Monthly Archives: July 2019

wealthiest-uk-families-save

Wealthiest UK families save nearly £700 million a year in Inheritance Tax

A new report has found that a significant proportion of the UK’s Business Relief goes to those with more than £1 million in assets.

Tax Justice UK, a campaigning organisation, has revealed that 234 wealthy families shared £458 million in tax relief in the 2015-16 year thanks to Inheritance Tax breaks via Business Relief.

The group said that this accounted for almost 80 per cent of the total Business Relief given in that financial tax year.

Business Relief can significantly reduce the value of a business or its assets when working out how much Inheritance Tax has to be paid.

Any ownership of a business, or share of a business, is included in the estate for Inheritance Tax purposes, but families can benefit from Business Relief of either 50 per cent or 100 per cent on some of an estate’s business assets, which can be passed on while the owner is still alive or bequeathed in a Will.

The scheme allows individuals to claim relief on property and buildings, unlisted shares and machinery.

The same report also revealed that 261 families owning more than £1 million in agricultural property and assets shared £208 million in Agricultural Relief in 2015/16, which accounted for 62 per cent of the total relief given out that year.

Agricultural Relief also allows families to pass on some agricultural property free of Inheritance Tax.

In January, figures produced by HM Revenue & Customs (HMRC) revealed the cost to taxpayers of all Inheritance Tax reliefs has risen to almost £2 billion annually.

Link: IHT Research

taxpayers-bills-delayed-by-payment

Taxpayers’ bills delayed by payment on account errors

The Association of Taxation Technicians (ATT) has revealed that problems with HMRC’s IT systems earlier this year, relating to calculations for payment on account, mean that some taxpayers will not receive tax demands this month.

The glitches in the tax authority’s systems during the self-assessment tax return season also mean that calculations for payment on account on some returns may not be adjusted correctly.

It was apparently made clear at the time that HMRC’s systems had not processed payments on account for 2018/19 correctly. Unless affected taxpayers contacted HMRC to correct the position, they will not have received a demand in June or July for the second payment on account due by 31 July 2019.

Instead, those affected by this HMRC failure will need to pay their total 2018/19 self-assessment tax bill by the end of January 2020 and the ATT is advising them to set additional money aside to make sure their bill is covered.

Jon Stride, Co-Chair of the ATT’s technical steering group, said: “If a taxpayer does not make any payments on account during 2019, then their tax bill in January 2020 could be significantly larger than they are expecting and could come as quite a shock.

“Individuals who do not receive expected demands should either set aside the funds needed ready for next year or, if they wish, they can make a voluntary payment on account to HMRC of their July payment – and their January payment if that was also missed.”

The ATT has been told by HMRC that if no 2018/19 payments on account have been demanded, then the taxpayer will receive a demand from HMRC for the full amount of tax in January 2020.

Self-assessment taxpayers with annual tax demands of £1,000 or less do not have to make payments on account, while those in the regime who have 80 per cent or more of their total annual tax collected at source, such as by PAYE, do not have to make payments on account either.

Link: Missing 2018-19 payments on account – what to do

value-of-uk-smes-reach

SMEs unaware of £1 million annual investment allowance

A new study has found that more than half (58 per cent) of SMEs are not aware of a temporary two-year increase in the annual investment allowance (AIA), which could help them secure £1 million in funding.

Last year, the Government increased the AIA from £200,000 to £1 million from 1 January 2019 to 31 December 2020 to assist businesses with plant and machinery investments.

AIA allows businesses to write off 100 per cent of qualifying capital expenditure against taxable profits for the same period up to the annual limit and yet many businesses are not aware of the opportunity currently on offer.

The research from Close Brothers Asset Finance also found that only 13 per cent of companies had intentions to increase investment significantly in 2019 because of the rise, meaning that around nine out of 10 businesses had no specific plans to make use of the increase in AIA.

It is thought that the complexity of the rules surrounding AIA may have been off-putting for some businesses.

Will Silsby, Technical Officer at the Association of Taxation Technicians, told Accountancy Daily: “AIA in the final three months of the chargeable period to 31 March 2021 is restricted to the time-apportioned fraction of the normal £200,000 limit, so just £50,000.

“For the first straddling period, the calculation is logical. The AIA cap for expenditure in the first part of the chargeable period (the months up to 31 December 2018) has to be the normal £200,000 limit regardless of the number of months in that part.

“There is currently no provision to allow any element of under-spend in the pre-January 2021 months to be carried over into the post-December 2020 months.”

Link: Majority of SMEs unaware of £1m machinery tax break

businesses-encouraged-to

Businesses encouraged to increase readiness for no-deal Brexit

Businesses across the UK are being encouraged to increase their readiness for a no-deal Brexit.

The Institute of Directors (IoD) said that, while all firms should be preparing for a no-deal Brexit, it had found that fewer than half of businesses had plans in place.

The IoD has also called on the Government to make Brexit planning vouchers available to SMEs to access professional advice in relation to trade and legal matters arising from Brexit.

Speaking to The Guardian, Edwin Morgan, Interim Director General at the IoD, said: “Business can have no absolute reassurance that an agreement will be reached, particularly given the commitment of some conservative leadership candidates to leave the EU in October, with or without a deal. It feels like the extension is at risk of being wasted.”

He added: “If businesses can’t have faith in politicians that means they have to look out for themselves. With business costs rising in many quarters, and management time precious, it is understandable that firms do not want to put resources towards preparing for something that we still hope will not happen. But the risk of no deal is very real and so we’d urge all businesses, if they haven’t done so already, to carefully consider their exposure and draw up mitigation plans now.”

Link: UK businesses urged to step up preparations for no-deal Brexit

value-of-uk-smes-reach

Value of UK SMEs reach £3 trillion

New research has found that the total value of UK SMEs has reached more than £3 trillion – with the average small business now worth £2.9 million.

The study by MarketInvoice found company valuation is something that two-thirds of owners consider a top priority and something they think about all the time.

Business owners cited their premises, product and people, as well as the financial health of their business as key factors that contribute to company value.

Despite the growth in the overall value of UK SMEs, the study showed that less than a third of businesses increased in value by more than 10 per cent in the last 12 months.

Those owners surveyed said that a lack of finance was the biggest obstacle to growth, with companies in the engineering, architecture and construction sectors struggling the most due to a lack of funding.

Only six per cent of businesses have used equity or venture capital investment, with the majority favouring invoice finance, followed by asset-based finance and finally traditional business loans, which made up just 10 per cent of funding for SMEs.

Despite the uncertainty over Brexit, more than half of UK SMEs hope to either open offices abroad or start exporting to global markets.

Link: Know your value: MarketInvoice Business Insights

more-than-150-chief-financial

More than 150 chief financial officers and senior finance executives personally fined by HMRC last year

Research by law firm, Pinsent Masons, has found that more than 150 chief financial officers and other senior finance executives have been fined personally by HM Revenue & Customs (HMRC) in relation to tax accounting issues during the last financial year.

This is an increase of 22 per cent on the previous year when 125 were fined and around three times more than the 46 fined in 2012-13 when the first fines were issued.

The fines were issued under the Senior Accounting Officer (SAO) regime that allows the Revenue to levy fines of as much as £5,000 to a qualifying company’s most senior accounting officer if they do not properly “account for their business’ income and expenditure”.

Jason Collins, a tax disputes expert at Pinsent Masons, said: “HMRC is on a mission to hold the most executives that they can to account and ‘C-suites’ should take the high number of fines issued last year as a warning.

“These fines are being used as a stick to ensure finance directors do not allow systemic tax accounting failures to arise. Considering the pace of actions by HMRC against CFOs and finance directors, businesses may need to invest more money in controls in this area.”

Link: Over 150 CFOs and senior finance executives personally fined last year by HMRC

remember-to-pay-the-annual-data

Remember to pay the annual data protection charge

Businesses across the UK are being reminded that, if they process personal data, they are subject to a legal requirement to pay the Information Commissioner’s Office (ICO) an annual data protection charge, unless they have a relevant exemption.

Any businesses that fail to pay the correct charge are at risk of a fine of up to £4,350. A list of businesses that have paid the charge is published on the ICO’s register of data controllers.

The amounts that businesses must pay are determined by their size, with micro organisations and sole traders paying £40 a year, SMEs and equivalent organisations paying £60 and large organisations paying £2,900.

Where an organisation pays the charge by direct debit, they will receive a £5 deduction.

There is a tool available on the ICO website here so that organisations can determine whether they are subject to the charge.

Link: The Data Protection Charge

sole-traders-must-plan-carefully

Incorporation no longer automatically resets the two year requirement for sole traders

Entrepreneurs’ Relief (ER) entitles a business owner to significant relief from Capital Gains Tax (CGT) on the disposal of their business, often halving the consequent tax bill.

To qualify for ER, the company must normally have been the business owner’s personal company for the whole of the last two years and they must have been an officer or employee throughout.

Until now, this has created problems for sole traders who have recently incorporated, as incorporation has had the effect of resetting the two year requirement.

However, provisions contained in the Finance Act 2019 mean that the conditions for ER will be considered to have been met where the shares in a newly incorporated business have been issued to the business owner in exchange for all business assets or all assets other than cash and as a going concern.

Failing to transfer business vehicles or premises, for example, into the new company can mean that a business owner must wait an additional two years before disposing of the company in order to qualify for ER.

Sole traders and owners of other unincorporated businesses wishing to take advantage of ER should seek professional advice at the earliest opportunity.

Link: Entrepreneurs Relief for New Incorporations