This month our Tax talk newsletter includes an article on the demise of
This month our Tax talk newsletter includes an article on the demise of salary sacrifice arrangements, a look at the recent Taylor Report on modern working, and a reminder of when you need to declare rental income. Also, take a look at our What’s on section for details of our forthcoming seminars and events.
There are transitional rules in place where a salary sacrifice arrangement or flexible arrangement was in place prior to 6 April 2017, so that the new OpRA rules apply from the earlier of:
Goodbye to salary sacrifice arrangements
•
Salary sacrifice arrangements have, for many years, been an attractive way of offering employees benefits in kind. From 6 April 2017, however, new rules have been introduced in an attempt to redress income tax and national insurance advantages. From this date, salary sacrifice arrangements have been replaced by optional remuneration arrangements (OpRA) which also cover the case where an employee chooses a benefit in kind rather than a cash allowance.
•
The date the arrangement is changed, modified, varied or renewed (including auto-renewal), or; 6 April 2018 (or 6 April 2021 where the benefits in question is a car with CO2 emissions exceeding 75g/km, living accommodation or school fees).
If you are an employer who offers flexible benefit packages, or you personally receive a benefit through an optional remuneration arrangement (or salary sacrifice arrangement), now is the time to review the position. For further information, please contact your usual Kreston Reeves adviser here or Anneka Griffiths on +44 (0)330 124 1399.
Under OpRA, generally the employee is taxed on the higher of the salary or cash given up and the cash equivalent of the benefit (which may be calculated using special rules).
Modern working
There are still various benefits that will retain the income tax and national insurance advantages previously enjoyed under salary sacrifice arrangements. The most common examples are:
Employed? Self-employed? Worker or Dependent Contractor? The world of work has become far more complex in recent years with changes in the way people want to work and can work. This has led to concerns that the regulations, including tax rules, may no longer be as effective.
• • • • • •
In July 2017, the Taylor review has reported on modern working practices in the United Kingdom and identified 7 steps towards fair and decent work with realistic scope for development and fulfilment.
Employer pension contributions and advice (subject to limits). Company cars with CO2 emissions of 75g/km or less. Employer provided childcare. Counselling. Retraining courses. Bicycles and bicycle equipment.
There are specific benefits that are excluded from being offered under OpRA, such as paid or reimbursed expenses, advice in respect of pension transfers from defined benefit to defined contribution schemes, subsidised meals, and trivial benefits.
The review comments that the far lower National Insurance Contributions (NIC) levels for self-employed compared with employees is “not justified or sustainable”. Similarly the review recommends change to the tax system to rebalance the tax position which currently imposes an additional charge on employed labour that is not charged on self-employed labour.
It is probably safe to assume that any alignment will be to increase the tax burden on the self-employed rather than a reduction for the employed. We have already seen new legislation making persons within IR35 working on engagements within the public sector taxed as employees from 6 April 2017. The Taylor review appears to be pressing for further moves to make the taxation of the selfemployed closer to that of employees. The attempt to increase the NIC rate for the self-employed announced in the Spring Budget 2017 was dropped but it is possible that NIC are revisited by the current government. The review also recommends that the definition of employees, dependent contractors and self-employed are clarified and this could lead to people currently defined as self-employed and taxed accordingly finding that they are dealt with differently in future.
If you are concerned that you may be required to declare your rental income, and you have not yet done so, we can help. There is a tried and tested process to bring matters up-to-date. Please contact your usual Kreston Reeves adviser here or Stephen Metcalf here or on +44 (0)330 124 1399. Claiming back professional subscriptions If your employment requires that you obtain and maintain membership of a professional organisation, you can make a claim to set the cost against your taxable earnings for income tax purposes. As you would expect there are a few hoops you will need to jump through to claim this relief. They are: • •
If you are changing the way you work, moving to self-employment or setting up a personal service company, or if you are an employer using contractors, it is important you understand the rights, responsibilities and obligations which apply in the modern workplace and how they affect you. To find out how we can help please contact your usual Kreston Reeves adviser here or Emma Beynon here or on +44 (0)330 124 1399.
• •
You must have the professional membership to do your job or if membership helps you with your work. You can only claim back subscriptions to organisations approved by HMRC. You cannot claim back fees for life membership subscriptions. You cannot claim subscriptions you have not paid yourself, for example, your employer has paid them for you.
To see the full list of professional organisations and other learned societies that are approved by the tax office visit this page on the GOV.UK website: https://www.gov.uk/government/publications/ professional-bodies-approved-for-tax-relief-list-3/approvedprofessional-organisations-and-learned-societies
Common misconceptions about tax and letting property HMRC has published a list of popular misconceptions that taxpayers have about letting property. We have listed below a summary of situations where you will need to declare rental earnings to HMRC: • • •
• • •
•
If you inherit property and let it out. If you buy a property as an investment and let it out. Divorcing partners, who decide to let out their jointly owned property, will need to declare their share of any rental profits on their individual tax returns. You may move to a new house due to employment considerations and let out the house you are moving from. You may move into a care home and let out your present home to help pay for the fees. You may buy a property for your son or daughter to use while at university, and they may sub-let to friends on an informal basis and charge a nominal rent, which you use to defray costs. Any surplus monies received from this sort of arrangement will still need to be declared. Moving to tied accommodation can create problems if you keep your existing home and let it out. If the rents you receive cover your mortgage repayments (capital and interest) you may consider that you have not made a profit, but the capital part of your mortgage repayments are not an allowable deduction for income tax purposes.
Also, watch out for the effects of the changes to the rules for repairs and finance costs (interest) that we have covered in recent Tax talk issues, as well as our article here.
For further information please speak with your usual Kreston Reeves adviser here or Kay Mind here or on +44 (0)330 124 1399. Evidence of earning for mortgage purposes If you are a Kreston Reeves client, and registered to submit a self assessment tax return, we can provide you with a statement that you can use as evidence of earnings for mortgage purposes. If you are not a client, there are many ways you can obtain this data direct from employers and other sources. For example, you could use the following as evidence of earnings: • •
A P60 from your employer, you should receive this on or before the 1 May following the end of each tax year. Alternatively, you can contact HMRC and request a tax year overview. This will take approximately two weeks to arrive so you should possibly request this information before you apply for your mortgage or loan.
If you submit your own tax return using HMRC’s online portal, you should be able to download and print the evidence you need. The evidence of earning that you should request from HMRC is called an SA302. You should be able to obtain copies for up to four years in this format. Please contact your usual Kreston Reeves adviser here or Kay Mind here or on +44 (0)330 124 1399 for more advice.
It’s never too early to start a pension! The focus on saving for retirement has gathered pace over the last decade or so as we realise that the state pension entitlement on its own is wholly inadequate. With the advent of auto enrolment for employers in making provision for their workforce, the government has tried to lessen the burden on the UK’s finances by placing more responsibility clearly in the private sector. With this said, making provision early for an individual can make a tremendous difference to that individual’s standard of living when they do retire.
Our Sussex event is being held on Wednesday 27 September (3:00pm-6:00pm) at Mannings Heath Golf Club (Horsham) and we are delighted to welcome guest speaker Phil Platt of Mannings Heath Golf Club and Wine Estate. There will also be an opportunity at the end of the seminar to take part in a wine tasting. For more information please visit our webpage here.
How early?
Our Kent event is being held on Wednesday 18 October (4:00pm-6:15pm) at Port Lympne (Hythe) and we are delighted to welcome a representative from Port Lympne. For more information please visit our webpage here.
Whilst most people are aware of pensions, they don’t always realise that their children can have their own pension provision from birth.
To book your place at either event location please contact Andy Powell at [email protected] or on 01403 253282. We hope you can join us!
It is possible to pay a maximum of £3,600 gross per annum, which actually costs £2,880 before basic rate tax is added, for the child with contributions from parents or even grandparents over the years. This can be paid either as a lump sum or a regular contribution and even at quite modest growth rates, could go a long way to meeting an individual’s income requirements when they eventually retire. We don’t know how our children will manage their financial affairs during their lifetime but making provision for them now for when they retire could be one of the most important legacies that we can provide. If you would like to review the options available to you both for your provision and for that of your children or grandchildren please do not hesitate to contact Lee Hayward at Kreston Reeves Financial Planning here or on +44 (0)330 124 1399. What’s on Please see highlights below of our upcoming events and recent news:
The East Kent Ploughing Match 2017 - please join us for some food for thought! Please join our business, tax and wealth experts for something to eat and drink at the East Kent Ploughing Match 2017 on Wednesday 27 September 2017 from 9:00am.
Events Autumn Wealth management seminars - Do you have a plan? We understand that looking after and protecting your wealth is of vital importance to you. Kreston Reeves Wealth management team offer a unique mix of experts in minimising taxation, providing excellent financial and investment management and estate planning. Our team is hosting Wealth management seminars in both Kent and Sussex and will explore possible opportunities available to you with the aim of creating a comfortable retirement. Topics covered will include: • • •
Strategies for retirement income success Wills & legacies Tax planning & IHT
This year’s event is being held at Quex Park, Manston Road, Birchington CT7 0HR. Click here for a map. There will be signs near the farm directing you on the day. We will be serving refreshments in our marquee all day, including lunch between 12:00pm and 2:30pm and would be delighted if you are able to join us! For more information, including details on how you can enter our ‘Name our beer’ competition please visit our webpage here. If you have any questions on the above please do not hesitate to contact us at [email protected].
Kreston Reeves have made every effort to ensure accuracy at the time of publication. Information may be subject to legislative changes. Recipients should note that information may not reflect individual circumstances and should, therefore, not act on any information without seeking professional advice. We cannot accept any liability for actions taken or not taken as a result of the information given in this factsheet. Kreston Reeves LLP (registered number OC328775), Kreston Reeves Private Client LLP (registered number OC342713), Kreston Reeves Financial Planning Limited (registered number 03852054, authorised and regulated by the Financial Conduct Authority) and Kreston Reeves Corporate Finance LLP (registered number OC306454, authorised and regulated by the Financial Conduct Authority) all operate under the Kreston Reeves Brand and are together known as “Kreston Reeves”. Any reference in this communication or its’ attachments to “Kreston Reeves” is to be construed as a reference to the Kreston Reeves entity from which the advice originates. All entities are registered in England and Wales, and the registered office address is 37 St Margaret’s Street, Canterbury CT1 2TU. Further details can be found on our website at www.krestonreeves.com
Website: www.krestonreeves.com Email: [email protected] Kreston Reeves Tax Talk newsletter September 2017 © Kreston Reeves
There are transitional rules in place where a salary sacrifice arrangement or flexible arrangement was in place prior to 6 April 2017, so that the new OpRA rules apply from the earlier of:
Goodbye to salary sacrifice arrangements
•
Salary sacrifice arrangements have, for many years, been an attractive way of offering employees benefits in kind. From 6 April 2017, however, new rules have been introduced in an attempt to redress income tax and national insurance advantages. From this date, salary sacrifice arrangements have been replaced by optional remuneration arrangements (OpRA) which also cover the case where an employee chooses a benefit in kind rather than a cash allowance.
•
The date the arrangement is changed, modified, varied or renewed (including auto-renewal), or; 6 April 2018 (or 6 April 2021 where the benefits in question is a car with CO2 emissions exceeding 75g/km, living accommodation or school fees).
If you are an employer who offers flexible benefit packages, or you personally receive a benefit through an optional remuneration arrangement (or salary sacrifice arrangement), now is the time to review the position. For further information, please contact your usual Kreston Reeves adviser here or Anneka Griffiths on +44 (0)330 124 1399.
Under OpRA, generally the employee is taxed on the higher of the salary or cash given up and the cash equivalent of the benefit (which may be calculated using special rules).
Modern working
There are still various benefits that will retain the income tax and national insurance advantages previously enjoyed under salary sacrifice arrangements. The most common examples are:
Employed? Self-employed? Worker or Dependent Contractor? The world of work has become far more complex in recent years with changes in the way people want to work and can work. This has led to concerns that the regulations, including tax rules, may no longer be as effective.
• • • • • •
In July 2017, the Taylor review has reported on modern working practices in the United Kingdom and identified 7 steps towards fair and decent work with realistic scope for development and fulfilment.
Employer pension contributions and advice (subject to limits). Company cars with CO2 emissions of 75g/km or less. Employer provided childcare. Counselling. Retraining courses. Bicycles and bicycle equipment.
There are specific benefits that are excluded from being offered under OpRA, such as paid or reimbursed expenses, advice in respect of pension transfers from defined benefit to defined contribution schemes, subsidised meals, and trivial benefits.
The review comments that the far lower National Insurance Contributions (NIC) levels for self-employed compared with employees is “not justified or sustainable”. Similarly the review recommends change to the tax system to rebalance the tax position which currently imposes an additional charge on employed labour that is not charged on self-employed labour.
It is probably safe to assume that any alignment will be to increase the tax burden on the self-employed rather than a reduction for the employed. We have already seen new legislation making persons within IR35 working on engagements within the public sector taxed as employees from 6 April 2017. The Taylor review appears to be pressing for further moves to make the taxation of the selfemployed closer to that of employees. The attempt to increase the NIC rate for the self-employed announced in the Spring Budget 2017 was dropped but it is possible that NIC are revisited by the current government. The review also recommends that the definition of employees, dependent contractors and self-employed are clarified and this could lead to people currently defined as self-employed and taxed accordingly finding that they are dealt with differently in future.
If you are concerned that you may be required to declare your rental income, and you have not yet done so, we can help. There is a tried and tested process to bring matters up-to-date. Please contact your usual Kreston Reeves adviser here or Stephen Metcalf here or on +44 (0)330 124 1399. Claiming back professional subscriptions If your employment requires that you obtain and maintain membership of a professional organisation, you can make a claim to set the cost against your taxable earnings for income tax purposes. As you would expect there are a few hoops you will need to jump through to claim this relief. They are: • •
If you are changing the way you work, moving to self-employment or setting up a personal service company, or if you are an employer using contractors, it is important you understand the rights, responsibilities and obligations which apply in the modern workplace and how they affect you. To find out how we can help please contact your usual Kreston Reeves adviser here or Emma Beynon here or on +44 (0)330 124 1399.
• •
You must have the professional membership to do your job or if membership helps you with your work. You can only claim back subscriptions to organisations approved by HMRC. You cannot claim back fees for life membership subscriptions. You cannot claim subscriptions you have not paid yourself, for example, your employer has paid them for you.
To see the full list of professional organisations and other learned societies that are approved by the tax office visit this page on the GOV.UK website: https://www.gov.uk/government/publications/ professional-bodies-approved-for-tax-relief-list-3/approvedprofessional-organisations-and-learned-societies
Common misconceptions about tax and letting property HMRC has published a list of popular misconceptions that taxpayers have about letting property. We have listed below a summary of situations where you will need to declare rental earnings to HMRC: • • •
• • •
•
If you inherit property and let it out. If you buy a property as an investment and let it out. Divorcing partners, who decide to let out their jointly owned property, will need to declare their share of any rental profits on their individual tax returns. You may move to a new house due to employment considerations and let out the house you are moving from. You may move into a care home and let out your present home to help pay for the fees. You may buy a property for your son or daughter to use while at university, and they may sub-let to friends on an informal basis and charge a nominal rent, which you use to defray costs. Any surplus monies received from this sort of arrangement will still need to be declared. Moving to tied accommodation can create problems if you keep your existing home and let it out. If the rents you receive cover your mortgage repayments (capital and interest) you may consider that you have not made a profit, but the capital part of your mortgage repayments are not an allowable deduction for income tax purposes.
Also, watch out for the effects of the changes to the rules for repairs and finance costs (interest) that we have covered in recent Tax talk issues, as well as our article here.
For further information please speak with your usual Kreston Reeves adviser here or Kay Mind here or on +44 (0)330 124 1399. Evidence of earning for mortgage purposes If you are a Kreston Reeves client, and registered to submit a self assessment tax return, we can provide you with a statement that you can use as evidence of earnings for mortgage purposes. If you are not a client, there are many ways you can obtain this data direct from employers and other sources. For example, you could use the following as evidence of earnings: • •
A P60 from your employer, you should receive this on or before the 1 May following the end of each tax year. Alternatively, you can contact HMRC and request a tax year overview. This will take approximately two weeks to arrive so you should possibly request this information before you apply for your mortgage or loan.
If you submit your own tax return using HMRC’s online portal, you should be able to download and print the evidence you need. The evidence of earning that you should request from HMRC is called an SA302. You should be able to obtain copies for up to four years in this format. Please contact your usual Kreston Reeves adviser here or Kay Mind here or on +44 (0)330 124 1399 for more advice.
It’s never too early to start a pension! The focus on saving for retirement has gathered pace over the last decade or so as we realise that the state pension entitlement on its own is wholly inadequate. With the advent of auto enrolment for employers in making provision for their workforce, the government has tried to lessen the burden on the UK’s finances by placing more responsibility clearly in the private sector. With this said, making provision early for an individual can make a tremendous difference to that individual’s standard of living when they do retire.
Our Sussex event is being held on Wednesday 27 September (3:00pm-6:00pm) at Mannings Heath Golf Club (Horsham) and we are delighted to welcome guest speaker Phil Platt of Mannings Heath Golf Club and Wine Estate. There will also be an opportunity at the end of the seminar to take part in a wine tasting. For more information please visit our webpage here.
How early?
Our Kent event is being held on Wednesday 18 October (4:00pm-6:15pm) at Port Lympne (Hythe) and we are delighted to welcome a representative from Port Lympne. For more information please visit our webpage here.
Whilst most people are aware of pensions, they don’t always realise that their children can have their own pension provision from birth.
To book your place at either event location please contact Andy Powell at [email protected] or on 01403 253282. We hope you can join us!
It is possible to pay a maximum of £3,600 gross per annum, which actually costs £2,880 before basic rate tax is added, for the child with contributions from parents or even grandparents over the years. This can be paid either as a lump sum or a regular contribution and even at quite modest growth rates, could go a long way to meeting an individual’s income requirements when they eventually retire. We don’t know how our children will manage their financial affairs during their lifetime but making provision for them now for when they retire could be one of the most important legacies that we can provide. If you would like to review the options available to you both for your provision and for that of your children or grandchildren please do not hesitate to contact Lee Hayward at Kreston Reeves Financial Planning here or on +44 (0)330 124 1399. What’s on Please see highlights below of our upcoming events and recent news:
The East Kent Ploughing Match 2017 - please join us for some food for thought! Please join our business, tax and wealth experts for something to eat and drink at the East Kent Ploughing Match 2017 on Wednesday 27 September 2017 from 9:00am.
Events Autumn Wealth management seminars - Do you have a plan? We understand that looking after and protecting your wealth is of vital importance to you. Kreston Reeves Wealth management team offer a unique mix of experts in minimising taxation, providing excellent financial and investment management and estate planning. Our team is hosting Wealth management seminars in both Kent and Sussex and will explore possible opportunities available to you with the aim of creating a comfortable retirement. Topics covered will include: • • •
Strategies for retirement income success Wills & legacies Tax planning & IHT
This year’s event is being held at Quex Park, Manston Road, Birchington CT7 0HR. Click here for a map. There will be signs near the farm directing you on the day. We will be serving refreshments in our marquee all day, including lunch between 12:00pm and 2:30pm and would be delighted if you are able to join us! For more information, including details on how you can enter our ‘Name our beer’ competition please visit our webpage here. If you have any questions on the above please do not hesitate to contact us at [email protected].
Kreston Reeves have made every effort to ensure accuracy at the time of publication. Information may be subject to legislative changes. Recipients should note that information may not reflect individual circumstances and should, therefore, not act on any information without seeking professional advice. We cannot accept any liability for actions taken or not taken as a result of the information given in this factsheet. Kreston Reeves LLP (registered number OC328775), Kreston Reeves Private Client LLP (registered number OC342713), Kreston Reeves Financial Planning Limited (registered number 03852054, authorised and regulated by the Financial Conduct Authority) and Kreston Reeves Corporate Finance LLP (registered number OC306454, authorised and regulated by the Financial Conduct Authority) all operate under the Kreston Reeves Brand and are together known as “Kreston Reeves”. Any reference in this communication or its’ attachments to “Kreston Reeves” is to be construed as a reference to the Kreston Reeves entity from which the advice originates. All entities are registered in England and Wales, and the registered office address is 37 St Margaret’s Street, Canterbury CT1 2TU. Further details can be found on our website at www.krestonreeves.com
Website: www.krestonreeves.com Email: [email protected] Kreston Reeves Tax Talk newsletter September 2017 © Kreston Reeves
