Update -  the proposed changes to class 4 National Insurance for self-employed individuals have now been dropped. See here for further details.  A summary of some of the changes anounced by the Chancellor of the Exchequer in the 2017 Spring Budget, published on 8 March 2017. Income and Personal Tax Personal Allowance and Higher Rate Threshold The personal allowance is increasing from £11,000 in 2016/17 to £11,500 in 2017/18. The basic rate band will increase from £32,000 for 2016/17 to £33,500 in 2017/18. Individuals will therefore be able to earn up to £43,000 before paying higher rate tax. Dividend Allowance Reduction The current tax free allowance of £5,000 for dividend income is to be reduced to £2,000 fr...

In the Autumn Statement 2016, the Chancellor announced the introduction of a new 16.5% VAT flat rate for businesses with limited costs. The new rate will take effect from 1 April 2017, and will affect traders using the flat rate scheme where VAT inclusive expenditure is less than 2% of their turnover, or £1,000 per annum. Background The flat rate scheme is a simplified accounting system which enables businesses to calculate their VAT liability as a flat rate of total VAT inclusive turnover, thereby reducing the administrative burden of keeping detailed records. This is in contrast to the standard method of calculating VAT payable, whereby the input VAT on business expenses is offset against the output VAT charged. Those on the flat rat...

The case before the First-Tier Tribunal (FTT) highlights the importance of correctly accounting for capital disposals in foreign currency. Taxpayers should ensure they account for non-sterling items correctly when calculating capital gains tax (CGT). Background George Knight and Ingeborg Knight (the taxpayers) purchased a Swiss property in August 1998 and disposed of the property in January 2010. A number of expenses were also incurred in relation the property. All the aforementioned transactions were charged/paid for using Swiss Francs. The taxpayers disclosed these disposals to HMRC under the Liechtenstein Disclosure Facility and HMRC issued discovery assessments for the 2009/10 tax year. The taxpayers and HMRC used alte...

In the case of Airtours Holidays Transport Ltd v HMRC, the Supreme Court dismissed the taxpayer's appeal and held that it was not entitled to recover input tax paid on an invoice for work carried out by PwC on behalf of its lenders. Background In October 2002, Airtours Holidays Transport Ltd ("Airtours") was in serious financial difficulties after borrowing money from around 80 financial institutions (the "Institutions"). Airtours commissioned PwC to prepare an accountants' report to satisfy the Institutions that the proposed restructuring and refinancing proposals were viable. Airtours paid PwC for the report and sought to recover the VAT it had paid on the fees. HMRC rejected the claim on the basis that PwC's services were supplied ...

A business must register for VAT once taxable supplies exceeds the registration threshold, and can only apply for deregistration when the 'taxable supplies' cease to exceed the deregistration threshold. The registration and deregistration thresholds can be found here. 'Taxable supplies' is the value of everything sold by a business that is not exempt from VAT. Whilst a business can register for VAT voluntarily, registration is compulsory where either the ‘historic test’ or ‘future test’ is met. Historic Test The historic test looks at the value of taxable supplies in the preceding 12 months. Where cumulative taxable supplies exceed the registration threshold, HMRC must be notified within the next 30 days. From...

The First-tier Tribunal has held that a taxpayer’s statutory records can include statements from a personal bank account when the account is used for business purposes. As a result, the Tribunal upheld HMRC’s notice to request these statements. The Facts HMRC have the power to request the production of information or a document in order to check a taxpayer’s tax position. Mr Akrill (the Taxpayer) appealed against an information notice issued to him by HMRC requesting that he was to supply bank statements for a particular account for the period 1 December 2009 to 31 August 2015. There is a right to appeal against information notices however this right is removed when the documents requested form a ‘part of the t...

An individual who buys a new home does not have to pay VAT on top of the purchase price because dwellings are exempt from VAT. In light of this, the DIY Housebuilders’ Scheme was introduced so that where an individual builds their new home, they can apply for a VAT refund on expenditure incurred on building materials and services. The scheme also applies to expenditure incurred on building a non-profit communal residence (e.g. a hospice), a property for a charity, or converting a non-residential building into a home. New Build As noted above, where a non-residential property is converted into a home, a claim for a VAT refund can be made. However, where the build relates to an existing residential property, it is importan...