Category: Uncategorized

Occasionally, the tax system in the UK throws up an issue that does not make sense. For example, how can you create a tax loss for capital gains tax (CGT) purposes without disposing of the asset?

After all, CGT applies when an asset subject to CGT is sold or otherwise disposed. If you sell an asset for more than you acquire it you make a gain for CGT purposes and if you dispose of an asset for less that you paid for it then you make a loss for CGT purposes.

So far, so good…

 

What if you own shares in a quoted company that are currently worth much less than you paid for them? You may consider that there is a possibility – perhaps a remote possibility – that the share price will recover in which case you may want to keep the shares.

But what if the present value of the shares means you are sitting on a significant CGT tax loss, a tax loss that you may be able to utilise against other chargeable gains?

Which brings us back to the opening comment of this post, how can you create a tax loss for capital gains tax (CGT) purposes without disposing of the asset?

The answer in to make what is called a Negligible Value Claim. This what HMRC offer in guidance on this topic:

If you own an asset which has become of negligible value in your ownership then you may choose to make a negligible value claim so that you’re treated as having disposed of an asset even though you remain the owner.

The claim is made when we receive it, even if you choose to use a tax return to make the claim. The conditions for making a claim are that:

• you must still own the asset when you make the claim,
• the asset must have become of negligible value while you owned it.

So, if the asset was of negligible value when you acquired it then it could not become of negligible value when you owned it. An asset is of negligible value if it is worth next to nothing.

If you make a competent negligible value claim then you’ll be treated as though you had disposed of the asset and immediately reacquired it at the time the claim is made for an amount equal to the value which you specified in the claim. That time will be after the year to which the tax return relates.

When you make the claim, you may choose to specify an earlier time when you will be treated as though you had disposed of and immediately reacquired the asset. If you want to specify an earlier time then you have to meet all of the necessary conditions to make the claim at the time the claim is made that are explained above.

If, by chance, you have a shareholding in your portfolio that is of no real value and you could utilise any CGT loss to good advantage, please get in touch and we will help you submit a formal claim to HMRC.

This article does not cover the risks of owning an electric car, depreciation rates etc. Instead it discusses the tax implications if you buy an electric car for business purposes.

As electric cars have zero carbon emissions for tax purposes it should be possible to claim what is called a “first year allowance” when the car is purchased from new. Effectively, this means that you can write-off up to 100% of the cost of the car against your business profits in the year that you buy the vehicle.

This allowance is only available for new vehicle purchases. If you buy a used electric car for business, you can only claim a “main rate” writing down allowance of 18%.

Additionally, self-employed traders will need to reduce their claim for either of these allowances if there is any private use of the vehicle.

When the car is sold, if you have claimed the 100% first year allowance then all of the proceeds of sale will be taxable as a balancing charge. The balancing charge will be reduced if there is any private use.

If you have the use of an electric company car, it will still attract a car benefit charge for the driver and a National Insurance charge for the employer, albeit at the lowest rates.

The ability to be able to write-off the cost of a car in the year of purchase is appealing as this boosts the initial cash-flow benefits of going-electric.

And, of course, there are environmental considerations…

When you make a gift to third parties you are potentially transferring part of your estate and a life-time charge to IHT may be applied.

However, in most cases you will not need to open your cheque book as there are a number of exemptions that may cover your intended gifts.

The current gift exemptions are reproduced below.

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year – but only for one year.

Each tax year, you can also give away:

• wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
• normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift
• payments to help with another person’s living costs, such as an elderly relative or a child under 18
• gifts to charities and political parties

 

You can use more than one of these exemptions on the same person – for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

Even if your gift is not excluded by these exemptions any tax payable can be deferred under the “potentially exempt transfer” or PETs. Essentially, as long as the person making the gift lives seven years after making the gift, no IHT is payable. A sliding scale applies if the donor dies during this seven year period.

It is fine to keep working past your State Retirement Age unless your employment is subject to retirement at a compulsory retirement age. If your employer does this, they must give a good reason, for example: the job requires certain physical abilities (e.g. in the construction industry) or the job has an age limit set by law (e.g. the fire service).

To be clear, a forced retirement age of 65 no longer exists.

You can also ask your employer if you can work more flexibly or work part-time. They have the right to reject your request.

You can claim your State pension while you are working, as long as you’ve reached the State Pension age. You can also work if you are claiming a personal or workplace pension. However, check with your pension provider or employer if you have a workplace pension as reducing your working hours could affect how much pension you will receive. You should also check to see what happens to your workplace pension if you continue working beyond the age when you can take it.

If you delay (defer) taking your State Pension, you will get larger weekly payments when you do start taking your pension.

A bonus

You don’t pay National Insurance if you work past State Pension age.

As a general rule, if you sell shares for more than you paid for them, any profit you make will be chargeable to Capital Gains Tax (CGT).

Shares and investments you may need to pay tax on include:

• shares that are not in an ISA or PEP
• units in a unit trust
• certain bonds (not including Premium Bonds and Qualifying Corporate Bonds).

CGT will not usually be payable if you give shares as a gift to your husband, wife, civil partner or a charity.

You also do not pay Capital Gains Tax when you dispose of:

• shares you’ve put into an ISA or PEP
• shares in employer Share Incentive Plans (SIPs)
• UK government gilts (including Premium Bonds)
• Qualifying Corporate Bonds
• employee shareholder shares – depending on when you got them

The amount of CGT payable will depend on your other earnings in the tax year. You may also be able to claim other reliefs if you are selling shares in a business that you control.

Finally, we are all entitled to make tax-free capital gains each tax year. For 2019-20, the CGT annual exemption is £12,000.

1 November 2019 – Due date for Corporation Tax due for the year ended 31 January 2019.

19 November 2019 – PAYE and NIC deductions due for the month ended 5 November 2019. (If you pay your tax electronically the due date is 22 November 2019.)

19 November 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2019.

19 November 2019 – CIS tax deducted for the month ended 5 November 2019 is payable by today.

1 December 2019 – Due date for Corporation Tax due for the year ended 28 February 2019.

19 December 2019 – PAYE and NIC deductions due for the month ended 5 December 2019. (If you pay your tax electronically the due date is 22 December 2019)

19 December 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2019.

19 December 2019 – CIS tax deducted for the month ended 5 December 2019 is payable by today.

30 December 2019 – Deadline for filing 2018-19 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2020-21.

The Brexit issue continues to drag its heels and it now looks as if we will have a general election until matters are resolved.

Another crucial matter that will be delayed is the presentation of a Budget that will determine any changes to the tax code next year.

However, while the politicians attempt to resolve these issues, what can we do?

This is not a time to sit back and wait to see what happens. At the very least we recommend that you create a plan of action for your business. This planning should include all aspects of your business: sales, costs, investment in new plant and equipment and most importantly, the management of your working capital including cash flow.

If undertaken with care, this planning exercise will reveal trouble spots before they arise. In particular, it will flag up any cash flow low-spots and give you time to agree funding with your bank.

There are no downsides to this planning process, only wins.

Once you have your plan it is a simple matter to upload the data into your account’s software. This will enable you to compare actual monthly results with your plan and remedy any variations as they happen.

This build and creation of management accounts for thriving businesses is something we advocate. If this is a process you would like to take on for your business, please call. We can help you create your plan and advise you which accounts software to use.

Whatever the outcome of the Brexit situation, using your management accounts to increase your business fitness will place you in the front line when matters are resolved. You can hit the ground running.

Contractors completing energy improvements on the homes of low-income families will need to be registered with a new government quality scheme – the Energy Company Obligation (ECO) – to give residents confidence that they will get a good service.

Work undertaken through ECO offers free energy-saving measures, including insulation and new boilers for low-income and vulnerable households.

The Energy Minister Kwasi Kwarteng recently confirmed that those completing this work will need to be registered through a new quality scheme, delivered by ‘TrustMark’. It will also protect all homeowners having energy efficiency improvement work done on their properties, when they choose to use a ‘TrustMark’ registered business.

Around 15% of households take an energy efficiency measure each year, with over one million installing additional or replacement loft insulation and over one million upgrading to double glazed windows. The energy efficiency industry is worth over £20 billion in Great Britain, employing nearly 150,000 and selling exports worth over £1 billion every year.

Emissions from buildings account for nearly a quarter of all carbon emissions, which the government is committed to reducing. Under this government, the UK became the first G7 economy to put into law a commitment that Britain will reach net zero greenhouse gas emission by 2050. Insulation in domestic premises can make a significant contribution to reaching our carbon targets and help reduce the cost of heating homes.

This new scheme will guarantee households the peace of mind that workers installing energy efficiency measures in their homes are trusted tradespeople.

All consumers who want energy efficiency and home improvement measures installed on their own homes will be able to search the ‘TrustMark’ website for trusted and certified tradespeople.

Contractors working in this energy efficiency sector should register with the ECO scheme asap.

UK farmers looking for opportunities to export beef products to China will be encouraged by the recent relaxation of export criteria. A recent UK government press release titled “China opens doors to British Beef” explains what is being offered.

A summary of the press release is reproduced below:

The British beef industry is set to benefit from an estimated £230 million boost as the Chinese government today (18 October) finalised details of a historic UK-China agreement.

For the first time in over 20 years, UK farmers and beef producers will have full access to the Chinese market, marking the end of a ban imposed by China following the BSE outbreak in 1996.

Today’s announcement follows extensive inspections by the Chinese authorities – who have confirmed that British beef producers meet the necessary standards to export to their market – and marks the final step in securing access.

The Chinese authorities have cleared four beef sites for export in the first instance – with further sites under review – and the first exports are expected to be shipped in the next few months.

The China-UK beef agreement is the culmination of several years of engagement between UK and Chinese government officials. China’s ban was lifted in June last year when market access engagement for UK beef exports began.

It follows a number of inspections and inward missions hosted by the Agriculture and Horticulture Development Board (AHDB), in partnership with Quality Meat Scotland (QMS) and Hybu Cig Cymru (Meat Promotion Wales HCC) and other industry bodies, as well as government departments and agencies.

The announcement comes after China recently approved five British pork plants to export products to China, which will build on a market which is already worth £70 million per year.

China is currently the UK’s eighth largest export market for food and drink, with more than £610 million worth of products bought by Chinese consumers last year.

In a further attempt to incentivise savings our government has created a new saving vehicle called a PrizeSaver account. Here’s what the Treasury press release on the launch says:

Treasury launches pilot of new PrizeSaver account on International Credit Union Day.

• Savers who put away as little as £1 with participating credit unions have chance to win up to £5,000 a month.
• Account is part of work to raise awareness of credit unions and encourage greater saving for the future.

Savers could now win up to £5,000 a month with the launch of a new account with credit unions today (Thursday 17 October).

To mark International Credit Union Day, the Treasury has teamed up with 15 credit unions across Britain to launch the new PrizeSaver pilot account. The pilot will give people who open an account with participating credit unions the chance to win prizes every month and boost their savings.

Every month will see a top prize of £5,000 awarded to the winning saver, with a further 20 smaller prizes of £20 also awarded. Accounts are available now with the first wave of credit unions and the first prize-draws will take place in mid-December.

The pilot, announced at last year’s Budget, is designed to help improve people’s financial resilience by encouraging greater saving for the future, as well as raise awareness of credit unions and the services they offer.

Credit unions are a type of member-owned cooperative, controlled and run by members. Most either serve specific local areas or certain professions like the police. Credit unions redistribute their profits to members through interest or dividends, or by investing in new services to meet the needs of their members.

The account is partly inspired by the ‘Save to Win’ scheme in the US, which has helped credit union members save $200 million and has awarded $3.1 million in prizes nationwide.

The pilot will run until the end of March 2021 and will help inform understanding of the PrizeSaver model. The Treasury will work with participating credit unions to evaluate the success of the PrizeSaver accounts throughout the pilot, with an ambition to roll the account out more widely if successful.