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Welcome...
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The value of shares quoted on the stock market has risen recently. This may encourage you to sell some investments before the end of this tax year (5 April 2013) in order to use your annual capital gains exemption and to soak up any capital losses. Any gains covered by the exemption (currently £10,600 per person) or capital losses are free of capital gains tax.
We can't advise you on what to sell, but we can help you calculate the level of your capital losses and potential gains. It is essential that you tell your financial adviser or stockbroker how much capital losses you have already realised, so future disposals can be made to meet the level of those capital losses.
If you have forgotten to declare a disposal which made a capital loss on your tax return form, there may be no harm done, but you need to submit a claim for the loss before it can be set against a later gain. The deadline for claiming capital losses is now four years from the end of the tax year in which the loss arose, so you can still claim for losses made in 2008/09 and later tax years. We can help you with these claims.
Don't forget you can crystallise a capital loss on shares which you still hold, but are now worth nothing or almost nothing. This is called a negligible value claim, and we can help you with that.
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The letting of land is exempt from VAT unless it falls into one of the many exemptions from the exemption for VAT. One of those exemptions to the exemption is where accommodation is provided in hotels, inns, boarding houses and similar establishments, including rooms provided for the purpose of catering, i.e. an eating and drinking occasion.
If you hire a room in a hotel for a group function including a meal, and the hotel supplies the catering, the whole fee is subject to standard rate VAT. If the catering is supplied by an outside caterer, the Taxman used to take the view that the room hire would be exempt from VAT, whilst the catering cost would carry standard rate VAT (if the caterer was VAT registered). However, the Taxman changed his mind on this point in October 2011, and updated the VAT Notice 709/3: Hotels and holiday accommodation.
Unfortunately he didn't tell anyone he had released a new version of that leaflet so
few businesses were aware of the change in practice, and confusion reigned. Now the Taxman has issued some more guidance as HMRC Brief number 02/13.
That guidance says where a room in a hotel is supplied for the purposes of catering, whether or not the catering is supplied by the same establishment, the room hire is subject to VAT at the standard rate. If you run a hotel, pub or similar place that hires out rooms, and have got this wrong in the past, the Taxman has said he will not pursue you for the VAT which should have been charged. However, you need to get the VAT treatment right from now on.
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| Self-Employed Travel Expenses |
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If you are self-employed you may have a number of customers you go to regularly to work at their premises. This could apply to mobile hairdressers, cleaners, gardeners, and even medical professionals who work at private clinics. The miles you drive to reach each of your customers from your business base are used to calculate the amount of travel expenses you claim in your business accounts.
This is all good, but the Taxman has recently argued in a tax case that where the business is based at the person's home, that home-office can't be treated as the starting point for travel when the work is performed almost entirely at customers' properties. The Taxman has particularly challenged travel expenses claimed by doctors who work at private clinics and do not see patients at their home-office. The Taxman has tried to ignore the necessary preparation and report writing work the doctor has to perform at his home-office.
The Taxman has agreed that travel between customers is allowable, so the mobile hairdresser or cleaner who travels to several customers each day should be able to claim the majority of their travel expenses. However, travel from the home-office to say one private clinic and back home again is in question.
This doesn't mean you should stop claiming the cost of travelling to customers, but to head-off any challenge in the future, you should record every business related journey; where it started, number of miles and the reason for the journey - who were you seeing. Using an estimate of your total business mileage for the year is no longer an acceptable method of calculating your travel expenses. You should also record what part of your business you conduct at your home-office, such as preparing estimates or writing reports.
If you are concerned you may be affected, please contact us for advice.
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| March Question and Answer Section |
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Q. The Taxman has sent me a new PAYE code for 2013/14, which includes about £1000 of savings income taxed at 40%. I don't know how he got that figure as I don't have any savings, and I only draw dividends from my company up to the limit of the 20% tax band.
A. The Taxman has looked at the income reported on your tax return for 2011/12, of say £7,475 wages plus £35,000 gross dividends (total £42,475), and assumed you will continue to receive the same amounts of wages and dividends in 2013/14. However, in 2013/14 your tax free personal allowance will be £9,440 and the limit of the 20% tax band will be £32,010 (total £41,450). If you draw the same amounts from your company in 2013/14 as you did in 2011/12, you will be taxed on £1,025 at the higher rate (40% for salary, 32.5% for dividends). To avoid the higher tax rate you will need to restrict the amount you draw from your company in 2013/14, and tell the Taxman to amend your PAYE code on the basis of your estimated salary and dividends for the year.
Q. I run a small B&B which has three let bedrooms, my family uses the other two bedrooms of the property. How should I calculate how much of the property's running costs relate to the B&B business?
A. The answer is to include all of the property's running costs (power, rates and repairs) in your B&B accounts and take out, or 'disallow', an amount that relates to your family's use of the property. This is called a private use adjustment. In many towns the private use adjustment for B&Bs has been agreed locally with the Inspector of Taxes as a monthly or annual rate. However, from 1 April 2013 national rates of private use adjustment have been set by the Taxman as follows:
- 1 family member living in the premises: £350 per month
- 2 family members living in the premises: £500 per month
- 3 or more family members living in the premises: £650 per month
Q. My family business is very traditional; the factory-floor workers are paid weekly, the management are paid monthly and the senior directors are paid quarterly. How will I report all these different pay dates under real time information (RTI)?
A. This is a problem, as the RTI system was designed on the basis that all employees on the same payroll are paid at the same time. Under RTI you must submit a report for the entire payroll called a Full Payment Summary (FPS), every time the employees are paid. Running the FPS with only say the weekly employees receiving pay will cause errors unless adjustments are done for those employees who are not being paid on that particular pay date. A solution may be to segment your payroll into weekly, monthly and quarterly runs, but you need to talk to your payroll software provider to check if that is possible, before you start to implement RTI.
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19/22 - PAYE/NIC and CIS deductions due for month to 5/3/2013
31 - Last minute tax planning for the 2012/13 tax year. Ensure you use up all exemptions to which you are entitled.
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Please contact us if we can help you with these or any other tax or accounts matters.
In addition, if there's anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
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If you are not already a client and are interested in becoming one, we would love to come to meet with you to discuss how we can help and provide you with a competitive quote for our services.
All new client consultations are provided free of charge and without obligation.
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TWR Accountants are based in Brandon near Thetford, offering local business owners and individuals a wide range of services to small and medium sized businesses.
All clients receive fixed fees, work delivered on time and free unlimited phone support. Visit our website http://www.twraccounts.co.uk for more information.
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