Recent reports in the national media have suggested that HMRC has sought to restrict Gift Aid on donations which are accompanied by a message of support from a donor’s family. According to a recent announcement by HMRC this is absolutely not the case. HMRC’s position as set out in their recent website posting is reproduced below:

“HMRC’s position has always been that Gift Aid can be claimed when an individual donor, who pays tax in the UK, makes a donation, even if additional names are added in a supporting message. HMRC’s advice on this issue appears to have been misinterpreted so we are going to ensure our guidance is as clear as possible.

Where gifts are made by groups of people, such as work collections or large groups of friends, Gift Aid is not due and should not be claimed.

It is a government priority to maximise Gift Aid on eligible donations, and £1.2bn of tax repayments were made to charities in the tax year 2014 to 2015 through Gift Aid.

HMRC will continue working closely with charity collection agents to help them improve their processes so that Gift Aid is not removed from eligible donations.”

HMRC have updated their online “top ten things you should know about the new tax-free childcare scheme”. The notes are reproduced below and they provide parents with and easy read overview of the changes that will start early 2017:

1. You’ll be able to open an online account

You’ll be able to open an online account, which you can pay into to cover the cost of childcare with a registered provider. This will be done through the government website, GOV.UK.

Tax-Free Childcare will be launched from early 2017. The scheme will be rolled out gradually to families, with parents of the youngest children able to apply first. You’ll be able to apply for all your children at the same time, when your youngest child becomes eligible. All eligible parents will be able to join the scheme by the end of 2017.

2. For every 80p you or someone else pays in, the government will top up an extra 20p

This is equivalent of the tax most people pay – 20% – which gives the scheme its name, ‘tax-free’. The government will top up the account with 20% of childcare costs up to a total of £10,000 – the equivalent of up to £2,000 support per child per year (or £4,000 for disabled children).

3. The scheme will be available for children up to the age of 12

It will also be available for children with disabilities up to the age of 17, as their childcare costs can stay high throughout their teenage years.

4. To qualify, parents will have to be in work, and each earning around £115 a week and not more than £100,000 each per year

The scheme is designed to be flexible for parents if, for example, they want to get back to work after the birth of a child or work part-time.

5. Any eligible working family can use the Tax-Free Childcare scheme – it doesn’t rely on employers offering it

Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare. Any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.

6. The scheme will also be available for parents who are self-employed

Self-employed parents will be able to get support with childcare costs in Tax-Free Childcare, unlike the current scheme (Employer-Supported Childcare) which is not available to self-employed parents. To support newly self-employed parents, the government is introducing a ‘start-up’ period. During this, self-employed parents won’t have to earn the minimum income level.

The scheme will also be available to parents on paid sick leave and paid and unpaid statutory maternity, paternity and adoption leave.

7. If you currently receive Employer-Supported Childcare then you can continue to do so

You do not have to switch to Tax-Free Childcare if you do not wish to. Employer-Supported Childcare will continue to run. The current scheme will remain open to new entrants until April 2018, and parents already registered by this date will be able to continue using it for as long as their employer offers it.

However, Tax-Free Childcare will be open to more than twice as many parents as Employer-Supported Childcare.

Employers’ workplace nurseries won’t be affected by the introduction of Tax-Free Childcare.

8. Parents and others can pay money into their childcare account as and when they like

This gives you the flexibility to pay in more in some months, and less at other times. This means you can build up a balance in your account to use at times when you need more childcare than usual, for example, over the summer holidays.

It’s also not just the parents who can pay into the account – if grandparents, other family members or employers want to pay in, then they can.

9. The process will be as simple as possible for parents

The process will be light-touch and as easy as possible for you. For example, you’ll re-confirm your circumstances every three months via a simple online process; and there will be a simple log-in service where parents can view accounts for all of their children at once.

10. You’ll be able to withdraw money from the account if you want to

If your circumstances change or you no longer want to pay into the account, then you’ll be able to withdraw the money you have built up. If you do, the government will withdraw its corresponding contribution.

More information will become available ahead of the scheme being introduced so parents making childcare decisions are able to consider all their options.

 The Treasury seems to be committed to wringing the last available drop of tax revenue from the buy-to-let sector.

 In the Budget last week the rate of capital gains tax (CGT) was reduced from 6 April 2016.

• From 28% to 20%  if the gains fell to be taxed as part of the higher rate tax band, and
• From 18% to 10% if the gains fell to be taxed as part of the basic rate tax band.

But this excluded gains on disposals of residential property. Thankfully, the principle private residence relief for home owners is untouched – sale of your home is still tax free. However, other residential property sales will be taxed at the 18% and 28% CGT rates.

This de facto tax increase for landlords follow hard on the heels of previous changes to the taxation of the letting sector.

1. From 6 April 2017, tax relief for mortgage interest to fund the purchase of residential property for letting will be reduced over a number of years until landlords are restricted to a basic rate tax credit. This could potentially more than halve the tax relief available for loan interest and promote many unwary landlords into the higher rate tax bands.
2. From 6 April 2016, the 10% wear and tear allowance is being abolished and landlords after this date will only be able to claim for the actual cost of replacing qualifying furniture and fittings. For many landlords this will result in an increase in their tax payments from 2016-17.
3. From 1 April 2016, landlords will pay an additional 3 percentage points on the stamp duty charged when they purchase a buy-to-let property.

By far the most insidious of these changes is the gradual reduction in the tax relief for loan or mortgage interest payments. Although the start of this process is still a year away, landlords would be well advised to seek professional advice to see exactly how they will be affected and what changes they will need to make in order to survive…

Just in case you were wondering what was in the Budget last week for small businesses, we have reproduced below the comments made by George Osborne and posted to the GOV.UK website:

Backing business and creating opportunity

This Budget backs business and enterprise to drive up productivity growth and create job opportunities. This Budget continues to lower taxes, with new support for small business and entrepreneurs, while also modernising the tax system and taking steps to ensure that taxes are fair and are paid.

The government will:

• cut the rate of corporation tax to 17% in 2020, benefiting over one million companies, large and small
• cut business rates for all properties in England, with 600,000 small firms paying no rates so that the business rates burden will fall by £6.7 billion over the next five years
• cut the higher rate of Capital Gains Tax from 28% to 20% and the basic rate from 18% to 10% from April 2016 (except for residential property and carried interest), and extend entrepreneurs’ relief to long term investors in unlisted companies
• cut National Insurance contributions for 3.4 million self-employed people, by abolishing Class 2 National Insurance
• modernise the corporation tax rules on losses, making the system more flexible for businesses while ensuring that companies making large profits pay tax on these, and further restricting banks’ use of their historic losses
• reform Stamp Duty Land Tax on non-residential property transactions, cutting the tax for many small businesses purchasing property, with over 90% of non-residential transactions paying the same or less
• abolish the bureaucratic and burdensome Carbon Reduction Commitment energy efficiency scheme and replace it, in a revenue neutral way, with an increase in the Climate Change Levy from 2019
• support the oil and gas industry by permanently zero-rating Petroleum Revenue Tax, reducing the Supplementary Charge from 20% to 10% and introducing targeted measures to encourage investment in exploration, infrastructure and late-life assets
• give large companies more time to prepare for a new corporation tax payments schedule, with a broadly neutral impact on the public finances

 Personal Tax and miscellaneous matters

 Personal Tax allowance

 From 2016-17, there will be one Income Tax personal allowance regardless of an individual’s date of birth.

• For 2016-17 the allowance is set at £11,000, and
• For 2017-18 at £11,500

 Income Tax rate bands

 The Chancellor confirmed his intention to remove taxpayers from the higher rate of income tax by increasing the levels at which taxpayers start to pay higher or additional rate taxes. The levels for the next two years are:

• For 2016-17 – £43,000
• For 2017-18 – £45,000

 If your income before allowances exceeds these amounts you will be paying 40% Income Tax on the excess (this assumes that you are only entitled to the basic personal allowance).

 The threshold at which the 45% rate starts is unchanged at £150,000.

 For yet another year there were no changes to the basic Income Tax rate (20%), the higher rate (40%) and the additional rate (45%).

 Capital Gains Tax (CGT) reduction

 From April 2016, CGT on the disposal of chargeable assets, apart from residential property, is reduced to:

• 10% from 18% on disposals that form part of the basic rate band.
• 20% from 28% on disposals that form part of the higher rate band.

 The existing rates (18% and 28%) will continue to apply to disposals of residential property subject to this tax and carried interest. Gains on a disposal of your home will continue to be exempt.

 Entrepreneurs’ relief extended to include investors

 Entrepreneurs’ relief (ER) will be extended to external investors in unlisted trading companies. This new investors’ relief will apply a 10% rate of CGT to gains accruing on the disposal of ordinary shares in an unlisted trading company held by individuals, that were newly issued to the claimant and acquired for new consideration on or after 17 March 2016, and have been held for a period of at least three years starting from 6 April 2016. A person’s qualifying gains for this investors’ relief will be subject to a lifetime cap of £10 million.

Entrepreneurs’ relief on disposal of goodwill relaxed

Legislation will be introduced in Finance Bill 2016 to allow ER to be claimed in respect of gains on goodwill where the claimant holds less than 5% of the shares, and less than 5% of the voting power, in the acquiring company. This ‘holding condition’ will replace a previous requirement that the claimant must not be a ‘related party’ in relation to the company.

Relief will also be due where the claimant holds 5% or more of the shares or voting power if the transfer of the business to the company is part of arrangements for the company to be sold to a new, independent owner.

Miscellaneous pension changes

A number of minor changes are being included to the pensions tax rules to ensure that they operate as intended following the introduction of pension flexibility in April 2015. The changes will:

• remove the requirement that a serious ill-health lump sum can only be paid from an arrangement that has never been accessed
• replace the 45% tax charge on serious ill-health lump sums paid to individuals who have reached age 75 with tax at the individual’s marginal rate
• enable dependents with drawdown or flexi-access drawdown pension who would currently have to use all of this fund before age 23 or pay tax charges of up to 70% on any lump sum payment, to continue to access their funds as they wish after their 23rd birthday
• remove the rule on paying a charity lump sum death benefit out of drawdown pension funds and flexi-access drawdown funds where the member dies under the age of 75 because the equivalent tax-free payment may be made as another type of lump sum death benefit
• enable money purchase pensions in payment to be paid as a trivial commutation lump sum
• enable the full amount of dependent’s benefits to be paid as authorised payments where there are insufficient funds in a cash balance arrangement when the member dies

These changes will apply from the day after the Finance Bill 2016 receives Royal Assent later this year.

 Excise duties

 The duty on beers, spirits and most ciders will be frozen this year. The duty rates on wine will increase by RPI inflation from 21 March 2016.

 Tobacco duty rates

Duty rates on all tobacco products will increase by 2% above the retail price index with a further 3% increase on hand-rolling tobacco, which will rise by 5% above RPI.

The changes to tobacco duty took effect from 6pm, 16 March 2016. 

 Fuel duty

 There will be no increase in fuel duties. At the end of 2016-17 this will be the 6^th year fuel duty has been frozen.

Transferrable allowances

 The maximum amount of free personal allowance that can be transferred between spouses is increased to £1,100 in 2016-17 and £1,150 in 2017-18.

 Lifetime ISA

 From April 2017, any person under 40 will be able to save into a new Lifetime ISA.

 Up to £4,000 can be saved each year and savers will receive a government bonus of 25% – that is a bonus of up to £1,000 a year.

 Some or all of the money can be used to buy a first home, or it can be kept until age 60.

 Accounts will be limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together. If a saver has a Help to Buy ISA it can be transferred into the Lifetime ISA in 2017, or savers can continue saving into both, but it will only be possible to use the bonus from one to buy a house.

 After your 60th birthday you can take out all the savings tax-free. You can withdraw the money at any time before you turn 60, but you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.

 ISA limit to rise April 2017

 The present ISA savings limit of £15,240 will rise to £20,000 from April 2017.

 Corporation Tax rate

 The main rate of Corporation Tax from 1 April 2016 remains at 20%.

• From 1 April 2017 the rate is set to reduce to 19%
• From 1 April 2020 to 17%.

 New stamp duty rates for commercial property acquisitions

 From 17 March 2016, the way in which stamp duty is calculated on commercial property acquisitions will be changed. Instead of higher rates being applied to the total cost on a slab basis, the following rates will apply on a graduated basis.

 The rates are:

• Up to £150,000 no stamp duty is due
• From £150,001 to £250,000 the rate is 2%
• Above £250,000 the rate is 5%

 Buyers of commercial property worth up to £1.05m will pay less stamp duty as a result of this change.

 Business rates reductions

 A 100% relief is currently available if a business occupies a property with a rateable value of £6,000 or less.

 From April 2017, small businesses will be able to claim a similar 100% relief if they occupy property with a rateable value up to £12,000. Taper relief will apply for properties valued between £12,000 and £15,000.

 It is estimated that this will mean 600,000 small businesses will no longer pay business rates.

 Non-monetary transactions are taxable

 From budget day, 16 March 2016, any trading or property income received in non-monetary form have to be included as income for tax purposes. This confirms previous tax cases on this issue.

Insurance premiums to rise?

 The standard rate of Insurance Premium Tax is being increased from 9.5% to 10% from 1 October 2016. This will likely result in increased premiums.

 The increase in the tax will be used to fund new flood defences.

Employer’s NIC on termination payments

 From April 2018, certain employee payoffs, for example termination payments in excess of the tax free £30,000 where income tax is also due, will be subject to an employers’ National Insurance charge.

 For employees, payments up to £30,000 will remain tax free and they will not suffer an additional National Insurance charge.

 Class 2 NIC to be abolished

 The Class 2 NIC charge is to be abolished from April 2018. The self-employed will continue to pay the existing Class 4 contributions from this date. Class 4 contributions will be reformed such that the self-employed can continue to build entitlement to the State pension and other contributory benefits.

 Two new tax allowances

 The Chancellor has introduced two new tax allowances for micro-business owners. The £1,000 exemption from tax will apply to:

• People who make up to £1,000 from occasional jobs such as selling goods they have made, and
• The first £1,000 of miscellaneous income from property, for example renting a driveway.

 Incorporated property businesses to pay increased stamp duty

 In an attempt to create a level playing field, the Chancellor has clarified, by amending legislation, that individuals are subject to the 3% SDLT supplement if they purchase more than one property, and companies on all residential property purchases even the first such purchase. Here’s what the Budget notes say on this issue:

 “If, at the end of the day of the transaction, an individual owns 2 or more properties and has not replaced their main residence, the higher rates will apply. Purchasers will have 36 months to either claim a refund from the higher rates, or before the higher rates will apply, in the event that there is a period of overlap or a gap in ownership of a main residence. Companies purchasing residential property will be subject to the higher rates, including the first purchase of a residential property. Properties purchased for under £40,000, caravans, mobile homes and houseboats will be excluded from the higher rates. Furthermore, small shares in recently inherited properties will not be considered when determining if the higher rates apply.”

 Zero-emission van’s benefit change deferred

 Existing legislation, that applies the level of the van benefit charge for zero-emissions vans at 20% of the charge for conventionally fueled vans has been extended to the tax years 2016-17 and 2017-18.

 This defers the planned increase to 40% of the van benefit charge for conventionally-fueled vans to 2018-19.

 The van benefit charge for zero emission vans will be 60% of the van benefit charge for conventionally fueled vans in 2019-20, 80% in 2020-21 and 90% in 2021-22.

 From 2022-23, the van benefit charge for zero emission vans is 100% of the van benefit charge for conventionally-fueled vans.

 Diesel fuelled company cars’ 3% supplement retained

 The 3% supplement that is added to the benefit in kind calculation for drivers of diesel fuelled company cars was due to expire 5 April 2016. The Finance Bill 2016 will now include a provision that retains this supplement indefinitely.

 Trivial benefits in kind

 Where the cost of providing a qualifying, “trivial benefit” for an employee is less than £50, it will no longer be required to disclose this as a benefit in kind from 6 April 2016.

 There is an annual cap of £300 if the payments are made to directors or other office holders of a small company, or their employees who are relatives or members of their household.

 Travel expense claims

 From 6 April 2016, it will no longer be possible for workers engaged through an employment intermediary to claim for home to work travel expenses.

 This regularises the established principal in the UK tax system that such regular commute costs between home and work cannot be claimed for tax purposes.

 EIS, SEIS and VCTs: exclusion of energy generation

 Investments in companies that engage in energy generation activities will be excluded from the tax advantaged Enterprise Investment Schemes, Seed Enterprise Scheme and Venture Capital Trusts. This will affect shares or holdings issued on or after 6 April 2016.

 Use of home for business purposes by partners

 The simplified expenses regime has been fully extended to include partnerships from April 2016. Where more than one property is used by partnerships for business and as a home then any claim for the simplified expense deduction for all such properties will be allowed.

 VAT registration and deregistration limits

 From 1 April 2016:

• Registration threshold increased to £83,000
• Deregistration threshold increased to £81,000

Closing tax avoidance loopholes

 In response to increasing demands from a number of directions the Chancellor has endeavoured to close a number of loopholes used by multinationals to avoid paying tax in the UK, on profits earned in the UK. They include:

• Rules to prevent multinationals avoid paying tax in any of the countries they do business, an avoidance technique called hybrid mismatches.
• Introducing rules to increase the tax take when companies make outbound royalty payments. Generally, these are fees paid for using intellectual property such as patents and copyrights.
• Ensuring that offshore property developers are taxed on their UK profits.

The oil and gas industry

 A £1bn tax support package has been announced that will effectively abolish Petroleum Revenue Tax – a tax on profits from oil fields approved before 1993 – and by dramatically reducing the supplementary charge on oil and gas extraction.

 Soft drinks levy

 From April 2018, manufacturers of soft drinks will be subject to a levy based on the sugar content of their products.

 The basic rate will apply to drink with a sugar content in excess of 5 grams per 100 millilitres, with a higher rate for drinks on more than 8 grams per millilitre.

 The levy will not apply to milk-based drinks or fruit juices.

 The Treasury will use the proceeds of the levy to double the primary PE and sport premium. They will increase money provided to schools for this purpose to £320m per annum.