New National Minimum Wage(NMW) requirement from April 2018
By Asif Mahmood
All employers need to make sure that their business implements the new NMW changes starting from April 2018
To avoid penalties and adverse publicity all employers need to get ready for the change and start paying their staff according to the new rates from April 2018.
The National Minimum Wage (NMW) is the minimum wage per hour a worker is entitled to in the United Kingdom. These rates are reviewed yearly by the government.
The National Minimum Wage depends on your age and whether you’re an apprentice.
Below table provides the detail of the changes to the National Minimum Wage from April 2018 with comparison to last year rates (April 2017):
||25 and over
||21 to 24
||18 to 20
For further information contact Asif Mahmood:
New deemed domicile rules for inheritance tax
HMRC has published a guidance detailing new deemed domicile rules for inheritance tax (IHT). The new rules will apply from 6 April 2017.
Guidance also include changes to the number of years of residence needed in the UK for deemed domicile rules to apply and the addition of a new category
Before 6 April 2017 an individual was UK domiciled if they were resident in the UK for 17 of the 20 years of assessment ending with the year in which the relevant time fell. From 6 April 2017 these changes so that someone is UK domiciled if they are resident in the UK for 15 of the 20 years before the relevant year.
HMRC advises a taxpayer can still be treated as UK domiciled even if they are not resident in the UK at the relevant time. If someone left the UK before 6 April 2017 and does not return the new rules do not apply.
Formerly domiciled resident
Under the changes, HMRC introduced a new category, i.e. formerly domiciled resident. This applies to someone:
- - who was born in the UK with a UK domicile of origin,
- - who has acquired another non-UK domicile of choice, and
- - who is resident in the UK and was resident in the UK in at least one of the two previous tax years.
However, if someone is a formerly domiciled resident, property they settled on trust when they were not domiciled in the UK cannot be excluded property for the purposes of IHT. This does not apply if someone is only deemed domiciled under the new rules.
HMRC says the new trust protection measures makes sure an IHT trust charge does not arise when someone is no longer resident in the UK, or a formerly domiciled resident.
HMRC advises that anyone who has a non-UK domicile of origin is not affected by the changes for formerly domiciled residents. They are, however, subject to the deemed domicile rules and the UK residential property rules.
For further guidance, please contact an expert staff member of Care Accountancy at 0113-2488181.
Canada plans to introduce tax on cannabis
According to a recently released report from Marijuana Business Daily titled "Marijuana Business Factbook 2017," the U.S. legal cannabis industry is expected to grow by about 30% in 2017, 45% the following year, and an aggregate of 300% between 2016 and 2021. Overall, we're talking about a roughly $17 billion industry by 2021. It's no wonder investors are so excited about marijuana stocks.
The Department of Finance Canada has published a proposed excise duty framework for cannabis products. The proposed level of taxation is intended to keep prices low to eliminate the black market, and would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, and seeds and seedlings for home cultivation.
The Canadian government says this approach is intended to provide flexibility in helping support its policy goals by establishing a minimum duty amount for cannabis products, while also accounting for changing market conditions and variances in product value and potency. The framework has also been designed to capture a wide variety of products to account for the expansion of available products for sale in the future (e.g., edibles).
Revenues raised from the taxation regime would be used to support investments in public education, enforcement, research and other activities integral to an effective system of legalisation and regulation of cannabis.
The federal framework is intended to be in place once legal cannabis for non-medical purposes becomes accessible for retail sale, no later than July 2018.
The deadline for comments on the proposals is December 7.
The Proposed Excise Duty Framework for Cannabis Products is here.
CAN GOVERNMENT POLICY ON THE UK PROPERTY MARKET DAMAGE THE ECONOMY?
CAN GOVERNMENT POLICY ON THE UK PROPERTY MARKET DAMAGE THE ECONOMY?
By Godwin Okri
It has long been a settled argument amongst free-market economists that a liberated market is a flourishing market. This is why some economists wince each time they read about Government policies affecting the UK property market.
Most people enter the housing market hoping to build financial security for themselves and their family. However, recent policy initiatives by the Government are set to undermine the platform for individuals to enter the property market and may have other, more far reaching negative impacts on the UK economy as a whole.
The Buy-To-Let (BTL) market (also referred to as the Private Rental Sector) has grown in size since the inception of the BTL mortgage in 1996. There are now about 2 million BTL landlords controlling assets worth about £2 trillion. The growth of the private rental sector has helped to mitigate the effect of the growing number of people on council waiting lists, which now stands at about 1.9 million. Commercial real estate investment in the UK has also grown significantly.
Rather than applaud the strides made by this sector, the current Government has instead blamed the Private Rental Sector (PRS) for the escalating property prices in the UK. As a result, the Government introduced a plethora of policies as panacea to cure the alleged problem, which are summarised below.
- The Prudential Regulation Authority (PRA), which is part of the Bank of England, has instructed that lenders must not lend to BTL investors if the property in question produces rent below an Interest Coverage Ratio (ICR) of 145%. The borrower must also be able to afford the mortgage with a hypothetical interest rate of 5.5%. Portfolio landlords (i.e landlord with more than 4 properties) must also show a robust yield.
- The Government announced that anyone buying a second home must pay a 3% surcharge to HMRC.
- BTL landlords must check the ID of potential tenants before execution of the agreement.
- The Government introduced Section 4 of the Finance Act (No.2) 2014 which prevents landlords from offsetting the full value of their mortgage interest payments against their rental income when calculating their profit. From April 2020, the tax relief they can claim will be limited to the basic rate of 20%.
- Since April 2016 the 10% of the rental income which landlords (who let furnished properties) were able to claim as notional wear and tear when preparing their tax returns has now been discontinued. Now, landlords can only claim the actual cost of ‘replacement’ of furniture, but not the initial cost of purchase.
- As a final straw, the amendment made to the provisions of Section 21 of the Housing Act 1988. The Deregulation Act 2015 (which introduced the amendment) is seen as the final dagger piercing the BTL heart. The 2015 Act now makes it a lot harder for BTL landlords to evict their recalcitrant tenants, even during a period of persistent none payment of rents. The Act introduces a new Form 6A, which cannot be served earlier than 4 months into the tenancy; if the tenant raises a complaint, he cannot be evicted until certain conditions are met, etc.
The cold breeze blowing from the camp of the government is cooling the market. The rules introduced by the PRA are making it difficult for buyers to get a mortgage. Stamp Duty surcharge is also adding more upfront costs to transactions, making it even harder for purchasers. Investors looking to sell would now be forced to reduce their prices, because of these draconian policies. London and the South East are already experiencing a drop in prices. This sustained attack by Government on the Private Rental Sector could be costly. But could it be costly enough to affect the whole UK economy? Could this possibly affect investment, consumer confidence, consumption, the mortgage market, or international trade?
Economists have long identified that there is a correlation between consumer confidence and spending. An investor who feels that the value of his property has dropped, would react by cutting back on his spending because of the economic uncertainty. Industries suffer when consumers cut their spending. This could lead to unemployment. It puts the economy in reverse, which affects the gross domestic product (GDP). John Maynard Keynes refers to this as the ‘multiplier effect’.
The banking and financial sector could also be affected: a stagnated property market affects banks looking to lend. As at 2015, the total value of mortgage lending was in the region of £152 billion. This included banks’ profit. A fall in the mortgage market would affect this margin, which may lead to a reduction of activity in the financial services sector.
Furthermore, many pension funds and investment bonds generate income from the UK property market. A loss of income as a result of a contracting property market would be damaging for these organisations.
Lastly, a failing UK property market could even affect our international trade. The balance of payments from international trade has two main sections: Current Account and Capital & Financial Account. The Current Account records payments for purchase and sale of goods and services. The Capital & Financial Account records flows of money relating to investments, savings or speculation. The ‘foreign direct payment’ is part of the Financial Account, which shows funds coming into the country from abroad to finance investments.
Although Britain has a history of trade deficit, it has benefited from the billions of pounds of inward foreign direct investments brought into the UK for property investments, which has helped us balance the books from international trade. The Bank of England even acknowledges that overseas investors account for about half of all commercial real estate transactions since 2013.
An international investor who believes that the value of his investment is likely to fall would readily sell up and move on. This could affect the inflow of investment, which would in turn worsen our international trade account.
It is therefore clear that a falling property market would have a macro-economic effect on our economy and the GDP. The Government should rethink its policy and act decisively by reversing or amending the policies set out above. Attacking the issues from the demand side will not solve the problem. The Institute of Public Policy Research said that England is facing a growing housing crisis and estimated a shortfall of 750,000 units by 2025. Thus, the Government could approach this from the supply side: releasing more land for development; allowing local authorities to borrow in the open market to fund programs of house building; relaxing the planning procedures; restricting the excessive use of Article 4 Direction, etc.
The PRS should be allowed to flourish in a free market without interruption. Free markets police their own integrity and solve problem areas by default because it is logical to do so. Maintaining the investment policies that have significantly enhanced a free property market would certainly be the fuel we need to guarantee the “greatest happiness to the greatest number”.
Godwin Okri, Realtor(USA) Lawyer (UK)
Author of the book “Investing in Property with Strategy”
One of our clients is looking for a friendly, positive and approachable Shop Manager for Leeds branch of a big nationwide franchise of cakes and related items.
To manage the day-to-day provision of cake designs and to exceed customers' expectations.
To develop the business and sales opportunities where possible.
Timing: From 11AM to 7PM. 6 days a week (Monday to Saturday)
Responsible for the day-to-day operation of the shop
Recruit and train staff as necessary
Responsible to manage materials costs and minimise wastage
Supervise and lead the shop staff
Previous experience in a similar position
Good organisational & communication skills
Good knowledge of processes & procedures
Please send your CVs or any questions to email@example.com. Please note that no information will be provided if you call our office.
Do you know how to cash your £2000 Employment Allowance?
Have you recently received a letter from Prime Minister, David Cameron, giving you a good news about Employment Allowance of £2000. Prime Minister wrote that from 6 April 2014, almost all UK employers can reduce the amount of National Insurance contributions (NICs) they pay for their employees by up to £2,000. The reduction is in employers’ contribution. Employees will keep paying the NIC as usual. It is being considered a significant move to get rid of tax on jobs.
Please click here to read the Prime Minister’s letter.
How to claim
Claiming Employment Allowance has been made very easy. You just have to click a relevant field in your payroll software.
Employment Allowance is for nearly all employers that pay Class 1 National Insurance contributions on their employees’ and directors’ earnings. This includes:
- community amateur sports clubs
You cannot claim the Employment Allowance, for example if you:
- employ someone for personal, household or domestic work, such as a nanny, au pair, chauffeur, gardener, care support worker
- already claim the allowance through a connected company or charity (see below)
- are a public authority, this includes; local, district, town and parish councils
- carry out functions either wholly or mainly of a public nature (unless you have charitable status), for example:
- NHS services
- General Practitioner services
- the managing of housing stock owned by or for a local council
- providing a meals on wheels service for a local council
- refuse collection for a local council
- prison services
- collecting debt for a government department
You do not carry out a function of a public nature, if you are:
- providing security and cleaning services for a public building, such as government or local council offices
- supplying IT services for a government department or local council
If a company has control of another company, or both companies are under the control of the same person or persons for example, companies linked in a group, these companies are connected. Where this is the case, you will only be entitled to one Employment Allowance to use against one PAYE scheme (regardless of how many PAYE schemes you operate). It is up to you to nominate which PAYE scheme to claim the allowance against. If your business controls a charity, they are not connected and you can claim the Employment Allowance for both the company and the charity.
Inheritance Tax in a Nutshell
The two unavoidable certainties, i.e. death and taxes, will inevitably come together one day. But you can possibly avoid but definitely reduce the inheritance tax with proper planning. Inheritance tax is often referred to as the ‘voluntary tax’, being easily reducible. Here is a small list of helpful facts:
1- The first step will be that HMRC will ask your executors to work out the value of your estate by adding up all your assets, including your home, your savings and investments (even individual savings accounts and any other tax-free savings accounts), valuables (such as jewellery, artwork, and cars), certain life insurance policies, and the value of any debts other people owe to you when you die.
2- But don’t worry anything you leave to your spouse or civil partner will be ignored for this inheritance tax calculation. Gifts between spouses and civil partners are totally exempt for inheritance tax purposes.
3- HMRC also looks back to the previous seven years and add the amount of certain gifts you made to others during the period to value of your estate.
4- For inheritance tax purposes all your assets are valued on the date you die or when you gave them away, not the date you bought or acquired them, or the date you included them in your will (assuming you have one).
5- Executors can deduct the following from the value of your estate:
- Certain exemptions (such as donations to national galleries and museums, and gifts to housing associations)
- Charitable donations (left in a will)
- Costs of winding up your estate
- Funeral costs
6- Once the executors have established the value of your estate, HMRC deducts the nil-rate band (£325,000 in 2012-13 and £329,000 in 2013/14 as proposed by the new Autumn Budget. For married couples or widows, the nil rate band is £650,000.
7- There is no tax payable on if the value of the estate is under nil-rate band. If the value of the estate is more than the nil-rate band, inheritance tax is payable at the flat rate of 40 per cent.
Inheritance Tax Calculator for single or divorced
Inheritance Tax Calculator
House Value (including 2nd property)
Household contents and Personal effects
Bank and Building Society Accounts
Stocks and Shares
Savings and Investments (including offshore, ISAs, endowments, etc.)
Other Assets (car, boat, Life Assurance not under trust etc.
Assets Sub Total
Subtract Debts (mortgages, other loans etc.)
Subtract Nil Rate Band
Approximately Net Estate Size
IHT x 40% Total
For married couples or widow, the nil rate band will be £650,000.
This is Inheritance Tax in a nutshell. If you need any further help, simply contact us on 0113-2488181 or email us at firstname.lastname@example.org.
Missed the Tax Return Deadline? Don’t Panic
There are 10 million self-assessment taxpayers in the UK and most of them have submitted
their returns on time i.e. on 31 January 2014. There are still over one million returns left to be filed.
If yours is one of them, don’t panic. Although you might have already received a £100 penalty from HMRC,
but no further penalties will be charged for late filing until 30 April 2014 when the return is three months overdue.
This should give you sufficient time to get your affairs in order. It is worth noting that HMRC will charge
daily penalties of £10 for a further three months, up to a maximum of £900. If your return is still
outstanding after six months you will face an additional charge of 5% of the outstanding tax or £300,
whichever is higher. This is repeated up until the return is twelve months overdue, with possible extra
penalties of up to 100% of the tax due if HMRC believes there has been a deliberate attempt to conceal
information. It is explained in the table below:
|Length of Delay
||Penalty you will have to Pay
|1 day late
||A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
|3 months late
||£10 for each following day - up to a 90 day maximum of £900. This is as well as the fixed penalty above.
|6 months late
||£300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
|12 months late
||£300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead. In some cases the penalties can be even higher than this.
These are as well as the penalties above.
HMRC will charge penalties on late payment of tax as well. Failing to pay tax within 30 days of the due date could see you charged a penalty of 5% of the outstanding amount. Further 5% penalties are then charged when the payment is six and 12 months overdue. It is explained in the table below:
|Length of Delay
||Penalty you will have to Pay
|30 days late
||5% of the tax you owe at that date.
|6 months late
||5% of the tax you owe at that date. This is as well as the 5% above.
|12 months late
||5% of the tax unpaid at that date. This as well as the two 5% penalties above
HMRC will also charge daily interest at a rate of 3% per annum on any outstanding amounts.
Incentive is strong to file as soon as possible. If you file in the next two weeks, you can limit any fines to £100, but putting it off will see the penalties and interest increase quickly from as soon as the start of March.
It is also important to remember that even if you have no tax to pay, failing to send in your return could result in a penalty of up to £1,600.
The sooner the return is filed and your tax paid, the less any penalty will be. And if you’ve already filed your return, now is the perfect time to start getting your records ready for next year’s return!
Appealing against a late filing penalty
Late filing penalties can be cancelled if you have a ‘reasonable excuse’ for filing late. Please note that you should file your tax return before making your appeal against the late filing penalties.
Initially you make your appeal to HMRC. The appeal should normally be made within 30 days of the penalty notice being issued, but HMRC may consider late appeals. If HMRC does not allow your late appeal, you can apply to the Tax Tribunal to have your appeal allowed.
Appeals need to be made in writing and this may be done using form SA 370. Form 371, accessible from the same page, should be used for partnership late filing penalty appeals.
HMRC expects you to file the tax return as soon as you are able to do so – within 14 days of the end of the special circumstances which caused you to file late.
If HMRC rejects your appeal you can ask HMRC to review the decision. The review will be carried out by a different HMRC official. You should consider asking for a review if you missed out significant information on your initial appeal letter. Failing this you may appeal to the First Tier Tribunal (Tax).
If HMRC, or the Tribunal, accept that you have a “reasonable excuse”, the entire penalty is cancelled. Points to consider are:
The ‘reasonable excuse’ must continue throughout the period from the missed filing date until shortly before you actually file the return. This means that it may be accepted that you may have a ‘reasonable excuse’ for some, but not all, of the penalties charged.
HMRC takes a narrow view of what is a ‘reasonable excuse’. HMRC’s view can be found at http://www.hmrc.gov.uk/sa/appeals-decisions.htm#e
The tribunal may, in some cases, take a wider view of what is reasonable. For example, the tribunal may accept that you had a reasonable excuse if you relied on your accountant, and it was reasonable to expect that your accountant would file on time, and you did all you could to ensure this. But this will not apply if your accountant has previously been unreliable – for example if returns for previous years were filed late by your accountant.
If you registered for on-line filing by 31 January 2014, but did not get your access code in time to file before the deadline, and filed your 2012-13 return using HMRC’s free software by 15 February 2014, this should count as a reasonable excuse.
Appeals to the First Tier Tribunal
If HMRC turns down your appeal, even after a review, you can ask for the appeal to be heard by the Finance and Tax Tribunals, First Tier Tribunal (Tax). This can be done at an oral hearing or on paper – but the taxpayer always has the right to appear and be heard. You can find out more about the First Tier Tribunal (Tax), and download an appeal form from their website at http://www.justice.gov.uk/tribunals/tax/appeals
Non-residents and UK Properties
Capital Gain Tax (CGT) will be charged on future gains realised by non-residents
on the sale of their residential property in the UK. It has long been an anomaly that
a non-resident pays no CGT on UK assets.
A consultation document will be published on how best to introduce this change in early 2014.
It is just future gains that will be taxed and not historical gains.
For more information, contact us at:
Care Accountancy Ltd
188 A Roundhay Road
Tele: 0113 248 8181
Fax: 0113 249 4902
Tax Return Deadline is Fast Approaching
Deadline to file your tax return is fast approaching- why wait till last minute to file your return and risk late filing fee or penalties.
1: You will be charged a penalty, even if you do not owe any tax.
2: If you miss the filing dates of 31 January 2013 (for on-line submission), you will be charges a penalty of £100 (this will not be refunded, even if no tax is owing)
3: If you are three months late, you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900
4: If you are six months late there will be a penalty of £300 (or 5% of the tax owing if this is greater)
5: If you are 12 months late, you will be charged another £300 (or 5% of the tax owing if this is greater). In exceptional circumstances a higher penalty of up to 100% of the tax due is possible
Penalties for late payment
1: 5% of tax unpaid after 30 days
2: Another 5% of tax unpaid after 6 months
3: Another 5% of tax unpaid after 12 months
There is more information about this on the HMRC website at www.hmrc.gov.uk/sa/deadlines-penalties.htm
At Care Accountancy Ltd we are committed at providing highest quality of professional services at affordable rates.
Contact us now at:
Care Accountancy Ltd
188 A Roundhay Road
Tele: 0113 248 8181
Fax: 0113 249 4902
Universal Credit System and Income Tax
Universal Credit is a new system introduced by the government in order to ensure greater fairness to the welfare system. The early introduction of Universal Credit has begun in the Greater Manchester and Cheshire areas whereas it will be operational nationwide in October this year. Universal Credit is more convenient compared to old system and provides a single monthly payment if you are on a low income or out of work. The system will also be beneficial for both self employed and employers. Between April 2013 and the end of 2017, Universal Credit will replace:
Income-based Jobseeker's Allowance
Income-based Employment and Support Allowance
Working Tax Credit
Child Tax Credit
Child Tax Credit
Why Work is more advantageous under Universal Credit System?
Unlike the current system, your benefits under Universal Credit won't suddenly be taken away because you have started work. The payment under Universal Credit will gradually be reduced as your take home pay increases. Additionally, Universal Credit system gives you freedom to work extra hours whether in a full or Part-time job. By combining in work and out of work benefits Universal Credit removes the financial risk of taking-up a job.
Universal Credit is paid monthly, directly into the account you have chosen. Separate rules have been devised for couples and adults living in the same house who claim Universal Credit.
Universal Credit and employers
Universal Credit is introducing Real Time Information (RTI) Pay as You Earn (PAYE) to help employers manage their Payrolls. Your employer shall report to HMRC the changes in your work hours. Consequently, Universal Credit will adjust payments according to information provided. This gives the employer and employee more work flexibility and removes the risk of the benefits being stopped. Many employers have already started to use RTI PAYE and many other are taking advice from the firms like Care Accountancy to get full benefits of the new system.
Universal Credit and self employed
There are several benefits that a self employed can claim with the Universal Credit. Universal Credit replaces these benefits and will support self employed people in the best way to ensure they become financially independent.
Universal Credit provides a 12 month start-up period for businesses less than 12 months old. During this 12 month period, the minimum income floor will not apply so that an entrepreneur can solely focus on the business. Moreover, entrepreneur will receive payment from Universal Credit like any other employee. However, the reporting requirements are strict and failing to report earnings to Universal Credit in 7 days will result in Universal Credit payment being suspended.
Under the new system self employed will have to prove its eligibility in order to get benefits from Universal Credit System. In order to completely understand the system you can contact Care Accountancy for the advice on the following address:
188a Roundhay Road, Leeds, LS8 5PL
T: 0113 248 8181 / 248 8182