Mar 2013
Issue 2, 2013
NEWSLETTER Capital allowances: maximising allowances before the end of the tax year You can claim tax relief on the purchase cost of capital equipment and assets in several different ways. The Annual Investment Allowance (AIA) gives businesses 100% tax relief on their expenditure on plant and machinery. Whilst the AIA does not extend to cars, which receive allowances based on their CO 2 emissions, it does apply to vans and other assets such as fixed fixtures and integral features in buildings. The amount of expenditure that will qualify for AIA relief increased from £25,000 to £250,000 in January 2013. This means that most businesses with a year end of 31 March or 5 April may be able to spend up to £81,250 in the 2012/13 tax year and £250,000 in the 2013/14 tax year on plant and machinery assets. Expenditure in excess of the AIA limit may be relieved by adding it into the general capital allowances pool. There are different capital allowances pools (each with their own rules) depending the type of asset and these will provide tax relief at 18% or 8%. If the balance of your pool is less than £1,000 you may write off the whole of the pool in the tax year.
Tax Calendar March 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.
April 2013 5
End of 2012/2013 tax year. Last day to use up your annual exemptions for capital gains tax, inheritance tax and ISA’s.
6
Start of 2013/14 tax year. Introduction of Real Time Information (RTI) for employers.
19
Monthly CIS payments due.
Businesses may also be able to claim tax relief outside of the capital allowances rules when an existing asset is repaired and the repair replaces the asset, as you may do if you change an old window for a modern double glazed unit. Using a combination of capital allowances and repairs and renewals a business may be able to obtain high levels of tax relief in the current and next tax year.
19/22
Quarter 4 PAYE/NICs payments due (for quarter ended 5 April).
Any tax relief is valuable and so if there is any delay in incurring capital expenditure from one tax year to the next, the benefits of tax relief may impact on cash flow. We note that many businesses get caught out at the end of each tax year by leaving online ordering too late and then failing to take into account lead time on orders.
22
Last day to pay any outstanding PAYE & Class 1 NICs electronically for the previous tax year.
30
Additional daily payments of £10/ day up to a maximum of £900 for failing to file self assessment tax return due on 31 January 2013.
There is another good reason to consider, if possible, bringing capital expenditure into the current (2012/13) tax year. From April 2013 HMRC is imposing a cap on the amount of certain income tax reliefs that can be obtained by individuals. This cap ensures that if a claim for the AIA (or any other capital allowance) creates a tax loss it may be restricted to the lower of £50,000 or 25% of income. If you were considering a large capital allowances claim in 2013/14 you may need to re-consider your timings and whether you might be able to accelerate expenditure into the current year. Please contact us to maximise your capital allowances before the end of the tax year.
Monthly PAYE/Class 1 NICs/ student loan payments due. 19th for non-electronic payments, 22nd for online payments.
May 2013 3
Notify HMRC of any changes in company car information for the previous quarter using P46(Car).
19
Monthly CIS payments due. Last date for employers to submit forms P35 and P14 for the year ended 05 April 2013 to HMRC.
19/22
19th for non-electronic payments, 22nd for online payments. 31
www.mcmillanaccountants.com
Monthly PAYE/Class 1 NICs/ student loan payments due.
Ensure all employees have been given their P60s.
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 2, 2013 Page 2
NEWSLETTER Pensions: update for business owners Pensions are tax-efficient investments as not only is tax relief given on your contributions but pension income and gains grow tax-free inside your pension fund. There have been some major changes to the pensions tax legislation in recent years that affect business owners and employers. Individuals: currently an individual may contribute up to £50,000 per year into a pension plan, but a higher contribution may also attract relief depending on the timing of payments. Overall, an individual may contribute up to £1.5 million into their scheme over their lifetime, but these limits reduce to £40,000 and £1.25 million respectively in 2014/15. Employers: under new workplace pensions rules large
employers must enrol their employees into a workplace pension scheme to which both employer and employee are required to contribute. Small employers (those with less than 50 employees at 1 April 2012) are not required to auto-enrol until April 2015. Workplace pensions will cost employers a minimum of 3% of salary and the amount of contributions made is subject to change by government and dependent on the levels of gross pay between a minimum and maximum earnings limit. Please contact us as soon as possible to run through the options that might be suitable to you.
Salary and dividends: what are the optimal figures to pay in 2013/14? Dividend income is taxed at a lower rate compared to earned income and is not subject to National Insurance Contributions (NICs). As a director of your own company you may set your salary at a level where you will continue to qualify for certain state benefits without incurring any liability NICs. For the tax year 2013/14 this sets a salary at between £109 and £148 per week. The personal allowance for the year will be £9,440, and the taxable band
for basic rate taxpayers £32,010. On top of a salary of say £7,696 per year (52 x £148) you can also vote yourself dividends of up to £30,379 without incurring an additional higher rate tax charge. Salary (52 x £148)
£7,696
Dividend (grossed up)
£33,754
Basic rate band + personal allowance
£41,450
Please contact us to discuss your optimal figures for 2013/14.
Furnished lettings: wear and tear relief If you are letting residential property it is not possible to claim capital allowances on the cost of furniture and fittings, however, a different system of tax allowances compensates the landlords of furnished property. There are two choices, you may either: claim the wear and tear allowance, this is an allowance calculated as 10% of your net rents receivable less any rates paid, or claim tax relief on the replacement cost of any of your furniture. If you claim the replacement cost you are not also given tax relief on the original cost of each item. Which claim is going to be the most suitable for you depends on the amount of rent that you receive and also
the frequency and cost of replacing furniture. Additionally, you may also claim the cost of repairs and replacement of items which are part of the building. This may include expenditure on re-decoration and also replacing roofing, windows or drainage, as well as internal items such as fixed furnishings including a fitted kitchen or bathroom. Tax relief on some of these items may be restricted when you incur refurbishing costs in between tenancies. If you are incurring any costs on your rental properties please contact us to discuss which tax reliefs are available.
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
NEWSLETTER Capital allowances: maximising allowances before the end of the tax year You can claim tax relief on the purchase cost of capital equipment and assets in several different ways. The Annual Investment Allowance (AIA) gives businesses 100% tax relief on their expenditure on plant and machinery. Whilst the AIA does not extend to cars, which receive allowances based on their CO 2 emissions, it does apply to vans and other assets such as fixed fixtures and integral features in buildings. The amount of expenditure that will qualify for AIA relief increased from £25,000 to £250,000 in January 2013. This means that most businesses with a year end of 31 March or 5 April may be able to spend up to £81,250 in the 2012/13 tax year and £250,000 in the 2013/14 tax year on plant and machinery assets. Expenditure in excess of the AIA limit may be relieved by adding it into the general capital allowances pool. There are different capital allowances pools (each with their own rules) depending the type of asset and these will provide tax relief at 18% or 8%. If the balance of your pool is less than £1,000 you may write off the whole of the pool in the tax year.
Tax Calendar March 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.
April 2013 5
End of 2012/2013 tax year. Last day to use up your annual exemptions for capital gains tax, inheritance tax and ISA’s.
6
Start of 2013/14 tax year. Introduction of Real Time Information (RTI) for employers.
19
Monthly CIS payments due.
Businesses may also be able to claim tax relief outside of the capital allowances rules when an existing asset is repaired and the repair replaces the asset, as you may do if you change an old window for a modern double glazed unit. Using a combination of capital allowances and repairs and renewals a business may be able to obtain high levels of tax relief in the current and next tax year.
19/22
Quarter 4 PAYE/NICs payments due (for quarter ended 5 April).
Any tax relief is valuable and so if there is any delay in incurring capital expenditure from one tax year to the next, the benefits of tax relief may impact on cash flow. We note that many businesses get caught out at the end of each tax year by leaving online ordering too late and then failing to take into account lead time on orders.
22
Last day to pay any outstanding PAYE & Class 1 NICs electronically for the previous tax year.
30
Additional daily payments of £10/ day up to a maximum of £900 for failing to file self assessment tax return due on 31 January 2013.
There is another good reason to consider, if possible, bringing capital expenditure into the current (2012/13) tax year. From April 2013 HMRC is imposing a cap on the amount of certain income tax reliefs that can be obtained by individuals. This cap ensures that if a claim for the AIA (or any other capital allowance) creates a tax loss it may be restricted to the lower of £50,000 or 25% of income. If you were considering a large capital allowances claim in 2013/14 you may need to re-consider your timings and whether you might be able to accelerate expenditure into the current year. Please contact us to maximise your capital allowances before the end of the tax year.
Monthly PAYE/Class 1 NICs/ student loan payments due. 19th for non-electronic payments, 22nd for online payments.
May 2013 3
Notify HMRC of any changes in company car information for the previous quarter using P46(Car).
19
Monthly CIS payments due. Last date for employers to submit forms P35 and P14 for the year ended 05 April 2013 to HMRC.
19/22
19th for non-electronic payments, 22nd for online payments. 31
www.mcmillanaccountants.com
Monthly PAYE/Class 1 NICs/ student loan payments due.
Ensure all employees have been given their P60s.
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 2, 2013 Page 2
NEWSLETTER Pensions: update for business owners Pensions are tax-efficient investments as not only is tax relief given on your contributions but pension income and gains grow tax-free inside your pension fund. There have been some major changes to the pensions tax legislation in recent years that affect business owners and employers. Individuals: currently an individual may contribute up to £50,000 per year into a pension plan, but a higher contribution may also attract relief depending on the timing of payments. Overall, an individual may contribute up to £1.5 million into their scheme over their lifetime, but these limits reduce to £40,000 and £1.25 million respectively in 2014/15. Employers: under new workplace pensions rules large
employers must enrol their employees into a workplace pension scheme to which both employer and employee are required to contribute. Small employers (those with less than 50 employees at 1 April 2012) are not required to auto-enrol until April 2015. Workplace pensions will cost employers a minimum of 3% of salary and the amount of contributions made is subject to change by government and dependent on the levels of gross pay between a minimum and maximum earnings limit. Please contact us as soon as possible to run through the options that might be suitable to you.
Salary and dividends: what are the optimal figures to pay in 2013/14? Dividend income is taxed at a lower rate compared to earned income and is not subject to National Insurance Contributions (NICs). As a director of your own company you may set your salary at a level where you will continue to qualify for certain state benefits without incurring any liability NICs. For the tax year 2013/14 this sets a salary at between £109 and £148 per week. The personal allowance for the year will be £9,440, and the taxable band
for basic rate taxpayers £32,010. On top of a salary of say £7,696 per year (52 x £148) you can also vote yourself dividends of up to £30,379 without incurring an additional higher rate tax charge. Salary (52 x £148)
£7,696
Dividend (grossed up)
£33,754
Basic rate band + personal allowance
£41,450
Please contact us to discuss your optimal figures for 2013/14.
Furnished lettings: wear and tear relief If you are letting residential property it is not possible to claim capital allowances on the cost of furniture and fittings, however, a different system of tax allowances compensates the landlords of furnished property. There are two choices, you may either: claim the wear and tear allowance, this is an allowance calculated as 10% of your net rents receivable less any rates paid, or claim tax relief on the replacement cost of any of your furniture. If you claim the replacement cost you are not also given tax relief on the original cost of each item. Which claim is going to be the most suitable for you depends on the amount of rent that you receive and also
the frequency and cost of replacing furniture. Additionally, you may also claim the cost of repairs and replacement of items which are part of the building. This may include expenditure on re-decoration and also replacing roofing, windows or drainage, as well as internal items such as fixed furnishings including a fitted kitchen or bathroom. Tax relief on some of these items may be restricted when you incur refurbishing costs in between tenancies. If you are incurring any costs on your rental properties please contact us to discuss which tax reliefs are available.
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
