How can careful estate planning can reduce inheritance tax?

How can careful estate planning can reduce inheritance tax?

Could you Legally save £100,000’s on your estate?

In the last tax year, £6.1bn was paid to HMRC in Inheritance Tax (IHT) payments – £700m higher than the previous tax year and according to the Office for Budget Responsibility Economic & Fiscal outlook, this figure could be as much as £37bn over the next 5 years. A scary but realistic outlook for many families in the UK.

 

What is IHT and what are the thresholds?

For UK residents IHT is a voluntary death tax paid on your world-wide assets. Without careful and strategic planning this will reduce the proceeds of your estate available to your loved ones.  In some cases, making HMRC the largest beneficiary of the estate.

There are certain ‘bands’ available, before any IHT should become payable:

  • Nil Rate Band (NRB) – £325,000 per individual.
  • Residence Nil Rate Band (RNRB) – £175,000 is the amount allowed if you’re leaving residential property to direct descendants.

For every £1 over these thresholds, HMRC will receive the first 40p in IHT!

 

The BIG Freeze!!!

During the pandemic the UK government spent billions in propping up the economy, Rishi Sunak announced legislation in the finance bill 2021 in an attempt to recoup some of the billions spent, by freezing the existing Nil Rate Bands until 2026 at least. The NRB has been the same level since 2009 and the RNRB was introduced in 2017, which started at £100,000.

The average house price in the UK is now £277,000, £27,000 higher than the previous year figures. In England average house prices now stand at £296,000 according to the ONS.

More and more families are finding themselves caught in an unfortunate position, having to pay tax on assets that have been left to them by their loved ones.

 

What can you do?

There are various ways in which an individual/couple can reduce the size of their estate, below we mention some of the options.

  • Annual Gift allowance
  • Marriage Allowance
  • Insurance Policy
  • Gifting (directly and trusts)
  • Spend the money
  • Exemption from Income
  • An insurance policy to cover the IHT bill.
  • Investing into shares that qualify for business relief
  • Equity Release – Lifetime Mortgage

Former Labour Chancellor Roy Jenkins famously described Inheritance Tax as ‘a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue. ‘

If you’d like to know more about the support available, you can book a free consultation with one of our advisers below:

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Hawsons wealth management
Natasha Fathers, Director of HWM

Natasha Fathers

Director of Hawsons Wealth Management Limited, Sheffield

0114 229 6557

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Hospitality sector to benefit from ban on exclusivity clauses

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What is an exclusivity clause?

When an exclusivity clause is put into an employee’s contact, it restricts the employee from being able to take on additional work with another employer. In 2015, exclusivity clauses were banned from being placed into zero-hours contracts. The government judged this unfair when work is not guaranteed to the employee.

 

What are the new rules on exclusivity clauses?

Business Minister Paul Scully has recently announced that the Government has decided to extend the ban on exclusivity clauses further which includes those earning less than £123 per week. This rule changes means employers will no longer be able to insert exclusivity clauses into employee’s contracts where their guaranteed weekly income is £123 of less (the Lower Earnings Limit). It has been estimated that 1.5 million workers across the UK are earning £123 or less per week. The intention of the new rules is to ensure that workers within this group with exclusivity clauses have the option to top up their income with additional work.

 

How will this benefit hospitality businesses?

This announcement has been welcomed by the hospitality sector and has been described as ‘positive for businesses and workers in hospitality’ and UKHospitality have said that the reform will benefit firms that are currently experiencing recruitment issues. The reform to the rules will enable those who would like a second job to have one. The hospitality sector has over 160,000 vacancies and enabling people to work with contracts that suits them should help with recruitment and increase business confidence.

 

Hospitality employees working longer hours

As referenced earlier, the hospitality sector currently has over 160,000 vacancies which is double the number of vacancies the sector had before the pandemic. The shortage of employees in the sector means that employees are being asked to work longer hours. According to a survey conducted by workforce management specialist Bizimply, it has been found that staff working hours in the hospitality sector has increased on average by 6 hours per week (25 hours per week compared to 19 hours per week) than before the pandemic. The hospitality sector is hoping that changes to exclusively clauses will help fill some of the many vacancies available. This may alleviate some of the pressure on their current staff who are working additional hours.

 

How can we help?

At Hawsons we have a dedicated team of leisure and hospitality accountants in Sheffield, Doncaster, and Northampton.

As the sector continues to become ever more challenging, with changes in fierce global, national and regional competition leading to unrelenting pressures to maintain margins, it is more crucial than ever to seek sound and proactive advice.

 

At Hawsons our dedicated team of specialist hotel, pub and restaurant accountants offer professionals advice and guidance that is tailored to their individual needs and requirements, providing a full range of proactive services.

Free initial meeting

Richard Burkimsher, Partner

Richard Burkimsher

Partner, Northampton

01604 645 600

Scott Sanderson

Partner, Sheffield

0114 266 7141
Paul Wormald, Partner

Paul Wormald

Partner, Doncaster

01302 367 262

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Charity Commission Opens Online System for Annual Returns

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After a delay due to a technical issue the Charity Commission has now opened its online system for submitting annual returns. The system was originally scheduled to go live towards the end of April. But due to the delay it was not released until 5th of May.

 

What is a Charity Annual return?

A charity annual return is an online form that charities in England and Wales are required to submit by law to the Charity Commission each year. The return requires you to answer specific questions regarding your charity as well as including copies of the trustee annual report and financial statements (audited or independently examined) for larger charities. The aim of submitting an annual return to the Charity Commission is to provide them with a clear picture of the charity’s financial position and activities throughout the year.

For smaller charities in particular this task can sometimes be time consuming. However, there are benefits to these requirements and you are given 10 months from the end of your financial year to file the annual return. The return must be completed online by logging into your Charity Commission account.

If you would like to find out more about preparing a charity annual return, please visit the government website here: https://www.gov.uk/guidance/prepare-a-charity-annual-return

 

How can we help?

At Hawsons we recognise that not-for-profit organisations have very different requirements from other businesses and are currently exposed to a challenging economic climate.

Our dedicated team fully understands the complex, ever-changing regulatory requirements of the charity and not-for-profit sector. Irrespective of your size we wish to support you to maximise the benefits you could achieve through our specialist professional advice.

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Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141
Paul Wormald, Partner

Paul Wormald

Partner, Doncaster

01302 367 262
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Charities Statement of Recommended Practice

Charities Statement of Recommended Practice

A revised version of the Charities Statement of Recommended Practice (SORP) is set to be updated from 1 January 2024. This is less than two years away.

The charities SORP was first introduced in 2015 and updated in 2019 to clarify and reflect amendments and changes to FRS 102.

 

The development process

The Charities SORP development process was created to discuss recommendations in the governance review which ended in 2019. The review recommended that greater focus was needed on small charities and wider engagement was required with stakeholder groups when the Charities SORP was developed.

These recommendations were acted on in February 2020 as six stakeholder groups were created called ‘strands’. Since the strands were created, they have been liaising with UK charity regulators. Subsequently the SORP-making body known as the SMB and the Charities SORP Committee was formed.  

The six strands that were created are:

·         Trustees

·         Smaller charities and independent examiners;

·         Professional and technical (qualified accountants specialising in charities, mainly audit)

·         Larger charities;

·         Major funders, donors, government and public bodies;

·         Academics, regulators and proxies for the public interest.

Once the six strands were formed the first order of business was to conduct an initial analysis of the amendments to the Charities SORP. During this analysis by the strands seventeen topics were raised for deeper analysis and they invited the Charities SORP Committee to create proposals to amend the Charities SORP.

The strands choose the following topics for in depth analysis:

·         A more tiered approach to concessions for charities of different sizes;

·         Charity reserves;

·         Accounting for donated goods and services;

·         Grant accounting;

·         Income recognition;

·         Impact reporting;

·         Sustainability reporting.

 

What now?

After in-depth analysis the Charities SORP committee will now begin work on drafting a consultation of the Charities SORP next edition throughout 2022. This consultation draft is planned to go to public consultation at the beginning of 2023.

The SMB’s published their aims and principles for drafting the next edition of the Charities SORP (FRS 102) in January 2022. There were four main aims:

‘Firstly the SORP is to address the needs of the main users who make use of a charity’s annual report and accounts who do not have the power to require specific information of a charity.’

‘Secondly in drafting the SORP we seek to comply with Financial Reporting Council’s (FRC) requirements that the: ‘SORPs should be developed in line with current FRC standards and best practice.’

‘Thirdly we aim to promote consistency across the charity sector by recommending a preferred treatment, approach or methodology.’

‘Lastly, we aim to keep our recommendations relevant to the socioeconomic context in which charities operate by retaining the advice of an expert SORP Committee.’

More details about these aims can be found in the SORP making body’s statement of drafting aims and principles.

These four aims are designed in a way where the Charities SORP should meet the needs of people that prepare and use trustees’ annual reports and financial statements.

This year the FRC is planning to publish an exposure draft of FRS 102 for public consultation following an initial call for input. Once the final changes to FRS 102 are confirmed, these will be implemented in the final edition of the Charities SORP (FRS 102).

In response to the FRC’s call for input, the Charities SMB provided some recommendations to the Charities SORP. These recommendations included a significant point ensuring that the same concessions available for commercial businesses are also available for charities.

 

How can we help?

At Hawsons we recognise that not-for-profit organisations have very different requirements from other businesses and are currently exposed to a challenging economic climate.

Our dedicated team fully understands the complex, ever-changing regulatory requirements of the charity and not-for-profit sector. Irrespective of your size we wish to support you to maximise the benefits you could achieve through our specialist professional advice.

Charities & not-for-profit organisations are currently facing extensive changes in their regulatory and legal framework. Given the additional pressures on fundraising, complex tax regimes, internal risk exposure, and stakeholder demands, it has never been more important to obtain specialist professional advice.

Free initial meeting

Simon Bladen

Partner, Sheffield

0114 266 7141
Paul Wormald, Partner

Paul Wormald

Partner, Doncaster

01302 367 262
Richard Burkimsher, Partner

Richard Burkimsher

Partner, Northampton

01604 645 600

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New VAT Penalties coming from 1 January 2023

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From 1st January 2023 a new penalty-based points system will be introduced for all VAT returns that are submitted late or the payment is late. This new system will replace the current default Surcharge.

Nil or repayment returns that are received late will also receive penalty points and financial penalties.

 

HMRC to introduce 12-month soft landing period for new penalty system

HMRC has confirmed that there will be a soft-landing period of 12 months which means that they will not be charging a first late penalty in the first year, only if the outstanding amount is paid within 30 days of the normal due date – we recommend that our clients DO NOT get into the habit of using this soft-landing period as a means of benefitting cashflow and get into the habit of submitting returns and paying on time for every return.

 

Further guidance to be introduced in December 2022

Unhelpfully, HMRC has stated that further guidance will be issued in December 2022 which gives little time for businesses to assess/implement these new rules.

 

New rules are complicated – so don’t get caught out!

What we know so far is that the new rules are complicated, so once again we recommend that all our clients submit their returns and payments on time:

  • For each VAT return submitted late one penalty point will be received
  • Once a threshold has been reached the business will receive a standard £200 penalty
  • A further £200 penalty will be received for each subsequent late submission

 

Penalty points threshold

Submission frequency 

Penalty points threshold

Period of compliance

Annually

2

24 months

Quarterly 

4

12 months

Monthly

5

6 months

 

A business can reset their penalty points back to zero by:

  • Submitting returns on or before the due date
  • Making sure all outstanding returns for the last 24 months have been received by HMRC

 

For late payment penalties the sooner the penalty is paid the LOWER the penalty rate will be.

Up to 15 days overdue – There will be no penalty if the VAT is paid in full or a payment plan is agreed with HMRC

Between 16-30 days overdue – The first penalty is 2% of the VAT owed at day 15 if the outstanding VAT is paid in full, or a payment plan is agreed, between days 16-30.

More than 31 days overdue – The first penalty is 2% of the VAT owed at day 15 plus 2% of the VAT owed at day 30.  A second penalty will be calculated at a daily rate of 4% per year for the duration of the outstanding balance. This is calculated when the outstanding balance is paid in full or a payment plan is agreed.

 

How can we help?

At Hawsons we have a dedicated team of tax/VAT experts at our offices in Sheffield, Doncaster, and Northampton.

At Hawsons we provide a range of VAT services. Over the past 12 months, we have registered companies, sole proprietors, and partnerships for VAT with HMRC. Using our expertise, we have advised clients whether to register for VAT voluntarily or if they are required to register due to their turnover.

VAT on services is a complicated area. VAT rates may or may not apply depending on who is providing or buying them, where they are provided and the precise nature of the services provided.

Free initial meeting

Tony Nickson

VAT Consultant, Sheffield

01604 645 600

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