Archive for December, 2017

What happens if we can\’t manage

Thursday, December 21st, 2017

A reminder that as we age the argument that we should grant powers of attorney to trusted family members becomes increasingly relevant. A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf. There are two sorts of LPA. They can cover personal issues (health and welfare) or financial issues (property and financial affairs).

An LPA allows you to nominate who has control over what happens to you if, for example, you have an accident or an illness and can’t make decisions at the time, or if you for other reasons, ‘lack mental capacity’ to make prudent decisions on your own behalf.

You must be 18 or over and have mental capacity (the ability to make your own decisions) when you make your LPA. This is a classic “chicken and egg” process: if you wait until you are no longer compos mentis, or physically able to make decisions on your behalf, it is already too late.

Please note that there are different processes for registering LPAs in Scotland and Northern Ireland.

How do you make an LPA?

This is a three-stage process:

  1. First, you must choose your attorney – the person who will have control over your affairs – and you can have more than one.
  2. Secondly, you will need to complete the relevant forms to appoint them as an attorney, and finally
  3. Register your LPA with the Office of the Public Guardian (this can take up to 10 weeks).

It costs £110 to register an LPA unless you get a reduction or exemption.

Unfortunately, you will need to register both LPAs if you want to cover all your risks, so the above costs are doubled.

If you want to find out more about the process you can contact the Office of the Public Guardian at:

Office of the Public Guardian
Telephone: 0300 456 0300
Textphone: 0115 934 2778

Or, you can take professional advice.

Timing is everything

Wednesday, December 20th, 2017

We are fast approaching the end of the 2017-18 tax year. In fact, the 31 March (or 5 April) is probably the most common trading year end date for sole traders, partnerships and limited companies. And individuals have no choice, the self-assessment tax year ends on 5 April.

This being so, it is worth considering how business owners, particularly self-employed traders, time significant investment decisions to maximise any tax relief available.

Consider James, a self-employed plumber. He has had a rough year. Due to family obligations he is unlikely to make more than £17,000 profit in the tax year 2017-18. However, he has secured work for 2018-19 that will create profits of at least £60,000.

Whilst this is good news James will need to replace his van to cope with the extra work. He finds a suitable vehicle for £18,000 and buys it during the last month of the 2017-18 tax year. He knows he can write off the full cost of the van against his profits of £17,000 and is feeling very pleased with himself, no tax to pay.

James makes an appointment with his accountant to deliver his books for 2017-18 during June 2018.

During the visit, his accountant points out that there is no need to claim all the van purchase against his profits for 2017-18 as he can earn up £11,500 tax free. Accordingly, his taxable profit of £5,500 (£17,000 – £11,500) is covered by £5,500 of the van purchase and the balance of £12,500 can be carried forward to claim against future years’ profits.

James is happy with this outcome, still no tax to pay for 2017-18 and he has £12,500 to write off against future profits. His accountant is not so sure…

James is dismayed as his advisor points out that if he had bought the van after 5 April 2018, just one month later, the full cost of the van could have been written off against his profits for 2018-19 and this would have eliminated all his exposure to higher rate income tax saving him more than £7,000 in higher rate income tax and Class 4 NIC.

There would have been approximately £2,000 of tax and NIC to pay for 2017-18, but overall a saving of £5,000 has been compromised.

It is true that James will still be able to claim the remaining £12,500 tax relief from the purchase of his van, but this will be restricted to just under 20% a year. Accordingly, it will take much longer to claim back the tax relief available and possibly at lower rates of income tax.

Timing really is everything and we would recommend that any self-employed trader that is thinking of spending a significant amount on commercial vehicles, plant, equipment or computer equipment before the 6 April 2018, take advice now on best way to structure the payments to gain the maximum tax relief.

Data protection essentials for 2018

Thursday, December 14th, 2017

From 25 May 2018, any business that stores the personal data of staff, customers, suppliers and other business contacts will need to comply with the General Data Protection Regulation (GDPR).

Basically, you will need to know what personal data you keep, where you keep it, who you share it with and how you will use this knowledge to comply with these new regulations.

You will also need to have a lawful basis for collecting and storing this data and this may involve a strict process of obtaining consent. The Information Commissioners’ Office have identified a twelve-point check list that you should have worked through before 25 May 2018:


  1. Awareness: You should make sure that decision makers and key people in your organisation are aware that the law is changing to the GDPR. They need to appreciate the impact this is likely to have.
  2. Information you hold: You should document what personal data you hold, where it came from and who you share it with. You may need to organise an information audit.
  3. Individuals’ rights: You should check your procedures to ensure they cover all the rights individuals have, including how you would delete personal data or provide data electronically and in a commonly used format.
  4. Communicating privacy information: You should review your current privacy notices and put a plan in place for making any necessary changes in time for GDPR implementation.
  5. Lawful basis for processing personal data: You should identify the lawful basis for your processing activity in the GDPR, document it and update your privacy notice to explain it.
  6. Subject access requests: You should update your procedures and plan how you will handle requests within the new timescales and provide any additional information.
  7. Consent: You should review how you seek, record and manage consent and whether you need to make any changes. Refresh existing consents now if they don’t meet the GDPR standard.
  8. Data breaches: You should make sure you have the right procedures in place to detect, report and investigate a personal data breach.
  9. Children: You should start thinking now about whether you need to put systems in place to verify individuals’ ages and to obtain parental or guardian consent for any data processing activity.
  10. Data Protection by Design and Data Protection Impact Assessments: You should familiarise yourself now with the ICO’s code of practice on Privacy Impact Assessments as well as the latest guidance from the Article 29 Working Party, and work out how and when to implement them in your organisation.
  11. Data Protection Officers: You should designate someone to take responsibility for data protection compliance and assess where this role will sit within your organisation’s structure and governance arrangements. You should consider whether you are required to formally designate a Data Protection Officer.
  12. International: If your organisation operates in more than one EU member state (i.e. you carry out cross-border processing), you should determine your lead data protection supervisory authority. Article 29 Working Party guidelines will help you do this.

Sent to Coventry

Wednesday, December 13th, 2017

The origins of the phrase, to be sent to Coventry, seem to have originated in the seventeenth century when Cromwell was purported to have sent Royalist soldiers to be imprisoned in Coventry around 1648. At the time, Coventry was a parliamentary supporter and it is likely that the hapless Cavaliers would have had a miserable time.

In a contemporary sense, the phrase has been used to describe an event when a person or group was isolated or ostracised by their peers, for whatever reason. Rather like a grown-up’s version of the “naughty step”.

From an economic viewpoint, Coventry has struggled to shed its reputation as a place in decline, which is why the announcement by the Department for Digital, Culture, Media & Sport last week was such good news. In competition with cities across the UK Coventry will host the title of UK City of Culture 2021.

The decision was made after an independent panel of culture experts, chaired by television producer and screenwriter Phil Redmond, visited each of the five candidate cities before recommending Coventry as the winner. The bid impressed the judges with its focus on youth, diversity and the scale of impact not only in Coventry but across the UK.

Coventry will take the title from Hull 2017, which has used City of Culture to transform its reputation as a destination for arts and culture both at home and abroad.

It is estimated that Hull’s local economy has received a £60 million boost in 2017 and the city has been praised for how it has engaged residents in the cultural programme. Nine out of 10 residents have attended, or taken part, in a City of Culture event and since it was awarded the title in 2013 it has received more than £3 billion of investment.

John Glen, Minister for Arts, Heritage and Tourism, said:

I would like to congratulate Coventry on winning UK City of Culture 2021. The title is an incredible opportunity for Coventry to boost investment in the local economy, grow tourism and put arts and culture centre stage.

We received excellent bids from all the cities and I would like to thank them for their efforts.

Coventry now has three years to prepare its year-long programme of activity for 2021. As part of its status as UK City of Culture 2012, Coventry will be eligible for a £3 million grant from the Heritage Lottery Fund.

Time also for Coventry to inject the phrase “sent to Coventry” with new and positive meaning…

Do you need to submit a self-assessment tax return

Friday, December 8th, 2017

According to HMRC, you are required to send in a tax return in the last tax year if:

  • you were self-employed – you can deduct allowable expenses
  • you got £2,500 or more in untaxed income, for example from tips or renting out a property
  • your income from savings or investments was £10,000 or more before tax
  • your income from dividends from shares was £10,000 or more before tax
  • you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
  • you were a company director – unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car
  • your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
  • you had income from abroad that you needed to pay tax on
  • you lived abroad and had a UK income
  • your taxable income was over £100,000
  • you were a trustee of a trust or registered pension scheme
  • you had a P800 from HMRC saying you didn’t pay enough tax last year – and you didn’t pay what you owe through your tax code or with a voluntary payment
  • your State Pension was more than your Personal Allowance and was your only source of income – unless you started getting your pension on or after 6 April 2016

Certain other people may need to send a return (for example religious ministers or Lloyd’s underwriters). Usually, you won’t need to send a return if your only income is from your wages or pension.

There are penalties for non-submission of returns, so if you are at all uncertain that you should submit a return, please call, we would be delighted to offer an opinion.

The Budget – personal tax considerations

Thursday, December 7th, 2017

Notable changes are listed below:

  • First-time buyers will pay no stamp duty on homes costing no more than £300,000. First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that. This will save £1,660‎ on the average first-time buyer property purchase. 80% of people buying their first home will pay no stamp duty, but there will be no relief for those buying properties over £500,000.
  • The personal allowance for 2018-19 is £11,850 (2017-18 £11,500). According to HMRC, this means that an average taxpayer will pay £1,075 less tax than in 2010-11.
  • The income tax bands for 2018-19 have been increased. They are: basic rate band increased to £34,500 (2017-18 £33,500); higher rate band £34,501 to £150,000 (2017-18 £33,501 to £150,000); additional rate, no change, applies to income of more than £150,000.
  • There is no change in income tax rates, and the tax rates applied to dividend income. Readers should note that the present £5,000 tax-free dividend allowance will, as previously announced, be reducing to £2,000 from April 2018.
  • There is a small increase in the marriage allowance from £1,150 to £1,185 from April 2018. This is the amount of unused personal tax allowance that can be transferred between spouses, or civil partners, if the person receiving the transfer is not a higher rate tax payer. From 29 November 2017, the government will also allow marriage allowance claims on behalf of deceased spouses and civil partners, and for the claim to be back dated four years in appropriate cases.
  • New railcard is to be introduced for the 26 to 30 age group. Government will work with the rail industry to introduce the new railcard from spring 2018.
  • The duty on beer. wine, cider and spirits is to be frozen. However, cheap, high strength cider will be subject to a new band of duty.
  • The duty on cigarettes will increase by 2% above inflation and hand-rolling tobacco by 3% above inflation.

Please call if you need more information on any of these changes.

The Budget – small business update

Thursday, December 7th, 2017

Notable changes are listed below:

  • Although there is no change to the rate of corporation tax, maintained at 19%, HMRC is to freeze indexation allowance on corporate capital gains for disposals after 1 January 2018.
  • From April 2018, business rate rates will rise by any increase in the Consumer Price Index (CPI) rather than the Retail Prices Index (RPI). The change has been brought forward two years. Historically, the RPI has tended to be higher than the CPI.
  • Pubs with a rateable value up to £100,000 will continue to receive a £1,000 discount next year.
  • Changes are to be made to the Enterprise Investments Scheme, the Seed EIS and Venture Capital Trusts. The aim is to target Venture Capital Schemes on companies where there is a real risk to the capital being invested, and will exclude companies and arrangements intended to provide ‘capital preservation’. EIS and VCTs will also see increased limits for investments in knowledge-intensive companies.
  • The diesel car supplement is to be increased from 3% to 4% from 6 April 2018. This will increase the company car tax and car fuel benefit charge (for company cars provided with an element of private use).
  • The VAT registration threshold is to be maintained at £85,000 until 31 March 2020.

Please call if you need more information on any of these changes.

Private pension tax relief

Tuesday, December 5th, 2017

There was much speculation prior to the budget last month, that the tax relief for higher rate tax payers was going to be scrapped, or reduced. Many pundits were expecting a flat-rate tax deduction of 33% rather than tax relief for higher rate taxpayers of 40%.

Fortunately, for those who may have been affected by a reduction, this change was conspicuous by its absence.

Presently, therefore, the annual tax-free allowance continues to be £40,000 a year. You can top-up this allowance with any unused allowance for the previous three tax years.

You may also be liable to pay tax if the combined value of all your pension pots is worth more than £1m. What counts towards your lifetime allowance depends on the type of pension you are paying into:

  1. Defined contributions schemes are valued as the money in pension pots that goes towards paying you, however you decide to take the money.
  2. Defined benefit schemes are usually valued at 20 times the pension you get in the first year plus your lump sum.

There are also certain protected policies where the expected retirement age is lower than the usual age 55 years limit, for example professional dancers and sportspersons. If this lower retirement age is written into pension plans, then the £1m lifetime allowance is reduced proportionately.

Now there is more certainty regarding the tax benefits of contributing into a pension, readers still making contributions should consider a consultation with their pensions advisor before the end of the current tax year (5 April 2018). Shifting potentially taxable income into a tax-free pension fund still makes good financial sense in appropriate circumstances.

Company capital gains relief is frozen

Monday, December 4th, 2017

Before the Autumn Budget, the capital gains tax (CGT) calculations of companies included a relief called the indexation allowance. Basically, this allowed a company to increase the acquisition cost of an asset by the annual rate of inflation.

Without this relief, any CGT payable on the sale of the asset would increase. Instead of deducting the cost plus the inflation proofed indexation allowance, companies would only be able to claim the historical cost.

This allowance has effectively been axed in the budget last week.

Assets owned prior to 1 January 2018

Companies that currently own assets that will be subject to a CGT payment when they are sold, will have any indexation relief capped at the RPI for December 2017. Accordingly, they will still get a measure of relief up to this date.

Assets acquired on or after 1 January 2018

Assets acquired on or after 1 January 2018 will no longer be able to claim indexation relief.

Companies should therefore be aware that if inflation continues to rise they will be paying tax on the inflationary value of the chargeable asset sold.

According to HMRC:

The measure aligns the treatment of capital gains by companies with that for individuals and non-incorporated businesses for whom indexation allowance was abolished in 2008. It will also align the treatment of capital disposals with disposals of similar assets as part of a company’s trading activities.

In addition, it will simplify tax computations and remove a source of potential errors.

What this measure will do, is to increase the corporation tax of companies that dispose of assets subject to CGT.