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25/08/2011
Taxman eyes luxury property
Nicholsons Chartered Accountants are reporting that in a bid to squeeze the last possible penny out of taxpayers, HMRC is scrutinising Land Registry data on house purchases and sales to check people are not avoiding tax.
Richard Grayson, Business Development Partner at the firm said: “This is affecting those who receive a gift or inheritance to buy a property, or who use this money to pay a sizeable amount off their mortgages.
“Figures released last month show that HMRC is actively targeting estates and beneficiaries for underpayment of inheritance tax (IHT). Last year, the taxman investigated 9,368 house price valuations and clawed back almost £70 million in IHT.”
IHT is levied at 40 per cent where the assets, minus any debt, of a person’s estate exceed £325,000, or £650,000 for couples. Estate beneficiaries, who are often the children and families of the deceased, face penalties of up to 100 per cent of the additional tax liability, in addition to the tax due, if HMRC investigates an IHT property valuation and finds it is incorrect because sufficient care was not taken in obtaining it.
If a property is sold for less than the valuation, the estate can come back and ask for the value to be revised. Executors and beneficiaries are being advised to get several valuations from professional valuers or chartered surveyors.
HMRC has said that it would open an inquiry based on a series of risk factors; part of the remit of an inquiry would be to check whether the declared income correlated to the individual’s lifestyle. In the case of gifts, they would look for evidence such as a copy of the donor’s bank statement.
When giving gifts, it is suggested that donors pay by bank transfer and have supporting documentation to give to their lawyer and accountant, as many people will have no provable record of giving gifts to children or grandchildren. Gifts of unlimited amounts can be given free of tax if the donor lives for another seven years.
For more information contact Jeannine Peta Thornley on 0845 276 6555.
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Nicholsons Chartered Accountants are reporting that in a bid to squeeze the last possible penny out of taxpayers, HMRC is scrutinising Land Registry data on house purchases and sales to check people are not avoiding tax.
Richard Grayson, Business Development Partner at the firm said: “This is affecting those who receive a gift or inheritance to buy a property, or who use this money to pay a sizeable amount off their mortgages.
“Figures released last month show that HMRC is actively targeting estates and beneficiaries for underpayment of inheritance tax (IHT). Last year, the taxman investigated 9,368 house price valuations and clawed back almost £70 million in IHT.”
IHT is levied at 40 per cent where the assets, minus any debt, of a person’s estate exceed £325,000, or £650,000 for couples. Estate beneficiaries, who are often the children and families of the deceased, face penalties of up to 100 per cent of the additional tax liability, in addition to the tax due, if HMRC investigates an IHT property valuation and finds it is incorrect because sufficient care was not taken in obtaining it.
If a property is sold for less than the valuation, the estate can come back and ask for the value to be revised. Executors and beneficiaries are being advised to get several valuations from professional valuers or chartered surveyors.
HMRC has said that it would open an inquiry based on a series of risk factors; part of the remit of an inquiry would be to check whether the declared income correlated to the individual’s lifestyle. In the case of gifts, they would look for evidence such as a copy of the donor’s bank statement.
When giving gifts, it is suggested that donors pay by bank transfer and have supporting documentation to give to their lawyer and accountant, as many people will have no provable record of giving gifts to children or grandchildren. Gifts of unlimited amounts can be given free of tax if the donor lives for another seven years.
For more information contact Jeannine Peta Thornley on 0845 276 6555.
Budget Report 23 March 2011
This Report, which was written immediately after the Chancellor of the Exchequer delivered his Budget Speech, is intended to provide an overview of the latest announcements and recent measures most likely to affect you or your business.
Throughout this guide we have included tips and ideas for effective tax and financial planning, but it is important to remember that this planning should be an ongoing, year-round process, not something that is left until the last minute.
We can help you to reassess your plans regularly, and adapt them as your personal and business circumstances change. With our help, you can plan for a rewarding and financially secure future.
Please note: while most taxation changes take effect from the start of the financial year, or tax year, some may not take effect until 2012, or later. Where relevant, details of these changes have been included in this Report. Throughout the Report, 'HMRC' refers to HM Revenue & Customs.
Lincolnshire chartered accountants Nicholsons are advising small businesses that the government has announced plans to make it easier for smaller firms to win public sector contracts.
In future, there will be a target of 25 per cent of contracts going to small and medium-sized businesses, aided by a more open procurement system and a reduction in the use of ‘preferred bidders’ – usually larger companies.
Nicholsons partner Emma Murray said: “Individual government departments will be required to publish their procurement contracts in future, together with details of how many of them were awarded to SMEs.
“In addition, the government is pledging to pay most ‘primary’ contractors within five days and ensure firms further up the supply chain receive payment within 30 days”.
The measures have been welcomed by the Forum of Private Business (FPB), which said they would help small firms to generate jobs and growth in the economy.
Lincolnshire chartered accountancy firm Nicholsons, in partnership with Outstand, is offering charities in the area the chance to pick up some advice on best practice concerning the role of trustees at a free seminar taking place this month.
Lincolnshire chartered accountancy firm Nicholsons is offering businesses in the region advice on some significant actual and potential changes to employment law at a seminar later this month.
Andy Tomlinson, the firm’s in-house Human Resources consultant, and lawyer Danny Miller will be discussing the potential abolition of the default retirement age, meaning firms would no longer be able to force employees to leave when they reach the relevant age.
They will also be discussing the 2010 Equality Act which brings together various pieces of existing legislation as well as introducing some new provisions on such issues as ‘indirect’ discrimination and harassment.
Mr Tomlinson said: “The change to the default retirement age will be a major challenge to businesses – many may welcome the opportunity to continue to use the knowledge and expertise of senior staff but there may be issues where employees are no longer able to do the job, which is obviously a more subjective judgement.
“Furthermore, while I am sure most employers will already be complying with the majority of points in the Equality Act, it is important that they are aware of the changes already introduced to ensure they do not inadvertently fall foul of one of the new provisions. An example is that in most cases it will amount to discrimination if questions are asked about the health of a job applicant before the interview.
“I’m looking forward to discussing these changes with local employers and will be happy to answer any questions they may have.”
For more information, or to book a place, contact Jeannine Peta Thornley at Nicholsons on 0845 2766555 or visit www.nicholsonsca.co.uk, go to the events page and click on the on-line booking form.
Chancellor of the Exchequer George Osborne billed his second Budget as a “Budget for growth”, telling MPs that it was an “urgent call to action for Britain”. His main ambitions, he said, were to ease the economic burden on families and businesses while promoting Britain as the best place to do business in Europe.
Summary of key proposals
- Consultation on plans to merge income tax and National Insurance.
- Tax-free personal allowance increased by £630 to £8,105 from April 2012.
- Corporation tax to be cut by two per cent in April 2011 – more than the one per cent previously announced.
- Forty three tax reliefs to be scrapped as part of the simplification of the tax code, along with £350 million of business regulation.
- Business rate relief holiday for small firms extended for another year.
- Bank levy to be adjusted so that banks do not pay less tax.
- Ten per cent discount on Inheritance Tax for those who leave 10 per cent of their estate to charity.
- Direct tax rates to be indexed to Consumer Price Index (CPI) from 2012.
- Funding for 40,000 new apprenticeships for unemployed young people and 100,000 new work experience placements.
- Twenty one “enterprise zones” to be launched, backed by tax incentives.
- No new regulation on firms with fewer than 10 staff for three years.
- Tax loopholes to be closed to raise £1 billion this year.
- Fuel duty cut by 1p per litre from 6pm on 23 March. Planned 4p per litre rise due in April delayed until 2012. Annual fuel duty escalator scrapped until 2015. No reduction in VAT on fuel. Tobacco tax up by two per cent from 6pm on 23 March but no increase in alcohol duty.
- Council tax to be frozen or reduced this year in every English local authority.
Setting the scene
Mr Osborne laid out his cards on the table from the start, telling Parliament that “the size of the task of repairing Britain’s finances is unchanged”. However, while this year’s Budget was not about raising taxes, neither was it about “giveaways”, he said. Instead, the 2011 Budget was about “sound money” and encouraging enterprise, export and manufacturing, while also easing the burden for families who were struggling to cope financially.
Britain had lost ground in the world’s economy, he said, and needed to catch up. The Chancellor said Britain needed to become an attractive place to do business – both for overseas companies and for new start-ups.
Mr Osborne also revealed that the growth forecast for Britain in 2011 had been downgraded from 2.1 per cent to 1.7 per cent. The following years had also been downgraded to 2.5 per cent for 2012, 2.9 per cent for both 2013 and 2014, and 2.8 per cent for 2015. This was due to a 0.6 per cent contraction in the last three months of 2010.
Inflation would remain at between four and five per cent this year, but was expected to fall to two per cent by 2013.
The borrowing forecast was also not as high as previously predicted by the Office for Budget Responsibility. Figures now show this to be £146 billion for this year, rather than the original £148.5 billion. This would go down to £29 billion by 2015/16, Mr Osborne said.
Duty
Having been under pressure not to increase fuel duty, which was due to go up by 4p a litre from April this year, the Chancellor instead cut it by 1p per litre as of 6pm on 23 March. The annual fuel escalator was also scrapped until 2015. The cuts will be paid for by a £2 billion tax, known as the Fair Fuel Stabiliser, on North Sea oil producers. This is a supplementary charge which will increase the tax paid on oil and gas production from 20 per cent to 32 per cent. There will be no reduction in VAT on fuel.
There was no further increase in alcohol and air duty, but tobacco tax was increased by two per cent from 6pm on 23 March.
Income tax
The tax-free personal allowance on income tax will be increased by a further £630 to £8,105 from April 2012. This is in addition to the £1,000 increase announced during last year’s Emergency Budget, which comes into effect from April this year. Mr Osborne said the 2012 increase would save 25 million people around £45 a year. The measure will affect anyone earning less than £115,000 a year.
Direct tax rates will be indexed to the Consumer Price Index (CPI) from 2012.
Income tax relief on the Enterprise Investment Scheme will increase from 20 per cent to 30 per cent from April 2011.
There were no personal tax increases. The 50 per cent top tax rate will remain, but this will be reviewed to see how much it raises.
Mr Osborne also revealed that a consultation is to take place into a long-term plan to merge income tax and National Insurance, saying that having two separate taxes imposed unnecessary costs on many businesses.
Business and enterprise
Mr Osborne announced that corporation tax will be cut by two per cent in April 2011. This is a bigger reduction than the one per cent originally planned.
Tax simplification also played a leading role in the Budget, with 43 tax reliefs being scrapped by the Chancellor following recommendations from the Office for Tax Simplification.
There was also a boost for small firms, with a moratorium on new regulation for firms with fewer than 10 staff for three years. The business rate relief holiday for small firms will also be extended by another year until October 2012.
Entrepreneurs’ relief will be doubled from £5 million to £10 million from April, while capital allowances will be doubled from four years to eight years in a bid to encourage more investment in new equipment.
Research and Development tax credits for small businesses will be raised to 200 per cent this year.
Twenty one new “enterprise zones” will be launched, backed by tax incentives, while new rules will require planners to prioritise jobs and growth when making planning decisions.
In terms of jobs and skills, there will be funding for a further 12 university technical colleges, as well as 40,000 new apprenticeships for unemployed young people and 100,000 work experience placements.
Science facilities will also receive a £100 million funding boost.
Housing and mortgages
Mr Osborne pledged £250 million to help 10,000 first-time homebuyers purchase newly built flats and houses in England. The scheme, which will be funded by profits from the bank levy, will involve the buyer putting up five per cent of the cost while the Government and home builder would both put up 10 per cent. The move is also aimed at boosting the construction industry.
A scheme to help out-of-work homeowners with mortgage arrears, introduced by Labour, will also be extended.
Council tax will be frozen or reduced this year in every English local authority, Mr Osborne announced.
Benefits and working fami