Only two weeks to the 31 January 2019 tax return deadline

Ensure you submit your Self Assessment Tax Return online to HM Revenue and Customs for the tax year ended 5 April 2018 by the 31 January 2019 to avoid any penalties and interest.

You also need to make your Self Assessment  balancing payment for tax year 2017/18, and make the first payment on account to HM Revenue and Customs for tax year 2018/19 by 31 January 2019.

A look back at our Inheritance Tax Planning Event: Don’t let the taxman take your family’s inheritance

 

On 22 November 2018, Saint & Co hosted an inheritance tax planning event entitled “Don’t let the taxman take your family’s inheritance!” in conjunction with Quilter Private Client Advisors, Old Mutual Wealth and Quilter Cheviot.

50 guests joined us at The Halston Hotel in Carlisle for an informal afternoon to enjoy a buffet and wine tasting, and to learn how to reduce the amount of tax payable in short presentations by speakers from Saint & Co, Quilter Cheviot and Old Mutual Wealth.

Feedback from the event has been fantastic ranging from “informative” to “very good” and “fun” (the wine tasting!).

Our three speakers looked at inheritance tax planning from a different perspective and outlined different, simple steps that can be taken to either totally eliminate, or at the very least reduce the amount of inheritance tax payable on your estate – all very thought provoking if you haven’t planned your tax affairs in the event of your death.

First to speak was Pauline Jackson, Saint & Co’s Tax Partner who briefly touched on various inheritance tax basics.  Using a case study of a husband and wife’s assets, Pauline explained what reliefs would be available and outlined some planning opportunities which included:  writing life assurance policies under trust, gifting assets during lifetime, looking at the ownership of business properties, diverting assets on a first death, using a lifetime family trust, gifting surplus income during lifetime.

Ash Kapasi, Offshore Specialist with Old Mutual Wealth, then touched on trust solutions such as gift trusts, discounted gift trusts and loan trusts and how these can be used in inheritance tax planning.

Gillian Bailey, Investment Director with Quilter Cheviot then explained how investing in the Alternative Investment Market (AIM) could be used to mitigate inheritance tax.

Pauline rounded off the presentations with a brief explanation of the residence nil rate band and what complications can arise with this.

Inheritance tax is a very complex and sometimes sobering topic so the evening concluded with wine tasting and a very light hearted and fun wine quiz, delivered by Paul Bolt from Quilter Cheviot.

If you couldn’t make this inheritance tax event, we are planning another in 2019 – watch out for the details!

In the meantime, if you would like to know more about inheritance tax, how to calculate the value of your estate and what planning opportunities are available please contact us.

 

Collecting unpaid tax for 2017/18 through your PAYE Coding

Under certain circumstances it is possible to arrange the collection of unpaid tax through your PAYE coding rather than making a balancing payment on 31 January 2019.  This  will depend upon the amount outstanding and the amount of income taxable under PAYE. There is a further condition that the return is submitted to HMRC online before 30 December 2018 in order that the 2017/18 tax be collected by amending the 2019/20 PAYE coding.

Not all shares qualify for CGT entrepreneurs’ relief now

As the result of changes announced in the Autumn Budget, and now incorporated into the latest Finance Bill, not all ordinary shares necessarily qualify for the 10% CGT entrepreneurs’ relief rate on disposal.

As mentioned in our ‘Capital Gains Entrepreneurs Relief Changes’ blog last month,  the definition of a personal company was tightened up so that from 29 October the shareholder must have entitlement to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company.

The shareholder, as before, will also need to be an officer or employee of the company.

This change means that certain “alphabet” and other shares with limited rights may no longer qualify for CGT entrepreneurs’ relief when disposed of. As a consequence of this change we may need to review the rights attaching to the shares that your company has issued and make changes to ensure that the shares qualify.

Gifts to charity

Where possible, higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.

For example where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing their net cost to £15.

Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will be taxed on the shortfall.

Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell your donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.

Gifts of up to £50 to employees

 

From April 2016 new rules were introduced to allow employers to provide their directors and employees with certain “trivial” benefits in kind tax free.

The new rules were brought in as a simplification measure so that certain benefits in kind do not now need to be reported to HMRC as well as being tax free for the employee. There are of course a number of conditions that need to be satisfied to qualify for the exemption.

Conditions for the exemption to apply

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

So this exemption will generally apply to small gifts to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.

Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company the exemption is capped at a total cost of £300 in the tax year.

Please feel free to contact us if you are considering taking advantage of this exemption.

Christmas is the time for giving and making gifts

Those thinking about making gifts at Christmas should take advantage of the various inheritance tax (IHT) exemptions and reliefs available to them. Note that certain gifts can also have capital gains tax (CGT) implications.

THE IHT ANNUAL EXEMPTION – USE IT OR LOSE IT!

Although not particularly generous at £3,000 per donor per annum if this annual IHT exemption is not used by 5 April it is lost, although it is possible to carry the allowance forward one year if unused. This means that if the annual allowance for 2017/18 was not used an individual may make gifts of up to £6,000 in 2018/19.

Where the gifts to individuals exceed the annual exemption there may still be no inheritance tax to pay if they survive for 7 years following the gift or the gift falls within the £325,000 nil rate band.

GIFTS OUT OF INCOME ARE NOT TAKEN INTO ACCOUNT FOR IHT

A more generous inheritance tax exemption than the £3,000 annual exemption will apply where the donor can prove that he or she is not transferring capital but is making gifts out of their income. There are detailed conditions for this exemption to apply requiring records to be kept of income and expenditure in order to prove that there is sufficient surplus income each year to make regular gifts to the beneficiaries. We can of course assist you in keeping the necessary records to satisfy HMRC.

CERTAIN GIFTS CAN HAVE CAPITAL GAINS TAX CONSEQUENCES

Although there will be no CGT on gifts of cash there may be CGT to pay where the gift comprises shares or other assets. This is because the transaction will generally be deemed to take place at market value between connected persons even though no money changes hands.

The amount of the gain would normally be determined by comparing the market value with the original cost of the asset gifted.

Where the amount of this gain is within the annual CGT allowance (currently £11,700) then there would be no CGT payable.

Where the gift comprises shares in a trading company or other business assets it may be possible for the donor and recipient to sign an election to hold over the gain so that no CGT is payable by the donor at the time of the gift. The effect of such an election is that the recipient of the asset will take over the donor’s original cost for subsequent disposal. Please get in touch with us if you are considering making gifts of shares or other assets so that we can advise you fully of all the tax implications.

Common Xero VAT errors and queries

I have already published common Xero bank errors and queries and common Xero supplier and customer errors and queries.      In this third and final blog in the series I  will outline Xero VAT errors and queries.

Why it is important to publish your VAT returns in Xero

Even if you still file your VAT returns through the HMRC website (although with Making Tax Digital looming this may not be an option for much longer) it is still important to publish your VAT return in Xero as this marks all the transactions that appear on that particular VAT return so they cannot appear on another VAT return in the future.

If you do not publish the VAT return in Xero and any late invoices are entered, if you try to recreate that VAT return on Xero (i.e. in the case of an inspection from HM Revenue and Customs [HMRC]), Xero will include the late invoices in the VAT return figures, even though they did not appear on the original VAT return, as Xero cannot distinguish when the invoice was entered, it just uses the invoice date.  This means that, unless you publish your VAT return in Xero, you can never get back to the figures submitted at the time.

By publishing this return in Xero, any invoices or payments that are entered for an earlier period after the VAT return has been filed will be picked up on the next VAT return, as Xero will include any late transactions if a previous return has been published in Xero.  If a VAT return is not published in Xero, then Xero cannot pick up any of these late claims and all the input VAT on these late invoices will be lost.

To publish your VAT return in Xero once you have reviewed it, click on the green File VAT now button at the bottom of the VAT return, and click on the green File & Publish button on the next page.  If you want to file with HMRC through Xero enter your government gateway user ID and password on the next page and click the green File & Publish button now.  If you do not want to file with HMRC through Xero take the tick out of the “File now with HMRC” box and click the green Publish VAT button.  Just remember in this instance to go onto the HMRC website and file your VAT return before the due date.

If you need any help with Xero please contact me at the Carlisle Office or email me michelle.ruddick@saint.co.uk

 

Advisory fuel rates from 1 December 2018

COMPANY OWNED VEHICLES

HM Revenue and Customs have announced revised tax free advisory fuel rates from  1 December 2018 which may be paid for business journeys in a car owned by the business.   Rates for the previous quarter are shown in brackets.

Engine size Petrol Diesel LPG
1,400 cc or less 12p (12p)   8p (7p)
1,600 cc or less   10p (10p)  
1,401 cc to 2,000 cc 15p (15p)    10p (9p)
1,601 cc to 2,000 cc   12p (12p)  
Over 2,000 cc 22p (22p) 14p (13p)  15p (13p)

These rates may be used in the following circumstances:-

  1. Where employers reimburse for business travel in company cars.
  2. Where employers provide fuel for company cars but employees are required to reimburse the cost of fuel for private use.

INPUT VAT CLAIMS ON MILEAGE PAID FOR COMPANY CARS OR EMPLOYEE OWNED VEHICLES

HM Revenue & Customs will accept the above figures for claiming input VAT on fuel for company cars, provided a VAT receipt is available to cover the cost of the fuel.  They will also accept use of the above rates by the employer when calculating input VAT on the fuel element for employees using their own vehicles and claiming mileage under the tax free approved mileage rates for business travel of 45p for the first 10,000 miles and 25p thereafter.

If you have not already done so, please update any spreadsheets you may use.

If you have any queries regarding the above or require any further information please do not hesitate to contact us.

More rates relief for small businesses

There has been much lobbying from the small business sector to reduce business rates to enable traditional retailers in particular to compete with internet traders.

The Chancellor announced  in his 2018 Budget that a one third reduction in business rates for small businesses with premises with a rateable value up to £51,000.

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