Lewis Hamilton – Winning the Race and the Tax System

British driver Lewis Hamilton won his second Formula 1 world title over the weekend, describing it as the “greatest day of my life”. The 29-year old has the prestigious honour of being able to call himself a double winner but also winning tax-free.

Unfortunately we’re all not like Lewis Hamilton and currently live in Monaco where the city levies no income tax on individuals. The absence of this personal income tax system has attracted a considerable number of wealthy “Tax refugee” residents from European countries. However there are some exceptions to the system:

·      Companies earning more than 25% of their turnover outside of the Principality and companies whose activities consist of earning revenues from patents and literary or artistic property rights, are subject to a tax of 33.33% on profits.

·      French nationals who are unable to prove that they resided in the Principality for 5 years before October 31, 1962.

Furthermore, Assets located in Monaco are subject to the following inheritance tax rates:

·      In direct line of descendance: 0%

·      Between brothers and sisters: 8%

·      Between uncles and nephews: 10%

·      Between relatives: 13%

·      Between non-relatives: 16%

So there you have it! It’s a shame we’re not all in Lewis Hamilton’s shoes, so if you need some tax advice feel free to call the office on 01482 861919.

Breaking News (Part 2) – The Collapse of Phones 4U

September saw the announcement of the retail company Phones 4U going into administration, after its last remaining mobile operator partner, EE, cut ties with retailer. Since then, it has been revealed that the company collapsed with £168 million of unsecured debt, which means taxpayers stand to lose £78 million from the company’s demise. We’ve got the latest information on this controversial topic.

About Phones 4U

Phones 4U currently has 720 outlets, including 550 stand-alone stores, with over 5,000 people employed. Since opening in 1996, the company has suppliers with EE, Vodafone, Orange and O2. Since going into administration, it has been revealed that the company owes millions of pounds in debt, which breaks down as follows:

·      £69.2 million in VAT

·      £8.8 million in Corporation Tax

·      £168 million to HMRC

·      £4.8 million to Phones 4U customers

·      £42 million to suppliers

·      £25.9 million to employees

·      £17.2 million in unpaid bills.

It has been revealed that as well as the £168m of unsecured debts, Phones 4U owed £450 in secured debt to banks and bondholders. PwC said £19.8m owed from a revolving credit facility will be repaid in full to banks, but only 10pc to 20pc will be paid out to bondholders owed £430m.

That’s the loss, what about the profit?

The only money that Phones 4U has raised is from the sale of company shops to the mobile phone networks. Vodafone and EE bought a total of 198 stores for £15 million, while Dixons Carphone hired staff working at Phones 4U concessions in its Curry PC World stores. This has saved more than 2,000 jobs, but 365 shops were still closed.

What does all this mean for Phones 4U Customers?

The company has announced that mobile contracts signed through the retailer will be unaffected by the administration. Similarly, if you recently purchased a phone before the administration process you should still receive it.

The company have published a page with several frequently asked questions surrounding the issues, so more information you can click here.

Money Matters (Part 9) – Military Pension Changes

There has long been a loophole in the pension system meaning military widows lose their pension if and when they remarry. However, this rule is to be changed from April 2015, meaning those who remarry will be entitled to the pension for life. We’ve provided you with as much information as possible on this news below.

What does this mean?

Thousands of war widows who remarry will no longer face an effective financial penalty under new plans to be set out by David Cameron, the prime minister, on Saturday. The current system, which applies to anyone whose partner started claiming a military pension between 1973 and 2005, will be scrapped from April next year.

As of April 2015, those who already receive a survivor's pension will be allowed to keep their pension for life if they do remarry, cohabit or form a civil partnership. Around 4,000 people - mostly widows - will benefit from the changes. They are those who lost loved ones serving between 1973 and 2005 - women whose partners died or were killed during the Troubles in Northern Ireland, or the wars in the Falklands and Iraq.

One noteworthy point is that the policy is not retrospective and it will only apply to those who remarry on or after April 1 next year. The cost of service pensions to those who remarry or find new partners will be about £120m over the next 40 years.

Breaking News – The Manchester Devolution

It was announced over the weekend that George Osbourne has agreed to give three UK cities “London-style” rules, in the sense that they will be given their own powers to run their own affairs. The first city to undergo this change is Greater Manchester.

The move – agreed with Nick Clegg, the Lib Dem leader - comes as all three main parties compete to offer English regions more devolution at the same time as Scotland is given extra powers to raise its own taxes in the wake of the independence referendum. We’ve got the latest information for you in this blog post.

Details of the Devolution

The entire devolution has been estimated to cost £1 billion, and a mayor of Greater Manchester will be elected, taking over the duties of Police Commissioner. The package includes:

·      Control of the region’s £500m skills budget

·      A £450m tram extension to Trafford Park

·      £300m in house-building cash

·      Power to combine health and social care funds together - and oversee back-to-work schemes

·      A pledge to make Manchester a science capital

This would also mean a new ‘Oyster card’ for the region that would include the buses, he said – one that would work ‘better’ than London’s. Transport for Greater Manchester, however, are already in the process of rolling out its 'get me there' smart ticketing system to the region's trams, trains and buses.  It’s been argued that the devolution deal will create jobs, better transport and more responsive policing.

What are the arguments for this deal?

1.     The person is directly accountable to the public - so if they mismanage the new power and money, the public can vote them out.

2.     It lessens the impact of any huge fall out among the existing council leaders, whose unity currently props up the system.

3.     It provides Manchester with a representative on the world stage.

What are the arguments against this deal?

There are major fears among councillors at a local level that this will drain power away from grassroots communities - particularly over issues such as planning.

Money Matters (Part 8) - Changes to Collecting Overdue Tax

HM Revenue and Customs (HMRC) are currently able to collect people’s debts of up to £3,000. This is done through a system known as ‘coding out’, where HMRC adjust your Paye as You Earn (PAYE) code. By doing this, they recover the debt from your income by increasing the amount that they deduct from your income during the tax year.

This only applies if you have a debt with HMRC and:

·      Are an employee paying through the (PAYE) and/or

·      Receive a taxable UK-based private pension.

If you are earning less than £30,000, there is no change to the £3,000 coding limit. However, due to the recent changes in law, HMRC is now increasing that amount of debt they can recover through a person’s tax code each year if their annual earnings are £30,000 or more.

The changes will only ever apply to underpaid Self Assessment and Class 2 National Insurance debts and Tax Credit overpayments. These changes will also be reflected on your 2015-16 tax code and HMRC will always write to someone before they collect any debts through their PAYE code from April 2015.

All debts are calculated through a sliding scale, as shown below:

Annual PAYE earnings	Coding out limits
Up to £29,999.99	£3,000.00
£30,000.00 – £39,999.99	£5,000.00
£40,000.00 – £49,999.99	£7,000.00
£50,000.00 – £59,999.99	£9,000.00
£60,000.00 – £69,999.99	£11,000.00
£70,000.00 – £79,999.99	£13,000.00
£80,000.00 – £89,999.99	£15,000.00
£90,000.00 and above	£17,000.00

The current £3,000 coding out limit will still apply to the collection of Self Assessment balancing payments and PAYE underpayments.

If you don’t want the debts to be included in your tax code, then you will need to pay the full amount you owe or speak to HMRC to agree a suitable payment arrangement.