I am grateful to Bob Edwards of Landmark Professional Development for producing this clear guide on when you are required to complete a personal tax return.
Please click on the link below to access it:
If you need further guidance, please do not hesitate to contact us
Following the recent announcements from HM Revenue and Customs, I am pleased to put forward our recommendations for tax-efficient wages and dividends for the year beginning 5th April, 2013.
If you are the owner of a limited company, the most tax-efficient remuneration package is an annual salary of £7,692 and dividends of £30,382 (profits allowing). This assumes you have no other income. At this level, you will have no income tax to pay. The limited company will have been taxed on the dividend income. Dividends in excess of this amount will be taxed as 25%.
There are some formalities about dividend vouchers and board minutes which we would be happy to advise on.
You may recall that last year we advised a salary of £7,600 and dividends of £30,933 – £459 more than we advising for this year. This is because the higher-rate income tax threshold has been reduced to take account of the increase in annual personal allowance from £8,105 to £9,440. National insurance thresholds have not benefited from the same increases as income tax thresholds. Annual wages between £7,692 and £9,440 will be subject to a combined national insurance charge of 25.8%, more than offsetting the Corporation Tax relief.
By substituting £1,748 of dividends for rents charged for a use of home office, an overall annual tax saving of £350 can be achieved. Please contact for more details if this suits your situation.
Now that HM Revenue and Custom’s formal consultation deadline has passed, it seems almost certain that a major tax relief (the renewals allowance for fixtures, furniture, furnishings and moveable equipment) available to taxpayers who let out furnished and unfurnished houses will be withdrawn in April, 2013.
The allowance currently means that the like for like replacement of fixtures, furniture, furnishings and moveable equipment is tax-deductible against rental profits. This will not be the case after 5th April, 2013. So, if you own an unfurnished rental property and you know that, say, the cooker needs replacing, you should do it before April, 2013 to get tax relief.
Owners of furnished lets will continue to be able to claim the 10% wear and tear allowance. This is in place of claiming the renewals basis for furniture, furnishings and moveable equipment.
However, owners of furnished lets will also see their tax bills rise, as it will not be possible to claim for the cost of renewing fixtures (which can currently be claimed in addition to the wear and tear allowance). Fixtures are things which would not normally be removed if the property were vacated or sold (for example, baths, washbasins, toilets). As things stand, after 5th April, 2013, the cost of repairing a toilet is tax-deductible but not the cost of replacing it.
This is a complicated area. We hope this is clear. If you need further advice, please contact us.
In my previous article on this subject, I explained the opportunities and pitfalls in a employer providing a car to an employee. I explained the taxation effect of acquiring the vehicle either by outright purchase or on hire purchase.
One other commonly used option is for the employer to take out a lease contract to provide the car to the employee. Again, tax relief depends on a vehicles CO2 emissions and there are some changes planned for future years.
Currently, a business can deduct 100% of contract hire costs against business profits provided that the car’s Co2 emissions are 160g/km or less. There is a disincentive to taking out a lease for a car with higher emissions as legislation states that only 85% of the leasing cost of these cars is allowed against tax. This adjustment is made on the Corporation Tax computation. Please be aware that this restriction with apply to cars with emissions over 130g/km for leases signed after 1st April, 2013.
You will be aware that VAT is charged on contract hire charges. Where the vehicle is used for business purposes, 50% of the VAT (not all of it) can be reclaimed. Again, this is a common area of confusion. There is no distinction for VAT regarding CO2 emissions.
A common question about company cars is which is the best way of providing one to an employee – buy, take out an HP agreement or contract hire it. It is usually important to review a number of aspects of the business’s tax affairs in order to provide a clear answer.
I hope this article has given you some useful pointers on this subject. We would be happy to advise further.
In my next article, I will talk about the taxation of cars owned and used for business by sole traders and partners.
In this article and future articles, I aim to give you a brief overview of taxation of company cars.
In this article will deal with tax from the employer’s point of view.
I will provide details for a business providing a car to an employee (who may be a owner/director). Different rules apply to cars used by sole traders and partners.
I will use the 2012/13 tax rates. Significant changes will take place in future tax years and I will highlight this.
Low emission vehicles
A business buying a new car (outright or on hire purchase) with CO2/km emissions of 110g or less can set the entire purchase amount against its profit. When sold, the proceeds may be non-taxable if there are sufficient assets (including cars) in the general pool (18%).
From April, 2013 the threshold will reduce to 95g CO2/km. We would advise that businesses act before it is too late. This link will give you list of these vehicles
http://www.comcar.co.uk/newcar/companycar/poolresults/110tax.cfm
Cars with higher emissions
The tax allowances for cars with higher emissions are much less generous. Cars with CO2 emissions between 111g and160g CO2/km will be pooled with other assets and receive a writing down allowance of 18% per annum. Over 3 years, the business will receive 45% of the cars cost back in tax relief. Typically, a car loses 65-70% of its value in this period. This means that you will probably never get tax relief for this 20-25%.
From April, 2013 this CO2/km threshold will be reduced to 130g CO2/km. If you have a car in mind with emissions between 131g and 160g CO2/km, we suggest you act quickly.
Cars with CO2 emissions over 160g CO2/km go into their own pool and receive a writing down allowance of 8% per annum. Over 3 years, the business will receive 22% of the cars cost back in tax relief. Typically, a car loses 65-70% of its value in this period. This means that you will probably never get tax relief for this 43-48%. Shocking, isn’t it! These rules will apply for cars with emissions over 130g CO2/km with effect from April, 2013.
In my next article, I will outline the rules for leasing.
I hope you found this article informative. If you need further information including the double benefit of low emission vehicles, please do not hesitate to contact me.
We are often asked about the tax reliefs available for the costs incurred when working at home. In this and a previous article , I intend demistify this for you and, hopefully, help save you some tax (or at least stop you falling into some nasty hidden traps).
In the previous article, I explained the issues faced by a Director of a limited company when trying to claim tax relief to defray the costs of working from home.
The simplest route for a Director to obtain tax relief is to charge the limited company rent for the use of his own premises. There are formalities that need to be followed including a board minute and a formal rent agreement. The Director has to show this rental income on his self-assessment tax return but will be able to claim back the incremental costs incurred as a result of working from home. We recommend that the rent charged is the same as the incremental costs incurred as a result of working from home.
Sole traders and members of partnerships are able to claim tax relief (as a cost to their business) on the same basis on the self-employed pages of the tax return.
Calculating the incremental costs of working from home
You need to work out what rooms (or floor area) you use for business, and how much you’re using that room (or floor area) is for business use as opposed to private use. So lets say, you have 8 rooms and use 2 of them for business use 50% of the time. You will be able to claim 1/8th of your household costs as business costs (50% of 2 rooms = 1 room; total number of rooms 8).
Costs that can be claimed on this basis include:
Other costs you could claim include
The claim would be based on your estimate of business v private costs.
There is some very good guidance on the HMRC web-site.
I hope this is article is useful. Please do hesitate to contact us if you require further information.
There are only 14 more days until the end of the 2012 tax year. There is still time to save some tax. The tax planning fact sheet below will give you some ideas.
Year end tax planner – 5th April, 2012
I would also like to remind you that sole traders and partnerships should buy capital equipment before 5th April, 2012 to obtain tax relief in 2011/12 tax year. Similarly, limited companies with a 31st March, 2012 year end will need to buy these assets before 31st March, 2012 in order to claim tax relief in the current year.
There are major changes to capital allowances in 2012/13. The Annual Investment Allowance is reducing from £100,000 p.a. to £25,000 p.a. There is also a nasty tax complication which may affect businesses with a non-March year-end. Please contact us if you plan to make significant asset purchases after 31st March so that we can advise you.
Please click on the link below to access our really comprehensive review of the Chancellor’s announcements yesterday.
There is lots of detail to follow and we will, of course research it all and identify any potential effects. Aside from the headline grabbers, it is disappointing to note the continued aggressive taxation of motor vehicles. If you have company vehicles, you need to consider some further tax planning.
The Shrewsbury Accountant’s review of March, 2012 budget
As always, if you need further advice, please do not hesitate to contact us.
VAT on commercial property is a complex area. Much confusion comes from the Opting to Tax regulations. These regulations were introduced on August 1, 1989, and include a critical landmark being the 20th anniversary of the date that any option to tax was taken, after which it is possible to revoke the option.
It seems almost impossible, but is true, that the 20-year period will now have expired for properties owned back in the late eighties and the incidence of expiry of the 20-year period will become more frequent in the next few years. As a result the number of opportunities to consider whether it might be beneficial to revoke the option with HMRC will increase.
If you own commercial property that is currently opted and want further advice, please do not hesitate to contact us.
Self Assessment deadline
To make sure our customers are not disadvantaged if they cannot get through to HMRC’s call centres on 31 January, we will not impose any late filing penalties for people who file their Self Assessment returns on 1 and 2 February.
The SA deadline remains midnight on 31 January. But HMRC will treat all returns that come in by midnight on 2 February as though they were submitted by 31 January. No customer will have to pay interest on payments due on 31 January that are paid on 1 or 2 February.
Acting Director General Personal Tax, Stephen Banyard, said: “We’ve always been very clear that we want the returns – not the penalties. For that reason, we don’t want anyone who can’t get through for help and advice on 31 January to be disadvantaged in any way.”
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