Commercial letting of furnished holiday accommodation and tax

/in , , , , , , , , , , /by

Commercial letting is defined as ‘let on a commercial basis and with a view to the realisation of profits’.
Accommodation is furnished if the tenant is entitled to use of sufficient furniture.

It will generally be necessary to calculate the furnished holiday lettings profit or loss separately from the rest of the rental business.

If a letting is to qualify as furnished holiday letting(FHL)a few conditions should be met:
• the property to be in the UK ;
• property has to be furnished;
• property should be available for holiday letting to the public for at least 140 days a year;
• it should be let commercially for 70 days or more, and
• cannot not be occupied for more than 31 days by the same person in any period of 7 months.
The difference between residential lets and holiday lets is that with residential ones you can claim a certain relief called wear and tear as compared to the holiday ones where you can claim capital allowances.

Capital allowances can include the cost of furnishings and furniture, and equipment such as refrigerators and washing machines.

Another important difference between residential and holiday lettings is that with holiday ones you can offset any loss you make in the year against other type of income.
You may also be able to take advantage of Capital Gains Tax (CGT) reliefs, such as ‘business asset roll-over relief’.
For example, if you reinvest within three years in another UK holiday letting property or certain other assets costing the same as or more than you got for the property you have sold, you may be able to defer payment of CGT until you dispose of those new assets.
To work out your taxable profit you deduct your allowable expenses from your gross rental income. These include:
•Letting agent fees (where applicable)
•Legal and accountant fees
•Buildings and contents insurance
•Interest on mortgage payments
•Maintenance and repair costs (but not improvements)
•Utility bills
•Council Tax
•Cleaning or gardening
•Other costs related to letting the property, such as phone calls, advertising and stationery.
Landlords with income from furnished holiday accommodation in the UK are
currently treated as if they are trading for certain tax purposes, as long as they
satisfy the above criteria.
Landlords with income from furnished holiday accommodation elsewhere in the
European Economic Area (EEA) cannot currently qualify for this treatment. They
were treated instead in the same way as landlords of other types of overseas
property, under the property income rules.
The Government has decided it should repeal the Furnished Holiday Lettings rules from 2010-11.

Next week we are going to talk about these changes in more detail.

If you are still confused about lettings in relation to tax, Taxfile‘s tax agents in South London and accountants in Exeter are here to assist you.

Taxfile: Scholarship Income

/in , , , , , , , , , /by

By scholarship we mean an exhibition, bursary or any other similar educational endowment. If the holder of the scholarship is receiving full-time education at a university, college or school then the income from the scholarship is exempt from tax.
The rate of payment including lodging, subsistence and travelling allowances is now £15,480 a year, £1,290 a month or £297.92 a week. This rate has increased from £15,000 (rate used up to 01/09/2005) to £15480 (from 01/09/2007 onwards).
Important to note is that this exemption does not apply to payments of earnings made for any periods spent working for the employer during vacations.
If the rate exceeds £15,480 HMRC will look at the arrangements in detail. This is because the level of payment exceeds what might reasonably be described as a scholarship or training allowance. However, an increase in the rate of payment over the qualifying limit, part way through a course, will not affect the exemption applying to any payments for the earlier part of the course
One of the condition to be met by the employee receiving the scholarship, is that he/she must be enrolled at the educational establishment for at least one academic year and must attend the course for at least twenty weeks in that academic year.
Also, the educational establishments must be recognized universities, technical colleges or similar educational establishments, which are open to members of the public generally and offer more than one course of practical or academic instruction.
Very important to know is that the concepts of “earnings” and “scholarship income” are mutually exclusive.
In conclusion, it is important to remember that there are a few factors to consider when dealing with scholarship income:
•the relationship between the payer and the recipient;
•the nature of the course;
•where the course is being undertaken;
•whether it is full time;
• total amount.
So pop in to see us in our office in South London Monday to Friday and even Saturday now!
Any of our tax agents at Taxfile will be more than happy to help if you have any further queries.

Taxfile will help you with tax & accounting

/in , , , , , , , , /by

We thought it was about time to say a little about ourselves – TaxFile.

TaxFile can help with your accountancy and tax issues whether you are an individual needing help filling in your self-assessment tax return, are someone needing assistance with a tax rebate, or are a large organisation needing full accounts work and payroll services. So if you need professional tax help, just drop into the shop or contact TaxFile.

Non-residency Tax Issues

/in , , , , , , , /by

The United Kingdom (UK) charges tax on income arising in the UK, whether or not the person to whom it belongs is resident in the UK. United Kingdom also charges tax arising outside the UK which belongs to people resident in the UK.
If a person is resident in the UK he or she is taxed also on the gains made on the disposal of assets anywhere in the world.
To be regarded as resident in the UK you must normally be present in the country at some time in the tax year. You will always be resident if you are here for 183 days or more in the tax year. If you are here for less than 183 days, you may still be treated as resident for the year under other tests . For instance if you visit the UK regularly and after four tax years your visits during those years average 91 days or more a tax year. You are treated as resident from the fifth year.
If you are resident in the UK year after year, you are treated as ordinarily resident here. You may be resident but not ordinarily resident in the UK for a tax year if, for example, you normally live outside the UK but are in this country for 183 days or more in the year.
You will not be liable to tax on your British income if you live in a country that has a double taxation agreement with the United Kingdom.
Double taxation agreements are designed to protect against the risk of double taxation where the same income is taxable in two states. So, under such agreements, income is only taxed in the country where you live.
You are either resident or not resident in the UK for the whole of a tax year. However, by concession, the tax year is split in certain circumstances when you come to, or leave, the UK part way through a tax year. In order to find out whether or not you are entitled to split-year treatment you would need to answer a few questions.
Taxfile’s tax experts in South London and Exeter would be able to help you establish your status in UK for tax purposes making sure you pay the right amount of tax.

Student Loan Deduction

/in , , , , , , , , /by

Student Loans are considered to be a financial support package for students in higher education in the UK with the Government’s help. They are available to help students meet their expenses while they are studying.
HM Revenue & Customs is responsible for collecting repayments of Student Loans in cases where the borrower is within the UK tax system and is no longer in higher education.
The loans are still administered by the Student Loans Company.
In most cases the employer collects Student Loan repayments by making deductions from the borrower’s pay .
The employer has the following responsibilities:
• making deductions of Student Loan repayments from thee the employee’s wages
•keeping records of the deductions made
•paying the deductions over to HM Revenue & Customs
•providing HM Revenue & Customs with details of the deductions at the year end
•giving the employee details of the deductions on their payslips
•identifying on form P45, when the employee leaves your employment, that they are liable to make Student Loan repayments.
There is an Annual Threshold, currently £15,000, below which Student Loan repayments are not due. Employers making Student Loan deductions apply a proportion of the threshold appropriate to the pay period in calculating the amount of Student Loan repayment to deduct.
The rate of deduction when calculating the amount of Student Loan deduction is 9%.
Deductions are made on a non-cumulative basis. In order to deduct the right amount from the employee’s pay than the employer has to look up the Student Loan Deduction Tables on the HM Revenue & Customs website.
If you need to know more about the way Student Loans deductions work out, Taxfile’s tax agents in South London can help you get a better understanding of it.

What are the tax credits?

/in , , , , , , , /by

Tax credits are payments the Government makes to you if you live in the UK and are in a paid work, responsible for children or both.
There are two types of tax credits: Working Tax Credit (WTC) and Child Tax Credits (CTC).
The CTC has the following parts:
• a family part
• a baby part
• a child part
• a disability part.
The WTC has in turn the following parts:
• basic part
• a couple part
• a lone parent’s part
• a 30 hours a week part
• a disability part
• over 50 years old part.

If you are a student and do not have paid work you may still be able to claim if you look after a child.
If you are 16 or over and have a dependant child or are working and disabled you can still claim tax credits.
If you are 25 years old or over and you work at least 30 hours a week you can claim even if you have no children.
People who have children can claim WTC as well as CTC as long as they work at least 16 hours a week.
Rates and Thresholds for 2008-09 tax credits:

Working Tax Credit ( per year)
•Basic part:£1800
•Couple and lone parent part :£1770
•30 hour part: £735
•Disabled worker part:£2405
•Severe disability element: £1020
•50+ Return to work payment (16-29 hours) : £1235
•50+ Return to work payment (30+ hours) : £1840
There is a childcare element with the WTC.The maximum eligible cost for one child in 2008-09 tax year is £175 per week and for two to more children is £300 per week.

Child Tax Credit ( per year)
•Child Tax Credit Family part: £545
•Family element, baby addition: £545
•Child element : £2085
•Disabled child element : £2540
•Severely disabled child element :£1020

If you need to know more about tax credits, Taxfile‘s tax accountants can help you decide whether you are eligible or not to claim tax credits.

Dealing with someone’s tax after they die

/in , , , , , , , , , , , /by

When somebody dies it is important to sort out their tax and National Insurance contributions as soon as possible. The ‘personal representative’ or the executor has to sort out the deceased person’s tax affairs, as well as the rest of the estate.There may be either tax to pay or a rebate from the Tax Office.
If the deceased paid tax through Pay As You Earn (PAYE), their Tax Office will send the executor a form called R27 ‘Potential repayment to the estate’ to complete.
If the deceased person was self-employed paying tax through self-assessment, the administrator can choose to fill in form R27 in full – or only in part and then complete a Self Assessment tax return immediately or at the end of the tax year.
The deceased person will get their full tax-free personal allowance for the year of their death. They will also get a full year’s entitlement to any blind person’s or married couple’s allowance that was due to them for the full year.
If they did not receive enough income to use the whole of the blind person’s or married couple’s allowances, the personal representative can arrange for the unused allowances to be transferred to a surviving spouse or civil partner.
The personal representative may have to pay Capital Gains Tax (CGT) if profit is made from selling the property or possessions of the deceased. The executor is treated as acquiring the house at its market value at the time of death so CGT can only be payable if a profit is made after disposal and if it exceeds the ‘annual exempt amount’ (AEA).
You might find it very useful to ask a tax accountant for advice. Taxfile in South London can give you the best solutions when having to sort out a deceased person tax affairs.

Capital Allowances

/in , , , , , , /by

As a business you can claim tax allowances, called capital allowances, on certain purchases or investments. This means you can deduct a proportion of these costs from your taxable profits and reduce your tax bill.
Capital allowances are available on plant and machinery, buildings – including converting space above commercial premises to flats for renting – and research and development.

Capital allowance on plant and machinery
You can claim capital allowances on:
• the cost of vans and cars
• machines
• scaffolding, ladders, tools, equipment
• computers and similar items you use in your business
• expenditure on plant and machinery
If you’re buying equipment, 25 % is the standard allowance for businesses each year. This will reduce to 20% from April 2008.
You can claim additional allowances in the first tax year after the expenditure was made. This is called first -year allowance. First-year allowances are a tax allowance you can claim on certain purchases or investments in the year you buy them.
Small businesses can claim first-year allowances of 50% for qualifying investments. Medium-sized businesses can claim 40%, and in certain circumstances both small and medium-sized businesses can claim allowances of 100 % (referred to by HMRC as Enhanced Capital Allowances for Energy-Saving Investments), in the year they make the purchase. However, for most plant and machinery, 25 % is the usual capital allowance. There are also allowances for investment in research and development.

Capital allowance on buildings
You can claim capital allowances on the cost of:
• constructing industrial or agricultural buildings, commercial buildings in enterprise zones, and certain types of hotel
• buying or constructing a building to use for a qualifying trade such as manufacturing or processing
• renovating or converting space above shops and other commercial premises to provide flats for rent – for example, money spent on building dividing walls or fitting a new kitchen
• converting or renovating unused business premises in a disadvantaged area on or after 11 April 2007
You cannot claim capital allowances on the cost of:
• houses, showrooms, offices and shops
• the land itself, such as buying the freehold of a property or acquiring a lease
• extensions, unless it provides access to qualifying flats
• developing adjacent land
• furnishing qualifying flats
The allowance for buying industrial and agricultural buildings is 4 %, in both the first and subsequent years. You can usually claim 100% of the cost of converting underused or vacant space above commercial property into flats or converting or renovating unused business premises in a disadvantaged area.
If you need to know more about capital allowances you can contact Taxfile‘s tax accountants in South London and they will make sure you make the best of your capital allowances in order to minimize your tax liability.

Tax return deadlines: taxpayers’ worse nightmare

/in , , , , , , , /by

Have you ever felt overwhelmed by not having enough time to cope with your tax affairs in time?
During the tax year (6 April one year to 5 April the next) there are important dates , let’s call them key dates, by which you need to send in your tax return and make certain payments. It’s important to be aware of these dates as HM Revenue & Customs (HMRC) imposes penalties, interest and surcharges if you miss them.
• 31 January
This is the formal deadline for sending back a tax return received by the previous 31 October. If it arrives after this deadline you’ll be charged an automatic £100 penalty.This is also the deadline for paying the balance of any tax you owe, referred as ”balancing payment”.HMRC will charge you daily penalties until they receive your payment.
• 30 September
Paper tax returns for the tax year that ended on the previous 5 April must reach the HMRC by this date if you want them to calculate your tax for you, tell you what you have to pay by the following 31 January or collect tax through your tax code (if possible) where you owe less than £2,000 .
If they receive your paper tax return after 30 September and process it by 30 December, they’ll still calculate your tax and try to collect tax through your tax code; but they can’t guarantee to tell you what to pay by 31 January.
If you file your tax return online the deadline is later (see below) because the system calculates your tax liability for you automatically on-screen.
• 28 February
If you don’t pay the balancing payment by 31 January, you’ll be charged an automatic 5% surcharge on top of the amount still owing. This is in addition to any interest payments.
• 31 July
This is the deadline for making a second ‘payment on account’ for tax owing for the preceding tax year.
If you still owe tax that you were due to pay by the previous 31 January, you’ll be charged a second automatic 5% surcharge on top of the amount you owe.
Taxfile‘s tax accountants in South London took a group policy for all their customers in order to protect them from any extensive work generated by an enquiry from the tax office. In order to help us protect you from the taxman you need to send your tax return in time.
Taxfile can also protect new customers for their last tax return, provided they sent their return in time, before the deadline.

PAYE forms: P45, P60, P11D

/in , , , , , , , , , /by

PAYE (PAY As You Earn) is the HM Revenue and Customs system for collecting income tax from the pay of employees.

As an employer, you need to deduct income tax and National Insurance contributions (NICs) from your employees’ pay and send it to the HMRC.

As an employee, you should receive a P45 or a P60 from your employer that show you the tax you pay on your wages. If you receive benefits or expenses your employer has to send a form P11D to the tax office.

P45 form

You receive a P45 from your employer when you stop working for them. It shows:
•your tax code, tax reference number and Tax Office
•your NI number
•when you were last paid
•your earnings in the tax year from all your jobs
•how much tax was deducted from your earnings

You are entitled by law to get a P45 when you stop working for your employer.

P60 form

P60 is a summary of your pay and the tax and the tax deducted during the year.

Your employer should give you a P60 at the end of every tax year (tax year runs from 6 April to 5 April the next year)

It is very important to keep your P60 safe as you might need it to prove your income if you apply for a loan or to claim back any overpaid tax.

P11D form

Your employer doesn’t have to give you a copy of P11D but he must tell you the details included on the form. This form shows the expenses payments, benefits and facilities provided by the employer.

For more information, you can visit Taxfile‘s tax accountants in South London. Their multilingual staff (including English, Polish, French, Hungarian and Dutch) are ready to help you with any type of tax affair.