Broadly speaking there are always 4 tax years in play. So at the moment we have
2015/16. The tax year just finished. Remember the tax year runs 6th April to following 5th April . This tax year runs 6/4/15 to 5/4/16.
What can seem like relatively small amounts can add up when taken across four years.
You can claim tax relief on equipment which you buy for your employment or self employment. A computer, printer, scanner and associated equipment falls into this category.
Step 1. Do you have a receipt? That is ideal but not essential. A payment entry on a bank statement or credit card will often suffice.
Step 2. You need to write down the reasons why you need the computer for work. There has to be some business use.
Step 3. Ideally you will then apportion the cost between business and private use. There was a time when this was probably 50/50 or more towards private use. However these days people tend to use mobiles or tablets for Facebook and photos so an estimate of between 80% and 90% might be reasonable.
A general link is here
More detailed ones are here
Notes which i recently prepared for one of our clients in the medical world.
Travel expenses – what can be claimed and how it works. Reference within the NHS
Travel to a temporary workplace is allowable and you can claim
45p a mile up to 10000 miles
25p a mile thereafter.
Also ancillary costs such as parking.
The question is what is a temporary workplace.
Key test 1. Place of employment where you expect to work for 24 months or less
Key test 2. Or it takes up less than 40% of your working time. E.g. Say one day a week.
What it is not
It cannot be your only place of work. So for instance if you accepted a 6 month contract at another hospital then that is a new place of work and a new contract – this is not temporary for tax.It is a permanent workplace which only lasts for 6 months.
Examples within the NHS which are relevant.
- Employed at one hospital on a permanent basis and then asked to cover 6 months at a satellite hospital whilst remaining in the same employment. This 6 month period should be classed as temporary.
- If there was a new contract with a new employer for the satellite site then this is not classed as temporary. This is why a lot of trainee GPs cannot recover their rotation travel.
- It cannot apply to travel incentives to take up a new position however short.
- It cannot work for bank work at another hospital if that means you have a second employer. So for instance you are employed at Kings but do bank work at Royal Surrey. In this case you would have 2 employers one is full time, one is part time but neither are temporary.
- However in example 4 if the bank work was at a satellite site for Kings ie you were paid for both jobs on the same payslip or two payslips but the same employer reference then the bank work would be temporary.
How will your employer treat the travel?
It depends. Some will recognise that the travel is allowable and will either not tax the payments when they reimburse the mileage or they will tax the excess over 45p a mile. You then have the opportunity to reclaim the element which they have not paid you. For instance they pay 24p a mile then you can reclaim another 21p a mile to make up the full 45p. With these payments they often show with the code TASNT on the payslip.
Sometimes the hospital will wither say they think it is not allowable or they do not want the risk of getting it wrong. So they tax all the payment and leave it to you to claim the fulle 45p a mile. These often show with the NP coding.
The core legislation. Here
And whilst the legislation has just a couple of pages the HMRC booklet (basically their views) has some 77 pages.
So you have decided that you would like to be self employed as opposed to conducting your business through a company. Well this is what you now need to do.
1. Set up a business bank account.Longer term it is better not to mix up private and business expenses and income. This is better for your accountant and better when dealing with the tax man.You will need to keep the statements for 6 years.
2. You have to notify HMRC within 3 months of starting. If you fail to do this there is a £100 penalty.
3. Contact HMRC to register for national insurance and income tax. They will supply you with a 10 digit unique tax reference number (UTR).
4.Once you have a UTR you can then register to use the online service. As part of this process they will send you an activation code so you can complete the process.
5.If you expect your sales to be in excess of £79000 pa then you have to register for VAT.They will issue you with a VAT registration number and as for income tax you can administer this online.
6.You need to decide to what date you would like to complete your trading year. We recommend 31st March each year to coincide with the tax year. Technically it is the 5th April but the 5 day difference is ignored by HMRC in most cases.
7.You should budget for any income tax payable. This is due on 31st January in the tax year and 31st July after the tax year.These two payments are always estimates.The balance is paid 31st January the year after the tax year.This means each January you have two payments to budget for. Half of what you think you will need to pay this tax year plus any under/overpayment for the previous year.
The recent first tier tribunal decision in the Wagstaff case brings welcome news for anyone who has come to a financial arrangement with an parent or in law in regard to their house.
The old lady sold her house to her daughter and son in law on the condition that she could continue to live there. When the house came to be sold it was accepted that an implied trust had been created and therefore private residence relief was available.
More details here
If you live in Cumbria and have a tax question then please give me a call on 075 1391 7997
The £2000 employers NIC relief will kick in from April
Basically it is
Available to all sizes of business, with certain exceptions.
Claimed via the payroll software.
From 6 April 2014 onwards.
This measure was announced in the 2013 Budget
So for instance
a single employee a salary of £22,448, or
two part-timers on salaries of £15,202, or
three part-timers on £12,786, or
four part-timers on £11,579 per annum and
pay no ER’s NICs at all.
From 2015/16 there will also be exemption for any employee under 21 and earning less than £813 a week.
Do you live and work around Carlisle? Why not give me a call for free a consultation.
When houses became harder to sell the government brought in a relief for owners who basically had to buy a new house without selling their old one.
They allowed you 3 years to sell the old house without any reduction in the private residence relief for the capital gain on sale.
From April 2014 this period will be reduced to 18 months.
So if you own 2 or more houses and they are both potentially your residence then you might need to reassess which is your main one and let the tax man know.
Tax advice and bookkeeping in Cumbria? – Give me a call on 075 1391 7997
The Upper Tier Tribunal has upheld the rulings in the Dr Samadian case.
The main point seems to be that travel between a home base and anywhere which is a regular place of business will now be disallowed under duality of purpose.
This is potentially very significant and claims for business mileage should now be reviewed.
Do you live in Carlisle? Would you like tax advice? Please give me a call.
There has always been a degree of uncertainty around whether or not some people are resident in the UK for tax purposes. The recent changes to the rules are meant
to improve this situation. Why is this important? Well if you are resident for tax purposes then you are liabel on worldwide income and capital gains.
If you are not resident then foreign income and gains should usually escape the UK tax man.
This is a very brief simplification of the rules
You are non resident for a tax year if
1) You spend less than 16 days in the UK; or
2) You were non-resident in all of the previous 3 tax years and this year you spend less than 46 days in the UK; or
3) You are working full time abroad.
If none of the three points above apply then you will be resident in the UK if either
1) You spend 183 days or more in the UK; or
2) You have your only or main home in the UK; or
3) You work full time in the UK.
If none of the above six tests apply then we look at a combination of the number of days spent in the UK along with the strength of your ties to the UK.The more
ties you have then the fewer days you can spend here if you want to escape the UK tax regime for foreign earnings and gains.
Holiday cottages ( or furnished holiday lets ) are a funny creature. For NIC purposes they are not a business but for some really important reliefs they have always been regarded as a business.
One of these reliefs, business property relief, means that traditionally there would be no inheritance tax to pay on a holiday cottage. With IHT rates as high as 40% this was a valuable concession.
However the recent Pawson case looks as if all this has been overturned.
Basically the executors of the estate will need to show that the business activities have been much more than maintenance and taking bookings. You have to look to what a hotel or B&B would provide as an idea. So these might include
1. Cooking and provision of meals ( think a courtyard of cottages and maybe a tea room attached)
2. Activities on site such as organised trips.
3.On site services such as massages or baby sitting.
To me it looks like this level of service would be tricky for single cottages and ones which are remote or isolated.
If you have a number of houses close to many attractions and you or a manager live on site or nearby then there is a chance for you but otherwise?
So if you think that you can’t meet these conditions then what are the alternatives?
1. Make a PET ( potentially exempt transfer). Gift the cottages to your beneficiaries. As long as you live more than 7 years after the gift then there is no inheritance tax. Death earlier than 7 years might attract taper relief to help reduce the tax.
2.Life insurance to cover any IHT liability.
3. If the cottages are merged with a larger business, for instance farming, then the whole might well be considered a business.
A very interesting post here on how HMRC can use the issue of a self assessment tax return to collect tax now due and to enforce collection across the years ahead.
I guess it also highlights how tricky it can be to get out of self assessment.
Don’t forget that once you have been issued with a Self Assessment return you have until 31st October following the tax year to file the paper return and 31st January after this for an online return.
If you file late then the penalties are
£10 per day after 3 months for up to 90 days ie £900
£300 at six months or 5% tax due if higher
£300 at 12 months or 5% tax due if higher
At the 12 month point there are then options of further tax due based penalties depending upon the usual scenarios of
Deliberate and concealed
One of the key decisions you will need to make for any new business is whether to operate as a sole trader or through a limited company. We will discuss the pros and cons of each in more detail separately but for this article we are going to look at what you need to do to set up a limited company.
Step 1. Incorporate a limited company. The usual route is to purchase an existing shell company, one which has been created just for this purpose and which has not yet traded.
You would then file a change of name ( assuming you didn’t want to keep the existing name ) as well as change of registered address,members and directors. Alternatively you can start from scratch and create the company from the ground upwards. Costs should be between £100 to £150 to have an accountant do this for you.
Step 2. Open a business bank account.It is much easier to separate your business and private affairs this way. Bank statements will need to be kept for 6 years.
Step 3.Companies house will notify HMRC on incorporation. You will be issued with a CT41G which basically asks what the business does, when did it start trading and who are the Directors.It will also provide you with a URN or unique reference number for all tax correspondence.
Step 4. You now need to register with HMRC to use their services online.Once they have received the application they will issue an activation code. Let your new tax advisor have this code so that he can notify HMRC that he will act for you. You will receive a second activation code which should be passed to your tax agent.
Step 5. VAT. If your sales are £79,000 or more then you must register. See here.
The rules are slightly more complex when you start to approach the limit so do check the reference or seek advice. If you are dealing mainly with VAT registered businesses then it might well be worth registering even though you are below the limit.
Step 6. Drawing money out. Hopefully you will make profits and generate funds to allow you to take money out either as a salary or as dividends. The salary route requires the operation of PAYE and you should register for a PAYE scheme. There is software available to simplify this.