Tuesday 28 June 2016

Entrepreneurs' relief, Investors' relief, Companies House

The Government has made some significant amendments to the draft Finance Bill 2016 concerning entrepreneurs' relief and investors' relief, which take effect immediately. The procedures and costs relating to incorporation and returns filed at Companies House are also changing from 30 June 2016. We outline those changes below.

This is an extract from our topical tax tips newsletter dated 23 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Entrepreneurs' relief 
The associated disposal rules within entrepreneurs' relief (ER) have been manipulated by people who arrange for their trading business to use a personally owned property for the purposes of the trade, (say as an office) for a year. A claim for ER on the sale of the property would succeed if the individual disposed of any shares or interest in the partnership at the same time as the property sale. 
  
Those associated disposal rules were changed from 18 March 2015 (by FA 2015), to discourage such manipulation. Now the taxpayer has to dispose of at least 5% of his partnership, or personal company, if he wants to claim ER on an associated disposal. Finance Bill 2016 tweaks these rules further to require the personally-held asset to be owned for at least 3 years before disposal - a change which was to apply to disposals from 18 March 2015 onwards.   
  
The Government has realised that such back-dating would mean some people would have further tax to pay on transactions which have already been completed. It has thus amended the Finance Bill 2016 such that the 3-year ownership period will only apply to assets acquired on or after 13 June 2016. 
  
The condition that the taxpayer must dispose of at least a 5% interest in his partnership is also changed by amendments to the Finance Bill 2016. In most circumstances a partner must reduce his interest in his partnership by at least 5% (eg from 20% to 15%) when he makes an associated disposal. But if the partner is retiring and he may have already reduced his interest in the partnership to below 5%. In such a case the retiring partner will be able to claim ER on an associated disposal made when he finally exits from partnership, even if that last portion of partnership interest amounts to less than 5% 


This is an extract from our topical tax tips newsletter dated 23 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 21 June 2016

Shortage of funds, Professional conduct, HMRC experiments

Two tricky tax problems to consider this week; how a shortage of funds leads to a default surcharge for late paid VAT, and a client who refuses to provide the information necessary to complete his tax returns. We have tips on what to do in both situations. We also have news of two experiments HMRC is conducting on your clients. Are they messing with our minds?

This is an extract from our topical tax tips newsletter dated 16 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

PCRT - Guide to professional conduct relating to tax
Tax work can put you in a tricky position at times, as you stand between your client and HMRC. You are paid by the client, but occasionally you must provide some uncomfortable truths about his obligations under tax law. This can place you in an ethical dilemma. 

Fortunately help is at hand in clearly written guidance approved by a joint committee of the professional accountancy and tax bodies: Professional conduct in Relation to Taxation (PCRT). This document was last updated in May 2015 and its worth referring to when in doubt as what to do. 

One fairly common situation is when the client doesn't provide you with the information to complete his accounts or tax return on time. You may be tempted to do what one accountant did, and submit blank tax returns for his client for three consecutive years (see Murat Anik v HMRC). The accountant did this to prompt HMRC to investigate his client and, in his words “kick start” his client into doing something. 

The accountant knew there were self-employed profits and rental income to report, but he didn't have any figures to use as an estimate, so he entered nothing. This was the wrong approach, as by submitting a nil return he was knowingly presenting an incorrect position. The professional conduct guidance says a tax adviser “should take care not to be associated with the presentation of facts he knows or believes to be incorrect or misleading nor to assert tax positions in a tax return which he considers have no sustainable basis.” 
  
The professional conduct guidance also sets out what a tax adviser should do if there is a possible irregularity in the tax return, such as an under declaration (see para 5.9). If the client will not disclose the correct information to HMRC you must cease to act for the client. You would need to advise the client in writing, and HMRC. You may also need to make a money laundering report. 

This is an extract from our topical tax tips newsletter dated 16 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 14 June 2016

Share scheme reporting, Second income disclosure, Penalties for follower notices

The P11D forms are sorted, so what's the next tax deadline to worry about? That will be the annual returns for employee share schemes which are due in by 6 July, as outlined below. We also have news of a disclosure opportunity for individuals who have a second income, and some new HMRC factsheets about penalties and follower notices. 

This is an extract from our topical tax tips newsletter dated 9 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>> 

Second income disclosure 
This disclosure opportunity was opened in April 2014 (see our newsletter 17 April 2014), but the guidance has recently been updated. It amounts to an open-ended opportunity to disclose taxable income or gains and take advantage of a discount on penalties due. 

To use this disclosure opportunity, the individual (or you as their tax agent), must notify HMRC using a special online form or by telephoning: 0300 123 0945. HMRC will respond with a disclosure number, and a payment reference number to quote when paying the tax due. A full disclosure and payment of all liabilities must be made within four months of HMRC's acknowledgement of the notification. 

The calculation of the payment due must include interest and penalties, but the level of penalty will be no more than 20%, and could be zero for some years. If the taxpayer can't pay the full amount due in one go, you should contact HMRC and make a formal time to pay agreement. This will generally require instalments to be paid by monthly direct debit for a period of between 6 and 12 months. 

If the only undeclared income relates to let property, the individual should use the let property campaign to declare that income and any related gains. The let property campaign operates in a similar fashion to the second income disclosure, but the taxpayer has only three months to pay the amount due after notifying HMRC. 

The second income disclosure can't be used to declare employer's NIC, IHT, VAT, trust income or income arising from a deceased's estate during administration. It also can't be used if there is an open tax enquiry into the taxpayer's affairs. 

If the taxpayer is uncertain about their residency status, and hence their liability to pay UK tax, that point needs to be resolved before completing the disclosure form. Also if the taxpayer has been part of a tax credit claim in any of the tax years covered by the disclosure, that fact should be declared on the disclosure form.


This is an extract from our topical tax tips newsletter dated 9 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 
The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>

Tuesday 7 June 2016

Doctors' pensions, VAT compliance checks, Beware HMRC scammers

The civil service for central Government is now in “purdah”, which means there will be no significant Government announcements until after the EU referendum on 23 June 2016. This is holding up the publication of key tax consultations, particularly on Making Tax Digital. In the meantime there is a problem with GPs' pensions you need to be aware of. We also have news of a pilot scheme for VAT compliance visits, and a warning about fraudsters claiming to be from HMRC.

This is an extract from our topical tax tips newsletter dated 2 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

Beware HMRC scammers 
Fraudsters are using threats and intimidation in phone calls to taxpayers and accountants, as they pretend to be collecting tax debts on behalf of HMRC. This is not surprising as the HMRC-approved debt collectors can be threatening and unreasonable at times. 
  
The latest calls and text messages claim there is an outstanding tax debt, and that payment must be made immediately or the police will arrest the individual. The fraudsters are able to use technology to pretend to be calling from a genuine HMRC call-centre telephone number, in this case: 0300 200 3300. You should not trust the number shown on your telephone's display as it can easily be spoofed. 
  
The fraudulent caller normally attempts to obtain credit or debit card details, and may give her name as Heather Grey of HMRC. There is no such person within HMRC. In another twist the taxpayer may be asked to pay the tax debt in the form of gift card vouchers from iTunes or Argos. This sounds incredible, but some people are falling for this scam. Gift cards can be easily redeemed or sold on. 
  
Please warn your clients about these scams, especially those individuals who are new to self-employment and haven't dealt directly with HMRC before. HMRC never use text messages to ask for payment. 
  
If you or your clients have suffered an attempted fraud, report it to Action Fraud (National Fraud and Cyber Crime unit) on 0300 123 2040 or by using the online fraud reporting tool.   
   

This is an extract from our topical tax tips newsletter dated 2 June 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>
 
The full newsletter contained links to related source material for this story and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>