Archive: 23rd January 2025

Capital Gains Tax

Designating a property as your main residence

Jan 23, 2025 by Terry Harris 0 Comments

Owning more than one property? You can claim Capital Gains Tax (CGT) relief on just one at a time. By formally electing your main residence within two years of property changes, you can optimise your CGT exemption and make the most of key tax benefits.

Taxpayers who own more than one property should be aware of a number of important considerations. An individual, married couple, or civil partnership can only claim Capital Gains Tax (CGT) relief on one property at a time. However, it is possible to designate which property will benefit from the CGT exemption at the time of sale by making a formal election.

To nominate a property as the main residence, a letter must be sent to HMRC specifying the full address of the property being nominated. This nomination must be signed by all owners of the property and the election must be made within two years of any change in the combination of properties owned. Additionally, the property must have been occupied as the main or only residence at some point in the past.

There are specific rules governing overseas properties and for non-UK residents. It is important to carefully consider the timing and frequency of making such elections. Notably, if a property has been used as a private residence at any time, the final nine months of ownership are disregarded for CGT purposes even if the individual was not residing in the property when it was sold.

Source:HM Revenue & Customs | 20-01-2025
Business

Beware false business rates warnings

Jan 23, 2025 by Terry Harris 0 Comments

The 2023 Revaluation updates business property rateable values, based on April 2021 valuations. While challenges are open until March 2026, beware of false claims about earlier deadlines and unscrupulous agents pushing for quick decisions or upfront payments.

The Valuation Office Agency (VOA) periodically reassesses the rateable values of business properties through a process known as Revaluation. This is done to update the rateable values in line with changes in the property market. The most recent revaluation took effect on 1 April 2023, with rateable values now based on the valuation date of 1 April 2021.

The VOA is aware of false claims that are being made about upcoming deadlines to appeal the 2023 rating lists. These are not true. You should be wary of anyone making these claims.

You are generally able to challenge your property valuation on the 2023 list at any time until March 2026. Any claims of an earlier deadline are false.

You should be cautious of any agent who:

  • tries to pressure you to decide a course of action or sign a contract;
  • makes claims about ‘unclaimed credits’ or similar;
  • says they are acting on behalf of the VOA; or that
  • demands large sums of money up front.

The VOA reiterates that, although the majority of agents are trustworthy and offer excellent service, there is a small minority that operate in bad faith.

Source:Other | 20-01-2025
Value Added Tax

Claiming VAT on pre-registration purchases

Jan 23, 2025 by Terry Harris 0 Comments

Businesses can reclaim VAT on pre-registration expenses if they relate to taxable supplies made after VAT registration. The rules differ for goods and services, with time limits of 4 years for goods and 6 months for services. Proper understanding ensures you don't miss out.

VAT can only be reclaimed if the pre-registration costs relate to taxable goods or services that will be supplied by the business after it becomes VAT registered.

Different rules apply depending on whether the costs are for goods or services:

Goods: VAT can be reclaimed for goods still held by the business or for goods used to produce other goods still in possession of the business.

  •  Time limit for reclaiming: 4 years from the date of registration.

  Services: VAT can be reclaimed for services related to the business.

  •  Time limit for reclaiming: 6 months from the date of registration.

Pre-registration VAT should be reclaimed on the business’s first VAT return. In certain cases, it may be possible to backdate the VAT registration. This should be considered if there is additional Input Tax that can be recovered.

There are specific provisions for partially exempt businesses, businesses with non-business income, and the purchase of capital items under the Capital Goods Scheme (CGS). These rules may affect the recoverability of VAT and should be reviewed in detail based on the circumstances of the business.

Source:HM Revenue & Customs | 20-01-2025
Corporate Governance & Regulation

Dealing with company unpaid debts

Jan 23, 2025 by Terry Harris 0 Comments

Unpaid debts can put a limited company at risk of a winding-up petition, potentially leading to liquidation. Creditors may act via court judgments or statutory demands, forcing companies to settle debts. Learn how this process works and the consequences for the business.

A limited company that has unpaid debts, beyond their normal agreed payment terms, can face a precarious future. The people or organisations that are owed money may be able have the company wound up (dissolved) by applying for a winding-up petition. This is a drastic measure and can lead to the company in question being liquidated. This action, by the creditors, can be a powerful motivator for the company to settle its debts before the process is completed.

The creditors can start this process by either:

  • Obtaining a court judgment. A company has 14 days to respond to a court judgment. If the company does not respond to the court judgment within 14 days, the creditors can apply to have the assets seized by a bailiff or sheriff.
  • By making an official request for payment – this is called a statutory demand. A company has 21 days to respond to a statutory demand. The creditors can apply to wind up the company if the company does not respond to a statutory demand within 21 days.

If the court grants the winding-up petition, a liquidator is appointed to sell the company’s assets and pay off creditors. However, unsecured creditors are unlikely to receive full payment, depending on the company's assets.

When a company enters administration, liquidation or receivership, the appointed Insolvency Practitioner is required to post announcements in the London Gazette.

Source:Companies House | 20-01-2025
Capital Gains Tax

Rolling over capital gains

Jan 23, 2025 by Terry Harris 0 Comments

Business Asset Rollover Relief allows you to defer Capital Gains Tax (CGT) when reinvesting proceeds from selling business assets. By rolling gains into the cost of new assets, tax is postponed until the new asset is sold. Learn how this relief can optimise your business investments.

Rolling over capital gains is a useful way to defer CGT when you sell or dispose of business assets.

Essentially, if you use the proceeds from selling an old asset to buy a new one, the gain is "rolled over" into the cost of the new asset. This means you do not have to pay CGT on the gain immediately; instead, the tax is deferred until you sell the new asset. This relief is known as Business Asset Rollover Relief. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.

If you do not use all the proceeds from the sale to buy a new asset, you can still make a partial rollover claim. Additionally, you can apply for provisional rollover relief if you plan to buy new assets but have not yet done so.

Rollover relief also applies if you use the sale proceeds to improve assets you already own.

The total amount of relief depends on how much you reinvest in new assets. There are a few conditions to keep in mind.

  • the new asset must be purchased within 3 years of selling the old one (or up to a year before), though HMRC can sometimes extend this period;
  • both the old and new assets must be used for your business, and your business needs to be trading when you sell the old asset and buy the new one; and
  • claims for relief must be made within 4 years of the end of the tax year when the new asset was bought (or the old one was sold, if that happened later).
Source:HM Revenue & Customs | 20-01-2025
Business Support

Investing in new equipment for your business?

Jan 20, 2025 by Terry Harris 0 Comments

Making a significant investment in new equipment can be a transformative step for a business, improving efficiency, productivity, and competitiveness. However, such a decision requires careful planning and analysis to ensure the investment aligns with the business's long-term goals.

1. Cost and Financing

The upfront cost of new equipment can be substantial, so businesses must assess their budgetary constraints. Consider whether the purchase will be financed through cash reserves, loans, or leasing arrangements. Compare interest rates and tax implications of each option and ensure the business can comfortably manage the repayment terms if borrowing is required.

2. Return on Investment (ROI)

Evaluate how the new equipment will impact productivity and profitability. Will it enable cost savings through greater efficiency, reduce downtime, or enhance product quality? A detailed ROI analysis should include all associated costs, such as installation, training, and maintenance.

3. Suitability and Scalability

The equipment must meet current operational needs and be flexible enough to adapt to future requirements. Consider whether the investment aligns with projected business growth and whether it can integrate with existing systems and processes.

4. Technology and Innovation

With technology evolving rapidly, it's important to choose equipment that won’t quickly become obsolete. Assess whether the purchase includes future-proof features, software updates, or warranties that extend its useful life.

5. Compliance and Environmental Impact

Ensure the equipment complies with industry regulations and health and safety standards. Additionally, businesses should evaluate its environmental impact, as eco-friendly investments can lead to cost savings and improve corporate responsibility.

6. Training and Maintenance

Factor in the time and resources needed to train staff to use the equipment effectively. Ongoing maintenance and repair costs should also be included in the financial analysis.

By thoroughly considering these factors, businesses can make informed decisions that maximise the benefits of their investment while minimising risks.

Source:Other | 19-01-2025
General

Debt Management Plan

Jan 20, 2025 by Terry Harris 0 Comments

Navigating financial challenges can be daunting, but understanding the tools available can make a significant difference. One such tool is a Debt Management Plan (DMP), designed to help individuals regain control over their finances.

What is a Debt Management Plan?

A DMP is an informal agreement between you and your creditors to repay your non-priority, unsecured debts at an affordable rate. This plan is particularly useful if you can only manage to pay a small amount each month or if you're facing temporary financial difficulties but expect your situation to improve soon.

How Does it Work?

You can set up a DMP through a licensed debt management company authorised by the Financial Conduct Authority (FCA). The process typically involves:

  1. Assessment: Providing details about your financial situation, including assets, debts, income, and creditors.
  2. Proposal: The company calculates a monthly payment based on what you can afford.
  3. Negotiation: They contact your creditors to seek agreement on the proposed plan.

Once in place, you'll make regular payments to the debt management company, which will then distribute the funds to your creditors. It's important to note that while many creditors may agree to freeze interest and charges, they are not obligated to do so.

Costs Involved

Some debt management companies may charge:

  • A setup fee.
  • A handling fee for each payment made.

Ensure you understand any costs involved and how they will affect your repayments.

Eligibility Criteria

DMPs are suitable for managing 'unsecured' debts, such as:

  • Credit card debt.
  • Personal loans.
  • Overdrafts.

They are not applicable for 'secured' debts like mortgages or car finance agreements.

Advantages of a DMP

  • Single Monthly Payment: Simplifies your finances by consolidating multiple debts into one payment.
  • Professional Negotiation: The debt management company negotiates with creditors on your behalf.
  • Flexibility: Payments can be adjusted if your financial situation changes.

Disadvantages of a DMP

  • No Legal Protection: Creditors are not legally bound to agree to the plan and may still contact you or take legal action.
  • Impact on Credit Rating: Entering a DMP can negatively affect your credit score.
  • Potential Costs: Fees charged by some companies can extend the time it takes to repay your debts.

Your Responsibilities

It's crucial to maintain the agreed-upon payments. Missing payments can lead to the cancellation of the plan, and creditors may resume collection actions.

Seeking Free Advice

Before committing to a DMP, consider seeking free, impartial advice from organisations like MoneyHelper, which can guide you through your options and help you make an informed decision.

Source:Other | 19-01-2025
Inheritance Tax

Tax return for deceased person

Jan 16, 2025 by Terry Harris 0 Comments

Inheritance Tax (IHT) impacts estates over £325,000, with rates of 40% on death and 20% on certain gifts. A 36% reduced rate applies if 10% of the estate is left to charity. Executors must value estates and may need to file tax returns for the deceased and their estate.

The current IHT nil rate band is £325,000 per person, below which no IHT is payable. This is the amount that can be passed on free of IHT as a tax-free threshold.

A reduced rate of IHT of 36% (reduced from 40%) applies where 10% or more of a deceased’s net estate after deducting IHT exemptions, reliefs and the nil rate band is left to charity.

In order to ascertain whether or not IHT is due, the personal representative (an executor or administrator) of the deceased must value the deceased's estate. The personal representative is legally responsible for dealing with the deceased’s money, property and possessions (their estate). As part of this process, a tax return for the deceased may be required.

 This could be:

  • a self-assessment tax return for income the person earned before they died; or
  • a separate self-assessment tax return for income the ‘estate’ generated after the person died.
Source:HM Revenue & Customs | 13-01-2025
Employee Benefits

Payrolling employee benefits

Jan 16, 2025 by Terry Harris 0 Comments

Employers can voluntarily register to report and account for tax on certain benefits and expenses via the RTI system before the start of the tax year. This process, known as payrolling, eliminates the need to submit P11D forms for the selected benefits at the end of the tax year.

The deadline for submitting P11D, P11D(b), and P9D forms for the 2024-25 tax year is 6 July 2025. These forms can be submitted via commercial software or HMRC’s PAYE online service, as HMRC no longer accepts paper submissions. Employees must also receive a copy of the information by the same date.

Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.

A P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2025 (or 19 July if paying by cheque).

If no benefits are provided during the tax year, employers can either submit a 'nil' return or notify HMRC that no return is required. Penalties apply for late submissions or payments, of £100 per 50 employees for each month a P11D(b) is late.

Source:HM Revenue & Customs | 13-01-2025
Employee Benefits

Tax-exempt employee loans

Jan 16, 2025 by Terry Harris 0 Comments

Beneficial loans, where employees benefit from cheap or interest-free loans from their employer, can trigger tax implications. However, certain exemptions, like loans under £10,000 or qualifying loans, eliminate the need for employers to report or pay tax on them.

An employee can receive a benefit when they are provided with a loan from their employer that is either cheap or interest-free. The benefit arises from the difference between the interest the employee pays, if any, and the market rate they would have to pay if they obtained a loan from another source. These types of loans are commonly referred to as beneficial loans.

However, there are several situations in which beneficial loans may be exempt, meaning employers don’t have to report anything to HMRC or pay tax and National Insurance. One of the most common exemptions applies to small loans where the total outstanding balance to the employee is less than £10,000 throughout the entire tax year.

Other exemptions include:

  • Loans given in the normal course of a domestic or family relationship, where the loan is made by an individual (not a company they control, even if they are the sole owner and employee).
  • Loans provided to an employee for a fixed, invariable period, with a fixed, invariable interest rate that is equal to or greater than HMRC’s official interest rate when the loan was taken out.
  • Loans offered on the same terms and conditions to the general public, typically seen with commercial lenders.
  • Loans that are ‘qualifying loans’ for tax relief, meaning all the interest is eligible for tax relief.
  • Loans made through a director’s loan account, as long as the account is not overdrawn at any point during the tax year.

In these cases, no tax or reporting requirements would apply to the employer.

Source:HM Revenue & Customs | 13-01-2025