SME Tax News

Time is running out for employers to use HMRC's Employee Benefit Trust (EBT) Settlement Opportunity (EBTSO). It ends on 31 July 2015. Advisers and their client need to act quickly and consider the consequences of not settling their liabilities now.

In East Allenheads Estates Ltd v CRC (2015) TC04513, the First Tier Tribunal (FTT) dismissed a claim for Enterprise Investment Scheme (EIS) deferral relief. The company was not a qualifying company at the time of the investment.

There is widespread confusion about how the chancellor's proposed changes to the taxation in dividends will work from 2016/17.

The Low Incomes Tax Reform Group (LITRG) is calling on HMRC to clear up confusion over future levels of child tax credit thresholds. LITRG have conveyed these concerns in the following statement issued after last week's budget:

There are to be major changes to the way non-domiciled (non-dom) individuals that live in the UK are taxed.

This guide summarises the proposals made in the Summer Budget 2015. On 30 September 2015 HMRC launched a consultation containing more details.  See Reforms to the taxation of non-domiciles: HMRC consultation.

This article is only available to paid subscribers.

Following an announcement in the March 2015 budget, a consultation was published in July 2015 inviting discussion and comment on how averaging could be extended from two years to five.

Draft legislation was published in December 2015 which proposes the following changes:

• Averaging can be claimed for a period of five consecutive years provided that the volatility condition is met.
• To meet the volatility condition, one of the following conditions must be met:
  • Either, one of the following must be less than 75% of the other:
    • The average of the first four years’ profits
    • The last year’s profit
  • Or, the profits of one or more of the five tax years to which the claim relates must be nil (or a loss).
• There will be a choice whether to use the five year or two year period.
• Marginal relief will be abolished for those using the two year period.
• When using a two year period, full averaging will be available if the difference between the two profits is at least 25% of the higher profit.

It is proposed that the new legislation will be effective for claims where the 2016/17 tax year is either the second or the fifth averaging year. 

The extension of averaging from two to five years will not be available for trades where profits are derived from creative works. 

This article is for paid subscribers only.

 The capital allowances Annual Investment Allowance (AIA) will be set at a permanent £200,000 from 1 January 2016.

The AIA is currently £500,000, it had been previously scheduled to decrease to £25,000.

Complicated calculations

The policy paper confirms that the much criticised current method of calculating and restricting the allowance where accounting periods straddle one or more change dates will continue. As the allowance will no longer be subject to fluctuations, the need for convoluted calculations (and inevitable errors) should gradually become a thing of the past.

Many unincorporated businesses have found that they have been unable to obtain tax loss relief when incurring high levels of capital expenditure due to the cap on unrestricted reliefs. This contiues to be an issue for these type of businesses.

The policy paper, including an example of an accounting period straddling the date can be found here.