Welcome to September’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring all our clients don’t pay a penny more in tax than is necessary.
Please contact us for advice in your own specific circumstances. We’re here to help!
Table Of Contents
Swiss Bank Account Tax Deal
To remedy this non-disclosure, the UK Government has reached a unique tax deal with Switzerland. From 2013, investment income from Swiss bank accounts held by UK residents will be subject to a withholding tax of 48%, and gains made on those investments will be subject to withholding tax of 27%. These withholding taxes will NOT apply if the bank account holder authorises the bank to disclose all details of the income to HMRC, and pays any associated taxes in the UK.
To settle past tax liabilities, all existing funds held by UK taxpayers in Switzerland will be subject to a one-off deduction of between 19% and 34%. This deduction will only apply to amounts in bank accounts open at 31 December 2010, which remain open at 31 May 2013. However, if the bank account holder has instructed the bank to disclose details of the account to HMRC, the one-off deduction will not apply, but HMRC will follow-up all disclosures made.
If you hold a Swiss bank account, now would be a very good time to discuss this with us!
Business Exit Planning
If you have younger relatives who could take on the business it is advisable to get those individuals involved in the management for a considerable period before you go. You may need to restructure the business to make this hand-over easier, perhaps incorporate, or slim-down the enterprise.
Where your business is already run though a company, a neat method of exiting for the founder is to have the company purchase its shares from you. However, this ‘purchase of own shares’, as it is called, must be planned and undertaken in a very precise way to ensure the tax charges are as low as possible.
Another option is to sell off all or part of the business to another person. This also needs to be planned at least a year in advance to ensure you and all your fellow shareholders achieve the maximum tax relief on the sale.
Entrepreneurs’ relief can be claimed for most company sales, which reduces the effective rate of tax from 28% to 10% on the first £10 million of gains made by each shareholder. To qualify for entrepreneurs’ relief each shareholder and the company must meet all of these conditions:
– The shareholder must hold at least 5% of the ordinary shares of the company and 5% of the voting rights for the company for at least one year ending with the sale;
– The shareholder must be an employee, or director, or company secretary of the company for at least one year up to the date of the sale;
– The activities of the company must be at least 80% trading, as opposed to investments, or it must be the holding company of one or more trading companies.
Where your family members have minority shareholdings check whether they will each meet the 5% threshold. Consider gifting some shares to your grown up children or spouse to achieve this threshold. Where shareholdings exceed 5% but the individual does not work for the company, consider making them a non-executive director, or giving them a small part time position at the company for 12 months to the date of the sale.
If you are considering selling your business please talk to us well in advance to get the right planning in place first.
Jointly Held Property Tax Savings
For example a let property could be transferred from one spouse into the joint ownership of the married couple or civil partners, or entirely into the other spouse’s name. Joint ownership has advantages, as on the eventual sale of the property up to two annual exemptions (£10,600 each for 2011/12) may be available to reduce the chargeable gain. Transfers between husband and wife or civil partners who are living together do not create a capital gains tax charge at the time of the transfer.
Generally UK land can be held as joint tenants when the owners hold an equal undivided interest in the whole property, or as tenants-in-common where the individuals hold separate and identifiable shares, say 10% and 90% of the property (the legal terms may differ under Scottish law). However, where the owners are either married or in a civil partnership, the property will be treated for tax purposes as being held in equal shares (50:50), even if this is not the case. To be taxed on the actual interest each holds in the property the couple need to sign a declaration on Form 17 and submit it to HMRC.
Form 17 has recently been reissued. HMRC now require evidence of the actual beneficial interest held by each person in the property to be submitted with form 17. This evidence may be a copy of the property deeds, or the purchase or transfer document.
New Mileage Rates
Petrol & LPG Engines
1401 to 2000cc: Petrol 18p (18p), LPG 12p (13p)
Over 2000cc: Petrol 26p (26p), LPG 18p (18p)
1601 to 2000cc: 15p (15p)
Over 2000cc: 18p (18p)
Note there is now a different scale for diesel vehicles.
The advisory fuel rates are based on average fuel prices per litre:
– Petrol: 134.6p
– Diesel: 139p
– LPG: 75.8p
If the prices in your local area are significantly higher, or your company cars are less fuel-efficient than average, you can pay a higher mileage rate. You need to keep a record of how you calculated that higher rate.
Where your employees use their own cars for business journeys, you can pay a tax free mileage rate of 45p per mile for the first 10,000 business miles driven in one tax year, and 25p per mile for extra miles in the same year. This rate was increased from 40p per mile on 6 April 2011, so remember to pay the higher rate to your employees and to yourself when you undertake business journeys in your own car.
Where the company is VAT registered it can reclaim VAT on the fuel element of mileage rates paid to employees, if the employee supplies the company with VAT receipts for fuel showing enough VAT to cover the claim. The advisory fuel rates are purely for fuel. The 45p per mile rate is only partly for fuel, the excess above the advisory fuel rate is to pay for other costs of running the car which are incurred by the employee.
If you are self-employed, with an annual turnover below the VAT threshold of £73,000, you can use the 45p rate as an approximation for the cost of business journeys in your own car.
September Question & Answer Section
A. The late issuing of these statements was due to a lack of paper at HMRC’s printers! As the delay was essentially their fault HMRC has decided to waive the interest due, as long as the tax payment is received by 27 September 2011. However, this interest free period only applies to the second payment on account of income tax for 2010/11, due by 31 July 2011. Any other late tax payments, such as tax due by 31 January 2011 will accrue interest as normal.
Q. My son worked for a company that has gone into liquidation. The Tax Office are refusing to acknowledge the student loan repayments which were deducted from his salary in 2010/11 and pass those repayments on to the Student Loans Company. What can he do to get his student loan records corrected?
A. This can happen when the company folds before submitting its end of year PAYE return: form P35. This form shows the totals for all the deductions taken from each employee during the year. Your son needs to provide HMRC with any evidence he has of the student loan repayment deductions, such as original payslips or his form P60 for the tax year. HMRC should then pass this information onto the Student Loans Company who will correct his payment record.
Q. I recently applied for VAT registration for my business as the turnover had exceeded the compulsory registration threshold. Now I’ve had a call from the VAT office asking to come and see me. What have I done wrong?
A. A visit to a newly registered business is now normal practice for VAT officers, particularly where the first VAT return shows a repayment due. The VAT inspectors will want to see the invoices for your first VAT period, and be assured that you know how to keep adequate business records. We can sit in on the VAT visit to provide back-up for any difficult questions if you wish.
September Key Tax Dates
19/22 – PAYE/NIC and CIS deductions due for month to 5/8/2011