Welcome to Harbour Key's December 2016 e-newsletter.

Cash is King

November was again a busy month for our business.  One of the main issues where we have been assisting clients is dealing with HMRC regarding debt management.  HMRC are becoming a lot “sharper” and aggressive in collecting outstanding tax and getting outstanding returns filed.  If a HMRC debt letter is received it needs to be acted on immediately by contacting HMRC to put in place a time to pay arrangement.  December and January are generally tough months for business cash flow, with many businesses having to fund corporation tax payments and VAT, in addition to paying bonuses/dividends so that director/shareholders can settle their personal tax bills. 

Keeping on top of cash flow is critical at all times, but particularly at this time of year.  See our tips.

Autumn Budget Summary

The Chancellor delivered his first and last Autumn Budget Statement in November!  One of the most interesting points in the Statement was the one with the least amount of supporting detail,  the announcement that HM Treasury would be reviewing 'incorporation'.  It's not clear what 'incorporation’ means - is it the act of incorporation, or is it the taxation of a business once incorporated? Is it the introduction of see through companies for tax purposes, or is it the re-introduction of close company apportionment for undistributed profits to prevent money-boxing?  Close company apportionment (taxing profits held in the company on its owners) has been raised previously in another consultation at the start of the year and we had hoped, been kicked in to touch.  We will be keeping our eye on this review!

Child Benefit

It is common knowledge that if one parent earns between £50,000 and £60,000 a year, a 'high income child benefit tax charge' is levied on that £50,000+ income, which has the effect of reducing the child benefit payment. If one parent earns over £60,000 a year, the tax charge means the child benefit payment is completely cancelled out, resulting in what is known as the high income child benefit charge.  This charge has meant that a lot of high earning parents do not bother to claim child benefit.  In not claiming, you could be impacting your right to claim a full state pension in the future (and possibly other benefits).  For state pension you need 35 years' worth of NIC credits or contributions and those without a full record can only claim a reduced pension.  If you are a parent claiming child benefit for a child under 12, you'll automatically get NI credits towards your state pension record if you don't work, or don't earn at least £5,824 per year. If you were claiming child benefit at the time means-testing was introduced in January 2013 and have since stopped claiming even though you're still eligible, there won't be any impact on your state pension entitlement, as under transitional rules you'll continue to get NI credits.  However, those whose have had children after January 2013 need to register which can be done in two ways:

• Claim child benefit as normal, then your partner pays tax on it.Claim child benefit, but at a 'zero rate'.
• You won't actually receive any child benefit but, you will get NI credits. To apply for this zero rate child benefit, tick a box on the child benefit application form.

Act now so as not to miss out.

Advanced Payment Notices (“APNs”)

We have reported and advised on HMRC’s APNs previously since their introduction two years ago.  November saw a number of taxpayers receive APNs or the initial warning letter, in respect of film partnership planning arrangements, following successful court actions by HMRC.  On the receipt of APN it is important to take action, otherwise late payment penalties or surcharges become due and with potential enforcement action being taken to recover the tax.  If you can’t pay the tax, then you should contact HMRC immediately to discuss payment options. 

HMRC are feeling very bullish currently with regards to aggressive tax planning arrangements, having won so many cases, as reported in our October newsletter. 

We have also been notified by one of the main providers via clients who acquired their products, that based on the recent Tax Counsel’s opinions and court decisions, they are no longer going to defend any HMRC challenges.

Staff Christmas Gifts

A quick reminder for those who give gifts to their employees at Christmas.  If you decide to give your employees a cash bonus, this will be treated as taxable income and subject to tax and national insurance, the same as other cash earnings.  Alternatively, if you decide to give an actual present, say a turkey for their Christmas dinner, this will be exempt from any tax or national insurance payments, provided the gift is defined as a trivial benefit. A trivial benefit gift is one which is of low cost (say £25 to £30 maximum), the gift is for general welfare purposes and the cost in administering the tax and NIC is disproportionate to the value of the tax/NIC.

London Office Space Available

One of our clients who is expanding their operations, is leaving their office site just off Portland Street Tube Station.  If anyone is looking for central London office space we can provide further details if interested in the space. Contact us.

May we take this opportunity to thank you for all your support over the year.

Please note our offices will be closed from Friday, 23rd December 2016 until Tuesday, 3rd January 2017 inclusive.

Dates for your 2016 & 2017 diary

• 13th December – Access to Finance Clinic at Growth Hub. Book a space here;
• 1 January 2017 – Financial Reporting Standard 102 will apply to company accounts;
• 31 January 2017 – Self Assessment filing deadline / due date for balancing payments and payments on account;
• 17 & 18 May 2017 – Gloucestershire Business Show – Cheltenham Racecourse.

Our Partnerships.