fpdteam, Author at Bennetts Accountancy

Help for Households campaign

25th August 2022 by fpdteam

The new Chancellor, Nadhim Zahawi, has visited a school holiday club in London where he committed to continuing to help families with increases in the cost of living. The visit shone a light on the government’s Help for Households Campaign after a further series of cost-of-living deals were announced. These deals will help provide extra support to families as children return to school.

The back to school offers include a bespoke new deal with the publishing firm Scholastic, who are offering 20% off children’s books and a curated set of Back-to-School deals from Amazon, including up to 30% off Clarks School Shoes and deals on stationery. A number of other Help for Households partners, including Marks & Spencer, Primark, Shoezone, ZSL and Go-ahead have also agreed to promote their existing support schemes under the Help for Households campaign to raise awareness.

Existing deals include the extension of Asda’s ‘Kids eat for £1’ scheme, where children aged 16 and under can access a hot or cold meal for £1 at any time of day in Asda Cafes across the UK and Sainsbury’s is introducing a ‘feed your family for a fiver’ campaign, helping customers with budget-friendly meal ideas to feed a family of four for less than £5.

At his visit, the Chancellor said: ‘We are doing all we can to support families and I am delighted that more retailers have got on board with our Help for Households campaign, offering some brilliant discounts on back-to-school essentials.’

The discounts and offers can be accessed on a special website on GOV.UK helpforhouseholds.campaign.gov.uk/discounts-and-offers/

Source:HM Treasury| 21-08-2022

CGT Rollover Relief

25th August 2022 by fpdteam

Business Asset Rollover Relief, usually referred to as ‘rollover relief’, is a valuable relief that allows for deferral of Capital Gains Tax (CGT) on gains made when taxpayers sell or dispose of certain assets and use all or part of the proceeds to buy new business assets. The relief means that the tax on the gain of the old asset is postponed. The amount of the gain is effectively rolled over into the cost of the new asset and any CGT liability is deferred until the new asset is sold.

Where only part of the proceeds from the sale of the old asset is used to buy a new asset a partial rollover claim can be made. It is also possible to claim for provisional rollover relief where the taxpayer expects to buy new assets at a future date. Interestingly, rollover relief can be claimed if taxpayers use the proceeds from the sale of the old asset to improve assets they already own. The total amount of rollover relief is dependent on the total amount reinvested to purchase new assets.

There are qualifying conditions to be met to ensure entitlement to any relief. This includes ensuring that new assets are purchased within three years of selling or disposing of the old asset(s) or up to one year before. Under certain circumstances, HMRC has the discretion to extend these time limits. In addition, both the old and new assets must be used by a business and the business must be trading when the old asset is sold and the new asset is acquired. Taxpayers must claim relief within four years of the end of the tax year when they bought the new asset or sold the old one, if that happened after.

Source:HM Revenue & Customs| 21-08-2022

IHT Business Relief

25th August 2022 by fpdteam

There are a number of reliefs available that can reduce liability to Inheritance Tax (IHT) when you inherit the estate of someone who has died. One of these reliefs is known as IHT Business Relief and is a valuable tax relief for taxpayers with business interests. The relief offers a 50% or 100% deduction from IHT on the value of the business assets if certain conditions are met.

100% Business Relief can be claimed on a business or interest in a business or on shares held in an unlisted company.
50% Business Relief can be claimed on:
– shares controlling more than 50% of the voting rights in a listed company;
– land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled; and
– land, buildings or machinery used in the business and held in a trust that it has the right to benefit from these assets.

Relief is only available if the deceased owned the business or asset for at least two years before they died. There are a number of restrictions to the relief, for example, if the company in question predominantly deals with securities, stocks or shares, land or buildings, or in making or holding investments. In some cases, partial Business Relief may be available.

Source:HM Revenue & Customs| 21-08-2022

Incorporation relief

25th August 2022 by fpdteam

Where a taxpayer owns a business as a sole trader or in partnership, a capital gain will be deemed to arise if the business is converted into a company by reference to the market value of the business assets, including goodwill. This could give rise to a chargeable gain based broadly on the difference between the market value of the assets and their original cost. However, in most cases the incorporation of the business will be organised in such a way as to satisfy the conditions necessary to secure incorporation relief. One such condition is that the entire business with the whole of its assets (or the whole of its assets other than cash) must be transferred as a going concern wholly or partly in exchange for shares in the new company.

It is important to note that where the necessary conditions are met, incorporation relief is given automatically and there is no need to make a claim. The relief works by reducing the base cost of the new assets by a proportion of the gain arising from the disposal of the old assets.

Although the relief is automatic, it is possible to make an election in writing for incorporation relief not to apply. An election must be made before the second anniversary of 31 January next following the tax year in which the transfer took place. This means an election in respect of a transfer made in the current 2022-23 tax year must be made by 31 January 2026. The election deadline is reduced by one year if the shares are disposed of in the year following that in which the business was incorporated.

Source:HM Revenue & Customs| 21-08-2022

Retaining tax return records

25th August 2022 by fpdteam

There are no set rules for the way in which you keep your tax records, but they are usually evidenced on paper, digitally or as part of a software program.

If you are keeping records used to complete a personal (non-business) self-assessment tax return, you must keep records for 22 months from the end of the tax year to which they relate. This means that you should keep all records for the tax year ended 5th April 2022 until at least the end of January 2024. If you file a late self-assessment return, then you will need to keep your records for at least 15 months after the date you filed the tax return.

The types of records you should keep include those relating to:

Income from employment e.g., P60, P45 or form P11D forms.
Expense records if you have been required to pay for items such as tools, travel or specialist clothing for work.
Income from employee share schemes or share-related benefits.
Savings, investments and pensions e.g., statements of interest and income from your savings and investments.
Pension income e.g., details of pensions (including State Pension) and the tax deducted from it.
Rental income e.g., rent received and details of allowable expenses.
Any income which is open to Capital Gains Tax.
Foreign income.
State benefits.

Please note, this is not a complete list. You should retain any other important records that were used in preparing your self-assessment return.

If you need to keep records for other reasons, there are different time limits to consider. For example, self-employed individuals must keep business records for at least five years from the 31 January submission deadline for the relevant tax year. This means that for the 2020-21 tax year – when online filing was due by 31 January 2022 – you must keep your records until at least the end of January 2027. There are penalties for failing to keep proper records or for keeping inaccurate records.

Source:HM Revenue & Customs| 21-08-2022

Claiming Employment Allowance

24th August 2022 by fpdteam

The Employment Allowance reduces an employer's NIC liability. The current allowance is £5,000. An employer can claim less than the maximum if this covers or eliminates their total Class 1 NIC bill.

The allowance is only available to employers that have employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. The Employment Allowance can be used against employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. The allowance can only be claimed once across all employer’s PAYE schemes or connected companies. De minimis state aid rules may also apply in restricting the use of the allowance.

Employment Allowance claims need to be re-submitted each tax year. There are currently a number of excluded categories where employers cannot claim. This includes limited companies with a single director – and no other employees – as well as employees whose earnings are within IR35 ‘off-payroll working rules’.

You can also backdate your claim for the Employment Allowance for the previous four tax years.

For the tax years 2018-19 and 2019-20, it does not matter how much your employers’ Class 1 NICs liability was or how much de minimis state aid you received.

The Employment allowance was £3,000 in 2018-19 and 2019-20 and £4,000 in 2020-21 and 2021-22.

Source:HM Revenue & Customs| 21-08-2022

VAT and food supplies

18th August 2022 by fpdteam

HMRC’s VAT Notice 701/14: food explains what types of foods are zero rated and standard rated for VAT. The notice includes many examples of different food categories. The notice covers some general VAT liability rules. For example, food supplied in the course of catering is standard rated for VAT. This includes hot take-away food. Most basic food stuffs intended for human consumption and not supplied in the course of catering are zero rated for VAT. However, the definition of 'basic' is not straightforward.

The following food and drinks must usually be standard rated:

Ice cream, similar products, and mixes for making them. Note that frozen yoghurt that’s designed to be thawed before being eaten is zero rated.
Confectionery, apart from cakes and some biscuits. Drained cherries and candied peel are zero rated.
Alcoholic beverages.
Other beverages, and preparations for making them. Exceptions that are zero rated include milk and milk drinks, tea, maté, herbal tea, coffee and cocoa, preparations of yeast, meat and egg.
Potato crisps roasted or salted nuts and various other savoury snack products.
Products for home brewing and wine making.

Produce that’s unfit for human consumption, such as waste and contaminated food products (including used cooking oil), may be eligible for zero rating as animal feeding stuffs.

Source:HM Revenue & Customs| 15-08-2022

Definitions of connected persons

18th August 2022 by fpdteam

The definition of a connected person for tax purposes can be complex and varies depending on the circumstances at hand. A statutory definition of “connected persons” for Capital Gains Tax purposes is set out in Section 286 of the Taxation of Chargeable Gains Act (TCGA) 1992. The legislation states:

" A person is connected with an individual if that person is the individual’s spouse or civil partner, or is a relative, or the spouse or civil partner of a relative of the individual or of the individual’s spouse or civil partner"

In this context, ‘relative’ means brother, sister, ancestor or linear descendant and spouses or civil partners of relatives. The term 'relative' does not cover all family relationships. In particular it does not include nephews, nieces, uncles and aunts.

HMRC’s internal manual also states that: excluded are the widows or widowers or surviving civil partners of deceased persons, or relatives of a deceased spouse or of a deceased civil partner unless connection can be established by a route not involving the deceased. A dissolution of a civil partnership or a divorce can similarly lead to persons in addition to the former civil partner or spouse ceasing to be connected with the individual.

Source:HM Revenue & Customs| 15-08-2022

Employee ownership and involvement

18th August 2022 by fpdteam

There are many ways that employees can own a stake in their employer's company. However, employee ownership usually refers to a situation where all employees of a business have a ‘significant and meaningful’ stake in a business. This means employees have a financial stake in the business (e.g., by owning shares). Other types of business (e.g. charities or sole traders) may have to change their legal structure so they can sell shares. Employee-owned firms can also operate as co-operatives.

In addition, employees must have a say in how the business is run, known as ‘employee engagement’. Different ways of engaging employees are suitable for different businesses.

These can include:

An employees’ council or other consultation group.
A constitution defining the company’s values and its relationship with employees.
Employee directors on the board, with the same responsibilities as other directors.
Working with trade unions on issues like pay and conditions.

The latest statistics published by the Employee Ownership Association (EOA) say that the employee ownership sector has more than doubled in the past three years, exceeding the 1,000 milestone for the first time.

Source:HM Revenue & Customs| 15-08-2022

Contacting HMRC by email

18th August 2022 by fpdteam

HMRC has published a new guidance titled ‘Corresponding with HMRC by email’. The guidance was published on 9 August 2022 and explains some of the risk factors associated with contacting HMRC in this way. HMRC suggests that the information contained in the new guidance should help taxpayers decide whether or not they want to communicate with HMRC by email. Further, HMRC will not deal with taxpayers by email unless they confirm in writing that they accept the risks of doing so.

The guidance identifies the following main risks of communicating with HMRC by email:

confidentiality and privacy — there’s a risk that emails sent over the internet may be intercepted;
confirming your identity — it’s crucial that HMRC only communicate with established contacts at their correct email addresses;
there’s no guarantee that an email received over an insecure network, like the internet, has not been altered during transit; and
attachments could contain a virus or malicious code.

HMRC also works to reduce the risks when sending emails by desensitising information, for example, by only quoting part of any unique reference numbers and can also use encryption if required. HMRC will accept incoming emails and can respond by telephone or in writing. This may be requested if, for example, multiple people have access to the email address sending the message.

In order to use email as a way of communicating, HMRC requires confirmation in writing by post or email:

that you understand and accept the risks of using email;
that you are content for financial information to be sent by email; and
that attachments can be used.

It is possible to opt out of receiving email at any time.

Source:HM Revenue & Customs| 15-08-2022