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Today I am letting you know about yet another volte-face by HM Revenue & Customs. I apologise that this will only affect a small number of you but to those few this is of paramount importance.

Any of you working in the highly regulated pensions’ sector will know how complicated the whole issue of VAT has been over the last few years. Those of you who either work specifically in VAT or who follow recent court cases will not be surprised to learn that the latest change comes about as a result of a Court of Justice case.

Prior to the judgement in the ATP Services case, HMRC did not accept that any pension fund qualified as a Special Investment Fund (SIF). As a result of the judgement they now accept that, where certain conditions are present, a pension scheme does qualify.

HMRC Brief 44/2014 confirms that if the pension fund is funded by the person who will ultimately benefit, that person bears the investment risk, the fund contains pooled investments of several pensioners and the investment risk is spread over a range of securities, the fund will qualify as a SIF.

So what? It may be that certain of the services in respect of the fund’s administration may now qualify for VAT exemption.

What should you do about this if you think you may be affected? Give some consideration as to what aspects of the fund’s administration have been out-sourced and give some thought to whether these services may now qualify for VAT exemption.

I imagine that you will all be aware that that HM Revenue & Customs (HMRC) can recover tax and tax credit debts through your PAYE codes, the upper limit for which is currently £3,000. HMRC say that this form of debt collection is a “relatively simple, cheap and a less intrusive way”.

You of course may disagree with this assertion and would rather be given the opportunity to choose how you make your payments but accept the current amount of up to £3,000 isn’t bad.

If the above paragraph  describes you then you’ll want to be aware that regulations introducing a graduated scale taking effect for 2015/16 have been laid before parliament. The measures will permit more debts to be collected in this manner.

The limit on the amount which can be ‘coded out’ is to be increased from £3,000 to £17,000 for those whose PAYE income is expected to be at least £90,000. There are to be no changes for those of you whose income is expected to be less than £30,000 and there will still be the overriding limit of 50% of income.

There is a little bit of light in this legislation in that if you have a tax credit debt you can object to that debt being coded out.

A number of weeks ago I ‘blogged’ about auto enrolment but a couple of things lead me to believe that there are businesses owners out there that are either ignorant of their up and coming  responsilities, or think it won’t affect them or worse of all are trying to avoid being affected.

Well LISTEN UP this legislation affects every single business with employees!

I was at a networking meeting last week (don’t yawn it was actually brilliant being targeted at women in business and the initiative of Dumfries Business Gateway) and asked many of those present if they had heard of auto enrolment. A blank face was the main response with the best being ‘oh yes but I don’t know what it’s about’.

Then on Sunday there was a headline in my paper which read ‘First employers fined for failing to auto-enrol staff’.

So do I now have your attention? If so read on.

The law on workplace pensions has changed and if you are an employer you are
legally required to automatically enrol staff into a pension and make contributions.

You need to know when you need to be ready, your ‘staging date’ which you can find on www.tpr.gov.uk/staging date

You need to nominate someone to receive emails from the Pension Regulator, see www.tpr.gov.uk/nominate-contact

You must start making plans at least a year prior to your ‘staging date. Create a plan at www.tpr.gov.uk/planner and consider what your contributions may be at www.tpr.gov.uk/calculate

You have to know which of your staff must be automatically enrolled. Evaluate this at www.tpr.gov/uk/evaluate

Considering your payroll software is a priority, does it support automatic enrolment? Help with software can be found at www.tpr.gov.uk/software

Talk to your financial adviser/pension adviser about a suitable scheme or visit www.tpr.gov.uk/scheme

Once you reach your staging date and have enrolled the staff requiring automatic enrolment make sure your pay the contributions by the deadlines your provider has given you.

By the way don’t forget to have that all important meeting with your staff to discuss their options. Seems obvious but with everything else you need to do it would be so easy to overlook this.

All of the above and more can be found on the Pension Regulator’s website at www.the pensionregulator.gov.uk

Ignore this at your peril and cost!

I was reading an article in my paper yesterday about a 10 year long VAT battle between Nectar and HMRC eventually won by Nectar resulting in a VAT repayment of £56 million.

The reason I am telling you this is that I realised how much I take my VAT knowledge for granted and, more importantly, how easy it is for the man in the street to get it wrong leaving him out of pocket. So today I am going to start a series of ‘how to’ VAT blogs starting with advice for set up businesses about registration.

1. Do I have to register for VAT?

You have to register for VAT if the value of your taxable supplies in the past 12 months or less has exceeded the VAT registration threshold for the year commenced 1 April 2014 of £81,000.Take care with this as the threshold is calculated on a ‘rolling 12 months basis’ i.e., when you reach the first 12 months you continue by adding the next month on and removing the first month. You also have to register if the value of your taxable supplies in the next 30 days alone is expected to exceed this threshold. Even if the business has not reached the mandatory registration threshold you may wish to register voluntarily. As strange as it may sound, there are occasions when this will prove beneficial. My advice to you is to contact a VAT specialist to discuss your options.

2. How do I register?

You can submit a hard copy application form (VAT 1) to HMRC but they encourage businesses to register online. You can do and also download a hard copy by visiting www.hmrc.gov.uk

3. Then what happens?

You will receive a registration certificate which will show your VAT number and the date from which you were registered. You must show this VAT number on all of your invoices from that date onwards.

On your application form you will have been asked if you want to complete monthly, quarterly or annual VAT returns and these have to be completed online. The occasions on which you can request hard copy returns are so abtruse as not to be worth mentioning.

As with all things ‘HMRC’ there are strict rules regarding submission dates of the returns and, no surprise, penalties for missing those deadlines. So be aware that you have one month and seven days following your VAT period end to submit your return and pay your VAT. Payment must also be made electronically.

I can’t emphasize enough how easy it is to get into a mess with VAT so, if you have any doubts at all, contact a VAT specialist.

If I mention inheritance as a tax to be aware of  quite a few of the people for whom I work, my family and my friends would probably laugh and add the comment “Oh I’m not wealthy enough to worry about that”. My response is quite simply “Don’t be so sure of that”.

Inheritance tax is charged at 40 per on the value of estates in excess of a threshold of £325,000 or, in the case of a married couple and civil partners, £650,000 and has been frozen at that level mainly due pressure exerted by the Liberal Democrats.

Now if you have got this far into my blog you may decide to stop reading thinking that your estate will never exceed the thresholds. But here I would like to caution you and urge you to read on.

It is a fact that in the financial year to April 2014 £3.4 billion in inheritance tax was received by Her Majesty’s government, a jump of nearly 9 per cent on the year before. You may be wondering how that could have happened and if you just take a look at the rise in property prices – indeed consider the current value of your home. Now are you so sure this tax is something you can happily ignore? If the answer is “No” or “I’m not sure” then read on for some ideas on how to minimise your exposure to inheritance tax.

• You can give cash gifts of up to £3,000 per annum which are exempt from inheritance tax when you die. This yearly amount can be carried forward, but only for one year, after which it is lost.

• If you have children you can give them £5,000 on marriage, their grandparents can give £2,500 and anyone else up to £1,000, all of which will be inheritance exempt.

• Small gifts of up to £250 a year can also be made to as many people as you like.

• You can make a gift of any amount you wish, for example, to help your children get onto the property ladder, and provided you live for another 7 years after making this gift then it will not be included in your estate on death.

• Your assets can be put into a trust and therefore be excluded from your estate. There are too many types of trust to go into in this blog but any good tax adviser would be able to assist you.

• If evidence can be provided to HMRC that for the seven years prior to your death you made gifts which were made out of your normal income and which did not affect your usual standard of living, you can claim an exemption from inheritance tax for those gifts.

• Make sure that you have made a will, it is astounding how many people do not have a will. If you die intestate and your assets end up going to a number of relatives, other than your wife/husband, then inheritance could be payable.

• If you cannot avoid inheritance then you may want to consider making provision for it now. This can be achieved by taking out a life assurance policy written in trust and your tax adviser or financial adviser will assist you with this.

A difficult subject to address at any time in your life but one which we all need consider as, like tax, death is a certainty.

I don’t often buy a newspaper when out of the country but on a day when the temperature was above 90 degrees decided that a wee break in the shade with a newspaper was a good idea.

The date was 21 September and I (rather stupidly) thought that the furore over the referendum vote would have receded somewhat and that there would be other snippets of news to be had. Well it hadn’t and there weren’t so instead, and bear in mind that I try to leave everything concerning tax behind when on holiday, I actually found myself relieved to get to the financial pages where I found the following headline ‘HMRC: May the £8 million force be with you’.

Now it would appear that whilst the rest of us are grateful for the wee tax breaks available to us (those that HMRC haven’t closed down) Disney, yes the AMERICAN media giant, has been given an £8 million tax break by HMRC in return for making the next Star Wars (yawn) film in Britain.

The costs of making this film are huge with the biggest single expense being the 128 production staff who have received £6 million. (Shame it’s a tad late for me to rethink my career). But anyway back to this tax break, it’s been paid to Disney under the Government’s film tax credit scheme which entitles films with costs of more than £20 million to claim back up to 20% of its production costs.

I fully appreciate that it’s great for British film production jobs as the tax break entices some of the world’s biggest studios to film in the UK but if put to the vote who among us would not rather see these huge sums spent, for example, on cancer research and the many other great causes who struggle to find funding?

Rules, regulations and legislation governing tax in the UK (including as I write this on 9 September 2014, Scotland) are constantly in flux and it is a very astute business owner who, if questioned, would be able to be on the ball about everything ‘tax’.

So the following is a wee reminder to all employers out there who make loans to their employees. Listen up my friends this is important.

As a result of legislation in the 2014 Finance Bill, and with an effective date of 6 April 2014, employers are now able to offer tax free loans of up to £10,000 to their employees. This doubles the previous tax free amount of £5,000 which had been in place for twenty years.

The government has said that they expect this to affect 7,000 employers – are you one of them?

What if you have pre-existing loans to employees of over £5,000? Is it worth looking into having those loans paid off and a new loan entered into? Might be worth considering after taking advice from your tax adviser of course.

I spent 6 years working as a VAT Consultant and saw many occasions on which HMRC brought in a new ‘scheme’ only to discover that they had shot themselves in the foot and started to challenge those who had seen the benefit of using the ‘scheme’.

One such ‘scheme’ is the VAT flat rate scheme (FRS) which can prove very beneficial for  businesses small enough to use it and the following is a good example of what can happen.

A mechanical engineer based in Cumbria registered his business for the FRS in 2009 but found that none of the categories on the list supplied by HMRC appeared relevant to his business – from my experience, not an uncommon occurrence. He took advice from his accountant and registered the business under “Any other activity not listed elsewhere”, with a flat rate, at that time, of 12%.

After three years and following a VAT inspection, HMRC ordered that the business should have been registered as  ‘Architect, civil and structural engineer or surveyor’ which, again at that time, was rated at 14.5%.

The action by HMRC meant that nearly £9,000 plus a penalty of 35% was demanded. The penalty was later reduced, on review, to 15%.

Sensibly, in my opinion, HMRC was challenged on the grounds that a mechanical engineer is not a civil or structural engineer.

Expert assistance was sought as a result of which first-tier tribunal ruled in favour of the taxpayer and he walked away with nothing to pay.

This case highlights the necessity to work with a specialist who knows VAT inside out as it was the specialist that pointed out that HMRC’s guidance notes had no backing in law.

There will be many businesses who have been and will be challenged on the FRS classification which they have chosen. My advice to all is not to accept any HMRC ruling without first asking for an opinion from a specialist.

A lot of employers with a small staff, me included, will not have spent much time worrying about auto enrolment yet as it all seems so far in the future. Today’s blog is meant as a bit of a wake up for us all:

1. Every employer in the UK will be affected by auto enrolment, no matter the size of the work force or who it is we are employing;
2. Don’t imagine for one minute that because your only employee is your wife/husband that you are excluded from the legislation you aren’t as even those only paying a salary to their spouse will need to consider their situation.
3. Ah you are thinking I am fine because I don’t have any employees who want to be in the scheme – think again my friends. Employers with no-one in the pension scheme do not escape as they will still need to perform some administrative tasks for each and every pay period.
4. Those of you with limited storage space will now have another problem as the records for the scheme have to be kept for a minimum of 6 years – again even if you have no-one enrolled in the scheme.
5. There are pre-set deadlines by which time we all have to be ready. These deadlines are already established and are based on the number of employees you had in April 2012.
6. It is imperative that you check your deadline as we all have to be ‘compliant’ by that date and this ‘compliance’ can include having a pension scheme in place that is at a stage to accept employees.
7. You underestimate the amount of work required at your peril and I read recently that the recommendation is that you start to prepare  6 – 9 months ahead of your deadline.
8. If you don’t get this right that you can expect a fine or even imprisonment for persistent non-compliance.

Happy days my friends!

As a private, residential landlord myself I found both of the following of interest but note before you read, the first piece of advice is totally kosha whilst the second……………….well I’ll leave you to make up your own minds.

1. There is a 100% allowance of up to £1,500 available to private, residential landlords  per dwelling per tax year when energy efficiency improvements are made to the dwelling.

• The claim can be made for:
• loft insulation;
• cavity and solid wall insulation;
• draught proofing;
• hot water supply insulation;
• floor insulation.

Unsurprisingly there are a number of conditions:

• The allowance cannot be claimed if ‘rent-a-room’ relief is claimed on that particular property.
• The claim is exclusively for private, residential landlords and doesn’t apply to commercial or furnished holiday let accommodation.
• It is applied per dwelling and not per building so for a house converted into two or more flats the maximum allowance is £4,500.
• The claim is for expenditure incurred before 1 April 2015 for corporate landlords and 6 April 2015 for individual landlords.
• The allowance is separate from the Annual Investment Allowance.
• The allowance is available on an existing dwelling only.

2. If you go away on an extended holiday and let out your home on a on a short-term residential let while you are away, is rent a room relief available?

• Well the property was your home prior to going away and will be your home when you return.
• On the assumption that you stay only in temporary accommodation whilst away you don’t have another home established.
• It is always your intention to return home.
• The income you receive is below the £4,250 rent a room limit.

If you decide it is a goer then the only advice I would give you is to put the details in the white box on your tax return.

Happy letting!