In December this year an EU directive will come into force which will have implications for you if you plan to draw an income via an annuity from your pension pot after this date.

This is because annuity providers will no longer be able offer a different annuity rate for male and females when calculating the amount of income your pension pot will buy.

Currently annuity providers use a number of different criteria to assess the level of income they will pay to you when you retire, such as your age, gender and where you live in the UK.

Typically a male buying an annuity today will receive a higher level of income at outset than a female of the same age. This because statistically, life expectancy for females is longer than males on average, and therefore annuity income is likely to be paid out over a longer time period.

In theory, this should mean that post December, annuity providers will pay a higher level of income to females than otherwise would have been the case pre-December and conversely a lower of level of income to male annuitants. Whether or not this proves to be the case remains to be seen.

Our view is that if you are male and are planning to buy an annuity sometime this year or next, you might want to consider the option of buying an annuity before December 2012.

Interestingly and perhaps unfortunately, this new ruling has come at a time when more individuals than ever reaching retirement age, having been born in the post war baby boom years.

Your health is another important factor too. Your medical history and / or certain lifestyle factors could mean that you qualify for a higher starting level of income at outset than buying an annuity using standard rates.

Shopping around for the most competitive annuity rate is therefore essential. It also makes sense to seek advice as there are number of other ways by which you can draw an income from your pension pot that may also be worth considering.

Self invested personal pension plans (SIPPS) offer interesting planning angles for business owners. This is because SIPPs can hold investments assets such as commercial property and land. I thought it might be useful to highlight some of the potential benefits.

Buying a commercial property through a SIPP
Owning a property via a SIPP can be most beneficial because of the tax relief on the asset, which effectively means that the property is purchased at a discount price because of the corporation tax relief applied on employer contributions into the SIPP, and / or the income tax relief applied (at an individual’s highest marginal rate) on any personal contribution made into a SIPP. Read the rest of this entry

The preliminary estimated figures announced today by the Office for National Statistics (ONS) once again place the UK economy back in recession.  This is the first time since the 1970s the UK has experienced a double dip recession.

The two consecutive periods of contraction of 0.3% and 0.2%, measured from the beginning of October 2011 to the end of December 2011 and from the beginning of January 2012 to the end of March 2012, confirmed what some of us already suspected.  Although only contributing approximately 7% to the UK Gross Domestic Product (GDP), the 3% decline in the construction industry was seen by many to have a significant bearing on the figures.

What does this mean to me? In essence probably not a great deal other than the word recession seems to endorse a sentiment of pessimism in consumer and household confidence. This sentiment is then generally replicated across businesses, with companies unwilling to invest and grow. At a time when households and businesses should be more optimistic, caution is likely to reign. 

Industry experts believe that until the Government develops a long term and cohesive growth strategy, rather than focusing solely on short term austerity measures we are likely to see much of the same, with periods of relatively small growth and contraction over individual quarters.

Trading whilst knowingly insolvent can result in a financially restorative action against a director.

However as liquidator, perhaps surprisingly, a wrongful trading claim is not the simplest of actions to bring for two reasons.

Firstly, as a Liquidator you need to pin point the exact date when the company director(s) knew or ought reasonably to have known that there was no prospect of avoiding insolvent liquidation. It will be easier to demonstrate this if the director is an accountant! The test for directors competence is set out within section 174 of Companies Act 2006 and states that a director must exercise the reasonable care, skill and diligence of a person carrying out such a role. It follows therefore that ignorance is no defence.

Read the rest of this entry

So George Osborne is apparently surprised that some of the richest people in the country are paying a lot less tax than you might expect, simply because of legal (but presumably unethical, in his view) tax avoidance, and he wants to do something about it.

Some of the “dodgy” tax avoidance techniques he complained about were slightly surprising, because they didn’t sound very dodgy to me: some rich people give so much of their income to charity that they don’t have much left to pay tax on. What is surprising is that anyone would take exception to this. The charitable sector does a great deal of good in areas that the government fails to deal with properly, or chooses to leave to someone else. Donors might well be encouraged by the fact that their gifts are tax-efficient, but nevertheless they are making real gifts — the tax they save is a lot less than the amount they actually genuinely give away.

It seems a shame that the Government, in its desperate attempts to raise more cash, is in effect taxing the charity sector. The Government will listen to representations from charities about the proposed cap on donations that qualify for tax relief, but I think we can nevertheless expect to see charities lose out.

Odd also that this is the same Chancellor who plans to give Inheritance Tax incentives to those who leave at least 10% of their taxable estates to charity.

Over the May Bank Holiday weekend six hardened members of the Critchleys Walking Club will undertake the “Dartmoor Challenge”

This will be a very gruelling walk of 20 to 25 miles over the rugged Dartmoor terrain taking in as many Tors (rocky outcrops, capping hills or high ground) as possible and at least 5 river crossings; all in an attempt try to raise £1,500 for the firm’s nominated charity Against Breast Cancer, an organisation dedicated to funding ground breaking research to improve detection and increase survival after diagnosis.

Andy Lloyd, Jacqui Warner, Martin Wright, Nicola Derek, Terry Still and I will be taking on this challenge and we have been on various practice walks runing up to the big day, and this is what happened on practice walk number three….

On Saturday 10 March we all set off on our third “training” walk.  The venue this time was the Peak District National Park, a little place called Hathersage.

The schedule was to commence the walk at 9am which meant leaving Oxford at around 6.30am. Unfortunately, a certain member in the team based in the North of Oxford thought they lived an hour further up the M1 and arrived 45 minutes late!  The advantage to my car was the fact that we had time to stop for breakfast at Trowell services, trouble was we were still there when the crew in the other car drove past!

On arrival in Derbyshire it was a glorious morning and after we had driven past many cyclists, runners and fellow walkers.  We arrived at the National Trust car park which gave us a deadline of Dusk to collect the cars.

The route was rough on the legs and feet, there were boulders, bogs and hills (or let’s call them undulations or inclines), we had a lunch stop in the windiest cave in existence, it was almost warmer on the ridge than in the cave. 

The sun shone most of the way round and in the areas that we could get out of the wind it was almost tropical, we had a sing song at about 8 miles, and having been in Derbyshire at the start of the walk at one point found ourselves in the City of Sheffield, very confusing.

Towards the end of the walk, Captain Walker (aka Martin) was asked on numerous occasions if this was the last hill – and he replied in the affirmative, there was just a small incline or an undulation around the corner and then we were there.  We have now confiscated Martin’s thesaurus – a hill is a hill after all!

The final part of the walk found us descending towards a river, it was a very steep descent and we were not sure if there was a bridge over the river and low and behalf there wasn’t a bridge but fortunately there were a few strategically placed rocks!

A couple of pints were consumed in the Fox & Hounds, where due to post walk high and the booze (in some cases not all…) the general consensus of opinion was that a blink could serve as a power nap if required!

Now the bit that matters, as you know we are raising money for Against Breast Cancer and would welcome any donations to this very worthwhile cause and to support us in our challenge.

Please follow the link below to the specially designed Justgiving page and if you would like to see more photos of the walks and the amazing scenery please look here

On Wednesday 21st March 2012, the Chancellor delivered a ‘kaleidoscope’ budget. It contained many different elements, which, at first glance, may seem quite small but on closer inspection many planning possibilities rise.

Speculation beforehand was largely about changes to pension tax relief. In the event none of those happened. However, and perhaps somewhat paradoxically, with the changes that were announced pension opportunities abound.

Here is our analysis and we have highlighted a few key planning points.

Budget highlights

• Personal allowance to be increased to £9,205 in 2013/14, and the higher
  rate threshold reduced by £1,025 to £41,450.
• Age allowance to be frozen from 2013/14 and then phased out.

Our comments – The tax free personal income tax allowance is being raised from £7,475 to £8,105 for the under 65s in 2012/13 and is set to increase to £9,205 from April 2013.  This provides a useful planning opportunity for couples where one spouse isn’t working. Income producing assets such as cash savings could be held in the non-earner’s name and thus be tax free. The intention is that the base Personal Allowance will increase and the higher allowances for those aged over 65 and 75 will be phased out so that there will be a universal Personal Allowance for all.

• Limit on maximum amount of income tax reliefs that can be claimed from
  2013/14.

Our comments – Our initial assessment is that this will not impact on you making pension contributions and it is thought to be targeted at loss relief but one of the unintended consequences might be to discourage philanthropists from making significant charitable donations. The detail of this change will need to be examined further.

•  Additional rate of income tax reduced to 45% from 2013/14.

Our comments – This gives high earners an opportunity to maximise pension contributions in 2012/13 and use up any remaining carry forward allowance from 09/10, 10/11 and 11/12 to benefit from 50% tax relief whilst it is still available.

It is worth remembering that the Personal Allowance is lost at a rate of £1 for every £2 of income over £100,000. From 6th April 2012 this will mean that income in the bracket £100,000 to £116,210 will be taxed at 60%. This can be mitigated by making a pension contribution and/or charitable donation.

For example, someone with income of £130,000 in 2012/13 would achieve an effective rate of tax relief of just over 50% by paying £30,000 gross into their pension.

• From 1 October 2012, standard rate VAT will be charged on the provision of self-storage facilities and approved alterations to listed buildings. Standard rate VAT will also apply, where it does not already do so, to the sale of hot food, cold food consumed on the supplier’s premises, sports drinks, holiday caravan purchases and rental of hairdressers’ chairs.

Our comments – VAT on “hot pies” has been grabbing the headlines, but there are some nasty surprises for charities in relation to Listed Buildings-see here.

•  7% SDLT rate for residential properties valued at over £2 million and new
  measures to counter ownership through corporate entities.
• No changes to main pensions tax reliefs.
• Restrictions on the tax relief available on benefits from regular premium life
  assurance policies.
• Child benefit to be phased out where income is over £50,000.

Our comments- . The measure of income will be “adjusted net income” which means it will be possible to make a pension contribution or gift aid charitable donation to bring income down to under £50,000 if it is desirable to do so.

• Corporation tax main rate cut to 24% from April 2012 and to 22% by April
  2014.

Our comments – incorporating your business still makes sense from a tax and NI savings point of view.

• Voluntary cash basis based on turnover for tax on profits of small
  unincorporated businesses.
• An increase from £120,000 to £250,000 in the individual grant limit for EMI
  schemes.
• A further tightening of the car benefit rules through to 2016/17.

The Chancellor’s Budget last Wednesday contained some surprises relating to VAT. He described his measures as “Correcting Anomalies.” Simply put, he’s planning to add VAT to certain goods and services from 1 October. Specifically:-         

• Certain hot food and other “catering”
• Sports Nutrition Drinks
• Self-Storage
• Hairdressers’ Chair Rental
• Holiday Caravans
• Approved Alterations to Listed Buildings

While the addition of VAT to the price of hot pies has grabbed some attention, it is the last point on the list which may cause particular pain. Perhaps that is why HMRC tucked it away at the end.

Current Position
Oxfordshire probably has more than its share of Listed Buildings. The current position is that an alteration to a Listed:

• dwelling; or
• building used for qualifying charitable purposes; or
• building used for a qualifying residential purpose; (e.g. student accommodation; care home; or hospice) can be zero-rated.

There is an anomaly here, in that repairing a listed building is liable to VAT, but putting an extension on it can currently be zero-rated. However, the relief is still extremely valuable. It has helped Oxford Colleges extend student accommodation; Hospices provide further beds; church groups convert disused buildings into village halls; and householders (and not all listed dwellings are mansions) carry out necessary structural underpinning.  Many of these projects would not have gone ahead if VAT was chargeable on the work.

What’s changing?
From 1^st October, the relief is due to be withdrawn. For contracts in place prior to Budget Day, (21 March 2012) work can be zero-rated up until 20 March 2013. Otherwise, any work performed on or after 1 October 2012 will become standard-rated. And HMRC have introduced anti-avoidance rules to prevent getting zero-rating by invoicing in advance of work done on or after 1 October.

What next?
Well, HMRC would like to hear, by 4 May 2012, from those affected by the changes (the consultation document can be found here). This will presumably give time for representations to be considered before MPs debate the Finance Bill. Finances being what they are, I don’t imagine the Government will reverse the measure or reduce the rate of VAT on all building works to 5%, however.  

What I would like to see is a deferring of the start date. In particular for charities who often need to raise funds over an extended period. Adding 20% to a project cost isn’t going to help. So I would like to see a transitional arrangement where a charity may still enjoy zero-rating if say 50% of the funding has been raised.

In the meantime, there are still some VAT reliefs available in particular circumstances if you and your accountants look hard enough…

One of key headline grabbers in Wednesday’s Budget announcement was in respect of the Government’s intention to introduce a £140pw flat rate state pension for all.

Whilst this will be good news for many retirees who perhaps might not have been able to build up sufficient NI contributions to achieved the full basic state pension and the state second pension for employees, what will happen to the state pension for those individuals who are on course to achieve in excess of £140pw?.

This news does feel like a typical double edge sword in that for many individuals to be better off with increased state pension benefits there must be some who will be worse off. Particularly when George Osbourne has said that the changes will not cost the Government anymore than the current state pension system.

Keeping record of everyone’s State Pension entitlement must cost a significant amount of time and resource for the Government, so in effect simplification of the current system could also be viewed as a cost cutting measure too.

Full details have not yet been announced and will follow later in the spring, so it is a case of watch this space in the meantime.

1. Review of the Charities Act 2006. This is being led by Lord Hodgson  and consultations are in progress. The review will also cover aspects of charity law wider than the 2006 Act. Further information about the review can be found on the website  of the Cabinet Office. There are regional events to enable charities to discuss the issues.
2. Online charity registration process. Until recently, the Charity Commission encouraged all accompanying documents (governing documents, trustee declaration, bank statement and other supporting documents) to be attached at the time the online application is submitted. From 1 March 2012 it became compulsory to attach these documents at the point of submission. It is essential that new charities have prepared all these documents in advance of completing the online form, which is particularly relevant if there is an urgent deadline for consideration of the application. For more information, see Charities Commission guidance here.
3. Revised financial reporting standards/SORP. FREDs 43, 44 & 45 (which we described in previous charity newsletters) have been replaced by FRED 46, 47 & 48 and now the proposed effective date is for accounting periods beginning on or after 1 January 2015 – for more information see the Financial Reporting Council information here.
4. Charity auditing. The Auditing Practices Board (APB) of the FRC has published an update to Practice Note 11 (Revised): The Audit of Charities in the UK and a related update to the illustrative charity auditor reports in Bulletin 2010/2 (Revised): Compendium of Illustrative Auditor’s Reports on United Kingdom Private Sector Financial Statements ended on or after 15 December 2010. These updates have primarily been made to incorporate new legislative references to the Charities Act 2011 which became effective on 14 March 2012. The amendments do not require any changes to audit processes and procedures and a formal consultation was not considered necessary. The Financial Reporting Council (FRC) guidance is here and the Charity Commission guidance is here

In 2010, the Government introduced some changes to the laws on charities. Most importantly, there was a new specific definition of what counts as a charity for UK tax purposes. While the change actually allowed some non-UK bodies to qualify for some of the tax breaks previously reserved for UK-only charities, it did impose other restrictions, including that the body had to be registered as a charity (either in the UK or overseas). It also meant that the people managing the charity had to be seen to be “fit and proper”.
Before that, all that was necessary was that HMRC accepted that the body satisfied the conditions to be a UK charity, whether registered or not, and regardless of who managed it.

From 2010 onwards, any charity that wanted to claim the benefit of gift aid had to satisfy the new definition. But there are other tax benefits for charities besides gift aid, and charities didn’t necessarily have to meet the new definition if they just wanted to benefit from these other tax reliefs. That is, until now: from 1 April 2012 all charity tax reliefs will be dependent on satisfying this updated definition of “Charity”.

We expect that the larger charities won’t notice this because they already satisfy the conditions, especially as a lot of them rely on gift aid income. The problem area is the smallest charities which, usually because of issues of costs, have cut corners, but who may now find that they do not benefit from the same tax advantages they previously had.

Might this affect you? Contact us to find out more.

There has been an element of speculation that the Chancellor might introduce a ‘luxury VAT rate’  of 25% in the 2012 Budget. He probably won’t.

But, the beauty of commenting on VAT is that fact is sometimes stranger than fiction so one can make outrageous predictions.

 Here’s two examples we might mention.  

Snack products: rice cakes

Unflavoured = zero rated

Plain rice cakes are not savoury and are also considered to require further preparation before consumption and accordingly are zero-rated by excepted Item 5.

Flavoured (savoury) = standard rated

Flavoured rice cakes are intended to be consumed without further preparation and therefore, as savoury food products obtained by the swelling of cereals and cereal products, under excepted Item 5, are standard-rated. The fact that such rice cakes could be eaten with a topping does not bring them within the auspices of requiring further preparation. Rice cakes including sesame seeds falls within this category.

This view was supported by the decision of the tribunal in the case of Quaker Trading Ltd. Flavoured rice cakes sold by the appellant were considered not to require further preparation before they could be consumed.

Salted = who knows?!

The problem area is salted rice cakes. Lightly salted cakes are considered to require further preparation before consumption; whereas more heavily salted rice cakes are not. However, there is no guideline as to where this borderline falls, and this must therefore be judged on a matter of perception, a consideration of the packaging and how the product is held out for sale.

Flavoured (sweetened) = zero rated

Sweetened rice cakes are prepared items of sweetened food normally eaten with the fingers. However, they are considered to be biscuits within the meaning of excepted Item 2 and are therefore zero-rated. “

And my all time favourite, the “furskin flowchart” for children’s clothes.

Stamp Duty Land Tax (or “SDLT”) is a tax charged on property transactions. It ranges between 0% and 5% of the price paid for a property. SDLT collects a lot more tax for the Revenue than many people realise — it probably collects more than Inheritance Tax and Capital Gains Tax combined. And it would collect more, but apparently lots of people find ways round it.

SDLT isn’t the same as Stamp Duty. Stamp Duty is charged at ½% on share purchases. And actually that gives one way that people dodge SDLT. By putting a property into a company and selling the company, the buyer ends up paying only ½%, not 5%.

Still some people don’t even want to pay ½%, and they are pleased to learn that there are aggressive schemes available which use loopholes in the legislation to get round even that amount. Actually, these schemes can be quite expensive to buy into, but if you are buying a multi-million pound property in London the costs are less than any tax saving. We suspect that the people of Oxfordshire use schemes like these rather less than they do in London, but that is mainly because they are less cost-effective.

We’ve been hearing predictions that the next Budget will have provisions that will make avoidance of SDLT a lot more difficult. Except we’ve heard promises like that before, and they often lead simply to new tax schemes to replace the old ones. Still, it will be interesting to see whether they do come up with something new.

If you want to find out more, contact me on 01865 261100 or email gjackson@critchleys.co.uk

A regular feature during the weeks leading up to the Budget Statement is speculation over the future of higher rate tax relief on pension contributions and this year is no exception – see coverage in The Telegraph article here.

This may be of interest to individuals who are in two minds over whether to consider a substantial contribution before the end of the tax year, and the Carry Forward facility could give them scope to pay more than they’d anticipated.

Note that Budget Day this year is on 21 March, and that it’s not unprecedented for a Chancellor to announce a new measure with immediate effect rather than waiting for the end of the tax year.

Our Budget Seminars on the 22 March will cover this and any other relevant fiscal policies the Chancellor will announce on the 21st go to www.critchleys.co.uk/events for more information.

In one of his final acts as Minister for Employment Relations  Ed Davey released a statement which back tracked markedly on the government’s proposed introduction  of a 3 day notice period for sales in a pre-packed situation.

Read the rest of this entry

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.
Read the rest of this entry

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…