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Landlords need to register for Self Assessment .
They will need to keep track of the rental income and claim allowable expenses
Rent less expenses will either produce a profit or a loss.
If you have residential buy to let properties that you own personally you can deduct any losses from your property letting profit and enter the figure on your Self Assessment form.
You can offset your loss against:
You can only offset losses against future profits in the same business.
If you incorporate your Buy to Let business, see our blog in incorporation tax relief..
If you transfer your business in exchange for shares to another company, you can use any unused losses against your income from the new company.
• Average House Price: 9 June £297,508 August £304,116 – Zoopla
• More FTB Mortgages issued in June since 2007
• First time buyers make up 47% of the market in Q1 2016 – 154,200 Deposit is £33.960 up 14%.
• BTL arrears falling after Brexit 9,300 Q1 2016 to 6,600 in Q4
Top Buy to LetMortgages
• TMW: 2.49% 2 Year Fix 75% LTV
• B Mids: 2.84% 2 Year Fix 75% LTV
• KENT REL: 4.99% 2 Year Fix to 85% LTV
• VIRGIN: 2.54% 2 Year Fix 75% LTV
• MORT TRUST: 2.80% 31/01/18 75% LTV
• COVENTRY: 3.29% 2 Year Fix 75% LTV
Top Long Term BTL
• BMSols: 3.29% 5 Year Fix 75% LTV
• VIRGIN: 3.48% 5 Year Fix 75% LTV
• Coventry: 3.19% 5 Year Fix 65% LTV
BRIDGING & DEVELOPMENT
• Typical 70-75% LTV x Purchase Price
• Arrangement Fees 2%
• Monthly Interest from 1%
50% x GDV
100% x Build Cost in Stages
50-60% x Purchase Price
Please contact Rory to discuss the information in this blog.
Training courses can be expensive, in this blog we are going to focus on the self employed.
The key rules are contained in BIM42526
Specific deductions: administration: own training courses
Provided it is incurred wholly and exclusively for the purposes of the trade carried on by the individual at the time the training is undertaken, expenditure on training courses attended by the proprietor of a business (either as a sole trader, or in partnership with others) with the purpose of up-dating their skills and professional expertise is normally revenue expenditure, which is deductible from the profits of the business.
Business purpose test
In considering the question of purpose, you should not take an unduly narrow view of whether the content of any particular course only up-dates existing skills of the individual. But if it is clear that, for example, a completely new specialisation or qualification will be acquired as a result of the expenditure, it is unlikely that the expenditure will be wholly and exclusively for the purposes of the existing trade.
Expenditure on new skills etc may also be capital if what is acquired can be viewed as an identifiable asset of sufficient substance and endurance. See Dass v Special Commissioner and others  EWHC2491 (Ch)
There are many property courses available for investors, often the investors are self employed/sole traders/individual investors, the courses can cost thousands.
What courses are claimable:
What courses are not claimable:
If the course is disallowed the travel costs will also be disallowed
The rules for companies are much easier to comply with and written with a much wider scope..
Section 250 Exemption of work-related training provision
(1)No liability to income tax arises by virtue of—
(a)the provision for an employee of work-related training or any benefit incidental to such training, or
(b)the payment or reimbursement to or in respect of an employee of—
(i)the cost of work-related training or of any benefit incidental to such training, or
(ii)any costs of a kind specified in subsection (2) in respect of such training.
(2)The costs are—
(a)costs which are incidental to the employee undertaking the training,
(b)expenses incurred in connection with an examination or other assessment of what the employee has gained from the training, and
(c)the cost of obtaining any qualification, registration or award to which the employee becomes or may become entitled as a result of the training or such an examination or other assessment.
Section 251 Meaning of “work-related training”
(1)In this Chapter “work-related training”, in relation to an employee, means a training course or other activity designed to impart, instil, improve or reinforce any knowledge, skills or personal qualities which—
(a)are likely to prove useful to the employee when performing the duties of the employment or a related employment, or
(b)will qualify or better qualify the employee—
(i)to perform those duties, or
(ii)to participate in any charitable or voluntary activities that are available to be performed in association with the employment or a related employment.
(2)For this purpose “related employment”, in relation to an employee, means another employment with the same employer, or with a person connected with the employer, which the employee—
(a)is to hold,
(b)has a serious opportunity of holding, or
(c)can realistically expect to have a serious opportunity of holding in due course.
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We have prepared a report made up of 3 blogs written by Steve Bicknell and Whitney Highum
The blogs cover childcare vouchers, salary sacrifice, the new 2017 scheme, and tax allowable expenses for childcare professionals. Click here to download
You can get small business rate relief if:
You’ll get 100% relief (doubled from the usual rate of 50%) until 31 March 2017 for properties with a rateable value of £6,000 or less. This means you won’t pay business rates on properties with a rateable value of £6,000 or less.
The rate of relief will gradually decrease from 100% to 0% for properties with a rateable value between £6,001 and £12,000.
You can get small business rate relief if the rateable value of each of your other properties is less than £2,600.
The rateable values of the properties are added together and the relief applied to the main property.
You’ll keep getting any existing relief for one year when you get a second property.
If your property has a rateable value below £18,000 (£25,500 in Greater London) you’re considered a small business.
Even if you don’t qualify for small business rate relief, your business rates will be calculated using the small business multiplier instead of the standard one. This is the case even if you have multiple occupied properties.
The multiplier shows the percentage (pence in the pound) of the rateable value that you pay in business rates. You can see a list of current multipliers on the Valuation Office Agency (VOA) website.
There are ways that you can claim tax relief for your mortgage interest.
Qualifying Loan Interest Relief
Often when you start a business you will need to borrow money personally to lend to your new company or buy shares.
You might borrow by increasing your mortgage.
You may be entitled to claim tax relief for interest paid on a loan or alternative finance arrangement used to buy:
If you receive a low-interest or interest free loan from your employer for one of the above purposes you may be able to claim relief for any benefit taxable on you.
This is called ‘Qualifying loan interest relief’, HMRC have a helpsheet which gives further details HS340
Property Investors/Buy to Let
At the moment property investors can also offset mortgage relief against their profits but the rules are changing.
2017/18 75% of the interest can be claimed in full and 25% will get relief at 20%
2018/19 50% of the interest can be claimed in full and 50% will get relief at 20%
2019/20 25% of the interest can be claimed in full and 75% will get relief at 20%
2020/21 100% will get only 20% relief
For a 20% tax payer that’s fine but for higher rate taxpayer its a disaster that will lead to them paying a lot more tax
These rules will not apply to Companies, Companies will continue to claim full relief.
How much can you borrow?
In summary if you re-mortgage above the original market value and you own the property personally and take out the cash you will not be able to claim relief from interest on the part above the original market value
If however you borrow to invest in another property that is ok.
There are several issues to watch out for:
Transfer Of a Going Concern (TOGC)
Before you buy a commercial property you will need to find out if the current owner has opted to tax.
Supplies of land and buildings, such as freehold sales, leasing or renting, are normally exempt from VAT. This means that no VAT is payable, but the person making the supply cannot normally recover any of the VAT incurred on their own expenses.
However, you can opt to tax land. For the purposes of VAT, the term ‘land’ includes any buildings or structures permanently affixed to it. You don’t need to own the land in order to opt to tax. Once you have opted to tax all the supplies you make of your interest in the land or buildings will normally be standard rated, and you will normally be able to recover any VAT you incur in making those supplies. VAT Notice 742A
If an Option to Tax is in place the seller will charge VAT when they sell the property.
If the purchaser is not registered for VAT they get a very large VAT bill to pay, however, if they register for VAT or are registered for VAT before the sale takes place then its possible to use the TOGC rules to avoid having to pay VAT on the purchase.
The main conditions are:
The TOGC rules are compulsory. You cannot choose to ‘opt out’. So, it is very important that you establish from the outset whether the business property is being sold as a TOGC. Incorrect treatment could result in corrective action by HMRC which may attract a penalty and or interest.
TOGC Intended for Residential Use
Schedule 10 para 6 VATA 1994 Notice 742A para 3.4
Your option to tax will not apply if you supply a building or part of a building that is not designed or adapted as a dwelling (or number of dwellings) or for a relevant residential purpose but you receive a certificate (VAT1614D) from the recipient of your supply (by the time described in paragraph 3.4.3 and paragraph 3.4.4) certifying that it is intended for use as a dwelling or number of dwellings or solely for a relevant residential purpose. This can apply where the building, or relevant part, is either intended for such use:
Conversion of Commercial to Residential for Sale – Zero Rating
VAT notice 708 (Schedule 8 Group 5 item 1 VATA 1994)
You are a ‘person converting’ a building if, in relation to that building, you are acting as, or have, at any point in the past, acted as:
A person acquiring a residential development that has been subject to a qualifying conversion as part of a TOGC inherits ‘person converting’ status and is capable of making a zero rated first major interest grant in that building or part of it as long as:
a) a zero rated grant has not already been made of the converted building or relevant part by a previous owner (not including the grant that gives rise to the TOGC)
b) the person acquiring the building as a TOGC would suffer an unfair VAT disadvantage if its first major interest grants were treated as exempt (for example, a developer restructures its business. This entails the transfer (as a TOGC) of its entire property portfolio of newly constructed or converted qualifying buildings to an associated company, which will make first major interest grants. If these were treated as exempt, the transferee might become liable to repay input tax recovered by the original owner on development costs under the Capital Goods Scheme or partial exemption “claw back” provisions and would incur input tax restrictions on selling fees that would not be suffered by businesses in similar circumstances – we would consider this to be an unfair disadvantage)
c) that person would not obtain an unfair VAT advantage by being in a position to make zero rated supplies (for example, by recovering input tax on a refurbishment of an existing building)
A recent case suggests the rules even apply to Houses of Multiple Occupancy (HMO’s) and that HMO’s can also be Zero Rated
Capital Focus purchased Tintern House in Banbury, Oxfordshire in August 1994, it was a commercial building and they intended to create one large residential building so they started work and reclaimed the VAT, however, they changed their mind and decided to create an HMO instead.
Reduced Rate VAT for Conversion from Commercial to Residential
The rules are in VAT Notice 708
Using the reduced rate of 5% is useful for Residential property (exempt from VAT) but is also useful for commercial buildings where there is no option to tax in place.
A qualifying conversion includes the conversion of:
It does not include:
A qualifying conversion includes the conversion into a multiple occupancy dwelling of:
It does not include, for example, the creation of additional bedrooms at a dwelling consisting of bed-sits.
A qualifying conversion includes the conversion of:
into premises that will be used solely for a relevant residential purpose.
It does not include:
Other than installing goods that are not building materials, you can reduced-rate any works of repair, maintenance (such as redecoration), or improvement (such as the construction of an extension or the installation of double glazing) carried out to the fabric of the building.
You can also reduced-rate works within the immediate site of the premises being converted that are in connection with the:
All other services are standard-rated. For example, you must standard-rate:
Companies Act 2006 Section 830 – Distributions to be made only out of profits available for the purpose
(1)A company may only make a distribution out of profits available for the purpose.
(2)A company’s profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.
(3)Subsection (2) has effect subject to sections 832 and 835 (investment companies etc: distributions out of accumulated revenue profits).
A distribution must be justified by
In small businesses having the right paperwork is vital should HMRC raise any questions, you will need:
Companies Act 2006 Section 847 – Consequences of unlawful distribution
(1)This section applies where a distribution, or part of one, made by a company to one of its members is made in contravention of this Part.
(2)If at the time of the distribution the member knows or has reasonable grounds for believing that it is so made, he is liable—
(a)to repay it (or that part of it, as the case may be) to the company, or
(b)in the case of a distribution made otherwise than in cash, to pay the company a sum equal to the value of the distribution (or part) at that time.
(3)This is without prejudice to any obligation imposed apart from this section on a member of a company to repay a distribution unlawfully made to him.
Mistakes can happen even to large companies like NEXT PLC…
Whilst the Company always had sufficient reserves to pay the Relevant Distributions at the time that they were made, the Act required this to be demonstrated by reference to interim accounts filed at Companies House prior to payment. Regrettably, those interim accounts were not filed with Companies House until after the Relevant Distributions had been paid and after the lapse had been identified. No fines or other penalties have been incurred by the Company.
Section 386 Duty to keep accounting records
(1)Every company must keep adequate accounting records.
(2)Adequate accounting records means records that are sufficient—
(a)to show and explain the company’s transactions,
(b)to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and
(c)to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act (and, where applicable, of Article 4 of the IAS Regulation).
(3)Accounting records must, in particular, contain—
(a)entries from day to day of all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place, and
(b)a record of the assets and liabilities of the company.
(4)If the company’s business involves dealing in goods, the accounting records must contain—
(a)statements of stock held by the company at the end of each financial year of the company,
(b)all statements of stocktakings from which any statement of stock as is mentioned in paragraph (a) has been or is to be prepared, and
(c)except in the case of goods sold by way of ordinary retail trade, statements of all goods sold and purchased, showing the goods and the buyers and sellers in sufficient detail to enable all these to be identified.