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Newsletter September 2014

Welcome to this month's newsletter

This month’s newsletter includes: an update on new support for home based businesses; tax incentives to support cycling; an update on proposals to give HMRC access to your bank account; and extracts from HMRC’s Charter.

Our next newsletter will be published Thursday 2th October 2014.


New support for home based businesses

It is estimated that seven out of ten small businesses are managed in the first instance from home. Home based entrepreneurs contribute £300 billion to the UK economy. It is not surprising, therefore, that the Government have woken up and realised that they should be supporting this sector.

Recently, the Business Minister, Matthew Hancock, announced a package of additional support for home based business owners. They include:

  • The law will be changed so that landlords can be assured that agreeing to home working by tenants will not undermine their residential tenancy agreement. A new model tenancy agreement will also be made available shortly;
  • Updated planning guidance will make it clear that planning permission should not normally be needed to run a business from your home; and
  • New business rates guidance will clarify that in the majority of circumstances home based businesses will not attract business rates.

This is welcome news. It is a pity that the announcement did not include a relaxation in the complicated Capital Gains Tax rules that can affect individuals who claim for the use of a room at home to run their business.

Readers may be interested to know that there are already 2.9 million businesses being run from entrepreneurs’ homes. As mentioned above, these businesses contribute £300 billion in annual turnover to the UK economy. They also have a marked affect on employment.

If 1 in 10 home businesses took on just 1 extra employee it would create 300,000 jobs. Unemployment fell in June 2014 to just over two million so the 300,000 reduction would represent a significant 15% fall.

On the face of it, home based businesses can take encouragement from these announcements. Let’s hope that these will be the first of a number of initiatives to encourage entrepreneurs to take the plunge.


On your bike

The cycle to work scheme encourages employees to cycle to work and allows employers to reap the benefits of a healthier workforce.

Employers of all sizes can set up a tax exempt scheme. Basically, employers can loan a cycle and associated safety equipment to an employee without the employee suffering a taxable benefit-in-kind charge.

In order to qualify for tax exempt status, a cycle loan scheme has to satisfy a number of criteria including:

  • Ownership of the equipment is not transferred to the employee during the loan period;
  • Employees use the equipment mainly for qualifying journeys; i.e. for journeys made between the employee’s home and workplace, or part of those journeys (for example, to the station), or for journeys between one workplace and another;
  • The offer of the use of a loaned or provided cycle (i.e. one for which ownership is not transferred to the employee) is available across the whole workforce, with no groups of employees being excluded. This does not necessarily have to be through a Cycle to Work salary sacrifice arrangement.

Employers’ expenditure on purchasing cycles and associated equipment is treated as capital expenditure and the usual tax and capital allowances are available including the Annual Investment Allowance.

In theory there are no limits to the amount that can be invested although there may be limits set by the OFT consumer credit license that regulates the loan of cycles under this scheme. The current OFT limit per loan is £1,000.

At the end of the agreed cycle loan period the employee can continue to use the cycle equipment for qualifying journeys with no tax consequences, or, the employer can sell the equipment to the employee. To avoid any tax charge the sale must be made at current market value.


Smash and grab

The government is considering the response to its consultation document on proposals to introduce powers allowing HMRC to dip into a tax payer’s bank account in order to recover arrears of tax. There will be safeguards:

  • The debt recovered would have to be £1,000 or more.
  • A minimum of £5,000 has to be left in an account after the debt has been recovered.

Needless to say this proposal has created quite a stir.

The British Banking Association wants the Chancellor to take legal advice on the matter as they believe the legislation would contravene the Human Rights Act. Others believe that HMRC has proved itself incompetent in the past to accurately calculate the amount of tax arrears owed by an individual. HMRC would, in effect, become judge and jury, assessing and collecting tax without any initial remedy or intervention available to the tax payer.

Let’s hope that the firestorm this proposal has provoked will temper any future change in the law. At present it is likely that HMRC will be given these new powers as part of the Finance Act 2015.


Treat you as honest

Readers will be interested, and gratified to hear that HMRC will always treat you as honest. The following is an extract from HMRC’s “Your Charter” which states:

Your rights - What you can expect from us:

  • Respect you
  • Help and support you to get things right
  • Treat you as honest
  • Treat you even-handedly
  • Be professional and act with integrity
  • Tackle people who deliberately break the rules and challenge those who bend the rules
  • Protect your information and respect your privacy
  • Accept that someone else can represent you
  • Do all we can to keep the cost of dealing with us as low as possible

Your obligations - What we expect from you:

  • Be honest
  • Respect our staff
  • Take care to get things right.

Considering that we have one of the most complex tax systems, HMRC seems to have set itself and the nation’s tax payers a high bar to clear. Compliance with a known legal obligation is one thing, compliance with an unknown legal obligation is quite another.


Tax Diary September/October 2014

1 September 2014 - Due date for Corporation Tax due for the year ended 30 November 2013.

19 September 2014 - PAYE and NIC deductions due for month ended 5 September 2014. (If you pay your tax electronically the due date is 22 September 2014.)

19 September 2014 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2014.

19 September 2014 - CIS tax deducted for the month ended 5 September 2014 is payable by today.

1 October 2014 - Due date for Corporation Tax due for the year ended 31 December 2013.

19 October 2014 - PAYE and NIC deductions due for month ended 5 October 2014. (If you pay your tax electronically the due date is 22 October 2014.)

19 October 2014 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2014.

19 October 2014 - CIS tax deducted for the month ended 5 October 2014 is payable by today.

31 October 2014 – Latest date you can file a paper version of your 2014 Self Assessment tax return.