Archive for December, 2017

What happens if we can\’t manage

Thursday, December 21st, 2017

A reminder that as we age the argument that we should grant powers of attorney to trusted family members becomes increasingly relevant. A lasting power of attorney (LPA) is a legal document that lets you (the ‘donor’) appoint one or more people (known as ‘attorneys’) to help you make decisions or to make decisions on your behalf. There are two sorts of LPA. They can cover personal issues (health and welfare) or financial issues (property and financial affairs).

An LPA allows you to nominate who has control over what happens to you if, for example, you have an accident or an illness and can’t make decisions at the time, or if you for other reasons, ‘lack mental capacity’ to make prudent decisions on your own behalf.

You must be 18 or over and have mental capacity (the ability to make your own decisions) when you make your LPA. This is a classic “chicken and egg” process: if you wait until you are no longer compos mentis, or physically able to make decisions on your behalf, it is already too late.

Please note that there are different processes for registering LPAs in Scotland and Northern Ireland.

How do you make an LPA?

This is a three-stage process:

  1. First, you must choose your attorney – the person who will have control over your affairs – and you can have more than one.
  2. Secondly, you will need to complete the relevant forms to appoint them as an attorney, and finally
  3. Register your LPA with the Office of the Public Guardian (this can take up to 10 weeks).

It costs £110 to register an LPA unless you get a reduction or exemption.

Unfortunately, you will need to register both LPAs if you want to cover all your risks, so the above costs are doubled.

If you want to find out more about the process you can contact the Office of the Public Guardian at:

Office of the Public Guardian
customerservices@publicguardian.gsi.gov.uk
Telephone: 0300 456 0300
Textphone: 0115 934 2778
 

Or, you can take professional advice.

Timing is everything

Wednesday, December 20th, 2017

We are fast approaching the end of the 2017-18 tax year. In fact, the 31 March (or 5 April) is probably the most common trading year end date for sole traders, partnerships and limited companies. And individuals have no choice, the self-assessment tax year ends on 5 April.

This being so, it is worth considering how business owners, particularly self-employed traders, time significant investment decisions to maximise any tax relief available.

Consider James, a self-employed plumber. He has had a rough year. Due to family obligations he is unlikely to make more than £17,000 profit in the tax year 2017-18. However, he has secured work for 2018-19 that will create profits of at least £60,000.

Whilst this is good news James will need to replace his van to cope with the extra work. He finds a suitable vehicle for £18,000 and buys it during the last month of the 2017-18 tax year. He knows he can write off the full cost of the van against his profits of £17,000 and is feeling very pleased with himself, no tax to pay.

James makes an appointment with his accountant to deliver his books for 2017-18 during June 2018.

During the visit, his accountant points out that there is no need to claim all the van purchase against his profits for 2017-18 as he can earn up £11,500 tax free. Accordingly, his taxable profit of £5,500 (£17,000 – £11,500) is covered by £5,500 of the van purchase and the balance of £12,500 can be carried forward to claim against future years’ profits.

James is happy with this outcome, still no tax to pay for 2017-18 and he has £12,500 to write off against future profits. His accountant is not so sure…

James is dismayed as his advisor points out that if he had bought the van after 5 April 2018, just one month later, the full cost of the van could have been written off against his profits for 2018-19 and this would have eliminated all his exposure to higher rate income tax saving him more than £7,000 in higher rate income tax and Class 4 NIC.

There would have been approximately £2,000 of tax and NIC to pay for 2017-18, but overall a saving of £5,000 has been compromised.

It is true that James will still be able to claim the remaining £12,500 tax relief from the purchase of his van, but this will be restricted to just under 20% a year. Accordingly, it will take much longer to claim back the tax relief available and possibly at lower rates of income tax.

Timing really is everything and we would recommend that any self-employed trader that is thinking of spending a significant amount on commercial vehicles, plant, equipment or computer equipment before the 6 April 2018, take advice now on best way to structure the payments to gain the maximum tax relief.

Scottish Budget – Little Festive Cheer

Friday, December 15th, 2017

15th December 2017

Derek Mackay, our Finance Secretary, has announced his much publicised tax changes for 18/19. The first thing that should be noted is that the SNP will require opposition support for the changes and it remains to be seen whether the Green Party call for more money for Local Authorities will result in worse tax increases than published so far!

Secondly, my personal view is the changes are modest. A manifesto commitment not to change the basic rate was thrown aside as the basic rate band on earned income in Scotland is split into 3 bands of 19%, 20% and 21%. 1% is then added to the upper rates. However, the personal allowance and 40% limit rise with inflation so the overall effect of this tinkering seems to be negligible for people earning unless they are well towards £100,000 income. However, at £130,000 there’s an £80 a month pay cut which may be noticed. The marginal rate between £100,000 and £123,000 where you lose your personal allowance gradually as income rises is 64% (tax and NI) – ouch!

Of course, politicians will focus on the differential between England which for somebody on £50,000 appears to now be over £600 per annum. And business owners can ignore all this by receiving their income as dividends (not devolved!).

How our tax software will copy is very unclear.

Otherwise the change I noticed most is the announcement was not the small increase in the LBTT limit for first time homebuyers, but was instead the removal of rates relief for independent schools in 2020. I am guessing this will add a few hundred pounds to school fees.

It seems to me that the losers from the SNP policies over the last couple of years are the Doctors and the like, who may have a large house (or want one) where LBTT charges of 12% are just horrendous and damage house values. I think the LBTT rates are a major problem for mobility and send a signal to people that the Scottish Government wants to make it hard for people to build up any wealth in property. The “nip” at their income and attack on private schools is all a very negative message to send out.

However, my guess is most Scots feel that the “free stuff” needs to be paid for and they don’t want to scrap or means test free prescriptions or university education.

The other real issue in the McBudget (worth a read) is the terrible forecasts for growth over the next five years that sit alongside forecasts growths in public expenditure at a higher level. In short, the state as a % of GDP will become bigger I think, which means the 1% rise may be the start of things to come.

I also worry the McBudget does little to encourage business investment. Mind you, I maintain the view the best thing Holyrood could do for business is commit to the Union with England for the long term. It seems odd to me that we can blame Brexit uncertainty for many woes yet the same politicians present the idea that Scexit is not off the table and expect business and investment in Scotland to remain unaffected.

Finally, I wish all those reading this little note a very Merry Christmas and best wishes for 2018.

Regards
Donald Parbrook CTA
Director, Milne Craig

Data protection essentials for 2018

Thursday, December 14th, 2017

From 25 May 2018, any business that stores the personal data of staff, customers, suppliers and other business contacts will need to comply with the General Data Protection Regulation (GDPR).

Basically, you will need to know what personal data you keep, where you keep it, who you share it with and how you will use this knowledge to comply with these new regulations.

You will also need to have a lawful basis for collecting and storing this data and this may involve a strict process of obtaining consent. The Information Commissioners’ Office have identified a twelve-point check list that you should have worked through before 25 May 2018:

 

  1. Awareness: You should make sure that decision makers and key people in your organisation are aware that the law is changing to the GDPR. They need to appreciate the impact this is likely to have.
  2. Information you hold: You should document what personal data you hold, where it came from and who you share it with. You may need to organise an information audit.
  3. Individuals’ rights: You should check your procedures to ensure they cover all the rights individuals have, including how you would delete personal data or provide data electronically and in a commonly used format.
  4. Communicating privacy information: You should review your current privacy notices and put a plan in place for making any necessary changes in time for GDPR implementation.
  5. Lawful basis for processing personal data: You should identify the lawful basis for your processing activity in the GDPR, document it and update your privacy notice to explain it.
  6. Subject access requests: You should update your procedures and plan how you will handle requests within the new timescales and provide any additional information.
  7. Consent: You should review how you seek, record and manage consent and whether you need to make any changes. Refresh existing consents now if they don’t meet the GDPR standard.
  8. Data breaches: You should make sure you have the right procedures in place to detect, report and investigate a personal data breach.
  9. Children: You should start thinking now about whether you need to put systems in place to verify individuals’ ages and to obtain parental or guardian consent for any data processing activity.
  10. Data Protection by Design and Data Protection Impact Assessments: You should familiarise yourself now with the ICO’s code of practice on Privacy Impact Assessments as well as the latest guidance from the Article 29 Working Party, and work out how and when to implement them in your organisation.
  11. Data Protection Officers: You should designate someone to take responsibility for data protection compliance and assess where this role will sit within your organisation’s structure and governance arrangements. You should consider whether you are required to formally designate a Data Protection Officer.
  12. International: If your organisation operates in more than one EU member state (i.e. you carry out cross-border processing), you should determine your lead data protection supervisory authority. Article 29 Working Party guidelines will help you do this.

Sent to Coventry

Wednesday, December 13th, 2017

The origins of the phrase, to be sent to Coventry, seem to have originated in the seventeenth century when Cromwell was purported to have sent Royalist soldiers to be imprisoned in Coventry around 1648. At the time, Coventry was a parliamentary supporter and it is likely that the hapless Cavaliers would have had a miserable time.

In a contemporary sense, the phrase has been used to describe an event when a person or group was isolated or ostracised by their peers, for whatever reason. Rather like a grown-up’s version of the “naughty step”.

From an economic viewpoint, Coventry has struggled to shed its reputation as a place in decline, which is why the announcement by the Department for Digital, Culture, Media & Sport last week was such good news. In competition with cities across the UK Coventry will host the title of UK City of Culture 2021.

The decision was made after an independent panel of culture experts, chaired by television producer and screenwriter Phil Redmond, visited each of the five candidate cities before recommending Coventry as the winner. The bid impressed the judges with its focus on youth, diversity and the scale of impact not only in Coventry but across the UK.

Coventry will take the title from Hull 2017, which has used City of Culture to transform its reputation as a destination for arts and culture both at home and abroad.

It is estimated that Hull’s local economy has received a £60 million boost in 2017 and the city has been praised for how it has engaged residents in the cultural programme. Nine out of 10 residents have attended, or taken part, in a City of Culture event and since it was awarded the title in 2013 it has received more than £3 billion of investment.

John Glen, Minister for Arts, Heritage and Tourism, said:

I would like to congratulate Coventry on winning UK City of Culture 2021. The title is an incredible opportunity for Coventry to boost investment in the local economy, grow tourism and put arts and culture centre stage.

We received excellent bids from all the cities and I would like to thank them for their efforts.

Coventry now has three years to prepare its year-long programme of activity for 2021. As part of its status as UK City of Culture 2012, Coventry will be eligible for a £3 million grant from the Heritage Lottery Fund.

Time also for Coventry to inject the phrase “sent to Coventry” with new and positive meaning…

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