Stamp Duty Land Tax – Individuals

04 July 2016 • HMRC News, Tax Videos

 

As of 1 April 2016, those acquiring an additional property will need to be aware of higher rates of Stamp Duty Land Tax. Buyers are required to pay 3% on top of the normal bands which can be as high as 15%.

Conditions - There are four conditions for the higher rate to apply for individuals. These include the value of the interest, the number of interests owned including non-UK dwellings and whether the property is going to be a main residence, as the higher rate does not usually apply to replacing your home.

Pitfalls – There are certain pitfalls to try and avoid including:

  • Where a property is bought jointly, if one purchaser is subject to the higher rate tax, the entire transaction will be too. 
  • If the property is purchased by an individual, their spouse or civil partner are treated as a joint purchaser, and each of their interests in dwellings are combined, increasing the potential of the transaction being higher rate.

Multiple transactions - If two or more dwellings are purchased in a single or linked transaction, the buyer could be entitled to Multiple Dwellings Relief. This works out the mean consideration of each dwelling in the transaction and is subject to a minimum rate of tax of 1%. Where six or more dwellings are purchased in a single transaction, the purchaser can choose whether to apply the non-residential rates of SDLT.

Stamp Duty Land Tax - Companies

For Companies, Stamp Duty Land Tax is charged at 15% on residential properties costing more than £500,000.

Where a transaction would not trigger the 15% rate, it will still be subject to the additional 3% even if it is the only residential property that the company owns. There are no special exemptions from the higher rate for companies. This said, the higher rate does not apply to non-residential or mixed use properties, transactions with a consideration of less than £40,000 and caravans, houseboats and mobile homes.

Reliefs - There are SDLT reliefs available from the 15% rate for certain types of properties including rental properties or properties acquired for development, redevelopment or trading. There is no similar relief from the higher rate tax. Tax relief, however, can be clawed back if, for example, within 3 years the use of the property changes from the relief initially claimed or a connected person occupies the property.

Annual Tax on Enveloped Dwellings

This is a daily tax, paid annually, by Companies, at the beginning of the financial year for companies owning residential properties valued at over £500,000. The current valuation date is 1 April 2012 however this will move to 1 April 2017 for the next chargeable year. The charge is dependent on the value of the property, and a return needs to be filed and the tax paid annually by 30 April.

Reliefs - Like with Stamp Duty Land Tax, similar reliefs are available from the ATED charge, however the ATED reliefs are fully changeable. Some properties including hotels, care homes and prisons are not considered dwellings and are exempt.

Bowled over – Warrener Stewart treat staff to an evening of ten pin bowling

30 June 2016 • Warrener Stewart News

Rather than hitting the tiles after work, Warrener Stewart recently encouraged their staff to strike lucky and hit the pins!

Staff were treated to a night of ten pin bowling at a local American themed bowling alley. The company neatly divided into four teams each led by one of the four directors; Colin Edney, Gary Chapman, Nick Morgan and Jon Last.

The competition between the lanes was incredibly tense as several staff led with early strikes – including Alex Eagle who claimed to be a novice bowler; whilst others simply watched as their balls rolled into the gutter. It was a clean sweep for the winning team championed by Nick, with fellow team mates, Stuart Barbour, Francis Kershaw, Jack Moody, Ryan O’Connor and Victoria Dent.

Commenting on their win, Nick Morgan said; “It was a great evening – everybody thoroughly enjoyed themselves. Of course winning always helps!”

Pictures clockwise: l-r

  1. Half of the winning team; Stuart Barbour, Francis Kershaw and Jack Moody
  2. The other side of victory; Ryan O’Connor, Nick Morgan and Victoria Dent.
  3. Limbering up Jon Last and Charlie Dessain
  4. Bowlers in arms; Jon Last pictured with Colin Edney, Felicity Butler, Alex Eagle, Ashleigh Molton and Jack Moody.
  5. Top tips from Ryan Lane to Gary Chapman, assisted by Freddie Hollom and Sarah Libros
  6. Striking it lucky are Victoria Dent and Felicity Butler

The most frequently asked questions about US tax filing

20 May 2016 • Tax Videos, US Tax returns

 

Whilst many Americans living in the UK may be focused on the race for the White House, a more important date for them is looming – 15 June. This is the deadline for any US citizens living abroad when they must file their individual tax returns.

Head of tax at Warrener Stewart, Damian Talbot, who is both an EA (Enrolled Agent) and an Authorised Acceptance Agent has noted that recently they have been advising several new clients about their American tax liabilities.

“The number of enquiries about filing US tax returns has increased quite considerably in the past two months, ahead of the final deadline,” notes Damian. “We are qualified to advise on both US and UK tax affairs and find that many of our enquiries are based around these most frequently asked questions.”

A review of the most common questions we are asked about American tax liabilities

1. Do I need to file a 1040 if my income is below the Foreign Earned Income Exemption (FEIE)?

Yes. A US citizen is required to file a US tax return every year that their total income exceeds the standard deduction and exemption (for 2015 this is $10,300/£7,015). If the total income is from foreign earnings below the FEIE limit then it is likely there will be no tax to pay, however a tax return needs to be filed so that the income is reported and the exemption can be claimed as this is not an automatic relief.

2. Do I need to file an FBAR if all accounts individually are below the $10,000 threshold?

Potentially, Yes. The FBAR (Foreign Bank Account Reporting) is required if the maximum balance during the year of all your non US bank accounts COMBINED are over the $10,000 threshold. So if you hold 3 accounts, with maximum balances during the year of $4,000 year, you will need to file. It doesn’t matter if this figure relates to the same funds which have been moved around you accounts. The FBAR report must include all foreign bank accounts, not just those exceeding the $10,000 threshold.

3. Does my non US citizen spouse need to file?

Not necessarily. Like any other person a ‘non-resident alien’ spouse would need to file a US tax return if they received US source income. However being married to a US citizen does not impose any US filing compliance. The US spouse will simply need to file a ‘married filing separate’ tax return indicating that their spouse is a non-resident alien who is not required to file.

4. Is it too late to complete a US return for years I’ve missed?

No. You can still file for years that you’ve missed, it’s never too late. If you owe US tax then interest and penalties will continue to apply until submission/payment so the sooner your affairs are in order the better.

5. What is FATCA?

Many US citizens living in the UK are finding that their UK (and other non US) banks are sending them rather intimidating FACTA compliance packs asking them to disclose any connection to the US. This has come about due to the new FATCA regulations.

FATCA (the Foreign Accounts Tax Compliance Act) has been introduced in the US and requires all banks and other foreign financial institutes to report information about the foreign bank accounts of their clients who are US citizens and/or residents. This is aimed to prevent tax evasion through the use of offshore accounts.

For a US citizen who has fallen behind on their US tax filing and foreign bank account reporting this can be very concerning. Not only is the compliance packs sent by the bank a long and confusing form, but it is also getting reported to the IRS who will be informed about accounts that have potentially not been disclosed.

This legislation has been brought in to catch the ‘big fish’ tax evaders not your average delinquent filer but it is another reason to get caught up with your US tax compliance sooner rather than later.

6. How much will it cost to get up to date with my US taxes?

It may not be as much as you think. Warrener Stewart provide a free initial consultation to discuss your position with you to help get your affairs in order (whether you decide to use our services or not). From this we will be able to provide you with a quote for the completion of you US tax return, FBAR reports and any streamlined procedures as applicable.

An evening of conversions for Warrener Stewart at The Rosslyn Park Floodlit 7’s

13 May 2016 • Warrener Stewart News

On a balmy evening, last Thursday, 5th May, Warrener Stewart treated guests to a spectacular evening of sevens rugby hosted at Rosslyn Park FC. Winners of the past five years, Harlequins were keen to try and retain the cup and faced strong opposition from sides including London Irish, Worcester Warriors and Rosslyn Park.

The hosts of the night, Rosslyn Park, fielded a strong team including one of the Warrener Stewart sponsored players, Harry Broadbent, to reach the final against Ramblin Jesters. Despite a valiant effort from the home side, the Jesters were crowned winners by 26-14.

“It was a perfect night,” noted Nick Morgan from Warrener Stewart who co-ordinated the event, “One which combined a great atmosphere at Rosslyn Park with plenty of lively chat, some amazing tries and some light refreshments!”

Pictures clockwise: l-r

  1. It’s a full house of Rebecca Ferguson of Gordon Dadds LLP, with Colin Edney from Warrener Stewart, joined by David Measures from Carla International, Francis Kershaw, Warrener Stewart, Alex Coote, David Collins Studio and Stephen Fuller also Gordon Dadds LLP.
  2. Damian Talbot from Warrener Stewart flanks Geoff Eden of Eden Architects, Jon Last, Warrener Stewart and Nick Smith, Maddox Homes.
  3. Keeping on side are Stuart Barbour, Warrener Stewart, with Lee Watts from Kinleigh Folkard & Hayward and Chris Sarsfield, Meaby & Co.
  4. Lining up are Rupert Bruce from MinMax Limited with Mark Radford, Templar Financial Planning and Ryan Lane, Warrener Stewart.
  5. Backs in waiting, Nick Morgan, Warrener Stewart lines up with Paul Marples, Stockbridge Estates and David Collins, Warrener Stewart.

Charity accounts - know your obligations

25 April 2016 • HMRC News

Recent research conducted by the Charity Commission into the quality of annual reports completed by smaller charities concluded that many smaller charities were not aware of their reporting obligations.

This observation and the commission’s recent research outlined on Gov.uk comes as no surprise to Warrener Stewart’s Gary Chapman, the Fulham based Chartered Accountants includes several charities as clients; “We work with a number of charities completing both audits and independent examinations, together with assisting with financial reporting. For the charity sector it is imperative to maintain clear and transparent financial records. We would be happy to hear from any charities who would like our assistance with their financial reporting obligations.”

The Charity Commission’s research revealed the following findings:

Small charities not up to scratch

The research showed that just under half of the annual report and accounts that were provided to the commission by small charities met a minimum, basic standard. Many small charities do not appear to be aware of their reporting obligations - 1 in 5 sent some other form of report, 1 in 6 did not send the commission any form of report at all, and several small charities only sent their annual report and accounts after the commission had provided further explanation of the requirements to them.

However those charities that use both the commission’s annual report and accounts templates showed a significant improvement on the others, with 71% producing reports and accounts of acceptable quality.

Larger charities are improving

The larger charities report shows their accounts are improving. It tells a more positive story, with over three quarters of charities producing sets of accounts that met a minimum basic standard in 2013-14, up from just over half in 2011-12. Looking at the 3 documents that make up a set of accounts:

90% of annual reports covered either the charity’s purposes and its activities to carry them out or its reserves policy: most included both

90% of independent scrutiny reports were of the correct type, either audit or independent examination, for the charity’s size

93% of accounts met a basic integrity standard and all of the charities that were required to prepare accruals accounts had done so

But some larger charities continue to produce accounts with major flaws

Charities continue to file sets of accounts with the commission with major flaws, such as a chairperson’s statement instead of an annual report, an accountant’s report instead of an independent examiner’s report, or accounts that don’t balance. They also file annual reports that look well-presented but are not transparent about what the charity does, or about how the trustees are dealing with financial risks shown in the accounts.

More charities are talking about the public benefit that their activities provide - but not nearly enough

The public benefit report showed that whilst the number of charities meeting the public benefit requirement has improved, just over 40% of charities in their 2013/14 annual reports compared to just over a quarter in 2011/12, the numbers still need to improve significantly. Meeting this requirement is more than just discussing a charity’s activities. It also requires an assessment of how a charity’s activities have led to benefit for its beneficiaries and a statement that the trustees have had regard to our guidance on public benefit.

Spring Budget 2016 Highlights

16 March 2016 • HMRC News

Today’s Budget Statement introduced a broad range of new measures and changes to the tax landscape.  The headline announcements - and a reminder of the measures coming in from April 2016, April 2017 and beyond - are highlighted below.

Measures introduced from April 2016

Property taxation

From 1 April 2016, the purchase of buy-to-let residential property will attract a 3% surcharge over and above the usual rates of SDLT on purchases of second homes (“additional residential properties”).
In addition, the 10% “wear & tear” allowance is also to be abolished from 6 April.
For commercial property, a new SDLT rate system is to be introduced from midnight tonight.  The first £150,000 will be at 0%; the next £100,000 at 2% and above £250,000 will be 5%.

Tax on Dividends

The major change to the taxation of dividends announced last year will come into effect from 6 April 2016.  The rates of tax applicable to dividend income will increase by 7.5% at all income levels, although this is mitigated to a certain extent by a new £5,000 tax-free allowance for dividends.

Reduction in Capital Gains Tax rates

From 6 April 2016, the rates of Capital Gains Tax will reduce from 18% to 10% for basic rate taxpayers, and from 28% to 20% for higher rate taxpayers.  It is important to highlight, however, that the old rates of 18% & 28% respectively will continue to apply to gains on residential property.  

Loans to participators

The tax payable by close companies on new loans or advances (made on or after 6 April 2016) will increase from 25% to 32.5%, in line will the new tax rate on dividends for higher rate taxpayers.

Pension Allowance

As previously announced the annual pension allowance is to remain at £40,000, however, for those earning more than £150,000 per annum, the pension allowance will be tapered down to a maximum of £10,000 for those earning £210,000 or more.

Entrepreneurs Relief for Investors

Entrepreneurs’ Relief is to be extended for long term investors who subscribe for new shares (after 17 March 2016) in unlisted trading companies and hold these for three years.  There is to be a separate lifetime allowance of £10M available.

Employee Share Schemes

A restriction has been introduced to the CGT exemption on the disposal of ESS shares, acquired after midnight tonight, to a lifetime exempt amount of £100,000.

Proposed measures from April 2017

Property taxation

A restriction on the tax-deductibility of mortgage interest payments for private landlords will be introduced from April 2017 and is to be phased in over four tax years up to 2020/21.

Savings

A new Lifetime ISA is to be introduced for adults under 40 at 6 April 2017.  Individuals will be able to save up to £4,000 per annum and receive a 25% bonus from the Government up to the age of 50.

Corporation Tax 

The corporation tax rate is set to fall to 19% from April 2017 onwards.

In addition, new measures will come into effect from April 2017 onwards applicable to large corporations (i.e. those with profits in excess of £5M per year), restricting the deductibility of losses from earlier years and also the deductibility of interest costs that are allowable. 

Measures for the future

Property taxation

From April 2019, where capital gains tax is due on the disposal of a residential property, payment of the tax will be due within 30 days of completion. This is a significant change from the current Self-Assessment system, under which individuals have up to 22 months until CGT is payable, depending on the time of year of the disposal.

Employment

It is proposed that from April 2018, Employers National Insurance contributions will be payable on termination payments where the amount exceeds £30,000.

National Insurance

From 2018 Class 2 NIC for self-employed will be abolished.  There will be a consultation regarding Class 4 NIC, which are also paid by the self-employed, to consider how to build entitlement to the State Pension and other contributory benefits which used to be covered by the payment of Class 2 contributions.

Corporation Tax

The corporation tax rate is set to fall to 17% from April 2020.  It was previously announced that corporation tax would reduce to 18% from April 2020.

If you would like to explore what today’s Budget Statement could mean for you and your business, please call 020 7731 6163 to talk to one of our tax team. 

 

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