Wednesday 4th December 2013: Autumn Statement

It has been announced that George Osborne will be presenting his Autumn Statement to Parliament at 12.30pm, Wednesday 4th December. The Statement usually sets the tone of future changes to our tax legislation, particularly, those to be included in the Finance Bill 2014.

 Tuesday 10^th December 2013: Draft clauses published

Six days later the Treasury have committed to publishing draft clauses to be included in the Finance Bill 2014. This “putting meat on the bones” approach will give tax professionals an opportunity to comment on proposed changes to the tax code.

The draft clauses will be augmented by the addition of the following information:

• Responses to policy consultations
• Explanatory notes, and
• Tax information and impact notes

This process, of publishing draft clauses, is to be welcomed as it provides a useful window of opportunity for meaningful consultation prior to the publication of the more formal Finance Bill next year.

Consultations on the draft legislation will remain open until 4th February 2014.
 

Dare we hope?

In the third quarter of 2013 the UK’s Gross Domestic Product (GDP) grew by 0.8%. Don’t be dismayed by the small percentage. The key is it’s a positive number and the best growth indicator published since 2010.

Hidden within this increase are some pleasant surprises:

• A 2.5% surge in construction activity, bolstered in part by the Governments Help to Buy initiative.
• Production grew by 0.5%
• Manufacturing by 0.9%
• The UK’s manufacturing activity was the highest in the G7 group in September

Overall, in the last year Britain’s economy has grown by 1.9%.

Politicians will no doubt interpret these results in different ways. The Government will likely consider these results a vindication of their economic policy. A Treasury spokesperson said has already commented:

“Today’s GDP figures show that Britain’s hard work is paying off and the country is on the path to prosperity.

Many risks remain, but thanks to our economic plan the recovery now has real momentum.

All parts of the economy are growing, the deficit is falling and jobs are being created – and that’s the only sustainable way to raise living standards for hardworking families.”

No doubt the opposition parties would stress that whilst “All parts of the economy [may be] growing” wealth and living standards are rising fastest in London and the South-East.

Never-the-less the news has to be welcome. It is time to talk-up economic activity and start to see that we may indeed be over the worst.

Dare we hope? Yes, why not…

If you managed to acquire Post Office shares at 330p per share you will have been presently surprised by the opening price on the London Stock Exchange. At 8am on the first day of trading the shares stood at 430p rising to 450p in the first few minutes. At the end of the first days’ trade the price stood at 455p. A rise of nearly 38%.

And the price continued to increase giving rise to press speculation that the floatation was “under-sold”. No doubt the professional advisors will have to face a few difficult questions in the coming weeks?

In the meantime there continues to be strong demand for the shares in the face of confirmed industrial action. CWU General Secretary, David Ward said, before the ballot result was known, that:

"We will not accept people maximising individual profit on the back of minimising the value, terms and conditions of postal workers. We're determined this privatisation will not lead to the kind of job losses and downward pressure on pay and conditions we've seen in other industries and we're seeking a legally-binding agreement to protect jobs."

Be interesting to see how the intended interruption in services affects the share price?
 

The Chancellor announced the creation of a NICs Employment Allowance in the 2013 Budget. This is planned to start on 6 April 2014 and moved a step closer to becoming law with the First Reading of the Bill on 14 October 2013.

HMRC have published the following background information about the scheme:

“In the March 2013 Budget, as part of its strategy to encourage business growth, the Government announced that it will introduce an employment allowance of £2,000 a year for all businesses, charities and CASCs to offset against their liability for Class 1 secondary NICs.

To keep the process as simple as possible for employers, the employment allowance will be delivered through standard payroll software and HMRC’s Real Time Information (RTI) system. HMRC will add a facility to the RTI Employer Payment Summary (EPS) referring to the employment allowance in the form of a “yes/no” indicator and payroll software providers will do the same. HMRC will amend its basic PAYE tools to have an EPS facility to help those employers who do not have such a facility on their software.

To claim the allowance, the employer will have to signify his intention to claim by completing the yes/no indicator just once. The employer will then offset the allowance against each monthly Class 1 secondary NICs payment that is due to be made to HMRC until the allowance is fully claimed or the tax year ends. The following tax year, the allowance will be available as an offset against a Class 1 secondary NICs liability as it arises during the tax year.

The employment allowance will apply per employer, regardless of how many PAYE schemes that employer chooses to operate, so each employer can only claim for one allowance. It will be up to the employer which PAYE scheme to claim it against.”

Sir Richard has decided to leave the UK and live in his holiday home. He wants more time to surf, kite surf, play tennis and stay limber practising pilates. He says that his decision is not dictated by tax considerations. His personal wealth is estimated to be £3.5bn which means he can spend several million pounds a year for the next 50 years and still be a wealthy man.

He’s done all the right things to justify a non-resident tax status in the UK; sold his family home in the UK, albeit to his children, and the implication is he will run his global empire from Necker Island, part of the BVI group. He will still pay tax in the UK on his earnings made in the UK. According to the Sunday Times, Virgin Group Holdings is controlled by family trusts based in the British Virgin Islands. Income tax rates in the BVI will not present tax planning problems for Sir Richard, they are 0%.

Hopefully, we have not seen the last of Sir Richard on home turf. He can revisit the UK for a certain number of days each tax year without unbalancing his non-residence tax status.

We have enough information about the UK’s economic woes to keep us depressed for many years to come. Every week we are told why sustainable recovery from recession and its after effects is just round the corner. The problem is the “corner” is mobile, always just out of reach.

Which is why the current round of speculation about the UK economy is encouraging:

• We are told that thus far in the current fiscal year, the growth in tax receipts exceeds the growth in Government spending.
• The Bank of England is more optimistic about estimates for growth next year.
• Independent advisors are talking about real growth of 3% for 2014.

So are we getting closer to the elusive corner?

Back in the real world there is no doubt that many, structurally weak companies, have dropped by the wayside in recent years. Successful companies are working hard to expand, but carefully. Retaining profits and managing cash flow has become the mantra rather than maximising turnover and borrowings.

If the pundits’ present optimism proves to be realistic perhaps the next step for businesses is to seriously consider sustainable investment. The tax incentives are there: R & D relief, high levels of tax allowances for plant and equipment purchases. We must not become a nation of hoarders, especially, of our capital. Carefully planned and monitored investment may become the order of the day.

Let’s hope that the economists are correct and the numbers for the next year bear out the early glimmers of optimism. Time to talk up prospects for growth…

A number of trade associations have issued warnings to their members recently. They are concerned that HMRC are making an issue of business mileage recording. Apparently, employers are failing to keep adequate records of mileage for employees who have the use of company vehicles.

Self-employed business owners can also be caught out by the same issue. If you are a sole trader or partner in a business and have the use of a business vehicle for a mix of private and business mileage you should keep a record of your total mileage for the tax year and your total business mileage. Any claim for vehicle running costs, or a claim for capital allowances, should then be adjusted to remove any private use element, using the mileage data collected.

HMRC are still running a business record check campaign. Business owners should take steps to regularise their record keeping ensuring that they are compliant with legislation. If you have any doubts about the systems you presently use to record mileage, or any other aspect of your business record keeping, please call and we will undertake a review on your behalf. A few adjustments to your present routines may be preferable to an uncomfortable audit by HMRC and possible additional tax bills, penalties and interest payments.
 

It has been announced that the new Single-Tier State Pension will start, subject to Parliamentary approval, April 2016.

The original proposals for the new system were outlined in a White Paper published January 2013. At present the changes are speculative and will need to be agreed by Parliament. However, readers may be interested to read the following notes that summary some of the provisions set out in the White Paper.

• Persons reaching the State Pension Age after the proposed single-tier scheme starts will receive the new flat rate payment. This was set at £144 per week in the White Paper.

• The single–tier pension will be increased each year by at least the percentage average earnings have increased in the previous year.

• If you are already over the State Pension age when the new scheme starts 6 April 2016 you will continue to receive your State Pension in accordance with the existing rules.

The new pension will be fairer to the lower paid, the self-employed and carers, as all persons reaching the State Pension Age after 6 April 2016 will receive the same amount.

One of the major accountancy bodies, the Association of Certified Accountants, has reminded home based entrepreneurs that they can make a valid claim, for tax purposes. The ACCA’s head of tax, Chas Roy-Chowdhury, reflected:

“The rise in start-ups from the home is good news for the economy, but whether these home-based entrepreneurs are aware that, for example, they can deduct tax for the electricity they use in the room where they do most of their work is another matter.

Unless you are trawling through HM Revenue & Customs website, you may not know that even costs of hiring a cleaner can be deducted from your tax bill for the work they have done in the ‘business room’ of your home.”

However, business owners were advised to look before they leap into claiming.

“It is not always straightforward and it will not always be clear what can and cannot be allowed,” said Mr Roy-Chowdhury. “Getting it wrong could land you in hot water with HM Revenue & Customs, so it’s worth going over what is allowed and what isn’t”.

Home based businesses can claim reasonable costs for using a room in their house for business purposes. The costs could include: cleaning, electricity, water, heating and even decorating expenses. In some circumstances, house repairs can be tax deductable too.

If you do work from home, check out what you can validly claim.
 

 1 October 2013 – Due date for Corporation Tax due for the year ended 31 December 2012.

 19 October 2013 – PAYE and NIC deductions due for month ended 5 October 2013. (If you pay your tax electronically the due date is 22 October 2013.)

 19 October 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2013.

 19 October 2013 – CIS tax deducted for the month ended 5 October 2013 is payable by today.

 31 October 2013 – Latest date you can file a paper copy of your 2013 Self Assessment tax return.

 1 November 2013 – Due date for Corporation Tax due for the year ended 31 January 2013.

 19 November 2013 – PAYE and NIC deductions due for month ended 5 November 2013. (If you pay your tax electronically the due date is 22 November 2013.)

 19 November 2013 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2013.

 19 November 2013 – CIS tax deducted for the month ended 5 November 2013 is payable by today.