As the result of changes announced in the Autumn Budget, and now incorporated into the latest Finance Bill, not all ordinary shares necessarily qualify for the 10% CGT entrepreneurs’ relief rate on disposal.
The definition of a personal company was tightened up so that from 29 October the shareholder must have entitlement to at least 5% of the company’s ordinary share capital, voting rights, profits available for distribution, and assets available on the winding up of the company. The shareholder, as before, will also need to be an officer or employee of the company.
This change means that certain “alphabet” and other shares with limited rights may no longer qualify for CGT entrepreneurs’ relief when disposed of. As a consequence of this change you may need to review the rights attaching to the shares that your company has issued and make changes to ensure that the shares qualify.
A more generous inheritance tax exemption applies where the donor can prove that he or she is not transferring capital but is making gifts out of their income. There are detailed conditions for this exemption to apply requiring records to be kept of income and expenditure in order to prove that there is sufficient surplus income each year to make regular gifts to the beneficiaries.
Certain traders can be made liable for the unpaid VAT of another VAT-registered business when you buy or sell specified goods. HMRC have recently updated VAT notice 726 which advises traders to carry out due diligence into their supply chain.
The specified goods are any equipment made or adapted for use as a telephone and any other equipment made or adapted for use in connection with telephones or telecommunication, such as SIM cards.
Also included is equipment made or adapted for use as a computer and any other equipment for use in connection with computers or computer systems and also other electronic equipment for use by individuals for the purposes of leisure, amusement or entertainment, such as Satnavs and games consoles.
Where possible higher rate taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity and for the individual to obtain additional tax relief on the payment.
For example where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing their net cost to £15.
Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will be taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell your donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.
Under certain circumstances it is possible to arrange the collection of unpaid tax through your PAYE coding rather than making a balancing payment on 31 January. This will depend upon the amount outstanding and the amount of income taxable under PAYE. There is a further condition that the return is submitted to HMRC online before 30 December 2018 in order that the 2017/18 tax be collected by amending the 2019/20 PAYE coding.
To utilize the 2015/16 unused relief any additional pension savings would need to be paid to the pension fund by 5 April 2019, otherwise the relief from 2015/16 will lapse.
Note however that for some taxpayers the method of calculating unused relief for 2015/16 is extremely complicated as the Government changed the pension rules part way through the year on 8 July 2015. The amount of pension allowance will depend on the pension input period of your scheme.
For most taxpayers the maximum pension input annual allowance is currently £40,000.
However, from 2016/17 those taxpayers with ‘adjusted income’ over £150,000 and ‘threshold income’ over £110,000 receive a tapered annual allowance. For those persons affected the allowance tapers by £1 for every £2 that their adjusted income exceeds £150,000 down to a minimum annual allowance of £10,000.
The calculations of ‘adjusted income’ and ‘threshold income’ can be complicated.
HMRC have updated their guidance on the rules for carrying forward the unused pension savings annual allowance, together with a calculator on their website.
For most taxpayers the maximum amount of pension savings that qualifies for tax relief each tax year is £40,000. It is possible to increase this amount by utilising unused relief brought forward from the previous 3 tax years, provided the individual was a member of a pension scheme that year.
The brought forward relief from the earliest year is utilised before later years. Thus for the current tax year 2018/19 the unused relief from 2015/16 may be utilised in addition to the current year relief, followed by 2016/17 and then 2017/18.