Auto Enrolment, Pensions, Capital Allowances, Subsistence and Partners Parting Company

Nov 21, 2015   //   by Ralph   //   Latest News

Here we are in November and as most people start to get ready for the Festive Season I doubt there will be much good cheer from the Chancellor in his Autumn Statement this month. As I get older the subject of pensions seems to pre-occupy me more so the first couple of items reflect this.

Auto-enrolment – has it been a success? Now that Auto-enrolment (AE) has been in the workplace for the largest of employers for three years a survey has been carried out to see if it a success. Whilst over 90% of employees think it is a good idea over half do not know where the funds are being invested or what the options are at retirement.

State pension top-up scheme now open. There has been much talk in the press of late about the ability of those who reach state pension age before 6th April 2016 to increase their state pension by making a lump-sum contribution. The amount required is based upon the person’s age and how much extra pension they require. At 65 for £10 per week (£520 per annum) £8,900 is required and this drops to £6,740 at age 75. The scheme will remain open until 5th April 2017. The reason for the scheme is to recognise that those retiring before 6th April 2016 will be ineligible for the new state pension launched on that date.

Capital allowances and property.  Since April 2014 solicitors acting on property transactions are obliged to raise the issue of capital allowances with their clients otherwise both the seller and the purchasers may lose their ability to claim. An indication of the scale of the issue is that a recent report estimates that £1.6 billion went unclaimed in the 9 months to December 2014. If you are involved in a property transaction you need to ensure that both your solicitor and your accountant are aware of the rules and the requirements. The position regarding capital allowances can also be used as a marketing tool if your advisors are aware of the possibilities.

Taxman reviewing subsistence rules. HMRC are reviewing the rules for subsistence as they date back to the days when companies had subsidised staff canteens. The taxman views that all subsistence is private expenditure as we “eat to live”. Nothing has been finalised yet but I doubt that there will be a change of heart.

What to do when shareholders part company. Many small limited companies have few shareholders and all goes well until one of them wants to leave. Apart from the usual negotiations there is the issue of how to buy the shares from the leaving party. The most tax efficient way of doing this is for the company to buy back its own shares. This provides considerable savings as the funds do not need to be withdrawn from the company by the shareholders to purchase the shares personally, potentially saving higher rate tax and from the 6th April 2016 the new additional dividend tax of 7.5%. There are some conditions and it does of course depend upon the size of the transaction whether it is worthwhile.

The author Ralph Robson FCCA is based at TA Gittins & Company’s Wrexham office and can be contacted on 01978 264846 or via email on ralph.robson@tagittins.co.uk

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