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Are you able to claim small business rate relief for your furnished holiday let?

Holiday homes and holiday lets are treated differently – holiday lets are liable for business rates while holiday home owners must pay council tax. This can work to the landlord’s advantage, particularly if small business rate relief is available. However, owners of holiday properties should be warned – new rules are coming into effect from April 2023 to ensure only those properties that are actually let as holiday accommodation will be within business rates rather than council tax. Nature...

CGT on residential property gains – are you aware of the 60-day limit?

Statistics published by HMRC in August 2022 revealed that in the 2021/22 tax year, 129,000 taxpayers reported residential property disposal using HMRC’s online service, filing 137,000 returns in respect of 141,000 disposal and paying £1.7 billion in tax. However, an estimated 26,500 returns (20%) were filed late, suggesting some ignorance around the rules and the filing deadlines. What do you need to know? Need to report residential property gains Where a chargeable gain is made on the sale ...

Five tax-efficient ways to extract profits

If you operate your business as a personal or family company, you will need to extract some or all of the profits if you wish to use them personally. When it comes to tax, not all profit extraction methods are equal. While personal circumstances will dictate the most efficient way for you to extract profits, the following five extraction methods should be considered as part of a tax-efficient profit extraction strategy. Method 1: salary Paying a small salary can be tax-efficient where the recipi...

What are disbursements for VAT?

There may be occasions where your company makes payments on behalf of a client. These payments are known as ‘disbursements’ and have to be treated correctly for VAT purposes. If your clients are not able to reclaim all their VAT on purchases, it can be beneficial to show these disbursements separately on your invoices. We’ll explain how this process works and the benefits of accounting for disbursements for VAT purposes in this way. How do disbursements work? Disbursements are costs incurr...

Holiday lettings – beware of longer lets

Furnished holiday lettings enjoy favourable tax treatment as long as certain conditions are met, allowing landlords of holiday lets to access certain valuable reliefs, such as business asset disposal relief and business asset rollover relief. The landlord can also claim capital allowances for items such as fixtures, furniture and equipment. As winter approaches and bookings start to dwindle, longer lets can be appealing. But is this wise from a tax perspective? Conditions To qualify as a furnis...

Corporation tax: carry forward or carry back your losses?

If your business makes a loss for tax purposes, that might sound like bad news. But the reality is that you can turn this loss to your advantage, with the right tax planning. In many circumstances, your loss can be offset against other taxable income. This means you can reduce your payable tax, or even get a refund on the tax you’ve already paid. Not a bad outcome – and something that could be a significant financial boost for your company. So, what can you do to offset this loss? What ...

Help if you are struggling to meet your tax bills

Inflation is at a ten-year high and the ensuing cost of living crisis means that many people may be struggling to pay the tax that they owe. If this is you, what can you do about it? While it may be tempting to bury your head in the sand and hope that the bill will magically disappear, this is a really bad idea. Ignoring the problem will in this instance make it worse; HMRC will eventually want their money and have a range of tools available to them to help them achieve this. It is far better to...

Transferring Assets Between Spouses

Although spouses and civil partners are taxed independently, there are some tax breaks available. One of these is the ability for spouses and civil partners to transfer assets between them at a value that for capital gains tax gives rise to neither a gain nor a loss. This can be very useful from a tax planning perspective. No gain/no loss rule The no gain/no loss rule essentially means that where an asset is transferred from one spouse to another, the value of that asset is equal to the transfe...

Your Q4 2022 deadlines for the diary

Staying on the ball with the latest accounting, tax and compliance deadlines helps you stay organised with your returns. Here are the deadlines and cut-off points for Q4 of 2022 to add to your diary.NOTE: If your company’s accounting period is longer than 12 months, the first tax payment deadline is normally 21 months and 1 day after your accounting period started, and the second one is 9 months and 1 day after your accounting period ends.For example, a company with an accounting period runnin...

Why are some expenses not allowed for tax?

As a business owner, you’ll be looking for every opportunity to claim back expenses and minimise your tax liability. But not everything that falls under expenses is tax-deductible.To give you a better understanding of which costs are allowed and which are not allowed, we’ve highlighted the main areas where business owners habitually trip up with their expense claims.How do you know if expenses are allowable?The starting point for working out if expenses are (or are not) deductible for tax is...

What's An Associated Company and How it Can Affect your Tax

Knowing what constitutes an ‘associated company’ is about to become an important piece of information for business owners to know.From 1 April 2023, the rules to decide whether or not you need to pay tax in instalments are changing. Whether you pay in instalments will soon be determined by the number of companies considered to be associated with each other.From that date, the tax rate you pay will depend on your business’s taxable profits and the number of companies considered to be associ...

Take Advantage of the Rent a Room Scheme

If you are feeling the pinch and you have a spare room in your home, you may consider renting it out to earn some additional money to help meet your living costs. As university and college terms start, now is a good time to let as students will be looking for accommodation. Even better, the rent-a-room scheme enables you to earn the money you receive from letting the room tax-free. You cannot use the scheme if you let the room unfurnished (but you may qualify for the property letting exemption o...

Getting Ready for the Extension of Making Tax Digital

Keeping the UK’s tax system running effectively and up to date with advances in technology is no easy task. But the introduction of the Government’s ‘Making Tax Digital (MTD)’ initiative is intended to solve this problem, by moving most taxation over to a digital model.Making Tax Digital for VAT began in April 2019, making it compulsory for VAT-registered companies that met the £85k turnover registration threshold to comply with the MTD rules. But the MTD initiative will soon be ex...

Paying PAYE by Recurring Direct Debit

Employers must act as a tax collector for HMRC, deducting tax, National Insurance and, if applicable, student loan deductions, from their employees’ pay and pay these over to HMRC with their employer’s National Insurance contributions. The payments must reach HMRC by 22nd of the following tax month where payment is made electronically, and by the earlier date of 19th of the following tax month where payment is made by cheque. As penalties are charged if the payments are made late for more th...

Take Advantage of the Dividend Allowance

Where a business is operated as a family company, it is necessary to extract the profits from the company in order to use them outside the company for personal use, such as to meet living expenses. Extracting profits may trigger further tax and National Insurance liabilities, and when formulating a strategy, it is advisable to extract profits in as tax-efficient manner as possible. What this will look like will, to a certain extent, depend on individual circumstances. However, that said, a popul...

Lettings Relief - Do you Qualify?

In the halcyon days of buy-to-let ownership, landlords were able to benefit from lettings relief if they sold a let property which at some point had been their only or main residence. This could reduce the chargeable gain by as much as £40,000. While the relief still exists, it is now only available to landlords who have shared their home with a tenant. Nature of the relief If an individual lives in their home at the same time as a tenant, for example, if they let out a room or several rooms wh...

Is a Property Company a Tax Efficient Option?

Tax changes in recent years to the way that unincorporated landlords are treated for tax purposes, particular in respect to relief for interest, have resulted in an increase in the number of landlords operating their property rental business through a company. Is this a good idea? We take a look at some of the issue to consider in reaching a decision. Separate legal identity A company has a separate legal identity to those who own it. A company must be registered at Companies House and must file...

Common deductible business expenses

No-one wants to pay more tax than they need to. Consequently, it is important to keep good records of business expenses so that deductible expenses are not overlooked. General rule The basic rule is that a deduction is allowed for expenses incurred wholly and exclusively for the purpose of the trade, profession or vocation. Unlike the equivalent rule for employment expenses, there is no requirement that the expense is ‘necessarily’ incurred. This means that as long as an expense is incurred ...

Tax relief for bad debts

Bad debts are a fact of business life and most businesses will suffer a bad debt from time to time. This may be because the customer goes out of business after the work has been done or the goods have been supplied, or runs into financial difficulty resulting in them defaulting on the debt. Unfortunately, sometimes the customer may just not pay and refuse all attempts to recover it. While there are actions that the business can take to recover the debt (such as making a claim using the Money Cla...

Involuntary strike-off: what can you do?

The registrar of companies has the power to strike a company off a register if the registrar has reasonable cause to believe that the company is no longer carrying on a business or is in operation. This may be the case if the company has failed to file its annual accounts or its annual confirmation statement, there is no director in place or mail sent to the company is returned unopened. However, before the registrar can move to strike the company off, he or she must first send two letters to th...

How to claim the IHT transferable nil rate band

For inheritance tax (IHT), there are potentially two nil rate bands available. The first – the nil rate band – is available to everyone and is set at £325,000 until 5 April 2026. An estate does not have to pay any IHT up to this amount. The second nil rate band is the residence nil rate band (RNRB). This is available where the main residence is left to a direct descendant, such as a child or grandchild. The RNRB is set at £175,000 until 5 April 2026. However, unlike the nil rate band, the...

Capital allowances for cars

Capital allowances are a mechanism for providing tax relief for capital expenditure. Relief is generally given in the form of a writing down allowance, although a first year allowance is available for expenditure on new and unused zero-emission cars. Expenditure on cars does not qualify for the annual investment allowance or for the time-limited super-deduction or 50% first-year allowance available to companies. Capital allowances cannot be claimed where the simplified expenses system is used to...

The Construction Industry Scheme and property investment companies

The Construction Industry Scheme (CIS) is a tax deduction scheme under which tax is deducted from payments made to subcontractors for construction work unless the subcontractor is registered with HMRC for gross payment status. HMRC recently published guidance on the application of the CIS to property investment companies after it came to their attention that many property investment companies undertaking substantial redevelopments were unaware that they needed to register as a contractor within ...

Managed lets – is VAT due on recharged expenses

If you use an agent to manage a let property, they may incur expenses, such as repairs and cleaning costs, on your behalf and recharge these to you. Where this is the case, will you need to pay VAT on those expenses? Recharge or disbursement? Where costs are incurred by the agent and passed onto the landlord, it is necessary to determine whether the cost is a recharge or a disbursement. This is an important distinction as the VAT treatment differs. Disbursements A payment made to a supplier on b...

Use the property allowance to make tax-free income from renting your drive

The summer is a popular time for events and event parking is often limited. If you have a drive or field that you do not use, you could consider renting it out to make some money. This need not give rise to a tax headache. However, it should be remembered that all income from renting UK property owned by the same person or persons forms a single UK property business. Consequently, if a person has other rental properties, rental income from renting a driveway cannot be considered in isolation; in...