Woodland Creation Grant

woodland

If you are thinking of planting a new forest, whether using currently owned marginal land, or the purchase of land for this specific purpose, now is as good a time as any to look into the grant funding availability.

In England, depending on the size of forest, the net income could be around £1,900 per hectare over 10 years, particularly if deer fencing and native broadleaf supplements are taken up. In Scotland, the net income could be even more, perhaps £2,350 per hectare over 7 years, if Central Scotland Green Network Funding is achieved in addition to the standard Woodland Creation Grant. Larger forests will no doubt benefit from “economy of scale”, and it is suggested a minimum area would be 25 to 30 hectares to make them viable, however, for marginal land or shelter belts, this is not unachievable.

It ought to be noted that there will be an initial cash deficit in both countries of £2,500 to £3,000 per hectare as the grant funding is only claimable/receivable after a successful application and the woodland has been planted. Initial ongoing costs up to around year 5 will also need to be considered too.

The tax benefits of forestry are also quite generous, not only from a Capital Gains Tax perspective, but also from a long term income tax perspective too.

If you are interested in looking into this further, there are a number of specialist land agents and woodland consultants around the country, with practical knowledge from planting right through to harvesting and marketing. An initial site visit to assess the land and its capabilities will no doubt be beneficial, and should give an overview of specific anticipated planting densities and general cash flow in your own circumstances. If you would like to visit a forest to see first-hand the processes of creation, thinning and harvesting, or to talk it through, then please contact us at advice@saint.co.uk and we will be happy to suggest forestry land agents who you may wish to contact.

Cumbria Flood Recovery Fund application deadline extended to 30th September 2017

The Cumbria Flood Recovery Fund 2015 was set up for those affected directly or indirectly by storm damage and flooding in December 2015.

Cumbria Community Foundation said that the Fund “has supported more than 3,000 households and helped communities rebuild after the floods.   Over £9 million has been awarded in total, with more than £2.5 million being invested in resistance and resilience measures for both households and communities, to help minimise the extent of damage in the future.

Cumbria Community Foundation have advised that the deadline for applications to the Cumbria Flood Recovery Fund 2015 has been extended to 30 September 2017 and are encouraging households to apply to the Fund by the same date as all district councils who are providing the Property Level Resistance (PLR) grants have extended their deadline to 30 September.

Priorities for grant making are:

  • Individuals and families suffering hardship as a result of the storms and floods
  • Community relief and ‘community rebuilding’ projects

For further details or to apply visit www.cumbriafoundation.org.

New Tax-Free Childcare Scheme

New Tax-Free Childcare Scheme

At the end of April 2017, the new Tax-Free Childcare scheme was launched by the government. The government has started inviting parents to apply for Tax-Free Childcare beginning with parents of the youngest children and parents of disabled children.

This may be of interest to you as:

  • if you are an employer, you may be asked questions about the new scheme by your employees
  • you may be interested in using the scheme yourself, particularly if you are self-employed, as this is the first childcare scheme providing a tax break for the self-employed.

What is Tax-Free Childcare?

Eligible parents will open an online childcare account. When a parent pays into the account, the government will pay in an extra 25%. So if £80 is paid into the account, the government will automatically add £20. The maximum government payments are £2,000 per child per year. This means annual childcare costs of £10,000 per child can be met by £8,000 of payments by the parents and £2,000 by the government.

For a disabled child, the maximum top-up payments are £4,000.

How much parents pay into their Tax-Free Childcare account, and when, is up to them.

Who can qualify for Tax-Free Childcare?

Parents need to be ‘working parents’ paying for ‘registered childcare’ for children under 12 (or under 17 for disabled children). If parents are not living together, the qualifying parent depends upon with whom the child usually lives.

The main criteria for a parent are:

  • earns on average at least £120 a week
  • earns less than £100,000 a year
  • not receiving other support for childcare such as Child Tax Credit or Universal Credit.

The self-employed parent can average self-employment income across the year to meet the minimum income requirement.

If the parent has a partner, he/she also needs to be working and satisfy the criteria above.

It is possible for an individual who is not the parent to qualify if the child usually lives with them. The income criteria would apply to that individual (and their partner).

Partners are people who are:

  • married or in a civil partnership, and live together in the same household, or
  • a couple who live together as if they are married or in a civil partnership.

Registered childcare

Only childcare providers registered or approved by a UK regulator can sign up to receive Tax-Free Childcare payments. HMRC has written to childcare providers, asking them to sign up online for Tax-Free Childcare. Parents will be able to check online who is registered for the Tax-Free Childcare scheme.

Parents will send payments online from their Tax-Free Childcare account to the bank account of the registered childcare provider. Therefore when a provider receives a payment from a parent, this will include both their payment and the government contribution.

What if you have an Employer Supported Childcare scheme?

As an employer, you may have set up and still run an Employer Supported Childcare scheme. Employer supported childcare, commonly by way of childcare vouchers, has provided tax and national insurance efficient benefits for many employers and employees. Many schemes have been set up under a salary sacrifice arrangement. The employee receives a childcare voucher which, within certain limits, provides income tax and national insurance savings.

An employee cannot benefit from both an Employer Supported Childcare scheme and the Tax-Free Childcare scheme. However, employees are free to choose between the schemes if already in an Employer Supported Childcare scheme or join such a scheme before April 2018.

This choice is, of course, dependent on you continuing to offer a scheme. If you do continue to run a scheme, your employees will need to decide what to do. There are winners and losers when the two schemes are compared. For some, this will be a difficult choice to make.

The government has provided a ‘childcare calculator’ which provides an estimate of the financial support parents may be able to receive after they have answered a number of questions on their childcare costs and income. The calculator is available at www.gov.uk/childcare-calculator

Your childcare voucher provider should also be able to supply information to your employees to help them decide what is best for them.

30 hours free childcare (please note that this applies to England only)

The government is introducing an extension to the current schemes available in England for free childcare for three and four-year-olds. The current scheme provides 570 hours of free early education or childcare over 38 weeks of the year (typically taken as 15 hours a week over 38 weeks). It is available for all three and four-year-olds. The 30 hours scheme potentially extends the entitlement to an additional 570 hours. However, not all children will be entitled to receive the extra hours. The criteria for the extension are similar to the criteria that apply for the Tax-Free Childcare scheme – for example the requirement for parents to be working and not earning above £100,000 a year.

The scheme will begin in September 2017 but eligible parents can apply for the Tax-Free Childcare and the 30 hours schemes through one online application. See the link below.

New government website – Childcare Choices

The government has recently launched a website – Childcare Choices – which guides parents through the various ways help is, or will be available. Please see: www.childcarechoices.gov.uk

The childcare calculator which has been referred to above in the section ‘what if you have an Employer Supported Childcare scheme?’ is also useful.

Currently, parents with a child under four on 31 August 2017 or disabled can apply through the Childcare Choices site. Parents will be able to apply for all their children at the same time when their youngest child becomes eligible.

Other parents can request to receive an email from the government as to when they are able to apply. The link is also available on the Childcare Choices site. All eligible parents will be able to join the scheme by the end of 2017.

Information sheets for employees

If you would like to provide information to your employees about Tax-Free Childcare we can supply you with an information sheet. Please contact us and we will supply you with a digital version.

We hope you find this information useful. Please do not hesitate to contact us if you have any questions.

Motor racing sponsorship was tax deductible

Motor racing sponsorship was tax deductible

In order for an expense to be deductible against business profits, it must be incurred “wholly and exclusively” for the purposes of the trade.

In a recent tax case, a hotel owner near Silverstone sponsored his granddaughter’s career as a racing driver by making payments through his company. The argument was that this would promote the motorsport credentials of the hotel, rebranded as Silverstone Hotel. The granddaughter was well known in motor racing circles and her endorsement of the hotel was designed to promote the company’s business.

HMRC sought to disallow the expense on the grounds that there was a “duality of purpose” and consequently not incurred wholly and exclusively for the purposes of the hotel trade. However the Tax Tribunal allowed the company’s appeal and consequently, the payment was tax deductible.

One business or two for VAT?

One business or two for VAT

A recent VAT Tribunal had to decide whether two hairdressing businesses should be treated as a single business for the purposes of VAT registration.

The distinction was critical as the two separate businesses were operating below the registration limit (currently £85,000) and the combined operation would have exceeded the limit meaning that VAT would need to be charged.

Note that HMRC have been successful in a number of cases aggregating the turnover of two businesses carried on by the same person(s).

However in this recent case it was established that the couple had never intended to run a single business in partnership. There was also physical separation of the premises, separate clientele, different stylists worked for each salon and separate books were kept.

Note that where the same person carries on several businesses, the combined turnover of all of those businesses need to be considered in deciding whether or not the VAT registration threshold is exceeded.

3 things to know about tax when selling business assets

3 things to know about tax when selling business assets

As a business owner, you may at some point be in a position to dispose of a capital asset, such as a share of a business or a property for example. However, more often than not, we find business owners perplexed by the different legislation surrounding selling capital assets.

That’s why we’re on hand to advise you on the complex issues and have put together 3 things you need to know before selling a capital asset. Knowing this will help you, as the business owner, ensure that maximum relief is obtained were available.

1. Considering Capital Gains Tax

When you sell a business asset, capital gains tax needs to be considered. The gain or loss is calculated by taking the sale proceeds and deducting the purchase price.

There are different rates of capital gains tax. Currently, the standard rate is charged at 10%, with the higher rate of 20% being applied where the gain takes the individual into higher rates.

In addition to these rates, if the disposal is of residential property, then the rate is 18% for those within the basic rates tax band, and 28% for those who are within the higher rate of tax.

Capital Gains Tax can often be a complicated affair, and so it is highly recommended that you consult with a specialist advisor before proceeding with disposing of your asset.

2. Reducing your Tax Liability

It is important to try and reduce your tax liability when you are looking to dispose of an asset, and you can do so by looking at what tax reliefs are available.

For example, if the asset which has been disposed of is regarded as a business asset, then you may be able to claim Entrepreneurs’ Relief, which would, in turn, reduce the rate of tax to 10%. Careful planning is required to ensure all of the detailed conditions are met for ER, as the relief only applies to gains arising on a disposal of:

● A trading business of an individual or partner,
● Shares in a trading company, or holding company of a trading group,
● Assets used by a business or a company

Other reliefs may also be available and need to be considered such as private residence relief and lettings relief for residential property

Rollover relief may be available if the proceeds are reinvested or holdover relief may be claimed if assets have been gifted.

3. Tax Planning

You should always remember that with Capital Gains Tax, there won’t be any tax liability if the gain is less than £11,300 per individual. However, trustees will only have £5,650 as an annual exemption.

When exploring your options for tax planning, it is always important to remember the following:

● Transfers between spouses or civil partners can be made tax free.
● Involve your tax adviser at an early stage to ensure that the small print in any agreements does not result in the loss of any reliefs

Where can I go for more information?

Our team is on hand to provide you with assistance in disposing of your capital assets and you can contact us for support.

We’ve also put together a set of frequently asked questions for those who may have more queries about selling an asset and Capital Gains Tax.

If you’re still not sure, then let’s talk. Simply fill out a contact form to get in touch with our team of experts!

Which business structure is best for me?

Which business structure is best for me?

Starting a business on your own can be very exciting. You get to be your own boss, and plot your own course. There are lots of things to think about and you will need to make lots of decisions about many aspects of your business. One such decision you’ll need to take very early on in your entrepreneurial journey is the structure of your business.

In short, which business structure is best for me?

The decision is really between four different structures: sole trader, partnership, limited company or limited liability partnership.

Should I set up as a sole trader?

Setting up as a sole trader is the most simple way to start a business. It’s incredibly straightforward, with very little paperwork, less red tape, and fewer costs involved.

If you want to get going quickly, with less paperwork and compliance, it’s a great option.

There are, however, a few disadvantages. Namely, any business debt accrued is your own, there is no limitation of liability. And your profits are taxed as self-employment income. Tax rates for 2017/18 are 40% where your gross income exceeds £45,000.

To set up as a sole trader, you’ll need to register as self-employed with HM Revenue and Customs (HMRC) and complete a personal tax return annually too. One tip we would recommend is to open a separate business bank account to keep your personal and business finances separate enabling you to have better control over both.

Should I set up as a partnership?

Setting up a partnership is step beyond a sole trader model where you go into business with someone else. This is great to work together with someone and bounce ideas off each other.

It has many of the advantages of a sole trader business, being flexible and having less paperwork. But also has some of the same disadvantages. As a partner you are jointly liable for the whole debt of the partnership and again there is no limit on liability. Each partner is taxed on their profit share as self employment income. A partnership tax return will need to be completed in addition to each partners own personal tax returns.

We would recommend for most partnerships that a a partnership agreement is drafted to cover all the legal bases, including detailing how the profits, liabilities and ownership is split and what happens when a partner wants to leave the business.

Should I set up a limited company?

Setting up a limited company adds real credibility to a business. Even if you’re completely on your own, you can operate with the perception of scale and security; something many would-be clients will look for before handing out lucrative contracts.

The biggest advantages is as a limited company is its own legal entity, you liability as shareholder is limited (in other words, you won’t be liable for all business debt accrued (unless you have given personal guarantees).

However structuring your business as a limited company requires a great deal more paperwork than if you were to start as a sole trader, and the ongoing management can be onerous. This is something that puts some people off setting up a limited company

For example, there are certain legal responsibilities that you must fulfil as the director of a limited company, and being a limited company involves much more administration.

A limited company must prepare annual accounts at the end of the financial year, and complete a corporation tax return. A limited company must also submit an Annual Return to Companies House, outlining information regarding directors, shareholders, and the company’s registered office.

Another major plus for opting to set up as a limited company is the favourable tax landscape. Corporation tax is on its way down to 19% from 20% in April 2018, before dropping again to 17% in April 2020.

Consideration would need to be given as to how you would remunerate yourself and the tax consequences of this would need to be considered. Should you pay yourself a salary? Dividends? Or a combination of salary and dividends?

Should I set up a Limited Liability Partnership?

This structure is really a combination between a partnership and a limited company. It gives you the limited liability of a limited company but also gives you the flexibility of a partnership. But it is taxed in the same way as a traditional partnership which can be less favourable than a limited company. This structure is more typical of professionals such as solicitors or accountants.

Which should I choose?

The answer to this comes down to your circumstances.

Do you want the benefit of limited liability? Or are you happy that this would be a low risk.

What is your tax position? Which regime would be more tax favourable to yourself?

Are you testing the water with a new business idea? Well, it’s much easier and quicker to get started as a sole trader. That way you can see if there’s a demand for your product or service and perhaps set up a limited company a year or so down the line. Unravelling a limited company after a few months of trading if your venture is not successful, on the other hand, can be a costly endeavour.

But, if you’ve done your due diligence and you know there’s a market to be tapped into, setting up as a limited company can provide you with credibility and shield you from risk.

Still not sure? Let’s talk

If you’d like to discuss business structure options in greater detail, one of our friendly team members will be happy to do so.

Simply fill out our contact form, or visit www.saint.co.uk for our contact details.

How a recent decision in the court of appeal affects VAT on holiday park’s electricity supply

How a recent decision in the court of appeal affects VAT on holiday park's electricity supply

HMRC have recently won the case of HMRC vs Colaingrove in the Court of Appeal. Colaingrove operates various holiday parks across the UK including Haven. It offers cut-price holidays in static caravans or chalets to the readers of The Sun newspaper. One of the features of the offer is that the customers must pay a separate charge for the electricity that will be supplied to the caravan or chalet. As it was not practical to engage in meter reading for each holidaymaker, a set charge of £12 per day is payable at least 56 days in advance of the commencement of the holiday.

Fuel for domestic use is charged to VAT at the reduced rate of 5%. Hence it is accepted that metered electricity supplied at pitch-sites to those who own their own caravans was liable to VAT at the reduced rate.

Colaingrove argued that the supply of the accommodation in The Sun holiday offer was separate to that of the electricity and that the later was, therefore, subject to VAT at 5% and not the standard rate of 20% which applied to the caravan/chalet accommodation. HMRC accepted that if the supply of electricity was done on a metered basis it would constitute a separate element of the supply and would also be liable at the reduced rate. However, because a flat-fee was payable which did not relate to the amount of power consumed by any particular customer the supply was a composite supply liable to VAT at the standard rate applicable to the supply of the holiday accommodation.

The Court decided in favour of HMRC saying that The Sun holidaymaker purchased a package of goods and services and paid a standard rate where fuel was not optional. The charge made for electricity provided in Colaingrove’s holiday accommodation could not be split out from the provision of that holiday accommodation and was therefore liable to VAT at the standard rate. The supply of holiday accommodation is a different transaction from the supply of fuel to the owner of a caravan parked on a pitch owned by the appellant.

As is always the case with VAT, it is very important to look carefully at what you are actually supplying and in particular are you making a composite supply or separate single supplies. The VAT issues with regard to caravans are complex and ever shifting.

Please contact Saints Tourism & Leisure on 01228 534371 if you need further advice.

Selling land to a developer – is that trading or a capital gain?

TRADING OR A CAPITAL GAIN

Farmers and other landowners will often be approached by developers seeking to obtain planning permission to build on the land. Great care is needed to avoid unnecessary tax charges on the transaction. HMRC have recently updated their guidance on transactions in land clarifying that under certain circumstances some of the eventual profit can be taxed as income, not a capital gain. For individual property owners that could mean 45% income tax as opposed to just 28% CGT.

For example, a landowner sells some land to a developer for £5 million plus 10% of any profit on the development over £6 million. If the profit on the project was £8 million then the additional £200,000 would be taxed as a trading profit.

The tax rules in this area are complex. If you are involved in such a deal contact us so we can advise on the best way of structuring the transaction.

Does the new 16.5% VAT flat rate percentage apply to your business?

DOES THE NEW 16.5% VAT FLAT RATE PERCENTAGE APPLY TO YOUR BUSINESS

The new VAT flat rate of 16.5% started to apply from 1 April 2017 for “limited cost traders”.

A “limited cost trader” is one using the VAT flat rate scheme but where the VAT inclusive cost of goods for a year is less than 2% of VAT inclusive turnover, excluding certain specified items.

Those specified items include capital expenditure, food, fuel, and vehicle costs.

If you are currently using the VAT flat rate scheme contact us to discuss whether the changes will apply to you.