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December 2016

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To December’s Tax Tips & MYOB News.

Have you planned your Christmas function or party yet? Remember that HMRC allows your company to spend up to £150 (in total) per staff member on annual parties. This could be, for example, split between a summer barbeque and Christmas Party.

You don’t need to report to the HMRC is as long as it is:
  •      £150 or less per head
  •      annual
  •      open to all your employees

Please contact us for advice on your own specific circumstances. 
December 2016
· Seasonal Gifts – Unseasonal Tax
· Voluntary Living Wage Increased
· Dividends now subject to heavy advance tax
· Caps on income tax relief
· December questions and answers
· December key tax dates
Seasonal Gifts – Unseasonal Tax top
Voluntary Living Wage Increased top
Gifts to employees can count as a declarable benefit.  Somewhat unhelpfully HMRC then refuses to make this clear, eg in this guidance: what-to-report-and-pay.

Delving through their manuals it becomes apparent that in order for the benefit to be exempt:
  • the employee must not be entitled to the gift as part of their contract or as part of their employment duties and
  • the benefit is not cash or a cash voucher and
  • either the cost of providing the gift does not exceed £50 or the gift is to a director and the cost is less than £300 in a tax year.

Gifts to customers are not allowed for tax purposes.  VAT cannot be recovered on business entertainment expenditure. This includes the gratuitous provision to customers or clients of hotel accommodation, food and drink or tickets to events.  Heavy gifts could fall foul of the Bribery Act.

As explained above in our Welcome section, HMRC allow your company to spend up to £150 (in total) per staff member on annual parties.
The Voluntary Real Living Wage rate has increased by 20p per hour to £8.45 an hour (£9.75 in London), which is higher than the UK-wide official National Living Wage for those over 25, currently set at £7.20, while those under 25 must be paid the national minimum wage.

The Living Wage is independently-calculated each year based on what employees and their families need to live. Employers can choose to pay the real Living Wage on a voluntary basis but it is currently paid by a third of FTSE 100 companies.

The rates apply to all workers over 18 in recognition that young people face the same living costs as everyone else.

These figures are calculated annually by the Resolution Foundation and overseen by the Living Wage Commission, based on the best available evidence on living standards in London and the UK.

Dividends now subject to heavy advance tax
As reported in our newsletter last year, from 6 April 2016, any dividends you receive up to £5,000 are tax-free.  However dividends received in excess of this amount will be taxed at 7.5%.  This extra tax charge is HMRC seeking revenge because the dividend has been received free of National Insurance. 

HMRC have now also twisted the knife a little.  Those of our clients who have received significant dividends in the recent past are being assessed for significant dividends in 2016-17.  And HMRC is then immediately demanding huge back taxes for the tax that might be due on that assessment in future years.  HMRC then issue a punitive tax code.  We have ended up with several clients on K codes (ie have had their personal allowance reduced).  These have been imposed on even very modest salaries.  If you end up with an odd tax code contact us and immediately stop your pay/salary to yourself while we apply to the HMRC to see sense.

For our clients the payment of salaries should always follow the routine below:
1.    In March or April our E-Newsletter will give advice on the best salary and dividend strategy for your situation.  
2.    You should ideally set up a standing order for the amount or at least post it into the accounts as though you had paid it, every month.  
3.    Look for the quarterly Employer’s Summary report from Tax Assist (York). This is the one which you have to pay to the HMRC.  Note: firms that usually pay less than £1,500 per month PAYE can pay the total quarterly, if your PAYE bill is more than £1500 per month you need to pay it monthly.

Any questions about the figures please email
Caps on income tax relief top
December questions and answers top
In general terms, providing a business is undertaken on a commercial basis with a view to making a profit, tax relief should be available for trading losses incurred. It is usually possible to offset the loss against other taxable income from the same year, or the previous year. Other taxable income may include for example, a former employment (where tax was deducted under PAYE) or a pension.

This relief may be particularly beneficial for someone who is self-employed on a part-time basis. For example, where an individual earns £30,000 a year from employment, and makes a £2,000 loss from his or her part-time business, their tax bill for the year will be based on income of £28,000.Read More
Q. My wife doesn’t work. Can she transfer her unused personal tax allowance to me? Answer

Q. I am currently in the process of purchasing a property which includes a separate granny annex. Since there is only one title number for the whole property, can I apply for stamp duty land tax multiple dwelling relief (MDR)? Answer

Q. I bought a flat in 2000 and paid £100,000 for it. I left the UK in November 2003 to work overseas and it has been rented out since then. I have not returned to the UK since I left and I now live permanently in France. I am thinking of selling my UK flat, which is now valued at £300,000. What are the tax implications of doing this? Answer
December key tax dates top
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/12/2016

30 – Deadline for 2015/16 self assessment online returns to be filed if you are an employee and want tax underpaid to be collected by adjustment to your 2017/18 PAYE code (for underpayments of up to £3,000 only)

Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks or Clearbooks.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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