To October’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!
Changes to NICs for the Self-employed
From 2015-16 onwards, the collection of Class 2 contributions will be through the self-assessment system. This means that Class 2 NICs can now be paid together with income tax and Class 4 NICs in one chunk on the 31 January following the end of the relevant tax year. In the past, most people have paid Class 2 contributions monthly by direct debit. – read more >>
Spotlight on Contractor Loan Schemes
According to recent guidance published by HMRC, contractors and freelancers have been bombarded by promoters who make claims that they can help individuals take home up to 90% of their income using a contractor loan scheme. Broadly, promoters have been using this type of scheme to reduce the amount of tax paid on income by making payments which purport to be ‘loans’ from a trust or a company. Normally, a contractor would receive the contract income directly and pay tax on it. – read more >>
Tax Credit Changes Approved
The government has recently confirmed that the draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2015, which were laid before Parliament on 7 September 2015, are compatible with the European convention on human rights. Following a lengthy parliamentary debate, the draft regulations have been approved and are expected to apply from 6 April 2016. – read more >>
IHT on Main Residence Nil-rate Band and Downsizing Proposals
HMRC have published a technical note covering the proposals, announced in the Summer Budget 2015, to phase in a new residence nil-rate band (RNRB) from 6 April 2017 when a residence is passed on death to a direct descendant. – read more >>
R&D tax relief claims rise by 27 per cent in 2013-14 according to HMRC figures
If you were to hazard a guess about which tax relief has gained the greatest traction over the last couple of years, what would your answer be? Well, you may be as surprised as accountancy professionals were to learn that the answer is research and development tax relief. According to figures released by HM Revenues and Customs, the cost of research and development (R&D) tax relief claims across the UK has risen by £380 million. – read more >>
Government announces new measures in the new Enterprise Bill to ease late-payment concerns for small businesses.
Ask any accountant what the biggest problem facing small businesses is, and they’ll tell you it’s the issue of late, or non- payments. Nothing can wreak havoc with cashflow like this issue. Accountants are already aware of the problem, and so, it seems, is the government. Being aware of the problem is one thing, but doing something about it, however, is another. So, it’s pleasing to see that the government is about to take action to remedy the situation. – read more >>
October Questions and Answers
Q. I am a VAT-registered sole trader, owning a cycle shop in my local town. I am thinking of opening a second shop in another town and am wondering how I will deal with this for self-assessment and VAT. Will I need to register the new shop for VAT separately and complete two VAT returns – one for each business?
A. I presume you are going to be selling similar goods and providing similar services in the new shop. If that is the case, you will be able to do one self-assessment for the two businesses by amalgamating the figures for both shops. For VAT purposes, the HMRC state that it is the ‘person’, not the business, who is registered for VAT. A person can be either an individual or a legal person or entity and each VAT registration covers all the business activities of the registered person. This means that even if your new business has a different name, you will only need one VAT registration number.
Q. I own a rental property and let it out on a fully-furnished basis. Can I claim a tax deduction for the cost of replacing items as and when needed?
A. The government withdrew the ‘renewals basis’ capital allowance for furnishings in rental properties from April 2013, which means that currently only the 10% wear and tear allowance for a fully furnished rental property is available to you. Note that the wear and tear allowance is not available to those property businesses that rent part-furnished or unfurnished property.
The good news, however, is that in the Summer 2015 Budget the government announced that, as from April 2016, the 10% wear and tear allowance will cease and will be replaced with a new ‘replacement allowance’. Broadly, the new relief will enable all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings in the property. The relief will apply to landlords of unfurnished, part-furnished and furnished properties (but not to ‘furnished holiday lettings’ (FHLs) or commercial properties).
Under the new replacement furniture relief, landlords of all non-FHL residential dwelling houses will be able to claim a deduction for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use in the dwelling house, such as:
- movable furniture or furnishings, such as beds or suites,
- fridges and freezers,
- carpets and floor-coverings,
- linen, and
- crockery or cutlery.
The new replacement furniture relief will only apply to the replacement of furnishings. The initial cost of furnishing a property will not be included.
Q. I am a higher-rate taxpayer. My wife currently works part time and pays tax at the basic rate. We have a second property that we rent out but the deeds are held in my sole name. Is it worth putting the property into joint names, or even transferring it to my wife outright, so that we pay tax on the rental income at the basic rate?
A. If you live with a spouse or civil partner and have income from property you jointly own, you will normally be taxed on an even split of the income between you. In your particular circumstances there are two options available:
1. Under what is known as the ’50:50 rule’, you can simply make your wife a partial owner of the property, which means you will each be taxed on 50% of the rental income. For the purposes of these rules, the actual amount she owns is not relevant – it could be 99%, 50% or even 1%, as long as she is a partial owner.
2. You can make your wife a partial owner of the property and notify HMRC of the proportion she holds accordingly. You do this by submitting Form 17 to HMRC to record your actual shares of ownership. You will both then be taxed on the rental income according to the proportion you both actually own in the property (known as the ‘actual basis’). You will need to provide HMRC with evidence that your beneficial interests in the property are unequal, for example a declaration or deed. You can complete Form 17 online here. https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp
October Key Tax Dates
1 – Due date for payment of Corporation Tax for the year ended 31 December 2014
5 – If a Tax Return has not been received, individuals and trustees must notify HMRC of new sources of income and chargeability in 2014/15
14 – Return and payment of CT61 tax due for quarter to 30 September 2015
19 – Tax and Class 1B national insurance due on PAYE settlements for 2014/15
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/10/2015 or quarter 2 of 2015/16 for small employers
31 – Deadline for 2014/15 self assessment paper returns to be filed for HMRC to do the tax calculation. If a paper return is being filed also the deadline for tax underpaid to be collected by adjustment to your 2016/17 PAYE code (for underpayments of up to £3000 only)