Welcome to June’s Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
Client Updates: A belt from Eco Emporia was featured in the US edition of Vogue and modelled by Cameron Diaz. It is fantastic to see new clients achieve success and we are fortunate to have such a diverse array of clients.
The Booking Agent have asked me to share details of their FREE services with you, please see attachment for full information.
Future Events: Caroline from a-count-a.bilty and myself are presenting at an FSB event on 18th June “How to manage your cash flow” more information is attached as we would love to see you there, but please book soon to avoid disappointment.
Team Update: We are delighted to welcome Lauren Filer, who has been recruited as an office assistant, she has already become an integral part of the team
If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.
Please contact us for advice in your own specific circumstances. We’re here to help!
Table Of Contents
Car Scrappage Scheme Tax Implications
Claiming Tax Relief on Overseas Property
– Setting losses on the let property against other UK income;
– Capital allowances on equipment used in the property;
– Capital gains relief on selling the property;
– Entrepreneurs’ relief for disposals made after 5 April 2008;
– Business asset taper relief for disposals made before 6 April 2008; and
– Business property relief for inheritance tax.
These tax reliefs could apply for a number of PAST tax years, but to qualify you need to prove all of the following applied for the relevant year:
– The letting business was carried on commercially with a view to a profit;
– The property was available to let as furnished short-term holiday accommodation for at least 140 days per year;
– It was actually let for these short-term periods for at least 70 days per year; and
– Longer-term lettings, which exceed 31 consecutive days let to the same person, did not take up more than 155 days per year.
If this applies to you we can help you make a claim for tax relief which may be due.
Credit Crunch Tax Credit Protective Claims
Working Tax Credit is paid to single people who work at least 30 hours a week, and to parents and disabled workers who work at least 16 hours per week, but in both cases the total family income must be below a qualifying threshold. For a single childless person aged at least 25, the qualifying income threshold is currently £13,250 per year. For a family with children the qualifying threshold is considerably higher, up to around £80,000 in certain extreme cases, although the exact amount would depend on the family’s circumstances. Child Tax Credit is paid alongside Working Tax Credit and is assessed on the same claim form.
The income that counts towards the qualifying threshold is the family’s income spread out over the full tax year. If the family income suddenly drops part way through the tax year, due to redundancy or business failure, which is far more likely in the credit crunch, the family’s average income for the tax year may well be below the qualifying threshold.
This is where the system gets really crazy. The family or individual must make a Tax Credit claim before 6 July 2009 to allow the claim to be back-dated to the beginning of the current tax year (2009/10). Although the claim may initially give rise to a nil payment based on income received in 2008/09, the claim for 2009/10 can be amended later to take account of the reduced income for 2009/10. At that point payments will be made based on the total family income averaged out over the tax year.
If you feel your family income may be at risk in the current unstable economic climate, it may make sense to submit a protective Tax Credit claim before 6 July 2009. Do be careful if you are making a claim as a single person, when you later become part of a couple, as you must tell the Taxman when this happens. The Taxman requires couples (mixed or single sex) to make Tax Credit claims as a couple, and will demand repayment of Tax Credits paid to individuals who make an invalid single-person claim.
Beware the VAT Threshold
If your annual sales are near this limit you need to calculate your total turnover for the last 12 months, every month, adding the latest month and subtracting the earliest month each time, to check you haven’t breached the threshold. Alternatively, if you believe your sales for the next 30 days will exceed £68,000 you must register for VAT immediately.
There are several advantages of keeping your sales below the VAT threshold:
– You don’t have to register for VAT, but you can if you wish to.
– If you are not registered for VAT, your customers do not pay VAT on top of your basic prices. This makes your goods and services appear to be better value for money for non-business customers or other small non vat registered businesses.
– On your 2009/10 self-assessment tax return, which will be issued in April 2010, you will only have to complete three lines to report your business profits.
– You do not have to submit your VAT returns online.
Currently a small percentage of VAT-registered businesses submit their VAT returns online each quarter. But for periods starting after 31 March 2010 all VAT-registered businesses with a turnover of £100,000 or more will be compelled to submit their VAT returns online. Also any business that becomes VAT registered after 31 March 2010 will also have to submit all their VAT returns online, whatever its turnover.
If you become VAT registered before 1 April 2010 you will not be forced into online filing straight away, as you will be able to continue with paper VAT returns until your turnover exceeds £100,000, or the law is changed.
There are of course penalties for failing to register on time so please contact us if you need any help with the decision to register for VAT.
Question and Answer Corner
A. The Tax Inspector is not correct. His own Employment Income Manual at paragraph EIM 31835 says: “The tests that apply to travel expense relate to the nature of the expense and not to the amount.” It goes on to say: “You should not refuse a deduction for first class rail travel, if that has been incurred, on the basis that the same journey could have been made more cheaply in standard class”. As long as the travel and accommodation costs were incurred wholly and exclusive for your business of lecturing the full cost can be claimed.
Q. I pay income tax at 40%, but my wife and child have no income at all. If I purchase fixed income bonds in their names will the interest be effectively tax free, as it will be covered by their personal allowances?
A. When you purchase the bonds in the names of your relatives you will be giving them the capital you invest, as they will have complete control of the bonds. There is no limit on the amount you can give to your spouse, although there could be inheritance tax implications. Your wife will be taxed on the interest from her bond, but if this does not exceed her personal allowance of £6,475, there will be no tax to pay. If your child is aged under 18, the interest from his bond will be taxed as part of your income if it exceeds £100 per year.
Q. If I start earning money from a website I have setup in my spare time, will I have to pay tax and NI on that income? I am also employed full time on a salary of £25,000 a year.
A. You should register your new web business with the tax office as a self-employed business. We can help you do this if you wish. Your self-employment will not affect your employment, and your employer need not know about your website business. However, you will have to complete a tax return each year to declare all of your income; from your business, employment and any investments. By registering as self-employed you will also be automatically registered to pay class 2 NI in respect of your self-employed profits. If these profits are expected to be less than £5,075 for the current year, you should complete form CF10 which is a request for exemption from paying class 2 NI.
Key Tax Dates for June 2009
30 – Deadline for UK businesses to reclaim EC VAT chargeable in 2008.