We have enough information about the UK’s economic woes to keep us depressed for many years to come. Every week we are told why sustainable recovery from recession and its after effects is just round the corner. The problem is the “corner” is mobile, always just out of reach.

Which is why the current round of speculation about the UK economy is encouraging:

• We are told that thus far in the current fiscal year, the growth in tax receipts exceeds the growth in Government spending.
• The Bank of England is more optimistic about estimates for growth next year.
• Independent advisors are talking about real growth of 3% for 2014.

So are we getting closer to the elusive corner?

Back in the real world there is no doubt that many, structurally weak companies, have dropped by the wayside in recent years. Successful companies are working hard to expand, but carefully. Retaining profits and managing cash flow has become the mantra rather than maximising turnover and borrowings.

If the pundits’ present optimism proves to be realistic perhaps the next step for businesses is to seriously consider sustainable investment. The tax incentives are there: R & D relief, high levels of tax allowances for plant and equipment purchases. We must not become a nation of hoarders, especially, of our capital. Carefully planned and monitored investment may become the order of the day.

Let’s hope that the economists are correct and the numbers for the next year bear out the early glimmers of optimism. Time to talk up prospects for growth…

A number of trade associations have issued warnings to their members recently. They are concerned that HMRC are making an issue of business mileage recording. Apparently, employers are failing to keep adequate records of mileage for employees who have the use of company vehicles.

Self-employed business owners can also be caught out by the same issue. If you are a sole trader or partner in a business and have the use of a business vehicle for a mix of private and business mileage you should keep a record of your total mileage for the tax year and your total business mileage. Any claim for vehicle running costs, or a claim for capital allowances, should then be adjusted to remove any private use element, using the mileage data collected.

HMRC are still running a business record check campaign. Business owners should take steps to regularise their record keeping ensuring that they are compliant with legislation. If you have any doubts about the systems you presently use to record mileage, or any other aspect of your business record keeping, please call and we will undertake a review on your behalf. A few adjustments to your present routines may be preferable to an uncomfortable audit by HMRC and possible additional tax bills, penalties and interest payments.
 

It has been announced that the new Single-Tier State Pension will start, subject to Parliamentary approval, April 2016.

The original proposals for the new system were outlined in a White Paper published January 2013. At present the changes are speculative and will need to be agreed by Parliament. However, readers may be interested to read the following notes that summary some of the provisions set out in the White Paper.

• Persons reaching the State Pension Age after the proposed single-tier scheme starts will receive the new flat rate payment. This was set at £144 per week in the White Paper.

• The single–tier pension will be increased each year by at least the percentage average earnings have increased in the previous year.

• If you are already over the State Pension age when the new scheme starts 6 April 2016 you will continue to receive your State Pension in accordance with the existing rules.

The new pension will be fairer to the lower paid, the self-employed and carers, as all persons reaching the State Pension Age after 6 April 2016 will receive the same amount.

One of the major accountancy bodies, the Association of Certified Accountants, has reminded home based entrepreneurs that they can make a valid claim, for tax purposes. The ACCA’s head of tax, Chas Roy-Chowdhury, reflected:

“The rise in start-ups from the home is good news for the economy, but whether these home-based entrepreneurs are aware that, for example, they can deduct tax for the electricity they use in the room where they do most of their work is another matter.

Unless you are trawling through HM Revenue & Customs website, you may not know that even costs of hiring a cleaner can be deducted from your tax bill for the work they have done in the ‘business room’ of your home.”

However, business owners were advised to look before they leap into claiming.

“It is not always straightforward and it will not always be clear what can and cannot be allowed,” said Mr Roy-Chowdhury. “Getting it wrong could land you in hot water with HM Revenue & Customs, so it’s worth going over what is allowed and what isn’t”.

Home based businesses can claim reasonable costs for using a room in their house for business purposes. The costs could include: cleaning, electricity, water, heating and even decorating expenses. In some circumstances, house repairs can be tax deductable too.

If you do work from home, check out what you can validly claim.
 

 From 6 April 2014 the pensions’ lifetime allowance will be reduced to £1.25 million from the present level of £1.5 million. If you have already built up pension savings of more than £1.25 million or have planned to do so in the expectation that the lifetime allowance would not reduce from the 2013-14 level, there is a new form of protection called “Fixed Protection 2014” (FP2014).

The legislation for FP2014 applies from 6 April 2014 and broadly follows that for the existing fixed protection which was introduced when the lifetime allowance was reduced from £1.8 million to £1.5 million in 2012-13.

 If you expect your pension savings to be more than £1.25 million (including taking into account past benefits crystallised) when you come to take any benefits on or after 6 April 2014 you can use FP2014 to help reduce or mitigate the lifetime allowance charge. FP2014 will allow you to crystallise benefits worth up to £1.5 million without paying the lifetime allowance charge, although the ability to accrue future benefits is very limited.

The application form for FP2014 is available since 12 August 2013 and must be submitted electronically or in paper form by 5 April 2014. However, HMRC will not send out any FP2014 certificates before November 2013.

We will be happy to speak with any pension savers who may be affected: those who have, or intend to have, pension savings in excess of £1.25m.