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Your Monthly Tax Update – December 2019

Election Tax Proposals – More Money for the NHS?

The various political parties have all made bold promises in the run up to the General Election about increased spending if elected, particularly extra money for the NHS. Although many of the spending pledges will be funded out of increased borrowing, the parties have assumed that they can persuade voters that extra spending on the NHS should come from general taxation.

The Liberal Democrats policy would be to increase the rate of income tax by 1% to raise £35 billion a year for the NHS and social care. The Conservative and Labour parties propose to provide extra money for the NHS from corporation tax changes.

Boris Johnson to Delay 17% Rate of Corporation Tax

Corporation tax is scheduled to be reduced from 19% to 17% from 1 April 2020.

However, in a speech to the CBI on 18 November Boris Johnson announced that, if elected, the Conservative Party would keep the rate at 19% to provide an extra £6 billion for the NHS.

Despite Jeremy Corbyn telling the CBI that the Labour party is “not anti-business” the party have  announced that they would reverse the recent cuts in corporation tax. Their manifesto proposes bringing back the distinction between small and larger companies, with small companies paying 21% by 2022 and large companies paying 26% by 2022.

More Money for Social Care?

In every General Election since 1997 there have been pledges by the various political parties to resolve the funding of care for the elderly in the UK but yet nothing has happened. It even sparked a dramatic U-Turn by Theresa May in 2015 with her proposal for a so-called “dementia tax”.

Labour’s manifesto includes raising the average annual funding growth to 4.3% in real terms, free dentistry, prescriptions and car parking in NHS England and free personal care for the over 65s.

The Conservatives are pledging additional funding of £1 billion per annum across the term of their parliament, doubling the research funding into dementia and £74 million over 3 years for additional capacity in community care settings for those with learning disabilities and autism.

Although not strictly a tax matter, for many families funding care fees for the elderly is a bigger issue than inheritance tax (IHT). The current rules in England and Wales require the family to make a contribution to care fees where the person’s assets exceed £23,250, including the value of the family home.

The normal IHT planning strategy of giving wealth away and surviving for seven years does not necessarily work as the social care rules are based on the concept of “deliberate deprival” of the estate.

If the local authority consider that the transfer of assets was done deliberately to deprive the estate of assets to avoid paying care fees, then the transfer is ineffective.

Christmas Gifts of Up to £50 to Employees

Remember that certain gifts to staff at Christmas are tax free if structured correctly. Ever since April 2016 employers are allowed to provide their directors and employees with certain “trivial” benefits in kind tax free. Check out our blog- Have a very tax efficient Christmas.

The rules were brought in as a simplification measure so that certain benefits in kind do not now need to be reported to HMRC, as well as being tax free for the employee. There are of course a number of conditions that need to be satisfied to qualify for the exemption.

Conditions for the exemption to apply

  • the cost of providing the benefit does not exceed £50
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of any contractual obligation such as a salary sacrifice scheme
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties (or in anticipation of such services)

This exemption will generally apply to small gifts to staff at Christmas, on their birthday, or other occasions and includes gifts of food, wine, or store vouchers.

Note that where the employer is a “close” company and the benefit is provided to an individual who is a director or other office holder of the company, the exemption is capped at a total cost of £300 for the tax year.

Please feel free to contact us if you are considering taking advantage of this exemption.

Gifts to Charity

With Christmas coming don’t forget about making tax efficient charitable donations. Check out last month’s blog- tax efficient charitable giving at Christmas

Get on Your Bike – Using the Cycle to Work Scheme

The government has recently announced that the previous £1,000 limit on the cost of a bicycle provided under the cycle to work scheme has been removed. This will apply where the employer uses a firm authorized by the Financial Conduct Authority (FCA) to hire out cycles to employees who use them to commute to work.

Note that where the cycle is provided under a salary sacrifice arrangement there continues to be no taxable benefit if the amount paid by the employee is within HMRC approved limits. Note that where the bicycle is transferred to the employee after 6 years HMRC accept that value is negligible.

Salary Sacrifice

The provision of a bicycle to employees under the government’s cycle to work scheme is an exception to the general rule introduced from April 2017 where the amount taxable is the greater of the salary foregone and the taxable benefit as set out in the tax legislation.

Other exceptions to the general rule include employer pension contributions and childcare vouchers.

HMRC Advisory Fuel Rates – Updated

If you need to check the fuel rates issued by HMRC you can find them all the details here. HMRC review  & publish rates quarterly on 1 March, 1 June, 1 September and 1 December.

Please call Jan Friend if you have any queries in respect of the above.

The content in this blog is correct as at 04/12/2019. See terms and conditions.

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