Nichola's SME Tax w-update 24 July 2015

Hello

This time we have updates on property tax, owner-managed business taxes and a briefing on offshore issues.

The new proposals to change Wear and Tear relief in 2016/17 are slightly baffling as they appear to be merely returning us to the old rules for replacement cost. The other important change for property rental businesses is in the future restriction in loan interest relief from 2017/18. If interest rates increase this will be expensive; perhaps it is worth incorporating and refinancing ahead of the changes.

If the proposed U-turn on replacement cost is baffling, it is nothing compared with the confusion surrounding proposals for a new dividend tax and the further proposals to tax and remove travel expense claims from personal service companies and reinvent IR35. It all looks very costly for SMEs.

On an entirely different topic. As time runs out to use HMRC's current batch of offshore disclosure facilties, we have created a briefing on offshore issues for advisers and their clients. Although many UK taxpayers have declared overseas assets there are without doubt many folk out there who have not. Whether they have inherited bank accounts and now don't know what to do, or whether they have got confused about the remittance basis of tax, our briefing should assist you to assist them in resolving the problems.

Nichola Ross Martin FCA Tax Director

www.rossmartin.co.uk

Your online Virtual Tax Partner®: practical support for accountants, tax advisers and their clients. 

News and views

Employment related securities (shares and securities) online filing
HMRC extends the online filing deadline to 4 August as it struggles to beat the gremlins in its IT system.

Summer Budget 2015: at a glance
A summary with links to all the key announcements, and news on the new dividend tax.

Update for Personal service companies and family companies

Despite the Government's claim to be backing small business the future is looking particularly bleak and the proposals are terrifyingly complicated:

Continuing confusion over proposals for dividend tax
With no sign of any draft legislation, it is anyone's guess what will happen to dividends in 2016/17. There are broadly two different ways to calculate the new tax on dividends. In both cases small company owners and family companies will be adversely affected.

IR35: new discussion document
HMRC has openned discussion to consider changing the IR35 rules in order to improve compliance. The preferred option is that the end client applies a new employment status test. It seems that some small business owners may become tax-only employees without any legal protection of employment law.

Employment intermediaries: tax on travel and subsistence
Agency workers and personal service company owners are set to lose out as the government consults on overhauling the temporary workplace travel rules. 

Essential reading & adviser briefings: subscription content

Adviser and client briefing: what to do about disclosure of offshore income & assets?

This briefing includes:

• Top planning points and pitfalls for advisers: from the remittance basis to undisclosed or unremitted offshore funds
• An update and summary of the current offshore disclosure facilities.
• An outline of HMRC's proposed new measures for offshore evasion.

Property taxes update

At a glance

From 6 April 2016:

• Rent-a-room relief to be raised to £7,500 
• The 10% wear and tear allowance may be reformed (subject to consultation)

From 6 April 2017:

• Higher rate relief on mortgage interest will be restricted for buy-to-let landlords.

See:

Briefing: replacing the Wear & Tear allowance
The proposed new relief seems to be much the same as the previous concessionary replacement cost basis. Landlords will be allowed to deduct the actual incurred cost of replacing furniture. Expected to apply from 2016/17 onwards.

Restrictions on loan interest relief and the increased Rent a Room relief
Loan interest relief: a staggered introduction from 2017/18

Buy-to-let ownership: personal v company
It's official the property boom combined with expensive and poor-performing pensions have made us a nation of buy-to-let nuts. What is the most efficient way to hold your property following the latest budget changes?

Editor's choice (subscription content)