To September’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!
Tax-efficient savings for children
There are a number of ways to save or invest for children – some accounts are tax-efficient but rigid, others are often flexible but liable to tax. Interest earned from CTFs and Junior ISAs is paid tax-free, but the money is effectively locked in until the child is 18, at which time it belongs to the child. Standard savings accounts usually offer lower interest rates and the interest is likely to be taxable, but there will be flexibility on withdrawals and transfers, enabling the parent to keep a tight rein on the money. – read more >>
The future for intermediaries
The Summer Budget 2015 contained an announcement that the government is to consult on proposals to improve the effectiveness of the existing intermediaries legislation, commonly known as IR35. The reason for this review was given as the perceived unfairness that two people could be doing the same job and pay very different levels of tax depending on how they are engaged. A consultation document has now been published (Intermediaries Legislation (IR35): discussion document), which sets out the rationale for change, the options to be discussed and the likely next steps. – read more >>
When tips are taxable
Confusion often arises regarding tips and gratuities as the tax and NIC treatment depends on how they are paid to the recipient. – read more >>
Paying inheritance tax
Various rules exist for determining the time for payment of inheritance tax (IHT). In certain circumstances it will be possible to pay in instalments, and it is even possible to settle a liability by transferring ownership of assets to the Crown (for example, a valuable painting may be donated to a national museum in lieu of an inheritance tax bill). – read more >>
What will the proposed Summer Budget, 2015, changes mean for landlords?
The Summer Budget was packed full of announcements; so many, in fact, that few people were able to fully appreciate the implications of these change. One of the groups that were specifically singled out for special treatment was landlords of residential property. But what were these proposed changes, and how will they impact on you as a private landlord should the changes receive full assent in 2016 Finance Bill? Here is Steven Glicher accountants summary of the changes. Why were landlords of residential property singled out? Well, the Treasury and the Bank of England have expressed increasing concern about the amount of debt now outstanding in the buy-to-let mortgage sector. – read more >>
HMRC publishes new guidance on sideways loss relief settlement
Are you a sole trader, a corporate or GAAP partnership seeking to create a loss through the right-off of expenditure or the value of rights or assets through GAAP? – read more >>
Internet businesses face HMRC tax crackdown
Internet companies may have to provide more information on people and businesses who sell goods and services online, in a crackdown on tax evasion. – read more >>
September Questions and answers
Q. I have recently registered for VAT. What is the difference between ‘normal’ and ‘cash’ accounting?
A. Under the normal method of accounting for VAT, you account for the output tax on your sales as they take place or as soon as you issue a VAT invoice, even if your customer hasn’t paid you. Then you can reclaim input tax on purchases you make as soon as you receive a VAT invoice, even if you haven’t paid your supplier. This method can cause cash flow problems if you have to pay a VAT bill before your customer pays you.
The cash accounting scheme, which is available to most businesses with an annual taxable turnover up to £1.35m, turns this normal method upside down. In cash accounting, you account for the output tax when you receive payment for the sale, rather than when the customer received the goods or service. So this way, you have the money from your customer to pay the VAT you charged on his bill. However, this scheme cuts both ways because you can only reclaim the input tax once you pay your supplier, which means that when your VAT bill is due you can’t offset the VAT you owe suppliers against your total bill.
The cash accounting scheme can help your cash flow because in general you don’t have to pay VAT until your customers have paid you. The scheme is especially helpful if you give your customers extended credit or suffer a lot of bad debts. However, the scheme may not give you any benefit if you:
- are usually paid as soon as you make a sale;
- regularly reclaim more VAT than you pay; or
- make continuous supplies of services.
Q. I bought my flat in 2008 and lived in it until 2013 when I moved into my now wife’s house. The flat was in negative equity so we kept it and rented it out. Now that the housing market has improved we have decided to sell it. We plan to use the proceeds to buy my wife’s parent’s house jointly with my wife’s sister and her husband. If we reinvest the profits on the sale of my flat in my wife’s parent house, will we avoid paying any capital gains tax?
A. Unfortunately rollover/holdover/reinvestment relief is not available for residential investment property, unless it relates to furnished holiday lettings, or where there is a compulsory purchase order. However, as you lived in the property from 2008 until 2013 and then rented it out, you should be able to claim some relief from capital gains tax via a combination of principal private residence relief, lettings exemption and the capital gains tax annual exemption.
Q. I am thinking of starting my own business and can’t decide whether to incorporate straight away or not. I will need to make a substantial investment in my business so it is likely that I will make a loss in the first, and maybe even second, year of trading. Is loss relief the same for sole traders and limited companies?
A. Taking all the pros and cons of incorporation into account, you may come to the conclusion that you’re best to carry on your business as a sole trader in the early years. This situation may be particularly relevant if you envisage making losses in the early years of trading, because you can carry back losses made in the first four years against personal income of the three preceding years, often resulting in a substantial refund of tax becoming due. However, don’t miss out on the opportunity of forming a limited company later on when the benefits of company status may be more valuable.
September Key Tax Dates
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/9/2015
30 – Closing date to claim Small Business Rate Relief for 2014/15 in England