Posts Tagged ‘Julia Whelan’

IHT threshold up to £1m

Monday, May 23rd, 2016

From April 2020, married couples and civil partners will be able to leave property worth up to £1m to their children and grandchildren tax free.

The changes were announced in Budget 2015 and exempt estates from Inheritance Tax when passed onto direct descendants. For example, leaving property to a niece would not qualify for this additional allowance.

The IHT threshold is currently £325,000 per person with the additional ‘family home allowance’ of £175,000 available for most estates. This additional allowance will not apply to estates worth in excess of £2m.

There will be a staged introduction of the family home allowance, initially worth £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20 then the £175,000 in 2020-21.

Says tax partner Julia Whelan, “Individuals should consider their inheritance tax position to ensure they’re using all reliefs available to them. Even if the family home allowance isn’t available, there are still other options to consider when optimising the tax position”.

Continues Julia “There are other IHT-saving tools available, such as making gifts out of income, use of Potentially Exempt Transfers and gifting to charity in order to reduce exposure the IHT”.

If you would like to find out how to reduce your exposure to Inheritance Tax or to find out more about estate planning, please contact Julia Whelan on 01527 558539 or [email protected].

 

Higher tax applied to directors’ loan accounts

Thursday, May 19th, 2016

From 6 April 2016, companies will be charged a higher rate of tax (payable under s.455 CTA 2010) on outstanding loans to directors, or any other participator in a close company. This new rate is 32.5%, (up from 25%) and is payable by the company on unpaid balances existing nine months after the end of the accounting period. The new rate of 32.5% applies to transactions from 6 April 2016. Existing loans in place at this date will still be subject to the 25% rate.

Income tax & NIC

Where a director has an unpaid interest-free loan 9 months after the year end, the director is in receipt of a taxable benefit which must be reported on the P11D. Such an amount is not covered by a P11D dispensation and the individual is taxed on the amount of benefit received.

The company is subject to Class 1A NIC on the beneficial loan interest and should report this on the P11D (b).

Paying an HMRC official rate of interest

Where a director pays interest at HMRC’s official rate, there is no taxable benefit and the reporting requirements are reduced.

Tax avoidance measures

The government has put in measures to tackle tax avoidance on ‘close company loans’. Where a loan is repaid within the 9 month timeframe, then another loan taken out shortly after, the individual is assessed as if the loan had never been repaid. This concept was known as ‘bed and breakfasting’.

Tax planning

It is worth calculating if it is cheaper for the director to pay tax on the beneficial loan (and the company pay the associated Class 1A NIC), or the director pays interest on the loan at the HMRC official rate. The director’s marginal tax rate will play an important role in determining which is the most preferable scenario all round.

What happens when the loan is repaid?

The company receives back the s.455 tax it originally paid, in full or in part, depending on how much of the loan has been repaid. This tax is repayable 9 months and a day after the end of the accounting period in which the repayment is made.

How we can help you

There are several other factors to consider in order to achieve a tax efficient outcome which also suits the commercial and practical objectives of the loan. We can offer bespoke tax planning advice based on your requirements and for further information, please contact Julia Whelan on 01527 558539 or email [email protected].

Budget 2016 – corporate, business and property taxes

Wednesday, March 16th, 2016

Corporate & Business Taxes

In 2010 the government set out a corporate tax road map which outlined plans to back business through lower corporation tax rates and the modernisation of tax rules and administration, whilst ensuring a crack- down on avoidance and aggressive tax planning.

In this budget we have seen substantial changes announced to reform our corporate tax system.

 

Corporate Tax Rates

Announced previously has been the reduction in corporation rates to 19% for all companies with effect from April 2017. In this budget we saw the Chancellor further extend his policy to have one of the lowest corporation tax rates in the G20 by announcing to decrease further to 17% in 2020.

The Government also previously announced that corporation tax payment dates for businesses with profits in excess of £20m would be brought forward to make payments during the tax period in the third, sixth, ninth and twelfth month. The implementation of this regime has been delayed until April 2019 to allow businesses further time to prepare. Although these business will already be in the payment on account regime this will bring forward the tax payment date by 3 months.

 

Corporate Tax Losses

Currently in the UK we have a very restrictive loss system, trading losses generated are only able to be carried forward and offset against future trading profits arising from the same trade in that company. In addition if during the period the company has had a change in ownership further restrictions on the utilisation of losses can also apply. When a company is part of a group we can only surrender losses for the same period leaving losses stranded in certain companies whilst other group member are profitable unable to offset.

The Chancellor announced from April 2017 a more flexible system where businesses will be able to use carried forward losses against other business streams and not restricted to the same trading profits and group surrender in later periods. This is a welcomed change which is more suited to the current commercial environment as we see increase us of group, specifically given the recent reforms on associated companies and the uniform corporate tax rate.

As is usual in the tax world, where you see a benefit there is always a restriction. Although we see the manner in which we can utilise losses being extended we are also seeing the amount of this being restricted to 50% of the losses for profits in excess of £5 million. For the majority of businesses this should ensure the flexibility remains in place as well as full relief.

Loan to Participators

The rules on loans to participators have seen a large degree of reform over recent budgets to try to stop the abusive of the rules which apply mainly to owner-managed businesses and partnerships who are shareholders. From April 2016 we see the rate increased from 25% to 32.5% for loans, advances and arrangements made on or after 6 April 2016. This aligns the rate with the higher rate tax on dividends to ensure loans are not left outstanding.

Capital Allowances

We have seen the annual investment allowance being moved up and down regularly in budgets as the government tries to boost plant investment. Today it was announced that the £200k which has been in place since January 2016 is to remain permanently. Diverted profit tax to target contrived arrangements so that multinational enterprises pay more tax on their UK profits.

Company cars first year allowance will also be extended for a further three years to April 2021 with new co2 emission levels to be announced.

 

Business Rates

We have seen major reform in business rates in recent budgets and the Chancellor has continued with his theme to help smaller business by further extending the Small Business Rate Relief properties with a rateable value of £12,000 or under receiving 100% relief, a tapered relief will also apply to properties with a rateable value up to £15,000.

Also announced were:

  • Increase the threshold for the standard business rates multiplier to a rateable of £51,000
  • From April 2020 taxes for all businesses paying rates will be cut as they switch from RPI to CPI
  • Increase of business rate revaluations to at least every 3 years.
  • Business rate systems to be linked with HMRC digital tax accounts

 

Business rates cuts – extending the doubling of business rate relief to April 2017, giving 100% relief.

 

Commercial Stamp Duty

Previously we saw the radical reform of the residential stamp duty system to a layered system of rates. In this budget we see the commercial stamp duty rules aligned with the residential stamp duty with a slice system.

  • For properties up £150,000 – 0% rate of tax
  • For properties between £150,001 and £250,000 – 2% rate of tax
  • Above £250,001 – 5% rate of tax

In addition we will also see a new 2% rate of stamp duty for leasehold rent transactions where the net present value is above £5 million.

 

Anti- Avoidance

As we have now come to expect in every budget we have further announcements regarding tax anti-avoidance announced. Today’s budget was no exception with several announcements:

  • Interest relief – a cap is being placed on interest relief to 30% of taxable earnings in the UK or based on the net interest to earnings ratio for the worldwide group. The rule will include a threshold limit of £2 million net UK interest expense.
  • Royalty payments – rules to be changed regarding the withholding tax on the royalty payments to avoid profit shifting by groups.
  • Offshore property developers – new rules will be introduced which will prevent offshore structures being used by property developers who are involved in developing property in the UK. HMRC are also creating a new task force to target offshore structures to ensure tax compliance on profits and rental income from property development in the UK.

 

VAT

No major headlines for VAT in this budget but here are some of the items in the small print;

  • VAT registration threshold to increase to £83,000 and deregistration to £81,000
  • Tackling of overseas traders who trade on-line and avoid UK VAT
  • Further due diligence scheme where traders store their goods in the UK.

Time running out for extra tax breaks on business assets

Tuesday, December 8th, 2015

Many businesses could soon miss out on the opportunity to claim early tax relief as they are not aware of major changes from next year.

The Annual Investment Allowance (AIA) is a form of enhanced tax relief, permitting a 100% write-off on the purchase of qualifying business assets (normally the tax relief against asset purchases is 18% or 8%, depending on the type of expenditure). In a bid to stimulate capital expenditure and boost suppliers’ and manufacturers’ order books, the Chancellor increased the maximum amount of expenditure to £500,000 but as announced in the Summer Budget this year, this will be capped at a permanent level of £200,000 from 1 January 2016.

Warns Julia Whelan, tax partner at Curo Chartered Accountants “Businesses affected by this reduction in relief will be those planning to spend in excess of £200,000 over the next few months on qualifying capital expenditure. I would urge these businesses to consider purchasing assets before 31 December in order to maximise their AIA”.

Qualifying capital expenditure covers most assets bought for use within the business and includes:

  • Computer hardware and qualifying software
  • Office furniture and equipment
  • Van, lorries and associated equipment
  • Machines used in the business, such as printers, tooling machines etc

Items not qualifying for the AIA include existing plant and machinery, land & buildings and cars. These lists are not all exhaustive and it is worth discussing planned expenditure with your accountant, to ensure the business’ entitlement to AIA is optimised.

For qualifying capital expenditure after 31 December 2015, 100% AIA relief is available on the first £200,000 bought in the year, with any excess attracting tax relief at the standard rates of 18% or 8%.

To find out how your business can maximise its entitlement to AIA, please contact [email protected] or call 01527 558539..

Probate – what you need to know

Monday, January 26th, 2015

Probate – what’s changed?

The law has changed in respect of probate. The Lord Chancellor has granted approval for the ICAEW to offer probate services, subject to satisfying various requirements including passing probate exams. Curo Chartered Accountants is one of the first ICAEW – regulated firms in the West Midlands licensed to carry out probate work which we see as a natural extension of our existing services and includes tax planning, estate accounts and business valuation work.

Many people still don’t understand what probate is or how much of the process they can realistically carry out themselves. Worryingly, 60% of the people in the UK don’t have a will and 10% believe that the ‘right’ people will receive their intended bequest under the intestacy rules.

 

Probate explained and how to identify Personal Representatives

The term ‘probate’ refers to the process of dealing with a deceased person’s estate. Those administering the estate are the personal representatives (‘PRs’). The PRs have responsibility for not only administering the estate of the deceased but also distributing it correctly to the beneficiaries and providing information to the relevant advisors. Additionally, they are required to settle any tax liabilities with HMRC. Where there’s a valid will, the PRs are known as the ‘executors’. If there is no will, or individuals are not names/unwilling to act, they are known as administrators.

Firstly, a Grant of Representation ‘GR’ is required, giving the PRs legal authority to administer and distribute the estate of the deceased. The application for the GR depends on whether or not there is a valid will, named individuals and people willing to act. The GR is known as one of the three below:

Grant of Probate – a valid will is in place with willing executors

Grant of letters of administration with will annexed – there is a valid will but certain events have occurred which deny a grant of probate (e.g. no executor named in the will etc)

Grant of Administration – there is not a valid will; administrators are determined according to a hierarchy of entitlement (surviving spouse, children, father/mother etc)

Grants are required for all estates but there are exceptions which include the estate being valued at less than £5k.

Inheritance Tax – What is exempt and what are the HMRC obligations?

The rules have changed slightly removing certain estates from the IHT bracket, such as those valued at less than twice the IHT threshold AND 100% of unused IHT allowance remaining from a late spouse. There are also exemptions concerning domicile status and of course estates valued at less than the IHT threshold (£325,000 until April 2015; £329,000 for the year until April 2016).

HMRC reporting requirements – excepted estates are required to submit shorter, simpler forms including the IHT205.

Non-excepted estates require more forms to be submitted including a return showing the tax liability due, plus any reliefs. The calculation of tax liabilities and reliefs is something we specialise in frequently and we are well placed to support you in this area.

Tax payments – how does it all work and how do I pay?

Inheritance tax is due six months from the date of death with the option to pay in instalments where assets are realised over time, e.g. property.

Personal tax is payable according to normal self assessment rules, together with submission of a self assessment tax return due up to the date of death.

Additionally, any tax arising on income from an estate, such as rental on a property must be reported via a Trust or Estate Tax Return and paid by the due date.

What happens if there isn’t a will?

The intestacy rules cover the scenario where there is no will. If an individual dies intestate, there is an order of hierarchy setting out who will receive the distributed estate.

The rules changed in October 2014 and largely depend on whether or not children are involved.

If there are no children involved, the entire estate passes to the surviving spouse. If you do have children, the surviving spouse receives the first £250,000 and half the assets above £250,000. The other half of the excess is received equally by the children.

What can you do yourself and when should you hire a professional?

Losing a loved one can very an extremely upsetting time and for some, having to deal with the burden of probate alone can be too much to bear.

There are some areas where professional help really should be sought, such as business valuations and tax planning aspects.

As probate-qualified accountants, we can do as much or as little of the process as you like. It is important that all procedures are followed correctly, all relevant forms are submitted and amounts paid as they become due. We welcome your queries and are keen to demonstrate the significant advantages of appointing a probate-qualified accountant to carry out this work.

Please contact Julia Whelan on 01527 558539 or email [email protected] to discuss your probate requirements..

Year end tax planning tips – March 2014

Tuesday, March 18th, 2014

With the end of the tax year almost upon us, here are some tax planning tips to consider:

Tax Rates

Income over £150,000 per annum is taxed at 45% but adding in the loss of the personal allowance can result in a top rate of tax of up to 60% for some. Individuals with income close to the thresholds could reduce their tax liabilities considerably by making gift aid payments or pension payments. Salary sacrifice can also be a useful way of keeping income below important thresholds including those for personal allowances and child benefit.

Tax Free Savings

Individual savings accounts (ISAs) provide an income tax and capital gains tax free investment. To take advantage of the limits available for 2013/14 investment must be made by 5 April 2014. The current limits are £11,520 in 2013/14. This can be made up of up to £5,760 in cash with the balance from stocks and shares.

Junior ISAs enable parents or grandparents to save up to £3,720 a year, tax-free for their children or grandchildren.

Pensions

The annual contribution limit for an individual is currently £50,000 however this will drop to £40,000 from 6 April 2014. Contributions attract tax relief at your marginal rate of tax. There is an option to use unused relief from the previous three tax years.

It’s also possible to make pension contributions of up to £2,880 (effectively, £3,600 gross) each year for members of your family, even for those who do not have any earnings.

Capital Gains

Each individual has a Capital Gains Tax allowance and in 2013-14 this is £10,900. It’s worth considering whether  assets can be sold before 6 April 2014 if you haven’t used up your allowance. If you have used up your allowance, consider deferring selling assets until the new tax year or transferring them to a partner if they pay tax at a lower rate. Assets can be transferred CGT free between spouses.

Principal Private Residence Relief

From 6 April 2014, the final period exemption for private residence relief will be reduced from 36 months to 18 months. If you are in the process of selling a second home, it could be well worth doing before April if you want to take full advantage of this relief.

Business Owners

Business owners can take advantage of having a tax efficient mix of salary, dividends and bonuses. To achieve the maximum tax savings the timing of dividends and bonuses either side of the tax year end can be crucial..

Budget 2014 – What we know already #2

Tuesday, March 18th, 2014

Abolition of Employers NI for Under 21s

Employers’ (Class 1 secondary) National Insurance contributions will be abolished for employees under the age of 21. This will be effective from 6 April 2015 and applies to earnings paid up to the Upper Earning Limit.

Employment Allowance

The Employment Allowance can be claimed from 6 April 2014 in a move which will see employers cut their NI bills by up to £2,000. The claims will be made through payroll software and it is hoped the move will stimulate further employment.

Corporation Tax

Due to fall from 23% to 21% from April 2014 and to align with the small companies rate of 20% from April 2015.

Transfer of Personal Allowance between spouses

In a nod to supporting marriage within the tax system, from April 2015, a spouse not liable to income tax or not liable beyond the basic rate is able to transfer up to £1,000 of personal tax allowance to his/her spouse or civil partner providing the recipient of the transfer is not liable to tax at the higher rate. This means that up to £200 in tax can be saved by effecting the transfer. Business leaders have suggested the maximum transfer be raised in line with the new allowance of £10,000 to have any real impact on a couples’ finances.

Extension of Help to Buy Scheme

The Help to Buy scheme was a surprise announcement at last year’s Budget with the measure designed to encourage first time buyers and those struggling to secure loans  onto and up the housing ladder.  There are two parts to the scheme; the first provides an interest free loan on new build properties and is open to first time buyers as well as existing homeowners. The second part of the scheme has proved to be more controversial, offering a taxpayer-backed loan on mortgages of up to 95% loan to value. It has been difficult to measure the impact of Help to Buy as increased movement in the housing market has coincided with the wider economic recovery. It was announced last weekend that the Help to Buy scheme would be extended by four years to 2020.

Pension relief

From April 2014, tax relief on pension contributions will be capped at £40,000 p.a. and lifetime pension savings capped at £1,250,000 with rumours circulating that lump sum drawdowns will become taxable.

Capital Gains Tax ‘Holiday’ to be halved

From April 2014, gains on the sale of a main residence will be exempt for up to 18 months after the owners have moved out. The current exemption period is 3 years.

Tax free childcare scheme

From September 2015 working parents can receive up to £2,000 per year per child on qualifying childcare costs. The scheme will include children of up to 12 years of age within a year of commencing.

Personal

From 6 April 2014, the personal tax allowance will rise to £10,000. There is speculation that this amount could increase further from April 2015 to £10,500. The higher rate threshold will rise to £41,865, representing a 1% increase. It will be interesting to see how Chancellor Osborne reacts to calls to increase this amount more in line with inflation as it is estimated that an additional 1 million taxpayers will be dragged into the 40% tax net.

Salaried partners will be taxed in line with employees for income and corporation tax, where certain conditions are met. There are also changes surrounding the allocation of profits within partnerships.

From 6 April, tax advantaged share schemes will be subject to self-certification with HMRC and the rules around this have been simplified.

We will be sending out our Budget highlights on the afternoon of the Budget. This will also be on our website.

If you would like to discuss anything surrounding Budget 2014, please contact Curo’s head of tax, Julia Whelan [email protected] or call Julia on 01527 558539..

Budget 2014 – What we know already

Wednesday, March 12th, 2014

Like businesses up and down the country (and beyond), we’re eagerly anticipating Chancellor Osborne’s Budget on 19 March and hoping that it contains measures to support and encourage continued growth throughout the economy. Here’s a reminder of some measures already announced:

Corporate

The main rate of corporation tax will fall to 21% in April 2014 before reducing further to 20% from April 2015 and in line with the small companies’ rate. This will help to simplify the compliance process as the rules identifying associated companies will cease to exist.

The rules governing the use of trading losses where there has been a change of ownership are to change and designed to ease current restrictions.

The Employment Allowance is introduced from 6 April 2014, reducing an employer’s National Insurance Contributions by up to £2,000 per annum.

Personal

From 6 April 2014, the personal tax allowance will rise to £10,000. There is speculation that this amount could increase further from April 2015 to £10,500. The higher rate threshold will rise to £41,865, representing a 1% increase. It will be interesting to see how Chancellor Osborne reacts to calls to increase this amount more in line with inflation as it is estimated that an additional 1 million taxpayers will be dragged into the 40% tax net.

Salaried partners will be taxed in line with employees for income and corporation tax, where certain conditions are met. There are also changes surrounding the allocation of profits within partnerships.

From 6 April, tax advantaged share schemes will be subject to self-certification with HMRC and the rules around this have been simplified.

We will be sending out our Budget highlights on the afternoon of the Budget. This will also be on our website.

If you would like to discuss anything surrounding Budget 2014, please contact Curo’s head of tax, Julia Whelan [email protected] or call Julia on 01527 558539..

New Partnership Tax Rules

Monday, February 24th, 2014

From 6 April 2014, the rules governing the taxation of partnerships will change significantly and could affect a large number of people working under such arrangements.

The two main areas of focus are:

Limited Liability Partnerships

From 6 April 2014, the automatic presumption of self-employment will be removed for partners of LLPs. The salaried member legislation is being amended so that those members who are effectively in the same position as employees will be taxed as employees. Partners will have to satisfy certain criteria to continue to be treated as self-employed partners for tax and national purposes.

All Partnerships

The second strand of the new legislation focuses on partnerships with corporate members and is targeted to prevent tax motivated allocation of partnership profits and losses. Legislation will include provisions to allow excess profits to be reallocated from a non-individual partner to an individual partner and also deny certain income tax loss reliefs and capital gains for a loss allocated to an individual partner.

We are currently reviewing the possible effect of these new rules on all of our partnership clients. If you would like further information, please contact Helen Sewell on 01527 558539 or email [email protected].

Curo featured in Economia magazine

Tuesday, February 11th, 2014

We’re delighted to be featured in this month’s Economia magazine, the official publication of the Institute of Chartered Accountants in England and Wales (ICAEW). The article covers Curo’s early days, issues faced and how the business has expanded over the years. It also explains Curo’s unique approach to accountancy which has led to the firm being recognised as one of Worcestershire’s leading professional practices.

Here is a link to the feature – enjoy!

Curo Chartered Accountants

February 2014

 .