OUR BLOG

Keeping you up to date on the latest accounting and tax issues

Author Archives : George Hay Chartered Accountants

Self-employed should be aware of self-assessment registration deadline

HMRC must know about any new source of income by 5th October in the tax year following it’s establishment. The concern, with only a short time left to register for self-assessment, is that self-employed and gig-economy workers may be unaware of this requirement.

Should you be registered for self-assessment?

For these individuals, work doesn’t always come in a steady stream and assignments may be ‘one-off’, or otherwise very casual. This leads to uncertainty about whether income is or is not taxable. The truth is that even the most casual activity, or one-off job, may be taxable.

The Low Income Tax Reforms Group (LITRG) is concerned that self-employed and gig-economy workers may not fully understand their responsibilities. Even where no Income Tax or National Insurance is due, HMRC should still be notified of any new income. In these instances, preparing and filing a self-assessment tax return may still be necessary.

You can find out if you need to register for self-assessment and send a self-assessment tax return here on the GOV.UK website.

Failure to notify HMRC and failure to prepare and submit a return accordingly may result in financial penalties. 

Where the 5th October deadline is missed, the individual should still register for self-assessment as soon as possible. If the tax owed is paid on time (31st January 2018), then penalties may not be imposed.

Simple assessments

In the same week, as various reminders emerge about self-assessment, HMRC also began to rollout simple assessment notices. These notify taxpayers of Income Tax or Capital Gains Tax due without the need for a tax return submission.

HMRC will only issue these in straight-forward cases, where it has access to all the 3rd party information it needs.

Although this seems to be a step towards improving the efficiency of the tax system and making it easier for the taxpayer to navigate, it is not entirely failsafe. If a taxpayer receives a simple assessment notice, it is vital that they carefully check the details that HMRC has used for its calculations and ultimately whether they agree with any amount owing as a result.

HMRC are allowing a 60-day period, within which taxpayers must query a notice if they believe it to be incorrect. We urge taxpayers to engage swiftly upon receipt of a simple assessment notice. If you fail to query the notice within 60 days, you cannot appeal and you must pay any tax due.

Here at George Hay, whether self-assessment or simple assessment we can help you to fulfil your obligations. Contact us today on 01767 315010, to find out more.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

HMRC release September 2017 advisory fuel rates

HMRC has now published the latest advisory fuel rates (AFR), effective from 1 September 2017, for users of company cars.

If you drive a company car, you can’t claim business mileage but you can recoup the cost of fuel for business journeys using HMRC’s recommended advisory fuel rates.

Compared with the rates applied in the previous quarter, there have been only 4 changes; the rates for diesel and LPG vehicles, over 2000cc, have fallen by 1 pence per mile as well as petrol and LPG vehicles between 1401cc and 2000cc which are also subject to the same reduction.

Advisory fuel rates are applicable only under the following circumstances:
– To reimburse employees for any business travel in their company car; or otherwise,
– to reclaim money from employees to cover the cost of fuel for personal travel in their company car

The new advisory fuel rates

HMRC accepts that there is no taxable profit on reimbursed travel expenses, where the rate per mile paid does not exceed the AFR. Likewise, in these circumstances, no Class 1A national insurance is payable.

Advisory fuel rates are calculated based on engine size and the type of fuel that the vehicle requires. Below are the rates effective from 1 September:

advisory fuel rates

 

 

 

advisory fuel rates

The above applies to all journeys, made on or after 1 September, until further notice. However, for one month from the date of change, employers can opt to use the previous quarter’s rates.

HMRC review the AFR four times a year and take into account recent fluctuations in the cost of fuel when doing so. It will publish rates for the next quarter shortly before 1 December 2017.

So how will it affect you?

If you… cover the cost of fuel yourself your employer can choose whether or not they wish to reimburse you. Should they opt to reimburse you, the rate that you receive must be correct. If the rate you receive is higher than the AFR, your employer must provide evidence to support the higher rate. You may face tax and national insurance liabilities if use of the higher rate cannot be justified.

If you… use a company card to pay for fuel then you will likely find yourself repaying your employer for any private trips that you take in the company car. In some cases, if you have the relevant evidence, you may repay at a lower rate, relative to the cost of your fuel.

If you… don’t pay anything towards your fuel and your employers covers the total cost you may have to pay fuel benefit tax.

Tax relief

There are a couple of instances whereby you may be eligible to claim tax relief on fuel costs, as follows:

– Your employers pays you less than the advisory rate
– Your employer does not reimburse you at all

Either way, you’ll need to fill in HMRC Form P87, or a self assessment tax return if your claim exceeds £2,500 and keep records to support your business mileage and fuel costs.

Further information about advisory fuel rates can be found here on the GOV.UK website.

 

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

UK businesses still struggling with Automatic Enrolment

As UK law now states, it is your job as an employer to enrol all eligible employees onto a workplace pension scheme and contribute towards it. This is called ‘Automatic Enrolment’.

During 2017 it is estimated that approximately 700,000 employers will stage.

Are employers complying with Automatic Enrolment?

Figures recently released by The Pensions Regulator show that just over 598,100 out of 1.4m employers have submitted a Declaration of Compliance, up to the end of May 2017. However, there is still a shortfall of approximately 800,000 employers who are not yet compliant with the schemes legal requirements.

All businesses existing prior to April 2012 will have passed their staging date by now, while other companies will still be in the process of staging. The Pensions Regulator has issued a warning to businesses looking to begin trading from October this year (see our earlier blog post). The warning highlights the immediate pensions duties that these businesses must observe.

If you are planning to begin trading and recruiting from October, you will have an immediate legal obligation to your employees in respect of pensions. Therefore, you cannot afford to forget about, or ignore, your Automatic Enrolment responsibilities.

Non-compliance leads to naming and shaming

If you fail to fulfil your legal duties, you can expect to face significant financial penalties or other enforcement action taken against you.

So far, The Pensions Regulator has issued more than 16,000 penalty notices to those failing to comply and has now begun to name and shame these businesses online. It has publisheAutomatic Enrolmentd details of employers who have paid penalties but remain non-compliant and employers who have failed to pay and are now facing a court order.

Whatever you do, do not ignore your auto-enrolment responsibilities. At George Hay, we can support you throughout the process and ensure you are fully compliant. Get in touch with our team today on 01767 315010.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Instant pension duties for start-up businesses

Businesses who begin trading and recruiting from 1st October this year will have instant pension duties to fulfil. This warning comes as the current schedule for employers to meet their automatic enrolment obligations comes to an end, meaning all businesses who existed prior to April 2012 will now have passed their staging date.

Specifically, the duties will apply from the first day that the first member of staff commenced work, referred to as the ‘duties start date’.

The Pensions Regulator (TPR) has launched an online bank of information and relevant tools to help new businesses, as well as their advisers, understand and fulfil their obligations. New employers will also receive written guidance, from The Pensions Regulator, explaining what they must do and highlighting the deadlines associated with the process. startup1

One exemption that may apply to these new businesses is in respect of PAYE; when it comes to having a PAYE scheme in play, if staff earn £490 a month or less then HMRC may not require the employer to set one up.

If you’d like more information, there is now a new ‘employer’ landing page on The Pensions Regulator website, which can be found here.

At GH Payscheme, George Hay’s specialist Payroll Bureau in Biggleswade, Letchworth and Huntingdon, our team can assist you with administering your chosen workplace pension scheme and help you to ensure that you comply with the requirements of Auto Enrolment.

If you’re a business looking to start employing your first members of staff later this year, or if you’d just like to find out more about the services we offer, talk to one of our advisers today.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Top Tips for the end of the tax year

Are you making the most of the allowances and tax advantages available to you? Are you aware of how certain changes to the tax system may impact you and your business? Have you planned and prepared for the new tax year? Here’s some top tips that just might help…

Top 7 Tips

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Coming soon: Changes to IR35 rules confirmed

The Government has confirmed that, from 6th April 2017, changes to IR35 rules will apply for those contracting in the public sector. This is another step towards them tackling tax avoidance, targeting those who use limited companies to disguise employment status.

The new rules shift the responsibility for determining whether a contract falls within IR35 from the contractor themselves (the personal service company) to the client.

If the client decides that IR35 applies then the contractor’s business will be taxed at source, as if it were an employee. Despite this, there is no change to a contractor’s actual employment status meaning they are not entitled to the rights and benefits associated with being employed. The result will be a significant reduction in the contractor’s take home pay.

It is worth noting that the underlying criteria, on which IR35 status is determined, has not changed, only the responsibility for who applies it. Often this will be an agency who may not always have sufficient information about particular working practices to make a decision. However, they can ask the client, who must provide an answer within 31 days, to give an opinion on IR35 status.

To assist with the decision-making process HMRC have developed an online tool which makes a judgement on the employment status of a contractor. The user answers questions about the relationship between the worker and the public-sector client they are contracted with. It is for the public authority to decide whether off-payroll working rules should apply.

It is interesting to note that HMRC’s software found 90% of contractors to be ’employees’, compared with a tax adviser’s alternative software which gave a result of 40% as borderline.

There is a danger that public-sector bodies and agencies who do not fully understand IR35, as well as being adverse to risk, will invariably deem that the contractor is within IR35 as default. Consequently, many contractors will fall into the net who should not be there. 222

To counter this, if a contractor believes they have been taxed incorrectly a repayment claim can be submitted to HMRC. HMRC will then determine if a repayment of Income Tax or NICs is due and action as appropriate.

Long-term, the new rules could see a decline in contractors’ willing to work in the public-sector and the public-sector may find it a challenge to attract the skill-sets it wants. There may also be a trend towards more contractors accepting employment in the sector.

Besides all this, it’s perhaps also worth considering that if IR35 changes in the public-sector work well, it’s very possible that the same could be implemented in the private-sector, in the not-so-distant future.

For those of you who think you could benefit from guidance on IR35, particularly the new legislation and how it will affect contractors, intermediaries and public-sector bodies, please do contact us on 01462 708810 or email martin.williams@georgehay.co.uk.

Further details of the changes to IR35 coming in April can be found here.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

A summary of Philip Hammond’s Spring Budget speech

Yesterday afternoon The Chancellor, Philip Hammond, delivered his first and last Spbudgetring Budget, giving a promising speech in which he altered very little within the tax system promoting a level of stability that we, as accountants, can only approve of.

Addressing Parliament for just 56 minutes he reaffirmed his intention to persist in cultivating a strong and fair economy, preparing Britain for a ‘global future’ in the face of Brexit and ‘making it the best place in the world to do business’.

Here are the top 10 things we think you need to know following the Spring Budget:

  1. Hammond confirmed that the tax-free personal allowance would increase to £11,500 and the higher rate tax threshold would increase to £45,000. The National Living Wage will also increase to £7.50 from £7.20 for workers aged 25 or over. Both measures take effect from April and will result in many full-time employees being financially better off.
  2. For the self-employed, Class 4 NIC’s will increase from 9% to 10% in April 2018 and again to 11% in April 2019; this certainly represents a hit for this demographic and such an attack fails to recognise the significant contribution they make to the British economy.
  3. The tax-free dividend allowance will shrink from £5,000 to £2,000 for shareholders of companies, undoubtedly affecting most owner-managed businesses, meaning many more people will end up with tax liabilities on dividends.
  4. Small businesses and landlords with an annual turnover below the VAT threshold will have until April 2019 to prepare for the transition to quarterly reporting, to HMRC, under the Making Tax Digital (MTD) regime.
  5. A £300m fund, given to local councils, will provide discretionary funding for those worst affected by the hike in business rates, plus those losing small business rate relief will see their monthly increase capped at £50 for a yearlong period; despite these measures many believe the consequences of the increases will only be delayed and not eliminated.
  6. Funding has been allocated for 110 new free schools, in addition to the existing commitment.
  7. Other investments include: £2bn in social care, £425m in the NHS, over £500m in technical education, £300m for academic research placements and £690m on infrastructure.
  8. For savers, the Lifetime ISA will become available from 6th April this year, allowing younger adults to save up to £4,000 each year, receiving a bonus of up to £1,000 a year on these contributions. Funds can be withdrawn, tax-free, to put towards a first home or otherwise saved until the individual turns 60. For 12 months, from April 2017, the three-year NS&I investment bond with a 2.2% interest rate will be available to all aged 16 or over, allowing them to save between £100-£3,000.
  9. Tax-Free Childcare is on the horizon, providing up to £2,000 a year in support for each child under 12. Parents can receive up to £4,000 for disabled children up to the age of 17. Those parents of younger children will be eligible to apply first, with all eligible parents able to access the scheme by the end of the year. Working parents in England will also be able to submit an application for an additional 15 hours of free childcare for three and four year olds, bringing the total to 30 hours a week.
  10. There will be no change to previously planned uprating’s of duties on alcohol and tobacco, however there is a new minimum excise duty applicable to cigarettes based on a packet price of £7.35.

As always, the issues raised and addressed in the Budget have lasting consequences for us as individuals, our families, our businesses and, on a larger scale, our economy.

Here at George Hay we are experienced in providing professional, and proactive tax advice, as well as a wide range of other advisory services, to businesses of all sizes, and individuals. If you’re concerned about any of the announcements in the Spring Budget, or have questions about how they might affect you or your business, please do contact our team of Tax experts.

The George Hay Spring 2017 Budget Summary, written by our experts, can also be found here.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Bereaved families will see sharp rise in Probate fees

When a person dies, their assets are frozen and it is the responsibility of the executor/s named in the Will, or administrators if a Will does not exist, to apply for a grant of representation, otherwise referred to as Probate. This is an authority from the Court that permits the administration of the estate and banks and building societies, for example, will often request this document before they are able to close accounts and release funds.

A ‘flat-fee’ system currently operates in respect of Probate fees, whereby personal applications are charged at £215 and applications made by accountants on behalf of an individual at £155. However, from May 2017 (date TBC), in England and Wales, the structure of Probate fees will change dramatically, as part of the Ministry of Justice’s (MoJ’s) plans to subsidise costs associated with running the HM Courts & Tribunals Service.

The ‘flat-fee’ approach will be replaced by a banded structure, meaning fees will increase in line with the value of the estate.

Presently, estates valued at £5,000 or less are exempt from fees but this threshold will increase to £50,000; a measure which the MoJ suggests will relieve some 30,000 estates. At the other end of the scale estates valued at, or in excess of, £2m will incur fees of up to £20,000. It is also expected that probate applications will be excluded from the fee remissions scheme for those who cannot afford them.

The banded fee structure is expected to operate as follows:

Probate estate values

The MoJ’s initial proposals were met with overwhelming opposition, and its subsequent decisions have been received in a similar vein. The pronouncement that it will continue with the implementation of these plans, expected to raise over £250m, has sparked concern amongst industry professionals.

The worry is that the new fee structure, deemed a ‘backdoor tax’, will disproportionately affect those ‘asset-rich but cash-poor’ individuals who, despite perhaps having money tied up in other assets, may not have immediate access to funds, as well as many rural families owning farmland. If sufficient funds are not readily available it is a concern that families may resort to securing bank loans to cover the costs, putting little thought into how these will eventually be paid back.

The changes will undoubtedly present problems in respect of time delays, an increased financial burden and added stress for bereaved families. Not only this, but it is expected that enforcement of the proposals will motivate people to consider reorganising their affairs to avoid the costs.

The increases, we feel, are totally unjustified, seeming to be just another fund raising measure by the Government. People must be aware that the charges apply based on the value of an estate, no matter who inherits and whether or not Inheritance Tax is payable. Somebody with an estate worth over £1m could leave it all to the surviving spouse yet still be liable to pay the £8,000 fee. If the plans go ahead, as expected, our first priority will be to explain the changes carefully and thoroughly to our clients and advise them to consider how any assets are currently held. In all but the most straightforward cases, it is vital that you pursue professional advice.

You can find more information about our comprehensive Probate offering here.

GH Probate is the trading style of GH Probate Limited. Registered in England and Wales number 9630102. Registered Office: St George’s House, George Street, Huntingdon, Cambridgeshire PE29 3GH.
Authorised to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England & Wales

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Tick, Tock, Tick, Tock! Time is running out to make BPRA claims…

renovation-2The 10-year window within which sole traders, partnerships and limited companies can claim 100% relief under the Business Premises Renovation Allowance (BPRA) on the renovation or conversion of unused commercial property, for business use, is coming to an end on the 31st March 2017.

The tax relief was first introduced in 2007, intended to encourage the development of empty premises in areas considered to be disadvantaged. For the expenditure to qualify for relief it must meet a number of conditions, as follows:

1. The individual incurring the outlay must have a relevant interest in the property
2. The property must be a business premises
3. The property must be unused for more than 12 months
4. The property must be located in a disadvantaged area

The expenditure must be incurred on, or in relation to, the renovation or conversion of a qualifying building into a qualifying business premises. In order to qualify, the building must satisfy the following criteria:

The building must have been empty for at least 12 months prior to work beginning
The building must be in a designated disadvantaged area
The building must have been last used as a commercial property
The building must remain as business premises following conversion/renovation

The available relief covers expenses including construction work, management fees, professional fees, machinery costs and even planning applications. However, it is worth bearing in mind that costs associated with acquiring land, extending a building and developing land beside a building do not qualify for BPRA.

Expenditure incurred prior to the 31st March deadline will qualify for the relief, but you will not be eligible to claim if expenditure is incurred after this date.

With the deadline looming it is important that you consider any current plans to set in motion a project that may qualify for relief under BPRA – if you think you are in the midst of planning an eligible development you should seek professional advice at the earliest opportunity to ensure you don’t miss out on the benefits of your entitlement.

Here at George Hay we have a team of property experts who understand the complexities associated with property taxation. Our team are perfectly placed to provide well-considered tax advice and integrated solutions to developers and investors alike. If you’d like to find out more about how we can help, call us now on 01480 426500.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Thousands more families facing fearsome inheritance tax bills…

Many people face bills of tens or even hundreds of thousands of pounds with inheritance tax currently being charged at 40 per cent and in the last year alone, the number of estates liable to pay IHT has risen by 15 per cent. For the 2016/17 tax year it is expected that many more families will face IHT bills than in previous years, a trend that looks set to continue.

The IHT threshold, or nil-rate band, is currently frozen at £325,000 and will remain at this level until at least 2019. IHT is charged at 40 per cent on everything in the estate above the £325,000 boundary, or £650,000 for married couples.

Previously George Osborne had made the promise that he would raise the threshold to £1m, something which, in the end, never came to fruition. underprepared, will be caught in the IHT net. The government will undoubtedly remain reluctant to ease the tax burden, particularly because IHT makes up an ever-growing proportion of the revenue that they collect.

The decision to freeze the nil-rate band, combined with rising house prices and inflation, means that many more ‘ordinary’ families, who are potentially unaware and hugely underprepared, will be caught in the IHT net. However, as doom and gloom as this all may seem, with careful planning you may still maximise the amount of your wealth that is protected.

For instance, the introduction of the new main residence nil-rate band from April 2017 means that where an estate includes a property valued at £100,000 or more, this can be passed to a direct descendant tax-free, effectively meaning the threshold is increased to £425,000. (This is still a long way from the George Osborne’s promise of £1m!)Picture1

The rules surrounding IHT are incredibly complex, and there are IHT planning steps taxpayers can and should consider throughout their lifetime. There will also be opportunities for planning post death by the Executors and beneficiaries in order to maximise entitlement to the available reliefs.

Here at George Hay, we have a team specialising in IHT planning, who can work closely with your legal advisers to ensure your wishes are achieved. We also offer a non-contentious, comprehensive probate service, with no need to involve a third party, whereby we can assist you with taxation, administration and accounts preparation. Click here to find out more about how we can help.

Authorised to carry out the reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England & Wales.

Share this article:Share on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn

Contact Us

Our Offices

Bedfordshire (Biggleswade)
Brigham House, 93 High Street, Biggleswade, Bedfordshire, SG18 0LD
Tel: 01767 315010

Hertfordshire (Letchworth)
Unit 1b, Focus 4, Fourth Avenue, Letchworth Garden City, Hertfordshire, SG6 2TU
Tel: 01462 708810

Cambridgeshire (Huntingdon)
St George’s House, George Street, Huntingdon, Cambridgeshire, PE29 3GH
Tel: 01480 426500
© 2017 George Hay