Sep 2013
New rules for “bed and breakfasting” directors’ loans When a director borrows money from his own private company and does not repay the company within nine months of its year end HM Revenue & Customs (HMRC) can impose tax at 25% of the outstanding loan on the company. If the loan is more than £5,000, the director may also face an income tax charge. Following the introduction of the top rate of income tax, many company owners have found it cheaper to borrow from their companies rather than draw out taxable remuneration. It is not uncommon for directors to repay their loans shortly before the nine month time limit and then withdraw their loans a few days after in order to avoid the company incurring the 25% tax charge. HMRC calls this practice “bed and breakfasting”. Parliament introduced new measures to block bed and breakfasting of loans on 20 March 2013.
Tax Calendar September 2013 19
Monthly CIS payments due.
19/22
Monthly PAYE/Class 1 NICs/student loan payments due. 19th for non-electronic payments, 22nd for online payments.
October 2013 1
Annual increase in national minimum wage.
5
End of tax quarter.
11
Deadline for requesting a pre-banding check for the Annual Charge on Enveloped Dwellings.
19/22
Second quarter PAYE/NICs/student loan and CIS payments due (for quarter ended 5 October).
The 30-day rule for loan balances of £5,000 or more: if a repayment of £5,000 is made and then the same amount is re-withdrawn within a 30-day period, the repayment is matched with the later withdrawal. The effect is that the original loan is not treated as being repaid. Replacement rule for loans exceeding £15,000: if a repayment of at least £5,000 is made against an outstanding loan of £15,000 or more, but there is an intention to withdraw at least the sum repaid again later it is not treated as a repayment but is instead matched against the subsequent drawing. The two measures may easily catch out directors who are trying to repay loans by instalment, if they are not careful about timings. However they can take some comfort in the fact that they will not apply when the loan is repaid by voting taxable pay such as a dividend or salary. Call us and we can advise how these rules will apply in your particular circumstances.
Monthly PAYE/Class 1 NICs/student loan payments due. Deadline for payment of PAYE Settlement Agreement (if any) for tax year ended 5 April, 2013. 19th for non-electronic payments, 22nd for online payments. 31
HMRC have also revealed that they have received a large number of requests from employers who wish to be treated as annual schemes. HMRC expect to deal with these by Autumn. If you are unsure as to whether you may qualify for annual reporting under RTI give us a call to discuss your specific circumstances.
www.mcmillanaccountants.com
Deadline for submission of paper Self Assessment tax return for tax year ended 5 April, 2013. Deadline for first annual return for Annual Tax on Enveloped Dwellings
November 2013 2
Quarterly submissions of P46(car) (for employees whose car and/or fuel benefit has changed in the quarter to 5 July).
19
Monthly CIS payments due.
19/22
Monthly PAYE/Class 1 NICs/student loan payments due.
Real Time Information (RTI) update HMRC has announced that its concession to relax the strict timing of submission under Real Time Information (RTI) reporting will now be extended until April 2014. This means that smaller employers should make every effort to file under RTI but they will not be penalised if their submissions are delayed until after payment is made to employees.
Issue 5, 2013
NEWSLETTER
19th for non-electronic payments, 22nd for online payments. December 2013 19/22
Monthly PAYE/Class 1 NICs/student loan payments due. 19th for non-electronic payments, 22nd for online payments.
This newsletter is written for the general interest of our clients and is not a substitute for professional advice. Please contact McMillan & Co LLP for specific advice before taking any action.
Issue 5, 2013 Page 2
NEWSLETTER Tax-efficient vans Vans are essential machinery for many businesses. Unlike cars, vans qualify for a wide range of tax allowances and they may also be provided to employees tax-free. If you are self-employed you will receive tax relief on the cost of a new or second-hand van as a “capital allowance”. If you are using your van 100% for business the allowance will be worth 100% of the cost. You may also claim the costs of general motoring, such as fuel, road tax, servicing and repairs. HMRC tend to accept that most vans have minimal private use, however if there is substantial private use you should restrict the amount that you claim for capital allowances and general motoring proportionately. If you are buying a van by HP you also receive tax relief on any interest or charges that you pay under the finance agreement. Alternatively, you may claim tax relief on a fixed rate per mile. If you do this you are unable to claim capital
allowances or your general motoring costs. The fixed rate (see July’s news) is 45p per mile for up to 10,000 miles and 25p per mile thereafter. If you are an employer or a company, you may provide vans for your employees or directors and if private use is insignificant or just amounts to commuting to and from work there is no taxable benefit for the employee or director. If you decide to allow unlimited private use by the driver the tax cost for them, compared with running a car, is very low. The tax benefit being £3,000 for use of the van and £564 for unlimited fuel. This will cost a basic rate taxpayer just £13.70 per week in tax, and £9.45 for the employer, who is required to pay employer’s National Insurance on any taxable van benefit. The employer will additionally obtain capital allowances on the cost of the van and on all general motoring costs, including the private fuel it provides. If you are either self employed and choosing whether to claim tax relief on your actual costs or on a fixed rate, or you’re an employer who is considering providing vans for private use, please don’t hesitate to contact us so that we can go over the options with you.
Furnished holiday letting: recent developments If you rent out a property as a short-term holiday let it may be desirable to ensure that your property qualifies as a “furnished holiday letting” (FHL) for tax purposes. Achieving FHL status not only allows you to claim losses and capital allowances on the furniture and fixtures used in your property but it also allows you capital gains tax (CGT) Entrepreneurs’ relief when you sell up. This means that even if you are a higher rate income tax payer you pay no more than 10% on disposal. Tax law in this area has seen many changes in the last few years, for example: •
In 2013 in two different tax cases before the Upper Tier Tribunal it was decided on the first hand that FHL does not qualify for inheritance tax (IHT) business property relief, but in another case it was agreed that any letting qualifies as a business activity for CGT hold over relief.
•
In April 2012 the qualifying conditions for FHL changed. The minimum period in which your property must be available for letting is now 210 days per year and it must be let to the public for 105
days in a year. Additional provisions were added in 2011 which allow a period of grace if you do not make the required number of days in a tax year. •
Also from April 2012 buyers of FHLs need to ensure that sellers have pooled all fixtures for capital allowances purposes in the property for sale.
•
In April 2008 the capital allowances rules changed making electrical and cold water systems qualify for allowances (previously they had been classed as part of the structure of the building) and so it may be possible to still claim these capital allowances.
We expect there to be an appeal in the IHT case but given the number of changes we strongly advise that we review with you your FHL businesses year on year to ensure that you are not affected in any adverse way.
If you have any queries in relation to any of the topics covered in this newsletter then please do not hesitate to contact us. 28 Eaton Avenue Matrix Office Park Buckshaw Village Chorley Lancashire, PR7 7NA 01772 299888 [email protected]
McMillan & Co LLP is registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales
Tax Calendar September 2013 19
Monthly CIS payments due.
19/22
Monthly PAYE/Class 1 NICs/student loan payments due. 19th for non-electronic payments, 22nd for online payments.
October 2013 1
Annual increase in national minimum wage.
5
End of tax quarter.
11
Deadline for requesting a pre-banding check for the Annual Charge on Enveloped Dwellings.
19/22
Second quarter PAYE/NICs/student loan and CIS payments due (for quarter ended 5 October).
The 30-day rule for loan balances of £5,000 or more: if a repayment of £5,000 is made and then the same amount is re-withdrawn within a 30-day period, the repayment is matched with the later withdrawal. The effect is that the original loan is not treated as being repaid. Replacement rule for loans exceeding £15,000: if a repayment of at least £5,000 is made against an outstanding loan of £15,000 or more, but there is an intention to withdraw at least the sum repaid again later it is not treated as a repayment but is instead matched against the subsequent drawing. The two measures may easily catch out directors who are trying to repay loans by instalment, if they are not careful about timings. However they can take some comfort in the fact that they will not apply when the loan is repaid by voting taxable pay such as a dividend or salary. Call us and we can advise how these rules will apply in your particular circumstances.
Monthly PAYE/Class 1 NICs/student loan payments due. Deadline for payment of PAYE Settlement Agreement (if any) for tax year ended 5 April, 2013. 19th for non-electronic payments, 22nd for online payments. 31
HMRC have also revealed that they have received a large number of requests from employers who wish to be treated as annual schemes. HMRC expect to deal with these by Autumn. If you are unsure as to whether you may qualify for annual reporting under RTI give us a call to discuss your specific circumstances.
www.mcmillanaccountants.com
Deadline for submission of paper Self Assessment tax return for tax year ended 5 April, 2013. Deadline for first annual return for Annual Tax on Enveloped Dwellings
November 2013 2
Quarterly submissions of P46(car) (for employees whose car and/or fuel benefit has changed in the quarter to 5 July).
19
Monthly CIS payments due.
19/22
Monthly PAYE/Class 1 NICs/student loan payments due.
Real Time Information (RTI) update HMRC has announced that its concession to relax the strict timing of submission under Real Time Information (RTI) reporting will now be extended until April 2014. This means that smaller employers should make every effort to file under RTI but they will not be penalised if their submissions are delayed until after payment is made to employees.
Issue 5, 2013
NEWSLETTER
19th for non-electronic payments, 22nd for online payments. December 2013 19/22
Monthly PAYE/Class 1 NICs/student loan payments due. 19th for non-electronic payments, 22nd for online payments.
This newsletter is written for the general interest of our clients and is not a substitute for professional advice. Please contact McMillan & Co LLP for specific advice before taking any action.
Issue 5, 2013 Page 2
NEWSLETTER Tax-efficient vans Vans are essential machinery for many businesses. Unlike cars, vans qualify for a wide range of tax allowances and they may also be provided to employees tax-free. If you are self-employed you will receive tax relief on the cost of a new or second-hand van as a “capital allowance”. If you are using your van 100% for business the allowance will be worth 100% of the cost. You may also claim the costs of general motoring, such as fuel, road tax, servicing and repairs. HMRC tend to accept that most vans have minimal private use, however if there is substantial private use you should restrict the amount that you claim for capital allowances and general motoring proportionately. If you are buying a van by HP you also receive tax relief on any interest or charges that you pay under the finance agreement. Alternatively, you may claim tax relief on a fixed rate per mile. If you do this you are unable to claim capital
allowances or your general motoring costs. The fixed rate (see July’s news) is 45p per mile for up to 10,000 miles and 25p per mile thereafter. If you are an employer or a company, you may provide vans for your employees or directors and if private use is insignificant or just amounts to commuting to and from work there is no taxable benefit for the employee or director. If you decide to allow unlimited private use by the driver the tax cost for them, compared with running a car, is very low. The tax benefit being £3,000 for use of the van and £564 for unlimited fuel. This will cost a basic rate taxpayer just £13.70 per week in tax, and £9.45 for the employer, who is required to pay employer’s National Insurance on any taxable van benefit. The employer will additionally obtain capital allowances on the cost of the van and on all general motoring costs, including the private fuel it provides. If you are either self employed and choosing whether to claim tax relief on your actual costs or on a fixed rate, or you’re an employer who is considering providing vans for private use, please don’t hesitate to contact us so that we can go over the options with you.
Furnished holiday letting: recent developments If you rent out a property as a short-term holiday let it may be desirable to ensure that your property qualifies as a “furnished holiday letting” (FHL) for tax purposes. Achieving FHL status not only allows you to claim losses and capital allowances on the furniture and fixtures used in your property but it also allows you capital gains tax (CGT) Entrepreneurs’ relief when you sell up. This means that even if you are a higher rate income tax payer you pay no more than 10% on disposal. Tax law in this area has seen many changes in the last few years, for example: •
In 2013 in two different tax cases before the Upper Tier Tribunal it was decided on the first hand that FHL does not qualify for inheritance tax (IHT) business property relief, but in another case it was agreed that any letting qualifies as a business activity for CGT hold over relief.
•
In April 2012 the qualifying conditions for FHL changed. The minimum period in which your property must be available for letting is now 210 days per year and it must be let to the public for 105
days in a year. Additional provisions were added in 2011 which allow a period of grace if you do not make the required number of days in a tax year. •
Also from April 2012 buyers of FHLs need to ensure that sellers have pooled all fixtures for capital allowances purposes in the property for sale.
•
In April 2008 the capital allowances rules changed making electrical and cold water systems qualify for allowances (previously they had been classed as part of the structure of the building) and so it may be possible to still claim these capital allowances.
We expect there to be an appeal in the IHT case but given the number of changes we strongly advise that we review with you your FHL businesses year on year to ensure that you are not affected in any adverse way.
If you have any queries in relation to any of the topics covered in this newsletter then please do not hesitate to contact us. 28 Eaton Avenue Matrix Office Park Buckshaw Village Chorley Lancashire, PR7 7NA 01772 299888 [email protected]
McMillan & Co LLP is registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales
