Joseph Lawrence

To keep you informed with any details both within the Joseph Lawrence company and externally through changes in legislation or other factors, we have set up this news page.

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Making Tax Digital (Jan 17)

HMRC's Making Tax Digital programme has the potential to be an expensive disaster unless plans for the national rollout are delayed, according to MPs in the Treasury Committee, who are calling for a one to two year delay to the introduction of quarterly reporting, which is being rushed through to meet a 2018 kickoff date.

In a 50-page report, the committee calls for a delay to the implementation of Making Tax Digital, HMRC’s flagship project to modernise the way tax is reported and introduce the controversial quarterly reporting requirements which would result in five reporting triggers for companies, buy-to-let landlords and the self employed.

The introduction of the entire Making Tax Digital should be pushed back ‘until at least 2019/20, possibly later’, the committee said. The current plan is to start quarterly reporting from April 2018 for landlords and self employed, with micro businesses next to come online.

It also suggests the threshold for reporting through Making Tax Digital should be lifted from the currently proposed £10,000 to match the VAT threshold of £83,000. There has been criticism across the accounting profession about the arbitrary choice of £10,000 as being too low and even lower than the basic tax free allowance of £11,000 for 2016/17.

President of the Chartered Institute of Taxation Bill Dodwell echoed the committee’s position. He said: ‘Rushing it through to deliver by April 2018 is just too short a timescale. There are hundreds of different providers of accounting software – in many cases adapted for specific industries and trades. Right now we have no idea how many of these will be ready and tested in time.

‘The introduction of Making Tax Digital should be deferred for at least a year to allow a smoother and more effective transition to digital record keeping, giving businesses sufficient time to prepare for the significant administrative, technological and financial implications associated with the move to digital accounting.’

The Treasury will have the final decision on the timetable, but the government will be under pressure to try to keep to the overall principle to digitise as many government services as possible, although the complexity of the Making Tax Digital programme means that time spent fine tuning the final system processes will reduce the potential for taxpayer confusion and lost revenues.

An HMRC spokesman said: 'Many businesses find it hard to get their tax bills right. Making Tax Digital will modernise the tax system, helping them get their tax bills right with the least administrative burden.

'We’ve consulted business at every step and have already made changes as a result to exempt the smallest businesses and pilot the programme with hundreds of thousands before it is rolled out. We welcome the committee’s support for the digitisation of the tax system, and will consider its recommendations carefully.'

 

Stamp Duty Land Tax – an extra 3% for additional properties (Dec 16)

Government has introduced a higher rate of 3% on top of the normal SDLT rates. As a result from
1 April 2016 you usually have to pay an extra 3% on the whole consideration if buying a new residential property means you’ll own more than one.

The government has justified this extra tax with the following statement:

‘Owning a home is an aspiration for millions of people in our country. This government is committed to helping people achieve that aspiration, by supporting those who want to work hard, save and buy their own home. Home ownership is also a key part of the government’s plan to provide economic security for working people at every stage of their life’.

‘The higher rates will be 3 percentage points above the current SDLT rates, and will take effect from 1 April 2016. The government will use some of the additional tax collected to provide £60 million for communities in England where the impact of second homes is particularly acute’.

 

You’ll usually have to pay 3% on top of the normal SDLT rates if buying a new residential property means you’ll own more than one.

You won’t pay the extra 3% SDLT if the property you’re buying is replacing your main residence and that has already been sold.

If there’s a delay selling your main residence and it hasn’t been sold on the day you complete your new purchase:

  • you’ll have to pay higher rates because you own 2 properties
  • you may be able to get a refund if you sell your previous main home within 36 months

What on the face of it seems a simple process can become quite complex with the devil being in the detail. Talk to us today to explore how the new tax may impact you and the process of obtaining a refund.


Making Tax Digital (Dec 16)

HMRC unveiled six consultation documents on 15 August 2016 as part of an ambitious project to create the most digital tax authority in the world. It is heralded by the Government as both offering significant administrative savings to businesses and in addition considerable additional tax for the exchequer.

The plans include:

  • From 2018 most businesses, the self-employed and landlords will need to use software or apps to keep their business records and to update HMRC quarterly.
  • There will be an exemption for all unincorporated businesses and landlords with gross income/annual turnover below £10,000. However, following the consultation period it is widely anticipated this will be much increased.
  • HMRC is proposing to defer implementation for a year for a limited group of unincorporated businesses and landlords with annual turnover above £10,000 but below a threshold which is being consulted on.
  • Those that genuinely cannot use digital tools will not be forced into doing so and they will exempted entirely from the new obligations.

The profession is particularly sceptical of the plans and has voiced concerns that the plans could in fact lead to further errors and addition costs for taxpayers. The Association of Taxation Technicians said HMRC present a picture of an idyllic world – ‘Everything works perfectly, everyone is organised with their books, people update their books as they go along, any queries are resolved quickly and everyone understands the tax treatment of the expenses they have incurred and deal with them correctly. In reality, though, it's not like this. It's good to strive to achieve this and work towards this but it is not going to happen overnight or even by April 2018. Indeed, ‘doing ones tax anywhere and everywhere’ could mean less thought and consideration might go into it, and quite innocently and without the intention to defraud, taxpayers might overlook the fact that something is an unusual expense and consequently fail to take specialist advice’.

Joseph Lawrence will be keeping a close eye on developments in anticipation of advising its clients on what necessary steps to take.

Putting errors right (Dec 16)

If you have failed to notify HMRC about receiving taxable income or made an error (deliberate or otherwise) you may be unsure how to put things right. HMRC's disclosure facility offers taxpayers the opportunity to do just that and take advantage of the best possible terms. We are experienced in helping clients navigate the complexities of the campaigns (some being business specific) to achieve the best possible outcomes and pay the right amount of tax. With our professional expertise you will be guided through the process of deciding how many years and what income to include, what penalty if any will be charged and quantify the interest payable.

Timing and quality of disclosures are critical parts of mitigating penalty. Don't delay in contacting us to discuss how we may help.

HMRC is currently running a 'Let Property Campaign' which is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple and straightforward way.

HMRC gone fishing (Dec 16)

Things are changing and the world of tax is becoming more transparent. From 2016, HMRC is getting new financial information about their customers from more than 100 jurisdictions - including details about overseas accounts, structures, trusts and investments.

If you are confident your tax affairs are up to date and complete, then you don't need to do anything further. However, if you find you need to bring your tax affairs up to date it can be easier than you think.

HMRC has launched its 'Worldwide Disclosure Facility' as a last chance for individuals to disclose UK tax liabilities relating to offshore assets. The facility will be available until 30 September 2018. However, HMRC has indicated that from September 2017 the best possible penalty outcome will no longer be available in some cases.

If you have not paid the right amount of tax and choose not to take action now you need to be aware that the penalties are increasing for those not paying the right amount of tax on their offshore assets and can even face criminal prosecution.

Self-assessment and repayments

HMRC will generally refuse to process a return four years after it was due, even if a substantial repayment would be otherwise due.

If this has happened to you we can help.

If you have had a “late” tax return rejected by HMRC on the basis of the four year rule (or the previous six-year rule which applied before 2000) we can help.

We can help to secure repayments going back to the advent of self-assessment in 1996/97.


Letting property 

For 2014/15 and 2015/16 if a property is let furnished wear and tear allowance (effectively 10% of rents received) is available as an alternative to the renewals basis which effectively allows tax relief on expenditure as incurred. From 2016/17 wear and tear allowance will no longer be available and relief will only be available on expenditure actually incurred.


For 2014/15 and 2015/16 if a property is let unfurnished no relief for repairs is available on the cost of replacing items such as cookers, fridges, dishwashers and so on. 

There is, however, an argument which maintains that equipment such as cookers and other white goods qualify as “trade tools” so that their costs are deductible by virtue of statute. 

For further guidance and help please contact us.



Change on the taxation of dividends

If you operate your business through a limited company and extract profits by way of dividend then you should be aware that there at some key changes to the taxation of those dividends with effect from 6 April 2016.

You should therefore expect next year's tax is likely to be higher than this year's.

For those with significant income, where the dividend tax will make a big difference, we can help you consider the timing of dividend payments to reduce the tax burden.

Significant tax savings can be made if tax-efficient professional advice is sought.

However, HMRC can be expected to look closely at the timing of dividends so getting the paperwork right will be essential.
We can also help you explore alternative ways to extract profits so as to reduce the tax burden.






 
DISCLAIMER - PLEASE NOTE: The news and ideas shared with you are intended to inform rather than advise. Taxpayer’s circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

 

Copyright © 2009 Joseph Lawrence is a trading name of Joseph Lawrence & Co (Accountants) Limited
Registered with The Chartered Institute of Taxation as a firm of Chartered Tax Advisers
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