BUSINESS RATES ON EMPTY PROPERTIES
As a landlord you may have lost income during the pandemic as tenants have left or gone into liquidation.
Council tax (for residential properties) and business rates (for commercial premises) remain payable when a
building is empty but there may be reliefs available.
Some local authorities allow landlords to claim a discount on council tax for empty
residential properties but this varies across the country. It is always worth asking your local
council whether they offer such relief.No business rates are due on an empty commercial
property for the first three months it is vacant. This is extended to six months for industrial
or warehouse properties. After that period the landlord can claim an extension to this empty-property
relief for listed buildings or those with a rateable value under £2,900. Charities and
community amateur sports clubs also qualify for some business rates relief.
Where the owner is a
company in liquidation or administration and is not occupying the property, business rates will not be due.
Some local authorities have challenged business rates avoidance schemes that use special
companies to hold vacant properties. Be aware that use of a business rates avoidance scheme almost certainly will not work.
If you are facing a business rates bill on an empty property you can also contact your local council and
claim hardship relief or a discount on those rates.
Some local authorities allow landlords to claim a
discount on council tax for empty
residential properties
BEWARE OF MINI UMBRELLA COMPANIES
Umbrella companies employ temporary workers such as contractors
on behalf of employment agencies or very
large companies.
The umbrella company will operate
the payroll and makes money by
taking a cut of the fees earned by the individual.
An umbrella company should provide each worker with an employment
contract and payslips. It should also provide a breakdown of the worker's
assignment rate received and list its costs including employer's national
insurance contributions (NIC). The employer's NIC should not be deducted from the worker's contract rate.
Some umbrella companies try to boost their profits by bending the law to take
advantage of tax breaks designed for small companies. One method is to form multiple 'mini umbrella'
companies (MUCs) each of which employs only one or two people.
Each MUC then claims the employment allowance which is worth up to £4,000
per year and may also use the VAT flat rate scheme to save some VAT.
If you are a contractor caught up in a mini umbrella scam you
should speak to your ultimate customer immediately and warn them about potential fraud in their supply chain.
If your business uses temporary workers be sure to carry out due diligence checks on your
supply chain and be clear about who pays those workers and how. Alarm bells should ring if your
workers have been promised non-taxable pay, higher take-home pay or have been asked to sign
a loan or annuity agreement.
If your business uses temporary workers be sure
to carry out due diligence checks on your supply chain
PROBLEMS WITH HOLIDAY LETS
Landlords of furnished holiday accommodation
qualify for tax breaks if their property is
available for short term
lettings for at least 210 days a year and is actually
let for 105 days in the year.
Longer lets out of season are permitted but these must not exceed 155 days in total.
Due to the Covid-19 pandemic Easter holiday lettings were prohibited in many parts
of the country and the 2020 summer season was heavily restricted. This is likely to
mean that the 105-day minimum holiday letting was not achieved for many properties in the tax year 2020-21.
All is not lost as you can retain the favourable tax treatment for your holiday letting
business by claiming a 'grace period' for the 2020-21 tax year. To qualify you must have
let the property as short lets for at least 105 days in either 2019-20 or 2018-19 and be
intending to let it again in 2021-22 as a holiday rental.
If you have more than one holiday property, the number of days let can be
averaged over all properties in a single tax year to achieve the minimum 105-day requirement.
If you plan to sell one or more of your holiday properties, any profit will
be subject to capital gains tax (CGT) which is normally charged at 28% for residential
property. The business asset CGT rate of 10% may be available if the property qualified as a furnished holiday let within three years of the sale.
We can help you calculate the tax due on the sale and discuss the timing of the disposal to maximise
the reliefs available so please discuss your plans with us before you agree to sell.
We can help you calculate the tax
due on the sale and discuss the timing
of the disposal to maximise the
reliefs available
HOW TO REPORT EMPLOYEE BENEFITS
Employee expenses and benefits provided in the year to
5 April 2021 must be reported to HMRC by way of the P11D process by 6 July 2021.
Every employee who received benefits or expenses
in the year should be included in that process even if they have already left the company.
Employers who have already accounted for the value of the benefits during the payroll
process do not have to complete a P11D for those employees but must submit a P11D(b) to HMRC to
report the class 1A NIC which is due.
Many employees were provided with extra support from employers in 2020-21 to enable them to
work in a covid-secure way. HMRC introduced some concessions to ensure that employees are not taxed on the benefit of this necessary support.
Where the employee was required to work at home as the workplace was closed or they had to self-isolate, the following costs are not
treated as taxable benefits if met by the employer:
- broadband internet connection if it was not already available;
- computer tablet, laptops and office supplies;
- reimbursing employee for the cost of home office equipment; and
- working at home allowance up to £6 per week.
Strictly there should be no significant private use
of the broadband and equipment to allow the provision to
be tax free but HMRC says that the private use
measure should be based on the employee's duties
and the need for them to have the equipment or services provided to do their job.
We are able to help deal with P11D and
P11D(b) filing and advise on what costs should and should not be included.
We are able to help deal with P11D and
P11D(b) filing and advise on
what costs should and should not be included.
CGT ON SALE OF HOMES
Capital gains tax (CGT) may be due when you sell a
second home or a property that has not been occupied
as your main home for the entire period of ownership.
For sales of UK homes completed since 6 April
2020 any CGT due must be declared and paid within 30
days of the completion date of the deal. Some
conveyancing solicitors and estate agents are still
unaware of this requirement or do not inform their
clients about the shorter reporting period so particular care is required.
Non-resident sellers must also declare the disposal of all UK properties within 30 days.
The declaration must be made through an online UK property account which
is a separate system from annual self assessment tax returns. HMRC will
issue you with a reference number when you report the gain, which you must
use when paying the tax due. The HMRC computer will issue penalties automatically
if the reporting or tax payment is late.
Taxpayers must also report the same gain on their tax return for the year
and declare how much CGT they have already paid through the UK property
account. If you have paid too much CGT that overpayment must be reclaimed
by amending your UK property account. The overpayment cannot be
offset against your income tax liability for 2020-21 which is payable on 31
July 2021 with any balance due by 31 January 2022.
If you have disposed of a UK residential property in the last 14 months
and this has not already been reported to HMRC please speak to us without delay.
For sales of UK homes complet-ed since 6 April 2020 any
CGT due must be declared and paid within 30 days.
AVOID CHILD BENEFIT CLAWBACK
Couples who receive child benefit
are in danger of having some of
that benefit clawed back as a tax
charge if the higher earner has
annual income of over £50,000.
When the higher earner has income exceeding £60,000 all of the family's child benefit is clawed back.
If your annual income is around £50,000 and you or your partner receive child benefit you must declare the
amount of child benefit received on your tax return.
If you do not receive an annual tax return to complete,
it is essential that we contact HMRC to register for a self assessment tax return.
With planning it may be possible to avoid the child benefit clawback by
making Gift Aid donations or personal pension contributions during the tax year.
We can help structure this planning where possible.
If you run a business with your partner, planning may also
be possible to equalise your income levels so
that neither of you has annual income of more than £50,000.
This adjustment of income needs to be done in advance so please talk to us as soon as possible.
TAX CREDIT RENEWALS
All tax credit claimants should have received their
renewal pack by 4 June 2021. If you have not received your renewal pack you should contact HMRC on 0345 300 3900.
You can renew your claim online at www.gov.uk/renewing-your-tax-credits-claim.
If you need any assistance contact us and we will guide you through the process.
If your income has reduced permanently due to the Covid-19 pandemic, check that your income details in the tax credit pack are correct.
If your income has fallen temporarily as a result of Covid-19, perhaps because you were furloughed,
you do not have to report this. HMRC will treat your tax credit claim as if you have been working your normal hours while on furlough
ther changes in your personal life should be reported as they may
affect your tax credit claim. For example a change in your living arrangements or a change in your
childcare costs will generally need to be included.
Self-employed individuals who claim tax credits should include in their claim any grants received from the
Government under the Eat Out to Help Out scheme; Self-Employed Income Support Scheme; retail, leisure or
hospitality grants; and small business rates grants. You do not have to
include a Test and Trace Support payment (which came in the form of a one-off lump sum of £500).
Your tax credits claim must be renewed by 31 July 2021 so you may need to include some estimated figures.
If you need any guidance or figures get in touch with us as soon as possible.
If you have not received your renewal
pack you should con-tact HMRC on 0345 300 3900
MTD FOR VAT: CRUNCH TIME
Most VAT registered businesses were required to comply
with the making tax digital (MTD) regulations for VAT
periods beginning on or after 1 April 2019.
HMRC has not been imposing penalties for non-compliance with those rules,
preferring to nudge businesses with letters and advertising campaigns instead.
However HMRC is starting to take a tougher approach with traders who
have not signed up to MTD. Around 800 businesses have been told that they can file their
current VAT return using the old HMRC portal (online form) but from 8 July 2021 they
will have to file using MTD software as the old portal will be closed to them. If
the response to this test-run is positive HMRC will roll it out to others in a similar position.
Businesses whose annual turnover is less than the VAT registration
threshold of £85,000 are not required to file using MTD until their
first VAT period starting on or after 1 April 2022
but should prepare for their move to MTD sooner rather than later.
The MTD regulations require that the VAT data flows through
the accounting system without manual intervention such
as re-typing or copying and pasting figures. If your system still contains these manual breaks
they need to be replaced by digital links without delay. We can advise on the best options available to you.
All businesses using MTD for VAT need to have digital links in
place in their accounting systems from the first accounting period that starts on or after 1 April 2021.
HMRC is starting to take a
tougher approach with traders who have
not signed up to MTD
POSTPONED IMPORT VAT ACCOUNTING
As the UK is no longer a member of the EU, import VAT applies to all
goods imported from the rest of the world into Great Britain (different rules
apply for Northern Ireland) which do not qualify as small parcels (worth under £135).
That import VAT will commonly be accounted for as a reverse charge entry on the importer's next
VAT return using postponed import VAT accounting (PIVA). This is a permanent change to the VAT system in the UK.
The reverse charge means that there are two entries on the VAT return which normally
cancel each other out. However this will not be the case if there is any
non-business use of the goods or where the importer is
partially exempt so not permitted to reclaim all VAT on purchases.
There is a separate process for deferring payment of customs
duty on imported goods. Both VAT and customs duties are included on customs declaration forms.
The monthly PIVA statements are an essential part of your VAT records and are needed to give the correct
figures to include on your VAT return. Remember to download the PIVA statements regularly as they are only available online for six months.
Where the PIVA statement is not available HMRC will allow you to estimate the amount of
VAT paid but the figure should be corrected on the following quarter's VAT return.
If the import VAT is paid on arrival of the goods in the UK the amount
will be shown on a C79 certificate which you should retain as evidence.
Remember to download the PIVA statements
regularly as they are only available online for six months
