Davies Mayers Barnett

Budget 2012 - The Key Features - Part 2

Tue, 24 Apr 2012 08:25:36 +0100

Following our look at the changes affecting businesses in Part 1, here's our summary of the changes affecting individuals.

Budget 2012 – the Key Features - Part 1

Mon, 16 Apr 2012 13:04:19 +0100

Now that the dust has settled on the 2012 Budget, we take a look at the key announcements and their impact.

Capital Gains Tax – Year End Planning 2012

Mon, 06 Feb 2012 15:17:24 +0000

As the end of the tax year approaches there are a number of Capital Gains Tax (CGT) planning options which are available to help you to manage your tax exposure.

Your annual capital gains exemption can only be used in the current tax year; there is no option to carry it forward or backwards. It is currently set at £10,600 for individuals (and a maximum of £5,300 for trustees). With capital gains liable to tax at 18% for amounts within your basic rate band and 28% for higher and additional rate taxpayers, using this exemption could save you tax of up to nearly £3,000.

If you have assets which are currently pregnant with gains, and you have not used your available exemption, you might consider disposing of them to realise the gains. However, a gain cannot be realised by selling assets and then simply buying them straight back; this is known as bed and breakfasting. Under the anti-avoidance rules a gain cannot be crystallised if the asset is repurchased by the seller within 30 days. As always, with a little advance planning this catch can be avoided. If you do want to retain the asset, alternatives include:

• Bed and spouse - the asset can be repurchased by your spouse.

• Bed and ISA - the asset can be bought back within an ISA. However, this is subject to the current year limit for investments in ISAs of £10,680.

• Bed and SIPP - cash realised from the sale of the original asset can be reinvested into a SIPP. The SIPP then uses that cash to reacquire the asset. The icing on the cake with this option is that you may also qualify for income tax relief on the pension contribution!

If none of these options appeal to you, a final alternative for investment funds is to consider selling and then replacing the asset with a similar asset from another fund provider. However, this option shouldn't be taken without first considering the full investment consequences.

Assets can also be transferred between spouses free of capital gains tax. This can be helpful if you have already used your annual exemption and your spouse hasn't or if you have assets worth in excess of your annual exemption. Where both exemptions have already been utilised, the spouse transfer route can be beneficial if your spouse's marginal tax rate is lower than your own.

Capital gains in excess of the annual exemption are taxed at your marginal rate of tax so if you are close to the basic rate limit, you could use a pension contribution to increase the amount that is taxed at 18% rather than 28%.

If you have assets which are standing at a loss it may be possible to crystallise these to offset any other taxable gains you may have. If you are considering this option make sure that by using your losses you are not going to waste your annual exemption. This is not a problem if you are looking to use losses that you have realised in earlier tax years.

If you have still realised a gain which is now taxable, you could also consider whether using the Enterprise Investment Scheme (EIS) is a suitable deferral option. In the right circumstances, investments into qualifying EIS can provide unlimited deferral of capital gains. However, the investment risks attached to these schemes can be significant so they may not be suitable for all investors.

This time of year is also good for reviewing your investments to make sure that next year you will be making the most of the annual exemption and the lower rates of tax that apply to capital gains. If you are not already doing so, you could consider investing for capital growth rather than just income returns to do this.

For the more adventurous investor there are also Venture Capital Trusts (VCT) available. Any future capital gains arising from qualifying investments in these will be free from CGT.

There are plenty of opportunities available for both managing your exposure to CGT and using the allowances available. If you have any questions on the best strategies for you, please contact Jane Hamilton or Richard Lupson-Darnell.

A Guide to iXBRL

Wed, 04 May 2011 14:05:51 +0100

When is it effective from?

From 1 April 2011, for any accounting period ending after 31 March 2010, all Company Tax Returns must be filed online with accompanying financial statements and computations in iXBRL format.

From 2013, this format will also apply to accounts being filed with Companies House.

What is it?

iXBRL is an electronic format for business information, which HMRC expects to provide benefits in standardising communication and analysis of business and financial data. With iXBRL format certain pieces of financial information is "tagged" with standard codes. These ‘tags' effectively convert the financial statements and computations into a standard machine-readable template. iXBRL is becoming a global standard for financial reporting.

Who does it affect?

Nearly all companies are required by HMRC to file financial statements and tax computations using iXBRL. The few exceptions are published on HMRC's website.

What are the options for tax returns and computations?

Appropriate software is now available and action is required for computations which have previously been submitted without using a software package or using a software package that has not being upgraded to manage the required aspects of iXBRL.

While tax software should create iXBRL tax computations and submit your tax return to HMRC, the accompanying financial statements will also need to be in iXBRL format to prevent potential rejection of your tax return. Financial statements require a separate solution to convert them into iXBRL format.

What are the options for financial statements?

The solutions for conversion of financial statements are more complex. These are the options to consider:-

• Software embedded in accounting software - an iXBRL solution is included in the accounts production process.

• Conversion - where financial statements are produced using Word, Excel etc there is a solution that enables conversion into an iXBRL document.

• Outsourcing - the conversion process can be outsourced to organisations who will prepare the iXBRL document to be filed by the company.

The options above will create additional work beyond that currently performed in the preparation of financial statements. Software is currently only able to automate the production of iXBRL financial statements to a certain degree and some knowledge of iXBRL tags and accountancy is needed to achieve a reasonable degree of accuracy.

What are the likely costs?

The costs of meeting this requirement will include the cost of software, the time taken to tag data and quality control processes. The time involved will vary depending on the complexity of your documents, e.g. the number of notes in your financial statements and the tagging solution required.

Is there anything else I need to know?

For the first two years of mandatory iXBRL filing, HMRC has introduced a minimum tagging list as an interim measure. This means that not all of the information within accounts are required to be tagged.

During that period, HMRC has suggested that it will take a lenient view where problems arise, provided that an effort appears to have been made to submit in iXBRL.

From 2013, both the number of items required to be tagged and the standards expected by HMRC will rise considerably.

Companies will also need to consider the implications of submitting financial statements to Companies House in iXBRL.

Can we help?

Yes - we can advise you on how to address the issue which includes our own solutions for iXBRL financial statements and tax computations.

For more information please contact Cathrin Richards on 01242 252555.

Are you ready for the VAT rate change?

Tue, 14 Dec 2010 14:41:14 +0000

As has been broadly trailed, the standard rate of VAT is to increase to 20% on 4 January 2011. The new rate applies:-

• to sales invoices raised from 4 January 2011, except if the goods or services were supplied before then. If the supply took place before 4 January the supplier has the option to apply the 17½% rate on invoices raised from 4 January.

• to cash takings for goods and services supplied from 4 January 2011.

• in relation to stage payment contracts, on the value of work done after 4 January 2011.

Effect of increase on certain types of transaction

• Deposits taken or event tickets paid for before 4 January 2011 for supplies taking place after that date will be subject to the 17½% rate. For cash operated vending machines emptied from 4 January 2011 you can make a fair apportionment for pre January sales and apply the 17½% rate to them.

• Retentions on building works can optionally be charged at 17½% after 4 January in relation to the proportion of work done at that rate.

• Acquisitions of goods acquired from other EC states are subject to 20% self-assessed VAT in relation to goods sent or invoiced from 4 January 2011. Cross-border services subject to the reverse charge rules are liable to 20% when the service is completed after the rate change date. However, where the service is completed before or is paid before the rate change date the 17½% rate applies.

Anti-avoidance rules

The Government has enacted a special anti-avoidance forestalling law to prevent the non-payment of increased rate of VAT.

Forestalling occurs when arrangements are put in place for a VAT invoice to be issued by a supplier or payment received by a supplier before the rate increase, where goods are not due to be delivered or services to be performed, until on or after 4 January 2011. The grant of a right or similar option may also be used for forestalling.

The legislation applies to standard-rated goods and services. It prevents forestalling by introducing a supplementary charge to VAT on the supply of goods or services where the customer cannot recover all the VAT on the supply, and one or more of the following conditions are met:-

• the supplier and customer are connected parties;

• the value of the supply (and any related supplies made under the same scheme) exceeds £100,000. But this does not apply if the prepayment or issuing of an advance VAT invoice is normal commercial practice;

• the supplier or someone connected to the supplier funds a prepayment for the goods or services; or

• an advance VAT invoice is issued where payment is not due in full within six months (except hire purchase invoices issued in accordance with normal commercial practice).

The supplementary charge to VAT is due on 4 January 2011 and must be accounted for on the supplier's VAT return covering that date.

NEW PENALTIES FOR LATE PAYMENT OF PAYE /CIS

Mon, 01 Mar 2010 16:46:04 +0000

From May 2010, HMRC is changing the penalty regime for interest on PAYE and CIS accounts.

These new penalties will apply to the payment by employers and contractors of PAYE, Class 1 NICs, student loan deductions and CIS deductions.

Penalties will now depend on the number of times payment is made late during the tax year, and will be charged at between 1% and 4 % as follows:

No of times payments are late in a tax year	Penalty percentage	Amount to which penalty percentages apply

1	No penalty	Total amount that is late in the tax year (ignoring the first late payment in that tax year).
2-4	1%
5-7	2%
8-10	3%
11 or more	4%

In addition a 5% penalty will be charged on amounts more than six months late with a further 5% after 12 months.

Penalties will also be applied to Class1A NICs and Class1B NICs at the rate of 5% if not paid within 30 days of the due date; a further 5% if not paid within six months of the due date and a further penalty of 5% if still not paid 12 months after the due date.

These penalties will affect in-year payments due from May 2010 onwards. The first Class 1A NICs payment that the new rules will apply to is the payment due in July 2011.

Late payment of PAYE can also adversely affect an existing registration as a contractor. One payment over 14 days late or three payments as little as one day late can be enough to trigger the loss of gross status. This not only applies to existing contractors, but would be taken into account when registering in the future.

These penalties do not apply to any existing repayment plans in place, but will apply to any late payments made in the 2010/2011 tax year. If you anticipate problems paying any liabilities you should contact HMRC before the due date to try to arrange payment terms.
If you have any queries on this issue and would like further help and advice, please call your usual point of contact within the firm.

TOP TIPS FOR RAISING BUSINESS FINANCE

Thu, 24 Jul 2008 14:20:18 +0100

If you are looking to raise money for investment, growth or acquisition you need to present a comprehensive and feasible business plan to provide comfort to the bank or venture capitalist that the proposition is well thought out and has a future.

SOLID FOUNDATIONS?

Mon, 16 Jun 2008 08:48:16 +0100

All this talk of economic doom and gloom has brought into focus the need to start from solid foundations when managing wealth; those who have the basics right will be best placed to weather the storms.

COMPANIES ACT 2006

Mon, 16 Jun 2008 08:45:39 +0100

RUNNING A COMPANY?…then The Companies Act 2006 will affect you. The new legislation is intended to make setting up and running a company as easy as possible and to help small private companies to operate flexibly.

MORE BAD NEWS FOR COMPANY CARS?

Mon, 16 Jun 2008 08:45:39 +0100

Did you know that emission thresholds for calculating benefits in kind for 2008/09 and 2009/10 have been lowered, and will fall again from 2010/11?