Author Archive

Thinking of selling all or part of your business?

Thursday, September 26th, 2013

If you have spent your working life building your business, when you reach the point at which you are considering a sale, planning is critical.

VAT, corporation tax, income tax, stamp duty land tax, and capital gains tax are all standing in the wings waiting for you sign on the dotted line; so they can take a share of your hard-earned, sale proceeds.

Key areas that you will need to seek professional advice are:

• Do you need to strip surplus cash from your business prior to sale? What is the most tax effective way to do this?

• Are you selling all, or only part of your business? Do you need to consider demerging?

• If you are selling shares in your company will the sale benefit from Entrepreneurs’ Relief?

• Do you want to keep property owned by the business?

• If you have a group of companies would the group benefit from a formal reorganisation prior to sale?

• What impact will the sale have on any employee share options?

You may also need to consider that a potential buyer will be taking a close look at due diligence issues, particularly PAYE, VAT and corporation tax contingent risks.

In order to maximise the amount of post-tax sale proceeds you receive planning is absolutely key. We recommend that this be done before you instruct the selling agents and lawyers.
 

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Payroll giving award for HMRC

Tuesday, September 24th, 2013

Payments that your employees make through a Payroll Giving Scheme are deducted from their pay before tax is deducted. This means that employees are given tax relief on their donation immediately – and at their highest rate of tax.

It's easy to set up a Payroll Giving Scheme for your business. There's little in the way of cost and administration, and you'll probably be able to adapt your existing payroll system to operate the scheme.

Figures recently published show that HMRC is the top Government department for payroll giving – almost 10,000 of its staff donate through their salary. In July, HMRC published figures for the UK that confirmed payroll giving had risen £4m since 2012 to £124m.

Charities benefit from this type of donation as tax relief at the donor’s highest rate is applied when the donation is made. Giving by direct debit and ticking the Gift Aid box effectively pegs tax benefits to the charity at basic rate only.
 

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What is a salary sacrifice?

Thursday, September 19th, 2013

A salary sacrifice is a voluntary reduction in your salary in exchange for tax-free benefits. These benefits can include:

• Child care vouchers
• Cycle to work schemes
• Bus passes for commuters
• Canteen tokens
• Staff car parking and vouchers


The Government have also launched a consultation into the promotion of payroll giving. The aim is promote the system that allows monthly charitable donations to be taken from your salary before tax and National Insurance are deducted.


Ironically, the higher your income, and therefore your marginal tax rate, the less you will have to contribute to achieve the same result. For example:


1. If you pay income tax at 20%, and want to contribute £20 a month to a charity you would have approximately £16 stopped from your salary.
2. If you pay income tax at 40% and want to contribute £20 a month to a charity you would have approximately £12 stopped from your salary.
3. If you pay income tax at 45% and want to contribute £20 a month to a charity you would have approximately £11 stopped from your salary.
You could also use a salary sacrifice arrangement to reduce your taxable income if it seems likely that it will break through a significant tax threshold. For example:
• If your income is about to exceed £100,000 you will lose your personal tax allowance at the rate of £1 for every £2 your income exceeds £100,000.
• If your salary, or that of your partner, is about to exceed £50,000 you may lose entitlement to some or all of Child Benefit you may receive.
• You could also use salary sacrifice to keep your income below an increase in a tax band rate: from 20% to 40% or 40% to 45%.


It is important to crunch the numbers before you approach your employer so that you can quantify the benefits.
 

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Landfill tax clarification

Tuesday, September 17th, 2013

HMRC have published draft guidance on landfill tax. Materials that can be classified as naturally occurring, and therefore taxable at the lower rate of £2.50, include:

“Group 1 of the 2011 Order allows the following waste materials to be lower rated: naturally occurring rock, clay, sand, gravel, sandstone, limestone, crushed stone china clay, construction stone, stone from the demolition of buildings or structures, slate, sub-soil, silt, and dredgings. Generally, these materials are formed by a natural process and are therefore naturally occurring.”

HMRC also states:

“Mechanical processing such as crushing or sorting does not in itself affect the 'naturally occurring' status. Therefore waste containing only naturally occurring group 1 materials that have been crushed or sorted are still 'naturally occurring'. However, chemical or thermal processing does affect the 'naturally occurring' status (but minerals that have been processed or prepared may qualify for the lower rate under Group 3 of the 2011 Order).”
 

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Do you receive Child Benefit?

Thursday, September 12th, 2013

Many parents who receive Child Benefit may be blissfully unaware that they are walking into a tax trap.

From 7 January 2013 Child Benefit payments are effectively means tested by the tax system. If either parent, or both parents, has income in excess of £50,000, then part or all of the Child Benefit you have received after 7 January 2013 may be clawed back by the new High Income Child Benefit Charge (HICBC).

For every £100 your income exceeds £50,000, 1% of the Child Benefit you have received will be clawed back. Accordingly, if your income is in excess of £60,000, the benefit you may have received will be fully recovered by the HICBC. 

Apparently, over 400,000 people have opted out of receiving Child Benefit and they will be unaffected by the HICBC – you cannot be asked to repay what you have never received!

However, if you continued to receive Child Benefit after 1 January 2013, and if either you or your partner has income in excess of £50,000, then the HICBC will apply. This has implications for high income earners who do not normally submit a self assessment tax return.

You only have until 5 October 2013 to register for self assessment for the year to 5 April 2013. On the return you are required to state the amount of Child Benefit you received for the period 1 January 2013 to 5 April 2013. When your return is submitted, HMRC will work out the amount of the HICBC you need to pay and this will be collected through the self assessment system.

If both parents have income in excess of £50,000 then the highest earner will need to register for self assessment. If you prefer to avoid the HICBC, and registration for self assessment, you could always elect not to receive Child Benefit in future tax years.
 

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G20 agree tax crackdown

Monday, September 9th, 2013

Although the recent G20 conference in St Petersburg failed to reach a consensus on the best way to deal with the Syria crisis, they did agree on a long term strategy to make it harder to hide money in tax havens. The ultimate goal, to force companies to pay tax in the countries where they make the profits, will take a number of years to organise as the necessary legislative changes required will no doubt take time.

The breakthrough was facilitated by the Chinese who finally agreed to align with the other members of the G20 by signing an agreement to share tax records.

The G20 accord states:

“Cross-border tax evasion and avoidance undermines our public finances and our peoples’ trust in the fairness of the tax system,” it read. “We endorse plans to address these problems and committed to take steps to change our rules to tackle tax avoidance, harmful practices, and aggressive tax planning.”

The G20 members have committed to begin the exchange of information by the end of 2015.

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Check HMRCs callers IDs

Thursday, September 5th, 2013

Readers will be aware that there a multitude of emails circulating on the internet purporting to be from HMRC. In almost all cases these will be some form of scam, attempting to gather personal information from you in exchange for the promise of a tax refund or similar inducement.

HMRC have confirmed, on numerous occasions, that they do not email taxpayers. They may telephone, send you a letter or knock on your door, but they will not send you an email.

However, if someone does turn up at your door, purporting to be from HMRC, how do you know the person is who they say they are? To deal with this HMRC have issued instructions: how to check a caller’s ID.

‘To provide a safeguard against bogus callers in these situations, HMRC has introduced a new Field Force Verification Helpline.
To access the helpline, customers [taxpayers] should follow these simple steps:

• Ask to see the Collector’s photo ID
• Make a note of the ID number on the photo ID
• Call 0300 200 3862
• Provide HMRC with the ID number you’ve noted

The operator will then be able to confirm to you whether or not your caller is genuinely an HMRC Collector.

Every customer visited, from now onwards, will be given a copy of a leaflet showing the rights and responsibilities by the Collector on arrival at the customer’s premises. This also includes the Field Force Verification Helpline number.’
 

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High Income Child Benefit Charge (HICBC)

Thursday, September 5th, 2013

The HICBC was introduced on 7 January 2013 and applies to couples where:

  • One partner has received Child Benefit payments after 7 January 2013, and
  • Either partner has income in excess of £50,000 a year. The person with the highest income, if both are over £50,000, will be liable to pay the charge.

 It will not apply if the person entitled to receive Child Benefit stops their claim for a complete tax year (or for the period 7 January 2013 to 5 April 2013, for the tax year 2012-13).

 In effect, the charge recovers the actual Child Benefit received using a graduated scale. 1% of benefit received will be recovered for every £100 the highest earner’s income exceeds £50,000. Accordingly, if the highest earner’s income exceeds £60,000, all of the Child Benefit received will be clawed back.

 The partner with the highest income in excess of £50,000, and where either partner received any Child Benefit payments from 7 January 2013 to 5 April 2013, will need to declare the benefit received on their Self Assessment tax return for 2013.

 If you are not registered for Self Assessment you must do so by 5 October 2013.

 If you are concerned that you may be caught by the HICBC, and would like assistance with the registration or reporting process, please call.

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National Minimum Wage (NMW)

Thursday, September 5th, 2013

There has been much press commentary recently regarding HMRC’s pursuit of football clubs who stand accused of paying certain “employees” below the NMW. This action is being taken due to complaints HMRC has received from ballboys and club mascots who receive no payment for their time.

 All employers are required to pay their employees at least the NMW rates. However, there are a number of persons not entitled to the minimum wage. They are:

  • self-employed people
  • company directors
  • volunteers or voluntary workers
  • workers on a government employment programme, e.g. the Work Programme
  • family members of the employer living in the employer’s home
  • non-family members living in the employer’s home who share in the work and leisure activities, are treated as one of the family and aren’t charged for meals or accommodation (e.g. au pairs)
  • workers younger than school leaving age (usually 16)
  • higher and further education students on a work placement up to 1 year
  • workers on government pre-apprenticeships schemes
  • people on the following European Union programmes: Leonardo da Vinci, Youth in Action, Erasmus, Comenius
  • people working in a Jobcentre Plus Work trial for 6 weeks
  • members of the armed forces
  • share fishermen
  • prisoners
  • people living and working in a religious community

HMRC took enforcement action against more than 700 employers last year who were each fined up to £5,000 for non-compliance with the NMW rules. HMRC also secured back pay for over 26,000 employees, to top up their wages to the appropriate NMW rate.

The NMW rates are changing from 1 October 2013:

  • the main adult rate (for workers 21 and over) will increase by 12p to £6.31 an hour
  • the rate for 18-20 year olds will increase by 5p to £5.03 an hour
  • the rate for 16-17 year olds will increase by 4p to £3.72 an hour
  • the rate for apprentices will increase by 3p to £2.68 an hour

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Charities reminded to adopt online Gift Aid submissions

Thursday, September 5th, 2013

HMRC are advising certain charities to sign up to its new online Gift Aid system. The last “old style” forms will not be accepted after 30 September 2013.

According to HMRC, more than 19,000 charities have already signed up to Charities Online. Since the online process was launched 22 April 2013 almost 50% of Gift Aid payments are now being processed online.

Charities with no access to the internet can still claim using a paper based system, but must use a new form, ChR1, that can be ordered from the Charities Helpline on 0845 302 0203.

 Charities should allow 15 working days from the day they sign up, before making their first Gift Aid submission online.

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