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Chartered Certified Accountants since 2003
Chiswick, twickenham and Richmond

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Often the case - capital gains tax

Tax relief on Enterprise Investment Schemes (EIS) and Seed Enterprise Investment Schemes (SEIS)

Protect your assets in a Discretionary trust

New to self assessment and tax returns

Online accounting software

Client enquiry:
Which value is to be used as the base cost when calculating the capital gains tax when the client sells the late parents home? Is it;

a) the value of the part inherited share 10 years ago when her father died ? Leaving a quarter share to her in a will trust or
b) the value when her mother died, inheriting the other 25%. There was a second beneficiary in the terms of the will and factors affecting rights to inhabit the property.

Would the values be apportioned or split some other way? Would she have to pay capital gains tax for the 10 years that her mother remained living in the house?
In the detail of this case the client only gained absolute entitlement to her share of the property after the death of her mother and so the later date is used for the valuation hence a smaller taxable gain arises.
Significant tax relief can be achieved through these investments. It is also possible to carry an investment back to the previous tax year to utilise the available tax relief where there is insufficient tax to relieve in the year of investment.

The tax relief, when the criteria is met such as investing for three years and gaining a certificate from HMRC, is 30% of the amount invested for EIS and 50% for SEIS. If you have invested in these we will claim the tax relief for you.

There is more information on the EIS page on the HMRC website
If you are thinking about giving something to your children to help them onto the property ladder a discretionary trust protects the asset when compared to giving it to them outright. It also starts the seven year clock ticking when at the end of the seven year period the asset will then no longer form part of your estate, on a sliding scale over the seven year period.

The trust must be registered with HMRC and will need to prepare it's own tax return each year. There are different tax rules and rates for trusts so careful planning is required before deciding to put an asset into a trust. There are inheritance tax obligations on entry to a trust and 10 yearly charges if the asset is worth in excess of the current inheritance tax free band of £325,000.

However if you want to protect an asset's ownership and/or start the process of reducing the value of your estate for inheritance tax purposes this may be a valid consideration.
If you have been an employee up until now, paying tax via payroll, it can be a daunting transition into the self assessment tax system.
Register online for self assessment and obtain your UNIQUE TAX REFERENCE number, called a UTR. This enables online filing of your eventual self assessment tax return. Ideally do this within three months of starting self employment otherwise as soon as possible.
Open a separate bank account if you have self employment income and use this exclusively for business. This will make collecting the data straight forward when gathering your records for your tax return.
As well as the more traditional hand over methods, for some clients, we log into their accounting solutions via Xero, Quickbooks, Easybooks, Kashflow, Freeagent and Sage One for clients that wish to maintain up to date information that is accessible by us at any time in order to prepare accounts and personal tax returns.

This makes keeping records more reliable and organised. They are powerful accounting software resources for small businesses. We work with those particular clients on a single set of data and the client can access it at all times from a mobile phone, tablet and computer.
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Technical matters

Revised wear and tear rules for your furnished buy to let property

If you let a furnished property you will no longer claim the 10% charge on rental income for wear and tear. This is because the new rule came into effect from 6 April 2016. The allowance is available to you if you have either fully furnished your property or only partly furnished it with one or two items.

Because buying extra furniture before 6 April 2016 won't give you any additional allowance (up to this date it is still 10% of the rental income) but the purchase after 6 April 2016 then qualifies for the renewal allowance.

If you sell an item from your rental property and do not replace it the money you receive is not taxable and does not have to be declared on your self assessment tax return.

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An overdrawn director's loan account can be cleared by the company if the directors or shareholders agree to write the loan off. However, it must get the paperwork right.

Reporting requirements
Where a director or shareholder's loan is written off, S415 of the Income Tax Act 2005 says that it's taxed as income in the same way as a dividend. The director must report the write-off in their self assessment personal tax return and the company notify HMRC.

A record of the write-off should be kept by the company and the director shareholder, you can use our letter to do this and notify HMRC of the transaction. 

Director's loan account

Are you a non UK resident with property in the UK?
Non UK residents are only subject to UK tax on the sale of residential April 2015. They are subject to non resident capital gains tax (NRCGT) and there are three main differences from CGT:
Only the gain arising since April 2015 is chargeable. If the property is held in a non UK company, the company rate of NRCGT is 20% and therefore greater than the current rate of corporation tax. A non resident capital gains tax return must be filed within 30 days of the sale. The tax must also be paid by this date unless a self assessment will be filed in which case the due date is the usual tax return filing deadline.
Bear in mind that, if an individual sells a property during a period of non UK residence which lasts less than five years, any pre April 2015 gain will become chargeable on their return to the UK.

Flat rate VAT scheme:
Limited cost traders from 1 April 2017 Under the new rules, businesses in the scheme which have a low cost base,referred to as ‘limited cost traders’, will see the VAT rate increase. Limited cost traders include consultants, IT contractors, journalists, entertainers,hairdressers, beauticians, construction (labour only), accountants ,lawyers,architects, surveyors. This list is not exhaustive, it includes any business on the flat rate scheme that does not purchase physical goods totalling more than 2% of vat inclusive sales.
Software does not count as a physical good. A business is considered a limited cost trader when VAT inclusive expenditure on goods is either:
Less than 2% of their VAT inclusive turnover in an accounting period;
or greater than 2% of their VAT inclusive turnover, but less than £1,000 per annum, if the prescribed accounting period is not one year, the figure is the relevant proportion of £1,000).

When working out the amount spent on goods, it cannot include purchases of:
Capital goods, food, drink, vehicles or parts for vehicles.
This is assessed and reported on a quarter-by-quarter basis removing the original simplicity of the flat rate scheme. Rate rise The VAT flat rate percentage for low cost traders will increase to 16.5%.

The benefits of remaining within the flat rate scheme, for many traders, are completely wiped out by these changes and some small businesses are likely to be caught out by the additional reporting requirements. Others businesses under the VAT threshold may even find that without the benefit of the flat rate scheme, they no longer have a need to be VAT registered.
Tax free childcare

A useful article for all working parents paying for childcare:

From 24 November 2017 (next week at the time of writing) the childcare scheme covering 30 hours free childcare a week and the tax-free childcare option for qualified parents is available to parents whose youngest child is under six or who has their sixth birthday on that day. Parents can apply online through the childcare service which can be accessed via the childcare choices website.

In April this year, HMRC started rolling out the childcare service. Since then more than 275,000 parents have an open childcare account. Of these, more than 216,000 parents received an eligibility code for 30 hours free childcare for September.

However, HMRC acknowledges that while the majority of parents used the childcare service without significant problems, over the summer some parents did not receive the intended level of service when using the website. HMRC says it has now made significant improvements.

Over the coming months, HMRC will gradually open the childcare service to parents of older children, while continuing to make further improvements to the system.

HMRC says this is so it can manage the volume of applications going through the service, ensuring parents continue to receive a better experience and prompt eligibility responses when they apply – almost all parents receive a response within five working days, and most get their decision instantly. All eligible parents will be able to apply by the end of March 2018.

The scheme was originally meant to start on 28 April, for parents of the youngest children with all parents being able to join by the end of 2017.

The Childcare Choices website is here

Source: by Pat Sweet, tax reporter.
Income Tax
There is what looks like a useful increase in the personal allowance and higher rate threshold for income tax, to £11,850 and £46,350 for the 2018/19 tax year – though as the Budget documents confirm, these changes are simply in line with CPI inflation.

Corporate tax

Some really significant changes here (albeit two of these are by way of embarking on consultations):

Consultation on the introduction of taxation of non-residents’ gains on UK commercial real estate. This extends to real estate held indirectly (in property-rich entities), and the scope of the existing non-residents’ charge on residential property gains is similarly to be widened.

Consultation on Corporate tax and the digital economy: here the government has issued a ‘position paper’ setting out its proposed approach for addressing the challenges posed by the digital economy.

The extension (from April 2019) of withholding tax obligations to royalty payments made to low or no tax jurisdictions in connection with sales to UK customers.

The freezing of the indexation allowance on corporate gains from 1 January 2018. This looks like a reasonable revenue-raiser, HMRC’s impact summary states an increased tax take of £1.7bn over five years to 2023.

One of the other interesting developments, though in the specialised sector of oil and gas, is the introduction of the ‘transferable tax history’ to facilitate the transfer of late life assets; there will also be a consultation on allowing a petroleum revenue tax deduction for decommissioning costs incurred by a previous licence holder. The North Sea sector is one that has in recent years had very considerable attention from government.

Thankfully the VAT registration threshold has not, as was muted, been lowered. It is, however, frozen for two years from April 2018.

Budget - Autumn 2017 update and comment

The latest scam to hit taxpayers is a call to mobile phone numbers from fraudsters posing as HMRC officials requesting immediate payment of £500 in so-called vishing attacks.
Taxpayers are being told that the tax bill relates to unresolved tax issues dating back 10 years and the fraudsters ask for immediate payment by credit card. However, HMRC does not even accept credit card payments anymore so anyone being told to pay by credit card should immediately be on alert and notify HMRC of the scam.

It appears that the company has accessed old mailing addresses and frequently cites the wrong postcode when the taxpayer asks where the information has come from.
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