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.
Inheritance Tax – Something to Think About
Growth of asset values coupled with the fact that the nil rate band, unchanged at £325,000 since 2009, will remain frozen until at least April 2028 means many more states of relatively modest size are being drawn into the IHT net every year.’
IHT receipts for April 2022 to March 2023 were recently reported at £7.1bn, which is £1b higher than the same period a year earlier.
There will be many estates that end up paying IHT unnecessarily.
One of the first things to watch out for is that you leave a valid will. You may have thought long and hard about what you wanted to happen to your estate, but if for example your will cannot be found or it is invalid for some reason, then what actually happens could be quite different and those plans in place to minimise the IHT could fail.
So, get the will properly drawn up, make sure everyone knows where it is, and ideally communicate its contents in advance so everyone knows your intentions in advance and your reasoning.
While lifetime gifts may be made to mitigate IHT on death, there can be many other reasons for such gifts. It may be to help your children or other family become financially secure. It might be to help them buy their first property.
What happens if you are helping one child financially but you have other children. You may choose to try to equalise the gifts you make, or you may also make good any inequality in lifetime gifts with the distribution of assets in a Will.
Leaving the family home between children has the potential to sour relations if there is no agreement about what to do with it. This can be particularly awkward if one sibling has been living in the property and wants to remain.
In this case is there sufficient cash either from the estate or otherwise for one sibling to buy out the others.
Defined contribution pension pots are not legally part of an estate and are therefore exempt from IHT. If the pension holder dies at age 75 or over no IHT will be due but income tax will be levied on the nominated recipient of the pension at their normal income tax rate as the funds are withdrawn.
If death is before age 75 no income tax or inheritance tax will be payable.
It may therefore be better to use up your other assets before depleting your pension in order to preserve this IHT free asset.
Manchester based firm, AMS Accountants Group Ltd, has been hired and will have two months to complete the year end audit for 2021-22, to meet the Electoral Commission filing deadline of 7 July.
The firm will also have to audit the accounts of the SNP group in parliament, which have to be filed by 31 May to meet a requirement for £1.2m in ‘short money’, which is funding for Westminster MPs and is paid to all opposition parties.
AMS Accountants Group was set up in 1982 and offers audit, accounting, assurance and M&A services with fee income of £10.4m for yearend 2021.
Government Invests More in Anti-Fraud Plan
This aims to halve fraud to £3.3bn from the current £7bn a year.
The development is part of the Home Office’s anti-fraud plan, which will include a £30m state of the art fraud and cybercrime reporting and analysis service.
This service will provide a new reporting website, to make it easier to report fraud online.
A national fraud squad will also be set up with 400 specialist investigators across police and the National Crime Agency (NCA).
Another element of the plan will see banks permitted to delay payment processing so suspicious payments can be properly investigated.
In 2021, Action Fraud received victim reports totalling losses of £2.35bn, with the average personal losses for authorised fraud being around £3,000. Fraud also cost businesses over £1.3bn, said UK Finance.
In addition, devices which can hold multiple SIM cards, and are used to send scam texts and run scam call campaigns, will be outlawed.
There will also be a review of the use of mass texting services and spoofed UK phone numbers by scammers.
VAT break for pharmacists
With effect from this month the VAT treatment of medical services carried out by staff directly supervised by pharmacists will be exempt for VAT.
Services include health checks and blood pressure checks, which currently are liable for the 20% VAT rate.
Car benefit for disabled employee
A car benefit charge is incurred when a car is made available to an employee by reason of employment and is available for private use.
However, an exemption is available in specific circumstances. The three conditions that all need to be met for a disabled employee to be totally exempt from any car benefit or car fuel benefit are as follows:
- That the car being provided has been adapted for the employee’s needs or the car provided is an automatic where the employee’s disability prevents them from driving any other car.
- That the car being provided is available only for the employee’s business travel, home to work travel or travel for training.
- That there is no other private use of the car.
If the driver has a disabled person’s badge, then the following can be considered.
- Any equipment included in the car that enables the disabled employee to use the car is disregarded when calculating the cost of accessories.
- The CO2 emissions of the equivalent manual car can be used in the benefit calculation if these are lower than those of the automatic they actually drive.
- The list (or where relevant) notional price of the equivalent manual car can be used in the benefit calculation if this is lower than the price of the automatic they actually drive.
If the driver does not have a disabled person’s badge, then only the following can be considered i.e. Any equipment designed solely for use by a chronically sick or disabled person is disregarded when calculating the cost of accessories.
OTS – Office of Tax Simplification
The government decided to abolish the OTS (Office of Tax Simplification).
The OTS has been running for over a decade and has been instrumental in ironing out some of the wrinkles in the tax system, which seems to get more complicated almost daily..
The OTS was in the middle of a call for evidence on hybrid and distance working, and any pressures they put on existing tax rules and guidance.
In its short history it has produced enormously useful and thoughtful work on everything from inheritance tax to property taxes.
The announcement of the abolition came just a few short weeks after it was announced that posts for two further board members were to be advertised. Is this yet another ill thought out measure taken on the spur of the moment.
Is abolishing another advisory body part of the trend to becoming less accountable and more authoritarian.
The Tax System
I sometimes wonder whether MPs are the right people to legislate about tax. Most of them will not understand it and so vote with their party to confirm whatever the Chancellor proposes.
Surely, once the criteria for the required tax outcome have been determined, it should be for an independent tax raising body to put in place the rules of engagement.
At a time when the business world is changing fast, tax policy and implementation is lost in its own bubble, resulting in non sensical rules that drive behaviour. Why should it make any difference if you work through your own company or stay as a sole trader or partnership. And accountants and tax advisers make a good living because government cannot or will not grasp that particular nettle.
In its annual report, HMRC tried to deflect criticism of falling standards by insisting it was in the midst of a massive recruitment drive. But a freedom of information request discloses that rather than the number of customer service staff increasing, the number is in fact dropping.
Then you have the removal of the OTS when it was in the middle of considering the tax implications of hybrid and distance working. OTS was about to formulate its response or recommendations from its inquiry. This would have been an important and very relevant report given the shift in working patterns. The tax system is a thing routed in older work patterns.
HMRC recently produced a report on the short-term effects of the recent changes. In the report, HMRC estimates that 130,000 workers are likely to have been affected and that the reforms generated an estimated additional £1.8bn in tax and other revenue between October 2019 and March 2022.
What do you need to properly determine IR35 status;
- the contract details.
- the contractor’s or worker’s responsibilities.
- who has control over what work has to be carried out.
- who has control over when or where the work can be carried out.
- how the contractor/worker will be paid.
- whether any expenses will be reimbursed or benefits provided.
- whether the contractor has the right to send a substitute to do the work on their behalf.
- whether there is an obligation for work to be provided and carried out.
- if something goes wrong, how this would be put right and who is financially liable.
- whether any equipment is provided so the work can be undertaken.
HMRC created the Check Employment Status for Tax (CEST) tool, which allows hirers, agencies and contractors that work through limited companies, partnerships or unincorporated associations to check whether the IR35 rules apply to the freelancers they use.
If you answer the questions asked by CEST accurately, HMRC will stand by any CEST decision made. So if you use it make sure you keep a record.
The IR35 rules apply on a contract-by-contract basis, so a check needs to be made for any new contracts.
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.