With the new year already underway, the Retail Distribution Review (RDR) countdown for regulated financial advisory firms has really started and firms now have less than 12 months to go. Under the regulators (FSA) new regime, from January 2013 all regulated advisers are required to achieve a new level 4 qualification to highlight core competencies in areas of Financial Services, Regulation and Ethics, Investment Principles and Risk and Personal Taxation. All Advisers will need to apply for and be given a Statement of Professional standing (SPS) by the deadline in order to continue to advise.

At Critchleys Financial Planning LLP, we are pleased to confirm that Jason McGuigan, Chartered Financial Planner and Head of the team has already been awarded his SPS by the Chartered Insurance Institute, 9 months before the deadline and his team are working hard to finalise their applications.  Demonstrating Level 4 is the minimum statutory requirement although all Critchleys Financial Planning LLP advisers are qualified at a far higher level already (Certified and / or Chartered) and as we work on a fee based advice structure,  you can feel assured that you will be in safe hands.

Should you need help from any one of our team ( Jason McGuigan, Ian Brookes and Terry Still) please contact Jason McGuigan in the first instance on 01865 261100

A recent article that I had published in Governance magazine (January 2012), highlights the responsibilities trustees have to produce an annual set of accounts that comply with the charity SORP with particular relation to risk management requirements under paragraph 45.

The full article can be viewed here

It’s interesting to see that the Government is scrapping its plans to abolish the 50% tax rate — at least for the immediate future. I suspect the reasoning has very little to do with raising cash, and is more political.

The 50% rate generally only applies to those with incomes over £150,000 a year, and there probably aren’t that many people in this fortunate position. I suspect that the 50% rate therefore won’t raise that much cash, although we won’t know until all the 2010/11 tax returns have been processed how much has been raised in its first year.

While there aren’t that many people making over £150,000 a year, those that do have taken great exception to the 50% rate. When it was introduced, I thought that moving the top rate from 40% to 50% would just annoy those affected, but they’d accept it because it wasn’t so much of a hike that they’d be bothered to do anything about it. But I think I underestimated the result. People who thought that 40% was “fair enough” seem to think 50% tax is just going too far (especially if there is National Insurance payable on the income as well), and are much more willing to consider tax avoidance schemes that may mean that Government may get less tax off them than before. Some may even consider leaving the UK.

The Government may not care. If the numbers of people affected are relatively modest, the amount of tax gained or lost is probably not that big a deal. It is more likely that they think that it is important to keep the rate simply so that they can argue that “we are all in this together”, and that rich people are being see to do their bit.

Towards the end of 2011 it was announced by the Department of Work and pensions that Businesses with under 50 employees are to be given extra time to get ready for auto enrolment.

To recap, under new pensions legislation certain employees (known as eligible jobholders) must be enrolled into a qualifying workplace pension scheme. It was originally planned that smaller employers (with less than 50 staff) would have had to start complying with the new legislation from April 2014. However, under new proposals, smaller employers won’t have to start complying until May 2015 at the earliest.

Medium-sized employers (50 to 3,000 employees) will also be given new staging dates (this is the specific date on which each company has to comply with the new rules).

The announcement can be found on the DWP website.

My article in Critchleys Comment Autumn 2011 provides further information on auto enrolment

For businesses that claim capital allowances (the tax allowances for depreciation of plant and equipment which can sometimes include building fittings), there are changes in the pipeline that make those allowances a lot less generous.

At the moment, most businesses can write off the first £100,000 of expenditure in any year in full. If they spend more than this, the excess is added to a “pool” and written off over a number of years.

From 1 April 2012, the figure that can be written off in full in any year will drop to only £25,000. And the period for writing off any excess will be extended too.

If you typically spend less than £25,000 in any year on equipment, this change won’t affect you. But if you spend more, there can be significant advantages in bringing forward expenditure to March 2012 that would have happened afterwards. There is no point in buying equipment that you don’t need, just for the sake of the tax saving; but if you were planning on buying it anyway, purchasing before the end of March might save you tax.

If you’re not clear how this will affect you, call us to discuss.

The case of Pressure Coolers Limited v Molloy & Others [2011] UKEAT 0272_10_0906 provides a reminder on handling employees to those who purchase businesses via a “pre-pack” scenario from an Administrator.

In this case Mr Molloy had worked for Maestro International Limited (“Maestro”) for a number of years prior to Maestro entering Administration.

The Administrator enacted a pre-pack sale to Pressure Coolers Limited (“PCL”). It had been agreed that the Administrator would issue letters of redundancy to the employees PCL deemed no longer required, no such letters were sent prior to the completion.

In turn PCL advised Mr Molloy he was being made redundant after their purchase of Maestro.

The Employment Tribunal considered that there had been a transfer of Mr Molloy’s employment to PCL and he was entitled to a claim for unfair dismissal.

The question was, who was bound to discharge this liability: the Secretary of State (on behalf of Maestro) or PCL?

Given the dismissal occurred after the transfer, it is PCL not the Secretary of State who is liable to discharge Mr Molloy’s claim.

Some have commented that this goes against the grain of the rescue culture and amendments to the TUPE Regs in 2006. However, quite simply on a practical basis, it would seem it is now incumbent upon the purchaser to ensure that that the timings of any potential dismissals are enacted in an appropriate manner in order to avoid an unexpected claim such as PCL received from Mr Molloy.”

On 7 December 2011, The Government announced that the proposed date for introducing the Statutory Residence Test had been delayed by a further twelve months. As a result, the uncertainty which pervades the existing residence rules is set to continue. Anyone therefore, wishing to arrange their affairs to become UK or non-UK resident, should take professional advice as soon as possible.
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According to the latest Insolvency Statistics the number of bankruptcies is down 31% from a year ago. In the last quarter, personal insolvencies dropped by 1%, while company insolvencies rose by 2%. However the number of corporate entities entering an insolvency procedure is now 10% up on a year ago, with personal insolvencies down 11%.

The decrease in personal insolvency can be explained by 2 separate factors. Read the rest of this entry

Although death benefits such as individual pension funds do not attract Inheritance Tax (IHT) on transference to a surviving spouse, the net-worth value of the widow or widower will increase and their estate will be valued with the death benefit included. This means that IHT will be increased when the surviving spouse dies and leaves their estate to their children or other parties.

Spousal by-pass trusts are used to divert death benefits to a Trust rather than the surviving spouse therefore avoiding the increase in IHT liability. Problems arise however, when a pension has been moved before death from an un-cashed pension fund (100% payable on death) into Income Drawdown. On death post-drawdown, any lump sum death benefits (payable to a spouse or a Trust) are then taxable at 55%.The spouse can instead take a widows pension (taxable as income) from the fund itself and avoid the 55% tax charge. When the surviving spouse dies, any residual fund will be paid out as a lump sum attracting a 55% tax hit at that point unless the expression of wish (nomination form) directs the pension provider to treat the benefits differently on each death.

The solution is to ensure the provider holds a nomination form from the point that the member goes into drawdown which states that the spouse is the key beneficiary on the first death and the Trust the beneficiary on the second.
Critchleys Financial Planning can provide advice on the treatment of death benefits to your clients’ best advantage.

Contact myself, Ian Brookes or our tax expert Tim Keeley on 01865 261100 for more information.

So, VAT is front page news again. This time due to HMRC’s decision to “clarify” the position of VAT on cosmetic surgery. Essentially, VAT can be relieved on certain activities undertaken “in the Public Interest.” There will, no doubt, be quite a lot of debate about when cosmetic surgery is, or is not, in the Public Interest.

HMRC simply draw a distinction between surgery undertaken as a part of a treatment programme; and surgery undertaken “purely for cosmetic reasons.” Which raises the practical matter of “how will this be policed?”

Will HMRC expect the Surgeon to breach patient confidentiality to support any case where VAT is not charged? This may be particularly relevant where a cosmetic procedure is necessary because the condition is significantly affecting the patient’s mental well-being.

Some practical guidance from HMRC, ideally after discussions with health professionals, would be welcome.

 But I would add a general comment, here. HMRC are quite capable of reviewing an organisation’s website, and general materials, to check that what they are told about the organisation’s operations is consistent with what the organisation says to potential customers. Advertising facilities as “Aesthetic Beauty Centres” is unlikely to help a case for VAT exemption…

From 6 April 2012 the Government has confirmed that contracting out of the State Second Pension (S2P) through defined contribution schemes (e.g. individual and group personal pensions /  stakeholder pensions) will be abolished. It is still possible however to stay contracted out for the current tax year.

To recap, contracting out happens when an employed individual elects to have part of their annual employee national insurance (NI) contributions paid into a private pension of their choice. The amount of NI paid through salary stays the same, however once a year a partial NI rebate is paid as a lump sum into the pension. An individual who is contracted out for periods of time during their working life will generally have a reduced entitlement to S2P, although the main basic state pension remains unaffected.

Pension money built up from being contracted out, is known as Protected Rights. From 6^th April 2012, Protected Rights will become ordinary pension benefits, this means that individuals will no longer have to provide a pension for their spouse/civil partner when they retire – although they can do so if they still want to.

Following the publication of inflation figures for September, HMRC has announced that subscription limits for Individual Savings Accounts (ISAs) for the 2012/2013 tax year will increase to £11,280 – a maximum of half the annual allowance can be saved as cash (£5,640).

It is also worth noting that Junior ISAs (JISAs) will be available from 1 November with a limit of £3,600 for each eligible child per year.

Those who have been saving into a Child Trust Fund (CTF) for their children will not be disadvantaged – the current £1,200 pa savings limit will also treble to £3,600 from 1 November, thus aligning these savings plans with the new JISA limit.

At the start of this month, I attended the Institute of Financial Planning’s annual Conference which again proved to be valuable time well spent listening, learning and reflecting on the speakers provided for our benefit.

One speaker particularly stood out this year, and I thought I would take the opportunity to share some of the key points raised by the renowned American financial commentator, Nick Murray. Read the rest of this entry

In my email blog last week, I covered the benefits of investing into longer term fixed rate deposits to provide certainty of return – 4.65% pa was a quoted 5 year rate at that point.

Well what about an investment with an inflation linked hedge instead?

As the National Savings Indexed linked certificates were withdrawn recently, I was interested to read about the 3 and 5 year indexed linked bonds offered by the Post office (via Bank of Ireland).  Save for a 3 year fixed term and receive the annual RPI inflation rate plus 0.25% gross / 0.24% AER fixed each year, paid at maturity. Save for a 5 year & 1 day fixed term and receive the annual RPI inflation rate plus 1% gross / 0.98% AER fixed each year, paid at maturity. If the annual RPI inflation rate is 0% or below in any year, you will still benefit from the fixed return for that year (paid at maturity). Read the rest of this entry

It is estimated that six million people will receive tax refunds this week averaging £400 as HMRC have overcharged them. The repayments are likely to total more than £2.5bn in excess payments which date back to 2001. On the other hand another 1.2m people — including 150,000 pensioners — are likely to receive a bill for an average of £600. Read the rest of this entry

With bank base rates still holding at 0.5% and with the likely-hood of this remaining into the near term while the UK struggles to come out the recession, the plight for UK savers continues.

Regularly, we see people coming out of decent maturing 4 or 5 year fixed rate bond accounts which were taken out when interest rates were substantially higher and those savers are now discovering the harsh savings reality of 2011. i.e:

• low interest rates
• high inflation
• uncertainty

So, the choice you’re left with is less than ideal. Either you wait and see – take a short term hit in the expectation that things will improve in the next year or two OR you take a long term savings product, such as another 5 year fixed rate bond, and risk being locked into an uncompetitive rate later on.

So is a 5 year fixed rate bond, the right place to put your money? Read the rest of this entry

HMRC have recently issued further guidance on the VAT treatment of salary sacrifice schemes.Where an employer charges an employee for benefits, this has always been seen as a supply for VAT purposes. This has applied whether the employee pays cash, or by deduction from salary. Clearly, the nature of the benefit determines whether VAT is due from the employer. Childcare vouchers, for example, would not normally be VAT-able, nor would insurance, including PHI. The change relates to salary sacrifice, i.e. where the employee accepts a lower salary in return for the benefit. Read the rest of this entry

As publicised, twenty high-profile UK Economists have lobbied the Financial Times (FT) with a letter urging the Government to cut the 50% tax rate ‘at the earliest opportunity’ to aid economic growth.

The economists who include two former members of the Bank of England Monetary Policy Committee argue that the tax of 50p in the pound for earnings over £150k is rendering the UK uncompetitive and an unattractive destination for foreign investment, entrepreneurs and a talented workforce.  It is also argued that the UK’s wealthy tax payers may relocate to tax havens in order to avoid the higher rate. Read the rest of this entry

It was announced in the June 2010 Emergency Budget that, following a successful pilot, HMRC would use private debt collection agencies (DCAs) operating under industry and HMRC standards to boost HMRC’s debt collection capacity and help the pursuit of lower value debts.

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A warning that in a new policy, HMRC is refusing Time to Pay (TTP) applications where dividends are used as a form of remuneration.

TTP, introduced in November 2008, normally allows companies and individuals to defer and pay by instalment any taxes that they owe, in a bid to assist with temporary cash flow problems. 

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From 9 August 2011 tax payers  will no longer be able to use HMRC’s Bank of England accounts. Payments made into these accounts will no longer be accepted.

Unfortunately you may be charged a penalty and interest if your payment is not received by HMRC by the agreed deadline date so please take a note of the new arrangements.

Details of how to pay can be found on HMRC’s website

As financial planners, we are regularly asked about the pros and cons of making pension contributions versus making contributions to ISAs and the decision to invest in one over the other is not clear cut. Although the rules around how and when pensions can be taken have become far more flexible following the April 2011 rule changes, there are still several reasons why people rule out pensions as an investment. Read the rest of this entry

This week, HMRC has launched details of an ”initiative” for businesses with turnover above the VAT threshold of £73k but are not VAT registered to declare their unpaid taxes. Read the rest of this entry

On 7 June I had the pleasure of presenting a summary of the tax implications arising from the 2011 Finance Bill at the Association of International Accountants (AIA) Taxation and Tax Planning Conferences in London and Nottingham.
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As of 6 April 2011, employees can now claim 45 pence per mile for the first 10,000 miles of business use. This figure is an increase from the previous rate of 40 pence per mile. The 25 pence  per mile rate which applies to additional business miles per year is unchanged. These rates (45p and 25p) are called Approved Mileage Allowance Rates or AMAPs.

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