Brian McGuire of the Association of Chartered Certified Accountants outlines the issues that are affecting corporate and personal tax matters
Finance Bill 2013
Last month HM Revenue & Customs (HMRC) published its draft clauses including explanatory notes, Tax Information and Impact Notes (TIINs) as well as other tax updates.
These contain the detail within the clauses and explanatory notes to be included in the Finance Bill which is due to be published after spring Budget 2013. There was also a further announcement at the end of last year regarding plans to introduce targeted anti-avoidance rules to the income tax and corporation tax provisions prohibiting and allowing deductions from the profits of trade and property businesses.
The much discussed child benefit charge on high income families for 2012-13 came into effect from January 7.
A taxpayer is liable if he/she or their partner has adjusted income in excess of £50,000 and either is entitled to child benefit. The charge is the 'appropriate percentage' of the total child benefit received in the fiscal year. Where the adjusted income is £60,000, the appropriate percentage is 100%.
Where a partner's income is in excess of £60,000, it may be preferable to disclaim the benefit in order to avoid the charge. If the claimant decides to elect not to receive the benefit because the expected income is over £60,000 and subsequently finds that this is not the case, the claimant can revoke the election.
In addition, SI 2612/2012 Child Benefit and Child Tax Credit (Miscellaneous Amendments) Regulations 2012 updates the provisions that exclude a claimant from eligibility to child benefit where their right of residence is of a specified type.
The start of the year is often the time when business people are being called upon to update and renew their professional fees or subscriptions. It is worth noting that a deduction for fees and subscriptions paid to professional bodies or learned societies (under Section 344 ITEPA 2003) are an allowable expense (where employees pay an annual subscription to a body shown in the list as approved by HMRC). This is allowable on the basis that employees pay this out of their earnings from an employment and, the activities of, the body are directly relevant to the employment. For more details visit http://tiny.cc/qch3ow.
IT and class 4 NIC
It is often overlooked that, when trading losses are relieved against sources of income other than trading income, or indeed capital gains, this will cause a mismatch between the amount of losses carried forward for income tax and class 4 national insurance purposes.
Where losses are claimed (under certain circumstances) separate memoranda should be kept of the unutilised losses for income tax and class 4 NIC purposes as the amount of losses available for income tax relief may differ. See some worked examples at http://tiny.cc/42h3ow.
Business records checks
Unfortunately, HMRC has reintroduced business records checks (BRCs); the 'new approach' checks started on 1 November 2012.
HMRC states that customers who are more likely to be at risk of having inadequate records will be contacted by letter to arrange for HMRC to call them to go through a short questionnaire.
Where issues are identified, customers will be offered targeted self-help education options. Customers who are assessed as being at risk of keeping inadequate records will be referred for a BRC visit.
Patent box regime
Now is also the time to check to see if you meet the requirements on innovative expenditure introduction of the patent box regime.
The aim is to provide an additional incentive for companies to retain and commercialise existing patents and to develop new, innovative patented products.
The patent box allows companies to elect to apply a 10% rate of corporation tax to all profits attributable to qualifying patents, whether paid separately as royalties or embedded in the sales price of products, an exceptionally competitive rate of corporation tax.
Finally, you can find details of any changes to VAT rates across the European Union at www.accaglobal.com/uk/members/technical.