Nick Smith, our senior manager, says…

Rotherham Taylor Tax Investigation Service – new aggressive approach from HMRC

 

We have noticed a more aggressive attitude from HMRC in recent years and we are concerned about this new approach especially as this will mean more and more innocent businesses and individuals are likely to be investigated. HMRC do not need a reason to investigate you and they can investigate anyone at random.

 

HMRC collected £20.7 billion last year from tax investigations – almost £2 billion above their target for the year. They have also announced that they aim to bring in extra revenue of £7 billion a year by 2015. Last year they redeployed more than 5,000 people to new or different compliance roles to help meet new targets.

 

We run a Tax Investigation Service to help protect clients against the professional costs involved in a tax investigation or enquiry. This service is backed by an insurance policy we have taken out in our own name. Dealing with a tax investigation is not included in our normal fees and the costs involved could be substantial. We strongly recommend you consider subscribing to our Tax Investigation Service. With annual premiums ranging from £55 for individuals to £220 for limited companies, it is definitely money well spent.

 

Please get in touch if you want further information.

Jonnie Whittle, from Rotherham Taylor Financial Planning, says…

The Problem with Pensions

As a financial planner I have always understood some of my client’s issues with pensions – too complex, old contracts are highly charged and not letting you have access to your money.

However over the last few years they have improved considerably.  This is probably due to the fact that over the next couple of decades the State Pension will probably be reduced and when the time is right, stopped all together.  The government needs to make them more attractive, slowly shifting the responsibility to us.

This has forced the government and pension industry to clean up its act with regards to charges, transparency and rules of access.

In the recent budget the following announcements were made:

Pension investors will be able to take the whole of their pension as a lump sum

Currently most investors aged 55 or over can take up to 25% of their pension as tax-free cash and a taxable income from the rest.  There are, however, rules that determine the maximum income most people can draw each year.  These restrictions will be removed in April 2015 so pension investors will be able to take the whole of their pension as a lump sum if they so wish, subject to consultation. The first 25% will be tax free, whilst the rest will be taxed as income.

Should this come to fruition, it takes away one of the most cited objections to funding a pension.

Subject to consultation, potentially effective from April 2015

 New higher income drawdown limits

Drawdown investors currently have a yearly limit to the income they can draw.  They can choose from zero up to the maximum. This maximum has increased by 25% (from 120% to 150% of a broadly equivalent annuity) for investors starting a drawdown account after 27 March 2014.

For instance, an investor aged 65 with a £100,000 pension starting drawdown today can draw a maximum income of £7,080 a year. If they start from 27 March 2014 this will rise to £8,850.

 Flexible drawdown more accessible

Flexible drawdown allows investors to make uncapped, unlimited withdrawals from their pensions. There are, however, strict qualifying criteria. The main one is that you must already have a secure pension income of at least £20,000 a year in place (including any state pension).  From 27 March 2014 this limit is reducing to £12,000 (including any state pension).  This means a far greater number of investors should be able to qualify.

 More flexibility for investors with smaller pots

From 27 March 2014 investors aged 60 or over with total pension savings under £30,000 will be allowed to draw them as a lump sum.  The first 25% will be tax free, and the rest taxed as income. This can only be done once.  Investors with individual personal pension pots smaller than £10,000 will be allowed to draw them as a lump sum from age 60.  Again, the first 25% will be tax free, and the rest taxed as income.  This can only be done three times. Some further restrictions will apply.

I really do feel that correct pension planning is a good way to add to your savings plan for retirement, alongside ISAs and, in some cases, property.

One problem still exists………..using the name PENSION. Tax efficient savings trust may be more relevant?

 

Lucy Birchall, our trainee accountant, says…

 

“Long-term unemployed people will have their benefits cut unless they visit a Job Centre every day, work for free or undertake training, under new rules which have now come into effect.”

These rules now apply to anybody who has not found a job after two years on the existing Work Programme Scheme. Their jobseeker’s allowance could be suspended for four weeks for their first failure of attending, then 13 weeks for a second failure.

The Government have said that this new scheme, called Help to Work is not intended to punish jobless people. But what do you think? It is said that around 200,000 people will be affected.

Work and Pensions Secretary Iain Duncan Smith said: “Everyone with the ability to work should be given the support and opportunity to do so.

Stephen Timms, shadow employment minister, said the introduction of Help to Work was a “reflection that previous policies haven’t worked”.

Many others believe that there just is not enough jobs.

Let us know what you think.

Are you in favour of the new scheme, Help to work? Do you think it will stop the ‘one way street of benefits’? Or do you disapprove? Maybe it’s just a waste of money?