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Benefits filing deadline approaching

By P&A Knowledge Team • 15 June 2017 • Posted in Payroll

Employers are reminded that the deadline for submitting the 2016-17 forms P11D, P11D(b) and P9D is 6 July 2017. P11D forms are used to provide information to HMRC on certain benefits and expenses that employees and directors receive during the tax year: such as company cars, loans and private medical insurance.

Employers making online submissions will need to correct any problems with the forms before filing electronically. Employers who submit paper forms with errors will have to re-submit when corrected and may exceed filing deadlines.

Since 6 April 2016, employers may have registered on a voluntary basis to report and account for tax on certain benefits and expenses via the Real Time Information payroll system. If you have, you will not have to submit form(s) P11D at the tax year end. This is known as payrolling, and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments.

Where no benefits have been provided from 6 April 2016 to 5 April 2017, and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or complete the '2016 to 2017 Employer - No return of Class 1A' form. A 'no return to make' form is available online. Employers are also required to provide, for each employee for whom a form P11D is due, a statement of the information shown on the employee’s form. The statement should also be provided by 6 July 2017.

Planning note:

There are late filing penalties if you delay making any of the year end returns mentioned in this article beyond the various filing deadlines. If you are at all concerned about your filing obligations we can help. To give us time to access the benefits that you need to report - whether via your payroll or by filing forms P11D etc - please call as soon as you can.

Main Residence Nil Rate Band

By P&A Knowledge Team • 15 June 2017 • Posted in Inheritance Tax

The impact of Inheritance Tax has been reduced recently for families that own their own home. HMRC has introduced a new relief, the Inheritance Tax main residence nil-rate band (RNRB), which came into effect on 6 April 2017.

The RNRB is a transferable allowance, that is available to the estates of both parties in a marriage or civil partnership, when their main residence is passed down to a direct descendent: for example, their children or grandchildren. The RNRB is available in addition to the existing £325,000 Inheritance Tax nil-rate band (NRB) threshold.

The RNRB is being introduced in stages:

  • Initially, £100,000 in 2017-18
  • £125,000 in 2018-19
  • £150,000 in 2019-20, and
  • £175,000 in 2020-21.

Any unused portion of the RNRB can be transferred to a surviving spouse or partner in a similar way to the existing NRB. The combined benefit of these two reliefs, means that by 2020-21, parents will be able to pass on their private residence - to a value of up to £1 million - free of Inheritance Tax to their direct descendants.

From 2021/22 onwards the RNRB is due to increase annually in line with the Consumer Prices Index (CPI).  However, there will be a tapered withdrawal of the RNRB for estates with a net value of more than £2m. This will be at a withdrawal rate of £1 for every £2 over this threshold.

Technical notes: to qualify for the RNRB:

  • The deceased’s estate must include a residential property or qualify under the downsizing rules.
  • The RNRB is transferable where the second spouse or civil partner dies after 5 April 2017, irrespective of when the first partner died.
  • If there is more than one residential property, the personal representatives of the deceased person can nominate the property to qualify for the relief.
  • The property must have been a residence of the deceased. A buy-to-let property would not qualify for the relief.
  • The property must be left to a direct descendant (including a step-child, adopted child or foster child) or other lineal descendant of the deceased. 

Planning advice:

Readers who have not reviewed their estate planning since this new relief was announced, should consider their options. Estate planning, to mitigate the effects of Inheritance Tax, is a moveable feast. To stay ahead of the planning curve, it will benefit couples with a significant investment in their home to reconsider their Wills and any new opportunities to reduce a possible 40% estate tax. We can help. Please call if you would like more information.

Post-election comment

By P&A Knowledge Team • 15 June 2017 • Posted in General

The recent election result has certainly thrown the cat amongst the pigeons.

There are already indications that the Queen’s speech and the start of Brexit negotiations may be delayed, this mainly due to extended negotiations to agree support for the Conservatives with minority groups, at present the DUP.

Manifesto pledges that may be removed from the Queen's speech includes:

  • cancelling plans to remove the triple lock on pensions
  • the means testing of winter fuel payments
  • the introduction of new grammar schools, and possibly
  • a softening of the approach to Brexit negotiations

Philip Hammond has kept his job at number 11 Downing Street and this will add some continuity to any other tax changes that may be forthcoming. A stripped-down version of Finance Bill 2017 was fast-tracked through the last Parliament and received Royal Assent before Parliament was dissolved. To achieve this, the government deleted 72 out of 135 clauses and 18 out of 29 schedules from the original Bill. This included the legislation for the introduction of Making Tax Digital (MTD) which was expected to be introduced in April 2018. Other measures that were removed from the Bill include corporate loss relief and interest deductibility, VAT in relation to fulfilment houses and penalties for enablers of defeated tax avoidance schemes.

We are also expecting the first ever Autumn Budget later this year as the changes to the Budget cycle take effect. By then, we should have a better idea of the direction this new Parliament is taking and what effect the Brexit negotiations are having.

This, of course, all depends on Mrs May's efforts to maintain her minority government.

Planning note:

The major tax item that is still not fully implemented, and that will affect all businesses in future years, is HMRC's progress towards their digitisation of tax payer records - the so-called Making Tax Digital program.

At present, we are told that the self-employed with turnover above the current VAT registration limit will need to be in a position to upload summarised accounts information via their approved accounts software, from April 2018. Other businesses will be required to comply in future years. It should be noted that legislation is still outstanding to formalise this arrangement.

However, taking the first step, by choosing the authorised accounts software you should use, will not only provide you with a solution to upload data to HMRC in due course, it will also provide you better access to your financial information. If you are still undecided which software to use, we can advise. We realise that this is a difficult "first step" for many smaller business owners, who have been used to less complex recording systems in the past, and don't forget that businesses include property landlords. Please call so that we can discuss your needs in more detail.

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