Long Term Care Funding – Living longer

Long Term Care Funding – Living longer

Long Term Care Funding

We are all aware that people are now living longer. The main factors said to be affecting this are mortality, fertility, health provisions and lifestyles.

Whilst most people wish to live a long and healthy life, unfortunately that is not always the case and many are facing the need for either domiciliary (care in the home) or residential/nursing care. With the cost of care fees becoming part of their expenditure, people are turning to their trusted advisers to assist with the best way to pay for this. Some are even trying to plan in advance, possibly those with the experience of relatives requiring care!

If you need to pay – what are the rules?

  • Assets over £23,250 (in England) which can include your property = No financial support from the Local Authority
  • Assets less than £14,250 = Full financial support from the Local Authority, but:
  • Local Authority sets maximum limits for cost of care
  • Eligible income still taken into account
  • Between £14,250 and £23,250 = some care may be covered by the local authority and you will pay for the rest

Different types of income such as money from certain disability benefits and pensions, may not be counted in the means test. This is the same for certain types of capital. All other income and capital can be taken into account.

Is any help available?…

Financial assistance can be available, some payments/benefits require means testing/financial and physical assessments (where your income and assets or current health have to be considered before a decision is made).

Attendance Allowance – available if you require help with personal support and are aged 65 or over and physically or mentally disabled.

  • Higher rate – £82.30 per week or
  • Lower rate – £55.10 per week

Carers Allowance – if you care for someone  for at least 35 hours a week and they get certain benefits:

  • Amount payable – £62.10 per week

Nursing care – if you require nursing care the local authority will contribute towards this (paid directly to care homes only). You would require an assessment to see if you qualify for this:

  • RNCC (residential nursing care contribution) –

£155.05 per week (England)

If you moved into a care home before 1st October 2007, and you were on the high band, NHS- funded care is paid at a higher rate. In April 2017, the higher rate was set at £213.32 a week. You’re entitled to continue on this rate unless:

  • you no longer have nursing needs
  • you no longer live in a care home that provides nursing
  • your nursing needs have reduced and you’re no longer eligible for the high band. You would change to the standard rate of £155.05 a week, or
  • you become entitled to NHS continuing healthcare instead

NHS Continuing Healthcare – All of your care could be paid for if you have long-term complex needs. You would require an assessment to see if you qualify for this.

I have to pay towards care….how?

If you need to pay for care there are various ways to do this. Your adviser will be able to assist you in agreeing your best option. This could be done by considering the following:

  • Pay from income
  • Use investments to produce an income
  • Equity release
  • Deferred Payment Agreement
  • Draw down capital
  • Immediate Care Plan

If funding for care is something that you need   to consider, it can be an emotional time for families. Specialist advisers can assist you with the financial aspects of this, leaving you free to support your loved ones.

Please note that giving away assets to try and reduce your estate and therefore reduce/stop having to pay for care is considered deliberate deprivation of estate. If the local authority conclude that this was the case they can treat you as still owning these assets and use them in your assessment.

The content of this article is based on our understanding of current legislation.

Natasha Fathers
Independent Financial Adviser
[email protected]
0114 229 6557

Free initial meeting

Making Tax Digital and VAT: are you ready?

Making Tax Digital and VAT: are you ready?

Making Tax Digital VAT: are you ready?

Making Tax Digital (MTD) will commence in April 2019 under the current Government timetable.  Initially this will only be for VAT purposes, with the wider roll out of MTD having been delayed until the system has been shown to work well for VAT and not before April 2020 at the earliest.

Hawsons’ Senior Tax Manager Craig Walker comments on what the introduction of MTD will mean for VAT registered businesses and what they should do to prepare.

 

What is Making Tax Digital?

MTD is the biggest shake-up of the tax system in 20 years and will fundamentally change the way taxpayers report to HM Revenue & Customs (HMRC) and keep their business records.  Taxpayers will be required to keep records digitally and generally update HMRC more frequently than is currently the case.

 

When is MTD being introduced for VAT purposes?

MTD will be introduced for VAT in April 2019.

The implementation of MTD for other taxes has been delayed until at least 2020.

 

How will it work?

From April 2019 VAT registered businesses with a turnover above the VAT threshold (currently £85,000) will be required to:

  • keep VAT records digitally, and
  • submit VAT returns using MTD compatible software.

 

Digital record keeping

VAT records will need to be kept digitally using ‘functional compatible software’, including:

  • your business name, address, VAT registration number, and any VAT accounting schemes you use,
  • the time and value of each supply made and the VAT rate charged,
  • the time and value of each supply received and the amount of input VAT you will recover,
  • the amount of any adjustments or corrections,
  • the VAT account audit trail between your business records and VAT return

The digital records must be kept for at least six years (or 10 years if you use VATMOSS).

 

MTD compatible software

You will be required to use a third-party software programme which can connect with HMRC’s systems via the Application Programme Interfaces (“API”) platform.  HMRC will not be offering software.

If you wish to continue to keep books and records on spreadsheets, you will need to use third party bridging software to convert this information into a format that is compatible with HMRC’s API platform.

 

How do I prepare for MTD?

It is vital that businesses start to prepare for MTD now.

You should consider whether your current system of record keeping will meet the requirements of MTD for VAT.  If all or part of your VAT records are currently kept on paper, you will need to consider how best to digitise your records.

You will need to ensure that the software you are using to submit your VAT returns is MTD compatible.

 

How can Hawsons help?

We can help you to review your current VAT record keeping arrangements and identify the changes that will be necessary to comply with the requirements of MTD.

You may wish to consider utilising cloud-based accounting software and many of our clients are already enjoying the benefits of this.  At Hawsons we are experienced in the use of the accounting packages marketed by the major cloud providers, such as Quickbooks, Xero, Sage and Freeagent.  We can assist you in your choice of software, help you to set this up, and offer training for you and your staff.

These packages can allow you to capture receipts and payments from your bank account directly, use your Smartphone to photograph expenses and have this information filed straight into your accounts, keep track of your accounts 24/7, and easily create quotes and invoices for your customers.

We would be happy to give you a demonstration of how cloud accounting software can help your business.

 

If you wish to discuss the implications of MTD for you and your business, please get in touch with your usual Hawsons contact.

 

 

Craig Walker is a senior tax manager at the firm. He advises on all matters tax related, both corporate and personal, including income, capital gains and inheritance. For more details and advice, please contact Craig on [email protected] or 0114 266 7141.

Cryptocurrency & Tax

Cryptocurrency & Tax

What is cryptocurrency?

Historically, money has taken many forms; from being recorded in physical ledgers to now being entered electronically into a banks books, money has had to evolve and change with society for ease of transaction and consumer purchase.

Enter cryptocurrencies. These currencies use encryption technology (cryptography) in the process of its creation, ensuring security of transactions, but also the prevention of additional, unlicensed units.

Over the past five years, the most prevalent and popular cryptocurrency is Bitcoin. It was founded in 2009, and was first released in open-source software allowing developers to use and develop their own ways of transferring the currencies between individuals. It was truly revolutionary, as it is a global currency, and is totally independent of any central authority or bank. Because it is traded directly between individuals, without any interference from an intermediary, it theoretically means the transaction is much safer.

However, as with anything of monetary value, there are implications with regards to tax, and what you will need to pay if you are involved in the exchanging, purchasing or selling of any cryptocurrency.

Tax Implications of Cryptocurrencies

As with any other activity, whether any income received from and charges made in connection with activities involving Bitcoins and other similar cryptocurrencies will be subject to Income Tax, Capital Gains Tax or Corporation Tax depends on the activities and the parties involved.

Individuals

The tax treatment for individuals is determined by whether or not the activities are caught under the trading profit rules.  The chief indicators used to make a decision about whether a transaction or series of transactions constitutes trading transactions are known as the ‘badges of trade’, a series of pointers based on years of case law.  There can be doubt as to the nature of transactions, particularly isolated ones, therefore it is important to seek professional advice.

If the activity is deemed to amount to trading income then any gains or losses of unincorporated businesses on Bitcoin or other cryptocurrency transactions must be reflected in the business accounts and subject to income tax under the normal rules.  A charge to National Insurance may also be applied to any income received.

If the trading rules do not apply, gains or losses on Bitcoin or other cryptocurrencies are chargeable or allowable for capital gains tax.  If you have made more profit than the capital gains allowance (£11,700 from 6 April 2018) then you will have to report and pay tax on your gains. Bear in mind that every single trade you make – even crypto to crypto – impacts tax calculations.  Additionally, to calculate the capital gains tax on these transactions, you have to convert everything to GBP value at the time of the transaction, and then continue your calculations from that point.

Companies

Companies involved in cryptocurrency activities are always subject to corporation tax, following the general rules on currencies and loan relationships.  The current rate of corporation tax on gains is 19%, but is due to reduce to 17% from 1 April 2020.

Case by Case Basis

Each case will be specific to each individual client, but care needs to be taken to ensure all transactions are reported to HMRC in the correct manner and the right amount of tax is paid.  The distinction between trading and non-trading is essential as it can mean the difference between 20% and 45% tax.  Hawsons can provide specialist advice regarding the correct tax treatment for all cryptocurrency transactions, so please get in touch with us to arrange a free initial meeting if you would like our assistance.

Jenny Brown Senior Tax Manager

Jenny Brown is a personal tax manager at Hawsons, based in the Sheffield office, who manages the personal tax affairs of our clients. She started her career with HM Revenue and Customs, specialising in small business compliance. For more details and advice, please contact Jenny on [email protected] or 0114 266 7141 or your local tax specialist.[/author_info]

£560 million of Gift Aid goes unclaimed every year

£560 million of Gift Aid goes unclaimed every year

£560 million of Gift Aid goes unclaimed every year

Research from HMRC has shown that, due to a lack of awareness surrounding the scheme, charities are missing out on £560 million of Gift Aid every year.

Gift aid allows charities to claim an extra 25p for every £1 that is donated to them by eligible UK tax payers. The scheme accounts for approximately £1.3billion in charitable income every single year.

The research from HMRC, which was completed in September 2016, but published in March 2018, states that Gift Aid is not claimed for around a third that are eligible for the scheme. The report also gives reason for the lack of claims – and that is a lack of awareness among both the public and charities themselves that leads to a high number of unclaimed funds.

The research showed that about 30% of donors asked said they had “fairly poor” understanding of Gift Aid, and 11% said that their understanding was “poor”. Alongside the £560 million that is going unclaimed, due to a lack of knowledge from donors, £179 million per year uis being claimed erroneously.

In response to these figures, the government said that it will be supporting Gift Aid awareness initiatives, and will be communicating with 50,000 small charities to raise awareness and understanding of the Gift Aid Small Donations Scheme. The GASD scheme allows charities to claim relief similar to Gift Aid on cash donations of up to £8,000 each year, without individual paperwork (our previous article on the limitations of GASDS can be found here). This can be massively beneficial to charities, as research shows that around 80% of people mainly donate to charity through collection tins and buckets.

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141
Is your firm at risk from Personal Injury reforms?

Is your firm at risk from Personal Injury reforms?

Is your firm at risk from Personal Injury reforms? 

New Solicitor Regulation Authority (SRA) figures have shown just how much many law firms are depending on the Personal Injury market, a sector that is potentially threatened by incoming government reforms. Out of the 10,506 that are currently operating in England and Wales, 768 of them are considered to specialise in personal injury work. These firms have reported that, in the last 12 months, half of their turnover has been generated from PI work.

Furthermore, analysis shows that PI firms are relatively bigger than most other firms, and 49% of specialist PI practices have an annual turnover of over £500,000, compared to only 34% of non-PI firms. These figures were published as part of the SRA’s response to the Insurance Fraud Taskforce from January 2016. This taskforce set out a series of recommendations to help reduce fraudulent behaviour in the personal injury claims industry.  

The release of these figures is timely, as they come just as the Ministry of Justice confirmed that it wants to implement reforms to the sector by April 2019. The new reforms will put a tariff system in place for soft tissue injury compensation. They will increase the small claims track limit for claims related to road traffic accidents (RTAs) from £1,000 to £5,000. This could effectively exclude solicitors from the vast majority of cases.

These changes will mainly impact on whiplash injuries, and were initially going to be introduced in October 2018, however it has been pushed back 6 months due to the legislative agenda being mostly dominated by Brexit in the near future.

Furthermore, alongside these reforms, the Department of Health and Social Care last week announced the establishment of a working group, which will possibly introduce cost caps in cases of clinical negligence.

The SRA have stated that they will not ask any firms for any business plans for dealing with the changes, but will continue to monitor the sector.

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141