IR35 Private Sector Rules postponed until 2021

The Chief Secretary to the Treasury announced, during the debates on the Spring 2020 Budget resolutions, that the extension to the private sector of the off-payroll working rules will be delayed until 6 April 2021. The announcement was subsequently confirmed in a press release by HM Treasury. The postponement is in response to the ongoing spread of coronavirus and was stated to be a deferral, not a cancellation, with the Government remaining committed to reintroducing the policy.
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How to (Legally) Pay No Tax on UK Property Development Profits!

This blog post provides an overview of how individuals can legally enjoy the trading profits from their UK commercial or residential development projects without suffering any UK tax costs.

Planning Overview

The planning (broadly) operates as follows:

  • The property development activities would be undertaken by a UK private limited company (Company) of which the individuals would be the directors and shareholders.
  • The Company would shelter its taxable trading profits through the use of an offshore trust (Trust).
  • The Trust would appoint a UK corporate investment manager (Manager) which has fiduciary powers of control over the profits / monies held by the Trust. The individuals would be the directors and shareholders of the Manager.
  • The individuals would extract the sheltered trading profits through the use of commercial loans from the Manager.

UK Tax Benefits

  • No corporation tax is payable on the development profits.
  • No income tax is payable on the profit extractions (via the use of loans).
  • No corporation tax is payable by the Manager.
  • The planning is based on established case law, tax legislation and tax practice.
  • The planning has a long history of successful use.
  • HMRC accept the technical analysis.

Summary

This tax planning allows property developers of both UK commercial and residential property to legally enjoy their development profits without suffering any UK tax charge.

If you would like to schedule a free 30 minute telephone consultation to see if you qualify for this form of tax planning, please contact Simon Newsham at Newshams Tax Advisers on 020 3151 0650 or email him at simonnewsham@newshams.com

Newshams Tax Advisers

www.newshams.com

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Tax – avoidance or evasion

To the average person whose only concern is whether they have correctly rounded up their building society interest on their tax return the tax machinations of multi-national corporations must seem not just a world away but more like on another planet. Just within the last few days Microsoft has been reported to have avoided paying £100 million a year in tax thanks to an agreement which it reached with HMRC; whilst on the other side of the equation research has revealed that HMRC’s tax evasion workload rose by 8% in the year to April 2016.

It’s easy to say that tax avoidance is optimising benefit through legitimate use of tax legislation but with evasion increasingly being seen as a matter not just of legislation but of conscience the lines between right and wrong are increasingly becoming blurred. Where does that leave the ordinary taxpayer, the small partnership or the SME; how do they react when filling in their tax returns or taking advantage of government introduced initiatives such as ISAs, venture capital or enterprise investment schemes?

The fact is that schemes such as these have been introduced by successive governments not simply as a way of individuals avoiding tax but more as a method of boosting investment in the economy and driving long-term growth. So when we talk about efficient tax planning we should remember that it can be a two-way street, benefiting the country as well as the individual.

If you would like to speak to a tax adviser about efficient tax planning, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Giving back to society

It may have rained on Her Majesty The Queen’s birthday party, but that didn’t dampen the celebration of the long history of volunteering and charity work in this country. The Queen is patron of more than 600 charities and organisations, the majority of which have benefited from her wisdom and guidance since she acceded to the throne in 1952.

The Patron’s Lunch was not only a fitting finale to a weekend of celebration, it also marked the end of national volunteer’s week which celebrated the role which volunteers play in our society. According to the BBC studies have shown that volunteering equates to an input of some £50 billion a year, showing what a huge impact voluntary sector has on the life of the UK.

But volunteering is a two-way street and other studies have shown that those who volunteer benefit personally in a range of ways, not the least of which are improved self-esteem and health. During the recession, charities and other voluntary organisations faced some tough times as donations fell and the call on their services increased. This has in turn forced charities to become smarter with their finances, maximising their income through gift aid and taking advantage of free services such as the Google AdWords grant.

If you would like to speak to a tax adviser about charity finances and Google AdWords for charities, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

 

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Celebrating tax freedom day

Enjoy your next payslip. We’ve passed the milestone in the year that marks tax freedom day and from now on what you earn belongs to you.

Of course it doesn’t quite work like that because (for those on PAYE at least) a proportion of tax is taken from your salary evenly throughout the year. But tax freedom day marks the time at which, if we had to pay all our taxes up front, we would stop working in order to pay the government and start earning money for ourselves.

Is the fact that for the first time in fifteen years this milestone has crept into June a good thing? Some would say that a four-day jump to 3rd June is indicative of high levels of taxation whilst others would comment that in order to pay more taxes we have to be earning more and therefore on average we are better off. Let’s hope it isn’t, partially at least, down to some individuals paying more tax than they should simply because they don’t understand what allowances they are entitled to.

If you would like to speak to a tax adviser about personal taxation, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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When contacting HMRC can be taxing

A report into HMRC effectiveness by the National Audit Office (NAO) has received near universal headlines highlighting chaos, a collapse in customer service and the potential for errors in millions of tax returns. Whilst HMRC failings in service are highlighted throughout the report, the NAO in its introduction does comment that following a collapse in service quality in 2014 and the first half of 2015, “services have since improved.”

The core of the problem related to HMRC’s move towards digital and online tax services, something which has the approval of the NAO. Nevertheless, the report highlights the fact that an expected fall in demand for telephone contact following the move to digital did not materialise, leading to a significant worsening of call waiting times and levels of service. Indeed, the report estimates that every £1 saved by HMRC in cost-cutting measures gave rise to an increased cost to callers and the country of £4.

It will be interesting to see whether the improvements commented on by the NAO will continue into the next tax return reporting season. April 2016 saw the introduction of a number of changes to taxation in respect of personal investments, and although these won’t affect tax returns due for the 2015/16 tax year, their widespread reporting will inevitably cause a measure of confusion on the part of those completing tax returns over the next couple of years.

If you would like to speak to a tax adviser about personal taxation, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Taxing second homes

Earlier this month (May 2016) the residents of St Ives in Cornwall voted overwhelmingly to restrict the purchase of new build homes to those who can prove they intend to live in the property for more than six months in any year. It’s a move which is already under consideration by other areas of the country which have seen property prices soar in recent years thanks to multiple home ownership.

It’s also another potential nail in the coffin of those who are looking to buy second homes, either for their own use or to rent out to others. The cost of buying a second home increased on 1 April 2016 when higher stamp duty land tax rates for second and buy to let homes came into force. This change will potentially hit many who already have a home, either in the UK or abroad; including joint purchasers where one already owns a property.  The Government consultation covers many common scenarios but there is ongoing discussion about some of the more complex scenarios so it is worth taking advice in advance of any purchase decision.

Adding to the complexity is the change to tax relief on buy to let mortgage interest payments which is being phased in from April 2017. Together these changes leave those thinking of entering the buy to let market or who already have property portfolios needing to rethink their finance model. This was highlighted in the last week by the fact that Barclays has followed the Nationwide in upping its minimum rental cover requirement for landlords to 145%.

If you would like to speak to a tax adviser about taxation in respect of additional properties, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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SME opportunities

It can be tough running an SME business. You may be smaller and more flexible than some monoliths which been around for decades but you still have to cover all of the day-to-day business operations without the support infrastructure which a larger business can bring. HR, IT, marketing and social media; those working in SMEs may well have to wear many hats or call for external expertise.

Perhaps that’s why a recent report from online freelance company People per Hour reveals that nearly two thirds of SMEs now call on freelancers to fill positions such as design and software, marketing and social media. In a way this is a logical extension of the standard practice in business to appoint external professionals such as solicitors, accountants and tax advisers who can bring their expertise to bear on helping SMEs to finalise their accounts and maximise their tax opportunities.

But whilst SMEs face many challenges, there are also many opportunities available. For example, Innovate UK has recently announced a competition to identify innovation projects in manufacturing and/or materials. With a closing date of 6th July, Innovate UK is looking to invest up to £15 million on relevant projects that lead to increased UK SME productivity, and growth. With SMEs being the beneficiaries of this competition, all entrants need to be either SMEs or a conglomeration of businesses which includes at least one SME.

If you would like to speak to a tax adviser about SME taxation, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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Taxing inherited pensions

Amid all the talk of Panama papers and offshore tax havens, it can be easy to lose sight of the fact that when it comes to taxation there are some things which should be taxed and some which shouldn’t. Understanding the rules can therefore help people to avoid falling into the overpayment trap in which tax is taken when it need not be.

One such example in respect of inherited retirement funds came to light recently. With effect from 6 April 2016, those dying before the age of 75 can pass certain types of pension pots on to inheritors free of income tax. Tax is payable on such transfers for those dying after the age of 75. However, an investigation has revealed that in some circumstances, where the pension company has provided HMRC with details of the transfer in accordance with normal procedures, HMRC has raised a tax demand.

At the time of writing information in respect of the number of those affected is unclear but pension providers have been ordered to stop providing information in respect of death benefits to HMRC until the problem has been resolved. The danger of issues such as this arising is that those who are grieving may be all too ready simply to accept the tax bill rather than investigate the regulations and this could affect their own income tax and investment decisions.

If you would like to speak to a tax adviser about inheritance tax, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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SME tax benefits

Calling all SMEs and micro businesses; are you fully aware of the tax reliefs which are available to you? If you’re not then you aren’t alone. A survey carried out on behalf of Direct Line for Business has revealed that nearly half of UK SMEs have a very poor understanding of tax reliefs which may be available for their business and 66% don’t know if they are eligible for the reliefs which are available.

Tax breaks on offer include entrepreneurs relief, enterprise zone relief, capital allowances, corporation tax marginal relief and small business rate relief. When you add in other measures such as the recent change to the treatment of dividends it’s not surprising that according to Direct Line for Business some 3.5 million SMEs could be missing out on tax reliefs amounting to millions of pounds.

Commenting on the findings Nick Breton, head of Direct Line for Business said he would encourage SMEs “to do some research and seek help if necessary to make sure they are taking full advantage of the benefits.”

If you would like to speak to a tax adviser about taxation for SMEs, please contact Newshams Tax Advisers on 0800 211 8657 or email us at enquiries@newshams.com.

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