Archive: 1st May 2025

Corporation Tax

Tax refunds for dissolved companies

May 1, 2025 by Terry Harris 0 Comments

Dissolving a company ends its legal existence — but unresolved assets become property of the Crown under bona vacantia. Directors must act carefully to settle assets and liabilities before dissolution, avoiding costly mistakes and lost opportunities.

Dissolving a company is a formal legal process that marks the end of its existence. While this process may seem straightforward, it is essential for directors and company officers to understand the legal and financial consequences that arise once a company is dissolved. In particular, in relation to outstanding assets, liabilities, and the principles of bona vacantia.

A company legally ceases to exist upon dissolution. From that point forward, it can neither undertake activities nor receive assets, including tax refunds. It is therefore the responsibility of the company's directors to ensure that all assets and liabilities are appropriately resolved prior to the dissolution taking effect.

Any assets or rights (excluding liabilities) that remain within the company at the date of dissolution automatically pass to the Crown as bona vacantia, a legal doctrine meaning “ownerless goods.” The management of bona vacantia assets is delegated to different bodies across the United Kingdom depending on the company's location, but all act on behalf of the Crown.

Importantly, only companies that have been formally dissolved fall under bona vacantia. Companies that are in the process of liquidation or being wound up are not yet subject to these rules, as they are still legally in existence. Until dissolution is complete, the company retains ownership of its assets and rights.

In certain circumstances, it may be possible to restore a dissolved company to the Companies Register if the dissolution occurred within the last six years. Restoration would reverse the effects of bona vacantia, reinstating the company’s rights to its previously held assets. However, this process can be complex, time-consuming, and should not be relied upon as a remedy for poor planning.

Source:HM Government | 28-04-2025
Employment & Payroll

Tax relief if required to work from home

May 1, 2025 by Terry Harris 0 Comments

If employees must work from home and their employer does not reimburse certain costs, they may be entitled to claim tax relief. Understanding the rules for household expenses, business travel, and equipment purchases is key to making a successful claim.

Eligibility to claim tax relief applies when homeworking is a requirement of the role. This may be the case if an employee's job necessitates living at a distance from the office, or if the employer does not maintain a physical office. Tax relief is generally not available where homeworking is a personal choice, even if permitted under the terms of the employment contract or where the office is occasionally at capacity.

Employees may claim a flat-rate tax relief of £6 per week (or £26 per month for monthly-paid staff) to cover additional household costs incurred as a result of working from home, without the need to retain detailed expense records. The value of the relief depends on the individual’s highest marginal rate of tax. For example, a basic-rate taxpayer (20%) would receive £1.20 per week in tax relief (20% of £6). Alternatively, individuals may opt to claim the actual additional costs incurred, provided they can supply evidence to HMRC in support of the claim. Backdated claims for up to four previous tax years are also permitted.

Tax relief may also be available for the use of a personal vehicle, a car, van, motorcycle, or bicycle, when used for business purposes. Relief is not available for ordinary commuting between home and a regular place of work. However, where travel is to a temporary workplace, or where the vehicle is used for other qualifying business journeys, tax relief may apply.

In addition, employees may claim tax relief on the cost of equipment purchased personally for work-related purposes, such as a laptop, office chair, or mobile phone, provided these are used exclusively or primarily for business use.

Source:HM Revenue & Customs | 28-04-2025
Income Tax

Is income from hobbies taxable?

May 1, 2025 by Terry Harris 0 Comments

Not every money-making hobby counts as a business for tax purposes. Knowing when a hobby crosses into trading territory is vital to avoid unexpected tax bills. If your side project is growing, it might be time to check your tax position and stay compliant.

For instance, HMRC manuals provide the example of someone who enjoys repairing cars or selling stamps in their spare time. Whilst this might lead to making what’s known as taxable supplies, that alone does not mean the person is operating a business. It all depends on whether the activity passes the "business test". This is a set of measures that HMRC uses to determine whether there’s a business intention.

Generally, small-scale or infrequent sales from hobbies aren’t considered a business. But in some cases, hobbies can evolve. What starts off as a hobby or side interest might grow over time into something more substantial, and that’s when it could begin to attract tax obligations. In fact, many well-known businesses have started out as hobbies before scaling into full operations.

When deciding whether a hobby has crossed into business territory, it’s also helpful to consider how income tax would apply. The Income Tax Act makes it clear that tax is charged on the profits of any trade, profession, or vocation and there are similar VAT rules.

It is also important to look at any costs that have been incurred and whether these might genuinely relate to a business activity.

Source:HM Revenue & Customs | 28-04-2025
HMRC notices

State Benefits – What is taxable and what is not

May 1, 2025 by Terry Harris 0 Comments

Not all state benefits are tax-free! Some, like the State Pension and Carer’s Allowance, are taxable, while others, like PIP and Universal Credit, are not. Knowing the difference can help you stay on top of your tax responsibilities and avoid surprises.

HMRC’s guidance outlines the following list of the most common state benefits on which Income Tax is payable, subject to the usual limits:

  • Bereavement Allowance (previously Widow’s Pension)
  • Carer’s Allowance or (in Scotland only) Carer Support Payment
  • Contribution-Based Employment and Support Allowance (ESA)
  • Incapacity Benefit (from the 29th week you receive it)
  • Jobseeker’s Allowance (JSA)
  • Pensions Paid by the Industrial Death Benefit Scheme
  • The State Pension
  • Widowed Parent’s Allowance

The most common state benefits that are not subject to Income Tax include:

  • Attendance Allowance
  • Bereavement Support Payment
  • Child Benefit (income-based – use the Child Benefit tax calculator to see if you’ll have to pay tax)
  • Disability Living Allowance (DLA)
  • Free TV Licence for Over-75s
  • Guardian’s Allowance
  • Housing Benefit
  • Income Support – though you may have to pay tax on Income Support if you’re involved in a strike
  • Income-Related Employment and Support Allowance (ESA)
  • Industrial Injuries Benefit
  • Lump-Sum Bereavement Payments
  • Maternity Allowance
  • Pension Credit
  • Personal Independence Payment (PIP)
  • Severe Disablement Allowance
  • Universal Credit
  • War Widow’s Pension
  • Winter Fuel Payments and Christmas Bonus

Understanding which state benefits are taxable and which are tax-free is important in order to understand the tax implications and ensure compliance with HMRC rules. If you are receiving any of the benefits listed and are unsure about your tax obligations, please do not hesitate to contact us.

Source:HM Revenue & Customs | 28-04-2025