HMRC Update Inheritance Tax Calculator

HMRC has updated its online Inheritance tax grossing up calculator to take into account the residence nil-rate band and the rates if you give 10% of your estate to charity.

For more information please visit

https://www.gov.uk/inheritance-tax-reduced-rate-calculator

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Is it really you making the repayment claim?

The Abbey Tax Blog

HMRC appears to have stepped up the number of repayment security checks it undertakes, judging by an influx of letters we have recently seen.

Repayment claims are checked when a risk is activated which raises HMRC’s suspicion about the validity of a claim.

Here are some of the circumstances which may trigger a security check:

  • A claim is made where the taxpayer address differs from that shown on their self-assessment record.
  • Previous correspondence sent to the taxpayer address has been returned undelivered by the Post Office.
  • The taxpayer deceased signal is set on the self-assessment record.
  • The taxpayer is insolvent.
  • The repayment claim exceeds HMRC’s limits for automatic processing.

HMRC also stops repayments being made when certain signals are present on a taxpayer’s self-assessment record, such as the Budget Payment Plan or No Repayment signals. The Budget Payment Plan signal is self-explanatory, but the No Repayment signal is placed on…

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NEW RULES FOR IR35 WORKERS IN THE PUBLIC SECTOR START 6 APRIL 2017

There are significant changes that commence on 6 April 2017 for workers in the public sector supplying their services via their own personal service companies or other intermediaries.
From 6 April 2017 the public sector employer or agency that engages the worker will have to review the employment status of the worker and decide whether or not to deduct tax and national insurance from payments to the worker even though he or she invoices for the services through their own company.

 

An online tool called “The Employment Status Service” is expected to be made available by the end of February 2017 and can help them make that decision. The tool can be used if the worker uses either an employment agency, or other third-party to get work.

 

These changes come on top of the restrictions on the tax deductibility of travelling expenses for IR35 workers that came into effect on 6 April 2016.

 
Please contact us if you want to discuss whether or not these rules affect you or your organisation.

VAT – Charities, Energy Saving Materials & Builders

A client is a VAT registered builder. He has been asked to install draught stripping to the windows and doors in a church. The customer has said that as the Church is a charitable organisation my client should not charge VAT at the standard rate. What’s correct?

Draught stripping for windows and doors is defined in VAT legislation as an energy saving material (“ESM”)
The reduced rate of 5% applies to the service of installing ESMs in residential accommodation (VATA 1994, Schedule 7A, Grp 2, item 1), and also to the supply of those materials by the person who installs them in the residential accommodation (VATA 1994, Schedule 7A, Grp 2, item 2).

Historically the 5% rate of VAT also applied to the installation of ESMs in buildings used for a relevant charitable purpose, but this provision was removed from the legislation with effect from 1 August 2013. The reduced rate of VAT for the installation of ESMs was only intended by the EU to apply to residential accommodation, so the amendment to UK legislation brought it into line with the intention of the Directive.

Consequently, the client will need to charge at 20% to the Church for the installation of draught stripping.
Charities are entitled to VAT relief on certain purchases of goods and services, but the conditions can be complex and eligibility declarations or certificates are often issued in error. As a supplier the client is responsible for determining the correct VAT treatment, so was wise to check the correct position and not take the charity’s statement at face value. This should be standard practice in any business supplying a charity and being provided with a request for VAT relief, whether verbal or in an eligibility declaration.

Annual Investment Allowance Reduction… What can be done?

My client company is currently incurring large amounts of capital expenditure including significant amounts of plant and machinery. The reduction in the Annual Investment Allowance on 1 January 2016 was a huge disappointment to my client. Can anything be done to counter the reduction in available capital allowances?

The client might wish to consider whether any of the expenditure qualifies for the 100% “enhanced capital allowances” which can be claimed for certain expenditure on energy-saving and environmentally beneficial plant and machinery. Details of qualifying expenditure can be found at www.gov.uk/guidance/energy-technology-list and at  www.gov.uk/government/publications/water-efficient-enhanced-capital-allowances.

Loss-making companies have the possibility of surrendering some or all of the ECAs for a 19% tax credit but any repayment cannot exceed £250,000 and may be restricted by reference to the company’s PAYE and NIC liabilities.

Whether or not expenditure already incurred qualifies for ECAs is a question of fact but there may be time to revisit proposed expenditure to determine whether there is an overall benefit to be gained by substituting qualifying for non-qualifying.

When to charge VAT?

My client is VAT registered as he provides consultancy to UK businesses. A French business customer has now approached him for his consultancy services. Does my client need to charge UK VAT to this French customer?

In order to answer the question we would need to know what type of consultancy the client is providing, as the deemed place of supply, and consequently the VAT treatment, are determined by the nature of the supply.

To give an example, if the client provides IT consultancy this falls within the general rule for business to business (‘’B2B’’) supplies meaning that the place of supply is treated as being where the customer belongs and so the supply would be outside the scope of UK VAT.

On the other hand, land related services fall within one of the exceptions to the general rule, so if the client is providing consultancy services in relation to a particular site or the design of a building in the UK the place of supply would be the UK where the land is located, and UK VAT would be charged.

Other types of consultancy could potentially fall either under the general B2B rule for services or the exception for services related to land.

Detailed information can be found in VAT Notice 741A, sections 6-11 but it is important first to understand exactly the nature of your client’s consultancy as the description “consultancy services” is too broad to be able to reach a conclusion.

Taxation on childrens saving

A parent wants to put some of their substantial savings into the names of their children. The children are all under the age of 18. Will the children be taxed on the interest that is earned from those savings?

Children’s income is theirs in their own right, no matter how young they are.  They are also entitled to the full personal allowance. However for a child under the age of 18 and unmarried, this does not apply to income that comes directly or indirectly from a parent. Where it has come from the parent it is treated as the parent’s own income with the following exceptions:

  1. Each parent can give each child sums of money from the total of which the child receives no more than £100 gross income per annum eg interest on bank or building society deposits. If the income exceeds the limit, the whole amount and not just the excess over £100 will be taxed on the parent.
  2. The National Savings ‘children’s bonds’ for under 16 year olds can be given in addition because the return on such bonds is tax exempt.
  3. A parent may pay personal pension contributions of up to £3,600 a year on behalf of a child under the age of 18.
  4. Parents may contribute towards a Child Trust Fund Account for their children.

A child includes a stepchild, an illegitimate child and an adopted child.

For tax purposes income that arises to the child that has come from the parent is treated as a settlement and is taxable on the parent under ITTOIA 2005 s629.