SIGNATURE TAX MARCH 2019 NEWSLETTER

March Newsletter 2019

As we approach the end of the tax year, April 2019 will bring some interesting key changes to the tax sector. Some of the main changes include, the introduction of Making Tax Digital for VAT and the April 2019 loan charge. In this newsletter we shall be covering these two key changes and what tax reliefs can be claimed before April 2019 kicks in.

Making Tax Digital (MTD)

 In line with HMRC's vision to digitalise the UK tax system, from April 2019, the transformation will be well underway by the introduction of Making Tax Digital (MTD) for VAT with the view of extending this to various other sectors in tax. Tax payers and agents will be required to keep digital records and submit the relevant information to HMRC using the software. MTD will start with VAT but who knows maybe in the near future the entire tax system will be have moved into the digitalised era !


It is worth having a look into Furnished Holiday Lettings (FHLs) ?

 

FHLs have many tax advantages in comparison to other longer term rental properties. one of the major advantages of FHLs is that they benefit from Entrepreneurs' Relief (ER) which has a massive tax benefit as this means any capital gains on the sale of the property is taxed at a flat rate of 10%, whereas on the sale of residential property the capital gains tax to be paid is at 18% or 28% depending on the taxpayer's bracket.

With mortgage interest also now becoming a bigger tax problem this again benefits having a look into purchasing an FHL. In the 18/19 tax year only 50% of mortgage interest is an allowable expense and the remaining 50% is available for basic rate relief, however for FHLs any mortgage interest is fully deductible from the rent on the property. 

For landlords it may be worth reviewing their rental properties and see if maybe they can be restructured in to a short-term lettings in order for it to meet the qualifying conditions for an FHL. Rather than selling the rental properties in the current uncertain property market it may be more beneficial to set up the rental properties in this way.

However the landlord may prefer the security of having a long-term tenant over the constant changeovers an FHL brings with it. The location of a property is also a key factor as this needs to be a realistic location for an FHL for example a house in Blackburn is less likely to be regarded as an FHL than a flat in central London.

 

Planning for the year end

 

There are many reliefs and exemptions that can be considered before the year end, here are a few reliefs you may be eligible to claim and we're sure you don't want to miss out on them !

Charitable donations

Tax relief is available on cash gifts to UK registered charities and certain other charitable organisations throughout the EU. When a taxpayer makes a cash donation to charity under the 'Gift Aid' scheme the charity may reclaim 25% of your donation from HMRC (surely you'd rather your tax money do some good), which benefits the taxpayer as the donor will receive a tax relief of the amount donated grossed up by 20%.

Pensions

Each individual is entitled to tax-deductible pensions savings of up to £40,000 a year. For those taxpayers where the pension contributions has been less than the annual allowance, for the past 3 years, there may be scope for catching up on these savings in the current year. For the pension contribution to be deductible individual must be a member of a UK registered scheme for the relevant tax years.

CGT annual exemption

Individuals are entitled to annual exemptions for CGT (£11,700 for 18/19). However this annual exemption cannot be carried forward and is essentially lost for that tax year. Everyone is entitled to this tax-free allowance so why not use it, it's £11,700 of tax-free money all in your pocket at the end of the day.

Changes to SDLT from 1st March 2019

 

As of the beginning of this month the period for submitting the Stamp Duty Land Tax Return and paying the duty has changed, following the completion of a property purchase, from 30 days to 14 days including non-working days. Failure to meet this 14 day deadline may result in interest and penalties for the taxpayer. However this deadline change does not apply to Scotland or Wales, which remains at 30 days.

This change was initially announced in in the Autumn 2015 Statement, the aim being to increase efficiency and reduce the compliance burden for both HMRC and the taxpayers. where the advantage to HMRC is clear the advantage to the taxpayer is somewhat blurred as it provides less time to organise the returns and make payment.

The plans were officially confirmed in the 2018/19 Finance bill with the changes coming into effect from the beginning of this month. the new timescales apply to those land transactions with an effective date of 1st March 2019 or later, or those land transactions with the effective date of before 1st March 2019 but only became notifiable to HMRC from 1st March 2019.

The 30 day window will still apply to those that are required to fill in a further SDLT return following the filing of a previous SDLT return.

Signature Tax Newsletter February 2019

SigTax Newsletter February

With the tax return deadline having come to a close on 31st January, have a little chuckle at some of these excuses people have used to try and avoid any late return penalties:

  • My mother-in-law is a witch and put a curse on me  

  • I’m too short to reach the post box

  • I was just too busy – my first maid left, my second maid stole from me, and my third maid was very slow to learn

  • Our junior member of staff registered our client in Self Assessment by mistake because they were not wearing their glasses

  • My boiler had broken and my fingers were too cold to type

We hope you never had to resort to any of these silly excuses, however HMRC do offer help for those people with genuine excuses. If you require any assistance on your 2019 self-assessment please do not hesitate to get in touch with us at info@signaturetax.co.uk

Do you have Commercial Property?

Under UK Tax Legislation, a company or business which has expenditure on capital assets, is not allowed to make a deduction for expenditure in it’s accounts. Instead, businesses are provided with a tax relief called Capital Allowances (CA). 

Pools? 
In order to claim capital allowances, taxpayers must group items into "pools" of capital expenditure on which the taxpayer has not previously claimed capital allowances. These pools attract different rates of allowances: most plant and machinery falls within the main pool (18% rate), but integral features and items which have a life of more than 25 years will fall within the special pool (8% rate).

Purchasing Property ?
Commercial or semi-commercial property, whether it is owned privately or as a limited company, there may be a scope to claim capital allowances, which can be used against your profits immediately. For this reason Capital Allowances are a highly valuable form of relief. 
Capital Allowances must be identified and recorded at the point of purchase which is agreed and passed down by a s.198 election, which determines the CA amount passed over from the Seller to the buyer, this removes the possibility of the CA being claimed twice on the same asset.
If parties make a s198 election at Tax Written Down Value(“TWDV”), the seller will unable to claim further allowances.

Own Residential Property ?
You can only claim CA for items in residential property if your business qualifies as a furnished holiday lettings business. In each year the property must be:

  • available for holiday letting for 210 days

  • let for 105 days or more

What can I claim on ?
Capital Allowances are generated from expenditure on fixtures and when you buy assets that you keep to use in your business, known as Plant and Machinery–
·         Equipment
·         Machinery
·         Integral Features

Capital Allowances are generally calculated by writing down the cost of the qualifying asset (e.g. the heating system) at a fixed rate on a reducing balance basis. The rate is determined by the type of asset and this generally means the tax relief is spread over a number of years

Integral features
Integral Features attract CA at a rate of 8% per year over the useful life of the asset.
Integral Features include –
·         Lifts & escalators
·         Air-conditioning
·         Electrical systems 
·         Water heating systems


Fixtures 
Fixtures attract CA at a rate of 18% per year over the useful life of the asset
·         Fitted Kitchens
·         Bathroom Suites
·         Fire Alarm and CCTV systems


If you believe you have a potential Capital Allowances claim please do not hesitate to contact us on 0161 850 0648 or email us at info@signaturetax.co.uk

Changes to Entrepreneur's Relief


In the Budget speech, important changes were proposed to the definition of 'Personal Company' for the purposes of entrepreneur's relief.  The changes are put in to place to target the relief at ‘genuine entrepreneurs’ by way of limiting the relief to individuals who’s interest in the company just passed the minimum threshold. The existing requirement of holding at least 5% of the ordinary shares with a 5% voting right has been added to in which 5% of the profits available for distribution to the ‘Equity Holders’ must be held. These conditions must be met on original investment and again met throughout one year prior to disposal (two years from 6 April 2019). 

Research and Development


R&D tax credits were introduced for SMEs in 2000 and extended to large companies from 2002 and every year since, tens of thousands of pounds are being lost in tax relief by eligible companies who fail to submit a claim for tax relief which they are perfectly entitled to. This reflects the misconception that Research and Development (R&D) is confined to global tech giants or research laboratories and people in white coats. Businesses are often undertaking R&D every day, driving innovation and moving the UK economy forward without realising, which is precisely why the Government want to incentivise you for doing so.
 

R&D tax relief is the Government’s way of rewarding UK businesses that invest in innovation. This innovation can be in the form of developing new, or appreciably improving existing products, processes, services, devices and materials. The project must seek to achieve an advance in science or technology and doesn’t always have to be completed. An attempt to resolve a technical uncertainty and subsequently failing, will also fall within the HMRC guidelines.
 

Signature Tax are market leaders and specialists in R&D tax credits with a very experienced team of Tax Advisors, Accountants, Report Writers and Industry specialists. We will investigate your business activities, produce and submit a fully compliant report to HMRC and answer any queries raised on your behalf. Refunds are typically paid within 60 days of submission.
 

Our in-house specialist Steve can be contacted on info@signaturetax.co.uk or 07921 841 724 who would be pleased to speak with you on a no obligation basis to answer any queries you may have.

Signature Tax Newsletter August 2018

SigTax Newsletter August

Are you a Landlord?

Considering Incorporation ?

UK residential property has been a target for legislators in recent years. Immediately springing to mind are the provisions of ATED; ATED CGT; the 3% SDLT surcharge; CGT for non residents; the 8% “surcharge” on CGT rates; the restriction of relief for finance costs; the abolition of the wear and tear allowance; and the widening of the scope of Inheritance Tax.

Of all the recent tax changes the most controversial has been the introduction of Mortgage Interest Relief. Previously, individuals who took out a mortgage on a property were able to make a full deduction from gross profit of the interest payments to arrive at Net Profit. This is a huge disadvantage if you own property which is significantly geared. As the interest relief restrictions are being phased in over the years, more of your income will be subject to tax. In the Tax Year 2020/2021 only a 20% deduction will be allowed. However, the same deduction does not apply to companies* where the interest costs meets the wholly and exclusively condition.

Considering Incorporation?
If you own a property business through a partnership you will be able to transfer your rental business to a company but not without incurring CGT or SDLT charges. However, you may be able to transfer your business if certain conditions are met without incurring these charges.

Summary
A thorough analysis of the position on whether to incorporate a business should be undertaken. It is advisable to carry out a financial modelling exercise of the business as well as to factor in legal, commercial, taxation, administrative and refinancing costs.

R&D tax credits and GDPR

The Government has stated that data breaches are significant, whether they are minor and/or unintended regardless of the size of the company. Fines are likely to be significant as NCC Group, a global cyber security expert body, estimates that the total value of fines to UK businesses for data breaches in 2016 of just over #880k would have been more than #69 million under the incoming GDPR rules.

Our in-house expert, Steve Deighan explains; ‘There are often serious challenges finding data in (multiple) legacy software systems and actually finding where it has been stored. Additionally, deleting data is not as easy as it sounds as we have witnessed from Google’s experience following the EU court ruling which gave individuals a ‘right to be forgotten’. Again, there are technical issues in getting legacy systems to ‘forget’ individuals and their data and therefore, developing a robust IT security system is imperative to avoiding this.

What many of our Clients are not aware of is that research and development (R&D) into IT security systems and data deletion can often be eligible for R&D tax relief by simply adhering to the new rules and identifying appropriate qualifying expenditure.
R&D tax credits can help offset the expense involved in complying with GDPR, however you need to use an adviser who understands both the technical issues and the tax rules to be sure that your claim is eligible’
 

Steve can be contacted on info@signaturetax.co.uk

Requirement to Correct

What is the Requirement to Correct? 
HMRC has introduced new legislation called the Requirement to Correct. This requires UK taxpayers to make sure that all their foreign income and assets, where there might be tax to pay, have been declared to HMRC before the 30th September 2018. From the 1st October 2018, new, substantially higher penalties will apply for those who have failed to pay all the tax due on foreign income and assets. To avoid these new penalties, action must be taken now.  

Does it affect me? 
Many people may not realise that some straightforward actions, such as renting out a property abroad or transferring income or assets from one country to another, could mean having to pay tax in the UK. This includes having income from or an asset in the Channel Islands, Isle of Man, the Republic of Ireland, the EU or anywhere else in the world. These must all be declared to HMRC. 
Although the Requirement to Correct applies to people who pay tax in the UK, it could still affect you if you live abroad and pay tax outside of the UK, for example people who rent out their UK home whilst living in another country.  

What action should I take? 
If you are concerned that you haven’t told HMRC about foreign income or assets, or that you have transferred UK income abroad without paying the UK tax on it, you should make a disclosure to HMRC before the 30th September 2018.  
If you are confident that your tax affairs are in order, then you do not need to worry. If you are unsure, we recommend you seek advice from a professional tax advisor or agent. 

How do I make a correction to my tax affairs? 
The main route to let HMRC know about previously undeclared income or assets is the Worldwide Disclosure Facility through the Digital Disclosure Service. This is the final opportunity to make a disclosure before the penalties rise.  

Why act now? 
A disclosure or discovery after the Requirement to Correct deadline will be subject to much tougher Failure to Correct penalties. These penalties are much higher than the present penalties and start from a minimum penalty of 100% of the tax owed. There is also an Asset Based Penalty of up to 10% of the underlying asset for serious cases; and an additional penalty for situations in which HMRC can show the taxpayer moved their assets to avoid reporting.  

We would also like to make you aware that HMRC is beginning to receive an unprecedented amount of information about foreign income and assets under the Common Reporting Standard (CRS) exchange of information. By September 2018, more than 100 jurisdictions will be exchanging data with the UK under the CRS. The CRS data will provide HMRC with information on UK taxpayers’ bank accounts, investments and trusts held around the world. HMRC will use this information to open tax enquiries, issue tougher penalties, and take forward criminal prosecutions against those who avoid paying the tax they owe.  The Requirement to Correct period, from now until 30th September 2018, is the last opportunity to put things right before HMRC receives the CRS data and the new penalties apply.