Appeal Success for Contractor

Late CIS Return

In the recent case of Scott Building Contractors Ltd v HMRC, the taxpayer appealed the late filing penalties imposed by HMRC on the basis that they had not one, but multiple reasons for filing their CIS returns late.

The director of the appellant company cited family reasons, a burglary and mental health problems. In addition, the business had recently commenced work on a large contract.

The director also provided evidence to show that their accountant was difficult to reach and did not respond promptly. Reliance on an accountant is not an acceptable excuse unless the taxpayer has taken reasonable care to avoid the failure.

Whilst the excuses in isolation would not have held, the first-tier tribunal ruled that, when considered together, they form a reasonable excuse.

If you require any further information please contact Green & Co on 01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Extra HMRC Help for Mid-Sized Businesses

Extra HMRC Help for Mid-Sized Businesses

Since September 2017, medium sized businesses have been able to ask for the assistance of a specialist at HMRC to help them as they expand.

Under the scheme, businesses with a turnover of more than £10 million or with more than 20 employees, who are looking to increase turnover or expand their business, will be able to ask for a tax specialist. The specialist will be available to support the business on complex tax matters during key events such as mergers and acquisitions.

The move follows an increasing frustration from business owners unable to get answers to their questions online.

Green & Co have a specialist tax team with over 30 years worth of experience and we pride ourselves on helping our clients achieve their goals and objectives. Contact us to speak to one of our team today.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Ensure You Are Claiming Tax-Deductible Expenses

Tax deductible expenses

Self-employed individuals are able to claim tax relief on part of their household expenses, which can include insurance, repairs and utilities.

If you often work away from your main place of business, you may also be able to claim for travel and accommodation costs; make sure that accurate records are kept, such as a log of business journeys.

However, you cannot claim business expenses for non-business driving or travel costs, fines or travel between your home and your place of work.

For more information on claiming tax-deductible expenses, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Are You Making the Most of Capital Allowances?

Purchasing plant and machinery

Businesses looking to purchase capital equipment are able to claim tax relief in the form of capital allowances. Here we outline some of the key details.

What is the Annual Investment Allowance?

Businesses purchasing plant and machinery are able to make use of the Annual Investment Allowance (AIA), which allows the costs for equipment, machinery and business vehicles (excluding cars) to be deducted from your profits before tax. The maximum annual amount of the AIA is £200,000. The AIA applies to businesses of any size and most business structures, but there are provisions to prevent multiple claims.

Plant and machinery includes items such as machines, equipment, furniture, certain fixtures, computers and similar equipment you use in your business. However, certain items do not count as plant and machinery. These include buildings, land and structures, and items that you lease. There are special rules for cars and some specific ‘environmentally friendly’ equipment.

Enhanced Capital Allowances

In addition to the AIA, a 100% first year allowance is also available on energy-saving or environmentally friendly equipment. A separate Enhanced Capital Allowances (ECA) scheme is available for new electric and low carbon dioxide (CCb) emission cars (up to 75 g/km – reducing to 50 g/km from April 2018) and new zero emissions goods vehicles (up to 31 March 2018 (corporates) or 5 April 2018 (others)). They also qualify for the 100% first year allowance.

Expenditure pooling

Where purchases exceed the AIA a writing down allowance (WDA) is due on any excess in the same period. This WDA is currently set at a rate of 18%. This is the main rate pool and it is available on any expenditure incurred in the current period not covered by the AIA or not eligible for the AIA as well as on any balance of expenditure remaining from earlier periods.

Certain expenditure on building fixtures, known as integral features (e.g. lighting, air conditioning, heating, etc.) is only eligible for an 8% WDA so is allocated to a separate ‘special rate pool’, though integral features do qualify for the AIA.

Motor vehicle expenditure

With regard to capital allowances, special rules govern the treatment of expenditure on vehicles. Cars do not qualify for the AIA, but other specific types of vehicle are treated as pool, plant and machinery.

For business cars, a vehicle’s level of C02 emissions plays a key role in its capital allowance treatment. New low emission cars acquired between 1/6 April 2015 and 31 March/5 April 2018 and not exceeding 75 g/km C02 emissions will be allocated to the main rate pool, and will be eligible for a 100% allowance. Vehicles not exceeding 130 g/km C02 emissions will also be allocated to the main rate pool, but will be eligible for an 18% WDA. Those that exceed 130 g/km C02 emissions will be allocated to the special rate pool, and will be eligible for an 8% WDA.

From April 2018, new capital allowance rules for cars are set to take effect.

How do I make a claim for capital allowances?

Businesses are required to make a claim for capital allowances through their tax return. Unincorporated businesses must make a claim within 12 months after the 31 January tax return filing deadline. Companies must ensure that their claim is made within two years of the end of the accounting period.

If you are considering investing in plant and machinery, please talk to us first as we can help to ensure that you time your purchase to receive the maximum tax benefit.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Is It Time to Review Your Estate Plan?

Estate Planning

Planning to minimise the inheritance tax (IHT) due on your estate is always important, but the recent introduction of the residence nil-rate band (RNRB) means now could be the ideal time to review your existing plans.

What is the RNRB?

IHT is charged at 40% on estates worth in excess of the nil-rate band, which is currently £325,000. Married couples and registered civil partners can pass any unused nil-rate band on death to one another.

However, 6 April 2017 saw the introduction of an additional nil-rate band – the RNRB – which is intended to take the family home out of IHT for all but the wealthiest. The RNRB is set at £100,000 for deaths in 2017/18, rising to £125,000 in 2018/19, £150,000 in 2019/20, and £175,000 in 2020/21. It is then set to increase in line with the Consumer Prices Index from 2021/22 onwards.

The introduction of the RNRB means that up to £1 million of a married couple’s estate could eventually be taken outside the scope of IHT if the full nil-rate bands (£325,000 + £175,000 x 2) are available to each spouse.

The RNRB is also available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets of an equivalent value, up to the value of the RNRB, are passed on death to direct descendants.

It is important to note that the additional band can only be used in respect of one residential property, which does not have to be the main family home but must at some point have been a residence of the deceased.

There will also be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million (at a withdrawal rate of £1 for every £2 over this threshold).

Reviewing your estate plan

It is always advisable to review your Will and planning strategies on a regular basis, but it is particularly pertinent following changes in your personal or family circumstances or significant new tax rules. The introduction of the RNRB is one such example.

The additional nil-rate band will only apply when a main residence is passed on death to one or more descendants (including a child, stepchild, adopted child or foster child) of the deceased and their descendants. In order to utilise the RNRB, you may need to review your Will to check that the property is being bequeathed to the correct beneficiaries. The home doesn’t have to be specifically mentioned in the deceased’s Will, as long as it has at some point been a residence of the deceased.

It is also important to review your Will where property has been left in trust, as certain types of trusts may not be eligible for the RNRB. This is a complicated area and we suggest that you consult an expert for further advice.

If downsizing is contemplated, special care is needed to include provisions in a Will which will satisfy the conditions of obtaining the additional band.

For more information on the RNRB or for advice on other tax-efficient estate planning strategies, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

New Welsh Land Transaction Tax Receives Royal Assent

welsh land transaction tax

A new Land Transaction Tax (LTT) is set to replace Stamp Duty Land Tax (SDLT) in Wales, with effect from April 2018.

The legislation is similar to the existing UK SDLT legislation, and the new LTT will be payable by the purchaser when buying or leasing a building or land, in line with a series of set rates and bands.

Higher rates of tax will apply to purchases of additional residential properties, as is currently the case, but there are some additional rules.

The new LTT marks the latest step in the drive towards tax devolution, which has seen the introduction of the Land and Buildings Transaction Tax (LBTT) in Scotland, and the Scottish Rate of Income Tax.

The proposed rates and bands for the LTT are set to be announced by October 2017. The Welsh Revenue Authority (WRA) will be responsible for the collection and management of the LTT from April 2018.

For more information on the Land Transaction Tax please contact our tax team.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Advisory Fuel Rates from 1st September 2017

Fuel rates

For employees using a company car, the new fuel rates for use from 1 September are as follows:

Engine Size Petrol LPG Diesel
Amount per mile (in pence)
1400cc or less 11 7 9
1401cc to 1600cc 13 8 9
1601cc to 2000cc 13 8 11
Over 2000cc 21 13 12

For the purpose of fuel rates, hybrid cars are treated as either petrol or diesel cars.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Cash-Based Lifetime ISA Enters the Market

Cash-based lifetime ISA

The first cash-based Lifetime ISA recently entered the market, allowing adults under the age of 40 to put aside cash sums in order to save for their first home or their future retirement.

The Lifetime ISA was first introduced in April, but initially only share-based investments were available. A new cash Lifetime ISA has since been launched.

Under the scheme, savers aged between 18 and 39 can invest up to £4,000 a year and will receive a 25% bonus on contributions from the government up until their 50th birthday.

Both the tax-free savings and the government bonus can be used for a deposit for a first home in the UK worth up to £450,000 at any time from 12 months after first saving into the account.

Alternatively, the funds, including the government bonus, may be withdrawn from the Lifetime ISA from age 60 tax-free for any purpose. However, where the funds are withdrawn before the age of 60 the account holder will lose the government bonus (plus any interest or growth on this) and will be liable to pay a 5% surcharge.

For further information on the cash Lifetime ISA or for other tips to reduce your tax, please contact us.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Are You Affected by Inheritance Tax?

Inheritance Tax.jpg

The Inheritance Tax (IHT) collected by HMRC for the year June 2016 to May 2017 saw an increase of 9% on the previous year, rising to over £5 billion for the first time.

According to law firm Wilsons, this is attributed to rising property values and the freezing of the basic Inheritance Tax allowance, which has remained at £325,000 since the 2009/10 tax year.

It will be interesting to see how the new family home allowance (officially known as the main residence nil rate band) impacts on these figures. This relief was introduced in April 2017 and, according to HMRC, is intended to ‘reduce the burden of IHT for families by making it easier to pass on the family home to direct descendants for all but the largest estates.’

As well as this, there are other allowances which can reduce an individual’s exposure to inheritance tax and now, more than ever, it is important to assess how best to align your IHT position with your expectations for the future.

Green & Co have an Inheritance Tax and Care Home Review service that we run in conjunction with a local solicitors. If you’d like to discuss this service or any related matters please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

To Have, Hold & Share Rental Income Tax Efficiently

Rental Income Tax.jpg

As of 6 April 2017 the tax relief landlords receive for mortgage interest and other finance costs is restricted. The restriction is being introduced gradually so that by 2020/21 landlords will receive tax relief for finance costs at basic rate (currently 20%) instead of at the rate at which they pay tax.

This change does not just affect higher rate taxpayers.  Some people may find that, even though they are currently a basic rate taxpayer, as finance costs are no longer deducted in calculating their net rents, their income can be pushed into the higher rate bracket.

For spouses and civil partners who jointly own rental property, in the absence of an agreement to the contrary, the profits will typically be split 50/50. This can however be inefficient for tax purposes if one spouse is a basic rate taxpayer and the other is taxed at higher rate.

In such circumstances, they can register a beneficial ownership on the asset which stipulates a different ownership split, for example 80/20 and submit Form 17 to HMRC in order to tax the profits as such. This should of course be discussed with the experts in application to your personal circumstances before implementing.

If you’d like any further information please contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.