Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the sole basis for making decisions.
How often have you changed jobs in your career? This is likely to mean that you will have lots of pension pots of various sizes that you have lost track of.
Do you have any old paperwork? If you cannot find any documents, you can use the government’s pension tracking service instead.
The sums paid into pensions over an extended period, although fragmented, could still be significant.
Once you’ve located any old defined contribution pensions, you could consider combining them into a single pot, possibly with your existing provider. This will make your pensions easier to monitor and manage. Make sure you double check whether any of these old pensions have any guarantees attached, as you could lose them if you switch to a new provider.
Saving for the kids
Children also have tax allowances that can be used each year. The Junior ISA allowance is now a very generous £9,000 a year, which means that if you have spare cash you can start building a very healthy fund for your children’s future. They won’t be able to access the money until they are 18, at which point it automatically turns into a normal ISA and transfers into their name, giving them full access.
If you contribute the maximum £9,000 each year and achieved a 5% investment return after charges each year, the pot would be worth almost £266,000 by the time your child turns 18.
Investing just £50 a month, earning 5% returns a year, would give your child a £16,000 present on their 18th birthday.
You can also pay up to £2,880 into a Junior SIPP each year, with government tax relief automatically boosting that to £3,600. Your child will not be able to access the money until they are at least age 57, maybe later.
If you paid in the maximum each year until your child turns 18 and they don’t contribute anything else, assuming 5% investment returns each year after charges, the pot would be worth £713,000 by the time they turn 57 or just over £1.1m by the time they hit the current state pension age of 66.
VAT Flat Rate – Deferred Import VAT
From 1 June 2022, businesses registered under the flat rate scheme should no longer include imports accounted for under postponed VAT accounting within their flat rate turnover. Businesses will still have to complete a flat rate scheme calculation and also record the VAT due on any imports. The value of import VAT should be included in box 1 on VAT returns.
Businesses with a turnover of no more than £150,000 a year, excluding VAT can join the scheme. Businesses will cease to be eligible to use the scheme if the total value of their income for the year ending is more than £230,000.
Postponed VAT accounting was introduced on 1 January 2021 and allows UK VAT registered businesses to declare and recover import VAT on the same return, rather than having to pay it upfront when the goods are imported and recover it later.
Business less Confident
A survey carried out by ICAEW of 1,000 chartered accountants in the UK, found confidence levels hit 27.6 on the quarterly index for Q1 of 2022, which is significantly below the highest ever reading of 47 two quarters ago.
The figure matches the confidence level last recorded in Q4 2014 but is still much higher than the period from 2015 which recorded a level of 16.8.
Among sectors, IT and communications and energy, water and mining companies are the most confident with an average confidence level of 42 while retailers and wholesalers are among the least with a level of 13.2.
Regulatory Oversight of Crypto
Could crypto-asset markets reach a point where they represent a threat to global financial stability?
The Financial Stability Board’s latest report examines developments and associated vulnerabilities relating to various types of crypto assets, including bitcoin.
The crypto-asset market grew by 3.5 times in 2021 to $2.6 trillion (£1.9 trillion).
The report notes that ‘financial stability risks could escalate rapidly and calls for timely and pre-emptive evaluation of possible policy responses. The rapid evolution and international nature of crypto-asset markets raise the potential for regulatory gaps.
There are also wider public policy concerns related to crypto-assets, such as low levels of investor and consumer understanding of crypto-assets, money laundering, cybercrime and ransomware.
Many other concerns have also been raised concerning crypto assets.
Some of the trading platforms operate outside of a jurisdiction’s regulatory perimeter or are not in compliance with applicable laws and regulations presenting the potential for concentration of risks and underscores the lack of transparency on their activities.
HMRC Lose Another IR35 Case.
Since 1996, Adrian Chiles had been working for the BBC and then subsequently ITV, with a mix of BBC and ITV contracts, and work for other media outlets, and was being paid through his personal service company, Basic Broadcasting Limited (BBL). He set this up following a decision taken by the BBC in 1996 that BBC presenters should be removed from the payroll and paid on a freelance contractor basis.
HMRC issued determinations for income tax and notices of decision in respect of national insurance contributions to BBL based on the IR35 intermediaries legislation, raising the question about whether Chiles should be considered as an employee.
The income tax and NICs at stake amounted to £1,249,433 for the ITV contract and £460,739 for his work for the BBC.
Chiles retained Avalon, which has acted as his agent since 2007 and made all his bookings, earning 15% of fees.
Chiles’ presenting style and the words he used on air were a matter for Chiles, provided that his overall performance was of a good standard, which was clearly set out in the ITV contract.
Judge Barbara Mosedale added that ‘to some extent, Mr Chiles provided his own “tools of the trade” at his own expense to perform the ITV contracts. This included maintaining a home office with a desktop computer, broadband connection and two mobile phones. He subscribed to satellite sports channels and various newspapers and periodicals’.
However Chiles had never exercised BBL’s contractual right to provide a substitute.
As Chiles had a specific contract to work on named programmes, the judge said: ‘There were clearly no rights on the part of the broadcasters to direct Mr Chiles to present different types of programmes at significantly different times or on different days.’
The judge ruled that the structure of the contracts is consistent with Mr Chiles, in his capacity as a director of BBL, agreeing to enter into the contracts with ITV and then in his capacity as an employee of BBL performing the services of a presenter. Mr Chiles should be treated as being in business on his own account in all the tax years under consideration. This was underlined by the fact that Chiles had a significant number of clients. In the period 1996 to 2019 he contracted with nearly 100 different third parties.
Throughout the relevant tax periods Chiles continued to seek and obtain other work apart from his work under the ITV contracts and the BBC contracts. He entered into 40 separate agreements with some 25 different third parties. It was also a factor that Chiles employed an agent who earned 15% commission on his income.
The case was dismissed, and Chiles’ appeal against the HMRC assessments was upheld. But HMRC still has the right to appeal so this may not be the end of the matter.
100,000 Time to Pay Arrangements
The latest HMRC figures show that nearly 100,000 self-assessment taxpayers have used online payment plans to spread the cost of their tax bill into monthly instalments since April 2021.
Once a taxpayer has filed their 2020-21 self-assessment tax return, they can set up a Time to Pay arrangement to spread their repayments over 12 months on debts up to £30,000. This can be done online at gov.uk without speaking to HMRC.
Since April 2021, more than £310m has been paid back by people using the monthly repayment scheme. There is a cap on the scheme meaning that anyone owing more than £30,000, or needing longer to pay must actually contact HMRC to discuss payment options.
Anyone who did not pay their tax liabilities by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April.
Despite this, from 1 February, all outstanding amounts were subject to interest.
Stealth Taxes for Younger Generation
A report by the Intergenerational Foundation (IF) claims that the government’s manifesto promise to ‘not raise taxes’ has directly led to tax by stealth for young people.
The report accuses the government of burdening the cost of social care and Covid-19 on young people as they are going to pay a rate of 13.5% with the national insurance increase.
Those who reach the state retirement age of 65 do not pay national insurance even when they continue working however, they will pay the social care levy at 1.25% from next year.
The report states that during a time of high inflation the decision to freeze the tax brackets will force young people into higher tax brackets much sooner than they normally would.
The decision to also freeze the student loan repayment threshold at £27,295 for the next year is expected to generate an additional £600m for the Treasury.
Tax Gifts for Valentine’s Day
Here are some novel tax gifts that you could have shared:
- Can you transfer some of your unused personal allowances to your loved one saving them up to £252 in tax.
- What about the wedding gift exemption for Inheritance Tax.
- Transfers of assets, such as shares or property to your spouse’s/civil partners are free from capital gains tax (CGT) and inheritance tax (IHT). But don’t do it until after the ceremony as otherwise the normal rules of gifts will apply.
- Contribute to your spouse/civil partnership pension even if they are not earning. The maximum pension contribution that can be made in these circumstances in the tax year is £2,880 net or £3,600 gross.
- If you wanted to give your partner a sponsorships or animal adoption, then you can claim Gift Aid relief on the donation.
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at email@example.com.