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.
We will be moving into our new office on 1st July. The office is just 1 mile away from our current location, so still very convenient for our clients. Our new address will be:
Goringe Accountants, 5, Theale Lakes Business Park, Moulden Way, Sulhamstead, Reading, Berkshire, RG7 4GB, GB
We will be able to offer a registered address service from there, therefore if you are considering changing your limited company address, just let us know.
Our Business Networking Evening celebrating our 6th anniversary on 11th June at The Bentley Centre, Pangbourne has over 50 booked attendees. For last minute places please email
The Phase2Business Club offers support and advice to small business owners, and hold meetings the first Friday of every month.
We offer free business reviews to all our clients. If you would like to book one please contact Nicky or your account manager.
Please contact us for advice in your own specific circumstances. We’re here to help!
Table Of Contents
Inheritance Tax Loan Change
At present any debts owed by the estate are deducted from the net estate after reliefs, such as business property relief (BPR), have been given. Broadly BPR provides 100% or 50% relief from IHT on the value of your business assets and unquoted shares. After the Finance Act 2013 is passed, the value of a loan must be deducted from the asset it was used to acquire.
Say in the past you increased the loan on your home to invest in your business, and that loan is still outstanding on your death. To calculate the IHT due that business part of the loan must be deducted from the value of your business and not from the value of your home. This reduces the value of your estate exempt from IHT under business property relief, and increases the taxable value of the remaining estate.
Also if the loan owing at death is not actually repaid by the estate to the creditor after death, that loan can’t be deducted from the estate at all, unless there is some commercial reason for not repaying the loan.
Remember IHT is payable at 40% on the taxable value of your estate that exceeds £325,000. A lower rate may be payable if you leave at least 10% of your net estate to charity. There are other ways of mitigating IHT, but we need to discuss your individual circumstances to formulate a plan.
No RTI Reports Made?
If you are within RTI you can’t use the link on the HMRC website to report that no PAYE is due. You have to submit an employer payment summary (EPS) after the end of the tax month (5th) and before the payment date of the 19th.
Even if you pay your PAYE over to HMRC on a quarterly basis, you still have to submit an EPS or a full payment submission (FPS) for every tax month.
If in earlier tax years you had a history of paying PAYE to HMRC for every month or quarter, and you haven’t submitted any RTI reports so far, HMRC may well send you an estimated PAYE demand called a specified charge. The only way to get out of paying a specified charge is to submit an EPS or FPS under RTI for the missing periods in 2013/14.
RTI Growing Pains
Incorrect NI numbers
The Taxman says you should use the NI number he has sent to you in your payroll software, but to leave the last digit blank by typing a space using the space bar. This may not be a workable solution, because most payroll software will reject any NI number with less than nine characters. We’re hoping for an HMRC update on this issue!
Sometimes a long standing NI number has been replaced, but the old NI number is quoted on official notices. This indicates a possible data corruption problem within the HMRC machine. You should exercise caution when amending any NI numbers notified by HMRC since 6 April 2013, and talk to us if in doubt.
Incorrect PAYE codes
Subsequently when you submit a FPS including one of those missing employees, that employee is treated as a new starter, with a new employment record. Any details of benefits in the PAYE code belonging to that employee haven’t been carried over to his new employment record. Thus his new PAYE code may be wrong.
The Taxman has advised employers in this position to use the old PAYE code for the employee. However, under the PAYE regulations employers are not permitted to take a view on which PAYE codes to apply and which to ignore. Many payroll software packages download the PAYE codes directly from HMRC and apply them automatically, with no human intervention.
The employer helpline will not discuss employee’s tax codes with an employer, so the only way to straighten out the mess is to get the employee to contact the Taxman directly.
Letting Business Tax Reliefs
For example if you have a property letting enterprise which you wish to transfer into a company in return for shares in the company, a capital gain will arise in your hands when you transfer the properties to the company. This gain can be rolled into the value of shares of the company if the property enterprise is deemed to be a ‘business’. This relief is known as incorporation relief, but it will only apply if the business owner is more than just a passive property investor. The courts have decided that the business must have some substance in terms of turnover, be conducted on sound business principles with a view to a profit, and be activity pursued with reasonable continuity.
The holding of let properties is considered to be a ‘business’ for inheritance tax, but it is excluded from the IHT relief called business property relief (BPR), as letting is considered to be mainly the holding of investments (i.e. the let properties). In order to qualify for BPR the business owner has to offer the tenants additional services which would generally only be available in a holiday letting business, bed and breakfast, or hotel business. Even then the owners of self-catering holiday cottages have to jump through some hoops to get the letting business to qualify for BPR.
Losses made in a property letting business cannot be set against profits or income from other sources, such as other trading businesses, interest or dividends.
Check with us as to whether your property business qualifies for a particular tax relief and don’t assume anything.
June Question and Answer Section
A. You can reclaim VAT on goods and services purchased before VAT registration, but there are different time limits for goods as opposed to services. The VAT paid on goods held at the date of VAT registration can be reclaimed if they were purchased within four years before the registration date. VAT on services can only be reclaimed if the services were supplied for the on-going business within 6 months before the VAT registration. The van is classed as goods, so you can reclaim the VAT on purchase.
Q. Is it true that my company can purchase a top-end touring bike plus safety gear, for me to use without any restrictions?
A. There are restrictions. For you to receive tax and NI free use of the bike your company must offer the use of bikes to all its employees, but the same quality of bike does not have to be offered to every employee. The bikes should be used mainly for work related journeys, such as getting to work, or traveling between different work sites, but personal use is not prohibited. Safety equipment can be provided by the company with the bikes. However, remember the bikes must remain the property of the company, or be leased directly by the company. There are tax implications if the company gives you the bike outright.
Q. I am a self-employed personal trainer. I pay rent to various local gyms where I train my clients, supply my own uniform and make my own appointments. I have to look the part to get work, so I take body-building supplements. Can I claim the cost of those supplements as a business expense?
A. The supplements are a form of food, and as such it has a dual purpose; to keep you healthy and prepare you to undertake your work. So it is very unlikely that the Taxman would agree that your body-building supplements are tax allowable.