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New ATED Charge

Feb19

The annual tax on enveloped dwellings (ATED) came into effect on 1 April 2013. This new tax applies to residential properties in the UK worth over £2 million, which are owned by a non-natural person, such as a company, trust or partnership that includes a company as a member.

The value of the residential property is measured as at 1 April 2012, not the purchase price.

Is your farmhouse owned by a farming partnership, which also has a company as a member? Does your company own properties which are used to house employees?

In both of those circumstances the property is potentially subject to the ATED charge if it is worth £2 million or more. The ATED charge ranges from £15,000 to £140,000 per year, and is payable by 31 October 2013 for 2013/14.

There are many exemptions and reliefs for ATED, including for farmhouses occupied by farmworkers, and for properties occupied by employees who don’t individually own more than 10% of the company. However, to claim the relevant exemption, the property owner needs to submit an ATED return to HMRC without delay.

The ATED return can be completed online on the HMRC website, and there is no need to register through the Government gateway. You can also download a paper version of the ATED return from the HMRC website. There is space on the ATED return to appoint us as your tax agent so we can then submit the return on your behalf. Note that the deadline for submitting the ATED return for 2013/14 is 1 October 2013.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

Disclaimer

 

Resurfacing – Repairs or Capital?

Feb17

Any business owner whose property includes a road, driveway, or parking area, will have to repair those surfaces at some point. The question is whether to charge the costs to ‘repairs’ or to ‘capital improvements’ in the accounts.

This decision has significant tax consequences, as the cost of repairs will qualify for a tax deduction, but capital improvements will not. Capital expenditure on improvements or renewals doesn’t get a tax deduction until the property is sold. Capital allowances can’t be claimed for the cost of laying roads or the structure of buildings, except in rare cases where the facility is used for research and development.

Tax Inspectors frequently challenge the cost of repairs in business accounts, particularly where the sum expended in one year is large. The Inspector may argue that where a road is resurfaced, the work should be treated as a renewal (capital) and not a repair. However, following a number of tax cases on this issue HMRC has changed its official guidance to its Tax Inspectors. The new guidance states that where a road has been resurfaced, that amounts to a repair and not a renewal or a replacement, so the cost is tax allowable.

There are still many grey areas which can be argued to be one side of the capital/repairs line or the other.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Disclaimer

 

Question and Answer- Maternity Pay

Feb12

Q. I formed my new company in November 2012 and my wife (Liz) became a director and employee of that company at that time. Liz is now expecting our first child in August 2013. Can our company pay Liz statutory maternity pay?

A. Unfortunately Liz has not worked for 26 weeks for her employer before the 15 weeks prior to birth, so statutory maternity pay is not due. There is nothing to stop your company from paying Liz her normal wages while she is on maternity leave, but as those wages do not amount to statutory maternity pay the company can’t reclaim that pay from the tax office.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Question and Answer – non-executive director

Feb10

Q. I am a non-executive director of a number of companies. Can I offer consultancy services to those companies on a self-employed basis?

A. You can offer your services to those companies on a self-employed basis, but you need to have a clear contract which distinguishes your work as a consultant from work you do as a director. The self-employed tasks need to be invoiced separately and declared to HMRC as a separate business from your fees as a director.

Generally the fees for work you perform as a director should be taxed under PAYE. Legislation introduced in the Finance Act 2013 requires the IR35 provisions to apply to work done as officers where that work is charged through a third party, such as a personal service company.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Question and Answer – Premium Bonds

Feb5

Q. I am thinking of investing some money in premium bonds. Are there any tax advantages or disadvantages?

A. You won’t receive interest on the money held in premium bonds but any prizes you receive from those bonds are tax free. The prize fund is calculated on the basis of a nominal interest rate of 1.3%. Thus if you hold £10,000 in premium bonds for one year, on average you should expect to win £130 as bond prizes over the year. However, that return is not guaranteed and you may win more or less. You could also win the big prize of £1million!

The premium bonds will form part of your estate for inheritance tax purposes, so will be subject to inheritance tax on your death if the value of your total estate exceeds the exempt limit of £325,000 (fixed to 2018).

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

VAT Mistakes

Feb3

If your company makes a deliberate VAT mistake, which results in less VAT being paid over to HMRC than is correctly due, you as the director of that company can be issued personally with a penalty. This very rarely happens, but the VATman does have the power to impose such penalties where he can show the underpaid VAT was due to the dishonest conduct of one or more of the directors.

Two recent cases illustrate the types of situations where a personal penalty can be imposed:

Mr Brookes is the sole director of a building company. A VAT inspection found suppliers’ invoices to support VAT inputs were missing. Brookes obtained ‘copy’ invoices from the main suppliers, but those ‘copies’ were found to be very poor forgeries. Brookes was served with a personal penalty of £43,753 which was 60% of the over claimed VAT.

Mr & Mrs Walker failed to submit eight successive VAT returns for their company. The VAT office issued estimated VAT assessments to the company which were less than the VAT eventually found to be due, and the Walkers did not challenge those estimated assessments. The Walkers were served with personal penalties totalling £194,214.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

 

Disclaimer

 

RTI for Seasonal Workers

Jan29

Have you taken on casual workers this summer? Perhaps you are paying piece-rates for the amount of produce picked or packed by each person. Reporting such small and variable payments under the new RTI system is a significant hassle.

The RTI rules require you to report each payment to workers on or before the date of the payment. Fortunately you may be able to use one of these two concessions to ease your RTI reporting burden:

a) Where you pay your casual workers daily or more than once a week, but the amounts paid are less than £109 per person per week, you can send RTI reports to HMRC weekly; or

b) Where the total number of your employees, including casual workers, is less than 50, you can send your RTI reports to HMRC on a monthly basis.

Concession b) will only apply for payments made before 6 April 2014.

Your casual workers are likely to have no set working hours for each week. In effect they will be on a zero-hours contract; paid for the hours they work, but otherwise not at all. In such cases you should choose option D of hours worked on the FPS report under RTI.

The Government wants employers to report data on the hours worked by employees in order to prevent fraud in the Tax Credits system. Under Universal Credit the hours worked will not be relevant to the employee’s claim, so in time when all claimants are moved from Tax Credits to Universal Credit, the requirement to report hours worked should be dropped.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Disclaimer

 

Self-billing Change

Jan27

The procedure of ‘self-billing’ is frequently used in the publishing and construction sectors, where a large business customer engages lots of smaller businesses as suppliers (eg authors or subcontractors). The customer issues self-billed invoices on behalf of the small suppliers, usually with the payment to each supplier.

If you are operating self-billing you must comply with the conditions set out in the VAT Notice 700/62: Self Billing. These conditions have recently changed, so make sure you download the latest version of the VAT notice from the HMRC website. In particular there is a new legal requirement to mark all self-billed invoices as ‘SELF BILLING’.

The key requirement of self-billing is that the suppliers must actively agree to self-billing, and provide the customer with their VAT details (registration number and address). Those that do not sign a self-billing agreement must issue their own invoices to the customer.

When you operate self-billing you should review your self-billing agreements at least once a year. This involves checking with the supplier that their billing details are still correct, and whether their business is VAT registered or not. In the recent recession many businesses have deregistered for VAT but have carried on trading.

It is important to get the supplier’s VAT details right. If you issue a self-billing invoice on behalf of a supplier, that includes VAT, when the supplier is not VAT registered, your business will over-claim VAT. This will result in penalties and interest for your business.

Your annual review of self-billing agreements does not have to be conducted all at the same time; the agreements can be reviewed on a rolling basis.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Disclaimer

 

Can allowable expenses include food Supplements?

Sep16

Q. I am self-employed personal trainer. I pay rent to various local gyms where I train my clients, supply my own uniform and make my own appointments. I have to look the part to get work, so I take body-building supplements. Can I claim the cost of those supplements as a business expense? A. The supplements are a form of food, and as such it has a dual purpose; to keep you healthy and prepare you to undertake your work. So it is very unlikely that the Taxman would agree that your body-building supplements are tax allowable. If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.

Reclaiming VAT on Goods and Services prior to Registration

Sep16

Q. I have decided to become VAT registered. Can I claim the VAT back on the van I bought two years ago, which I still use for my business?

A. You can reclaim VAT on goods and services purchased before VAT registration, but there are different time limits for goods as opposed to services. The VAT paid on goods held at the date of VAT registration can be reclaimed if they were purchased within four years before the registration date. VAT on services can only be reclaimed if the services were supplied for the on-going business with 6 months before the VAT registration. The van is classed as goods, so you can reclaim the VAT on purchase.

If you would like any further information, please do not hesitate to contact Southside Accountants Wimbledon & London.