Archive for January, 2016

Quarterly accounts filing

Tuesday, January 5th, 2016

At present smaller businesses are required to file accounts once a year with HMRC when their Self Assessment or Corporation Tax returns are filed.

HMRC are now moving towards the provision of a digital account for business owners, a portal that will allow taxpayers to manage their tax affairs online. In the draft notes for the Finance Bill 2016 there is further clarification of the way in which HMRC will expect this digital account to be used.

Here’s what they have to say:

 “Making Tax digital – As announced at Autumn Statement, the government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.”

This declaration is likely to have wide ranging implications. For example, will HMRC use this data to require taxpayers to pay their tax quarterly instead of twice yearly (if self employed), or annually if incorporated? Will tax due be based on current year earnings instead of prior year profits?

As stated, HMRC will be consulting on the detail this year. We will be keeping a careful eye on the outcome of their deliberations. Readers should be aware that these changes are unlikely to be implemented before 2020.

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Stamp Duty increase for second home buyers

Tuesday, January 5th, 2016

George Osborne and his team seem to have a grudge against landlords and second home owners. From 1 April 2016, Stamp Duty Land Tax (SDLT) payable on the acquisition of residential property – where the property is a second home or a buy-to-let investment – will see a significant increase in the amount of SDLT payable.

 

At present, this will only apply to properties purchased in England and Wales. In Scotland, the new Land and Buildings Transaction Tax applies.

 

For example:

 

Andy Jones is considering a further acquisition for his Midlands based buy-to-let property business of £300,000. What are the SDLT implications of buying before or after 1 April 2016?

 

Completion date 1 March 2016 – SDLT payable would be £5,000.

Completion date 1 May 2016 – SDLT payable would be £14,000.

 

The virtual tripling in SDLT due is a result of the 3% increase in SDLT rates from 1 April 2016. For acquisitions after 1 April 2016 the new rates are:

 

£0 to £40,000 no SDLT is payable

£40,000 to £125,000 – 3% on total cost of acquisition

£125,001 to £250,000 – 5% on this band only

£250,001 to £925,000 – 8% on this band only

£925,001 to £1.5m – 13% on this band only

Over £1.5m – 15% of the property price above this amount

 

Will this fuel a rush to buy before rates increase on 1 April 2016? Prospective buyers may want to consider this option, but don’t buy in haste and repent at leisure!

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