10 March 2017

Tax Matters - re April 2017

Well the post Budget announcements were distinctly lacking in drama to the extent the Taxation Magazine Article published today is headed "Is that it?" As usual there are pages of documents although many announce consultations or do not impact most of our business lives.

The headline measures affecting most of us are the 1% rise in NI for the self-employed and the £225 per annum increase in the dividend tax which applies from April 2018. Good news is that Making Tax Digital, which involves businesses (including landlords) reporting their income quarterly to HMRC, has been deferred to April 2019 for those below the Vat turnover threshold. However the rest of us will be reporting regularly from April 2018!

So what might affect people from April 2017? Not necessarily newly announced measures but:-

VAT Flat Rate Scheme. Many clients generate a surplus through FRS which most of you will be aware is replaced in April 2017 by a fixed rate of 16.5% compared with a rate in the region of 14% you may be using now. Since the original announcement we have been considering ways of continuing to benefit but the government have recently amended the proposed rules to close the gaps so there now seems little opportunity and most businesses below the turnover threshold will deregister as the cost of complying will outweigh any benefit.

VAT Registration. From 1 April 2017 the VAT registration threshold will increase from £83,000 to £85,000 and the deregistration threshold from £81,000 to £83,000.

IR35 in the public sector. If caught you will know all about this and I only mention generally as it is a significant tax raising measure by this Conservative government. While an agency supplying the public sector may endeavour to stay outside the legislation by making a business proposition the general feedback is that most agencies will apply PAYE through an umbrella provider where the public authority certifies that IR35 applies. The take home pay of the worker will significantly reduce and inevitably it would seem this legislation will apply to the private sector in due course.

A Budget announcement advises "it will be optional for the agency (or public sector body) to take account of the worker's expenses when calculating the tax due. This change would put these workers in the same position as other employees, whose employers can choose whether or not to reimburse the expenses they incur. This will not affect the individual's right to claim tax relief on legitimate employment expenses from HMRC"

Business Rates. Not within my domain at all but I know there will be some very harsh situations arising this year. I have long felt the rating of Licensed Premises in particular to be inequitable and it would seem this is to be compounded as identified by the special treatment afforded by the £1,000 rebate offered in the Budget. I suspect that may be a drop in the ocean for many.

Tax Free Childcare Scheme. Starts this year and will provide up to £2,000 a year in childcare support for each child under 12 where the parents save in a special account. If they save £8,000 the government will top up the account with 20% to a total of £10,000 which can then be used to pay for childcare costs. For more information see:- https://www.gov.uk/government/news/tax-free-childcare-10-things-parents-should-know

Corporation Tax rate. Reduces to 19% for periods commencing April 2017

Dividend tax. For the last twelve months or so we have been warning that income tax liabilities for people trading through limited companies payable in January 2018 will increase because of the dividend tax. If you draw up to the higher rate band this will cost you slightly in excess of £2,000 per person which because of the "payment on account" system will require a payment of £3,000 per person payable in January 2018 which in January 2017 would have been nil!

Landlords. Also starting in April 2017 is the restriction of higher rate tax relief on interest paid on rented properties. It is being phased in and will be four years before fully operational. Another warning of increased taxes payable in January 2018.

Ian