Replacement of Domestic Goods

26 July 2016

Claiming cost of replacing domestic goods is changing from April 2016. The former wear and tear allowance is now replaced with relief for replacement of domestic goods, the new allowance however isn’t as generous as the 10% wear and tear allowance where landlords could claim 10% of the net rent received as expenses even if the expenditure was not incurred, though the downside to the wear and tear allowance was when the actual cost of replacing items was more than the 10% allowance full relief was not obtained.

Replacement of domestic items relief is available from April 2016 and it’s available on meeting certain conditions such as:

·         The replacement item should be substantially the same as the old one (like-for-like) and amount of the deduction is the cost of replacement item, plus cost of disposing the older item, less any amount recovered from disposing the older item.

·         The older item in no longer available.

·         The item is to be used solely by the lessee.

·         The expenditure is capital in nature and capital allowances are not available in respect of the expenditure.

·         Rent a room relief was not claimed.

TT Intelligence can help you with complying with the new rules and all the tax and accountancy work related to your property business please contact us or get in touch today by calling 0203 039 3993. 

COP 9 Investigations

15 July 2016

Code of practice 9 investigations (COP9) are opened when HMRC suspects serious tax fraud has taken place and expect to reclaim taxes in excess of £75,000.

Although COP 9 investigations are a civil investigation, failure to comply can result in criminal investigation and prosecution with the ultimate punishment of imprisonment available to authorities.

However immunity from prosecution is granted in exchange of full and complete disclosure of all irregularities in the individual’s tax affairs via a procedure called Contractual Disclosure Facility (CDF).

HMRC agrees not to proceed with criminal investigation or prosecution against the individual over the fraud that they disclose in the CDF contract in return the individual must do the following:

  • Respond within 60 days, as failure to respond can be deemed as declining the offer to disclose and you will no longer be immune from prosecution.
  • Tell HMRC all the tax evasions and irregularities and sign a statement to say you have provided complete and accurate information and stop all evasions immediately.
  • Pay all the taxes, penalties and interest charges.

It is always advisable to cooperate with HMRC to avoid criminal prosecution, the individual would need to:

  • Complete a Disclosure Report to explain all tax irregularities including and careless or innocent errors.
  • The individual and their advisers must ensure that nothing is missed out and they can show HMRC how they have quantified the irregularities.
  • Summaries tax/duties, penalties and interest due to HMRC.
  • List of all bank accounts and credit cards provided to HMRC.
  • A statement of all of the individual’s worldwide assets and liabilities   .

It is important and encouraged for the individual to appoint a professional adviser to guide them through the process and negotiate with HMRC on their behalf.

Here at TT intelligence we could help you:

  • Prepare the disclosure report.
  • Attend meetings with HMRC on the individuals behalf
  • Negotiate a fair and final statement and try to mitigate penalties where possible.
  • Negotiate a reasonable payment period with HMRC.

We understand that it’s always a worrying time if you have received a COP 9 investigation letter, even if you feel you haven’t done anything wrong, however please contact us or get in touch today by calling 0203 039 3993 as soon as possible to give you the best chance for defence.

Directors Loans DLA

07 July 2016

A cheap and tax efficient loan from your personal company can be very useful if structured correctly, however there are a few pitfall that you need to be careful with.

The first thing you need to be aware of is that HMRC has a £10,000 limit on loans to employees (which includes directors).

A personal income tax charge will arise if your loan account is overdrawn above the £10,000 limit at any time during the tax year, even if it only for one day as HMRC would class this as a “Benefit in Kind”.

The charge would be the difference between the interest that would be payable at the official rate which is set at 3% currently and the interest actually paid. This charge would only arise if the rate of interest paid on the loan is less than the office rate.

Where a tax charge arises, class 1A NIC is also payable by the company and forms P11D and P11D(b) need to be completed and submitted to HMRC before the deadline of 6 July each year, you can read more about P11D’s here.

The second thing you would need to be aware of is that if the loan balance is still outstanding nine months and one day after the end of the accounting period in which the loan was made then a section 455 tax charge will apply. There is no de-minimus here.

Section 455 tax will be charged at 32.5% for loans taken out after the 6 April 2016, however the section 455 tax is repaid once the loan have been cleared but the repayment is not due until nine months and one day after the end of the accounting period in which the loan is repaid.

Section 455 tax can be avoided by the company paying a salary, bonus or declaring a dividend, however the dividend route is subject to profit available in the company.

It’s not always a good idea to just clear the loan depending on the amount of salary or dividends you have received from your personal company. It could be beneficial to pay the section 455 tax and perhaps clear the loan at a later date, either against the payments of salary or dividends, or when the director has sufficient funds to repay the loan.

It is possible for a director to borrow up to £10,000 for up to 21 months from their personal company without paying any tax, however careful planning and steps should be taken to avoid the pitfalls mentioned above.

For more information on Directors loan account (DLA), please contact us or get in touch today by calling 0203 039 3993.

 

 

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