Tuesday, August 15, 2017

I make no money: do I still need to file a tax return?

Quite often people assume that, because they make no money, or because they don't make enough to pay tax, they don't need to make a Self Assessment tax return. Unfortunately that is not the case and failing to do a tax return when you have to exposes you to serious penalties. While for most employees, there is no need to file a tax return since tax is taken at source through the PAYE system, they are many instances where you will have to do a tax return, even if failing to do so does not impact the HMRC coffers.

Obviously, one can understand that if you have additional income that generates additional tax, you will in most instances be required to file a tax return. There are instances however where, even if there is no additional tax due, you will have to file a tax return anyhow. Here are a few examples:
  1. You are a director of a Limited Company. Even if the company has not distributed any dividends, you are required to file a tax return every year. 

Thursday, August 10, 2017

HMRC stops providing SA302 for mortgage applications

Today accountants as well as their clients still have to call HMRC for a paper copy of the SA302 form which is the tax calculation for a given tax year.

It's because lenders will not accept the self-serve copy printed from the HMRC online account or the commercial software used to file the self assessment return, or their commercial software does not print an acceptable version.

HMRC has been in discussion for a while with UK Finance (formerly the Council of Mortgage Lenders) and their members to understand lenders’ requirements and make the necessary changes so that they will accept self-served copies of the tax calculation from the HMRC online account or the commercial software used to file the self assessment return.

Monday, August 7, 2017

Additional Reporting Requirements for PSC

From the 26th of June onward information on people with significant control (PSC) won't be updated on the confirmation statement (form CS01) on a yearly basis anymore. Instead, one needs to inform Companies House using new forms (forms PSC01 to PSC09) whenever there’s a change.

You have 14 days to update your PSC register and another 14 days to send the information to Companies House. Companies House will need to be informed if anyone (or any entity):
  • becomes a PSC
  • ceases to be a PSC; or
  • their details change, such as the extent of their control or their address. 
This will make the requirements for PSCs very like those of company officers, where changes to a director or secretary have been filed on an event-driven basis for some time. This update to the information required about PSCs arose due to a change in anti-money laundering legislation; the spirit of which is aimed at increasing the transparency of ownership and control of companies in the UK and ensuring the information is more current.

Monday, March 27, 2017

Non doms: BIR rules relaxed

Business Investment Relief (BIR) is a very attractive relief for non domiciled persons who have untaxed earnings or mixed funds abroad and who wanted to invest in the UK.

It is used a lot in conjunction with EIS or SEIS investments allowing people to bring in untaxed earnings without being taxed under the remittance basis and at the same time benefit from the tax relief provided by such schemes. New legislation included in Finance Bill 2017 now makes the BIR scheme even more flexible for any investment made on or after 6 April 2017. Here are the changes:
  1. The definition of a qualifying investment will be extended to the acquisition of existing shares and not just newly issued shares in a target company.
  2. Where the target company is preparing to trade or hold trading investments, the period during which it must actually do so will be extended from 2 to 5 years.

Wednesday, February 22, 2017

Non doms: rebasing opportunity in April

We mentioned a fund un-mixing opportunity for non-doms in a previous article. There is another opportunity for non-doms this year, albeit only available to non-doms who become deemed domiciled in April 2017 and that have actually paid the Remittance Basis Charge (RBC) in a previous tax year. In order to become deemed domiciled in the UK in  April, one needs to have been resident for at least 15 of the last 20 tax years. If the RBC has been paid in a previous tax year past, it will be possible to rebase any assets which hold unrealised capital gains as at 5th April 2017. If those assets are then sold and remitted into the UK, only gains that accrue after April 2017 will be taxable in the UK.

Rebasing applies on an asset by asset basis and there will is no requirement that any part of the sales proceeds relating to the part of the gain which arose before April 2017 should be left outside the UK. Where the asset was originally purchased with clean capital, the entire proceeds from the disposal can be brought to the UK without triggering a remittance. However, where it was purchased wholly or partly with foreign income and gains, an element of the disposal proceeds will still relate to those income and gains and so will be subject to the remittance basis in the normal way when the proceeds are brought to the UK.

Friday, February 17, 2017

Non-doms: New Mixed Fund Cleansing Opportunity

Individuals who have been taxed on the remittance basis will have a window of two tax years from April 2017 to rearrange their mixed funds held in overseas bank accounts. Where adequate records have been kept, some amounts can then be remitted to the UK from such accounts free of tax.

The opportunity will be available to all non-UK domiciled individuals who have paid tax on the remittance basis at some point prior to 6 April 2017, even if they have not paid the remittance basis charge. This includes those where the remittance basis applied without being claimed (for example when an individual's foreign income or gains were less than £2,000). It is not available however to individuals born in the UK with a UK domicile of origin who would have become non domiciled at a later date.

This will provide a valuable opportunity for many non-UK domiciled individuals to "top-up" clean capital accounts to finance UK expenditure. The individual will need to analyse the sources of funds in the account such that an amount equal to or at least less than the clean capital can be identified. This could prove to be a time-consuming and potentially expensive process for accounts which have been in existence for some time and / or where there has been plenty of activity, particularly in terms of additions, acquisitions, disposals and withdrawals.

Thursday, February 9, 2017

Pension contributions: time is running out...

It's now the time of the year to start thinking about funding savings and pensions. And all the more this year as starting next year, high earners will see their tax benefits on pensions seriously curtailed.

There are no changes this year in VCTs, EIS and SEIS funds so there is no need to talk about those. Please refer to our previous articles on the subject. So what changes to expect this year?

1. As every year, make sure to fully fund your ISA

Each of us is entitled to pay up to £15,240 prior to 5th April 2016 into our ISA. And for the 17/18 tax year the limit will increase to £20,000. Before July 1, 2014, you could only invest half your annual ISA allowance into cash. However, following changes to ISA rules, you can invest the full £15,240 allowance into a cash ISA. This is an interest-bearing account that carries no risk, although as interest rates are so low, your returns may be eroded by inflation. Also note that you can invest some of your allowance in Innovative Finance ISA, such as P2P funds.

Don't forget that your kids have an allowance as well. The Junior ISA allowance for 16/17 is £4,080.

Thursday, December 15, 2016

What is a European VAT number?

In July 2013, VAT rules for digital services sold to individuals and non VAT registered businesses were changed. From that date, these services, when supplied to EU consumers, are to be subject to VAT in the Member State where the customer belongs, even if the supplier has no EU presence. This means that non-EU businesses would have been required, under the normal rules, to register separately and account for VAT in each and every Member State in which they make those supplies. For example, a Canadian business with customers in the UK, France, Germany and Holland would have to register in, and submit declarations to each of those Member States.

In order to simplify the process, a special scheme was created that offers eligible non-EU businesses the option of registering electronically in a single Member State of their choice and account for VAT on their sales of electronically supplied services to all EU consumers on a single quarterly electronic VAT declaration which provides details of VAT due in each Member State. It's called the Mini One Stop Shop (MOSS). The return is submitted with payment to the tax administration in the Member State of registration which then distributes the VAT to the Member States where the services are consumed. Those businesses are issued a VAT number that starts with EU rather than the 2 letter code of the European country where they are registered.

Thursday, December 1, 2016

Saving tax with Deferral of Capital Gains

While Capital Gain Taxes have been slashed in the recent budget to 10% and 20% (from the 18% and 28% that it used to be), CGT has remained unchanged for residential property gains. While the tax rate for gains is lower than the one for income, amounts tend to be much bigger and far appart, making it harder to use allowances and low rate bands.

This is where deferral comes in handy. The Enterprise Investment Scheme (EIS) provides one of the mechanisms that allows such a deferral. Most people misunderstand that the general EIS conditions for income tax relief are much more restrictive than the conditions for CGT deferral. In particular the requirement that one owns less than 30% of the company or that one is connected to the business only applies to the income tax relief component of the EIS, not the CGT deferral. Same thing for the requirement that the investment be held 3 years or more: if you sell earlier the deferral just ends then (see HMRC note).

Monday, November 21, 2016

Dividend strategies for post April 2016

Prior to 6 April 2016, there was generally a tax advantage to extracting profits by way of dividends, often once a salary had been taken to utilise the personal allowance and ensure entitlement to certain state benefits. With the new dividend taxation regime from 6 April 2016, the tax advantage of dividends as opposed to salary / bonuses is reduced or in certain cases eliminated entirely. However, dividend planning is still important and is not as straightforward as it appears on the surface. Dividend planning strategies include cashflow and administrative ease as well as tax savings.

Many companies distribute dividends on a monthly basis as a means of providing themselves with a 'salary-like' income. In many cases it is only through habit and there is no reason that these frequent distributions shouldn't be replaced by a less frequent dividend followed by drawings against their current account with the company.