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News

May 2017 Newsletter

Overview

That was a great success. Of the six key points, I highlighted to you in the newsletter only two (VAT and Capital Gains Tax Annual Exemption thresholds) have made it to the Finance Bill. The others have been dropped because of the General Election. I assume that if the Conservatives win the election the other points will be re-introduced, but if the Labour party win all bets are off.

Trading and Property Allowances

Two other measures that were announced in the Budget but haven't made it to the Finance Bill are the allowances for individuals who had income of less than £1,000 from trading (selling on eBay or similar) or received less than £1,000 rental income in a year. Under the budget proposals, these individuals did not have to include this income on their self-assessment return. As things stand the reliefs do not exist and the income must be declared.

Dividends

We have started filing 2016/17 tax returns. This is the first year where the new rules for taxing dividends have applied. The results do not make happy reading. Clients who have previously had no personal tax bill to pay in January or July are now being faced with bills of £3,000 in January 2018 and a further £1,000 in July 2018. The January bill is high because clients are having to pay the whole of the liability due for 2016/17 and then a further 50% as a payment on account for 2017/18. All things being equal their future bills will be in the order of £1,000 in each of January and July each year. I am sorry to be the bearer of bad news but I want you to be aware of this situation as early as possible.

Errors in HMRC tax return software

You may have seen in the press that the software developed by HMRC for filing 2016/17 self- assessment returns electronically doesn't always calculate the tax due correctly. The returns generated by our software will calculate the tax correctly but will be rejected by HMRC. The way round the problem put forward by HMRC (the organisation pushing forward with Making Tax Digital-see below) will be to file a paper return. We will review all client's positions and where we identify a problem we will submit returns manually. The total savings for each client may only be in the low hundreds of pounds but we always work on the basis that if you are entitled to it we should make sure we claim it for you.

Making tax digital

HMRC are still pressing on with a start date of 6 April 2018 despite the tax and accountancy professions and the House of Lords recommending a postponement of at least one year. The budget announcement of a delay of one year has been dropped but hopefully will be brought back in by the new Chancellor after the election. In the meantime, details on MTD are slowly coming out from HMRC. We will keep you informed as to how and when the requirements affect you. Looking back I note that when the proposals were first announced by the previous Chancellor he called it "making tax easier" - at least the new title is more honest.

Forms P11D - benefits in kind

These forms advising HMRC of benefits in kind provided to employees are due to be submitted by 6 July. In previous years we have had to record travel and subsistence payments to individuals even if these were totally for business purposes and were claimed back by the individual on their tax return. These do not now have to be reported, but the employer must have evidence that the expenditure has been incurred. If you pay a round sum lunch allowance to an individual who is working away from the office for a day of £5 (which is within the HMRC guidelines) you still have to report it unless you have evidence that the full amount has been spent.

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