Taxing Times – October 2015

Welcome to the October edition of Taxing Times.  In this edition we’ll look at: Tax Opps

  • Capital Allowances – beware the bear trap!
  • Grants for Cumbrian businesses
  • PAYE updates
  • Question everything!
  • An update on Government consultations
  • What’s new in the world of tax?

Don’t forget: Due to popular demand and following the huge success of our last 2 seminars we will be holding another auto enrolment seminar, this time at our Rosehill office in Carlisle. For further information click here or to book your place please contact Shardia Sahib on 01228 530913 or email shardia.sahib@doddaccountants.co.uk

Doddie Calendar Competition 2016 – Calling all budding photographers: All things British is our theme for our 2016 Doddie Calendar. We’re looking for different and interesting shots to be featured in next year’s calendar.

To be in with a chance of seeing your image in print please send your photo to Debs at debs@doddaccountants.co.uk by 31st October 2015.  We can’t guarantee it will be used and the judges decision is final but for every image used we’ll send you a bottle of champagne and, of course, a few copies of the calendar. All photos submitted must be high resolution and landscape not portrait.

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Capital Allowances – beware the bear trap!

Only political spin doctoring could promote a drop in the annual investment allowance (AIA) from £500k to £200k as an “increase” (of course hanging its hat on the fact that the AIA was scheduled to reduce to £25k, so from that perspective £200k is indeed an increase!)

That said, the £200k – which kicks in on 1st Jan 2016 – is a welcome reprieve from the miserly £25k limit we were expecting – and the fact that George Osborne has confirmed it will remain at £200k for the duration of this term of office provides some welcome stability.

17905074_lBut be warned – in the “transition” period which straddles the change in the limit from £500k to £200k, there is a particular timing trap to be wary of!  This is best illustrated by an example.

Assume you have a year end of 31 March 2016.  9m of your accounting period falls into the period up to Dec 2015, when the AIA is £500k.  This gives a time apportioned allowance of £375k.  3m falls into the period after 31 Dec 2015 when the AIA is £200k.  This gives an apportioned allowance of £50k.  This gives a total annualised allowance of £425k.

But – this is the bear trap – the MAXIMUM allowance that can be claimed for the period after 31 Dec is only £50k (i.e. 3/12m x £200k).  So if you spend £400k on qualifying capital expenditure in Feb 2016 you might think that this spend is within the annualised allowance of £425k for the whole 12m so you can claim AIAs on the full lot.  This is NOT the case!  You can only claim AIAs on £50k because you spent it after 1st Jan 2016 when the limit dropped. (You can of course claim writing down allowances on the balance).  Whereas if you spent £400k before 31 December you will get full AIAs on the £400k – a phenomenal difference!

This is a surprising and counter-intuitive result, not to mention damaging to your cash flow forecasts!  The moral of the story is therefore to be very careful about the timing of your capital purchases.

If you are looking to make capital purchases and want to discuss how this will impact your business please get in touch.

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Don’t miss out on grant funding

It’s only just over 2 months since Cumbria Chamber of Commerce received its formal offer letter from BIS for its £4m Round 6 Regional Growth Fund grants programme – the Cumbria Growth Fund.

In that short time offers of funding have already been made to 11 businesses throughout the county, totalling £633,000 and intended to create or safeguard 111 jobs. And businesses have already started spending that money. Money bags 2

A further 20 businesses have had their Expressions of Interest approved and are working on full applications totalling £2m in grant requests aimed at creating or safeguarding 1,662 jobs! There’s a strong pipeline behind that working on Expressions of Interest.

Cumbria Growth Fund is aimed at businesses in manufacturing or services to manufacturing of any size looking to create and/or safeguard jobs, with grants of between £10,000 and £1m available.  If you’d like to know more, Dodd & Co have a team of approved growth hub advisers and Tony Ferguson here at Dodds would be delighted to talk to you about what you might be eligible for. If you’re interested in a grant don’t miss out – contact Tony now! Even if you’re not eligible we’ll do our best to point you towards other funding available.

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PAYE Updates

If you have any queries on any of the following PAYE updates please give Julie Campbell a call.

The National Minimum Wage

The Government has announced further measures to ensure people receive the pay they are entitled to.  The measures include working with payroll providers to make sure payroll software contains checks that ensure employees are being paid what they should be.  The National Minimum Wage increases take effect from 1 October and the government recently announced that a National Living Wage of £7.20 an hour will be introduced in April 2016 for those aged 25 and over.  Supermarket Lidl have already announced that they will pay all staff above the living wage from October, pledging a minimum rate of £8.20 per hour for UK staff with London staff guaranteed £9.35 per hour.  Other retailers have warned over the impact of higher staff costs from the national living wage, with Next and Whitbread, which owns Costa Coffee and Premier Inn, last week cautioning they may need to raise prices as a result.

Travel Time and Working Time

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The European Court of Justice (EJC) has ruled that, for workers who do not have a fixed or usual place of work, the time spent travelling to their first and last customers of the day is regarded as working time under the Working Time Directive.  This could mean employers of for example home care workers or travelling sales reps, may be in breach of EU working time regulations if they do not pay their staff from the point of leaving their home. Employees may now be working an additional ten hours a week once you take into account their travel time, and that may mean employers are falling below the National Minimum Wage level when you look at the hourly rate that staff are paid.  This could also have significant implications in relation to the maximum working week and rest breaks for such staff, depending on working arrangements.

Tips and Gratuities

hotel and leisure

The payment of tips, gratuities, cover and service charges is commonplace but concerns have been raised about the treatment of such payments in the hospitality sector, particularly in relation to the percentage of each payment that goes directly to the employer.  The Department for Business, Innovation & Skills (DBIS) is currently gathering information on how tips are collected and current tipping practices. In particular, DBIS is seeking views on the role for government in ensuring greater transparency and limiting the amount an employer can keep.

 

Scottish Agricultural Wages Order 2015

The Scottish Agricultural Wages Order rates are now available and the new rates come into force from 1 October 2015.  For all ages of worker who have been continuously employed by the same employer for up to 26 weeks the minimum wage is £6.70 per hour.  For a worker continuously employed for more than 26 weeks, the hourly rate is £7.24.  Agricultural apprentice rate for all ages is £4.02 minimum per hour.  Where a worker is required, for the performance of their duties, to keep and feed a dog, the employer will need to reimburse their costs by way of a dog allowance payment of no less than £5.49 per week.  This allowance is payable for each dog up to a maximum of 4 dogs.

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Question everything! And don’t forget to ask for help.

22175861_sRunning your own business can be scary, or at the very least a bit daunting.  You may previously have been a specialist – but in business you have to be a generalist and deal with not only your “core” business but marketing, selling, looking after employees and dealing with all the bureaucratic demands that occur day to day – from VAT to payroll to accounts to computer systems to Health & Safety, and so on…..

It can be easy to get bogged down in the day to day stuff and difficult to pause, take a breath, clear your head and question how things could be done better.  But please do so! When you have a difficult or complex task, or when you have lots of administrative functions that are taking up your time, remember that there are lots of people out there to support you – business collectives, solicitors, and of course your trusted accountant and tax adviser, for example.  No matter what problem you find yourself facing, at Dodds we are here for you and can help point you in the right direction.  Whether you want us to act as a sounding board, to hep you access finance or to help you stay on top of compliance and red tape, help is only a phone call or email away.  Please contact Claire Phillips.

And if that doesn’t persuade you, just remember that asking questions, getting the help you need from the experts and letting someone else look after certain areas of your business (accounts and payroll for example, necessary but dare I say it a little bit boring?!) frees you up to do what you are best at – running your business!!

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Government Consultations

Consultation on tax relief for furnished residential lettings

HMRC have been consulting since the summer on proposals to replace the existing 10% Wear and Tear allowance for fully furnished residential lettings with a new tax relief for actual expenditure incurred on replacing furnishings.  The proposed “replacement expenditure relief” seems sensible– spend something, get relief, don’t spend it, don’t get relief – and a lot more logical than the arbitrary 10% Wear and Tear allowance.  In addition, the 10% Wear & Tear deduction is only available for fully furnished lettings, whereas the new relief will be available for part furnished properties (and unfurnished lettings which have white goods).

Sounds like good news.  The consultation closes in October and the new relief will apply from April 2016.

Consultation on fees for tax tribunals

What price justice?  At least £250!

2526462_lThe government has proposed introducing fees for individuals appealing decisions to the tax tribunal as part of broader reforms to civil court funding. The Law Society has criticised plans to charge taxpayers who challenge decisions by HMRC, warning that access to justice could be denied.  The Ministry of Justice, which is consulting on its proposals, has suggested fees of between £50 and £200 for referring cases to the first-tier tax tribunal, with hearing fees to range from £200 to £1,000. Appeals to the upper tribunal would incur an initial fee of £100, plus up to £2,000 for a hearing.

That would mean, for example, that if a taxpayer felt he was wrongly charged a £100 late filing penalty and wanted to take his tax case to Tribunal against HMRC  it would cost him at least £50 to get through the door and at least £200 for a hearing…all to save £100.  A case of pay if you lose, pay if you win!

Jonathan Smithers, the Law Society’s president, has accordingly accused the government of effectively “selling justice.”  Paul Aplin of the Institute of Chartered Accountants in England and Wales said that tribunals serve a vital function in preventing HMRC from acting as both judge and jury.

Consultation responses on closure of tax enquiries published

HMRC have consulted on their proposals to change the closure rules governing tax enquiries, which involved HMRC being able to seek closure of a particular aspect of an enquiry (but without the taxpayer being able to do the same if he felt HMRC were dragging their feet). HMRC have now published a summary of the responses to this consultation. The report highlights an overwhelming disagreement with the suggestion that only HMRC should be able to use proposed legislative changes. It was felt that both parties involved in a tax enquiry should have the ability to approach the tribunal, to seek closure of a particular aspect – which does seem only fair!

HMRC propose to proceed on the basis that there is a need to provide a partial closure provision. But given the disagreement over their proposed approach they have said they will try develop a small number of alternative models for further consultation. Ideally, HMRC wish to include legislation for change in Finance Bill 2016. However, given the differing views of respondents on the optimum approach, and the time needed to consult further, the changes may be deferred until Finance Bill 2017.

Government plans for apprenticeship levy via PAYE

The government is consulting on plans to introduce an apprenticeship levy for larger businesses, to be collected via PAYE, as part of a package of measures designed to boost apprenticeship numbers and drive up the quality of courses offered to young people entering the workforce. 2587751_xxl

Employers are being asked for their views on the introduction of the apprenticeship levy, which is set to be introduced in April 2017. Under the proposed approach, employers who put in funds will have direct spending power over it.

In addition, from 1 September 2015, all bids for government contracts worth more than £10m will be required to demonstrate a clear commitment to apprenticeships. In particular, employers’ bids will be reviewed in line with best practice for the number of apprentices that they expect to support.  Central government departments, their executive agencies and non-departmental public bodies will then be required to assess these pledges alongside other relevant elements of the contract, including cost. The successful bidder will then have its agreed apprenticeship numbers written into the contract schedule.

The move is aimed at widening the scope of businesses offering apprenticeships, and with more than £50bn a year spent on procurement contracts, the government says it will provide a significant boost in apprenticeship numbers.

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What’s new in the world of tax?

HMRC investigator accused of tax con

A tax fraud investigator stands accused of stealing £150,000 in a VAT scam he set up to pay off gambling debts. HMRC officer Richard Barr is said to have pretended to trade £4m of electronic parts that never existed. The court heard how in 17 months, the two bogus companies he created obtained £500,000 from HMRC by reclaiming VAT.

A case of “do as I say, not as I do”!

509970_lFrustration over calls to HMRC

Research by Citizens Advice shows frustrated callers tweeted HMRC more than 11,500 times in the past year after failing to get through by phone. Those who complained via Twitter claimed to have spent an average of 47 minutes waiting to speak to someone at the Revenue.  Quite a difference to HMRC’s official figures suggesting an average wait of 10 minutes – if only!

Defending HMRC after the Citizens Advice report was published, Lin Homer, chief executive of HMRC, said “We aren’t answering enough calls within five minutes, but we are now doing more ‘once and done’ calls,” she said, meaning that taxpayers only needed to phone once. The total number of calls answered by HMRC fell from 79% in 2013/14, to 72.5% in 2014/15, according to the National Audit Office (NAO). The NAO added that just 39% of calls were being answered within five minutes.

Those of us who regularly spend over half an hour waiting for HMRC to answer the phone can only wish we were one of the lucky 39%!

CIOT criticises new penalty regime

The Chartered Institute of Taxation (CIOT) has criticised the Government’s announcement that it will be pressing ahead with the introduction of a new ‘strict liability’ offence for offshore tax evasion. The offence will be targeted at only the most serious offshore tax evaders and that there will be a threshold of £5,000 of under-declared tax before the new offence can be used.  However, the CIOT believes it is fundamentally wrong to create a criminal offence which will require no proof of intention.

HMRC as judge and jury again, then?

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And finally….tax thought of the month

“Like mothers, taxes are often misunderstood, but seldom forgotten.” — Lord Bramwell, 19th Century English judge

 

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