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A number of changes have been made to the tax legislation recently (in addition to those covered in our Budget article in March) so we thought it might be useful to include a brief catch up note to ensure you’re not missing out.
Previously Smartphones (such as Blackberrys and iPhones) were classed by HMRC as computers rather than mobile phones. As such a taxable benefit in kind arose on the provision of these devices to employees where private use was not prohibited. The technology has now become so common place that HMRC have changed the classification. Smartphones can now be provided tax free, even where there is private use – provided of course the contract is between the employer and the phone company. (The new definition of mobile phones does not extend to tablet computers (such as iPads) or devices using Voice Over Internet Protocol systems.)
The change of classification has been made retrospectively so it may also be possible to reclaim tax suffered in previous years.
Tax Free Savings
ISA subscription limits have been increased. With effect from 6 April 2012, individuals over aged 18 can now save up to £11,280 tax-free. (Up to £5,640 of this can be in cash, the remainder in stocks and shares.) Individuals between 16 and 18 can save up to £5,640 tax free in a cash ISA.
Junior ISAs became available from Nov 2011 for younger children. These allow tax free cash savings of £3,600 per annum. The funds are locked away until the child reaches age 18 and the ISA can be rolled over into an adult ISA on maturity. So if you’re looking to pay cash into a savings account for your kids (possibly to save for those university fees!) this could be a tax efficient way of doing so.
Capital Allowances - Fixtures
Capital allowances are usually available on qualifying fixtures (such as alarm systems, lighting, kitchen units, sinks, toilets, boilers, air conditioning units etc), which are included in the purchase price of (non-residential) property.
From April 2012, in order to claim capital allowances on fixtures within the building:
Further capital allowance may also be available on items not previously claimable by the seller (eg due to changes in the legislation), which should be identified as part of the acquisition process.
It is therefore more important than ever to seek professional advice on the acquisition (or sale) of any property to ensure the most beneficial tax outcome is achieved.
Capital allowances are also still available on any new costs incurred by the buyer after acquisition, for example, on refurbishment costs.
Business Premises Renovation Allowances
The BPRA scheme, which provides capital allowances on qualifying refurbishment works on bringing certain unused property back into commercial use, has been extended to 2017.
Legislation is being drafted to allow companies to apply a 10% corporation tax rate to a proportion (60% for the first year) of their profits attributable to patent and certain other qualifying intellectual property from 1 April 2013. The legislation is still a work in progress so watch this space….
From 1 April 2012, all VAT registered businesses must now submit their VAT returns online and pay all VAT liabilities electronically. (There was previously an exemption for small businesses that registered for VAT before 1 April 2010.)
VAT on Entertaining
The HMRC guidance explaining the VAT treatment of business entertaining costs has been rewritten to improve readability and better explain the position on entertaining non UK residents. Input tax incurred by you on the provision of entertainment to UK business contacts and non-UK business contacts who are not customers cannot be reclaimed. It is however possible to reclaim input tax on staff entertaining or, in some circumstances, on entertaining provided to overseas customers.
VAT on Alterations to Listed Buildings
The 2012 Budget announced the intention to remove, from 1 October 2012, the zero-rating relief which currently applies to certain approved alterations to listed buildings. Works completed before this date will still qualify for zero-rating, as will works completed on or before 20 March 2013 if they are carried out under a binding contract entered into on or before 20 March 2012.
Distributions on winding up your Company
From 1 March 2012, where the total distributions made on the winding up of a company are under £25k, these will be taxed as capital gains. Where distributions are over £25k in total, the distributions will be revenue distributions (with no option to apply for capital treatment). For individuals this may mean that distributions will often be taxed at the dividend rates (often upwards of 25%) rather than as capital (potentially at 10%).
If capital treatment is preferred, it may be possible to undertake a capital reduction exercise or declare dividends in the years before winding up to reduce the effects of the new legislation. Alternatively, it may be beneficial to undertake a more formal liquidation process, which us unaffected by the new legislation.
HMRC have announced that a new taskforce team has been set up to tackle tax evasion by landlords in Scotland. Another 30 taskforces are expected for 2012/13, including teams to tackle tax evasion in the rag trade, the motor trade and indoor/outdoor markets. HMRC have already started 13 criminal investigations and expect to collect over £50m in taxes as a result of the 12 taskforces launched in 2011/12!
HMRC also announced a new ‘Tax Safe Plan’, this time for electricians. Anyone who installs, maintains or tests electrical systems, equipment or appliances under safety regulations can apply. If you have not told HMRC about your income and now want to get your tax affairs back on track you can do so under the tax safe plan. If you take part:
Anyone wishing to take part must notify HMRC by 15 May 2012 and disclose the amount of unpaid tax and make payment (if you have not agreed an alternative payment plan with HMRC) by 14 August 2012.
PAYE Real Time Information
A new pilot scheme begins in April 2012 as part of the HMRC move towards PAYE Real Time Information (RTI). RTI is a process whereby you provide PAYE information in real time (each time the payroll is run), rather than as part of the year end payroll procedures. It will be mandatory for all UK employers who operate PAYE. HMRC hope to begin the migration process in April 2013 with the aim of having the scheme fully implemented by October 2013. There will be no change to the basis of assessing tax, benefit in kind reporting or payment dates.
Finally, a word of warning, a new round of scam e-mails appear to be circulating at the moment, so please watch out for these. HMRC only ever contact customers who are due tax refunds in writing by post. HMRC do not use telephone calls, e-mails or external companies to advise of tax refunds and you should on no account give personal details to anyone using these forms of communication to contact you. If in doubt, please speak to your tax advisor who will be able to confirm if you are entitled to a refund and organise for this to be issued to you.
For further information on any of the above, please contact firstname.lastname@example.org or your usual Springfords advisor.