You may remember that the summer issue of Square Circular came out in September which hardly qualifies as summer. Mind you, nine months of the year seem to qualify as autumn with the other three months being winter. So, no complaints; this issue is well and truly autumn.
At this stage we usually like to give you some indication of what’s in this issue of the Square Circular. But this time the topics are so varied that we won’t even try.
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.
We’re delighted to welcome Gary Hughes as a tax manager, experienced in both compliance and advisory work and Paul Hammond as an experienced management accountant.
The Chancellor’s Autumn Statement is scheduled for 25 November and we should have draft legislation for the 2016 Finance Bill a couple of weeks later. But that’s hardly news; every Square Circular seems to talk about some tax measure that’s just been enacted or is about to be enacted. If you want to talk about any of the measures in the Autumn Statement please feel free to call any of our tax team.
Something to do in December apart from retail therapy.
No doubt you’ve heard about the Volkswagen emissions scandal. Or, “inconsistencies” as VW delicately put it.
Without going into all the ins and outs of CO² emissions and nitrogen oxide emissions and the difference between them, what effect does it all have on tax? It could impact on taxable benefits-in-kind, capital allowances and, of course, road tax itself.
HMRC have said that they won’t seek to retrospectively re-calculate tax liabilities. That’s because the tax position is based on the figures in the approval certificate. Fair enough. It says what it says even though what it says is wrong.
Unusual to see such a relaxed attitude being taken to false records. But the government can probably afford to be laid back as far as innocent taxpayers are concerned. We wonder what fine will be imposed on VW.
Talking about records do you remember the BRC Initiative? If you’re a dedicated reader of Square Circular and can remember back to Autumn 2012, and can work out what BRC stands for, the answer will be “you betcha!”
It’s HMRC’s Business Records Check Initiative which began in November 2012. Selected businesses would get a nice friendly phone call from a nice friendly tax officer enquiring about their business records, possibly followed up by a nice friendly visit giving nice friendly advice about keeping nice (friendly) business records. If your records were still deemed inadequate after all this nice friendliness there was a possibility of a not so nice and not so friendly penalty.
As far as we know it never really got properly off the ground. It started, down south, region by region, and we’re not sure if it ever got up to Manchester. But, HMRC seem to have decided that it’s not a worthwhile project because they ended up contacting too many compliant taxpayers and not enough taxpayers who would benefit from one of these nice friendly visits.
The BRCs are being wound down rather than abruptly finished. This means that if the BRC process has started for a particular business it will be completed. It’s just that HMRC aren’t taking on any further (nice friendly) customers.
The summer issue of Square Circular told you about the proposed new rules for dividend payments. We’re not going to go through all that again (that’s a relief) but suffice to say in general terms that receipt of dividends of any substantial amount will cost more in tax for most people. We talked about, maybe, bringing dividends forward to before 5 April 2016 although that’ll accelerate the tax payment date and we also mentioned other ways of extracting profits from a company. As we said in the summer Square Circular, dividends are still not as expensive in terms of tax as is salary/bonus but the gap has narrowed somewhat.
Last summer was our early warning system to put the issue on the radar. We’re now getting close to “crunch” time. 5 April 2016 is an obviously important date. But for those looking for a corporate based solution the end of your company’s accounting period can be a significant date and 31 December and 31 March tend to be particularly popular. So it’s no longer, just something to think about. It’s something to talk about with the partner you usually contact or with one of our tax team and then, if need be, do something about it.
You’d be forgiven for thinking this was some sort of wrestling hold. Like a sort of half nelson but six times as rough (do the math).
Of course, we tax gurus know better. It’s the Government’s commitment that rates of income tax, VAT and National Insurance contributions (NIC) will not rise over the lifetime of this parliament. You can call us cynical but what does that suggest about other tax rates and reliefs. It doesn’t cover Capital Gains Tax rates and it doesn’t cover a whole range of tax reliefs which could be tinkered with to raise revenue and to keep the headline rates of income tax, VAT and NICs as they are at present.
POLITICS AND HOME SWEET HOME
Do you remember the days of the last Labour government when Tony Blair handed over the reins to Gordon Brown? There was talk of Gordon calling a snap election which he should have been able to win to cement his authority but then opinion suddenly seemed to change and he backed away from the election, hanging on until 2010. The rest, as they say, is history. Some put the change in the public mood down to George Osborne’s announcement at the Tory Party conference that, in government, they would raise the Inheritance Tax nil rate band to £1 million. Ever since then, in government, they’ve been trying to figure out how they could do it, but without actually doing it. As is so often the case the answer just creates more complications.
This has given rise to the “residence nil rate amount”. What it means is that if as a part of your estate you leave a residential property on death to one or more direct descendants you’ll get a nil rate band which will increase in stages but by 2020-21 will reach £175,000. You might be forgiven for thinking that increasing the nil rate band to £1 million just means substituting the figure of £1 million for that of £325,000 but nothing quite so simple. The current £325,000 figure stays just that until 2020-21 but then we add £175,000 if you’ve left a qualifying residence to qualifying descendants. That brings it up to £500,000. Double it, if you’ve got a spouse and, bingo, that’s your £1 million. Smart, or what?
As you’ve probably guessed there are rules about what qualifies as your residence. Can you only own one such property and must it have been your residence when you owned it? Does it have to be your residence throughout the ownership period? You’ve probably also guessed that there are rules defining direct descendants. Does that include stepchildren, adopted children, foster children? If an elderly couple want to downsize and pass on a smaller home or equivalent value assets to a direct descendant, do they lose some of the nil rate amount?
And did you know about the £2 million taper threshold? This might sound a bit quirky but if you leave your entire estate to your spouse, sure he or she can benefit from your nil rate band but the bunching effect can lose the spouse some of the residence nil rate amount.
Maybe it’s time to review your Ih.T planning. Sounds like lots of fun. You’re welcome to give one of our fun-loving tax team a call to join in.
HMRC has announced that the LDF will end on 31 December 2015. The LDF is the Liechtenstein Disclosure Facility which enables naughty taxpayers to come clean on undisclosed income and gains using a facility which can limit non-disclosure penalties and avoid the possibility of criminal prosecution. Presumably, HMRC now believes it no longer needs to offer carrots to persuade taxpayers to voluntarily disclose previously undisclosed income. Apparently, just a stick will do with the sources of information at its disposal.
We hope none of our clients need to use the LDF. But just bear in mind that there aren’t that many disclosure days left to 31 December.
Another memorable notice from a church notice board.
“Potluck supper, Sunday at 5pm. Prayer and medication to follow”.