Tax Video Update - Autumn Statement 2013

05 December 2013 •

Warrener Stewart Tax Update

Autumn Statement 2013

The Chancellor announced a number of changes, some potentially significant and some which come into effect immediately.

Capital Gains Tax - Principal Private Residence Relief

If you sell a property you have lived in, you may be eligible for Principal Private Residence Relief on the gain.  Hitherto it has been possible to get relief for the last 3 years of the gain, even if you didn’t live in the property the whole time.  That period will be halved to 18 months from 6 April 2014.

Residential Property owned by Non UK Resident Individuals

From April 2015, individuals who are non UK resident will face a capital gains tax charge on disposals of UK residential property.  It is not clear at this stage whether the charge will be on the whole gain since you bought the property or whether it will just be on the gain calculated to have accrued since April 2015. 

Abolition of NICs for Under 21s

From 6 April 2015, employers will not be subject to Class 1 secondary NICs on earnings paid to employees under the age of 21 up to the Upper Earnings Limit. 

Personal Allowance Transfer between Couples

From 6 April 2015, someone who is earning less than the personal allowance will be able to transfer up to £1,000 of their personal allowance to their spouse or civil partner, provided their spouse or civil partner is a basic rate taxpayer, thus achieving an annual tax saving of up to £200.

Partnerships with Mixed Membership

HMRC are concerned that partnerships with a partner who is an individual and a corporate partner are being used to avoid tax:  profits are allocated to corporate partners artificially so the individual partners pay less tax and losses are being allocated to individuals artificially so the individual partners get more tax relief.  Constraints will be imposed from 6 April 2014.  Anti-Avoidance rules are in place from today.

Dual Contracts

Legislation will be introduced in Finance Act 2014 to prevent high-earning non-domiciled individuals from avoiding tax by dividing up their employment artificially into two contracts, one UK and one overseas.

Personal Allowance and Higher Rate Threshold

The personal allowance will rise from £9,440 in 2013/14 to £10,000 in 2014/15. 

The benefit of this for people on middle incomes will be offset by the fact that the threshold for higher rate tax is being reduced at the same time.

Tax Video Update - VAT and Bad Debts

29 November 2013 •

Warrener Stewart Tax Update

VAT and Bad Debts

Why the reminder?

Given the number of problems businesses are facing collecting money from their customers we thought this would be an ideal opportunity to discuss how to claim back output VAT on an unpaid sales invoice.

Tax relief available

This is obviously not relevant to clients on cash accounting as VAT is only paid over to HMRC when an invoice is settled.

In other circumstances output tax is declared on a VAT return based, more often than not, on the date of the sales invoice.  Consequently VAT can be paid over to HMRC prior to settlement of the invoice.  This can cause cash flow problems especially if the customer never pays. 

We therefore think it is important that businesses know how to reclaim the VAT paid to HMRC and in doing so reduce the loss suffered to the net amount of the invoice.

Conditions for reclaiming output VAT

The main condition is that the debt must be more than six months overdue for payment.  A common mistake is that the first point at which bad debt relief can be claimed is six months from the date of the sales invoice.

The other two conditions are that debt has been written off in the accounts of the business and it has not been paid, sold or factored under a valid legal agreement.

Another common mistake is that legal proceedings must have started in order to make a claim, this is no longer the case.

One final point to consider is that to ensure HMRC are not out of pocket the above rule works both ways.  Consequently, if there are creditors which have been outstanding for more than six months HMRC can request that any input tax claimed is repaid.  However, the positive point to remember is that input tax can be reclaimed at a future date if the invoice is eventually paid.

Conclusion

Having a debt which is unlikely to be settled can cause problems.  However knowing how to claim back the output VAT at least mitigates to some extent the loss suffered. If you are in any doubt whether you can benefit from the above, please get in touch and we will be happy to answer any queries you may have.

Christmas is the time of giving – but what are the tax implications of holding a staff party?

25 November 2013 •

Providing your staff party is open to all your employees, HMRC allows an exemption from tax for those who attend; here is an outline of the rules that apply:

·         There is a £150 (average cost per person) per tax year limit

·         The average cost per person must include the VAT and any accommodation and/or transport provided.

·         £150 is not an allowance but the threshold for exemption; if the cost is £151, the whole benefit is taxable.

Are you allowed more than one party per tax year?

You can offer staff more than one party per tax year providing the combined total does not exceed £150; for example you could have a low cost summer party at £40 per head and then a Christmas party at £100 per head.

If you have two functions, at say £100 and the other at £75 per head, you can choose which party to make exempt.  If you opt to make the £100 function exempt, then the £75 function is taxable in full which means that if an employee only attended the £75 function, they would be taxed on the £75 benefit in full. If the employee attended both functions, they would still only be taxed on the £75. Obviously, if an employee does not attend either function or just the one with a cost of £100, no taxable benefit would arise.

In practice employers will often settle any tax due on behalf of employees. If you are in any way uncertain how to apply these rules please do not hesitate to contact us on 020 77316163 or email info@warrenerstewart.com

 

Tax Video Update - Seed Enterprise Investment Schemes

14 October 2013 •

Warrener Stewart Tax Update

Seed Enterprise Investment Scheme (SEIS)

Why the reminder?

FA 2012 introduced the Seed Enterprise Investment Scheme (or SEIS) which offers great tax efficient benefits to individuals while also encouraging investing in small and early stage start-up businesses in the UK. SEIS applies for shares issued on or after 6 April 2012.

We are concerned that not enough investors and investees are coming together to use the relief.

Tax reliefs available

Income tax relief is available at 50% of the cost of the shares, on a maximum annual investment of £100,000. The relief is given by way of a reduction of tax liability, providing there is sufficient tax liability against which to set it. It is possible to carry back relief to the preceding tax year. The shares in the new SEIS company must be retained for at least three years.

In addition, 50% of chargeable gains realised from disposals of any assets in 2013/14 and reinvested via the SEIS in the same year will be exempt. This was 100% for gains made in 2012/13.

Chargeable gains on disposals of SEIS shares will be exempt from Capital gains tax provided the shares are held for at least three years.

Finally, provided the business does not perform well, the capital loss (up to the amount of income tax relief obtained) can be converted into an income loss and set against income tax of 2013/14 and/or 2012/13 tax year.

Qualifying company and investor

There are number of factors to take into account to be eligible for the reliefs.

First of all, the qualifying activity must be a new trade (less than 2 years old) and the money raised via SEIS must be spent on a qualifying business activity within 3 years of the issue of the shares. SEIS company must have a permanent establishment in the UK, cannot have assets of more than £200,000 immediately before the share issue and the number of full-time equivalent employees must be less than 25 when the shares are issued. The total amount raised by the company through SEIS cannot exceed £150,000; this is a cumulative limit and not an annual one. The company cannot previously have raised funds through the EIS or VCT schemes.

Employees of qualifying companies cannot invest, nor can directors who own or hold shares for more than 30% of the company.

Conclusion

SEIS is one of the most generous tax schemes available in the UK and is intended to be available for only a short period of time. The availability of any tax relief depends on the individual circumstances of each investor and of the company concerned. If you are in doubt whether you can benefit from the above changes, please get in touch and we will be happy to answer any queries you may have.

A Brighter, Better Economy?

02 October 2013 •

For the first time since 2008 over 1,000 business leaders highlighted that outlook for the UK economy is now brighter, according to the latest poll from the Institute of Directors.

The IoD poll1 asked members to assess the statement that ‘the outlook for the UK economy is now brighter than at any stage since the onset of the financial crisis in 2008’; which 62 percent agreed with. The poll highlighted that there is a renewed confidence in the UK economy with 34 percent of members agreeing that they had high confidence in the economy, with a further 44 percent citing medium confidence.

When looking at their own organizations members maintained this positive outlook with over half, 59 percent, ranking their confidence about the outlook for their own organization between the scales of 7-10.  Overall the mean score for all those polled was 6.3, a good indication that the economy is buoyant.

A further indication that the economy is moving can be seen by 42 percent of members being positive about their own company’s revenue with 29 percent of them believing they would remain profitable. 

Commenting on this latest poll, Colin Edney, director at Warrener Stewart said; “Confidence in the economy and in business is improving. Through our work with owner managed businesses we have witnessed the highs and lows that economy has dealt them, but are finally seeing a level of positivity returning.

With unemployment levels falling by 57,000 in the last three months2 and UK retail sales rising by 0.2 percent in June3, according to the Office for National Statistics latest figures, businesses are right to feel optimistic, now is a good time to review their business plan and assess additional opportunities.”

 

Reference:

1. http://www.iod.com/influencing/press-office/press-releases/new-iod-poll-economic-outlook-at-its-brightest-since-2008
2. http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/july-2013/index.html
3. http://www.ons.gov.uk/ons/index.html

Tax Video Update - IHT changes for non-domiciled spouses

09 September 2013 •

Warrener Stewart Tax Update

Inheritance Tax Changes for non-domiciled spouses, September 2013

What is the change?

The Finance Act 2013 includes the following changes:

1.    An increase in the spousal exemption to the nil rate band in force at the time of the relevant transfer.
2.    An election can now be made to allow non-domiciled spouses to be treated as UK domicile for inheritance tax purposes.  This can be made either during their life time or on death.

Increase in spousal exemption

For deaths occurring before 6th April 2013, the exemption for transfers from a UK domiciled spouse and their non-domiciled spouse was limited to £55,000.  Transfers above this life time limit were subject to an immediate charge to inheritance tax.  This change will allow estates of up to £325,000 to be passed on death from a UK domiciled individual to his non-domiciled partner without suffering any charge to inheritance tax.

Election to be treated as UK domiciled for inheritance tax

Where an IHT liability would arise on death, the non-domiciled spouse should consider whether to make an election to be treated as UK domiciled.  The election will allow a non-domiciled spouse to be treated as UK domiciled for inheritance tax purposes.  The election does not affect the position for income tax or capital gains tax, so the individual may continue to claim the remittance basis in respect of foreign income and capital gains if they wish.

Conclusion

The obvious tax advantage of the making the election is not only will the couple be able to transfer assets freely during their life time but will also qualify for a further nil rate band.  However, once the previously non-domiciled individual is treated as UK domiciled, their worldwide assets will be within the scope of IHT and not just UK situs assets.  Although there are steps which could be taken to ensure the non-UK assets remain outside the scope of UK inheritance tax.

Conditions attached to both the life time election and the death election to ensure they are valid.  Care needs to be taken when advising clients whether to make an election as it can have a significant effect on the amount of inheritance tax that becomes due, especially given that current rate of this tax is 40%.
 

Tax Video Update - Streamlined US Tax Filing

16 August 2013 •

Warrener Stewart Tax Update

Streamlined US Tax Filing, August 2013

Need to file an old US Individual tax return?

The IRS has announced a new streamlined filing compliance procedure for non-resident U.S. taxpayers, put into effect from September 1, 2012.  The new streamlining has been introduced after recognizing that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs).  The aim is to provide an efficient means for low compliance risk taxpayers to bring their US tax affairs to date.  

What is streamlining?

The streamlining procedure will bring taxpayers up to date with regards to the past 3 years of federal returns and the past 6 years of FBARs.  For those taxpayers presenting low compliance risk, review of the streamlined tax returns will be expedited by the IRS and no penalties or follow-up actions will be pursued.  If the submitted returns show less than $1,500 in tax due in each of the years, they will be treated as low risk and processed in a streamlined manner.   Taking advantage of streamlining is simple and can be obtained by simply sending your completed return and streamlining questionnaire to a specific filing address and noting on the return that the streamlining process is being used.

Eligibility

Streamlining is available for non-resident U.S. taxpayers who have resided outside of the U.S. since January 1, 2009 and who have not filed a U.S. tax return during this same period.

Conclusion

It is always advisable to keep on top of your US tax affairs to avoid penalties and administrative problems (e.g. obtaining passports).  With the new streamlining process in effect, there really is no excuse!

Tax Video Update - Enterprise Management Incentive Scheme changes

01 July 2013 •

 

Warrener Stewart Tax Update

Enterprise Management Incentive scheme, July 2013

What is the change?

The draft Finance Bill 2013 includes the provision to allow the period from the date the share options are granted under an Enterprise Management Incentive (“EMI”) scheme to count towards the 1 year period needed to qualify for Entrepreneur’s Relief.

What is an EMI scheme?

EMI is an HMRC approved share incentive scheme to reward and retain key staff by offering them options to purchase shares in the employing company.  The idea behind EMI is that the option price (the amount payable for the shares) is set at the open market value of those shares at the date the options are granted; as the key employees increase the value of the company over time they can then exercise the options and acquire the shares (at the price set when granting the options) without any tax consequences.

Why is the change important?

Entrepreneur’s Relief allows a 10% capital gains tax rate to be used (subject to satisfying certain criteria) on the sale of shares.  Two of the key criteria surrounding the sale of shares owned by employees are that the employee needed to own at least 5% of the shares in a company and they needed to have owned those shares for at least 1 year.

HMRC had previously announced the removal of the need for the shareholding to exceed 5% of the employing company where those shares were acquired under an EMI scheme but until now the 1 year ownership period only counted from the date the shares were actually issued to the employee (i.e. the period from date of grant of the options did not previously count).

Most EMI share options include a provision to allow unexercised options to be exercised immediately prior to a possible sale/takeover of the company to allow the employees to sell the newly acquired shares.  Without the recent change the employee would have faced a capital gains tax rate of up to 28%, however, after the change mentioned above as long as the options had been granted one year prior to the sale the employee should face a capital gains tax rate of 10%.

Conclusion

The change to allow the period from date of grant of the options to count toward the 1 year period for Entrepreneur’s Relief has brought back the EMI scheme into sharp focus as an extremely tax efficient way to reward key members of staff and, more importantly, to retain those key members.

We would be more than happy to explore with you the mechanics of setting up an EMI scheme and the potential tax savings both for the employees and the employing company.

Tax Video Update - The Renewals Basis

24 June 2013 •

 

WARRENER STEWART TAX UPDATE

REVISED GUIDANCE ON RENEWALS BASIS

What is the change?

Revised guidance was recently issued by HMRC on tax relief available on the cost of renewal of assets for businesses.  This update focuses on the impact for landlords of residential property.

What is the Renewals Basis?

Up to April 2013, there was an option available for landlords who let fully furnished residential property to claim either the wear and tear allowance which is based on 10% of rents received, or the renewals basis, which is based on actual costs incurred on replacing items in property.  Once selected, the option of either wear and tear or renewals could not be changed and in our experience, it was often more beneficial to claim the wear and tear allowance.

Where a property is not let fully furnished, the wear and tear allowance is not available and so the renewals basis was the only option available to the landlord to obtain tax relief on these types of costs.

From April 2013, however, whilst the wear and tear allowance continues to be available on fully furnished lettings, the new guidance from HMRC states that the renewals basis will no longer apply to expenditure on replacing items such as cookers, white goods and so on.

Furnished or unfurnished?

For a residential property to qualify as furnished lettings (and therefore able to claim the wear and tear allowance), the tenant needs to be able to occupy the property without the need to bring any significant items of furniture with them.  Significant items of furniture includes, beds, chairs, tables, sofas and kitchen appliances.  Provided that this is the case then a claim for the 10% allowance would be appropriate.

To support a furnished letting position, it may also be worthwhile to include an inventory of the furniture as part of the letting agreement, if this is not already done.  If the property is not let furnished then no claim for wear and tear is available.

Conclusion

The above change will see a reduction in tax relief available to landlords of unfurnished and partly furnished properties particularly where there is a requirement to replace these types of items moving forward.

Same intelligent approach. New look.

23 May 2013 •


Why the change?

We wanted to capitalise on our 30 years of experience and encompass this in a new brand identity, one that highlights the services we offer and incorporates our core values. 

At Warrener Stewart we are Chartered Accountants, Intelligent Advisors; a dedicated team of chartered accountants, chartered tax advisors, registered auditors and highly responsive, proactive business advisors to owner managed businesses and entrepreneurs of businesses striving for success.

Our Ethos

Wherever you are in the business lifecycle our aim is to help you make better informed business decisions with greater confidence, so that the business fulfills its potential and you achieve your personal goals.

Take a look around our new site

We have updated our site to include details about our process and ethos, emphasising how Warrener Stewart’s client management team can work with you.

To make ourselves stand out in a busy marketplace the redesigned website now includes more details about the range of services that we can offer, plus information on the target markets that we work with. 

We will continue to update and improve the site to ensure we keep you informed about any changes that could affect you or your business.

 

 

 

Tax Video Update - Simplified Tax Accounts

30 April 2013 •

 

WARRENER STEWART TAX UPDATE

SIMPLIFIED TAX ACCOUNTS

What is the change?

The draft Finance Bill 2013 includes the provision to allow cash accounting for new and existing unincorporated businesses from 6 April 2013.

What is cash accounting?

Cash accounting is a straightforward accounting method which will mean that tax liabilities are based on actual money received by the business less amounts actually paid out. This is different from current legislation that expects you to account for unpaid trade debtors and creditors.

To qualify:

  • You must have turnover below £79,000.
  • You must be unincorporated i.e. not a Limited company or LLP.
  • Once you are in the scheme you must deregister once your turnover exceeds £158,000.

Can new and existing businesses join?

Yes, new unincorporated businesses will automatically enter the scheme. Existing businesses can also join the scheme but there will be an “opening adjustment” which adjusts the tax advantage for being a cash basis tax flier over a 6 year period.

Conclusion

Any simplification is good news for HMRC. However, they have introduced special rates and restrictions that may make it inappropriate for your business. As an existing client, we will automatically appraise the position when we complete your 2013/14 tax return and so this is for your information only and no action is required from you at this stage.

Marketing experts reveal goals and challenges for 2013

21 January 2013 •

Businesses and brands that focus on their customers and getting the basics right will be most successful in 2013, according to experts at a recent business network and marketing event.

The advice from various marketing experts, including YouGov and Marketing Week Magazine, also said that businesses with strong brand values - beyond the purpose of selling - were likely to fare well in the year ahead.

Commenting on what were considered the best brands of 2012, the event panel highlighted that simple strategies were often the best. Long-running campaigns were similarly felt to demonstrate consistency and attract mass audiences.

YouGov's Tim Britton said: "Those that stick to the basics and do the basics well are guaranteed a degree of success."

Demonstrating a brand's value, as well as communicating its brand values, is also now a major factor for gaining consumer trust, said AMV BBDO's Cilla Snowball.

This was also echoed by Samsung's Andrew Garrihy, who said: "For a brand to be truly great, it has to be aligned behind a higher purpose. It has to pursue the activation of that purpose in a really authentic manner. The brand has to be generous, humble, relentless, passionate and successful."

Tightening budgets were considered the major challenge facing marketers in 2013, with marketing often seen as an overhead rather than a revenue-generating function.

"This year, more than ever it's about being more accountable and really focussing on the numbers and on the return," said Garrihy. "Never before have companies needed marketers like they need them now. But we need to help them understand that."

The panel suggested that gathering evidence and measuring business performance were key to marketing success.

Business Groups Look Ahead To 2013

02 January 2013 •

New Year messages from the Federation of Small Businesses (FSB) and the Confederation of British Industry (CBI) have warned of the challenges facing UK businesses in 2013.

The FSB's national chairman, John Walker, said that the group's members were heading into 2013 with more confidence than in 2011 or 2012 and that many small businesses would be looking to grow and invest in the next 12 months. He said that access to bank finance had continued to be an issue in 2012 and he hoped that the Funding for Lending and Business Bank initiatives would help with this.

Mr. Walker said: "The signs seem to be positive, but it's going to be a long road ahead with some economists warning of a triple-dip recession, and others cautious optimism. There is little doubt small firms are best placed to help the recovery as long as they have the confidence and ability to invest and grow."

The New Year message from the CBI focused on the UK's role in Europe and its trade relationships with the US. The CBI's director-general, John Cridland, said that it was vital for the UK to be able to use the EU as a launch-pad for increased exports and global trade.

Mr. Cridland said: "We can't beat around the bush - we pack a bigger punch in securing trade deals inside the EU than outside. The US wants the big prize - access to a market of 500 million customers across the EU, not just 60 million on our own shores. So the best way of getting the right deal for the UK is on an EU-wide basis."

"It's essential we stay at the table to bang the drum for businesses and defend our national interest, particularly protecting our world-class financial services industry to maintain our competitiveness internationally."

Elsewhere, the British Chambers of Commerce (BCC) also reminded the Government that plans for the Business Bank would need a kick-start in the New Year. John Longworth, director general of the BCC, said: "We recognise that the road to a British Business Bank is a difficult one to travel. Yet business is clear that the new institution must develop into a major source of both patient growth capital and risk capital."

Mr. Longworth said that, in order for the bank to have a truly radical and transformative impact, it would need much larger amounts of capital in the long-term. He said: "We have one opportunity to radically change Britain's business finance system, and we must get it right."

“we were so impressed at their quick response times and ability to resolve even the most complicated financial problem”
Pen Hadow