‘Uncategorized’

Claiming tax relief when working from home

Wednesday, May 13th, 2020

Claiming tax relief on working from home expenses

With millions of employees expected to work from home due to Covid-19, HMRC reports it has been inundated with tax relief claims.

If your employer requires you to work from home, as a taxpayer, you may be able to claim £6 per week against your taxable income.

No proof is required when claiming the flat rate of £6 per week, so there’s no need to keep receipts or similar records to justify the claim. If you are claiming more than this amount, you will need to retain proof.

The fixed rate claim can be made on the self-assessment tax return and is worth £1.20 for basic rate taxpayers (£6 @20%) and £2.40 for higher rate taxpayers (£6 @40%). Of course, the claim can only be made for weeks worked at home, not when back in the office. If you don’t complete a Tax Return the claim can be made online or by post.

Alternatively, employees can ask their employers to pay the £6 per week to them but given the current financial circumstances of many businesses, it’s not likely that many businesses will have the money to do this.

If you’d like to understand how to optimise your tax position and use the tax reliefs available to you, please get in touch and we can talk you through your options.

Please email Julia Gallagher or Helen Sewell or call 01527 558539 to find out how we can help you.

working from home

Preparing to move out of lockdown – measures for businesses & individuals

Wednesday, April 29th, 2020

With more than 70% of UK private businesses having furloughed their staff and other financial help sought in the forms of loans and rate holidays, businesses should now plan for their post-lockdown futures. Many office-based roles will be done more remotely, prompting the need for a serious rethink about location and IT. Amongst all the uncertainty, here are some steps to consider as we transition out of lockdown:

Prepare to welcome back furloughed/part-time staff

With the Chancellor’s announcement on 12th May that the furlough scheme is extended until the end of October, businesses can start welcoming back furloughed staff on a part time basis from August. Of course, this is dependent on suitable protective measures in place. Has a COVID-19 risk assessment been carried out? Ensure you communicate this to all staff, including specific information such as who is allowed into the office on which days, where employees will sit to observe social distancing rules and hygiene procedures such as how frequently & when to use hand sanitiser and more frequent emptying of bins. Until the end of July the government is covering 80% of wages (capped) but from Auguust employers are expected to share more of this cost and pay a percentage towards the ‘furloughed’ salary. More details to come at the end of May.

 Adjust the business plan

Many businesses have already adapted to survive and continue trading, with management addressing the issue of what happens when we’re out of this crisis. Those without robust and reliable online platforms have suffered and customers have gone elsewhere, possibly forever. Teams are addressing practical issues such as how to continue manufacturing using technology but adhering to social distancing. Identify different markets and where possible, expand your model to sell beyond your usual customers. Rework the figures to calculate the new profit margins of selling via various platforms. Business plans aren’t set in stone and should be changed when the facts change, which they most certainly have in recent weeks.

Update your IT

Organisations quick to adapt online include those as diverse as interior design services, schools, DIY stores and professional service firms. With millions having switched to working remotely, for large swathes of the economy this will become the new normal post lockdown. Remote meetings of all magnitudes are conducted via apps such as Microsoft Teams, Zoom & Webex, saving hours spent commuting to meetings which can instead be accessed in seconds (much better for the environment too…). Now is the time to invest in more robust IT systems and cloud sharing/storage such as One Drive and Dropbox. Not only will this allow business to continue as smoothly as possible, it provides far more flexibility in the future for both customers and employees. Firms offering flexibility around working hours and locations are perceived as far more attractive propositions and will attract the best candidates. Trekking into the office 5 days a week will soon be consigned to the past.

Reconsider your office space

Will headcount be the same post lockdown? If not, consider moving to a smaller premises providing options for hot desking and remote working. Consider switching to online/cloud storage rather than hard copies. This results in either saved storage costs or extra office space – does this business need that extra space for new staff/ventures or could it downsize? Also consider relocating if being in the centre of town is no longer a priority.

Rotate your furloughed staff

It is possible to rotate staff on furlough, to avoid the same people doing all the work on only marginally more pay with the rest not required to work at all. This ensures staff retain their skills and avoids resentment within the team. Bear in mind there is a minimum claim period of 3 weeks per furloughed employee.

Stay close to your clients & customers

Build customer loyalty by helping them as much as possible and keeping in touch with their situations. This is an incredibly challenging time requiring communication between both parties to help each other out. How businesses treat their customers now will be remembered for a long time to come.

Furloughed staff can take on other jobs

With a shortage of fruit pickers in the UK and the busy harvest upon us, furloughed workers are being urged to take second jobs picking fruit. The peak demand for pickers will be June and you’ll need to get permission from your current employer before taking on a second temporary job.

Get the accounts & tax compliance done early

We’re urging businesses with a March ’20 year end to consider getting all possible compliance done now, freeing up time post-lockdown to grow the business. The same goes for individuals who are now able to submit their 2019/20 self-assessment tax returns. Of course, the sooner HMRC receives your return, the sooner you receive any tax refund due.

Reopen the business using appropriate social distancing measures

Not all work can be done from home. What measures can your business reasonably adopt to reopen the business and get it moving again once restrictions are eased?

Stock volumes

Get an accurate picture of stock levels and reassess how much really needs to be held. Could you renegotiate storage facilities?

Contact Julia Gallagher or Anna Madden if you’d like help with any of the above issues or call 01527 558539.

lockdown

Coronavirus Job Retention Scheme and how to furlough employees & sole directors

Thursday, March 26th, 2020

Under the Coronavirus Job Retention Scheme (CJRS), government is to step in and cover staff wages (capped) for employees who were on the payroll at 19th March 2020 and otherwise at risk of redundancy due to the coronavirus pandemic. This will be in the form of an initial grant (CJRS V1) payable from 20th April 2020 and cover up to 80% of an employee’s wages up to £2,500. A second grant will be available (CJRS V2) for the 3 months to the end of October with the employer expected to contribute more. The affected employees are ‘furlouged’ (given a leave of absence) and retained for when the business needs them again. This is an online service (do NOT try to claim via phone). Click here to claim your grant.

Key points:

  1. Furloughed members of staff must not work for the employer during the period of furlough. This agreement should be in writing and confirmation provided by both the employer and furloughed employee.
  2. Furlough is from 1 March 2020, so is to be backdated. It will last until the end of October with employers expected to share the costs from 1 August as part-time employees are phased back into the workplace. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
  3. It is available to employees on the payroll at 19 March 2020 and included on the employer’s Full Payment Submission (FPS) before this date. You can claim for full-time and part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. The scheme also covers employees who were made redundant recently if they are rehired by their employer. Our understanding is that currently, no claims can be made for annual payrolls.
  4. The employer will need to be registered for PAYE online in order to make the claim. You can register here.
  5. All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words. This includes recruitment agencies (agency workers paid through PAYE) and public authorities.
  6. The scheme pays a grant (not a loan) to the employer.
  7. The grant will be paid to the employer through a new online system from 20 April 2020.
  8. The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
  9. Scheme will be administered by HMRC:
    • Relevant employees must be designated as furloughed employees.
    • Employers will submit information to HMRC through a new online portal.
    • As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
  10. The maximum grant to the end of July will be calculated per employee and is the lower of:
    • 80% of ‘an employee’s regular wage’ and.
    • £2,500 per month.
    Plus the associated Employers’ national insurance contributions (ER NICs) on this amount and the minimum automatic enrolment employer pension contributions on that wage.
    Fees, commission and bonuses should not be included.
    This gives a maximum cap of £2,500 +£245 (ER NICs) + £59 (auto- enrolled pension contribution) = £2,804 of total possible grant that can be applied for per employee per month.
  11. August: Government will pay 80% of wages up to a cap of £2,500 with employers paying ER NICs and pension contributions
  12. September: Government pays 70% of wages up to a cap of £2,187.50 with employers paying 10% of wages, ER NICs and pension contributions, making up 80% total up to a cap of £2,500
  13. October: Government pays 60% of wages up to a cap of £1,875, with employers paying 20% of wages, ER NICs and pension contributions to make up 80% total up to a cap of £2,500
  14. Furloughed employees can not undertake work for or on behalf of the organisation, including providing services or generating revenue.
  15. To claim, you will need your ePAYE reference number, the number of employees being furloughed, the claim period, (start & end date), amount claimed, your bank account number and sort code, your contact name and phone number. You will also need to provide the following details for the employee/s being furloughed: NI number, salary, National Insurance & pension contribution info used to calculate the claim amount.
  16. Employers must pay at least the minimum Auto Enrolment employer pension contributions on behalf of their furloughed employees. But they can only claim back the minimum AE employer pension contributions on the earnings paid.
  17. From 1 July 2020 businesses have the option of bringing back furloughed employees into the workplace on a part time basis and will be responsible for paying their wages while in work.
  18. The scheme closes to new entrants after 30th June 2020, so employees must have been furloughed for a minimum of 3 weeks by 30 June to qualify for CJRS V2 later payments.

How to furlough Sole Directors

Sole directors can take advantage of the Job Retention Scheme but only to the extent of their PAYE salary.

The scheme applies to sole directors as follows:

  • Dividends are NOT included as part of the amount which can be claimed
  • Sole directors mush have been created by 28 Feb 2020
  • A 2019/20 RTI report must have been filed by 19 March 2020
  • The director must stop working in the business on services or revenue-generating activities; only statutory duties can be carried out
  • The employers’ PAYE scheme must have been created and started by 28 February 2020 and you must also have a bank account in the UK. You must be on the payroll as at this date
  • Full time and part time directors on the payroll can claim the wage
  • A salary paid annually should be acceptable
  • The director can claim a grant of up to 80% of the ‘regular wage’ or £2,500 (whichever is lower). This claim can be backdated to 1 March 2020
  • The ‘regular wage’ is taken as the higher of the same month’s earnings from the previous year or the average monthly earnings from the 2019-20 tax year

There are a number of other factors which should be considered and further information can be found on the GOV website – is your employer eligible for the furlough scheme? How to claim for employees’ wages under the furlough scheme. We are here to advise you specifically and help you get the help you need.

We appreciate there are various scenarios specific to your business and we can advise accordingly. Please email Julia Gallagher or call Julia on 01527 558539.

Job Retention Scheme

Job Retention Scheme

 

 

Help for businesses affected by the coronavirus

Wednesday, March 18th, 2020

Following last week’s unprecedented Budget, Chancellor Rishi Sunak has announced further measures to help businesses cope with the financial fallout of the coronavirus pandemic.

At a glance:

HMRC Coronavirus Helpline 0800 0159 559 / 0800 024 1222

The Business Support helpline 0300 456 3565

Applying for a Coronavirus Business Interruption Loan (‘CBILS’)

Job Retention Scheme – how it will operate

Job retention scheme for employers affected by coronavirus – HMRC guidance

Statutory Sick Pay – an employer’s guide

HMRC Summary of measures for businesses affected by Coronavirus

Details:

  • The Job Retention Scheme was announced for employers, encouraging them to avoid making redundancies in the light of coronavirus. HMRC covers 80% of salaries via a grant, effective from 1 March 2020 and is capped at individual salaries of £2,500. Employers should identify affected workers as ‘furloughed’ (granted a leave of absence), notify them of this change and notify HMRC of the staff member and their salary details when applying for the grant. Important to note that workers are not ‘laid off’ as part of being furloughed. We will provide details of this once the scheme is up and running. There is no limit on the funding for this scheme. HMRC is currently setting up a new online portal to make the claim and we expect details shortly to come through. Details of how the scheme will operate here.
  • Companies can apply for a 3 month filing extension for their accounts if impacted by coronavirus. This must be done before the original filing deadline and an automatic 3 month extension will be granted.
  • VAT payments are postponed for the next three months until 30 June 2020. The VAT will then be due at the end of the 2020/21 financial year i.e. 31 March 2021 for monthly payers or quarterly payers 31 March 2021, 30 April 2021 or 31 May 2021. There has been no mention of interest charges on any deferred VAT. Businesses should apply to suspend their direct debits via their VAT online account, then reinstate the DD in due course. All returns must still be filed on time and this postponement only applies to UK businesses and not foreign businesses with a UK VAT registration. More info on this here.
  • £330bn of low interest government-backed loans has been made available to all businesses to ease cash flow pressures when covering rent, suppliers, payroll expenses and stock.
  • SMEs can now borrow up to £5m under the ‘Coronavirus Business Interruption Loan Scheme’ (‘CBILS’), up from the £1.2m limit announced in last week’s Budget. These are delivered by the British Business Bank with the government paying the first 12 months of interest. Loans can be applied for from 23rd March 2020 and the BBB advises approaching one of the 40+ accredited lenders with their proposal. See our separate page on CBILS for what info you’ll need and other useful advice.
  • All retail, hospitality, leisure and nursery businesses in England are exempt from paying Business Rates for a whole year and enquiries should go through the local authority.
  • The 700,000 small businesses already eligible for 100% business rate relief and Rural Rate Relief will receive a grant of £10,000 to help with business costs. This was previously capped at £3,000 in last week’s Budget.
  • Businesses in the retail, hospitality and leisure sectors with a rateable value of between £15,000 but less than £51,000 will receive a cash grant of up to £25,000.
  • Banks have agreed a 3-month mortgage holiday for individuals hit by the coronavirus.

We are expecting and hoping for further support to businesses and individuals which gets cash to the front line quickly and will update you on these as and when we hear about them. These could include changes to employer NIC and further help for individuals who lose their jobs as a result of the coronavirus.

We’d also urge you to check your insurance wording as pandemics are often excluded from cover.

Help for businesses announced in the Budget 2020

SME employers with fewer than 250 staff will be refunded up to 14 days of Statutory Sick Pay (SSP) per employee providing certain conditions are met. These include adequate record keeping and that the sickness is coronavirus related.

Some small businesses affected by coronavirus will receive a 100% Business Rates discount for 2020/21. Relief has also been extended to the hospitality and leisure sectors. Pubs can claim a Business Rates discount up to £5,000, providing the pub has a rateable value below £100,000.

Time to Pay – The HMRC has a dedicated help line (0800 0159 559) with 2,000 experienced call handlers for those affected by the virus. Businesses and the self-employed will get extra time to pay their tax liabilities, with late payment penalties and interest waived during the affected period.

Business Interruption Loan Scheme – businesses will be able to access funding and overdrafts via this government backed initiative with the scheme supporting loans of up to £1.2m in value.

Help for individuals    

SSP will be available from day 1 of corona-related sickness absence or for those self-isolating.

Employers will relax the requirements around sick notes.

For those ineligible for SSP, it will be easier to access Employment & Support Allowance and the Universal Credit and this is claimable by those self-isolating or directly affected by the coronavirus.

Help for public services

The National Institute for Health Research will receive funding of £30m to carry out research into the virus and its effects. An additional £10m is available for diagnostic testing.

If your finances have suffered as a result of the coronavirus, we can help you understand what help you are entitled to. Please get in touch to discuss your options. [email protected]  or call 01527 558539.

businesses affected by coronavirus

Budget 2020 – Property taxes

Wednesday, March 11th, 2020

Property Taxes

Non-UK resident Stamp Duty Land Tax (SDLT) surcharge– From 1 April 2021 a new 2% SDLT charge will apply on non-UK residents purchasing residential property in England and Northern Ireland. In recent years we have seen various measures to discourage non-UK residents from investing in the UK property market to free up the housing market.

Business Rates – In recent Budgets we have seen a lot of announcements in respect of business rates which is seen as a major cost for those businesses on high streets being able to survive. Previously announced for a period of one year starting in April 2020 was the retail discount for properties with a rateable value below £51,000. Additional support was announced today that this discount would be extended to include cinemas, music venues but also for 2021 hospitality and leisure business with an increase in the relief to 100%.

The government is also launching a full review of business rates as it is heavily criticised in its current format.

To discuss how the announcements in today’s Budget affect your property business or portfolio or to understand how to optimise your tax position, contact [email protected] or call 01527 55839.

Further information about our business tax servies can be found here.

Property taxes

Property taxes

Budget 2020 – Business taxes

Wednesday, March 11th, 2020

Fewer Business taxes were announced in the Budget than we were expecting.

Corporation Tax – As expected from the election manifesto the legislated reduction in corporation tax rates from 19% to 17% due to be effective from the 1 April 2020 is removed. Corporation tax rates will remain at the current level of 19% which is still a low rate for a G20 country, with only Switzerland at 18% and Singapore at 17% lower than the UK.

Business will see changes reflected in accounts as the deferred tax provisions reflect the 2% increase.

Additional funds received by the Treasury by keeping the level at 2% have been used to promote further tax relief on structures and buildings allowance, research and development and the employers’ allowance.

Capital Allowances – As anticipated the new relief for structures and buildings allowance (SBA) has been increased from 2% to 3% from 1 April 2020 for corporation tax and 6 April 2020 for income tax. It was also widely predicted that the annual investment allowance which is due to reduce from £1,000,000 to £200,000 on the 1 January 2021 would remain at the £1,000,000 but sadly this has not materialised.

Research and Development Relief (R&D) – A welcomed increase in the tax credit for R&D from 12% to 13% was announced today. However, in the detail we also see a consultation on whether qualifying R&D should include investments in data and cloud computing and further work to ensure the claim is not being abused are proposed.

Employers Allowance (EA) – The employers’ allowance will increase from £3,000 to £4,000 for businesses with under £100,000 charge per annum for employer’s national insurance contributions.

Enterprise Management Incentives Scheme (EMI) – The government is to launch a review into the scheme to ensure it provides support for high growth companies to recruit and retain talent by allowing them to have a stake in the business. Although a popular approved HMRC scheme, it is not always taken up due to employees having to fund the exercise of the options or the income tax charge without sometimes the proceeds from the sale of shares.

Entrepreneurs Relief (ER) – During recent weeks there has been a lot of speculation as to what will happen with entrepreneur’s relief, from scrapping completely to lowering the lifetime limit and increasing the rate of tax. The only change announced today has been to lower the lifetime limit for the 10% rate of tax from £10 million to £1 million. Although for those retiring this will not be welcomed news, the fact that is was not scrapped altogether is seen as a bonus and would save £100,000 in tax for the individual.

Digital Services Tax (DST) – Previously announced has been a 2% rate of tax on revenues on certain digital businesses from 1 April 2020.

Tax Avoidance – It seems now that measures to tackle tax avoidance are a guarantee component of any budget and todays Budget was no exception. With an estimated £200 billion of tax collected since the introductory measures began in 2010 it is easy to see why is it a high priority on all Chancellors agendas.  More measures have been announced to tackle tax abuse in construction, illicit tobacco, big business and promoters of tax avoidance schemes.

For the construction industry, the new legislation will see non- compliant businesses being unable to claim CIS refunds, as well as the introduction of the reverse charge which will now be introduced from 1 October 2020 after being delay 12 months.

HMRC is also recruiting additional compliance officers and bringing in new technology is to bring in an additional £4.4 billion in tax by 2024/25.

The main focus of HMRC is seen to be directed at the promoters of tax avoidance schemes to enable HMRC to shut down the promoters in the first place.

Contact [email protected] or call 01527 558539 to discuss how Curo can help your business.

Changes to the National Minimum Wage from April 2020

Wednesday, March 11th, 2020

The National Minimum Wage rates are set to increase from April 2020 and we’re urging employers to take note of the changes:

 

Year                                       25 & over            21 to 24                18 to 20                Under 18              Apprentice

April 2019 (current)        £8.21                     £7.70                     £6.15                     £4.35                     £3.90

April 2020                           £8.72                     £8.20                     £6.45                     £4.55                     £4.15

 

A word of warning: if you’re employing an apprentice, check to make sure they meet the apprentice criteria. Apprentices are entitled to an apprentice rate if they’re either aged 19 or under, or over 19 and in their first year of an apprenticeship.

An apprentice is entitled to the minimum wage for their age if they are both aged 19 or over and have completed the first year of their apprenticeship.

We’re urging all employers to ensure they hold correct date of birth information for their employees to ensure the correct rates are applied.

Company car BIKS

From April 2020, electric company cars with zero emissions will not attract a Benefit in Kind charge during the 2020/21 tax year.

Employment Allowance

From April 2020, employers can claim the Employment Allowance if their annual Class 1 National Insurance bill was less than £100,000 in the previous tax year. The EA relief is currently £3,000 but likely to change in the Budget.

If you would like help understanding your employer tax obligations, our team is here to advise. The rates, rules and opportunities change frequently and we can help you get it right and stay off HMRC’s radar.

Please contact [email protected] or [email protected] or call 01527 558539 to find out how we can help your business. We offer advice and solutions on all areas of employer taxation including employee incentivisation, EIS and EMI, company share option schemes and bespoke payroll solutions.

National Minimum Wage

National Minimum Wage

Chancellor to go easy in IR35 shake up

Monday, March 9th, 2020

Chancellor to go easy on businesses and freelancers in IR35 shakeup

From 6th April 2020, responsibility for determining the tax status of freelancers will fall on the paying company, not the freelancer, in a huge shake up of the rules around tax status. The new rules apply to all fee-paying medium and large companies in the private sector and as a guide, a private company requiring an audit is large/medium, so affected by the new rules.

Chancellor Rishi Sunak announced recently that businesses and freelancers would not be punished with penalties for any errors unless they were deliberate mistakes. These changes are expected to have a significant impact on the contractor industry, with 70% of 350 organisations in a recent poll saying they would no longer be willing to use contractors.

The area is covered by the IR35 rules and is aimed at ensuring an individual who operates like an employee is taxed as an employee, not as self-employed. The fee-paying company will be responsible for declaring the individual’s tax status and deducting the correct amount of tax & NI, where applicable. It will also need to send information about the payments to HMRC under Real Time Information.

VAT

Where VAT has already been charged on an invoice, this needs to be adjusted for so that it is not charged or accounted for incorrectly.

Action to take now

The impact of these changes is likely to be significant and wide-reaching, affecting many businesses and companies who currently pay individuals in this way.

We are urging fee-paying companies to review the arrangements they have in place with workers and ensure they are prepared for the changes in April. Issues such as adequate software, an understanding of PAYE and NIC calculations and VAT should be considered. This will be high on HMRC‘s radar and getting it right from the start is essential.

We can advise on this area and all related employer & employee tax issues. Please contact [email protected] or [email protected] or call 01527 558539 to discuss your requirements and queries.

IR35

IR35

Tax planning considerations before 5 April 2020

Monday, February 10th, 2020

Tax planning considerations before 5 April 2020

PPR and Lettings relief

From April 2020, the availability of Principle Private Residence Relief (PPR) and Lettings relief will be reduced, with more taxpayers potentially subject to Capital Gains Tax (CGT) on disposal of their properties.

PPR relief exempt period

PPR relief shelters taxpayers from paying CGT on disposal of their main homes and covers not only the period of occupation, but an additional period before disposal. Currently, the final 18 months of ownership (‘exempt period’) is covered by PPR relief, regardless of occupation of the property. This changes for disposals after 5th April 2020 when the exempt period is halved to 9 months.

Changes to Lettings Relief

Lettings relief is available to taxpayers qualifying for PPR relief and can be claimed in addition to PPR relief when the property has been let to a third party.

Lettings relief can be used to reduce any chargeable gain resulting during the let period and is currently worth up to a maximum claim of £40,000 per person, which is doubled to £80,000 in the case of a married couple disposing of a joint property.

From April 2020, Lettings relief will only be available to owner-occupiers. Those who rent out their properties but no longer live there at the same time as their tenants will not be eligible for the relief and are likely to suffer a charge to CGT when the property is sold.

Pension contributions

We’re urging those of you with a company or personal pension to review your position and, if relevant, consider making extra contributions to optimise the tax position. Currently, the annual allowance for individuals making pension contributions is £40,000. This amount is reduced for with adjusted income over £150,000 and settles at a minimum allowance of £10,000. It’s also worth considering the ‘Lifetime Allowance’ which permits up to £1,055,000 in total qualifying pension contributions without incurring a tax charge.

IHT Annual Exemptions

Individuals can gift up to £3,000 each tax year without any IHT implications. The unused balance from the prior year can be carried forward for one year, so up to £6,000 could be gifted IHT-free in the current tax year.

Transfers of assets to spouses and civil partners

Within a marriage or civil partnership, it may be worth considering transferring assets to maximise any unused tax-free allowances and the lower/higher rate tax bands. This could be in the form of income-generating assets or assets which could be sold resulting in a capital gain tax charge. Some tax reliefs are ‘use it or lose it’ so cannot be rolled forward into the next tax year but as ever, practical considerations should be made along with the tax angles. Be cautious if one party is non-UK resident for tax purposes.

How we can help

Please contact [email protected] or [email protected] to find out what the changes could mean for you and how you can optimise your tax position. 01527 558539.

More info on our services. More info on PPR relief from HMRC.

Tax planning considerations

Tax planning considerations

Changes to the taxation of termination payments

Monday, November 4th, 2019

termination payments

Changes to the taxation of termination payments

From 1 April 2020, termination payments made by employers will be taxed differently, reducing the scope for payments to fall under the £30,000 tax exempt threshold.

The changes

Currently, most ‘termination payments’ made up to £30,000 are covered by the £30k threshold and are paid tax and national insurance free but from next year, the new measures require payments to be split and treated as follows:

  • Amounts identified as earnings such as Payments in Lieu of Notice (PILONS) will not be covered by the £30k threshold and are subject to tax and NI
  • Genuine termination payments will be covered by the £30k exemption

The objective is to level the playing field and apply income tax & Class 1 employers NI to earnings received under the guise of PILONS in the same way as if they had been earned in the course of employment. The current guidelines allow for a degree of interpretation of termination payments but the new rules aim to remove any ambiguity.

Employers will also be liable to employer’s NI on any part of the termination payment which exceeds £30,000. There is no upper limit for employers under current proposals. Statutory redundancy payments will continue to form part of the £30k exemption limit.

What now?

If you are considering making redundancies, we can advise on the tax effects of your proposed redundancy packages and how the rules will affect both the company and individual employee. Please contact [email protected] or call 01527 558539 to discuss your requirements.

For further information about how we can help your business in terms of employer tax compliance, audit and accounts regulations and optimal tax planning, please visit our website. The rules around compliance change frequently and ensuring your business is up to date with all filing and regulatory requirements is paramount.