To November’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
Please contact us for advice in your own specific circumstances. We’re here to help!
Follower Notices and Accelerated Payment Notices (APNs)
When a court or the tribunal issue a ruling that potentially resolves a large number of cases, many ‘followers’ (i.e. taxpayers with similar circumstances) agree to settle their affairs with HMRC, but some do not. They argue that small differences in the arrangements mean that the decision does not apply to them. HMRC will issue a follower notice to such taxpayers requesting them to settle the liability they believe is due. – read more >>
Update on intermediaries review
The government estimates that around £420m a year is lost in tax and NICs by taxpayers ignoring or manipulating the intermediaries’ legislation (IR35). The September edition of this newsletter (see The future for intermediaries) contained details of the government’s consultation on proposals to improve the effectiveness of the rules. – read more >>
HMRC business records checks scrapped
HMRC have announced that they have scrapped their compliance procedure known as ‘business record checks’ (BRCs) with immediate effect. However, businesses should be warned that keeping good records is still essential to enable them to produce accurate accounts and read more >>. Broadly, BRCs were introduced in 2011 and used by HMRC to confirm that a business was keeping sufficient information on its income and expenses to produce an accurate tax return. –
Flat rate homeworking expenses
Many small businesses can choose to be taxed on the basis of the cash that passes through their books, rather than being asked to spend their time doing calculations designed for big businesses (‘cash basis’). Where the cash basis is used, it is also possible for the business to use certain simplified arrangements for claiming expenditure in working out taxable profits for income tax purposes. Flat rate expenses can be claimed for business costs for vehicles, working from home, and living at your business premises. – read more >>
Employment Opportunity – Finance Manager
1847 is the UK’s leading brand of vegetarian restaurants. Established in 2010, the company has grown from its initial site in Manchester and opened Birmingham in 2013 plus Bristol and Brighton in 2015. There are plans to establish more restaurants plus separate deli sites and a cookery school during 2016. – read more >>
November Questions and Answers
Q. I am a director and employee of a trading limited company (A Ltd), of which I also own 100% of the shares. I am about to set up a holding company in the European Union, which will own 100% of the shares in A Ltd. I will own 100% of the new EU company. Will there be any capital gains tax or stamp duty payable on the transfer of shares?
A. The ‘share for share’ rules should apply to the transfer, so there should be no capital gains tax or stamp duty payable on the transaction. Further information on these rules can be found in the HMRC Capital gains tax manual at www.hmrc.gov.uk/manuals/cgmanual/CG52521+.htm, and www.hmrc.gov.uk/manuals/cgmanual/CG52800.htm.
Q. I have recently registered for VAT. I understand that I can use a flat rate for working out the VAT payable to HMRC, but I am not sure how the scheme works and how to register for it.
A. This scheme is designed to help small businesses with a turnover of no more than £150,000 a year, excluding VAT, by taking some of the work out of recording VAT sales and purchases. If you use the scheme, you pay HMRC a single percentage of your turnover in a VAT period.
The percentages applicable to this scheme currently vary from 4% for food and children’s clothing retailers up to 14.5% for builders and contractors who supply labour-only services.
In your first year of VAT registration you get a 1% reduction in flat rate, which means that you can take 1% off the flat rate you apply to your turnover, until the day before your first anniversary of becoming VAT registered.
The scheme works well for some but not others. On the positive side, the scheme may save you some admin because you don’t have to work out every item of input and output tax, but if your customers are VAT registered, you do have to calculate the VAT and issue VAT invoices in the normal way. Financially, the flat rates averages may work out cheaper for you than normal accounting or you may find this scheme more expensive – use HMRC’s ready reckoner to check.
Under the scheme, you pay the VAT quarterly and you can swap back to the normal VAT scheme at any time if your inputs rise. You can also claim VAT on any capital expenditure of more than £2,000 excluding VAT.
You can register to join the scheme online. See the GOV.UK website at www.gov.uk/vat-flat-rate-scheme/join-or-leave-the-scheme for further details.
Q. I am a self-employed painter and decorator. I own two properties, one of which I rent out. My next self-assessment payment on account is due for payment shortly. I will need to pay £13,500 to HMRC. The rental property is currently worth around £20,000 less than I paid for it. If I were to sell it now, would I be able to off-set the loss against my self-assessment tax bill?
A. Sadly not! For capital gains tax purposes, allowable losses of an individual can generally only be set against capital gains in the same tax year or in future years.
The HMRC capital gains tax states:
“Allowable losses must be deducted:
- as far as possible from chargeable gains accruing in the same year of assessment; and
- any balance must be carried forward without time limit and deducted from chargeable gains accruing in the earliest later year. Losses brought forward are deducted after losses accruing in the year of assessment and cannot reduce the net chargeable gains to below the annual exempt amount. Any losses which thus cannot be deducted remain available for deduction in later years.”
See the HMRC Capital Gains Tax Manual at www.hmrc.gov.uk/manuals/cgmanual/CG15810.htm for further details.
November Key Tax Dates
2 – Last day for car change notifications in the quarter to 5 October – Use P46 Car
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/11/2015