AC Mole Proactive (Spring 2018)

A N D C H A R T E R E D TA X A D V I S E R S

A .C . M O L E & S O N S C H A R T E R E D A C C O U N TA N T S

proactive

Inside: More on digital technology

SUMMER 2018

A spring in his step

Consultations

For many years Chancellors have delivered a Spring Budget and an Autumn Statement, each containing a mix of tax and spending announcements. Last year Philip Hammond announced that we would in future have a Spring Statement and an Autumn Budget. The 2018 Spring Statement would, he said, be brief and would not contain any tax announcements.

The Chancellor delivered the 2018 Spring Statement on 13 March and was true to his word.

A number of other consultations were announced, including one to consider the level of the VAT threshold (the level above which businesses have to charge VAT to their customers).

Some argue that it is a barrier to growth because some small businesses deliberately pause trading when they near the threshold; others say that it creates an unfair price advantage for those who are not VAT registered. Any attempt to lower the threshold would be controversial, not least because customers of small businesses brought within the VAT net would face a 20% price increase.

Another consultation will look at how to encourage cashless and digital payments, “while ensuring cash remains available to those who need it”. The Treasury’s hope is that cashless payments will reduce the scope for tax evasion by reducing the number of undocumented transactions. A number of countries are well ahead of the UK in this field.

Last word The economy Borrowing for the current financial year is now expected to be £45.2 billion, some £4.7bn lower than forecast in November.

That is good news, but the £45.2 billion will still add to the UK’s overall national debt, taking it to over one and three quarter trillion pounds.

The economy grew by 1.7% in 2017, compared to the 1.5% predicted in the November Budget. The Office for Budget Responsibility revised the growth forecast for 2018 from 1.4% to 1.5% and then 1.3% in 2019 and 2020, before picking up to 1.4% in 2021 and 1.5% in 2022.

One of the most worrying and persistent problems in the UK economy is low productivity. Most major economies suffered a setback in productivity after the 2008 financial crisis, but the UK has been slower than others to recover. Mr Hammond said that the government will call for evidence to understand how best to help the UK’s least productive businesses learn from the most productive. He also stressed the importance of boosting skills and announced a consultation on improving the way the tax system supports self-funded training by employees and the self-employed.

Mr Hammond was cautiously upbeat and spoke of light at the end of the tunnel, but we are not there yet by any means. With reduced levels of economic growth, there are still only two levers to pull: spending cuts and tax rises. We suspect that at some point talk of “levelling the playing field” between the way employees, the self-employed and those trading through companies are taxed will return and that some tax reliefs will move into the Treasury’s sights: with a cost approaching £40 billion a year, higher and additional rate tax relief on pension contributions may well be one. Inheritance Tax Agricultural Property Relief and Capital Gains Tax Entrepreneurs’ Relief may also find themselves under scrutiny.

Mr Hammond described himself as “Tiggerish” on 13 March, but the bounce the UK needs to see is not in Tigger’s tail, but in the economy. Until the final shape of the Brexit deal is known, that bounce is likely to be elusive.

The last Proactive newsletter?

It isn’t, but it will be the last one you receive

unless you complete and send back the form on the reverse of the address sheet enclosed

in the prepaid envelope or email us to say you want to continue receiving Proactive. The new

General Data Protection Regulation means that you agree, so please tell us you still want to hear from us!

Financial Power List Tax partner Paul Aplin, who takes over as president of the Institute of Chartered

Accountants in England and Wales (ICAEW) in June, has been placed 12th in the 2018

Accountancy Age Financial Power List, which

ranks the UK’s 50 top influencers in the world featured on the list. Accountancy Age said: “Brexit is bound to feature heavily during

Aplin’s reign, as is ensuring that Making Tax

Digital is implemented smoothly and effectively.

Aplin will also be likely to push the government to introduce measures to support small

businesses in navigating challenges arising from the current economic climate.”

“The accountancy profession is facing a period of unprecedented change and challenge,” Paul said. “The impact of digital technology on the way businesses operate and the way the tax system is administered will be huge and the

accountancy profession will have a critical role to play in helping businesses navigate the

uncharted waters of the post-Brexit world.”

Paul has continued to be a regular

commentator on tax issues in the press and on featured in an article in Saga magazine.

Charity of the Year Our 2017 Charity of the Year was Mind in

Taunton and West Somerset. Over the course of the year we organised numerous fundraising activities and we will shortly be

presenting the charity with a cheque for £7,251.25 as a result.

Our 2018 Charity of the Year – based on a vote

Follow us on twitter

A .C.MOLE & SONS

CHARTERED TAX ADVISERS

E. info@acmole.co.uk www.acmole.co.uk

Rob, who comes from a North Devon farming family, moved up from his position as associate in the farming team, replacing Chris Loveluck on his retirement. Rob joined A C Mole & Sons in 2006 after gaining a degree in Politics and International Relations at Southampton University and working for firms in Bristol and Exeter.

radio and in January his ideas on tax saving

Musgrove MRI Scanner appeal.

A. C. Mole & Sons Stafford House, Blackbrook Park Ave, Taunton, Somerset TA1 2PX T. 01823 624450 F. 01823 444533

Rob Selley was made a partner on 1 February.

of finance. This is the fifth year running he has

by staff and partners – will be the Love

CHARTERED ACCOUNTANTS

New Partner

we cannot send the newsletter to you unless

You can keep up to date with our thinking on tax,

farming and general business issues on Twitter by following:

@PaulAplinOnTax @RobAtACMole @cchandler_

While he specialises in farm accountancy and taxation, Rob also acts for limited companies, partnerships and sole traders across a wide range of sectors. He is regularly quoted on issues facing the agricultural community in the national farming press and on Twitter where you can follow him at @RobAtACMole.

Married with two children, he enjoys shooting in the winter and part time farming. Commenting on his new role, Rob said: “I am thrilled to have been appointed as a partner in such a long-established accountancy practice with such a great reputation in the farming community.”

Rob is actively involved with the Somerset Centre for Management in Agriculture as a committee member, organiser of the annual farm management competition and sponsorship secretary and is a member of the Agricultural Law Association.

Managing partner Christine Glover added: “Our farming team has built a strong reputation across the South West over many years for practical and informed advice. Coming from a farming family, Rob combines a personal understanding of the issues facing the farming community with very strong technical knowledge. He is a great addition to the partnership.”

SUMMER 2018

Planning

for a new tax year

The best time to plan is at the start of a tax year. When advice is sought as part of the tax return process or towards the end of the tax year it is often too late, so here are some ideas that you could implement now to save money in the current tax year.

Spouses and civil partners Spouses and civil partners have opportunities to save tax that are not available to others. If one spouse or civil partner has income exposed to higher rates and the other is only taxed at the basic rate – or has unused allowances – it may be possible to transfer income generating assets such as shares or cash to lower the couple’s overall tax burden.

If you are contemplating the disposal of shares in a trading company, of an asset used in a business or of the whole or part of a business, it is important to take advice before you initiate the sale process. The rules have changed many times over recent years and the way in which a sale is structured may be critical in securing the maximum tax relief.

Sometimes one spouse or civil partner will have capital gains while the other has none, or perhaps even losses. While it is not possible to share the annual CGT allowance, it may be possible to transfer an asset standing at a gain tax free to a spouse with losses or unused allowance before it is disposed of. Another possibility may be to look at shared ownership to minimise tax.

Inheritance tax

Transfers can also be made between spouses and civil partners - either during their lifetimes or on death - without an IHT charge.

Capital gains While capital gains tax losses can be carried forward from one tax year to the next, they cannot generally be carried back to an earlier tax year. If you know that you will realise a gain but also have assets standing at a loss, it is important to crystallise the loss before – or in the same tax year as – the gain if the two are to be offset.

If you have shares that have become worthless, you may be able to claim a loss on these to set against other capital gains.

If the loss is on shares in a company that carried on certain permitted trades, it might even be possible to claim the capital loss against income rather than gains, significantly increasing the tax benefit.

There are a number of ways to mitigate IHT. Making use of the annual £3,000 gift allowance is one straightforward thing to do, as is making gifts early so that they escape IHT after seven years. The relief for normal expenditure out of income is often overlooked but can be very effective. Reliefs for business property and agricultural property are valuable, but the rules are strict. Taking time to consider wills is also important as is, after someone’s death, the scope for a deed of variation.

Tax efficient investments and tax rates It is important to identify the tax rate that you will be exposed to: will it be 7.5%, 20%, 32.5%, 38.1%, 40%, 45% or even 60%?

It may be possible to drop to a lower rate by making gift aid or pension payments, or by shifting income to a spouse or civil partner. You might also consider tax efficient investments such as Individual Savings Accounts, Venture Capital Trusts, Enterprise Investment Scheme shares or Seed Enterprise Investment Scheme shares.

Last word There are many ways to save tax but there are many hidden traps as well, so we always recommend taking advice before acting.

Going digital On 21 February, tax partner Paul Aplin attended a meeting in Whitehall chaired by Financial Secretary to the Treasury, the Rt Hon Mel Stride MP, to discuss HMRC’s Making Tax Digital (MTD) project. MTD will affect all VAT registered businesses with sales in excess of the VAT threshold from 1 April 2019.

The meeting brought together software developers, business representative bodies and the HMRC team heading the project. Everyone agreed that digital technology has the potential to transform tax compliance, but there was also consensus that we should be thinking more broadly about the potential that accounting software and apps hold for businesses. Businesses must see clear commercial benefits in moving to digital, not feel that they are being forced into something that only benefits HMRC. Apps and software are delivering ever more sophisticated means of capturing, recording and analysing information.

The challenge for businesses and their accountants is to harness that potential and use it to deliver greater efficiency and better management information. Arguably, some of the greatest potential is for the very smallest businesses.

Take a sole trader who currently brings in their business records once a year and for whom we prepare accounts and a tax return. We are providing a necessary, but reactive service based on old information. An app that captures images of purchase invoices in real time, paired with software that draws data from the business bank account can enable us to offer a very different service. If the technology is cloud based, we can view data through the year rather than many months after the year end and give advice closer to real time, perhaps prompting the client to raise invoices to head off a cash flow pinch. It would be impossible for us to deliver such a service – let’s call it a virtual Finance Director service - for such a small business without digital technology.

Linking business bank accounts to accounts software can save a significant amount of time and effort. Several banks are working with software and app suppliers such as QuickBooks, Sage One, Xero, Free Agent and Google Analytics to facilitate integration.

For some this digital revolution will be daunting, perhaps too daunting. For increasing numbers however, it will quickly become the norm. Whether you are keen to adopt digital technology or have concerns, we can help you make the transition by advising on software and apps we think will help you, by helping with advice and training and by talking you through what is involved.

Why do you ask?

You may have received – or may shortly receive – a letter from us asking some fairly intrusive questions. We do not like having to ask them but we are required under the Money Laundering Regulations 2017 to carry out ever more detailed work to prove that we know who our clients are and that we have taken steps to show that we have identified any of the prescribed risks. Another piece of legislation, the Criminal Finance Act 2017 also requires us to look very closely at transactions to make sure that they do not constitute tax evasion: this includes for example ensuring that we see adequate evidence to support business mileage claims and that we are satisfied that only genuine business expenses are claimed. The government and HMRC are taking an increasingly hard line on such matters and to protect our clients, we have to take more care than ever to ensure compliance.

SUMMER 2018

Planning

for a new tax year

The best time to plan is at the start of a tax year. When advice is sought as part of the tax return process or towards the end of the tax year it is often too late, so here are some ideas that you could implement now to save money in the current tax year.

Spouses and civil partners Spouses and civil partners have opportunities to save tax that are not available to others. If one spouse or civil partner has income exposed to higher rates and the other is only taxed at the basic rate – or has unused allowances – it may be possible to transfer income generating assets such as shares or cash to lower the couple’s overall tax burden.

If you are contemplating the disposal of shares in a trading company, of an asset used in a business or of the whole or part of a business, it is important to take advice before you initiate the sale process. The rules have changed many times over recent years and the way in which a sale is structured may be critical in securing the maximum tax relief.

Sometimes one spouse or civil partner will have capital gains while the other has none, or perhaps even losses. While it is not possible to share the annual CGT allowance, it may be possible to transfer an asset standing at a gain tax free to a spouse with losses or unused allowance before it is disposed of. Another possibility may be to look at shared ownership to minimise tax.

Inheritance tax

Transfers can also be made between spouses and civil partners - either during their lifetimes or on death - without an IHT charge.

Capital gains While capital gains tax losses can be carried forward from one tax year to the next, they cannot generally be carried back to an earlier tax year. If you know that you will realise a gain but also have assets standing at a loss, it is important to crystallise the loss before – or in the same tax year as – the gain if the two are to be offset.

If you have shares that have become worthless, you may be able to claim a loss on these to set against other capital gains.

If the loss is on shares in a company that carried on certain permitted trades, it might even be possible to claim the capital loss against income rather than gains, significantly increasing the tax benefit.

There are a number of ways to mitigate IHT. Making use of the annual £3,000 gift allowance is one straightforward thing to do, as is making gifts early so that they escape IHT after seven years. The relief for normal expenditure out of income is often overlooked but can be very effective. Reliefs for business property and agricultural property are valuable, but the rules are strict. Taking time to consider wills is also important as is, after someone’s death, the scope for a deed of variation.

Tax efficient investments and tax rates It is important to identify the tax rate that you will be exposed to: will it be 7.5%, 20%, 32.5%, 38.1%, 40%, 45% or even 60%?

It may be possible to drop to a lower rate by making gift aid or pension payments, or by shifting income to a spouse or civil partner. You might also consider tax efficient investments such as Individual Savings Accounts, Venture Capital Trusts, Enterprise Investment Scheme shares or Seed Enterprise Investment Scheme shares.

Last word There are many ways to save tax but there are many hidden traps as well, so we always recommend taking advice before acting.

Going digital On 21 February, tax partner Paul Aplin attended a meeting in Whitehall chaired by Financial Secretary to the Treasury, the Rt Hon Mel Stride MP, to discuss HMRC’s Making Tax Digital (MTD) project. MTD will affect all VAT registered businesses with sales in excess of the VAT threshold from 1 April 2019.

The meeting brought together software developers, business representative bodies and the HMRC team heading the project. Everyone agreed that digital technology has the potential to transform tax compliance, but there was also consensus that we should be thinking more broadly about the potential that accounting software and apps hold for businesses. Businesses must see clear commercial benefits in moving to digital, not feel that they are being forced into something that only benefits HMRC. Apps and software are delivering ever more sophisticated means of capturing, recording and analysing information.

The challenge for businesses and their accountants is to harness that potential and use it to deliver greater efficiency and better management information. Arguably, some of the greatest potential is for the very smallest businesses.

Take a sole trader who currently brings in their business records once a year and for whom we prepare accounts and a tax return. We are providing a necessary, but reactive service based on old information. An app that captures images of purchase invoices in real time, paired with software that draws data from the business bank account can enable us to offer a very different service. If the technology is cloud based, we can view data through the year rather than many months after the year end and give advice closer to real time, perhaps prompting the client to raise invoices to head off a cash flow pinch. It would be impossible for us to deliver such a service – let’s call it a virtual Finance Director service - for such a small business without digital technology.

Linking business bank accounts to accounts software can save a significant amount of time and effort. Several banks are working with software and app suppliers such as QuickBooks, Sage One, Xero, Free Agent and Google Analytics to facilitate integration.

For some this digital revolution will be daunting, perhaps too daunting. For increasing numbers however, it will quickly become the norm. Whether you are keen to adopt digital technology or have concerns, we can help you make the transition by advising on software and apps we think will help you, by helping with advice and training and by talking you through what is involved.

Why do you ask?

You may have received – or may shortly receive – a letter from us asking some fairly intrusive questions. We do not like having to ask them but we are required under the Money Laundering Regulations 2017 to carry out ever more detailed work to prove that we know who our clients are and that we have taken steps to show that we have identified any of the prescribed risks. Another piece of legislation, the Criminal Finance Act 2017 also requires us to look very closely at transactions to make sure that they do not constitute tax evasion: this includes for example ensuring that we see adequate evidence to support business mileage claims and that we are satisfied that only genuine business expenses are claimed. The government and HMRC are taking an increasingly hard line on such matters and to protect our clients, we have to take more care than ever to ensure compliance.

A N D C H A R T E R E D TA X A D V I S E R S

A .C . M O L E & S O N S C H A R T E R E D A C C O U N TA N T S

proactive

Inside: More on digital technology

SUMMER 2018

A spring in his step

Consultations

For many years Chancellors have delivered a Spring Budget and an Autumn Statement, each containing a mix of tax and spending announcements. Last year Philip Hammond announced that we would in future have a Spring Statement and an Autumn Budget. The 2018 Spring Statement would, he said, be brief and would not contain any tax announcements.

The Chancellor delivered the 2018 Spring Statement on 13 March and was true to his word.

A number of other consultations were announced, including one to consider the level of the VAT threshold (the level above which businesses have to charge VAT to their customers).

Some argue that it is a barrier to growth because some small businesses deliberately pause trading when they near the threshold; others say that it creates an unfair price advantage for those who are not VAT registered. Any attempt to lower the threshold would be controversial, not least because customers of small businesses brought within the VAT net would face a 20% price increase.

Another consultation will look at how to encourage cashless and digital payments, “while ensuring cash remains available to those who need it”. The Treasury’s hope is that cashless payments will reduce the scope for tax evasion by reducing the number of undocumented transactions. A number of countries are well ahead of the UK in this field.

Last word The economy Borrowing for the current financial year is now expected to be £45.2 billion, some £4.7bn lower than forecast in November.

That is good news, but the £45.2 billion will still add to the UK’s overall national debt, taking it to over one and three quarter trillion pounds.

The economy grew by 1.7% in 2017, compared to the 1.5% predicted in the November Budget. The Office for Budget Responsibility revised the growth forecast for 2018 from 1.4% to 1.5% and then 1.3% in 2019 and 2020, before picking up to 1.4% in 2021 and 1.5% in 2022.

One of the most worrying and persistent problems in the UK economy is low productivity. Most major economies suffered a setback in productivity after the 2008 financial crisis, but the UK has been slower than others to recover. Mr Hammond said that the government will call for evidence to understand how best to help the UK’s least productive businesses learn from the most productive. He also stressed the importance of boosting skills and announced a consultation on improving the way the tax system supports self-funded training by employees and the self-employed.

Mr Hammond was cautiously upbeat and spoke of light at the end of the tunnel, but we are not there yet by any means. With reduced levels of economic growth, there are still only two levers to pull: spending cuts and tax rises. We suspect that at some point talk of “levelling the playing field” between the way employees, the self-employed and those trading through companies are taxed will return and that some tax reliefs will move into the Treasury’s sights: with a cost approaching £40 billion a year, higher and additional rate tax relief on pension contributions may well be one. Inheritance Tax Agricultural Property Relief and Capital Gains Tax Entrepreneurs’ Relief may also find themselves under scrutiny.

Mr Hammond described himself as “Tiggerish” on 13 March, but the bounce the UK needs to see is not in Tigger’s tail, but in the economy. Until the final shape of the Brexit deal is known, that bounce is likely to be elusive.

The last Proactive newsletter?

It isn’t, but it will be the last one you receive

unless you complete and send back the form on the reverse of the address sheet enclosed

in the prepaid envelope or email us to say you want to continue receiving Proactive. The new

General Data Protection Regulation means that you agree, so please tell us you still want to hear from us!

Financial Power List Tax partner Paul Aplin, who takes over as president of the Institute of Chartered

Accountants in England and Wales (ICAEW) in June, has been placed 12th in the 2018

Accountancy Age Financial Power List, which

ranks the UK’s 50 top influencers in the world featured on the list. Accountancy Age said: “Brexit is bound to feature heavily during

Aplin’s reign, as is ensuring that Making Tax

Digital is implemented smoothly and effectively.

Aplin will also be likely to push the government to introduce measures to support small

businesses in navigating challenges arising from the current economic climate.”

“The accountancy profession is facing a period of unprecedented change and challenge,” Paul said. “The impact of digital technology on the way businesses operate and the way the tax system is administered will be huge and the

accountancy profession will have a critical role to play in helping businesses navigate the

uncharted waters of the post-Brexit world.”

Paul has continued to be a regular

commentator on tax issues in the press and on featured in an article in Saga magazine.

Charity of the Year Our 2017 Charity of the Year was Mind in

Taunton and West Somerset. Over the course of the year we organised numerous fundraising activities and we will shortly be

presenting the charity with a cheque for £7,251.25 as a result.

Our 2018 Charity of the Year – based on a vote

Follow us on twitter

A .C.MOLE & SONS

CHARTERED TAX ADVISERS

E. info@acmole.co.uk www.acmole.co.uk

Rob, who comes from a North Devon farming family, moved up from his position as associate in the farming team, replacing Chris Loveluck on his retirement. Rob joined A C Mole & Sons in 2006 after gaining a degree in Politics and International Relations at Southampton University and working for firms in Bristol and Exeter.

radio and in January his ideas on tax saving

Musgrove MRI Scanner appeal.

A. C. Mole & Sons Stafford House, Blackbrook Park Ave, Taunton, Somerset TA1 2PX T. 01823 624450 F. 01823 444533

Rob Selley was made a partner on 1 February.

of finance. This is the fifth year running he has

by staff and partners – will be the Love

CHARTERED ACCOUNTANTS

New Partner

we cannot send the newsletter to you unless

You can keep up to date with our thinking on tax,

farming and general business issues on Twitter by following:

@PaulAplinOnTax @RobAtACMole @cchandler_

While he specialises in farm accountancy and taxation, Rob also acts for limited companies, partnerships and sole traders across a wide range of sectors. He is regularly quoted on issues facing the agricultural community in the national farming press and on Twitter where you can follow him at @RobAtACMole.

Married with two children, he enjoys shooting in the winter and part time farming. Commenting on his new role, Rob said: “I am thrilled to have been appointed as a partner in such a long-established accountancy practice with such a great reputation in the farming community.”

Rob is actively involved with the Somerset Centre for Management in Agriculture as a committee member, organiser of the annual farm management competition and sponsorship secretary and is a member of the Agricultural Law Association.

Managing partner Christine Glover added: “Our farming team has built a strong reputation across the South West over many years for practical and informed advice. Coming from a farming family, Rob combines a personal understanding of the issues facing the farming community with very strong technical knowledge. He is a great addition to the partnership.”