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How to pay your Self-Assessment by 31 January 2018

As you are aware the self-assessment deadline of 31 of January 2018 is fast approaching, here are five ways to pay before the deadline to ensure you avoid any unnecessary penalties.

Listed below are the methods you can use to pay your tax liability.

 By debit or credit card or by BACS

If you wish to pay via debit or credit card online or over the phone you will need your 10-digit unique taxpayer reference (UTR) followed by the letter ‘K’. This will be on your tax return and computation.

It is important to note HMRC will no longer accept payments from personal credit cards, so if you are paying with a credit card ensure it is a business account.

The debit or credit card link is as follows (you will incur a fee if you pay by credit card):

 

https://www.tax.service.gov.uk/pay-online/self-assessment

 

Alternatively, you can pay by BACS as follows (assuming your account is UK based)

 Sort Code   Account Number     Account Name

 

083210            12001039                    HMRC Cumbernauld

 

OR

 

083210            12001020                    HMRC Shipley

 Your bill should advise you which account to use, but if you are unsure, use HMRC Cumbernauld.

 

At your bank or building society

You can only pay at your branch by cash or cheque if you both:

·         still get paper statements from HM Revenue and Customs (HMRC)

·         have the paying-in slip HMRC sent you

Make your cheque payable to ‘HM Revenue and Customs only’ followed by your reference number - this is your Unique Taxpayer Reference (UTR). Followed by the letter ‘K’. You’ll find it on your paying-in slip. 

 

Direct Debit

If you wish to pay via Direct Debit you will need to set up a Direct Debit through your HM Revenue and Customs (HMRC) online account to make single payments for 31 January. If you will need to make a payment on account, then you will also need to set up another debit before 31st July.

 

You’ll also need to use your 11-character payment reference. This is your 10-digit Unique Taxpayer Reference (UTR) followed by the letter ‘K’.

 

Please Allow 5 working days to process a Direct Debit the first time you set one up. It should take 3 working days the next time if you’re using the same bank details.

 

By cheque through the post

 You can send a cheque by post to HM Revenue and Customs (HMRC).

HMRC 
Direct 
BX5 5BD 

Please allow 3 working days for your payment to reach HMRC.

In the envelope you should include:

A cheque payable to ‘HM Revenue and Customs only’, followed by your Unique Taxpayer Reference (UTR). You’ll find this on your paying-in slip.

Include the paying-in slip HMRC sent you (if you still get paper statements). Don’t fold the paying-in slip or cheque or fasten them together. If you don’t have a paying-in slip you can print a slip to use to pay by post. However, you won’t be able to use this at a bank.

Through your tax code

You could have paid your Self-Assessment bill through your PAYE tax code providing you met the following criteria:

·         you owe less than £3,000 on your tax bill

·         you already pay tax through PAYE, for example you’re an employee or you get a company pension

·         you submitted your paper tax return by 31 October or your online tax return online by 30 December

How it’s set up;

HM Revenue and Customs (HMRC) will have automatically collected what you owe through your tax code if you met all 3 conditions. unless you’ve specifically asked them not to (on your tax return).

If you’re not eligible, you wouldn’t have been able to pay this way. You aren’t legible if:

·         you don’t have enough PAYE income for HMRC to collect it

·         you’d pay more than 50% of your PAYE income in tax

·         you’d end up paying more than twice as much tax as you normally do

Give the Gift of Tax Relief this Christmas: Trivial Benefits and Christmas Parties

 

With the festive season fast approaching, Christmas parties and gifts for employees and customers will no doubt be on the minds of many businesses. However, if tax relief is to be achieved there are many rules and regulations to be followed.

Gifts to Employees

All gifts will be tax deductible as an expense for the business. If the gift is a cash gift, the employee will have tax deducted as though the gift is regular earnings, and employers NIC is payable on the gross amount of the cash gift, and the employee will have national insurance and tax deducted on that gift. For example, if you give a cash bonus of say £100 to a basic rate employee, this will cost you as an employer £113.80 (less the corporation tax), and the employee will only receive £68 (after employees NI and tax).

However, you may wish to consider a non-cash gift known as a Trivial Benefit. The benefit is exempt from being taxed as employment income if all the following conditions are satisfied:

 

  • 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 (including under salary sacrifice arrangements)
  • 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)

 

 
This could be, for example, in the form of a hamper or a shop voucher. A good example of this is a voucher which can only be exchanged for goods but may be used in many stores, for examples of such vouchers please see the following link: https://www.one4allgiftcard.co.uk/

By comparison, providing a trivial benefit of say a John Lewis Voucher of £50 would cost you as an employer £50 (less the corporation tax) and the employee would receive £50 as a voucher, and not be subject to employees national insurance or tax. Likewise the employer would not be subject to employers national insurance.

It may also be interesting to note that trivial benefits may be used at any time of the year and there are no limits on the amount of times these may be provided to employees in the year, for example for staff birthdays.

Directors count as employees, but they may only receive a maximum of £300 per year in these trivial benefits. Therefore this is as equally beneficial for Directors.

Gifts to Customers

Gifts to customers are only allowable as a tax deduction if:

 

  • the total cost of gifts to any one individual per annum does not exceed £50
  • if the gift bears a conspicuous advert for the business
  • the gift is not food, drink, tobacco or exchangeable vouchers.

 

However, samples of a trader’s product are allowable even if they are food, drink or tobacco.

Christmas Parties

Christmas parties are tax deductible as long as they meet the following criteria:

 

  • £150 or less per head
  • Annual, such as a Christmas party or summer barbecue
  • Open to all of your employees

This allowance applies to ‘annual parties’, therefore if you have already entertained your staff during the year, the amount must still be kept under £150 in total to ensure the amount remains tax deductible. If the total annual expense for the employee exceeds £150, the total cost of the event is no longer tax deductible, not just the cost that exceeds the £150. All of the costs become taxable as a benefit in kind, requiring a P11D submission to HMRC for your employee.

It is also important to note that the cost is per employee, therefore if partners of employees are invited to the Christmas party, the cost of the partners will have to be absorbed within the £150 limit per employee.

For further information, please feel free to contact the team at Spirare.

The Budget 2017: A Summary

The Autumn Budget 2017: A Summary

 

The Chancellor Philip Hammond has announced his 2017 Autumn Budget, with first time buyers being the key winner from today’s budget.

In a Budget that was expected to raise funds for housebuilding, there were surprises to incentivize first time buyers in the form of stamp duty reductions. Effective from today onwards, first time buyers will pay £5,000 less on purchases between £300,000 and £500,000.

Other highlights included the rise of the National Living Wage from April 2018 onwards, maintaining the VAT threshold (despite concerns that this was going to be reduced), tax free benefits for electric company cars and a confirmed increase in the higher rate tax band and personal allowance for 2018/19.

For businesses, this was a mixed budget, with relatively little to comment on that would have a material impact. Key items including the VAT threshold which was confirmed as set to remain at £85k for the next two years, the rise in business rates to now be based on CPI not RPI, and the abolition of the indexation allowance for companies’ capital gains to be abolished from January 2018. Allowances for EIS and further research and development were more advantageous highlights for businesses, but this will impact the few rather than the many.

We have summarised the key highlights as follows:


Personal Taxation

  • Stamp duty to be abolished immediately for first time buyers purchasing properties costing up to £300,000. To help those in London and other expensive areas, the first £300,000 of the cost of a £500,000 purchase by all first-time buyers will be exempt from stamp duty
  • 100% council tax premium to be levied on empty properties for second home owners
  • The personal tax free allowance will rise to £11,850 in April 2018, an increase from £11,500 for 2017/18, while the higher rate threshold will start from £46,350, an increase from £45,000 for 2017/18
  • Short-haul air passenger duty rates and long-haul economy rates to be frozen (paid for by an increase on premium-class tickets and on private jets)
  • National Living Wage to rise in April 2018 by 4.4%, from £7.50 per hour to £7.83 per hour
  • Young person's railcard extended to 26-30-year-olds

 
Businesses

  • VAT threshold for small businesses to remain at £85,000 for the next two years
  • £500m support for 5G mobile networks, fibre broadband and artificial intelligence
  • £540m to support the growth of electric cars, including more charging points
  • For electric car drivers, charging cars at work will not be considered a benefit in kind for tax purposes
  • A further £2.3bn allocated for investment in research and development
  • Rises in business rates to be linked to CPI measure of inflation, not higher RPI. The Chancellor will also extend the £1,000 discount for small pubs to March 2019
  • The indexation allowance for companies’ capital gains will be abolished to bring the corporate tax system in line with personal capital gains tax. The indexation allowance takes inflation into account when calculating the chargeable gains of companies. The allowance will be frozen until January 2018 
  • The Chancellor is to double allowances for the Enterprise Investment Scheme (EIS) for "knowledge" businesses, although he said the enhanced perk would not allow the scheme to be used as a tax shelter for low-risk assets
  • Digital economy royalties relating to UK sales which are paid to a low-tax jurisdiction to be subject to income tax as part of tax avoidance clampdown

 
Other Announcements

  • Long-term goal to build 300,000 homes a year by the mid-2020s
  • £44bn in government support, including capital funding and loan guarantees, to boost housebuilding
  • Review into delays in developments given planning permission being taken forward
  • Tobacco will continue to rise by 2% above Retail Price Index (RPI) inflation while the minimum excise duty on cigarettes introduced in March will also rise
  • Duty on hand-rolling tobacco will increase by additional 1%
  • Duty on beer, wine, spirits and most ciders will be frozen
  • But duty on high-strength "white ciders" to be increased via new legislation
  • Fuel duty rise for petrol and diesel cars scheduled for April 2018 scrapped
  • Vehicle excise duty for diesel cars that do not meet latest standards to rise by one band in April 2018
  • Tax hike will not apply to van owners
  • Existing diesel supplement in company car tax to rise by 1%
  • Proceeds to fund a new £220m clean air fund
  • £40m teacher training fund for underperforming schools in England. Worth £1,000 per teacher
  • 8,000 new computer science teachers to be recruited at cost of £84m
  • Secondary schools and sixth-form colleges to get £600 for each new pupil taking maths or further maths at A-level or core maths at an expected cost of £177m
  • £320m to be invested in former Redcar steelworks site
  • Second devolution deal for the West Midlands
  • £1.7bn transport fund for city regions to be spent by mayors
  • £2bn for Scottish government, £1.2bn for Welsh government and £650m for Northern Ireland executive
  • Scottish police and fire services to get refunds on VAT from April 2018
  • £2.8bn in extra funding for the NHS in England
  • £350m immediately to address pressures this winter, £1.6bn for 2018-19 and the remainder in 2019-20
  • £10bn capital investment fund for hospitals

 
Should you have any queries on the above, please do not hesitate to contact a member of the Spirare team.

Annual Tax on Enveloped Dwellings

 What is ATED? 

ATED is a tax paid annually on UK residential properties that are owned by companies or other ‘non-natural persons’ such as collective investment schemes or partnerships where one of the partners is a company. Such entities will need to complete an ATED return if they own a property, or have shares in a property, that is; in the UK, classified as a dwelling, and was valued in excess of £500,000 at 1 April 2012 or at acquisition if later.

 

ATED was initially introduced in 2013, with the intention of discouraging ‘enveloping’ residential properties of high value within special purpose vehicles (SPVs) enabling sale of the property by means of share sales so that the purchaser did not have to pay stamp duty. At introduction, ATED only applied to properties with a value of more than £2 million, this has since been lowered twice and become more relevant to a larger amount of companies.

How much do I have to pay?

The ATED tax liability depends on which banding the property falls into. So that the charge can be correctly assessed, properties needs to be revalued every five years. As the last valuation date was 1 April 2012, the next date for revaluation is 1 April 2017, applicable to all properties subject to ATED.

 

Property value 1 April 2012 or acquisition

ATED Charge

2016/17

ATED CHARGE

2017/18

 

Over £500,000 but less than £1m

£3,500

£3,500

Over £1m but less than £2m

£7,000

 

£7,050

Over £2m but less than £5m

£23,350

 

£23,550

 

Over £5m but less than £10m

£54,450

 

£54,950

 

Over £10m but less than £20m

£109,050

 

£111,100

Over £20m

£218,200

 

£220,350

 

What are the reliefs?

Various reliefs are available that can reduce or eliminate the tax charge but these are not automatically given. This should be claimed on filing of an ATED return. Reliefs are available if your property is; 

+ Let to a third party on a commercial basis and isn’t, at any time, occupied (or available for occupation) by anyone connected with the owner

 

+ Open to the public for at least 28 days a year

 

+ Being developed for resale by a property developer

 

+ Owned by a property trader as the stock of the business for the sole purpose of resale

 

+ Repossessed by a financial institution as a result of its business of lending money

 

+ Being used by a trading business to provide living accommodation to certain qualifying employees

 

+ A farmhouse occupied by a farm worker or a former long-serving farm worker

 

+ Owned by a registered provider of social housing

When do I need to submit a return?

Submissions of ATED Returns and payments are subject to very tight deadlines. For companies already in the regime, a return must be filed and payment made within 30 days of 1 April, so for those submitting a return for the 17/18 year, the deadline is 30 April 2017.

Different deadlines are applicable where a company comes within the scope of ATED for the first time within a financial year; although the filing deadline is normally within 30 days of the property coming within the charge.

Failure to notify promptly, even if no tax is payable due to a relief, will result in late filing penalties which typically amount to £1,300 per year, so it is important to be aware of the value of your property/s and whether or not you need to submit a return.

 

If you require any further information, please do not hesitate to contact a member of the Spirare team.

Detailed guidance can be found at https://www.gov.uk/government/publications/stld-annual-tax-on-enveloped-dwellings-ated/annual-tax-on-enveloped-dwellings-returns-guidance

 

National Minimum Wage Increases from April 2017

As announced in Chancellor Philip Hammond’s Autumn Statement, the National Minimum Wage is set to increase from the April 2017. This also includes an increase in the National Living Wage for over 25-year olds with the view to getting this up to £9 by 2020.

The National Minimum Wage for over 25’s will be increasing by 4% from £7.20 to £7.50. With the other age ranges also increasing as shown in the table below.

Whilst looking at the changes in minimum wage, and with the school holidays approaching, it may also be useful to consider the employment regulations for under 18’s. Below are some of the key points to note when employing children:

During term time, children can only work a maximum of 12 hours a week. This includes:

  • The youngest age a child may work is 13 (with the exception of areas such as television and modelling).

  • A maximum of 2 hours on school days and Sundays.
  • A maximum of 5 hours on Saturdays for 13 to 14 year olds and 8 hours for 15 to 16 year olds.

During school holidays, 13 to 14 year olds can only work a maximum of 25 hours a week. This includes:

  • A maximum of 5 hours on weekdays and Saturdays.

  • A maximum of 2 hours on a Sunday.

During school holidays, 15 to 16 year olds can only work a maximum of 35 hours a week. This includes:

  • A maximum of 8 hours on weekdays and Saturdays.

  • A maximum of 2 hours on a Sunday.

For children under the age of 16, there is no entitlement to minimum wage, no NI liability, no need to pay through PAYE and you are not required to include them on payroll unless their total income exceeds the personal allowance.

For children over 16, they will be liable for NIC if the thresholds are met. If they are being paid over £112 a week you must be registered as an employer and operate PAYE and if you’re a registered employer, they must be included in the payroll.

If you would like more information on the National Minimum Wage increases or on employment regulations for under 18’s, please contact the team at Spirare.

U-Turn on Class 4 National Insurance Contribution Increase

The Chancellor has announced a U-turn on the planned National Insurance Class 4 contributions increases that he originally announced in the Spring Budget on 8th March 2017.

There was a planned increase in the amount of NIC Class 4 payable (which is payable on the profits for self-employed individuals) from 9%, to 10% in April 2018 and 11% in April 2019. However, many argued, and the Chancellor has agreed, that this move was a breach of the ''spirit'' of the Conservative 2015 election manifesto.

This has been a welcome U-turn for many of the self-employed. Originally designed to close the taxation gap between the employed and the self-employed, many argued that the self-employed do not benefit from the advantages that employees do, such as paternity pay, sick pay, and holiday pay. These benefits are being reviewed this summer for the self-employed, but for the time being the U-turn represents a welcome move for sole traders and partnerships.