Thursday, 25 June 2015

Hotter weather for the start of July 2015

Just in time for Wimbledon, which starts next week, the weather looks as if it is going to play ball and introduce much warmer and possibly even hot conditions.

In contrast to June which has seen mostly average or just below average temperatures next week could see hot days and muggy night especially in the south.

The heat will build in Iberia during the weekend and spread up through France during early next week.

The UK is likely to be the boundary between the cooler atlantic airmass and the hot airmass spreading up through France. This will still produce much higher temperatures that we have at present.

Scotland may see highs in the mid 20's and highs across the south of Britain are likely to reach the low 30's.

As so often is the case likely to finish after a few days with thunderstorms.


Wednesday, 24 June 2015

Mortgage Referrals and Tax Investigations

HM Revenue & Customs, the Council of Mortgage Lenders and the Building Societies Association came together in September 2011 to launch the Mortgage Verification Service.

Where a mortgage applicant has been unable to supply adequate evidence  of income, the mortgage lender can approach HM Revenue & Customs and ask for verification of the income. HM Revenue & Customs checks the tax returns received and employment data for the mortgage lender, but also risk assesses what it has seen. If the mortgage applicant has said their income is £50,000 on their application, but only declared £20,000 to HM Revenue & Customs, potentially either mortgage fraud is taking place or HM Revenue & Customs has a tax shortfall on £30,000 to pursue.

Since the service went live, the number of referrals made to HM Revenue & Customs has increased sharply:

2011/12  386
2012/13  1819
2013/14  5969
2014/15  7763

Great care should therefore be taken when completing the income details of a tax return.

Peer to peer lending

If you are a saver, no doubt you will have noticed that interest rates have been on a downward trajectory for some time. This is due largely to the Bank of England base rate having been kept at a dire 0.5% since 2009. While there is talk of the base rate being raised later this year, you may be wondering if there is any way to get a better rate of return on your hard-earned money.

Enter peer-to-peer lending. A fairly recent development in the business world, the idea is that businesses and individuals lend to other businesses through an intermediary, who vets each loan request and takes a small cut in fees. This process does away with the need to approach banks and often results in a more favourable rate for both lender and borrower than they would otherwise have achieved.

For example, Funding Circle, a peer-to-peer lender that was set up in 2010, currently boasts an average all-time return on investment of 6.6% (after fees and bad debts but before tax). You would be hard pushed to find such a high rate of return on a regular savings account at the moment.

However, there are drawbacks to consider. Peer-to-peer lending is riskier than a simple savings account because you are lending to businesses and you therefore have the risk of them defaulting on the loan. However, most peer-to-peer providers grade each borrower based on their prior financial performance so lenders can assess how risky each investment may be.

In addition, the Financial Services Compensation Scheme, which covers savings accounts of up to £85,000, does not cover peer-to-peer lending.

If you do decide to do some investing through a peer-to-peer lender, you will need to inform HM Revenue & Customs of any interest that you receive for each tax year because, unlike savings account interest, it is not taxed at source. If you are unlucky enough to experience any losses, the silver lining is that you from April 2015 you will be able to offset these against any other peer-to-peer income you received for tax purposes. In addition, plans were announced last year to include peer-to-peer lending interest in the tax-free ISA allowance, although there are no details on the timeframe yet.

So if you are prepared for the risks, peer-to-peer lending can be an attractive investment prospect, with the possibility of earning good rates of return and the added feel-good factor of investing in UK businesses. Talk to us today for more information.

Liz Simpson of Adders Accountants

Monday, 22 June 2015

Second Incomes Campaign

HMRC has been busy pushing its new Second Incomes Campaign. How might directors and other business owners be affected?

Undeclared personal fees, e.g. for consultancy work, are being targeted. If you’re worried, don’t automatically make a disclosure under the campaign - it could prompt a deeper investigation. Speak to your accountant first.

Friday, 12 June 2015

2014/15 P11Ds - What's New

The deadline for 2014/15 P11Ds is fast approaching. But with the P35-style end of year checklist no longer needed, how willHMRC know if they aren't due? And are there any other changes that you need to be aware of?

If you didn't complete the P11D question on the final Full Payment Submission (FPS) for 2014/15, avoid automatic penalties by completing an online form to tell HMRC that they are not needed. Apart from that, there are no major changes but for most company cars you will need 1% uplift to the emissions percentage.

Tuesday, 2 June 2015

Inheritance Tax - Gifts:Two tax reliefs for the price of one?

Where you make a gift to an individual, say a son or a daughter, it remains part of your estate for inheritance tax purposes for seven years. But if they work for the family company you can dodge the seven year wait. How does it work?

A pension premium for your children paid by a company you own does not count as a transfer of value for IHT purposes even though it reduces the worth of your estate. The seven-year rule therefore does not come into play. If your children are not on the payroll, making them directors will be enough to make the plan work.

If you require any further assistance please do not hesitate in contacting me.

The Consumer Rights Act 2015

On 1 October 2015 the Consumer Rights Act 2015 will replace the existing legislation relating to the sale of goods and the supply of services. It will also give consumers more rights. How can you prepare for this major change.

Read and apply the guidance given on the government's new Business Companion website  It spells out the major legislative changes and your legal obligations to consumers in detail. Just be sure to select your location from the drop-down menu first as there will be subtle differences across the UK.

Social Investment Tax Relief

Social Investment Tax Relief (SITR) - This new relief is available for investments made between 6 April 2014 and 5 April 2019.

It is intended to support social enterprises by offering a range of tax reliefs to individuals who invest in new shares or new qualifying debt investments in those enterprises. Its main features are as follows:

Income tax relief at 30% on amounts up to £1 million subscribed for qualifying shares or invested in qualifying debt instruments.

No chargeable gain arises on disposal of the investment, provided it has been held for at least 3 years.

Amounts invested may be used to defer tax on other chargeable gains arising in the years 2014/15 to 2018/19.

Social Venture Capital Trusts - A new scheme will be set up for Social Venture Capital Trusts (Social VCTs). The main features are expected to be as follows:

-  the same excluded activities as SITR;
-  income tax relief at 30% on amounts invested, subject to EU state aid clearance;
-  no income tax on dividends received; and
-  no capital gains tax on disposals of shares.

Budget announcement 18 March 2015

Monday, 1 June 2015

Profit Extraction

Your company is almost ten years old and doing well. You have no intention of retiring yet, but you would like to reap some of the growth in value now. What are your options?

The company will need cash to pay you. This might mean asking the bank for a loan and using it to buy back some of your shares or repaying share capital. This can be costly in terms of tax. Selling some of your shares to an outside investor means you won't have to beg the bank for cash and you'll pay less tax.

Happiness is cheap profit extraction !!

Ever thought of becoming a plc

One of your competitors has just become a plc and your MD is worried that this will make it look more attractive to customers. How easy would it be for your company to become a plc too?

It is relatively simple to convert to an unlisted plc but the company will need £50,000 of share capital to do so. You'll also need audited accounts both initially and on an on-going basis which could cost upwards of £5,000 p.a.

If this is something that you would like further information please do not hesitate in contacting me.

Taking your partner on a business trip

During a business record check the HMRC officer spots some expenses in your company's files relating to business trips you took with your partner. She says the company cannot claim a deduction for these. Is she right?

Apart from entertainment costs business expenses incurred by directors and employees are always tax deductible from company's profits. What's more, HMRC's practice is to only tax directors (or employees) where spouses accompany them on business trips when there is extra cost involved.​

Wednesday, 29 April 2015

Pensions - Auto-Enrolment

Auto-enrolment is now bring rolled out to all businesses so it's time to get ready. But what can you expect after you've set up your scheme?

Ongoing management of auto-enrolment involves potentially tricky and time consuming payroll procedures. Check well in advance that your software can cope. Alternatively, consider switching to a bureau service. Me !!

Tuesday, 21 April 2015


The new pension rules allow for a variety of ways to take a lump sum from your pension fund. Each has different tax consequences. What factors should you consider before taking your money?

If you take your whole fund, 75% counts as taxable income. The same is true of a uncrystallised fund pension lump sum, but you can take as little as you want now and more later. Or you can take a completely tax free pension commencement lump sum of up to 25% of your fund, but subsequent withdrawals are fully taxable.

After 5 April 2015 you will be entitled to free financial advice about your pension under a government scheme.

Sunday, 8 March 2015

Important News for employers and potental PAYE penalties

Automatic in-year penalties for late RTI reports have been in place for employers with 50 or more staff since October 2014. Starting from 6 March 2015 they will also apply for those with fewer workers. The one exception is employers with fewer than ten on their payroll; in-year penalties won't apply to them until April 2016 although it is still worth a note in your diary.

HMRC is about to start sending out penalty notices to employers in the 50 plus employees category who have submitted two or more late RTI full payment submissions (FPSs) since October 2014.

For second and subsequent late FPSs, the penalty charge is a minimum of £100 and a maximum of £400 depending on the number of employees. Plus, where a report is made more than three months late, a further fine equal to 5% of the PAYE/CIS tax and NI due on the report is payable.

If you receive notice of a penalty that you think isn't due, for example, if an RTI report wasn't required for the period in question, you can appeal against it. The easiest and quickest way to do this is to use HMRC's online penalty and appeals service.

Penalty notices will be sent automatically if HMRC's computer thinks an RTI report is late or has been missed. For this reason I expect to see a wave of incorrect notices following the end of each tax month. While you can appeal against an incorrect notice, it's better to avoid the hassle in the first place.

Even if you make no payments of salary etc. for a tax month, HMRC's system assumes that an FPS is required unless you tell it that there's nothing to declare. To avoid a penalty notice submit an employer payment summary as soon as you know an FPS is not needed.

Penalty notices will be issued in March 2015 to employers with 50 or more employees who have made two or more lates FPSs. Plus, the penalty rules will start to apply for employees with ten or more workers.