In association with Aequitas, LFR brings you the latest in a series of features offering insight and opinion on current business and finance news and how it relates to small and medium sized businesses…
It has been a month of party political conferences and pre-election tax pledges, with more significant announcements expected in the Chancellor’s Autumn Statement in early December.
In the meantime, here’s our round-up of the latest key tax and business stories:
Social investment tax relief – for you and your community
The social investment tax relief (SITR) offers investors upfront tax breaks and capital gains tax exemptions, similar to those given for buying shares in Enterprise Investment Schemes. Potentially you could reclaim one or more of the following, subject to various conditions:
- Income tax relief: This is available at 30% of the amount you invest. There is no minimum investment limit but the maximum annual limit is £1 million.
- Capital gains hold-over relief: You can defer payment of tax on a capital gain if the gain is reinvested in shares or debt investments that would also qualify for SITR income tax relief.
- Capital gains disposal relief: If you’ve had income tax relief on the cost of your investment, and you dispose of your investment after you’ve held it for at least three years, any gain you make on your investment is free from capital gains tax.
SITR will be in place for investments made, or capital gains arising, in the period from 6 April 2014 to 5 April 2019.
It is available for investments by individuals (but not companies or partnerships) in ‘Social Enterprises’. In essence, the company or organisation in which the investment is made must provide services for the ‘benefit of society’, such as housing, community transport, youth organisations, sporting facilities or healthcare, so typically they will be charities or community benefit companies.
The Social Enterprise need not necessarily be in the UK, and there is no defined list of what qualifies, however there is a list of activities that do not qualify. The good news is that if you are an investor you will not need to worry about judging whether the recipient of your investment meets the conditions, because any organisation offering SITR qualifying investments to the public should have already gone through an HMRC clearance process in order to be able to do so.
This process has only been available to social investment organisations since July 2014, so the options for investment are currently limited, but the numbers are expected to grow.
When you make an investment, the Social Enterprise will give you a Compliance Certificate in respect of your investment in it, confirming they have met the conditions. You won’t be able to claim for any of the tax reliefs without such a certificate.
None of the reliefs is available if you have had relief for the investment under the Enterprise Investment Scheme, the Seed Enterprise Investment Scheme or Community Investment Tax Relief.
An HMRC guide for investors can be found here. There are numerous qualification conditions and complications, so professional advice is essential.
HMRC criticised as ‘tax gap’ widens
The ‘tax gap’ – the difference between tax that should have been collected and what was actually collected – was £34 billion in the year to April 2013, an increase of £1bn from the year before, according to a new report by HM Revenue & Customs (HMRC).
This represents 6.8% of total tax liabilities, which HMRC insists is part of a downward trend, falling from an 8.5% high in 2005/6.
A breakdown of the total sum shows that most of the gap (£15.1 billion) was attributable to SMEs, with large business close behind (£9.3 billion).
When grouped by tax type, the figures show that income tax, national insurance and capital gains tax accounted for £14.2 billion of the gap – while the amount of uncollected VAT was £12.4 billion.
HMRC blamed the rise on criminal fraud, and people making mistakes on their tax returns. ‘Aggressive’ tax avoidance schemes are not included in the figures.
The rise comes despite HMRC being given extra resources to collect more in tax. Shabana Mahmood, Labour’s shadow exchequer secretary to the Treasury, said: ‘These damning figures show that this government is totally failing to tackle tax avoidance and evasion.’
David Gauke, Financial Secretary to the Treasury, said: ‘Since 2010/11 the percentage tax gap has stayed lower than at any point under the previous government, saving the country £4 billion.
‘The UK has one of the lowest tax gaps in the world but HMRC will continue to deploy its resources and skills to maintain the downward pressure that has proved so effective in recent years’.
ESSENTIAL TAX DATES FOR NOVEMBER:
- 1 November – £100 penalty if 2014 paper Tax Return not yet filed. Additional penalties may apply for further delay. No penalties will apply if online return filed by 31 January 2015.
- 2 November – Submission date of P46 (Car) for quarter to 5 October.
ON THE AEQUITAS WEBSITE:
Your Business – Our excellent tips and guides can be an excellent first step and point of reference. Visit the Your Business section of our website today.
Tax Information – Everything you need to know from the Budget to Tax Rates, our Tax Information page can help you on a daily basis.
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UK unemployment falls to 6%
New figures from the Office for National Statistics (ONS) show that unemployment in August this year dropped to 6%, the lowest level since 2008.
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New pension changes to be announced
With details to be set out in parliament, the Treasury is offering savers more freedom over their pension pots.
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Fake HMRC scam email warning for taxpayers
Yet another fake HMRC phishing scam email targeting taxpayers has been circulating, so recipients are warned not to click on the link it contains.
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To find out more about how Aequitas can help you to streamline the finances of your business, please visit the Services for Business page on their website.
