How does s455 tax apply to Directors Loans? what if you ‘bed and breakfast’ the loan?
Directors (participators in a closed company) often borrow money from their companies with the intention of paying a dividend to repay the loan.
If the loan is outstanding more than 9 months after the company year end, then an extra 25% corporation tax charge is due, this is the s455 tax which is refunded when the loan is repaid as explained in this blog
http://stevejbicknell.com/2015/02/04/new-tax-procedure-for-directors-loans-s-455/
HMRC were concerned that some participators were avoiding this tax by raising funds short term to repay an outstanding loan. They would then draw a new loan very shortly afterwards – HMRC refer to this as “bed and breakfasting”. New anti-avoidance rules were therefore introduced in 2013.
These new rules incorporate two provisions – the “30-day rule” and the “intentions and arrangements” rule.
30-day rule
This applies where within a 30-day period:
- a shareholder makes repayments of their s455 loan; and
- in a subsequent accounting period, new loans or advances are made to the same shareholder or their associate.
So basically prevents the use of ‘Bed & Breakfasting’
‘intentions and arrangements’ Rule
Relief is denied regardless of the 30 day rule, if prior to repayment there is an outstanding amount of at least £15,000 and at the time the amount is repaid to the company, any person intended to redraw any of that amount or had made arrangements to make a new withdrawal; and a new withdrawal is made.
The relief denied is the lower of the amount repaid and the amount redrawn.
steve@bicknells.net
VAT for sole trader start-ups
How to maximise your VAT reclaim
Plan ahead and reclaim everything
If you are setting up a business and can ahead, you can register for VAT from the date your business will start. For most traders there is not any restriction on the date the business can start, but for some professional services eg barristers and advocates, no trade exists until they qualify. To maximise the VAT to be reclaimed, the sole trader can register for VAT in advance of date of commencement, effective the date they are due to qualify. This means that the VAT registration will be in place from the 1st day of trading and all sales invoices can be issued as VAT invoices.
Pre-registration VAT
There are specific rules allowing pre-registration VAT to be reclaimed, but any claims to recover pre-registration VAT must relate to the same trade and made by the same person. A sole trader who incorporates the business is not the same legal person as the new company. Any VAT suffered by the (unregistered) sole trader can’t be claimed as pre-registration VAT by the new company.
Get help with registering
Your accountant will be able to register you for VAT and recommend the best scheme for you. It can take a few weeks for HMRC to process applications, but accountants who are registered as agents with HMRC are likely to have a quicker turnaround time. For advice on registering for VAT and setting up your invoices, please visit the Alterledger website.
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How does Principle Private Residence Relief work?
Principle Private Residence Relief (PPR) is useful relief that saves you capital gains tax (18% for basic rate tax payers and 28% for higher rates tax payers) on your main residence, but how does it work, lets take a basic example
Property Purchase Date 30/04/2001
Property Purchase Price £100,000
Date Moved Out 30/10/2010
Letting Start Date 01/11/2012
Date Sold 31/10/2014
Sale Price £200,000
Capital Gains tax calculation
Sale proceeds 31/10/2014 £200,000
Cost (assuming no improvements) -£100,000
Gross capital gain £100,000
Reliefs available
Principle Private Residence Relief
Actual Occupation 9.5 Years
Started 30/04/2001
Ended 30/10/2010
Plus last 18 Months of Ownership 1.5 Years
The Property was empty prior to letting
Up to 18 months could be by ‘absence for any reason’
Total period where private residence relief is
available 11.0 Years
Total Period of ownership 13.5 Years
Principle private residence relief
£100,000 x (132 mths/162 mths) £81,481
Gain after principle private residence relief £18,519
Letting Relief
01/11/2012 to 31/10/2014 2.0 Years
Lettings relief is to lower of
£40,000 statutory maximum
£81,481 the principle private residence relief in this example
The gain for the letting period
Gain attributable to letting 2/13.5 x £100,000 £14,815
This is the lowest figure
Capital gain after reliefs £3,704
Annual Exemption for 2014/15 £11,000
So in this example there is no tax to pay
For further details see the HMRC Helpsheet 283
For gains on sales prior to 6 April 2014, PPR is available for the last three years of ownership of a property that has been a main residence at any time. This is the case regardless of whether or not it has been occupied during the last three years of ownership.
But as a result of the 2014 Budget, from 6 April 2014 the automatic exemption from tax on gains in relation to the final years of ownership is now restricted to cover the last 18 months rather than three years.
steve@bicknells.net
What are Dispensations and Scale Rate Allowances?
Its nearly time to prepare your P11D’s, here is a link to the 2014-15 P11D
You’ll need to submit an end-of-year form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.
The form will either be a P9D or a P11D, depending on the expense or benefit.
You may need to submit form P11D(b) to report the amount of Class 1A National Insurance due on all the expenses and benefits you’ve provided. You should do this if:
- you’ve submitted any P11D forms
- you’ve been sent a P11D(b) form by HMRC
If you don’t submit any P11D forms, you can tell HMRC that you don’t owe Class 1A National Insurance by completing a declaration.
Due by 6th July 2015.
As an employer, you can apply for a dispensation on some expenses and benefits you provide for your employees. This means you won’t need to report them to HM Revenue and Customs or pay tax or National Insurance on them. Here is a link to apply for Dispensations.
There are also Benchmark Scale Rates which can be paid tax free, alternative you can claim the actual costs
| Description | Amount (up to) |
| Breakfast rate | £5 |
| One meal (5 hour) rate | £5 |
| Two meal (10 hour) rate | £10 |
| Late evening meal rate | £15 |
steve@bicknells.net
New Childcare Vouchers from Autumn 2015
Childcare vouchers to be withdrawn for new employees
The existing benefits available in the form of childcare vouchers to employees will be withdrawn to new entrants in the Autumn of 2015. The current scheme saves National Insurance contributions for both employers and employees. Employees also save income tax.
English: British National Insurance stamp. (Photo credit: Wikipedia)
New scheme to start in Autumn 2015
The new scheme for childcare vouchers will not be as good for many employees who currently benefit from the current scheme, but where both parents work and are self employed, they can get the government to pay £2,000 towards registered childcare.
How do I set up childcare vouchers?
Childcare vouchers are set up through your payroll scheme and must be available to all eligible employees to receive the tax benefit.
Alterledger can help
For more information on saving employer’s national insurance and preparing for changes to childcare vouchers, contact Alterledger or visit the website alterledger.com.
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Free Webinar for Employers
Free Webinar: The Essential Guide to Auto Enrolment for Employers
For employers auto enrolment is here to stay!!
If you are an employer who does not have payroll software or use the HMRC Basic PAYE tools to process your company’s payroll then this webinar is for you. This free webinar will take you through the main administration employer duties of auto enrolment including: an auto enrolment overview, staging, employee assessment, enrolment, postponement, opt in & opt outs, employee letters, reporting, choosing payroll software and processing auto enrolment in house or outsource it.
This webinar is specifically designed to help employers understand the processes involved in completing their automatic enrolment duties. Each and every employer with at least one member of staff has new obligations to carry out.
The webinar is ideal for employers who process their payroll in-house or are considering outsourcing it to a payroll professional. The session will help you understand what is involved for you and your business.
Places are limited.
For more information visit our website
Trivial Benefits £50 exemption deferred
It had been proposed that there will be a new statutory exemption for trivial benefits up to a limit of £50 from from 6 April 2015, this measure is not included in the first Finance Bill of 2015, it has been deferred until after the election.
The £50 tax exemption would have been on items such as birthday and Christmas gifts. The legislation would have also introduced an annual cap of £300 in some circumstances.
So we are stuck with the old rules for now
An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).
http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm
There are some non taxable benefits you be interested in….
HMRC Helpsheet 207 – Non-taxable payments or benefits for employees
http://www.hmrc.gov.uk/helpsheets/hs207.pdf
steve@bicknells.net
How do Help to Buy ISA’s work?
Top 10 facts and rules…
- Its only available to ‘First Time Buyers’
- ‘First Time Buyers’ can only have one Help to Buy ISA with one provider
- You can pay in £1,000 when you open the account and then save a maximum of £200 per month
- The maximum government bonus is £3,000 (but you can lower amounts of bonus if you have less than £12,000)
- The scheme will run for 4 years from the date it opens (Autumn 2015)
- Couples can have a Help to Buy ISA each which means if they don’t want to wait 4 years could save £12,000 in 25 months where as a single saver would need 55 months
- Unlike ISA’s where you open one per year, the Help to Buy ISA will continue for 4 years
- You can withdraw funds but if its not to buy a home then you won’t get the bonus
- More than 100,000 homes have now been bought with government backed schemes
- You will be able to get them at banks and building societies
Money Saving Expert has some useful Q&A including this one….
A first-time buyer is someone who does not and has never owned an interest in a residential property, either inside or outside the UK.
Many people have said “I owned a property previously but now rent”, “I have a shared ownership property” or “I have inherited a property” can I still open a Help to Buy ISA? And the answer is NO – you have to be a first-time buyer to open one.
steve@bicknells.net
The end of Tax Returns and start of ‘Digital Tax Accounts’
In last months Budget, the Chancellor George Osborne announced that during a 5 year period starting in 2016 we will see the end of tax returns and the introduction of Digital Tax Accounts.
According to Citywire
By the end of 2016, five million small businesses and the first 10 million individuals would use the new ‘digital tax account’.
‘Millions of individuals will have the information the Revenue needs automatically uploaded into new digital accounts,’ said Osborne. ‘Tax really doesn’t have to be taxing, and this spells the death of the annual tax return.’
Around 85% of those who complete self-assessment forms already do them online. But HMRC said the new accounts, unlike the current system, would be pre-populated with data HMRC already holds and that from third parties.
Those who pay tax using the pay-as-you-earn system will have their income tax, national insurance contributions and pension position already shown in their accounts, alongside any interest from banks and building societies.
HMRC said that small businesses using the system should also be able to use accounting software to feed data straight into their account.
In order for this to work, small businesses will need to keep their accounts up to date.
The top 5 common accounting problems accountants deal with are:
1. Not doing any accounts – the shoe box approach to business
This is the most common mistake, book keeping is best done as you go along, putting all the paperwork in a shoe box or carrier bag is a really bad idea as you have no idea how your business is performing.
2. Not keeping receipts. Often small business miss out on claiming all their expenses because they fail to keep receipts and lose track of their spending
3. Not reconciling. Reconciling your bank statements to your cash book is vital to make sure that all of your income and expenses have been recorded in your accounts.
4. Using the wrong accounting system. For some businesses a manual cash book and records are fine but for many accounting software such as Debitoor will be needed to keep track of debtors, creditors and VAT. Make sure you understand your accounting system and operate it correctly.
5. Mixing business and personal expenses. Some sole traders even mix up business and personal bank accounts and in extreme cases don’t even have a business bank account. This can cause errors and often means that a sole trader will either claim to many expenses or to few.
Will small businesses be able to overcome these problems or will they end up in a tax mess with Digital Tax Accounts?
steve@bicknells.net
How will FRS102 affect your tax position?
FRS102 will affect us all, even small companies will be subject to a version of FRS102.
Its not just a reporting standard it will affect your tax position too, for example
Intangible Assets and Goodwill
Under FRS102 these assets will have a maximum life of 5 years where as UK GAAP allowed them to have an infinite useful life.
Distributable Reserves
There are various FRS102 changes that can effect these but one specific one is deferred tax which will be calculated on investment properties.
Operating Leases
Leases incentives will be spread over the entire life of the lease rather than to first break clause.
Asset Reclassification
Some assets such as Websites and software development could be reclassified as Intangible
Have you assessed the changes for your business?
FRS 102 is effective for periods beginning on or after 1 January 2015.
steve@bicknells.net
Business Accountant 