S R Lynn Co - Budget Summary

High Income Child Benefit Charges (HICBC)

HMRC are now raising assessments going back to 2012/13 to individuals not under Self-Assessment for the HICBC.  They are also charging penalties for the failure to notify HMRC of a tax liability. 

If you or your partners earnings are over £50,000, you are obligated to either opt out of Child Benefit receipts or pay the tax charge.  HMRC have an online calculator to help you decide whether you need to pay the charge and how much is payable.

 

 

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S R Lynn Co - Budget Summary

HMRC’s Tax Calculation Forms P800

HMRC have been sending out tax calculation forms P800 and PA302. 

If you receive one of these calculations from HMRC, we would encourage you to check them.  In particular interest, dividend and rental income figures as these could be estimates, as HMRC will not have had  direct access to these amounts, unlike employment and pension income and state pension income. 

If you submit Self-Assessment returns, you should not receive one of these forms.  If you do, you need to call HMRC and ask them to cancel the form. 

If you need any help with checking a calculation from HMRC, then please give us a call on 01908 227055.

 

 

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S R Lynn Co - Budget Summary

EIS Schemes and Directors

To qualify for EIS relief you must subscribe for shares and not purchase them from a person or another business.  The company must be trading and you must have at least 5% of the company’s ordinary shares. 

You must not be connected with the company or EIS relief will be lost.  Connected means a paid employee or director, but you can be an unpaid director.  You must not own directly or indirectly 30% of the company’s ordinary shares capital, it’s voting rights or rights to assets on winding up. 

It is recommended that the shares should be subscribed for before the individual is appointed as a director, but remain unpaid for the 3 years after the shares were acquired or trade commences, which ever is the later. 

 

 

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S R Lynn Co - Budget Summary

VAT Notice 700/22 Making Tax Digital

HMRC have issued VAT Notice 700/22 MTD for VAT.  This sets out examples of how digital links can be used and where they are required.

VAT registered businesses should take the time now to look at this notice, as MTD for VAT comes in to effect April 2019, and if a change in accounting software is required, or the setup of digital links, then this could take time to implement.  Many businesses are assuming their current software is MTD compliant, but there are some that are probably not even aware MTD exists. The notice is quite clear that it is happening, and there will be no further delay.

What is a “digital link”?

A digital link includes linked cells in spreadsheets, for example, if you have a formula in one sheet that mirrors the source’s value in another cell, then the cells are linked.

HMRC will also accept digital links as:

  • emailing a spreadsheet containing digital records to a tax agent so that the agent can import the data into their software to carry out a calculation (for instance, a Partial Exemption calculation)
  • transferring a set of digital records onto a portable device (for example, a pen drive, memory stick, flash drive) and physically giving this to an agent to import that data into their software
  • XML, CSV import and export and download and upload of files
  • automated data transfer
  • API transfer

However the good news is for the first year of mandation (VAT periods commencing between 1 April 2019 and 31 March 2020) businesses will not be required to have digital links between software programs. The one exception to this is where data is transferred, following preparation of the information required for the VAT Return, to another product (for example, a bridging product) that is API-enabled solely for the purpose of submitting the 9 Box VAT Return data to HMRC. The transfer of data to this product must be digital.’

If you need help with MTD for VAT please give us a call on 01908 227055.

 

 

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S R Lynn Co - Budget Summary

Employer Notifications

HMRC are rapidly moving further towards being fully digital and therefore, the days of paper mailings are numbered. 

We are encouraging our employer clients to register for email alerts so they are aware of their latest coding changes and important information published on the Government web pages. 

 

 

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S R Lynn Co - Budget Summary

Company Tax References (UTR)

You have always been able to call HMRC and ask for your company Corporation Tax reference number.  HMRC are now withdrawing this option as it receives a large number of calls and is taking up valuable resources. 

If you cannot find your Company’s UTR, you will have to log onto your Business Tax Account or go back and look at letters or notices sent by HMRC.  It is worthwhile keeping a note of the UTR for future reference. 

 

 

 

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S R Lynn Co - Budget Summary

HMRC Refund Cheques

HMRC are phasing out cheques for Corporation Tax refunds. 

Companies that are expecting a refund should include their company’s bank details on the CT600 (Corporation Tax Return).  This will enable HMRC to send the refund directly. 

The bank account must be a UK bank account in the company’s name.

 

 

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S R Lynn Co - Budget Summary

Abolition of Class 2 National Insurance

The Government has delayed the abolition of Class 2 NIC’s by a year until 6 April 2019.

For the tax year 2018/19, self-employed individuals will pay Class 2 National Insurance at a rate of £2.95 a week if your profits are over £6,205.  If your profits are under £6,025 for 2018/19, then you can choose to pay Class 2 NIC to make yourself eligible for the same set of benefits.

 

 

 

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Last updated: 1 November 2018

S R Lynn Co - Budget Summary

Stamp Duty Land Tax

“I’m buying my first house, do I have to pay stamp duty……”

First time buyers of residential properties in England, Wales and Northern Ireland will not pay Stamp Duty Land Tax (SDLT) when buying a property of £300,000 or less. 

First time buyers paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price above £300,000. 

 

 

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S R Lynn Co - Budget Summary

Notifying HMRC when your Company becomes Active

Q: I have set up a company, when should I notify HMRC?

A:  Companies must notify HMRC within three months of becoming active, which means, carrying on any business activity, trading or receiving income.  This includes, buying, selling, advertising, renting a property and employing someone.  You can check the guidance Corporation Tax: trading and non-trading to clarify what counts as business activity and starting to do business.

HMRC will need the date your company became active and the date to which the annual accounts will be made up to, and they will use this information to update your records.  This will ensure the correct notice to file is issued and minimises delays when returns are received.  It will also prevent incorrect late filing penalties being issued.

If you require any help and advice setting up a company, please give us a call on 01908 227055

 

 

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S R Lynn Co - Budget Summary

Tax on Bank and Building Society Interest

For individuals who are not required to file Self-Assessment returns, HMRC are changing the way they collect tax on interest earned from savings.

HMRC have been working closely with banks and building societies and, in November 2017,  HMRC began writing directly to individuals where the interest on their savings exceeded the new personal savings allowance during the tax year 5 April 2017.  HMRC are advising that they have changed individuals tax codes  to collect any tax due.

If you are one of these individuals and need some help to check HMRC’s adjustment, please give us a call on 01908 227055.

 

 

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S R Lynn Co - Budget Summary

When does a business need to register for VAT?

The VAT registration threshold is currently £85,000 pa, so when a business’ taxable turnover reaches the limit, it must register for VAT. 

You should be monitoring your turnover on a rolling 12 month basis and then it is advisable to check your turnover for the past 12 months on a monthly basis.

What is my taxable turnover? 

There are some income streams that can be excluded when deciding if your business needs to register for VAT such as : 

  • Income outside the scope of VAT including: 

                –   Supplies of services to business customers in another EU country
                –   Supplies of services to customers outside the EU
                –   Supplies of goods or services that are outside the scope of UK VAT because of the place of supply rules

  • Rental income
  • Sale of land and buildings
  • Betting or gaming income

 

 

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S R Lynn Co - Budget Summary

Entrepreneurs’ Relief (ER) and risks of not meeting the conditions

Did you know that Entrepreneurs’ Relief would be lost if you resigned on or before the date of the contract to sell your shares? 

One of the conditions of Entrepreneurs’ Relief is that you must have been an employee or officer of the company for the previous 12 months.  If you resign the day before the contract, the conditions for ER will not have been met and you will be unable to claim the general relief and  pay Capital Gains at 10%. 

Please make sure that you do not fall into this trap when selling shares in your company. 

 

 

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S R Lynn Co - Budget Summary

Training Costs – Can I get tax relief?

This is a question I get asked from time to time and the answer is not as straight forward as you think. 

Whether you get relief depends on the following: 

  • Type of training, is it a new skill or development for keeping up-to-date in your industry?
  • Are you self-employed or an employee or director? 

If you are a sole trader or partner, the training must be wholly and exclusively for the purpose of the business and not be of a capital nature.  HMRC considers training to be  of a capital nature if it is training for a new qualification or skill. 

However, if you are a director or employee the rules are much simpler and clearer.  If the training is related to the employment, a company can claim the cost as allowable, and not a taxable benefit for the employee/director. 

 

 

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S R Lynn Co - Budget Summary

Do you pay wages to your spouse?

Do you pay wages to your spouse? 


If so, have you considered whether the payment is “wholly and exclusively” for the purpose of the business?

 

This can be an easy challenge for HMRC.  When a spouse or a family member works for you or your business you should apply the same principles as if they were a regular employee, such as giving them an employment contract.  You should not pay your spouse a rate that is excessive for the type and amount of work that they do. 

In addition, if you are a sole trader and you pay your spouse a wage, you should actually pay the wage rather than making a book entry. 

 

 

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S R Lynn Co - Budget Summary

Directors bonuses and Real Time Information

When a company declares a bonus to a director at its AGM, it is common for the declared bonus to be paid sometime in the future in order to get the Corporation Tax relief  (usually within 9 months of the end of the accounting period to which the bonus relates).  But, for PAYE purposes, the bonus is treated as paid on the date of the meeting.

Most companies are not aware of the ‘deemed payment’ rules for PAYE/RTI.  If your business pays directors bonuses, then you should notify your Payroll Administrator the same day that you declare the bonus. 

This is, of course, in practice, difficult to do.  Therefore, if there is more than one director receiving a bonus, you should not determine an amount for each director and just record the total amount available for the directors bonuses.  This way they will not count as paid until the bonus has been allocated between the directors. 

 

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S R Lynn Co - Budget Summary

Capital Gains Tax when Selling a Property

It  can be fairly simple to calculate the gain when you dispose of a property (the difference between the cost of the property and what you sell it for).

However, the sales price could include furniture, fixtures, white goods, adjustments to reflect water rates or warranties etc. These amounts should be excluded when working out your gain, as they are not taxable.

You should ask your Solicitor when selling a property to split out the extras on your Completion Statement for clarity and ease when calculating your gain.

If you need any help with CGT calcucations the please give us a call on 01908 227055

 

 

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S R Lynn Co - Budget Summary

Rent a Room Relief

If you rent a room out in your home,   HMRC let you earn up to £7,500 tax free .  To qualify for the relief, you must be a resident landlord or run a Bed and Breakfast.  The accommodation must be furnished and be part of your home. 

The exemption is automatic if your rent a room income is under the threshold. 

 

If you earn over £7,500 you can opt into the scheme and claim your £7,500 allowance on your return. 

However, you can choose whether or not you claim the allowance and you should choose which is more tax efficient:

  • Method 1 – pay tax on your gross receipts less the allowance. 
  • Method 2 – pay tax on your gross receipts less expenses. 

You can opt in and out of the scheme in each tax year.  However, if you want to opt in and claim the relief, you will need to tell HMRC within the time limit, which is 31 January following the end of the tax year. 

Careful consideration is needed if you are making losses. 

If you need any help or advice, please give us a call on 01908 227055.

 

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S R Lynn Co - Budget Summary

CIS – Ltd Company Subcontractor’s Repayment iForm

If you are a limited company subcontractor and you have not been able to off-set your company’s CIS deductions against PAYE liabilities during the year, you may need to claim a repayment after the end of the tax year. 

HMRC have now issued a new ‘Repayment iForm‘.  Rather than writing to claim a repayment, a limited company subcontractor can log into the Government Gateway and submit their claim using the iForm. 

 

 

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S R Lynn Co - Budget Summary

EIS/SEIS Schemes and Deferral Relief

Individuals making an investment under EIS or SEIS schemes cannot make a claim for Income Tax or Capital Gains Tax deferral relief unless they have a compliance certificate from the company that they invested in. 

A company can not issue a certificate to it’s investors until HMRC have authorised the company under the relevant scheme. 

Remember, a compliance certificate doesn’t automatically mean that an investor is entitled to claim the tax reliefs.  Individuals must also meet certain conditions relating to their personal circumstances. 

 

 

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S R Lynn Co - Budget Summary

Does the income from my buy-to-let properties trigger Class 2 and Class 4 NIC liabilities?

Buy to let blog  Surely my profits from a buy-to-let is not self employment? 

HMRC are known to look at buy-to-let investors and conclude that Class 2 and Class 4 NIC be due on profits.

The key is, do you play an active part in property management? 


Ask yourself these questions:

  • Do you advertise your properties?
  • Who collects the rent?
  • Who looks after the physical aspects of the properties?
  • How much of your time do you spend on looking after the properties?
  • Do you have other income, such as employment, which takes up the majority of your time?

If the answers to the questions above indicate that you spend a large amount of your time carrying out activities of a Landlord then you could be liable to Class 2 and 4 National Insurance liabilities.

If you would like any advice regarding a buy-to-let business, then please contact us on 01908 227055

Joanne

 

 

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S R Lynn Co - Budget Summary

Making Tax Digital (MTD)

CaptureHMRC are hoping to make tax administration more efficient, effective
and easier for taxpayers.  This means, under current proposals, the annual tax return will disappear by 2020 and, from April 2019, there will be a phased process of businesses (self-employed and landlords) needing to
file their accounts online.

 

 

The key facts: –

  • Unincorporated businesses that have a turnover below the VAT threshold of £85,000 will have until April 2019, before MTD becomes mandatory.  However,  for businesses that have turnovers in excess of the VAT threshold, the commencement date will be from the start of accounting periods which begin after 5 April 2018.
  • All unincorporated busineses and landlords with annual incomes below £10,000 will be entirely exempt from the new obligations.
  • VAT will move onto the new system from 2019.
  • Incorporated businesses will have until April 2020 for the new reporting requirements to be mandatory.

HMRC have published a more detailed ‘roadmap’ on MTD and it can be viewed here.

If you would like any assistance , please give us a call 01908 227055

Joanne

S R Lynn Co - Budget Summary

VAT Flat Rate Scheme for Small Businesses

IMG_4421Jo  For businesses using the Flat Rate Scheme for VAT, the rules are changing. 

All businesses that use the Flat Rate Scheme will be required to check if they are a ‘limited cost trader’.   If your business falls within this category then you are required to use the FRS rate of 16.5%, which would mean an increase of 4.5% for your company.  If you don’t fall into this category then you can carry on using the same rate as before.

There is guidance in HMRC’s paper VAT Notice 733: Flat Rate Scheme for small businesseswhich helps you work out if you fall into this category.  


For some businesses it maybe more beneficial for you to leave the scheme.  If you would like advice on this, please give us a call on 01908 227055  

Joanne

 

 

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S R Lynn Co - Budget Summary

Accelerated CGT

The Chancellor made another attack on those owning residential property not used as their home.  From 6 April 2019, anyone who makes a gain from selling such properties will have to pay an amount on account of their capital gains tax bill within 30 days of completion.  The government will consult on how the scheme will work.

S R Lynn Co - Budget Summary

Dividend Tax

Tax on dividends is usually payable as part of your self-assessment bill on 31 January following the end of the tax year.  However, HMRC is making adjustments to some director shareholders’ code numbers to increase the PAYE tax on their salary as an alternative way to get its hands on the extra dividend tax sooner.

HMRC is including adjustments in tax codes.  To have adjustments removed write to your tax office, phone HMRC’s helpline (0300 200 3300) or send an email using its secure service.

S R Lynn Co - Budget Summary

Dividends Income

“The Dividend Tax Credit was abolished  in April 2016 and a new £2,000 tax free allowance for dividend income introduced.  The allowance does not reduce total income for tax purposes.  And only applied to dividend income.

The next rates of tax on dividend income above the allowance are:

  • 7.5% for basic rate individuals
  • 32.5% for higher rate individuals
  • 38.1% for additional rate individuals

This enabled everyone to receive up to £2,000 of dividend income.  This is on top of any dividends received on shares held in an ISA.  If an individual earns less than £2,000 of dividend, they will not pay tax.  Dividend tax is in addition to and outside of ISA allowances.

 

Dividend tax is not affected by the Scottish Rate of Income Tax and is applied at the same rate for all taxpayers across the UK.

An individual with dividends of between £2,000 (anything over the dividends allowance) and £10,000 (the maximum amount of dividends income before the customer is auto-registered for Self Assessment) can have this laibility deducted from their code or added to the End of Year reconciliation calculation if there is also additional PAYE income”

How to pay tax on dividends

How you pay tax on dividends depends on the amount of dividend income you received in the tax year.  If this was less than £2,000, you do not need to do anything or pay any tax.  If it was between £2,000 and £10,000, you need to tell HMRC.  You can do this by contacting the helpline, asking HMRC to change your tax code – the tax will be taken from your wages or pension or put it on your Self-Assessment tax return, if you already fill one in.

If the dividend is over £10,000, you will need to fill in a Self-Assessment tax return.

If you do not usually send a tax return, you need to register by 5 October following the tax year you had the income.

You will get a letter telling you what to do next after you have registered.  If you need any help with this please give us a call on 01908 227055″

Joanne

 

 

Last updated 28 Aug 2018