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Stamp Duty for buyers of second homes or buy-to-let property in England

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This month’s newsletter includes articles that highlight some of the changes we can expect as 2016 progresses.

It includes: the draconian increase in Stamp Duty for buyers of second homes or buy-to-let property in England and Wales after 1 April 2016; a move by HMRC towards the online filing of quarterly as opposed to annual accounts; a summary of other changes announced for next year and beyond; and a note of changes to car fuel advisory rate changes 1 December 2015.

Stamp Duty increase for second home buyers

Stamp Duty Land Tax

George Osborne and his team seem to have a grudge against landlords and second home owners. From 1 April 2016, Stamp Duty Land Tax (SDLT) payable on the acquisition of residential property – where the property is a second home or a buy-to-let investment – will see a significant increase in the amount of SDLT payable.

At present, this will only apply to properties purchased in England and Wales. In Scotland, the new Land and Buildings Transaction Tax applies.

For example:

Michael Moore is considering a further acquisition for his Essex based buy-to-let property business of £300,000. What are the SDLT implications of buying before or after 1 April 2016?

Completion date 1 March 2016 – SDLT payable would be £5,000.
Completion date 1 May 2016 – SDLT payable would be £14,000.

The virtual tripling in SDLT due is a result of the 3% increase in SDLT rates from 1 April 2016. For acquisitions after 1 April 2016 the new rates are:

£0 to £40,000 no SDLT is payable
£40,000 to £125,000 – 3% on total cost of acquisition
£125,001 to £250,000 – 5% on this band only
£250,001 to £925,000 – 8% on this band only
£925,001 to £1.5m – 13% on this band only
Over £1.5m – 15% of the property price above this amount

Will this fuel a rush to buy before rates increase on 1 April 2016? Prospective buyers may want to consider this option, but don’t buy in haste and repent at leisure!

Quarterly accounts filing?

At present smaller businesses are required to file accounts once a year with HMRC when their Self Assessment or Corporation Tax returns are filed.

HMRC are now moving towards the provision of a digital account for business owners, a portal that will allow taxpayers to manage their tax affairs online. In the draft notes for the Finance Bill 2016 there is further clarification of the way in which HMRC will expect this digital account to be used.

Here’s what they have to say:

“Making Tax digital – As announced at Autumn Statement 2015, the government will invest £1.3 billion to transform HMRC into one of the most digitally advanced tax administrations in the world. Most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology. This will not apply to individuals in employment, or pensioners, unless they have secondary incomes of more than £10,000 per year. The government will publish its plans to transform the tax system shortly and will consult on the details in 2016.”

This declaration is likely to have wide ranging implications. For example, will HMRC use this data to require taxpayers to pay their tax quarterly instead of twice yearly (if self employed), or annually if incorporated? Will tax due be based on current year earnings instead of prior year profits?

As stated, HMRC will be consulting on the detail this year. We will be keeping a careful eye on the outcome of their deliberations. Readers should be aware that these changes are unlikely to be implemented before 2020.

Other changes proposed

The government has also published its intention to change a number of other tax reporting issues. Some of the more impactful for smaller businesses and Self Assessment tax payers are reproduced below:

  1. Simple Assessment – legislation will be introduced in Finance Bill 2016 to provide a new power to allow HMRC to make an assessment of a person’s Income Tax or Capital Gains Tax liability without them first being required to complete a Self Assessment return where it has sufficient information about that individual to make the assessment. This measure will have effect on and after the date of Royal Assent to Finance Bill 2016.
  2. PAYE – ‘On or Before’ Reporting Obligation Review – HMRC have carried out a review of the ‘On or Before’ reporting obligations for employers who use the Real Time information payroll filing process. Currently, existing micro employers (with 9 or fewer employees) using Real-Time PAYE may take advantage of a reporting relaxation to report all payments they make in a tax month ‘on or before’ the last payday in the tax month rather than ‘on or before’ each and every payday. This is a 2 year temporary relaxation which is legislated to come to an end on 5 April 2016: this measure confirms the temporary relaxation will end, as planned, aligning the treatment of existing micro employers with all other employers.
  3. Capital Gains Tax: payment on account – from April 2019 a payment on account of any Capital Gains Tax (CGT) due on the disposal of residential property will be required to be made within 30 days of completion of the disposal. Taxpayers will be able to reconcile their payment on account with their total CGT liability for the year, after the year end. Legislation will be introduced in Finance Bill 2017 and the government will publish draft legislation for consultation in 2016.
  4. Student loan repayments – As announced at Autumn Statement: From April 2016 the income threshold for loans taken out on or after 1 September 2012 is frozen at £21,000 until 5 April 2021, and from April 2019 employers will be asked to start deducting repayments from borrowers of postgraduate loans, at a rate of 6% alongside undergraduate repayments at the existing rate of 9%
  5. Data-gathering from Electronic Payment Providers and Business Intermediaries – Legislation will be introduced in Finance Bill 2016 to identify businesses who are not complying with their tax obligations by extending HMRC’s current data gathering powers. The extended powers will include business intermediaries who facilitate transactions, particularly online and electronic payment service providers who operate digital wallets, thereby future-proofing legislation to include emerging new data sources.
  6. Stamp Duty Land Tax: changes to the filing and payment process – As announced at Autumn Statement, the government will consult in 2016 on changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. These changes will come into effect in 2017 to 2018.

Car fuel advisory rates changes

From 1 December 2015, the advisory fuel rates have changed to:
1400cc or less: petrol 11p per mile, LPG 7p per mile
1401-2000cc: petrol 13p per mile, LPG 9p per mile
Over 2000cc: petrol 20p per mile, LPG 13p per mile
Diesel rates:
1600cc or less: 9p per mile
1601-2000cc: 11p per mile
Over 2000cc: 13p per mile

These rates can be used from 1 December 2015 to calculate the petrol content of mileage rates paid to employees, or as a basis to repay private petrol provided by employers for the use of a company car.

Tax Diary January/February 2016

1 January 2016 – Due date for Corporation Tax due for the year ended 31 March 2015.

19 January 2016 – PAYE and NIC deductions due for month ended 5 January 2016. (If you pay your tax electronically the due date is 22 January 2016.)

19 January 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2016.

19 January 2016 – CIS tax deducted for the month ended 5 January 2016 is payable by today.

31 January 2016 – Last day to file 2014-15 Self Assessment tax returns online.

31 January 2016 – Balance of Self Assessment tax owing for 2014-15 due to be settled today. Also first payment on account for 2015-16 due today.

1 February 2016 – Due date for Corporation Tax payable for the year ended 30 April 2015.

19 February 2016 – PAYE and NIC deductions due for month ended 5 February 2016. (If you pay your tax electronically the due date is 22 February 2016.)

19 February 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2016.

19 February 2016 – CIS tax deducted for the month ended 5 February 2016 is payable by today.

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