NOTE …..THIS IS ALL “PROPOSED” AND SUBJECT TO CHANGE.
Most importantly …..as things stand now MTD will NOT be required if your income/turnover is under £10,000.
Above £10,000 then …….
April 2018 MTD starts for landlords and self employed with turnover £83,000 or OVER
April 2019 MTD starts for landlords and self employed with turnover UNDER £83,000
April 2020 MTD starts for companies.
Stay in touch. This is likely to change over the coming months.
SPRING 2017 BUDGET NEWS
Another Budget speech yesterday, 8th March 2017, starting with many statistics, graphs, pie charts and so on.
Here’s my snapshot of the main items likely to be of interest / concern to you ……..
TOP HEADLINE ….
My post yesterday is confirmed …… Hammond said [quote] …. “I have decided that, for businesses with turnover below the VAT registration threshold, I will delay by one year the introduction of quarterly reporting”
This means that “Making Tax Digital”, which I have been warning everyone about, will now be introduced a year later, April 2019, NOT April 2018 as originally planned, for people with gross income under £83,000.
To quote HMRC …..”Those with annual turnover above the VAT threshold will still be required to keep digital records and send HMRC quarterly updates from April 2018.”
Other news …..
Personal allowance – increased from £11,000 to £11,500 in April 2017.
Higher rate tax 40% – the starting point for the higher rate tax band, currently £43,000, is raised to £45,000 (no change to the 45% “additional rate” band which starts at £150,000). This doesn’t apply fully to Scotland.
Dividend allowance – the amount of non taxed dividends, currently £5,000, falls to £2,000 in April 2018.
New £1000 “small income” allowances – starting April 2017 two new income tax allowances are introduced of £1,000 each for trading and property income.
The allowances are optional only and may be deducted from income instead of actual expenses.
(There will be anti avoidance measures for these new allowances to prevent their misuse / abuse).
Let property – from April 2017 it will no longer be possible for landlords letting out residential property to get full 100% tax relief on all interest paid on mortgages.
The 100% deduction in the past gradually morphs over the next few years to a 20% flat rate relief 20% by 2020.
NOTE the words used …. “deduction” changes to “relief”. There is a pivotal difference which may not be obvious. The two words do NOT mean the same thing. Be very careful.
National Insurance – Hammond said he intends “To address the taxation differential between the employed and self employed”
Apparently, this does not mean reducing the burden on the employed. Oh no. It means – as if you didn’t know – INCREASING the burden on the self employed. Wonderful.
Self employed people have always paid less National Insurance because their benefits were not as good.
We are told that the changes reflect the fact that the self employed now qualify for the same state pension as employed people but from when? Previously they did not receive earnings related top ups to the state pension.
Capital Gains Tax – no new announcements/ changes except a small rise in the capital gains tax annual exemption to £11,300.
Inheritance tax – the new additional “family home allowance” comes into effect but it is HIGHLY complex to use.
Corporation tax – rate falls from 20% to 19% in April 2017 then down to 17% by 2020.
ISA – the limit for investment is raised from £15,240 to £20,000 from April 2017.
Relaxed rules on passing existing ISA on death to beneficiary.
LISA – starts April 2017. An investment available ONLY to those aged 18 to 39. Maximum investment £4000 p.a.
Investment in pensions – one change previously flagged – from April 2017 the Money Purchase Annual Allowance (MPAA) is reducing from its current £10,000 to only £4,000 in an attempt to reduce the “recycling” of invested cash to get tax relief twice on the same money.
Non domiciled persons “non doms” – many changes/ restrictions announced previously are coming into force in April 2017.
A NEW CHANGE – from April 2017 non doms holding UK residential property in a foreign company will be within the scope of UK IHT.
This Budget changed the limit below which “minor” interests in UK property are disregarded from 1% to 5% of an individual’s total property interests.
Termination payments – all contractual and non contractual payments in lieu of notice (PILONS) will be taxable as earnings.
Tax and employer NIC treatment of termination payments will be aligned so that NIC will be payable by the employer on the elements of a termination payment exceeding £30,000 on which income tax is due.
The first £30,000 of a termination payment will remain exempt from income tax and NIC.
Foreign Service Relief is to be abolished.
QROPS – a 25% tax charge will be imposed on pension transfers made out of the UK to QROPS on or after 9th March 2017.
Exceptions will be made to the charge allowing tax free transfers if people have a genuine need to transfer their pension.
Anti avoidance – the government previously announced that it will introduce a new penalty for “…..a person who has enabled another person or business to use a tax avoidance arrangement which is then later defeated by HM Revenue & Customs (HMRC)”.
New legislation will be introduced to ensure that promoters of tax avoidance schemes (POTAS) cannot circumvent the laws by “reorganising” their business.
“Promoters” caught by all the above new rules are likely to include everyone in the chain of events including financial advisers, wealth managers and the like.
National Living Wage – rises to £7.50 per hour from April 2017.
New NS&I bond– paying 2.2% from April 2017 but on a maximum investment of £3000 ONLY.
And finally ……Pub news…….the government has announced a cap on rate rises for firms losing Small Business Rate Relief with extra help for pubs.
So …. it appears today’s Budget speech signals a one year delay in the implimentation of “Making Tax Digital” for people whose income is below the VAT threshold figure.
That said, I have yet to see the detail and, as we all know, that’s where the devil hides.
Fingers crossed I read it right and there will be a delay.
I’ll post again with more thoughts on this, and today’s Budget speech in general, as soon as I’ve digested it all.
The government have now issued their replies to all responses on MTD, Making Tax
In a nutshell … they have more or less ignored completely all the representations to them by learned professional bodies, the Treasury Select Committee (see earlier post on that) and everyone else who took the time and trouble to bother responding to their 6 white papers.
HMRC continue to insist that all small businesses, and people with rented property income, submit their figures on a quarterly basis, online ONLY.
The system will be trialled this year with a view to going live in April 2018.
However, even at this late stage, details are sparse, very few and far between. There is not much I can add to firm up the proposals.
One notable point is that the £10,000 income threshold, under which MTD will not apply, is still “under review” so……. will you be in this new system or not? Who knows.
Nothing more to say now. Will add more when developments occur.
The Treasury Select Committee has reported on Making Tax Digital (MTD).
The Committee says HMRC should…..
1. hold back imposing MTD from April 2018 to April 2019,
2. increase the exemption threshold,
3. run pilot tests across the FULL reporting cycle and
4. allow software providers to catch up.
So what’s the chance HMRC will listen? What do you think?
Somewhere between slim and none IMO.
CORRECTING VAT RETURN ERRORS
If you find your business has made a mistake you need to correct it in order to avoid paying additional interest and penalties.
The error correction procedure has two parts …..the correction itself and notification.
Errors under £10,000 can be adjusted on the next VAT return. Errors over £10,000 have to be notified on a special form and are subject to interest / penalties.
BIG HEADS UP >> Most businesses are unaware that, to avoid a penalty on an error under £10,000 that has been corrected on a subsequent VAT return, you must also notify.
If not HMRC would consider it to be a careless error and so liable to a penalty up to 30%.
When correcting an error you should write to HMRC VAT section detailing:
EXPENSES, INPUT VAT ON OVERSEAS ENTERTAINING CURRENT CUSTOMERS
VAT suffered on expenses when entertaining a business customer has not been allowed for some years but this has changed.
Despite the change, unfortunately, you still can only reclaim it when entertaining overseas contacts who are already your customers.
Do NOT push this in your VAT Return claims or HMRC will disallow your entire claim and maybe even penalise you.
Be reasonable and prudent. Claim only if “reasonable in scale and character”. Remember this is THEIR definition of “reasonable”. Not yours.
Maybe basic food and light refreshments, sandwiches and soft drinks (including tea / coffee but definitely NO alcohol) provided to enable a specific business meeting to proceed without interruption.
Taking an overseas customer out to a restaurant is very likely to lead to a claim refusal.
Take care. Always.
Are you using the VAT Flat Rate Scheme?
Are your costs for goods (not services) less than £1,000 p.a. or, if higher than that, less than 2% or your business sales?
If you reply “yes” to both questions then you will be classified as a “limited cost trader” and subject to the new 16.5% flat rate from April 2017.
If you want to see what the taxman has to say about it read this …..