Archives for 2016

Generally speaking, any business expenditure that you make up to seven years before you actually start trading, is treated for tax purposes as if it was incurred on the first day of trading.

This expenditure includes rent, rates, insurance, wages and other costs that you have had to pay.

You can also claim capital allowances for qualifying assets. Again, they are treated as being made on the first day of trading. However, assets that you have previously owned, that you introduce into your new business, will need to be valued at market value at the same date. These might include your car or personal computer.

Repairs can be a tricky item, as HMRC may want to treat them as improvements to your business property that were incurred to bring them to a working standard prior to commencement of trade. If they succeed in their argument HMRC would not allow a deduction as a revenue expense.

Repairs undertaken before commencement of trade should be allowed if the following three points apply:

1. The costs are regular maintenance rather than improvements.
2. The repairs were not incurred to make premises fit for trade.
3. The price paid for premises was not reduced to account for repairs to be made.

If you use your home for business purposes, rent out parts of your home whilst you are still in residence or if you rent out your home while you are resident elsewhere, you may need to consider the tax consequences. This article covers some of the tax issues that you may need to consider:
Use of home for business purposes
If the amount of space you use is limited to say one room, and if there is a duality of use (for example you may have a home office in the corner of a spare bedroom or your office may double as a hobbies room), then you should be able to charge your business a nominal amount to cover the “running costs” of the space occupied. Your claim will need to be restricted on a time basis to disallow the private use proportion.
Claims that fit into this category should cause you no personal tax issues as long as they are based on a realistic apportionment of actual costs and are discounted for private use.
It will also be unlikely that you will suffer any charge to Capital Gains Tax when you sell your home.
Renting a room
From 6 April 2016, you can let out a room or rooms in your house as furnished accommodation (not an office) and as long as the annual rents received do not exceed £7,500 per year (prior to 6 April 2016 the annual limit was £4,250) you will have no Income Tax to pay. If the rent is more than the limit, then only the excess is taxable. The “normal” basis (rents less allowable costs) can be claimed if this produces a better result.
If two persons are entitled to share the rental income, the above annual tax-free limits are halved.
Longer term lets when you are not in residence
If you let out your home, for example if you work abroad for a period of time, you will be subject to Income Tax on your rental profits.
When you subsequently sell your home there may also be Capital Gains Tax considerations. When you sell, a proportion of any gain that relates to the period (or periods) of letting may be taxable.
However, provided the property was your home at some time, you can claim reliefs, including principal private residence relief for the time it was your main residence, plus the last 18 months of ownership. Also, there may be some “lettings relief” relating to periods your home was let as above.
Homeowners’ private residence relief (for CGT purposes) is worth protecting. If you are considering any financial transaction concerning your home that you are concerned may have Income Tax of CGT implications, please call. It is better to sound out professional advice before the event…

Workplace Pensions – Automatic Enrolment Seminar

Wednesday 14^th September 2016

Registration and refreshments from 8.30am – Seminar starts at 9.00am

Oswestry Cricket Club, Morda Road, Oswestry, Shropshire, SY11 2AY

Under the Pensions Act 2008 every employer must automatically enrol all employees who meet certain criteria and contribute towards this. You must be ready to start enrolling staff from your staging date. The Pensions Regulator will have already advised you of your staging date which is set in law and is the date your automatic duties as an employer come into effect for you. Preparation is the key, the Pensions Regulator suggest that you need at least a year to prepare for automatic enrolment, so you need to make sure you start making plans in good time.

Many employers are under the impression that Automatic Enrolment will not affect them as they do not employ enough staff. Automatic Enrolment is not dependent on employee numbers even if you employ just one person you must provide a workplace pension.

Automatic Enrolment is the employers’ responsibility and cannot be ignored. Failure to comply with your duties as an employer may result in you being fined and/or prosecuted.

This seminar, presented by D&G Independent Limited, is designed to help you prepare your payroll procedures for Automatic Enrolment and explain what you will need to do to comply with the regulations.

• Automatic Enrolment – what it is and where you can get help
• What is your staging date
• Fines for non-compliance
• Which employees are eligible
• What are the costs for the employer
• What are the employer’s responsibilities
• Choosing a pension scheme
• What you will need to do to get ready
• Question and answer session

The seminar will last approximately 1 hour and is FREE.  There will be an opportunity for questions at the end.

To reserve your place:

Contact:

Telephone:  01691 654545               Fax:  01691 679449               Email:  [email protected]

Register on Eventbrite:

https://www.eventbrite.co.uk/e/automatic-enrolment-workplace-pensions-seminar-tickets-26466902217?aff=es2

Call into one of Morris Cook’s offices:

6 Salop Road, Oswestry, Shropshire, SY11 2NU

Bryn Estyn, East Street, Llangollen, LL20 8RB

3/5 Watergate Street, Ellesmere, Shropshire, SY12 0EX

Download a booking form click here

 

1 September 2016 – Due date for Corporation Tax due for the year ended 30 November 2015.

19 September 2016 – PAYE and NIC deductions due for month ended 5 September 2016. (If you pay your tax electronically the due date is 22 September 2016)

19 September 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2016.

19 September 2016 – CIS tax deducted for the month ended 5 September 2016 is payable by today.

1 October 2016 – Due date for Corporation Tax due for the year ended 31 December 2015.

19 October 2016 – PAYE and NIC deductions due for month ended 5 October 2016. (If you pay your tax electronically the due date is 22 October 2016.)

19 October 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2016.

19 October 2016 – CIS tax deducted for the month ended 5 October 2016 is payable by today.

31 October 2016 – Latest date you can file a paper version of your 2016 Self Assessment tax return.

Generally speaking, the purchase of any vehicle where there is any element of private use means any reclaim of VAT may be restricted. HMRC’s website offers the following guidance:

• You may be able to reclaim all the VAT on a new car if you use it only for business.
• The car must not be available for private use, and you must be able to show that it isn’t, e.g. it’s specified in your employee’s contract.
• Private use includes travelling between home and work, unless it’s a temporary place of work.

Due to the private use restriction, it is usual that no VAT can be recovered on the purchase of a car. However, you may be able to claim all the VAT on a new car if it’s mainly used:

• as a taxi
• for driving instruction
• for self-drive hire

If you are buying a commercial vehicle, you can usually reclaim the VAT. For example, a van, lorry or tractor. You can only reclaim the VAT if you use the vehicle in a business.

If they’re used only for business, you can also reclaim VAT on:

• motorcycles
• motorhomes and motor caravans
• vans with rear seats (combi vans)
• car-derived vans

If you are in any doubt that a proposed vehicle purchase is eligible for a VAT reclaim please contact us for advice. Reclaiming the VAT when a claim is in doubt will only attract the attention of HMRC.

A reminder, that if either parent’s income exceeds £50,000 this will affect eligibility for Child Benefits.

A tax charge, known as the ‘High Income Child Benefit Charge’ (HICBC), is payable if a parent has an individual income over £50,000 and:

• either parent claims Child Benefit, or
• someone else gets Child Benefit for a child living with a parent and they contribute at least an equal amount towards the child’s upkeep

It doesn’t matter if the child living with you is not your own child.
If the HICBC does apply, the parent with the highest income (if both exceed £50,000) will need to declare the amount of the Child Benefit received on a Self Assessment tax return. The tax charge will then claw back the Child Benefit received at the rate of £1 for every £2 that income exceeds £50,000. This means that if income is more than £60,000 the HICBC will equal Child Benefit received.
If parents can see that one or both incomes will exceed £60,000 they can elect to withdraw their Child Benefit claim in which case, no entry on a tax return would be required.
If income is in, or just over the £50,000 to £60,000 band, paying pension contributions or donations under gift aid can reduce the impact of the HICBC as well as reducing tax.

1 August 2016 – Due date for Corporation Tax due for the year ended 31 October 2015.

19 August 2016 – PAYE and NIC deductions due for month ended 5 August 2016. (If you pay your tax electronically the due date is 22 August 2016.)

19 August 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2016.

19 August 2016 – CIS tax deducted for the month ended 5 August 2016 is payable by today.

1 September 2016 – Due date for Corporation Tax due for the year ended 30 November 2015.

19 September 2016 – PAYE and NIC deductions due for month ended 5 September 2016. (If you pay your tax electronically the due date is 22 September 2016.)

19 September 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2016.

19 September 2016 – CIS tax deducted for the month ended 5 September 2016 is payable by today.

For 2016-17, the EA is set at £3,000. This means that if you are eligible, you will not have to pay employers’ Class 1 contributions up to this amount. The following set out some of the less well known facts about this allowance:

• The EA can only be used against your employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. Class 1A and 1B NICs are those payable on any taxable benefits or expenses provided by a business to its employees.
• You cannot claim the EA if the only employee paid above the secondary threshold is a sole director; or someone paid for personal or domestic work (unless they are a care or support worker).
• You can only claim one EA for your business or charity even if you have multiple PAYE schemes for different parts of your business or charity.
• You should take off the EA from employer Class 1 NICs liabilities before deducting any other amounts, for example, recoverable Statutory Maternity Pay.
• If you do not use your full £3,000 EA entitlement against your nominated PAYE scheme, but you have employer Class 1 NICs liability on your other PAYE schemes, and have paid all your PAYE up to date, you can apply to HMRC (at the end of the tax year) for a refund of any unused balance.
• If you do not apply for a refund, and have an unused balance you should apply to HMRC to use this against any forthcoming PAYE debt.
• If you make your claim for the EA towards the end of the tax year, you might not incur sufficient employer Class 1 NICs liabilities in the remainder of the tax year to use up the allowance in full. If so, HMRC will use the balance remaining against any PAYE debt or other tax/NIC liabilities arising in the following tax year. If you do not have any existing PAYE debts or liabilities to set the unused balance against, you can claim your allowance as a repayment.
• You can make a claim for the EA up to 4 years after the end of the tax year in which the allowance applies. For example, if you want to make a claim for the allowance for the tax year 2015-16, you must make your claim by no later than the 5 April 2020.

If a business that is claiming the EA changes ownership, then that existing claim for the allowance will end when the transfer of ownership occurs.

If you leave your entire estate to charities, will you be turning in your grave if disinherited relatives mount a challenge to break your last will and testament, and succeed?

In a 2015 case heard by the Court of Appeal, a disinherited daughter challenged her deceased mother’s Will.

The background to the case is illuminating. The daughter had not been in touch with her mother since she left home at age 17, some 26 years prior to her mother’s death. The mother had made no provision for her daughter in her Will and left the majority of her estate to animal charities.

Aggrieved, the daughter brought a claim under the Inheritance (Provision for Family and Dependents) Act 1975. After many court appearances and appeals, the Court of Appeal has ruled that the daughter is entitled to share in approximately a third of her mother’s estate. It should also be pointed out that the daughter’s financial circumstances were somewhat straitened.

The charities that stand to lose out in this process are making a further appeal to the Supreme Court…

The Courts, therefore, have the power to over-rule the testamentary wishes of a deceased person if it feels that the needs of relatives prevail over and above the needs of non-related beneficiaries.

Buy-to-let landlords need to start considering their options, in particular, those who have borrowed heavily in order to build their property portfolio.

As we have mentioned previously in this newsletter, from April 2017 deductions for finance charges will be progressively reduced and replaced by a 20% tax credit. This will promote a number of landlords into the higher rates of Income Tax and increase most buy-to-let landlords’ tax bills where annual finance charges are significant.

Consider Jane. She has purchased a number of buy-to-let properties and her total rental income is £120,000 a year. Her expenses, excluding mortgage and loan interest are £15,000 and her mortgage interest £85,000. Jane has no other income. Her Income Tax bill for 2016-17, based on these figures, is estimated to be £1,800 leaving her with disposable income from her property business of £18,200.

With no changes in her rents and expenses her Income Tax bill will gradually increase until 2020-21 (when the changes to tax relief on finance charges are fully implemented). Her tax bill for 2020-21 will increase to £13,500, leaving Jane with a much reduced disposable income of £6,500.

Landlords affected need to start to consider their options now. There are a number of practical changes that could be made. For example, Jane could:

• increase rents,
• introduce savings to repay loans and therefore reduce interest charges,
• dispose of properties that are not pregnant with capital gains.

If you have borrowed heavily in order to build your buy-to-let business, better to consider your options now than to be forced into less effective restructuring as the transitional period progresses.