The children are gone and there is an unoccupied ‘spare’ room. Apart from using the room as extra storage, renting it out is another option that can enable use of the space as well as bringing in some extra cash. The trend for letting spare rooms is increasing with websites such as Easyroommate, Gumtree and Hosts International making it easy to find someone to use the spare room on a long-term basis. There are tax implications, but you may find that there is no or little tax to…Read More
The tax rules for entertaining businesses are clear. Whether payment for lunch with a customer or tickets for a sporting event — whatever the reason, with few exceptions, any cost incurred for entertaining is not an allowable expense for tax purposes. The amount can still be paid out of the business bank account and deducted from arriving at the accounting profit but will be added back in the tax computation and taxed.
One of the exceptions to this rule concerns staff entertainment. Staff entertaining is…Read More
Making Tax Digital – should your business change its year-end now?
Making Tax Digital for Income Tax (MTD ITSA) is due to start on 6 April 2024 with the first year being 2024/25. In preparation, the rules that determine which profits of a non-company business are charged to tax for a particular tax year are also being reformed.
Which businesses will be affected?
It is important to note that not all unincorporated businesses will be affected. Basis period reform…Read More
Most businesses know that once the tax turnover for a business exceeds the VAT registration threshold (currently £85,000 a year), or it is expected to do so within the next 30 days, VAT registration is compulsory. Some businesses are not required to register (e.g. those offering education and training and some medical treatments) but if registration is required there are several schemes to choose from – which you choose will depend on the type of business and how the business is run.
The different schemes
Whatever the reason for becoming a landlord, expenses will be incurred relating to that property at some time or another. Unfortunately, just because a payment has been made does not necessarily mean it is allowable for tax. Even if the payment is allowable, when tax relief can be claimed depends on the nature of the expense and the method by which the accounts are prepared.
The default basis for preparing letting accounts is the ‘cash basis’ where income is recognized when received and expenses when…Read More
Claims for repayment of tax are usually made via submission of a tax return, e.g. a self-assessment repayment claim is by completion of the section on page TR7. Whether as an individual or a company the time limit for amending a tax return is usually one year from the deadline for submitting the return.
The amendment may result in a repayment of tax but if the time limit for amending a return has passed then the only way a taxpayer can claim is via an…Read More
The rates of class 1 NIC are reversed back to the levels in place on 5 April 2022 but the rates imposed from 6 July 2022 to 6 November 2022 remain. Therefore for all employees (except directors paying NIC cumulatively) the tax year will effectively be split into two – the first period for the first seven months of the tax year (6 April to 5 November 2022) and a second for the remaining five months (6 November 2022 to 5 April 2023)….Read More
Covid -19 had a devastating impact on many businesses with significant numbers closing for good. However, many workers who were made redundant or furloughed took the opportunity to set up their own businesses. According to the Government’s December 2021 report ‘Business Statistics’ an estimated 810,316 new businesses were launched in the financial year ending in 2021 — the highest number on record. The report also noted that there had been a distinct fall in the number of employees and said that it was believed that the decline was…Read More
Anyone who invests in a company is taking a chance, hoping that the money will not be wasted, and that the directors, as representatives of the company, will use the money in such a way that the company’s profit increases. In return for taking this chance, a shareholder receives ‘payback’ usually in the form of a share in the distribution of profits via a dividend. The payment is not an absolute right and unfortunately some directors/shareholders of family owned companies believe that as long as there is cash…Read More
Although dividends are generally the most tax-efficient method by which money can be extracted from a company, renting a property you own to your company can be more or as tax efficient depending on your marginal tax rate. Whether charging rent is tax-efficient needs to be looked at overall by not only taking into account the director’s immediate income tax position and the company’s tax situation, but also the future capital gains tax (CGT) position when the property or the company itself is eventually sold.
Benefit to the company