Spring Tax Update 2017 - Torquay

pkf-francisclark.co.uk

SpeakerSpring tax updateTorquay March 2017


SpeakerChairman’s welcomeJohn Rowe, Partner

pkf-francisclark.co.ukpkf-francisclark.co.uk

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Housekeeping

@pkfFrancisClark#FCSpringTax17 #Torquay

A copy of the slides will be sent to you by email shortly


Staff update – newly appointed Partners

Holly Bedford became Tax Partner on 1 December 2016

• Corporate and personal taxation expert• Leads the tax team in the Plymouth office • Previously with Arthur Anderson in Chicago

and EY in London and Edinburgh

Lucinda Coleman will become Business Recovery Partner on 1 April 2017

• Licenced insolvency practitioner and Company Voluntary Arrangements expert

• Joined PKF Francis Clark as a graduate trainee in 2003.


Staff update – newly appointed Partners

Jason Mitchell will become Partner on 1 August 2017

• Specialises in providing accountancy and advisory services to the legal sector

• SRA Accounts Rules expert• Provides a wide range of accountancy

services to SMEs across the region


Staff update – newly promoted Directors, 1 April 2017

Liam Dushynsky, VAT Director, Exeter

Adam Kefford Corporate Tax Director, Exeter

Katie Skea, Director, Plymouth

Ian Pring, Tax Director, Plymouth

Chris Watts, Tax Director, Torquay (FCTC)

Jemima Fox, Tax Director, Plymouth

Justin Gliddon, Director, Plymouth (1/10/16)

Frances Kingsnorth, Director, Salisbury


James Barratt, Director, Plymouth

Daniel Sladen, Tax Director, Truro

Lisa Macpherson, Tax Director & Head of Tax Technical, Poole

Martin Brown, Tax Director, Taunton (FCTC) – joined 6/3

Staff update – newly promoted Directors, 1 April 2017


• Budget day changing to autumn from 2017

• This update will be in March again next year

More convenient timing for attendees

We have better information to share

Access to consultations and draft legislation.

Spring tax update


Programme for today


Making tax digital

Business tax update

Paul Collings, Tax Partner

Paul Collings, Tax Partner

Personal tax update Andrew Squires, Tax PartnerFinancial planning update Kevin Stoyle, Chartered

Financial Planner


SpeakerBudget overviewPaul Collings, Partner


Measured & boring

Hammond’s speech


Overview


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PSNB as % of GDP (per OBR)

Estimate Forecast

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

Public sector net borrowing 3.8% 2.6% 2.9% 1.9% 1.0% 0.9% 0.7%

Cyclically-adjusted public sector net borrowing 3.6% 2.6% 2.9% 1.9% 0.9% 0.9% 0.7%

Treaty deficit 4.0% 2.7% 2.8% 1.9% 1.1% 0.9% 0.9%


Crisis over?

Spring tax update


SpeakerMaking Tax DigitalPaul Collings, Tax Partner


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Making Tax Digital

New HMRC initiative revolutionising the way businesses file online

• Landlords and unincorporated businesses 5 April 2018

• VAT registered businesses from 5 April 2019

• Corporates and large (> £10m) partnerships 5 April 2020


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Making Tax Digital

New HMRC initiative revolutionising the way businesses file online

• Landlords and unincorporated businesses 5 April 2018 5 April 2019

• VAT registered businesses from 5 April 2019

• Corporates and large (> £10m) partnerships 5 April 2020


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Making Tax Digital

• Deadline for submitting quarterly returns one month after the quarter end

• Deadline for submitting final adjustments for year will be the sooner of ten months after the year end, or 31 January following the year of assessment (the existing tax return deadline)

• Applies to the first accounting period that begins after 5 April 2019, so 5 April year ends’ first quarterly reporting date is 5 July 2019, and first MTD deadline on 5 August 2019

• First years will have multiple deadlines to meet


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Making Tax Digital

Government has given some assurances regarding small businesses, and the digitally excluded:

• Businesses can use spreadsheets for record keeping, but must file via MTD-compliant software

• Businesses eligible for three line accounts can submit quarterly updates with only three lines of data (income, expenses and profit)

• Free software will be available to businesses with “the most straightforward affairs” – in practice, this will mean those under the VAT registration limit and with no employees


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Making Tax Digital• No need to scan in invoices

• Only one update for the entire property business

• Accounting adjustments can be made in final adjustment

• Declaration of partnership splits now optional for quarterly updates –must be notified in year end adjustment

• Partnerships must return all income and gains i.e. investment income as well as trading income

• Will not include CIS returns for the time being – current quarterly return system will continue.


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Making Tax Digital

• Government has yet to decide on de minimis limit below which MTD will not apply

• £10,000 is seemingly too low

• What is the masterplan? What are the issues?


An Introduction to Cloud AccountingPaul Collings


What is Cloud?

..What is it?

Cloud technology is simply to host, or store, data remotely rather than on a machine at your premises.


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What does Cloud Accounting allow?

• Multi-user & multi-location

• Immense server processing power

• Machine learning

• Application Programming Interface (API).


How does Cloud help accounting?

• “Time saved on your books is time to invest in your self or your business”

• Automated bank feeds

• Invoice recognition

• Better Management accounts

• Make business decisions based on real time data


What does this achieve?

• Efficiencies

• Questions can now be answered in real time…

- What pension contributions can I make?

- When do I have to register for VAT?

- Should I purchase the equipment this year or next?


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Who to contact?

Thomas Roberts ACCACloudSourcing Technologist – [email protected]

Darren Jasper ACA CTAHead of [email protected]


• MTD journey – very much part of the master plan

• Training and Investment

• Consider “FC Relationship”

• Where now?

Is that it?


SpeakerBusiness tax updatePaul Collings, Tax Partner


Corporation Tax Rates

Northern Ireland12.5% from 2018

Year commencing 1

AprilMain rate

%

Small profits rate %

2010 28% 21%

2011 26% 20%

2012 24% 20%

2013 23% 20%

2014 21% 20%

2015 20% -

2016 20% -

2017 19% -

2018 19% -

2019 19% -

2020 17% -


Annual Investment Allowance

Capital allowance – 100% tax relief

Period from AIA1/6 April 2008 £50,000

1/6 April 2010 £100,000

1/6 April 2012 £25,000

1 January 2013 £250,000

1/6 April 2014 £500,000

1 January 2016 £200,000


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Corporation Tax - Losses

• New rules will increase flexibility for relieving corporate tax losses

• Losses arising from 1 April 2017 can be carried forward and offset against other income streams

• Losses can also be carried forward and group relieved

• Companies with profits > £5m – only 50% of profit can be relieved by losses brought forward


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Corporation Tax - Interest• New rules will restrict each group’s net deductions for

interest to

30% of EBITDA taxable in the UK or, if higher

An amount based on the net-interest to EBITDA ratio for the worldwide group.

• De Minimis of £2,000,000 of interest


Research and Development - Small

• SMEs (Turnover <€100m Balance Sheet<€86)

• Tax relief on allowable R&D is 230%

• £4,600 tax saved for £10,000 of spend

• Very attractive relief

• Encourages innovation and “inventiveness”

“Wants to make R and D simpler to claim…..makes us competitive”


Research and Development - Large

• Large companies now must use ‘Research and Development Expenditure Credit’ scheme – RDEC

• Receive a tax credit – ‘above the line’

• Taxable credit of 11%

• Net saving of 8.8% on qualifying expenditure (previously 6%)

• Above the line – Arguably “More Visible”


Liquidations and Entrepreneurs’ Relief

• 10% tax rate possible on liquidating trading company

• Members’ voluntary liquidation (MVL)

• Now have targeted anti-avoidance rules to catch: Money boxing Phoenixism

• Are you carrying out a similar trade or activity within two years?

• Those caught treated as receiving a dividend.


Substantial Shareholdings Exemption (SSE)

• SSE can apply to exempt gains on companies selling shares (10%)

• Changes to SSE following consultation:

Removing investing company trading condition

Making it easier to sell shareholdings in multiple tranches

Removing post disposal investee trading condition

Broader exemption for companies owned by qualifying institutional investors.


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Transactions in land• Rules aimed at taxing gains on development land as

trading income

• Previous rule – ‘sole or main object’ was to realise a gain on disposal of land

• New rule – ‘main or one of main purposes’ is to realise a gain

• Applies where other property (e.g. shares) derives 50+% of its value from land


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Employment taxes

• Employer NIC due on termination payments > £30,000 (aligned with income tax)

• Salary sacrifice rules tightened so employees will be taxed on salary foregone.

• From April 2017 PAYE applied to consultants providing services to public sector via a limited company.


IR35 – public sector changes

• New provisions apply when:

Worker personally performs services for end client

End client is public authority

If the contract had been directly with the end client the worker would have been regarded as an employee.

Employment taxes


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• Increase in business rates from April 2017 - revaluation of the rating list

• “Increase in rural rate relief to 100%, giving small businesses in rural areas a tax break worth up to £2,900 a year” Chancellor of the Exchequer, November 2016

• Transitional provisions failing to ease burden, too narrowly focused

Business rates


£435 Million of Measures

• If previously claiming Small Rates Relief increase capped at £50 per month;

• Measures to assist Pubs with a rateable value of <£100,000 – claim £1,000 of Business Rates Relief for 1 year;

• Local Authority Fund of £300 million to be provided to Local Authorities

Business Rates


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VAT – the basics

• Taxable- Standard → 20%- Reduced → 5%- Zero → 0%

• Exempt

• Outside the scope


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VAT – the basics

VAT recovery

For taxable supplies √ For exempt supplies x


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VAT – registration

An entity is…

• Currently liable to register where taxable turnover is:

> £83,000 in any rolling 12 month period or> £83,000 in next 30 days – anticipated

• threshold increasing to £85,000 from 1 April 2017

• eligible to register if making taxable supplies

Allows VAT to be reclaimed on costs…


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VAT – flat rate scheme

• ‘Simple scheme’ where business does not recover input tax and charges flat rate of VAT on turnover

• 16.5% rate applies for ‘limited cost traders’ from 1 April 2017

• Limited cost traders – expenditure on goods: <2% of VAT inclusive turnover for accounting period, or <£1k for accounting period (pro-rata if period ≠ 12m) Expenditure excludes capital, subsistence and most motor

costs.


• A new entrepreneur client commences in business in January 2016. He is self-employed..

- Deal with Auto-Enrolment by November 2017

- Self-Assessment liability by January 2018

- Payments on Account January 2019

- Removal of the Flat Rate Scheme for VAT

- Making Tax Digital introduced April 2019

Case Study


Personal tax updateAndrew Squires, Tax Partner


• From 6 April 2017• Personal Allowance £11,000 to £11,500• Higher rate tax threshold becomes £45,000

• From 6 April 2018• Dividend Allowance reduced to £2,000

The basics


• Manifesto pledge broken• Top 1% pay 27% of all income tax!• £32,000 of pay

• Employed - £6,170• Self-employed - £2,300

• From April 2018 – 9% to 10%• From April 2019 – 10% to 11% • No impact where s/e earnings less than £16,250

National insurance for the self-employed


Residential property

• Various ownership structures

• New tax rules where residential property owned personally

• Restriction to mortgage interest relief on residential lettings

• Increase in SDLT.


Residence nil rate band

• When a residence is passed on death to a direct descendant:

• Property must have been occupied by the deceased as their main residence at some point during the period of ownership.

Tax Year Rate of RNRB2017/18 £100,0002018/19 £125,0002019/20 £150,0002020/21 £175,000


• Downsizing provisions

• Unused band is transferable between spouses – potential for £1 million IHT free

• Tapered withdrawal of the nil rate band for estates with a net value of more than £2 million.

• Planning opportunities?

Residence nil rate band (continued)


Wear and tear allowance

• Allowance scrapped from April 2016

• Replacement furniture relief

• Initial furnishings

• FHLs retain capital allowances


Financing costs – residential

• 100% financing cost deduction being phased out over a number of years

• Replaced with a 20 % tax reducer

• Basic rate taxpayers, child benefit and personal allowance impact.

Tax Year Finance cost relief2017/18 75% of finance costs deductible against rental income, 25% tax

reducer

2018/19 50% of finance costs deductible against rental income, 50% tax reducer

2019/20 25% of finance costs deductible against rental income, 75% tax reducer


Financing costs – an example

2016/17 2020/21Rental income £50,000 £50,000General expenses -£10,000 -£10,000Allowable interest -£20,000 -Rental profit £20,000 £40,000

Tax at 40% £8,000 £16,000Tax reducer at 20% - -£4,000

Tax payable on rental income

£8,000 £12,000


• Full finance cost relief

• Corporation tax rate 19% from 1 April, reducing to 17%

• Tax costs of setup – capital gains tax and stamp duty land tax

• Reliefs may be available to mitigate tax costs

• Profit extraction

Incorporation of rental business


• Succession planning alternative to traditional trusts• £325,000 limit for trust transfers restrictive• 45% vs 17%• Control maintained• Easy to transfer shares – PET’s• Different share rights• Not for everyone

Family investment companies


• UK residential property disposed of by non-residents

• Default basis of tax computation – April 2015

• Alternative computation basis

• 18% and 28%

• Return must be made within 30 days of conveyance

• Penalties!

Non-resident capital gains tax


• 3% surcharge for additional residential property purchase

• Applies to any acquisition of residential property

• Commercial and mixed use properties are unaffected

• Furnished holiday lets included

Stamp duty land tax


SDLT (continued)

Main residence

Second home

or buy to let

Up to £40,000 Zero Zero* Up to £125,000 Zero 3% The next £125,000 (the portion from £125,001 to £250,000) 2% 5% The next £675,000 (the portion from £250,001 to £925,000) 5% 8% The next £575,000 (the portion from £925,001 to £1.5 million) 10% 13%

The remaining amount (the portion above £1.5 million) 12% 15%


SpeakerFinancial planning updateKevin Stoyle, Chartered Financial Planner


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ISA update

There are now six types of ISA!• Cash

• Stocks and shares

• Lifetime from 6 April 2017 (new)

• Help to buy (being withdrawn 30/11/2019)

• Junior

• Innovative finance


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ISA limits from 6 April 2017Reduction to tax free dividend allowance from April 2018 – increases benefit of ISA

• Cash and stocks & shares - £20,000 (2016/17 £15,240)

• Lifetime - £4,000 plus Government bonus 25%

• Help to buy - £1,200 in first month + £200pm thereafter plus Government bonus of 25%

• Junior - £4,128 (2016/17 £4,080)

• Innovative finance - £20,000 (2016/17 £15,240)


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Focus on lifetime ISA

Alternative to pension?

• Dual purpose – save for first home and/or retirement

• 25% Government top up

• Open to 18-40 year olds (can continue to age 50)

• Access before age 60 results in loss of Government top up and investment growth unless

Using funds to buy first property up to £450,000

Terminal illness.


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Focus on junior ISAWealth transfer idea?

• Available from 0 to age 18 (becomes adult ISA at 18)

• Parents, grandparents, friends etc can contribute

• Using a calculator from Fidelity we can see that saving £340 per month from birth to age 18 could produce a fund of £101,322 assuming 5% annual growth

• An excellent way of transferring wealth down through the generations with no tax consequences

• Could fund university fees or a property deposit.


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NS & I bond

Interest rate confirmed at 2.2%

• Available to everyone over age 16

• £3,000 investment limit

• Three year term

• Available from April 2017 for 12 months

• Said to be ‘market leading rate’

• Open market shows Atom Bank offering 2.2% three year fixed rate with FSCS protection up to £85,000!


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Pension update

Key changes/considerations

Budget confirmed reduction of annual allowance to £4,000 from 6 April 2017 if money purchase annual allowance triggered

What triggers it?

• Uncrystallised pension fund lump sum (UFPLS)

• Flexible access drawdown (income taken), but not if just tax free lump sum

• Exceeding the income cap in capped drawdown


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Pension update

• From 6 April 2016 tapered annual allowance applies if ‘adjusted income’ exceeds £150,000

• Lifetime allowance reduced to £1m

• Individual protection 2014 deadline is 5 April 2017 for those who had pension funds valued at more than £1.25m at 5 April 2014

• Pension scams – consultation closed in February, feedback due later this spring

• Aiming to tackle cold calling

• Giving powers to schemes to refuse pension transfers.


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Pension carry forward

• Carry forward still available from previous three tax years

• Useful for those caught by tapered annual allowance

• Be aware that 2013/14 carry forward (£50,000) drops away on 6 April 2017

• Can only carry forward if you had a registered pension plan in place for the tax years used in carry forward

• No pension plan but may want to save in future? Start one now to ensure full scope of carry forward is open to you when you need it.


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Non earners’ pension contributions• Can contribute up to £3,600 per annum gross

• Net cost £2,880 per annum

• Tax relief each year of £720

• Can contribute for children

• Pension funds generally free of inheritance tax

• In a low interest rate environment, 25% instant uplift in value is significant

• Wealth transfer opportunity, grandparents contributing for grandchildren?


Pension allowances restricted?• Venture capital trusts• High risk but with significant tax advantages• HMRC approved• £200,000 annual investment limit• 30% up front tax rebate• Tax free growth and dividends• Must be held for five years to retain tax benefits

Alternative tax efficient investing


No responsibility can be accepted for any action taken as a result of information contained in this presentation. We therefore strongly recommend that no action should be taken before obtaining detailed professional advice.

Past performance is not a guide to future returns and the value of investments and income from them may go down as well as up and an investor may not get back the amount invested.

PKF Francis Clark Financial planning and wealth management is a trading name of Francis Clark Financial Planning Ltd which is authorised and regulated by the Financial Conduct Authority. Registered Office: Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF. Registered in England No. 05413603.Francis Clark Financial Planning Ltd is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Exeter | New Forest | Plymouth | Poole | Salisbury | Taunton | Torquay | Truro

Disclaimer & copyright

fcpp.co.uk


SpeakerChairman’s Closing RemarksJohn Rowe, Partner


(c) copyright PKF Francis Clark, 2017

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PKF Francis Clark is a trading name of Francis Clark LLP. Francis Clark LLP is a limited liability partnership, registered in England and Wales with registered number OC349116. The registered office is Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF where a list of members is available for inspection and at www.pkf-francisclark.co.uk. The term ‘Partner’ is used to refer to a member of Francis Clark LLP or to an employee. Registered to carry on audit work in the UK and Ireland, regulated for a range of investment business activities and licensed to carry out reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England and Wales. Partners acting as insolvency practitioners are licensed in the UK by the Institute of Chartered Accountants in England and Wales. A partner appointed as Administrator or Administrative Receiver acts only as agent of the insolvent entity and without personal liability. Francis Clark LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Disclaimer & copyright
