Small Businesses. Travel Costs

Transcription

1 Small Businesses Travel Costs During the Summer Budget it was proposed that tax relief for travel and subsistence would be restricted for contractors who were employed through an umbrella company, or employment intermediary, which included a personal service company. This change in the tax rules would have caught many small businesses who supply the services of the owner/director to work at their customers sites. As of the 6th of April, this restriction will be rolled out for employees using an umbrella service provider and other employment intermediaries. However personal service companies will only be caught if the circumstances of the contract fall within IR35. This is a huge relief for many contractors working in various sectors throughout the UK. However with this jump of joy also comes with the responsibility of being extra cautious in relation to IR35 as the legislation may be reviewed during April 2016.

2 Our advice As the director of your limited company it is you, not your client, who is responsible for ensuring that you are complying with all relevant legislation; this includes IR35. With this in mind, along with the above mentioned changes to IR35 come April 2016, it is of vital importance that you are knowledgeable around the legislation. As always, we recommend to our clients to approach a professional advisor for a contract review upon each new contract. Robert Fawell, Practice Manager. Business Rates Small businesses have yet another reason to have a smile on their faces with the promise of another years extension for the Small Business Rate Relief from the 1st of April The whole structure of Business Rate Relief will be under review with decisions to lower or raise rates being given to local councils, depending if there is a locally elected Mayor in place. Distributions When a company has been dissolved through formal liquidation, any value held is distributed to the shareholders and taxed as a Capital Gain. This gain may only be subject to Capital Gains Tax (CGT) at10% where entrepreneurs tax relief applies, which results in a huge tax saving compared to income tax on dividend distributions or the 28% rate of CGT. The Government is now looking to introduce anti-avoidance legislation to prevent income which has accumulated within a company being taxed as a capital gain. Further details of this anti-avoidance measure will be released on the 9th of December in draft legislation. Tax Avoidance. Following a vast amount of publicity over the last couple of years, the Government has made the decision to block the following avoidance schemes with immediate effect: Intangible assets: The law has now changed to ensure the intangible asset rules still apply when the asset is held through partnerships of LLP s. The Government will also be reviewing the intangible assets regime for companies as a whole. Capital allowances: Under the current capital rules, it is possible to manipulate the disposal values of plant and machinery to achieve excess balancing allowances under the capital allowances rules. However legislation will be introduced in Finance Bill 2016 to adjust disposal values for tax purposes to reflect the payment actually received for the asset; this applies for corporate tax and income tax. Leasing: Where a company or individual takes on obligations under a lease, it may receive consideration from the party which previously held the lease. Such consideration has in some

3 Tax circumstances escaped tax. From now on where consideration is received for taking on a lease, that consideration will be taxable, regardless if it is received by a connected person. Disguised remuneration: In place of their pay, if an employee takes a non-repayable loan from his employer, or from a trust set up by the employer, this is classed as disguised remuneration. The Government first released legislation on such schemes back in 2011, however they have now given notice that any future attempts of disguised remuneration will be closed down with effect immediately following the release of retrospective legislation. Tax Administration Embracing the digital world with open arms, the Government are keen to encourage taxpayers to interact with HMRC online as much as possible, this includes submitting Self-Assessment Tax Returns online and paying taxes electronically. They believe that removing all paper processes will cut costs significantly and improve efficiency for all parties concerned. As part of the move towards making tax digital, the following changes will be taking place: Simple assessments: Taxpayers who usually submit a Self-Assessment Tax Return, but have relatively simple tax affairs, may be saved the trouble of completing the tax form for 2016/17. Instead HMRC will be sending a calculation of the tax due based on information it already holds, and if they taxpayer agrees, they will then pay the amount or appeal. Digital tax accounts: Self-employed individuals and landlords will be required to report their earnings and expenses to HMRC at least once per quarter during the tax year rather than the previous arrangement of once after the end of the tax year. It is not quite clear when this new reporting system will come into effect as new software will need to be developed. Our advice Although the move to Digital Tax Accounts will simplify the tax affairs for many, you are still relying on HMRC s information being correct which is often not the case. Given the issues with real-time reporting of payroll, I m a little sceptical about the implication itself. HMRC have also yet to mention whether they will request quarterly payments for sole traders and landlords, or clarify the definition most businesses as it could affect a huge number of small businesses. HMRC are aiming to reduce the cost of business administration by 400 million however it s difficult to see how making taxpayers report more frequently will reduce costs. Robert Trappe, Personal Tax Specialist.

4 The Scottish Rate of Income Tax From April 2016, the Scottish Parliament will have the power to set its own rate of income tax to fund spending by the Scottish Government. Essentially people who live in Scotland will pay a proportion of their income tax to the Scottish Government. This is a change from the current system, where all income tax is paid to the UK Government to fund spending across the UK. Currently, it is assumed that the main rates of income tax for Scottish taxpayers will be reduced by ten pence and this reduction will be replaced by the Scottish Rate of Income Tax. The rate has yet to be announced but it is heavily assumed to be 10 pence too, so income tax rates for Scottish taxpayers will stay the same as the rest of the UK. If it is set at a different rate, then Scottish taxpayers will pay a correspondingly higher or lower rate of income tax than elsewhere in the UK. The definition of a Scottish taxpayer is based on where an individual lives in the course of a tax year. Scottish taxpayer status applies for a whole tax year it s not possible to be a Scottish taxpayer for part of a tax year. For most taxpayers, the location where they live will be obvious, but there will be less straightforward cases for example, where people have more than one home, or have moved into or out of Scotland during the year. HMRC has provided guidance to help in these circumstances. HMRC will be writing to potential Scottish taxpayers in the next few weeks to confirm that the address held in their records is correct. If you receive this correspondence, please let us know. Property Investors Stamp Duty Land Tax (SDLT) The Summer Budget announced a restriction on the deduction of interest from rental income for individual landlords of residential property. This restriction will be phased in from 2017/18 to 2020/21. However, individual landlords who can buy properties to let without a mortgage are not affected by the interest restriction. To discourage cash-rich individuals from purchasing multiple properties to let, or to hold as second homes, a supplemental SLDT charge of 3% will be payable by individual purchasers of residential properties worth over 40,000. This supplement SDLT charge won t be payment by corporate purchases or by Real Estate Investment Trusts (REITS) which make significant investments in let properties. SDLT is currently payable within 30 days of the completion of the purchase and the SDLT return must be filed within that same period. From 2017/18 the Government is now proposing to bring that filing period down to 14 days from the completion date of sale. SDLT does not apply in Scotland as properties are subject to Land and Buildings Transaction Tax (LBTT) which was set by the Scottish Parliament. The Scottish Budget will be delivered on the 16th of December 2015 with any new rates being set for 2016/17.

5 Capital Gains Tax (CGT) CGT is currently paid by individuals by the 31st of January, after the end of the tax year. This gives the taxpayer between months to receive the proceeds, calculate the tax due, and then pay HMRC accordingly. From the 6th of April 2015 non-residential taxpayers have had a shorter time frame in which to report the sale of UK residential property and pay the tax due only 30 days from completion of the disposal. However there are a few exceptions to this for non-residents who are registered with HMRC before they make the disposal. Because HMRC is so pleased with the effectiveness of the 30 day reporting system and payment timeframe for non-resident taxpayers, the Government has decided to extend it to all UK taxpayers who make taxable gains when selling residential properties. This change is expected to apply from the 6th of April Although this is the case, the advanced payment of CGT will not be straight forward to implement. Currently CGT can only be accurately calculated once all the taxpayers capital gains and losses for the relevant year come to light. Losses must be set against gains; the net is then taxed at either 18% or 28% (depending on the taxpayer s total income for the year). The Government will allow CGT to be paid on a provisional basis to allow for these difficulties in calculation. Annual Tax on Enveloped Dwellings (ATED) The 2016/17 rates for the ATED were not announced in the Autumn Statement. We already know that a lower band for properties valued at 500,001 to 1 million will be imposed from the 1st of April 2016, and the charge for that band of property is likely to be around 3,500. The ATED is only payable where a residential property is held by a corporate structure, unit trust or partnership containing a company. There are exceptions from the ATED charge, however these are mainly relevant for properties which are commercially let or used for specific purposes. Those exemptions are to be expanded to include properties in equity release schemes from the 1st of April Employers Real Time Information (RTI) Employers with 9 or less employees can now take advantage of a relaxation in the RTI reporting rules. They are permitted to submit a full payment submission on the last payday of each month rather than on or before every payday within the month.

6 However the bad news is this relaxation will come to an end on the 6th of April 2016 and won t be renewed, so enjoy while you can. Auto-enrolment Employers who already have their employees enrolled in a company pension scheme are obliged to contribute a minimum of 1% of their employees relevant pay to the pension scheme. That minimum employers contribution was set to increase to 2% during October 2017, then to 3% during October It has now been announced those dates have been put back by 6 months to align with the start of the new tax years 2018/19 and 2019/20. This will give employers some breathing space to budget for the increased costs of auto-enrolment. Car and van benefits Company cars which use diesel currently carry a 3% supplement on the percentage of list price used to calculate the taxable benefit. This diesel supplement was going to be removed from April 2016, however this will now stay firmly in place until 2020/21. As a result, diesel cars will continue to attract a higher benefit charge than cars powered by other fuel types. The fuel charge multiplier has increased by 100 to 22,200 for 2016/17 with the benefit charge for fuel used in a company van increased from 594 to 598. The chargeable benefit for petrol or diesel company vans is set at 3,170 for 2016/17. The chargeable benefit of having a zero-emissions van provided for private use in 2016/17 will be 1,268, a significant increase from the previous 630 for 2015/16. Apprentice levy An apprentice levy will be introduced from the 6th of April The idea is for all employers to be required to pay the levy set at 0.5% of their annual payroll cost. However, each employer will also have an annual credit equivalent to 15,000 to set against the levy, which means only the largest employers with payrolls of over 3 million will actually pay the levy. Employers who choose to take on apprentices will receive vouchers funded by the apprenticeship levy to set against the cost of apprentices. Although this is the case, large employers who take on employees through graduate training schemes rather than as apprentices may in fact lose out - this is due to the fact they will need to pay for the levy but will not qualify for the vouchers, even though they have paid for training.

7 Individuals Entrepreneur s relief During the Autumn Statement in 2014, Chancellor George Osborne restricted the scope of entrepreneur s relief. The rules were then tweaked in March 2015 to restrict the relief in certain situations, mainly where joint venture companies or corporate partners are involved in a structure. The last change to this relief received strong criticism as many felt the rules cast the net too wide with many genuine investors and partners being prevented from claiming relief. It was announced that yet again these rules will be reviewed and re-written, with many fingers tightly crossed that the Government will get it right this time. Savings The maximum amounts that can be contributed to ISA s are frozen for 2016/17 at the levels for 2015/16 this will be for all types of ISA. The starting rate limit for savings income is retained at 5,000 for 2016/17. Every basic rate taxpayer has a personal savings allowance of 1,000 for 2016/17 and every higher rate taxpayer has a personal savings allowance of 500. Savings income falling within the savings rate limit or the savings allowance does not incur tax. Childcare The newly announced tax-free childcare savings scheme will be coming into effect in early For every 80 that is contributed to the savings account, the Government will contribute another 20. This will be up to a combined maximum of 10,000 per child per year, or 20,000 for a disabled child. Only parents who are working for a minimum of 16 hours per week will be eligible to open the savings account, and each parent must not earn more than 100,000 per year a threshold which has been reduced from 150,000 per year. If parents are currently receiving childcare vouchers from their employer, they can now opt to continue with this scheme or, alternatively, apply for the new savings scheme; it will not be possible to take advantage of both or swap back to vouchers once a decision has been made.

8 State Benefits Tax Credits In the Summer Budget, the Chancellor proposed cutting the rates and thresholds for working and child tax credits. This would have significantly reduced the income of many lower-paid families across the UK. However The House of Lords stepped in and blocked the legislation which would have made this change. It has now been decided that the rates and thresholds will be frozen for 2016/17 at the 2015/16 levels. One exception will be the disregard of rising income, which will be brought in line with the disregard for falling income; both will be set at 2,500 for 2016/17. However as mentioned earlier in the brief, it is important to note that the changes planned for tax credits will eventually come into force for anyone who starts on Universal Credit. The Government will be reviewing the rules surrounding making single or joint claims for tax credits as this is an area where many mistakes are currently being made and causing issues. State Pension The state retirement pension will be paid at two rates in 2016/17, this will depend on if the pensioner reached the state retirement age before the 6th of April 2016 or after that date. Full single tier pension per week Basic old-style pension per week Not everyone will qualify for the above mentioned maximum amounts. This brief has been written by MyAccountant for guidance. Before any action is taken, please contact our team for further advice.