More on the budget....
“48 hours after the Budget, the furore is dying down and one can see the individual trees in the forest,” says robinson+co’s Tax Partner, Victoria Bishop, mixing her metaphors.
“However, there are still matters to be clarified, including a couple of points of particular importance to the clients of robinson+co.”
One of these is how the new averaging rules for farmers will work. Farmers – along with authors and creative artists – are able to average 2 years of profits for tax purposes, which is intended to smooth the taxation profits of trades where profits can fluctuate wildly.
From 6 April 2016, it appears that farmers – but apparently not authors and creative artists – will be able to stretch this to five years – but how? We will be watching the publication of the Finance Act and reading it carefully so we can start to advise clients as soon as possible.
Another query relates to the Annual Investment Allowance (“AIA”) about which Victoria wrote on only 3 March (click here). It was announced that the AIA will decrease from 1 January 2016 – but not as far as £25,000. Until an actual figure is announced it is impossible to advise clients with any certainty. “Just check with us before committing to any extraordinary expenditure,” says Victoria. “We would hate you to miss out on valuable tax relief for the sake of a phone call or email!”
A third query is in response to the fact that Class 2 NIC – paid by the self employed – will be abolished. Whilst this is good news, the associated announcement that there will be a review of Class 4 NIC – also paid by the self employed but with no social security or benefits reason – will be reviewed. Let’s hope we are not jumping out of the frying pan and into the fire.
The next concern is the proposal to abolish tax returns. In their resumé issued on Budget Day, Victoria and Brett Bennett, our Tax Manager, indicated their immediate unease with this idea – and not just because it an immediate reaction was “what about our jobs?”
Other tax and accountancy professionals have similar concerns to Victoria and Brett:
- Successive governments’ history of failure with IT projects;
- Monthly returns will increase the bureaucratic burden on businesses;
- Monthly return will increase business’ accountancy fees;
- It will force some taxpayers into using technology they don’t want to – and let’s remember that it will be many years before the whole population have grown up with computers and the like;
- It’s simply a return (no pun intended!) to pre Self Assessment days when even more taxpayers than now were literally years behind with their tax (although not clients of robinson+co!).
But let’s now turn to better news: a tidy up of the rules relating to “benefit in kinds” and “dispensations,” all from 6 April 2016. These mean a lot of paperwork for employers for little if any tax take for the Treasury:
- There will be no need for employers to report to HMRC details of expenses paid for employees – as long as the expense, if paid by the employee would be tax relievable. This is great news and applies for things such as professional subscriptions, and travelling expenses other than the 45p per business mile rate
- “Trivial” benefits will also no longer need to be reported to HMRC. This applies where the benefit is less than £50 and not a cash voucher, and will apply to things such as a Christmas turkey or the one-off use of the business van over a weekend
- There will be no difference between people earning above or below £8,500 when it comes to calculating benefits in kind such as living accommodation. This was always a nightmare for people sitting tax exams and is a welcome abolition
The tightening of the rules on company cars continues though as the rates for taxation of the company car increase ever more, as the government tries to encourage “green,” low CO2 emission travel.
Victoria (finally) finishes with a warning: “Many of the
measures above, and those discussed on Wednesday, will be legislated in a ‘future’
Finance Act. In view of the coming
election what does ‘future’ mean? If it means a Finance Act after the election,
then who knows what will happen? Perhaps the new government (of whatever
political hue) will simply ignore these measures and introduce new one.”