Under qualifying circumstances, Corporation Tax (CT) relief is available where your company makes a trading loss. The trading loss can be used by offsetting the loss against other gains or profits of your business in the same or previous accounting period. The loss can also be set against future qualifying trading income.
However, there are restrictions on ‘loss-buying’. This describes the situation where a person buys a trading company wholly or partly for its unused trading losses rather than solely for the inherent value of its trade or assets. The new owner usually introduces new activity into the company to try to keep its entitlement to relief for losses.
The legislation governing this area can result in all the company’s unused carried- forward trading losses being cancelled where either:
For accounting periods beginning on or after 1 April 2017, the specified period is 5 years beginning no more than 3 years before the change in ownership occurs.
The Optional Remuneration Arrangements (OpRA) legislation was introduced with effect from 6 April 2017. The legislation counters the tax and NIC advantages of benefits where an employee gives up the right to an amount of earnings in return for a benefit. This includes flexible benefit packages with a cash option, cash allowances and salary sacrifice.
The taxable value is now the higher of the cash foregone or the taxable value under the normal BiK rules. A benefit is deemed to be provided under an OpRA if it is provided under an arrangement of either type A or type B.
Type A arrangement
Type A arrangements are arrangements under which the employee gives up the right, or the future right, to receive an amount of earnings which would be chargeable to tax in return for the benefit.
Type B arrangement
Type B arrangements can be defined as – other than type A arrangements – under which the employee agrees to be provided with a benefit rather than an amount of earnings.
A benefit does not include arrangements under which the employee reduces their working hours or becomes entitled to additional unpaid leave.
The First-Tier Tribunal (FTT), in the case of Villar v Revenue and Customs examined whether the disposal of goodwill was capital or income in nature. The taxpayer in this case was a renowned orthopaedic surgeon specialising in hip arthroscopic procedures. The taxpayer sold his business in return for a payment of £1m, this payment was treated as capital in nature and a claim was made for Entrepreneur’s Relief. HMRC opened an enquiry into the relevant tax return and eventually issued a formal closure notice and assessed the £1m payment as income. This resulted in the appeal before the FTT.
The taxpayer’s position is that he received the £1m payment as consideration for the sale of a business as a going concern and therefore it should properly be assessed to Capital Gains Tax (CGT) whilst HMRC argued that the payment was in fact income in nature, being effectively an advance for services provided and so subject to Income Tax. HMRC also put forward a second argument to the FTT, that if the payment were in fact capital in nature, it remained clear that it should be treated as income based on the provisions of Part 13, Chapter 4, Income Tax Act 2007. Both parties agreed that the sale of a business is a capital transaction, the case revolved around this issue of whether or not the taxpayer’s arrangements amounted to the sale of a business.
The FTT, after examining all the facts, concluded that the £1m consideration received was a capital payment and rejected HMRC’s second argument that the relevant provisions of ITA 2007 applied finding that there was no evidence that the taxpayer had entered into the relevant arrangements in order to avoid or reduce the amount of Income Tax payable. The appeal was allowed in full. The case makes for interesting reading and provides some helpful guidance for those in similar situations although it must be remembered that no precedent is set by the FTT’s decision.
For most fully taxable businesses, VAT can be reclaimed on goods and services used in the business. This means that businesses must consider where there is any personal or private use of goods or services purchased for the business as the business can only reclaim the business proportion of the VAT.
For example, VAT is recoverable on all the costs of mobile phones provided to employees where no personal use is allowed. Where businesses allow private calls to be made at no charge, the VAT recovery must be apportioned on a fair and reasonable basis. Where employees pay for the private use of their phones, the business is allowed to reclaim the input tax in full provided an output tax charge is accounted for in respect of private use payments received from employees.
You cannot reclaim VAT for:
There are different rules for a business that incurs expenditure on taxable and exempt business activities. These businesses are partially exempt for VAT purposes and are required to make an apportionment between their taxable and exempt activities using a 'partial exemption method' in order to calculate how much input tax is recoverable.
If you have concerns that you may be under or over-claiming VAT, please call, we would be delighted to offer an opinion, and if required, takeover your VAT filing duties.
First Year Allowances (FYA’s) are available for expenditure on new unused electric vehicles and other cars within the threshold for low CO2 emissions. Businesses can claim FYA of 100% in the year they purchase qualifying low emissions or electrically propelled cars. These measures were put in place to help encourage the use of low emission and zero emission vehicles.
The FYA’s for businesses purchasing low emission cars are available until 31 March 2021. The emission threshold below which cars are eligible for the FYA is 50 gms/km. The 50gms/km limit had been higher prior to 1 April 2018 but was reduced as car manufacturers reacted to the growing demand for lower emission and electric cars and developed new clean air technologies.
The FYA allows companies to set the full cost of these qualifying cars against their tax bills in the year the cars were purchased. The FYA is only available on the purchase of new cars, second-hand cars do not qualify for FYAs (but can claim writing down allowances). If claiming the full amount of FYA would create a loss, it is also possible to claim less than the full 100% FYA and claim the balance using writing down allowances.
There is no doubt that taking advantage of tax concessions to promote sustainable technologies as the world reacts to the growing awareness of climate change issues will increase in years to come. If you are considering changes to your business car(s) and need to consider the tax advantages for your company and the benefits tax charges levied on employees, please call, we can help.
Whilst there is usually no tax relief for ordinary commuting – home to work – there are a number of exceptions. The term 'ordinary commuting' is defined to mean travel between a permanent workplace and home, or any other place that is not a workplace. Case law has established the principle that travelling between your home and a permanent workplace is not a travel expense related to the performance of your duties.
The rules are different for temporary workplaces where the expense is allowable. A workplace is defined as a temporary workplace if an employee only goes there to perform a task of limited duration or for a temporary purpose.
Other home to work travel that may be allowed includes:
There are also specific exemptions from tax for works bus services and subsidies paid to public bus services as well as for the provision by an employer of bicycles and cycling equipment in order to encourage environmentally friendly transport between home and work.
The guidance looks at cookies and similar technologies in detail and it is relevant to any organisations operating online services such as websites or mobile apps. It covers:
The blog highlights, and aims to debunk, the myths that:
The ICO highlights that cookie compliance will be an increasing regulatory priority for it in the future an
HMRC imposes a VAT default surcharge on businesses that submit late VAT returns. VAT registered businesses are required by law to submit their return and make sure that payment of the VAT due has cleared to HMRC’s bank account by the due date. The normal deadline for submission of a VAT return and making payment is one calendar month and seven days after the end of the relevant VAT quarter.
There is no penalty for a first offence, however a business that submits a VAT return late is issued with a surcharge liability notice that begins on the date of the notice and ends twelve months from the end of the latest period in default. If further VAT returns are submitted late during this period, a penalty based on a 'specified percentage' ranging from 2% to 15% will apply. The penalty increases to a maximum of 15% with each default.
A recent First-Tier Tribunal heard an appeal by Secco Muro Limited following their receipt of two VAT default surcharges dating back to the April and July 2016 VAT quarters. The taxpayer appealed, claiming reasonable excuse due to cash flow difficulties. These difficulties were the combined result of a number of large customers failing to pay invoices due on time, coupled with a default by one significant customer that became insolvent and unable to settle their account.
The Tribunal was clear that an insufficiency of funds cannot be a reasonable excuse. However, based on precedent, a shortage of funds might comprise a reasonable excuse, especially where a significant customer defaults in payment. The Tribunal looked at this issue in more detail but ultimately dismissed the taxpayers appeal. The Tribunal felt that the insufficiency of funds was not an unforeseeable event given the circumstances as outlined to the court.
A further argument by the taxpayer that the penalties are a little unjust and unfair, was dismissed on the basis that HMRC has no discretion on the penalties levied as the percentages are clearly set-out in the underlying legislation.
Whilst there are some exceptions where a business had a reasonable excuse for submitting a late VAT return, the criteria is limited. To avoid these issues, it is imperative that VAT returns are submitted and paid on time as a delay of even one day can have significant knock-on consequences.
Business rates are a tax on non-domestic premises, including most commercial properties such as shops, offices, pubs, warehouses and factories. The money raised through business rates is used to help fund local services like the police, fire and rescue services.
Business rates are generally calculated by multiplying the rateable value of commercial premises by the business rates multiplier before any eligible reliefs are deducted. Business rates are treated differently in England, Wales, Scotland and Northern Ireland and the rates relief schemes vary across the UK.
In England, the available reliefs include small business rate relief, rural rate relief and charitable rate relief. In addition, some properties are eligible for exempted buildings and empty buildings relief from the local council on their business rates.
In Wales, the main reliefs are the small business rates relief scheme, the charitable and non-profit organisations rates relief and relief on empty properties. Local councils can also grant hardship relief under certain circumstances.
In Scotland, there are a large number of reliefs available. These include Small Business Bonus Scheme, Empty Property Relief, Charitable Rate Relief, Fresh Start, Business Growth Accelerator Relief, Hardship Relief and Rural Rate Relief.
In Northern Ireland, the reliefs include the Small Business Rate Relief, Small Business Rate Relief for small Post Offices, Charitable Exemption, Sport and Recreation Rate Relief.
As the school holidays fast approach, many parents face having to organise extra school holiday childcare over the summer months.
HMRC is reminding parents that the Tax-Free Childcare (TFC) scheme can help if you have children aged 0-11 years old. The TFC scheme helps support working families with their childcare costs and can be used to pay for regulated holiday clubs during the school holidays. More than 68,000 registered childcare providers including school, football, art and tennis clubs have signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays.
The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by the Government up to a maximum total of £10,000 per child per year. This will give parents an annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.
The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme, parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.
Chief Secretary to the Treasury, Liz Truss, said:
'We understand making arrangements for summer childcare at this time of year is important and can be a stressful time for parents. Tax-Free Childcare makes things easier, putting more money in the pockets of parents and supporting as many families as possible to secure high-quality, affordable childcare.'