Newsletter Tax update mid-October 2016

Welcome to our newswire designed to keep you informed of the latest business and tax issues. Please contact us if you have any questions.

TAX-EFFICIENT SAVINGS

LISA (lifetime individual savings account) is almost here

From April 2017 some of you will be able to benefit from a new kind of savings account. However, there are restrictions over who is entitled to benefit.  The new account offered as an alternative (or additional) way of saving for retirement. The annual allowance for a LISA is £4,000 per person per year.  

Making Tax Digital
HMRC has started plans for the government's Making Tax Digital (MTD) initiative.

MTD will be implemented from April 2018.

The consultations look at the following areas:

• How digital record keeping and regular updates will operate.
• Options to simplify tax for unincorporated businesses.
• How HMRC will make better use of the information which they currently receive from third parties, including updating of PAYE codes more regularly and coding out of bank interest via PAYE.

BENEFITS IN KIND

Salary sacrifice  

Salary sacrifice schemes have been an ideal way to take advantage of tax exemptions.

To enjoy the tax and NI savings that a salary sacrifice arrangement can offer, it must be “effective” in the eyes of HMRC. To be effective, the employee’s contract must be altered to reflect the revised arrangements.

Tax Free Childcare
HMRC have announced further details of the new Tax Free childcare scheme which is to be introduced in 2017.
To be eligible, families will have to have all parents in work and each expecting to earn at least £115 per week and less than £100,000 a year and not be already receiving support through Tax Credits or Universal Credit.

The government will top up the account with 20% of childcare costs up to a total of £10,000 - the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

Business property relief (BPR) and land:  

Where businesses include activities that might be regarded as investment or dealing in land or buildings,

Business property relief (BPR) provides a percentage reduction (usually 100%) in the value attributable to relevant business property passed by a lifetime gift or via a will following a death.

Relevant business property includes: (1) a business or an interest in a business; (2) certain shares or securities; and (3) land, buildings or plant used by the transferor’s company or a partnership of which they were a partner. The business need not be a trade. However, a business is excluded if it consists wholly or mainly, i.e. at least 51%, of: (1) dealing in securities, stocks or shares; (2) dealing in land or buildings; or (3) making or holding investments.

VAT claim on company cars allowed

HMRC recently lost a first tier tribunal case on the recovery of VAT on the purchase of six cars.

Although most VAT registered businesses are able to recover the VAT on the purchase of commercial vehicles the rules for the recovery on a car state two conditions must be met:

• the vehicle must be used exclusively for business purposes and
• it is not made available for private use.

EXPENSES PAYMENTS

Fuel rates for company cars

The latest advisory fuel rates for employees doing business mileage in company cars contain only minor changes. The new rates can be used for mileage incurred from 1 September 2016. Only the diesel rates have changed, and are slightly more generous. The new rates are:

Drivers can continue to use the previous rates for up to 30 days from 1 September 2016 (i.e. for payments made in respect of that period).