Lettings relief

This useful relief can be claimed by individuals who have let out their properties, which are or have been at some point in the past their main residence.  Lettings relief currently provides up to £40,000 of relief (£80,000 for a couple).

The relief is changing from April 2020 and will only be available to those who are in shared occupancy with a tenant.  This change will not affect owner-occupiers, as they are occupying the property with their tenant or landlords who have never lived in the property they are renting out, as this relief would never have been available to them in the first place.

Final period exemption

Currently individuals do not have to pay capital gains tax on gains made in the final 18 months of ownership, even if they are not an owner-occupier during that period, as long as the property has been their main residence at some point.

However, a long exemption period means that more relief can accrue on two properties (an unsold one and a new one) at the same time.  HMRC state that this relief is ‘out of line with the intention of the exemption, which is meant to protect those who move to a new main residence but are unable to sell their original home immediately’.

Therefore, from April 2020, the exemption will be reduced to 9 months from the previous 18 months, which in turn was reduced from 36 months from April 2014.  According to HMRC 9 months is still twice the length of an average property transaction, it does make you wonder where HMRC are going with this exemption.  For those in or moving into care homes, and people with a disability, 36 months of exemption will not change.

The post Upcoming changes to principle private residence relief and lettings relief. appeared first on Assure Accountants.

Receiving a letter from the worldwide disclosure facility

So what should you do if you receive one of these letters? Firstly if you receive one do not panic, it could be that you are already correctly declaring all of your income. In these instances, simply sign HMRC’s declaration included in their letter, which states that your income is “correct and complete to the best of your knowledge and belief”. In these circumstances, it may be worth your time sending a covering letter explaining your foreign income and how you have been declaring this.

The area of tax surrounding domicile, remittance and residency status can be complicated and there are many instances of individuals receiving money from foreign sources, which are not being declared in the UK. Usually there is no deliberate intention to not inform HMRC, just a lack of understanding on what does and what does not need to be declared in the UK.

Prompted disclosures

If you are reading this blog and you have yet to receive a letter from HMRC but are suddenly very aware that there may be income you should have been declaring then you are in luck. HMRC will usually charge lower penalties than those they charge if you are ‘prompted’ by one of their letters. For ‘prompted’ disclosures, the penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore-related income.

Whether you have or have not received this letter, if you are unsure of your position I would recommend talking to a tax adviser. Assure Accountants can certainly help you understand your tax position and what, if any action needs to be taken.

If income does need to be declared a disclosure will need to be made via HMRC’s worldwide disclosure facility and Assure Accountants can do this for you on your behalf, working with HMRC to get the best penalty outcome for you.

The post What to do if you receive a letter from HMRC’s worldwide disclosure facility appeared first on Assure Accountants.

What is a Help to Buy ISA?

The Help to Buy: ISA was launched in 2015 and it is intended to help first-time buyers save money for their first home. If you’re a first-time buyer, the benefit of saving into a Help to Buy: ISA is that the government will boost your savings by an impressive 25%. This is a welcome addition for anyone who is desperate to own their first home!

If want to help your adult children or grandchildren onto the property market you can contribute to their ISA. Anyone interested in opening a Help to Buy: ISA must 16+ and 18+ for a Lifetime ISA.

Opening a Help to Buy: ISA is relatively straight forward, and they are available from a range of banks, building societies and credit unions. The ISA is available to every first-time buyer, so if you are buying your first home with a partner you can both open an ISA and potentially benefit from a combined £6000 bonus.

The ISA can be used to buy a property up to the value of £250,000 or up to £450,000 for homes in London.

How the ISA works

Basically, for every £200 you save the government will contribute £50. You are entitled to save up to £200 per month into the ISA.

You can open the ISA with just £1 and add more money as it becomes available. Or, you can deposit a maximum of £1200 into the ISA to get you started.

The minimum bonus the government will pay out is £400, meaning you have to save £1600 into the ISA. The maximum the government will pay out is £3000 on savings of £12000.

When you are getting close to buying your chosen property, instruct your solicitor or conveyancer to apply for the government bonus. Upon receiving the money, it will be added to the money you are saving for your property. The bonus money can be used for a mortgage deposit, but it can’t be used for a deposit which is due at exchange, to pay for solicitor’s fees or estate agents fees.

Act quickly as time is ticking on

The latest date you can open a Help to Buy: ISA is 30 November 2019. After this it will be replaced with a Lifetime ISA (LISA for short).

As well having a deadline for applying a Help to Buy: ISA, you’ve only got until 30 November 2029 to apply for the bonus. So, if you want to receive the maximum £3000 bonus you’ve got 10 years to save £12,000.

If you’re a contractor who is planning to purchase your first home or if you’re looking to help a child or grandchild get onto the housing market, speak to our expert team for further information on the Help to Buy: ISA. Speak to one of our Directors on +44 330 174 4922 or send us a message via our website and we’ll be in touch shortly.

The post Could you cash in with a Help to Buy: ISA? appeared first on Assure Accountants.

Having a cash balance in the bank is a good thing, though. Isn’t it? Well – not always, because it may have an impact on several tax benefits.  Here’s how:

Entrepreneurs relief

If you qualify for entrepreneur’s relief it means, you’ll pay less Capital Gains Tax when you dispose of some or all of the business. There was a concern that building up a cash balance which is greater than the business’ trading activity, could impact on the company’s trading status. However, at this moment it’s deemed that a cash balance which has been built up due to trading, doesn’t necessarily affect a company’s trading status for entrepreneurs’ relief. But this is something be wary of for the future.

Inheritance Tax (IHT)

The thing to be aware of is that a trading company shares are eligible for 100% relief against tax. So, if you die while owning shares in a private trading company, these shares won’t be subject to tax. However, if it’s determined that the business is ‘wholly or mainly’ acquiring investments, then the shares can be subject to tax.

Cash balances are seen as an investment so if the cash balance is more than 50% of the company’s trading activity, you could lose this tax relief altogether.

IHT and excepted asset rule

If the cash balance is not too great that it has no impact on the company’s trading status, there’s still a danger that HMRC could argue that the cash balance is not required for the trading of the business. In this case, the ‘excepted asset’ rule could apply.  This is a complicated area of tax, and professional guidance should be sought, but in brief, business property relief would be given at 100% for the shares, but this would not apply to the value which is attributable to the cash balance.

For example, a company’s trade is worth £1 million, but it also has a cash balance of £500,00 which was surplus to its trading requirements. In this case, only 2/3 thirds of the value of these shares would be eligible for IHT relief.

Some business owners feel secure in having cash in the bank. But building up a cash mountain is not always the best option, not at least for the points we’ve covered above. There are other options available, which can put the money to better use. These include:

Making pension contributions

Making pension contributions is a good use of the cash balance, as you get Corporation Tax relief on them. Plus, the funds are available for investment in a tax-free environment – there is no tax to pay on investment income or capital gains released by pension funds. But there may be limitations on the amount of money that can be invested.

Investing the money

Any money that is sitting in a bank account will be earning a pittance in interest. You can look at alternative ways to invest the money, such as through property. Hopefully, over time the property will grow in value, thus increasing the return on your investment. However, the downside is that this could impact on your business’ trading status for entrepreneur’s relief. It could also affect your claim to business property relief.

Loan the money

If you’re looking to make use of the money while preserving your tax benefits, loaning the money to a parallel investment company, may be the best option. While the loan will be classed as an ‘excepted asset’ for inheritance tax business property tax relief, it’s unlikely to impact on the trading status of the lending business. Plus, if the loan was made to a company who is part of a Limited Liability Partnership (LLP), this company could invest in property and the income and subsequent growth would be outside of the corporate envelope.

If you’ve built up a cash mountain and are looking for ways to preserve your business’ tax benefits whilst making the most of the money, speak to one of our experienced Directors on +44 330 174 4922, or send us a brief message via our website and we’ll call you back.

The post ‘Cash mountain’ – why you need to be careful of building up cash appeared first on Assure Accountants.

What is ATED?

Annual Tax on Enveloped Dwellings (ATED) is an annual tax that is payable by companies which own UK based residential dwellings.  ATED applies to companies, partnerships or collective investment schemes that partly or wholly own a residential property which is valued at more than £500,000.

What is meant by ‘dwellings’?

The term, ‘enveloped dwelling’ can be confusing, but in simple terms, a property is deemed ‘enveloped’ if it is owned within a corporate wrapper and not by an individual e.g. owned by a limited company for instance.

The term dwelling is far-reaching and applies to a building and its grounds (including gardens) which can be used as a residence. More often than not, it will relate to houses and flats. If the property is mixed in with others which do not have residential use, then ATED will only apply to the portion that is used for residential purposes.

Certain types of buildings aren’t classed as dwellings, these include:

• hotels
• guesthouses
• boarding school accommodation
• hospitals
• military accommodation
• care homes
• prisons
• student halls of residence

Source: HMRC

How much ATED is due?

The amount payable is calculated depending on the value bracket the residential property falls into:

Source: HMRC

The ATED charge is calculated on the 2017 property valuation, or if it was purchased after this date, it’s based on the purchase price. HMRC then requires properties to be revalued every five years.

How to file your ATED return

You file your ATED return online with HMRC and pay anything that is due. The ATED period runs from 31^st March to 1^st April. The return (including nil returns) must be completed, filed and payment made by 30^th April. This only gives you 30 days to get everything sorted!

Tax relief available on ATED

There is some good news as tax relief may be available which means ATED is not payable. However, you can only claim this by filing an ATED return. You may be able to claim tax relief if the dwelling meets certain criteria, such as:

• it’s let to a third party on a commercial basis, and isn’t at any time occupied (or available for occupation) by someone connected to the owner
• it’s open to the public for at least 28 days a year
• it’s part of a property trading business and isn’t (at any time) occupied by someone connected to the owner

For a full breakdown on the tax relief available, please speak to one of our Directors on +44 330 174 4922.

ATED penalties

You may face penalty charges and interest if you do not file your ATED return on time, do not pay what you owe on time or make a mistake on your return. The penalties for ATED are in line with self-assessment tax return penalties and as such are:

• immediate £100 fine
• after three months a £10 daily charge is applied, up to a total of £900
• after three months a £300 penalty is charged
• after 12 months another £300 penalty is added

If you go past this period, further penalties will be added. Additionally, if tax is due, then interest will be added as a percentage to the amount owed over this period.

If you own a property through a company or partnership and are concerned you will have to file an ATED return or need advice on how to file an ATED return, get in touch with us on +44 330 174 4922, or send us a message via our website.

The post ATED – are you prepared? appeared first on Assure Accountants.

Our team of experts has come together to list their top Xero apps and plugins:

1. Receipt Bank

https://www.receipt-bank.com/

With Receipt Bank you’ll never have to worry about misplacing or losing a receipt or invoice again. Snap a picture of your receipt using their mobile app and the system gets to work extracting the important information like the date, the amount and the supplier’s details. This information is then fed into Xero. A copy of the receipt or invoice is stored in the cloud for 10 years. Using Receipt Bank saves you from having to manually enter the information and it makes it easier to claim for all your expenses, even the smallest.

2. Expensify

https://use.expensify.com/

Expensify takes expense tracking to a whole new level! Its mobile app – SmartScan, enables you to capture an image of the invoice or receipt, and the data is then automatically inputted into Xero. You can specify if you want this expense to be reviewed prior to approval, which can be useful if you’re in charge of tracking a team’s expense spending. Expensify can integrate with travel apps like Uber and HotelTonight to automatically record and store travel expenses. And, by enabling notifications, you can be kept informed of changes to your itinerary, like flight delays.

3. Harvest

https://www.getharvest.com/

Harvest is a fully integrated time tracking and invoice app plugin. It works across different devices, including PC, Mac and mobile. It’s used to track your time and turn your billable hours into professional looking invoices which can be sent to clients. Harvest has the ability to turn this data into a timesheet, so you can see where your time is being spent. The draw of this is that it can highlight inefficiencies in workflows and notify you if you a project is expected to overrun. Harvest can also be used to upload expense claims like travel expenses.

4. Hubdoc

https://www.hubdoc.com/ 

Say goodbye to bulky and unsightly filing cabinets and move all your important documents to the cloud. Use Hubdoc’s app to snap and to store copies of your receipts, bills and invoices. Or, if you’re not keen on apps, don’t worry, you can email a copy of your files to Hubdoc and they’ll put them into organised files for you. If you have multiple recurring expenses each month, connect your suppliers to Hubdoc and they’ll download all your bills so you and your accountant can access them all in one place, instead of having to log-in to multiple accounts.

5. Shopify

https://www.shopify.co.uk/ 

If you’re looking to build an online business, there’s no easier way to get going than with Shopify. Shopify is an eCommerce platform, which enables you to build a website through which to sell your products. By using the Shopify – Xero integration you can easily and quickly import the details of all your orders into your accounting system, which reduces the chance of mistakes being made. Use this imported data to create invoices or powerful reports to track how your business is going.

6. Stripe

https://stripe.com/gb

Speed up the process of getting paid with Stripe. Add a Stripe ‘Pay Now’ button to your invoices, to enable your clients to pay your invoice quickly and securely using a debit or credit card. It’s good for them as they can action payment immediately and it’s great for you as you don’t have to worry about late payments. It’s incredibly easy to set up the integration and once the payment has been made, it will be marked down as paid in Xero.

We’re Xero cloud accounting specialists.

If you’d like to find out how Xero can transform your small business accounting, speak to one of our Directors on +44 330 174 4922, or send us a message via our website and one of our team will call you back.

The post The top apps and plugins for Xero to make your life easier appeared first on Assure Accountants.

You may be doing this already, which is fantastic, but it’s important you regularly review your tax planning strategies to see if they are still tax-efficient. Plus, changes which were announced in the 2018 Budget means some of these strategies may have changed. As an owner – manager of a business, here are some things that our team think you need to be aware of:

Capital allowances

The Chancellor announced in the 2018 Budget there will be a temporary increase to the Annual Investment Allowance (AIA) from £200,000 to £1 million. This is available for capital expenditure, such as plant and machinery which is purchased from 1^st January 2019 to 31^st December 2020.

While most welcome this increase. It may cause problems for some businesses whose chargeable period spans 1^st January 2019. If this is the case the business’ transitional chargeable period comprises of:

1. the AIA entitlement, based on the £200,000 cap for the portion of the period falling before 1 January 2019
2. the AIA entitlement, based on the temporary £1,000,000 annual cap for the portion of the period falling on or after 1 January 2019

Source: HMRC

The business’ maximum Annual Investment Allowance for their transitional period would be the total of i. + ii.

For example, a business who has a chargeable period of 1 June 2018 to 31st May 2019, their maximum AIA would be:

1. Proportion for the period 1 June to 31^st December 2018 is 7/12 x £200,000 = £116,666
2. Proportion for the period 1 January to 31st May 2019 is 5/12 x £1,000,000 = £416,666

Total of £116,666 + £416,666 = £533,332.

In some cases, it may be appropriate to revise the chargeable period to align it with the calendar year.

Employer pension contributions

Employers can make a lump sum contribution into an employee’s pension scheme. And, as it’s classed as an allowable business expense, it can be deducted off the business’ profits, therefore reducing the amount of Corporation Tax that is due.

However, at your year-end, you can’t account for future pension contributions as they must be paid by the year-end for it to be a deductible expense. Also, if you plan on making a large contribution, this may have to be spread across the year.  To understand more about the deductibility and amounts that can be claimed, our directors can assist on +44 330 174 4922.

Claim for everything you can

Every business has 12 months after its accounting period ends to file a Company Tax Return, and a further 12 months to make amendments to this return.

It’s important that you use this period to check to see if there is anything else you can claim for. Such as losses against the previous year’s profit. Or, tax reliefs such as the ‘creative industry relief’ which is available to companies who work in TV and film industry.

Something else worth considering, is if the business has acquired commercial property with fixtures that may be eligible for capital allowances, then the business has two years from the purchase date to raise a query in conjunction with the vendor, to agree on how much of the purchase price is eligible for capital allowances and maybe AIA.

If you’re looking to get your year-end planning back on track, there is no better time to do it. Speak to one of our Directors on +44 330 174 4922 to discuss these points further in detail, or send us a brief message through our website and we’ll call you back.

The post Year-end planning 2018/19 – get your strategy on track appeared first on Assure Accountants.

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If you’re not sure what PPC is, it stands for Pay Per Click advertising. These are the adverts that you see at the top and bottom of Google search results.

In 2016, approximately $35 billion was spent on paid advertising in America alone.  The industry is huge, and if you get it right, it can be a great source of leads for your business.

If you are already using PPC or are thinking of placing some adverts on Google for your business, we discuss how you can reclaim the VAT on your advertising spend.

Things to know:

• The invoice you’ll receive from Google will have Google Ireland Ltd printed on it. That’s because Google (like many other large corporations) have based themselves in the Republic of Ireland.
• PPC is ultimately an electronic service. The place of supply for VAT is in the country in which you are based. In this case, the UK. Therefore, if you are VAT registered you must account for it using the Reverse Charge System.

Reverse Charge System – what it involves

The Reverse Charge System is only used for services and is not applicable to goods. Also, if you are not VAT registered the Reverse Charge System will not apply.

The Reverse Charge is the amount of VAT you would have paid on a service if you had bought it from a company within the UK. This figure is added to the output VAT figure in Box 1 on the VAT return. Next, you add the same figure to your input VAT figure in Box 4 on the VAT return.

The net invoice value (without VAT) is added to your net sales in Box 6 on the VAT return. The same figure is added to your net purchases in Box 7 on the VAT return.

This system effectively cancels out the VAT figure, meaning you don’t pay anything to HMRC or reclaim anything back.

Example:

You spend £120 on Pay Per Click advertising. If Google was based in the UK, the standard rate of VAT (20%) would apply.

So, the Reverse Charge would be £24, or £120 x 20%.

Extra points worth knowing:

1. If you have not advised Google of your VAT registration number, you must do this immediately. Otherwise, they will invoice with Irish VAT added. You can do this through your Google AdWords account.

2. If you are not VAT registered, the amount of money you spend on PPC counts towards your sales in relation to the VAT threshold. This is because the Reverse Charge System classes the invoice from Google as if you have raised it yourself as a sale. So, if you think you are nearing the threshold or expect to exceed it within the next 30 days you must register for VAT.

3. If you are using the VAT Flat Rate Scheme, then you add the VAT amount to your output VAT (Box 1) and your input VAT (Box 4) of your return. You leave boxes 6 and 7 blank.

Want to know more?

If you would like further information on the Reverse Charge System or if you would like to discuss any details mentioned in this article in greater depth, please contact us on +44 330 174 4922.

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