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61 Friar Gate  Derby  DE1 1DJ

 

Registered to carry out audit work Association of Chartered Certified Accountants.

www.auditregister.org.uk under number 8011438

Member of the Association of Chartered Certified Accountants
Phone

01332 202660

Blog

EIS and SEIS tax relief funding passes £2.1 billion

Adrian Mooy - Saturday, June 29, 2019
 
A rise over the course of the 2017-18 tax year saw funding for the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) tax reliefs pass the £2.1 billion mark.

 

The EIS scheme saw the larger increase in approved funding, with an increase in funds raised of £28 million. In comparison, SEIS approved funding rose by approximately £2 million over the year, despite a fall in the number of companies receiving investment.

 

The EIS scheme allows investors to claim relief on Income Tax of 30 per cent on investments of £1 million or below in high-risk start-ups. Meanwhile, they can also invest as much as £2 million in “knowledge-intensive companies”.

 

The figures follow a crackdown on some lower-risk investments, which most recently saw a “risk-to-capital” test introduced in the Finance Act 2018.

 

Some cars only qualify for 6% tax relief now

Adrian Mooy - Friday, June 28, 2019

 

Some cars only qualify for 6% tax relief now


The latest Finance Act has reduced the tax writing down allowance for motor cars that emit more than 110 grams of CO2 from 8% to just 6% on a reducing balance basis from April 2019.

 

For company cars the vehicle is included in the capital allowance “special rate” pool which means that even when the car is sold the proceeds are deducted from the pool and the 6% allowance continues until the balance is written off.

 

It may be more advantageous to lease such a vehicle, but please check with us first.

 

Research suggests small businesses 'unaware of AIA'

Adrian Mooy - Thursday, June 27, 2019

 

Research carried out by banking group Close Brothers has suggested that almost two thirds of UK small businesses are 'unaware of the Annual Investment Allowance' (AIA).

 

The majority of businesses are able to claim a 100% AIA on the first portion of expenditure on most types of plant and machinery (except cars). The AIA applies to businesses of any size and most business structures, but there are provisions to prevent multiple claims.

 

The maximum amount of the AIA depends on the date of the accounting period and the date of expenditure. From 1 January 2019, the AIA is £1 million for two years. Thereafter, it will revert to £200,000.

 

The research also revealed that 58% of small and medium-sized enterprises (SMEs) were unaware that the government increased the AIA in the 2018 Autumn Budget. Meanwhile, just 13% of firms stated that they plan to increase investment in 2019 in order to take advantage of the rise.

 

Commenting on the matter, Neil Davies, CEO of Close Brothers, said: 'The AIA provides significantly faster tax relief for plant and machinery. However, it's clear that more needs to be done to get the message out to business owners because the AIA was always intended as an economic stimulus by the government.'

HMRC will get a higher priority when firms go bust

Adrian Mooy - Wednesday, June 26, 2019
 
From April next year, HM Revenue & Customs (HMRC) will rank third, just after secured creditors such as banks and insolvency practitioners in order to recover additional outstanding tax from failing businesses.

 

Currently, HMRC is ranked alongside unsecured creditors, such as suppliers, trade creditors, contractors and customers, who on average rarely recover more than four per cent of debts owed.

 

However, the change will mean that they are now likely to recover a higher percentage of tax, which will contribute around £185 million extra a year to the public coffers, according to the Government.

 

The taxman’s new ‘third place’ position in respect of employment taxes and national insurance contributions means that its claims will jump ahead of floating charges from secured creditors, such as debt provided by financial institutions.

 

The VAT paid by customers on goods will also jump up the queue, although claims relating to other charges, such as corporation tax, still rank alongside other unsecured creditors.

 

This latest decision is a reverse of the previous crown preference arrangements that were removed in 2003. These were abolished after a record number of smaller corporate entities began winding up in the late 1990s following concerns that HMRC was inadvertently pushing them into liquidation through its tax recovery activities.

 

Revenue tests new trigger to increase the accuracy of PAYE codes

Adrian Mooy - Tuesday, June 25, 2019

 

HM Revenue & Customs (HMRC) is trialling a new trigger, which is intended to improve the accuracy of employees’ PAYE tax codes.

 

According to HMRC, as many as half a million tax codes being used by employers across the UK could be incorrect, leading to employees either overpaying or underpaying tax.

 

To address the problem, HMRC is making changes to dynamic coding, which began its rollout in July 2017.

 

Dynamic coding is designed to make use of the additional information HMRC is now receiving from employees and employers to recalculate pay estimates during the course of the tax year.

 

Now HMRC is adding mismatches between its records and those of employers to the list of events that can trigger a recalculation.

 

As part of the initiative, HMRC is also placing a renewed emphasis on ensuring that employers complete new starter checklists properly and will be visiting the 100 worst offending employers when it comes to failing to complete the new starter process.

New code launched to help protect victims of sophisticated banking fraud

Adrian Mooy - Monday, June 24, 2019
 
A new code has been launched by 17 UK banks to protect customers who fall victim to a sophisticated form of fraud known as Authorised Push Payment (APP) scams.

 

APP scams involve tricking people into making payments to fraudsters, who are masquerading as legitimate payees.

 

Victims of these scams who notify the banks signed up to the new code will now be informed within 15 working days whether they will be reimbursed for their losses.
 
Where a person is not satisfied with their bank’s response, they can refer their complaint to the Financial Ombudsman Service.

 

Chris Hemsley, Co-Managing Director at the Payment Schemes Regulator (PSR), said: “APP scams can have a devastating impact on the people who fall victim to them.
 
The code is a major step-up in protections and it reflects our strong belief that if somebody has done everything they can reasonably do to protect themselves, they should be reimbursed. I welcome the commitment that these banks have made to their customers.

 

“There has been a significant amount of work by consumer groups and the industry to develop and deliver this code and we are really pleased that these new protections are now available.”

 

MTD for VAT – relaxation on posting supplier statements

Adrian Mooy - Saturday, June 22, 2019

 

HM Revenue & Customs (HMRC) has updated its VAT notice regarding Making Tax Digital (MTD) for VAT to relax several of the digital recordkeeping requirements.

 

One of the changes, secured with the help of the Chartered Institute of Taxation (CIoT), relates to purchase invoices from suppliers.

 

It has become apparent in sectors that receive a high number of purchase invoices from the same company, that they are having to file multiple almost identical records, which is becoming very onerous.

 

MTD for VAT requires each individual supply or invoice to be entered as a new digital record.

 

However, a relaxation to the rules has been agreed, which will enable businesses to capture their digital records information from supplier statements, rather than from each individual invoice, as long as “all supplies on the statement are to be included on the same return and the total VAT charged at each rate is shown”. This change will only apply to purchases and not sales.

 

HMRC has also agreed to review the requirement for petty cash. Currently, the strict requirement is to record each individual supply, or at least each individual invoice/receipt, within a company’s digital records.

 

Instead, the updated VAT notice says that petty cash transactions can now be added up and summary totals entered as an alternative digital record.

 

The notice states: “This applies to individual purchases with a VAT-inclusive value below £50 and the total value of petty cash transactions recorded in this way cannot exceed a VAT-inclusive value of £500 per entry.”

 

The third and final relaxation of the rules relates to charity fundraising events run by volunteers. Under the new guidance the total values of supplies made can be entered as a single transaction, and similarly for supplies received.

 

HMRC has told the CIoT that it will not currently be seeking to apply record-keeping penalties where a business is clearly trying to comply with the requirements of MTD. This is in line with their previous promise of providing a ‘soft landing’ period in the first year of the new digital tax regime.

Furnished holiday lettings – is it worth qualifying?

Adrian Mooy - Friday, June 21, 2019
 
When it comes to taxing rental income, not all properties are equal. Different rules apply to properties which meet the definition of ‘furnished holiday lettings’ (FHLs). While the rules now are not as generous as they once were, they still offer a number of tax advantages over other types of let.
 
Advantages

 

Properties that count as FHLs benefit from:

 

 • capital gains tax reliefs for traders (business asset rollover relief, entrepreneurs’ relief, relief for business assets and relief for loans for traders); and
 • plant and machinery capital allowances on items such as furniture, fixtures and fittings.

 

In addition, the profits count as earnings for pension purposes.
 
What counts as FHLs?

 

For a property to count as a FHL it must meet several tests. It must be in the UK or the European Economic Area (EEA), it must be furnished and it must be let commercially (i.e. with the intention of making a profit).
The property must also pass three occupancy conditions. The tests are applied on a tax year basis for an ongoing let, the first 12 months for a new let and the last 12 months when the let ceases.
 
The pattern of occupancy condition

 

The total of all lettings that exceed 31 continuous days in the year cannot exceed 155 days. If continuous lets of more than 31 days total more than 155 days in the tax year, the property is not a FHL.
 
The availability condition

 

The property must be let as furnished holiday accommodation for at least 210 days in the tax year. Periods where the taxpayer stays in the property are ignored as during these times the property is not available for letting.
 
The letting condition

 

The property must be commercially let as furnished holiday accommodation for at least 105 days in the year. Periods where the property is let to family or friends at reduced rate or free of charge are ignored as they do not count as commercial lets. Lets of longer than 31 days are also ignored, unless the let only exceeds 31 days as a result of unforeseen circumstances, such as the holidaymaker being unable to leave on time as a result of a delayed flight or becoming too ill to travel.
 
Second bite at the cherry

 

If seeking to secure FHL status, but the property does not meet the letting condition, all is not lost. Where the landlord has more than one property let as a FHL and the average rate of occupancy across the properties achieves the required 105 let days in the year, the condition can be met by making an averaging election.

 

A property may also be able to qualify if there was a genuine intention to meet the letting condition but this did not happen and the other occupancy conditions are met by making a period of grace election.

 

Further details on making averaging and period of grace elections can be found in HMRC helpsheet HS253 (see www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet).
 
Is it worth it?

 

While FHLs do enjoy favourable tax treatment, these are only available if the associated conditions are met. While FHLs, particularly in prime tourist locations, may be able to command high rental values in high season, the properties may lay empty for several weeks in the off season. By contrast, a longer term let will offer an element of security that multiple short lets may not provide. The decision as to whether striving to meet the conditions is worth it, is, as always, a personal one.

 

 

Stamp duty land tax on non-residential properties

Adrian Mooy - Thursday, June 20, 2019

 

 
Stamp duty land tax (SDLT) is payable in England and Northern Ireland on the purchase of property over a certain price. It applies equally to residential and non-residential properties, although the rates are different. Stamp duty land tax is devolved with land and buildings transaction tax (LBTT) applying in Scotland and land transaction tax (LTT) applying in Wales.
 
Non-residential property
 
As the name suggests, non-residential property is property other than that which is used as a residence. This includes commercial property, such as shops and office, agricultural land and forests. The non-residential rates of SDLT also apply where six or more residential properties are brought in a single transaction.
 
Mixed use properties
 
The non-residential rates of SDLT also apply to mixed use properties. These are properties which have both residential and non-residential elements. An example of a mixed use property would be a shop with a flat above it.
 
Rates
 
SDLT is charged at the appropriate rate on each ‘slice’ of the consideration. No SDLT is payable where the consideration is less than £150,000, or on the first £150,000 of the consideration where it exceeds this amount.
 
The rates of SDLT applying to non-residential properties are shown in the table below. They also apply to the lease premium where the property is leasehold rather than freehold.
 
Consideration                                               SDLT rate
 
Up to £150,000                                                  Zero
The next £100,000
(i.e. the ‘slice’ from £150,001 to £250,000)       2%
Excess over £250,000                                       5%
 
Example

 

ABC Ltd buys a commercial property for £320,000. SDLT of £5,500 is payable, calculated as follows.
 
On first £150,000 @ 0%             £0
On next £100,000 @ 2%            £2,000
On remaining £70,000 @ 5%     £3,500
Total SDLT payable                    £5,500
 
New leasehold sales and transfers
 
The purchase of a new non-residential or mixed use leasehold property triggers a SDLT liability on the purchase price (the lease premium) and also on the annual rent payable under the lease (the net present value). The two elements are calculated separately and added together.
 
The lease premium element is calculated using the rates above, while the rent element is payable at the rates in the table below. No SDLT is payable on the rent if the net present value is less than £150,000.

 

Net present value of the rent       SDLT rates
 
£0 to £150,000                                 Zero
£150,001 to £5,000,000                   1%
Excess over £5,000,000                   2%
 
Existing leases

 

SDLT is only payable on the lease price where an existing lease is assigned.
 
SDLT calculator

 

HMRC have published a handy calculator on the Gov.uk website which can be used to work out the SDLT payable on a commercial transaction. It can be found at www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro.

 

Scotland and Wales

 

The rates of LBTT payable on the purchase of non-residential properties in Scotland can be found at www.revenue.scot/land-buildings-transaction-tax/guidance/calculating-tax-rates-and-bands and the rates of LTT payable on the purchase of non-residential properties in Wales can be found at https://gov.wales/land-transaction-tax-rates-and-bands.

 

Annual tax on enveloped dwellings

Adrian Mooy - Tuesday, June 18, 2019

 

The annual tax on enveloped dwellings (ATED) is a tax that applies, in the main, to companies owning residential property which is valued at more than £500,000.

 

The tax only applies on properties that are classed as ‘dwellings’. This is a property where all or part of it is used as a residence, for example a house or a flat. The ‘dwelling’ also includes the property's gardens or grounds. However, properties such as hotels, guest houses, boarding school accommodation and student halls of residence fall outside the definition of a ‘dwelling’, and thus outside the scope of the tax.

 

Valuing the property

 

The tax only applies to dwellings with a value of at least £500,000. The amount of the charge depends on the value of the dwelling. Therefore, it is necessary to know the value of any residential property owned wholly or partly by a company (or a partnership with at least one corporate partner). The key date is the valuation date. From 1 April 2018 the valuation date is 1 April 2017. If the property was acquired after 1 April 2017, the value is the date of acquisition.

 

The valuation is an open market valuation. How much is the charge? The charge is an annual charge payable for the period from 1 April to the following 31 March. The chargeable amount for 1 April 2019 to 31 March 2020 is shown in the following table.

 

Property value                                           Annual charge

 

More than £500,000 up to £1 million                    £3,650

 

More than £1 million up to £2 million                    £7,400

 

More than £2 million up to £5 million                  £24,800

 

More than £5 million up to £10 million                £57,900

 

More than £10 million up to £20 million            £116,100

 

More than £20 million                                       £232,350

 

Payment and returns

 

An ATED return must be filed by 30 April each year. The return should be filed using HMRC’s ATED online service. An agent can be appointed to file the return on the company’s behalf. The tax must also be paid by 30 April.

 

Partner note: FA 2013, Pt. 3 (ss. 94—174, Sch. 33 – 35).


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