Tax Tips and More Autumn 2017
Winter is Coming... Preparing for the GDPR?
Can I Make a Claim for my Home as an Office?
Top 10 Tech Tools for Start-ups and SMEs
The GDPR is coming and will take effect from 25 May 2018. It is now time to stop talking about the changes and start taking action to make your business compliant.
The simple answer is, of course. However, there are three options to consider: fixed rate allowance, actual expenses and charging rent.
If you are an entrepreneur or have a small team with huge responsibilities, you will need the correct tools to make sure your business runs efficiently.
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Contents
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Welcome and Partners
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Special Feature Winter is Coming... Preparing for the GDPR?
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Making Tax Digital and Your Business
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Why you Should Still Invest Offshore
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Can I Make a Claim for my Home as an Office?
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Xero Add-On Arthur and Xero
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Raffingers Foundation Charity Ball 2017
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Client Story Time to Refinance Your Business Loan
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HMRC v The Rest (Including Rangers) – 22 -3 With one Score Draw
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Top 10 Tech Tools for Start-ups and SMEs
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Employee Spotlight
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Inheritance Tax (IHT) The Basics
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“Old Friends…”
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Welcome to our AUTUMN Newsletter It seems a month does not go by when we are not talking to clients about yet another legislative change. Lately it has all been about the GDPR, which is coming into force on 25 May 2018. These changes will affect all businesses and are impossible to ignore. We, ourselves, have already begun to review our data and security processes and put plans in place to make us compliant by the start date. If you are putting off thinking about the GDPR, we really recommend you start now. Businesses that show genuine intent of making changes and making their business compliant will be a lot better off than those who do not do anything. To guide our clients and local businesses we are holding a series of webinars throughout November and December to discuss the changes and what businesses need to do to comply, to find out more or to attend contact ingrid.beya@raffingers.co.uk. As well as the GDPR, we are pleased to bring you articles on Offshore Investments, information on whether you can claim your home as an office and the Top 10 Tech Tools for Start-ups and SMEs. As always, if you have questions on any of the articles discussed, please contact one of us. We hope that you find this edition useful. If you would like to contribute to our next edition, please get in touch.
Raffingers Partners
Gary Inglis Managing Partner gary.inglis@raffingers.co.uk
Andrew Coney Partner andrew.coney@raffingers.co.uk
Lee Manning Partner lee.manning@raffingers.co.uk
Adam Moody Partner adam.moody@raffingers.co.uk
Suda Ratnam Partner suda.ratnam@raffingers.co.uk
Barry Soraff Partner barry.soraff@raffingers.co.uk
The Partners at Raffingers Paul Dell Partner paul.dell@raffingers.co.uk
Roy Butcher Partner roy.butcher@raffingers.co.uk
Neill Staff Partner neill.staff@raffingers.co.uk
Winter is Coming... Preparing for the GDPR? SPECIAL FEATURE
Unless you have had your head buried in the sand, it is impossible for you not to have heard about the General Data Protection Regulation (GDPR). The GDPR is coming and will take effect from 25 May 2018. The date is getting closer, which means it is time to stop talking about the changes and, actually, start taking action to make your business compliant.
What is the GDPR? The GDPR will supersede the outdated Data Protection Act (DPA) and will bring in tighter rules concerning the processing of data. People will have more say over what businesses can do with their details, which will affect how you use customer and prospect information. The GDPR will also address electronic data storage and will introduce tough fines for non-compliance and breaches. The GDPR will apply to all personal and sensitive data as a way to safeguard and give more choice to individuals. Going forward, you will be required to provide opt-in options to all customers and prospects and make it clear during this process what their information will be used for. You must also have ‘evidence’ that you can contact an individual before doing so. The government has also introduced several new principles including the “right to be forgotten” and the “right to object” clause, which will allow individuals to object to their details being used, shared, transferred or held. Upon request, you must remove an individual from all communications immediately.
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What you can do to prepare for the GDPR changes? Failure to comply can result in businesses being fined up to €20million or four percent of the business’ worldwide turnover. In order to avoid this becoming a possibility, there are several processes you must become acquainted with. To prepare for the changes: • Only use the medium you are authorised to use: You are obligated to only contact an individual using the channel they have opted in to. • Unsubscribes are not to be contacted: If an individual has actively asked to unsubscribe, it is important to refrain from contacting them again. You should never contact them to ask if they wish to be subscribed back to your content. • Alert everyone: Make sure that everyone in your business, especially those who have access to your data are aware of the GDPR. Otherwise you will be held directly responsible if your employees are still emailing contacts or breaching the law. • Reconsent your active users: Using the medium that the individual has consented to, ask them if they would like to remain on your database. You can, however, use this as an opportunity to ask if they would like to be kept up to date via other forms of communication. (Please note, if you do not have evidence that
Conclusion
you can contact an individual, be careful about asking them to opt in as this is still seen as a method of processing data, which is illegal if the person has not authorised it).
By May 2018 it is important that you can demonstrate that you are abiding by the new regulations and can show a process/ plan you have put in place to make your company compliant. It is those companies that have not even thought about the GDPR by May 2018 who may suffer the consequences.
• Data Protection Officers (DPOs): You must appoint a DPO if you: - are a public authority - carry out large scale systematic monitoring of individuals (e.g. processing personal data for behavioural advertising) - carry out large scale processing of special categories (e.g. sensitive personal data, such as ethnic origins, religious beliefs etc.) If you are not required to appoint a DPO you should keep records of all your decision making processes in regards to the GDPR.
Fines will not be as harsh for those that have a plan in place and show genuine intent of making changes.
• Safety, encryption and risk: With data protection soon to be stricter, so should your internal processes. You should take extra precaution to ensure that data is safeguarded and make sure regular tests take place. We also recommend you have a breach response plan in place.
You then need to develop a strategy to make your business compliant for the GDPR and ensure you document everything you are doing.
• Establish retention periods: Over the course of time, some users will become inactive or unresponsive. Establish retention periods so you can keep your data accurate and your database responsive.
Final guidance is expected shortly, but we advise you don’t wait for this. It is clear what changes will be implemented so it is better for you to begin planning sooner rather than later. We recommend that you carry out an initial audit (data map) to see what your business’ processes currently are. You also need to begin asking the following questions: Do we send mail shots to individuals? Do we have evidence that individuals have subscribed? Where do we store all our data? etc...
Going forward, you will need to put in place privacy notices and clearly communicate to your prospects and customers what data you are capturing and why. For further guidance contact: Suda Ratnam 020 8418 2681 suda.ratnam@raffingers.co.uk
An Introduction to GDPR | Webinar For charities: 9 Nov @ 11am For those in the hospitality sector: 7 Dec @ 11am For all other businesses: 13 Dec @ 11am Register with ingrid.beya@raffingers.co.uk
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Making Tax Digital and Your Business You already bank and shop online, now it’s time to do your tax! WHAT IS MAKING TAX DIGITAL (MTD)? MTD is a government initiative that sets out a vision for a new digital tax system. It will mean that you will need to begin keeping digital records of your accounts. That means tracking all transactions in a digital software as you go along. You will then be required to submit this information to HMRC quarterly. The good news is that through keeping digital accounts you will have a real-time view of your cashflow anytime, anywhere.
SPREADSHEETS Don’t panic, spreadsheets can be considered as digital records. BUT, your spreadsheets must meet MTD requirements and combined with a software product so that the digital update to HMRC can still take place.
WHAT MTD MEANS FOR YOU MTD does not mean four tax returns a year! Instead, you will be obligated to provide summary data to HMRC quarterly and end of year activity by 31 January. Quarterly Data
End of Year Activity
This data will need to be submitted a month after the quarter end, for example, the period 6 April 2020 to 3 July 2020, will require a summary of your data to be submitted on 3 August 2020. Your emerging tax liability will then be reflected to you by HMRC.
Summary updates are not classed as a return, which means you must also complete your end of year activity and produce an end of period statement to show net profit or loss for the accounting period. This must be completed by 31 January and is liable to compliance checks.
WHAT’S CHANGED? Presently...
Under MTD...
No set way of keeping records - paper, desktop, online etc... 99% file their VAT returns online, often on a quarterly basis Many keep digital records, but calculate VAT separately
Everyone will keep digital records using software or an app Everyone will generate and submit a VAT return from their digital records Software will interact with the digital records so updates can be sent and checked easily
*Alternative arrangements for those digitally excluded will be made. WHO’S AFFECTED? APRIL 2019 | Businesses that are VAT registered and above the VAT threshold will be required to keep VAT records digitally and to submit the VAT return via the bookkeeping software, rather than HMRC’s online gateway. APRIL 2020 | All businesses will be required to comply with MTD for Income tax and NI and submit quarterly financial information. For advice on making your business MTD compliant contact lee.manning@raffingers.co.uk 6
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Why you Should Still Invest Offshore By Sheriar Bradbury, Bradbury Hamilton If you hold an offshore investment bond it is very likely that you would have received a letter in recent months about the need to declare previously undeclared income with HM Revenue and Customs (HMRC). The aim of this letter is to scare individuals into declaring all their offshore income, whether it is from offshore investments or from offshore property. In this piece I want to take you through the benefits of investing offshore through an investment bond. We recommend individuals to invest offshore through an investment bond. An investment bond is a product that allows regular withdrawals of up to 5% of the original amount invested each policy year, without triggering any immediate tax liability. If the allowance for any one policy year is not used it can be carried forward to another year. The key thing to remember is that the tax charge is only deferred. When the bond is encashed, withdrawals will be considered in the chargeable surrender calculation and taxed as income in that tax year. The main benefit of an offshore bond over an onshore bond is the fact that it does not pay tax within it (or very little). In contrast, an onshore bond is deemed to have paid 20% within it (even if the effective rate is much lower which it typically is). This means that an offshore bond benefits from the compounding effect on income and gains, rolling up gross which can make a big difference to the overall return. On the surrender of an offshore bond, a higher or additional rate taxpayer pays tax at the higher (40%) or additional rate (45%) on any chargeable gain. A basic rate tax payer pays 20% on any chargeable gain and when the gains fall below the basic rate threshold for tax, 10% is applied. Top-slicing relief will be available to a basic rate taxpayer who becomes a higher rate tax payer on receipt of the bond proceeds, or higher rate tax payers pushed into the additional rate band. Top-slicing is a process where the gain is divided by the number of full years held to determine whether a reduced tax bill is possible. This reduced gain is added to taxable income in the year of surrender, which may avoid higher rate and additional rate income tax on very large taxable gains. The benefit of deferring tax on offshore bonds is particularly attractive for those that potentially will be
The main benefit of an offshore bond over an onshore bond is the fact that it does not pay tax within it (or very little). on a low income in the future. If you consider that the personal income allowance is now £11,500, plus £500 savings allowance and an additional £5,000 for the personal savings allowance. This means £17,000 of income can be taken by surrendering part or all of a bond without paying any income tax. For example, if John Smith received no other income apart from his state pension of £6,359.60 per annum and a small pension of £1,640.40. This would give a total annual income of £8,000. It would allow him to receive gains from a bond of £9,000 before having to pay tax. If we assume Mr Smith had originally invested £50,000 into an offshore bond five years ago and the policy was now valued at £80,000. This would give him a gain of £30,000. If Mr Smith decides to surrender the policy this gain is then top sliced over five years (£30,000 divided by five), which gives him an average gain of £6,000. When this gain is added to his other income it gives him a total assumed income of just £14,000 so there would be no tax to be paid. As the policy was held offshore no tax would have been paid within the plan or on surrender, making it very tax efficient. Points to note are that the calculations for the tax on the surrender of bonds with larger gains can become more complicated as some of the personal allowances are either reduced or completely removed. Also, the fact that offshore bonds are typically more expensive means that they should only be chosen in the right situation. For further financial planning advice visit: www.bradburyhamilton.co.uk or call Sheriar Bradbury on 020 7220 7274
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Can I Make a Claim for my Home as an Office?
The simple answer is, of course. However, there are three options to consider. 1. Fixed rate allowance HM Revenue & Customs (HMRC) allows a flat rate of £18 per month without the need to maintain receipts or bills. An expense claim is made to the company, much like you would if you made any other claim as an employee. The benefit of this method is that it is simple to operate, and this allowance will not be required to be disclosed on your self-assessment return. But, as is often the case, may not reflect the true costs incurred by those working from home on a regular or permanent basis. 2. Actual expenses The rules for directors and employees of limited companies differ from those of the self-employed, in that only the incremental cost of working from home can be claimed. This means any costs that would have been incurred anyway, such as the fixed costs of insurance, rent and council tax, are immediately ignored. The variable costs must then be reasonably apportioned between personal and business use. Typically, apportionment would take into account time spent working from home, and the area of the overall floor space used. This method gives a more favourable result if significant time is spent working from home. Preparing the expense claim, which also does not need to be included on your self-assessment return, will be a little more complex to calculate. 3. Charge a rent Instead of making an expense claim, you could charge the company a rent. However, you will need to consider: • Putting a license in place that permits the company to use your home for business purposes • If you rent your home whether your landlord 8
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permits sub-letting • The rent charged must be at a market rate • The room must not be used exclusively for business purposes • The rental income must be declared to HMRC via your self-assessment tax return • If you co-own your home, then the rental income and income tax liability is split accordingly The area that HMRC would be most interested in is how the rent charge has been determined. If you have overvalued the rent charge then HMRC will not allow full tax relief in the company’s corporation tax computation. You would still need to pay income tax based on the full rent received, so it is important to ensure the rent charge is not excessive. Calculating market rent There is no set method for determining a rent charge, but some strategies include: • Getting an estimate from an estate agent • Finding out how much it would cost to rent a similar sized office space in a business hub • Calculate the business proportion of household costs and add a mark-up. This time you can include fixed costs such as insurance, mortgage interest, rent etc. The self-assessment tax return of the home owner(s) Paying a market rent works particularly well if implemented correctly. The company will obtain tax relief on the rent it is charged while you need only pay income tax on your rental profit. This means the business proportion of the costs calculated can be used to reduce the amount of rent received that is subject to tax for you personally. If the home is jointly owned then the profit on the rent is split between the owners, and declared to HMRC accordingly. To see if you can benefit from charging rent, contact Andrew Coney at andrew.coney@ raffingers.co.uk.
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Arthur and Xero Centred Property Management
XERO ADD-ON
Property management is stressful; anyone involved in the business knows that. But, it can be simplified. One of the best ways to help make your life easier is to systematise and that is what Arthur Online does. Arthur is revolutionary property management software that connects your team, tenants, landlords and contractors together, with the property manager at the centre. There will always be a million moving parts, but there is only one software that has control over all of them in the palm of your hand. As the property manager, you can view incoming tasks from tenants, assess the situation and decide on the best course of action. From here, you can assign contractors, or handle the issue yourself, quickly and easily. For the tenant, they are able to easily communicate with the property manager whilst seeing an updated activity list so they know what is happening to fix their problem. This transparency ensures that what can often be a fractious relationship, remains calm and at arm’s length.
seamless integration, property financials have never been easier. Rent reconciliations are able to be completed on a single screen, with invoices from Arthur matching against payments in Xero. At the tap of a button, your rent reconciliation is completed in minutes, with no double entry. Furthermore, as one of our clients commented, rather than having to “rely on memory” or “continuously check a calendar” to see when rents are due, the automated generation of invoices in Arthur meant it was impossible to forget when rents were due. This isn’t even to mention the fact that disbursement charges against tenants and invoices raised within Arthur by contractor’s sync with Xero too. The integration truly is a powerful thing. When connected, P&Ls can be produced on a property by property basis, ensuring you know which property is costing you money and which one is making you money. The synchronisation means that you are at the top of the property and accounting game.
By using Arthur and Xero together, through their
Find out more at arthuronline.co.uk Email: sales@arthuronline.co.uk
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Raffingers Foundation Charity Ball 2017 Registered Charity Number: 1171885
We are pleased to announce that Raffingers Foundation raised over £12,000 for Pancreatic and Ovarian Cancer causes at their first charity ball. Over 100 people attended the ball at the Marriott Hotel in Waltham Abbey on Saturday 16 September 2017. The event was hosted by Lee Manning, Partner at Raffingers and featured live entertainment from Frog on a Rocket, a silent auction and raffle. Raffingers Foundation is run by volunteers, which means every single penny raised goes directly to the causes they support. These are: • Research projects conducted by Pancreatic Cancer Research Fund and Ovarian Cancer Action. • To financially help those directly affected by pancreatic and ovarian cancer. This money can be used for counselling, support and days away for the families. (For further details and applications for the fund, contact lauren.aston@ raffingers.co.uk.) Launched in 2016, Raffingers Foundation has already raised nearly £20,000 and we will be making their first donation to Pancreatic Cancer Research Fund and Ovarian Cancer Action in December of this year.
£12,000 raised for pancreatic and ovarian cancer causes. To donate contact charity@raffingers.co.uk. of supporting local charities. Instead, due to personal losses within the firm, a decision was made to support charities closer to the firm’s heart. Lee Manning, Partner at Raffingers and Chairman of Raffingers Foundation said, “The Raffingers Foundation Charity Ball was a great success and we cannot believe how much we managed to raise. We would just like to thank everyone that came out to support us as well as all of those who donated a raffle or auction prize. This is a charity very close to our hearts and we really appreciate everyone who donated and contributed to making the night a success.”
Raffingers launched Raffingers Foundation after years
Cloud Drop-In | 3 November | 2pm - 6pm Support for your cloud accounting software. Whether you would like further training, advice on using the software more efficiently or have a specific question on your data, our cloud team are here to help. Contact lauren.aston@raffingers.co.uk to book your FREE appointment at our cloud drop in.
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Time to Refinance Your Business Loan? CLIENT NEWS
Recently we helped one of our clients refinance a number of short-term, high-interest loans. Here’s how... What was the Challenge? The owner of one of London’s foremost specialist guitar and amp dealerships, and one of a number of music-based retailers on Denmark Street - a street steeped in musical history - was looking for help to refinance a number of short-term, high-interest loans that the business had taken over the course of the last year. How did Raffingers help? Raffingers introduced the client to Capitalise.com. The client had found themselves in the unfortunate situation of being engaged in loan facilities with several different short-term, high-interest lenders. Initially, the client was not particularly hopeful for a quick resolution, and was content to look for similar facilities whilst waiting for one of these facilities to end.
HMRC v The Rest (Including Rangers) – 22 -3 With one Score Draw HMRC are successfully cracking down on tax avoidance structures. If you’ll excuse the footballing analogy, in 2016/17 HMRC played 26 “matches”, won 22, lost three and one result was a “score draw”. Whilst HMRC’s coach would undoubtedly claim that their team played really well, their results are slightly down on the 2015/16 “season”. Although, to be fair (not something I’d normally be accused of with HMRC) they’ve had two consistently good “seasons” and every prospect of this continuing during 2017/18. Figures released by HMRC show that they generated a record compliance “profit” last year of almost £29billion from their anti-tax avoidance and evasion campaigns. Apparently, this is worth about 25% of the total NHS budget or slightly more than the average premier league club salary bill! 12
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The Capitalise.com platform had identified that the client could be suitable for more competitive, term lenders - and their recent financial performance indicated that they might be successful. In the end, Capitalise.com were able to introduce these lenders to refinance £80,000 worth of debt at a far more competitive rate, and significantly lower monthly repayment - helping to free up much-needed working capital that could be deployed back into the business. Outcome Loan type: Working Capital Loan / Refinance Amount: £80,000 Need help with financing for your business? Roy Butcher 020 8418 2673 roy.butcher@raffingers.co.uk
On a more serious note HMRC continue to be successful in most tribunal and court cases involving tax avoidance structures and schemes with the courts being very much minded to try and find an interpretation of the law which sides with HMRC. Only the most optimistic of tax payers would consider entering similar structures in the current environment. For most historic tax avoidance structures, there have been settlement opportunities offered by HMRC but in the main these have now been withdrawn. Accelerated Payment Notices demanding the payment of the tax due even before a case has been heard by the courts, have been issued for a large number of structures and legislation is imminent which will achieve the taxing of loans from Employee Benefit Trusts by April 2019. For anyone still involved in complex tax avoidance structures it really is the last chance to try and reach agreement with HMRC as they are well set for another good “season” in 2017/18. If you are concerned that you have been involved in a tax avoidance structure or would like advice on your tax affairs, contact Gary Inglis at gary.inglis@raffingers.co.uk.
Top 10 Tech Tools for Start-ups and SMEs Running a start-up or SME can sometimes be a challenge for many reasons. A recurring theme seems to be lack of funds, lack of staff and lack of time to complete certain tasks. If you are an entrepreneur or a have a small team with huge responsibilities, you will need the correct tools to make sure your business runs efficiently and that your team are super productive! Social Media - Promote and showcase your company for free! Facebook alone has two billion active users...that’s a lot of potential customers! Hootsuite - Save time by scheduling your social media posts in advance. It is also free. Xero - A cloud accounting software which is great for small businesses. You can easily keep on top of your cashflow, manage budgets and view balances on the go. Dropbox - This software enables you to store your work safely on the cloud. With the app you can sync your documents across different devices and add users to edit files. Mailchimp - Now you have some clients you need to find a way to retain them! Mailchimp is an email marketing platform which allows you to schedule regular eNewsletters and keep a tab on your customers. Trello - A project management application that allows teams to organise and prioritise projects in an easy way. You can add work projects, allocate team members and even integrate software like Google Drive...it is also free! Fiverr - Being a start-up or SME, it may be hard to find funds to pay individuals for certain services. Fiverr is a marketplace that allows you to choose from various affordable freelancers. Dashlane - Never forget a password again with Dashlane! This app remembers and securely stores passwords. Great if you have many accounts, also helps generate new passwords to prevent hacking. Google Docs - This allows you to create, edit and share documents on your computer, tablet or smartphone. It is a great alternative to Microsoft Word, free and extremely simple to use! Eventbrite - Plan, promote and sell tickets to your event. Not only can you find great business events to network in, you can also create your own events to attract customers.
Employee Spotlight In this slot we introduce you to a valued member of our team, allowing you to put a face to a name. This quarter we speak to our Assistant Audit Manager, Shafiq UrRehman. Name: Shafiq Ur-Rehman Email: shafiq.ur-rehman@raffingers.co.uk Career: After obtaining my Accountancy degree from the University of Karachi (Pakistan) and after much consideration, I decided to follow the family tradition and train to become an accountant. I started my training with Deloitte in Pakistan and qualified as a Management Accountant before moving to the UK. After ten years of experience and two more accountancy qualifications (ACCA, ICAEW), with many different entities, including Ernst & Young, I joined Raffingers in October 2016 as an Audit Senior and quickly got promoted to Assistant Audit Manager. Interests: I am a Barcelona fan and visited Camp Nou stadium in April 2017. I am also a big fan of cricket and support Pakistan and England. I enjoy spending spare time with my family, especially playing with my children. I also enjoy travelling. I travelled around five countries and would love to travel the whole of the world. My favourite place to visit so far is Saudi Arabia. Partners Report: Shafiq is an extremely hard working member of our team and is very much valued. Shafiq’s skill and expertise in supporting our clients with their audits have led to him being promoted to an Assistant Audit Manager within less than a year working here. Shafiq is a great asset to the firm and we look forward to him playing a bigger role in our audit team. Your Business Our Passion
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Inheritance Tax (IHT) The Basics
There is nothing fair about IHT - personal wealth has been accumulated from taxed income and then on death, there is further tax to pay! So, who pays IHT and when?
Transferable Nil Rate Band
(325,000)
Chargeable Estate
1,350,000
IHT @ 40%
IHT is paid by UK domiciled individuals on their worldwide assets. Non-UK domiciled individuals pay IHT on their UK situated assets. IHT is generally paid on death, but can also be payable during an individual’s lifetime on gifts into a Trust. IHT on death All the assets to which the deceased is beneficially entitled are aggregated at the date of death for inclusion in the estate. This includes: • All property to which the deceased had a beneficial entitlement • Bank and Building Society Accounts • ISA’s • Investments such as stocks and shares • The value of any gifts made in the seven years prior to death All liabilities at the date of death are then taken into account and deducted from the asset values. From the net estate value any reliefs are taken into account, for example Business and Agricultural Property Relief and Gifts to Charity. Then any exemptions are deducted, for example transfers to a spouse, the IHT Nil Rate Band and any Main Residence Additional Nil Rate Band. Any balance is then taxed at 40% (or 36% if enough money is left to a charity in the will) and is payable six months after death. The following table looks at a typical estate: £ Share of main residence (net of mortgage)
800,000
Other property (net of mortgage)
400,000
Jewellery / works of Art etc.
20,000
Vehicles
30,000
Investments – stocks and shares
250,000
ISA’s
250,000
Bank and Building Society Accounts
250,000
Total estate value
2,000,000
Nil Rate band
(325,000)
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540,000
The Chancellor takes over 25% of the total estate value – ouch! Is there any way to mitigate such a large tax bill? Lifetime exemptions – the following gifts are exempt from IHT: • Annual exemption - £3,000 per tax year (£6,000 the first time such gifts are made) • Small gifts – gifts of up to £250 per recipient • Gifts in consideration of marriage • Normal expenditure out of income – provided a gift is made from income and not capital it is covered by this exemption. Regular giving of up to circa 25% of net income per tax year could qualify under this exemption Lifetime IHT planning Several IHT planning steps can be taken during your lifetime to mitigate the potential IHT: • Life assurance. This can be used to cover the potential liability. However, the policy must be written in Trust otherwise the policy proceeds can form part of the estate and be taxed • Lifetime gifts – these fall outside the IHT net after seven years from the date of the gift • Take advantage of exemptions, especially the annul exemption and the “normal expenditure out of income” exemption • Lifetime transfers into Trust – these are chargeable lifetime transfers but provided the value transferred is within the Nil Rate Band no tax is payable. The value of the transfer falls outside of the IHT net after seven years • Financial Products – there are a number of financial products that can assist with IHT planning, including AIM portfolios; unquoted trading company structures and Discounted Gift Plans We advise you to act today to identify the quantum of the problem, then give us a call to discuss how we can mitigate your tax liability through IHT planning. Contact me, Paul Dell at paul.dell@raffingers.co.uk or on 020 8418 7200.
Tax From the Trenches | Neill Staff
“Old Friends...” One of the joys of having dealt with tax investigations on both sides of the fence, is that occasionally you get to bump into old colleagues and friends in the course of an enquiry. It doesn’t happen very often, and it must be said that some of the ex-colleagues I’ve dealt with over the years have been just a little bit frosty, perhaps anxious to ensure that there is no whiff of favouritism. From my point of view, they needn’t have worried. No-one that I’ve ever worked with would dream of extending me favourable conditions and rightly so. The bonus, however, is that we have been able to speak the same language and get to a result quicker. This leads nicely into the meeting I had last month with a guy I started working with in the early 1980’s, long before we were Inspectors. For the purpose of this article the Inspector in question must remain anonymous, so we will call him Mike. Hi “Mike” I said as we met in the reception of my firm. I hadn’t seen him in around 12 years and he hadn’t changed much. Mike was from Scotland and had always been something of a no-nonsense stocky rough-diamond. Exceptionally bright and good at his job, but not someone to suffer fools gladly. The meeting went along its predictable course, just like a game of chess with standard openings and strategical moves designed for the end game. As I listened to Mike warble on about unverified bank deposits I suddenly had a flash back to a HMRC social in 1992. Late into the night, the numbers had dwindled and Mike, myself, and one other were stumbling around Romford full of beer and curry. We had managed to get to the ring road for some reason, when suddenly we were subject to a hail of stones raining down on us. Such was our alcoholic confusion that it took us a while to realise what was going on. Then we saw two lads, late teens up on a footbridge, sitting on BMX bikes, shouting general abuse in our direction and throwing stones at us that had previously been reserved for passing cars. Mike shouted at them to pack in and go home. “Oh yeah” said one of the lads, “What are you going to do about it?” and with that, launched another stone that smacked Mike squarely on his right ear. In all my days, I have never seen anyone take off with such speed and vengeance. I had gone to shout something at the oiks but stopped in my tracks, mesmerised at the sight
of Mike in full flow and listening to him shouting in broad Glaswegian, not fully understanding most of what he was saying. Within seconds he had covered 50 yards or so to the bridges staircase and was taking the steps four at a time. My other friend Dave, who really is called Dave, shook his head in an accepting sort of way, “He’s gonna kill them isn’t he?”. Dave and I started running for the bridge just as the teenage oiks were trying to get some speed into their BMX bikes. Our concern was not for Mike, but the fear for what he might do in the circumstances. I finally got to the top of the bridge to see Mike standing over one of the guys who had fallen off his BMX. The other rider had disappeared leaving his mate to face the music alone. Much flowery language was being directed at the fallen youth who, by now was not anywhere near as brave as when he first started throwing stones. After a minute or so Mike told the guy to go away. Very meekly the lad got on his bike and, after picking up some speed, turned around to give a farewell volley of abuse. It was not a good decision. Immediately Mike was in full flow and within seconds had caught the guy, threw him off the bike and proceeded to kick in the spokes on both wheels. There may well be readers that “tut-tut” against this sort of approach to someone prepared to throw stones at passing cars and pedestrians. Personally, I thought it was entirely appropriate. Back in the meeting I half smiled as I remembered the whole incident from some 25 years before. My friend Mike had installed himself as a legend in my books that night. And here we were now cobbling together a deal to bring a long running enquiry to a conclusion. As we shook hands to close the meeting, I thought I detected a flicker of mirth from behind Mike’s eyes. Had he remembered that night? I hoped he had. “Safe journey” I said as he went to leave. Mike turned and smiled, “I wasn’t joking” he said, “when I called you a fat bastard. Speak soon”. Then with a wink and a grin he was gone. It’s not often a tax inspector closes a meeting with a comment like that, but then most tax inspectors aren’t exactly like Mike. Neill Staff 0208 418 2671 neill.staff@raffingers.co.uk
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