Tax E-News July

THE DOG ATE MY TAX RETURN

… is not a reasonable excuse!

However, it has been announced that HMRC will not contest appeals against the £100 late filing penalty in respect of 2013/14 tax returns where the taxpayer provided a reasonable excuse for not filing on time. In the past, HMRC has looked in detail to judge if each excuse is reasonable but will now reallocate resources onto tax evasion and avoidance.

What counts as a reasonable excuse is normally something unexpected or outside your control that stopped you meeting a tax obligation, for example:

• Death of your partner shortly before the deadline
• An unexpected stay in hospital
• Your computer or software failed just before or while you were preparing your return online
• HMRC online service issues
• Postal delays that couldn’t be predicted

Although the latest announcement concerns late self-assessment tax returns, the above list of excuses applies generally to other returns and payments such as VAT, PAYE and those due under the Construction Industry Scheme.

INHERITANCE TAX AND THE FAMILY HOME

Further detail has emerged (in a leak to the Guardian newspaper) concerning a new Inheritance Tax (IHT) allowance announced in the Conservative Party election manifesto to set against the value of the family home.

The proposed new family home allowance provides for an additional £175,000 nil rate band from April 2017, bringing a couple’s combined tax free estate to £1,000,000. This allowance is subject to a taper where the amount being left is more than £2,000,000 with £1 of the family home allowance being lost for every £2 of estate value over £2,000,000.  This clawback seems to be based on the value of the estate before reliefs such as business property relief and agricultural property relief and may result in some additional complications and redrafting of Wills.

We will almost certainly see further details announced in the Summer Budget on 8th July and you may wish to arrange a meeting with us to consider the impact on your Will and your family’s inheritance tax position.

EMPLOYER PROVIDED MOBILE PHONES

Whilst the provision by an employer to an employee of a mobile phone is tax and NIC exempt, there will be cases where tax/NIC charges and reporting obligations arise. Two common problem areas are:

1. The phone contract is in the name of the employee but is paid by the employer, either directly or through expenses and reimbursement

2. More than one phone is provided

HMRC do take these points – please check your phone contract documentation and speak to us if you need any assistance.

SHARES TO EMPLOYEES AND DIRECTORS

Whenever companies issue shares to employees and directors, they need to consider whether or not an entry needs to be made on the end of year HMRC Form 42. This form is used to report events relating to shares and securities obtained by reason of employment and now needs to be submitted online by 6^th July following the end of the tax year.

Remember that where the shares are issued at an undervalue there is potentially an income tax charge as employment income. Note that there are a number of exceptions from the need to make a report and that different forms are used to report shares acquired under tax-advantaged schemes such as EMI share options which we referred to last month.

The main exceptions from the reporting obligation are where shares are issued in connection with incorporation and where there is a transfer of shares in the normal course of the domestic, family or personal relationships. An example of the latter would be the gift of shares from father to son or daughter as part of an estate planning exercise. However, HMRC guidance states that there must be no element of remuneration in the award or grant. Please contact us for assistance whenever you are considering the transfer of shares to family members or other employees.

COMPANY CAR ADVISORY FUEL RATES

These rates are the suggested reimbursement rates for employees’ private mileage in their company cars and are reviewed each quarter on 1 March, 1 June, 1 September and 1 December.  In line with an increase in fuel prices, the rates that apply from 1 June 2015 are as follows:

TAX DIARY OF MAIN EVENTS FOR JULY/AUGUST 2015