HMRC is watching you!

HMRC have developed new software to help them decide if a tax return looks wrong, or if they think someone is not paying enough tax. This new software is known as ‘Connect’, and it pools information from varying sources to help create a picture of what someone’s tax affairs should look like.

Information is drawn from the various departments of HMRC (tax returns, employer records, national insurance records, VAT etc) and is combined this with information from other government databases such as the Land Registry, Companies House, DVLA, and the electoral roll. It has been rumoured that Connect tracks airport movements so they can see when people travel in and out of the UK.

HMRC have had access to certain bank account information for some time and in recent years they have signed many agreements with other countries to also share this information.

From time to time HMRC will target certain sectors and the suggestion is that they collect information from specific databases to help with this – for example Landlord information cross referenced with Land Registry and council tax data.

There has also been the suggestion that HMRC also track social media sites, such as Facebook and Twitter, to help build up a picture of someone and their tax records!

Changes to National Minimum Wage

From 1 October 2014 the national minimum wage rates will change as below:

 

• Adult Rate for workers aged 21 & over will increase from £6.31 to £6.50 per hour.
• the rate for 18-20 year olds will increase from £5.03 to £5.13
• the rate for 16-17 year olds will increase from £3.72 to £3.79
   
  Also the minimum wage rate for apprentices of £2.68 per hour is being increased to £2.73.
  As previously this applies to:
   

• Apprentices under 19
• Apprentices aged 19 or over, but in the first year of their apprenticeship.

 

You will need to apply the new rates to all payments for work commenced on or after 1 October 2014 so please make sure that you are complying fully with the new rates.

 

Please refer to www.gov.uk/national-minimum-wage for further information. 

Its over!

According to the Office of National Statistics the British Economy grew by 0.8% between April and June. This growth signifies the end to the worst downturn that the British Economy has known.

This has been hailed as a ‘major milestone in our long term economic plan’ by George Osbourne.

The IMF predicts growth this year of 3.2%, this rate of predicted growth is faster than any other major economy.

With this new era beginning ensure your business is in the best possible position to be ready to take advantage of the business opportunities ahead, consider if you have timely information about your business performance, and whether you understand where the cash within your business goes.

Contact Marshall Smalley Accountants to discuss your accounting and business requirements and we can help you understand your business.

Tax Credits and Tax Credit Renewal Packs 2014

If you are required to complete a self-assessment tax return you should get all your information into your accountant as soon as possible to enable them to be processed on time to meet the tax credit deadline – no later than 31^st July.  You can estimate it but this means you may receive too little or too much and the tax credits will need to be adjusted at a later date.

If you have not already received your tax credit renewal packs you should expect to receive them by the end of June 2014.  If you have not received them by this time you should contact the Tax Credit helpline Tel. 0345 300 3900 to request the renewal forms.  In the meantime, your payments will continue.  Please note you cannot obtain a pack online.

 

Marshall Smalley 2014 Budget Overview

 The Budget delivered on 19 March 2014 was a budget for “makers, doers and savers”.

This is our summary of some of the main changes.

 

BUSINESSTAXES

Corporation Tax: as previously announced from 1 April 2015, the main rate of corporation tax will be reduced to 20% so the rate will be the same for all companies whatever their taxable profits.

Small companies’ rate: this will be 20% from 1 April 2014 with the full rate being 21%.  The effective rate of tax for profits between £300,000 and £1,500,000 is 21.25% for the year ending 31 March 2015.

Capital allowances: the rates and thresholds of the main capital allowances from April 2014 are an 18% writing-down allowances and the 100% Annual Investment Allowance limit is doubled to £500,000 until 31 December 2015, thereafter it will revert to £25,000.

Employment allowance: as previously announced from 6 April 2014 some employers will be able to offset up to £2,000 each tax year against Class 1 NI contributions.

Research and development: for small loss making innovative companies the credit available for payment increases from 11% to 14.5% from 1 April 2014.   

PERSONAL TAXES

Income tax: as previously announced the personal allowance increases to £10,000 from 6 April 2014 and the basic rate tax band reduces to £31,865. The additional rate of tax chargeable on income over £150,000 remains at 45% for 2014/15 tax year. Budget 2014 has announced that, for 2015/16, the personal allowance will be increased to £10,500 and the basic rate limit reduced to £31,785.

National insurance: from 6 April 2014 the employee’s national insurance rate is 12% below the upper earnings limit and 2% above that, the rate of employer’s national insurance contributions is 13.8%.

Inheritance tax: the £325,000 threshold for the nil-rate band is frozen until 2017/18.

Capital Gains Tax: the annual exemption for 2014/15 is increased to £11,000.The final period of home ownership exempt from capital gains tax in most cases reduces from 36 months to 18 months from 6 April 2014.

Entrepreneurs Relief (ER): from 6 April 2014, the lifetime limit of gains which can benefit from ER remains at £10m.

Individual Savings Accounts: Budget 2014 announced significant flexibility and increased the allowance too; the annual limit is £11,880 for 2014/15 and increases to £15,000 from 1 July 2014 when restrictions on transfers between stock and cash ISA accounts are to be removed.

Childcare scheme: the Government had previously announced the extension of tax relief to employees and the self employed too. The new system will start from autumn 2015. Budget 2014 has announced an increase in the value of the scheme to a maximum of £2,000 each year.

Pensions: Budget 2014 announced the most far reaching changes for almost a century to the taxation of defined contribution pension schemes. The reforms will take effect from April 2015 with interim measures introduced from 27 March 2014. From April 2015 everyone over 55 will have full flexibility when accessing their pension fund.

VAT

Registration and de-registration thresholds: whilst the VAT rates remain unchanged the registration threshold will increase to £81,000 and the de-registration threshold to £79,000; both changes apply from 1 April 2014.

The Chancellor of the Exchequer’s Autumn Statement

The Chancellor of the Exchequer’s Autumn Statement

Announced on 5th December 2013 were a range of measures aimed at individuals and business.

State Pension Age increased

State pension age will increase to 68 from mid-2030’s affecting many people who are currently in their 40s. And it will rise again to 69 from the late 2040’s affecting many people who are currently in their 30s.

The Chancellor also confirmed that the State Pension Age will be reviewed at 5 year intervals in line with increases in life expectancy, The 5 year reviews on the State Pension Age will be set with the aim of ensuring that people spend no more than one third of their expected lifespan drawing a pension. This is a clear signal that the goalposts may be moved several times before most people can reach retirement age.

The rise in the age trigger for the state pension makes retirement planning even more important for those who want to stop working or slow down, before their late 60’s.

 Income Tax changes

The personal allowance will increase to £10,000 from April 2014.

The higher rate tax band of 40% will therefore apply to income of £41,865 (£10,000 + £31,865) rather than the current £41,450 (£9440 + £32010). 

Transferable personal allowance

Married couples or civil partners will be able to transfer up to £1,000 of unused personal allowance provided the recipient is a basic rate taxpayer. For some this could be worth up to an extra £200 a year.

ISAs allowance rises

From April 2014 the ISA allowance is £11,880 of which £5,940 can go into a cash ISA. The Junior ISA allowance will also increase to £3,840.

Capital Gains Tax (CGT) exemption increased

The annual exemption for CGT will increase by £100 from April 2014 to £11,000 and will increase to £11,100 from April 2015.

  Principle Private Residence Relief

There were also changes to Principle Private Residence Relief. Previously if you moved out of a house that was your principle residence and sold the property within 3 years, you paid no CGT. From April 2014, this 3 year period will be reduced to 18 months.

 National Insurance Contributions

The Chancellor announced that there will be no employer National Insurance Contributions for employees under 21 on earnings up to the upper earnings limit from April 2015.

 Business partnerships with mixed membership

Partnerships where profits are allocated to a  corporate partner, where an individual partner can benefit, or where partnership losses are allocated to an individual partner instead of a corporate partner, to allow them to access certain loss reliefs will be subject to review.

HMRC let property campaign

Let Property Campaign, which was recently announced by HM Revenue & Customs (HMRC) as a way of recovering upwards £500m in tax from an estimated 1.5 million landlords who haven't paid tax on their rental income. All landlords will be targeted including those like you who only own one property, those who have holiday lets and those who let houses in multiple occupation. It is intended that the campaign will run for at least 18 months and during that time what HMRC wants landlords to do is tell it voluntarily about their untaxed rental income, pay any unpaid tax due on it as well as any interest and penalties. The advantage is that by volunteering the information during the campaign, you'll get any penalties due at a preferential rate which will be a lot lower than the maximum penalty which can be as much as 100% of the tax due.

As Marian Wilson, head of HMRC Campaigns points out: "It is always cheaper to come forward voluntarily and pay the tax you owe, rather than wait for HMRC to come calling."

If you don't voluntarily disclose the fact that you owe tax on your rental income and HMRC finds out about untaxed income and launches an inquiry or investigation into your tax affairs, you could face stiff penalties and a possible criminal conviction.

Marshall Smalley Accountants can help with the whole of this process and make the disclosure on your behalf.

We have a number of cases currently being processed.

Please call 0115 956 5171 to arrange a free no obligation meeting to discuss the process and how we can help.