So what should you do?

• If you have paid too much you will automatically receive a repayment.
• If you have paid too little and the underpayment is under £2,000, HMRC will automatically add this to your tax for 2011-12. This spreads the collection of the underpayment throughout the year.
• If this results in hardship, you can ask for the underpayment to be included in your tax code over a longer period.
• If the underpayment is over £2,000 HMRC will write to you and ask for direct payment.  You should contact HMRC if you wish to discuss a repayment schedule.
• If your benefits have been affected then you should contact HMRC to discuss this.

In all cases it is important that you obtain a calculation from HMRC to determine whether they are correct in their assesment.  If you have any doubts then please feel free to contact me on 01923 202020 or james.odds@mablaw.com.

Getting technical, there are nine consultation / discussion documents which invite views from the public and professions on:

• PAYE reform
• Furnished holiday lettings
• Pensions tax relief
• Associated company rules
• Disclosure of inheritance tax avoidance
• Foreign branch taxation
• Controlled foreign company interim improvements
• Modernisation of investment trust company rules
• National minimum wage regulations

This is supposed to be the start of a new era of openness and transparency.  It is hard, though, to escape the cynicism engendered by 13 years of Mr Brown at the tiller.  Under the last regime, consultations meant less and less as time went by.  It became increasingly clear that they were more of a statement of intent than a genuine request for views. Time will tell how the new Government will act.

Only the papers PAYE and national minimum wage have the potential to be of interest to the public at large (and even then, there is a limited audience).  The other consultations are of more interest to the professions and to business.

Many people will look carefully at the proposed changes to pensions tax, and associated companies which could have a genuine impact on owner managed businesses.  For tax planners, the outcome of the discussions on disclosure of inheritance tax avoidance and foreign branch taxation will be of particular interest.

If you would like to discuss the impact of any of these proposals please contact me on james.odds@mablaw.com or comment below.

Basics

Inheritance tax (IHT) generally arises on death. It is normally only a concern if the estate on death is over the nil-rate band threshold, currently set at £325,000 for a few years. Over this amount, IHT is charged at 40%. IHT is also charged on gifts made in the seven years prior to death.  IHT can be charged on gifts made during someone’s lifetime, including gifts made to trusts.  

Married couples and registered civil partners are able to benefit from the transferrable nil rate band.  This can effectively increase in the nil-rate band threshold when the second partner dies – to as much as £650,000 currently.

Saving IHT with business property relief

Business property relief (BPR) is one of the most useful IHT reliefs. BPR can reduce the value of the relevant assets in the estate by up to 100% of its value. It is available in respect of a range of shares, securities or other property classed as an interest in a business.  The relief is also available for unquoted shares, which includes shares in AIM listed companies. The business property needs to have been held for two years before relief is available.

Top Tips:

• Some providers offer investments in a selected portfolio of shares all of which qualify for business property relief after 2 years. Clearly there are risks involved in investing in shares, and proper advice should be taken.
• BPR is only available for businesses which are substantially trading businesses.  If the business comprises a mix of investments and trading stock, or even large amounts of cash, careful planning will be required to ensure that relief is not restricted.  Compare, for example a business which develops properties and then rents them.  The development trade would qualify but the property rental would not, potentially contaminating the overall BPR position.
• For business owners, will planning is essential.  Not only does this give the opportunity to plan for the continued success of the business but through careful use of the nil rate band and other reliefs, it may be possible to minimize the overall IHT burden on the estate.
• If you are owed money by your business then this is an asset in your estate (and therefore subject to IHT).  It may be possible to convert this into a security which can benefit from BPR.

For more information about these planning ideas (or others) or to discuss inheritance tax generally please contact me on james.odds@mablaw.com