Author: Glenn

Navigating the intricacies of Inheritance Tax (IHT) can be daunting, but understanding the available gift exemptions and strategic planning can significantly reduce potential liabilities. By effectively utilising annual allowances, small gift exemptions, and planning for special occasions, you can ensure more of your wealth is passed on to your loved ones tax-free.

There is an annual Inheritance Tax exemption of £3,000 for gifts, which can be carried forward to the following tax year if not fully utilised. This allows for a maximum gift of £6,000 within a qualifying two-year period. Additionally, you can give as many gifts of up to £250 per person as you wish throughout the tax year, provided you have not already used another exemption for the same individual. There are also special allowances for gifts made on the occasion of a wedding or civil ceremony. These gifts are excluded from the Inheritance Tax calculations in the event of the donor’s death within seven years of making the gift.

Wealthier individuals may also have the ability to make tax-exempt gifts and payments that are funded from their income. With proper planning, this can be an effective strategy, allowing grandparents, for example, to contribute towards their grandchildren’s school fees without incurring tax liabilities.

However, careful planning and consideration are essential to ensure that these payments are deemed to be part of the transferor’s normal expenditure and are made from income rather than from capital. It is also important to ensure that the transferor retains enough income to maintain their usual standard of living after making the gift, as the arrangement must not cause any financial hardship to the giver.

HMRC together with the Department for Business and Trade (DBT) have launched a new consultation on e-invoicing to encourage its broader adoption among UK businesses and government departments. The consultation will run for 12-weeks and aims to cut paperwork for businesses and help improve productivity.

This is the first time that UK businesses have been invited to have their say on the government’s electronic invoicing (e-invoicing) proposals.

E-invoicing is the digital exchange of invoice information directly between buyers and suppliers. It could help businesses get their tax right first time, reduce invoicing and data errors, improve the accuracy of VAT returns, help close the tax gap and save time and money. It usually results in faster business to business payments, leading to improved cash flow and less paperwork.

HMRC provided the following example of where e-invoicing has improved cash flow. A UK NHS trust where e-invoices are ready for processing within 24 hours, compared to 10 days under paper invoicing. Their e-invoices are typically paid almost twice as quickly than paper invoices, with supplier queries reduced by an average of 15%.

Topics that the government is interested in exploring as part of the consultation include:

• different models of e-invoicing;
• whether to take a mandated or voluntary approach to e-invoicing, and what scope of mandate might be most appropriate in the UK and for businesses; and
• whether e-invoicing should be complemented by real time digital reporting.

With potential benefits like faster payments and fewer errors, e-invoicing could help UK businesses save time and money. If you are interested in sharing your thoughts, the consultation is open until 7 May 2025.

Deciding whether to incorporate your business in the UK involves evaluating several key factors:

Limited Liability Protection

Incorporating as a limited company creates a separate legal entity, safeguarding your personal assets from business debts and liabilities. This means your personal finances remain protected if the business faces financial difficulties.

Tax Implications

Operating as a limited company can offer tax advantages. Companies pay Corporation Tax on all trading profits at a maximum rate of 25%; for smaller companies, this rate can be as low as 19%. Additionally, dividends distributed to shareholders are not subject to National Insurance, potentially providing a more tax-efficient method of remuneration.

Administrative Responsibilities

Incorporation brings increased administrative duties, including:

• Regulatory Compliance: Registering with Companies House, filing annual accounts, and submitting confirmation statements are mandatory.
• Record Keeping: Maintaining detailed financial records is essential to meet legal obligations.
• Costs: Expenses include registration fees and potential professional services for compliance.

Professional Image and Credibility

A limited company structure can enhance your business's credibility, potentially attracting more clients and investors. This formal structure often instils greater confidence among stakeholders.

Business Growth and Investment

Incorporation facilitates business expansion by allowing:

• Equity Sharing: Issuing shares to raise capital from investors.
• Succession Planning: Simplifying ownership transfer, ensuring business continuity.

Conclusion

Incorporating your business offers benefits like limited liability and potential tax efficiencies but comes with added administrative responsibilities. It's crucial to assess your specific circumstances, financial goals, and the current economic environment. Please call if you need help considering your options.

Even if you have never been employed, you might have been eligible for NI credits without realising it. For example, if you have been a carer for a sick or disabled person for more than 20 hours a week, you could have claimed Carer's Credit. Similarly, if you have been receiving certain benefits, such as Jobseeker's Allowance or Employment and Support Allowance, you might have automatically received NI credits.

It's a good idea to review your personal history to see if there are any periods where you might have been eligible for NI credits. If you identify such periods, you can contact the HM Revenue and Customs (HMRC) to see if your NI record can be updated accordingly.

Paying Voluntary Contributions

If you are below the State Pension age and have gaps in your NI record, you can choose to pay voluntary contributions to boost your State Pension entitlement. This can be particularly beneficial if you have some qualifying years but not enough to reach the 10-year minimum.

Before deciding to pay voluntary contributions, it's important to:

• Check Your National Insurance Record: This will show you any gaps in your contributions and how they affect your State Pension forecast.
• Evaluate the Cost: Voluntary contributions come at a cost, so you'll need to assess whether the potential increase in your State Pension is worth the expense.
• Consider Your Health and Life Expectancy: If you're in poor health, it might not be financially beneficial to make voluntary contributions.

You can find more information on paying voluntary NI contributions on the GOV.UK website.

The Construction Industry Scheme (CIS) requires contractors to deduct tax from subcontractor payments and file monthly returns with HMRC. Even if no payments are made, nil returns must be submitted to avoid penalties.

The CIS is a specialised set of rules governing tax and national insurance for individuals working within the construction industry. This scheme specifically applies to businesses operating as 'contractors' and 'subcontractors' within the construction sector. Under the provisions of the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

One of the primary responsibilities for contractors under the CIS is the submission of monthly returns, which must be completed and filed online. These returns correspond to each tax month, which runs from the 6th day of one month to the 5th day of the following month. The deadline for submitting these returns is 14 days after the conclusion of each tax month.

It is important to note that even if no subcontractors have been paid during a particular tax month, contractors are still required to file a 'nil return.' The necessity to submit returns must be met regardless of whether the contractor typically submits PAYE returns on a quarterly basis. Contractors can file their monthly returns using the HMRC CIS online service or through commercial CIS software. Failure to submit the required returns on time may result in penalties and interest charges.

In cases where a contractor has not made any payments to subcontractors during a given tax month, they are still obligated to submit a 'CIS nil return' or inform HMRC that no return is necessary. Should this 'nil return' situation become a long-term occurrence, contractors have the option to request a period of inactivity from HMRC. This request indicates that the contractor has temporarily ceased employing subcontractors and lasts for a period of six months. It is important to notify HMRC if subcontractor payments resume within this time frame, as this could affect the contractor’s obligations under the scheme.

Contractors are defined as those who make payments to subcontractors for construction work or who have spent more than £3 million on construction in the 12 months following their first payment under the scheme.