Newsletter 1 - Albert Goodman

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I love you, you pay my rent! Charities and the fundraising preference service. MTD update .... Is there an area of tax y
TAX NEWSLETTER

CHARTERED ACCOUNTANTS, TAX CONSULTANTS & FINANCIAL PLANNERS

CHARTERED ACCOUNTANTS, TAX CONSULTANTS & FINANCIAL PLANNERS

Contents Upcoming tax deadlines In the news Game of Tax Profiling AG tax staff Employee suggestion schemes I love you, you pay my rent! Charities and the fundraising preference service MTD update

A GAME OF TAX With the nation gripped by Game of Thrones fever, we take a look at tax efficient ways to reduce your utility bills during the coming winter and discuss commercial and tax based considerations to help you dominate the business market you trade in.

TAX NEWSLETTER AUGUST 2017

Auto enrolment Benefits in kind and director only companies Taylor Review Winter is coming Labour market statistics HMRC phishing Tips on tips!

www.albertgoodman.co.uk

WELCOME

Welcome to this month’s ENews. Whilst the politicians are on their summer holidays, it seemed like a good opportunity to introduce a new feature to our monthly newsletter “Profiling AG tax staff”. This month you will meet Nick Scull, a tax director for the Taunton and Burnham office, along with newly CTA qualified Lucy Allen, who operates out of our Weymouth office. As Head of Tax for Albert Goodman, I am extremely proud of the tax resource we have developed and over the next few months I will introduce you to my team. Whilst on this subject, we are looking to add to our tax team in Taunton in the form of a VAT manager and a tax trainee. Please see the Albert Goodman website for more details. In this month’s e-news we pay homage to the TV series Game of Thrones. Whilst this drama is not known for its generous employee rights and benefits, Holly Gough also looks into benefit in kind registration requirements, suggestion schemes and taxing tips! Finally, Mark Ferbert looks into the tax reliefs available for utility bill reducing technologies; winter is coming….. As usual, if you would like to discuss any of the articles in more detail, please get in touch.

Upcoming tax deadlines August

24th Extended annual return deadline for employment related securities. st 31 Ensure PSA figures are submitted to HMRC (liability not payable until 19th October).

September

1st Companies (outside of QIPs) with November year ends are liable to pay their corporation tax liability. 6th Finance Bill (No. 2) 2017 should be published today. 7th 31 July 2017 VAT quarter – return and electronic payment due. 14th Large companies under the quarterly instalment payments regime may need to make a further corporation tax payment. 19th CIS liabilities (paid by cheque), for the month ended 5 September 2017 are due along with the return.

In the news treasury proposed a new national investment fund to help • The young growing businesses within their consultation “Financing growth in innovative firms”.

launched a new online tax forum and dedicated • HMRC webchat service for small businesses and the self-employed. EU Parliament agreed a three month extension to • The continue its inquiry into the Panama papers. £300m business rate relief fund promised by government • The to local authorities falls short. The Association of Licensed Multiple Retailers surveyed 25 local councils and confirmed that there was no evidence of any council issuing the relief to pubs and restaurants.

Tracey Watts Tax Partner

the introduction of a compulsory licensing scheme, • Following a London borough council announces that half of its 27,000 landlords failed to register for self-assessment. In the same month, a landlord who failed to declare his Capital Gains Tax following a disposal of buy-to-let properties was jailed for 2 years 3 months.

Waitrose and Morrisons announced that they would • Tesco, cover the 5% VAT attached to sanitary products. advises company directors to review R&D claims • HMRC where restrictions have been made in respect of reimbursed employee expenditure.

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www.albertgoodman.co.uk

It’s always tricky for tax advisers to write articles about a subject they love, knowing that the majority of the people we’re aiming it towards do not share our enthusiasm for the technical intricacies! So here I am on a Sunday evening, with my favourite drink (Hendricks, St Germain & tonic, thank you very much), Nina is on the background (in the hope that some of her creative genius will transfer), cogitating about my next article. Unfortunately for you, Nina’s creative genius did not transfer nor can I put a spell on you, but given Game of Thrones is on tomorrow night, it seemed like an unusual theme to work with! Aside from the fact I think my life is pretty uneventful in comparison to GOT characters, it would appear that the overriding goal of a number of GOT characters is the desire to rule the seven kingdoms (not Jon Snow, he’s too busy pouting!). If your business goal includes dominating the business market you trade in, here are some of the commercial and tax based considerations:

1. Structure

Group structures can provide a number of benefits to any entrepreneur including: a) Legal separation of activities providing protection for established trades; b) Group purchasing power and enhanced bank lending terms; c) Brand power as a collective and increased marketability; d) New subsidiary activities financed by other group members, can benefit from the losses generated by the start-up; e) Assets can be moved around the group without tax charges arising; f) On a sale of a trading subsidiary, the capital gain generated will likely be exempt within the group structure.

2. Investors

If you don’t want to be indebted to the (iron) bank or a spread of finance options is of interest, external investors can be attracted with the following regimes and reliefs: a) Seed Enterprise Investment Scheme; generally

for small start-up companies, restrictions exist in respect of trading activities. b) Enterprise Investment Scheme; available to larger businesses, restrictions exist in respect of trading activities and companies which have traded for more than 7 years (10 for knowledge intensive companies). c) Investors relief; available for shares issued after 17/3/2016, qualifying shares attract a 10% capital gains tax rate following a disposal.

3. Employees

Finding the right people to drive the business forward with you is tricky in itself, (just look at Daenerys resorting to using her dragon to win her battles). Providing equity to attract the talent the business requires can be one weapon in your armoury. This could include both HMRC approved and unapproved schemes: a) Approved schemes such as EMI provide tax advantages to both employee and company; b) Unapproved schemes may have more flexibility than approved schemes; however they generally attract limited tax reliefs.

4. Tax reliefs for innovation

Whilst Cersei’s (admittedly large) crossbow might not be considered innovative (or effective – note I may eat my words), tax reliefs exist for companies which spend a proportion of their time undertaking qualifying research and developing their next product line, these include: a) R&D tax relief which uplifts qualifying expenditure by 130% for SMEs, further reducing a company’s taxable profits. If losses are generated, these can be surrendered for a repayable tax credit which can assist cash hungry companies, particularly in the initial start-up years. b) Patent Box provides a reduced corporation tax rate for profits generated by registered patents.

Unfortunately you won’t have the insight into your competitors that Bran Stark can bring, but fingers crossed, they aren’t like Cersei Lannister.

Elaine Grose

TAX NEWSLETTER AUGUST 2017

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Profiling AG tax staff To introduce you to our eclectic mix of tax team members, we will interrogate members of the AG team each month.

Nick Scull, tax director of the Taunton and Burnham office is first up for this month’s grilling. 1. Nick, clearly tax advisers are one of the dullest people in any room, tell us an interesting fact about yourself.

I once went skinny dipping with Bear Grylls …

2. Why didn’t we get that invite….?! What do you love about working in the Albert Goodman tax team?

Everyone is so supportive of each other, by which I mean there is always cake.

3. What is your chief annoyance in respect of government and tax policy?

Politicians shouldn’t rely so heavily on tax policy to change behaviours.

4. We know it’s difficult for tax advisers to limit their words to a couple of sentences when it comes to tax. Tell us (briefly) about a piece of recent tax legislation or case which has caught your attention.

The recent tax changes for private landlords were written as though these people are solely to blame for the current housing crisis, and it looks like the result of this has been to reduce supply and make the situation even worse.

Next up is newly CTA qualified Lucy Allen, who works out of our Weymouth office. Firstly congratulations on becoming a Chartered Tax Adviser Lucy, that’s no mean feat.

1. What benefits do you feel studying for this exam has brought?

2. Is there an area of tax you really enjoy advising on?





When I was a small boy my father told me ‘For you, Son, the sky is the limit’, and with that my dreams of becoming an astronaut were cruelly dashed! I might have made a decent police detective perhaps? Not a comedian though.

Well Nick Scull, it is evident that you are 100% tax adviser, thank you for your time.

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You cannot beat a day at the beach with an ice cream, weather permitting!

4. Are there any interesting tax rules for businesses operating out of seaside communities?

Make sure you can correctly predict the future!

6. If you weren’t a tax adviser what would you be?

I do not seek out complexity just for the sake of it; I like to use clear and straight forward tax planning methods and ensure clients make use of all available allowances.

3. If I had a spare afternoon in Weymouth, where would you recommend I visit?

5. What is the one piece of advice you would give to clients in respect of their tax affairs?

I’ve learnt the importance of being able to explain tax matters in terms clients can understand.

Individuals can make use of the furnished holiday letting rules, which have additional benefits to standard residential property lets.

Qualifying properties may attract; capital allowances for fixtures and furnishings, rollover relief when reinvesting into new qualifying assets, gift relief for transfers to the next generation (for instance), and entrepreneurs’ relief on a disposal. In addition, they are not impacted by the mortgage interest restriction rules which became effective for higher rate taxpayers this April.

5. What’s your favourite Weymouth based fish & chip shop?

All chip shops are fab!



I like Zumba to try to keep active.

6. When you’re not advising on tax matters, what do you like to do?

Thank you Lucy, it’s clear you have a long and prosperous tax career ahead.

www.albertgoodman.co.uk

I love you, you pay my rent! Well I hope no-one has a spouse/civil partner as vile as GOT’s Ramsay Bolton, but if the final straw has come over the summer break, here are our five top considerations before you call the solicitor:

Employee Suggestion Schemes

Setting up an employee suggestion scheme is a perfect way to improve your business and reward your employees at the same time. There are two types of award that HMRC allow employers to implement which do not have tax and national insurance consequences.

Encouragement awards

This award is for good suggestions or to reward employees for special effort. The tax and national insurance exemption applies to awards up to the value of £25.

Financial benefit awards

This award relates to suggestions that will save or make your business money. The amount awarded is exempted from income tax and NIC up to the greater of the following:



50% of the money you expect the suggestion to make or save your business the year after you put it into action; and 10% of the money you expect it to make or save your business in the first 5 years after you put it into action.



This is capped at £5,000. There are a few final conditions which must be met:



The suggestion scheme must be open to all your employees – or to an entire group of employees (e.g. everyone in a particular office); The suggestion must be about your business; It must be likely that your employee would not have made the suggestion as part of their normal work; and The suggestion cannot be made at a meeting for proposing new ideas.

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If you would like to find out more about tax efficient employee incentives, please do get in touch. Holly Gough

TAX NEWSLETTER AUGUST 2017

1. Review your assets and income streams; consider how they could be impacted. 2. Should the divorce proceedings become protracted, determine whether you have control over sufficient assets to fund living costs. 3. Locate your marriage certificate; you’ll need it to start your divorce petition. 4. Once separated, you’ll have the remainder of the tax year to transfer assets without tax impact. Outside of this, until the decree absolute is granted, assets will transfer at market value and tax charges could accrue. Although those receiving assets would benefit from an uplifted base cost in this instance i.e. more cost to offset against future sale proceeds. 5. Re-draft your financial plan. *Note the author is not considering divorce – yet (subject to Khal Drogo becoming available). Talk to your AG adviser if you are considering separation or divorce. Anon

Charities bound by new Fundraising Preference Service

A new service is now available for individuals who want to limit the contact they receive from charities. The Fundraising Preference Service (FPS) should give individuals greater control over how and when charities can contact them. The FPS, which launched on 6 July, allows individuals to select charities that they no longer want to receive communications from. Under the FPS, where an individual opts out from a specified charity, this will apply to all forms of communication with a named individual including email, text, phone and addressed mail. Although the FPS is primarily an online service a phone service is available to support those who are vulnerable or without IT. The Fundraising Regulator will notify specified charities of suppression (those people opting out) and monitor compliance. Charities need to ensure they comply with these new rules. Internet link: FPS

Michelle Ferris

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We have listened very carefully to their concerns and are making changes so that we can bring the tax system into the digital age in a way that is right for all businesses.’

New timetable for Making Tax Digital The government has announced a revised timetable for the introduction of Making Tax Digital for Business (MTDfB). MTDfB introduces extensive changes to how taxpayers record and report income to HMRC. Unincorporated businesses, including landlords, were expected to be the first to see significant changes in the recording and submission of business transactions but the government has announced a delay to the implementation of the new rules and some exceptions for smaller businesses. The government had decided how the general principles of MTDfB will operate after receiving responses to their original ideas first published in August 2016. Some legislation was published in Finance Bill 2017 but this was removed due to the General Election.

• • •

The new timetable is being introduced following concerns raised by the Treasury Select Committee, businesses and professional bodies about the implementation of the new rules and to hopefully ensure a smooth transition to a digital tax system. Mel Stride, Financial Secretary to the Treasury and Paymaster General said: ‘Businesses agree that digitising the tax system is the right direction of travel. However, many have been worried about the scope and pace of reforms.

The Pensions Regulator (TPR) has confirmed that eight million employees have signed up for a workplace pension since the launch of automatic enrolment. The introduction of automatic enrolment was expected to lead to around eight million workers saving more for their retirement and this milestone has already been reached with hundreds of thousands more employers still to enrol staff over the coming months. Minister for Pensions and Financial Inclusion Guy Opperman said: ‘Reaching this eight million figure is a formidable achievement and represents a huge number of people on the path to a more financially secure retirement.’ ‘But we cannot be complacent and as contribution rates rise we know there is more to be done. That’s why our automatic enrolment review, which will report back later this year, is so vital to the future of this life-changing policy.’

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Under MTDfB, businesses will be required to: maintain their records digitally, through software or apps report summary information to HMRC quarterly through their ‘digital tax accounts’ (DTAs) submit an ‘End of Year’ statement through their DTAs.

Automatic enrolment reaches 8 million

The government has confirmed that under the new timetable: only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes they will only need to do so from 2019 businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020.

• •

This means that businesses and landlords with a turnover below the VAT threshold will not have to move to the new digital system. Ministers have also confirmed that the Finance Bill will be introduced as soon as possible after the summer recess and that all policies originally announced to start from April 2017 will be effective from that date. The government has also confirmed that the proposed changes to VAT reporting will come into effect from April 2019. From that date, businesses trading above the VAT threshold will have to provide their VAT information to HMRC through Making Tax Digital software. Internet link: GOV news

TPR’s report shows that at the end of June 2017, 8,165,000 workers were enrolled in workplace pensions. Darren Ryder, TPR’s Director of Automatic Enrolment, said: ‘Tens of thousands more people every week are signing up to a new workplace pension through automatic enrolment. Employers are continuing to become compliant and to remain so, allowing their staff to get the pensions they are entitled to.’ ‘There are more than 500,000 more employers whose duties are still to begin over the coming months. I would urge each and every one of them to check today that they know what they need to do and when they need to do it so they can seek our help if they need it.’ If you would like help or advice on complying with your Auto Enrolment duties please do get in touch. Internet links: Press release Report

Andrew Hopper

www.albertgoodman.co.uk

Benefits in kind and Taylor Review of director-only companies employment practices When taxable benefits in kind are provided to employees or directors, there is a reporting requirement to HMRC. This is either through the P11D system or through the company payroll. In order to satisfy this obligation the company will need to have a PAYE scheme set up.

The long awaited Taylor Review of employment practices suggests that a national strategy is needed to help provide security in such areas as wages, quality of employment, education and training, working conditions, work life balance and the ability to progress at work.

For most companies, this will not be an issue as it is likely they will already have a PAYE scheme set up in order to pay their employees. However, some director-only companies may decide not to pay the director(s) a salary and instead draw their income by way of dividends. If this is the case, then the company may not have a PAYE scheme.

One of the areas of focus relates to the ‘gig’ economy, with the report recommending the creation of a new category of worker, known as a ‘dependent contractor’, to provide additional rights and benefits for those who are currently classed as self-employed, but who work for businesses which have a ‘controlling and supervisory’ relationship with their workers.

In this situation if the company then decides to provide taxable benefits in kind to the director(s) e.g. a company car, the company will need to set up a PAYE scheme to fulfil its reporting obligations. The annual reporting deadline is 6 July following the tax year in which the benefits were provided, therefore there is plenty of time to consider this for next year.

The additional benefits would include sick pay, holiday entitlement and the minimum wage, and the new employment status would also oblige these businesses to pay national insurance contributions for these workers.

If you think you may be caught by this scenario and would like to discuss this further, please get in touch.

Hopefully this year’s UK winter won’t be anything like the GOT winter! However, just in case it does last a decade and you do not have access to a dragon, outlined below are some utility bill reducing technologies and the tax reliefs businesses may be able to claim.

Key

Annual Investment Allowance (AIA) = a business can write off the cost of the asset up to £200,000 (subject to restrictions). Writing Down Allowances (WDAs) = if the value of the asset is not written off in full, the remaining value reduces either by 8% or 18% p.a. 100% First Year Allowance (FYA) = like the AIA however no restriction is placed on the value of the asset.

TAX NEWSLETTER AUGUST 2017

Business groups have given mixed reactions to the report’s findings, with many welcoming the focus on labour market flexibility, but also warning that some areas, including the plans to rewrite employment status tests, are a cause for concern. However, the TUC warned that the review ‘is not the gamechanger needed to end insecurity and exploitation at work’

Holly Gough

Internet link: Taylor Review

Solar panels

Previously attracting enhanced capital allowances, from April 2012 the standard AIA is available along with 8% WDAs.

Thermal insulation

This section includes items such as roof lining, double-glazing, draught exclusion and cavity wall filling. Adding qualifying items to an existing commercial property can also qualify for the AIA plus 8% WDAs.

Cars with low CO2 emissions New and unused cars which emit less than 75g/km (50g/km from 1/6 April 2018) using the official CO2 emissions figure can qualify for 100% FYA. Electric cars can also qualify.

Environmentally beneficial and energy saving plant and machinery

The water technology criteria list details a number of qualifying technologies. A 100% FYA is available for qualifying expenditure. Energy saving equipment includes items such as hot water boilers, close control air conditioning and air source heat pumps. Qualifying expenditure attracts a 100% FYA. Please go to https:// etl.beis.gov.uk and watertechnologylist. co.uk to view all the technologies which can attract enhanced capital allowances (100% FYA).

Mark Ferbert

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Latest labour market statistics

Tips on Tips!

The latest labour market statistics for the period March to May 2017 showed a 175,000 rise in employment and 64,000 fall in unemployment. Estimates from the Labour Force Survey show that, between December 2016 to February 2017 and March to May 2017, the number of people in work increased, the number of unemployed people fell, and the number of people aged from 16 to 64 not working and not seeking or available to work (economically inactive) also fell. Some of the findings were: There were 32.01 million people in work, 175,000 more than the previous quarter. The employment rate (the proportion of people aged from 16 to 64 who were in work) was 74.9%, the highest since comparable records began in 1971. Latest estimates show that average weekly earnings for employees in Great Britain in nominal terms (that is, not adjusted for price inflation) increased by 1.8% including bonuses, and by 2.0% excluding bonuses, compared with a year earlier. Latest estimates show that average weekly earnings for employees in real terms (adjusted for price inflation) fell by 0.7% including bonuses, and fell by 0.5% excluding bonuses, compared with a year earlier.

• • •



For more details visit the link below. Anna Leach, CBI Head of Economic Intelligence, said: ‘These figures underline the strength of the UK’s flexible labour market, which was recognised in …. Taylor Review. But declining real pay and productivity remain concerning, reinforcing the imperative that any changes following the review support the economy’s ability to create great jobs.’ ‘Making real progress on productivity growth requires a modern industrial strategy, with real change on the ground on skills, infrastructure and innovation.’

You may be unaware that tips are actually taxable earnings, so here are some tips to ensure you are getting the tax treatment right.

Tips collected by the employer and passed to the employee

When the employer collects the tips by way of a service charge or credit/debit card and then passes them onto the employee, it is the employer’s responsibility to ensure that PAYE is operated. The tax and national insurance should be deducted before the employee receives them. If the employer uses a ‘troncmaster’ to process the tips, the distributions to the workers can be made without a national insurance deduction.

Cash Tips

It is a common misconception that cash tips are not taxable. It is the employee’s responsibility to notify HMRC that they have received tips and to pay the tax over. Cash tips are however not subject to national insurance.

Internet links: ONS employment statistics CBI news

You can notify HMRC in writing or by phone. HMRC will adjust the tax code based on the amount of tips received, in order to collect the tax due.

HMRC genuine and phishing/bogus emails and calls

Things to remember:

HMRC have issued an update of their guidance on how to recognise genuine HMRC contact be it via email or text. HMRC also provide advice on what to do if you have received a phishing/bogus email related to HMRC, or you are not sure if it is genuine, you can read about how to report internet scams and phishing to HMRC. Internet link: HMRC guidance

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If your cash tips change year on year, you should keep a record of everything received so that you are taxed on the correct amount. Keep an eye on your tax code, you may overpay or underpay tax as your tips vary year to year. Tips declared to HMRC may count towards your income for tax credit purposes.

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No outcome has been issued following last year’s HMRC consultation. Announcements could be made in September’s Finance Bill, watch this space. Holly Gough

www.albertgoodman.co.uk

CHARTERED ACCOUNTANTS, www.albertgoodman.co.uk TAX CONSULTANTS & FINANCIAL PLANNERS