Inheritance tax planning

Inheritance Tax

Post-Death Planning

Client A had passed away and had an Inheritance tax bill of approximately £1M. Fortunately we were within the statutory time limit to vary the intestacy to reduce the tax bill to Nil.

Comment: Post-death planning should be done as a last resort as the options available to save tax are far less. However, if you are in this position then this tax planning invaluable.

Pre-Death Planning

Client B owned an estate worth around £4,000,000. The Inheritance tax at current rates would have been approximately £1,340,000. Shipleys Tax reorganised his affairs by converting a substantial non-qualifying asset into one which qualified for 100% business property relief, thus removing the inheritance tax liability and ensuring asset protection.

Comment: We would suggest that you review your current Inheritance tax exposure, this will quantify the issue and then if need be, plan to mitigate this tax. There are a number of ways to do this pre-death and these are very cost effective especially against many of the insurance products on the market.

Latest news & blogs…

HMRC starts furlough fraud checks

Inheritance Tax Shipleys Tax Advisors

HMRC have started to open compliance checks into employers’ Coronavirus Job Retention Scheme (CJRS) claims after sending thousands of “nudge” letters earlier this year advising them that they may need to repay amounts received.

In today’s Shipleys Tax brief we look at what this means and what you should do if you are contacted by HMRC. If you have received correspondence from HMRC and require advice on an investigation or to appeal a penalty assessment, you should seek tax advice as soon as possible to understand your tax position and take necessary action.


What is the compliance check or tax investigation?

The compliance check starts by requesting very detailed information on every employee for which furlough monies were claimed. The letters will not necessarily be sent to the employer’s agent, as not many businesses have an agent for employment tax matters in the same way as for their corporation tax/income tax returns.   

The letter gives a short timescale to provide the information to HMRC. If HMRC issues a formal information notice to obtain the data (if it is not provided in response to the informal request, and there is no ‘good reason’ for the delay – this may detrimentally affect the investigation and potentially increase any CJRS penalties charged. 

The compliance check starts by requesting very detailed information on every employee for which furlough monies were claimed. 

The type and severity of the investigation is completely dependent on the facts of any individual case. HMRC have a specialist unit looking into these claims and you safely assume they will link with other employer compliance units to get the full picture.

It is strongly recommended that you consult a tax lawyer as soon as possible to receive detailed advice on how to take control of the situation and negotiate with HMRC.
 
What is CJRS/furlough fraud?

There are many ways in which a business could commit furlough fraud or abuse of the CJRS, for example:

  • Getting a furloughed employee to return to work as a ‘volunteer’ without pay
  • Not paying employees the full amount received from HMRC
  • Failure to inform staff that they have been furloughed
  • Not paying employees the full amount received from HMRC
  • Incorrect calculations and errors in furlough claims
  • Employers making backdated claims in periods in which the employee was working
  • Employers pretending to hire staff shortly prior to the qualifying period to take advantage of the payments.

It is strongly recommended that you consult a tax lawyer as soon as possible to receive detailed advice on how to take control of the situation and negotiate with HMRC.

What happens if you were not entitled to claim furlough?

If you are found to not have been entitled to the grant in the first place, or have used the funds inappropriately, the payments can be clawed back by way of a 100% income tax charge regardless of whether the claim was made innocently or deliberately.

As such, HMRC will be able to assess the tax due (and thereby impose the clawback) within four years after the grant was made in the case of an innocent error, six years if the error was careless, and twenty years if the claim was fraudulent.

In cases of serious fraud, HMRC may involve the police and prosecute. This might be using legislation which allows the indictment of a company for the facilitation of tax evasion even if senior management was unaware of the offence, unless reasonable preventative measures were in place.

Businesses are therefore required to notify HMRC if they know (or discover) that they have received a grant to which they were not entitled. Penalties and interest will apply for failure to notify and to the repayment clawback.

Expert Tax Investigation Advisers

If you need HMRC Tax Investigation advice, we have experts that are available to aid you at every stage of the HMRC investigation process. Members of our investigation team are ex-HMRC and have first-hand experience and knowledge of the internal workings of HMRC. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.

Please note that Shipleys Tax do not give free advice by email or telephone.

How to make childcare costs Tax-efficient

Inheritance Tax Shipleys Tax Advisors

PAYING for childcare can be expensive. The tax system, however, can provide somewhat of a helping hand. In recent years, there has been a shift away from tax relief for employer-supported childcare and vouchers to a Government top-up scheme.

In today’s Shipleys Tax brief we quickly cover how it works, who’s eligible and how it can benefit you.

Government scheme

The Government operate a tax-free childcare scheme whereby parents deposit money into an account which can be used to meet childcare costs and the Government provide a tax-free top up.

To qualify for the scheme, the parent (and their partner if they have one) must each expect to earn at least £1,853.28 over the next 3 months. This is equivalent to 16 hours a week at the National Living Wage of £8.91 an hour. However, if either the claimant or their partner expect to have adjusted net income of more than £100,000 in the current tax year, they cannot benefit from the tax-free top up.

The Government operate a tax-free childcare scheme whereby parents deposit money into an account which can be used to meet childcare costs and the Government provide a tax-free top up.

Eligible parents can access the tax-free top up by setting up an online childcare account for their child. For every £8 that is deposited into the account, the Government will add a further £2, to a maximum of £2,000 a year (or £4,000 a year where the child is disabled). The funds can be used to provide approved childcare, including that provided by childminders, nurseries, nannies, after-school clubs and playschemes, as long as the provider has signed up to the scheme. The care can be provided until the September after the child’s 11th birthday (or up to the child’s 17th birthday if the child is disabled).

The Government top-up scheme is not available to universal credit claimants, and cannot be used in addition to employer-provided vouchers or employer-supported care.

Employer-supported childcare and childcare vouchers

Where an employee joined their employer’s childcare or childcare voucher scheme on or before 4 October 2018, they can continue to benefit from the associated tax relief while their employer continues to operate the scheme. Childcare vouchers and/or employer supported childcare are tax-free up to the employee’s exempt amount. Where the employee is a basic rate taxpayer or joined the scheme prior to 6 April 2011, the exempt amount is £55 per week. Otherwise the exempt amount is £28 per week where the employee is a higher rate taxpayer and £25 per week where the employee is an additional rate taxpayer. The exemption also applies for National Insurance purposes. Employees only have one exempt amount for employer-supported care and vouchers, regardless of the number of children that they have.

It is also possible for employer-provided childcare and childcare vouchers to be made available under a salary sacrifice scheme without triggering the alternative valuation rules.

Where the employee is a basic rate taxpayer… the exempt amount is £55 per week. Otherwise the exempt amount is £28 per week where the employee is a higher rate taxpayer and £25 per week where the employee is an additional rate taxpayer.

Workplace nurseries

No tax charge arises under the benefit in kind rules where childcare is provided in a workplace nursery. Unlike the exemption for employer-supported care and vouchers, there is no cap on the value of childcare that can be provided tax-free in a workplace nursery. However, there are stringent conditions that must be met for exemption to be forthcoming.

Which is best?

Where a parent could potentially benefit from more than one scheme, they should evaluate the options and can choose the one best suited to their needs. Employees in an employer-supported scheme or employer voucher scheme will need to leave that scheme if they sign up for the Government scheme, and will not be able to re-join the employer’s scheme if they change their minds.

If you are affected by any of the issues above and would like more information, please call 0114 272 4984 or email info@shipleystax.com.

Please note that Shipleys Tax do not give free advice by email or telephone.

New NIC tax rates – how are you affected?

Inheritance Tax Shipleys Tax Advisors

NEWS UPDATE

On 7 September 2021 Boris Johnson announced that NI and dividend tax rates will be hiked to help fund social care, pay for COVID-19 support and help the NHS backlog.

In todays Shipleys Tax brief we look at who will be affected and by how much?

Firstly, NI rates will increase by 1.25% from April 2022. This will apply to both primary and secondary Class 1 contributions, which will increase to 13.25% and 3.25% for earnings up to, and above, the upper earnings limit respectively. Class 4 rates will also increase to 10.25% and 3.25%. The additional 1.25% will be carved out as a separate levy from April 2023 – essentially it will be a new tax.

To illustrate what this will mean for employees, the following table is a useful reference, assuming the current NI thresholds apply:

SalaryCurrent NI billExpected increased NI billChange
£15,000.00£651.84£719.74£67.90
£25,000.00£1,851.84£2,044.74£192.90
£35,000.00£3,051.84£3,369.74£317.90
£45,000.00£4,251.84£4,694.74£442.90
£55,000.00£4,951.84£5,519.74£567.90

Secondly, the dividend tax rates will also increase by 1.25%, i.e. to 8.75%, 33.75% and 39.35% for basic, higher and additional rate taxpayers respectively. This will mean slightly higher taxation for company shareholders extracting income via dividends. However it remains to be seen how tax efficient this route still is compared to other remuneration strategies given the NIC hike above.

If you would like to know how you are personally affected by the above measures and you’re options going forward, please contact us on 0114 272 4984 or email info@shipleystax.com.

Please note that Shipleys Tax do not give free advice by telephone or email.

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