News & Updates

Many taxpayers need to make a payment on account for 2018/19 alongside any balancing amount of tax due for 2017/18. This POA should be detailed on your statement of account, once the 2017/18 return is filed, but in some cases it’s missing.

This problem applies to your online account as well as to paper statements of account. In some cases, the CGT payment due on 31 January is also missing.

HMRC recognise this is an issue, but they say it only affects a small number of taxpayers for their 2017/18 tax returns. However, judging by the number of queries on the HMRC agent forum, this is a widespread problem.

We therefore advise clients to pay the correct amount of tax due, and not to pay the lower figure as shown on the incorrect statement. HMRC has said that no one will be charged additional interest because of this problem, but don’t count on the HMRC computer getting that right as well.

If your tax statement is wrong we contact HMRC, and they should be able to correct the PAO manually.

Incidentally this problem also arose for some 2016/17 tax returns where the POA due on 31 July 2018 went missing (see our newsletter on 19 July 2018).

 

Written by the Tax Advice Network

There are people who invest in, and trade in, crypto-currencies such as Bitcoin and Litecoin. It may come as a surprise to those individuals, but buying and selling amounts of any crypto-asset is treated just like dealing in shares or bonds.

The gains and losses made on those transactions are taxable as capital gains or capital losses, and they need to be reported as such on your SA return if the total amount of proceeds is more than four times your annual exemption. For 2017/18 the CGT annual exemption is £11,300, so where the total value of all capital transactions in the year is £45,200 or more, those gains/losses must be recorded.

It is quite possible for bitcoin trading to have exceeded £45,000 in 2017/18 as the peak value of one bitcoin on 11 December 2017 was $17,550 (£13,117). A gain or loss is made whenever a bitcoin (or similar token) is; exchanged for another one or for another asset, given away, or surrendered for payment in legal currency such as US dollars.

There are several problems to overcome when calculating gains made on crypto-assets for a UK taxpayer:

• All transactions must be calculated and reported in sterling, which means both the buy and sell value has to be stated in sterling.
• Each type of crypto-asset needs to be treated as a class of share and be “pooled”, paying attention to the 30-day rule for matching sales and purchases.
• The number of transactions in the year may be large, and there is unlikely to be a broker’s report which calculates the gains for you.

Where the volume of transactions is very large, you may consider if you have been trading in the assets, and if your profits or losses should be subject to income tax. This approach will be resisted by HMRC (see the R Gill case in our newsletter 14 June 2018).

Written by the Tax Advice Network

We outlined changes to the definition of a personal company for entrepreneurs’ relief in our newsletter on 1 November 2018. The two new conditions added to the definition are:

• a right to at least 5% interest in the distributable profits; and
• a right to at least 5% of the net assets due to the equity holders on a winding-up of the company.

The new definition of a personal company takes effect for disposals made on and after 29 October 2018, but drafting the law to implement the intended effect has proved difficult.

The primary problem is where the company has issued so-called “alphabet shares”. This sub-dividing of the ordinary share capital is done so that different amounts of dividend can be paid to different shareholders. Some shareholders may not receive a dividend, and thus would have difficulty in proving they were entitled to at least 5% of the distributable profits.

The government has listened to concerns and has introduced a late amendment to the Finance Bill including another test for a personal company, which says: “in the event of a disposal of the whole of the ordinary share capital of the company, the individual would be beneficially entitled to at least 5% of the proceeds.”

In other words; will the shareholder be entitled to at least 5% of the proceeds in the event of the disposal of the whole company. This test will also apply from 29 October 2018 as an alternative to the two new tests listed above.

The same Finance Bill amendment also changed the rules which restrict ER being claimed on gains arising from goodwill sold to a close company, to incorporate the new definition of personal company into those rules.

If you want to take advantage of entrepreneurs’ relief on a disposal, please call our office  to double check that all the conditions are met, as it is better to be safe than sorry later.

 

Written by the Tax Advice Network

The Making Tax Digital (MTD) project has not been derailed by Brexit (yet) and HMRC are ploughing ahead with the pilot for VAT reporting. However, as we reported in our newsletter on 18 October 2018 certain categories of businesses have had their start date for MTD deferred until their first VAT period which begins on or after 1 October 2019.

Those deferred businesses are now receiving letters from HMRC explaining that they must gear up to file VAT returns under MTD, but not until after 1 October 2019. A copy of the letter will not be sent to you as the tax agent, but you can read the standard text of the letter on the CIOT website.

HMRC started writing to other VAT registered businesses about MTD from 5 November 2018, but only to those who are eligible to join the MTD for VAT pilot. This pilot programme still excludes all businesses which are:

• a trust or a charity,
• part of a VAT group or VAT Division,
• trading in goods or services with the EU,
• based overseas,
• submitting annual returns,
• making VAT payments on account,
• a business that is newly registered for VAT and have not previously used the VAT online account to submit its VAT Return.

Small businesses which use the VAT flat rate scheme, and all partnerships, have been permitted to join the MTD for VAT pilot from mid-December 2018. However, businesses who want to join the MTD pilot must be up to date with their VAT payments and returns.

Where the business pays their VAT by direct debit, they must sign up to the pilot at least 15 days before the VAT submission date, to allow new direct debit instructions to be set up at the HMRC-end of the system.

Written by the Tax Advice Network

Happy New Year and welcome to our first monthly newswire of 2019. We hope you enjoy reading this newsletter and find it useful.

NEW YEAR RESOLUTIONS TO SAVE TAX

At this time of year we think about New Year’s resolutions. It is also a good time to start planning your tax affairs before the end of the tax year on 5^th April.

An obvious tax planning point would be to maximise your ISA allowances for the 2018/19 tax year (currently £20,000 each).

You might also want to consider increasing your pension savings before 5 April 2019 as the unused annual pension allowance is lost after three years.

For those looking to do some inheritance tax planning it would be a good time to review (or make) your Will.

PENSION PLANNING

For most taxpayers the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers contributions by both the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current year, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there are rumours that this generous relief may be reduced in future.

INCREASED CAPITAL ALLOWANCES START 1 JANUARY 2019

The Chancellor announced a temporary increase in the Annual Investment Allowance (AIA) for expenditure on plant and machinery to £1 million from 1 January 2019. However transitional rules mean that the full amount will not necessarily apply to your business straight away.

For example, if your business year end is 30 June 2019 the maximum AIA would be £600,000 being 6/12 x the old £200,000 limit plus 6/12 x the new £1 million limit. The following year to 30 June 2020 would be entitled to the full £1 million.

NEW CAPITAL ALLOWANCE FOR COMMERCIAL BUILDINGS

The Autumn 2018 Budget announced a new 2% straight line tax deduction for the cost of construction or renovation of commercial buildings and structures. HMRC have now issued a technical note setting out the details for the operation of the new relief.

Unlike the old Industrial Buildings Allowance the new relief is available for the construction of shops and offices as well as factories and warehouses.

The new tax break is available where the contract is entered into and construction costs are incurred on or after 29 October 2019. The allowance is available to commercial property landlords as well as trading businesses. There are special rules for leasehold buildings which determine whether the landlord or tenant is entitled to the allowance.

Note that there are more generous plant and machinery allowances available for fixtures and fittings within the building and we can work with you to help you maximise tax relief. The AIA referred above would mean that there may be 100% capital allowances for equipment such as central heating and air conditioning.

CAPITAL ALLOWANCE ON HIGH CO2 CARS AND ASSETS IN SPECIAL RATE POOL REDUCES TO 6%

One of the other capital allowance changes announced in the Autumn Budget was the reduction of the writing down allowance on assets in the special rate pool from 8% to just 6% per annum reducing balance from April 2019.

The assets included in this pool include long life assets, such as aircraft, integral features within buildings and cars emitting more than 110g CO2 per kilometre.

A claim for the 100% AIA referred to above can be made for expenditure on these assets, (with the exception of motor cars) and this will result in faster tax relief.

This means that where a company buys a motor car that emits more than 110g CO2 per km it will take many years to get relief for the expenditure as even when the car is sold the proceeds are deducted from the special rate pool and continue to be written down at 6% reducing balance.

For example Global Ltd which makes up accounts to 31 March each year buys a new Mercedes E220d AMG line for the managing director Mr Global for £40,000. As the CO2 emissions are 127g per km the WDA would be 8% for year ended 31 March 2019 = £3,200 leaving a tax written down value of £36,800. The 6% WDA would then apply for year ended 31 March 2020 = £2,208 leaving £34,592.

If the car was sold for £25,000 in the following year then the remaining balance of £9,592 would continue to be written down at 6% per annum, hence a very long write off period.

It may be more tax efficient to lease such a vehicle as, although 15% of the lease rentals are disallowed for tax purposes for such high CO2 vehicles, this may nevertheless be more beneficial.

Note that the above rules operate differently where the motor car is acquired by a sole trader or a partner for his business as the car is not included in the pool and a balancing adjustment occurs when the car is sold.

ADVISORY FUEL RATE FOR COMPANY CARS

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 December 2018. Where there has been a change the previous rate is shown in brackets.

Engine Size	Petrol	Diesel	LPG
1400cc or less	12p		8p (7p)
1600cc or less		10p
1401cc to 2000cc	15p		10p (9p)
1601 to 2000cc		12p
Over 2000cc	22p	14p (13p)	15p (13p)

Note that for hybrid cars you must use the petrol or diesel rate.

You can continue to use the previous rates for up to 1 month from the date the new rates apply.

PASSING ON THE FAMILY HOME

New inheritance tax rules for passing on the family home started on 6 April 2017. This additional relief should be taken into consideration when drafting your Will and we can work with your solicitor to make sure your Will is tax efficient.

From 6 April 2017 an additional nil rate band of up to £175,000 is available on death where your residence is left to direct descendants. This is in addition to the normal £325,000 nil rate band.

This additional relief is however restricted If your assets exceed £2 million. The rules are fairly complicated but we can review your personal circumstances to ensure that you take advantage of all the relief that you are entitled to.

This additional inheritance tax relief is available even when you downsize to a smaller property.

For example if a married couple currently live in a large house worth  £500,000 and downsize to a flat worth £250,000 they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property.  They could even sell up completely and move into a rental property and still get the inheritance tax relief!

DIARY OF MAIN TAX EVENTS

JANUARY / FEBRUARY 2019

Date	What’s Due
1/01	Corporation tax payment for year to 31/3/18 (unless quarterly instalments apply)
19/01	PAYE & NIC deductions, and CIS return and tax, for month to 5/01/19 (due 22/01 if you pay electronically)
31/01	Deadline for Self-Assessment tax return for 2017/18 if filed online. Also the due date for 2017/18 balancing payment and 50% payment on account of 2018/19 tax.
1/02	Corporation tax payment for year to 30/4/18 (unless quarterly instalments apply)
19/02	PAYE & NIC deductions, and CIS return and tax, for month to 5/02/19 (due 22/02 if you pay electronically)

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

Business trends to watch in 2019

Here are some of the top Business Trends to watch in 2019.

Marketing will continue to become more personalised

Marketing is becoming increasingly personal, and this trend will keep going as we move into the new year. No longer will stock images, generic campaigns or impersonal calls to action convince consumers. In order to appeal to increasingly sophisticated customers, you’ll have to provide high-value, targeted and personalised content. 

Technology will not replace the human touch

Technology is always improving, but AI (artificial intelligence) and predictive analytics will not replace the human when it comes to delivering the customer experience. While there are definitely some great opportunities ahead for AI, it will not be a true game-changer, at least in the next year. AI can really be thought of as ‘augmented intelligence,’ because it can augment the human, giving people better information, greater insight and can help businesses to become more efficient.

Flexible working is set to become the norm.

Businesses are changing the way they use space to drive productivity. More firms are embracing the open-plan office. The behaviour of employees will also change as they adapt to the new environment. New tech tools will be used, and more employees will choose to work flexibly and away from the office.

Data privacy regulations

The EU General Data Protection Regulation (GDPR) established a global standard, impacting all firms from start-ups to established international businesses. Acceptance for GDPR will be driven by a likely continued increase in cyber-crimes and data breaches in 2019. The new world of cyber security threats will most likely encourage other regions to consider the introduction of data protection regulations similar to GDPR.

The war for talent will continue

Hard-to-find talent and hard-to-fill jobs are constants in the new world of work. HR professionals will focus on building a fit-for-the-future workforce with approaches from three fronts: creatively sourcing talent wherever they can find it, engaging and developing the talent they have on hand, and building a future pipeline of talent.

Invest in your people with a wellness programme

Your people are your firm’s most important asset. As such, it is important to invest in their wellbeing. 

As global technology develops and demands on employees increase, it is not surprising that the terms ‘burnout’, ‘dissatisfaction’ and ‘distress’ are being increasingly reported across the developed business world.

With increased absence, pressure is put on the rest of the team to meet deliverables, which can negatively impact team morale and increase stress levels. This demonstrates how broad the impact of absence is and the negative impact it can have across an entire business.

As such, it’s no wonder that we are seeing more and more businesses investing in health and wellbeing programmes for their staff. The good news for businesses is that creating and implementing a health and wellbeing programme doesn’t have to cost the earth. Such an initiative can start with a focus on education for staff around exercise, healthy eating habits, etc. You could organise sessions that discuss recommended activity levels and bring to life how people can incorporate activity into their working day.

If your business has a budget to commit to a health and wellbeing initiative, then it may also be worth investing in some standing desks, a subsidised gym membership for staff, an office sports team, etc.

Obvious Innovation

Innovation can be driven by taking an ‘obvious’ idea from one context and applying it in another

The successful development and implementation of new, innovative ideas is crucial in business. Your innovation could focus on improving business processes, bringing new and improved products and services to market, increasing efficiency or, most importantly, improving profitability.

Being innovative in business isn’t all about being the next Steve Jobs or inventing the light bulb. Some of the most innovative business ideas come from taking an idea from another market sector and applying it in a new or innovative way in your own business in order to solve a different problem.

For example, Henry Ford didn’t invent the car. Karl Benz invented that. Ford also didn’t invent the assembly line, but he is famous for using the assembly line in order to improve the efficiency of his business. So why do people call Henry Ford an innovator?

Ford might not have invented anything 100% original, but he knew how to take existing ideas and develop them into something extraordinary. Henry Ford wanted to take the idea of an automobile reserved for the rich and bring it to the masses. He took existing ideas and applied them in a new way in order to realise his vision.

We are surrounded by new technologies. We live in an age where businesses are experimenting with Artificial Intelligence, Augmented Reality, Video Calling, High Speed Internet, online shopping with same day delivery and much more.

The best businesses of tomorrow will adapt today’s technology in new and innovative ways in order to bring new products or services to the market.

In order to innovate in your own business, take a step back and look at your market. Is there a gap where you can apply technology from another sector and implement it in your business in order to give you a competitive advantage?

They say that imitation is the greatest form of flattery. You may not be the next Steve Jobs but maybe you could copy a few of his ideas in order to create your own market leading business.

How to overcome your fear of failure

One of the most common things holding people back from achieving their potential in business is the fear of failure.

It is human nature to fear the unknown. When we push ourselves outside of our comfort zones, whether in business or in our personal lives, it is pretty normal to feel some degree of stress and anxiety.

In business, many of us consider our work to be representative of who we are as a person. As such, we can often view a failure in the workplace as a personal failure. This fear can often manifest itself in such a way that we avoid reaching for new targets or striving towards new goals in case we fail. We fear that such a failure in such a public way could change the way others view us and indeed how we view ourselves. This can result in us holding ourselves back because we fear failure.

It can be helpful to refocus and see “failures” as “learning opportunities”. Some of the world’s greatest entrepreneurs, including the likes of Richard Branson, have failed several times in business. However they view these failures as learning opportunities.

Each time you fall over, you must learn how to get back up and apply that learning next time around.

Change the way you think about your goals and objectives. Don’t frame each business objective in order to avoid a potential failure. This is setting the objective in a negative context. Instead, set your objectives in a positive context. For example, set an objective to explore a new potential business case in order to learn about that opportunity. The goal is to learn, rather than to create, a new part of the business.

Finally, it can be helpful to visualise obstacles. Think of a situation in which you are afraid of failure.  Visualise yourself hitting an obstacle, allow yourself to feel the fear, and then see yourself moving forward. 

Next, spend a few minutes planning how to overcome whatever obstacles may stand in your way. Then see yourself succeeding despite these obstacles. You need to train your brain to focus on the solution rather than the fact that there is an obstacle in your way.