Wednesday 25 November 2015

Buy-To-Let Landlords Beware! Four pronged attack coming your way soon!


In the 2015 Budget and today's Autumn Statement, the Chancellor has declared war on the buy-to-let landlord and the unwary expatriate who is letting out a former home in the UK.

The first major change is in the way tax relief is granted on let property.  It will no longer be a deduction from income, resulting in a lower taxable profit.  From April 2017, the interest paid on a property loan or mortgage will be used as a tax reduction and the relief will be restricted to the basic rate of tax ie 20%. 

Secondly, as announced today, the rate of Stamp Duty ( known as SDLT) will increase on buy-to-let properties and it is expected that this will be set at 3% above the standard rates of SDLT.

Thirdly, it is proposed that by 2020 the sale of a residential property must be reported to HMRC within 30 days of completion, and the capital gains tax paid by this date.  This is very similar to the regime in existence since April 2015 for non-resident landlords selling UK residential property.  It is not proposed that this regime will apply to residential property attracting main residence relief.  

And finally, the Chancellor has announced that in 2020 it is expected that rental businesses (along with most business and the self-employed), will be required to report their results quarterly instead of annually, potentially necessitating professional assistance four times per year, instead of once!  

Monday 5 October 2015

UK Inheritance Tax: new nil rate band for residences (RNRB)


Following the Budget announcement that there would be a new IHT relief when a residence is passed on death to a direct descendant, HMRC have now issued details of the band values for the next  four years.  The relief is to be known as "Residence Nil Rate Band" (RNRB) and will be introduced from 6 April 2017.

The RNRB will be phased in, as follows:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

Thereafter, it will rise in line with the Consumer Price Index.

Wednesday 22 July 2015

UK Wear & Tear Allowance to become Replacement Furniture Relief in 2016/17


The Government this week issued a Consultation Document to explain their proposals to introduce a Replacement Furniture Relief from April 2016.

The new relief would be available to all types of lettings (except Furnished Holiday Lettings, which are already covered by the Capital Allowances regime) and would reflect actual expenditure on items such as:

·       movable furniture or furnishings, eg. chairs, sofas, tables

·       televisions

·       fridges and freezers

·       carpets and floor-coverings

·       curtains

·       linen

·       crockery or cutlery

·       beds and other furniture
 

Currently, the 10% Wear & Tear Allowance is available only for furnished lettings and is calculated based on the level of rental income; it bears no relation to actual expenditure incurred by the landlord.   The new relief is to be based on actual expenditure incurred on such items.

 
There will certainly be winners and losers as a result of this new relief.  Those landlords of largely unfurnished properties, who perhaps install washing machines, dishwashers etc in their properties will now be able to get tax relief on the replacement products - but not on the initial expenditure.  Those landlords of furnished properties who do not replace the furnishings, but have hitherto enjoyed an allowance for nil expenditure,  will no longer be able to claim tax relief unless they actual pay out for replacement goods.  No tax relief is due on the initial expenditure.
 

Responses to this consultation can be submitted until 9 October 2015.

Thursday 9 July 2015

A Complex Budget from the UK Chancellor


Chancellor George Osborne delivered the first Budget of a Conservative Government for nearly 20 years and managed to pull a few surprises.

The main proposals from April 2017 are:

·       Non-dom status and, thus, access to the remittance basis of assessment, to be lost after more than 15 out of 20 years of residence in the UK; in order to re-acquire non-dom status it will be necessary to be not resident in the UK for five years.  Furthermore,  this measure will also impact on individuals' inheritance tax (IHT) position, effectively reducing the current 17 year "deemed" domicile rule also to 15 years.  It will not impact the non-dom status of children of those who become "deemed" domiciled in the UK after 15 years. 

·       Non-doms owning UK property through an offshore company (a significant IHT tax planning tool), will now get caught under the new "look through" rules so the property will be chargeable to IHT.

·       An additional nil rate band for IHT to be introduced where a property, which, at some point, has been a main residence, is passed on death to a direct descendant. The additional nil rate band will be £100,000 rising to £175,000 by 2020/21 and, like the main nil rate band, any unused amount can be transferred to a surviving spouse or civil partner.   This additional allowance will be available if an individual "down-sizes" or no longer owns their home and can be set against assets of an equivalent value passed on death to a direct descendant.  Estates with a net value over £2million will have this allowance withdrawn on a tapering scale of £1 for every £2 over the £2million threshold.

·       Mortgage interest relief on let property is to be restricted to the basic rate  - 20%.  This restriction will not apply to properties regarded as furnished holiday lettings.

·       Corporation tax will reduce to 19% and fall further to 18% in 2020.

The following measures will apply from April 2016:

·       Individuals will be able to receive a maximum of £5,000 of dividend income tax free; over this limit, graduated tax rates will apply - from 7.5% rising to 32.5% and on up to a top rate of 38.1%.  This measure will impact Owner Managed Businesses and the remuneration strategies of such businesses will have to be re-evaluated in light of this announcement.  

·       Rent-a-Room relief will increase to £7,500 per annum.

·       High earners will see the £40,000 pension Annual Allowance eroded further with a tapering of the relief of £1 for every £2 of income + employer pension contributions over £150,000 or over £110,000 of income excluding employer pension contributions.  Unused Annual Allowance can be carried forward for three years.

·       Death benefits payable by a pension scheme in respect of a deceased member aged 75 or over will no longer be subject to a 45% tax rate; instead the payment will be subject to tax at the recipient's marginal income tax rate.
If you require further explanations or analysis of the July 2015 Budget, please contact either Paulette Peterson or Gerry Sims at info@petersonsims.com

Saturday 13 June 2015

HMRC waive the £100 penalty for failure to file 2013/14 tax returns


In a carefully worded statement published on 5 June, HMRC announced that the £100 penalty will not be pursued in cases where individuals have already appealed against the penalty (with valid reasons for their failure to submit) and provided those individuals have now submitted their 2013/14 UK returns and paid any tax that is due.

Much of the media coverage prior to this announcement gave the wrong message and it is clear now that there is no blanket exemption to the £100 penalty.  HMRC has explained "we do not wish to penalise ordinary people who are trying to do the right thing" but it was stressed that 2013/14 penalties would only be waived in the specific cases outlined above.

HMRC have said that the intention is to focus resources against major tax evasion and avoidance. 

Thursday 19 March 2015

UK Budget 2015 Headlines


This pre-Election Budget has thrown up a few surprises and a few "give-aways":

·       Annual personal tax returns are to be replaced by new digital tax accounts (projected to be within five years)

·       Decrease in the lifetime pension allowance - now down to £1million but it will be indexed in line with inflation from 6 April 2016

·       FATCA-type reporting is to be introduced from 2016 to assist in the fight against tax evasion. Financial institutions with account holders tax resident in countries with which the UK has a Exchange of Information Agreement will be required to collect and report information on a wide range of financial investments and accounts

·       The VAT threshold has been increased from 1 April 2015 to £82,000

·       The first tranche  of interest income - £1,000 for basic rate taxpayers & £500 for higher rate taxpayers -  will be tax exempt.  Additional rate (45%) taxpayers will get no tax exempt allowance whatsoever!

·       Personal allowances will rise to £10,600 in 2015/16, £10,800 in 2016/17 and then to £11,000 in 2017/18

·       The basic rate band will be increased, reversing the trend in recent years, and will be £31,785 in 2015/16, £31,900 in 2016/17 and £32,300 in 2017/18

·       Class 2 National Insurance Contributions are to be abolished but no date has been set for the implementation of this measure.  Class 4 National Insurance Contributions are to be reformed

·       A new ISA account (Help To Buy ISA) is to be launched to help first-time buyers with the Government matching savings on the basis of £50 for every £200 saved by the individual with an overall limit of £3,000 and owners of existing ISAs will find they can make withdrawals and replacements without losing the ISA status

·       From April 2016, tax relief for travel and  subsistence expenses is to be restricted for individuals working through intermediaries eg umbella companies

·       The Remittance Basis Charge is to be extended such that non-domiciled individuals resident in the UK for 17 out of 20 years will be required to pay £90,000 to access the remittance basis of taxation from this April.  The charge for those resident in the UK for 12 of the last 14 years will rise to £60,000

·       A consultation process will be opened for comment on the Government's intention to restrict the availability of Deeds of Variation for Inheritance Tax planning purposes

Tuesday 3 March 2015

Class 2 NIC changes: self-employed to pay under Self-Assessment


From April 2015, Class 2 National Insurance Contributions (NIC), which have hitherto been paid as a weekly sum in arrears by quarterly direct debit, are to be linked to profit levels and will be collected under Self-Assessment, just like Class 4 NIC and income tax.

Class 2 NIC will now be an annual liability linked to the level of profits of the business and there will be a small profits threshold, beneath which no Class 2 NIC will be payable.

HMRC will be communicating these changes to self-employed individuals.

Monday 16 February 2015

£100 penalty being abolished by HMRC? Don't cheer too loudly yet.....


A discussion document entitled "HMRC Penalties" has been issued which promotes the view that, in future, the automatic £100 penalty for failure to file a personal tax return by the due date is likely to be abolished.  However, before cheering and celebrating the fact that the date of 31 January will no longer hold any terrors, be careful what you wish for!

Whilst nearly 2.5 million individuals failed to file their Self Assessment return by the due date,  generating "a nice little earner for HMRC", nevertheless, the Government has realised that small scale penalties, such as the £100 penalty, are costly to collect.  So now HMRC are exploring possible new ways of "encouraging" compliance.

One proposal is for a "points" system based on the number of transgressions  and the magnitude of the tax at stake, which will then result in points being incurred - not so much "points mean prizes" as "points means penalties"!  And more severe penalties than currently imposed!  However, HMRC has not addressed for how long the points would remain valid nor any of the finer detail.  In order to address the problem of habitual late filers, HMRC will be looking for patterns of failure in complying with deadlines and the new approach would apply across the board to all taxes - so, for example, the filing of VAT returns as well as personal tax returns would be brought together under one umbrella "personal account" which could be more easily monitored for non-compliance. 

As with other recent HMRC initiatives, there is concern being expressed for those taxpayers who are not computer-savvy nor have access to computers eg some seniors or low-paid groups.  Such ideas as "personal accounts" must be considered in the context of such taxpayers.   

This is a consultation document and views are requested from any interested parties by 11 May 2015; the professional tax and accounting bodies will be responding to this Consultation and we will report on the results of the consultative process. 

Tuesday 10 February 2015

PetersonSims - Partners on the Tour de Finance 2015 at the British Embassy in Paris


We are delighted to announce that, as in previous years, we are partners on the Tour de Finance and will be speaking at the prestigious evening event, hosted at the British Embassy in Paris on Wednesday 15 April.

This year's Tour de Finance starts on Tuesday 17 March in the Maine-et-Loire with two events and then continues in Deux Sevres on Thursday 19 March:

17 March Chateau de Colbert, 49360 Maulevrier

18 March Ackerman (Maison de Vins)  49400 Saumur

19 March Chateau de Javarzay 79110 Chef-Boutonne

This week of events is then followed by an Evening Event hosted by the British Ambassador at the British Embassy in Paris on Wednesday 15 April

Further events are being held:

19 May Villa Duflot  66000 Perpignan

20 May Chateau de Cabezac 11120 Bize-Minervois

21 May Cote-Mas 34530 Montagnac

Further dates for September 2015 in the Alps Region will be announced later in the year

Saturday 7 February 2015

Important Changes to the Auto-Entrepreneurs' Regime in France


Following the Pinel Act of June 2014, some significant changes to the AE regime have been introduced at the end of 2014 and early 2015:

·       traders and artisans are now required to be registered with their local Chamber of Commerce or Industry or Crafts

·       this registration, of course, comes at a cost - ranging from 0.007% to 0.044% based on turnover

·       there is now a mandatory requirement to attend 30 hours of "training" provided by these Chambers at a typical cost of 260€

·       for 2015 there is a reduction and harmonisation of the levels of cotisations:
 
       - 13,3 % pour les activités d'achat revente,
- 22,9 % pour les prestations de services commerciales et artisanales,
- 22,9 % pour les activités libérales relevant du régime de retraite du RSI,
- 22,9 % pour les activités libérales relevant du régime de retraite de la Cipav  

·       except in the year of commencement, AEs are now subject to the CFE tax which is levied by their local commune and varies from commune to commune

·       all AEs must now operate a dedicated bank account for their AE activity

·       certain artisans must state, on their estimates and invoices, their professional insurance policy number

·       access to training is now conditional upon payment of cotisations

·       for 2016 there will be a merging of the different types of existing micro-regime under the title of micro-entrepreneur