To the latest edition of Tax Tips & News.
Sleigh & Story News
In this bulletin here at Sleigh & Story we have got lots of good news to share! Firstly we would like to congratulate our colleague Jonathan Stead who has passed his final accountancy exams and is now a fully qualified Chartered Certified Accountant! We are proud of Jonny who passed all his exams in the first sitting. Well done Jonny!
We are also pleased to tell you that our colleague Aimee Rhodes has recently got married and we wish Aimee (now Mrs Hargreaves) and her new husband Martin all the best for a happy life together.
We would like to welcome our newest member of staff, Nicole Bland who joined us on 1st September after completing her A’ Levels at Rastrick High School. We hope Nicole enjoys her work with Sleigh & Story and we are sure she will settle in and be a valuable contribution to the team.
Sleigh & Story Fundraising
The team are taking on a number of tough challenges for three local charities. Some of the team are taking part in the Overgate Hospice Midnight Walk on 14th September – a thirteen mile walk starting at midnight from North Bridge Leisure Centre Halifax.
Some hardy souls are hoping to complete “The Major Series” on 29th September at Bramham Park, Wetherby. This is organised by British Military Fitness and is a 5K military assault course combining mud, obstacles, hills & water!
Fire Walking is the third sponsored event which will take place in October . This is organised by Rachel Gough of Inspired Marketing.
The team are hoping for sponsors for the package of events – the money raised for the three events is to be split equally between Overgate Hospice, The Forget-Me-Not Trust and Yorkshire Air Ambulance.
Summary of September 2013 tax tips and news:
• Resurfacing – Repairs or Capital?
• New ATED Charge
• VAT on Storage Change
• Pension Lifetime Allowance
• September Question and Answer Section
• September Key Tax Dates
Resurfacing – Repairs or Capital?
Any business owner whose property includes a road, driveway, or parking area, will have to repair those surfaces at some point. The question is whether to charge the costs to ‘repairs’ or to ‘capital improvements’ in the accounts.
This decision has significant tax consequences, as the cost of repairs will qualify for a tax deduction, but capital improvements will not. Capital expenditure on improvements or renewals doesn’t get a tax deduction until the property is sold. Capital allowances can’t be claimed for the cost of laying roads or the structure of buildings, except in rare cases where the facility is used for research and development.
Tax Inspectors frequently challenge the cost of repairs in business accounts, particularly where the sum expended in one year is large. The Inspector may argue that where a road is resurfaced, the work should be treated as a renewal (capital) and not a repair. However, following a number of tax cases on this issue HMRC has changed its official guidance to its Tax Inspectors. The new guidance states that where a road has been resurfaced, that amounts to a repair and not a renewal or a replacement, so the cost is tax allowable.
There are still many grey areas which can be argued to be one side of the capital/repairs line or the other. If you need a second opinion on the tax deductibility of your property expenses, please do ask us.
New ATED Charge
The annual tax on enveloped dwellings (ATED) came into effect on 1 April 2013. This new tax applies to residential properties in the UK worth over £2 million, which are owned by a non-natural person, such as a company, trust or partnership that includes a company as a member.
The value of the residential property is measured as at 1 April 2012, not the purchase price.
Is your farmhouse owned by a farming partnership, which also has a company as a member? Does your company own properties which are used to house employees?
In both of those circumstances the property is potentially subject to the ATED charge if it is worth £2 million or more. The ATED charge ranges from £15,000 to £140,000 per year, and is payable by 31 October 2013 for 2013/14.
There are many exemptions and reliefs for ATED, including for farmhouses occupied by farmworkers, and for properties occupied by employees who don’t individually own more than 10% of the company. However, to claim the relevant exemption, the property owner needs to submit an ATED return to HMRC without delay.
The ATED return can be completed online on the HMRC website, and there is no need to register through the Government gateway. You can also download a paper version of the ATED return from the HMRC website. There is space on the ATED return to appoint us as your tax agent so we can then submit the return on your behalf. Note that the deadline for submitting the ATED return for 2013/14 is 1 October 2013.
VAT on Storage Change
The law on whether VAT must be charged on storage facilities changed from 1 October 2012. Before that date if you let out space for storage to individuals or businesses, that service could be exempt from VAT, if you had not elected for the whole building to be subject to VAT (AKA: ‘opted to tax’). Since October 2012, if you are VAT registered, you generally need to charge VAT at 20% on the supply of storage areas.
The Taxman has recently confirmed in a new VAT information sheet (10/13) that any let space which is used for storage carries 20% VAT, not just the lock and leave facilities marketed as ‘self-storage’. This could affect businesses who let out unused parts of their buildings to others who use that space to store goods or materials. For example a farmer might let out surplus farm buildings on a temporary basis.
There are only a few exceptions to this new VAT rule. Those include where the space is let to a charity and it is not used for business purposes, and where the space is predominately used for an active purpose such as retail, and the storage is an ancillary activity.
It is the landlord’s responsibility to know how the let space is used and charge the relevant rate of VAT. If you have not charged VAT when you should have done for periods from 1 October 2012, you may need to correct this error in your next VAT return. We can advise you on the best way to do this.
Pension Lifetime Allowance
The Government want us to save enough so we can each draw an adequate pension in retirement, but if you save too much you will be stung with a 55% tax charge when you draw your pension. The boundary between ‘enough’ and ‘too much’ savings is set in law by the lifetime allowance, which is a value of your total pension savings at retirement. This allowance will be reduced from £1.5 million to £1.25 million on 6 April 2014.
To give you a handle on these seemingly high numbers: an annual pension of £75,000 for a man aged 65 at retirement, today requires a pension fund of roughly £1.5 million. A pension fund of £1.25 million would deliver an annual pension of about £62,500 to the same person. If you contribute to a defined contribution pension scheme (the most common type), the value of your pension fund will be shown on your annual pension scheme statement.
If you are a member of a final salary pension scheme it will promise to pay you a pension equivalent to a percentage of your final salary. That could be as much as 2/3rds of your final salary. Work backwards from your current salary to get a rough idea of how much your pension fund may be worth. Your pension scheme trustees will be able to give you more accurate figures.
Once you have those figures, you can judge whether you need to elect to fix your lifetime allowance at its current level of £1.5 million, where your pension fund already exceeds £1.25 million. This is known as ‘fixed protection 2014’, and you need to apply to HMRC to do this before 6 April 2014.
Once fixed protection 2014 is obtained you won’t be able to make any further pension contributions to a registered pension scheme. If you are member of an occupational pension scheme which receives automatic contributions on your behalf, you will have to opt out of that scheme or lose the fixed protection.
After 6 April 2014 there will be another way of protecting your pension fund, called ‘individual protection 2014’. This will fix your lifetime allowance at the value of your pension rights as at 6 April 2014, up to a maximum of £1.5 million. You should discuss with your financial adviser which type of pension protection is best for you.
September Question and Answer Section
Q. Please help, I’m so worried. I’ve received several threatening letters from the Taxman demanding money, but I’m sure I’m up to date with my tax payments. I’m terrified the bailiffs will turn up on my doorstep and demand payment. What should I do?
A. Let us see those nasty letters and we will try and sort the matter out for you with the Tax Office. In the meantime, keep this number to hand: 0300 200 3862. If bailiffs do turn up ask to see their photo ID cards, take a note of the ID numbers and call that number to confirm whether the bailiffs are genuine. Also collect evidence of the tax payments you have made recently, such as bank statements. These may be enough to prove to the bailiffs that you have paid the tax you owe.
Q. I need to get a high-end computer for my business which will cost about £2,200, but I use the VAT flat rate scheme for small businesses which doesn’t allow VAT reclaims. I’ve heard that I can claim back VAT charged on expensive items under the flat rate scheme, is that true?
A. Yes, under the flat rate scheme you can claim back VAT charged on the purchase of capital goods, which are items you will use in your business over a number of years. It must be a single purchase from one supplier with a VAT inclusive total of at least £2000, but that invoice can include several items bought together such as; screen, computer, and printer. The items must not be purchased for resale or for lease or hire.
Q. My company pays me the regular mileage rate of 45p per mile for business journeys I make in my own car. However, to reach certain customers I need to drive on mainland Europe which requires extra car insurance which is quite expensive. Can my company reimburse me for the cost of that extra insurance without any extra tax?
A. The regular mileage rate is supposed to cover all the marginal costs of using your personal car for business, including insurance. So if the company reimburses you for the extra cost of this insurance in addition to the mileage payment, that would be a taxable benefit in kind.
We need to look at the distances you are driving in Europe, and for what periods. If the time spent abroad is relatively short, it may be more economical for the company to hire a car for you while you are abroad. However, there is no substitute for crunching the numbers.
September Key Tax Dates
19/22 – PAYE/NIC, and CIS deductions due for month to 5/9/2013
30 – Closing date to claim Small Business Rate Relief for 2012/13 in England
New Clients Welcome
Please contact us if we can help you with these or any other tax or accounts matters. We are committed to ensuring that none of our clients or associates pay a penny more in tax than is necessary.
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.