Our office will be closed from Friday 24 December and will reopen on Tuesday 4 January 2022. We wish to thank you all for your continued support over another difficult and challenging year. We wish you all a peaceful Christmas and look forward to seeing you in the New Year!
CHRISTMAS IS THE TIME FOR GIVING
Many were expecting the chancellor to announce changes to inheritance tax (IHT) in his Autumn Budget, However, like capital gains tax (CGT), the rules have remained broadly the same as last year. That means that each tax year individuals may make gifts of up to £3,000 in total and that amount is not included in their cumulative total of gifts for IHT. Even if the £3,000 annual exempt amount is exceeded, provided it is an outright gift to an individual, there would be no inheritance tax payable provided the donor survives for 7 years.
Note that the gift of an asset other than cash may also give rise to a capital gain and CGT may be payable where the asset has increased in value. However if you give away a business asset such as shares in your trading company it is possible to make a claim to hold over the gain so that no CGT is payable. We can of course advise you on the procedure to follow.
REGULAR GIFTS OUT OF YOUR INCOME IS TAX EFFICIENT
One tax planning opportunity that many thought the chancellor might restrict was the exemption from inheritance tax for regular gifts out of an individual’s income. Inheritance tax is designed to tax transfers of capital so if the donor can demonstrate that the gifts are made out of surplus income then the transfers are not taken into consideration for IHT. The exemption applies where there is a regularity to the payments, such as a standing order to pay school fees. HMRC will also require proof that the payments are paid out of post-tax income and do not limit the donor’s normal lifestyle. Detailed records are required, and we can help you with a suitable spreadsheet.
TRUST PLANNING OPPORTUNITY STILL AVAILABLE
Another tax planning strategy that is still available despite rumours that it would be closed in the Budget was the CGT hold over relief when assets are transferred into or out of a trust.
This relief currently enables a non-business asset, such as an investment property, to be transferred without paying CGT. The relief applies where the transfer is subject to inheritance tax, but where the value transferred is no more than the £325,000 IHT nil rate band the transfer of the asset can take place without IHT or CGT being payable.
For example, Colin, a higher rate taxpayer, wants to gift his adult daughter Liz an investment property worth £300,000.
The property cost him £100,000 a number of years ago. If he were to transfer the property to Liz directly there could be up to £56,000 CGT payable on the £200,000 gain.
If the property is transferred to a trust for the benefit of Liz then the transaction would be immediately chargeable to IHT but covered by the £325,000 nil rate band. The resulting gain could then be held over so that no CGT is payable.
GIFTS TO CHARITY
Where possible taxpayers should “Gift Aid” any payments to charity to provide a further benefit to the charity. Higher rate taxpayers obtain additional tax relief on the grossed-up amount donated.
For example, where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing the net cost of their donation to £15.
Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.
CHRISTMAS GIFTS OF UP TO £50 PER EMPLOYEE IS ALSO TAX FREE
Remember that certain gifts to staff at Christmas are also tax free if structured correctly. Employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free. This exemption applies to small gifts worth no more than £50 to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.
REPORT CJRS FURLOUGH GRANTS ON CORPORATION TAX RETURNS
The latest version of the CT600 Corporation Tax Return requires companies to report CJRS furlough payments received and the amounts that the company was entitled to during the period. Where any overpayments have already been disclosed to HMRC that amount should be reported.
The total amount overclaimed should then be entered in box 526. This amount will be assessed to income tax not corporation tax and HMRC will provide you with a payment reference.
RICHMONDSHIRE DISTRICT COUNCIL: BUSINESS MASTERCLASSES 2022
Do you run a business in Richmondshire? Are you thinking about starting one?
If so, you're in the right place: a free package of business support is available in the New Year.
Designed especially for enterprises in Richmondshire, there is a compelling range of support:
short courses on key business topics – such as branding, marketing, sales, new markets, and finance – that you can listen to or watch in your own time;
live workshops on Zoom to network with other local businesses, ask questions of industry experts, and apply your new skills; one-on-one consultancy with hour long Zoom calls with a business expert; and checklists, templates, links, and other resources to make sure that your business starts the year on a high.
There is a strict maximum of 15 businesses for each programme, which are allocated on a first-come, first-serve basis – so it’s essential that you apply now. It’s free and takes less than a minute. Register now!
PRODUCT AND PROCESS INNOVATION GRANTS (PAPI)
Looking for a grant for equipment to enable innovation? PAPI offer:
40% grant for equipment that enables innovation and which generates new jobs and growth, up to a maximum grant value of £20,000
Expert business development support to help develop funding proposals
Guidance and advice available at every step of the application process from an experienced team - find out more on the PAPI website.
SUPPORTING NEW AND GROWING SMALL BUSINESSES
The Small Business Grant Scheme encourages the formation of new enterprises and the growth of established small businesses. Targeting those less than 36 months old and with no more than five employees, it offers up to £1,000 up to a maximum of 75% of the project costs. Costs that can be covered under the scheme include marketing costs, purchase of equipment and adaptation to premises. Our next round of funding for our Small Business Grant Scheme ends on 24 January 2022.
We have recently provided funds to assist with the start up costs for local businesses such as joinery, beauticians, cosmetics manufacture, fitness training and childminding. Please contact Angela Horner from the Business team for further details and to check that you are eligible.
MANUFACTURING BUSINESS SUPPORT AND FUNDING
The Manufacturing Growth Programme aims to support SME manufacturers to grow by identifying, understanding, and removing barriers to growth. The programme provides a range of support including: a business review to identify opportunities for business improvement and growth, an action plan guiding you through the process of improving your business, on-going business support with Manufacturing Growth Manage and access to grants to co-fund your improvement project.
Through the programme, businesses may be eligible for a grant to cover a percentage of the cost of implementing a business improvement project. Grant values are specific to each business application with a maximum project value of £10,000. For further information go to the Manufacturing Growth Programme website or contact Shaughan Farrow at Shaughan.email@example.com.
INNOVATION SUPPORT AND GRANTS
SparkFund is an innovation support and grants programme that can help SMEs to move their business forward through innovation and research and development.
The fund is made up of three funding streams; innovation vouchers, R and D grants and low carbon grants. SparkFund works with businesses to identify, define and deliver innovation and research projects which fit their individual needs, aspirations and plans.
If you would be interested in learning more about the support available, Helen Floyd from the Spark fund will be available for initial meetings on 12 January 2022 in Richmondshire. If you would like to arrange an initial meeting please contact Angela Horner from the Business team who will be in touch to arrange a suitable time for a face to face meeting or an online chat with Helen.
DIARY OF MAIN TAX EVENTS - DECEMBER 2021/JANUARY 2022
PAYE & NIC deductions, and CIS return and tax, for month to 5/12/21 (due 22/12 if you pay electronically)
Deadline for filing 2020/21 tax return online in order to request that HMRC collect outstanding tax via the 2022/23 PAYE code
Corporation tax for year to 31/03/2021 unless quarterly instalments apply
PAYE & NIC deductions, and CIS return and tax, for month to 5/1/22 (due 22/1 if you pay electronically)
Deadline for filing 2020/21 self-assessment tax return online and paying your outstanding tax for 2020/21 and first payment on account of 2021/22 tax.
Please contact a member of our team if you would like to discuss any of the issues raised.
Dawn, James, Mark, Deb, Penn, Lucy and Becky
Telephone: 01969 624999