STEP is the leading worldwide professional body for practitioners in the fields of trusts, estates and related issues. STEP members help families plan their long term financial future, facilitating good stewardship and financial planning across future generations. STEP members also help families comply with the often complex tax rules surrounding trusts, estates and inheritance.

At BWMacfarlane our trusts & estates department offers a full support service, giving both specialist tax advice and expertly dealing with the preparation of accounts for estates and for ongoing trusts.

This new appointment was confirmed by STEP Secretary John Duffy of Rathbones.

Please give us a call if you have any queries.

Lynn Green, Tax & Trust Partner

1. Top rate of income tax to fall from April 2013 – Following much speculation the Chancellor announced that the 50% top rate of income tax will be reduced to 45% from 6 April 2013. This provides tax payers with income estimated to be over £150,000 in the tax year 2012-13 an opportunity to defer income to 2013-14 and thus reduce any higher rate liability.
2. Personal tax allowances for under 65s – From 6 April 2012 the basic personal tax allowance is increasing to £8,105 for those with income under £100,000. From 6 April 2013 this allowance is due to increase by a further £1,100 to £9,205. There will be no benefit to 40% rate taxpayers as income tax thresholds will be adjusted reducing the amount taxed at basic rate from £34,370 in 2012-13 to £32,245 in 2013-14.
3. Personal tax allowances for over 65s – The higher personal allowances for the over 65s are to be frozen from April 2013 until they match the under 65s allowance. Effectively those born after 5 April 1948 will not be able to claim the higher allowance for the over 65s for 2012-13, and those born after 5 April 1938 will not qualify for the over 75s higher age related allowance from 2012-13.
4. Stamp Duty changes – A punitive rate of 15% SDLT now applies to all property purchases made by ‘non-natural’ persons such as a company. Interestingly this will only affect property purchases in excess of £2m. Properties worth less than £2m are not affected.
5. Capping of tax relief - From April 2013 the Chancellor intends to introduce a restriction to the amount of previously uncapped tax reliefs an individual can claim. The cap will be set at the higher of £50,000 or 25% of income.

Please give us a call if you have any queries.

Sue Stephens, Tax Manager

1. Corporation tax – A surprise reduction in the main corporation tax rate was announced. From 1 April 2012 this rate drops 2% to 24%. The small companies’ rate remains unchanged at 20%.
2. Bank levy – This is adjusted so that banks do not pay less tax as a result of the corporation tax reduction.
3. Enterprise Management Incentives (EMI) – The maximum value of qualifying options is to increase from £120,000 to £250,000. This change is subject to State Aid approval.
4. Seed Enterprise Investment Scheme (SEIS) - Further changes to this new investment tax incentive were announced in the Budget. Please contact us for more information.
5. Enhanced capital allowances – A number of changes have been announced regarding the availability of enhanced capital allowances for energy-saving and water efficient technologies. The changes will take effect by way of a Treasury Order which is expected to be made prior to the summer 2012 Parliamentary recess. The special scheme allows for 100% first year allowances for qualifying expenditure.
6. Patent box – Legislation will be introduced in Finance Bill 2012 to allow companies to apply a 10% corporation tax rate to a proportion of profits attributable to patent and certain other qualifying intellectual property. This will apply from 1 April 2013. In the first year this proportion will be 60% and increase annually to 100% from April 2017.

Please give us a call if you have any queries.

John Elliott, Tax Partner

1. VAT on hot food – One of the most contentious issues announced as part of the Budget related to the change in definition of “hot food”. It is now confirmed that the sale of all hot food, with the exception of freshly baked bread, is standard-rated. This measure will ensure that the sale of all hot food is taxed consistently at the standard rate. The new definition of hot food will be based on an objective test as to whether the food is above ambient air temperature at the time it is provided to the customer
2. Sports drinks – Legislation is being introduced to ensure that all sports drinks are taxed at the standard rate. This will ensure that the sale of sports nutrition drinks (mainly carbohydrate, protein and/or creatine based drinks) that are marketed as products that enhance physical performance, accelerate recovery after exercise, or build bulk, are subject to VAT.
3. Hairdressers chairs – Legislation will be changed to clarify that rent of a hairdressers’ chair is chargeable to VAT at the standard rate.
4. Caravans – The sales of all holiday and leisure caravans are to be taxed at the standard rate. The sales of touring caravans that are less than seven metres long are already standard rated for VAT purposes. The zero rate status will remain for residential caravans that are designed and constructed for year round occupation.
5. Taxable turnover threshold – The taxable turnover threshold that determines whether businesses should be registered for VAT, increased from £73,000 to £77,000 from 1 April 2012; the taxable turnover threshold that determines whether businesses can apply for deregistration increased from £71,000 to £75,000 on the same date.

Please give us a call if you have any queries.

Anita Mason, Audit Manager 

The Sea Odyssey Giant Diver passes along Castle Street, as seen from the balcony at the BWMacfarlane offices

Sea Odyssey Giant heading towards the Town Hall, as seen from the balcony at the BWMacfarlane offices on Castle Street

HMRC are required to consider the extent to which businesses are ‘closely bound to one another by financial, economic and organisational links’ when determining if there has been an artificial separation of businesses for the purpose of VAT avoidance. HMRC will consider the following factors in making their decision. 

Financial links

• financial support given by one part to another part
• one part would not be financially viable without support from another part
• common financial interest in the proceeds of the business.

Economic links

• seeking to realise the same economic objective
• the activities of one part benefit the other part
• supplying the same circle of customers.

Organisational links

• common management
• common employees
• common premises
• common equipment

Care should be taken in organising the VAT registration status of connected businesses. Please call if you are concerned that you may be caught by these regulations.

Lesley Malkin, Audit Partner

Employers are required to file an annual PAYE return, form P35, with HMRC containing details about their employees’ earnings during the tax year, along with information about the amount of income tax and National Insurance contributions (NICs) deducted from the employees’ salaries. This return is due on 19 May following the end of the tax year to which it relates. As the return is not filed until after the end of the tax year, but salary payments and deductions are made on a monthly basis during the tax year, errors in the PAYE code, leading to incorrect amounts of income tax being paid, are not discovered until well after the end of the tax year.

The solution – RTI

Under RTI, it is proposed that employers and pension providers would be required to file monthly PAYE returns containing similar information to the current form P35. These returns will be filed on-line at the point employers pay their employees, rather than after the end of the tax year, as under the current system.

What are the benefits?

The Government believes that RTI will make the PAYE system more accurate for individuals, resulting in fewer bills and repayments being sent after the end of the tax year, as reconciliations can be performed, and PAYE codes corrected, in real-time.

What are the disadvantages?

The major disadvantage will fall on employers. In particular smaller employers will suffer a disproportionate share of the software and other administrative costs to convert to electronic processing of payroll data.

A pilot programme will run from April 2012. All employers will be expected to apply RTI from October 2013.

If you have any queries or concerns, please give us a call. 

Sue Stephens, Tax Manager

1. HMRC identify taxpayers from a specific group who may have outstanding tax liabilities.
2. Stage 2 – HMRC offer a limited time disclosure facility with reduced penalties offering taxpayers the opportunity to bring their tax affairs up to date
3. Stage 3 – HMRC may formally investigate taxpayers that did not come forward under the disclosure facility or who HMRC believes have made an incomplete disclosure. 

It should be noted that any individual can make use of these campaigns to advise HMRC of any sources of undisclosed income.

Current and upcoming disclosure opportunities:

Electrician’s Tax Safe Plan (ETSP)

Electricians are to be targeted for tax evasion from February 2012. The launch of the ETSP will build on the success of the ‘Plumbers Tax Safe Plan’ (PTSP) and provide an opportunity to another group of trades people to come forward and declare unpaid tax and regularise their tax affairs.  

E-marketplaces

This disclosure opportunity will cover individuals and businesses who are using e-marketplaces to buy and sell goods as a trade or business and who fail to pay the tax owed. Individuals who only sell a few items and who are not traders are unlikely to be liable to tax and will not be targeted by this campaign. The campaign is expected to begin Spring 2012.  

Liechtenstein Disclosure Facility (LDF)

This agreement is designed to target UK taxpayers with investments in Liechtenstein which have not been taxed to make a full disclosure to HMRC.  This agreement known as the Liechtenstein Disclosure Facility (LDF) will allow penalties on unpaid tax to be capped at 10% of tax evaded over the last ten years. The LDF commenced on 1 September 2009 and will run until 31 March 2015. Both HMRC and the Liechtenstein authorities expect that by the end of the LDF all UK taxpayers with Liechtenstein investments will be fully tax compliant. 

If you have any queries, concerns or would like to take advantage of a current campaign to disclose any personal income to HMRC, please give me a call.

Sue Stephens, Tax Manager

If you have control of other companies, or are associated with other companies, these limits are reduced. The effect on the amount of tax you pay can be significant. Basically if your company is associated with say three other companies the small company marginal relief lower ceiling would reduce from £300,000 to just £75,000; and the other limits reduced in proportion. 

As you would expect, the rules that define association are complex and from 1 April 2011 they have changed. The purpose of the new rules is to take the existence of other companies into account for the purposes of the small profits rate only where there is a substantive relationship between the relevant companies.  However where there is an association by ‘accident’ the companies will not necessarily be associated. For example, a husband and a wife could each control their own company, and each company will no longer be associated. This is the good news! 

For the first time legislation also considers the association of companies where there is substantial commercial interdependence; financially, economically or organisationally. This is the bad news! 

To benefit from the new rules an election must be submitted, so this is not a process to be left to chance. Make sure that you consider the effects of the changes and avoid any future, unpleasant tax surprises.

John Elliott, Tax Partner

1. There is no penalty for a first offence, however a business that submits a VAT return late or makes a late payment is issued with a surcharge liability notice that begins on the date of the notice and ends twelve months from the end of the latest period in default.
2. If further VAT returns are submitted late during this period a penalty based on a ‘specified percentage’ ranging from 2% to 15% will apply. The penalty increases up to a maximum of 15% with each default.
3. There is also no scope for mitigation of the penalty and only a limited possibility of arguing that a reasonable excuse for the delay in filing or payment existed. 

HMRC accept that taxpayers may have a reasonable excuse in cases involving computer breakdown, illness or loss of key personnel, unexpected cash crisis or loss of records. However, a claim of reasonable excuse will not necessarily be accepted just because it seems to fit into one of these categories. HMRC do not accept that a lack of funds is a reasonable excuse unless this is caused by some unforeseen event.

No surcharge will be levied under the following circumstances: 

• A nil return is submitted late.
• A VAT repayment return is submitted late.
• If a time to pay agreement has been arranged in advance of the VAT due date. This is applicable only where the terms of the agreement are adhered to.
• The VAT due has been paid on time but the VAT return was late. This will be recorded as a default and will extend the 12 month surcharge period but will not increase the percentage rate.

If you have any VAT queries or concerns, please give us a call.

Lesley Malkin, Audit Partner