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How do Help to Buy ISA’s work?
Top 10 facts and rules…
- Its only available to ‘First Time Buyers’
- ‘First Time Buyers’ can only have one Help to Buy ISA with one provider
- You can pay in £1,000 when you open the account and then save a maximum of £200 per month
- The maximum government bonus is £3,000 (but you can lower amounts of bonus if you have less than £12,000)
- The scheme will run for 4 years from the date it opens (Autumn 2015)
- Couples can have a Help to Buy ISA each which means if they don’t want to wait 4 years could save £12,000 in 25 months where as a single saver would need 55 months
- Unlike ISA’s where you open one per year, the Help to Buy ISA will continue for 4 years
- You can withdraw funds but if its not to buy a home then you won’t get the bonus
- More than 100,000 homes have now been bought with government backed schemes
- You will be able to get them at banks and building societies
Money Saving Expert has some useful Q&A including this one….
A first-time buyer is someone who does not and has never owned an interest in a residential property, either inside or outside the UK.
Many people have said “I owned a property previously but now rent”, “I have a shared ownership property” or “I have inherited a property” can I still open a Help to Buy ISA? And the answer is NO – you have to be a first-time buyer to open one.
steve@bicknells.net
The end of Tax Returns and start of ‘Digital Tax Accounts’
In last months Budget, the Chancellor George Osborne announced that during a 5 year period starting in 2016 we will see the end of tax returns and the introduction of Digital Tax Accounts.
According to Citywire
By the end of 2016, five million small businesses and the first 10 million individuals would use the new ‘digital tax account’.
‘Millions of individuals will have the information the Revenue needs automatically uploaded into new digital accounts,’ said Osborne. ‘Tax really doesn’t have to be taxing, and this spells the death of the annual tax return.’
Around 85% of those who complete self-assessment forms already do them online. But HMRC said the new accounts, unlike the current system, would be pre-populated with data HMRC already holds and that from third parties.
Those who pay tax using the pay-as-you-earn system will have their income tax, national insurance contributions and pension position already shown in their accounts, alongside any interest from banks and building societies.
HMRC said that small businesses using the system should also be able to use accounting software to feed data straight into their account.
In order for this to work, small businesses will need to keep their accounts up to date.
The top 5 common accounting problems accountants deal with are:
1. Not doing any accounts – the shoe box approach to business
This is the most common mistake, book keeping is best done as you go along, putting all the paperwork in a shoe box or carrier bag is a really bad idea as you have no idea how your business is performing.
2. Not keeping receipts. Often small business miss out on claiming all their expenses because they fail to keep receipts and lose track of their spending
3. Not reconciling. Reconciling your bank statements to your cash book is vital to make sure that all of your income and expenses have been recorded in your accounts.
4. Using the wrong accounting system. For some businesses a manual cash book and records are fine but for many accounting software such as Debitoor will be needed to keep track of debtors, creditors and VAT. Make sure you understand your accounting system and operate it correctly.
5. Mixing business and personal expenses. Some sole traders even mix up business and personal bank accounts and in extreme cases don’t even have a business bank account. This can cause errors and often means that a sole trader will either claim to many expenses or to few.
Will small businesses be able to overcome these problems or will they end up in a tax mess with Digital Tax Accounts?
steve@bicknells.net
How will FRS102 affect your tax position?
FRS102 will affect us all, even small companies will be subject to a version of FRS102.
Its not just a reporting standard it will affect your tax position too, for example
Intangible Assets and Goodwill
Under FRS102 these assets will have a maximum life of 5 years where as UK GAAP allowed them to have an infinite useful life.
Distributable Reserves
There are various FRS102 changes that can effect these but one specific one is deferred tax which will be calculated on investment properties.
Operating Leases
Leases incentives will be spread over the entire life of the lease rather than to first break clause.
Asset Reclassification
Some assets such as Websites and software development could be reclassified as Intangible
Have you assessed the changes for your business?
FRS 102 is effective for periods beginning on or after 1 January 2015.
steve@bicknells.net
Will cashing in your annuity lead to a better pension?
The chancellor George Osborn has announce that he plans to allow pensioners to cash in their annuities.
Before the pension reforms….
Individuals saved into a pension during their working life and so built up a pension pot.
At some point during the first years of retirement, they used the money to buy an annuity from an insurance company.
This is a transaction that occurs once, and only once.
An annuity is an annual retirement income that is paid to them for the rest of their life.
From April 2016 the proposal is to allow pensioners to swap an annuity for a fixed lump sum.
But will pensioners be able to find investments which are better than the annuity they currently have?
steve@bicknells.net
Free Auto Enrolment Checklist to Maximise Profits
For years, accountants and bureaus have been offering payroll services, taking a massive burden off the hands of their clients. However, the payroll profession has changed dramatically over recent years with the introduction of Auto Enrolment. A significant 1.2 million small and micro businesses are set to start staging between June 2015 and the beginning of 2018. The Pensions Regulator defines small businesses as employers with 5 to 40 workers and micro businesses as having one to four workers.
The thought of choosing the right payroll provider has exasperated with the new AE employer duties that need to be completed. Some software providers are avoiding auto enrolment completely, while others are offering AE features with limited functionality or at a high extra cost. If you have payroll clients they may have an expectation that you will handle the AE setup and ongoing duties for them. For bureaus, it will be…
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What if you change a dividend to salary
Let’s look at the case of Richard and Julie Jones v HMRC [2014] UKFTT 1082 (5 December 2014).
They took a small salary and regular dividends from their recruitment company which was absolutely fine until the company got into financial trouble!
Their accountant (unethically but in an attempt to help their client) suggested they should re-write history and change the dividends to salary so that the liquidator couldn’t recall the dividends.
HMRC then decided to demand PAYE and NI and pursued Richard and Julie personally.
HMRC was refused the right to collect PAYE tax and NI due on the salary, not because the law didn’t allow it, but because it wasn’t possible for Richard & Julie to reclassify the dividends. They had been properly paid and the correct procedure followed. History couldn’t be rewritten and the dividends should have been changed to loans if the dividends were illegal.
steve@bicknells.net
New ‘Starter Homes’ scheme gives 20% discount!
The 20% discount is achieved by waiving local authority fees for homebuilders of at least £45,000 per dwelling on brownfield sites.
At the heart of the Starter Homes initiative is a change to the planning system. This will allow house builders to develop under-used or unviable brownfield land and free them from planning costs and levies. In return, they will be able to offer homes at a minimum 20% discount exclusively to first time buyers, under the age of forty. Under the proposals, developers offering Starter Homes would be exempt from those Section 106 charges and Community Infrastructure Levy charges. The homes could then not be re-sold at market value for a fixed period – making sure that the savings are passed onto homebuyers.Gov.uk
To qualify first time buyers must be under the age of 40 and living in England
steve@bicknells.net
New Tax Break for Couples – Register Now
A new tax break will start from 6 April 2015, which will be eligible to more than 4 million married couples and 15,000 civil partnerships.
The Allowance means a spouse or civil partner who doesn’t pay tax – therefore is not earning at all or is earning below the basic rate threshold (£10,600) – can transfer up to £1,060 of their personal tax-free allowance to a spouse or civil partner – as long as the recipient of the transfer doesn’t pay more than the basic rate of income tax.
Applying online is straightforward. Couples can register their interest to receive the Allowance now at gov.uk/marriageallowance.
The maximum saving is 20% x £1,060 = £212
However, the partner giving up the allowance must not be earning and the partner getting the allowance must not be a higher rate tax payer.
steve@bicknells.net
Is my website a fixed asset?
HMRC use the Analogy of a shop window….
The cost of a web site is analogous to that of a shop window. The cost of constructing the window is capital; the cost of changing the display from time to time is revenue. (BIM35870)
UITF Abstract 29
Set out 4 key areas of cost:
- Planning – P&L
- Application and infrastructure development – Tangible Fixed Asset
- Design costs – P&L
- Content costs – P&L
HMRC also have some useful information on software in CA23410
CAA01/S71
Computer software qualifies for PMAs if it is not already plant.
Computer software is not defined in the capital allowance legislation. You should treat computer programs of any type and data of any kind as computer software. Computer programs range from operating systems like Windows to games like Solitaire. There may be no physical asset because software is sometimes transferred by electronic means, for example it may be downloaded over the Internet. Software acquired that way is also plant.
A person may acquire a right to use or otherwise deal with computer software. If so, the right and the software to which it relates are plant. Treat the person as owning the plant while the person is entitled to the right.
Capital Allowances and the Annual Investment Allowance can be claimed against Plant including software.
steve@bicknells.net
New reporting requirements for intermediaries
An intermediary is any person who makes arrangements for an individual to work for a third party or be paid for work done for a third party. An employment intermediary is also commonly referred to as an agency.
From 6 April 2015, intermediaries must return details of all workers they place with clients where they don’t operate Pay As You Earn (PAYE) on the workers’ payments. The return will be a report (or reports) that must be sent to HM Revenue and Customs (HMRC) once every 3 months.
Agencies will be required to let HMRC know the following details:
- Contractor’s name, address, date of birth, etc.
- PAYE reference.
- National Insurance number.
- How the contractor was engaged during the period (i.e. was he working via a limited company).
- The duration of each assignment.
- Details of the contractor’s limited company (e.g. company registered number).
- How much was paid to the contractor.
The regulations will give HMRC information that will enable it to decrease false self-employment and abuse of offshore working. This will help HMRC to:
- support intermediaries that comply
- penalise intermediaries that don’t comply
- make sure the right tax and National Insurance is paid by people working through intermediaries
- reduce unfair commercial advantage
Here is link to the full reporting requirements – Legislation Link
This is the link to consultation – Consultation
steve@bicknells.net
Business Accountant 