Collect, Borrow & Spend!

The Chancellor will present his Budget for 2012 on Wednesday 21 March 2012, laying out the Government’s plans for public finances and the economy for the coming year.

Following another difficult financial year speculation is unsurprisingly rife, as to the key proposals the Chancellor will unveil before us.

A Budget proposed “......... for working people”, “............... for investment”, “............. for growth”, we hear, the usual suspects!

With debate still out over the success of the ‘50p income tax rate’, will we see a drop in the top rate of tax and a complete shift in policy with a direct attack on wealth with the introduction of a ‘mansion tax’?

High earners could be targeted again with the removal of tax relief on pension contributions, or perhaps a further cap on the eligible contributions that can be made.  Again we hear whispers that ‘capital gains tax’ rates, currently at 28% (18% for basic rate taxpayers), could be aligned with ‘income tax’ rates and the possible scaling back of the annual exemption for higher earners.

The Government could look to assist so called low earners, by accelerating the ‘£10K personal allowance’, thereby removing a number of earners out of the tax system altogether.  An uplift in the ‘basic rate tax band’ would also see a section of taxpayers no longer being faced with higher rates of tax.

‘Capital taxes’ could be on the agenda, as the Government may seek to increase the ‘nil rate band’ for inheritance tax purposes, having seen the allowance frozen in recent years.

There has also been widespread controversy over the proposed overhaul of the ‘child benefit’ system – will the Chancellor hold strong to his much scrutinised plans?

Will George have one or two surprises up his sleeve for the big day or will we be faced with a low key performance, opting instead to play safe with an attempt to please all.  Come Wednesday afternoon  all will be revealed as to the Government’s plans for ‘collecting tax’, ‘borrowing’ and ‘spending’ as we enter the new financial year...


For further information/advice on this subject please contact Ward Williams (www.wardwilliams.co.uk)

How long could you last without your main source of income?

Life Insurance Company, Bright Grey, recently revealed that more than 20 million Britons would be unable support their current lifestyle if their main source of income stopped.

41% of adults surveyed said they would only be able to rely on savings, borrow from friends and family or rely on credit, for up to 6 months in a financial emergency.

Roger Edwards, Proposition Director of Bright Grey, commented: “The fact that over a third of British adults believe they can’t survive financially for longer than half a year even with support from friends, families, loans or available credit, shows just how concerned the nation is about its finances.”

Expressing the importance of protecting your income, Mr Edwards said: “We urge everyone to improve their own personal financial safety net, in preparation for any situation where the main breadwinner finds themselves unable to work. Having proper provision in place means that you and your family can remain financially afloat for years, not months, should you or a loved one become disabled, seriously ill or die.”

If you would like to discuss Protection products further and how you could support yourself and family members, please feel free to contact Ward Williams Financial Services Ltd (Cliff Pocock) on 01932 830664 or email cliff.pocock@wardwilliams.co.uk

Reducing Corporation Tax by making company contributions to personal pension plans

Question:
My Limited Company, of which I am a Director, has just had a very good year and it looks like we will be in profit to the tune of £450,000 for our financial year end 31 March 2012. This will result in a significant Corporation Tax bill.  Is there any way that this can be reduced legitimately?

Answer:
There are a number of ways that the profits of a company can be reduced and, therefore, the level of Corporation Tax payable but one method that can best be explained by an example is the use of company contributions to personal pensions.

In this particular example;

·         There are three directors aged 55;

·         The company has a healthy level of cash, and has calculated that it has the ability to spend in excess of £200,000 without disturbing its cash flow;

·         All the directors have had pensions in place over the last four years, but only one has made a contribution in the current year (£10,000).

Company contributions made into each of the director’s personal pensions of £50,000 will reduce the profit of the company by £150,000 resulting in a Corporation Tax saving of £41,250 (assuming a Corporation Tax rate of 27.5%).  It is important to note that any contributions will need to be paid by 31 March 2012 in order to qualify for the corporation tax deduction.

In addition the directors will now have an additional £50,000 in their pensions and, as these have been paid directly, not as salary, the directors will have paid no Income Tax or National Insurance contributions on monies used to fund the pension contributions.

The director who has already made a contribution for the current tax year would need to utilise the carry forward provisions available.

Simple but effective. There are of course other solutions to help you manage your corporation tax liabilities and we would be pleased to discuss them with you. If you would like to discuss this or other methods of saving tax, please feel free to contact: Ward Williams Financial Services Ltd (Cliff Pocock) on 01932 830664 or email cliff@wardwilliams.co.uk

Fee Protection Insurance

As HMRC have changed the way they investigate tax returns, so we have changed our Fee Protection to suit.

With HM Revenue & Customs (HMRC) new powers of investigation, they now operate an information led approach to targeting non-compliant tax returns.  Their aim is no longer to open as many full enquiries, but to convince taxpayers to hand over money as soon as possible.  And high penalties based on subjective ‘reasonable care’ clauses mean that in the event of an enquiry or intervention it is more important than ever that the team at Ward Williams is able to concentrate our full efforts on your case as early as possible.

Dealing with an HMRC investigation, whether into PAYE matters or the company’s accounts, can be time consuming and a distraction from running your business. Therefore we believe we should offer clients the opportunity to purchase protection against these costs. Fee Protection Insurance provides this protection and can significantly reduce the financial burden you would face if you became the subject of an investigation by HMRC.

What is included in the service?

• HMRC Enquiries, Reviews and Interventions
• A Self Assessment Enquiry or Repayment Claim Enquiry by HMRC
• A review or intervention by HMRC concerning compliance with Self Assessment, PAYE, Social Security, Construction Industry, IR35 or VAT legislation and regulations.

What is not included in the service?

Any enquiry, review, intervention or dispute

a)   by, with or on behalf of HMRC Special Civil Investigations Office or Criminal Taxes Unit; or

b)  carried out under HMRC Civil Investigations of Fraud procedure, Public  Notice 160 or Section 60 of VAT Act 1994; or

c)   where HMRC has issued a Code of Practice 8 or 9 leaflet; or

d)   into compliance with  Tax Credits Legislation; or

e)  concerning a failure to reconcile returns; or

f)   circumstances where you unreasonably failed to implement changes or corrections identified and agreed with HM Revenue and Customs during a previous enquiry, review, intervention or dispute.

• Circumstances we or you ought to have known about before you joined the Premier Protection Client Service.
• The cost of taxes, fines, penalties, interest, compensation or damages which you are required to pay.
• The cost of preparing accounts, records or statutory returns and the cost of professional valuations to support them.
• The cost of reconciling returns.
• The cost of compliance work ordinarily capable of being completed by you.
• Any criminal prosecution.
• Judicial review.

Please speak to Ward Williams to ensure peace of mind (http://www.wardwilliams.co.uk/)

Some Holiday homes may qualify for relief from Inheritance Tax

Judge Richard Barlow decided on 12^th December 2011 that a deceased person’s  25% share of a property  in  Suffolk which was let out to holidaymakers  constituted a business not an investment and  would therefore qualify  for 100% relief from inheritance tax, thus saving the beneficiaries 40% of the value of the property at date of death.

It has long been HMRC’s view that, unless substantial services are included in respect of a let property, it will not qualify for the 100% relief. This “First Tier Tribunal”  (FTT) decision has now clarified that the provision in respect of a profitable letting  of a  package which included cleaning, laundry, heat and light and TV  fulfils this criteria and can be treated as substantial.

It was expected that HMRC would have appealed this decision made by the lowest of the four tiers of tax courts but they have not done so and their deadline has expired. This may encourage holiday home owners to increase the letting of their properties to 70 days a year and otherwise qualify as a “furnished holiday let” in the hope that they will be able to hand down the full value of their properties to their descendants free of tax. HMRC may however still argue that the relief is not due and a decision by FTT does not constitute a binding precedent.

Watch this space...

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

End of Year Tax Planning

Christmas seems a distant memory, the romance of Valentine’s Day has passed and spring is approaching.  There is now only a short time left to make use of your annual tax-free allowances. Each tax year there are a number of allowable tax efficient investments.  Two simple ways to make the most of your allowance are to invest in an ISA and contribute to a pension...

Click here to read the full article

Information for home buyers - NewBuy

What is NewBuy?

People thinking of buying a newly-built home, who do not have a large enough deposit to qualify for a mortgage, may qualify under the NewBuy scheme. They will still need to have saved a deposit of at least 5 per cent of the price of the home they wish to buy.

This scheme applies to England only.

How does someone buy a new build property under NewBuy?

Home buyers can either visit a participating new-build development or a mortgage lender in the scheme to discuss eligibility, or they can approach Ward Williams mortgage intermediary.

Those wishing to buy a new home under the scheme, and who meet the lender's affordability and credit criteria, will be eligible for a mortgage loan up to 95 per cent of the purchase price. Lenders will assess mortgages under the scheme in the normal way.

What is an indemnity and what does it mean for the borrower?

A mortgage indemnity protects the lender if, at some future stage, the borrower falls behind with their mortgage payments and the lender has to repossess the property and sell it. This can result in a loss to the lender if the property has to be sold for a value lower than the remaining value of the mortgage. Under NewBuy, the home builder puts aside a proportion of the sale price into a special indemnity fund and, when this is exhausted, Government provides a further guarantee to an agreed level.

If the property is repossessed and sold for less than the amount of the outstanding mortgage debt, the lender can claim on the mortgage indemnity to recover some of its loss. The basic security for the mortgage is the property. The mortgage indemnity, therefore, acts as a form of additional security for the lender.

The existence of the indemnity does not provide any additional protection for the borrower nor protection from repossession. It does not cover the borrower against negative equity or a shortfall between the sale price and the outstanding debt.

In the unfortunate event of a home being repossessed, the borrower will still be responsible for repaying any shortfall between the sale price of the property and the outstanding mortgage debt. This is the same as it would be for any borrower outside the scheme.

What are NewBuy's eligibility criteria/exclusions?

To qualify for NewBuy, properties will have to be:

• New build - residential properties being sold for the first time or for the first time in the current form
• Priced up to £500k - but there will be no cap on income
• Full ownership - NewBuy will not be available for shared ownership or shared equity purchases
• Primary homes - NewBuy will not be available for the purchase of second homes, for investors or for buy-to-let purchases.
• Buyers will have to be UK citizens and those with a right to remain indefinitely in the country.

It will not be possible to use NewBuy in conjunction with any other publicly funded mortgage schemes. NewBuy will not apply to interest-only mortgage products.

Which lenders/builders are participating?

At launch, these lender/builder relationships were available under NewBuy (with more to follow): Currently some of these details are only available through mortgage advisers.

Barclays who will offer 95 per cent Loan-to-Value mortgages on properties built by Barratt, Bellway, Bovis, Persimmon, Redrow and Taylor Wimpey at just 4.99 per cent fixed rate for two years and 5.89 per cent fixed rate for four years

Nationwide who will offer 95 per cent Loan-to-Value mortgages on properties built by Barratt, Bovis, Bellway, Persimmon, Redrow and Taylor Wimpey at just 5.69 per cent fixed rate for three years and 5.99 fixed rate for five years; and

NatWest who will offer 95 per cent Loan-to-Value mortgages on properties built by Barratt, Bellway, Bovis, Linden Homes, Persimmon, Redrow and Taylor Wimpey at just 4.29 per cent fixed rate for two years and 4.99 per cent fixed rate for five years.

Santander  will launch mortgages in mid-March

Further information: Please call Wayne Bass on 01932 830664 or 07775995310

http://www.wardwilliamsfs.co.uk/
Home buyers can find further information on direct.gov.uk