Pasty Tax U-Turn

It has been announced today that the controversial ‘Pasty Tax’ is to be dropped. The rethink follows protests from bakeries and others who claimed it was unfair.

Under the new proposals VAT will only be charged on food intended to be served hot, not food that is cooked and then left to cool. 

Also announced today is a watering down of the proposal to charge VAT at the full rate (currently 20%) on purchase of static caravans.  Following widespread opposition from MPs of all parties, static caravans will now only be charged at 5%.

The announcements have received praise from many although Labour has been critical of the way this has been dealt with by the Government.

For further information/advice on this topic area please contact Ward Williams: www.wardwilliams.co.uk

How much tax should a newly self-employed person set aside?

As part of the campaign to help very small businesses cope with tax, HMRC has produced an interactive online tool to help newly self-employed people budget for their first tax bill.  The ‘self-employed ready reckoner’ calculates approximately how much money should be set aside to meet the first tax and Class 4 National Insurance bill. 

It should be noted that it does not automatically calculate payments on the accounts, and Class 2 National Insurance contributions still need to be paid separately.

This tool is for self-employed people who have no other taxable income and who are entitled to a basic personal allowance.  It works on the assumption that the accounts will be prepared to 5 April each year.

Of course, everyone’s individual circumstances will be different and, as such, figures provided by the ready reckoner for one person may not be applicable to someone else with a similar income. It is therefore always best to seek professional advice tailored to your own requirements.

For further information please contact Ward Williams: www.wardwilliams.co.uk

Launch of HMRC Business Tax Dashboard

The Business Tax Dashboard shows the different online tax portals.

HMRC's Business Tax Dashboard provides an overall picture of your tax position including payments made and amounts still owed.  

You will be able to see either Corporation Tax or Self Assessment information, depending on the type of business you have. You can view information on VAT and PAYE for employers, if you have set up your business for these online services.

The information included is the amount of tax owed together with the status of payments and penalties. The dashboard can also be used to amend contact details, including an email address.

The following details for each tax type will be included:

·         Corporation Tax: accounting periods from 1 October 1993 onwards

·         Self Assessment: tax year 1996-97 onwards

·         PAYE for employers: 2010-11 onwards

·         VAT: the current and 15 previous months

It will be updated each weekend to reflect returns and payments that reached HMRC systems in the previous five days.

To use the dashboard, businesses will need to enrol for HMRC Online Services and use the User ID for each tax you want to show on your dashboard.

For further information/advice on this topic please visit www.wardwilliams.co.uk

Tax Credits Changes

The government has made major changes to tax credits with effect from 6 April 2012.

Previously, you could usually get some form of Child Tax Credit (CTC) if your income was below the limit of £41,300.  From 6 April 2012 the income limit depends on individual circumstances, but as a rough guide CTC will not be payable if:

·         you have one child, and your annual income is more than around £26,000;

·         you have two children, and your annual income is more than around £32,200.

You could still qualify for CTC if your income is above these amounts.  For example, if you pay for registered or approved childcare, have more than one or two children,  are disabled, or your child has a disability.

Also with effect from 6 April 2012 there are new working hours rules for Working Tax Credits purposes for couples with children:

·         if you both work, your joint weekly hours must be at least 24, with one of you working at least 16 hours a week;

·          if only one of you works, that person must be working at least 24 hours a week.

In addition, there have been changes to how far payments can be backdated. From 6 April 2012, payments can only be backdated by up to one month, down from three months.  A protective claim for tax credits should be considered, particularly for self employed individuals with fluctuating profits.  Please be aware that any such claim needs to be made on an annual basis.

For further advice on tax credits please contact Ward Williams: www.wardwilliams.co.uk

Ways to reduce your IHT liability

“The only two certainties in life are death and taxes” – Benjamin Franklin

Inheritance Tax (IHT) is usually payable on an Estate on the event of someone’s death. The current IHT threshold, also known as the 'Nil rate band', stands at £325,000. If your overall Estate is above this level, any excess amount will be taxed at 40%. Although there are some exceptions in respect of charities etc.

Since October 2007, any late spouse’s or civil partners unused nil rate band can be transferred to the second spouse or civil partner when they die. This will mean that currently on second death the IHT threshold will be £650,000.

How can one reduce the IHT liability if one’s Estate is worth more than the IHT threshold?

There are a number of ways to reduce the level of Inheritance Tax on one’s Estate, or provide funds to pay the tax bill, and highlighted below are a few simple examples;

Annual Allowance
Each individual can gift £3,000 each year (and any unutilised allowance from the previous year).

Potentially Exempt Transfers
Any lifetime transfer will be outside of an individual’s Estate if they survive seven years from the date of the transfer.

Whole of Life Policy
If an IHT liability is expected, a Whole of Life policy for the sum of the expected liability can be written into a Trust arrangement.

This policy will be payable on death of the life assured (or second death for couples), leaving Beneficiaries monies to pay all or part of any IHT liability.

The above examples are merely some of the actions that can be taken, there are many many more – if you would like more information please call Ward Williams Financial Services on 01932 830664 for an informal discussion, or to book an appointment with one of our highly qualified financial planners.
http://www.wardwilliamsfs.co.uk/

George Expects!

The Chancellor recently set out his ‘expectations’ from HMRC for the current financial year, with the emphasis on increasing revenues, tackling non-compliance and increasing efficiency and customer service.

The priority areas targeted by the Chancellor are set out below.

Improving tax collection and reducing the tax gap

HMRC is expected to secure ‘additional’ revenue in 2012/13 of at least £17bn.  Of this, £917m invested in efficiency savings under the Spending Review should secure £4bn by tackling tax avoidance, evasion and criminal activity.

Delivering cost reductions

In recognition of the need to reduce public spending, HMRC has committed to achieving efficiency savings of 25% by 2014/15, through their ‘comprehensive cross-departmental workforce strategy’.

Improving Services for Customers

HMRC has taken on board the Government’s proposals to make the tax system as straightforward as possible and generally improving the service to taxpayers.  The much improved internal PAYE computer system has aided HMRC’s strategy of bringing taxpayers affairs up to date however, it has been stressed that all outstanding cases are to be cleared by April 2013.  HMRC is encouraged to continue its proposal to improve online services, which includes the implementation of the ‘One Click’ programme for businesses.

Real Time Information

HMRC is on course to deliver RTI in 2013, which is crucial to the introduction of ‘Universal Credit’.   HMRC has been given targets to reduce tax credit errors and fraud, and to work closely with the DWP in recovering tax credit debts.

Tax Policy

Budget 2012 provided a large number of tax changes that need to be implemented in the coming year.  HMRC has been reminded of the important role it plays in designing and delivering tax policy changes.

Can Lin Homer, the new Chief Executive of HM Revenue & Customs, live up to George’s high expectations?  Only time will tell!

For further information/advice on this topic please visit www.wardwilliams.co.uk

 

Patent Box – a shining opportunity

The UK Government’s new Patent Box regime will come into effect from 1 April 2013.  It presents companies that are holding patents, and using them in their business, with the opportunity to significantly reduce their tax burden.

Although your company may not currently hold any patents, don’t assume that Patent Box won’t apply to you.  You may have products or processes, for which a patent application could  be made.  The tax benefits of the new scheme are attractive and make consideration of such an application well worthwhile.   The patent registration process can take at least 12 months so it is important for companies to act now.

The regime will be phased in gradually from 1 April 2013 with a 10% rate applying to all qualifying profits from 1 April 2017 onwards, and will apply to worldwide income earned by UK companies from UK and European registered patents. 

The scheme mirrors others already in place in Europe, and is intended to encourage companies to locate high value jobs and activity associated with development, manufacture and exploitation of UK patents. 

Patent Box presents many companies with the opportunity to significantly reduce their UK corporation tax bill.  Companies should take action now to understand how they can benefit from the regime and what business changes might be advantageous prior to the rules coming into effect.
 
Ward Williams are a leading firm of Chartered Accountants specialising in Patent Box and Research and Development claims.  For more information please contact us on 01932 830 664 or email sarah@wardwilliams.co.uk.