Newsletter – June 2016

Henry Cooper is walking 2016 km in the year 2016!

Henry is walking 2016 km in the year 2016, to raise some funds for the Thames Valley Air Ambulance.

Please click below, to sponsor him – thank youJustGiving - Sponsor me now!

Advisory fuel rates for company cars

New company car advisory fuel rates have been published which took effect from 1 June 2016. The guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 June 2016 are:

Engine size Petrol
1400cc or less 10p
1401cc – 2000cc 13p
Over 2000cc 20p
Engine size LPG
1400cc or less 7p
1401cc – 2000cc 9p
Over 2000cc 13p
Engine size Diesel
1600cc or less 9p
1601cc – 2000cc 10p
Over 2000cc 12p

The guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

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

Internet link: GOV.UK AFR

PAYE 3 days grace and risk based penalties to continue

HMRC have confirmed, in their updated guidance, that the three day easement and risk assessed approach to issuing penalties will continue to apply for 2016/17. As a result employers will not incur penalties for delays of up to three days in filing PAYE information during the 2016/17 tax year.

Late filing penalties will continue to be reviewed on a risk-assessed basis rather than be issued automatically.

Employers are required to file a Full Payment Submission (FPS) on or before each payment of wages is made to employees. Limited exceptions apply to this deadline which are set out at’.

HMRC will not charge a late filing penalty for delays of up to three days after the statutory filing date, however employers who persistently file late, will be monitored and may be contacted or considered for a penalty.

If you would like help with payroll matters please do get in touch.

Internet link: GOV.UK Penalties

VAT Flat Rate Scheme guidance updated

HMRC have issued updated guidance on the operation of the VAT Flat Rate Scheme which allows taxpayers to calculate the VAT payable by applying a flat rate percentage to their VAT inclusive turnover, rather than netting off output and input VAT due on sales and purchases.

The revision in the guidance follows a number of unsuccessful visits to the First Tier Tribunal (FTT). HMRC has issued a revised version of VAT notice 733 Flat Rate Scheme to update their guidance in accordance with the FTT decisions.

The previous version of the notice listed a number of trades and professions (at paragraph 4.4 of the guidance) and indicated the relevant sectors and percentages that these types of business should choose. These had a higher percentage than the 12% rate which applies to ‘business services not listed elsewhere’.

The FTT was critical of HMRC in their rigid interpretation of their own guidance. Although this section of the guidance has not been removed, taxpayers are now advised to ‘use ordinary English’ and choose the sector which ‘most closely describes what your business will be doing in the coming year’. The new guidance confirms that HMRC will not change a business’s choice of sector retrospectively as long as the choice was reasonable.

Please contact us if you would like any advice on VAT matters.

Internet link: VAT Notice 733

NAO report says HMRC’s customer service quality ‘collapsed’

According to a report by the National Audit Office (NAO) the quality of service at HMRC ‘collapsed’ over an 18 month period between 2014 and 2015.

The report found that average call waiting times tripled in 2014/15 and in the first seven months of 2015/16. Call waiting times for self assessment tax returns peaked at 47 minutes last autumn, which resulted in HMRC having to bring in 2,400 extra staff for their tax helpline.

Using HMRC’s own criteria, the NAO valued people’s time at an average of £17 an hour, and, as a result, calculated that callers would have wasted a total of £66 million while waiting on the phone, £21 million while actually talking to HMRC and £10 million on the cost of the call itself.

The NAO report blames the poor performance on HMRC’s decision to cut 11,000 staff between 2010 and 2014 in the move to persuade more people to complete their tax returns online. The report claims that HMRC ‘misjudged the cumulative impact of its complex transition and released too many customer service staff before completing service changes’.

In other words, it greatly underestimated how many call centre staff would still be required to help taxpayers with self assessment queries.

Amyas Morse, head of the NAO, said:

‘HMRC’s overall strategy of using digitally enabled information to improve efficiency and deliver service in new ways make sense to the NAO. This does not change the fact that they got their timing badly wrong in 2014, letting significant numbers of call handling staff go before their new approach was working reliably.

This led to a collapse in service quality and forced a rapid expansion of headcount. HMRC needs to move forward carefully and get their strategy back on track while maintaining, and hopefully improving, service standards.’

HMRC said its service levels had improved since the period analysed in the NAO report, and that, over the last six months, call waiting times had averaged six minutes.

Ruth Owen, HMRC’s director general for customer services, said:

‘We recognise that early in 2015 we didn’t provide the standard of service that people are entitled to expect and we apologised at the time. We have since fully recovered and are now offering our best service levels in years.’

Internet links: NAO press release HMRC news

HMRC update phishing scam advice

HMRC have updated their guidance to taxpayers on how to spot phishing scam emails.

Phishing is the fraudulent act of emailing a person in order to obtain their personal/financial information such as passwords and credit card or bank account details. These emails often include a link to a bogus website designed to encourage the unwary to enter their personal details.

The HMRC guidance is designed to help taxpayers to recognise genuine contact from HMRC, and how to tell when an email/text message is phishing/bogus.

Internet link: HMRC guidance

HMRC urges claimants to renew tax credits online

HMRC are urging people to renew their tax credits claim well before the 31 July deadline.

HMRC have made improvements to the online renewal service and recommend claimants renew their claim online once they receive their renewal pack which is issued between April and June. The online service can now accommodate all changes in circumstances (working hours, childcare costs or income) which affect the amount of someone’s entitlement.

Nick Lodge, HMRC’s Director General, Benefits and Credits, said:

‘Our online service means that you can renew at any time of the day or night, and on any device, without having to call us. Online help can also answer most queries you may have and a web chat facility will be available to support people renewing online. We urge everyone who can to go online.

Our customers should check their details and renew early to ensure they get the right money. The sooner people renew their claim, the sooner we can check payments are correct, meaning we avoid paying too little money, or too much, which claimants then have to pay back.

This year, claimants renewing online will be able to access further information, including viewing their next payment, through their own online Personal Tax Account.

Internet link: Press release

P11D deadline approaching

The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2016, are due for submission to HMRC by 6 July 2016. The process of gathering the necessary information can take some time, so it is important that this process is not left to the last minute.

Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July (22nd for cleared electronic payment).

HMRC produce an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

Internet links: HMRC guidance Toolkit

The Second Budget 2015 – An Overview

The Second Budget 2015

George Osborne presented the first Budget of this Parliament on Wednesday 8 July 2015. The speech set out his plans for the next five years ‘to keep moving us from a low wage, high tax, high welfare economy; to the higher wage, lower welfare country we intend to create’.

Main Budget tax proposals

  • New taxation system for dividend receipts for individuals.
  • Proposals to restrict interest relief for ‘buy to let’ landlords.
  • Extension to the inheritance tax nil rate band available.

Other tax changes

  • An announcement of the amount of the Annual Investment Allowance available to businesses from January 2016.
  • Removal of the tax relief available on the acquisition of goodwill and customer related intangibles.
  • An increase in the amount of the NIC Employment Allowance.

The government also announced a number of changes to tax credits and Universal Credit as part of the welfare reforms aimed at reducing the growing expenditure in this area.

Our summary focuses on the tax issues likely to affect you, your family and your business. To help you decipher what was announced we have included our own comments.

If you have any questions please do not hesitate to contact us for advice.

The Budget proposals may be subject to amendment in a Finance Act. You should contact us before taking any action as a result of the contents of this summary.


Personal Tax

The personal allowance for 2015/16

For those born after 5 April 1938 the personal allowance is £10,600. For those born before 6 April 1938 the personal allowance remains at £10,660. The reduction in the personal allowance for those with ‘adjusted net income’ over £100,000 is £1 for every £2 of income above £100,000. So for 2015/16 there is no personal allowance where adjusted net income exceeds £121,200.

Commitments to increase the personal allowance

The Chancellor announced that the personal allowance will be increased to £11,000 for 2016/17 and to £11,200 in 2017/18. These allowances are higher than those previously announced in the March Budget.

Legislation to ensure a tax-free minimum wage

The government has an objective to raise the personal allowance to £12,500 and the higher rate threshold to £50,000 by the end of this Parliament.

The government has announced that the personal allowance will automatically increase in line with the equivalent of 30 hours a week at the adult rate of the national minimum wage once the personal allowance reaches £12,500.

Tax bands and rates for 2015/16

The basic rate of tax is currently 20%. The band of income taxable at this rate is £31,785 so that the threshold at which the 40% band applies is £42,385 for those who are entitled to the full basic personal allowance.

The additional rate of tax of 45% is payable on taxable income above £150,000.

Currently dividend income is taxed at 10% where it falls within the basic rate band and 32.5% where liable at the higher rate of tax. Where income exceeds £150,000, dividends are taxed at 37.5%. Dividend income is deemed to be paid net of a notional 10% tax credit.

Some individuals qualify for the 0% starting rate of tax on savings income up to £5,000. The rate is not available if taxable non-savings income (broadly earnings, pensions, trading profits and property income) exceeds the starting rate limit.

Commitment to increase the 40% income tax threshold

The Chancellor announced that the basic rate limit will be increased to £32,000 for 2016/17 and to £32,400 for 2017/18.

The higher rate threshold will rise to £43,000 in 2016/17 and £43,600 in 2017/18 for those entitled to the full personal allowance.

Personal Savings Allowance

The Chancellor announced in the March Budget that legislation will be introduced in a future Finance Bill to apply a Personal Savings Allowance to income such as bank and building society interest from 6 April 2016.

The Personal Savings Allowance will apply for up to £1,000 of a basic rate taxpayer’s savings income, and up to £500 of a higher rate taxpayer’s savings income each year. The Personal Savings Allowance will not be available for additional rate taxpayers.

Dividend Tax Allowance and rates of tax

The government will abolish the dividend tax credit from 6 April 2016 and introduce a new Dividend Tax Allowance of £5,000 a year.

The new rates of tax on dividend income above the allowance will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers. While these rates remain below the main rates of income tax, those who receive significant dividend income, for example as a result of receiving dividends through a close company, will pay more.


The government expects these changes to reduce the incentive to incorporate and remunerate through dividends rather than through wages to reduce tax liabilities.

The government also gives an example of a person who receives significant dividend income ‘due to very large shareholdings (typically more than £140,000)’ having to pay a higher rate of tax. It is unclear what this means.

Individual Savings Accounts (ISAs)

In 2015/16 the overall ISA savings limit is £15,240.

From 6 April 2016 the government will introduce the Innovative Finance ISA, for loans arranged via a peer to peer (P2P) platform. A public consultation has been launched on whether to extend the list of ISA eligible investments to include debt securities and equity offered via a crowd funding platform.

It was announced in the March Budget that regulations would be introduced in autumn 2015, following consultation on technical detail, to enable ISA savers to withdraw and replace money from their cash ISA without it counting towards their annual ISA subscription limit for that year. This change will have effect from 6 April 2016.

Help to Buy ISA

The government announced the introduction of a new type of ISA in the March Budget, the Help to Buy ISA, which will provide a tax free savings account for first time buyers wishing to save for a home.

The scheme will provide a government bonus to each person who has saved into a Help to Buy ISA at the point they use their savings to purchase their first home. For every £200 a first time buyer saves, the government will provide a £50 bonus up to a maximum bonus of £3,000 on £12,000 of savings.

The government has now announced that Help to Buy ISAs will be available for first time buyers to start saving into from 1 December 2015. First time buyers will be able to open their Help to Buy ISA accounts with an additional one off deposit of £1,000.

Tax-Free Childcare scheme

The Tax-Free Childcare scheme will provide relief for 20% of the costs of childcare. The maximum relief will be £2,000 per child per year or £4,000 for disabled children. The scheme was scheduled to be launched in autumn 2015 but the launch date has been deferred to early 2017.

The current system of employer supported childcare will continue to be available for current members if they wish to remain in it or they can switch to the new scheme. Employer supported childcare will continue to be open to new joiners until the new scheme is available.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.


The scheme has been delayed due to a court case taken by some childcare voucher providers. The legal issues have now been resolved in favour of the government. So those people who are unable to use the current employer supported childcare scheme, such as the self-employed, will have to wait a bit longer to get support with childcare costs.

Free childcare

From September 2017 the free childcare entitlement will be doubled from 15 hours to 30 hours a week for working parents of 3 and 4 year olds. The government will implement this extension of free hours early in some local areas from September 2016. This free childcare is worth around £5,000 a year per child.

Restricting loan interest relief for ‘buy to let’ landlords

The government will restrict the amount of income tax relief landlords can get on residential property finance costs to the basic rate of income tax. Finance costs include mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. No relief is available for capital repayments of a mortgage or loan.

Landlords will no longer be able to deduct all of their finance costs from their property income. They will instead receive a basic rate reduction from their income tax liability for their finance costs. To give landlords time to adjust, the government will introduce this change gradually from April 2017, over four years.

The restriction in the relief will be phased in as follows:

  • in 2017/18, the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
  • in 2018/19, 50% finance costs deduction and 50% given as a basic rate tax reduction
  • in 2019/20, 25% finance costs deduction and 75% given as a basic rate tax reduction
  • from 2020/21, all financing costs incurred by a landlord will be given as a basic rate tax reduction.

This restriction will not apply to landlords of furnished holiday lettings.


The restrictions on loan interest will be an unwelcome development for landlords paying higher or additional rate of tax. For many investors, the restriction on loan interest relief will materially alter their attitude to the amount of debt taken on.

Other changes to property taxation

From April 2016 the government will:

  • replace the Wear and Tear Allowance with a new relief that allows all residential landlords to deduct the actual costs of replacing furnishings. Capital allowances will continue to apply for landlords of furnished holiday lets.
  • increase the level of Rent-a-Room relief from £4,250 to £7,500 per annum.

Pensions – restriction on tax relief

The Annual Allowance provides an annual limit on tax relieved pension savings. It is currently £40,000. From April 2016 the government will introduce a taper to the Annual Allowance for those with adjusted annual incomes, including their own and employer’s pension contributions, over £150,000. For every £2 of adjusted income over £150,000, an individual’s Annual Allowance will be reduced by £1, down to a minimum of £10,000.

The government also wants to make sure that the right incentives are in place to encourage saving into pensions in the longer term. The government is therefore consulting on whether there is a case for reforming pensions tax relief.


Business Tax

Corporation tax rates

From 1 April 2015 the main rate of corporation tax is 20% and it is proposed that this rate will continue for the Financial Year beginning on 1 April 2016. The main rate of corporation tax will then be reduced as follows:

  • 19% for the Financial Years beginning on 1 April 2017, 1 April 2018 and 1 April 2019
  • 18% for the Financial Year beginning on 1 April 2020.

Annual Investment Allowance (AIA)

The AIA provides a 100% deduction for the cost of most plant and machinery (not cars) purchased by a business, up to an annual limit and is available to most businesses.

The maximum amount of the AIA was increased to £500,000 from 1 April 2014 for companies or 6 April 2014 for unincorporated businesses until 31 December 2015. However it was due to return to £25,000 after this date. The level of the maximum AIA will now be set permanently at £200,000 for all qualifying investment in plant and machinery made on or after 1 January 2016.

Where a business has a chargeable period which spans 1 January 2016 there are transitional rules for calculating the maximum AIA for that period. The maximum amount for the transitional period is the total of the time apportioned maximum AIA of £500,000 from the start of the chargeable period to 31 December 2015 plus the time apportioned maximum AIA of £200,000 from 1 January 2016 to the end of the chargeable period. However any AIA available on expenditure in the second period would be limited to the time apportioned maximum in that period.

Corporation tax relief for business goodwill

Where a company acquires goodwill or intangible assets, which are recognised in the accounts, a corporation tax deduction is available for the charge to profit and loss when the assets are written off. This deduction is only available on the acquisition of a business and not on the acquisition of shares in a company.

For acquisitions of goodwill and customer related intangibles made on or after 8 July 2015 this relief will no longer be available. In addition, there will be restrictions on the treatment of any allowable losses realised on subsequent disposals of goodwill or customer related intangibles which were acquired on or after 8 July 2015. There are no restrictions where a profit is made on a subsequent disposal.

Corporation tax payment dates

The government will introduce earlier dates for the payment of corporation tax for larger companies and groups, for accounting periods starting on or after 1 April 2017. For companies with annual taxable profits of £20 million or more, tax will be payable in quarterly instalments in the third, sixth, ninth and twelfth months of their accounting period. For groups the threshold is divided by the number of companies in the group.

Tax-advantaged venture capital schemes

This Budget also announces that the government will make amendments to the tax-advantaged venture capital schemes to ensure that the UK continues to offer significant and well-targeted support for investment into small and growing companies, with a particular focus on innovative companies.


Capital Taxes

Capital gains tax (CGT) rates and annual exemption

No changes have been announced in respect of CGT rates or the annual exemption.

Inheritance tax (IHT) nil rate band

The IHT nil rate band is currently frozen at £325,000 until April 2018. This is to remain frozen until April 2021.

IHT and the main residence nil rate band

An additional nil rate band is to be introduced where a residence is passed on death to direct descendants such as a child or a grandchild. This will initially be £100,000 in 2017/18, rising to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. It will then increase in line with CPI from 2021/22 onwards. The additional band can only be used in respect of one residential property which has, at some point, been a residence of the deceased.

Any unused nil rate band may be transferred to a surviving spouse or civil partner. It will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil rate band, are passed on death to direct descendants. This element will be the subject of a technical consultation and will be legislated for in Finance Bill 2016.

There will also be a tapered withdrawal of the additional nil rate band for estates with a net value (after deducting any liabilities but before reliefs and exemptions) of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The current tax position of the non UK domicile

A UK resident and domiciled individual is taxed on worldwide income and gains. Non UK domiciles who are UK resident are currently able to claim the remittance basis of taxation in respect of foreign income and gains. This means that they are only taxed if foreign income and gains are brought into the UK. The non UK domicile is also favourably treated for IHT as they only pay IHT in respect of UK assets as opposed to their worldwide assets.

New proposals for non UK domiciles

The government intends to abolish non UK domicile status for certain long term residents from April 2017. This will only apply where an individual has been resident for at least 15 out of the last 20 tax years. Such individuals will be treated as deemed UK domicile for all tax purposes.

In addition, those who had a domicile in the UK at the date of their birth will revert to having a UK domicile for tax purposes whenever they are resident in the UK, even if under general law they have acquired a domicile in another country.

UK residential property held indirectly by non UK domicile persons

The government will legislate to ensure that, from April 2017, IHT is payable on all UK residential property owned by non UK domiciles, regardless of their residence status for tax purposes, including property held indirectly through an offshore structure such as a trust or partnership.


Other Matters

Tax lock

The government will legislate to set a ceiling for the main rates of income tax, the standard and reduced rates of VAT, and employer and employee Class 1 NIC rates, ensuring that they cannot rise above their current levels. The tax lock will also ensure that the NIC Upper Earnings Limit cannot rise above the income tax higher rate threshold and will prevent the relevant statutory provisions being used to remove any items from the zero rate of VAT and reduced rate of VAT for the duration of this Parliament.

National Living Wage

The government will introduce a new National Living Wage (NLW) for workers aged 25 and above, by introducing a premium on top of the National Minimum Wage (NMW). From April 2016, the NLW will be set at £7.20 an hour. This rate is 70p higher than the current NMW rate, and 50p above the NMW increase coming into effect in October 2015.

Employment allowance

From April 2016, the government will increase the NIC Employment Allowance from £2,000 to £3,000 a year. The increase will mean that businesses will be able to employ four workers full time on the new National Living Wage (NLW) without paying any NIC.

To ensure that the NIC Employment Allowance is focussed on businesses and charities that support employment, from April 2016, companies where the director is the sole employee will no longer be able to claim the Employment Allowance.

Tax avoidance

A raft of HMRC compliance initiatives are to be launched over the next few years. To quote the Chancellor:

‘We’re boosting HMRC’s capacity with three quarters of a billion pounds of investment to go after tax fraud, offshore trusts and the businesses of the hidden economy, tripling the number of wealthy evaders they pursue for prosecution – raising £7.2 billion in extra tax.’

Tax credits

A number of changes to tax credits and Universal Credit are announced as part of the welfare reforms aimed at reducing the growing expenditure in this area.

Key changes include:

  • From April 2016 the government will reduce the level of earnings at which a household’s tax credits and Universal Credit award starts to be withdrawn for every extra pound earned. There will also be an increase in the taper rate which applies to any excess income further reducing the tax credit award.
  • Limiting the Child Element of both tax credits and Universal Credit to two children so that any subsequent children born after April 2017 will not be eligible for further support. Some claimants will be protected from these changes.
  • Those starting a family after April 2017 will not be eligible for the Family Element in tax credits and equivalent in Universal Credit.

In addition tax credit allowances (with the exception of disability elements) will be frozen

Chancellors 2011 Autumn Statement 29 November 2011

On Tuesday 29th 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.

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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.


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.

Newsletter – June 2011

In this month’s enews we report on HMRC’s plans to extend their ‘tax cheats’ campaigns.

Please browse through the articles using the links below and contact us if any issues or questions arise.



HMRC extend ‘tax cheats’ campaigns

HMRC have announced that they will be launching new campaigns over the next year targeting VAT defaulters, private tutors and e-marketplaces.

HMRC will use more IT, such as ‘web robot’ software, to search the internet and find targeted information about specified people and companies. Using the software, HMRC feel that they can pinpoint more accurately people who have failed to pay the right tax. The software, used with HMRC’s Connect computer system, also helps find people who are trading without telling HMRC.

The Connect computer system alerts HMRC to previously invisible tax evasion by matching a vast amount of HMRC and third-party data. It can identify previously hidden relationships, uncovering anomalies between such elements as bank interest, property income and lifestyle indicators before homing in on unexplained inconsistencies.

HMRC announced last month that a campaign targeting VAT rule-breakers trading above the £73,000 turnover threshold but who have not registered for VAT will be launched in the summer.

Other campaigns to be launched in 2011/12 will focus on:

  • those who provide private tuition and coaching
  • e-marketplaces, which buy and sell goods as a trade or business
  • trades, which will build on HMRC’s plumbers’ campaign and give an opportunity to another group of ‘tradespeople’ to declare unpaid tax.

Mike Wells, HMRC’s Director of Risk and Intelligence, said:

‘We want to make sure HMRC listens to as many informed views as possible for our future campaigns. We want the views and experience of people and organisations outside the department to play a fuller part in the campaigns that we design for customers.’

‘By being open about our areas of interest for the coming year we hope to maximise that exchange of information and ensure we reduce the tax gap and help customers pay what they owe.’

‘We will use the information we gather to pursue people who choose not to use the opportunities we provide for them to put their affairs in order on the best possible terms. It will be more expensive if we come and find people, so I urge them to come forward and disclose voluntarily.’

Internet link: News release

Another email scam warning from HMRC

HMRC are once again alerting taxpayers to a surge of fake ‘phishing’ emails sent out by fraudsters in the run-up to the tax credits renewal deadline.

The email informs the recipient they are due a tax rebate and provides a click-through link to a cloned replica of the HMRC website. The recipient is asked to provide their credit or debit card details. Fraudsters then try to take money from the account using the details provided.

Since the beginning of April 2011, when the first tax credits renewals forms were sent out to claimants, more than 46,000 phishing emails have been reported. During the same period of time HMRC helped shut down more than 150 scam websites.

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

‘We currently only ever contact customers who are due a tax refund in writing by post. We 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 before deleting it permanently.’

HMRC strongly advises taxpayers to:

Internet links: News Release

Workplace pensions reform

The government has introduced measures aimed at encouraging greater private saving which includes workplace pension reforms. New legal obligations will require employers to automatically enrol their eligible jobholders into a qualifying pension scheme.

A new workplace pension scheme called NEST (National Employment Savings Trust) will be one of the qualifying schemes and will be open to any employer who wants to use it to meet their obligations.

The initial roll out of the scheme will be October 2012 but this will impact on employers with 120,000 employees or more. For those with a more modest workforce the start date varies; for example, those with less than 500 employees the date is 1 January 2014 and for those with less than 50 employees the earliest start date is 1 March 2014.

Employees eligible for automatic enrolment will be:

  • those who are not already active members of a qualifying scheme
  • are aged at least 22 years and below the State Pension age, and
  • earn over £7,475 gross a year.

The qualifying scheme may be the existing employer pension scheme if it meets certain conditions or if an employer does not have a qualifying scheme, they will have to set one up or use a NEST pension scheme.

Minimum contributions levels for qualifying schemes are as follows:

Minimum Contribution Employee Pays Tax Relief Minimum Employer Contribution
8% 4% 1% 3%

Employees will be able to opt out of the scheme if they so wish. However, for those employees within the scheme it is expected that the employer will have to contribute at least 3% of ‘qualifying’ earnings. These earnings are the employees’ basic salary plus commissions, bonuses and overtime between £5,035 and £33,540 a year (in 2006/07 terms but to be uprated). Pension contributions are to be phased in.

A great deal more information is starting to be released and can be viewed via The Pensions Regulator website.

Internet links: The Pensions Regulator website Basic employers guide

Consultation on residency

Over recent weeks, HMRC have issued numerous consultation documents totalling hundreds of pages.

One of these details how individuals will be judged to be resident or not resident in the UK for tax purposes.

The government proposes to introduce a statutory residence test (SRT) to take into account both the amount of time the individual spends in the UK and the other connections they have with the UK.

There are parts of the test where a distinction will be made between:

  • arrivers – defined as individuals who were not UK resident in all of the previous three tax years; and
  • leavers – defined as individuals who were resident in one or more of the previous three tax years.

The SRT will:

  • determine tax residence for individuals but not companies
  • apply for the purposes of income tax, capital gains tax and inheritance tax
  • not apply for non-tax purposes (including national insurance contributions), and
  • supersede all existing legislation, case law and guidance for tax years following its introduction.

The SRT will have three parts:

  • Part A contains conclusive non-residence factors that would be sufficient in themselves to make an individual not resident.
  • Part B contains conclusive residence factors that would be sufficient in themselves to make an individual resident.
  • Part C contains other connection factors and day counting rules which will only need to be considered by those whose residence status is not determined by Part A or Part B.

The above is part of a consultation process at present. HMRC intend to implement the measures from 6 April 2012.

We will keep you informed of developments but please do contact us if you have any concerns in the meantime.

Internet link: Press release

The Bribery Act

The Bribery Act 2010 comes into force on 1 July 2011. The new Act replaces, updates and extends the existing UK law against bribery and corruption. This important new legislation:

  • introduces a corporate offence of failure to prevent bribery by persons working on behalf of a business. A business can avoid conviction if it can show that it has adequate procedures in place to prevent bribery;
  • makes it a criminal offence to give, promise or offer a bribe and to request, agree to receive or accept a bribe either at home or abroad. The measures cover bribery of a foreign public official; and
  • increases the maximum penalty for bribery from seven to 10 years imprisonment, with an unlimited fine.

The introduction into law of the new corporate offence of failure of commercial organisations to prevent bribery is an important development that essentially requires all businesses to consider the requirements of the new Act. This new corporate offence is coupled with a defence where, if the business can show that it had ‘adequate procedures’ in place to prevent bribery, it can be protected from committing the new criminal offence.

All businesses should familiarise themselves with the statutory guidance and assess the risk of bribery occurring in the business. The extent of any further action will be dependent on the results of this risk assessment.

The Act also requires the government to produce guidance on what constitutes ‘adequate procedures’ and the Ministry of Justice has produced this. This can be found using the links below.

Internet links: Bribery Act 2010 guidance Quick start guide

Tax credits renewal deadline

Tax credits are state benefits which are generally available to lower income families. However, entitlement to the credits is significantly increased where individuals pay for childcare or suffer a drop in normal levels of income perhaps due to incurring trading losses or redundancy.

Individuals who have already claimed tax credits for 2010/11 have to finalise their provisional award, which would have originally been based on their 2009/10 income, and advise HMRC of any changes in their circumstances for 2011/12. This procedure is known as the renewals process. The deadline for the submission of tax credit renewals is generally 31 July 2011.

HMRC have been busily advertising the renewals process in the national press and on their website. Claimants need to be aware that the payment of tax credits will stop at the end of July if they have not renewed their applications by that date. There are significant changes to the income limits and claw back of entitlements for 2011/12 so you may wish to review the HMRC guidance. Alternatively if you need any help with the completion of your form or any advice on tax credits generally please do get in touch.

Internet links: HMRC tax credit deadlines HMRC Tax credit changes

Changes to the law to protect Patent and Design rights

The government has announced that it expects small and medium sized businesses to benefit from a new law which gives them easier access to justice to protect their patent and design rights. The introduction of a damages cap of £500,000 for claims made in the Patents County Court (PCC) means smaller businesses seeking damages up to that amount are less likely to have to resort to the High Court which could prove more costly.

The Patents County Court (Financial Limit) Order 2011 sets out to create a clearer definition of what disputes can be heard in the PCC and which ones should go to the High Court. Under the previous system businesses with a legal case worth less than £500,000 could face litigation in either court. This potentially exposed them to unknown levels of financial risk.

According to the press release:

‘The change in law will ensure that lower value, less complex cases, which would typically involve small businesses, will automatically fall within the jurisdiction of the lower, cheaper PCC. Therefore the risk of having costly disputes over where the case should be heard will be reduced. In the past some companies were put off protecting their rights due to the uncertainty of how much it would cost.’

Minister for Intellectual Property, Baroness Wilcox said:

‘Maintaining an effective and efficient intellectual property framework for businesses is not enough to drive innovation. We must offer businesses a more accessible justice system for them to enforce their rights. By making it easier for small firms and entrepreneurs to use the legal processes it will give them more time to concentrate on business activities.’

‘These changes will help small businesses and encourage them to innovate. It will also provide clarity over the legal processes, certainty over the risks and give small enterprises the confidence to stand on an equal footing with financially stronger companies.’

Internet link: News release

P11D deadline looming

The forms P11D, and where appropriate P9D, which report benefits and expenses for both employees and directors for the year ended 5 April 2011, are due for submission to HMRC by 6 July 2011.

Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A national insurance contributions at 12.8% (for 2010/11) on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. For those employers who submit paper forms P11D these should all be sent to the address detailed in the link at the end of this article.

If you would like any help with the forms P11D or the calculation of the Class 1A liability please get in touch.

Internet links: HMRC P11D guidance HMRC advice HMRC new address for paper forms P11D