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Tag: EIS

EIS

  • New Year’s Resolution? – Make Tax Understandable

    1. Training Costs – Allow all relevant business training costs paid by a sole trader to be tax deductible, as they are for limited companies. Surely training is a good thing?
    2. Class 4 National Insurance – Link Class 4 NICs paid by the self employed to benefits. Currently they are the most expensive NICs paid by the self employed but they provide no state pension credit or any link to benefits or the NHS. They are really no different from charging a further 9% of income tax, except they start to be paid at income levels £3.5k lower. 
    3. Gift Aid Carry Back – Allow charitable donations to be carried back to the prior year even if that earlier tax return has already been submitted to HMRC. Why should someone who has delayed sending in a return be treated more favourably?
    4. Corporate Gifts – Apply the same rules for VAT and corporation tax. Corporation tax rules require the presence of a logo and the gift can’t be food or alcohol, but there are no such restrictions for VAT. With a merged tax department surely this can be aligned?
    5. Property Partnerships – Similarly, treat jointly-owned property as a partnership for both income tax and VAT purposes. Currently, only the VAT department will automatically describe this as a partnership.
    6. S/EIS – Be more reasonable with the practical operation of S/EIS. If a taxpayer only needs to claim capital gains tax relief why insist that dummy income tax relief is claimed in a tax return? The investment is either eligible or not. And surely it doesn’t matter if the wrong form is completed by mistake, as long as adequate, relevant details have been provided?
    7. Making Tax Digital – Ensure MPs aren’t exempt from the biggest change to tax reporting for years. If MPs aren’t subject to the same rules, there is no incentive to make them understandable, relevant and proportionate. Is it right that a sole trader preparing perfectly good handwritten tax figures all his working life and filing returns online with HMRC, is now forced to adopt new software because MPs have said so? Whereas well paid supported MPs don’t even need to think about this for themselves?
    8. Personal and Tax Free Allowances – The interaction of these is so complicated even HMRC hasn’t yet managed to code everything correctly into their software. KISS!

    It’s these and many other strange rules which don’t help the public’s perception of HMRC and paying tax, which also adds to the feeling that the system is set up against them. This New Year and decade could be the time to tackle this properly. 

    Thank you. 

    Yours faithfully

    Accountant explaining tax to people every day…

  • Don’t Be Dwarfed By The Tax System – Seven Ways To Make Tax Less Taxing

     

    Dear Sajid Javid

    Following your ambition to simplify the tax system and as we approach your 1st Budget, may I pass on a few things that will make a difference to business’ actual experience of the tax system.

    Many good people looking at simplification tend to make changes from a macro viewpoint. Here, we’re looking at the micro level. The things that make people scratch their heads every day of the week.

    1. How many tax references do you need?

    A VAT registered owner-managed limited company with even only one shareholder-director has to obtain SIX different tax references, which arrive in different formats from different departments: 

    1. Government gateway
    2. Corporation tax
    3. VAT
    4. PAYE
    5. PAYE accounts office
    6. Income tax

    Not forgetting if there’s overseas trading, they’ll need a further VAT reference and in the construction trade, another reference. In the confusion they often end up setting up numerous government gateways. 

    There are attempts to make the system look combined but it soon breaks down into the same old silos once you scratch under the service. Please do not believe this is getting better.

    1. Names given to tax reliefs

    Please revisit the names of the following reliefs: 

    Substantial Shareholdings Relief – Part of the government’s business friendly agenda, to qualify and save capital gains tax, a company needs to own only 10% of shares in another company, hardly ‘Substantial’. Companies and many accountants miss out on this relief. 

    Adjusted Net Income – Affecting high earners and the amount of pension they can pay with tax relief, this is NOT net of tax. This is GROSS income and easily misunderstood so that unexpected tax bills arise. 

    Reinvestment Relief – This applies to SEIS capital gains tax savings when a gain is reinvested into SEIS shares. EIS also offers capital gains tax relief when a gain is reinvested into EIS shares. It’s not the same outcome (delay instead of reduction) but with both requiring a reinvestment into new shares, it’s endlessly confusing.

    1. Van tax

    What is a van? 3 different things according to the tax system depending on whether it’s:

    1. VAT
    2. Benefit in kind
    3. Capital allowances 

    Get this wrong and even taxpayers who run a simple van-based business, might get caught out and suffer financial hardship later.

    1. Change of company address

    With over 70% of limited companies registered at a home address, it’s quite common for the address to be changed. However, you can’t do this direct with HMRC. You change it with companies house and wait forever for that simple bit of information to be sent and/or dealt with by HMRC.

    If there needs to be the link, please ensure the information is acted upon. With electronic communication surely this should be almost immediate?

    There’s no point even trying to get the year end changed with HMRC via companies house. An accountant just has to do a workaround. If clients haven’t used an accountant before, they tend to appear at this point.

    1. CT61s

    Often needed when paying interest on a loan, perhaps to a shareholder-director for lending money to his/her company to help get it off the ground or expand.

    These forms record the income tax which still needs to be deducted despite the new £1k ‘simplification’. If tax still has to be deducted, surely the form should be available online? It’s about the only one that isn’t.

    Why the added administration for a busy start up who is responsibly lending money to ensure his/her company can pay its creditors. What’s so bad about that?

    1. IR35 and off-payroll working

    This gets more and more confusing. Recent Tribunal cases turn on a single judge’s casting vote, so how is anyone else supposed to decide?

    Surely the definition needs to either be very simple, such as after 2 years working for the same single client, you’re deemed an employee. Or people weigh up the pros and cons of being an employee and decide for themselves. With the new dividend tax, the government is now receiving some NI ‘replacement’.

    1. Agent Authorisation

    Due to the above, businesses need to use qualified accountants, who have to navigate HMRC’s agent gateway. To become an agent for a company the only box that works is the postcode and don’t forget to put the space in the right part of the postcode! No other website is so sensitive in this and other areas.

  • Budget 2017 – Brexit and Bricks

    The Brexit Effect – Changes effective from 2019 onwards

    VAT Registration Threshold

    This will be frozen at £85k for 2 years until 31 March 2020. In the meantime the threshold will be reviewed to establish how it might incentivise businesses further. It is true that many businesses selling to consumers deliberately stay under the threshold to avoid the administration and not to increase prices to their customers. With inflation, freezing the threshold itself might force many businesses to become VAT registered. If so, it’ll be a good time to review business models and how to grow successfully.  

    Travel and Subsistence

    From 6 April 2019, the overseas travel and subsistence allowances can be paid when on a business journey without needing to prove that some expenditure has been incurred by employees. This is a very welcome administration saving. A similar approach will be taken for UK subsistence rates. 

    Research and Development

    A pilot advanced clearance service will be available for SMEs to encourage them to make more claims. This is an excellent relief, but as usual there are some complicated parts which make many would-be claimants uninterested. Simplification is the real answer here.

    Entrepreneurs Relief

    Sometimes this valuable 10% capital gains tax rate isn’t available where new shares are issued at the same time as the founder is selling his/her final few shares. This issue will be looked at to see whether entrepreneurs can be encouraged ‘to remain involved in their businesses after receiving external investment’ presumably for the next phase of business growth. 

    Enterprise Investment Relief

    This change is effective a year earlier in April 2018 and will help businesses raise more much needed capital by doubling the tax efficient thresholds, but it comes with a price of more complication. HMRC is very quick to withdraw this relief for the smallest of reasons such as using the wrong form. As mentioned above, simplification at the same time would be very welcome for the busy growing business.

    Intangible Fixed Assets

    These have suffered many adverse tax changes recently and this will be reviewed to see whether UK companies can be better incentivised. 

    Disguised Employment

    AKA How can the government make sure it doesn’t lose out from the new flexible economy? The Matthew Taylor review will be consulted on to prevent the Chancellor from suddenly announcing an increase to Class 4 National Insurance, or similar, in the future. The delay to April 2019 in abolishing Class 2 National Insurance had already been announced.

    The possibility of extending the responsibility of deciding whether your supplier is really an employee from the public sector to the private sector will also be consulted on with the results due in 2018. This will be a worry to the many consultants who genuinely work on different projects for different clients and don’t require or want any employment related benefits.

    Making Tax Digital 

    Nothing new here except to confirm the delayed timetable to April 2019 for VAT registered businesses with a turnover of over £85k and to at least April 2020 for other businesses and individuals.  

    Property and Other Assets 

    Stamp Duty Land Tax  

    The house building, estate agent and related industries presumably will benefit from the abolition of stamp duty land tax for purchases of residential property up to £300k. Stamp duty is driven by completion dates so even if you’ve already exchanged, you will benefit now from this change on completion. 

    Companies Capital Gains Tax Indexation 

    This often valuable additional tax deduction for companies on the sale of an asset will be frozen at December 2017 inflation rates. This seems to be a further attack on residential properties where many buy-to-let landlords are incorporating in response to earlier adverse property tax changes. 

    Residential Property Capital Gains Tax Payment Date 

    The much reduced payment window to only 30 days will be deferred until April 2020, a welcome delay and perhaps not a government priority for now. 

    Conclusion 

    Many other initiatives were announced to make the UK Brexit-ready and to encourage house building. These were the main themes, but we can always expect anti-avoidance measures to be in Budgets for the foreseeable future. There were several of these, such as taxing Royalties from UK sales in the UK, which don’t affect most SME businesses.