Taxing Times – September 2015

Welcome to the September edition of Taxing Times.  A quiet month this month (thankfully after all the changes over the Summer!) Taxing Times

In this edition we’ll look at:

  • The new IHT “family home nil-rate band”
  • PAYE updates
  • The new theatre tax relief
  • Dates and deadlines
  • What’s new in the world of tax?

Don’t forget: We have some more free seminars coming up in September tackling auto enrolment! There will be one at the George Hotel in Penrith on Wednesday 16 September followed by one at the Cairndale Hotel, Dumfries on 30 September. For further information click here or to book your place please contact Debs Hirst on 01768 864466 or email

We also have a free seminar aimed specifically at bookkeepers and finance professionals to tackle the same issue held at our Carlisle office at Rosehill, Tuesday 15 September from 9am-11.30am. For further information or to book your place please contact Shardia Sahib on 01228 530913 or email

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The new IHT exemption

A new IHT exemption for property had been trailed some while before the Summer Budget on 8th July so the new “family home nil-rate band” which will come in from April 2017 was not unexpected – but its complexity and arbitrary criteria have caused some consternation.  The key to the IHT change is not to think of a single IHT threshold – many newspapers talked about “a couple being able to leave £1m without paying any IHT” – but this doesn’t help to understand the changes properly.  Instead think of the “original” IHT threshold of £325k per person, PLUS a separate and new additional-rate band of up to £175k per person. Yes, this gives £1m per couple but it has distinct component parts.

The additional nil-rate band or “family home allowance” is available where a residence is passed on death to a direct descendant (which includes stepchildren, adopted and fostered children and grandchildren).  The additional nil-rate band will be phased in as follows:

  • 2017/18 – £100,000
  • 2018/19 – £125,000
  • 2019/20 – £150,000
  • 2020/21 – £175,000

From 2020/21, this will remain at £175,000 and will then increase with the Consumer Price Index.

Buy to letAny unused proportion of the additional nil-rate band can be transferred to a surviving spouse or civil partner irrespective of when the first of the couple died….but because the family home allowance only starts to kick in from 2017-18, the second death has to occur after 6 April 2017.  Not something people can particularly control –  making this IHT change a little bit subject to the whims of fate unfortunately.

The additional nil-rate band is only available on a residential property which was “a residence” of the deceased.  So a property which was never a residence of the deceased, such as a buy-to-let property, will not qualify. The qualifying residential interest will be limited to one residential property but personal representatives will be able to nominate which residential property should qualify if there is more than one in the estate (note: more than one residence not more than one property!)  And buried deep in the small print is the quirk that any debts attached to the property, such as a mortgage, will reduce the additional nil-rate band available.

For estates worth in excess of £2,000,000, the family home allowance will be tapered at a withdrawal rate of £1 for every £2 over the threshold and will not therefore be available for an estate worth in excess of £2,350,000.

Those wanting to downsize to a smaller property will now be eligible for an “inheritance tax credit”.  This means they can sell their property, buy a cheaper one and still qualify for the new threshold having owned the higher value property, as long as a sufficient part of their estate is inherited by their direct descendants. For example, Mrs Biggs chooses to downsize from a £200,000 home to a home worth £100,000. She could still benefit from the maximum £175,000 allowance in 2020-21 if she leaves the home and £75,000 of other assets to direct descendants. She will only be liable for inheritance tax if her total estate exceeds £500,000. (There will be consultation on how exactly this IHT credit will work in practice – watch this space).


Note that if a person owns a residence which is worth less than the maximum value of the family home allowance then any “spare” family home allowance is lost – it cannot be used against other non–residence assets (unless they have downsized to get the IHT “credit” as above).

Interestingly – although perhaps not surprisingly – the Government is now facing calls to rethink what is effectively a policy that will see the estates of childless people excluded from the cut in inheritance tax. There have been widespread complaints that the family home allowance discriminates against childless people who wish to bequeath their homes to nephews, nieces, godchildren, siblings, parents or friends. The Association of Chartered Certified Accountants (ACCA) is also preparing to lobby the government to change the rule, which has a whiff of the forced heirship rules which apply in countries such as France.

If you would like to discuss these new IHT changes or your IHT position in general, please contact one of the tax team on 01228 530913 or 01768 864466.

Dotted Line2PAYE Updates

National Minimum Wage 7321522_l

Employers who have failed to pay their workers the National Minimum Wage (NMW) have been named and shamed by the Department for Business, Innovation and Skills.  Between them, the named companies owed workers over £153,000 in arrears, and span sectors including hairdressing, fashion, publishing, hospitality, health and fitness, automotive, social care and retail.

In addition to the NMW, the government recently announced that a National Living Wage (NLW) of £7.20 an hour will be introduced in April 2016 for those aged 25 and over.  The government are determined that everyone who is entitled to the NMW receives it and when the new NLW is introduced it will be enforced robustly. More information in our e-shot coming out next week.

Termination Payments

The government has ordered a consultation on simplifying the tax and National Insurance treatment of termination payments and is looking at removing the distinction between contractual and non-contractual termination payments to make it easier for employers and employees to understand.  The consultation will run until 16 October 2015.

Student Loan Plan 1 and Plan 2

From 6 April 2016 a new student loan threshold of £21,000 will be introduced and will be known as a Plan 2 loan.  Employees repaying under the existing threshold will be unaffected by the change and these existing loans will be described as a Plan 1 loan.  Payroll software is to be amended so you can add the type of student loan to enable the calculations to be completed at the correct thresholds.

The main employer notification method will still be the SL1 start notice and every SL1 issued will indicate which plan type should be operated which should then be added to the payroll software.   From 6 April 2016 the Starter declaration checklist will prompt employers to ask new employees about their student loan plan type.  Form P45 will only indicate whether an employee is already repaying a student loan.  It will not indicate a plan type and so employers must ask the new employee for this information.  If an employee doesn’t know, the employer should adopt a Plan 1 type by default.

Supporting creative industries – the new theatre tax relief

Theatre Tax Relief was introduced by HMRC on 1 September 2015 and is aimed at theatrical production companies. Despite the legislation being in place for almost a year now, very little guidance has been published by HMRC about how the tax relief will work.  Nonetheless, HMRC have now started to process claims and it is an area that should be carefully considered by any companies that will potentially be able to claim the relief – don’t let the lack of guidance, unhelpful as that is, put you off!


First of all, a warning: the relief can only be claimed by companies – this is an important criteria so it means that while non-incorporated bodies, including charities, may think they are eligible, they are NOT – so a change to the business structure may be needed.

How does it work?

Theatre Tax Relief is calculated on 80% of expenditure directly incurred in producing and closing qualifying theatrical productions – so the sums involved could be quite substantial. The relief will be given either as a deduction to taxable profit thereby reducing the company’s tax bill, or if the company is not in a tax paying position (for example, if it is a charity) then the relief is given by way of a tax “credit” (actually a cash repayment) from HMRC. This makes the relief potentially very valuable to qualifying production companies.  But as ever with tax reliefs, there are certain criteria which have to be meet in order  to qualify.

For existing production companies, claiming the relief will be fairly straight forward as it will be an entry in their year end corporation tax return. However, charities will need to consider whether their structure is appropriate in order to claim the relief.  Unincorporated charities will need to set up a trading subsidiary to bring them into the scope of corporation tax and therefore eligible to claim the relief. Charitable companies can potentially claim the relief through their existing structure, but must ensure that they are not negatively impacting their charitable status by claiming the theatre tax relief and filing a corporation tax return.

There are various rules set out by HMRC as to which companies, productions and expenditure will qualify for this relief. If you think your business may be able to take advantage of this relief and you’d like to find out more about how it works, then please get in touch.

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Upcoming Dates and Deadlines

30 September 2015

Corporation Tax:

  • Returns for accounting periods ended 30 September 2014 should reach HMRC
  • Tax payments for companies with 31 December 2014 year ends (who are not in the quarterly instalments regime) should reach HMRC

Company accounts:

  • Private companies with 31 December 2014 year ends should file their accounts at Companies House

1 October 2015

Property Tax:

  • Deadline to submit the 2014/15 returns for the annual tax on enveloped dwellings (ATED) for relevant properties which have a value of more than £1million but not exceeding £2 million (that is, those newly into the ATED charge)

National Minimum Wage:

  • NMW rises to £6.70 per hour for workers aged 21 and above; to £5.30 for those aged 18 to 20; £3.87 for those aged 16 to 17; and to £3.30 for apprentices

5 October 2015

Income Tax:

  • Last day for individuals not already registered for self assessment to notify HMRC of chargeability to income tax or Capital Gains Tax for 2014/15

19/22 October 2015

  • Deadline for employers to pay tax and Class 1B NIC under PAYE settlement agreements for 2014/15 (19 October by cheque and 22 October if paid electronically)

31 October 2015

Property Tax:

  • Deadline to pay the annual ATED tax for relevant properties which have a value of more than £1million but not exceeding £2 million

Income Tax:

  • Deadline to file tax returns for 2014/15 in paper form (unless the return is in one of the categories which cannot be filed online in which case the deadline is 31 January 2016)

Corporation Tax:

  • Returns for accounting periods ended 31 October 2014 should reach HMRC
  • Tax payments for companies with 31 January 2015 year ends (who are not in the quarterly instalments regime) should reach HMRC

Company accounts:

  • Private companies with 31 January 2015 year ends should file their accounts at Companies House

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What’s new in the world of tax?

HMRC denies more taxpayers will be dragged into the self assessment regime


It has been suggested that tens of thousands of pensioners could be forced to fill in tax returns for the first time or face fines under the Government’s “savings revolution”.  From April next year banks and building societies no longer have to withhold 20% tax on interest paid out.  Therefore it appears that the only way for the appropriate tax to be collected if the interest investors earn from their savings exceeds £1,000 for a basic rate taxpayer or £500 for a higher rate taxpayer is for them to inform tax officials, probably by completing a tax return. However, HMRC has denied the claims and said there was “no question whatsoever of savers having to complete tax returns”.

Hmmm.  So how will the tax be collected? Via the new “online accounts” – which are essentially tax returns by another name?

Change to pension input periods creates “double annual allowance” windfall

Pension savers who can afford to contribute large lump sums into their pension pots have been effectively handed a £40,000 “bonus” as an unintended consequence of changes the Government is making to pensions administration.  Currently, pension schemes can have varied “pension input periods” or contribution years, which don’t necessarily match up to the tax year.  As a simplification measure, it was announced in the July Budget that all pension input periods would be aligned with the tax year from April 2016.  To allow this to happen, the pension contribution ‘clock’ for 2015/16 was effectively stopped on July 8 and restarted with a fresh allowance of up to £40,000. The quirk means it is possible for some savers to contribute up to £80,000 into pensions this year and claim tax relief at up to 45%, as you become entitled to contribute a further £40,000 between  8 July 2015 and April 5 2016 regardless of contributions made before 8 July.

So for example, if you had contributed, say, £40,000 before July 8 2015, you can contribute another £40k by 5 April (assuming you – or your company – has it to spare!)

Pension freedoms kickstart divorces by the “silver splitters”

New rules allowing over-55s the freedom to cash in their pension pots and take control of their lifetime savings may be leading to a surge in “silver splitter” divorces. Divorce lawyers are reporting a new “rush” to divorce among couples around retirement age as they seize on their new financial freedom to start afresh.

Teed off?  Golf courses accused of VAT rip-off

Steven Barnes-2Golf courses, leisure centres and other sports clubs have been accused of failing to pass on a new tax discount to their visitors. In January, HMRC stopped collecting 20% VAT that was included in the price charged to non-members for rounds of golf, swimming sessions and other sporting pursuits offered by non-profit organisations. It has been questioned whether golf clubs have passed the savings on to visitors by cutting green fees.



And finally….tax thought of the month

For every tax problem there is a solution which is straightforward, uncomplicated…and wrong! – Anonymous

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