Author Archives: Mark Cupitt

Considering ongoing use of pilot trusts/Rysaffe planning

What are Pilot Trusts?

A Pilot trust is set up during the lifetime of an individual in order to receive funds and/or property upon their death from a legacy in their Will, a pension fund, a life insurance payout or a death-in-service benefit. Also known as feeder trusts or family bypass trusts, they are normally discretionary and can be created with as little as one pound in the original trust document.

Taxation of trusts

The changes to the taxation of lifetime trusts proposed in last year’s Budget, but postponed in the Autumn Statement, have now been resolutely kicked into touch. The Chancellor has confirmed that the proposed to introduce a so-called ‘settlement nil rate band’, which would be spread across all lifetime trusts created by the same settlor, will not now be introduced.

However, the Government will still pursue ways of reducing tax avoidance through the use of multiple trusts (so-called ‘Rysaffe planning’). The details on this are to follow, but it has been confirmed that:

The rules will only apply to additions to more than one relevant property trust made on the same day
There will be a de minimis of £5,000 (i.e. additions of £5,000 or less will not be treated as a same day addition – allowing for additions to cover trustee fees, for example)
The calculations will be simplified so that non-relevant property will not have to be included in the calculation of the relevant property charges (i.e. ten-year anniversary charges and exit charges)
The grace period for additions to existing will trusts where the will was executed before 10 December 2014 will be extended to included deaths occurring before 6 April 2017.

HMRC’s 7 year Trusts Proposal

Potential Impact

The potential impact is simple: where settlors have more than one relevant property trust, the trusts could end up paying more inheritance tax under these proposals.

Pilot Trusts

A similar situation arises with pilot trusts. The examples given by HMRC in the May consultation ignore this type of tax planning, but if the proposed new rules are applied to a typical pilot trust arrangement, the outcome is likely to be far from tax neutral.

The inheritance tax treatment of pilot trusts was confirmed in Rysaffe Trustee Co (CI) v CIR [2003] STC 536.

Pilot Trusts by HMRC

Furthermore, part D26 of HMRC’s GAAR Guidance states that HMRC accepts pilot trusts as a long-established tax planning practice and they are not regarded as abusive for the purposes of the GAAR.

Conclusion

If you need have any concerns on the process or require further information please contact us.

If you want to read more about the various topics and services we provide, then please go through our FAQs.

Obtaining your research and development tax relief

Obtaining your research and development tax relief to maximise your profits is crucial in the current environment.

The government views investment in research and development (‘R&D’) as a key to economic success. It is therefore committed to encouraging more smaller and medium sized (‘SME’) companies to claim R&D tax relief. Claims by SMEs for enhanced tax deductions have more than doubled over the last five years and claims for cash repayments have increased by 126% in 2013/14 from 2012/13.

The recently published government plan to improve access to R&D highlights the need for more SME companies to understand what relief is available and how the process of claiming tax relief works. Recent changes to R&D scheme rates have increased the relief available so a clear understanding is needed to ensure that companies are aware of how the tax rules work.

In order to help remedy the position they have therefore introduced:

A Voluntary Advanced Assurance scheme for small businesses making their first claim is being introduced from November 2015. Successful applicants will receive assurance that HMRC will allow their first three years of R&D tax relief claims without further enquiry.
Bespoke guidance aimed at smaller companies and more direct communication between HMRC and companies that are already claiming, or thinking about claiming, R&D tax relief

What is Research and Development for Tax Purposes?

In order to obtain Research and Development there needs to be 3 key conditions which need to be met:

The project must be a qualifying project; and
There must be relevant R & D activities; and
The expenditure must be qualifying expenditure

If the above conditions are met there is the opportunity to obtain additional tax relief on the expenditure.

What tax relief can I claim?

A company can claim enhanced deductions against its taxable profits for expenditure which is qualifying R&D expenditure. The amount of the enhancement has increased over the years. The rate was 125% for expenditure incurred before 31 March 2015 and has increased to 130% from 1 April 2015. This amount is in addition to the actual expenditure (ie a 230% total deduction from 1April 2015). R&D enhanced relief represents an additional corporation tax reduction of 26% of the expenditure incurred.

If the R&D claim creates a tax loss, then the company may be able to surrender the loss for a cash repayment. This is 14.5% for expenditure incurred on or after April 2014. A surrendered loss could therefore give a repayment of up to 33.35% of the expenditure.

Where the company incurs qualifying R&D expenditure before it starts to trade, it can elect to treat 230% of that expenditure as a trading loss for that pre-trading period. The pre-trading loss created by the R&D relief can then be surrendered, as above, which could which could provide much needed cash ﬂow for new companies.

On certain projects R&D relief under the SME scheme is not available if the R&D project has had the benefit of a grant or subsidy. There may, however, be an alternative claim available to the company. This is known as the Research and Development Expenditure Credit scheme (RDEC). RDEC allows the SME to claim a taxable credit of 11% of eligible expenditure. As this amount is taxable it is known as an ‘above the line’ credit. This 11% rate is for expenditure incurred on or after 1 April 2015. Prior to that date the rate was 10%.

The credit received is used to settle corporation tax liabilities of the current, future or prior periods subject to certain limitations and calculations. Where there is no corporation tax due the amount can be used to settle other tax debts or can be repaid net of tax.

The RDEC relief is also available to an SME for expenditure incurred on R&D that is contracted to it by a large company.

In order to maximise the potential of obtaining this beneficial relief it is crucial that you seek professional advice in order to maximise the opportunity of achieving the relief. Our tax specialists have considerable experience in this area and they can help you obtain the relief. If you need further advice please contact us.

Changes and choices for micro entities accounts

Changes and choices for micro entities accounts.

Over the next year or so the statutory accounts that small companies have to prepare and send to Companies House are changing because of revisions to the Companies Act and some connected changes to UK Accounting Standards. The combined rules are often referred to as UK GAAP – Generally Accepted Accounting Principles. Smaller limited companies (known as ‘micro-entities’) will often be able to choose between two versions of UK GAAP, one of which is considerably simpler than the other. However, companies which are ‘small’ but not small enough to be micro-entities will not be able to take advantage of this option.

What are the changes?

For periods beginning on or after 1 January 2016, the contents of small UK companies’ published accounts change. The contents of the actual profit and loss account and balance sheet are virtually unchanged but the number of notes to the accounts will generally be reduced, and all the notes, including related party transactions, will be filed at Companies House. Currently a filing option known as abbreviated accounts is available. This involves filing only a balance sheet and most of the notes to the accounts. Abbreviated accounts are abolished in the new framework but as company law still requires only a balance sheet and notes to be filed, this abolition will not have much effect in most cases!

Many more companies will qualify for the small company GAAP regime as the small company limits have increased substantially. The size limits to qualify as a small company increase to not more than:

Turnover £10.2m (previously £6.5m)
Balance sheet total £5.1m (previously £3.26m)
Average number of employees 50 (unchanged).

A company needs to meet two out of three of the above criteria for two consecutive years to qualify as a small company, unless it is the first year of the company’s existence, in which case only that year has to be considered.

If you are a small company and not a micro-entity you will need to prepare your accounts on the new basis.

What is a Micro- Entity?

A micro-entity is defined as meeting the following criteria – in each case not more than:

Turnover – £632,000
Balance sheet total – £316,000
Average number of employees – 10

A similar approach to the criteria applies as for the small company regime. A company needs to meet two out of three of the above criteria for two consecutive years to qualify as a micro-entity.

What are the options for micro- entities?

They can either:

1. Follow the standards for small companies; or

2. Adopt a new standard called FRS 105 (The Financial Reporting Standard applicable to the micro-entities regime).

The standard refers to the option being available from periods beginning 1 January 2016 but it is possible to adopt this new standard immediately, if it is in the company’s interest to do so.

What are the contents of micro-entity accounts?

The accounts of a micro-entity are considerably shorter and simpler than those otherwise required by UK GAAP for a small company.

The profit and loss account and balance sheet include less detail. For example current assets are shown in aggregated total on the balance sheet rather than being analysed into stocks, debtors and cash. There are less notes than those required for a small company.

These notes will be filed at Companies House together with the balance sheet. The profit and loss account does not need to be filed.

The micro entity accounts regime may reduce the cost of preparing the accounts as certain assets and liabilities we will need to be revalued every year by new UK GAAP will not be required by a micro company, such as:

Investment properties have to be revalued every year to what they are worth at the balance sheet These are properties held for their investment potential rather than being used in the business.
Forward foreign currency contracts require restatement to their value at the balance sheet This value may depend upon changes in exchange rates.
Loans payable or receivable (for example to or from a director) more than one year after the balance sheet date. If, as is frequently the case, such loans are not using a market rate of interest, their value has to be established at every balance sheet

In addition a company using the micro- entity regime is not allowed to provide for deferred tax. Deferred tax is tax probably payable at a future date but which has been deferred by, for example, tax benefits resulting from investing in fixed assets.

Many entities currently derive significant tax cash flow benefits from the acceleration of capital allowances such as the Annual Investment Allowance. Of course, the non- inclusion of deferred tax in the financial accounts does not mean the likelihood of this tax being payable at a future date should be ignored.

Is the micro-entity option suitable for all qualifying companies?

The option will not be appropriate for every company which qualifies to use it and we can advise you on whether it is an option you should consider. The contents of mico-entity accounts are almost certainly to limited use for any decision making purpose and we would be happy to discuss how we can provide more suitable information to help you run your business more effectively.

If you need any further information or advice on whether micro-entity accounts are suitable please contact us.

If you want to read more about the various topics and services we provide, then please go through our FAQs.

Spreading income around the family

Owner managed companies often seek to minimise the tax position of shareholder-directors by involving members of the same family and using personal reliefs and lower rate tax bands of each person. Spreading income around the family to maximise income. This diverts the income from the higher rate taxpayer and anti-avoidance rules need to be considered as to whether a diversion is effective. This is particularly relevant for spouse scenarios such as husband and wife. There it is considered that arrangements have been made by one spouse which contain a gift element, often referred to as ‘an element of bounty’ then the ‘settlements’ rules may apply. A key purpose of these rules is to ensure that income alone or a right to income is not diverted from one spouse to the other. Genuine outright gifts of capital or a capital asset from which income then wholly belongs to the other spouse are not caught by the rules because of a specific exemption from the settlement rules.

Family company shares and the dividend income derived there from have frequently been the subject of challenge from HMRC on this matter. An example of a structure which will be challenged is the issue of a separate class of shares with very restricted rights to a spouse, with the other spouse owning the voting ordinary shares.

An area of potential risk is the recurrent use of dividend waivers particularly where the level of profits is insufficient to pay a dividend to one spouse without the other waiving dividends.

In a recent tax tribunal case dividend waivers executed by two appellant husbands in favour of their spouses constituted a settlement for income tax purposes. The dividends therefore became taxable on the husbands.

The basic facts were that two directors of a company each owned 40% of the shares in the company. Their wives each owned 10% of the shares. Dividends totalling £130,000 were paid in respect of the shares in the company’s accounting period to 31 March 2010. The four individuals received the following:

Mr D £33,000 (25.38%)
Mrs D £32,000 (24.62%)
Mr M £33,000 (25.38%) and
Mrs M £32,000 (24.62%).

This clearly does not correspond to the legal and beneficial shareholdings and had been achieved through dividend waivers. The same type of mechanism had been used to allocate dividends back to the year ended 31 March 2001.

The arguments

HMRC argued that the taxpayers had waived entitlement to dividends as part of a plan which constituted an arrangement with an intention to avoid tax by seeking equalisation of their dividend income. The appellants’ arguments included the contention that the waivers had been executed to maintain the company’s reserves and cash balances in order to accumulate sufficient of each to fund the purchase of the company’s own freehold property.

The Tribunal preferred the submissions of HMRC that had this been the case the aim could have been achieved by other means, such as voting a lower dividend per share. The Tribunal determined that the waivers would not have been made if the other shareholders were a third party and therefore there was ‘an element of bounty’ sufficient to create a settlement.

Basic tax planning is still an activity that many will seek to use to mitigate tax liabilities but care has to be taken in the current anti avoidance environment to avoid the traps. If we can be of assistance in reviewing your position please do not hesitate to contact us

Should I continue trading through a limited company?

In the Summer 2015 Budget, George Osborne announced fundamental changes to the way in which dividends are taxed.

Some individuals who extract profits from their company as dividends may need to consider whether to increase dividend payments before this date. When a dividend is paid to an individual, it is subject to different tax rates compared to other income due to a 10% notional tax credit being added to the dividend. So for an individual who has dividend income which falls into the basic rate band the effective tax rate is nil as the 10% tax credit covers the 10% tax liability. For a higher rate (40%) taxpayer, the effective tax rate on a dividend receipt is 25%.

From 6 April 2016:

· The 10% dividend tax credit is abolished with the result that the cash dividend received will be the gross amount potentially subject to tax.

· New rates of tax on dividend income will be 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

· A new Dividend Tax Allowance will remove the first £5,000 of dividends received in a tax year from taxation.

Many owner-managers running their business through a limited company will pay more tax next year if most of the profits are paid out as dividends rather than as a salary. This prospect raises a number of issues which we address below.

There is still a benefit in tax terms for most individuals to continue to trade as a limited company. The tax saved by incorporation compared to being unincorporated will be reduced next year but there is still an annual tax saving.

There is still a benefit for a director-shareholder to take a dividend rather than a salary. The amount of the tax saved will be less than under the current regime.

If you do not currently extract all the company profits as a dividend you may wish to consider increasing dividends before 6 April 2016. However, other tax issues may come into play, for example the loss of the personal tax allowance if your total ‘adjusted net income’ exceeds £100,000. There will also be non-tax issues such as the availability of funds or profits in the company to pay the dividend.

Please contact us before you make any decisions about changing the amount of dividends taken.

Please note our conclusions above are based on only limited information that has been supplied by the government on the new regime. We expect draft legislation for the regime to be published by the end of the year.

Do you still need to file your self assessment tax returns on time?

Do you still need to file your self assessment tax returns on time? The simple answer is Yes!

It is an understandable question as you may have seen in the press or on the TV a couple of months ago, news stories that implied that it would be easy to get out of paying an automatic £100 minimum penalty for the late filing of a self assessment tax return.

The background to the initial news stories was the leaking of an internal memo of HMRC to its staff dealing with self assessment penalties. A £100 automatic penalty is charged if a self assessment tax return is not submitted by 31 January.

Individuals can successfully appeal against the penalty if they have a ‘reasonable excuse’. HMRC provide a list of what they regard as reasonable. Top of the list is ‘your partner died shortly before the tax return or payment deadline’, which provides an indication of the extreme circumstances listed.

Despite the automatic penalty system, around 900,000 people failed to submit their tax return on time for the 2013/14 tax year, the deadline for which was 31 January 2015. Many of these individuals appealed against the subsequent £100 minimum penalty causing a backlog of cases in HMRC. The internal memo explained a simplified approach to resolving penalties with the effect that HMRC would accept the taxpayer’s grounds for appeal in the majority of cases without questioning the taxpayer and cancel the penalty.

A subsequent press release from HMRC has made it clear that the deadline for appealing fines for the 2013/14 tax year has now passed. It did not state what their approach would be to individuals missing the 2014/15 tax return deadline which is 31 January 2016. The press release does say, in the longer term, HMRC want to move away from sending out penalty notices as a mechanical reaction to a single missed deadline. Instead they want to focus on those who persistently fail to pay or submit their tax returns on time.

It is good news, of course, that HMRC will use their right to send out fixed penalty notices in a fair and proportionate way. But it is far safer to meet the deadlines so please do contact us in plenty of time before the forthcoming 31 January to ensure that we can help you in ensuring that your self assessment return does not run the risk of being filed late.

Maximise the opportunities for tax relief on pensions

The recent substantial changes to the rules for accessing money purchase pensions and the treatment of funds remaining on death has sparked increased interest in pension fund provision. However, the amount of allowable tax relief on the contributions and the extent of taxation of the funds when the individual retires remains an area of change. A clear understanding is needed to ensure you maximise the opportunities for tax relief on pensions.

A money purchase pension scheme provides an individual with a fund which can be accessed by the individual later in life (usually at 55 at the earliest). Money purchase schemes can also be referred to as defined contribution schemes.

What are the tax breaks and what controls exist?

A money purchase scheme allows the member to obtain tax relief on contributions into the scheme and tax free growth of the fund.

If an employer contributes into the scheme on behalf of an employee, there is generally no tax or National Insurance Contributions (NIC) charge on the member and the employer will obtain a deduction from their taxable profits. However, since 2006 two areas of control were put in place to control the amount of tax relief which was available to the member and the tax free growth in the fund.

Firstly, a lifetime limit was established which set the maximum figure for tax- relieved savings in the fund(s) and has to be considered when key events happen such as when a pension is taken for the first time.

Secondly, an annual allowance sets the maximum amount which can be invested with tax relief into a pension fund. Amounts in excess of this allowance trigger a tax charge.

Relief for individuals

All UK residents may have a personal pension and can obtain tax relief on contributions up to the higher of:

· 100% of UK relevant earnings or

· £3,600.

This means that a pension fund can be provided for non-taxpayers such as children and non-earning adults albeit that the tax relief will be restricted to gross contributions of up to £3,600 per annum.

An individual with relevant earnings is entitled to make contributions and receive tax relief on up to 100% of their earnings in any given tax year. However, tax relief will generally be restricted for contributions in excess of the annual allowance.

Relevant earnings are primarily trading profits and employment income including taxable benefits but excluding pension income.

Property business profits are not relevant earnings for pension contribution purposes with the exception of furnished holiday letting income.

Methods of giving tax relief

Tax relief on contributions are given at the individual’s marginal rate of tax.

An individual may obtain tax relief on contributions made to a money purchase scheme in one of two ways:

· a net of basic rate tax contribution is paid by the member with higher rate relief claimed through the self assessment system

· a net of basic rate tax contribution is paid by an employer to the scheme. The contribution is deducted from net pay of the employee. Higher rate relief is claimed through the self assessment system.

In both cases the basic rate is claimed back from HMRC by the pension provider.

A more effective route for an employee may be to enter a salary sacrifice arrangement with an employer. The employer will make a gross contribution to the pension provider and the employee’s gross salary is reduced. This will give the employee full income tax relief (by reducing PAYE) but also reduces NIC. The employer also obtains income or corporation tax relief which is why owner managed companies often pay pension contributions for director-shareholders.

There are special rules if contributions are made to an older style scheme known as a retirement annuity contract.

The annual allowance

As indicated earlier there is an annual allowance which sets the maximum amount which can be invested with tax relief into pension funds. The allowance applies to the combined contributions of an employee and employer. The level of the annual allowance for 2015/16 was originally set as £40,000. The Summer Budget however proposed that this be increased for 2015/16 to £80,000 with the condition that tax allowable pension savings from 9 July 2015 to 5 April 2016 is capped at £40,000. For 2016/17, the annual allowance will revert back to £40,000.

It is necessary each tax year to assess whether the annual allowance has been exceeded. This is because any contributions in excess of the permitted annual allowance are generally charged to tax on the individual as their top slice of income.

Individuals who are eligible to take amounts out of their pension funds under the new ﬂexibilities from 6 April 2015 but who continue to make contributions into their schemes can trigger other restrictions in the available annual allowance. Under the rules, the annual allowance for contributions to money purchase schemes is reduced to£10,000 in certain scenarios.

If you think this may be relevant to you please contact us for further details.

Changes from April 2016

From 6 April 2016 the Government intends to introduce a taper to the annual allowance for those with ‘adjusted annual incomes’ over £150,000. Adjusted income means, broadly, a person’s net income and pension contributions made by an employer. For every £2 of adjusted income over £150,000, an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000.

To ensure the measure works as intended, pension input periods are to be aligned with the tax year (rather than the complex rules which applied before 9 July 2015).

The significance of pension input periods

Up until 2014/15, individuals who made pension contributions into more than one scheme needed to take particular care in determining whether the annual allowance limit had been exceeded. This is because pension contributions for each scheme are measured by a pension input period. A pension input period was usually a 12 month period but did not have to align with the tax year.

Pension input periods in 2015/16

All pension input periods open on 8 July 2015 are closed on that date. The period 6 April 2015 to 8 July 2015 is to be known as the ‘pre-alignment tax year’. There will then be a second pension input period running from 9 July 2015 to 5 April 2016. This will be known as the ‘post-alignment tax year’. All subsequent pension input periods will be concurrent with the tax year from 2016/17 onwards.

All individuals will have an annual allowance of £80,000 for the pre-alignment tax year. Where this amount has not been used in the pre-alignment tax year, it will be carried forward to the post-alignment tax year, subject to a maximum of £40,000.

Example

Eric has already paid pension contributions of £12,000 in a pension input period ending on 8 July 2015.

He has a fresh opportunity to utilise an annual allowance for the post-alignment tax year of £40,000.

Carry forward of unused annual allowance

A three year carry forward of unused annual allowance is also available. This means that the brought forward unused allowance for 2015/16 would be from the years 2012/13, 2013/14 and 2014/15. The annual allowance available for 2012/13 and 2013/14 was £50,000. The annual allowance for the current tax year is used before any unused brought forward. Earliest year unused allowance is then used before a later year.

Importantly no carry forward is available in relation to a tax year preceding the current year unless the individual was a member of a registered pension scheme at some time during that tax year.

Example

Assume it is March 2016. Bob has his own company and the company pays pension contributions on his behalf. In the previous three years the company has made contributions of £30,000, £20,000 and £30,000 to his pension scheme. He has therefore £60,000 unused annual allowance that he can carry forward to 2015/16. This is computed as:

2012/13 £50,000 – £30,000 = £20,000

2013/14 £50,000 – £20,000 = £30,000

2014/15 £40,000 – £30,000 = £10,000

Together with his current year annual allowance of up to £80,000 (dependent upon the transitional rules), this means that Bob’s company may be able to make a contribution of up to £140,000 in 2015/16 without Bob having a tax charge due to the annual allowance limit being breached.

The lifetime allowance

The lifetime allowance sets a maximum figure for tax-relieved savings in an individual’s pension funds. This remains at £1.25 million for 2015/16.

If the value of the scheme(s) exceeds the limit when benefits are drawn from the scheme there is a tax charge of 55% of the excess if taken as a lump sum and 25% if taken as a pension.

The Chancellor has announced that for the tax year 2016/17 onwards the lifetime allowance will be reduced to £1 million. It will then be indexed annually in line with CPI from 6 April 2018.

An important point to appreciate is that the investment growth of the funds over a long time period may well result in the value of the funds exceeding the lifetime allowance. If you consider the total value of your pension funds will exceed £1 million when you come to draw benefits, you should consider whether to apply for fixed protection which will allow your pension funds to grow to £1.25 million without a lifetime allowance charge when you come to draw benefits. However no further contributions can be made to any pension fund after 5 April 2016.

It is likely to be an area of further change as the government announced in the Summer Budget that it will consult on whether there is a case for reforming pensions tax relief.

There are a number of areas you may need specific advice based on your circumstances given the raft of changes so please do not hesitate to contact us.

Maximise your tax relief on two homes

In order to Maximise your tax relief on two homes you need to understand Principal Private Residence.

The UK tax regime provides an important relief from the capital gains tax charge (CGT) on the gains made by owner-occupiers on the sale of their private homes. This is known as Principal Private Residence relief (PPR).

The general principle is that only one home can count as a PPR at any one time. However prior to 6 April 2014, where a private home qualified for PPR at any stage during the period of ownership, the last three years of ownership qualified for PPR, even if the property was not lived in during that three year period. That period was reduced for most individuals to 18 months for disposals made on or after 6 April 2014.

Although the period has been reduced there is still useful tax planning that can be achieved for someone who has recently acquired an additional property which will also be a home, for example a property ‘in the country’ which will be lived in at various periods in the year. The example shows the potential advantages of making a ‘PPR election’.

Example:

Mr and Mrs White have lived in a property in Leeds for a number of years. They are now semi-retired and acquire a second property in Wales in which they intend to also reside. They start to occupy the Welsh property on 1 June 2015.

As the Leeds property already qualifies for PPR up to 1 June 2015 the gains accruing on a time apportioned basis to the last 18 months of ownership will be relieved even if they nominate the other property to be their PPR.

They therefore elect for the Welsh property to be their PPR on 1 December 2016. This means this property will also benefit from PPR for the last 18 months of ownership.

They may vary that nomination back to the Leeds property at any time. If the variation is made within a short period of time then any resulting gain on the Leeds property will likely be covered by their annual exemptions.

If they want to change their minds again about the nomination, they can do so. However none of this flexibility is available if the first election has not been made to HMRC within two years of the time when the second property became available to live in.

Last year the government issued proposals to remove the ability for everyone to make an election but it has changed its mind. Instead the government has implemented changes which affect non-resident individuals with property in the UK and UK residents with property abroad.

Prior to 6 April 2015, an individual who was not resident in the UK was not subject to UK CGT on residential property so could sell the property free from UK CGT irrespective of the availability of PPR relief. From 6 April 2015 UK residential property classed as ‘dwellings’ is brought into UK CGT for non-UK resident persons.

Further changes restrict the availability of nominating a property for PPR. Examples of the individuals affected by these changes are:

UK residents who go to work abroad and acquire an overseas second home in the country in which they work
individuals who retire overseas but keep their homes in the UK. They may be entitled to PPR for the period prior to 6 April 2015 but will have difficulty in getting the PPR to apply to the UK property after that date.

However the last 18 months of ownership may continue to qualify for PPR.

Please contact us if you consider these changes affect you or you wish to consider making an election for PPR where you have two homes in the UK.

The merits of Early Conciliation

In 2014 an ‘Early Conciliation’ process became available to help settle an employee’s dispute with an employer without going to an Employment Tribunal. Where individuals are considering making a claim to a tribunal, Acas, the Advisory, Conciliation and Arbitration Service, provides the opportunity for them and their employer to resolve the matter before a legal claim is lodged. In order to encourage the use of Early Conciliation an employee is required in nearly all cases to contact Acas and to obtain an Early Conciliation Certificate. Without a Certificate an employee cannot make an application to an Employment Tribunal.

The needs of the smaller business was part of the reason for the introduction of Early Conciliation. The Coalition Government, which introduced the reform, had found that smaller businesses are proportionately more likely to find themselves the subject of employment tribunal claims, but are much less likely to have access to in-house expertise to help them deal with problems.

Although an employee is legally required to contact Acas before making a tribunal claim, neither party is obliged to take part in conciliation and can stop whenever they wish. But Acas considers that Early Conciliation has been a success and has provided quick resolutions of disputes without the need for legal action.

Looking forward to the new flat-rate State Pension?

To ask any question about the new flat-rate State Pension scheme seems to suggest a straightforward answer. Everyone will get the same amount won’t they?

The answer to the latter question is no.

The amount you will get will depend upon a number of factors including:

how many qualifying years you have on your National Insurance (NI) record
how many years you have built up an entitlement to the additional State Pension under the current system
how many years you may have been paying lower NI contributions because you have been in a salary-related workplace pension scheme or you received NI rebates which went into a personal pension plan. Either of these scenarios had the effect of ‘contracting out’ a person from full entitlements under the State Pension scheme.

The new State Pension scheme applies to everyone who reaches State Pension age on or after 6 April 2016. The full State Pension will be at least £151.25 but the actual amount will be set this Autumn.

People who have no contribution record under the current system will have to obtain 35 qualifying years of NI credits on their record to give them the flat-rate amount.

However, for individuals who have already built up a NI record (which is nearly everyone reading this article) there are transitional provisions which take into account the NI record accrued up to 5 April 2016.

This is a very reasonable complication to have in moving to the new system. Otherwise, people who have accrued a substantial entitlement under the current system of basic and additional State Pension would be treated very differently depending on whether they reach State Pension Age on the 5 April 2016 (and thus receive a pension under the current system) or on the 6 April 2016 (and therefore receive a pension under the new system).

Under the transitional provisions, your NI record before 6 April 2016 is used to calculate your ‘starting amount’ for the new system at

6 April 2016. Your starting amount will be the higher of either:

the amount you would get under the current State Pension rules (which includes basic State Pension and additional State Pension)
the amount you would get if the new State Pension had been in place at the start of your working life.

For many of those reaching State Pension age in the near future, the transitional provisions offer the best of the current and new systems. Employees who have built up a significant entitlement to the additional State Pension will retain their entitlement. People who have been self-employed for most of their working lives may have little or no entitlement to the additional State Pension and thus will benefit from the new State Pension rules.

How do you get a state pension forecast?

You can get a forecast in some cases online – in other cases you need to ask for a forecast by post. Go to www.gov.uk/state- pension-statement to find out.