Brexit – The fallout continues

Following the result of the EU referendum, which was declared in the early hours of 24th June, the political and economic fallout continues to unfold, creating an environment of uncertainty and instability.

Understandably many businesses are now taking stock of the historic decision of the UK to leave the EU, and considering what lies ahead.

The honest answer is no one really knows.

In the wake of the decision, the Prime Minister has resigned, the opposition is in turmoil and no one knows when the government will indeed trigger Article 50 to begin exit negotiations with the EU. The Governor of the Bank of England, Mark Carney, has described it as a “period of uncertainty and significant economic restructuring”.

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What we know so far;

  1. The UK will leave the EU at an undefined period in the future

Exactly when will largely depend on the upcoming leadership election within the Conservative Party, with candidates at odds over a timescale for withdrawal. A withdrawal is expected to take up to two years once Article 50 is triggered, however many in the EU council wish to see this process accelerated.

 

  1. The pound is weakening

Sterling has weakened significantly in wake of the decision and the FX market remains extremely choppy. A weak pound means imports become more expensive, which could see inflationary pressure begin to build. This will eventually be reflected at the tills in terms of what consumers pay for goods.

 

The other side of a weaker currency is our exports may be boosted, as our goods become cheaper for overseas countries to buy. Potentially this could lead to job growth, however there are so many other economic factors at play, that this is not likely to be significant, if indeed realised at all.

 

  1. Interest Rates will move, initially down

The now historic 6 year run of interest rates being held at 0.5% will end, probably as soon as this month. There are convincing arguments to move rates both up and down, but the consensus view is that they are going to be cut again to 0.25%, making borrowing cheaper. The idea behind this is it will help protect the economy by encouraging cheap borrowing for businesses and try to inspire some confidence.

 

  1. Fiscal Stimulus and Corporation Tax Reduction

George Osborne has strongly hinted that there will be a need for the government to intervene in the economy to shore up economic growth. He has abandoned his target of running a budget surplus by 2020 and has instead suggested that government borrowing may have to rise to maintain the economy.

 

Importantly one of the key notes to come out of his last speech was his plan to further slash corporation tax. His target of a CT rate of 17% by 2020 (currently 20%) has been revised downwards to 15% – making Limited Companies tax efficient trading vehicles, and encouraging business from abroad to operate in the UK (boosting employment, tax revenue etc)

 

The knock on of this however will most likely be rises in personal income tax to help plug the short fall in Revenue from lower Corporation Tax. VAT hikes could also be used, however this would work against the objectives of lowering Corporation Tax in the first place, and so personal; income tax is much more likely to be targeted.

 

Our view

This is a period of unprecedented uncertainty. We are advising all clients to keep in mind the difficult times that lay ahead and try to plan contingencies. More than ever it is essential to minimise personal exposure through prudent borrowing and ensuring you are trading in the correct style.

 

The initial reaction will start to settle down, and hopefully smoother conditions will prevail, but with a new Prime minister, possibly a new opposition leader and of course the potential for an early general election, the period of time in the run up to withdrawing from the EU will see unstable markets and several shifts in policy, which will of course effect businesses of every different type and size.

 

Consider your business, it’s market and what may lay ahead and plan accordingly. We will be updating the website regularly from here with the latest news and advice. For anyone with specific questions or concerns, do not hesitate contact the office to discuss further.

 

T Green 4.7.2016

 

 

 

The Budget (18 March 2015) – Farmers

The 2015 budget brought a welcome change for farmers to help protect against income volatility. British Farmers will now be allowed to average their income over five years, rather than two, for income tax purposes.

 

The new measure follows extensive lobbying by the NFU, and comes into effect from April 2016.

 

To such end we are already making preparations to meet with all our clients from the Agricultural sector to discuss the changes and what it means for your business going forward.

 

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The Budget (18 March 2015) – The Key Points

We’ve picked out the key points of the 2015 budget and what they mean for you, the taxpayer. As always should you require any further advice or clarification on any of the changes outlined below, please don’t hesitate to get in touch.

 

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Personal Tax

  • Personal Savings allowance – A measure that is grabbing all the headlines, but will only come into effect in April 2016, if it passes a commons vote. The first £1,000 of interest earned on savings would be free of tax for basic rate tax payers (first £500 for 40p taxpayers and £0 for annual earners of over £150,000), should the proposal be passed.
  • ISA flexibility – Not only is the annual allowance for money saved in an Isa in a tax year due to rise to £15,240, but savers are going to be allowed to remove money from an ISA, and replace it later in the same tax year, without it reducing their overall contribution allowance for the year. In our view this is more significant change than the personal savings allowance, as most savers have been using ISA’s in recent years anyway due to their tax exempt status, and the increased flexibility of being able to replace money taken out in the same tax year without counting against the overall allowance could be extremely beneficial to many.
  • The Personal Allowance – The tax free personal allowance will be £10,600 in 2015/16, £10,800 in 2016/17 and £11,000 by 2017/18.
  • The 40p tax threshold is to rise from £42,385 in 14/15 to £43,300 in 17/18.
  • Another major talking point for the self employed, is that Class 2 National Insurance contrbutions are to be abolished in the next parliament.
  • The transferable allowance between married couples is to rise to £1,100.
  • Deeds of Variation are to be reviewed with regards to inheritance tax – This has potential implications with estate and inheritance tax planning and anyone concerned should contact the office for further information.

Self Assessment

  • The Self Assessment January “rush” could soon be a thing of the past. While there will still be the option to complete an annual Self Assessment for those who wish to, the government hopes to role out a system of ongoing “real time” accounting to improve on and eventually replace Self Assessment as we know it. This will mean individuals will be able to file tax information digitally on a more regular basis than just once a year. It will also mean payments can be spread throughout the year rather than the current “annual” bill. It is designed to be a more ongoing and integrated system of taxation, not dis-similar to how businesses running PAYE schemes and accounting for VAT currently have to report information.

In our view this is a huge transition, but one that could make the process of taxation and paying much easier for the individual to understand and account for on an ongoing basis, avoiding those nasty January surprises that creep up on some people.

We will be writing much more on this issue over the coming weeks and months.

Business

  • Review of Business Rates – Described as a “radical” review, with findings due before the 2016 budget, the Business rates system is due to be completely overhauled. Often blamed for the decline of the high street in the UK, it’s been acknowledged that the current system is outdated and so new legislation will be sought on the basis of the review.
  • Tax on diverted profits will come into effect to stop multinationals artificially moving profit “offshore”. The so called “Google Tax” was also accompanied with the announcement that new criminal legislation against tax evasion will be outlined later in the week.
  • The main rate of Corporation tax (profit over £300,000) will fall to 20% from April. The starting rate of Corporation Tax (profit under £300,000) will remain at 20%.
  • The Annual Investment Allowance for limited companies is due to be reduced from the current limit of £500,000, but no decision as to what it will be reduced to will be made until the Autumn statement. However it is due to be reduced to as little as £25,000 from January 2016. We would always advise our clients to consult with us regarding any planned large capital expenditure such that we can give you up to date information on the current tax treatments.
  • Fuel Duty frozen for 2015/16.

Employers

  • National Insurance for employing Under 21s abolished.
  • National Minium Wage to increase to £6.70 an hour from October 2015 – the biggest real-term increase in 7 years.
  • Statutory Minimum wage for 18-20 Year olds to rise to £5.30, 16-17 year olds to £3.87 and £3.30 for apprentices.

Farmers

  • Follow this link here

Pensions

  • Lifetime allowance cut from £1.25m to £1m.
  • New rules meaning most savers will no longer need to buy an annuity and will be free to withdraw their whole pot as a lump sum, or take out money when necessary.

 

In a general election year the political points scoring that goes hand in hand with the budget intensifies, making it difficult for people to tell exactly what it means to them. If you are unsure of anything or have specific concerns, please don’t hesitate to contact us.

And finally, while we represent clients across the UK, we are proud to be based in Yorkshire and welcome the proposed investment in the area outlined today. Indeed the Chancellor went on to say “Which County has created more jobs than the whole of France? The great county of Yorkshire”. According to data from Eurostat, between 2010 and 2013, this was indeed the case, with Yorkshire creating over 10,000 more jobs than France, a pattern we would very much like to see continue.

 

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‘Tis the Season

A quick guide to seasonal parties & gifts for staff.

We are frequently asked by clients as to how expenses relating to Christmas parties and gifts for staff are treated by HMRC.  Below are a few key points to remember while indulging your employees in festive cheer. Bah, Humbug!

Gifts

If you wish to give a Christmas gift to your staff keep in mind the following

  • A gift of cash or gift vouchers will be classed by HMRC as income and the employee will have to pay tax on the full value of the gift.
  • Christmas presents however such as wine, chocolate, small hampers will not be subject to tax as long as the value is considered “trivial”. As a guide, a gift exceeding the value of £50 should be declared and included on the employees p11d as a benefit and would therefore be taxable. Anything under £50 would be generally acceptable as a tax free benefit.
  • It may be that your employees may receive gifts directly from third parties (for example from customers, clients or contractors) as a consequence of dealing with them while in your employment. As long as these don’t exceed £250 there would be no tax implication for the employee.

 

Parties

The Christmas party is subject to relief of up to £150 per head (including VAT), if it is classed as an “annual party”. Any more than this and the whole amount (including the first £150) become taxable as a benefit in kind.

The per head cost is the cost of the whole event and also includes any provision for taxis and accommodation.

With regards to the business, the cost of employee entertainment is allowed for corporation tax purposes on the provision it is not incidental to the entertainment of others. Should clients or customers also be in attendance then the costs of entertaining these need to be apportioned out and disallowed as expenditure for corporation tax purposes.

The same applies with claiming input VAT, in that VAT on employee entertainment is recoverable, but not the input VAT on entertaining others.

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So it is worth keeping these guidelines in mind over the festive period, but they only serve as a starting point with regards to the rules around gift and entertainment expenditure and taxable staff benefits. If you require a more specific answer to a particular query please contact our office and someone will be able to advise you further.

Practice Update

Welcome to the new AST Green website. We hope you find the new site helpful and we’d encourage you to keep checking back here for updates about the practice as well as all the latest news from the world of business and taxation and what it means for you.
We have a lot of exciting developments to tell you about in the coming weeks which we believe will be of enormous benefit to our clients, the first of which being the launch of our new website which has been designed by the good people at One Rise East.
October has also seen the addition of two new members of our ever growing team, with Zara Ankerett joining our payroll department and Christine Mead returning to our administration team.

Self Assessment Deadlines

The deadlines to file your Self Assessment Return for 2014 are looming.

As a quick guide:

  • 31st October 2014 is the last day you can file a paper version of your Self Assessment. Any Paper versions submitted after this date will be subject to an automatic £100 penalty, however;
  • 31st January 2015 is the deadline for any returns being submitted online. This option applies to the vast majority of our clients as online submission is the preferred (and will soon be the only) option.

As ever we would encourage our clients to get their records to us as early as possible to beat the January deadline day rush and to allow plenty of time to pay any tax liabilities owed for 2014, which should also be paid by 31st January 2015.

Should you have any queries, please don’t hesitate to contact our office.