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Letters to landlords

As a landlord letting a residential property you are required by the Housing Act 2004 to protect deposits provided by tenants on assured shorthold tenancies, by using a deposit scheme.

The not-for-profit companies that run these schemes will provide details of their customers to HMRC or to any other Government department that requests the information.

HMRC has recently received a large sample of data from deposit schemes and has compared the information to the amounts of rent reported on landlords’ tax returns for 2020/21. As a deposit usually represents four…

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VAT repayment evidence

HMRC are always a little suspicious of businesses that claim a VAT repayment in their first VAT return, or a large refund in a later return. In such cases it will write to you asking for supporting evidence, such as copies of invoices, to be provided within 30 days.

You can now provide the requested information online, through a new portal HMRC has set up, especially for this purpose.

You need to quote the reference given in HMRC’s letter which will be in the format: CFSS-1234567, and supply other…

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A company closes – how to withdraw any remaining cash tax efficiently

When the time comes to close a company the usual method by which this is done is via a process known as ‘Striking off’. The procedure is an informal, voluntary way of closing a company which is no longer required either because the company has ceased trading, or the director wants to retire or because the directors just want to close the business. However, strike off can be undertaken compulsorily, typically by a disgruntled creditor or by Companies House for non-submission of annual accounts. Importantly, a company can…

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Renting out a ‘spare’ room

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…

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Entertaining – allowable for tax?

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…

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Latest news round-up

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…

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Which VAT scheme to use?

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

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Landlords – make sure you claim all the expenses you can

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…

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Are you too late to claim a tax repayment?

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…

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