TAXATION

Personal / Business Taxation

Taxation affects all aspects of the life of a business. Whether as a Sole Trader, Limited Company, Partnership or Investor, keeping up to date with complex taxation legislation is essential. As tax changes are continuously inherent and become more complicated, we provide expertise and advice across the whole spectrum of business taxation with the aim of ensuring that all our clients operate as tax efficiently as possible.

We offer offer a wide range of services that address the following:

· Start up businesses in all industries,

· Preparation of business tax computations, submission of computations and VAT guidance,

· Capital expenditure and allowances changes from April 2026 more

· Individual taxation advice and self-assessment returns and Shareholders’ dividends,

· Charities and Non-Profit Making Organisations,

· Non-UK Resident Entities and Expat tax issues,

· Property Income and reliefs and changes from April 2016 more and restriction on finance for individuals more,

· Business mileage increased to 45p per mile.

· Substantial changes in Research and Development claims more.

· Significant changes for non-doms. From 6 April 2025, UK-residents with a domicile of origin outside the UK that have lived here will be subject to tax on their worldwide income and gains going forward, without the ability to pay tax only when they remit the funds.

· They will therefore have two bases of tax; the arising basis of tax from 6 April 2017 and the remittance basis when they bring in any of their previously untaxed foreign income and gains.

· A few transitional provisions soften the blow by allowing individuals to organise their bank accounts containing their historical untaxed income, capital gains and clean capital (that will not be taxable) so that when they bring this into the UK they are taxed in the most favourable way.

· Capital Gains Tax. If you are a small business owner or individual considering disposing of an asset or business, we can advise on any reliefs that may be available and of the possible capital gains tax charges that may arise. In addition, we will recommend more beneficial ways of planning your affairs to help reduce any potential tax liabilities. So, let us take away this burden that causes many businesses concern and stress each year.

For homeowners, their elected Principal Private Residence (PPR) Relief is a major benefit in the case of lifetime disposals, as no Capital Gains Tax (CGT) is payable.

The PPR includes gardens and grounds up to 0.5 of a hectare (about 1.23 acres). (Larger areas than this can be justified in certain cases if required for the ‘reasonable enjoyment’ of the residence.)

However, Capital Gains Tax does apply on the gain in value of the non-permitted area, from the exchange date at purchase to the exchange date at sale. This includes everything outside the permitted area such as a let cottage, holiday let, commercial workshop and agricultural land on a Farm Business Tenancy or grazing licence. Any commercial transaction is excluded from the permitted area.

The current rate of Capital Gains Tax is based on the chargeable gain. If this amount is within the basic Income Tax band you’ll pay 10% on your gains (or 18% on residential property). You’ll pay 20% (or 28% on residential property) on any amount above the basic tax rate.

HMRC has had a consultation titled: CGT – Payment window for residential property gains.

Capital Gains Tax will be payable within 60 days of the sale, gift or disposal being completed.

(The date of completion is normally the day when the property conveyance takes place, not the date of exchange.

If the gain is fully covered by Principal Private Residence Relief, then no tax is payable.

Vendors and donors will need to make a special payment on account return to HMRC confirming:

• The disposal

• The amount payable

Retention of sufficient records and collation to calculate the gain, for example purchase price, subsequent acquisitions, any improvements and professional fees, will need to be available so a valuer can calculate the gain and any apportionment between permitted area and non permitted area.

There are the practical considerations of making accurate calculations within 60 days and ideally a valuer needs to be instructed at least at the start of the sale process before the property is offered for sale so there is enough time to undertake the valuation and apportionment’s. Vendors and donors will also need to have the necessary funds to pay the tax within 60 days. It is important to be prepared, because late filing penalties and interest will apply in cases of failure to pay within 60 days.

This shortening of the timescale for payment of Capital Gains Tax will remove the current benefits of delayed payment and put pressure on vendors to be very focused on organising their records and an assessment before sale.

The new Capital Allowances offer

As a result of measures announced at this Budget, businesses will now benefit from four significant capital allowance measures:
• The super-deduction – which offers 130% first-year relief on qualifying main rate plant and machinery investments until 31 March 2023 for companies.
• The 50% first-year allowance (FYA) for special rate (including long life) assets until 31 March 2023 for companies.
• Annual Investment Allowance (AIA) providing 100% relief for plant and machinery investments up to its highest ever £1 million threshold, until 31 December 2021.
• Within Freeport tax sites, companies can access new Enhanced Capital Allowances (ECA+)and companies, individuals and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA+) for investments until 30 September 2026.

Basis period reform

The Autumn Budget reformed the way that trading profits are allocated to tax years for income tax purposes. After a consultation HMRC published the changes that were legislated. The notion is to tax profits that are time-apportioned to the tax year instead of the profits for the 12 months to the accounting date in the tax year. This relates to tax payers who are sole traders or partners within trading partnerships, if their trading periods do not use 5 April or 31 March as their accounting date periods for tax purposes. The changes will take effect from the 2024/25 tax year, with transitional rules applying in 2023/24.

For example, if the trader draws their accounts to 31 December every year, the 2023/24 profits would be based on the whole of the 2023 calendar year accounts together with 96/366ths of the 2024 calendar year accounts, with a deduction for any unused overlap profits that arose in the opening years of trading. To the extent that this profit figure exceeds the profits for the first 12 months of the extended basis period, spreading provisions apply. These are called “transition profits”. Transition profits are spread equally over five tax years, including 2023/24, but the trader can elect to be taxed on them sooner. Any untaxed transition profits are taxed automatically on cessation of the trade.

The new basis from 2024/25 (“tax year basis”)

From 2024/25, taxable profits will be based on time-apportioned profits of the accounting periods that fall within the tax year. For example, if a trader draws their accounts to 31 December every year, their 2024/25 taxable profits would be based on 270/366ths of the 2024 calendar year profits and 95/365ths of the 2025 calendar year profits.

Although it maybe a simple exercise on paper, it may become problematic in practice. The 2024/25 tax return is due by 31 January 2026. Unless the business is very simple, it is unlikely that the trader(s) will be able to finalise the accounts and tax adjustments for the 2025 calendar year accounts in time. It is therefore pertinent to file based on provisional numbers and then amend the return later once the true figures for the later accounting period are known. This exercise would be repeated every year thereafter.

What are capital allowances?

• Capital allowances let taxpayers write off the cost of certain capital assets against taxable income. They take the place of accounting depreciation, which is not normally tax deductible. Businesses deduct capital allowances when computing their taxable profits.
• In translating its accounting profits into taxable profits, a business is usually required to ‘add back’ any depreciation, but can instead deduct capital allowances. For example, a corporation tax paying company with accounting profits of £1,000, depreciation expense of £200 and total capital allowance claims of £300 would make the following adjustment:
• Add £200 (depreciation expense) to £1,000 (accounting profits) = £1,200.
• Deduct £300 (capital allowances) from £1,200 = £900 (taxable profits).
• Apply the appropriate tax rate, e.g. corporation tax at 19%: £900 x 19% = £171 tax due.
• The two main types of capital allowances are:
• Writing Down Allowances (WDAs) for plant & machinery – covering most capital equipment used in a trade; and
• Structures and Buildings Allowances (SBA) – covering the construction and renovation of non-residential structures and buildings.
• The newly introduced 100% first-year allowance are generous brand new capital allowances for investments in plant and machinery assets. Both will allow investing companies to lower their corporation tax bills.

Long-life assets, integral features of buildings, cars over 130g/km* 8%
Other plant and machinery 18%
* The emissions figures are reduced to 50 and 110g/km respectively for expenditure incurred on or after 1st April 2018.

Corporation Tax. Every company that is based in the UK is subject to Corporation Tax on their profits. This refers to clubs and societies, trade associations, housing associations, and even co-operatives unless otherwise given exempt status by the HMRC, ie. charities, multi residency blocks (flats) simply paying regular management service charges and non profit making organisations. Non-UK based Companies may still be liable to pay Corporation Tax, if the Company has a permanent establishment in the UK.

Corporation tax

The increase to 25% for companies with over £250,000 in profits.

Small companies with profits up to £50,000 will continue to pay corporation tax at 19%.

Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate. Marginal Relief calculator to work out how much Marginal Relief you can claim on your Corporation Tax .

Vehicle Leasing

A simple 15% disallowance is computed where the leased car’s emission rating exceeds 50g/km during the hire period.

However, eco-friendly cars (with emissions of 50g/km or below and electric cars) are currently not subject to any restriction (irrespective of whether their original retail price exceeds £12,000). Where there is a chain of leases, any disallowance will only apply to one lessee in that ‘chain’ (hmrc-manuals).

Where lease rentals are subject to the above restriction, a corresponding proportion of any rentals rebated is exempt from tax.

Under contract hire arrangements, the lease agreement should identify the amount paid for maintenance of the car as this would not be subject to the restriction. If there is no split between the ‘lease’ and maintenance element, HMRC seek to apply the disallowance to the total amount.

Where a car is leased under a finance leasing agreement, any rental restriction is applied to the rental allocated to the period under GAAP (hmrc-manuals). The restriction is normally applied to the aggregate of the finance charge and depreciation (the finance charge is treated as part of the rental and not an interest payment).

Companies can recover 50% of the input VAT on car leasing charges (as the car will usually be available for the director’s/employee’s, etc. private use).

A pool car, if it can be demonstrated that it is only used for business purposes and only intended to be used as such can qualify for VAT recovery. If there is nothing actually preventing private use, then it cannot be said to be only intended to be available for business use.

In respect of pool cars, HMRC accept VAT recovery if it can be shown that the car is kept at the principal place of business, not allocated to an individual and not kept at an employee’s home. For a company, proving that no private use is intended is easier, by the use of board minutes, and having employment contracts which prohibit private use.

Input VAT on maintenance charges (provided they are separately billed) can be recovered in full.

It will no longer be acceptable for most companies to send either the accounts or computations on paper or as a PDF attachment to an online return. Unincorporated charities, clubs and societies may use either iXBRL or PDF for their accounts, but any computations must be in iXBRL format.

Companies must also make Corporation Tax payments electronically. Having the expertise and software to take the headache out of complying and completing the Self-Assessment tax return. By offering this service we calculate any tax liability or refund and advise on exactly how much to pay on the due dates. We also have relevant tax software to file your return on-line.

Personal / Corporate Tax Planning, being the subject to taxation requires sound tax planning and professional advice in order to minimise a tax liability especially with new changes being introduced annually. Our specialist tax team can provide you with advice on all aspects of personal and corporate taxation.

The tax-free allowance for dividend income (currently £1,000) is to be reduced to £500 from April 2024. Dividends above this amount will continue to be either taxed at 8.75%, 33.75% or 39.35%

Options for winding up a company. A capital distribution from a Members Liquidation should benefit from the current 18% capital gains tax rate and potentially be more beneficial by utilising the Entrepreneurs’ Relief to reduce the capital gains tax rate to 10%. In practice HMRC do not regard the ordinary liquidation of a company, where it ceases or is sold to an unconnected third party, as being done for tax avoidance purposes.

This process is normally conducted by a liquidator, whereby all distributions are then treated as repayment of share capital and capital. If a liquidator is not appointed, S.209 TICTA 1988 treats all distributions as income, however HMRC’s Extra Statutory Concession C16 permits distributions made under an informal winding up to be regarded as if made under a formal winding up procedure, and treated as capital. However, where tax affairs are involved it may be appropriate to first obtain clearance from the HMRC by application form C16 before any distributions are made.

HMRC Investigations. A HMRC inquiry can be a stressful and worrying experience. HMRC staff can now review cases on a ‘sample basis’, consequently tax and VAT investigations have become more frequent for both personal and corporate self-assessments. We have a wealth of experience in dealing with HMRC enquiries, whether the investigation relates to an individual, corporate level or a more detailed employer related PAYE and P11d matters for compliance, we can provide expert help and support.

No relief on rental income interest restriction. Although it was rumoured that there might be some sort of relaxation of the interest relief restrictions on buy-to-let properties, the Chancellor made no mention of this.

Non-domiciled individuals

• From 6 April 2025, the remittance basis will be abolished
• Arrivals to the UK after 10 consecutive years of non-residence will be exempted
from UK tax on foreign income and gains for the first 4 tax years (whether remitted
or not) – but lose their personal allowance/annual CGT exemption
• ‘Residence’ is decided by the statutory test (‘treaty residence’ is ignored)
• Split year treatment is ignored (i.e. a split year is still a year of residence)
• Claims must be made each year for the new treatment to apply
• The 4-year ‘clock’ starts on first becoming UK resident – so claims can resume after
temporary absences within that 4-year period
• After the 4-year ‘clock’ expires, a further 10 consecutive years of non-residence
will be needed to restart the process