VAT Online

For VAT Return periods starting on or after 1 April 2012 all VAT registered individuals and organisations will have to submit their VAT Returns online and pay any VAT due electronically. 

Download our helpsheet click here

Phishing tips from HMRC

During the last three months HMRC has helped to close down 185 websites that are purporting to hand out tax refunds to taxpayers.

Individuals receive an email and are requested to part with personal details of their bank or credit card accounts to facilitate the supposed tax refund.

HMRC will only ever contact you about these matters by post. Currently they do not use telephone calls, emails or external companies.

You can check the advice published at www.hmrc.gov.uk/security/index.htm to see if the email you have received is listed. If you do receive a suspicious email:

1. Forward email to HMRC at phishing@hmrc.gsi.gov.uk and then delete it from your hard drive.
2. Do not click on any website addresses, attachments or other links in the email.
3. Follow advice from www.getsafeonline.co.uk.
4. If you have inadvertently provided details of your bank or credit card accounts call your bank or card provider immediately.

Self-assessment late filing and payment penalties

Late filing:

Many individuals who are late in filing their 2011 self-assessment return may not realise that they will suffer late filing penalties even if they owe no tax for 2010-11.

And the days of a single £100 fine are long gone. The new fines are:

• One day late an initial penalty of £100
• Three months late a daily penalty of £10 per day up to a maximum of £900
• Six months late an additional £300 or 5% of any tax outstanding, whichever is the higher amount
• One year late a further £300 or 5% of any tax outstanding, whichever is the higher amount

As you can see the minimum penalty for filing 6 months late is £1,300 even if all your tax due is paid on time or you are due a tax repayment.

Late payment:

If you are late in settling your self-assessment liabilities a penalty calculated as 5% of tax unpaid at 30 days, 6 months and 12 months will be added to your debt. Additionally interest will be due until the debt is cleared.

Higher rate tax payers are you missing out?

Do the following criteria apply to you? If so you might like to read this article…

• Do you make payments into your own or your employer’s pension scheme?
• Do you pay higher rate tax, 40% or 50%?
• Have you omitted to claim higher rate tax relief on the contributions you have made?

If your answer to these questions is Yes, or Yes and No, then you may be one of the estimated 425,000 UK tax payers that are failing to claim higher rate relief on workplace pension contributions.

You may for instance assume that your payroll department are dealing with this for you. Or, that the Government automatically channels any refunds due into your pension pot. This is often not so.

If you pay ‘net’ contributions the tax office will top-up your fund for the standard rate tax paid of 20%. The remaining 20% tax relief, (if you pay tax at 40%) or 30%, (if you pay tax at 50%) has to be claimed from HMRC direct.

Which pension schemes are affected?

Most money purchase pension arrangements are affected, including:

• Personal pension plans (including Self Invested Personal Pensions – SIPPS)
• Workplace ‘contract based schemes’ including group personal pensions, group stakeholder schemes and group SIPPS.

The following schemes are not affected:

• All final salary schemes.
• Money purchase schemes that operate through a salary sacrifice arrangement in which case pension contributions are made before tax is deducted.
• Schemes where contributions are deducted from taxable pay.

If you are not sure what sort of pension you have check with your pension provider or employer.

How do I make a claim?

You need to make a claim in writing to HMRC as soon as possible. Claims can be backdated for up to four years. We would, of course, be delighted to do this for you. You will need to provide details of the gross and net contributions you have made in the period of your claim

Winter Fuel Allowance

This allowance is paid tax free. This year the payment is worth £200 per household. If one of the persons eligible is over 80 this increases to £300.

Please note that to be eligible for this payment in 2012 you need to have been born before 5 January 1951. This particular allowance is linked to the current women’s state pension age.

Consequently, men under their own state pension age but born before 5 January 1951 are eligible to claim. It will be necessary to make a formal claim in the first year. The claim form can be downloaded from the link that follows or you can call the help line on 0845 915 1515.

http://www.direct.gov.uk/prod_consum_dg/groups/dg_digitalassets/@dg/@en/
@over50/documents/digitalasset/dg_198683.pdf

Buying or bringing back goods from abroad

When travelling from the EU to the UK
You do not have to pay any tax or duty on goods you have bought in another EU country as long as:

• tax was included in the price when you purchased the items,
• the items are for your own use, and have been transported to the UK by you.

Own use includes gifts, but does not include any item that is intended to be used as payment or to be resold.

If you bring back large quantities of alcohol or tobacco, a Customs Officer is more likely to ask about the purposes for which you hold the goods – they will assume that they are not solely for your own use.
This will most likely be the case if you appear at the port or airport with more than:

• 800 cigarettes
• 400 cigarillos
• 200 cigars
• 1 kg of smoking tobacco
• 110 litres of beer
• 10 litres of spirits
• 90 litres of wine
• 20 litres of fortified wine e.g. port or sherry

EU countries currently include: Austria, Belgium, Bulgaria, Cyprus (Greek part), Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Irish Republic, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain (but not the Canary Islands), Sweden and the United Kingdom (but not the Channel Islands). Gibraltar is excluded for this purpose.

When travelling from outside the EU to the UK
You are allowed to bring in the following, provided you travel with the items and do not intend to sell them.

• 200 cigarettes, or 100 cigarillos, or 50 cigars, or 250g of tobacco
• 4 litres of still table wine
• 1 litre of spirits or strong liqueurs over 22% volume; or 2 litres of fortified wine, sparkling wine or other liqueurs
• 16 litres of beer
• 60cc/ml of perfume
• £390 worth of all other goods including gifts and souvenirs

Buying online or receiving gifts from abroad
Those buying online or by mail order from outside the EU will have to pay VAT if the value of the package is over £15. Customs duty may also be payable for goods over £135.

Those receiving gifts from outside EU will be charged import VAT if the package is valued at more than £40.

Cash in smaller pension pots

Changes to the present pension tax rules will allow over 60s to cash in up to two pension pots as a lump sum.

• Changes apply from April 2012.
• Pension pots of up to £2,000 in value can be considered for this treatment.
• HMRC will allow 25% to be taken free of tax. The balance will be taxed at individual’s marginal income tax rate.
• Only two pension pots can be considered.

Tax changes this year and beyond

On 6 December 2011 HMRC published draft clauses for the 2012 Finance Bill. This will set the scene for tax changes in 2012-13 and subsequent tax years. Notable items include:

1. From 1 April 2013 companies will be able to apply a 10% tax rate on profits attributable to patents and other intellectual property.
2. Research & Development tax credits are to be improved.
3. The new statutory residence test is to be introduced from April 2013, a year later than expected.
4. A new scheme to encourage investment in new, small start up companies will be launched from April 2012. The scheme will be a variant of the present EIS scheme and will be known as the Seed Enterprise Investment Scheme. Whilst reliefs may be greater, investment limits are more restricted.
5. The present EIS and Venture Capital Trust legislation will be more restrictive in order to focus on higher risk activities.
6. The UK tax position of certain non-domiciled individuals is changing from 6 April 2012.The good news is that non-doms will be able to bring in funds to invest in the UK without being penalised; the bad news is that for non-domiciles who have been resident in at least 12 of the previous 14 tax years, the present annual charge payable to secure more favourable tax breaks is to increase from £30,000 to £50,000 from April 2012.
7. The UK Controlled Foreign Company (CFC) rules are to be relaxed in certain circumstances. Not all of the expected changes in this area have been published – the remainder are expected to be made public shortly.

Interesting deduction

You may find the notes that follow useful if you raise money by increasing the lending/mortgage in respect of rental property.

The following factors need to be taken into account:

Loan used in property business

Generally speaking if the funds raised from refinancing are reinvested in the property business, for example to purchase new property or refurbish existing property, then any loan interest payable is allowed in full.

Funds withdrawn by property business owners (individuals and partnerships)

If funds are raised to enable the owners to withdraw money from the property business the following considerations need to be taken into account.

1. HMRC will seek to disallow interest on any loan in excess of the original cost of the property, or, the valuation of the property when first taken into business use. For example you may own a property that has been your own home for a number of years that you purchased for £100,000. You decide to move abroad and keep the property but let it out; the current value is £200,000. It would be possible to raise a buy to let loan for up to £200,000 (if the banks were willing!)  and claim interest on the loan against your rental income.
2. A claim can only be made for the interest on the loan not the capital element repaid.
3. There are many pitfalls that can result in a loss of tax relief so it is important to obtain advice before refinancing.

Loans taken out by a property business run by a limited company

Where a property is owned by a limited company any additional cash raised by increasing loans secured on the company’s business property belongs to the company. If directors wanted to withdraw the funds for personal purposes they would need to observe the usual rules:

1. Vote a dividend
2. Take extra salary or bonuses
3. Reduce the amount of any loans they have made to the company.

What seems on the surface a simple issue, ‘Can I borrow against business property and get full tax relief on the interest charged’, is far from a simple issue. Please get in touch prior to taking out such a loan to clarify the tax position, especially if you are relying on a tax deduction to make commercial sense of the loan.

Joint ownership of let property

Property, as with most assets, can be owned by individuals, jointly with other parties in partnership, or by a limited liability company or a trust.

In most cases the taxation of rental income derived from letting a property is straightforward. Individuals holding property in their own name or in partnership, companies and trusts all pay tax on the net income received.

The position of jointly owned property can vary and in particular that owned by married couples or registered civil partners who are living together.

Property owned and let by married couples or civil partners (who are living together)

1. HMRC will divide rental profits equally between spouses (civil partners), 50:50.
2. This division of rental income may not reflect the underlying ownership. For example property may be owned 10% by one spouse and 90% by the other.
3. If spouses/partners want the rental income split between them in accordance with the beneficial ownership they must make a formal election to HMRC. Once made the election cannot be revoked or changed, unless the underlying beneficial interest changes.
4. Interestingly, the above rules do not apply to property held in a business partnership or to property that is let as a furnished holiday let.

Property owned jointly by persons not married or in a civil partnership.

In this case the rental income will always be allocated between the joint owners in proportion to the underlying beneficial ownership.

Married couples and civil partners usually have a choice therefore, to split the rental income equally if this produces a lower joint tax liability or, split the rental income in the same proportion as their ownership of the property.