Peter Ruston

OpRA is the acronym for an optional remuneration arrangement. Before April 2018, these were termed “salary sacrifice” arrangements. Essentially, both are benefits in kind (BiK) offered to employees in place of salary increases.

Recent changes ensure that that where such benefits are offered recipients many are taxed as if the cash value of the benefits provided were taken as salary.

Readers should also note that there are still a small number of BiKs that are tax and NIC efficient.

Accordingly, we feel that there is a need to review all BiK arrangements before the end of each tax year to make sure that the most tax efficient remuneration options are being provided.

Where an arrangement falls under the new rules, the work to be included in an annual OpRA review could be:

• Test each benefit provided against the OpRA legislation.
• If OpRA applies, what are the increased tax and NIC costs for the employee and is the employer willing to compensate?
• Consider alternative benefit arrangements that have a lower tax and NIC footprint.
• Consider substitution for exempt BiKs, including: pension provisions, cycle to work schemes, ultra-low emission cars, and employer supported childcare.
• Consider an arrangement to purchase more holiday, effectively unpaid leave.

Our initial report would usually be directed to the employer to agree any changes, and then provide updates for employees to communicate these changes, if any.

Please call if you would like to schedule in a BiK review before the end of the tax year.

Truthfully, no one knows what trading conditions will be like once we exit the EU. Will supply chains seize up or will it be business as usual?

If there is a possibility, however remote, that the commercial landscape will change, doesn’t it make sense to undertake an assessment of any downside risks and plan accordingly?

From a Brexit point of view, supply chain concerns are likely to cause the most disruption, at least initially. Even if your business does not buy or sell goods to the EU, many of your customers and suppliers may, and this could affect your sales and purchases of goods if transport links are affected.

Accordingly, we recommend that you undertake a basic supply chain risk assessment. For example:

• If you sell goods to EU concerns could you encourage them to increase their stocks of your goods before 29 March 2019?
• If you buy goods from the EU, could you increase your stocks prior to the same date?

If we head for a no-deal Brexit, and you import goods, what effects will import VAT and other duties have on your margins and cash flow?

And if your suppliers or customers have similar concerns, will you be under pressure to reduce your selling prices to customers or find alternative suppliers in the UK?

Until we are certain which way the no-deal or negotiated separation will pan out, we should be planning for all options. Whilst this may seem to be over-the-top at present, come spring 2019, you will be grateful that you are ready for any disruption whatever shape it may be.

Many small businesses, including landlords, use personal bank accounts to lodge business receipts and make business payments. If traders in this situation are subject to a HMRC enquiry into their business affairs, HMRC would be entitled to request sight of all bank accounts that record business transactions even if those accounts are essentially, personal bank accounts.

As many of the transactions in these accounts are personal, you may need to explain to HMRC where credits to the account came from and provide evidence that the credits are nothing to do with your business.

Without this confirmation or evidence, monies that have nothing to do with your business may be treated as if they are business receipts by HMRC.

Accordingly, if you have let property or a small business, open a separate business bank account and pass all your business transactions through this account. Keep personal bank accounts for personal transactions.

There is nothing worse than trying to remember what the £2,000 credit to your personal/business account was, two or three years after the event, and merely saying that it was a gift from Aunt Mary will not pass muster with the tax office. Inspectors will assume that this is undisclosed business takings or rents.

If you insist on using a personal account for business and personal purposes, then you will need to keep evidence of both personal and business transactions. In our example quoted above this would involve a signed letter from your Aunt confirming the amount and date of the gift made.

HMRC investigators do not have an automatic right to see your personal accounts. In the first instance they will likely be limited to access to business records. Of course, they would like access to your private accounts, as this will evidence more information about lifestyle spending. And so, mixing accounts for business and personal matters will possibly open up investigations unnecessarily.

Keep private accounts private…

George Osborne’s summer budget 2015, and the subsequent Finance (No2) Act 2015, introduced far ranging changes to the income tax relief that can be claimed by individual landlords for finance costs.

George believed that property landlords were adding too much inflationary pressure to the UK’s housing stock. To remedy this, he set out to reduce the income tax relief available to buy-to-let landlords; after all, income tax relief for home owners has been denied for many years. It is intended that this levelling of the playing field will enable home buyers to compete more effectively as the demand from marginal buy-to-let investors is reduced.

This change has teeth, sharp teeth. From 6 April 2017, landlords (subject to income tax on their letting profits) will gradually lose the right to claim a deduction for finance costs: these are primarily, but not limited to, mortgage or loan interest payments. In its place, landlords can claim a tax credit based on 20% of the disallowed costs.

At a stroke this will deny higher rate tax relief on the disallowed costs. The reduction is to be introduced in stages starting April 2017 and be fully implemented by April 2020.

The changes also have a rather insidious side effect. Under certain circumstances, basic rate taxpayers will find themselves promoted to the higher rate tax band, and this with no increase in rental profits. Those most at risk are landlords who have borrowed heavily to grow their property portfolios and have high levels of rental income matched by high levels of finance costs.

This article is a repeat of our past exhortations to landlords: start planning for these changes now.

If your circumstances fit the most unfavourable combination of rental income to finance costs the effects on your income tax liabilities could be dire. This point cannot be overemphasised; for no change in your property business profits you may experience significant increases in tax due.

Planning is key. If you are concerned that you may be affected, please call.

Philip Hammond has announced the date for the Autumn Statement: 23 November 2016.

In the past, Chancellors have used the occasion to set the scene for the following years’ budgets. This year, Philip Hammond will be disclosing the fiscal direction of the new Conservative government. Are we to have evermore “austerity”, cuts in government expenditure, or will the Treasury abandon its commitment to reducing debt and balancing UK’s books?

No doubt the economic effects of Brexit will weigh heavily on the argument: can we afford to suppress economic activity if we are facing the loss of the EU single market?

All eyes will be on Philip Hammond as he rises to speak on the 23^rd. A lot hangs on what he says. 

There are a number of considerations that home owners will need to consider if they are letting out part of their home. The following points cover some of the more obscure situations that can arise:

I’m a tenant. Can I sublet part of the property or take in lodgers?

If you are a secure council tenant, you have the right to take in a lodger, but cannot sublet part without the council’s written permission, you cannot sublet the whole of a secure tenancy. If you are a private tenant, you should check the terms of your tenancy. If there has been nothing agreed to the contrary, the tenant would be free to sublet. However, in practice most private tenancies prohibit subletting: because there is something in the written tenancy agreement to this effect (either absolutely or without the owner’s permission) and/or because assured (including assured shorthold) periodic tenancies have this prohibition implied. But a tenant can of course ask his or her landlord for permission anyway. A tenant who has sublet in defiance of these prohibitions cannot use this as justification for denying his own tenant or licensee her rights, for example by evicting her illegally. Also, these restrictions only apply where the intended arrangement is for the tenant to “part with possession” of some of the property: if, for example, you were informally having a friend to stay, or taking in a lodger who you would be providing services to, you would probably not be giving exclusive use of any of the accommodation. Again, if any of these types of tenancies comes to an end, so generally will the sub-tenancy.

Will my home insurance cover be affected if I let part of my home?

It is very likely that insurance premiums will be increased by allowing someone to share the home, because of factors such as accidental damage. It is extremely advisable to check for both contents cover and building cover; and if existing arrangements will not provide cover if part of the property is let, to arrange to extend the cover.

Do I need planning permission or other consent from the local council?

You would not need planning permission simply for letting rooms, so long as the property remains primarily your home: but there could be a planning consideration if you were to use it mainly to earn money from letting accommodation.

What facilities should be provided?

You are free to decide most of these things with the person you let to, subject to the basic requirements of general housing law: you should provide access to kitchen, washing and toilet facilities (but these can be either the ones that you use or separate).

Does there have to be an agreement in writing?

Not unless the let is a tenancy for a fixed term of more than 3 years. But it is advisable to have one anyway, as this will make it easier to sort out any disagreements which may arise later. Even if there is nothing in writing, both parties must still do whatever they agreed to, except where this conflicts with their overriding legal rights and responsibilities.

A former City trader has been hit with a £2m-plus confiscation order for concealing assets from his bankruptcy trustee and thus, his creditors.

Tahseen Goni, 41, from Luton, has been ordered to pay a confiscation order of £2,084,897.37 and prosecution costs of £118,352.36, following a hearing at Cambridge Crown Court on 28 July 2016.

Mr Goni was convicted of concealing property from the Official Receiver in August 2015, following an initial investigation by the Insolvency Service and a full criminal investigation and Prosecution by the Department for Business, Energy & Industrial Strategy (BEIS).

The Investigation found that in October 2008 Mr Goni, a previously successful ‘spread betting’ trader, incurred substantial losses and was left with a debit balance of £238,021.30 on his personal account with a company providing financial spread betting, Contracts for Difference (CFDs), stockbroking and foreign exchange services. The company obtained judgment in default against Mr Goni and threatened to petition for his bankruptcy.

Mr Goni then began to put in place arrangements to enable him to continue to trade in the lead up to and following his impending bankruptcy. This involved him making use of both trading accounts and bank accounts in the name of a family member.

The investigation found Mr Goni had sufficient assets to pay off his creditors during the period of his bankruptcy. Despite his duty to declare them to his trustee in bankruptcy, he concealed them. This resulted in him being prosecuted and on being convicted, sentenced to 2 years’ imprisonment. At the subsequent confiscation hearing the court ordered that the benefit from his concealment of £2,084,897.37 should be confiscated of which £537,057.03 was to be paid to his creditor(s). A further £118,352.36 was ordered to be paid to cover prosecution costs.

Deputy Chief Investigating Officer Ian West from the Department for Business Innovation and Skills said:

“This is a substantial penalty and bankrupts should be in no doubt, that if they conceal assets from their trustee in bankruptcy that the Insolvency Service and the department for Business, will take firm action to have them prosecuted, their benefit confiscated and their creditor(s) recompensed.”

HMRC seem to be making progress in their attempts to discourage, and recover unpaid tax, from participators in tax avoidance schemes.

In a recent high profile case, HMRC have recovered more than £434m in unpaid taxes from users of the tax avoidance scheme promoted by the Ingenious Film Partnership. Their scheme tried to use artificial losses arising from investments in a range of movies, including the blockbusters Avatar, Life of Pi and Die Hard 4.

Director General of Enforcement & Compliance Jennie Granger said:

“These were some of the biggest films of all time, and the schemes involved people claiming far more in tax than they invested in the first place. We always say that if something is too good to be true then it probably is. And in this case the long legal battle will mean that investors face even bigger bills for interest and legal costs.”

In a second win for HMRC, they were successful in stopping a scheme by Icebreaker who attempted to create artificial losses from investments in limited liability partnerships.

For both schemes users claimed more in tax relief than they had invested.

The Icebreaker decision is HMRC’s second win against the scheme, following a victory in the First Tier Tribunal in 2014. The total tax at stake was £134 million.

This means that HMRC has now secured more than £1.2 billion in disputed tax from wins in avoidance litigation since the beginning of April.

A reminder, that if either parent’s income exceeds £50,000 this will affect eligibility for Child Benefits.

A tax charge, known as the ‘High Income Child Benefit Charge’ (HICBC), is payable if a parent has an individual income over £50,000 and:

·         either parent claims Child Benefit, or

·         someone else gets Child Benefit for a child living with a parent and they contribute at least an equal amount towards the child’s upkeep

It doesn’t matter if the child living with you is not your own child.

If the HICBC does apply, the parent with the highest income (if both exceed £50,000) will need to declare the amount of the Child Benefit received on a Self Assessment tax return. The tax charge will then claw back the Child Benefit received at the rate of £1 for every £2 that income exceeds £50,000. This means that if income is more than £60,000 the HICBC will equal Child Benefit received.

If parents can see that one or both incomes will exceed £60,000 they can elect to withdraw their Child Benefit claim in which case, no entry on a tax return would be required.

If income is in, or just over the £50,000 to £60,000 band, paying pension contributions or donations under gift aid can reduce the impact of the HICBC as well as reducing tax.

Thousands of British organisations will receive guarantees over EU funding in a new move by Chancellor Philip Hammond last month.

Key projects supporting economic development across the UK will be given the green light, ending uncertainty over their future following the UK’s decision to leave the European Union.

Assurances set out by the Treasury include:

·         all structural and investment fund projects, including agri-environment schemes, signed before the Autumn Statement, will be fully funded, even when these projects continue beyond the UK’s departure from the EU

·         the Treasury will also put in place arrangements for assessing whether to guarantee funding for specific structural and investment fund projects that might be signed after the Autumn Statement, but while we remain a member of the EU. Further details will be provided ahead of the Autumn Statement

·         where UK organisations bid directly to the European Commission on a competitive basis for EU funding projects while we are still a member of the EU, for example universities participating in Horizon 2020, the Treasury will underwrite the payments of such awards, even when specific projects continue beyond the UK’s departure from the EU

As a result, British businesses and universities will have certainty over future funding and should continue to bid for competitive EU funds while the UK remains a member of the EU.

And in a new boost to the UK’s agricultural sector Mr Hammond also guaranteed that the current level of agricultural funding under CAP Pillar 1 will be upheld until 2020, as part of the transition to new domestic arrangements.

The Treasury will work closely with the devolved administrations on subsequent funding arrangements to allow them to prioritise projects within their devolved responsibilities.

Chancellor of the Exchequer, Philip Hammond said:

“The UK will continue to have all of the rights, obligations and benefits that membership brings, including receiving European funding, up until the point we leave the EU.

We recognise that many organisations across the UK which are in receipt of EU funding, or expect to start receiving funding, want reassurance about the flow of funding they will receive.

That is why I am confirming that structural and investment funds projects signed before the Autumn Statement and Horizon research funding granted before we leave the EU will be guaranteed by the Treasury after we leave. The government will also match the current level of agricultural funding until 2020, providing certainty to our agricultural community, which play a vital role in our country.

We are determined to ensure that people have stability and certainty in the period leading up to our departure from the EU and that we use the opportunities that departure presents to determine our own priorities.”