HMRC’s second incomes campaign is targeted at employees who have additional income from working for themselves.
This latest campaign is an opportunity for taxpayers to disclose any additional tax due on such additional incomes. There is no fixed deadline and the campaign will be open for some time, unlike similar previous HMRC actions of this kind. There is also no incentive in the form of a reduced penalty for disclosure. However, voluntary disclosure is always treated more leniently compared with the position where it is HMRC that discovers a taxpayers error. Once the campaign closes, HMRC will use any information in its possession to come down hard on those it believes have something to disclose but have failed to do so.
HMRC is targeting a wide range of spare-time activities. You might be trading by making and selling craft items, or you could be selling goods from a market stall or at car boot sales. Personal services on which HMRC are focusing include taxi driving, hairdressing or fitness training. Maybe you receive fees for consultancy, or payment received for organising parties and events. Of course the tax liability might be much lower than expected once allowable expenses are deducted. Anyone wishing to take advantage of the campaign must initially notify HMRC of their intention, and they then have four months to calculate and pay what is owed. Any other undeclared income, such as investment income or chargeable gains, must be disclosed along with the second income.
We will, of course, be happy to help.
29 Aug 2014
The British Chambers of Commerce (BCC) has warned that this year’s improved economic conditions may suffer unless exports and investments are given a boost.
Director General of the BCC, John Longworth, said: ‘Our forecast confirms that Britain has become one of the fastest-growing developed economies. We are leading, rather than following, other major economies when it comes to short-term growth.
‘The task at hand is to ensure that the stellar 2014 growth is not a flash in the pan. We need to invest and export more, innovate, and build. It is disappointing that we have downgraded export growth for the next two years as a strong international trade performance is key if we are to steer away from a reliance on consumer spending’.
The BCC has upgraded its GDP growth forecasts from 3.1% to 3.2% in 2014, and from 2.7% to 2.8% in 2015. This year would mark the first time since 2007 that growth has exceeded 3%.
Chief Economist at the BCC, David Kern, added: ‘Though our GDP forecasts have been upgraded we are predicting a slight downturn in the pace of growth from next year. This reflects deceleration in household consumption, and falling public spending as a share of GDP. Together, these factors will more than offset the increased contributions to GDP growth from investment and trade’.
New mortgage lending rules have recently been introduced by the Financial Conduct Authority (FCA), meaning tougher checks by lenders.
The development of the mortgage market review has been a lengthy process, starting with a discussion paper in 2009. The FCA finally introduced the rules with effect from 26 April this year. The new rules require lenders to verify your income in all cases, rendering self-certified mortgages a thing of the past. They must also take account of your committed and basic household expenditure to ensure that you can afford the mortgage repayments. Previously, lenders generally used income multiples to establish the maximum loan they were prepared to advance, but this is no longer the key criterion. As well as making sure you have enough disposable income to repay the mortgage at current interest rates, lenders also have to consider the impact on repayments of possible future interest rate rises over the next five years and whether borrowers will still be able to afford them. Although interest only mortgages are still permitted, there must be a credible strategy for repaying the capital – the intended future sale of the property is unlikely to be a satisfactory approach.
28 Aug 2014
Online financial service PayPal has released data from a poll on 500 cash-taking businesses, revealing the cost of working on a cash basis.
The poll shows that on average a cash-taking business will spend a total of 12 days per year counting cash, including travel to the bank to make deposits where they are also liable to banking charges.
PayPal estimates the time and financial impact could amount to as much as £942 a year for each business. Figures indicate that 1 in 10 British businesses operate exclusively on a cash or cheque basis.
Director of Mobile Merchant Services at PayPal UK, Narik Patel, said: ‘Many small businesses only allow customers to pay with cash because they think it’s a cheap way to get paid. But our research reveals that the hidden costs of cash really add up. And that’s before you consider the sales you lose through turning away customers who want to pay by card’.
Based upon the figures collected, PayPal estimates the total cost to small businesses using cash could be £2.5 billion per year.
27 Aug 2014
July saw a significant rise in savings deposits, following the introduction of the New Individual Savings Account (Nisa) rules, according to a report from the British Bankers’ Association.
Savers deposited some £4.9bn in Nisas in July, after low levels of deposits earlier in the year. Usually there is a surge in deposits into tax-free savings accounts in April, as the new tax year starts. However, deposits into ISAs in April totalled £3.9bn, compared with £6.3bn in the same month in 2013, and £7.5bn in April 2012. The figures suggest that many savers were waiting for the launch of Nisas before paying in.
The introduction of Nisas to replace ISAs meant that the allowance rose to £15,000 and, for the first time, could be held in cash, or stocks and shares, or any combination of the two. In addition, any money that held in stocks and shares Isas can now be transferred into a cash Nisa (although some providers might not allow partial transfers).
About half the UK adult population – some 23 million people – have a tax-free ISA or Nisa but, with interest rates remaining low, savers are on average only getting a return of 0.86% on these accounts, according to the Bank of England.
26 Aug 2014
The boom in property prices has seen the Government’s stamp duty receipts reach exceptionally high levels, with house buyers paying £1.09 billion in stamp duty in July. Revenues from the duty have more than doubled in 18 months.
The July figure could be a record (receipts did exceed £1bn when the housing market peaked in August 2007, but at that time stamp duty on land was calculated together with duty on shares).
The current stamp duty rates are: 1% on sales between £125,000 and £250,000; 3% on sales of up to £500,000; and 4% on homes costing up to £1million. As house prices rise, so more and more buyers are pushed into the tax brackets. One in four home buyers now pay the 3% rate, compared to just one in 10 in 2003.
The stamp duty burden is particularly felt in the south east and London, where prices have risen faster than in other parts of the country. Although sales in London account for only 15% of all property transactions, London buyers contributed some 42%of the total stamp duty paid in 2013, according to Nationwide.
Many Conservative MPs wish to see Chancellor George Osborne raise the thresholds to prevent so many ‘ordinary’ buyers falling into the stamp duty net, with a back–bench debate on the issue in scheduled in Parliament next month.
Virtually everyone who is self-employed incurs travel costs, but whether or not these are allowable for tax purposes can be a fine point.
Unfortunately, there is no detailed guidance from HMRC and instead we have to look at what the courts have decided. The recent decision in the case of Doctor Samadian v HMRC (2014) does little to help taxpayers. Doctor Samadian was employed full-time at two NHS hospitals, and was also in self-employed private practice working from an office at home. He saw his private patients at consulting rooms hired at two private hospitals, and also visited patients in their homes. HMRC did not dispute the deductibility of travel between the two private hospitals, between the private hospitals and a patient’s home, and between home and a patient’s home. The dispute concerned travel between the doctor’s home and the private hospitals, and also between the NHS and the private hospitals, and in both cases the decision was in HMRC’s favour. Although home and the private hospitals were all places of work, the doctor was not considered to be itinerant, and his attendance at the private hospitals was regular and predictable.
With modern flexible working arrangements it is common for self-employed people to work from home, but the Samadian case means that a deduction for the cost of travel to another place of business will only be allowed in very exceptional circumstances.