Previously, cash deposits made into a charity collection box would offer no tax refund to the charity. This has now changed; a cash donation of no more than £20 is treated as a gift, after deduction of basic rate tax, which the charity can now reclaim.
This is subject to a modest overall limit to the charity of generally £5,000 a year.
Within this limit, therefore, a cash donation is just as valuable to a charity as a payment through Gift Aid, a cheque, a direct debit or a bank transfer. If you pay tax at more than the basic rate, there is no higher rate tax relief due to you on a cash donation. If this kind of relief is what you wish for, you need to use Gift Aid as before.
HMRC are looking to increase this activity, which involves the collection of tax debts by way of reducing your Code Number used when calculating PAYE deductions on earnings.
There would be no change to the current £3,000 maximum that can be coded out for individuals earning less than £30,000, and the current coding out limit of 50% of gross pay for a pay period would also remain. Indeed, HMRC also proposes to extend the current 50% K-code limit to all tax codes, so that employers and pension providers do not make tax deductions in excess of 50% of an individual’s relevant pay.
The main change proposed is to introduce a graduated, income-related scale for earnings of £30,000 or more so that a maximum of £17,000 could be coded out for a person with earnings of over £90,000
An increase in the maximum amount that can be collected under PAYE may be welcomed by individuals who would prefer to spread payment over a longer period. It is also true to say that some taxpayers do not want coding-out of self-assessment liabilities, but here as currently coding-out will be automatic within the new limits unless a positive claim is made not to use that method of collecting tax. We will ask which method you prefer if you find yourself with tax to pay outside of the PAYE regime; we will then make an entry in your tax return to show your choice.
Consultation is underway as to whether Class 2 national insurance contributions should be collected via self-assessment, in the same way as income tax and Class 4 NICs. It seems likely that this will go through, replacing the current method of collection via direct debits or quarterly demands.
If you buy a new car for your business that has CO2 emissions of no more than 95g/km, you can claim a full deduction against your business profits. There are approximately 30 cars that fall into this category, but the list is growing.
If you run your business as a limited company, the private use element is reflected in an income tax charge as a benefit. This is also based on CO2 emissions, but the tax charge is low to reflect low emissions.
If you are a sole trader or partner, the private use element is reflected simply by a reduction in the 100% tax write-off. For example, 10% private use means that 90% of the cost is tax deductible. If you reduce your self-employed activities while still owning the car (perhaps through planning a phased retirement), you can create a tax opportunity. Upon selling the car, the sale proceeds are charged to tax, as you originally obtained tax relief on the full purchase price. This charge to tax is then reduced by reference to private use on what is called a just and reasonable basis. For example, an increase in private use to 25% by the time the car is sold can result in a tax charge on only 75% of the proceeds, rather than the 90% you might have thought.
HMRC provide guidance on this and we will always be ready to get the best tax deal for you in these circumstances.
This new option for some small businesses needs careful consideration, particularly if you are self-employed and have annual turnover of less than £79,000.
You can choose to:
- use the cash basis with or without also using fixed rate deductions
- use accruals accounting with or without also using fixed rate deductions
The fixed rate deductions cover motor expenses and the use of your home as an office, and are available irrespective of your turnover. We will consider all of the issues before making a recommendation as to the best options in your particular circumstances.
HMRC has announced 4 new taskforces to investigate tax evasion in specific commercial and geographical sectors. The taskforces bring together various compliance and enforcement teams for what they term intensive bursts of targeted activity.
The new taskforces are localised and cover the following:-
Construction industry in London, expecting to raise £3 million
Security guards, bouncers and their employers in London and the South East, expecting to raise £10 million, with fraudulent VAT repayment claims identified as an increased risk in this sector
Second-hand motor traders in the Midlands, expecting to raise £3 million
Hidden wealth/”means” issues in the Midlands, also expecting to raise £3 million from comparing lifestyles to known assets.
HMRC are starting a LET PROPERTY campaign. This is aimed at residential lettings. HMRC estimate that up to 1.5 million landlords may be underpaying up to £500 million in tax every year. The campaign will run until at least March 2015. Unlike other campaigns the opportunity to come forward voluntarily will remain open throughout the period of the campaign.
Please make sure that this does not apply to you. We have spoken to many new clients who think they do not need to declare this income if they are not making any money. You do need to declare this even if you are making a loss.