http://www.youtube.com/watch?v=VEJY2LFJUWI

 

If you help run a local sports club, i.e. the kid’s football team, tennis club or other organised sports activity, you may be interested to learn you can apply to HMRC to be treated as a registered community amateur sports club, a CASC.

If your club fits the following criteria there are a number of significant tax exemptions. The main qualifying conditions are:

• the club must be open to the whole community
• the club’s main purpose must be to provide facilities for eligible sports, and to encourage people to take part in them
• the club must be organised on an amateur basis

The club must also be able to show that:

• it is set up and provides its facilities in an eligible area
• it is managed by fit and proper persons

The corporation tax reliefs that you can expect if you do register exempt the following sources of income:

• trading profits, if the turnover is no more than £30,000 per year (if turnover is more than £30,000 all trading profits are taxable)
• income from letting property, if the rent is no more than £20,000 per year (if letting income is more than £20,000 no exemption is possible)
• any interest your CASC gets
• any capital gains it makes
• any Gift Aid donations

Additionally you may qualify for relief from non-domestic rates. In England, Wales and Scotland this amounts to 80% rates relief. Contact your Local Authority finance department to apply.

There’s a lot of information published about the amount of capital gains tax you will need to pay if you sell a chargeable asset. And of course you can sell chargeable assets and the first £10,600 of taxable gains is exempt from a tax charge in the current tax year, 2011-12.

We thought it might be of interest to list items that can be sold with no fear of capital gains tax arising on the sale. Here’s HMRC’s published list and please note that a chattel, referred to in the list, is the personal variety; defined as ‘an item of movable, personal property’. In plain English personal effects or household goods:

• private motor vehicles
• an individual’s only or main residence (having gardens or grounds of half a hectare or less) which has been occupied as such throughout the period of ownership
• tangible moveable property, that is items such as household goods and personal effects, worth less than £6,000
• chattels with a predictable life of 50 years or less (unless used for the purposes of a trade, profession or vocation)
• SAYE (Save-as-you-earn) contracts
• National Savings Certificates
• Premium Bonds
• British Government Securities
• qualifying corporate bonds
• certain investments in Personal Equity Plans, Individual Savings Accounts and under the Business Expansion Scheme
• the receipt of personal injury compensation
• the receipt of winnings from betting, including pool betting, or lotteries or games with prizes.

 

HMRC are actively searching the internet for evidence of eBay traders that are consistently selling goods on eBay. They are known to be exploring the use of ‘internet robots’ to scour cyberspace!

And this activity is not necessarily restricted to eBay traders. What about car boot sales, sales via classified ads? Which raises an interesting question – when does a hobby become a trade, and more importantly, when do any surplus funds become subject to tax?

Generally speaking if you are selling your own private possessions you will not be trading. However you may be considered ‘in business’ if you habitually buy and sell goods on eBay and/or at car boot events. The list that follows is the published ‘badges of trade’ that HMRC use when considering this matter.

1. An intention to make a profit supports trading.
2. The number of transactions involved – systematic and repeated transactions support trade.
3. The nature of the goods sold – are the goods only capable of being turned to advantage by being sold? Or do they yield income, or give enjoyment through pride of ownership?
4. Existence of similar trading transactions – was this a one-off transaction or part of a pattern that suggests trading?
5. Changes to the goods – were the goods repaired, modified or improved to sell them more easily?
6. The way the sale was carried out – were the goods sold in a way that indicates trading, or to raise cash in an emergency?
7. The source of finance – was money borrowed to buy the goods? Were any profits to be used to repay the loan?
8. Interval of time between purchase and sale – goods being traded are usually bought then sold quickly.
9. Method of acquisition of the goods – goods acquired by an inheritance, or as a gift, are less likely to be the subject of trade.

As you can see one or more of these cases could apply to most hobbies.

The current penalty regimen adopted by HMRC precludes sticking your head in the sand. Don’t wait for the brown envelope to appear. If you are uncertain about the tax status of your money-making hobby call us now.

At present purchases of qualifying plant and other equipment can be written off against your taxable profits.

Tax relief is obtained by utilising the Annual Investment Allowance. For the current tax year, 2011-12, this amounts to a 100% write off with a limit of £100,000.

As with most opportunities all good things come to an end! From April 2012 the annual limit is being reduced to £25,000.

So if your plans over the next year or so include substantial investment in replacing worn out, or buying new, qualifying equipment, timing is absolutely critical.

Call us if you would like more information about these changes.

A dispensation is a notice from HM Revenue & Customs (HMRC) that removes the requirement to report certain expenses to them at the end of the year on forms P11D or P9D. There is also no need to pay any tax or National Insurance contributions to HMRC on items covered by a dispensation.

Once granted, dispensations last indefinitely. However, HMRC reviews them regularly – usually at intervals of five years or less – to make sure that the conditions under which they were issued still apply.
Expenses generally covered by a dispensation are:

• travel, including subsistence costs associated with business travel
• fuel for company cars
• hire car costs
• telephones
• business entertainment expenses
• credit cards used for business
• fees and subscriptions

HMRC strictly apply the dispensation from the date they accept an application, although in most cases they will agree to retrospective cover to the beginning of the current tax year.

The application process is fairly straight forward, complete and submit form P11DX. Do take care in completing the form. If you are at all unsure of the answers to the various questions, or would like us to apply for you, please contact us.

Don’t forget that from 6 April 2011 the HMRC approved amount you can claim for the business use of your own car is 45p per mile (previously 40p per mile).

The 45p rate applies to the first 10,000 business miles claimed in a tax year, after that the rate reduces to 25p per mile.

Employers are not obliged to pay at this rate but any rate paid up to 45p per mile will be effectively tax free to the recipient. Any payments in excess of 45p would need to be declared as a taxable benefit unless the recipient could prove that their actual motoring costs equalled or exceeded 45p per mile.

If employers pay, or have paid, less than 45p per mile (40p before 6 April 2011) employees can make a claim. For instance if an employer pays £25p per mile after 6 April 2011, the employees could claim 20p per mile on their tax return as an expense of their employment that they have not been reimbursed.

Before we deal with the issue raised by the title of this article it is necessary to outline the claims procedure.

In order to qualify for tax credits for the complete tax year 2011-12 it is necessary to make a claim before 1 July 2011 as claims can only be backdated 3 months.

Any claim now for 2011-12 would have to be based on your taxable income to 5 April 2011, the previous tax year. If your income for that year was over the tax credits threshold, and if you did make a claim before the 30 June 2011, the Tax Credits office would issue a ‘Nil Award’ for 2011-12  – effectively your claim would be recorded but no payments would be made to you.

Let’s say that you are self-employed, you have made no application for Tax Credits, and during the 2011-12 tax year your income dropped from £100,000 to £10,000 due to a number of factors:

• Loss of a major customer
• Bad debts
• Claim for purchase of new plant and equipment (to take advantage of the present 100% write down)

It only became apparent that your actual income would be at this level in June 2012 when your accounts were completed for the year to 31 March 2012 (the basis for your 2011-12 tax assessment). As you have made no claim for Tax Credits up to this point you could only backdate a claim to 5 April 2012. This being so you would receive no Tax Credits for 2011-12.

If, however, you had made a protective claim before end of June 2011, you could ask for your ‘Nil Award’ to be reassessed based on your actual earnings of £10,000 for 2011-12, instead of the earnings for the previous year amounting to £100,000. If all of the other qualifying conditions were satisfied you would then get a cheque for a full year’s tax credit claim.

This scenario does not just apply to the self-employed. Anyone, whose income fluctuates for whatever reason, may benefit in the same way. If it is likely that your income may drop in 2011-12, as compared to the previous tax year, please contact us now so that a protective claim can be put in place.

If HMRC send you a notice reminding you to fill in a Self Assessment tax return, you should do so!

But what happens if you are not presently reminded or required by HMRC to send in a return?

The following persons should notify HMRC that they need to submit a return even if HMRC are not presently asking them to do so:

• If you are, or become, self-employed, this includes being a member of a partnership.
• If you are a company director, a minister of religion or member of Lloyd’s

You are also required to send in a return if your income from the following sources exceeds:

• £10,000 or more income from savings and investments
• £2,500 or more income from untaxed savings and investments*
• £10,000 or more income from property (before deducting allowable expenses)
• £2,500 or more income from property (after deducting allowable expenses)
• annual trust or settlement income on which tax is still due (even if you’re only treated as receiving this income)
• income from the estate of a deceased person on which tax is still due

* Although there is no requirement to request a tax Return if your untaxed savings income is below £2,500, it is necessary that you advise HMRC to include the income as a deduction on your Notice of Coding.

Other reasons:

• You are 65 and receive a reduced age related allowance
• You have any foreign income that is liable to UK taxation
• Your annual income is over £100,000
• You need to claim certain allowances or reliefs
• You have capital gains tax to pay
• You are a trustee
• If you have lived or worked abroad or you are not domiciled in the UK
• If you have untaxed income sources and are using personal allowances elsewhere

As you can see this is quite a list. Unfortunately it is the taxpayers’ responsibility to notify HMRC that they need to submit a return. If you have any doubts about your status please call.