HMRC was given new powers from 1st September 2013 to request information from UK’s merchant acquirers – the companies that process card payment transactions.
This will enable HMRC to data-mine information on all credit and debit card payments made over the last four years.
It would seem likely that HMRC will use their Connect software to make connections within the data obtained that will forward investigations into taxpayers’ affairs.
The list below sets out the main reasons why your client would need to fill in a tax return:
They were self-employed for any part of the tax year.
Partner in a business partnership
They were a partner in a business partnership for any part of the tax year.
They were a company director (unless this was a non-profit organisation and they didn’t receive payments or benefits).
Savings and investment income
They received £10,000 or more in the tax year.
They received £2,500 or more in the tax year.
Income from Property
They received income from property during the tax year of £10,000 or more (before deducting allowable expenses) or £2,500 or more (after deducting allowable expenses).
Foreign income that is liable to UK tax:
They received any foreign income that’s liable to UK tax.
Employment and wish to claim expenses or professional subscriptions
They were employed or a director. They have expenses or professional subscriptions of £2,500 or more to claim
They received income from all sources in the tax year of £100,000 or more.
Bankruptcy / Sequestration / Individual Voluntary Arrangement
They may need to fill in a tax return for the year in which they were declared bankrupt, sequestrated or entered into a voluntary arrangement.
High Income Child Benefit Charge
If your client’s income is more than £50,000 and your client or their partner received Child Benefit, they may need to fill in a tax return.
HM Revenue and Customs (HMRC) recently introduced a campaign for taxpayers to bring their tax affairs up to date under Self Assessment.
This is aimed at individuals who have been issued with a tax return for any tax years up to 5 April 2012 but who have not yet submitted the return to HMRC.
Individuals who have outstanding tax returns and who do not take advantage of this campaign may face a penalty charge of 100% of the outstanding income tax and National Insurance Contributions (NIC) (200% for overseas matters for the 2012 tax year).
If you would like to join this campaign, you must notify HMRC and submit all outstanding tax returns up to 5 April 2012 by 15 October 2013. In addition, any outstanding income tax and NIC must be paid by 15 October 2013. It may be possible to arrange a payment plan with HMRC’s My Tax Return Catch Up team.
Taxpayers cannot take part in this campaign if HMRC has opened an investigation, enquiry or compliance check into their tax affairs. Also, only taxpayers currently registered for Self Assessment can take advantage of this campaign.
It is common for unmarried couples to jointly own a property. Cohabiting couples with assets in excess of £650,000 may be subject to inheritance tax at 40% in the event of one of them passing away. This is as a result of each individual may have up to £325,000 worth of assets that can be transferred free of inheritance tax on their death to non-spouses - this is called the nil rate band.
The above is not the case for married couples, as assets left to a spouse is exempt from inheritance tax and in addition the unused element of the nil rate band of £325,000 is transferred to the surviving spouse meaning the amount of £650,000 worth of the surviving partner’s death estate may not be liable to inheritance tax.
Capital Gains Tax
A key point is that married couples can transfer assets between each other without being subject to capital gains tax. As a result of this, married couples can transfer assets to each other freely to ensure that the capital gains annual exemption of £10,900 is fully utilised on the subsequent sale, for example on a rental property that is owned by one of the married couple prior to a sale of this property, half of the ownership can be transferred to the their spouse meaning upon sale of the property the married couple can fully utilise the capital gains exemption of £21,800.
Other areas to consider
Married couples allowance applies when one of the married couple was 65 before 6 April 2000 when the universal married couples allowance was withdrawn.
New Childcare Scheme from autumn 2015
A new Childcare Scheme will be introduced to support working families with their childcare costs and will replace the current salary sacrifice scheme. Unlike its predecessor, the new scheme will be available to the self-employed and those on a minimum wage. Also parents will be able to choose their own voucher provider, as the new system will not be administered by employers.
Claimants will fund 80% of their childcare costs up to £6,000 per child. The remaining 20% (up to £1,200) will be subsidised by Government. From the first year of operation all children under 5 will be eligible and the scheme will build over time to include children under 12.
The scheme will provide support for families where:
Support will be provided through a childcare account redeemable at any registered childcare provider. The new scheme will be phased in from autumn 2015 as the current system of Employer Supported Childcare is phased out. The Government will shortly consult on the detail of delivery.
National Insurance £2,000 employment allowance
The Government is to introduce an allowance of £2,000 per year for all businesses and charities to be offset against their employer Class 1 secondary NICs' bill from April 2014. The allowance will be claimed as part of the normal payroll process. The Government will engage with stakeholders on the implementation of the measure after Budget 2013 and is seeking to introduce legislation later in the year.
Although this change is a year from now, the allowance should be factored into your payroll budgeting for next year. It is likely that payroll software will be updated to allow for the £2,000 reduction in employers' Class 1 secondary NICs. For smaller businesses contemplating their first or further appointments into the employment arena this will be a welcome support.
Employers' Class 1 secondary contributions are 13.8% of any wage or salary that exceeds the secondary threshold, currently £148 per week (£641 a month, £7,696 per annum). New employers could pay a salary or wage of up to £22,189 per annum to one employee and be liable for no employer's National Insurance ? ordinarily, employer's NIC on this level of salary would amount to £2,000.
This scheme is not intended to replace salary sacrifice arrangements that will continue to offer employees and employers NIC savings. Whether it will help to stimulate new job creation or reduce unemployment is an open question.
Mortgage support - Help to buy
In the distant past Government supported home buying by offering tax incentives. It has been some years now since UK taxpayers could obtain tax relief for mortgage interest payments. The MIRAS arrangement, where tax relief at the basic rate was deducted from mortgage interest payments by the lender, was the last and fading effort at stimulating home buying in this way.
Instead George Osborne and his team have elected to try out two alternative systems: an equity loan scheme and a mortgage guarantee.
Help to buy: equity loan
This scheme will run for three years from 1 April 2013 and is proposed to provide £3.5bn of additional investment.
Help to buy: mortgage guarantee
This scheme will run for three years from 1 January 2014. Buyers will need to secure a mortgage from a lender who should be encouraged to offer better access to low deposit mortgages by the Government guarantee.
Real Time Information (RTI) slow down
The following quote is from information recently published to HMRC's website:
'HM Revenue & Customs (HMRC) recognise that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC have therefore agreed a relaxation of reporting arrangements for small businesses.
Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month (5th).
This is a temporary relaxation to give some extra time to small businesses that pay weekly (or more frequently) but who only run their payroll (or use an agent to run their payroll) at the end of the month. This extra time will enable these businesses to adapt their processes or change their arrangements with their payroll service supplier so that they can comply with the new legislation.
From April 2013, employers who choose to take advantage of this relaxation will still need to report their PAYE in real time by the last payday in the month or the end of the tax month (5th) at the latest.
This is not a withdrawal of the requirement to report PAYE in real time. All employers are still required to operate PAYE in real time and we expect most employers to be reporting PAYE in real time from their first payday on or after 6th April.
From 6th October all employers will be required to report PAYE in real time each time they pay their employees. However HMRC will continue to work with employer representatives during the summer to assess and understand the impact of RTI on the smallest businesses and consider whether they can make improvements to real time reporting which will address their concerns without compromising the benefits of RTI or the success of the Department for Work & Pension's Universal Credit.
HMRC recommends that employers and agents move to real time reporting as soon as possible in order to give them time to refine business processes before automated penalties are implemented. Employers using commercial payroll software will find that their payroll software is designed to submit their PAYE information as part of their integrated payroll processes. So these employers should continue to or start to report "on or before" each payment is made to employees as this will be the easiest and quickest way of operating their payroll.
Software developers have been informed that they do not need to change their products to accommodate this relaxation.'
Business owners who are still unsure how these changes affect their business should contact us ASAP.
HMRC has issued around 850,000 late filing penalties for the tax year ended 5th april 2012 which was due by the 31st January 2013. Remember the penalties apply regardless of whether there is a tax liability or not, the cap of earlier years has been scrapped.
A record 9.61 million people filed and sent their self-assessment tax returns on time this year, with 7.93 million sent online, HMRC has revealed.
Tax return deadlines are 31 October for paper returns and 31 January for electronic returns following the end of the tax year to 5th April.
At first sight the Chancellor’s Autumn Statement did not contain much cheer, but things are not as bad as you might think. The restriction in pension tax relief caught the headlines, but has not yet been implemented. Although the pension annual allowance will fall to £40,000 as of 6th April 2014, there is still scope to use unused relief from previous years. Other non-contentious tax breaks are also still available for those who want to look for them.
With just over three months to go to the end of the tax year, it’s time for people with income of more than £100,000, especially those paying the top tax rate of 50%, to consider how to reduce their tax liabilities.
Accountants, Brighton, Hove, accountant
HMRC ’s ‘affluent compliance team’ is to recruit an extra 100 tax inspectors in its bid to clamp down on wealthy tax avoiders. The unit will target taxpayers earning over £150,000 and with wealth of between £2.5m and £20m, as well as those with wealth in the range £1m to £2.5m.
Licenced Accountant in Brighton