Taxing Times

Child Benfit - Don't leave it too late to notify

2012-09-12T00:22:00.001-07:00

I wrote a blog post on child benefit a few months back but since that time there has been some important updates which I have included in this latest offering.

I recently went on a brilliant tax update course with my favourite tax speaker Tim Palmer taking it. He shared some very interesting stories about the latest tax investigations but he also brought us up to date with the latest tax position on child benefit, which I thought I would share with all of you as it is very interesting and probably some of you reading this will be affected.

Firstly legislation has been introduced to impose a new tax liability on a taxpayer who has income greater than £50,000, where they receive child benefit. It is important to note this is not the collective income with your partner and if your income is less than £50,000 and so is your partners, then the child benefit is not taxable. This new legislation comes into effect from 7th January 2013.

The £50,000 is 'net taxable income' i.e. after gross pension contributions but before personal allowances. For the current year (2012/13) taxpayers will pay income tax on the period 7 Jan 2013 - 5th April 2013.

Therefore if your income is between £50,000 - £60,000 you will have to pay income tax of 1% on the amount of child benefit you receive in the year, for every £100 of your income that exceeds 50k. If your income exceeds 60k however you will pay an income tax bill that actually equals the child benefit! For example if you have income of £60,000 and your partner received child benefit for 2 children of £1,752 for the year, the income tax will equal £1,752 which is the full amount received anyway giving a nil effect.

Individuals who earn above £50,000 per annum and receive child benefit will now need to register for self assessment with HMRC or face penalties in the future!

This will force thousands of individuals into a self assessment regime. Furthermore HMRC guidance states that you have to declare the amount you are entitled to and not received as the figure to go onto the retune.

If you do earn above 60k you can if you wish elect to not claim child benefit by disclaiming it.. HMRC will be producing a form in the coming months to enable this to happen. This form must be submitted to HMRC by 7 January 2013.However my opinion is that the majority of individuals will still keep it as their partners have used the income for their children and more importantly for the 'stay at home mums' will lose the Home Responsibility Protection which will mean they may lose the qualifying years for their state pension, meaning their state pension will be lower.

In summary there are 3 different scenarios:

1. If the partners both individually have income below £50,000, then the child benefit is not taxed at all

2. If either of them has income greater than £60,000, the income tax bill on the child benefit equals the benefit itself and must be declared on a self assessment tax return.

3. If either of them have income between \£50,000 and £60,000, he will have to pay income tax of 1% of the child benefit element in the fiscal year for every £100 of his income over £50,000

The income tax charge arises when the claimant of the child benefit is entitled to receive it and not when they actually receive it. The person who is liable to pay the income tax charge (father) is responsible for notifying HMRC of their chargeability. Employees who are entitled to child benefit with net income greater than £50,000 must notify HMRC to avoid penalties.

I do not agree with the government on this and feel it is unfair and also to bring this into the self assessment tax regime is unnecessary and I can predict a lot of complications in the future.

As stated above this will no doubt affect a lot of you reading this as you will now need to complete tax returns and register with HMRC - Please contact me for a free initial chat and I will happily advise you and offer you 25% off our usual service fee.

Thank you for reading my blog and please do not hesitate to get in touch I am happy to help

Mitch the Tax Man
mitch@ljd.uk.com

PAYE Changes - Real Time Information - Make sure you are ready !

2012-09-04T03:44:00.001-07:00

I have found some very useful guidance from HMRC that should help you understand what Real Time Information is and how it will effect the way you and your Company operate PAYE.

What is Real Time Information
From April 2013 there will be a new way to report PAYE in real time, Real Time Information (RTI).
Under the present PAYE system, employers tell HMRC what deductions they have made from employees’ pay at the end of the year.
Over time reporting PAYE in real time will help improve accuracy for some individuals by improving processes relating to starterrs and leavers.
It will also provide accurate records on wages and tax for the forthcoming Universal Credit, so eligible employees will get the right amount of benefits or tax credits every month.

What is changing?
PAYE itself will not change – just the way, and how often, employers send PAYE details to HMRC.
Instead of sending all PAYE details to HMRC in one go, at the end of the year, from April 2013 employers will have to:
send details every time a payment is made
use payroll software to send the details electronically
send the details as part of your normal payroll process.

How will RTI benefit employers and pension providers?
By getting rid of employer annual returns and streamlining the starter and leaver processes, RTI will remove admin burdens from businesses of around £300m each year.

What is the timetable for introducing RTI?
RTI is being introduced progressively to give plenty of time for testing the new systems. We began piloting RTI in April 2012, with around 310 volunteer employers. The pilot is going well and is on track.
Most employers will begin reporting PAYE in real time in April 2013, with all doing so by October 2013.

Next steps
Businesses of all sizes should start preparing for RTI now by talking to their payroll software provider or payroll service provider about how they are developing appropriate payroll software. It’s also vital that employers check that information about their employees is accurate and up to date. This involves making sure that surname, forename, gender, address, date of birth and National Insurance Number (NINO) are correct and in the right format. Employers should also make sure that they add staff to their payrolls who will now need to be included with their RTI submissions, for example, those under the Lower Earnings Limit (LEL). For more help and advice on improving data quality go to www.hmrc.gov.uk/rti/dip/index.htm
For further information about RTI go to: www.hmrc.gov.uk/rti

If you need any further help or have any additional queries please do not hesitate to contact me mitch@ljd.uk.com

Also please have a look at my new update facebook page and LIKE http://www.facebook.com/Mitchthetaxman

Yours in Tax

Mitch the Tax Man

Tax Planning Ideas - Reducing the costs of National Insurance

2012-08-16T04:03:00.000-07:00

One area that often gets over looked when discussing tax savings and planning ideas is National Insurance. As we know National Insurance Contributions are on the rise and I expect them to continue to increase over the next 3 tax years. NI can be a major cost for a business and thus I thought I would share some simple tax tips to potentially lower this cost for you and your associates.

Dividends
The most common suggestion I make is to ensure that a Director takes a low salary and increases the amounts he takes in dividends. This will ensure one pays the marginal National Insurance Contributions and the rest is only subject to corporation tax at 20% with no additional NIC liabile. One thing to bear in mind is that if you are changing salaries for existing directors ou must ensure you have meeting notes on file with shareholders agreement and potential a revised contract of the new arrangement.

Pension Contribution
Another planning point can be to entering employees into a salary sacrifice pension scheme. This enables payments into the scheme to made from the gross pay. You must ensure inwrirting that the employee has given up part of his salary in favour of the company making a contribution.

Self Employment
A company can consider engaging individuals on a self employed basis rather than an employed contract. This is simply a matter of drafting appropriate contracts and terms and conditions. The benefit is obvious as one would not pay employees/ers NI. The most important thing here is getting the contract right as HMRC often investigate this scenario

Share Incentive Schemes
Similar to the benefits under a salary sacrifice arrangement, an employer can set up this share scheme giving employees and option to purchase shares out of their gross pay and thus would not attract NI. The downside of this is that a trust must be set up and the shares must be held for five years to avoid further tax implications.

These are four very good, basic tips to give you and your associates ideas to reduce any National Insurance Costs.

As you know I am working hard to build my own client base so if you know of anyone who needs tax compliance work or advice please pass them my details

Thanks for reading and feel free to comment

Mitch the Tax Man

Helping Pensioners

2012-08-03T05:04:00.000-07:00

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money

I love dealing with pensioners – This week I helped a pensioner client of mine by saving him over £120 a year in tax

The way that one pays tax on a State Pension depends on whether the individual is employed or not:

if you're working, you'll pay tax through your employer's PAYE scheme depending on the amount you earn
if you're not working, you'll need to pay tax through Self Assessment by completing a tax return

My client completes tax returns and has state pension income that he pays tax on but after checking the full breakdown of what made up the state pension I found out it included, attendance allowance and winter fuel payments which are not taxable and he has always been paying tax on it !!

I thereby requested a repayment of tax for him and saved him £120 a year moving forward. No doubt he was delighted and fully appreciated my thorough approach to his situation

Furthermore if you are a pensioner who has income less than the personal allowance and you have income such as bank interest that is taxed at source we can claim that tax back for you

Thus this week I would love to review any tax affairs of pensioners who you may know as I am sure I can help them potentially save tax

That’s Mitch Young from Lerman Jacobs Davis, helping you and your business to count

mitch@ljd.uk.com

HMRC to tax 5 a side football - Act Now !!

2012-07-19T23:59:00.003-07:00

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money

HMRC have caused up roar in the sporting world by trying to tax five a side football.

The 150 plus sites around the country that offer all-weather pitches to play and train on for small sided football are poised to receive a VAT bill of 20 per cent from HMRC under proposals from the government

Leagues say they would be forced to pass on the tax to individual players, costing about an extra £1 per player per match – or up to £100 a year for someone playing twice a week. Clubs say this will inevitably reduce the number of people playing football. This is not fair !

There is a petition on the telegraph website so make sure you sign it !

http://www.telegraph.co.uk/sport/football/VAT-5-side-football/9393175/Scrap-VAT-on-five-a-side-football-Telegraph-petition.html

Thus this week I would love an introduction to any Residents Asssociations you know or work with

That’s Mitch Young from Lerman Jacobs Davis, helping you and your business to count.

Can a purchase of a Box at your favourite football club be tax deductible?

2012-07-12T04:44:00.000-07:00

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money

HMRC recently queried an engineering company claiming a deduction for a cost of a box at a London Premier League football club. For the 19 home matches they invited clients to the box to watch the game but before each match the partners held a board meeting. They also had promotional material highlighting their services and gave a brief presentation.

No children were invited and this was a genuine promotional targeted series of event. Furthermore they disallowed the separate bill for food and wine. They claimed it was like renting a satellite office for an event. HMRC investigated it and the engineering company won!

Thus this week I would love an introduction to any company directors you know who love football.

That’s Mitch Young from Lerman Jacobs Davis, helping you and your business to count.

Tax Tips - June 2012

2012-06-15T03:55:00.000-07:00

There is a lot happening in the tax world this month so please have a look through the below five important tax tips for you to think about.

1. If you have received notices from HMRC informing you that you have under or overpaid tax for the year 2011/12 then this is a result of an annual check of PAYE carried out by HMRC and that an underpayment will most likely be coded out in your PAYE code.

2. There could be potentially a large tax saving if you you regularly draw a large bonus remuneration or dividend from your company and you defer this income until after 5th April 2013 where the tax rates get reduced slightly.

3. Another warning about various marketed tax schemes is that these are often very expensive to get involved in and more importantly that they can ultimately be found to be ineffective by HMRC and the courts, or event countered by retrospective legislation.

4. Are you involved in software development? Then you could take advantage of the extremely advantageous and generous tax relief known as research and development relief. Provided you can show that the various conditions are met then you could obtain a tax deduction of 125%.

5. We have seen over the past few years a rise in the popularity of personal service companies. The main area of concern for HMRC is that employees could provide their services through a medium of a company and as a result avoid PAYE and National Insurance. In the light of this HMRC has produced a business entity test which asks the customer a number of questions and scores the results on a points system. This is a good measure in determining whether someone is caught by the IR35 legislation. Consider applying this test in determining your risk factor.

I hope you have found these useful and should you require any tax assistance please do not hesitate to get in touch

Yours in tax

Mitch the Tax Man

mitch@ljd.uk.com

P.S. As previously mentioned, I like to grow my business on a referral basis. I would therefore very much appreciate if you could suggest to me any colleagues, friends or family members of yours who might be interested in our services and I can guarantee my utmost discretion and professionalism

78% Tax Relief with The Seed Enterprise Investment Scheme

2012-06-04T02:28:00.000-07:00

As a tax practitioner I am often asked by clients how they can reduce their tax bill. I am always cautious when it comes to pointing clients in the direction of tax efficient investments but the latest offering known as the Seed Enterprise Investment Scheme (SEIS) offers some of the most generous tax reliefs seen in a long time.

SEIS is designed to help small, early-stage companies raise equity by offering generous tax reliefs to individual investors who purchase new shares in qualifying companies. The investor obtains 50% income tax relief up to a maximum of £100,000 invested and the company can raise up to £150,000 investment in total.

The scheme is intended to recognise the difficulties early stage companies face in obtaining investment, by offering tax reliefs at a higher rate than that offered by established tax efficient investments such as the existing Enterprise Investment Scheme (EIS). The SEIS should help new companies in the UK find funding and I expect there to be a steady rise in new company formations over the coming year. I think SEIS is an excellent scheme and what is more remarkable is the fact that, even if you are a basic rate tax payer, you can still benefit from 50% relief (provided you have paid sufficient tax in the year in question.

Furthermore there is an exemption from capital gains tax on gains realised from the disposal of assets where such gains are reinvested through the new SEIS. This means that the total tax relief could reach a staggering 78% if taxable gains are reinvested into the scheme: 50% tax relief and 28% capital gains tax relief. This means that if someone is sitting on a capital asset (say a rental property purchased 30 years ago) and if they were to sell it today for a large profit, resulting in a capital gains tax liability at 28%, if they invest the gain through a SEIS qualifying company then there will be no capital gains tax to pay!

To give you an example, Gareth has an uncle who is about to open a new stationery office via a limited company. He is sure his uncle would make a great success of the company. Gareth is a basic rate tax payer and he wishes to invest in his uncle's SEIS approved company.

He will claim a 50% deduction from his income tax liability on the investment. Furthermore, Gareth has made some capital gains on the sale of a share portfolio. He will invest the gains made into the stationery company resulting in the gains becoming tax free. Therefore, Gareth will get 78% tax relief on his investment.To claim the SEIS relief, the investor must have received a compliance certificate from the issuing company. The company must not have more than 25 employees, no more than £200,000 gross assets and be not more than 2 years old. Other conditions to bear in mind are that an investor cannot have a substantial interest in the company (i.e. greater than 30% shareholding) and cannot be an employee. Curiously, however, directors are not excluded.

The shares must be held for a period of three years from the date of issue for relief to be retained. If they are disposed of within that three year period, or if any of the qualifying conditions cease to be met during that period, relief will be withdrawn or reduced.

Application to HMRC for SEIS is made using Form SEIS1.

The company cannot submit an SEIS1 until either:

it has been trading for at least four months

if not yet trading, it has spent at least 70 per cent of the monies raised by the relevant issue of shares

HMRC have a special unit dealing with SEIS and advance clearance can be obtained that the company's trade qualifies.

In conclusion, I believe this is a truly great incentive for investors to invest in UK companies and will generate a lot of interest. I have been approached by numerous clients who want to set up new trading companies or investors looking for SEIS companies to invest in. Either way I would seriously recommend using SEIS to invest in these companies, especially as the legislation on connected persons is being relaxed, meaning you can invest in a company established by your partner/wife/family. However, bear in mind, if you are considering investing in a new company there is significant risk attached. Always seek professional advice before investing. For further information please do not hesitate to contact me. mitch@ljd.uk.com

Thank you for reading my blog

Mitch the Tax Man

Child Benefit - The new Income Tax Charge

2012-05-27T07:23:00.002-07:00

I recently went on a brilliant tax update course with my favourite tax speaker Tim Palmer taking it. He shared some very interesting stories about the latest tax investigations but he also brought us up to date with the latest tax position on child benefit, which I thought I would share with all of you as it is very interesting and probably some of you reading this will be affected.

Firstly legislation has been introduced to impose a new tax liability on a taxpayer who has income greater than £50,000, where they receive child benefit. It is important to note this is not the collective income with your partner and if your income is less than £50,000 and so is your partners, then the child benefit is not taxable. This new legislation comes into effect from 7th January 2013.

The £50,000 is 'net taxable income' i.e. after gross pension contributions but before personal allowances. For the current year (2012/13) taxpayers will pay income tax on the period 7 Jan 2013 - 5th April 2013.

Therefore if your income is between £50,000 - £60,000 you will have to pay income tax of 1% on the amount of child benefit you receive in the year, for every £100 of your income that exceeds 50k. If your income exceeds 60k however you will pay an income tax bill that actually equals the child benefit! For example if you have income of £60,000 and your partner received child benefit for 2 children of £1,752 for the year, the income tax will equal £1,752 which is the full amount received anyway giving a nil effect.

Individuals who earn above £50,000 per annum and receive child benefit will now need to register for self assessment with HMRC or face penalties in the future!

This will force thousands of individuals into a self assessment regime. Furthermore HMRC guidance states that you have to declare the amount you are entitled to and not received as the figure to go onto the retune.

If you do earn above 60k you can if you wish elect to not claim child benefit by disclaiming it permanently. HMRC will be producing a form in the coming months to enable this to happen. However my opinion is that the majority of individuals will still keep it as their partners have used the income for their children and more importantly for the 'stay at home mums' will lose the Home Responsibility Protection which will mean they may lose the qualifying years for their state pension, meaning their state pension will be lower.

I do not agree with the government on this and feel it is unfair and also to bring this into the self assessment tax regime is unnecessary and I can predict a lot of complications in the future.

As stated above this will no doubt affect a lot of you reading this as you will now need to complete tax returns and register with HMRC - Please contact me for a free initial chat and I will happily advise you

Thank you for reading my blog and please like or share with your contacts

Mitch the Tax Man

mitch@ljd.uk.com

Tax Evasion or Tax Avoidance?

2012-05-15T00:31:00.003-07:00

Ever since the last Budget there has been a lot of commentary on tax avoidance and following on from last night’s BBC Panorama show 'the truth about tax' I thought I would share my comments and understanding on the difference between Tax Evasion and Tax Avoidance.

Tax evasion is in quite simply unlawful and can expose the taxpayer to penalties. Examples include giving inaccurate information or describing a transaction as something different from what it really is. It is basically a form of deception.

Tax Avoidance however has developed over a number of years in to what we have today in artificial schemes by which a sequence of transactions is undertaken for the sole purpose of mitigating a tax burden much like what was shown in the panorama show.

I have taken a quote from the judge in the tax case Duke of Westminster 35 that perhaps sums it up the best "A taxpayer may have a choice between two or more alternative methods of achieving a desired result. He is entitled to select the method, if lawful which avoids altogether or reduces the tax he would pay on another alternative. He is not to be taxed on the basis that a more normal method would attract a heavier tax burden. The selection of a tax effective method is called tax avoidance"

The best analysis on tax avoidance does come from case law and taken from the 'Ramsay' case the courts came up with a strategy to look at tax avoidance.

1. There must be a per ordained series of transactions

2. Into which are inserted steps which have no commercial purpose except the avoidance of tax

3. In which case the court may disregard the inserted steps in deciding how the transaction should be taxed.

4. Look at the end result.

This is the basic form the courts have been using over the past 20 years to tackle these artifical tax avoidance schemes however many sophisticated schemes have been winning. I believe now along with the Chancellor's Budget we will see more anti avoidance measures put in place potentially starting with stamp duty mitigation and in a fairer society this can only be seen as a good thing. Although how strict these provisions are remains to be seen and I suspect the highly intelligent people operating these schemes will find a way around it.

It is very hard as a tax practitioner to tell a client who wants to minimise his tax liability and has taken part in these various schemes that it is unethical and to me goes against certain principles. I believe others have to suffer and pay more tax whilst people are working within the tax avoidance legislation to sometimes not paying tax at all. However whilst it is still 'law' and the legislation has not been amended then as a practitioner you have to accept the schemes. HMRC of course operate the general anti avoidance provision. Where the scheme must by notified to HMRC by its promoter to obtain a reference number to go on the tax return. There is a £5,000 penalty for failure to notify.

Tax Avoidance is a term that should not be used loosely and can’t be interrupted in a number of ways. Whilst I would not promote any artificial schemes I am all in favour of tax planning to minimise the client’s liability and here are some examples:

1. Income bearing assets should be held by the spouse with the lowest marginal rate to tax.

2. The use of pensions can reduce tax in the years of high income working whilst making provisions when the marginal rate is lower

3. On the sale of a business there is some scope for allocating the price between different assets to reduce the tax burden

I have many more what we call 'lawful' tax planning tips.

I hope you have found this useful and provide a clearer picture of tax evasion and tax avoidance and if you would like any help with your tax or have any questions please email me mitch@ljd.uk.com

Mitch the Tax Man

Tax Tips - May 2012

2012-05-04T00:25:00.001-07:00

It has been a while since I issued some Tax Tips, so here are 5 important tips you should be aware of for the month of May.

1. Submit your 2011 Tax Return. If you have not submitted last year’s tax return HMRC will now start charging daily penalties. Where a client has not filed a Tax return 3 months from the return due date Daily penalties will start to accrue for a period up to 90 days at a rate of £10.00 per day, the rate is fixed and cannot be changed (except by legislation) and in the majority of cases this will be an automatic process

2. HMRC has wrongly sent penalty notices to taxpayers who no longer have to submit a tax return. If you have received a penalty notice and no longer need to complete a tax return then you can write to HMRC appealing this notice.

3. Do you operate through personal service companies? If so you may be subject to IR35 rules and it is important to have a meeting with a tax advisor to see if any potential liability can be mitigated.

4. Do you operate takeaway food outlets and are you operating the present VAT rules correctly? The new proposals state VAT should be charged on all hot food takeaway except freshly baked bread.

5. End of year PAYE Employers' Return is due in by 19th May. You will needs to submit the P35 & P14 forms online by this date or face a penalty between £100 - £3,000. Even if no tax have been deducted. To avoid unnecessary penalties tell your PAYE office by May 19th that no return form is required.

I hope you found these tips useful and if you require any assistance please do not hesitate to get in touch.

Being the start of the tax year I am looking to speak with newly self employed individuals.

Have a great weekend

Mitch the Tax Man

Mitch@ljd.uk.com
@mitchyoung27

How to avoid paying Capital Gains Tax on the sale of your property?

2012-04-20T00:45:00.000-07:00

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money.

Well here is one for you. How can we avoid paying capital gains tax on our home?

This was a question a reader of the Daily Express asked and you can read my answer that appeared in the National Paper 2 weeks ago below,

“Approximately 15 years ago my parents put their bungalow into my name in the belief that if they had to go into care they would not have to sell their home to cover the cost.

My father has since passed away and my mother still lives in the property. I have been informed that, because my husband and I own our house, when my mother dies the bungalow will be classed as a second property and I will have to pay Capital Gains Tax on it.

If this is so, is there anything I can do to prevent this? I have been given lots of different advice, but nothing definite - such as putting the property back into my mother’s name (may have to pay CGT), or moving into the property and living there for six months after she dies.

Would this help, or is there anything else I could do to avoid paying this tax?”

If you sell the property and make a gain then this will be chargeable on both you and your husband. You will have to pay capital gains tax at 18% or 28% depending on your total income for the tax year. However, the good news is that the gain will be split between you and your husband meaning that both of you will be entitled to an annual capital gains exemption of £10,600 each. This will result in a total exemption of£21,200, subject to any other gains and losses you may have in the tax year.

There are ways that you can potentially reduce the gain. One way is if you and your husband move into the property for a period of time after the death. You will need to make sure that the property becomes your residence for long enough for it to be treated as your principle private residence. As a result you will benefit from capital gains tax relief of 36 months of ownership.

Also, after becoming your principal private residence, if you were then to move out and rent the property out, this would enable you to take advantage of lettings relief. This gives you a capital gains tax exemption calculated in one of three ways: the lower of the actual gain or the amount qualifying for principle private residence relief or £40,000.

It is important to point out that the actual cost of the property used for the capital gains calculation will be the market value of the property when it was transferred to you and not the original cost when your mother purchased it.

This is the 4^thtime in 6 months the Daily Express have asked me to contribute to their National Paper and this shows that they trust our knowledge, advice and proves we are a respectable, up to date young dynamic firm of accountants. I have written further articles which should appear in the near future as well.

As you know it is the start of the tax year so I would love to hear from anyone you who requires help with their tax affairs, to include freelancers, landlords and footballers.

Please contact me mitch@ljd.uk.com

Thank you for reading and have a great weekend

Mitch the Tax Man

Budget Summary 2012

2012-03-21T07:11:00.001-07:00

I felt quite patriotic as we watched the Chancellor deliver a Budget Speech designed to encourage investment back into the UK. In today's post I will just provide you with the main points to take away from the speech however HMRC release detail notes, guidance and additions that were not mentioned in the speech itself. These get released tomorrow so Friday I will update the blog again to inform you of aspects such as pensions, SEIS and further tax reliefs mentioned in the proposed first draft of the legislation.

Main points to take away from the Budget Speech are as follows:

From April 2013 Personal Allowance will be increased to £9,205
The 50% tax rate is to be reduced to 45%
Age Related Personal Allowance is to be phased away
Child Benefit will be gradually tapered away for those that earn £50,000 at 1% deduction for every £100 over the limit, resulting in when someone earns £60,000they will not be entitled to child benefit
Main rate of Corporation Tax to be reduced to 24%
Stamp Duty Land Tax increased to 7% on properties valued at £2 million or over.
Stamp Duty Land Tax charge of 15% on properties bought under a 'corporate envelope' i.e. a company
Single Tier Pension of £140 to be brought in, consultation on this over the summer
A general anti avoidance law to be brought in, consultation on this over the summer
£50,000 capped amount of income tax relief available at 25% of overall income total. More details to follow on the guidance of this

The personal allowance increase is good but in reality you only will be getting around £20 pounds a month. The phasing out of age allowance means middle tier pensioners will be hit harder as this will not keep up with inflation and the stamp duty land tax charges may see foreign suitors stop investing in UK attractive properties

As mentioned above before giving a detailed tax review I need to wait till HMRC release their budget guidance tomorrow.

Thank you for reading my blog and please feel free to pass it on !

Mitch the Tax Man

mitch@ljd.uk.com

My Predictions for the 2012 Budget

2012-03-14T05:39:00.001-07:00

Very exciting times in the tax world as the budget approaches for yet another year. The Chancellor will unleash the budget one week from today (Wednesday 21st March) but what does he have in store for us? Today's blog post I will focus on 5 key topics I predict the Chancellor to bring up:

1. Pension

One can still obtain higher tax relief on pensions and the current 3 year carry back rule mean an individual can benefit from £50,000 contributions over a 3 year period and get relief on this. I predict Osborne to reduce the limits on pension contributions and potentially restrict the relief to 20%.

2. SEIS

As mentioned last month in my blog the new SEIS tax relief will be announced. The first draft of the legislation restricts the amount an investor can invest to £100,000 or £150,000 over 2 years but I have a sneaky feeling the government may relax these rules even further. The investor will be able to get an astonishing 50% tax relief/tax deduction on their investment. If you know of any start-up companies start investing!

3. Stamp Duty Land Tax Avoidance

I have been approached to get involved with these schemes over the past year but I have always turned down the opportunity because I believed it was only a matter of time before the government will crack down on them and that is exactly what I predict to be announced in the budget. HMRC will start issuing investigations into all these schemes.

4. Real Time Information

This is going to come in and Businesses need to be aware of it. "Real Time Information (RTI) is a priority Government programme aimed at improving the operation of Pay As You Earn (PAYE). It will make the system better for individuals and easier for employers and HM Revenue & Customs (HMRC) to operate. It also supports the introduction of Universal Credits." HMRC. They want every form submitted online on a monthly basis to do with your employees and PAYE operation. More will be announced in the budget

5. Child Benefit Allowance

I believe the original plan to stop child benefit allowance for households that have to total income of just over £40,000 is too tight and has already caused some unrest. I predict there will be a restriction on child benefit allowance but they might increase the total household income to nearer £60,000.

I am excited for this budget and as stated I am interested to hear more of the 50% tax reliefs and other tax incentives the government might have for us.

I will be analysing the budget next week on my blog

Thank you for reading

Mitch the Tax Man

My Second Article in the Daily Express

2012-03-09T00:30:00.000-08:00

It is amazing what can come from some twitter banter. As my regular regular readers know I am trying to build up my own client base at the moment. I use Twitter as a marketing tool and when I asked Annie Shaw (@cashquestions) to retweet my blog she responded with some sarcastic remark. We had some exchanges on twitter that eventually led to emails and now she has helped get my second article in the Daily Express. I will forever be grateful to Annie and it just goes to show keep trying and you will succeed.

I thought this week I would share the subject of the article in case you missed Wednesday’s edition of the Express.

Q I am selling part of my garden so a bungalow can be built. The land is worth about £150,000. What tax would apply to the sale?

A Mitch Young from LJD Chartered Accountants in Elstree, Hertfordshire, says: “You may not have to pay tax on the sale but this will depend on the size of the land.

“The capital gains tax exemption for a main residence includes grounds not exceeding half a hectare (about 1.25 acres) or a larger area which is appropriate to the size and character of the house.

“If you sell some of the land, perhaps for development, the sale may be covered by the exemption if the land was used as part of the garden and grounds and is sold either before the sale of the house or at the same time.

“If your garden and grounds exceed half a hectare you are unlikely to be entitled to relief for all of it. The area for which you are entitled to relief is called the permitted area, which is that part required for the reasonable enjoyment of your dwelling as a home. The size and character of your dwelling house is taken into account.

“If the portion of the land does not qualify for the exemption then you are likely to be subject to capital gains tax on the gain, at either 18 per cent or 28 per cent, depending on your total income for the tax year.”

I am hoping for more opportunities with the Express and I am working on pitching for a regular tax tips column. Watch this space.

In the meantime I would love to speak with any football agents out there. Do you have any contacts you could introduce me to?

If you have any questions or require tax assistance please get in touch mitch@ljd.uk.com

Thank you for reading, have a great weekend

Mitch the Tax Man

Do you need to complete a tax return?

2012-03-02T01:12:00.000-08:00

I have had a decent week meeting potential new clients all around London. I have been dealing with quite a number of city bankers recently and a question that I often get asked is "do I need to complete a tax return if my I am taxed at source"? I thought it would be a good idea to simplify the answer in this week’s blog post.

If HMRC has written to you with a request to complete/file a tax return then quite clearly you need to complete one aside from that obvious one here is a list of the most common situations where HMRC require you to register for self assessment:

1. Self Employed
2. Company Directors
3. Income is above a certain level from savings, investments and property
·         £10,000 or more income from savings and investments
·         £2,500 or more income from untaxed savings and investments
·         £10,000 or more income from property (before deducting allowable expenses)
·         £2,500 or more income from property (after deducting allowable expenses)
·         annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income)
·         income from the estate of a deceased person on which tax is still due
4. Income from Overseas
5. Claiming certain reliefs such as EIS/VCT
5. Capital Gains arising
6. Trustees
7. Aged over 65 and have a reduced age allowance
8. YOU EARN ABOVE £100,000

This list is not exhaustive but provides you with the most common scenarios.

The one I want you to focus on is number 8. The majority of people I come across that earn above 100k and are taxed at source do not complete a tax return because they believe they do not have to register. Well you do!! Register ASAP to avoid further penalties and surcharges.

Last week I helped my new client register and file his tax return before the end of the month managing to avoid him an additional 5% surcharge.

If you know of anyone earning above 100k or people in the banking industry that may benefit from a chat with me please pass them on my details as I would love to help them.

Don't wait for HMRC to find you bring your tax affairs up to date today

Thank you for reading my blog and have a great weekend

Mitch the Tax Man

Understanding the Tax Changes for Non Domiciled Individuals

2012-02-17T02:18:00.000-08:00

I have always been intrigued by this area of taxation and I often get asked by my clients to explain the latest rules so I thought it would be beneficial to write a blog post on it!

UK tax residents are taxed on their worldwide income and gains on an arising basis, this means whether the funds come into the UK or not they will be taxed. If those individuals are non UK domicile they can choose to benefit from a form of taxation known as the remittance basis, this means they will only be taxed on their UK source income and gains plus anything remitted to the UK.

It was announced back in 2008 that if you are non domiciled but have been resident in the UK for the past 7 out of 9 previous tax years if you choose to be taxed on the remittance basis of taxation you will be subject to a £30,000 tax charge. However from 6th April 2012, this charge will be increased for those individuals who have been in the UK for 12 out of the previous 14 years to £50,000 per year.

The UK government are concerned that this tax charge is discouraging investors from bringing money into the UK and investing in UK companies and thus new rules have been drafted and will be announced in the finance bill 2012, known as 'investment relief'.

It is being proposed that if you are non domicile and you bring funds from offshore to the UK and invests these funds in a qualifying UK trading company then there will be no tax charge on the remittance. I believe this will generate a lot of investment into UK companies and there can be a lot of planning work done for anyone you know who is non domiciled.

The investment can be a subscription for new shares or a loan in an unlisted company. The company must be one which is trading or is letting commercial property. As always the lettings of residential properties will not qualify nor does furnished holiday let. If for whatever reason the company becomes an investment company then the investor has 45 days to withdraw the cash either to invest in a new qualifying company or export the funds back to the UK.

One key point to note is that there is no limit on the amount of the investment possible in any one period or lifetime. There may even be entrepreneur’s relief on the sale of the investment in the UK so this really is worth considering.

If you know anyone that is non domiciled please forward this onto them and tell them to get in touch with us at LJD as I believe with proper planning it could save thousands of pounds of tax and this is the year to take advantage of it.

Thank you for reading my blog and feel free to contact me at mitch@ljd.uk.com

Mitch the Tax Man

Planting the Seed !

2012-02-13T00:36:00.000-08:00

Before I begin on my chosen topic this week, as a spurs fan I thought I would just give my two cents worth on the Harry Redknapp vs HMRC case. For me the decision to prosecute Harry was all for publicity, it should never have gone to court and I really hope HMRC are happy paying 8 million pounds for this type of publicity.

Moving on, I attended a cracking course last week where I found out a bit more about the new Seed Enterprise Investment scheme (SEIS). It works along the same basis as EIS scheme where you invest in a qualifying company and you get tax relief on your investment; however this new scheme seems to be offering very generous reliefs

It was introduced in the Autumn Budget statement and comes in from 6th April 2012. The new scheme is designed to encourage investment in small, early stage companies. The investor gets 50% tax relief, up to a maximum of £100,000 invested and the company is allowed to raise up to £150,000 from offering the relief.

I think this is astonishing, what is more astonishing is the fact that even if you are a basic rate tax payer you can still benefit from 50% relief.

Furthermore there is an exemption from capital gains tax on gains realised from the disposal of assets where the gains are reinvested through the new SEIS. This means that the total tax relief could reach an amazing 78% if taxable gains are reinvested into the SEIS. 50% tax relief and 28% cgt relief.

To claim the SEIS relief the investor must have received a compliance certificate from the issuing company. The company must not have more than 25 employees and not more than £200,000 gross assets and be not more than 2 years old.

Detailed final legislation on this will be included in the finance bill 2012.

In conclusion I believe this is a truly great incentive for investors to invest in UK companies and will generate a lot of interest. I am keen to see how many of my clients invest in new companies next year; however before you invest make sure you do your research about the company you are investing in!

If you have any queries or need any help with your tax please contact me mitch@ljd.uk.com

Thank you for reading my blog

Mitch the Tax Man

I survived the January Tax Returns !

2012-02-03T00:17:00.001-08:00

Good morning everyone, Mitch Young from Lerman Jacobs Davis the young dynamic accountants who are committed to saving our clients hassle and money.

Some of you may be aware that the tax deadline for filing a tax return was extended till yesterday evening because of strikes from staff at HMRC. So why was I out for dinner last night looking so relaxed? Because at LJD we completed all our clients tax returns on time and submitted them with HMRC by the original deadline.

Having worked on over 900 tax returns this year I thought I would share a couple of tips to bear in mind for next year’s returns

1. If you are a higher rate tax payer remember to keep a note every time you make a charitable donation. Too may clients just estimate these or do not have any evidence to back up the postings. What’s more is that the tax relief from making a charitable donation in the current year can be claimed back against the previous tax year so it is a good tax planning exercise.

2. If you have any PAYE income make sure you have your tax code checked by a professional too often clients that have this income end up with a tax liability because they are on the wrong tax code. A prime example is where an employer puts you on a 747L code giving you an entitlement to a personal allowance where actually your income level well exceeds £100,000 so this should be tapered away.

This week I would love to speak with anyone you know who works in finance with a large organisation and would like to make sure they are not paying too much tax. Please pass them my details. mitch@ljd.uk.com

I am looking forward to my first weekend off in a month so please look back next week where I will be producing some more tax tips for you to enjoy.

Thanks for taking the time to read my blog

Mitch the Tax Man

The Deadline Looms

2012-01-25T00:06:00.001-08:00

As you might imagine at this time of year, I am up to my eyes in tax returns.

A reminder in case you have missed my previous warnings, midnight on Tuesday is the deadline for filing your self assessment return and failure to do so will result in a £100 penalty regardless of whether you have any tax to pay.

It still might not be too late. I can’t make any promises, but if I receive paperwork in the coming days, I and my team may still be able to ensure a penalty is avoided. Last year almost 600,000 returns were filed on the last day, including several at Lerman Jacobs Davis. We’d like to increase our share of that number

Approximately 1 Million returns were filed late last year and with the stricter conditions this year, the treasury is set to net a small fortune. As you know, my role is to minimise the amount the treasury earns and keep this money in my clients’ pockets. Minimising tax is one way, but avoiding penalties is a much easier way of saving clients money.

The ICAEW are warning all self-assessment taxpayers to check what constitutes a reasonable excuse before missing the January 31 online deadline. Jane Moore from the ICAEW says: "What is reasonable depends on your situation. It may be valid if an unexpected or unusual event prevented you from meeting the deadline." HMRC, though, will not accept excuses such as the return being "too complicated", that you were too busy or that you didn't have all the information. "You must file as soon as possible after the reasonable excuse comes to an end," adds Moore. Elsewhere, The Sun’s Cashflow column claims that a HMRC source has admitted to them that their website will struggle with the number of people expected log on to file their tax returns on the deadline day. The column warns that 600,000 businesses are expected to try to file their forms to HMRC on that day, with estimates suggesting that 90,000 will be baffled by the complexity of the form, and that anyone hoping for over the phone help could be in for a long wait as the call centre workers will be on strike

So the referral I am looking for this week, is anyone who hasn’t yet filed their tax return and wants to avoid a penalty. Please get in touch mitch@ljd.uk.com

Mitch the Tax Man

New Year - New Tax Tips

2012-01-06T04:06:00.000-08:00

Happy New Year to you all!

January is traditionally a very busy month for those that work in tax. However please do not worry I will be posting my tax tips up for my dedicated readers every week this month.

1. Did you know HMRC are now accepting tax payments through the faster payment service? It is important to note however that they do charge interest for any late payments so make sure you pay on time

2. In light of HMRC's revised interpretation of the pension carry forward rules for the unused allowance in respect for the tax years 2008/09 to 2010/11 are you or your clients affected? It may be worth recalculating your tax based on the pension figures.

3. It is common for a property to be owned by the company director or shareholder and then rented to the limited company. If this applies to you then you really need to consider the tax implications sooner rather than later because there maybe a reduced or no entitlement to entrepreneurs relief.

4. The European Commission has approved for state aid purposes the increase in the small and medium sized enterprise research and development relief to 200% from 1 April 2011. Does your business activities/expenditure qualify for research and development? Take advantage of this generous relief.

5. HMRC has advised that correspondence goes missing because tax payers do not give their National Insurance or Unique Tax Reference Number as references. Make sure when writing to HMRC you always put at least one of these as a reference

I hope you have found these useful. I am now going to get back to my tax returns however if you have any questions please do not hesitate to contact me or alternatively if you know of anyone panicking about completing a tax return by the end of the month pass them on to me.

All the best

Mitch the Tax Man
mitch@ljd.uk.com

A Tax Rhyme for Xmas by Mitch Young

2011-12-23T00:21:00.000-08:00

Good morning, Mitch Young, the young dynamic accountant from LJD

Where we are committed to saving our clients hassle and money

Leading up to Xmas you may have some spare time

So think about your tax return over a glass of mulled wine

It is important you are not late in submitting the return to HMRC

Because if you do you will face a significant penalty

Even if you have no tax, they will now charge you £100 pounds

3 months late and a 5% surcharge, how do you think that sounds?

And after that it could go up to £10 a day

So make sure you give me a call I will keep the tax man away

Furthermore if you know a private tutor don’t forget they must declare

All their private earnings by 5^th Jan or face a right old scare

If you get your tax return into me within the next 28 days

I can complete this for you on time and offer you tax advice in lots of different ways

So listen out over Xmas for your friends and family talking about tax

When you hear the magic word give them my phone number, email or even my fax

Surely this rhyme proves accountants can also be fun

Wishing you happy holidays from LJD and Mitch Young

Xmas Tax Tips

2011-12-20T04:50:00.000-08:00

Over the past week I have been snowed in. No, not by snow by 100's of tax returns! I still have around 150 to complete by the end of January and no doubt I will be working over the festive period. However this is the name of the game when it comes to tax and it is Xmas I have made sure I spend some time preparing my tax tips blog just for you. So here are 5 tax tips for xmas:

1. It is very important that you are all aware that new penalties will apply for tax return that is submitted after the 31 January deadline. An initial £100 fixed penalty, will apply even if there is no tax to pay. After 3 months additional penalties of £10 a day, up to £900 and after 6 months a further 5% of the tax due! Get them in

2. Make sure those who of you provide a service on a self - employed basis have a water tight contract. For example important factors to include within a contract are mutuality, control and the right to organise a substitute.

3. Remember if you are a partner in a partnership you will have to complete a specific partnership tax return as well as filling in the partnership pages of your personal self assessment tax return.

4. I have mentioned before about some of the tax benefits of sharing income evenly between husband and wife however a new opportunity has recently come to my attention in this regard. If a partnership is created between husband and wife, and say the wife is designated as a sleeping partner, i.e. she does no work at all for the business, she is able to receive whatever share of the profits is desired and will incur no national insurance liability on her income whatsoever. This means that (depending on the overall profit) it makes probably sense to give the wife the majority of the profits as there is no national insurance for her whereas there is for the husband

5. A final reminder for Private tutors and coaches that you have less than a month to tell HMRC about any tax you may owe for not declaring your private work income. Under the tax catch up plan, teachers with previously undisclosed earnings must register by 6 January 2012 to benefit from the terms of the offer.

I wish you all a very merry Xmas and a happy and healthy new year and remember if you have not got your loved one a present yet how about a voucher from me to complete their tax return.

Mitch the Tax Man
mitch@ljd.uk.com

Friday's Tax Tips - Episode 3

2011-12-02T06:01:00.000-08:00

I have had an excellent week. I have taken on 3 newly self employed clients and one landlord. Although it means more work for me over the Xmas period I don't mind, you know that is going to be the case when you decide to have a career in tax! Furthermore my week has been topped off by attending a really useful tax lecture where I recapped on some really interesting points that I will share with you next week in my blog.

As it is Friday, it can only mean one thing - My weekly tax tips!

1. HMRC has revised their interpretation of the way that pension allowance carry forward works for years 2008/09 to 2010/11. You can now potentially contribute £200,000 if you meet all the qualifying criteria. Contact me for further info on this

2. It is very important that owners of small companies follow the proper procedures when carrying out share subscriptions so that evidence can be provided in the future as and when required.

3. If you are non domiciled have you been monitoring the number of year’s resident you have been? There may be an up and coming remittance base charge you need to plan for.

4. If you are an employer have you considered changing your employees benefit package to a flexible benefits package to take advantage of tax and National Insurance Mitigation?

5. Whenever properties are bought or sold with a view to building residential property, there are potential issues concerning the option to tax. Make sure you contact your tax advisor before finalising any deals.

We are now in December so not long to go until you have to submit a tax return. If you need any assistance please do not hesitate to get in touch mitch@ljd.uk.com

Have a great weekend

Mitch the Tax Man

Chancellor's Autumn Statement 29/11/11 - Commentary from Mitch Young

2011-11-29T05:30:00.000-08:00

I watched the Chancellor on BBC give an Autumn Statement he never wanted to give. He looked uncomfortable at times especially when the noise from the back benchers increased to a very loud level. There was a lot of waffle within the statement so I have summarised the main points that I found interesting and relevant to me and my clients:

1. From April 2012, anyone investing up to £100,000 in a new start-up business will be eligible for income tax relief of 50%. In 2012, any tax on capital gains invested in such businesses will also be waived.

2. Freeze on Capital Gains Tax allowance

3. Corporation Tax confirmed to fall to 25% next year, and rules of taxation of foreign profits to be published next week

4. End of tax breaks for the Channel Islands

5. Capital Allowance boost to several zones including Liverpool

6. The bank levy tax will be raised for a third time this year

7. National loan guarantee scheme - covering £40bn for bus' of less than £50m turnover. Expect fall in rates of one percentage point

8. The child element of the working tax credit will be uprated in line with inflation, but other elements will not

9. Public sector pay awards will be set at 1% for the two years after the current freeze ends. Mr Osborne says he's knows this is tough, but it's fair to taxpayers.

10. There'll be £40bn to underwrite loans for small and medium sized firms

Overall, these are just a few of the main points I picked up from the statement and in truth there was not too much that was announced that was new and not predicted. However for me it is clear from a tax point of view there is and will be a lot of planning to be done with the use of EIS and investing in new qualifying companies

If you have any comments or questions please do not hesitate to get in touch mitch@ljd.uk.com

Mitch the tax man