New tax law places a requirement on the taxpayer to correct their past tax position in relation to tax due on overseas assets and transactions, rather than on HMRC to discover the facts.
If you make the correction on or before 30 September 2018, and pay any tax due, you will face the normal level of penalties (up to 100% of the tax). If the disclosure is made after that date, the penalties can be up to 200% of the tax due and, in addition, you could be subject to additional penalties based on the value of any assets which you hold overseas.
If you have any doubts about accounts you hold offshore, or deals you have made with overseas entities, now is the time to talk to us about them.
The most expensive piece of equipment most small businesses use is a car, but the Government generally doesn’t allow you to claim a deduction for the full cost of a car in the year of purchase. The acquisition cost of most cars must be spread over several years using Capital Allowances, the rate of which varies depending on the vehicle’s CO2 emissions.
Cars with higher emissions qualify for a Capital Allowance deduction of 8% of the reduced cost per year, and cars with lower emissions qualify for an annual deduction of 18% of the remaining cost. The boundary between higher and lower CO2 emissions is 110g/km for cars purchased from April 2018 onwards, reduced from 130g/km for cars purchased in 2015/16 to 2017/18.
Cars with very low CO2 emissions do qualify for a 100% deduction in the year of purchase, but only if the car is brand new and unused when acquired. Very low CO2 emissions is now defined as no more than 50g/km; for cars purchased in 2015/16 to 2017/18 this threshold was CO2 emissions of 75g/km.
New electric cars qualify for 100% first year allowances. The cost of installing charging points for those electric cars also qualifies for a 100% deduction where the expense is incurred by 31 March 2019. Gas refuelling stations for vehicles also qualify for 100% allowances in the first year, if the cost is incurred by 31 March 2021.
All Capital Allowances must be claimed within the tax return for the period in which the cost was incurred, or in an amendment to that return, which can be made up to a year after the filing date for the return.
Scottish taxpayers have a Government which has a different approach to income tax and spending. It has increased tax rates for higher earners and inserted new tax bands from 6 April 2018.
Unfortunately, the Scottish tax bands don’t align with the thresholds for National Insurance Contributions (NIC), which are set by the UK Government. The Scottish tax rates and bands also don’t apply for savings and dividend income, nor for Capital Gains Tax.
The Scottish Income Tax and NIC bands for 2018/19 are shown in the table.
Tax bands for 2018/19
|Income in band £
||Scottish tax rates
||Class 1 NIC rates %
||Total rate on band
|0 – 8,424
|8,425 – 11,850
|11,851 – 13,850
|13,851 – 24,000
|24,001 – 43,430
|43,431 – 46,350
|46,351 – 100,000
|100,001 – 123,700
|123,701 to 150,000
* The rate between £100,000 and £123,700 is an effective rate that applies due to the withdrawal of the personal allowance above £100,000.
You are classified as a Scottish taxpayer if your main home is in Scotland, in which case you should have a PAYE code that starts with ‘S’. HMRC use your correspondence address as the indicator of your main home, unless you inform them otherwise.
If you are a self-employed Scottish taxpayer, you will pay the Scottish Income tax rates as per the table, plus NIC at 9% instead of 12% paid by employees.
Tax relief on pension contributions is given at 20%, even for Scottish taxpayers who pay tax at only 19%. Any additional tax relief due for pension contributions at 21% or higher rates will have to be claimed in your tax return, or by contacting HMRC.
Tax free childcare accounts can now be opened by all eligible parents who have children aged under 12, or under 17 if the child is disabled. For every £8 the parent deposits in the account, the Government will contribute £2, up to a maximum of £2,000 of Government support per child per year. Those limits are doubled for disabled children.
Parents who open a tax free childcare account are not supposed to double-up their childcare support by also receiving childcare vouchers or directly paid-for childcare from their employer. The parent should tell their employer in writing that they have opened a tax free child care account within 90 days, and the employer should take that employee out of the childcare scheme.
All employer-provided childcare voucher schemes were due to close to new entrants in April 2018, but this deadline has been extended to October 2018. This is good news, as the tax and NIC-free childcare vouchers can be given to parents whose youngest child is aged 12 or more, and hence don’t qualify for the tax free childcare account. Employer-provided childcare vouchers can be used to provide care for any child under school leaving age.
Many families ask the child’s grandparents to provide childcare on an informal or formal basis. Where those grandparents are under state pension age, and they care for a child aged under 12, they can claim adult childcare National Insurance (NI) Credits.
The person providing the care must be a relative of the child and mustn’t be paying NIC on another job at the same time.
The child’s parents must be entitled to child benefit for the child (but don’t have to be actually receiving that benefit). This type of NI credit has only been available since 2011 and it is not widely advertised by HMRC.
There is a new scam claiming to be from Companies House doing the rounds. Please click the below link to make yourself aware of this scam.
Hills & Peeks are pleased to announce that Chris Martin will be joining us as a Business Administrator Apprentice on 26th March 2018.
Chris will be replacing Emma in reception and will be the first point of contact for all clients.
Chris will book in appointments for Leigh, take messages and direct any queries to another member of our team who will be able to help you. We would like to ask for your patience whilst Chris settles in and learns the ropes and gets to know people.
Emma’s role is changing and she will be moving upstairs to join the accounts production team.
If you receive an email or text from HMRC, be aware that they will never ask for personal or payment information. If you’re concerned about a message from HMRC, please do not action. Type ‘HMRC Scams’ into your web browser for further guidance.
The Governments aspiration for the UK tax system is that all taxpayers should submit their accounts information to HMRC directly from accounting software. The first step towards this brave new digital world will be taken by VAT registered businesses.
From 1 April 2019, VAT registered businesses will have to submit their VAT returns via accounting software, not as now, by inputting figures on to a form on the HMRC webpage. There will be exceptions for business owners who cant use computers due to age, disability or religious reasons. Businesses that are VAT registered on a voluntary basis will be able to choose whether to use accounting software to submit their returns or not.
The figures submitted by the software will be the same totals as are currently reported on quarterly VAT returns, but the business will have the option to submit more detailed supplementary information. We will be able to submit your VAT figures on your behalf as now, but the law will require you to keep your accounting information in a digital form.
The best way to prepare for this digital revolution is to get into the habit of recording your income and expenses using accounting software. We can help you choose and implement the right software for your business.
|Are you geared up for the digital tax revolution?
For many people the New Year prompts a review of their life goals. If you are now wondering whether, or when, you should sell your business, a sensible first step is to make a provisional plan for its disposal.
The sale of a successful trading company will generate a capital gain, which would normally be taxed at 20% after deduction of the annual exemption (currently £11,300, £11,700 for 2018/19).
Entrepreneurs Relief can reduce the tax rate to 10% on a gain of up to £10m. But both of these conditions must be met for at least 12 months ending with the date of the sale:
- you held at least 5% of the ordinary shares and voting rights of the company, or you acquired the shares under the EIM scheme;
- you were an employee, director or company secretary of that company or of another company in the same group.
If you step back gradually from your company, retiring from your role as director before you sell your shares, you may miss out on this valuable tax relief. A plan to disincorporate and carry on the business on a smaller scale as an individual or partnership can be caught by antiavoidance legislation.
If you would like to pass on your company to your employees but they cant afford to buy it, an employee ownership trust can be used. The trust acquires enough shares to control the company, and holds those shares on behalf of the employees. You escape CGT on the shares you pass to the trust, as long as the controlling shares are transferred within one tax year.
|Allow at least 12 months to prepare to sell your company.
Buying property is about to get a little more complicated, as the taxes you pay on purchase will be different in Wales, Scotland, and the rest of the UK from 1 April 2018.
In Wales, Land Transaction Tax (LTT) will apply to residential property purchased for over £180,000, with a starting rate of 3.5% in the band to £250,000. This contrasts with the starting rate of Stamp Duty Land Tax (SDLT) in England and Northern Ireland of 2% for properties in the band £125,001 to £250,000. In Scotland the starting rate of Land and Buildings Transaction Tax (LBTT) is also 2% but that applies to properties valued at over £145,000, up to £250,000.
However, there is an exemption from SDLT on the first Â£300,000 of the property value for first-time buyers from 22 November 2017, where the total value of the property doesn’t exceed £500,000. The Scottish Government will also apply a first-time buyer exemption from LBTT on the first £175,000, from a date to be announced in 2018/19.
The Welsh Government has decided not to cut LTT for first-time buyers, as the average price of a home purchased by such individuals in Wales is £135,000, below the starting point for LTT.
All three countries impose a 3% supplementary charge on the value of residential property purchased by companies or as a second home, where the value of the property exceeds Â£40,000. However, the detailed rules for the supplementary charge differ in each country.
|Check the taxes to be payable on purchase before exchanging contracts to buy property.