Small Dairy Farmers Scheme – Do you qualify?

dairy cattle

Applications for the above scheme are now open, with a fund value of £8.5 million, with this fund being for England only, and designed to provide a one off payment to eligible farmers.

If your total milk deliveries in the reference period 1 April 2015 to 31 March 2016 were upto and including one million litres (or equivalent kilograms), and you are still milking, you are eligible to apply to the scheme.

The application form can be found at

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/610375/SDFS1_v1.0_Small_Dairy_Farmers_Scheme.pdf

Guidance notes can be found at https://www.gov.uk/guidance/small-dairy-farmers-scheme

It is suggested that the form is completed and emailed to smalldairyfarmersscheme@rpa.gsi.gov.uk, and we suggest that if you qualify, you should apply as soon as possible.

For further help, or if you require clarification, then please don’t hesitate in contacting Will Robinson at our Carlisle office 01228 534371 or email wr@saint.co.uk or call his mobile 07475 470132.

New partner appointed at Saint & Co

Darren Little is pictured above left with Ian Thompson outside our Ambleside Office
New Partner, Darren Little is pictured above left with Ian Thompson

Saint & Co, one of Cumbria and South West Scotland’s largest independent firms of Chartered Accountants, would like to announce the appointment of Darren Little as partner at our Ambleside Office.

Born and raised in Carlisle, Darren attended Morton School before gaining his degree in Accountancy & Finance at Lancaster University. He joined the firm’s Carlisle office as a trainee in 2003, qualifying as a Chartered Accountant in 2006.  Darren then moved to the Ambleside office as Audit Manager, to work alongside Ian Thompson.

Darren enjoys guiding and supporting a wide range of clients through the audit process and he has a significant amount of experience in working with academies.

Saint & Co was formed in 1884 and now has 13 partners and over 100 staff. We offer the following key service areas; accountancy, audit, taxation, payroll, financial services, and have ten offices throughout Cumbria and South West Scotland.

Partner, Ian Thompson said, “Darren has made a significant contribution to the firm; his promotion is well deserved and recognised by both clients and fellow colleagues.”

 

Lorry Driver Overnight Allowance – Changes from 6 April 2017

lorry drivers overnight allowance

HMRC have recently announced that from 6 April 2017, in order to pay the overnight allowance free of tax and national insurance, operators are required to apply for an Approval Notice from HMRC.  If operators wish to pay amounts in excess of these rates they will need to apply for a Bespoke Agreement.

When applying, the operator must be able to show the presence of a checking system, which they will use on a random basis to ensure that expenses claimed are actually being incurred.

The Approval Notice and Bespoke Allowance Agreement may be applied for online here. Note that both applications may be made on the same Bespoke Allowance Agreement application form.

The approval will last for up to five years.

Checking systems

Employers must have a system in place for checking that payments to employees are only made on occasions where the employee would be entitled to a deduction from earnings in respect of that payment and had incurred and paid an amount in respect of expenses on that occasion.

HMRC will accept evidence in the form of a sampling exercise based on the expenses incurred:

  • By a random sample
  • Of 10 per cent of all eligible employees
  • Over a one-month period.

These checks should cross-reference driver work schedules and time sheets to demonstrate that drivers were away from base in the performance of their duties on the days that payments were made. A further check on driver receipts should be carried out to ensure that costs were incurred.

Further details of the checking model are available from HMRC document EIM30275 which is available here.

The documentary evidence needed to support the checking system may include the following.

  •   Receipts – e.g. for hotels or parking
  •   Drivers’ log sheets or tachograph records/data
  •   Drivers’ expense claims.

Operators may need to make further enquiries to be satisfied that a tax-free payment is justified.

Operators will need to retain evidence to show that they have undertaken checks in accordance with the checking system that they proposed when making their application fora bespoke agreement. This evidence may also be required when the employer is subject to an HMRC employer compliance review.

Meal Allowances

If meal allowances are also paid then it is advisable to obtain HMRC approval at the same time as the overnight allowance on the Bespoke Allowance Agreement application form.

 

Making Tax Digital

66204538 - businessman hands typing something on smart phone sitting at his office. close up view. mobile applications, communicating, playing games, social media, organizing work or wireless technology concept.

These changes apply to everyone including you: 

HM Revenue & Customs (HMRC) are making revolutionary changes to the tax system which will be launched in 2018. These changes are named Making Tax Digital (MTD). But what does Making Tax Digital mean for businesses and you?  In practical terms Making Tax Digital impacts on your business by requiring the mandatory keeping of digital records in a format acceptable to HMRC and the submission to HMRC of quarterly accounts figures.

What is it? 

  • HMRC is rolling out Digital Tax Accounts and with that, digital record keeping for businesses and landlords. The self-employed, companies and some individuals will need to submit details of income and expenditure on a quarterly basis plus a final year-end update.
  • New businesses will need to make a first return within four months of start-up.
  • MTD is intended to improve the accuracy of business records and minimise errors through the use of new technology.
  • At present, there are no plans to change the tax payment dates although a voluntary ‘pay as you go’ system will be introduced.

Who does it affect?

  • MTD will affect all businesses, including landlords; very few will be exempt. The main exemption will be for landlords and the self-employed with turnover below £10,000.
  • Some businesses may apply for an exemption on the grounds of insufficient internet infrastructure (however, HMRC expects this to be minimal), religion or medical conditions (these will be checked rather than accepted at face value).
  • Charities and community amateur sports clubs will also be exempt, but can voluntarily comply.

What does this mean? 

  • Businesses will have to submit details of their income and expenditure electronically on a quarterly basis, with a month to do this from the end of each quarter.
  • The quarterly updates and the year-end adjustments will be compulsory, and there will be penalties for non-compliance.
  • You will have to start keeping your accounting records and books digitally to allow the transfer of the data to HMRC in the prescribed format.
  • HMRC will not provide software; businesses will need to buy their own MTD compatible software. It is expected that free software will be available to the smallest businesses only.
  • MTD will apply for most unincorporated businesses and landlords for income tax and National Insurance from April 2018. There will be a one year delay for small businesses and landlords where the annual turnover is less than the VAT threshold.
  • MTD will apply from April 2019 for VAT and from April 2020 for corporation tax.

The Solution

  • The revolutionary changes to the tax system mean that the partners and staff of Saint & Co are actively involved in MTD, including attending courses to keep up-to-date with the latest HMRC legislation & guidelines. We are also working with our accounting software suppliers so that we can provide clients with the accounting package necessary to enable you to keep your ‘Digital Accounting Records’ as required by HMRC.
  • As yet HMRC have not issued the final definitive guide to MTD but we do have an outline of the new system. We will over the next year provide further information and discuss with you, the improvements or necessary changes required to your accounting systems and records so that you conform with HMRC requirements.
  • Should you wish to discuss MTD sooner then please do not hesitate to contact the partner looking after your affairs.

Taking stock – is bigger better? Fifth in the series on pigs and poultry

pigs

While there is a drive to become ever more efficient in all types of agriculture, there becomes a point where bigger is not necessarily better. Whether it be livestock or arable, sheep, cattle or pigs, getting the right level of stock and equipment for your own business can make a big difference. Getting the “goldilocks effect” on your outputs, being “just right” for your own system can be the key.

 

Pigs and Poultry

A number of things affect the pig and poultry industry looking to increase, and with the margin being so tight, getting the right feed costs, minimising the unproductive time in the poultryanimal rotation cycle and also waste disposal can limit the benefits of increasing. The cost of additional accommodation, or free range land area must also be carefully considered. Ensuring you have an available market at a price to at least cover the cost of production is also a key consideration, after all, there would be little to gain if the increase meant selling the additional product for less than or equal to the cost of production, unless it made the original operation more efficient and there was additional margin available on that proportion. Forward contracts, both on the sales and purchased feeds can be of use for stability, however, markets do fall and rise, so it may be after the event that the positive or negative impact can manifest itself.

Bigger is not always better, it is simply another way of farming the land available, problems are not necessarily larger, but management of the issues, good or bad, that face you as a business owner may define your business moving forward! Standing still is not always a step backwards, and careful consideration should always be made when considering changing the scale of your operation.

If you would like to discuss any of these issues further, then please do not hesitate in contacting either Will Robinson at Carlisle on 01228 534371 or email wr@saint.co.uk, or one of the Agricultural Team spread right across Cumbria & South West Scotland.

 

Taking Stock – is bigger better? Fourth in the series on beef

cows

While there is a drive to become ever more efficient in all types of agriculture, there becomes a point where bigger is not necessarily better. Whether it be livestock or arable, sheep, cattle or pigs, getting the right level of stock and equipment for your own business can make a big difference. Getting the “goldilocks effect” on your outputs, being “just right” for your own system can be the key.

Beef

Having an extra 50 head of cattle means you would undoubtedly need more feed, whether that be grazing land, winter outlier land (potentially at a premium rate) or bought in feed and bedding. The cost of any increase should be carefully considered prior to taking the step. Closing the headlock on a cattle crush after the beast has ran right through simply means an empty crush, and a little more work. Extra winter housing space could also be required, and this can quickly eat into the margins. For a shed only being used for six months or so of the year, is an increase really productive, both over the short term and longer?

Bigger is not always better, it is simply another way of farming the land available, problems are not necessarily larger, but management of the issues, good or bad, that face you as a business owner may define your business moving forward! Standing still is not always a step backwards, and careful consideration should always be made when looking to change the scale of your operation.

If you would like to discuss any of these issues further, then please do not hesitate in contacting either Will Robinson at Carlisle on 01228 534371 or email wr@saint.co.uk, or one of the Agricultural Team spread right across Cumbria & South West Scotland.

 

Reducing your exposure to inheritance tax – the value of working with a tax specialist

inheritance tax

Inheritance tax (IHT) has become an increasingly thorny problem for many individuals, and especially property owners over the past few decades. So it’s a topic that many of us will benefit from understanding in more detail.

In our last blog post, I helped to explain a little around how IHT works – and to iron out some of the more common misconceptions around the impact it can have on your wealth and tax planning. You can read more on these popular IHT misunderstandings here.

In this post, I’m going to grab the bull by the horns and show you how – with proper forethought, careful planning and the expertise of a professional tax adviser – you can reduce your exposure to inheritance tax and make sure you’re doing the best for your wealth, and the wealth of future generations.

The value of working with a professional adviser 

So, what IHT tax-planning tips should you be aware of? As a Saint & Co partner and tax specialist, I deal with a wide range of clients, all of whom want to know their exposure to IHT is as low as possible.

Every person’s tax position will be unique, and that’s why a big part of my job is sitting down with you to learn about your situation, your financial background and your other business and investment interests. Based on the many years of experience we have of helping private individuals to maximise the efficiency of their tax planning, here are my ten top tips for minimising your IHT costs.

10 important ways to minimise your IHT costs

  1. Summarise your assets and liabilities to see where there are planning opportunities. No two estates are the same and what may be suitable planning for one individual may not be suitable for others. For example, there are some financial products available which can give an immediate discount once invested – with the outcome that the balance of the investment falls outside of your estate after the seven-year threshold.
  2. Review your IHT investments regularly. Wealth planning has to be constantly monitored to make sure your plan is still effective and working as hard as possible for you. For example, if you’ve invested in shares with the Alternative Investment Market (AIM) or have applied for the Enterprise Investment Scheme (EIS), you need to ensure that you’re still eligible for Business Property Relief (BPR) – companies are taken over and can be listed on another stock exchange, which can result in you losing your eligibility to relief.
  3. Review life assurances and pensions. It’s important to review any life assurance policies or pension entitlements to ensure they’re written under trust. If they’re not, this can potentially create an additional inheritance tax problem, which you’d be best to avoid.
  4. Review your wills. Once you’ve created a will (or wills), it’s vital to review this document on a regular basis to make sure the will is still tax efficient and fully meeting your needs. This is especially important following the introduction of the residence nil rate band as a trust may result in this relief being lost.
  5. Look into a trust or family investment company. Once you’ve reviewed your situation, it’s worth considering whether a trust or family investment company should be part of your planning. By putting your assets and investments into this structure, it’s possible to limit some of your tax liability and cut your final tax bill.
  6. Spend all your money above your nil-rate band (NRB). Obviously, this will be totally impractical for the majority of people as we all need some assets to produce income for us to live on a day-to-day basis. But it’s available as an option and the theory should not be forgotten. Wherever possible, it’s sensible to gift assets down a generation – or maybe two generations – where your life expectancy is more than seven years.
  7. Set up power of attorney. The future can be uncertain, so it’s advisable to have a power of attorney in place with a relative or friend. With this power of attorney, they can then deal with your financial affairs and healthcare affairs, should you become incapable of doing so yourself.
  8. Consider the implications of paying for long-term care. If you need to pay for long-term care (should you require it at any point in the future) the assets in your estate will be taken into consideration by the local council when assessing your liability to pay for care. Investments should be reviewed to ensure they’re not only tax efficient but also council efficient.
  9. Don’t look at IHT in isolation. As with most taxes, it’s very important not to look at your IHT liabilities and planning in isolation from other taxes. You will always need to consider the effects of any planning, both on capital gains tax and on your own personal income tax liabilities.
  10. Work with a professional tax adviser. This may seem obvious, but you’ll achieve the best possible tax position by working with a tax adviser that has the experience and insights needed to plan your taxes effectively. It’s not just a case of minimising tax: there’s the ever-present need to make sure tax planning achieves your personal and business goals as well – and that’s where professional advice really is invaluable.

Talk to us about your IHT planning

At Saint & Co, our aim is always to help you achieve the best possible outcomes from your tax planning and wealth management. If you think you’re likely to be affected by any of the IHT issues we’ve highlighted, please do come and talk to us.

Get in touch with us to arrange a coffee and a chat with our Tax team.

Getting the correct view of inheritance tax – and how to reduce its impact

35757702 - a farm in the lake district national park, cumbria, england, uk.

Property prices have been on the rise in the UK for some time – although figures published in the recent Spring Budget do suggest that this stratospheric price rise is gradually beginning to slow. But the huge increases in house prices we’ve seen over recent decades have been one of the main reasons why inheritance tax has started to hit more and more ordinary people.

Inheritance tax (IHT) is the money you pay to HM Revenue & Customs on assets in your estate – and with property prices so high, a good deal more of us have been getting stung for IHT.

So, if you’re likely to be hit by inheritance tax, what will the impact be? And how can you reduce that impact as much as possible through clear tax planning?

Paying the right amount of IHT

No-one wants to pay any more tax than is necessary. But we’re all duty bound to pay the right amount of tax for our circumstances. So what I’ll be talking about in this post is focused around legitimate and wholly legal tax planning – I’m not looking at the kinds of convoluted tax schemes you may have heard about in the news, and I’m certainly not going to talk about using any offshore planning in Panama!

There’s a very clear and immovable mantra when it comes to tax:

We can plan to avoid tax but not to evade tax!

Tax planning that helps you avoid certain tax liabilities is completely legal, above board and acceptable. Tax evasion, where you knowingly make plans to evade paying taxes you’re liable for, is illegal activity.

Firstly, I just want to be clear that inheritance tax is payable by UK domiciliaries – basically, if you were born in the UK you’re likely to be domiciled in the UK. If you were born overseas it’s possible that you may have a non-UK domicile, but its possible to become domiciled based on residence within the UK.  If you are non-UK domiciled, you may still be liable for tax on UK assets.

So, with our foundations clearly outlined, what I’m going to do in this blog post is look at a few of the common IHT misunderstandings I’ve come across when dealing with clients over the last few years – and help you avoid the same challenges.

Misunderstanding 1: I’m leaving all of my estate to my family, so there won’t be any inheritance tax to pay

This is actually only true in part. If you’re a married couple or in a civil partnership, you can leave your estate to each other and there won’t be any inheritance tax on those assets.

The reason for this is that there’s a specific IHT relief for assets passing between spouses. However, where your estate exceeds the nil rate band of £325,000 and those assets are left to other family members or friends, inheritance tax will be payable at a rate of 40% – which could amount to a fairly hefty tax bill.

Misunderstanding 2: I won’t have any inheritance tax to pay on my property overseas

This is actually false – IHT is payable on any worldwide assets. In fact, you may even have tax to pay in the country in which the property is situated.

So, taking this into account, it’s essential to make sure you take legal advice in the country where your overseas assets are located. Some overseas properties are owned in a company to ensure they’ll pass to the beneficiaries you intend – and in many cases to reduce any potential overseas tax. Even so, they’re still taxable in the UK.  In addition a foreign Will should be used to ensure your assets pass in the manner that you’ve planned.

It’s probably helpful at this point to outline what makes up an estate. Here’s a quick overview of the main assets that are likely to appear in your estate:

  • All property – wherever these properties are situated in the world
  • The contents of these properties
  • Jewellery
  • Cars
  • Life assurances
  • Stocks and shares
  • Bank and building society accounts, including ISA’s
  • Current accounts in a sole trader or partnership business
  • Directors loan accounts in a personal company
  • Life interest in a trust
  • Less any liabilities such as funeral expenses, mortgages, loans etc

It’s worth noting that some of the above may have reliefs or exemptions available, so it’s always sensible to check with a professional adviser.

Misunderstanding 3: My joint estate is less than £1m, so I won’t have any inheritance tax to pay

This statement is based on the announcement in Budget 2015 that a married couple will be eligible to a new residence nil-rate band, which when added to the existing nil rate band of £325k will give each of you £500k – £1m between both of you.

But the intricacies of the new legislation mean that, in certain circumstances, the full £1m may not be available. Let’s take a quick look at this in more detail:

  • Firstly, the new relief is only being introduced from April 2017. It starts at £100k, increasing to £125k from 2018, £150k from 2019 and £175k from 2020.
  • The relief only applies where your property is left to one or more lineal descendants – so that will include your children, stepchildren, adopted children or grandchildren. If it’s left to a sibling there won’t be any relief available and those with no children won’t be able to benefit from the relief.
  • If the value of your residence is less than the resident nil-rate band (RNRB) then the relief is restricted to the value of the property.
  • Where more than one property is owned, executors can nominate which property to allocate the relief against – but only where it’s been used as a main residence. So buy-to-let properties and furnished holiday lets won’t qualify. Also, if you’ve made a capital gains tax election for principle private residence relief, this won’t apply for IHT purposes.
  • If the value of your estate exceeds £2m before any reliefs then the relief will be tapered until after £2.2m in 2017/18 no relief will be available. The figure in 2020 will be £2.35m.  This is likely to affect many business people who are likely to qualify for BPR on the value of their interests in their business – whether that be a company, sole trader or partnership, but when their estate is totalled before the relief they could end up losing it altogether.
  • If you’ve downsized the scale of your property, there are provisions to enable the relief to continue. But, again, the small print needs to be checked if you’re going to do this to make sure you don’t jeopardise the relief.

Misunderstanding 4: I’ve given away assets so I wont have IHT to pay on them

This is true in the right circumstances. Provided that you survive seven years after making a gift, the value of the asset will fall outside of your estate.

However, you need to be very careful where gifts are made which you continue to benefit from. These are known as gifts with reservation of benefit (GROBS) and will continue to form part of your estate. An example of this may be a property that you gift to a child but where you continue to occupy the residence.

This kind of scenario wouldn’t be effective for inheritance tax as the value would still be brought into your estate upon your death. That isn’t to say that you shouldn’t make such gifts as they may be useful for other reasons, but you must remember that it won’t reduce your inheritance tax liability unless you pay a market rent for the use of the asset/property.

Misunderstanding 5: I can only give away £3,000 per annum tax free

There are several inheritance tax reliefs available for gifts, and the complexity of this can end up confusing people. So let’s take a look at the main available reliefs.

  • The first one is that you can give away up to £3,000 IHT-free each year.  However, that doesn’t mean this is the maximum you can gift. It just means that if you don’t survive seven years and the gift comes back into your estate that the first £3,000 of the gift won’t be taxable.
  • If one year’s £3,000 gift allowance isn’t used, it can be carried forward for one year only. If you’re a married couple, or in a civil partnership, you can gift away £6,000 per annum.
  • There’s an IHT exemption of small gifts of £250 or less that you make to individuals.
  • Gifts that you make in connection with a marriage are also potentially exempt
  • £5000 for parents
  • £2500 for grandparents
  • £1000 for all others.
  • Gifts out of income – if you can show that you have surplus income, and that this is used to make regular gifts, then these will fall immediately outside of your estate and won’t be dependent on the seven-year rule. Examples of this include paying regular contributions towards your grandchildren’s education, or the running of cars etc.

Now you understand inheritance tax

Having ironed out the popular misconceptions around inheritance tax, I hope you’re now feeling more confident about the possible impact of this tax and the importance of long-term tax planning.

In the next part of this blog series, I’ll be running you through some of the most effective ways to plan to reduce your inheritance tax liabilities – and to make sure you’re protecting as much of yours and the next generation’s wealth.

If you’d like to talk to our Tax team about your inheritance tax, please do get in touch to arrange a chat over a coffee.

 

New rules for IR35 workers in the public sector start 6 April 2017

There are significant changes that commence on 6 April 2017 for workers in the public sector supplying their services via their own personal service companies or other intermediaries.

From 6 April 2017, the public sector employer or agency that engages the worker will have to review the employment status of the worker and decide whether or not to deduct tax and national insurance from payments to the worker even though he or she invoices for the services through their own company.

An online tool called “The Employment Status Service” is available and can help them make that decision.  The tool can be used if the worker uses either an employment agency, or other third-party to get work.

These changes come on top of the restrictions on the tax deductibility of travelling expenses for IR35 workers that came into effect on 6 April 2016.

Please contact us if you want to discuss whether or not these rules affect you or your organisation.

New company loss relief rules start on 1 April 2017

New rules that will allow greater flexibility in the way that companies obtain relief for losses will apply to losses incurred from 1 April 2017 onwards.

These rules have been introduced to encourage companies to diversify as the losses may be available to offset against profits of another activity in a future period and even those of a company in the same group.

The proposed new rules were consulted on the last summer and are included in the latest Finance Bill.

Although there will be greater flexibility for “new” losses arising after 1 April 2017 “old” trading losses incurred prior that that date will continue to be restricted and will only be available to of be offset against future profits from that same trade.  The new rules are very complicated and we will of course work with you to ensure that your company obtains relief for losses in the most advantageous way.

BUYING A COMPANY WILL LOSSES

The new flexible loss relief rules coming into effect from 1 April 2017, could make the purchase of a loss-making company attractive however care and planning will be required.

For many years there has been anti-avoidance to block the use of such losses and it is proposed that these rules will continue to apply.

If within a five year period there is both a change in the nature or conduct of the trade carried on by the acquired company then the losses will be blocked.

If you would like further information, please contact your local Saint & Co Office.