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Tax relief for buy-to-let landlords
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Income Tax
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HMRC has published new guidance on the upcoming changes to tax relief for buy-to-let landlords. From April 2017, tax relief on mortgage costs is to be restricted to the basic rate of tax. Landlords of residential properties have benefited from tax relief on finance charges, such as mortgage interest for many years.
This change marks a seismic shift in tax relief for buy-to-let landlords and will leave many facing far larger tax bills than was previously the case. The reduction in the relief for finance costs for landlords will be phased in over four years from April 2017.
The changes will also…
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New authorised ISA managers list
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Income Tax
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HMRC has published an updated list of authorised ISA managers. The list was updated on 25 July 2016 and inclusion on the list means that HMRC is satisfied that the person, firm or company concerned has met the various criteria in order to be considered authorised.
An ISA account is free of all Income Tax and Capital Gains Tax. Eligible holdings include cash, national savings products, life insurance products, stocks and shares. Account holders may make withdrawals at any time without the loss of tax relief.
In July 2015, the list of investments that can be held in a tax-advantaged ISA was…
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Employment intermediaries reporting deadline
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Payroll
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New rules introduced in April 2015 require employment intermediaries, who supply two or more workers to a client, to send HMRC details of workers where they don’t operate PAYE on the workers’ payments. HMRC has created these new rules to help combat issues of false self-employment and the abuse of offshore working by some intermediaries.
There is no requirement to send HMRC reports for UK employers that supply workers to end clients where nobody else is involved and where they operate PAYE when they pay those workers.
The report (or reports) must be sent to HMRC once every 3 months. The most…
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Withdrawal of transitional relief on investment growth
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Payroll
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HMRC Spotlights identify specific tax avoidance schemes of which HMRC has become aware and that they consider are not likely to have the legal effect desired by those thinking of using them. According to HMRC, the Spotlights series is designed to help taxpayers avoid unwittingly entering into arrangements that HMRC are likely to treat as tax avoidance.
In the Spotlights series HMRC:
- Provides some advice on tax planning to be wary of, listing some indicators that HMRC sees as suggesting that a scheme may involve tax avoidance and which it is likely to investigate.
- Identifies specific schemes…
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Pension auto-enrolment
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Pension
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The introduction of automatic enrolment for workplace pensions is intended to ensure that the majority of employees in the UK are offered the chance to be part of a work based pension scheme. Automatic enrolment into workplace pensions has been rolling out across the UK since 2012.
However, the first batch of small and micro employers with 30 or less employers only began to enrol in the scheme on 1 June 2015. There are estimated to be 1.8 million small and micro employers in the UK. It is expected that all employers will be part of the scheme by February 2018.
The Pensions Regulator is in the…
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More toolkits updated
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Value Added Tax
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HMRC has recently updated two further toolkits for the 2015-16 tax year.
1. The VAT input tax toolkit sets out common areas of risk in relation to completing a VAT Return. The toolkit may also be helpful to help tax agents and advisers review a client’s VAT return. For example, the toolkit includes a summary of the correct treatment of input tax incurred in the course of entertaining overseas customers.
2. The VAT partial exemption toolkit has also been updated. A business that incurs expenditure on taxable and exempt business activities is partially exempt for VAT purposes. The toolkit outlines…
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VAT – insolvency
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Value Added Tax
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There are special VAT rules concerning the VAT liability of certain services provided by insolvency practitioners. The rules are relevant to insolvency practitioners and official receivers (office holders) who are dealing with the business activities of VAT registered traders. There are also special procedures for insolvency practitioners to follow when dealing with HMRC.
Insolvency occurs when individuals or businesses do not have enough assets to cover their debts or are unable to pay their debts when they become due. There are various types of insolvency procedures that a VAT registered…
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Tax credit renewals deadline
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Tax credits
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The 31 July is the last day for families and individuals that receive tax credits to renew their tax credit. As in previous years, there was likely last minute rush when it may have been difficult to contact HMRC by phone.
Claims can be renewed by post, phone or online. A press release from HMRC released on 24 July 2016 highlighted the fact that approximately two million people have already renewed their tax credits. However, that still left more than one million renewals outstanding. According to HMRC the online renewal process now takes less than 10 minutes on average, with satisfaction…
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Company vehicles and private use
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Employee Benefits
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Where employees are provided with fuel for their own private use by their employees the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount. The fixed amount is currently £22,200. For example, in the current 2016-17 tax year a 150g/km CO2 rating would create a taxable benefit of £5,994 (£22,200 x 27%). The fuel benefit is removed if the employee reimburses their employer for all their private fuel use.
A company van is defined as ‘a van made available to an employee by reason of their employment’. The…
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Incorporating an LLP
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Corporate Governance & Regulation
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Limited Liability Partnerships (LLPs) retain the flexibility of a partnership with the added advantage that a partner’s personal liability is limited. At least two members must be ‘designated members’ and the law places extra responsibilities on them.
The formation of an LLP is more complex and costly than that of a conventional partnership. Problems can still arise when there are disagreements between the members. There is also the prospect of paying more tax on high profits than for companies.
The procedure for incorporating a Limited Liability Partnership (LLP) and the controls applied to the…
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Applying for an EORI number
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European Union
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The Economic Operators’ Registration and Identification System (EORI) is a European Union (EU) wide initiative that helps businesses communicate with customs officials when they are importing and exporting goods. The number allows for the tracking of imports and exports within the EU. By registering in one Member State businesses are able to obtain an EORI number that is valid throughout the EU. The EORI can be used in communications with any customs authorities in the EU.
An EORI application is made to HMRC and usually takes about 3 days to be processed. UK EORI numbers start with the letters…
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Ceased being self-employed?
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HMRC notices
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It is important for taxpayers to follow the correct steps if they stop trading as a sole trader or are ending or leaving a business partnership. This is so that HMRC can help to get the taxpayer’s affairs in order. Taxpayers that have ceased to be self-employed must inform HMRC of their change in status.
Taxpayers must send in a Self Assessment return by the relevant deadline and will need to work out their trading income, allowable expenses and any capital allowances. Taxpayers must also determine if they have any Capital Gains Tax to pay. In certain circumstances taxpayers may be able to…
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Uruguay and UK tax treaty
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Overseas tax issues
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HMRC has recently published a new Double Taxation Convention (DTC) that has been signed with Uruguay. The agreement will be effective in the UK for Income Tax, Capital Gains Tax and Corporation Tax and for similar Uruguayan taxes.
The new convention largely incorporates the latest standards on business profits, exchange of information and assistance in collection of taxes. The agreement follows the provisions of the latest Organisation for Economic Co-operation and Development (OECD) Model Double Taxation Convention. The convention also includes special rules relating to royalty payments and…
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New Code of Practice requirement for public sector workers
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Employment Law
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A new statutory Code of Practice on the English language requirement for public sector workers has been published by the government. The Code supports the new duty, contained in the Immigration Act 2016 and not yet in force, for all public authorities to ensure that their employees in customer-facing roles speak fluent English to an appropriate standard, or alternatively fluent Welsh in Wales.
The Code contains practical guidance on the standards and practices expected of public authorities when complying with their legal duty under the Immigration Act. The intention is that there will be a…
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General Data Protection Regulation
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Employment Law
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The General Data Protection Regulation (GDPR), which replaces the current EU Data Protection Directive, is due to come into force in the UK on 25 May 2018 and it introduces the most wide-ranging changes to data protection laws for 20 years. As the GDPR is a Regulation and not a Directive, it will be directly applicable in the UK from that date without the need for additional national legislation and this will be at a time when it seems likely that the UK will still be a member of the EU. Therefore, Brexit should have little, if any, impact on GDPR compliance planning for organisations.
The…
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VED receipts drop after new rules introduced
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General
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The use of paper tax discs for cars was first introduced in 1921. In October 2014, the requirement to display a motor disc on a vehicle windscreen was removed. Cars are now checked against the DVLA’s electronic register which the public can use to check the tax status of any vehicle online. Cars can also be checked by automatic vehicle number plate recognition technology.
At the time the changes were introduced, the National Audit Office had claimed there would be no ‘material increase in lost revenue’ as a result. The DVLA has now published annual accounts for the year ending 31 March 2016….
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The Northern Powerhouse
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General
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The Northern Powerhouse was a key economic proposal of the previous coalition government and continued to be a key focus of the David Cameron led conservative government. The plans to build a Northern Powerhouse remain an important government priority. The new Northern Powerhouse Minister Andrew Percy recently undertook his first official visit to the North since his appointment.
Key achievements for the Northern Powerhouse to date include:
- five historic devolution deals have been agreed across the Northern Powerhouse – in Sheffield, Greater Manchester, North-East, Tees Valley and Liverpool
- 55%…
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