Tax on sale of assets for individuals

Posted by admin on January 01, 2018 in Tax

This article looks at the basics of capital gains tax on gains in the sale of assets by individuals. Capital gains tax is paid by individuals whereas companies pay corporation tax on capital gains.

HMRC refers to sale of personal possessions. It is useful to note that, they are concerned with the sale of items for more than £6,000, and would include, a second property ,  jewelllery, paintings, antiques, coins and stamps, matched dining tableware and other items.

Items excluded from Capital gains tax include cars, clocks and other items with a limited lifespan. However, these items become included if they are used for business puirposes.

When a person or couple sell their home, they are usually eligible for Private Residence Relief.  They would need to check to verify their eligibility with HMRC. Where an individual sells a property which is not a sole residence, they can expect to pay

Indexation allowance may be available and is based on inflation records known as a consumer price index . Indexation allowance models the effect of recorded inflation on the cost price of the asset. Generally, inflation and therefore, prices, go up, except where a deflationary trend exists. The application of indexation allowance will usually result in a reduction of the capital gain

Once the amount of the gain is calculated, the tax is worked out using the applicable  annual exempt amount and the Capital Gains Tax rates.

The annual exempt amount is the amount of capital gain an individual may earn from Capital gain on disposal of personal possessions without taxation.

In the tax year 2016-17, the annual expempt amount was set at £11,100. The tax ratesrange from 10% to 28% depending on the type of asset and other factors.

Capital Gains are assessed via the standard self assessment system, and so, for those who currently do a return,  the relevant pages should be filled in. If you have not previously done a self assessment return, and feel that you may require on, please contact us.

 

what is a tax rebate

Posted by admin on November 11, 2017 in Tax

You might have asked your self this question before. What is a tax rebate.
The phrase tax rebate refers to a tax refund. That is, hmrc returns cash its already collect as tax from a tax payer.This article takes a look at tax rebates for employees, sole traders and companies.

Tax rebates for employees

Each employee on PAYE should receive an annual P800 tax calculation letter. This letter will often confirm where Hmrc has calculated an over payment of tax due to reasons like taxcode changes, periods of un employment, and other unexpected errors. The letter should indicate how the tax rebate should be collected or claimed. Much of the time, for an employed person, the rebate will be given via the taxcode resulting in an adjustment to their PAYE taxes.Employees can claim a tax refund on costs incurred on things like uniforms for their work. To process the tax rebate, the employee can fill in a P87 form in paper and post it to HMRC or file a claim online via government gateway.

However, if the employee is already filling a tax return, they’re required to claim for expenses on the tax return.Typically, these would be people with extra non PAYE income, or higher rate tax payers.
If the claim exceeds £2,500, the employee is required to make the claim via a self assessment tax return. If the employee in not registered for self assessment, the employee has to register in order to claim the tax rebate.

Tax rebates for Self employeds and Sole traders

For self employeds, sole traders, partners in partnerships or other persons who fill tax returns, tax rebates have to be claimed via a self assessment tax return. Generally
only expenses incurred in the period being taxed for the purpose of self assessment, can be claimed via the tax return. Expenses which were not claimed in previous years have to be the subject of a separate letter to HMRC. However , losses can be relieved

Tax rebates for Self employeed individuals under CIS

Construction industry sole traders and self employeds are required to fill in a self assessment tax return. Due to the fact that their income generally suffers a flat 20 percent deduction, they will often get a tax rebate after they file their tax return. The main reasons are usually expenses and the tax free personal allowance. However, the higher their income , the more complex the computation is, an the less likely a rebate is.

Tax rebates for companies

For incorporated businesses ,a tax refund can arise when losses disclosed in the most recent accounts are offset against the prior year’s taxable profit. A claim for tax relief is made in the corporation tax return . Where a company,is itself a contractor in the construction industry, it is likely to suffer CIS deductions. Reclaiming the deductions may be possible where the taxable profit of the company indicates a tax amount due thats less than payments taken from the companies income.

Summary

Tax rebates are a refund of tax paid by HMRC where the tax payer has paid more tax than is due at that time. Tax refunds are also available when loss relief is suffered by a business corporate or sole trader in the normal course of business. Business Loss relief is not available to employees, however employees can make a claim in writing for employment expenses not claimed in previous years. Note that while every effort is made to keep this article accurate, as at May 2016, it should not be taken to be profssional advice at any time. Furthermore, income tax law changes constantly.

vat flat rate scheme

Posted by admin on June 22, 2017 in Tax

The VAT flat rate scheme is offered to small businesses by HMRC. To use the vat flat rate scheme, the business must be VAT registered. Essentially, the business can work out VAT due solely on their gross sales turnover.

The business charges its clients the applicable  rate of VAT on its  sales, as per the VAT rating of the product being sold. Hence , sales invoices have VAT on on them for the buyer to reclaim output VAT and the rate indicated by the invoice

The business itself works out the VAT due to HMRC as a multiple of the gross sales value of vatable invoices for the VAT period and the vat flat rate scheme percentage. The Flat rate VAT percentage varies by business sector. The applicable rate will be confirmed by Hmrc on registration for the Flat rate scheme.

Ted items only

For illustrative reasons, a typical rate would be 15% on Gross sales. When issuing an invoice, a business on the vat flat rate scheme must show the net , vat and gross amounts separately on the invoice.

Example: company Great shops ltd registered on the vat flat rate scheme, sells standard rated items only, Vat rate 20%. However, the company’s flat rate percentage is 15%.

When great shops ltd sells a product for £120 cash received in full, the VAT invoice will show : net £100, vat £20, total £120.

The VAT due to HMRC on this individual transaction would be 15% x £120 = £18. It should be noted that there is no input tax deduction on expenses.

The £18 and the 15% do not appear anywhere on the invoice, the customer can reclaim the full £20 from HMRC if they are Vat registered or from outside the EU. Other factors not considered might apply.

Not all small businesses benefit from the vat flat rate scheme, and tax law changes from 2017 mean that businesses with  limited costs might not benefit at all.

To explore further the issues raised in this article, please drop us a line we will be happy to go through the applicable facts with you. This article is not intended to represent financial advice.

Construction Industry Scheme CIS

Posted by admin on March 22, 2016 in Tax

Construction industry scheme outline

The construction industry scheme operated by HMRC in the united kingdom, requires that construction businesses, contractors, in the UK withhold an amount for taxes when making payments to independent contractors.

  • The Contractors in the construction industry who employ subcontractors, have to with hold money from what they pay their sub contractors. They have to be registered with HMRC as contractors.
  • Sub contractors do not have to register HMRC as sub contractors .
  • 20% deducted from HMRC registered sub contractors.
  • 30% deducted from HMRC unregistered sub contractors.
  • Contractors have to keep and retain detailed records of payment and deductions
  • Money deducted has to be paid to HMRC by the company with holding the money.
  • The money deducted  under CIS is a forward payment against the sub contractors tax liability for the relevant financial year.
  • contractors are required to issue a Payments and deductions statement to their sub contractors.

Reclaiming Construction industry scheme deductions

The way CIS is operated often results in the sub contractor been due a tax refund. This tax refund is often referred to as a tax rebate.
There are a number of things to consider at the financial year end regarding tax liability and CIS deductions.

  • The deductions suffered by the sub contractor will be offset against the sub contractors personal tax liability at year end if the sub contractor is self employed this is usually handled via a self assessment tax return.
  • A company can suffer cis deductions on its income if the company is itself a sub contractor. The same company can also have sub contractors and be required to make deductions of the income paid to its sub contractors. The deductions collected from sub contractors can be off set against the deductions suffered by a sub contracting company who also uses subcontractors.
  • CIS deductions can be offset against a businesses PAYE liabilities.
  • CIS deductions cannot be offset against corporation tax liabilities or reclaimed against corporation tax payments.
  • Where there is insufficient PAYE related liability and payments to offset the CIS deductions, the are other CIS reclaim procedures available at HMRC.

 

tax on rental income

Posted by admin on August 12, 2014 in Tax

Tax on rental income is a matter of great importance to many people and the state as well. In this article, we will take a look at some basic items relating to taxation on rental income .Rental income and expenditure is treated separately from trade and other self employed income.

When a person human or corporate rents out a property, they generally get an income from the tenant which is the rent. Very often , the tenant will pay a lot of the bills associated with the property.This could include utility bills, cleaning bills, domestic or commercial rates,Naturally, expenses paid directly  by your tenant are not rental expenses for you the landlord.

Expenses you the landlord might pay, are off set against your rental income to get your taxable profit on which you would be liable to pay tax on rental income. These expense could include Gardening, decorating, maintenance, Electricity for communal areas, you might be paying the rates, might be paying all the fixed costs when property is empty, Mortgage interest costs, loan interest on loans to improve the property.

Major works on the property, which result in an improvement to the property, or are necessary to make the property habitable, might be considered to be capital expenditure and therefore not allowable.

In addition to the standard expenses, you get 10% wear and tear allowance on furnished property lettings, the 10% being a percentage of the related rental income for the furnished property only. Ergo, don’t go taking 10% from the incomes of multiple properties where only one is Furnished.

Rental income and expenditure are netted off  in an income and expenditure account to get your rental profit or loss figure. this figure is what is taken to your tax computation.. Rental property losses brought forward from previous years can be set off your current rental profits.

If your rental property has made a loss, this loss can be carried forward or , depending on the current tax law at the time,and depending on the type of rental , it might be set against your other income for the year. Currently, tax legislation allows Rental losses to  be carried forward to off set against rental profits in the future, thereby reducing the tax on rental income payable.

A common question is whether rental properties attract Annual investment relief or capital allowances, and generally the answer is no, unless the legislation changes. However wear and tear allowance does give relief for some of the fittings in a furnished letting

Furnished holiday letting  are treated differently, any property profits or losses under furnished holiday lettings can be treated in a similar way to  trade income. Strict rules govern the type of property which would be accepted as furnished holiday letting.

Once your taxable rental income has been determined , it is taxed along with the rest of the  income .according to the existing tax rates and allowances.

Payroll for small business

Posted by admin on May 09, 2014 in Accountancy Tips, Tax

Payroll for small business is the focus. In the UK, Real time information (RTI) has changed payroll operation. Here are some of the features of RTI and payroll in the UK.

Payslips: These are printed to and give the employee an account of Gross pay, PAYE, and National insurance deductions, plus the employers national insurance contribution.
PAYE : Pay as you earn is tax deducted at source from employees salary

NIC Employee: National insurance contributions deducted from employees gross salary

NIC Employer: This is national insurance contributions paid by the employer on top of the employees gross salary. This extra cost is often classified as social security costs in the accounts.

Pension contributions: pensions are are a deductible expense for employees subject to the limitations set out in the relevant legislation.

RTI: payroll information is communicated to HMRC under the Real Time Information system. A filing must be made whenever employees are paid.

FPS: A Full payment submission is filed whenever a payment is made to the employees.

Year End FPS: After the last payment for a financial year is made, a year end FPS is filed,a final FPS is required even when no payments are made.

EPS: Once a month, an EPS is file where there is a need to inform HMRC about recoverable statutory payments such as SMP ,SSP, ASPP, OSPP, SAP.

Year end EPS: This is run when the timing of the final fps is uncertain.

NVR: The national insurance number verification request is sent to HMRC when you wish to verify that you have the right national insurance number(NINO) for an employee.

EYU: This is an earlier year update filing used to make corrections for filings from an earlier financial year.

P60 : The p60 is a certificate stating the employees Gross salary received, PAYE and NIC deducted, plus the NIC contribution paid by the employer on their income.

Their are a number of statutory payments, relevant when dealing with payroll for small business in the UK, these are:
SMP :Statutory maternity pay, this is payable to new mothers who take maternity leave.

SSP: Statutory sick pay is paid to employees who are unable to work due to illness.

OSPP: Ordinary Statutory paternity pay is paid to new fathers who take paternity leave to help with baby care.

ASPP: Additional Statutory paternity pay is paid is paid to fathers who take extended leave to look after newborn infants. The man wife should have come off maternity leave for a valid claim to be made

SAP: Statutory Adoption pay is paid to a employee taking time off to look after a newly adopted minor.

The statutory payments, SMP, SSP, OSPP, ASPP, SAP can be recovered against payments for Employers NIC contributions by the employer.

Payroll for small business in the UK can be challenging, should you require assistance with your payroll, we are here to help at north london #accountancy Ltd

Tax deductible business expenses

Posted by admin on May 08, 2014 in Tax

A frequently asked question is “can I claim for money spent on.” Here is a listing Some tax deductible business expenses for companies:

Business telephone calls,both mobile and land line calls, where the contract is in the companies name.

Repairs and maintenance  expenditure on the companies assets. In this category,you do have to take care because a lot of what you might consider to be repair is actually capital expenditure.

Internet connection fees and  web hosting fees are 2 relatively new additions to the list of items companies pay for,but they are tax deductible,provided they are for the business and contracts should be in the companies name.

Interest paid on loans, hire purchase agreements, or bank overdrafts. These figures should be extracted from your period end statements from the lender.

Rental expenses on offices, staff accommodation, parking spaces, garages, workshops, dock yard berths or even aircraft hanger space.

Equipment hire is very similar to rental,but traditionally, is disclosed separately in accounts. The usually refers to hire of plant and machinery such as diggers, tractors, cranes,  and can include computers, seating, marketing display units and many other items.

 

Professional fees,being the fees paid to professionals such as Lawyers, Architects, surveyors, accountants.

 

Salaries and Wages paid to all employees including the directors. The total amounts should include PAYE and employees national insurance contributions.

Social security costs refers to the employers national insurance contribution where a payroll scheme is being operated

 

Motor expenses will include fuel and maintenance costs for cars registered to the company.

Postage and packaging expenses being the cost of dispatching products or correspondence in the course of business

Bad debts can be tax deductible where the money is confirmed to be irrecoverable, and the losses are uninsured.

 

Travel expenditure on train tickets, flight tickets,hotel accommodation while travelling, is generally tax deductible

 

There Many more tax deductible business expenses,and we shall be editing and adding to this list in time

 

 

 

self assessment deadlines

Posted by admin on June 24, 2013 in Tax

If you are  self employed and completing self assessment, there are a number of self assessment deadlines that you should keep in mind always.

31st October : This is currently the self assessment deadline for paper returns if you prefer these. Beyond this date, you would have to submit your tax return on line.  For self employed people,  The only likely exceptions to this deadline are where you receive a written instruction stating otherwise from HMRC.

31st January: Current, this is the self assessment deadline for on line returns.  On line filing can be via commercial software or using the HMRC portal. At this stage, a self employed person , would usually  get penalised for submitting a paper return . The 31st January is also the due date for the balancing payment of the previous years tax liability and the first payment on account for the financial year you’re in.

31st July:This is the due date for your second payment on account, for the year ended the previous 5th April .

Its important to note that these self assessment deadlines can and do change , and its up to the tax payer to comply with the extant  filing deadlines.

Its also a good idea to keep in contact with HMRC to reconcile the figures in your account with them.

We would be happy to assist you with your personal tax filing needs and would complete the returns and process the filing for you. plus we’d give you the amount due to be paid to HMRC. Plus, here at North London Accountancy, we have the experience of handling correspondence with HMRC, including reconciling your tax liability  figures with the tax man.

 

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