The View from No 50

 

 

 

 

July 2014

K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby RoadMenston

IlkleyLS29 6JA

Tel:01943 870933

Fax:01943 870925

Email:keith@kpbonney.co.uk

www.kpbonney.co.uk

 


 

 

 

NEW ISA RULES FROM 1 JULY

 

The maximum subscription to Individual Savings Accounts increases to £15,000 per tax year with effect from 1 July.

 

A second significant change taking place on that date is the abolition of the distinction between cash ISAs and shares ISAs.From 1 July cash ISAs and shares ISAs become New ISAs, or NISAs for short.†† Your old cash element can be converted to shares.†† Your old shares element can be converted to cash.That is a most welcome improvement and simplification.

 

You might have to shop around and to lock in for a fixed period in order to get a decent rate of interest on your NISA cash.

 

Like the products they replace NISAs provide tax free income and capital gains.They are not, however, exempt from inheritance tax.

 

Our Advice: If you are one of the 8% of ISA savers who makes full use of the annual allowance be aware of the change and top up as necessary.

 

 

HELP! WE DONíT KNOW WHAT WE ARE DOING.

 

HMRC has written to selected self-assessment taxpayers to tell them their effective rate of tax for the year 2011/12 is lower than average and to ask them to check their return is right.

 

A personís effective rate of tax is the percentage of their income they pay in tax.

 

There are a limited number of reasons why a personís effective rate of tax might be lower than average for a given level of income.These include

 

Pension contributions

 

Gift Aid payments

 

Subscriptions to venture capital trusts and / or enterprise investment schemes.

 

The point is that all these reasons are obvious to any half-sensible person who reads the relevant tax return.Which leads us to the worrying conclusion that HMRC doesnít know what it is doing.

 

Our Advice: The letter has no statutory force.It is wonder HMRC management allowed it to see the light of day.If you receive a letter questioning your low effective rate of tax do not worry and do not leap to the conclusion you or your accountant has made a mistake.††Provided you are satisfied your return is correct you can safely ignore the letter.

 

 

CROUCHING TAXMAN HIDDEN LANDLORD

 

HMRC is writing to letting agents asking them to provide information about the rents they collected on behalf of landlords for the year 2012/13.

 

Whilst letting agents may object they must comply.HMRCís powers here over-ride the privacy provisions afforded to individuals under the Data Protection Act.

 

HMRC is also using its Connect data-analysis search facilities to identify landlords who are letting overseas properties.

 

Our Advice: If you failed to declare some or all of your UK or overseas rental income for 2012/13 now might be a good time to seek professional help.

 

Will HMRC use the information produced by this exercise wisely?We wonder.

 

 

LE GRAND DEPART

 

Le Grand Depart throws up a wonderful money making opportunity for people with land close to the route.You donít have to travel far along the A65 to see signs for camping and parking.

 

Our Advice: Donít forget even casual receipts like these are chargeable to tax.So if you wouldnít normally file a tax return make sure you give HMRC notice of your chargeability after the end of the tax year.Failure to do so could result in you paying not only the tax but also a penalty.

 

 

MCLAREN

 

The FIA, which is the governing body for Formula 1 motor racing, imposed a penalty of £32 million on McLaren Racing Ltd which had broken the rules of the FIA's international sporting code. McLaren's chief engineer was caught in possession of confidential information belonging to a rival company.†† The information was used to given McLaren a sporting advantage. McLaren claimed that this penalty should be allowed as a deduction in computing its profits. HMRC rejected the claim.McLaren appealed.

 

There is no law which specifically prevents fines or penalties from being deductible for tax purposes but there is a general rule which provides that for an expense to be deductible it must be incurred wholly and exclusively for the purposes of the trade.

 

Over the years it has become accepted that there is no deduction for fines and penalties which are imposed by statute.So for example if a company suffers a fine for filing its VAT returns late it cannot deduct the fine in computing its profits for tax purposes.The fine is not incurred wholly and exclusively for the purposes of the trade.It is incurred because the law says so.

 

McLaren argued that the fine imposed by the FIA was different from a statutory fine.Its argument was in effect that cheating (or gaining an advantage) is part of the game and getting caught and getting fined is part of the same game (or trade).

 

The judge in the First-tier Tribunal bought McLarenís argument.

 

HMRC appealed.

 

The Upper-tier Tribunal reversed the decision.They found that the penalty was not incurred wholly and exclusively for the purposes of the trade.

 

One imagines McLaren is a profitable business so there is a win here for the UK taxpayer.

 

A while ago Uefa fined Manchester City £49m under its fair play rules.No doubt they are watching closely to see if McLaren appeals.

 

 

CUTBACKS CUTBACKS

 

HMRC has now closed all its local enquiry offices.If you have a question about your tax affairs you must contact them by telephone.

 

Good luck with that.

 

Our Advice:Put the kettle on before you ring.

 

TEAM SELECTION QUANDRY

 

The school coach walked into the changing room before the game, looked over to his star player and said, "I'm not supposed to pick you since you failed maths.But we need you.So, what I have to do is ask you a maths question and, if you get it right, you can play."

 

The boy agreed and the coach looked into his eyes intently and said, "Okay, now concentrate hard and tell me the answer to this. What is two plus two?"

 

The player thought for a moment and then he answered, "I think... no... yes... Iím not sure... what about 4?"

 

The coach smiled.

 

All the other boys began screaming: "Come on coach, give him another chance!"

 

Copyright:K P Bonney & Co LLP 2014.All rights reserved.No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.Disclaimer:The publishers have taken all due care in the preparation of this publication.No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

 

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