New rules for non UK Residents regarding CGT property disposals

capital gains tax, UK commercial property, UK residential property, HMRC

HM Revenue & Customs have extended the rules that previously applied to non UK residents in respect of UK residential property to UK commercial property also.

This change to the rules means that from April 2019 all UK property disposals made by non-resident individual, whether directly or potentially indirectly through a company or trust, require a non-resident Capital gains tax return which must be completed and submitted to HMRC within 30 days of the completion date. This deadline must be adhered to even if:-

  • You have no tax to pay
  • You’ve made a loss
  • You are registered for Self Assessment
  • You are registered with HMRC for corporation tax
  • You send HMRC Annual Tax on Enveloped Dwelling (ATED) or ATED related capital gains tax returns

Any tax due must be paid within 30 days of completion. You will be issued a late penalty and be charged interest if you miss the deadline:-

  • Up to 6 months late – penalty of £100
  • More than 6 months late – further penalty of £300 or 5% of any tax due, whichever is the greatest
  • More than 12 months, a further penalty of £300 or 5% of any tax due, whichever is the greatest

When calculating the capital gain/ (loss) on a property disposal every individual is entitled to the capital gains tax annual exemption of £12,000 for the tax year ended 5 April 2020.

If you require any assistance regarding capital gains tax for non-residents property disposals please contact us.

Year-end Capital Tax planning

Capital gains exemption, inheritance tax

Have you used your 2018/19 £11,700 annual capital gains exemption?  Consider selling shares where the gain is less than £11,700 before 6 April 2019. In addition, if you have any worthless shares, consider a negligible value claim to establish a capital loss. You may even be able to set off that capital loss against your income under certain circumstances which could save income tax of up to 45% of the loss.

As far as Inheritance Tax (IHT) planning is concerned, all individuals have a £3,000 annual allowance which means that gifts up to that amount each year are exempt from IHT. If you have not used your £3,000 allowance from 2017/18 you can make gifts of up to £6,000 before 6 April 2019 without the gift being liable to IHT. Also, consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT. Gifts out of your surplus income are not subject to IHT if properly structured and we can assist you in keeping the necessary documentation.

The Cloud Isn’t Witchcraft!

Xero, cloud accounting

“We don’t save the numbers to our computer. Where do they go? Are they safe? How do they get from my laptop to my phone? Everything’s paperless. I’m telling you, the cloud is witchcraft!”

Just when we thought we’d heard it all… No, the cloud isn’t black magic. But it is more than a little misunderstood. That’s why we wanted to send this blog post to shed some light on what it is, how it works, and why we love it.

What is the cloud?

In the most basic terms, the cloud is essentially a metaphor for the internet.

Back in the early 90s, computer scientists had to find a way to display “the network” in their presentations. The network in question was a group of computers and storage devices (a server-farm), held elsewhere, off-site.

The image they used was that of a cloud, and the name stuck.

How does it work?

Unlike typical computing, where you save data or run programs from your hard drive, cloud computing is all about utilizing the internet. You don’t physically store anything on your own computer; rather, it’s stored elsewhere, held on powerful internet-connected computers spread around the globe.

So long as you have an internet connection, you can log in to an application and access your data quickly and securely.

Why we love the cloud

Here at Saint & Co., we’re passionate advocates for the cloud, and cloud accounting in particular. We encourage our clients to make the switch to Xero and experience the benefit of real-time numbers and instant access to up-to-date accounts, from anywhere, and at any time.

The major advantage of the cloud is that you can access information across a range of internet-connected devices. In the office? Log onto Xero and run a few reports. Out and about meeting clients? Pull up the Xero smartphone app and double check key figures or the status of an invoice before your meeting.

And because the cloud uses powerful remote servers to handle the computing and data storage, you can save money on hardware costs. In days gone by, an in-house desktop accounting system would, at the very least, require a powerful computer to run it. For larger businesses, they often needed their own server (complete with running and maintenance costs).

Thanks to the cloud, you don’t need an expensive machine to use quality accounting software. It does the heavy lifting for you, making the whole approach more affordable than ever before.

Finally, we love the cloud because it makes our lives easier. We can collaborate with you on your accounts, and see what you see, as you see it. We’re not left scrambling for information, or working with out-of-date figures, and that means we can provide you with the very best advice, backed by real numbers.

Switch to the cloud with Saint & Co.

Interested in learning more about the cloud and cloud accounting software? We can show you the ropes – with no broomsticks or cauldrons in sight!

Our accountancy software training service can have you up and running in no time at all.

Contact us today to speak with one of our team members.

Year-end Pension Planning

pension allowance, tax relief

For most taxpayers, the maximum pension contribution is £40,000 each tax year, although this depends on their earnings. This limit covers both contributions by the individual and their employer.

Note that the unused allowance for a particular tax year may be carried forward for three years and can be added to the relief for the current, but then lapses if unused. Hence the unused pension allowance for 2015/16 will lapse on 5 April 2019 if unused. Note that under the current rules the net after tax cost of saving £10,000 in a personal pension for a higher rate taxpayer is only £6,000 but there continue to be rumours that this generous relief may be reduced in future.

No deal Brexit – What about VAT?

The Government and HMRC have updated its collection of high-level guides called “partnership packs”, intended to help businesses involved in importing and exporting prepare for changes to customs procedures after 29 March 2019 in the event of a “no deal” scenario.

If the UK exits the EU without a deal, UK businesses will have to apply customs, excise and VAT procedures to goods traded with the EU, in broadly the same way that already applies for goods traded outside of the EU.

In the event of a “no deal” Brexit the government’s aim will be to keep VAT procedures as close as possible to what they are now. This will provide continuity and certainty for businesses.

However, there will be some specific changes to the VAT rules and procedures that apply to transactions between the UK and EU countries.

Postponed VAT Accounting for Imports

The government has announced that in the event of a “no deal” Brexit, it will introduce postponed accounting for import VAT on goods brought into the UK.

This means that UK VAT registered businesses importing goods to the UK will be able to account for import VAT on their VAT return, rather than paying import VAT at or soon after the time that the goods arrive at the UK border. This procedure will apply both to imports from the EU and non-EU countries.

Low-Value Consignments

If the UK leaves the EU without an agreement, VAT will be payable on goods entering the UK as parcels sent by overseas businesses. Low-Value Consignment Relief (LVCR) will no longer apply to any parcels arriving in the UK. For parcels valued up to and including £135, a technology-based solution will allow VAT to be collected from the overseas business selling the goods into the UK.

VAT Mini One Stop Shop (VAT MOSS) will come to an to end

A further change if the UK leaves the EU without an agreement is that the UK will stop being part of EU-wide VAT IT systems such as the VAT Mini One Stop Shop which currently simplifies VAT reporting for UK businesses.

CUSTOMS CHANGES Businesses can currently move goods freely between EU countries. For customs purposes, this means that businesses trading with the rest of EU do not have to make any customs import or export declarations, and their trade with the EU is not subject to import duty.

In the event of a “no deal” Brexit there would be immediate changes to the procedures that apply to businesses trading with the EU. It would mean that the free circulation and movements of goods between the UK and EU would end.

HMRC is currently introducing its new Customs Declaration Service (CDS), which replaces its Customs Handling of Import and Export Freight (CHIEF) system.

From 11pm on 29 March 2019, for businesses trading with the EU, the impacts would include businesses having to apply the same customs and excise rules to goods moving between the UK and the EU as are currently applied in cases where goods move between the UK and non-EU countries.

This means customs declarations would be needed when goods enter the UK (an import declaration), or when they leave the UK (an export declaration).

For imports into the UK, a separate safety and security declaration needs to be made by the carrier of the goods (usually the haulier, airline, freight train operator or shipping line).

For exports from the UK, the export declaration includes the safety and security declaration.

Ignore Making Tax Digital at your peril!

Xero, HMRC, VAT

Less than 6 months now to go until tax gets digital via H M Revenue and Customs’ (HMRC) “Making Tax Digital” initiative. Yet a huge 40% of the affected businesses know nothing about it and have made no plans to conform with the new requirements for submission of their VAT Returns.

From 1 April 2019 VAT registered businesses with turnover above the VAT registration limit (£85,000) must submit their VAT Returns using HMRC approved digital software. The present online VAT filing system will be removed for businesses meeting the MTD criteria. The first VAT Return for a business’ VAT Return period starting after 1 April 2019 must be submitted digitally via “Application Programmed Interfaced” software (this just means that the digital software used must be capable of communicating with HMRC’s own digital software).

Whilst HMRC are expected to be lenient for the first year until people get their digital systems in place, they have published a penalty regime which will come into force from 1 April 2020 for late submissions and payments.

The regime is points based and will only apply to returns with a regular filing frequency e.g. monthly, quarterly or annually. It will not apply to occasional returns e.g. a return to report a one-off transaction.

A taxpayer will receive one point every time they fail to make a return on time. A penalty will be charged and notified once the taxpayer has reached the threshold penalty applicable to the frequency of submission periods as follows:-

Submission frequency Penalty threshold
Annual 2 points
Quarterly 4 points
Monthly 5 points

Points will have a lifetime of two years calculated from the month after the month in which the failure occurred.  Points will expire after a period of good compliance i.e. filing returns on time as long as all returns due within the preceding 24 months have been submitted.  The regime for period of good compliance is again set on the frequency of the returns as follows:-

Submission frequency Period of good compliance
Annual 2 submission
Quarterly 4 submissions
Monthly 6 submissions

As yet HMRC have not issued the amount of the financial penalty to be charged but Saints will keep you advised of this.

As everyone knows time flies, so it is sensible for VAT registered business to look at their record-keeping systems for VAT now and consider switching to an HMRC approved digital package.

Here at Saints we have been planning for our clients’ needs in light of this expected development for some time.  To this end we have adopted Xero Cloud software which has been approved by HMRC as being digitally compliant.  We offer clients flexibility in that we can supply them with Xero and provide the necessary training for businesses to use the package themselves.  Alternatively, advances in technology mean that we can offer clients a fee competitive package to maintain the required book-keeping and submit the digital returns – leaving businesses to concentrate on their day to day operations without worrying about VAT return submission deadlines.

Contact your local Saint & Co Office to learn how this could work for your business and receive a fee quote which could relieve you of a lot of hassle and stress!

Cyndy Potter

Saints Tourism & Leisure Manager

Find Out How Cloud Accounting Can Make MTD a Smoother Transition

Making Tax Digital

Technological hitches and Brexit-related delays aside, Making Tax Digital (MTD) is going to happen. One way or another, the UK’s tax system is going digital, and it’s vitally important that you take the correct measures now to avoid scrambling at the last minute two years from now.

In this brief blog post, we explain why switching to cloud accounting today can make MTD a smoother, more effective transition in the future.

A reminder: What is Making Tax Digital?

We’ve previously blogged about what Making Tax Digital is and how it will affect you, but if you’re still not sure, here’s a quick reminder:

Making Tax Digital is a government initiative designed to streamline and simplify tax, and bring about the end of paper accounting for millions across the UK. Instead of a yearly tax return, businesses will be tasked with setting up a digital tax account and filing an online return once per quarter.

If it all works as intended, MTD will make tax more straightforward, accurate, and far less stressful.

Why make the switch now?

From a compliance point of view, if your business does not exceed the VAT threshold, you will not be mandated to keep digital records and submit quarterly returns via digital accounting software. Or, in other words, if you’re not turning over £85,000 and above, you can breathe easy about implementing new software.

However, there’s still an argument that you should make the switch to a cloud-based accounting system well in advance of the inevitable expansion of MTD, set to take place in or around April 2020.

Why? Well, cloud accounting can save you time and save you money. It makes financial admin easier, and will ultimately result in a more effective and efficient tax return, regardless of whether or not your business is compelled to comply with MTD.

It might be tempting to dismiss MTD as yet another HMRC obligation, but the truth is, the move towards a fully digital and largely automated accounting process will improve your business tenfold. You’ll have instant access to real-time, up-to-date numbers which will, in turn, help you make better decisions in your pursuit of growth and profit.

So, the question ought to be “which cloud accounting software do I choose?” and the answer is simple – Xero.

How can Xero help?

Xero is by far the most popular cloud accounting software in the UK – and with good reason. It acts as the financial hub of your business, bringing together important functions such as bookkeeping, accounting, invoicing, and reporting.

Whether you have MTD in mind or not, making the switch to the cloud with Xero will undoubtedly bear fruit for your organisation. In fact, the features and benefits are there for all to see:

  • A clean and clear dashboard provides an at-a-glance overview of your key numbers, meaning you’re always in control.
  • A live bank feed keeps everything up-to-date.
  • Online invoicing means you can invoice directly to customers, log sales straight into Xero, and follow up with late payers in a timely and efficient manner.
  • Financial reports give you the opportunity to see your balance sheet, profit and loss, or cash report at any given time, and all with real-time, accurate numbers.

Where Making Tax Digital is concerned, Xero is already a step ahead. It can:

  • Automatically calculate tax (including VAT and payroll tax).
  • Pull financial data directly from your bank, invoicing software, or point of sale system.
  • Update transactions daily, keeping you on top of bank reconciliation.
  • Create digital records of paper receipts and bills via its smartphone app.

All of this combines to provide you with a clear picture of your business’s financial performance and tax liabilities, keeping you organised and ready to meet your next tax payment, or sidestep your next cash flow concern. In short, by introducing a cloud accounting system like Xero, you’ll take the change to Making Tax Digital in your stride.

Get Ready for MTD with Saint and Xero

There are no two ways about it, change is scary. Especially if it means implementing technology you’ve never used before. But Making Tax Digital could be a huge positive for your business. Filing returns quarterly could make tax less taxing, and allow you the opportunity to better plan for the future.

And by making the switch to Xero, not only will you be prepared for MTD, you’ll also have accurate financial information at your fingertips, helping you spot opportunities and threats faster than ever before.

If this sounds like something you’d be interested in, simply click the link to Get Started with Xero, or call us on 01228 534 371 to chat with one of our friendly advisors.

Should I buy machinery and equipment before the accounting year ends?

As another financial year draws to a close, you might be wondering if now’s the time to make a last-minute capital purchase.

No matter how much money your business is turning over, purchasing new equipment is a big call and one that shouldn’t be solely dictated by the time of the year. Depending on the industry you’re in, machinery can cost tens – or even hundreds – of thousands of pounds, and along with operational and maintenance costs, a single purchase could significantly alter your bank account and balance sheet.

That being said, if you know you need new machinery, there is an argument for making the purchase before the accounting year ends.

Why Timing Your Purchase Matter

With a plan in place to purchase new equipment, it makes sense to incur the expense before the accounting year ends. That way you’ll receive the tax relief one year earlier than if you were to wait until the new accounting year begins.

An expense incurred entirely for business purposes can be deducted from your income, lowering your taxable profit, and in turn lowering the amount of tax you will be required to pay.

Which items are eligible?

Capital purchases are assets that offer a benefit to your business lasting more than a year. In addition to new machinery, you can also include computers, printers, smartphones, and tablets.

What’s more, other necessary business-related purchases such as print cartridges, stationery, web design, logo design, or office furniture should be ordered prior to the end of the accounting year to ensure you benefit from the earlier tax relief.

However, it’s vital that these purchases are made as part of a wider business plan, and not as a tax saving gambit. Otherwise, you run the risk of depleting funds and causing cash flow problems in exchange for superfluous items.

What Does HMRC Say?

HMRC offers a definition of ‘plant and machinery’ for items on which you can claim capital allowances. This covers a wide range of items, and the costs associated.

Using the Annual Investment Allowance (AIA), you can deduct the full value of a qualifying item from your profits before tax. You can claim AIA on most plant and machinery up to the AIA amount.

What doesn’t count as plant and machinery?

As per the HMRC website, you cannot claim capital allowances on:

  • Things you lease – you must own them
  • Buildings, including doors, gates, shutters, mains water and gas systems
  • Land and structures, eg bridges, roads, docks
  • Items used only for business entertainment, eg a yacht or karaoke machine

And you can’t claim AIA on:

  • Cars
  • Items you owned for another reason before you started using them in your business
  • Items given to you or your business

Always Seek Advice

These allowances can change from financial year to financial year, so it’s vitally important that you monitor the situation closely, or seek expert advice before making a significant business purchase.

We recommend sitting down with your accountant and planning the purchase of your next piece of machinery to ensure you see the full tax benefit.

Need Some Advice? Let’s Talk

Saint & Co has long worked with businesses operating in industries reliant upon heavy machinery, so we know a thing or two about planning and making major purchases.

If you’re not quite sure if and when to pull the trigger on a new piece of equipment, we can guide you through the important considerations, and explain the various tax implications.

Simply fill out our contact form, or call us on 01228 534371 to get started.

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.