Newsletter October 2017
Tax exemptions, a reminder of forthcoming tax payments and the Our newsletter this month includes: a review of recent tax announcements, a discussion of Inheritance benefits of using the VAT Annual Accounting Scheme.
Readers may be forgiven for finding the recent rash of announcements by HMRC, regarding possible changes to tax legislation, rather confusing.
On 8th September, we were informed that the remaining sections of the March 2017 finance bill, that were deferred due to the May election, were back in circulation and being dealt with by the appropriate committees and debates. Eventually, they will find their way onto the statute books unless amended by the parliamentary processes.
Changes reintroduced include:
- Ability to reimburse employers for certain benefits and avoid a tax charge.
- A reduction in the money purchase pension allowance, once crystallised, from £10,000 to £4,000.
- A reduction in the tax-free dividend allowance, from £5,000 to £2,000; effective from 6 April 2018.
In all there are seventy-two clauses and eighteen schedules.
It was then announced the government will publish its next Budget on Wednesday 22 November 2017. The November Budget will include further legislation to introduce digitisation of business tax.
What are tax-free transfers for Inheritance Tax (IHT) purposes?
There are many reliefs for IHT purposes. They include:
- Business Property Relief - 100% relief for business assets including an interest in a business, a controlling interest comprising unquoted shares including AIM listed shares, and unlisted shares in a private company.
- Agricultural Property Relief - 100% relief (occasionally 50%)
- A controlling interest in a listed company - 50% relief.
- Certain personal assets used in a business - 50% relief.
Additionally, there are other, smaller reliefs that can be claimed:
- An annual exemption of £3,000. An unused allowance can be carried forward for one year.
- Small gifts exemption of £250 per person.
- Gifts on a marriage or civil partnership: £5,000 from a parent, £2,500 from a grandparent, £1,000 others
There is also an exemption for annual gifts made from income. Basically, a gift will not count as a gift for IHT purposes, if you can demonstrate that the donor’s annual income is at a level to make the gifts without affecting their ability to cover their usual monthly costs.
Gifts to an individual within the nil rate band, and with no strings attached, may still be made without any charge to IHT if the donor lives for 7 years after making the gift.
Changes to the taxation of trusts and non-domiciled persons have complicated IHT planning in recent years. If you haven’t considered your options recently we recommend a review. All you need to do is compile a list of your assets, let us have sight of your Will(s) and we can consider changes you might make to reduce your exposure to this tax.
Self-employed tax payments
Self-employed persons and other individuals who submit a self-assessment (SA) tax return should bear in mind that there are only three months until the electronic filing and payment deadline for 2016-17, 31 January 2018.
If you have not filed the 2016-17 SA return yet, or at the very least crunched the numbers to work out if you owe any arrears of tax for 2016-17, you may want to attend to this as soon as possible. Otherwise, you will be shortening the period when you have time to consider gathering funds together to meet any tax payment on 31 January 2018.
On the same date, 31 January 2018, you will also need to make a payment on account for the following tax year, 2017-18. In the first instance, this will be based on fifty percent of your liability for 2016-17 with a similar payment July 2018. And so again, knowing what the earlier year’s liability is will provide the information you need to save for this additional tax payment.
As we have outlined in previous newsletters, if your income is reducing during the current year (2017-18) you can elect for payments on account to be reduced.
This is all part of the basic self-assessment planning we undertake for clients. If you have previously managed your own tax filing, and would like to out-source this annual chore, we would be delighted to help.
Pay your VAT monthly
If you find it difficult to manage quarterly payments to HMRC to settle your VAT, why not consider the VAT Annual Accounting Scheme (AAS).
With the AAS you:
- make nine payments on account towards your annual VAT bill - based on your last returns (or estimated if you’re new to VAT), and
- submit one VAT Return a year.
When you submit your VAT Return you either:
- make a final payment - the difference between your advance payments and actual VAT bill, or
- apply for a refund - if you’ve overpaid your VAT bill.
The scheme wouldn’t suit your business if you regularly reclaim VAT because you’ll only be able to get one refund a year (when you submit the VAT Return). Also, you can only join the scheme if your estimated VAT taxable turnover is £1.35 million or less.
However, smoothing the cash flow impact of VAT payments can be helpful as is submitting one VAT return a year instead of four returns.
The annual return, and any balancing payment, need to be submitted within two months of the annual year end date for VAT purposes.
You can’t use the scheme if:
- you left the scheme in the last 12 months
- your business is part of a VAT registered division or group of companies
- you are not up to date with your VAT Returns or payments
- you are insolvent
You must leave the scheme if:
- you’re no longer eligible to be in it
- your VAT taxable turnover is (or is likely to be) more than £1.6 million at the end of the annual accounting year
Tax Diary October/November 2017
1 October 2017 - Due date for Corporation Tax due for the year ended 31 December 2016.
19 October 2017 - PAYE and NIC deductions due for month ended 5 October 2017. (If you pay your tax electronically the due date is 22 October 2017.)
19 October 2017 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2017.
19 October 2017 - CIS tax deducted for the month ended 5 October 2017 is payable by today.
31 October 2017 - Latest date you can file a paper version of your 2017 self-assessment tax return.
1 November 2017 - Due date for Corporation Tax due for the year ended 31 January 2017.
19 November 2017 - PAYE and NIC deductions due for month ended 5 November 2017. (If you pay your tax electronically the due date is 22 November 2017.)
19 November 2017 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2017.
19 November 2017 - CIS tax deducted for the month ended 5 November 2017 is payable by today.