Tax Simplification for Individuals

New method of assessment

A new, simpler process for paying tax will take effect from 2016-17. The new system will be used for self-assessment taxpayers who have simple tax affairs where HMRC already hold all the data needed to calculate the tax liability, and where existing payment processes are not available. Taxpayers will be sent a calculation which will be a legally enforceable demand for payment, although taxpayers will be able to challenge and appeal the calculations.

Digital tax accounts

At the Spring Budget 2015 the government announced proposals for the introduction of personalised digital tax accounts to replace the current annual tax returns system. The government has now announced that companies, unincorporated businesses, self-employed people and landlords will all be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology and will include features which will prevent errors and promote compliance. The measure will not apply to employees, or pensioners, with a secondary income source from self-employment or property and whose gross income from this secondary source is under £10,000 per year.

The measure will be implemented for income tax and NICs from April 2018, VAT from April 2019 and corporation tax from April 2020. The roll out will be staggered and there will be testing before the reporting becomes mandatory.

Self-assessment time limit clarification

The government is to publish draft legislation clarifying the time allowed for making a self-assessment, making it clear that the time limit is four years from the end of the relevant tax year. (This will be legislated in Finance Bill 2016).

Stamp Taxes Update

SDLT on acquisition of additional properties

From 1 April 2016, higher rates of stamp duty land tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes. The higher rates will be 3 percentage points above the current SDLT rates.

The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.

The government will consult on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

SDLT payment

A consultation is to be undertaken on possible changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. It is expected that any changes would take effect from 2017-18.

ATED and 15% higher rate SDLT

From 1 April 2016 the reliefs available from Annual Tax on Enveloped Dwellings (ATED) and from the 15% higher rate of SDLT will be extended to equity release schemes (home reversion plans), property development activities and properties occupied by employees.

SDLT and Authorised property funds

A seeding relief will be introduced for Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs) and changes made to the SDLT treatment of CoACSs investing in property so that SDLT does not arise on the transactions in units.

There will be a defined seeding period of 18 months, a 3 year clawback mechanism, and a portfolio test of 100 residential properties and £100 million value or 10 non-residential properties and £100 million value.

These changes will take effect from the date of Royal Assent to Finance Bill 2016.

Deep in the Money Options

Shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will be charged at the 1.5% higher rate of stamp duty based on either their market value or the option strike price, whichever is higher.

HMRC will prevent avoidance using ‘Deep in the Money Options’, which are options with a strike price significantly below (for call options) or above (for put options) market value. Share transfers made other than to a clearance service or depositary receipt system as a result of exercising an option will be unaffected.

This change will apply to options entered into on or after 25 November 2015 and exercised on or after Budget 2016.

In a controversial move, HMRC is to close 137 local offices and replace them with 13 larger regional centres in a bid to save £100m by 2025.

Lin Homer, HMRC’s chief executive, explained: “HMRC has too many expensive, isolated and outdated offices. This makes it difficult for us to collaborate, modernise our ways of working, and make the changes we need to transform our service to customers and clamp down further on the minority who try to cheat the system. The new regional centres will bring our staff together in more modern and cost-effective buildings in areas with lower rents.”

But the move has been criticised in some quarters, with the Public and Commercial Services Union (PCS) saying that 11,000 full-time equivalent staff posts had been cut from HMRC since 2010 and any further cuts would be “absolutely devastating”.

PCS general secretary Mark Serwotka said: “Closing this many offices would pose a significant threat to the operation of HMRC, its service to the public and the working lives of staff, and the need for parliamentary scrutiny of the plans is undeniable and urgent.

The plan comes as HMRC faces criticism of its call centres, with its record of answering calls being described as “staggeringly bad” at the Commons Treasury committee earlier this month. Only half of calls were answered successfully between April and June, although performance has improved since.

Agreat new plug in has been developed by A2X to feed transactions from Amazon through to Xero.

When Amazon creates a new settlement file A2X automatically fetches it, crunches the data and generates a summary of the income and expenses charged or received from Amazon.

You can configure A2X to summarize sales by SKU, Product Type, or to group all Sales together. You can also optionally group sales by country.

Stamp Duty Land Tax (‘SDLT’) has been changed and a progressive tax rate will apply to residential sales completed after midnight on Wednesday 3rd December. The ‘break even’ point is £935,000, purchases below that will be subject to lower SDLT than before whereas purchases above that will be subject to higher SDLT.

Research & Development Tax Credits paid to small and medium sized companies will increase from 125% to 130% of ‘qualifying expenditure’ incurred after 1 April 2015. The credit for large companies will also increase from 10% to 11%.

Income Tax Personal Allowance will increase to £10,600 for the 2015/16 tax year – this is higher than previously advised by the government.

Resident non-domiciles will see an increase in the annual charge payable if they wish to retain the remittance basis of taxation. A new scale will apply from £30,000 for those resident in 7 out of 9 tax years up to £90,000 for those resident 17 out of 20 tax years. A consultation is also being proposed to make the election apply for a minimum of three years.

Diverted profits tax is a new tax to counter the use of aggressive tax planning techniques used to divert profits away from the UK. The tax will be levied at 25% from 1 April 2015 although exact details on how this will be applied have not yet been released.

Air Passenger Duty is being scrapped on economy flights for those under 12 years old with effect from 1 May 2015. The relief will extend to under 16’s from 1 March 2016 and tickets will be expected to display the amount of duty payable to ensure that the savings are passed on.

The amount held in an ISA at the time of death of an individual can now be used by a surviving spouse to invest into their own ISA. Although no IHT was payable on the transfer of assets between spouses on death the funds can now be reinvested in full into an ISA.

Entrepreneurs’ Relief will be removed for individuals in respect of the transfer of goodwill to their own company and Corporation Tax reliefs will be restricted for payments in respect of these intangible assets.

National Insurance employers contributions are abolished for apprentices under 25 with effect from 1 April 2016 (unless the apprentice earns more than circa £42,000).

A new ‘aggravated’ penalty loading of 50% will apply in addition to existing behavior related penalties for individuals who move hidden funds to circumvent tax transparency agreements

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If you let out residential property you need to know whether you can receive a tax deduction for the cost of replacing or repairing furniture and fittings provided inside that property. The cost of equipment used to maintain the outside of a property, or used in the communal areas of a building containing multiple dwellings, is always deductible.

When you fit something for the first time to a property, such as a fitted kitchen, that cost will form part of the capital cost of the building and will only be deductible when you sell the property. If you repair a fitting or replace the fitting with something of the same quality, the cost counts as a repair which can be deducted from the rental income.

If the fitting is replaced with items of a higher quality, the whole cost must be treated as a capital improvement, which is only deductible from the proceeds of selling the property. This does not apply if the replacement is superior just because the modern equivalent of an outdated material or design is used. For example when you replace an old central heating boiler with a new condensing boiler, which does the same job but with greater energy efficiency, that will be a tax deductible repair not an improvement

Vans, computers and most office furniture can help reduce your tax bill

Do you know that there are a range of tax reliefs/allowances that you may be able to claim that could help save your business money?

Whether you are thinking of investing or buying assets for your business, or simply thinking of employing someone, there may be a tax relief or allowance that you are entitled to.

 contact us now at Cloudbookkeeper for more help info@cloudbookkeeper.co.uk

The sale of the Van should be dealt with as a Standard Rated Sale for VAT purposes, but under the Second Hand Goods (Margin Scheme).

Example

Purchase price of Van 5,000

Sale Cost of Van 10,000

Profit on Van 5,000

VAT Payable on Profit 833.33 (Vat on 5,000 – Net to Gross)

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