1. From the 2010-11 tax year the Personal Allowance reduces where the income is above £100, 000 – by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of age.
2. 2. These allowances reduce where the income is above the income limit for age-related allowances by £1 for every £2 of income above the limit. For the 2010-11 tax year the Personal Allowance for people aged 65 to 74 and 75 and over can be reduced below the basic Personal Allowance where the income is above £100,000.
3. Tax relief for the Married Couple’s Allowance is given at the rate of 10 per cent.

Income Tax rates and taxable bands

* The 10 per cent starting rate applies to savings income only. If your non-savings income is above this limit then the 10 per cent starting rate for savings will not apply.

The rates available for dividends are the 10 per cent ordinary rate, the 32.5 per cent dividend upper rate and the dividend additional rate of 42.5 per cent.

More useful links

Find out more about Income Tax

Introduction to tax allowances and reliefs

National Insurance Contributions

1. Class 1A NICs are payable in July and are calculated on the value of taxable benefits provided in the previous tax year, using the secondary Class 1 percentage rate appropriate to that tax year.

National Insurance for individuals

Find out about National Insurance and which rates apply to you by following the link below.

National Insurance: the basics

Corporation Tax rates

Marginal Relief changes from 1 April 2010

From 1 April 2010 onwards, the terminology used to describe some Corporation Tax rates and reliefs changed. This table reflects the new terminology but for ease the changes are shown below:

• Small Profits Rate – previously Small Companies’ Rate
• Marginal Relief – previously Marginal Small Companies’ Relief
• Standard fraction – previously Marginal Small Companies’ Relief fraction
• Ring fence fraction – previously Marginal Small Companies’ Relief fraction (ring fence profits)

The main rate of Corporation Tax applies when profits (including ring fence profits) are at a rate exceeding £1,500,000, or where there is no claim to another rate, or where another rate does not apply.

Ring fence companies

*For companies with ring fence profits (income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf) these rates differ. The Small Profits Rate of tax on those profits is 19 per cent and the ring fence fraction is 11/400 for financial years starting 1 April 2010, 2011 and 2012. The main rate is 30 per cent for financial years starting on 1 April 2010, 2011 and 2012.

Corporation Tax on chargeable gains

Indexation Allowance allows for the effects of inflation when calculating the chargeable gains of companies or organisations.

Corporation Tax on chargeable gains: Indexation Allowance

Capital Gains Tax rates and annual tax-free allowances

Each tax year nearly everyone who is liable to Capital Gains Tax gets an annual tax-free allowance – known as the ‘Annual Exempt Amount’. You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above this amount.

Tax-free allowances for Capital Gains Tax

The annual tax-free allowance (known as the Annual Exempt Amount) allows you to make a certain amount of gains each year before you have to pay tax.

Nearly everyone who is liable to Capital Gains Tax gets this tax-free allowance.

There’s one Annual Exempt Amount for:

• most individuals who live in the UK
• executors or personal representatives of a deceased person’s estate
• trustees for disabled people

Most other trustees get a lower Annual Exempt Amount.

Gains arising after 22 June 2010 may be charged at different rates. You can use your Annual Exempt Amount against the gains charged at the highest rates to minimise the tax you owe. See the section on ‘Rates for Capital Gains Tax’ below for an example.

Executors and personal representatives

If you’re acting as an executor or personal representative for a deceased person’s estate, you may get the full Annual Exempt Amount during the ‘administration period’. The administration period is usually the time it takes to settle the deceased person’s affairs and get a grant of probate (or confirmation in Scotland).

You’re entitled to the Annual Exempt Amount for the tax year in which the death occurred and the following two tax years. After that there’s no tax-free allowance against gains during the administration period.

Find out more about death, inheritance and Capital Gains Tax

Trustees for disabled people

If you’re acting as a trustee for a disabled person you use the higher Annual Exempt Amount above – and not the rate for ‘other trustees’.

A disabled person in this context is a person who has mental health problems or receives the middle or higher rate of Attendance Allowance or Disability Living Allowance.

Find out more about Capital Gains Tax and trusts

People who are ‘non-domiciled’ in the UK

You won’t get the Annual Exempt Amount if you’re ‘non-domiciled’ in the UK and you’ve claimed the ‘remittance basis’ of taxation on your foreign income and gains.

You may be ‘non-domiciled’ in the UK, for example, if you were born in another country and intend to return there.

You may have claimed the ‘remittance basis’ if you have income and gains from abroad and have decided that it’s beneficial to be taxed on the foreign income and gains that you bring into the UK, rather than on all income and gains that arise.

Issues of domicile and tax on foreign gains are complicated. A lot depends on the facts of each case. You can find out more by following the link below. Or speak to your Tax Office about your specific circumstances.

Download guidance on ‘residency’, ‘domicile’ and the ‘remittance basis’ (PDF 560K)

Telephone or write to HMRC

Rates for Capital Gains Tax

2010-11 and 2011-12

For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.

The following Capital Gains Tax rates apply to gains after this date:

• 18 per cent and 28 per cent tax rates for individuals (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first )
• 28 per cent for trustees or for personal representatives of someone who has died
• 10 per cent for gains qualifying for Entrepreneurs’ Relief

If you’re not sure how to work out your taxable income, see the examples in the section below ‘Working out your Capital Gains Tax for 2010-11′.

Find out more about Entrepreneurs’ Relief

2009-10 and 2008-09

Capital Gains Tax is charged at a flat rate of 18 per cent

2007-08

For individuals Capital Gains Tax is charged at variable rates (10 per cent, 20 per cent and 40 per cent) based on the total amount of your income and gains. For trustees or personal representatives of someone who has died there is a single rate of 40 per cent.

Find out more about working out 2007-08 rates

Working out your Capital Gains Tax for 2010-11

Gains before 23 June 2010

For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.

Gains on or after 23 June 2010

For gains on or before 22 June 2010, Capital Gains Tax is charged at a flat rate of 18 per cent.

For gains on or after 23 June 2010, individuals need to work out their total taxable income before working out which Capital Gains Tax rate to use.

1. First work out your taxable income by deducting any tax-free allowances and reliefs that you are entitled to.
2. Next see how much of your basic rate band is already being used against your taxable income. The basic rate band for 2010-11 is £37,400.
3. Allocate any remaining basic rate band first against gains that qualify for Entrepreneurs’ Relief – these are charged at 10 per cent.
4. Next allocate any remaining basic rate band against your other gains, these are charged at 18 per cent.
5. Any remaining gains above the basic rate band are charged at 28 per cent.

Using your Annual Exempt Amount

If you have gains which are charged at different rates, you need to decide how to use your Annual Exempt Amount. You use it against the gains charged at the highest rates to minimise the tax you owe.

Find out more about Income Tax bands and rates

Example one – a simple example

Mr P’s total income, after deducting allowances and reliefs, is £20,000 and his capital gains, after reliefs, are £15,000.

The basic rate band is £37,400. Mr P has used £20,000 of this amount against his income – so has £17,400 remaining.

As his gains are only £15,000, he has enough of the basic rate band remaining to cover his gains, so they are all to be taxed at 18 per cent. He now deducts his tax-free allowance of £10,100 and pays Capital Gains Tax at 18 per cent on £4,900.

Example two – Annual Exempt Amount

Miss W’s total income, after deducting allowances and reliefs is £60,000. In May 2010 she made a first gain of £5,000. This is taxable at 18 per cent. Her second gain in February 2011 of £12,100 is taxable at 28 per cent.

Miss W uses her Annual Exempt Amount of £10,100 against the second gain after 22 June 2010 and pays tax on the remaining £2,000 at 28 per cent. She pays tax at 18 per cent on the first gain of £5,000 before 23 June 2010.

Example three – Entrepreneurs’ Relief

Mrs T’s total income, after deducting allowances and reliefs, is £30,000 and her capital gains, after reliefs, are £20,000. £5,000 of these gains qualify for Entrepreneurs’ Relief.

The basic rate band is £37,400. Mrs T has used £30,000 of this amount against her income – so has £7,400 remaining.

She has to allocate £5,000 against the gains that qualify for Entrepreneurs’ Relief, and pays tax on these at 10 per cent.

She allocates the remaining £2,400 basic rate band against her other gains, so these are taxed at 18 per cent.

Her tax-free allowance of £10,100 is allocated to her remaining £12,600 gains. This leaves £2,500 gains taxed at 28 per cent.

Read more about Entrepreneurs’ Relief

More useful links

Find out more about Capital Gains Tax

How to work out your gain or loss

Corporation Tax on chargeable gains for companies: Indexation Allowance

Inheritance Tax thresholds

The Inheritance Tax threshold (or ‘nil rate band’) is the amount up to which an estate will have no Inheritance Tax to pay.

If the estate – including any assets held in trust and gifts made within seven years of death – is more than the threshold, Inheritance Tax will be due at 40 per cent on the amount over the nil rate band.

This page shows the different thresholds in use for deaths going back to 1986.

Stamp Duty Land Tax rates and thresholds

Stamp Duty Land Tax (SDLT) is charged on land and property transactions in the UK. The tax is charged at different rates and has different thresholds for different types of property and different values of transaction.

The tax rate and payment threshold can vary according to whether the property is in residential or non-residential use, and whether it is a freehold or leasehold. SDLT relief is available for certain kinds of property or transaction.

This guide provides an overview of the SDLT rates and provides links to related guidance where necessary.

SDLT rates for residential property

The table below applies for all freehold residential purchases and transfers and the premium paid for a new lease or the assignment of an existing lease. (If the property will be used for both residential and non-residential purposes the rates differ – please see the section ‘SDLT for non-residential or mixed use property’).

New leases

If the transaction involves the purchase of a new lease with a substantial rent there may be an additional SDLT charge to that shown below, based on the rent. See the next section and further table ‘SDLT on rent for new leasehold properties (residential)’ for more detail.

Residential land or property SDLT rates and thresholds

If the value is above the payment threshold, SDLT is charged at the appropriate rate on the whole of the amount paid. For example, a house bought for £130,000 (by someone who is not a first-time buyer) is charged at 1 per cent, so £1,300 must be paid in SDLT. A house bought for £350,000 is charged at 3 per cent, so SDLT of £10,500 is payable.

First time buyers

The first time buyer’s £250,000 threshold applies from 25 March 2010 up to 24 March 2012 inclusive.

£1 million threshold for wholly residential property

From 6 April 2011 SDLT on residential properties over £1 million is charged at 5%. It does not apply to non-residential or mixed-use properties.

There are some transitional arrangements for contracts which were entered into before 25 March 2010 but not completed by 6 April 2011 in most of these cases the new rate will not apply.

Read more about the amount of SDLT on £1 million properties

Properties bought in a disadvantaged area

If the property is in an area designated by the government as ‘disadvantaged’ a higher threshold of £150,000 applies for residential properties.

From 25 March 2010 up to 24 March 2012, first-time buyers can claim a relief from SDLT if the amount paid for the property is under £250,000. This relief applies whether or not the property is in an area designated as disadvantaged.

Read more about Disadvantaged Areas Relief

SDLT on rent – new residential leasehold purchase

When a new residential lease has a substantial annual rent, SDLT is payable on both of the following, which are calculated separately and then added together:

• the lease premium (purchase price) – see the table above
• the ‘net present value’ (NPV) of the rent payable

The NPV is based on the value of the total rent over the life of the lease and can be worked out using HMRC’s online calculator (link below).

In practice SDLT only becomes payable on a fairly high rent – starting at around £4,500 a year for a 99-year lease, for example, however the exact amount depends on the length of the lease.

SDLT on rent for new leasehold properties (residential)

Note that a higher threshold of £175,000 applied for rents on residential only leases taken from 3 September 2008 to 31 December 2009. Follow the link below to find out more.

SDLT rates 3 Sept 2008 – 21 April 2009

Read more about calculating SDLT for leasehold purchases

Go to the SDLT lease calculator

If six or more residential properties form part of a single transaction

If six or more properties form part of a single transaction the rules, rates and thresholds for non-residential properties apply. The amounts paid for all the properties in the transaction must be added together in order to establish the rate of tax payable.

SDLT rates for non-residential or mixed use properties

Non-residential property includes:

• commercial property such as shops or offices
• agricultural land
• forests
• any other land or property which is not used as a dwelling
• six or more residential properties bought in a single transaction

A mixed use property is one that incorporates both residential and non-residential elements.

The table below applies for freehold and leasehold non-residential and mixed use purchases and transfers

If the transaction involves the purchase of a new lease with a substantial annual rent, there may be additional SDLT charge to that shown below, based on the rent. See the later section and table for more detail.

Non-residential land or property rates and thresholds

Note that for the above purpose the annual rent is the highest annual rent known to be payable in any year of the lease, not the net present value used to determine any tax payable on the rent as described below.

SDLT on rent – new non-residential or mixed use leasehold purchase

When a new non-residential or mixed use lease has a substantial annual rent, SDLT is payable on both of the following which are calculated separately and then added together:

• the lease premium or purchase price – see the table above
• the net present value of the rent payable (this is based on the value of the total rent over the life of the lease and can be worked out using HMRC’s online calculators)

SDLT on rent for new leasehold properties (non-residential or mixed use)

Read more about calculating SDLT for leasehold purchases

Go to the SDLT lease calculator

Using the HMRC SDLT online calculators

HMRC has developed online calculators which work out the amount of SDLT payable on residential, non-residential and mixed transactions in land and property.

Go to HMRC’s SDLT calculators

SDLT and Stamp Duty rates before 6 April 2011

Follow the links below to check SDLT and Stamp Duty rates in earlier tax years.

SDLT rates from 25 March 2010 until 5 April 2011

SDLT rates from 1 January 2010 until 24 March 2010

SDLT rates 22 April 2009 until 31 December 2009

SDLT rates 3 September 2008 until 21 April 2009

SDLT rates from 12 March 2008 until 2 September 2008

SDLT rates from 23 March 2006 until 11 March 2008

SDLT rates from 17 March 2005 until 22 March 2006

SDLT rates from 1 December 2003 until 16 March 2005

Rates of Stamp Duty on land transfers before December 2003

eNEWS – January 2012

The first draw was for clients who had recommend us to a colleague, who went on to become a client.

The winner was Ralph Stobart of Bright Lake Consulting Limited, Bright Lake Consulting works with medium and large private and public sector organisations to help them improve performance. They use a participative approach to design how clients can find sustainable solutions and lasting improvement. They work with leaders and staff, enabling them with methods to follow the customer’s journey through the organisation and then help them to use this knowledge to challenge and improve.  Congratulations!

The second draw was for participants in our recent customer survey.

The winner was Jane Lloyd, from Amaranth Lloyd Limited, Jane describes herself as “Jane Lloyd, Free-Range Human and Specialist in Management & Personal Development”.  Again congratulations.

They each win a Silverstone Super Choice Voucher, to partake in a track experience of their choice at the SIlverstone Race Circuit.

We will be holding further draws in the future so watch out for further news.

eNEWS – December 2011

We will close at 14:00 on Friday 23rd December and re-open at 9:00 on Tuesday 3rd January 2012.

We would like to take this opportunity to wish everyone a very happy Christmas and a very happy and prosperous 2012

Finally, please do not forget the 31st January 2012 deadline for electronic submission of personal tax returns – ALL late returns will incur a penalty of at least £100, whether or not there is any unpaid tax.

In this month’s enews we report on various issues including the Chancellor’s Autumn Statement and HMRC’s latest targets. Please contact us if you would like any further details on any of the issues covered.

Autumn Statement

On Tuesday 29 November the Office for Budget Responsibility (OBR) published its updated forecast for the UK economy. Chancellor George Osborne responded to that forecast in a statement to the House of Commons later on that day.

The Chancellor emphasised that the OBR does not predict a recession in Britain but they have revised down their short term growth prospects for the country. He also made clear that the OBR central forecast assumes ‘the euro finds a way through the current crisis’.

The Autumn Statement sets out the actions the government will take in two main areas:

• protecting the economy and
• building a stronger economy for the future.

In order to maintain economic stability and meet its fiscal rules, the government will:

• set plans for public spending in 2015/16 and 2016/17 in line with the spending reductions over the Spending Review 2010 period
• raise the State Pension age to 67 between April 2026 and April 2028
• set public sector pay awards at an average of 1% for each of the two years after the current pay freeze comes to an end.

The growth plans include the publication of a National Infrastructure Plan 2011. The plan sets out a pipeline of over 500 infrastructure projects.

Other announcements include:

Credit easing

In order to free up lending to business, the government is launching a package of measures worth up to £21 billion to ease the flow of credit to businesses. This includes up to £20 billion for the National Loan Guarantee Scheme and £1 billion for the Business Finance Partnership.

Small business rate relief holiday

The government will extend the current small business rate relief holiday for a further six months from 1 October 2012 and also give businesses the opportunity to defer 60% of the increase in their 2012/13 business rate bills.

Employment regulations

In an attempt to make it easier to ‘hire and fire’, the government intends to:

• look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases by introducing a ‘Rapid Resolution’ scheme
• complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days.

Youth Contract

A number of measures under the heading of a ‘Youth Contract’ will be introduced including government funding of:

• wage incentives for 160,000 young people to make it easier for private sector employers to take them on
• at least 40,000 incentive payments for small firms to take on young apprentices.

Seed Enterprise Investment Scheme (SEIS)

This is a new tax relief which will be introduced from 6 April 2012. It will provide income tax relief at 50% in respect of investment in a small company whose total assets before the investment are less than £200,000. The relief will be limited to investments of up to £150,000 in each company and a maximum of £100,000 investment for an individual. In addition an individual who makes a capital gain in 2012/13 and reinvests some or all of the gain in a SEIS company in the same year will obtain exemption from capital gains tax for the sum invested.

Tax treatment of asset-backed pension contributions

Rules are to be introduced from 29 November 2011 to limit tax relief for employers who enter into arrangements to make asset-backed contributions into their pension schemes. The new rules will ensure that the tax relief obtained more accurately reflects the actual costs to the employer.

Further announcements expected

It is also expected that large amounts of draft legislation for the Finance Bill 2012 will be issued for consultation on 6 December 2011.

We will update you on significant announcements in next month’s enews.

Internet link: Treasury website

New HMRC Taskforces

Five new taskforces have been set up to tackle tax evasion in different areas of the country. The new HMRC taskforces will target:

• scrap metal dealers in Scotland
• construction traders who are self employed or run their own company who suppress sales or over-claim expenses in the North West and North Wales
• taxpayers not submitting their statutory returns across Corporation Tax, Income Tax Self Assessment, PAYE and VAT in the South East
• fast food outlets deliberately falsifying their records and mis-declaring their true sales levels to avoid paying the correct taxes in Scotland, and
• landlords – owning or renting three or more properties – evading their tax responsibilities in North West and North Wales.

Internet link: Press release

VAT and duty on shopping

Angela Shephard, Head of Customs Policy, HMRC is warning individuals not to get caught out by ‘unexpected charges when you are shopping for Christmas bargains this year’.

‘If you are going abroad to do Christmas shopping, or buying goods online from non-EU countries, you need to know how much you can buy before you have to pay import duty or VAT.’

‘We know many people like to go abroad at this time to buy their Christmas gifts, or buy online from non-EU countries, and think that the ‘cheaper’ price they see is always the price they finally pay. HMRC is keen to remind the general public how much they can actually bring back from abroad or buy from an online overseas seller without having to pay import duty or VAT.’

‘You don’t want to be faced with unexpected extra charges, when you thought you had found a bargain.’

HMRC advise that:

• Arriving in the UK by commercial sea or air transport from a non-EU country, you can bring in up to £390 worth of goods for personal use without paying customs duty or VAT (excluding tobacco and alcohol, which have separate allowances, and fuel). Detailed information on the non-EU limits can be found at http://www.hmrc.gov.uk/customs/arriving/arrivingnoneu.htm
• Should you buy goods over the internet or by mail order from outside the EU, you will have to pay VAT if the value of the package is over £15.
• If the goods are over £135 in value, customs duty may also be due, although this will depend on what they are and where they have been sent from. Where, however, the actual amount of duty due is less than £9, this will not be charged.
• If someone sends you a gift from outside the EU, import VAT will only be due if the package is valued at over £40. To qualify as a gift, the item must be sent from one private individual to another, with no money changing hands.
• Please note that excise duty is always due on all alcohol and tobacco products purchased online or by mail order.
• The spirits or tobacco products, there are no limits on the amounts of duty and tax paid goods you can bring back personally from another EU country, as long as they are for your own use.

Internet link: Press release

Parties for employees

With the season for office parties fast approaching we thought it would be a good idea to remind you of the tax implications. The good news is that, unlike entertaining customers, the costs of entertaining employees are generally allowable against the profits of the business.

But what about the tax consequences for the employees themselves? Is it a perk of their jobs and will they have to pay tax on a benefit?

Generally, as long as the total costs of all employee annual functions in a tax year are less than £150 per attendee (VAT inclusive) there will be no tax implications for the employees themselves. In considering this limit make sure you have included all the costs, which may include not only the meal itself but also any drinks, entertainment, transport and accommodation that you provide.

If the costs are above the £150 limit then the full cost will be taxable on the employee. In that case do get in touch so we can advise you how best to deal with them.

Internet link: HMRC guidance

Consultation – have your say

The government has launched a consultation, ‘Modernising the administration of the personal tax system’. They would like to hear interested parties views on a number of issues regarding the personal tax system.

‘This consultation seeks feedback and ideas for how the administration of the personal tax system could be improved to achieve better understanding and make it easier for taxpayer to deal with it.’

To have your say visit the link below.

Internet link: HMRC consultation

Fighting Customs and Excise fraud and tax evasion

HMRC are asking for information to help them tackle Customs and Excise fraud and tax evasion.

The HMRC guide explains ‘how you can help HMRC by either telling them about your suspicions, or give information that will help stop people committing fraud, bringing goods into the UK that they shouldn’t or deliberately not paying tax’.

For more information visit the link below.

Internet link: HMRC reporting fraud

Unemployment rises to 2.62 million

The CBI commented on official data showing unemployment rose by 129,000 to 2.62 million in the three months to September 2011, including a rise in youth unemployment to over a million.

John Cridland, CBI Director-General, said:

‘These figures underline why we need urgent action to help our young people take their first steps in the labour market. A generation risks being scarred by the devastating effects of long-term unemployment.

We are calling for action for jobs now, with a clear plan to get the UK working, focusing on our young people.’

Internet links: BBC news CBI press release

EU VAT registration letter scam

HMRC are warning of a new scam letter which is being sent to businesses. The letter requests payment of a fixed fee by credit card and provides a website address to activate VAT registration.

HMRC are advising that these letters are not issued by HMRC and the registration should not be completed or payment made.

Internet links: HMRC security examples Copy scam letter

In the period since the Budget in March a number of consultation papers and discussion documents have been published by HMRC. Draft legislation relating to many of these areas will be published on 6 December 2011. Some of these proposals are summarised here. We will provide an update for you if significant changes are announced on 6 December.

This summary also provides a reminder of other key developments which are to take place from April 2012.

The Chancellor’s statement

The Chancellor emphasised that the OBR does not predict a recession in Britain but they have revised down their short term growth prospects for the country. He also made clear that the OBR central forecast assumes ‘the euro finds a way through the current crisis’.

General measures

The Autumn Statement sets out the actions the Government will take in two main areas:

• protecting the economy and
• building a stronger economy for the future.

In order to maintain economic stability and meet its fiscal rules, the Government will, for example:

set plans for public spending in 2015/16 and 2016/17 in line with the spending reductions over the Spending Review 2010 period

• Raise the State Pension age to 67 between April 2026 and April 2028
• set public sector pay awards at an average of 1% for each of the two years after the current pay freeze comes to an end.

The growth plans include the publication of a National Infrastructure Plan 2011. The plan sets out a pipeline of over 500 infrastructure projects including:

introducing a new approach to financing infrastructure, by obtaining £20 billion of private investment from pension funds

• investing over £1 billion to tackle areas of congestion and improve the national road network
• investing more than £1.4 billion in railway infrastructure and commuter links
• investing £100 million to create up to ten ‘super-connected cities’ across the UK, with 80-100 megabits per second broadband and city-wide high-speed mobile coverage.

Comment

The proposal to raise the state pension age is expected to save around £60 billion in today’s prices between 2026/27 and 2035/36.

The aim of the National Infrastructure Plan is to kick start the economy by accelerating infrastructure projects with a view to job retention/creation. Time will tell how successful the new strategy is.

NON-TAX MEASURES FOR SMEs

Credit easing

In order to free up lending to business, the Government is launching a package of measures worth up to £21 billion to ease the flow of credit to businesses. This includes up to £20 billion for the National Loan Guarantee Scheme and £1 billion for the Business Finance Partnership.

Comment

The hope is that credit easing will encourage bank lending and enhance the demand for credit by reducing the price of loans for eligible businesses.

Small business rate relief holiday

The Government will extend the current small business rate relief holiday for a further six months from 1 October 2012 and also give businesses the opportunity to defer 60% of the increase in their 2012/13 business rate bills.

Employment regulations

In an attempt to make it easier to ‘hire and fire’, the Government intends to:

• look for ways to provide a quicker and cheaper alternative to a tribunal hearing in simple cases by introducing a ‘Rapid Resolution’ scheme
• complete a call for evidence on the impact of reducing the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days.

The Government will begin a call for evidence on two proposals for reform of UK employment law. They will:

• seek views on the introduction of compensated no-fault dismissal for micro-businesses with fewer than 10 employees
• look at how it could move to a simpler, quicker and clearer dismissal process, potentially including working with ACAS to make changes to their code or by introducing supplementary guidance for small businesses.

Youth Contract

A number of measures under the heading of a ‘Youth Contract’ will be introduced, including Government funding of:

wage incentives for 160,000 young people to make it easier for private sector employers to take them on

• at least 40,000 incentive payments for small firms to take on young apprentices.

Planning reform

The Government has announced a series of changes to the planning regime. Changes will include:

• introducing a 13-week maximum timescale for the majority of non-planning consents
• building more flexibility into the new major infrastructure planning process, particularly in the pre-application phase
• reviewing the planning appeals procedures to make them faster and more transparent
• consulting on proposals to allow existing agricultural buildings to be used for other business purposes such as offices, leisure and retail space.

Comment

These changes are designed to speed up building projects. ‘Red tape’ has been cited as a major reason for UK infrastructure development being more expensive than in other European countries.

Housing

In an attempt to increase house building, stabilise the housing market and enable more people to own their own home, the Government will:

• introduce a new build indemnity scheme under which home buyers will be able to purchase new build houses and flats with a 5% deposit, with house builders and the Government helping to provide security for the loan
• reinvigorate the ‘Right to Buy’ to help social tenants buy their home
• launch a new £400m ‘Get Britain Building’ investment fund, which will support firms in need of development finance
• support new development, which could include modern garden cities and urban and village extensions.

PERSONAL TAX

The personal allowance for 2012/13

For those aged under 65 the personal allowance will be increased by £630 to £8,105. This increase is greater than the minimum required and is part of the plan of the Coalition Government to ultimately raise the allowance to £10,000.

The personal allowance is reduced by £1 for every £2 of adjusted net income over £100,000. Next year the allowance ceases at adjusted net income in excess of £116,210.

Comment

Planning should be considered where adjusted net income is expected to exceed £100,000. This figure is calculated after giving a deduction against income for pension contributions and gift aid payments. Consider whether these could be made to protect some or all of the personal allowance.

Tax band and rates 2012/13

The basic rate of tax is currently 20%. The band of income taxable at this rate is being reduced to £34,370 so that the threshold at which the 40% band applies will remain at £42,475.

The 50% band currently applies where taxable income exceeds £150,000.

If dividend income is part of total income this is taxed at 10% where it falls within the basic rate band, 32.5% where liable at the higher rate of tax and 42.5% where liable to the additional rate of tax.

Tax credits

The child element of Child Tax Credit will rise by £135 per year in 2012/13 which is in line with the inflation increase but the additional increase above inflation of £110 which was planned has been dropped.

The disability elements of tax credits will be uprated by the increase in the Consumer Price Index of 5.2% but there is to be no uprating of the couple and lone parent elements of Working Tax Credit.

 Integration of the operation of income tax and NIC

Following an invitation for people to express views on a proposed integration of the operation of income tax and NIC the Government has decided to continue with the review. The Government will establish a number of working groups with stakeholders to explore options for integration. Depending on the results of the working groups, further rounds of consultation will proceed after Budget 2012. It is unlikely that there will be any substantive change in reality before 2017.

Junior ISAs

Provisions to allow these accounts were introduced this tax year. At present there is not a wide availability of these accounts although some building societies have launched products. The key features of the accounts are:

• the accounts are available to any child who does not qualify for a Child Trust Fund
• all returns will be tax free
• funds placed in the account will be owned by the child and would be locked in until the child reaches adulthood although they can manage the account from the age of 16 years
• investments will be available in cash or stocks and shares
• annual contributions will be capped at £3,600
• there will be no Government contributions into the account.

Comment

These accounts provide a way of increasing the tax free income available to a family in addition to the use of adult ISAs for the parents.

Child Trust Funds

These ceased to be available for children born on or after 1 January 2011 although existing accounts remain in place and can be added to by parents and family members. The maximum annual contribution has been increased to £3,600 to keep in line with the Junior ISA. No further Government contributions will be made to any account.

Furnished holiday lettings

From 6 April 2012 the tests which determine whether a property can qualify for treatment as a furnished holiday let will change. The number of days for which the property is available for letting increases from 140 days to 210 days and the number of days actually let increases from 70 to 105 days.

If an individual can show there was a genuine intention to meet the letting conditions but has been unable to do so they will be able to make an election to continue to treat the property as a furnished holiday let. This will protect the special tax treatment that such properties receive.

Statutory Residence Test

There is currently no definition of ‘residence’ in UK tax law and yet the liability to income tax and capital gains tax (CGT) rests on knowing an individual’s UK residence status for a tax year. Currently the determination of residence is based on old case law and, as a recent Supreme Court decision has shown, it can lead to significant uncertainty and large tax liabilities.

The Government published a consultation document in summer 2011 on the introduction of a Statutory Residence Test (SRT) which would come into effect in April 2012. The SRT is based on three parts and an individual would consider each part in turn. If a definite answer on their residence status is found on the first part then there is no need to proceed further. Similarly if the second part gives a definitive answer there is no need to move to the third part. That final test then provides a definitive answer.

The parts and the conditions are as follows:

• Part A – satisfy any one of three conditions and the individual is conclusively non-resident in the year:
• an individual with no UK residence in the three previous tax years spends less than 45 days in the UK
• an individual who has been UK resident in one of the three previous tax years spends less than ten days in the UK
• an individual goes to work abroad in a full time employment or self- employment and spends less than 90 days in the UK and has less than 20 working days in the UK.
• If no definite answer under Part A then proceed to Part B
• Part B – satisfy any one of three conditions and the individual is conclusively resident for the year:
• an individual spends 183 days or more in the UK
• an individual has their only home in the UK or if they have more than one home all are in the UK
• an individual works full time in the UK for a continuous period of at least nine months and not more than 25% of duties are outside the UK.
• If no definite answer under Part B then proceed to Part C
• Part C – here the rules combine the time spent in the UK and a number of connection factors which are deemed to link an individual to the UK. Five connection factors have been identified:
• spouse and/or minor children are resident in the UK at any time in the year
• the individual has accessible accommodation in the UK and uses it in the year
• the individual spends at least 40 working days in the UK
• in either of the two previous tax years the individual spent at least 90 days in the UK
• the individual spent more time in the UK than in any other single country in the tax year.
• Part C then provides for a combination of factors and time which will make an individual resident in the UK.

A day will count as being in the UK if the individual is physically present in the UK at midnight unless they satisfy specific rules for those in transit through the UK.

There are a number of issues which have been raised in the consultation process on which clarification has been sought and it is hoped that these will be clarified in the draft legislation. It is intended that the new rules will apply from 6 April 2012. From that point they will supersede all existing case law and practice. However residence status for years up to 2011/12 is determined using the present rules.

Comment

The proposed rules do seem to work to give a definitive answer to the question ‘Am I resident in the UK?’ The answer may not be the one that you want but it should then be possible to identify the factors which need to change in order to achieve the desired result.

Individuals planning a move into or out of the UK after 6 April 2012 should be taking the new rules into account in their planning. They should also note that they are going to need to keep comprehensive records not just of their time in the UK but also, where relevant, their working days in the UK and the time they spend in each other country that they may visit.

Some individuals who are currently outside the UK, particularly those working abroad, will need to note that the new rules could change their residence status and they may wish to review plans for visits back to the UK and the impact of any potential connecting factors.

Changes for non-domiciled individuals

Following changes in 2008 all UK resident individuals are taxable on overseas income and gains overseas arising in the tax year. Individuals who are not domiciled in the UK or who are not ordinarily resident can make a claim to be taxed only on sums actually remitted to the UK in the year. These rules, known as the ‘remittance basis rules’ are complex but can mean a significant tax saving.

There are currently two downsides to making a remittance basis claim:

•  the individual automatically loses their personal allowance for income tax and their annual exempt amount for CGT unless the remittances amount to almost all of the overseas income and gains arising
• an individual who has been resident in the UK for at least seven out of the preceding nine UK tax years must pay a remittance basis charge of £30,000 in addition to the tax actually due.

Two significant changes are planned in the remittance basis rules from 6 April 2012:

• the remittance basis charge will be increased to £50,000 where an individual has been resident in the UK for 12 out of the preceding 14 tax years
• if an individual remits funds to invest in a UK business then that remittance will be tax free if the remittance basis is claimed (although the remittance basis charge will still be payable). A consultation paper has proposed a wide definition of business and indicates that the business vehicle can be a company or an unincorporated business. When the investment is realised it will be necessary for the individual to either reinvest the funds immediately in another qualifying venture or remove the funds from the UK within 14 days otherwise they will be treated as a remittance for that year.

Some administrative changes in the remittance basis rules will also be introduced.

BUSINESS TAX

Corporation tax rates

In accordance with the plans announced in March the main rate of corporation tax will fall from 26% to 25% from 1 April 2012. The small company rate is 20% and there has been no announcement of the rate for next year.

Enterprise Investment Scheme (EIS)

Changes announced in the March Budget are due to come into effect on 6 April 2012. These are:

• the maximum amount that an individual can invest in total in a tax year rises from £500,000 to £1m.
• the maximum funds that a company can receive under EIS rises from £2m to £10m
• the size of a company that can benefit from EIS (subject to meeting all the qualifications) is increased to £15m gross assets and fewer than 250 employees.

A number of other changes were announced in the Autumn Statement:

• the rules which identify individuals who are deemed to be connected to the company are to be relaxed in some circumstances
• the £1m per company limit that currently applies for Venture Capital Trusts will be removed
• anti-avoidance rules will be introduced  to exclude companies set up for the purpose of obtaining the relief, and to exclude the purchase of shares in another company
• investment in Feed-in-Tariffs will be excluded.

Seed Enterprise Investment Scheme (SEIS)

This is a new relief which will be introduced from 6 April 2012. It will provide income tax relief at 50% in respect of investment in a small company whose total assets before the investment are less than £200,000. The relief will be limited to investments of up to £150,000 in each company and a maximum of £100,000 investment for an individual. In addition an individual who makes a capital gain in 2012/13 and reinvests some or all of the gain in a SEIS company in the same year will obtain exemption from CGT for the sum invested.

Comment

This relief will encourage business angels or perhaps family members to invest in small enterprises and obtain a tax refund of half their investment. The details of the conditions which the recipient company will have to meet are not yet known.

Annual Investment Allowance (AIA)

The AIA is a capital allowance available for many businesses on most purchases of plant and machinery, long-life assets and integral features. Relief is given on the full cost up to a current maximum allowance of £100,000 for a full year. This allowance is to be reduced to £25,000 with effect from 1 April 2012 for companies and 6 April 2012 for unincorporated businesses.

Where a business has an accounting period that straddles the date of change the allowances have to be apportioned on a time basis. For example a company with an accounting period ending on 30 September 2012 will have an allowance of £62,500 (£100,000 x ½ + £25,000 x ½). However it should be noted that for expenditure incurred after the 1/6 April, the maximum allowance that can be attributed to that expenditure is a fraction of £25,000. The fraction will be the amount of the £25,000 that is included in the calculation of the overall AIA for the accounting period.

Comment

Planning the timing of purchases of significant items of plant becomes very important over the next year to ensure that the maximum available AIA can be secured.

Suppose the company with the 30 September year end wishes to buy new plant costing £35,000. If they buy it in February 2012 they will be able to claim an AIA on the full £35,000 but if they buy it in June 2012 they will only be able to claim an AIA of £12,500. They would actually then be better off if they waited until October when they would have a full £25,000 available.

Writing down allowances

Writing down allowances are to be reduced from April next year. The normal rate of 20% will be reduced to 18% and the lower rate of 10% which applies to integral features and long-life assets will reduce to 8%. It will be necessary to calculate hybrid rates where the accounting period straddles 1/6 April which will give a rate between 20% and 18% (or between 10% and 8%) for that period.

Capital allowances in Enterprise Zones

Over the past year the Government has designated a number of very specific areas as Enterprise Zones. Businesses in these areas enjoy certain reliefs, for example, a relief from business rates. The Chancellor has announced that 100% capital allowances will now be available for the Zones in the Black Country, Humber, Liverpool, North East, Sheffield, and the Tees Valley.

Compulsory pooling

The Government is considering whether to introduce a requirement that businesses should pool their expenditure on fixtures within a short period after acquisition in order to qualify for capital allowances.

Research and development expenditure (R&D)

There are currently a number of restrictions which effectively limit the scope of this relief and it is planned to remove these for expenditure incurred on or after 1 April 2012. The proposals include:

• removing the rule limiting a company’s payable R&D credit to the amount of PAYE and NIC it pays
• removing the £10,000 minimum expenditure condition
• changing the rules governing the provision of relief for work done by subcontractors under the large company scheme
• increasing the additional deduction for R&D expenditure by SMEs by a further 25% making the total deduction 225% of actual expenditure.

The Chancellor has announced a consultation next year on the introduction of an ‘above the line’ tax credit in 2013 for larger companies.

Controlled Foreign Companies (CFCs)

The CFC regime can apply to a UK company which has a subsidiary operating in a country with a low rate of corporation tax. The rules have been in place for 25 years but are seen as complex and in some cases disadvantageous to business. Some interim changes were made in 2011 but a major overhaul is planned for 2012. The aims of the new rules will be:

• to target and impose a CFC charge on artificially diverted UK profits, so that UK activity and profits are taxed fairly
• to exempt foreign profits where there is no artificial diversion of UK profits
• to not tax profits arising from genuine economic activities undertaken offshore.

General Anti-avoidance Rule (GAAR)

The Government commissioned an independent report from a leading tax lawyer on whether or not it would be appropriate to introduce a GAAR into the UK tax system. This is a route that has been used in a number of other countries.

The reviewer has just presented his report to the Government and recommends that a moderate rule targeted at abusive arrangements would be beneficial to the UK tax system. Such a GAAR would apply for income tax, CGT, corporation tax and NIC. It would not apply to ‘responsible tax planning’.

It is now likely that the Government will undertake a consultation process in this matter but legislation is not likely until 2013 at the earliest.

High risk tax avoidance schemes

Certain types of tax avoidance schemes are currently subject to a disclosure regime which requires the scheme promoter to disclose details of the scheme to HMRC and for the users of the scheme to indicate their involvement on their tax return. Such schemes are usually challenged by HMRC but this procedure can take many years with Tribunal and Court hearings being required. If the scheme is blocked the scheme users have to pay the tax due but HMRC is concerned that the delay can still give them a significant cash-flow advantage.

HMRC is currently consulting on a proposal to introduce an additional charge on scheme users where the scheme fails. A user will be able to prevent this charge by paying the disputed tax to HMRC ahead of the challenge.

Tax treatment of asset-backed pension contributions

Rules are to be introduced from 29 November 2011 to limit tax relief for employers who enter into arrangements to make asset-backed contributions into their pension schemes. The new rules will ensure that the tax relief obtained more accurately reflects the actual costs to the employer.

EMPLOYMENT TAX

Employer-provided cars

From 6 April 2012 the CO₂ emissions bands used to work out the taxable benefit for an employee who has use of an employer-provided car will be shifted downwards by 5gm/km. This will have the effect of increasing the charge for each vehicle.

In addition, the current graduated table of employer-provided car bands will extend down to a 10% band and will apply to cars with CO₂ emissions between 76 and 99gm/km. As a result ‘qualifying low emission cars’ will no longer exist as a separate category.

In summary the new rules from 6 April 2012 will be:

• no emissions                              0%
• 75gm/km or less                        5%
• 99gm/km or less                      10%
• 100gm/km                               11%
• graduated increases of 1% per 5gm/km up to a maximum, including diesel supplement, of 35%

Real Time Information (RTI)

HMRC have produced draft legislation to introduce probably the most significant change in the PAYE system since its introduction in 1944. Under the RTI scheme, employers will electronically provide monthly information to HMRC related to wages and salaries paid to employees. Once the scheme is ‘bedded in’ employers will no longer have to complete year end returns such as the P35 and P14. The new system will also see the end of the use of the P45 when an employee leaves an employment.

Volunteer employers are to pilot the new scheme from 6 April 2012. The intention is that it will apply to employers on a phased basis from 6 April 2013 so that all employers are operating the system by October 2013.

Comment

This really is a major change but the success or otherwise of the scheme will depend on the ability of the HMRC computer system to cope. History suggests that this could be the problem.

CAPITAL TAXES

CGT rates

The current rates of CGT are 18% to the extent that any income tax basic rate band is available and 28% thereafter. The rate for disposals qualifying for Entrepreneurs’ Relief (ER) is 10% with a lifetime limit of £10m for each individual.

No announcement has been made of the rates for next year.

Comment

The ER limit is very generous and owners of businesses should ensure that they meet all the conditions necessary to secure the relief throughout the twelve months up to the date of a disposal.

CGT annual exemption

The CGT annual exemption has been frozen at £10,600 for 2012/13.

Inheritance tax (IHT) nil rate band

The IHT nil rate band remains frozen at £325,000 until 6 April 2015.

Reduced rate of IHT for the charitable

The Government will introduce a reduced rate of IHT for an estate where a minimum level of legacy has been left by the deceased to charity. The actual legacy to charity remains exempt from IHT and it is the rate of tax on the balance of the estate that would be reduced to 36% from 40%.

The intention is that the reduced rate will apply where charitable bequests satisfy a 10% test. A comparison will be made between:

• the total value of charitable legacies for IHT purposes and
• the value of the net estate as reduced by:
• any available nil rate band
• the value of assets passing to the surviving spouse or civil partner and
• other IHT reliefs and exemptions for example Business Property Relief.

If the first figure is at least 10% of the second then the balance of the estate will qualify for the reduced IHT rate of 36%.

The changes will apply to estates where the individual dies on or after 6 April 2012.

Comment

Because the benefit of the reduced IHT rate will be dependent on whether or not the amount of the charitable legacy is sufficient for the estate to pass the 10% test there will be a ‘cliff edge’ effect. Where the amount of the charitable legacy is close to the critical 10% point, a small difference to the amount of the legacy could have a much larger impact on the estate’s IHT liability. There are no plans to apply any taper or other mechanism to mitigate this.

OTHER TAXES

VAT – Low value consignment relief (LVCR)

LVCR is an administrative simplification to reduce the costs for businesses, Royal Mail and other carriers and consumers all of whom would otherwise be involved in the collection and/or payment of small amounts of VAT on large numbers of low value packages coming into the UK from outside the EU. It is the main reason that suppliers of DVDs and CDs often use a base in the Channel Islands from which to ship their products.

The amount at which LVCR was to apply was reduced from £18 to £15 from 1 November 2011.

The Government recently announced that the relief is to be abolished from 1 April 2012 for goods imported as part of a distance selling transaction from the Channel Islands.

VAT cost sharing exemption

The Government is to introduce an EU VAT exemption for organisations that wish to share costs between themselves on a non-profit basis. The exemption can be used, amongst others, by organisations such as charities, universities and higher education colleges and housing associations wanting to make efficiency savings by working together to achieve economies of scale.

Under current UK legislation a VAT cost can arise creating a barrier to the sharing of services. The exemption once implemented would also, in certain circumstances, remove this VAT barrier.

Stamp Duty Land Tax (SDLT) holiday for first time buyers

Currently first-time buyers do not have to pay SDLT on house purchases where the cost is no more than £250,000. This relief is due to expire at midnight on 24th March 2012.

Air Passenger Duty (APD)

The Government intends to proceed with the introduction of APD to flights taken aboard business jets from 1 April 2013.

Disclaimer – for information of users

This summary is published for the information of clients. It provides only an overview of the Autumn Statement and previous announcements. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this summary can be accepted by the authors or the firm.

In this month’s enews we report on HMRC’s latest disclosure opportunity. Please contact us if you would like any further details on any of the issues covered.

HMRC launch the Tax Catch Up Plan

HMRC have launched a campaign to target private tutors and coaches who have undeclared tax liabilities.

The Tax Catch Up Plan (TCUP) is aimed at individuals who provide private lessons, or who profit from tuition and coaching, as a main or secondary income where the correct tax has not been paid. The types of tuition, instruction or coaching covered by the TCUP include tuition of traditional academic subjects, fitness and dance instruction, musical instrument tuition, art, services provided by life coaches and others.

Under the TCUP, tutors and coaches have until 31 March 2012 to advise HMRC about their outstanding tax for the years up to 5 April 2010, and pay what they owe. HMRC have confirmed that those who come forward by the deadline are likely to receive the best possible terms for paying the tax owed. If they have to pay a penalty, it is unlikely to be more than 20%.

Those who wait for HMRC to come to them will find that they have to pay much higher penalties (as much as 100% and may even face criminal prosecution). After 31 March 2012, using information pulled together from different sources, HMRC will investigate those who have chosen not to come forward.

Marian Wilson, Head of HMRC Campaigns, said:

‘Our campaigns are designed to ensure tax is paid so that the money is available to spend on public services used by everyone. We are making it as easy as possible for people offering tuition and coaching to use this unique opportunity to put their tax affairs in order by making a full disclosure, and benefit from the best possible terms.

We are using various intelligence sources to identify and then target those who do not take advantage of this opportunity to declare their full income. The message is clear: contact us before we contact you.’

The Tax Catch Up Plan has two stages:

• From 10 October 2011 to 6 January 2012, tutors/coaches/instructors must register with HMRC to ‘notify’ that they plan to make a voluntary tax disclosure.
• By 31 March 2012 those who have registered to notify must tell HMRC what they owe and pay the tax, interest and penalties due.

People can register online by completing a notification form which can be accessed using the link below or by calling HMRC on 0845 601 8817.

Please do get in touch if you have any concerns in this area.

Internet links: Press release TCUP guidance

Plan to boost the economy

The Institute of Directors (IoD) has proposed a new economic growth plan which aims to improve business investment and development. ‘The Route Back to Growth’ contains several recommendations including:

The IoD claims that if its suggestions are adopted by the government, it could make the UK one of the most advanced economies in the world.

Internet link: IoD plan

HMRC extend Business Records Checks

HMRC have announced that they are extending their Business Records Checks programme.

These checks were piloted earlier this year and involved checks on the adequacy of Small and Medium Sized Entities’ business records. The pilots apparently found that around 44% of businesses visited had issues with their record-keeping, while around 12% of those visited had seriously inadequate records.

HMRC are now extending this activity from mid-September to cover a number of key areas across the UK. As part of this, the number of full-time staff employed on the programme will rise from 30 to 120.

HMRC are planning to complete up to 12,000 checks by the end of the current financial year, with 20,000 provisionally planned for 2012/13. HMRC are increasing the number of visits so it can refine the process, before final decisions on a national roll-out are taken in the New Year. If you have any concerns in this area please contact us.

Internet link: Press release

Make sure your employee information is correct

HMRC are reminding employers of the importance of correct employee information and have updated the questions on the introduction of Real Time Information (RTI). They have issued a number of questions and answers stressing the importance of correct details in the run up to the introduction of RTI in 2012/13.

According to the advice which has been issued:

‘It has always been important to make sure the information that you send HMRC about your employees is accurate to help ensure that your employees pay the correct Income Tax and NICs. Improving the accuracy of the information you hold and send to HMRC will help match the information to the correct HMRC record. This could save you money by helping to reduce the number of employee enquiries you receive.

This is not just important for tax and NICs. From October 2013, RTI will support Universal Credit by providing the Department for Work and Pensions with up to date information about claimants’ employment income. Ensuring your employee information is correct will help to ensure they receive the right amount of Credit.

As part of the process for an employer joining RTI, HMRC will align the records of employees held on the NPS system and the records held by employers. HMRC will publish more information about the ‘employer alignment’ process soon.

In the meantime HMRC recommends that you start to prepare for RTI by checking the information you hold.’

Over 80% of matching problems experienced by HMRC are caused by incorrect information about an individual’s name, date of birth or National Insurance number.

Please use the following link to read the guidance on the correct format for information.

Internet link: HMRC RTI FAQs

National Insurance Numbers – by letter

HMRC have for many years notified individuals of their National Insurance number (NI No) for the first time by sending them a plastic NI No card.

Last year, as part of the Government’s Spending Challenge, it was announced that HMRC would stop issuing NI No cards and send letters instead. The government estimate this will save approximately £1 million per annum.

Late last year HMRC introduced a system of notification by letter for those requesting a reminder of their NI No, and in July this year adults requesting a number for the first time will be issued with one by letter by Jobcentre Plus.

HMRC have confirmed that they will stop sending NI No cards altogether. Anyone needing a number (adults and juveniles approaching age 16) will now receive their NI No on a notification letter.

HMRC are advising employers that new employees may now have a letter or a card with their NI No information and that either is acceptable.

Internet link: HMRC NI news

HMRC issue updated guidance for employees on childcare

HMRC have updated their guidance on employers helping with childcare costs.

Leaflet IR155 which sets out the circumstances and the amounts of tax and National Insurance (NI) free childcare costs that an employer may provide has been updated.

The update reflects the change to the rules which mean that where a new claimant enters into a scheme from 6 April 2011 the amount of exempt childcare is restricted

• for higher rate taxpayers to £28 a week, and
• for additional rate taxpayers to £22 a week.

The amount available to basic rate tax payers and those in relevant schemes prior to 6 April 2011 remains at £55 a week.

If you would like any further information on tax and NI efficient childcare please do get in touch.

Internet link: IR155 leaflet

Importing and Exporting Guide

HMRC have issued a ‘Guide to Importing & Exporting – Breaking down the Barriers’. According to the introduction to the lengthy document:

‘This information pack is for anybody, whether already in business or not, who wishes to bring goods into the United Kingdom (UK) from outside the European Union (EU), or intends to send goods from the UK out of the EU.

The pack has been designed to help you get started on importing and / or exporting, and to help you better understand the procedures involved in these activities.’

If you have any queries or would like advice in this area please do get in touch.

Internet link: HMRC guidance

HM Revenue & Customs (HMRC) has announced an extension of its Business Records Checks programme.

Business Records Checks were piloted earlier this year in eight key areas, and involve checks on the adequacy of small and medium-sized enterprises’ business records.
The pilots found that around 44 per cent of businesses visited had issues with their record-keeping, while around 12 per cent of those visited had seriously inadequate records.

HMRC will be now be extending this activity from mid-September to cover a number of key areas across the UK. As part of this, the number of full-time staff employed on the programme will rise from 30 to 120.

HMRC plans to complete up to 12,000 Business Records Checks by the end of the current financial year, with 20,000 provisionally planned for 2012/13. HMRC is increasing the number of visits, so it can refine the process, before final decisions on a national roll-out are taken in the New Year.

Initially, HMRC will only levy a record-keeping penalty in the most extreme cases of poor record-keeping. In the longer-term, HMRC intends to issue penalties of up to £3,000 for serious inadequacies in record-keeping. HMRC will issue guidance on this, and make a further announcement on when it will happen, in due course.

HMRC’s Director of Local Compliance, Richard Summersgill, said:

“Good record-keeping helps businesses pay the right amount of tax at the right time, thereby potentially avoiding interest and penalties.

“Adequate records give businesses a clear idea of their trading position and profitability, allowing them to make business decisions and adjustments to ensure survival and success. And where a check has shown a business keeps adequate records, it gives HMRC a greater degree of assurance as to the likely accuracy of its tax returns.

“Ultimately, this is about supporting businesses and reducing the tax gap.”
For further information on record-keeping, visit www.hmrc.gov.uk/record-keeping

Notes for editors
1. The Business Records Checks pilots involved around 800 visits, focusing on eight different sites (Edinburgh, Irvine, Sunderland, Liverpool, Manchester, Stockport, Sheffield and Portsmouth). The extended programme of visits will cover key areas in England, Scotland, Wales and Northern Ireland.

2. Research by the Organisation for Economic Cooperation and Development (OECD) indicates that poor business record-keeping generally leads to an underassessment of tax, even where there is an audit-type check into a return for the period covered by such records. On this basis, poor business record-keeping is responsible for a loss of tax in up to two million SME cases annually.

3. A guide to setting up a basic record-keeping system is available from the Business Link website at www.businesslink.gov.uk/startrecordkeeping.
Issued by HM Revenue & Customs Press Office

In this month’s enews we report on increases to the NMW rates. Please contact us if you would like any further details on any of the issues covered.

National Minimum Wage rates

The adult rate of the National Minimum Wage (NMW) increases to £6.08 (£5.93) an hour from 1 October 2011. This is payable to those age 21 and over.

The rate for those aged 18 to 20 increases to £4.98 (£4.92) and for 16 and 17 year olds to £3.68 (£3.64) an hour.

The apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship, increases to £2.60 (£2.50) and hour.

Updated guidance available on the Business Link website includes specific situations such as those engaged on work experience or internships and their entitlement to the NMW. The guidance also includes a new worker checklist for employers and case study examples.

The press release confirms:

‘Entitlement to the NMW does not depend on a job title but on whether the arrangement they have with an organisation makes them a worker for NMW purposes. Where an individual is a worker – and no exemption applies – then they must be paid at least the NMW.’

Employment Relations Minister Edward Davey said:

‘Internships and work experience of all forms offer an excellent opportunity in helping to bridge the gap between education and the workplace. And for businesses it allows them access to a wide talent pool of some of our best and brightest who didn’t take the traditional route into a job.

Fairness though is absolutely paramount with all placements. When a worker is entitled to the minimum wage, they should be paid it and we will continue to enforce the law. Today’s publication will help clarify this for employers and will also make sure that all interns and those on work experience placements have a better understanding of their entitlement to the minimum wage.’

HMRC are able to charge penalties to those employers found to be in breach of the NMW rules.

If you have any queries on the NMW please do get in touch.

Internet links: NMW rates Business link guidance Press release NMW Penalties

Advisory fuel rates for company cars

New company car advisory fuel rates have been published to take effect from 1 September 2011. HMRC’s website states:

‘These rates apply to all journeys on or after 1 September 2011 until further notice. For one month from the date of change, employers may use either the previous or new current rates, as they choose. Employers may therefore make or require supplementary payments if they so wish, but are under no obligation to do either.’

The advisory fuel rates for journeys undertaken on or after 1 September 2011 are:

Please note that only one rate has changed and that has been reduced and care must be taken to apply the correct rate after the one month period of grace.

Other points to be aware of about the advisory fuel rates:

• Employers do not need a dispensation to use these rates.
• Employees driving employer provided cars are not entitled to use these rates to claim tax relief if employers reimburse them at lower rates. Such claims should be based on the actual costs incurred.
• The advisory rates are not binding where an employer can demonstrate that the cost of business travel in employer provided cars is higher than the guideline mileage rates. The higher cost would need to be agreed with HMRC under a dispensation.

If you would like to discuss your car policy, please contact us.

Internet link: HMRC advisory fuel rates

Agreement with Switzerland to secure billions in unpaid tax

The government has agreed measures with Switzerland to tackle offshore tax evasion. Under the terms of an agreement, existing funds held by UK taxpayers in Switzerland will be subject to a significant one-off deduction of between 19% and 34% to settle past tax liabilities.

From 2013, a new withholding tax of 48% on investment income and 27% on gains will ensure the effective future taxation of UK residents with funds in Swiss bank accounts. This will be accompanied by new information-sharing rules which will make it easier for HMRC to find out about Swiss accounts held by UK taxpayers. The new charges will not apply if the taxpayer authorises a full disclosure of their affairs to HMRC.

Internet link: Press release

Unemployment figures

The latest unemployment figures show the number of people out of work rose by 80,000 to 2.51 million in the three months to July 2011.

Neil Carberry, CBI Director for Employment Policy, said:

‘This rise in unemployment is troubling, particularly the growing number of young people out of work.

With one in five 16-24 year olds currently unemployed, tackling youth unemployment must be a priority. Businesses are eager to play their part through apprenticeships, training and work placements, but now the government must do all it can to create the right conditions for the private sector to create much-needed jobs.’

Internet link: Press release

HMRC reminder on new tax return penalties

HMRC are reminding individuals and businesses about new Self Assessment penalties for late returns and late payments, which come into effect this autumn.

The changes will apply to Self Assessment returns for 2010/11 which must be submitted by 31 January 2012. As stated on the HMRC website:

‘The new penalties for late Self Assessment returns are:

• an initial £100 fixed penalty, which will now apply even if there is no tax to pay, or if the tax due is paid on time
• after 3 months, additional daily penalties of £10 per day, up to a maximum of £900
• after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater; and
• after 12 months, another 5% or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due.’

If you would like help or advice on your Self Assessment return please do contact us.

Internet links: Press release HMRC deadlines and penalties

School Charities – Gift Aid and Payroll Giving guide

HMRC have published a Gift Aid and Payroll Giving guide for School Charities.

The guide contains information and simple examples specifically related to funds received by school charities to help make the most of these donations and identify what qualifies for Gift Aid. The guidance covers the following scenarios:

‘Appeals to fund extra lessons

Non-uniform days

School fees

Appeals towards school running costs

Appeals to fund scholarships

Appeals to a general reserve fund

Educational school trips

Appeals to buy a minibus or other equipment

Sponsored events

Payments to e-Learning Foundations

Building appeals

Other fundraising events’

Internet links: HMRC website Guidance

Revised construction industry penalties

From October 2011 the late submission Construction Industry Scheme monthly returns will result in revised penalties. The penalties are as follows:

• a basic penalty of £100 for failure to meet due date of the 19th of the month
• where the failure continues after two months after the due date, a further penalty of £200 will be charged
• after six months an additional penalty will be due, rising to the greater of 5% of the tax or £300
• after 12 months a further penalty will again be due being the greater of £300 or 5% of the tax but, where the withholding of information is deliberate and concealed, it will be 100% of the tax (or £3,000 if greater) and where information is withheld deliberately 70% of the tax (or £1,500 if greater).

Please get in touch if you would like help or advice on the Construction Industry Scheme.

Internet link: HMRC guidance on CIS penalties

HMRC report increase in phishing scams

HMRC have confirmed that reports of fraudulent ‘phishing’ emails have risen by 300% over the past year. The figure for August 2011 was 24,000. HMRC are currently helping to shut down around 100 scam websites a month.

They are stressing that if anyone receives an email claiming to be from HMRC advising that they are due a tax repayment that they do not follow the email’s instructions.

The emails provide a ‘click-through link’ to a cloned replica of the HMRC website, where the recipient is asked to provide their credit or debit card details. HMRC advise that victims risk not only having their bank accounts emptied but also their personal details being sold on to other organised criminal gangs.

Joan Wood, Director of HMRC Online and Digital, said:

‘We only ever contact customers who are due a tax refund in writing by post. We currently don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.

The increase in reports is partly due to improved awareness of this scam. However, I have no doubt that more of these “phishing” emails are in general circulation than ever before.

HMRC will do everything possible to ensure those receiving this email know what steps to take to protect their information, and we are working closely with other law enforcement agencies to target the criminals behind this serious crime and see them brought to justice.’

Internet link: