Q. I am a VAT-registered sole trader, owning a cycle shop in my local town. I am thinking of opening a second shop in another town and am wondering how I will deal with this for self-assessment and VAT. Will I need to register the new shop for VAT separately and complete two VAT returns - one for each business?
A. I presume you are going to be selling similar goods and providing similar services in the new shop. If that is the case, you will be able to do one self-assessment for the two businesses by amalgamating the figures for both shops. For VAT purposes, the HMRC state that it is the 'person', not the business, who is registered for VAT. A person can be either an individual or a legal person or entity and each VAT registration covers all the business activities of the registered person. This means that even if your new business has a different name, you will only need one VAT registration number.
Q. I own a rental property and let it out on a fully-furnished basis. Can I claim a tax deduction for the cost of replacing items as and when needed?
A. The government withdrew the 'renewals basis' capital allowance for furnishings in rental properties from April 2013, which means that currently only the 10% wear and tear allowance for a fully furnished rental property is available to you. Note that the wear and tear allowance is not available to those property businesses that rent part-furnished or unfurnished property.
The good news, however, is that in the Summer 2015 Budget the government announced that, as from April 2016, the 10% wear and tear allowance will cease and will be replaced with a new 'replacement allowance'. Broadly, the new relief will enable all landlords of residential dwelling houses to deduct the costs they actually incur on replacing furnishings in the property. The relief will apply to landlords of unfurnished, part-furnished and furnished properties (but not to 'furnished holiday lettings' (FHLs) or commercial properties).
Under the new replacement furniture relief, landlords of all non-FHL residential dwelling houses will be able to claim a deduction for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant's use in the dwelling house, such as:
movable furniture or furnishings, such as beds or suites,
fridges and freezers,
carpets and floor-coverings,
crockery or cutlery.
The new replacement furniture relief will only apply to the replacement of furnishings. The initial cost of furnishing a property will not be included.
Q. I am a higher-rate taxpayer. My wife currently works part time and pays tax at the basic rate. We have a second property that we rent out but the deeds are held in my sole name. Is it worth putting the property into joint names, or even transferring it to my wife outright, so that we pay tax on the rental income at the basic rate?
A. If you live with a spouse or civil partner and have income from property you jointly own, you will normally be taxed on an even split of the income between you. In your particular circumstances there are two options available:
1. Under what is known as the '50:50 rule', you can simply make your wife a partial owner of the property, which means you will each be taxed on 50% of the rental income. For the purposes of these rules, the actual amount she owns is not relevant - it could be 99%, 50% or even 1%, as long as she is a partial owner.
2. You can make your wife a partial owner of the property and notify HMRC of the proportion she holds accordingly. You do this by submitting Form 17 to HMRC to record your actual shares of ownership. You will both then be taxed on the rental income according to the proportion you both actually own in the property (known as the 'actual basis'). You will need to provide HMRC with evidence that your beneficial interests in the property are unequal, for example a declaration or deed. You can complete Form 17 online here. https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp
Q. I have realised that I made a mistake on my most recent VAT return. What should I do?
A. You can adjust your current VAT account to correct errors on past returns if the error:
was below the reporting threshold (broadly, less than £10,000, or up to 1% of your box 6 figure (up to a maximum of £50,000);
was not deliberate; and
relates to an accounting period that ended less than 4 years ago.
When you submit your next return, add the net value to box 1 for tax due to HMRC, or to box 4 for tax due to you. Make sure you keep good accurate records relating to the adjustment.
Q. A friend has told me that I may be entitled to a larger state pension if I pay Class 3A national insurance contributions. What are they and how do I know if paying them is worthwhile?
A. Class 3A is a new voluntary type of national insurance contribution (NIC) that is being introduced from 12 October 2015. Broadly, between then and 5 April 2017 certain people will be able to make a contribution to top up their state pension by up to £25 per week. Men born before 6 April 1951 and women born before 6 April 1953 will be eligible to make top up payments. The cost of the contribution will depend on how much extra pension the applicant wants to qualify for (between £1 and £25 per week), and how old they are when they make the contribution. A top up calculator is available on the GOV.uk website at www.gov.uk/state-pension-topup/y. The calculator will help you work out whether it is worthwhile you making Class 3A contributions.
Q. I have assets worth around £600,000, including my home. I am single, have never been married and have no children. I intend leaving my estate to my siblings. Will they qualify as 'direct descendants' and, in turn, will I qualify for the extra £175,000 family home inheritance tax allowance that was announced in the Summer Budget?
A. The draft legislation and guidance on this issue states that the relief will only be available where the family home is passed to children. This includes stepchildren, adopted and foster children, plus grandchildren. Therefore the family home allowance will not be available.
Savings income (which includes all types of interest) paid net is taxed usually at source at 20%. Dividends on UK equities carry a (non repayable) tax credit of 10%. The intention is that only higher rate taxpayers should have to pay any additional tax, although 'starting rate' and non-taxpayers may be entitled to claim a tax refund. The starting rate of 10% applies only to savings income up to £2,880. If non savings income exceeds this, no 10% rate applies.
For higher rate taxpayers, there is the question of how much of their savings income has to bear extra tax. In determining this, the general rule is that savings income is treated as the 'top slice' of income.
This is best illustrated by examples of individuals who have exactly the same savings income in 2014/15, but different other income (for simplicity, treated as being after application of all allowances). The treatment of dividends is more complicated and they are therefore excluded.
Suppose the savings income is received as follows:
Bank interest £1,600 net (£400 tax deducted) £2,000
Building society interest £3,200 net (£800 tax deducted) £4,000
Mr Black Mr Smith Mr Brown Mr Green
Other taxable income £1,000 £10,000 £31,000 £45,000
Savings income £6,000 £6,000 £6,000 £6,000
Total taxable income £7,000 £16,000 £37,000 £51,000
Mr Black's non-savings income of £1,000 utilises part of the savings income starting rate band. The remaining £1,880 is taxed at 10%, so a refund of tax is due.
Mr Smith's total taxable income is below the higher rate threshold of £31,865 and so he has no additional tax to pay. All his savings income will have been taxed at 20% only. The 10% starting rate does not apply as the non savings income exceeds £2,880.
Mr Brown's total taxable income exceeds the higher rate threshold by £5,135, and so he will have additional tax of £1,027 to pay (£5,135 at 20%).
Because Mr Green's other taxable income already exceeds the higher rate threshold, his savings income will trigger additional tax of £1,200 (£6,000 at 20%). Mr Green's savings income will therefore have been taxed at 40%.
Please contact us if you would like further information on this subject.
Q. I run a small shop, which I inherited from my father. The shop has a flat above it which is let out. I've always reported all the income from the shop and flat together as self-employed income on my tax return. Is that correct?
A. No, the income from your shop and the flat should be reported separately on your tax return. The profit or loss from the shop should be reported on the self-employed pages of your return. The net income from the flat should be reported on the UK property income pages on your tax return. Any loss from the shop can't be set off against profits from the letting, or the other way round.
Q. Back in 2010 I borrowed money from my company, and paid the corporation tax charge due. Business has now improved and my company can now pay a dividend to clear the debt I owe to the company. How can I reclaim the corporation tax charged?
A.You need to complete a form L2P to reclaim that tax charge, but that must be done online here: www.gov.uk/government/publications/corporation-tax-reclaim-tax-paid-by-close-companies-on-loans-to-participators-l2p
You need to answer all the questions on the interactive form, then print it off and sign it. The signed form should be sent to:
Corporation Tax Services
PO Box 29997
Glasgow, G70 5AB
GrowthAccelerator been extremely successful, 98% of businesses report that they are on track to achieve their key milestones having gone through the process and 96% would recommend it to others. It is a unique service co-invested by Government with the main goal of helping small and medium sized businesses to grow.
GrowthAccelerator is open to small and medium sized businesses registered in England and not restricted to any geographical area. Through GrowthAccelerator the Government aims to add £2.8 billion value to the economy and create 70,000 jobs by March 2015.
Businesses are able to receive a package of support valued at £3,500 for a net cost of £600 if you have 1-4 employees and for a net cost of £1,500 if you have 5-49 employees. Furthermore, once you have qualified for GrowthAccelerator you can also receive matched funding from the Government of up to £2,000 for owners and senior managers to undertake training in leadership and management skills.
The most popular area of GrowthAccelerator support is their Business Development service which includes creating strategic growth plans, sales and marketing systems etc.
There are numerous success stories including a health and safety company that has quadrupled its employees and is set to increase its turnover from £150,000 per annum to £650,000 per annum in three years; an architectural and design practice that has grown from 13 to 20 employees in 4 months and a food distribution company which doubled its turnover from £500,000 to £1 million in 2012.
The overriding criteria for eligibility is that a business should have the ambition, capacity and opportunity to double its turnover, profits or employees in 3 years.
To start the process most businesses contact a registered and approved Growth Coach for GrowthAccelerator who can introduce them to a Growth Manager. This person will advise whether you could be eligible and assist you in drafting your applications. This normally includes coaching with a registered and approved GrowthAccelerator Coach together with access to workshops and master classes for you and your team normally over a three to nine month period.