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Welcome...
To July's Tax Tips & News, Hanley & Co's newsletter
designed to bring you tax tips and business news to
keep you one step ahead.
We are committed to ensuring all our clients don't pay
a penny more in tax than is necessary and receive
advice and support throughout the year..
Please contact us for advice in your own specific
circumstances. We're here to help!
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Applying New CGT Rules |
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The June Budget introduced some complex changes to capital
gains tax (CGT) that apply from 23 June 2010. For
disposals made on or after that date there are now three
alterative tax rates for individuals.
Taxable income and gains after deduction of allowances up
to £37,400 are taxed at 18%. Those over
the £37,400 limit are taxed at 28% and
gains subject to entrepreneur's relief are taxed at
10%.
The old CGT rate of 18% applies to all capital gains made
by individuals and trustees from 6 April 2008 to 22 June
2010 inclusive, irrespective of the amount of the gain or
the person's level of income. Trustees pay CGT at 28% on
all gains made on or after 23 June 2010 irrespective of
the level of income of the trust.
The new higher rate of 28% only applies to individuals
where their total taxable income and gains exceed the
higher tax rate threshold of £37,400. That sum includes
the total income for the full tax year less allowances and
all allowable deductions, plus all capital gains made on
or after 23 June less your annual CGT exemption of
£10,100. Any gains made before 23 June 2010 are not
included in this total. You can choose
how to set-off any losses and your annual CGT exemption so
you pay the minimum amount of tax. This is best
illustrated by an example:
Example
Sid's taxable income for 2010/11 is £27,400 after his
personal allowance and all tax allowable expenses have
been deducted. He sold a property in May 2010 that made a
gain of £17,000, and sold another property in November
2010 for a gain of £25,100. Neither property qualifies for
entrepreneurs' relief or for the exemption as his main
residence. Sid has no capital losses to use in 2010/11.
The CGT on those gains is calculated as follows:
The first gain of £17,000 in May 2010 will be taxed at
18%. The second gain in November 2010 of £25,100 plus his
taxable income of £27,400 exceed the higher rate threshold
of £37,400 by £15,100 and are liable to the higher 28%
rate. As such it makes sense to deduct the CGT annual
exemption of £10,100 from the second gain so that only
£5,000 of the gain is taxed at 28%. The remainder of the
gain of £10,000 will be taxed at 18%. If Sid has any CGT
losses he could also have chosen to offset those against
the second gain to maximise relief at 28% rather than 18%.
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Giving Shares to
Employees |
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There are a number of approved share schemes that a
company can use to provide its employees with shares in
the company they work for, or options to buy those shares
at a favourable price. The scheme designed for small
companies to use is the Enterprise Management
Investment scheme (EMI).
If the company chooses not to use one of the approved
share or share option schemes and issues shares or options
to its employees, there can be some very serious tax
consequences, such as:
- The employee is taxed on the value of the shares he
receives as if that value was part of his salary.
- The company must pay the employer's class 1 NICs on the
value of the shares issued.
- The company must also fund the employee's class 1 NIC
and the tax that should have been deducted under PAYE from
the value of the shares provided to the employee.
- If the employee leaves shortly after acquiring the
shares, the employer may not be able to recover the PAYE
and NIC paid in respect of the value of those shares.
- If the Taxman views the giving of the shares as part of
a tax avoidance scheme, the employee may be subject to tax
and NICs on any dividends he receives from those shares,
as if those dividends were salary payments.
If you want to provide your employees with shares please
talk to us about how you want to achieve this, so we can
advise on how to do it the most tax efficient manner.
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VAT Online - Are You Ready? |
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Compulsory online filing for VAT returns is here. The
first period for which an established business with a
turnover of £100,000 or more is required to submit their
tax return online is the quarter ending 30 June 2010. That
VAT return is due in by midnight on 31 July 2010. In fact
as the VAT return is submitted online the submission date
is stretched to 7 August 2010, although a VAT repayment
claim must still be received by 31 July.
Businesses who always receive VAT repayments can ask to
complete monthly VAT returns, in which case the first
period for which they must submit their VAT return online
was 30 April 2010.
Once you start to submit your VAT returns online you will
no longer receive a paper form from the VAT office, or any
type of paper reminder.
If you have included your email address in the information
about your business in the HMRC online services page, you
should receive an email reminder when your VAT return
becomes due.
When you submit your VAT return online you also need to
pay any VAT due electronically. One of the easiest ways to
do this is by direct debit (DD), when the VATman calls the
exact amount of VAT due from your account as reported on
your VAT return. To allow the VAT office time to allocate
your VAT return to the DD instruction, you must set up the
DD instruction at least five working days before your VAT
return is submitted online. Not five days before the VAT
payment is due.
Please talk to us without delay if you would like us to
submit your VAT returns online on your behalf.
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Young People and Taxes |
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The summer is here and the exams are over, so many young
people will be leaving school or college this month to
take their chances in the jobs market. It is a daunting
prospect; trying to cope with the tax and benefits systems
for the first time.
If your child is in this position you could point them
towards the HMRC website designed for 16 to 19
year olds:
http://www.taxmatters.hmrc.gov.uk
It covers topics such as NI and how the NI number is
important, what is PAYE and self-assessment. There are
also quizzes and a teacher's area including materials
teachers can use to explain tax to different age groups of
students.
As a parent you may need to tell HMRC that your child is
no longer in full-time education.
- Child benefit is paid until 31 August
following the child's 16th birthday, but after that date
the benefit if only paid while the child is under 20 and
in relevant education or training, or is aged under 18 and
is registered for work, education or training with an
approved body. You can provide the relevant details to
HMRC using an online form on their website, or by phoning
the child benefit helpline on: 0845 302 1444.
- If you are claiming Child Tax Credits
for that child you also need to inform the Tax Credits
Office that your child is no longer in full-time
education. You can only do this by telephone on 0845 300
3900 as the online forms for Tax Credits were taken down
some years ago due to fraud.
Although Working and Child Tax Credits are administered by
HMRC who also administer Child Benefit, you will need to
make to make a separate call to the Tax Credits office as
their computers are not linked into the Child Benefit
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July Question and Answer
Section |
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Q. My company has bought a classic motorcycle as
an investment. Can it claim a tax deduction for the cost?
If the motorcycle is kept at my home, but not used at all,
will I suffer a tax charge?
A. If your company buys a motorcycle for
use in its trade, including providing the motorcycle to
the director, it can claim a tax deduction for the cost.
If the motorcycle is purchased as an investment and not
used in the trade, the company cannot claim a tax
deduction for the cost.
If the motorcycle is kept at your home it is available for
your use. The benefit in kind tax charge applies if the
motorcycle is made available to you, not whether you
actually ride it. The same tax charge would apply whether
the motorcycle was a 'work of art' or a functioning
motorcycle, as it remains a company owned asset which is
made available to you for your private use.
Q. I'm looking to buy the property my company
trades from. Should I buy it in my own name or should my
company buy it? I have the reserves for either.
A. If you hold the property personally
and let it to the company you will be able to extract
funds from your company as NIC-free rents. However, when
you sell the property, the gain may well be taxed at a
higher rate in your hands (up to 28%) than in the company
(possibly 20%). You will only get entrepreneurs' relief on
the property if it is sold in association with your
withdrawal from the business that involves a disposal of
some, but not necessarily all, of the company shares. The
entrepreneurs' relief on the gain is reduced where rent
for the property has been paid by the company.
If the company holds property this removes the possibility
of NIC-free rents. When the company sells the property it
will get indexation relief on the value and the net gain
may be taxed at a lower tax rate. However, the proceeds
will be trapped within the company. Both you and the
company could roll-over a gain arising on the sale of the
property in the future, if it has been used for the
purpose of the trade carried out by your personal company.
As you can see there is a lot to consider and expert
advice in your own situation is important
Q. What happened to the Furnished Holiday Lettings
rules in the Budget?
A. The tax rules and exemptions for
furnished holiday lettings (FHL) remain in place and
unchanged at least until 5 April 2011 (1 April 2011 for
companies). However, the Government has said that it will
consult on changes to the FHL rules to be introduced from
6 April 2011.Those changes are likely to include a
restriction on how losses from FHL can be set off, and a
tightening of the conditions which will allow the tax
reliefs for FHL to be claimed. |
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We Want
To Help More Clients |
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If you
have
received this newsletter and are not already a client of
Hanley & Co we
would be
 delighted
to hear from you.
If you are already a client you may know someone who is
setting up in business or who is looking to change
accountants for their existing business, please be sure to
pass on our details so we can offer them a Free
Unlimited Initial Consultation - with Absolutely No
Commitment.
We feel sure they will also benefit from receiving our
FREE 73 page 'New Business Start Up' report or the easy to
read 'How To Pay Less Tax'
guide. |
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| About
Us |
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Hanley & Co provide personal advice to all clients based on twenty
year's experience as practising accountants.
We have clients across the North West of England and
some even further a-field.
Visit our website http://www.hanleyandco.co.uk for
more information.
HANLEY & CO -
ACCOUNTANTS YOU CAN TALK TO
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Disclaimer
The information contained in this
newsletter is of a general nature and no assurance of
accuracy can be given. It is not a substitute for specific
professional advice in your own circumstances. No action
should be taken without consulting the detailed
legislation or seeking professional advice. Therefore no
responsibility for loss occasioned by any person acting or
refraining from action as a consequence of the material
can be accepted by the authors or the firm. |
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Copyright © Hanley &
Co. Chartered Accountants and Business Advisors All rights reserved.
18 Church Street,
Ashton under Lyne, Lancashire, OL6 6XE Tel 0161 339 7502
15 Olympic
Court, Whitehills Business Park, Blackpool, FY4 5GU Tel 01253
320018 / 01772 673377
Email - help@hanleyandco.co.uk |
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