Archive for the 'Tax' Category

Childs Play

In the furore about the ‘granny tax’ and offshore companies owning property, the ‘reform’ of Child Benefit seems to have sneaked under the radar. The government initially raised this issue at the Conservative Party conference in 2011 and there was an outcry.  It was unfair, complex and just not on!

Things then went extremely quiet until Budget 2012 and, as part of the reforms to the welfare system it was confirmed that Child Benefit will be withdrawn from households that include certain higher earners.

Although the change applies from January 2013 the calculation to decide whether or not a household is affected by the reform includes the full income for 2012/13. So those households that include higher earners need to be aware of the rules now so they can plan to ensure they don’t miss out unnecessarily.

Who will the rules apply to?

Legislation will impose a new charge (the High Income Child Benefit charge) on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner, if they have one, are in receipt of Child Benefit for the year. Where there is a partner and both partners have adjusted net income in excess of £50,000 the charge will apply to the partner with the higher income.

Weekly woes

As the charge is by reference to weeks, the charge will only apply to those weeks of the tax year for which the partnership exists. If the couple break up, the partner with the highest income will only be liable for the period from 6 April to the week in which the break up occurs. Conversely, if a couple come together and Child Benefit is already being paid, the partner with the highest income will only be liable to the charge for those weeks from the date the couple start living together until the end of the tax year.

Very strange

So an inequity arises! One couple with £60,000 of adjusted net income will lose all of the Child Benefit, whilst a couple with adjusted net income of £49,999 each will retain it all. Therefore, equalising income for those who are able becomes important.

What is the £50,000 made up of?

It can be seen that the rules revolve around ‘adjusted net income’, broadly:

  • net income (total income subject to income tax less specified deductions e.g. trading losses and payments made gross to pension schemes),
  • reduced by grossed up Gift Aid donations and pension contributions which have received tax relief at source.

It may be that a couple would want to donate more to charity, for example, to reduce or avoid the charge.

Who is a partner?

A person is a partner of another person at any time if any of the following conditions are met at that time; the persons:

  • are a man and a woman who are married to each other and not separated; or
  • are a man and a woman who are not married to each other but are living together as husband and wife.

Similar rules apply to same sex couples.

The charge

An income tax charge will apply at a rate of 1% of the full Child Benefit award for each £100 of income between £50,000 and £60,000, rounded down to the nearest pound. The charge on taxpayers with income above £60,000 will be equal to the amount of Child Benefit paid.

Example

The Child Benefit for two children amounts to £1,752 per annum.

The taxpayer’s adjusted net income is £54,000.

The income tax charge will be £700.80.

This is calculated as £1,752 x 40% (£54,000 – £50,000 = £4,000/£100 x 1%).

Administration

 Interestingly, the requirement to notify liability to income tax and capital gains tax by 6 October following the tax year is amended to include situations where the person is liable to this charge. In addition, the charge is included in PAYE regulations so that it can be collected through PAYE, using a reduced tax code, unless the taxpayer objects.

Continue claiming?

Child Benefit itself is not being made liable to tax and the amount that can be claimed is unaffected by the new charge. It can continue to be paid in full to the claimant even if they or their partner have a liability to the new charge.

Child Benefit claimants will be able to elect not to receive the Child Benefit to which they are entitled if they or their partner do not wish to pay the new charge. However, this will not affect the credit available (for state pension purposes) to certain people who stay at home to look after children.

An election can be revoked if a person’s circumstances change.

When does the new charge apply?

This charge will have effect for any week beginning on or after 7 January 2013 and for 2012/13 will apply to the Child Benefit paid from that date to the end of the tax year. The income taken into account will be the full income for 2012/13.

It may well be that neither you and/or your partner currently receive a tax return but this may well change for 2012/13. Remember the need to tell HMRC by 6 October 2013 if you think a charge may be due.

HMRC will contact people earning over £50,000 about the new charge from autumn 2012.

How many are affected?

To quote the government:

‘The new tax charge in relation to Child Benefit will affect approximately 1.2 million families. Approximately 70 per cent of these households will lose all of their Child Benefit, and 30 per cent will only lose a portion. The average loss for those that lose will be roughly £1,300 per year. Ninety per cent of families in the Child Benefit population will continue to benefit from some or all of their Child Benefit.’

Further help

HMRC have released a series of FAQs at http://www.hmrc.gov.uk/budget2012/cb-income-tax.htm to explain the change, essential reading for many families.

However, if you are unsure about anything to do with this new charge or would like to discuss things further including how we might be able to minimise the tax charge which will apply to your family, please do not hesitate to get in touch.

Thanks for reading

The Blog Team

Advertisements

This weeks breaking practice news – Congratulations to Daimien McConnell for passing his PCG Accredited Accountant Certification for Professional Freelancers, Contractors and Consultants.

In June this year we celebrated Ian Quartermaine’s success in passing a demanding training programme in respect to the intermediaries’ legislation (IR35).

Today we are very proud to announce that Daimien McConnell joins Ian as another member of the team to pass this grueling training programme. In fact when the results came through, ‘excellent’ was on Damien’s report. PCG Membership Manager, Mandie Bell who looks after the programme said she had never seen such fantastic comments on completion of the programme before in the years that she has been with PCG.

Accreditation is only given to a select number of accountants throughout the UK who undergo a rigorous training programme with Accountax LLP, the leading firm of specialists in the field who defend a large proportion of cases brought by HMRC to tribunal.

If you are looking for advice, look no further, call Daimien McConnell or Ian Quartermaine, our committed Freelance and Contractor Directors who will be happy to arrange a free no obligation meeting to discuss your requirements.

So who are the PCG?

The PCG was set up in 1989 to provide independent freelancers, contractors and consultants with a united voice in opposing original IR35 proposals. This then grew and within a few months several thousand freelancers and contractors joined the network.

PCG is a not for profit organisation for freelancers and contractors across business sectors IT, graphic design to engineering, protecting the interests, promote freelancing and contracting and to save these individuals time and money. For more information on PCG please go to www.pcg.org.uk

PCG appoint the expertise of Accountax LLP for their training and technical support. Accountax LLP are the UK’s leading experts in IR35, Employment Statute, Umbrella Companies and other contentious tax issues and have been involved in thousands of disputes with HMRC.  Accountax LLP has a proven track record of success with many cases being conceded by HMRC.

 

Why accredit William Hinton Limited?

Some years ago a PCG survey identified what members most wanted was a scheme whereby the PCG would identify and promote accountants who had received additional training on contractor-specific tax and accounting issues and had a good understanding of how freelance businesses operate.
In response to this clear demand, they have launched a PCG Accredited Accountant scheme. The PCG scheme involves:

  • Strict entry criteria
  • Training on IR35/S660A
  • Customer service training to enable accountants to meet the needs of freelance consultants and contractors
  • Annual assessment, including feedback from PCG members

Benefits to PCG members:

  • The reassurance that PCG accredited accountants will have received relevant and up-to-date training in freelancer-specific issues
  • A published list of all accountants who passed the course satisfactorily and qualified
  • The ability to provide feedback on accredited accountants to PCG which will be taken into account when performing annual reviews.

Services:

With over 20,000 PCG members there is an increasing demand for specialised accountants trained within freelance issues such as IR35, contract reviews, S660A and PAYE. William Hinton Limited saw this as a growing market and wanted to be able to offer this service and is one of very few firms in the Gloucestershire area able to work within the PCG Accredited Accountant Scheme. Our services in this area include:

  • Status Issues

Is Joe really self employed or does his contractual arrangements really make him an employee of the organisation to whom he provides his services? This is an area of tax law that often comes to light at the time of an HM Revenue & Customs (HMR&C) PAYE review and can prove costly to the taxpayer if the wrong arrangements are in place.
With the new Construction Industry Scheme requiring a monthly declaration being signed and submitted to HMR&C more visits are forecast and more fines issued if errors are discovered.

  • IR35IR35 was introduced in 1999 to prevent those operating through a Limited Company and often via an agency drawing large dividends and a low salary when without the intermediary their status would have required them to be an employee of the end user to whom the services are provided.Many contractors believe that their contract is “IR35 proof” and continue to draw the dividends. But are they correct in this assumption and may a substantial tax bill be waiting for them around the corner? There are also those contractors who signed up to IR35 but now may be with a different agency under a different agreement and so may have the flexibility to remove themselves from the scheme.

    The opportunity of taking specialist advice to determine whether IR35 is applicable to you as a Contractor may well represent money well spent in identifying risks or opportunities in this most difficult of areas.

If you work in the Professional Freelancers, Contractors or Consulting market then please call Daimien or Ian on 01451 831130 at William Hinton Limited to make sure that you receive the best possible advice.

Capital Allowances – a gift to small businesses

While many businesses claim capital allowances on items such as computers and cars, not many are aware of the huge tax savings that can be made in claiming on other ‘plant and machinery’ items that are embedded in their property.

Most commentators agree that over 90% of commercial properties in the UK have untapped capital allowances within them that could create huge savings for small to medium sized enterprises (SMEs) in tax relief, often over 30% of the purchase price of the building.

‘Machinery’ as a claimable category is rather self-explanatory and items falling into it are often easily defined. ‘Plant’ items however are very different. In basic terms, plant items that can be claimed on are taken to be “apparatus used for carrying on a business”.

This can include items such as removable floor coverings, demountable partitioning, air conditioning systems, toilets and kitchens, but the complex web of rules and case law that is the capital allowances regime means that this definition is in no way exhaustive. In fact, the items falling into this category can be very varied and often unusual — allowances have in the past been claimed on items such as bowling alleys, fish tanks, zoo cages and artwork. One person even tried to claim on a horse!

Capital allowance claims on existing plant and machinery purchased with a building can only be made once in a building’s lifetime. However, a proportion of capital expenditure incurred on maintenance, refurbishments, alterations, extensions and new installations can also be claimed back against your businesses taxable profits to reduce your tax bill.

This can extend to claiming back on the services paid for throughout the whole process. For example, the capital expenditure on the design, project management or cost control or for the specialist costs of installation of a specific item of plant or machinery can also be taken into account for capital allowances — it is not just the cost of the item itself which is eligible. To take full advantage of the generous rules, SMEs should be sure to keep detailed records, particularly for building works on these projects.

Whether your business owns a factory, office, shop, hotel or other commercial property, the chances are good that it will have a sizeable amount of tax relief hidden away in its fixtures. While the big accountancy and law firms are well aware of these capital allowances and may claim for their international clients on a regular basis, advisors to smaller businesses generally do not have access to the same specialist expertise. This is a shame, as £50,000 or so claimed in tax relief through capital allowances can make a much bigger difference to the margins of an SME that it can for the likes of Tesco.

SMEs wishing to take advantage of this system should act fast. Changes to legislation mean that a time limit for making a claim has now effectively been phased in. Although you can still make a claim at any point after the capital expenditure on plant or machinery has been incurred (providing you still own the assets), you must now pool the expenditure and make an election before you sell. It is also possible that a time limit for claiming may be introduced in the future as this is already under consideration by HMRC.

The outlay for identifying, recording and claiming these allowances can seem complex and daunting, but the tax relief available often makes it more than worth it — taking just one example, expenditure of £100,000 on a hotel can typically generate £35,000 worth of tax relief hidden away inside. With these kinds of bonuses on offer, capital allowances could just be the industry’s best kept secret.

 Article written by Jeanette Edmiston, Portal Tax Claims.

 This is why we at William Hinton have recently engaged with a firm of Capital Allowance Tax Claim specialists to help us benefit clients and prospects alike.

This is just one area of many ‘big firm’ services that we are offering. Something that can add real value to SME’s in times of cashflow difficulties. We have already begun the process of looking at our clients to see whether they would benefit from such a claim with many proceeding with such a claim.

Please do get in touch with us if you think this could apply to you and we will be sure to provide you with all necessary information and help.

 Thanks for reading

 The Blog Team

William Hinton are awarded the PCG Accredited Accountant Certification for Professional Freelancers, Contractors and Consultants.

Need to know more about IR35? Is the Tax Man going to be knocking on your door? Here at William Hinton we are proud to announce that we are able to offer specialist advice in respect to the intermediaries’ legislation (IR35).

On 14 June 2012 leading firm of Chartered Accountants and Business Consultants, William Hinton Limited were accredited with the Professional Contractors Group (PCG) certification. Accreditation is only given to a select number of accountants throughout the UK who undergo a rigorous training program with Accountax LLP, the leading firm of specialists in the field who defend a large proportion of cases brought by HMRC to tribunal.

Having met the demanding requirements set by PCG, William Hinton Chartered Accountants and Business Consultants are now an accredited firm. If you are looking for advice, look no further, call Ian Quartermaine ACA, our committed Freelance and Contractors Director who will be happy to arrange a free no obligation meeting to discuss your requirements.

So who are the PCG?

The PCG was set up in 1989 to provide independent freelancers, contractors and consultants with a united voice in opposing original IR35 proposals. This then grew and within a few months several thousand freelancers and contractors joined the network.

PCG is a not for profit organisation for freelancers and contractors across business sectors IT, graphic design to engineering, protecting the interests, promote freelancing and contracting and to save these individuals time and money. For more information on PCG please go to www.pcg.org.uk

PCG appoint the expertise of Accountax LLP for their training and technical support. Accountax LLP are the UK’s leading experts in IR35, Employment Statute, Umbrella Companies and other contentious tax issues and have been involved in thousands of disputes with HMRC.  Accountax LLP has a proven track record of success with many cases being conceded by HMRC. 

Why accredit William Hinton Limited?

Some years ago a PCG survey identified what members most wanted was a scheme whereby the PCG would identify and promote accountants who had received additional training on contractor-specific tax and accounting issues and had a good understanding of how freelance businesses operate.

In response to this clear demand, they have launched a PCG Accredited Accountant scheme. The PCG scheme involves:

  • Strict entry criteria
  • Training on IR35/S660A
  • Customer service training to enable accountants to meet the needs of freelance consultants and contractors
  • Annual assessment, including feedback from PCG members

Benefits to PCG members:

  • The reassurance that PCG accredited accountants will have received relevant and up-to-date training in freelancer-specific issues
  • A published list of all accountants who passed the course satisfactorily and qualified
  • The ability to provide feedback on accredited accountants to PCG which will be taken into account when performing annual reviews.

Services:

With over 20,000 PCG members there is an increasing demand for specialised accountants trained within freelance issues such as IR35, contract reviews, S660A and PAYE. William Hinton Limited saw this as a growing market and wanted to be able to offer this service and is one of very few firms in the Gloucestershire area able to work within the PCG Accredited Accountant Scheme. Our services in this area include:

  • Status Issues

Is Joe really self employed or does his contractual arrangements really make him an employee of the organisation to whom he provides his services? This is an area of tax law that often comes to light at the time of an HM Revenue & Customs (HMR&C) PAYE review and can prove costly to the taxpayer if the wrong arrangements are in place.

With the new Construction Industry Scheme requiring a monthly declaration being signed and submitted to HMR&C more visits are forecast and more fines issued if errors are discovered.

  • IR35

IR35 was introduced in 1999 to prevent those operating through a Limited Company and often via an agency drawing large dividends and a low salary when without the intermediary their status would have required them to be an employee of the end user to whom the services are provided.

Many contractors believe that their contract is “IR35 proof” and continue to draw the dividends. But are they correct in this assumption and may a substantial tax bill be waiting for them around the corner? There are also those contractors who signed up to IR35 but now may be with a different agency under a different agreement and so may have the flexibility to remove themselves from the scheme.

The opportunity of taking specialist advice to determine whether IR35 is applicable to you as a Contractor may well represent money well spent in identifying risks or opportunities in this most difficult of areas.

If you work in the Professional Freelancers, Contractors or Consulting market then please call Ian on 01451 831130 at William Hinton Limited to make sure that you receive the best possible advice.

Thanks for reading!

The Blog Team