Monthly Tax News – May 2016
MAKING TAX DIGITAL – TOO SOON?
George Osborne announced the introduction of digital tax accounts in his 2015 Budget, with more information being sent online to HM Revenue and Customs (HMRC) by employers, pension funds, banks and other institutions. This information will then be used to calculate individuals’ tax liabilities which may be viewed by them online. All this sounds great in theory, but many accountants expressed concerns about the reliability of this data.
We now learn that by June 2016 every individual and 5 million small businesses will get access to their digital tax account. Over the next four years HMRC expects a full range of services to be available to taxpayers through their digital tax accounts.
The next big step will be introduction of quarterly reporting of income and expenditure by businesses and landlords from 2018 according to the government.
Again we accountants have serious concerns about the timescale and lack of consultation. HMRC say “you will not need an accountant to fill out the information on the new system”. They are expecting businesses to use new Apps on their Smart phones and Tablets to transmit their data to HMRC. Most of you, I am sure, would rather spend time running your business than filling in more forms.
EMPLOYMENT ALLOWANCE IS NOW £3,000 BUT NOT SINGLE DIRECTOR COMPANIES
For the last two years there has been a £2,000 allowance available to employers to set against their employers National Insurance liability for the year. This increased to £3,000 from 6 April 2016 and no action is required if you claimed the allowance for 2015/16. However, from 6 April 2016, limited companies where the director is the only employee paid earnings above the Secondary Threshold for Class 1 National Insurance Contributions (£156 a week) will no longer be entitled to claim the Allowance.
HMRC guidance states that if more than one employee or director earns above the Secondary Threshold, the company will continue to be eligible for Employment Allowance for the whole tax year. This other employee could be the director’s spouse or partner. The HMRC guidance is not consistent with the legislation however, and we hope to clarify the matter so that you don’t miss out.
INHERITANCE TAX PLANNING USING THE NEW LIFETIME ISA
Budget 2016 announced a new “Lifetime ISA” that will be available to those aged between 18 and 40 from 6 April 2017. The Government will add 25% to the amount saved subject to a maximum of £4,000 a year (plus £1,000 from the Government). It seems there will be no requirement that the savings come from the person named on the account so parents, grandparents, or other relatives could make payments into the account.
Where you have excess income and have concerns about inheritance tax (IHT), what about taking advantage of the exemption for normal expenditure out of income by committing to regular payments into the account. £4,000 a year would save you £1,600 IHT, so £2,400 net turns into £5,000 gross, per recipient!
SUPPLYING DIGITAL SERVICES TO CUSTOMERS IN OTHER EU COUNTRIES?
The VAT place of supply rules changed on 1 January 2015 where digital services are supplied to non-business customers. The place of supply changed from where the supplier was based to where the customer is located as some companies were avoiding UK VAT.
This rule change had serious implications for small businesses supplying digital services such as software downloads to non-business customers. Where those customers are in other EU countries the UK trader may be required to register for VAT in that country and charge that country’s VAT rate on the supply. This is because unlike the £83,000 UK threshold many EU countries have a zero threshold. To simplify compliance with the EU VAT rules HMRC introduced the VAT Mini One Stop Shop (MOSS). Please contact us for further assistance if this may apply to your business.
TAX DIARY OF MAIN EVENTS FOR MAY / JUNE 2016
|1 May||Corporation tax for year to 31/7/15|
|19 May||PAYE & NIC deductions, and CIS return and tax, for month to 5/5/16 (due 22 May ifyou pay electronically);|
|1 June||Corporation tax for year to 31/8/15|
|19 June||PAYE & NIC deductions, and CIS return and tax, for month to 5/6/16 (due 22 June ifyou pay electronically)|