Archive: 27th February 2025

Corporation Tax

Tax relief for structures and buildings expenditure

Feb 27, 2025 by Terry Harris 0 Comments

Maximise your tax relief with the Structures and Buildings Allowances (SBA). If you have invested in new or renovated commercial structures, you could claim 3% relief annually—saving you money for the next 33 years!

The Structures and Buildings Allowances (SBA) allows for tax relief on qualifying capital expenditure on new non-residential, commercial structures and buildings. The relief applies to the qualifying costs of building and renovating commercial structures.

The relief was introduced in October 2018 at an annual capital allowance rate of 2% on a straight-line basis. The annual rate was increased to 3% from April 2020, and the corresponding period reduced to 33 and one third years. The rate has remained fixed since then and will remain at the same rate for the 2025-26 tax year.

HMRC’s guidance sets out the process for making a claim. In order to make a valid claim a written allowance statement is required. 

The allowance statement must include:

  • information to identify the structure, such as address and description;
  • the date of the earliest written contract for construction;
  • the total qualifying costs; and
  • the date that you started using the structure for a non-residential activity.

The claimant must also meet the necessary requirements in respect of the building itself and the chargeable period for the claim. 

The start date of the claim is the later of the following two dates:

  • the date when you started using the structure for a qualifying activity; and
  • the date that you’re due to pay for the structure or construction.

No relief is available where parts of the structure qualify for other allowances, such as plant & machinery allowances.

Source:HM Revenue & Customs | 24-02-2025
HMRC notices

Treatment of post-cessation receipts and payments

Feb 27, 2025 by Terry Harris 0 Comments

When a trade ends, income doesn’t always stop. Post-cessation receipts can still arise, and knowing how they are taxed is crucial. Whether it’s Income Tax or Corporation Tax, the recipient—not necessarily the original trader—bears the responsibility.

There are special rules for the taxation of post-cessation receipts after a trade has ceased. The legislation clearly states that the person who receives or is entitled to the post-cessation receipt is the person who is subject to Income Tax or Corporation Tax on the income. This person does not necessarily have to be the same one who was originally carrying on the trade.

The only factor to consider when determining whether these rules apply is whether the income qualifies as a post-cessation receipt. If it does, then, unless a territorial exclusion applies, the income is taxable for the recipient.

The legislation provides for the taxation of certain receipts arising from the carrying on of a trade which:

  • are received after a person permanently ceases to carry on a trade;
  • arise from the carrying on of the trade before the cessation; and
  • are not otherwise subject to tax.

In addition to income meeting these conditions, the legislation specifically identifies other types of income treated as post-cessation receipts. There are also certain receipts, such as payments for the transfer of trading stock, which are specifically excluded from being classified as post-cessation receipts.

Source:HM Revenue & Customs | 24-02-2025
HMRC notices

How far back can HMRC assess under-declared taxes?

Feb 27, 2025 by Terry Harris 0 Comments

From income tax to VAT, HMRC has specific time limits for issuing tax assessments. Depending on the circumstances—whether it’s standard, careless, offshore, or deliberate behaviour—these limits can stretch from 4 to 20 years.

HMRC’s time limits apply in different ways to various taxes, including income tax, capital gains tax, corporation tax, VAT, insurance premium tax, aggregates levy, climate change levy, landfill tax, inheritance tax, stamp duty land tax, stamp duty reserve tax, petroleum revenue tax, and excise duty.

There are four time limits within which assessments can be issued. These are:

  • 4 years from the end of the relevant tax period
  • 6 years (careless) from the end of the relevant tax period
  • 12 years (offshore) from the end of the relevant tax period
  • 20 years (deliberate) from the end of the relevant tax period

The 4-year time limit is the standard time limit for all taxes.

The 6-year time limit applies when taxes have been lost due to the careless behaviour of the taxpayer, or another person acting on their behalf.

The 12-year time limit applies when taxes have been lost due to an offshore matter or offshore transfer. This also applies if reasonable care was taken, or the behaviour is considered careless by the taxpayer or another person acting on their behalf.

Lastly, the 20-year time limit applies when taxes have been lost due to the deliberate behaviour of the taxpayer or another person acting on their behalf, or if the taxpayer has failed to comply with specific historic obligations for periods ending before 1 April 2010.

Source:HM Revenue & Customs | 24-02-2025
Income Tax

UK residence and tax issues

Feb 27, 2025 by Terry Harris 0 Comments

The UK's shift to the Foreign Income and Gains (FIG) regime from April 2025 changes how foreign income is taxed. If you are a UK resident, get ready to possibly pay UK Income Tax on all foreign earnings—no more non-dom remittance basis.

UK Income Tax is generally payable on taxable income received by individuals including earnings from employment, earnings from self-employment, pensions income, interest on most savings, dividend income, rental income and trust income. The tax rules for foreign income can be very complex.

However, as a general rule if you are resident in the UK you need to pay UK Income Tax on your foreign income, such as:

  • wages if you work abroad
  • foreign investments and savings interest
  • rental income on overseas property
  • income from pensions held overseas

Foreign income is defined as any income from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign.

If you are not UK resident, you do not generally have to pay UK tax on your foreign income. There are special rules if you work both in the UK and abroad.

The remittance basis rules which allowed non-UK domiciled individuals (often referred to as non-doms) to be taxed only on UK income and gains, is being abolished. From 6 April 2025, the concept of domicile as a relevant connecting factor in the UK tax system has been replaced by a new residence-based regime known as the Foreign Income and Gains (FIG) regime. 

Source:HM Treasury | 24-02-2025
Value Added Tax

What’s included in your VAT return

Feb 27, 2025 by Terry Harris 0 Comments

With a £90,000 VAT registration threshold, many UK businesses might wonder whether to register voluntarily. Understanding how to balance output and input VAT can help optimise cash flow and avoid costly mistakes with HMRC.

The current VAT registration threshold for businesses is £90,000 in taxable turnover. However, businesses below this threshold can still opt for voluntary VAT registration.

VAT registered businesses charge VAT on their sales, known as output VAT, while also paying VAT on most of their purchases, referred to as input VAT.

The output VAT is collected from customers on behalf of HMRC and must be regularly paid over to HMRC. However, businesses can deduct the input VAT on most (but potentially not all) goods and services purchased from their output VAT liability to HMRC.

This calculation usually results in a VAT payment that is due to HMRC. If the input VAT exceeds the output VAT, HMRC will owe you a refund of overpaid VAT.

HMRC’s guidance states that the following must be included on your VAT return:

  • your total sales and purchases
  • the amount of VAT you owe
  • the amount of VAT you can reclaim
  • the amount of VAT you’re owed from HMRC (if you’re reclaiming VAT on business expenses)

It's important to include VAT on the full value of your sales, even if:

  • You receive goods or services instead of money (e.g., part-exchange)
  • You have not charged VAT to the customer (the full price charged is treated as including VAT).

Please note, you cannot charge VAT to your customers or claim back the input tax you have paid to suppliers unless you have formally registered for VAT.

Source:HM Revenue & Customs | 24-02-2025
Employment & Payroll

Tax-free redundancy payments

Feb 27, 2025 by Terry Harris 0 Comments

If redundancy strikes, you could receive up to £30,000 tax-free. Whether it’s statutory or a more generous employer offer, understanding your entitlements and the latest caps on weekly pay can make a real difference to your finances.

There is a tax-free threshold of £30,000 for redundancy payments, regardless of whether the payment is your statutory redundancy pay, or a more generous amount offered by your employer.

If you have been employed for two years or longer and are made redundant, you are typically entitled to redundancy pay. The legal minimum you are entitled to receive is known as "statutory redundancy pay." However, there are exceptions to this entitlement, such as if your employer offers to retain you in your current role or provide suitable alternative employment, and you refuse the offer without a valid reason.

The amount of statutory redundancy pay is determined by your age and length of service, and is calculated as follows:

  • Under 22: Half a week’s pay for each full year of service
  • Aged 22 to 40: One week’s pay for each full year of service
  • Over 41: One and a half weeks’ pay for each full year of service

Weekly pay is capped at £700, with a maximum of 20 years of service considered. The maximum statutory redundancy payment for the tax year 2024-25 is £21,000, with slightly higher limits applicable in Northern Ireland. The cap on weekly pay for redundancy calculations is expected to increase in April 2025, though details have yet to be announced.

Employers may opt to offer a higher redundancy payment, or you may be entitled to an increased amount based on the specific terms outlined in your employment contract.

Source:HM Revenue & Customs | 24-02-2025
Business Support

The benefits of benchmarking financial results

Feb 25, 2025 by Terry Harris 0 Comments

Benchmarking financial results involves comparing a business’s financial performance against industry standards or competitors. This process offers numerous benefits, helping businesses identify strengths, weaknesses, and opportunities for improvement.

Firstly, benchmarking provides a clear understanding of a company’s position in the market. By comparing key financial metrics such as profit margins, costs, and revenue growth with peers, businesses can identify performance gaps and areas needing attention.

Secondly, it aids strategic planning. With insights from benchmarking, businesses can set realistic targets and develop informed strategies to enhance profitability and efficiency. For example, if a competitor achieves higher profitability through lower overheads, a business might explore cost-reduction strategies.

Moreover, benchmarking promotes continuous improvement. Regular comparisons highlight trends and potential risks, enabling proactive decision-making. It fosters a culture of learning, as businesses adopt best practices from industry leaders.

Lastly, benchmarking can enhance investor confidence. Demonstrating performance in line with or better than industry standards reassures stakeholders of a business’s stability and growth potential.

Overall, benchmarking financial results is a powerful tool for driving competitiveness, efficiency, and long-term success in today’s dynamic business environment.

Source:Other | 24-02-2025
Business

Women in leadership roles

Feb 25, 2025 by Terry Harris 0 Comments

The UK is making significant strides in promoting gender equality within its top companies. According to the latest FTSE Women Leaders Review, women now occupy nearly 43% of board positions across FTSE 350 companies, totalling 1,275 roles. Additionally, women hold 35% of leadership roles, equating to 6,743 positions.

This progress indicates that the voluntary target of 40% women's representation by the end of this year is within reach for many businesses. Over 60% of FTSE 350 companies are close to achieving this goal, reflecting ongoing efforts to dismantle barriers and foster inclusive leadership.

Chancellor of the Exchequer Rachel Reeves emphasised the importance of this momentum, stating that while the UK leads in gender equality in boardrooms, continuous efforts are necessary to eliminate obstacles preventing women from ascending to decision-making roles.

Minister for Investment Baroness Gustafsson OBE highlighted the positive impact of female leadership, noting that strong female voices inspire change and add value throughout organisations.

Despite these advancements, challenges persist, particularly in increasing the number of women in top executive positions such as Chairs and CEOs. The government remains committed to collaborating with businesses to ensure equal opportunities for all, aiming to unlock economic growth and enhance living standards across the nation.

This concerted effort underscores the UK's dedication to fostering a diverse and dynamic business environment, recognising that inclusive leadership is key to driving innovation and economic success.

Source:Other | 24-02-2025
Employment Law

Self-employment cannot be used as a tax smokescreen for contracted employees

Feb 21, 2025 by Terry Harris 0 Comments

A complex celebrity case arose recently in which the First-tier Tax Tribunal (FTT) was asked to consider the application of the intermediaries’ legislation (IR35), otherwise known as off-payroll working, to payments made by Manchester United Football Club (MUFC) to Bryan Robson Ltd.

This appeal was in relation to determinations of income tax made under Reg. 80 of the PAYE Regulations and s31 of the Taxes Management Act (TMA) 1970  for personal appearances provided to MUFC by Bryan Robson Ltd. as a ‘global ambassador’ from 2015/16 to 2020/21. Those agreements included a licence for MUFC to exploit Mr. Robson’s “image rights” and required the former England star to make 35 personal appearances per year at MUFC’s request for a fixed sum. Although the image rights were not subject to the IR35 legislation and were left to be decided separately, and the additional tax due under the IR35 rules is to be determined.

This technical tax case highlights the intricate factors that determine employment status under IR35 and anyone providing such personal services, including freelancers, content creators, and contractors, has to demonstrate a high level of autonomy to be considered truly self-employed and present watertight contracts to the HMRC. 

Source:Other | 20-02-2025
Inheritance Tax

Gifts exempt from Inheritance Tax

Feb 20, 2025 by Terry Harris 0 Comments

Navigating the intricacies of Inheritance Tax (IHT) can be daunting, but understanding the available gift exemptions and strategic planning can significantly reduce potential liabilities. By effectively utilising annual allowances, small gift exemptions, and planning for special occasions, you can ensure more of your wealth is passed on to your loved ones tax-free.

There is an annual Inheritance Tax exemption of £3,000 for gifts, which can be carried forward to the following tax year if not fully utilised. This allows for a maximum gift of £6,000 within a qualifying two-year period. Additionally, you can give as many gifts of up to £250 per person as you wish throughout the tax year, provided you have not already used another exemption for the same individual. There are also special allowances for gifts made on the occasion of a wedding or civil ceremony. These gifts are excluded from the Inheritance Tax calculations in the event of the donor’s death within seven years of making the gift.

Wealthier individuals may also have the ability to make tax-exempt gifts and payments that are funded from their income. With proper planning, this can be an effective strategy, allowing grandparents, for example, to contribute towards their grandchildren’s school fees without incurring tax liabilities.

However, careful planning and consideration are essential to ensure that these payments are deemed to be part of the transferor’s normal expenditure and are made from income rather than from capital. It is also important to ensure that the transferor retains enough income to maintain their usual standard of living after making the gift, as the arrangement must not cause any financial hardship to the giver.

Source:HM Revenue & Customs | 17-02-2025