Government Proposes Replacing Self Assessment Penalties
with new Points-based System
The £100 penalty regime for filing a late tax return could be scrapped and replaced with a new 'driving licence-style' points system, HMRC has revealed.
Under the current system, taxpayers who fail to submit their tax return by the 31 January deadline are liable to an instant £100 fine, with further penalties applying for prolonged delays.
Under new plans being considered by the tax authority, taxpayers who miss the self assessment filing deadline could receive points instead of an immediate fine. Only those taxpayers accruing too many points would then be penalised. Individuals would also see points wiped from their record after a set period of time.
It is thought that around 840,000 taxpayers missed the filing deadline in the last tax year.
The new 'holistic' approach is intended to focus on taxpayers who persistently break the rules rather than those who make genuine errors of judgement.
The proposals are included in the Treasury's Red Book, which states: 'The government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments'.
HMRC intends to consult on the plans, and must seek approval from Parliament. If approved, the new points-based system could undergo a phased introduction for different taxes.
However, some experts have warned that the abolition of the £100 late filing penalty could have 'unintended consequences'.
The Association of Taxation Technicians (ATT) warned that a new points system could generate anomalies, and has urged the government to ensure that the consultation details exactly how the new system would work, in order to avoid such anomalies.
We can help to ensure that your tax returns are filed accurately and on time - please contact us for further assistance.
BPU are looking for ambitious new graduates for our Chartered Accountancy Training Programme. We would be very grateful if our clients could spread the word or recommend any suitable candidates that may be interested in joining our training programme.
New Year - New BPU Baby !
Congratulations to our Sophie Ong who gave birth to a beautiful baby girl on New Years Day. Ruby Sophia Ong arrived safely on 1st January weighing 8lb 11oz and both mother and baby are home doing well. We can't wait to meet baby Ruby.
Tax Advice - Martin Knight BPU Head Of Tax
Protecting Wealth and Assets of a Limited Company
In the current economic climate in which there are a number of uncertainties surrounding Brexit negotiations, it is an opportune time to consider protecting the accumulated wealth and assets of a Limited Company or group of companies. This can be achieved through the undertaking of a share reorganisation. Reorganisations can have many benefits: for example protecting existing businesses when embarking on new ventures; protecting assets; to cater for the orderly separation of businesses etc.
A reorganisation is a general term used for adjusting the share capital of a company, typically to introduce a 'parent' or 'holding' company. In this scenario, the share capital of a company would be sold to a new company. In return, the new company will issue shares to the original shareholders. The resulting structure is a parent company with a trading subsidiary with owners that mirror the original shareholding of the trading company.
Once a group structure has been established, it is possible to transfer assets including cash from the trading company to the newly established parent company, tax free. In the case of a subsequent business failure, uninsured claim etc of the trading subsidiary, the assets held within the parent company will usually be protected from any creditor claims.
The expectation of a tax liability often dissuades business owners/managers from undertaking a reorganisation but it is possible for the commercial advantages to be realised without triggering a tax bill of any sort. With careful planning and setting out the commercial rationale for a reorganisation to be undertaken, HM Revenue & Customs (HMRC) will provide tax clearances, before you formally begin a reorganisation to effectively confirm that no tax liability will arise. Such an approach provides clients with comfort before undertaking the reorganisation.
There are a number of commercial, non-tax, matters to consider too, such as the impact a reorganisation may have upon a trading company's credit rating or ability to raise finance and these should always be considered prior to a reorganisation taking place. However, in the majority of cases with careful planning and thought these can be overcome to deliver a successful outcome for all.
At BPU we have advised upon a number of reorganisations ranging from the simple scenario mentioned above to more complex situations.
If you would like any further advice regarding any of these topics please contact:
The New Land Transaction Tax (LTT)
The Welsh government has also recently exercised its devolutionary powers: in its Draft Budget, which was published in October, the Welsh government outlined the proposed rates for a new LTT which will replace SDLT in Wales from 1 April 2018.
From this time, those seeking to buy residential property worth up to £180,000 in Wales will pay no tax on the purchase. In a written statement published on 11 December, the Finance Secretary for Wales, Mark Drakeford, announced that individuals purchasing property worth between £180,000 and £250,000 will pay a proposed 3.5% in LTT, and those purchasing a home worth between £250,000 and £400,000 will pay 5%.
The starting threshold for LTT was originally set at £150,000, however this has subsequently been increased to £180,000 in order to 'help everyone in Wales seeking to purchase a home.
Devolution of Welsh Income tax
From April 2019, the National Assembly for Wales will have the power to vary the rates of income tax payable by Welsh taxpayers.
The National Assembly for Wales are yet to determine what the three Welsh rates of income tax will be. We will continue to monitor this and provide further updates in due course.
Martin Knight, Head of Tax at BPU Chartered Accountants
Tel: 029 2073 4100
ESSENTIAL DATES FOR JANUARY 2018
Deadline for submitting your 2016/17 self assessment return (£100 automatic penalty if your return is late) and the balance of your 2016/17 liability together with the first payment on account for 2017/18 are also due.
Capital gains tax payment for 2016/17.
Balancing payment - 2016/17 income tax, Classes 2 and 4 NICs.
Quote of the month
'Businesses trading between the UK and Europe have done their best to focus on the potential impact of Brexit on their operations, rather than on the day-to-day political noise.'
Dr Adam Marshall, Director General of the British Chambers of Commerce, commenting on the business group's call for the commencement of transition and trade talks in the Brexit negotiations.