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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. 

Budget 2021 guide to budget 2021

Changes due to the Covid19 pandemic have brought in many expected changes in the tax legislation for 2021 and have attached a simple guide.

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 2016 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.

Significant changes for non-doms. From 6 April 2017, UK-residents with a domicile of origin outside the UK that have lived here for 15 out of the last 20 years 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. They are also allowed to rebase the value of their foreign assets at 6 April 2017, to wipe out any historical capital gain, provided they have previously paid the remittance basis charge. There are also favourable rules that apply to any existing offshore trusts so long as they are not added to. The foreign income and gains are not assessable to tax until distributed to beneficiaries. It is worth noting that the provision of an interest-free loan to the trust by the settlor does cause the settlement to lose this privileged status.

New residence nil-rate band (RNRB) from 6 April 2017 when a residence is passed on death to a direct descendant. At Summer Budget 2015, the government announced it will phase in a new residence nil-rate band (RNRB) from 6 April 2017 when a residence is passed on death to a direct descendant. It will be: · £100,000 in 2017 to 2018, · £125,000 in 2018 to 2019, ·  £150,000 in 2019 to 2020, ·  £175,000 in 2020 to 2021 It will then rise in line with the Consumer Price Index (CPI) from 2021 to 2022. This will reduce the burden of Inheritance Tax for most families by making it easier to pass on the family home to direct descendants without a tax charge more

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 28% based on the chargeable gain.

At the moment, if you sell in the tax year 2018/19, any tax is payable by 31 January 2020 as part of the annual self-assessment cycle. This represents a 10 to 22 month payment delay.

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

The proposal is that from April 2020, Capital Gains Tax will be payable within 30 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.)

The draft legislation is in the Finance Bill and requires approval by the House of Lords before it is enacted. 

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 30 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 30 days.

It is important to be prepared, because late filing penalties and interest will apply in cases of failure to pay within 30 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. 

2017/18 Capital Allowances. Plant and Machinery, for Investment for use in Enterprise Zones, energy saving and environmentally beneficial equipment, new low CO2 emission (up to 75g/km*) cars, natural gas/hydrogen refuelling equipment.
First Year allowance (FYA) 100%. Annual investment allowance (AIA) 100%* On the first £200,000 of investment. Excludes cars and expenditure already qualifying for 100% FYA. Writing Down Allowance on expenditure not qualifying for AIA or FYA:

  • 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.

However Non-UK based Companies are still liable to Corporation Tax for property rental income even if they don’t have a permanent establishment. From 1 April 2015 there is a single Corporation Tax rate of 20% for non-ring fence profits. Use the Marginal Relief calculator to work out how much Marginal Relief you can claim on your Corporation Tax for profits before 1 April 2015.

The government announced legislation, setting the Corporation Tax main rate (for all profits except ring fence profits) at 19% for the years starting the 1 April 2017, 2018 and 2019 and at 18% for the year starting 1 April 2020. At Budget 2016, the government announced a further reduction to the Corporation Tax main rate (for all profits except ring fence profits) for the year starting 1 April 2020, setting the rate at 17%. Legislation, which came into force on 1 January 2010, means that it is compulsory for companies to send their Company Tax Return online using iXBRL for accounts and computations.

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.

The new requirements became effective for returns delivered after 1 April 2011, for accounting periods ended after 1 April 2010. 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.

Dividends hit again! Despite only coming into effect 12 months ago the tax-free allowance for dividend income (currently £5,000) is to be reduced to £2,000 from 6 April 2018. Dividends above this amount will continue to be either taxed at 7.5%, 32.5% or 38.1%

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. As previously announced, from 6 April 2017, the new restrictions on interest relief will be phased in as follows:          

Tax Year         Interest Relief fully         Interest Relief allowable at the basic rate

2017/18                           75%                                                 25%
2018/19                           50%                                                 50%
2019/20                           25%                                                 75%

Once the measures take full effect, the interest cost will be completely disallowed in computing rental profits and instead a tax credit equal to 20% of the interest will be given against the individual’s income tax liability.

Budget Reports. The Chancellor has delivered his 2017 Budget speech and it includes confirmation of the cut in the basic rate of Income Tax. Tax Rates and Allowances 2019/20 more. George Osbourne’s Spring-budget-2019.

If you would like more information or would like to ask us a question then call us on 0161 283 9639. JT Accountants take every care in making their recommendations and offering advice, any contract is bound between the selected accountant and the client.

JT Accountants cannot be held liable for any failure on the part of either of the parties concerned. JT Accountants is a trading name of JT Accountants Limited Company No. 06554865. Registered in England and Wales. Registered Office Flat 1, Sir Matt Busby Way, Old Trafford, Manchester, M16 0QG.

JT Accountants

Tel. 0161 283 9639
Suite 1, Sir Matt Busby Way, Old Trafford, Manchester, M16 0QG.