It’s been quite a while since the last Square Circular saw the light of day. Various reasons for that which we won’t go into. Let’s just hope that absence makes the heart grow fonder.
To ease you back into the swing of things, Issue 59 is not too technical. We hope you’ll find it interesting, informative and entertaining.
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.
What did you think of the Spring Statement on 13 March? And what about the tax changes? You’d be forgiven for asking “what tax changes?” It was all something of a nothing, wasn’t it? So the good news is that there are no changes in legislation to digest.
On the other hand a few new “consultations” were announced in addition to current ongoing consultations. And then there were measures in Budgets and Finance Bills in 2017 and 2018 that come into effect in April 2019. Keeps us busy anyway.
But not so busy as to stop fourteen intrepid runners/walkers/hobblers, including three partners of Alexander & Co, from tackling the Great Manchester 10km Run on Sunday 19 May. Team Alexander are raising money for projects in Salford such as “Young People Experiencing Homelessness Project” and “Looked After Children Project”. You can find out more about these by following the link to:
where you can also sponsor Team Alexander’s great feet and feat.
MORE NEWS – AUTO ENROLMENT
Be aware that from 6 April the employer minimum contribution went up from 2% to 3% and the staff contribution rose from 3% to 5%.
TELL ME HISTORY NOT NEWS
Well, it’s only history because Square Circular has mentioned this before – more than once.
You make a loan to your company. You have no interest bearing deposit accounts to speak of, with banks and building societies. And you don’t charge interest on your company loan account. In the old days it didn’t make too much sense for you to pay income tax on the interest, possibly at the 40% higher rate and get tax relief at the Corporation Tax rate which was lower.
But, just remember, nowadays a higher rate taxpayer can have £500 interest tax free and a basic rate taxpayer can have £1,000 tax free. Beginning to change your mind about charging interest?
TAX SCAM TIME AGAIN
Your tax return is filed at 11.59pm on 31 January. Phew! Beat the deadline. The accountant says you may get a tax refund. Perhaps payments on account based on the previous year were too high. Perhaps too much tax was deducted under PAYE.
Whatever; nothing happens for a few weeks. Fair enough; it does take a while for HMRC to process returns. And then, guess what. You get an email (supposedly) from HMRC. Urgent action required to get your tax refund! Personal details required. Links to click on. Downloads.
Just be careful. Check with us if necessary. We do get a handful of scam cases each year. Whilst you might treat with suspicion an email from an International Lottery (that you didn’t enter) offering you £millions you might not be suspicious of HMRC offering you £874.67.
HMRC’s advice about scam emails is to report it to them and then delete the email.
Don’t think our remarks about scams apply just to emails. HMRC have reported a 360% increase in household landline phone tax scams. They say “if you receive a suspicious call to your landline from someone purporting to be from HMRC which threatens legal action, to put you in jail, or payment using vouchers: hang up and report it to HMRC who can work to take them off the network”.
You think it doesn’t happen? Here’s a true story. A few years back, the wife of one of our partners received a phone call from someone telling her that HMRC were taking her to Court for a tax debt of £thousands but not to worry because he (the noble caller) could help her. It just so happened that her husband was home at the time and, taking the phone, it took him all of about 10 seconds to detect the scam.
Moral of the story. Either be sceptical or be married to an accountant.
WHAT’S THE BIG ISSUE?
You’ve probably heard about HMRC hounding a homeless man for a penalty for late filing of his tax return. £1,600 worth of penalty reminders were sent to his previous address. It reached a Tribunal where the judge agreed that the taxpayer had a reasonable excuse for late filing and described HMRC’s behaviour as a “scandal”.
Take comfort from the fact that money raised by Big Issue vendors is not being spent paying off HMRC penalties. And whilst on the subject of residential accommodation…..
A FORTHCOMING ATTRACTION
That’s enough fun. Now for something more technical. Well, a little more technical, anyway.
Any residential property landlords reading this? Suppose you sell a property the day after 5 April 2019 resulting in a capital gain. When d’you pay your CGT? By 31 January 2021. That’s nearly 22 months away! Suppose you make a mistake and sell it the day before 5 April 2019. When d’you pay your CGT? By 31 January 2020. That’s nearly 10 months away. Not as much leeway as 22 months but still not too bad.
It was proposed in the Autumn Budget 2017 that from April 2020 individuals and trustees will have to calculate, report and pay CGT within 30 days of completion of the sale of residential property. So, imagining the new rules already applied, if you sold (exchanged contracts) on 6 April 2019 and completed on say 6 May, tax would be payable by 5 June 2019. Compare that to 31 January 2021. Bit of a difference!!
Now imagine you want to shelter your gain. Let’s say you sell a property early in the tax year and pay your CGT after 30 days. Suppose towards the end of the tax year you look at your portfolio of shares and notice some gains and some losses. If you realise the losses before the end of the tax year it’ll reduce the CGT payable on the gain on the property sale. Ah, but you’ve already paid CGT. All in all you’ve overpaid. Well, you can get it back after you’ve submitted your tax return for that year which for most people means December or January following the tax year.
Now there’s an incentive to get your tax return done early!
BACK TO THE NEWS
The nation talks about Brexit. But accountants talk about MTD. Shame on you if you didn’t know by now that MTD stands for Making Tax Digital.
It’s not worked out quite as George Osborne anticipated. Remember him and when he announced the end of the tax return? A few years later we still have tax returns. MTD has now started for VAT purposes for businesses over the registration threshold but at the moment there are deferrals granted to VAT groups, Trusts, annual accounting scheme users and a few other types of entity.
And, the big news is that income tax MTD is also being deferred. It certainly makes sense to see how it works for one tax before extending it others.
You may be familiar with the story of the vicar/imam/rabbi whose wife asked him one day what he’d prayed for. He answered that he’d prayed that the rich would share their wealth with the poor. When she asked him whether his prayers had been answered he told her that, at least, they’d been half answered; the poor had agreed to accept.
We were reminded of this last May when the Resolution Foundation produced a think tank report and, amongst other ideas, suggested a so-called citizen’s inheritance one-off payment of £10,000 to all 25 year olds so as to provide capital to be used towards a deposit on a property or capital to start a new business or to use towards pension saving. This would be funded by abolishing inheritance tax (yes, abolishing, you read that right) and replacing it (there’s the catch) with a lifetime receipts tax levied on recipients and which would have fewer exemptions, a lower nil rate band and lower tax rates but which would, presumably, result in more tax being collected if it’s meant to fund the 25 year old’s tax giveaway.
We understand that the under 25s have agreed to accept. But from the silence that’s followed the proposal we guess that the over 25s haven’t yet agreed.
A letter from a taxpayer to HMRC read:
“I have to inform you that my mother-in-law passed away after receiving your form on 22 November. Thank you”.