Following recent media interest in commercial relationships with the sector, The Charity Commission has today issued an alert setting out it’s expectations regarding such arrangements.

William Shawcross, chairman of the Charity Commission, explained:
“This alert should prompt trustees to check their ties to commercial operations. These bring in important income for charities and fund valuable work for beneficiaries. It is essential, however, that any arrangements are transparent and that they do not jeopardise the reputation of the charity. The public expects charities to abide by the values they claim to represent.”

Further details are available at the Charity Commission website here.

If you sell an asset that is subject to CGT the rate of tax you will pay will be 0%, 18% or 28%.

In the current tax year 2015-16, you are allowed to make gains of up to £11,100 tax free. In fact the first £11,100 of all gains are free of tax.

If all your taxable income, including any capital gain in excess of £11,100, is within the basic rate income tax band, (and gains are considered to be the top slice of income for this purpose), then the rate of CGT chargeable is 18%. The amount of the basic rate band for 2015-16 is £31,785.

If, however, any or all of a capital gain falls into the higher rate tax band the rate of CGT payable is 28%.

As gains tend to be made on a sporadic basis, and as the amount of CGT payable is calculated as part of an individual’s self assessment, no payments on account will have been made regarding the CGT due. Accordingly, the CGT payable will need to be paid on or before the 31 January following the end of the relevant tax year. For taxable gains declared for 2015-16 any CGT due will be payable 31 January 2017.

Example

Let’s say that your total taxable income is £20,000 and your total taxable gains are £22,100. From your gains, deduct the tax-free allowance of £11,100. This leaves £11,000 to pay tax on.

You’ve used £20,000 of the basic rate band (£31,785 for the 2015-2016 tax year) against your taxable income, so you have £11,785 left.

You have enough of the basic rate band remaining to cover your gains, so you pay Capital Gains Tax at 18% on £11,000. This means you’ll pay £1,980 in Capital Gains Tax 31 January 2017.

Readers who have made gains that are likely to be taxed in 2015-16 should take advice to estimate any CGT that may be due 31 January 2017. There are numerous reliefs that may apply to the gain you have made.

Gains made by companies are subject to corporation tax, currently 20%.

In a major boost for pioneering small businesses, the Financial Secretary to the Treasury, David Gauke, recently launched a new plan outlining how government will make it easier for small businesses investing in research and development to claim tax relief.

The two-year plan, which is a response to an HMRC consultation, aims to increase take-up of research and development (R&D) tax relief through raising awareness of the relief amongst small businesses and making it easier for them to apply.

The tax relief, which encourages companies to invest in costly new product development, helps companies reduce the amount of corporation tax they pay on profits by offsetting them against any investment in research and development. Latest statistics for 2013-14 show more than 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but the government wants to go further.

Financial Secretary to the Treasury David Gauke said:

R&D is crucial for the long-term growth of the UK economy. Over 15,000 SMEs claimed the relief in 2013, an increase of around 19 per cent from the previous year, but we need to go further to support pioneering small businesses.

That’s why we’ve published a document setting out our plans to increase awareness and make it easier for people to apply.

The plan, ‘Making R&D Easier: HMRC’s plan for small business R&D tax relief’, was published 28 October 2015 and sets out that:

• From November, small companies – with a turnover under £2 million and fewer than 50 employees – will be able to seek advance assurance on R&D tax relief. This will give them greater certainty and enable them to plan their finances effectively.
• HMRC will explore ways to improve its communication around R&D tax relief, including looking at ways to use data and work with other government agencies to identify companies that have carried out R&D but have not claimed relief.
• Interactive guidance will be developed with stakeholder involvement

HMRC evaluation shows that each £1 of tax foregone by R&D tax relief stimulates between £1.53 and £2.35 of additional R&D investment. SME R&D relief works by way of super deduction, allowing companies to reduce profits liable to corporation tax by 230 per cent of their qualifying R&D expenditure. In 2013-14, businesses received £1.75 billion in R&D tax relief, an increase of almost £750 million since 2009-10.

Treasury Minister Damian Hinds visited Belfast and Newry recently as HM Revenue and Customs (HMRC) unveiled new roadside fuel testing equipment to tackle the trade in illicit diesel.

The hi-tech equipment has been introduced to allow officers to test vehicles at the roadside for the presence of the new fuel marker, which was introduced into supplies intended for use in agriculture and construction industries in April. The new marker is resistant to laundering techniques known to be used by criminal gangs and significantly improves HMRC’s capability to detect fraud.

Previously, the test for the new marker was completed at a laboratory, leading to a delay in identifying illicit fuel and further action being taken. The new equipment will now be installed in 49 HMRC Road Fuel Testing Unit vehicles throughout the UK and used to analyse fuel samples taken at the roadside and at retail premises, starting in Northern Ireland.

Exchequer Secretary to the Treasury, Damian Hinds, said:

“I am delighted to see first-hand the new roadside testing equipment in action. Together with the new marker it will play an important part in the fight against fuel fraud.

“At a time when the government’s priority is cutting the deficit, it is unacceptable that criminals are cheating the system. The new marker and testing equipment are part of the significant investment we have made in HMRC to tackle avoidance, evasion and fraud to make sure all businesses and individuals contribute to the tax revenue that is used to fund vital public services.”

Illicit diesel is estimated to make up 13% of the market share of diesel in Northern Ireland and costs the taxpayer around £80 million each year in lost taxes.

The government will monitor the success of the marker during the first six months, to make sure it is delivering results in the fight against fuel fraud. HMRC will publish an evaluation in the autumn.

From June 2017, British visitors to Europe will no longer be charged additional fees for using their mobile phones. This is great news for business people who need to keep in touch with their UK base of operations when travelling in Europe. Ironically, it is the UK that has been a vocal supporter of this EU initiative.

The UK has led from the beginning in getting agreement on this point. In March last year, the PM and Germany’s Chancellor Merkel called for accelerated progress towards deepening the European single market in telecoms, including the abolition of roaming charges.

Last month the EU agreed a deal based on those proposals.

The Prime Minister David Cameron said:

“This deal is fantastic news for British consumers and shows that the UK, working with its partners, can deliver real change in Europe, bringing significant benefits for working people. It also shows that the EU can show the flexibility and creativity to deliver changes that benefit people in this country and across Europe.

This deal will deliver major benefits for consumers in the UK, and those across the EU.”

Roaming charges will no longer apply for those making calls, sending texts and using the internet on their phones or tablets in the EU.

 1 August 2015 – Due date for Corporation Tax due for the year ended 31 October 2014.

 19 August 2015 – PAYE and NIC deductions due for month ended 5 August 2015. (If you pay your tax electronically the due date is 22 August 2015)

 19 August 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2015.

 19 August 2015 – CIS tax deducted for the month ended 5 August 2015 is payable by today.

 1 September 2015 – Due date for Corporation Tax due for the year ended 30 November 2014.

 19 September 2015 – PAYE and NIC deductions due for month ended 5 September 2015. (If you pay your tax electronically the due date is 22 September 2015)

 19 September 2015 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2015.

 19 September 2015 – CIS tax deducted for the month ended 5 September 2015 is payable by today.

 Legislation in Summer Finance Bill 2015 introduces a tapered reduction in the annual allowance from 6 April 2016, for those with an ‘adjusted income’ of over £150,000.

The ‘adjusted income’ definition adds-back any pension contributions, to prevent individuals from avoiding the restriction by exchanging salary for employer contributions.

To provide certainty for individuals with lower salaries who may have one off spikes in their employer pension contributions, a net income threshold of £110,000 will apply. If the individual’s net income is no more than £110,000 they will not normally be subject to the tapered annual allowance. However, anti-avoidance rules will apply so that any salary sacrifice set up on or after 9 July 2015 will be included in the threshold definition. The rate of reduction in the annual allowance is by £1 for every £2 that the adjusted income exceeds £150,000, up to a maximum reduction of £30,000.

All pension input periods open on 8 July 2015 are closed on that date, with the next pension input period running from 9 July 2015 to 5 April 2016. All subsequent pension input periods will be concurrent with the tax year.

To prevent retrospective taxation, individuals will have an £80,000 annual allowance for 2015-16, but subject to a £40,000 allowance for savings from 9 July 2015 to 5 April 2016. To achieve this, the 2015-16 tax year will be split into two notional periods: 6 April 2015 to 8 July 2015, the ‘pre-alignment tax year’ and 9 July 2015 to 5 April 2016, the ‘post-alignment tax year’. All individuals will have an annual allowance of £80,000 for the ‘pre-alignment tax year’. Where this amount has not been used in the ‘pre-alignment tax year’, it will be carried forward to the post-alignment tax year, subject to a maximum of £40,000. In addition, any unused annual allowance from the previous 3 years can be added to these amounts in the normal way.

The transition arrangements for 2015-16 mean that taxpayers who paid sizeable pension premiums in the period to 8 July 2015 (perhaps in anticipation of Budget changes) may be able to have a second bite at the cherry.

As readers will appreciate these are complex changes. Taxpayers who feel they may be affected should take professional advice.

One of the tax issues that the Conservative Party promised to legislate for, a promise they made during the recent election campaign, was the easing of the Inheritance Tax charge for home owners in the UK. The much publicised change was to take family homes of up to £1m out of Inheritance Tax charge completely.

The Chancellor’s announcement last month confirmed this intention, but it will not happen for some time. The mechanism to achieve this relief is to be called the main residence nil-rate band (MRNB).

This will be set at:

• £100,000 from April 2017
• £125,000 from April 2018
• £150,000 from April 2019
• £175,000 from April 2020

It will then increase in line with Consumer Prices Index (CPI) from April 2021 onwards. Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.

The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.

There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The existing nil-rate band will remain at £325,000 from 2018-19 until the end of 2020-21.

The MRNB relief will be available to married couples and civil partners.

The £1m overall relief will not be achieved until April 2020. From this date, on the death of the first spouse or civil partner, if they leave their share in the family home to the surviving spouse or civil partner, this will pass IHT free and the deceased parties’ unused MRNB will pass to the surviving spouse. If the rest of the deceased person’s estate passes to the surviving spouse then their unused nil rate band of £325,000 will also pass to their surviving partner.

On the subsequent death of the survivor, if they leave their home to a direct descendant, their estate may be able to claim a combined MRNB of £350,000 (2 x £175,000) plus £650,000 combined nil rate band (2 x £325,000); a total relief of £1m.

 There were a number of measures in the Summer Budget that will impact the taxation of property income. These include:

• the abolition of the 10% wear and tear allowance (see details below);
• the restriction of tax relief to the basic rate (20%) for loan interest on funds raised to purchase residential property for letting. This will be phased in over four years from April 2017; and
• the current £4,250 rent-a-room allowance is to be increased to £7,500 from April 2016.

The abolition of the wear and tear relief will apply from April 2016. It will be replaced by a new replacement furniture relief. The new relief will be available to landlords of unfurnished, part furnished and furnished properties. The relief will not apply to ‘furnished holiday letting’ (FHL) businesses and letting of commercial properties, because these businesses receive relief through the Capital Allowances regime.

The new replacement furniture relief will only apply to the replacement of furnishings. The initial cost of furnishing a property would not be included.

Under the new replacement furniture relief landlords of all non-FHL residential dwelling houses will be able to claim a deduction for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use in the dwelling house, such as:

• movable furniture or furnishings, such as beds or suites,
• televisions,
• fridges and freezers,
• carpets and floor-coverings,
• curtains,
• linen,
• crockery or cutlery,
• beds and other furniture

Landlords of furnished residential let property considering the replacement of these qualifying items in the current tax year, 2015-16, may be advised to defer expenditure until after 5 April 2016. In this way they will still maximise their claim to the present wear and tear allowance of 10% of rents for 2015-16, and be able to claim the new replacement furniture relief from 6 April 2016.

 Some of the key changes that will impact small businesses in particular are set out below:

• Taxation of dividend income from April 2016. The present 10% dividend tax credit is being abolished from April 2016. In its place an annual dividend tax allowance of £5,000 is being introduced. Dividends received will be free of further charge to Income Tax up to this limit. Above the £5,000 limit dividend income will be taxed as follows:

• Basic rate tax payers at 7.5%
• Higher rate (40%) tax payers at 32.5%, and
• Additional rate (45%) tax payers at 38.1%

 Shareholder directors of small companies that pay limited salaries and high dividends may be affected by this change and should review their dividend strategy.

• National Insurance Employment Allowance. From April 2016 the present £2,000 allowance is being increased by 50% to £3,000. The Chancellor has also announced that the allowance will be withdrawn for one person shareholder/employee companies.

• Annual Investment Allowance (AIA). The annual limit for this generous tax allowance, presently up to £500,000 of qualifying expenditure can be written off against taxable profits, was due to revert to £25,000 from 1 January 2016. It has been confirmed that the £25,000 limit will instead increase to £200,000 with no further changes currently tabled.

 It was also announced that Corporation Tax rates would fall to 19% in 2017 and 18% in 2020.

 A number of counter measures will also be introduced to curb tax avoidance. This continues HMRC’s strategy to root out and penalise businesses that continue to misuse tax legislation in a way not intended by parliament.