Archive for December, 2016

Do not have a fake Christmas

Thursday, December 22nd, 2016

The Intellectual Property Office has issued a video setting out the dangers of buying counterfeit goods this Christmas.

They say:

Counterfeiting can be defined as the manufacture, importation, distribution and sale of products which falsely carry the trade mark of a genuine brand without permission and for gain or loss to another. Counterfeits can bring many dangers to us as consumers. From fake alcohol to children’s costumes…if it can be made, it can be counterfeited. Make sure you understand the risks.

Do you really know what you’re getting for Christmas?

We recently broadcast live talking about IP crime and the dangers and impact of buying counterfeit goods in the run up to Christmas.

You can view the video on the website at

What taxes are payable if you set up in business

Tuesday, December 20th, 2016

The answer to this question depends, in the first instance, on the business structure you select.

If you run your business as a sole trader, or in partnership with another person, you are deemed to be self-employed. Partnerships also include Limited Liability Partnerships where the partners’ personal assets are protected from business risks.

The alternative to the above self-employed options is to incorporate your business, to be a limited company. In this case the company legally owns the business and you are an employee of the company, and in most cases, a shareholder too.

Sole traders and partners

As defined above, tax payers in this group are self-employed and subject to self-assessment for income tax purposes. Profits of your business, adjusted for tax purposes, are included in your annual self-assessment tax return and provide the basis (together with any other income you earn) of your half yearly income tax payments under self-assessment.

Additionally, there are National Insurance considerations. Presently, you will pay Class 2 and Class 4 contributions and these are collected with your income tax payments. Class 2 is a fixed weekly amount, and Class 4 contributions are graduated, based on the amount of profit you make. The government is to phase out Class 2 contributions shortly and adjust Class 4 contributions to provide for basic State benefits such as the State Pension.

Limited companies

Companies do not pay income tax, instead, they are subject to corporation tax.

Corporation tax is based on a fixed percentage of adjusted profits plus any chargeable capital gains the company makes.

Directors are treated as employees by the company. Any salary taken is taxed under the PAYE system and forms part of the allowable costs of the company. The amount of any income tax or National Insurance due will depend on the amount of salary taken.

Directors, who are also shareholders, may also choose to take part of their remuneration as a dividend. This is a distribution of taxed profits by the company and so no further tax consequences apply to the company. Dividends received by shareholders are subject to personal tax if they exceed £5,000 in a tax year. The rate of tax payable depends where the dividends sit in the tax payer’s basic, higher or additional rate income tax bands.

As you can see, business structure determines tax treatment, and the selection of the most appropriate structure is of paramount importance, both to ensure you minimise taxes due and protect your personal assets.

The Land Registrys free property alert service

Thursday, December 15th, 2016

This service helps people to detect fraudulent activity on their property by sending them email alerts when there is certain activity on the property being monitored, such as a mortgage being taken out against it. The recipient can then decide whether they think the activity is suspicious and act quickly if so. The alert email tells them who to contact should they be concerned. The following notes are part of a recent announcement on this issue on the website.

Alasdair Lewis, Director of Legal Services, said:

Property is usually our most valuable asset so it’s important to protect it from the ever-increasing risk of fraud. Land Registry is doing all it can to detect and prevent fraud but no system can be 100 per cent fraud-proof, which is why we urge people to follow our advice about protecting themselves from property fraud, including signing up for Property Alert.

Property fraud

Property fraud is where fraudsters try to “steal” a property, most commonly by stealing the homeowner’s identity and selling or mortgaging the property without their knowledge. They then disappear with the money leaving the true owner to deal with the consequences.

Since 2009, Land Registry has stopped fraud on properties worth more than £92 million.

How Property Alert works

You can monitor up to 10 registered properties in England and Wales. You will receive email alerts when there is certain activity on the properties you are monitoring, such as an application to change the ownership details.

Although Property Alert won’t automatically stop fraud from happening, it’s a useful early warning of suspicious activity which the home-owner can investigate if they are suspicious.

Example of how Property Alert helped to prevent a fraud

A landlord was renting out a property in England while he lived overseas. He was aware that absent landlords are more at risk of property fraud and signed up to our free Property Alert service. When he received an alert email informing him of a mortgage application being made against his property worth over £300,000, he contacted our property fraud line immediately as he wasn’t expecting this. Using this intelligence, we investigated and discovered the fraud. We then prevented the application from being registered. His contact details were out of date, so we advised him to update them, which he did so that if we need to contact him in the future he will receive our emails or letters.

Most at risk

You’re more at risk if your property:

  • is rented out
  • is empty
  • is mortgage-free
  • isn’t registered with Land Registry

Other fraud protection measures

To help protect yourself against property fraud, make sure:

  • your property is registered. If you become an innocent victim of fraud and suffer financial loss as a consequence, you may be compensated. Properties most likely to be unregistered are those that haven’t changed hands or been mortgaged since 1990
  • Land Registry has up-to-date contact details so we can reach you easily. You can have up to three addresses in the register including an email address and/or an address abroad

You can find out more about this service at

Changes to the VAT Flat Rate Scheme

Wednesday, December 14th, 2016

As we have noted in previous blog postings, Philip Hammond announced a significant change to the VAT Flat Rate Scheme (FRS) from 1 April 2017.

To join this scheme, businesses need to have turnover excluding VAT of under £150,000. VAT payable to HMRC is based on a fixed percentage of turnover including VAT. The percentage rates vary for different business sectors, and obviously the lower the rate, the lower the quarterly VAT bill.

Many users of the FRS have discovered that using the scheme means that they make a cash profit. This happens when the appropriate FRS rate produces a VAT bill that is lower than the cash collected from the VAT output tax added to sales (which FRS traders are required to do), less any input VAT added to goods and services purchased.

HMRC have decided that this is not the outcome they intended when setting up the scheme.

Accordingly, from 1 April 2017, users of the FRS scheme will be obliged to use the higher rate of 16.5% if they are classified as a “limited cost trader” (LCT). The LCT classification will apply to users of the FRS whose VAT inclusive costs are:

  • lower than 2% of their VAT inclusive turnover in an accounting period
  • greater than 2% of their VAT inclusive turnover but less than £1000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1000).

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

These exclusions are required to prevent traders buying either low value everyday items or one-off purchases in order to inflate their costs beyond 2% and thus continue to pay VAT at a rate lower than 16.5%.

Existing users of the FRS are advised to seek advice before 1 April next year to determine if they are affected by these changes. In some cases, traders may need to discontinue use of the FRS and switch to the use of the standard VAT scheme.

Carry back gift aid donations

Monday, December 12th, 2016

For a number of years, it has been possible to make gift aid donations and carry them back to the previous tax year. This is a useful tax planning facility if earnings were higher in the previous year, and in some cases it may mitigate loss of personal allowances and tax at higher rates.


There are, however, two conditions that need to be complied with:

  1. Firstly, you cannot claim to carry back gift aid donations once you have submitted your tax return for the current year. Consequently, if it would be beneficial to carry back gift aid contributions you have made since 5 April 2016, as if paid during 2015-16, you will need to make the claim when you file the 2015-16 return. This means that the latest date to action this type of claim is 31 January 2017.
  2. Secondly, you will need to have paid enough Income Tax or Capital Gains Tax in the earlier year to cover the tax that the charities reclaim on those donations.

For higher rate tax payers, especially those with taxable income in excess of £100,000 this strategy is a useful device to reduce tax payments in a year by utilising transactions made after the end of the tax year. In fact, this is the only readily accessible carry-back planning tool available to most tax payers.

What is a power of attorney

Wednesday, December 7th, 2016

A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf. There are two sorts of LPA. They can cover personal issues (health and welfare) or financial issues (property and financial affairs).

An LPA allows you to nominate who has control over what happens to you if, for example, you have an accident or an illness and can’t make decisions at the time, or if you for other reasons, ‘lack mental capacity’ to make prudent decisions on your own behalf.

You must be 18 or over and have mental capacity (the ability to make your own decisions) when you make your LPA. You can choose to make one type or both.

Please note that there are different process for registering LPAs in Scotland and Northern Ireland.

How do you make an LPA?

This is a three stage process:

1.      First, you must choose your attorney – the person who will have control over your affairs – and you can have more than one.

2.      Secondly, you will need to complete the relevant forms to appoint them as an attorney, and finally

3.      Register your LPA with the Office of the Public Guardian (this can take up to 10 weeks).

It costs £110 to register an LPA unless you get a reduction or exemption.

Unfortunately, you will need to register both LPAs if you want to cover all your risks so the above costs are doubled.

If you want to find out more about the process you can contact the Office of the Public Guardian at:

Office of the Public Guardian
Telephone: 0300 456 0300
Textphone: 0115 934 2778

Or, you can take professional advice.

Tax Diary December 2016/January 2017

Monday, December 5th, 2016

1 December 2016 – Due date for Corporation Tax due for the year ended 29 February 2016.

19 December 2016 – PAYE and NIC deductions due for month ended 5 December 2016. (If you pay your tax electronically the due date is 22 December 2016.)

19 December 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2016.

19 December 2016 – CIS tax deducted for the month ended 5 December 2016 is payable by today.

30 December 2016 – Deadline for filing 2015-16 Self Assessment tax returns online to include a claim for under payments to be collected via tax code in 2017-18.

1 January 2017 – Due date for Corporation Tax due for the year ended 31 March 2016.

19 January 2017 – PAYE and NIC deductions due for month ended 5 January 2017. (If you pay your tax electronically the due date is 22 January 2017.)

19 January 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2017.

19 January 2017 – CIS tax deducted for the month ended 5 January 2017 is payable by today.

31 January 2017 – Last day to file 2015-16 Self Assessment tax returns online.

31 January 2017 – Balance of Self Assessment tax owing for 2015-16 due to be settled on or before today. Also due is any first payment on account for 2016-17.

Changes to NLW and NMW from April 2017

Monday, December 5th, 2016

From April 2017, the National Living Wage (NLW) for the over 25s is being increased to £7.50 per hour. This is an increase from the current NLW rate set in October 2016 of £7.20 an hour. For the over 25s, this will represent a wage increase of just over 4%.

The National Minimum Wage (NMW) will also increase from the same date to:

·         For 21 to 24 year olds – from £6.95 to £7.05 per hour

·         For 18 to 20 year olds – from £5.55 to £5.60 per hour

·         For 16 to 17 year olds – from £4.00 to £4.05 per hour

·         For apprentices – from £3.40 to £3.50 per hour

The government will also be spending an additional £4.3m to ensure that employers are complying with their legal obligation to pay the NMW.

Are you affected by changes to the VAT Flat Rate Scheme (FRS)

Monday, December 5th, 2016

HMRC is to introduce an additional test that will determine the flat rate percentage used by traders. It would seem that HMRC presently considers the benefits obtained by certain businesses to be excessive and not in accord with the intentions of Parliament.

Traders that meet the new definition of a “limited cost trader” will be required to use a fixed rate of 16.5%. This will include traders who are already using the FRS scheme, and many at rates lower than 16.5%.

From 1 April 2017, FRS traders who meet the following definitions will be considered “limited cost traders” and will be obliged to use a new 16.5% rate. A limited cost trader will be defined as one whose VAT inclusive expenditure on goods is either:

  • less than 2% of their VAT inclusive turnover in a prescribed accounting period
  • greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000)

Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:

  • capital expenditure
  • food or drink for consumption by the flat rate business or its employees
  • vehicles, vehicle parts and fuel (except where the business is one that carries out transport services – for example a taxi business – and uses its own or a leased vehicle to carry out those services)

Businesses using the FRS will be expected to ensure that, for each accounting period, they use the appropriate flat rate percentage.

VAT traders using the FRS should review their position before April 2017 to ensure that there are still advantages to using the scheme.

Salary sacrifice under the microscope

Monday, December 5th, 2016

Salary sacrifice is a term applied to benefits taken in place of salary. In many respects these benefits provide employees with higher “take home” value than if the benefits were treated the same as cash income. Mr Hammond is mindful to curb this practice as it is intended that the change will add £1bn a year to tax revenues by 2020.

No definitive list of benefits affected has been published, but benefits that may no longer be tax effective are:

·         Mobile phones and tablets

·         Car parking

·         Gym membership, and possibly

·         Health check-ups

There are a number of benefits that will not be affected by these changes. They are:

·         Pensions

·         Child care

·         Cycle to work schemes

·         Ultra-low emission cars (CO2 emissions up to 75g/km)

Benefits in place before April 2017 will be protected from restrictions for 1 year, and arrangements in place before April 2017 for cars, accommodation and school fees will be protected for up to 4 years.

For those who contribute towards or make-good their benefits to reduce the taxable amounts, they will have until the 6 July after the tax year to do so – starting 6 July 2017. This only applies to benefits not already taxed as income through payroll.

Readers who are concerned they will be affected by these changes should consider a review of their salary sacrifice/benefits arrangements prior to the April 2017 cut-off date.