Monthly Archives: December 2018

smaller-estates-should

Smaller estates should not have to file Inheritance Tax paperwork, says Office for Tax Simplification

The Office for Tax Simplification (OTS) has said that smaller and less complex estates should not be subject to the requirement to file Inheritance Tax (IHT) paperwork.

The call was part of a review into IHT, which Chancellor Philip Hammond ordered earlier this year.

While just five per cent of estates are subject to IHT, HM Revenue & Customs (HMRC) requires the estates of half of the 570,000 UK residents who die each year to file IHT paperwork.

Angela Knight, Chairman of the OTS, said: “Inheritance Tax is both unpopular and complicated. The basic design of the tax itself is for Government, but at the OTS we can address that most frequent of all comments and at least make it easier for families to fill in the forms.

“The OTS has worked on ways to address these practical complexities, which have come through loud and clear.”

She added: “The recommendations will make it easier for the majority, and would mean that in future, many may not have to do the forms at all. Improving the administration of this tax in these ways is important, as having to deal with the current process can seem overwhelming to people at a time when they are both preoccupied and distressed.”

The findings were the first part of the review published by the OTS, with further findings scheduled for publication in spring 2019.

Link: Hundreds of thousands of families needlessly filling in inheritance tax paperwork

big-increase-in-p2p

Big increase in P2P lending

The fifth annual UK Alternative Finance Industry Report has revealed a 65 per cent year-on-year increase in peer-to-peer (P2P) lending.

The P2P lending market is now worth £2 billion and small and medium-sized enterprises (SMEs) appear to be the dominant force behind it.

To put the rise of P2P lending into context, its value is equal to nearly a third (29.2 per cent) of all new bank loans to small businesses last year, nearly doubling the 2016 figure of 15.3 per cent.

Peer-to-consumer (P2C), valued at £1.4 billion was the next largest element of the alternative finance market. P2P property lending followed, valued at £1.2 billion, while invoice trading was valued at £787 million.

Bryan Zhang, the Executive Director of the Cambridge Centre for Alternative Finance, which published the report, said: “This report reflects an industry that is playing an increasingly important role in helping consumers and businesses access finance, whilst growing to become more diversified, sophisticated and institutionalised.”

Link: 5th UK Alternative Finance Report

180-500-first-time-buyers

180,500 first-time buyers benefit from relief on Stamp Duty Land Tax (SDLT)

Figures released by HM Revenue & Customs (HMRC) have revealed that 180,500 first-time buyers have benefited from the Government’s changes to Stamp Duty Land Tax (SDLT).

HMRC estimates that first-time buyers have saved a total of more than £426 million since Chancellor Philip Hammond announced the First-Time Buyers’ Relief (FTBR) in November 2017.

At Budget 2018, the Chancellor announced an extension of the scheme to first-time buyers purchasing through approved shared ownership schemes that choose to pay SDLT in stages, rather than on the market value of the property. This relief is available retrospectively to eligible property transactions since November 2017.

Mel Stride MP, Financial Secretary to the Treasury, said: “These statistics show that the Government was right to offer a helping hand to first-time buyers. Without this investment, more than 180,500 new homeowners may have struggled in getting onto the property ladder. Maintaining the status quo was not an option.”

FTBR is becoming increasingly popular, with the relief claimed in 58,800 transactions between July and September 2018, representing a 12 per cent increase on the previous quarter.

Link: 180,500 new homeowners benefit from stamp duty tax relief

italian-e-invoicing-requirements

Italian e-invoicing requirements make Making Tax Digital look like a walk in the park

While a series of false starts and changes of direction have made Making Tax Digital (MTD) seem more complicated than it might need to be, new e-invoicing requirements that come into effect in Italy from 1 January 2019 make it look like a walk in the park.

The Italian tax authorities will require VAT-registered businesses to issue electronic invoices converted into .XML format to other VAT-registered businesses. They will then need to sign the invoices digitally, before sending them through the Italian tax authority, Sistema di Interscambio’s ‘SdI’ interchange system.

Businesses will need to archive each invoice for 10 years.

The aim of the scheme is to promote the use of digital technologies amongst businesses and to tackle tax evasion and VAT fraud.

house-of-lords-calls

House of Lords calls for a delay to Making Tax Digital

The House of Lords Economic Affairs Committee has criticised HM Revenue & Customs (HMRC) for its handling of Making Tax Digital (MTD) and called for a delay to some of the regime’s mandatory requirements.

The majority of VAT-registered businesses with taxable turnover above the VAT registration threshold of £85,000 will need to keep digital records and file their VAT returns using HMRC-compliant software or methods on a quarterly basis from April 2019.

However, having reviewed the requirements for MTD and its promotion by HMRC to businesses, the committee has recommended that the new rules for VAT should not be made mandatory next year and should instead allow businesses to ‘go digital’ at their own pace.

The Lords also recommended that the Government wait until April 2022 to apply MTD to other taxes to give HMRC time to learn lessons from the implementation of digital taxation on VAT.

Within its report, Making Tax Digital for VAT: Treating Small Businesses Fairly, the committee was also highly critical of HMRC’s public promotion of the new regime, which only began in any significant way several months ago.

Lord Forsyth of Drumlean, Chairman of the House of Lords’ Economic Affairs Committee that authored the report, said: “HMRC has neglected its responsibility to support small businesses with MTD for VAT.

“Small businesses will not be ready for this significant change to their practices, especially with Brexit taking place three days earlier,” he added.

The committee’s report has already gained the backing of a number of leading accountancy organisations, including the Institute of Chartered Accountants in England and Wales (ICAEW), the Chartered Institute of Taxation (CIOT) and the Association of Tax Technicians (ATT).

Link: Making Tax Digital for VAT: Treating Small Businesses Fairly

uk-takes-second-spot

UK takes second spot for tax compliance in G20

New research from the World Bank has revealed that the UK has the second most effective tax system amongst the G20 nations for tax compliance and ease of paying corporate taxes.

According to the survey, companies take an average of 105 hours per year to prepare and file their taxes in the UK, which equates to around three hours per week.

The report looks at the overall tax rate and time spent preparing, filing and paying the three main forms of taxation – corporation tax, labour tax and VAT – and has ranked 190 global economies based upon these factors.

When looking at the wider global picture, the UK falls just outside the top 20 rankings for tax compliance, coming in at 23, but still managed to beat most other developed G20 nations, bar Canada which is rated as best for tax compliance amongst the G20 nations.

In comparison, the US ranked in 37, while Brazil is the lowest ranked member of the G20 at 184.

The average UK business takes almost half the time to complete their tax compliance tasks as the global average, which is currently 237 hours per year.

According to the report, global tax authorities need to do more to realise the full potential of new technologies to reduce the tax compliance burden on taxpayers. It also says that some advanced economies are already in the process of improving their systems to the benefit of both taxpayers and tax authorities.

However, it does recognise that digitisation is not a cure-all and points to Poland where the implementation of new technology for VAT compliance has increased the administrative burden in the short-term.

Looking further ahead, however, the report says technology can be effective as proven by the digitisation of VAT in Spain, which has slightly reduced the time taken to achieve compliance.

The World Bank said that the impact of HMRC’s own Making Tax Digital programme, which comes into force in April 2019, will be assessed in future editions of the report.

Link: Time to prepare and pay taxes

unwrapping-christmas-tax

Unwrapping Christmas tax gifts

Christmas is a time for giving, but many businesses may not be aware that their gifts can be made in a tax-efficient manner, which could make raising festive spirits that little bit cheaper.

While Christmas parties may not be for everyone, HM Revenue & Customs (HMRC) does provide an allowable tax deduction of up to £150 per head per year for events.

This means companies could hold one big Christmas blow out or spread their allowance over the year to improve staff engagement.

Of course, there are restrictions to this allowance. Under the rules, you must invite all employees to the event for it to qualify for the exemption and the cost per head must include VAT and take into consideration the cost of the entire event, including food, drinks and a venue.

If you are feeling generous this year, you could also give gifts to your employees at Christmas or any other special occasions. Thanks to the relief on offer, there will be no taxable employment benefit, providing the gift is trivial, such as a box of chocolates or a bottle of bubbly. However, the costs must not exceed £50 and must not be in the form of cash or a cash voucher.

Finally, you can spread the Christmas cheer even further by providing gifts to your clients. As long as the gift is less than £50 and includes a “prominent” advertisement for your business, then you can receive a tax deduction.

Gifts of food, drink, tobacco or vouchers are unfortunately not allowable, but items such as stationary would fall within the rules.