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As we anticipated on Twitter @cooperfaure, there are a few nasty surprises buried in the detail. This newsletter looks in more depth at some of the key policy decisions that will impact individuals and small businesses.
There were few measures affecting Personal Taxation other than it was confirmed that, from the 2015-16 tax year, spouses and civil partners will be able to transfer £1,000 of their Income Tax Personal Allowance where neither partner is a higher or additional rate tax payer.
As widely forecast, the State Pension age is set to increase to 68 in the mid-2030s and to 69 by the late 2040s.
Whilst the economic indicators offered little hope for savers in terms of any imminent increase in interest rates, there was one ray of good news. Despite many rumours to the contrary and lobbying by HMRC, the annual subscription limits for ISAs will continue to be raised in line with the Consumer Price index.
As a result, the 2014-15 ISA limit will be increased to £11,880, half of which can be saved in a cash ISA. This remains one of the best forms of savings in the market.
The Chancellor announced in his statement that Capital Gains Tax would be introduced from April 2015 on the future gains made by non‑residents disposing of UK residential property.
However, in the detail of the Autumn Statement document, it was stated that the Capital Gains Tax Private Residence Relief period will reduce from three years to eighteen months with effect from April 2014.
This seems iniquitous and may have the consequence of creating a spike in the housing market as people rush to sell their homes if they are either nearing or already over eighteen months threshold to avoid incurring Capital Gains Tax.
One of the most complex areas of taxation that an individual can be faced with is Inheritance Tax. There was a pledge to reduce the administrative burden of this by the HMRC committing to provide an online service during the 2015-16 tax year.
There were no changes to Corporation Tax other than the government committing to simplifying the rules around Associated Companies in April 2015 when the main rate and small profits rate of Corporation Tax are unified at 20%.
Despite this reaffirmation that the reduced rate of Corporation Tax for small businesses is effectively going to disappear, there were a number of measures targeted primarily at the SME sector.
There were a raft of announcements around Business Rates including:
– The level of Business Rates increases will be capped at 2% for a year from 1st April 2014.
– A two-year Business Rates discount of £1,000 per annum will be introduced for retail and food and drink premises with a rateable value below £50,000 from 1st April 2014.
– The government will introduce a 50% Business Rates Reoccupation Relief lasting eighteen months for businesses that move into retail premises that have been empty for more than a year between 1st April 2014 and 31st March 2016.
– Small Business Rate Relief will extend for a further year from 1st April 2014.
– Small Business Rate Relief rules for businesses taking on a second property will be relaxed on to allow a business in receipt of Small Business Rate Relief on their first property to continue to do so for a year with effect from 1st April 2014
– Business Rates will be able to be paid over twelve monthly instalments rather than ten from 1st April 2014.
As a further incentive for businesses to take on new staff, there was a commitment to encourage Apprenticeships by developing a mechanism to route the available funding for Apprenticeships directly to employers via the HMRC systems. Further, there was a commitment to evaluate alternative faster funding routes for the smallest businesses.
In another incentive for companies to take on young trainees, Employer National Insurance Contributions for staff aged under twenty-one will be abolished from April 2015 except for those earning more than the Upper Earnings Limit, which is currently £42,285 a year.
Under the existing rules on Directors Loans, if a Director has a loan at the end of a company’s financial year, so long as that loan is repaid within nine months of this date, there is no company tax liability.
If the loan runs beyond this nine month period, a “notional tax” of 25% of the outstanding amount is payable to HMRC and this notional tax is refunded in the year that the loan is eventually repaid.
Despite the HMRC lobbying for either increasing the notional tax charge to 40% of the outstanding balance or replacing the notional tax by a non-refundable annual charge, there will be no change on Directors Loans to the level or operation of the tax charge.
However, there will be some changes to Company Car Tax that will take effect from 6th April 2014 aimed to ensure that individuals make the tax payments for private use of a company car or van in the relevant tax year and to ensure that, where an employer leases a car to an employee, the benefit is taxed as a car benefit rather than as employment earnings.
On a positive note, the Fuel Duty increase that was due to take effect on 1st September 2014 will be cancelled.
If you would like more detailed guidance on the impact of any of the Autumn Statement announcements, whether or not featured in this newsletter, or have a specific question, please contact email@example.com to arrange a consultation.
As the calendar rolls into December and thoughts turn to the festive season and the Christmas holidays, in the UK the HMRC plays the role of scrooge with strict limits on the rewards that a company can give to its staff and gifts that it can offer its customers without creating an unwanted tax liability.
The most common staff reward is the Christmas Party. For incorporated companies, in general, the costs of employee entertaining are an allowable business expense. However, there are strict limits on the cost of a staff party (or any other annual event) within which these events do not become a taxable benefit to the staff.
To qualify, the event must be open to all staff, either company-wide or at a specific location, and the total cost of the event must not exceed £150.00 per head including VAT. Employees’ partners or spouses are included in calculating the cost per head but it vital to remember that the £150.00 per head covers the event from beginning to end so, if overnight accommodation or taxis home are provided, the cost of these have to be included in the total.
The bad news is that £150.00 per head is not an allowance. If the cost of the event exceeds this amount even by £1, the whole amount becomes a taxable benefit creating a tax liability for the employee and a National Insurance liability for the company.
Any Christmas Bonus paid to staff either through the payroll, in cash or in vouchers must be treated as additional earnings and would be subject to PAYE and NI.
Gifts to Employees can be made by a company without incurring a tax liability so long as HMRC deems them to be trivial. Unfortunately, HMRC has not defined ‘trivial’ but as a rule of thumb a seasonal gift such as a turkey, a decent bottle of wine or a box of chocolates would be allowable but a case of wine or a hamper would not be considered trivial.
If an Individual Director decides to make a personal gift to their staff, it is important to remember the Inheritance Tax implications. Everyone has an annual exemption of £3,000.00 for the gifts that they make and gifts of up to £250.00 to an individual are exempt from Inheritance Tax. Gifts of larger amounts would be considered a Potentially Exempt Transfer.
Similarly, if an employee receives a Gift from a Third-Party customer or supplier, so long as the gift does not exceed £250.00 in value, this would not be seen as taxable.
Client Entertaining is not an allowable business expense and neither can the VAT be recovered on any such expenditure.
Business Gifts to customers or suppliers are only deemed to be an allowable business expense if the total cost of the gifts to an individual in a year does not exceed £50.00, each gift is conspicuously branded with the company’s name or logo and the gift is not food, drink or an exchangeable voucher.
We hope that this whistle-stop summary of the various tax rules in has not dampened the festive cheer but serves as a useful guide.
If you would like more detailed guidance on business entertaining, taxable benefits, VAT or Inheritance Tax or have a specific question, please contact firstname.lastname@example.org to arrange a consultation.