidance are blurred? What about when politicians and journalists misrepresent tax law out of ignorance? And what about when the politicians ignore what tax law says and talk about what’s fair? After all, who cares about such minor details as fact and law when we’ve got our own subjective opinions about what’s fair.
Don’t get stressed. The GAAR (General Anti Abuse Rule) is on its way. Scheduled for this April but postponed until Royal Assent to the Finance Bill, usually some time in July, it will clarify exactly where the tax avoidance goal posts stand although it is possible that the goal posts will be moved over the course of time. In fact, some have suggested that it’ll be quite a number of years before there is real clarity as to what constitutes reasonable tax planning and what constitutes egregious and aggressive abuse.
To be fair, HMRC have issued plenty of guidance. In December, heedless of the effect on the Rainforests HMRC published a Consultation draft which gave useful examples of what might fall foul of a GAAR and what might not. That’s very useful for us because we’re obliged to let you know “what’s out there” without necessarily recommending anything. It is comforting to know that there’s nothing we’ve brought to your attention which is highlighted as an example of abuse which will be countered by the GAAR. But that doesn’t mean that planning won’t be open to attack under present rules or, in the future, under the GAAR.
So, what are the lessons to learn from commentary on the GAAR and from cases which have recently reached the Tribunals and the Courts. We would highlight two points:
1. Planning must be commercially driven. Don’t go for anything that is artificial or contrived.
2. Don’t be a DIY planner. You must do everything by the book in order to have the protection you need.
So if anyone invites you to use a whizzo tax wheeze they know about please bounce it off us. We know what’s whizzo and what will leave you wheezing.
Don’t you get a bit fed up with the same old year end tax planning from the Financial Press and IFAs year after year? And isn’t it all a bit mundane. Let’s face it you’re not going to make a fortune in tax savings by transferring £5,640 into a Cash ISA from a regular savings account.
We’ve devised a novel idea to get this advice out of the way. It’s a game called Ring-A-Bell. If any of the brief thoughts in the left hand column ring a bell in your mind you have to call the number in the right hand column.
You’ll soon get the idea and should be able to memorise the phone number after a while.
|Make the most of your and your spouse’s/civil partner’s combined tax allowances||0161 832 4841|
|Make the most of your children’s tax allowances||0161 832 4841
|What about pension provision for you, your partner and even your children before 5 April||0161 832 4841|
|Deferring income into next year if it reduces your tax rate||0161 832 4841|
|Deferring gains to next year to help cash flow||0161 832 4841|
|Utilising annual CGT exemption||0161 832 4841|
|Crystallising capital losses||0161 832 4841|
|EISs and VCTs||0161 832 4841|
|Utilising annual Inheritance Tax exemption, gifts out of income relief and small gifts relief||0161 832 4841|
|Individual Savings Accounts||0161 832 4841
|Bed and breakfasting||0161 832 4841|
Tax planning should really be an ongoing process so keep that telephone number handy.
CERTIFICATES OF TAX DEPOSIT (CTDs)
It is sometimes forgotten that CTDs can be a useful way of paying future tax liabilities. Here’s a brief reminder of how they work.
Quite simply, all you do is deposit money with HMRC and use it later to pay your liabilities. A CTD can be particularly helpful in the case of an HMRC investigation because if tax is eventually found to be due, late payment interest will not be charged from the date the CTD was bought.
CTDs bear interest but only if they are for more than £100,000. And then the interest rate is far from exciting; 0.75% if used to pay tax and an even more measly 0.25% if you withdraw the certificate, for example if you find you don’t need it after all. You can see that the attraction lies not in the interest you’ll get on the CTDs but more in preventing interest from mounting up if you have a contentious case with HMRC which may result in you having to put your hand in your pocket.
CTDs can be used for most taxes but not for Corporation Tax or PAYE.
How many of those irritating cold calls have you had this week? You know, that altruistic stranger who sounds so excited at the prospect that you might be entitled to compensation for PPI mis-selling.
We haven’t yet got to the stage of an excited sounding recorded voice accountant calling you to say that you might have a tax liability on your PPI refund and offering to do your tax return.
Accountants can’t do that kind of thing because dull, boring accountants can’t usually manage to sound excited. So, here’s our excitement.
If a PPI refund is made up of premium refund plus interest, the interest is taxable. In some cases the interest could be quite chunky. If interest is added gross or if received by a higher rate taxpayer with only basic rate tax deducted at source there will be some tax liability. For receipts in 2012/13 there’s time to declare such income. For receipts in 2011/12 with that year now well past, it’s starting to get exciting.
If any of this applies to you give us a call on 0161 832 4841. If you have any friends in this situation let them know that they’re welcome to call us. We’ll do our best to put on a disembodied excited voice when we speak to you.
A TRIP DOWN MEMORY LANE
When you buy a building to house your business or for commercial letting you probably know (let’s re-phrase that, you must surely know) that included in that big sum of money you pay for the building, is an amount which relates to plant and machinery on which capital allowances can be claimed as distinct from the structure itself on which you can’t get allowances. Legislation over the last few years has highlighted this. Surveyors particularly those specialising in capital allowances, have built up business in this area and everybody is more aware of this opportunity than they were years ago.
This being the 40th Issue of the Square Circular, we took the opportunity to go down memory lane. What do we find as the first (yes, the first) article in Issue 1 (yes, Issue 1)? A piece entitled “Capital Allowances on Plant in Buildings”.
A firm ahead of our time – that’s us!
A quote from Albert Einstein on filing for tax returns.
“This is too difficult for a mathematician. It takes a philosopher”.