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Online tool to assess self-assessment requirement

Adrian Mooy - Thursday, January 24, 2019


It should seem obvious whether an individual must submit a self-assessment tax return annually. Yet, each year, thousands of people find themselves brought into the regime unwittingly.


To help taxpayers prepare their affairs accordingly, HM Revenue & Customs (HMRC) is offering a free online tool to help people find out whether they need to submit a return.


Typically, an individual must submit a tax return if, in the last tax year, they were self-employed as a ‘sole trader’ and earned more than £1,000, or a partner in a business partnership.


Most taxpayers will not need to send a return if their only income is from their wages or pensions, which are recorded by employers via PAYE.


However, some individuals may need to submit one if they have any other untaxed income, such as:


money from renting out a property

tips and commission

income from savings, investments and dividends

foreign income


Taxpayers should be aware that if they use the tool their details will not be sent to HMRC. If you are unsure whether you need to submit a tax return, please click here to use the tool.

Taxpayers treated unfairly by HMRC says House of Lords

Adrian Mooy - Wednesday, January 23, 2019


The House of Lords Economic Affairs Committee has criticised some of the powers granted to HM Revenue & Customs (HMRC), describing them as disproportionate and lacking effective taxpayer safeguards.


The committee’s latest report says that HMRC’s powers are now too broad and the penalties too high, deterring taxpayers from appealing and creating injustice within the system. It has demanded that the Government reviews the current arrangements.


Lord Forsyth of Drumlean, the committee’s chairman, said that, while the tax authority was right to challenge tax evasion and aggressive tax avoidance, “a careful balance must be struck between clamping down and treating taxpayers fairly.”


The committee believes that the evidence it uncovered suggests that “this balance has tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect.”


Although the report covers a number of areas of taxation, the committee gave special consideration to “disturbing evidence” on the approach to the loan charge.


This new fee is intended to prevent disguised remuneration schemes, where workers have been paid via a loan with the intention of avoiding tax and national insurance contributions.


However, the committee is concerned that the retrospective nature of the charge could affect those that were unaware of the risks or forced to use this arrangement by their employer.


It has recommended that HMRC urgently reviews these cases where the only remaining consideration is the individual’s ability to pay and establishes a dedicated helpline to support those adversely affected by the loan charge.


The committee has also called on Parliament to consider how it scrutinises the powers it gives to HMRC.

Think about tax planning

Adrian Mooy - Wednesday, January 09, 2019


With the Self-Assessment tax return deadline rapidly approaching on 31 January it becomes easy to overlook your tax planning and leave it until it is too late, however now is the perfect time to act.


If you haven’t thought enough about tax planning, don’t worry you are not alone. A recent study found that almost three-quarters of UK taxpayers have not done enough to reduce ‘tax waste’ in the last year.


Taxpayers should explore the numerous tax reliefs available and think about whether or not you are paying the right amount of tax.


Personal tax


When it comes to personal tax planning, a broad range of reliefs and allowances can be applied to the likes of Capital Gains Tax (CGT), business tax and Inheritance Tax (IHT), and each of these should be carefully considered.


CGT, for example, has a reputation for leaving people with a hefty tax bill on disposal of valuable assets. However, careful planning about how and when an asset is disposed of can have a major impact on the size of the bill. Likewise, making careful use of other allowances can see your tax bills shrink considerably.


When it comes to IHT, there are a wide range of allowances and reliefs to take advantage of, such as the Residence Nil-Rate Band (RNRB) – which provides an additional tax-free allowance if you leave your main home to direct descendants – or leaving money to charity, which is exempt from IHT. This means it makes sense to draft your Will with a view to your IHT liabilities.


It is also wise to consider Married Couples’ Allowance and any other helpful tax reliefs which could be appropriate depending on your situation.


Business tax planning


Business taxes have potentially an even greater scope to benefit from careful tax planning, with the way in which you structure your business having a major impact, as well as the ways in which you acquire new businesses and finance expansion.


Taken together, the potential savings for an individual and their business can stretch into the tens or even hundreds of thousands of pounds and beyond, depending on their income.


This means it will come as no surprise that up-to-date research suggests that UK taxpayers are paying £4.9 billion more in tax than they should.

Entrepreneurs’ relief – what do the Budget changes mean?

Adrian Mooy - Tuesday, January 08, 2019


Ahead of the 2018 Budget there was some speculation that entrepreneurs’ relief may be scrapped. In the event, this did not happen. However, the relief made an appearance with the announcement of changes to the personal company test, applying from Budget day, and of a doubling of the qualifying period throughout which the conditions must be met for two years from 6 April 2019.


Nature of the relief - Entrepreneurs’ relief reduces the rate of capital gains tax on disposals of qualifying assets to 10%. This is subject to a lifetime limit of £10 million. Spouses and civil partners have their own limit.


The relief is available where there is:

• a material disposal of business assets;

• a disposal associated with a material disposal; or

• a disposal of trust business assets.


Availability of entrepreneurs’ relief is contingent on the qualifying conditions being met. The qualifying conditions depend on the type of disposal.


The relief is complex, and a detailed discussion of the relief is beyond the scope of this article. However, guidance is available in HMRC’s Capital Gains Tax Manual at CG63950ff.


Shares in a personal company - Entrepreneurs’ relief is available for disposals of shares or securities in a personal company. To qualify, throughout the ‘qualifying period’ the company must be a personal company and either a trading company or the holding company of a trading group. The taxpayer must either be an officer or an employee of that company or of one or more members of the trading group.


The definition of a ‘personal company’ changed from 29 October 2018 (Budget day). Prior to that date, a personal company was one in which the individual held at least 5% of the ordinary share capital and that holding gave the holder at least 5% of the voting rights in the company.


From 29 October 2018 two further conditions must be met. The holding must also provide entitlement to at least 5% of the company’s distributable profits and 5% of the assets available for distribution to equity holders in a winding up.


Qualifying period - Entrepreneurs’ relief is only available if the conditions are met throughout the ‘qualifying period’. This is currently set at one year. However, it was announced in the Budget that the qualifying period will be doubled to two years from 6 April 2019 (except in relation to disposals where the business ceased prior to 29 October 2018).


Securing the relief - The timing of the disposal is important in securing the relief. If the disposal is one of shares in a personal company, and the new definition is not met, the qualifying period clock cannot start to run until the date when all conditions are met. To secure relief, the shares should not be disposed of until at least two years from the date on all of the conditions are first met.


Where the conditions have already been met for one year but will not have been met for two years by 6 April 2019, it may be preferable to dispose of the shares prior to 6 April 2019 to secure the relief. Alternatively, if the disposal is to take place after that date, it will make sense to wait until conditions have been met for two years in order to benefit from the relief.

National Living Wage to rise in April 2019

Adrian Mooy - Thursday, January 03, 2019


In his latest Budget speech to the Commons, Chancellor Philip Hammond announced that the National Living Wage and National Minimum Wage would increase from April next year.


However, despite many employees across the UK welcoming this sudden pay rise, small business owners across the UK are being left to pick up the bill.


From April 2019, employers will be required by law to pay their employees the following minimum wages:


Year        25 & over   21-24    18-20    Under18    Apprentice

Current      £7.83        £7.38     £5.90      £4.20         £3.70

Apr 19       £8.21        £7.70     £6.15      £4.35         £3.90


It is thought this increase in the UK’s statutory wage requirements will benefit around 2.4 million workers and means that the annual earnings of a full-time minimum wage worker will have increased by over £2,750 since the introduction of the National Living Wage in April 2016.


For businesses though the increase in the wage has not only affected their wage bill but has also led to an increase in their workplace pension contributions for staff.


With workplace pension contributions set to rise yet again in April 2019 to three per cent, this double whammy of costs is likely to affect their cashflow if they are unprepared.


The Government has said it will set out the Low Pay Commission’s goal for the years beyond 2020 next year, with a view to reviewing the potential impact on employment and economic growth of subsequent wage increases.


Link: National Minimum Wage and National Living Wage rates