There are special rules for the taxation of post-cessation receipts after a trade has ceased. The legislation clearly states that the person who receives or is entitled to the post-cessation receipt is the person who is subject to Income Tax or Corporation Tax on the income. This does not have to be the same person who carried on the original trade.
HMRC manuals state that: a receipt which arises from a property rental business, after it has ceased, is taxable under special rules provided, it is assumed that the taxpayer has not already included that receipt in the computation of their rental business profits.
The taxpayer may also be able to claim relief for post-cessation expenses for which they have had no relief. One example might be the cost of background heating for empty premises to keep down condensation and so maintain the value of the property for later sale.
A claim for post-cessation property relief is possible if a taxpayer ceases to carry on a UK property business and within 7 years makes a 'qualifying payment' or a 'qualifying event' occurs in relation to a debt of the business. A claim to relief must be made on or before the first anniversary of the 31 January following the end of the tax year in which the payment is made.
An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans.
A taxable cheap loan is an employment-related loan:
The official rate of interest on beneficial loan arrangements is currently 2.5%. A change in the rate is only made in the event of significant changes in interest rates. An employee can also benefit if an employment-related loan is released or written off. He or she is then no longer obliged to repay the amount that was lent.
A benefit in kind will be applicable where a loan is provided at an interest rate of less than 2.5%. In addition, employers must also pay Class 1A National Insurance. It is not necessary for the loan to be advantageous to the recipient for a chargeable benefit to arise.
The weekly rates of child benefit for the only or eldest child in a family is currently £20.70 and the weekly rate for all other children is £13.70. These rates have remained unchanged for some time. Taxpayers entitled to the child benefit should be aware that HMRC usually stop paying child benefit on the 31 August following a child’s 16th Birthday. Under qualifying circumstances, the child benefit payment can continue until a child reaches their 20th birthday if they stay in approved education or training.
Child benefit is usually payable for children who come to the UK, however, there are a number of rules which must be met in order to claim. HMRC must be notified without delay if a child receiving child benefit moves permanently abroad.
It is also possible to claim Guardian’s Allowance if you are bringing up someone else’s child because one or both parents have died. The Guardian’s Allowances is paid on top of child benefit and is currently £17.60 per week.
Beware related tax charge
The High Income Child Benefit charge applies to higher rate taxpayers whose income exceeds £50,000 in a tax year and who are in receipt of child benefit. The charge either reduces or removes the financial benefit of receiving child benefit. Where both partners have an income that exceeds £50,000, the charge will apply to the partner with the highest income.
For taxpayers with income above £60,000, the amount of the charge will equal the amount of child benefit received. Taxpayers have the choice: to keep receiving child benefit and pay the tax charge through Self Assessment or elect to stop receiving child benefit and not pay the charge.
Most VAT registered businesses with a turnover above the VAT threshold need to be ready to keep digital records for VAT purposes, and to file their VAT returns, as required by the new Making Tax Digital (MTD) rules.
What does this mean?
For VAT return periods starting on or after 1 April 2019, businesses with a turnover above the VAT threshold (currently £85,000) have to:
Businesses need to sign up for MTD for VAT in order to submit VAT returns digitally. HMRC has confirmed that businesses that pay VAT by Direct Debit cannot sign up in the 7 working days leading up to, or the 5 working days after sending a VAT Return.
HMRC has also confirmed that during the first year of the changes that they will take a light-touch approach to digital record keeping and filing penalties where businesses are doing their best to comply with the law. HMRC is clear that this does not mean a blanket 'no penalties promise' and businesses need to be aware to do all they possibly can to meet the MTD requirements.
But I am exempt from online filing
Any businesses that are currently exempt from online filing of VAT will remain so under MTD. There are also provisions for those who cannot adapt to the new service due to age, disability, location or religion to apply for an exemption.
There is also a deferral group for certain entities that have until the first VAT Return period starting on or after 1 October 2019 to start using MTD for VAT. This includes businesses that are part of a VAT group or VAT division, use the annual accounting scheme or that make payments on account. If your business has a turnover under the VAT registration threshold, you are not currently mandated to use the MTD for VAT service but can opt to do so if you wish.
If you are uncertain how to proceed, either to register for MTD filing, find appropriate software or deal with any other aspect of MTD for VAT, please call asap as we are running out of time to keep you compliant.
We would like to remind employers that the deadline for submitting the 2018-19 forms P11D, P11D(b) and P9D is 6 July 2019. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.
This is known as payrolling and removes the requirement to complete a P11D for the selected benefits. However, a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. It is important to be aware that the deadline for paying class 1A NICs is 22 July 2019 (or 19 July if paying by cheque).
The Optional Remuneration Arrangements (OpRA) legislation was introduced with effect from 6 April 2017. The legislation means that the tax and NICs advantages of benefits where an employee gives up the right to an amount of earnings in return for a benefit are largely withdrawn. 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.
Don't ignore the forms…
Where no benefits have been provided from 6 April 2018 to 5 April 2019 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest if you are late paying HMRC.
Need assistance with the form filling?
Please call if you need help either completing the individual P11D forms, or any of the associated forms.
Two changes to the way Private Residence Relief works are due to come into effect from April 2020. These changes could reduce the amount of CGT relief available on the sale of a private residence. The government has said that the measures are being introduced to better focus Private Residence Relief at owner-occupiers and the changes will mostly affect home owners who let out their home, or part of their home at some time.
The current private residence rules and forthcoming changes
Currently, if a property has been occupied at any time as an individual’s private residence, the last 18 months of ownership are disregarded for CGT purposes. This relief applies even if the individual was not living in the property when it was sold. From April 2020, this final exempt period will be reduced from 18 months to 9 months.
The intention of this relief was to protect those who had difficulty selling their original home after purchasing a new home. However, the long exemption period allows all qualifying home owners to accrue CGT reliefs on two properties at the same time. The government is concerned that this relief is being used by some homeowners / landlords who intentionally hold on to a property they have lived in to benefit from the CGT reliefs available.
There will be no change to the 36 months exempt period available for those that are disabled or moving into care homes.
Home owners that presently let all or part of their house may not benefit from the full private residence relief but can benefit from letting relief of up to £40,000 (£80,000 for a couple). The relief is not available on a 'buy to let' property in which the owner has never lived.
From April 2020, lettings relief will be reformed. The change will mean that lettings relief will only be available to those property owners who are in shared occupancy with a tenant.
Are you considering a property sale?
If you have two properties on which you can take advantage of Private Residence Relief then it might be time to consider your options and look to possibly sell one of these properties before April 2020.
Also, it is important to note that these changes from April 2020 do not affect landlords who have never lived in a rented property.
The National Insurance Contributions (NICs) Bill was introduced into Parliament on 25 April 2019. The Bill will see the introduction of a new 13.8% Employer Class 1A NIC charge on termination payments and sporting testimonials that are already liable to Income Tax from 6 April 2020. The government announced this change at Budget 2018.
This means that from next April, termination payments over £30,000 and sporting testimonials of more than the £100,000 limit will be subject to Employer Class 1A NIC charge. These changes will ensure that termination awards and sporting testimonials have the same Income Tax and NIC treatment. It will also close a commonly used loophole where employers disguise final payments as compensatory termination payments that benefit from the current NIC exemption.
The government had previously confirmed that the £30,000 tax free exemption on termination payments would be retained but that certain payments will no longer fall within the allowance. It is expected that any employer NIC ue on these termination payments will be collected in ‘real-time’, as part of the employer’s standard weekly or monthly payroll returns and remittances to HMRC.
The current Governor of the Bank of England, Mark Carney, will step down from his role on 31 January 2020. Mr Carney had been due to step down earlier but agreed to stay in his role to help support a smooth exit from the European Union. Although this has not yet happened, the Chancellor has confirmed that Mr Carney will step down in January 2020 as planned, and the search for a new Governor of the Bank of England has been launched.
The Chancellor of the Exchequer, Philip Hammond, said:
'In today’s rapidly evolving economy the role of Governor is more important than ever. Finding a candidate with the right skills and experience to lead the Bank of England is vital for ensuring the continuing strength of our economy and for maintaining the UK’s position as a leading global financial centre.'
The appointment of Mr Carney was the first time the position of Governor was held by a foreigner since the Bank of England was founded in 1694. The recruitment net for the next Governor has been designed to ensure that the most qualified candidate is appointed from the broadest possible pool of applicants.
The new role has been advertised on the Cabinet Office public appointments website and potential candidates have been informed that they should be able to commit to an eight-year term.
The cash basis scheme helps many sole traders and other unincorporated businesses to manage their financial affairs. The scheme is not open to limited companies and limited liability partnerships. Using the scheme, allows qualifying businesses to use the cash basis when recording income and expenditure.
You must have a turnover of £150,000 or less to join the scheme and you can continue using the scheme until your turnover reaches £300,000. However, certain small businesses are more suited to using the case basis than others. The scheme is most suitable to relatively modest businesses especially those that provide services.
If you are using the cash basis scheme, then capital expenditure is usually treated as an allowable business expense with the following exceptions:
In addition, if you buy a car you can claim the purchase as a Capital Allowance on the condition that the business mileage rate has not been claimed on the car. This is because the rate already contains an element to allow for depreciation.
It is common practise in the building industry for a final percentage of an amount due to a builder to be withheld as a retention. This payment allows the customer to retain part of the total payment due until satisfied that the builder has completed all the activities required of them under contract at an agreed level of satisfaction.
Typically, this may be for a 12-month period between a Certificate of Completion being given and the issue of a Maintenance Certificate.
HMRC accepts that builders will generally deal with retentions in one of the following ways:
HMRC is prepared to accept either of these options for tax purposes as an accepted treatment unless an unrealistically conservative view has been taken. In some cases, these monies are never paid. HMRC point out that, consequently, it will often be the case that, whichever of the above approaches is adopted, there will be little or no difference in the figure of net profit.