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If you fail to plan your planning to fail, this approach will help when it comes to tax planning without doubt.
1) PLAN YOUR TAX FROM THE BEGINNING One of the reasons many small businesses fail is cashflow or the lack of it, if you put aside a provision for tax from the start, its easy to estimate your profits and transfer your tax provision on a monthly basis into a separate bank account, at the end of the year once your actual liability is calculated you may even have some funds left over! 2) KEEP AN EYE ON YOUR TURNOVER The current VAT registration threshold is £73,000 based on a rolling 12 months, you need to register if you exceed this or expect to exceed it in the next 30 days, however, if you can demonstrate to HMRC your turnover in the following year will be below this amount you may be able to apply for exemption from registering. 3) PLAN AHEAD The decisions you make at the beginning and during the year can have tax implications, you need to be thinking about the structure of the share ownership, remuneration, entity i.e sole trader, limited company or LLP Its important to discuss your business discussions with your accountant as he/she may be able to advise you in the right direction or point out something you may not have considered.
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Principal private residence (PPR) exemption can be a very important tool in reducing capital gains for clients who own more than one property. So how can you make sure they are not missing out on their relief? The important thing to remember when using PPR relief is that the residence on which it is being claimed must at some point have been an actual residence where the claimant has lived and it needs to be available at th 1. Make an election An election can be made within two years of acquiring two residences. It is important to do this for protective purposes and it can save a lot of hassle later on. Once an election is made it can be varied. If no election is made then which residence is the residence on which PPR relief can be claimed will come down to the facts. It may be worth putting a note on your year end tax planning to check whether clients have acquired a new residence in the year, otherwise a valuable tax planning opportunity could be lost. Once an election validly is made it is conclusive. However, HMRC will not comment on the validity of an election until a claim is made. 2. Evidence This is important if HMRC query any exemption claimed and is very important where no election has been made or where the facts are disputed. Ideally this needs to be in place before the disposal. Assembling a convincing case as an afterthought is very difficult and there have been several recent cases where taxpayers have lost out on significant amounts of relief because the facts did not stack up. The available evidence needs to point towards the residence on which exemption is claimed as being the taxpayers main residence. So questions HMRC might ask:
Once an election is in place it can subsequently be varied. This ‘flipping’ is what caused so many problems for MPs during the expenses scandal. An example of how to do this used to appear in the CGT manual. This has now been removed however the principle remains. The election can be varied and the variation can be backdated up to two years. The example that used to appear in the HMRC manual varied the election for a week. This can give the last 36 months relief on the second property losing only one weeks PPR relief on the first residence. This is very valuable planning and as the variation can be backdated, it can be varied after the sale. You may want to add this to your standard tax planning checklist where a client has a gain on a property to ensure this is not missed. 4. Remember to use the exemptions In theory these look quite generous and include:
If job related accommodation is occupied on anything more than a licence the taxpayer should make an election in favour of his main residence. 5. Lettings relief If the property has been let at any time as residential accommodation then lettings relief may also be available. This is a very valuable relief and can be worth up to £40,000 per owner. The relief is the lower of the gain attributable to the let period, the PPR relief due and £40,000. This can often exempt a large part of the gain. 6. Spouses and civil partners Spouses and civil partners can only have one PPR between them. This does seem inequitable in modern times, however, the flip side is that transfers can be made between spouses under the nil gain/ nil loss provisions to facilitate planning before sale. For example, if one spouse is not a higher rate taxpayer, an inter-spouse transfer of part of the property before sale could mean more gain taxed at 18% instead of 28%. Similarly if one spouse has capital losses available a transfer may be advantageous. You need to consider all of the circumstances before recommending any planning. As a Director of a small limited company you have 9 months, from your accounting year end date to file your accounts with Companies House. However, if you are a new company you have 21 months to file your accounts from the date of incorporation of your company. You will get a reminder from Companies House about 6 weeks before your accounts are due. This reminder will be sent to your registered office address.
If you miss the deadline of filing your company’s accounts you will incur an automatic penalty. Please be aware that late filing of accounts or not filing the accounts may mean you could be prosecuted and may end up with a criminal record and a fine that could be as high as £5,000. You may also be disqualified acting as a director. Late filing penalties are as follows: Missed Deadline by: Penalty Less than 1 month £150 Over a Month but less than 3 months £375 Over three months but less than 6 months £750 Over 6 months £1,500 The above penalties will be doubled if you are late in filing the accounts again in the following year. Small businesses have been reminded of changes to the UK's VAT systems. HM Revenue & Customs (HMRC) has issued a notice urging such enterprises to be prepared for the changes, which mean that from April 1st this year all VAT returns must be filed online. Those yet to have made the necessary adjustments to cope with online filing could be tempted to seek the assistance of a specialist accountancy service to ensure their financial affairs are in order. "Previously, only newly-registered businesses and those with turnovers of more than £100,000 had to submit their VAT online, as well as pay electronically. Anyone else could send HMRC a paper VAT return, but this will no longer be an option," the department explained. Business owners have also been urged to register for online filing in plenty of time ahead of the changeover to avoid the risk of incurring any late filing penalties. |
AuthorLicenced Accountant in Brighton Archives
May 2020
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