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  • New Budget timetable and Spring Statement date confirmed

    HM Treasury has confirmed that the Spring Statement will take place on Tuesday 13 March 2018.

    At Autumn Statement 2016, the Chancellor announced that in future there will be a single fiscal event each year - the annual Budget statement, which will be delivered in the autumn. Autumn Budget 2017 was the first Budget in this new cycle. From Spring 2018, an annual Spring Statement will accompany an updated economic and fiscal forecast from the Office for Budget Responsibility. The Chancellor has said that he will not make significant tax or spending announcements at the Spring Statement, unless the economic circumstances require it.

    HM Treasury has also published a policy document setting out a summary of the timetable and process the Government will use for tax policy making and consultation following the move to a single annual fiscal event.

  • Fulfilment House Due Diligence Scheme

    The new Fulfilment House Due Diligence Scheme will open for online applications on 1 April 2018. From that date, businesses in the UK that store any goods imported from outside the European Union (EU) owned by, or on behalf of, someone established outside the EU, will need to apply for HMRC approval if those goods are offered for sale. The deadline for applications from existing businesses falling within the scope of the scheme is 30 June 2018, and there are penalties for late applications. For businesses that commence trading on or after 1 April 2018, the application deadline date is 30 September 2018.

    Businesses that only store or fulfil goods that they own, or only store or fulfil goods that are not imported from outside the EU, are not required to register.

    Registered businesses must carry out certain checks and keep certain records from 1 April 2019. Businesses covered by the scheme will not be allowed to trade as a Fulfilment Business from this date if they do not have approval from HMRC. Those that do, risk a £10,000 penalty and a criminal conviction.

  • Consider a partnership

    Whilst forming a partnership can be an extremely flexible way for two or more people to own and run a business together, it is important to appreciate that under this type of trading vehicle, the partners themselves do not have individual protection. If one of the partners resigns, dies, or goes bankrupt, the partnership has to be dissolved, even though the business itself may not need to cease. Although there is no legal requirement to do so, it is highly recommended that, on forming a partnership, a formal partnership deed is drawn up. Many partnerships ask a solicitor to help with this, but it is possible for the partners to drawn one up themselves. Broadly, the partnership agreement sets out what each partner is responsible for and what he or she can expect from the business. Each partner of the firm will be self-employed, taking a share of the profit and paying income tax and NICs personally on that share. However, each partner will also be personally responsible for any (and potentially all) debts that the partnership incurs. It may be worthwhile considering forming a partnership with a sleeping partner, who usually receives a smaller annual share of the partnership's profits. In simple terms, a sleeping partner normally contributes money to the business but doesn't get actively involved with running it. HMRC obligations The partnership needs to appoint one of its officers (the nominated officer) to fill in the partnership tax return each year and send it to HMRC. This return includes a Partnership Statement, which shows how profits or losses have been divided amongst the partners. The nominated partner also has to give each partner a copy of the Partnership Statement to help them complete their own personal tax return correctly.

    Partners are individually responsible for submitting their own self-assessment tax returns. However, the partnership must register with HMRC by 5 October in the business's second tax year, or a penalty may be incurred.

    With regard to VAT, where a sole trader takes in one or more partners there is a change in business entity for VAT purposes. If the sole trader is VAT registered, the change must be notified to HMRC within 30 days and his/her VAT registration will be cancelled. Alternatively, an application may be made (on form VAT 68) for the VAT registration to be transferred to the partnership. The partnership itself must register if the VAT taxable turnover is more than the VAT registration threshold (currently £85,000).

    Limited liability partnerships

    In some circumstances it may be worth considering the formation of a limited liability partnership (LLP). This type of trading vehicle is similar to an ordinary partnership in that a number of people or limited companies join together and share the costs, risks, and responsibilities of the business. They also take a share of the profits, and pay income tax and NICs on their share of the partnership profits. However, under an LLP, debt will be limited to the amount of money each partner invested in the business and to any personal guarantees given to raise business finance. This, in turn, affords members some protection if the business runs into difficulties because their liability will be restricted in general terms to the level of their investment.

  • New tax bands announced in Scottish Budget

    In the Scottish Budget, which took place on 14 December 2017, Scotland's Financial Secretary, Derek Mackay, announced that two thirds of income taxpayers will pay less next year on their current income. However, new bands of income tax were also announced, which will see taxes rise for Scottish taxpayers in the middle income bracket.

    The Draft Budget 2018/19 proposes a progressive income tax policy which protects low earning taxpayers through the introduction of a new Starter Rate of tax.

    It was also confirmed that a new intermediate rate of tax of 21% will be introduced, and the higher and top rates of tax will rise to 41% and 46% respectively.

    As a result of these changes, and the increase in the personal allowance, all taxpayers earning up to £33,000 will be protected from any increase in tax rates. Those earning more than £33,000 will pay only a proportionate amount more.

    A majority of taxpayers (55%) in Scotland will pay marginally less in 2018/19 than they would in the rest of the UK.

    It is hoped that these measures will raise an additional £164 million of revenues to support Scotland's investment plans in relation to healthcare without having to reduce spending on police and fire services, social care or education.

    Delivering his Budget speech, Mr Mackay said "Our new, fairer, income tax policy will protect the 70% of taxpayers who earn less than £33,000 a year and ensure they pay less tax next year for any given income whilst asking those earning more than £33,000 to pay a proportionate amount more to support our public services."

    "Our plans also ensure that over half of taxpayers will pay slightly less in Scotland next year than they would in the rest of the UK, protecting low incomes and supporting the economy."

    Income tax proposals for 2018/19 for Scottish taxpayers can be summarised as follows:

    • introduction of a new starter rate of 19% for those earning between £11,850 and £13,850;
    • a basic rate of income tax at 20% for those earning over £13,850;
    • a new intermediate rate of 21% for those earning over £24,000;
    • a higher rate of 41% on incomes over £44,273 to £150,000; and
    • a top rate of 46% on incomes over £150,000.

    In addition, the Draft Budget confirmed that for Residential Land and Building Transaction Tax (LBTT), the Scottish Government will set a new zero rate threshold for first time buyers of £175,000 - taking 80% of first time buyers out of tax altogether. The residential and non-residential rates and bands for LBTT will remain unchanged.
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