The government are considering plans to offer people with serious debt issues time to consider their options.

They are seeking views to develop a way to provide individuals in debt with up to six weeks free from further interest, charges and enforcement action. This period would give those affected time to act by seeking financial advice about how to manage and relieve their debt burden.

Solutions that can be considered include:

• informal repayment plans, and
• debt write-off options,

The Economic Secretary to the Treasury, Stephen Barclay, said:

For many people in the UK problem debt seems impossible to escape. Its effects can be far-reaching, impacting all aspects of a person’s life and leaving them feeling helpless. That is why we are working to give people who are overwhelmed by debt more time to seek advice, find a workable solution, and help get their lives back on track.

Although many people can and do use credit successfully to manage their personal finances, for the minority who get into difficulties the government now wants to offer more support.

For example, the new scheme could include legal protections that would shield individuals from further creditor action once a plan to repay their debts is in place.

Problem debt, where people are falling behind on their financial repayments or see their debt as a heavy burden, now affects millions of people in the UK. Causes can range from the sudden loss of employment to a more gradual dependence on debt to make ends meet, with many people waiting 12 months or more before seeking help.

A six weeks’ grace period, where those suffering are safe from enforcement action and interest charges, could help give people the time and opportunity to seek debt advice.

The government is committed to getting this right and over the next twelve weeks will be meeting with key industry representatives from charities, debt advice organisations, lenders and creditors.

If one party to a marriage or civil partnership has earnings below the personal tax allowance (£11,500 for 2017-18) and their spouse does not pay tax at the higher 40% rate, then they should be claiming the Marriage Allowance.

For 2017-18 this tax break is worth £230 in cash terms.

The allowance was introduced from 6 April 2015 so if you have not claimed in previous tax years you can back-date your claim to include the tax years 2015-16 and 2016-17. Together with the current tax year this should produce a combined tax refund of £662.

You will be eligible to make a claim if all the following conditions apply:

• You are married or in a civil partnership
• You currently have no earnings or your income is £11,500 or less
• Your partner’s current income is between £11,501 and £45,000 (or £43,000 if you’re in Scotland)

It won’t affect your application for Marriage Allowance if you or your partner:

• are currently receiving a pension
• live abroad – if you get a Personal Allowance.

Your Personal Allowance will transfer automatically to your partner every year until one of you cancels the Marriage Allowance or your circumstances change, for example because of divorce or death.

According to HMRC, the take-up for this allowance has been slow to gain momentum. Applying is easy enough if you have internet access, the URL is https://www.tax.service.gov.uk/marriage-allowance-application/eligibility-check?_ga=2.13601205.366078670.1508664989-262204862.1487688115

Make sure you have the following information to hand:

You will need you and your partner’s National Insurance numbers. You will also need a way to prove your identity. This can be one of the following:

• the last 4 digits of the account that your child benefit, tax credits or pension is paid into
• the last 4 digits of an account that pays you interest
• details from your P60
• details from any of your 3 most recent payslips
• your passport number and expiry date

You’ll get an email confirming your application has been received.

The government seems to be taking steps to streamline the process of buying and selling your home. In particular, they are seeking views on ending the practice known as gazumping: where an offer can be accepted and then disregarded when a higher offer is received.

In many countries this is illegal, once an offer is accepted the sale is binding on both parties.

A press release issued 22 October 2017 says:

As part of a continued drive to make the housing market work better, we want to hear from everyone with an interest in home buying including estate agents, solicitors and mortgage lenders.

We want to ensure that we address issues across the whole sector, from ways to tackle gazumping and reduce time wasting to increase commitment to a sale.

Views will be taken on:

• Gazumping – Buyers are concerned about gazumping, with sellers accepting a higher offer from a new buyer, we will look at ways this could be tackled.
• Building trust & confidence – Mistrust between parties is one of the biggest issues faced, we want to look at schemes including ‘lock-in agreements’. Although 1 million homes are bought and sold in England each year, around a quarter of sales fall through and hundreds of millions of pounds are wasted, we want to increase confidence in the housing chain
• Informing customers – How to provide better guidance for buyers and sellers, by encouraging them to gather more information in advance so homes are ‘sale ready’
• Innovation – You can now search for a home online, but the buying process is too slow, costing time and money so we’re looking for innovative digital solutions including making more data available online

If followed through into legislation this will be a popular change to the present unpredictable process where buyers are in a state of anxiety until formal contracts are exchanged.

According to HMRC you don’t have to pay tax or NIC on a benefit provided to an employee if:

• it costs you £50 or less to provide (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person)
• it isn’t cash or a cash voucher
• it isn’t a reward for their work or performance
• it isn’t in the terms of their contract

Unfortunately, this generous offering does not apply to directors or other office holders or their family. Where the employer is a private company and the benefit is provided to an individual, who is a director or other office holder of the company (or a member of their family or household), the exemption is capped at a total cost of £300 in the tax year.

Even so, by keeping to the rules this does provide a useful tax-free benefit. For directors who pay income tax at higher rates, the £300 annual benefit is equivalent to a taxable income of £500.

It is worth noting the following points:

• One of the conditions that needs to be satisfied is that the cost of providing the benefit does not exceed £50. If the cost of providing the benefit exceeds £50, the full amount is taxable, not just the excess over £50.
• In determining the cost of the benefit for the purposes of the exemption, as for benefits in kind more generally, use the VAT inclusive amount.
• The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to 1 or more employees can be treated as trivial.
• Usually it will be obvious what the cost of providing the benefit is. However, on occasions an employer will provide a benefit to a group of employees and it is impracticable to establish what the precise cost is per person. In such cases, when determining whether the monetary limit has been exceeded you should take the average cost per person of providing the benefit.
• In determining whether the average cost method should be applied, you should apply common sense, bearing in mind the circumstances, in deciding whether it is appropriate.

The following example published by HMRC may be pertinent as we approach the festive season:

Employer D provides each of its employees with a bottle of wine costing £25 at Christmas. However, as an alternative, it provides employees who do not drink alcohol with a £25 gift voucher for a national supermarket chain which they can exchange for an alternative non-alcoholic Christmas gift. Both the bottle of wine and the non-cash gift voucher can be covered by the exemption.

Food for thought?

There is a whole raft of legislation that seeks to penalise directors and shareholders if they borrow money from their company. These regulations include possible benefit in kind charges for the director/shareholder, and additional corporation tax payments of 32.5% for the company.

In effect, the tax system discourages directors from using their company as a private bank account.

But what happens if the reverse situation occurs and a director/shareholder lends money to their company?

If a company requires long-term funding, this “loan” may be secured by the issue of shares in which case the shareholder may be entitled to a dividend. They would also share in the spoils if the company was subsequently sold or wound-up. Essentially, once capital is locked in to a formal shareholding arrangement, it is difficult for the shareholder to recover their investment without undertaking a complicated, and expensive, legal process.

An alternative approach, is to simply lend money to the company. This is best done by agreeing terms and setting up a formal loan agreement between the company and the person lending the funds. It should set out any terms for repayment, security offered by the company, and most important, any interest that will be paid by the company for the use of the funds.

The last point is significant. Many directors of smaller companies simply deposit funds in their company and take it back when it is no longer required, but they may be missing out on a possible tax-free – albeit small – income stream.

For example, depending on other sources of income, the person lending the money could be entitled to the £1,000 or £500 personal savings allowance. A loan of just £16,000, with an agreed interest rate of say 6%, would generate an annual income for the lender of just under £1,000. If the lender was a basic rate tax payer they would be entitled to the £1,000 tax-free allowance, and the company could deduct the interest payment from their taxable profits.

As always, the devil is in the detail. Please contact us for advice if you are considering a loan to your company or formalising any past loans made.