Forward planning is essential if you want to ensure that you are on course to achieve your business and personal financial goals, and this is even more the case in times of ongoing economic uncertainty. Click on the image to read our 25 page guide.
New VAT rules are coming into force from 1st October 2019 to create a domestic reverse charge for Construction, known as Construction Services Domestic Reverse Charge.
HMRC are introducing the change to combat missing trader fraud.
VAT registered construction clients will need to account for reverse charge as it was a self supply, the supplier won’t charge them VAT. This then removes the risk of deducting input tax when the output tax has never been paid.
The new system will not apply to Zero Rated Supplies.
Unlike some other “reverse charge” schemes, amounts accounted for under the CSDRC will not count towards the VAT registration limit. This means that if a customer is not already required to be registered for VAT, the CSDRC “deemed self-supplies” will not change this.
Subcontractors will see a loss of cashflow under the scheme and its likely to cause issues for customers as they need their Making Tax Digital systems to be able to cope with the change.
Subcontractors also need to be sure that their services are within CSDRC before agreeing not to charge VAT.
CSDRC will follow the CIS rules to determine what is within the scope of CSDRC.
In the first 6 months HMRC has suggested they will apply a light touch to the new rules.
For businesses over the VAT registration threshold, Making Tax Digital starts in April 2019. This represents the first phase of the UK Government’s plan to become one of the world’s most digitally advanced tax administrations. However, many people are still not fully aware of the impact it will have on their business and the various software solutions which need to be considered.
It is vital that all businesses understand the imminent changes and what further developments we can expect in the future. This essential course will guide you through everything you need to know about Making Tax Digital and what procedural changes you need to put in place to ensure you are compliant with the new requirements.
It will cover the following key areas…
# What is Making Tax Digital for VAT?
# When does it start?
# VAT notice 700/22
# Deferred reporting
# Software solutions
# New penalties
# The soft landing
# The next phase 2021: Income Tax and Corporation Tax
Book your place at https://www.uktraining.com/training/making-tax-digital/116/
So you bought a commercial property, applied a 1614D to remove the option to tax, you started work and ran out of money, what happens to VAT you have reclaimed?
The good news it you can keep it and zero rate the sale, provided..
For conversions, real and meaningful works must have been carried out before they have ‘person converting’ status. Judgement should be used to decide whether works are real and meaningful.
If your landlord is non resident or let property for a non resident landlord you will need to deduct tax at source
The Non-resident Landlord Scheme
A landlord who lives abroad for more than 6 months of the year must pay tax on any income they get from renting out property in the UK. If the landlord is a company or trustee, the rules about their usual place of abode apply.
The tax is collected using the Non-resident Landlord (NRL) Scheme.
The tax can be paid by either:
# a letting agent
# the tenant
If the landlord is a joint owner, tax is paid on their own share of rental income.
If your landlord lives abroad and you pay over £100 a week, you need to register with HMRC and deduct tax from your rent.
You also need to register with HMRC if you pay a UK representative of your landlord, such as a friend or family member, who isn’t a letting agent.
You don’t need to deduct the tax if HMRC has told you in writing that the landlord can receive the rent with no tax deducted, but you must still register with HMRC and complete an annual report.
If you’re a letting agent you must operate the Non-resident Landlord Scheme no matter how much rent you collect, unless HMRC has told you in writing that the landlord can receive the rent with no tax deducted. You may still need to register and complete an annual report.
You’re considered a letting agent under the scheme if you:
help the landlord run their UK rental business
receive their rent or control where it goes
live in the UK for more than 6 months a year
A letting agent can be an estate agent, solicitor, accountant or friend of the landlord. You’re not a letting agent if you only give a landlord legal advice or services.
Rental income can include money received for a wide variety of things such as:
letting furnished, unfurnished, commercial and domestic premises or land
use of the furniture in a rented property
the grant of certain leases
sporting rights, such as fishing and shooting permits
allowing waste to be buried or stored on land
allowing others to use the property – for example, where a film crew pays to film inside a person’s house
grants to help with allowable expenses, such as repairs
enterprise investment schemes
caravans or houseboats that are not moved around
insurance policies for non-payment of rent
What you need to do
1. Register with HMRC within 30 days.
Letting agents should use form NRL4i.
Tenants should write to HMRC. Give your own name and address and that of your landlord and state that you wish to register for the Non-resident Landlord Scheme.
2. Work out and pay the tax.Send payment within 30 days of the end of each tax quarter – 30 June, 30 September, 31 December and 31 March.
3. Send a report each year by 5 July to HMRC and the landlord using form NRLY.
4. Provide the landlord with a certificate NRL6 each year by 5 July.
5. Keep records for 4 years.
You need to keep records of:
rent you’ve received (or paid, if you’re a tenant), with dates and amounts
correspondence with the landlord if you’ve contacted them about where they usually live
expenses you’ve paid, with dates, amounts and descriptions of the expenses, along with copies of invoices and receipts
The normal rule is that if you buy more than one property the extra 3% SDLT is payable.
However, if you buy a property that contains subsidiary dwellings and the main property will be your home you might not have to pay the extra 3%, the rules are in SDLTM07955
SDLT – higher rates for additional dwellings: What is a dwelling – further information
It will be important in some cases to determine whether a premises consists of one or more than one dwelling.
It is a question of fact whether a purchase consists of one or more than one dwelling. A self-contained part of a building will be a separate dwelling if the residents of that part can live independently of the residents of the rest of the building including independent access and domestic facilities.
In certain cases a purchase of more than one dwelling will be treated the same as if a single dwelling had been purchased. This is the case if any of the dwellings purchased are subsidiary dwellings. A subsidiary dwelling must be within the same building as or in the grounds of another dwelling purchased in the same transaction (the principal dwelling). The principal dwelling and the garden and grounds attributable to that principal dwelling must be at least two thirds of the value of the land purchased in the transaction.
There can be more than one subsidiary dwelling purchased at the same time as a principal dwelling, but the principal dwelling must always be at least two thirds of the transaction value.
Where a principal dwelling is purchased and all the other dwellings purchased are subsidiary dwellings, the tests for whether the transaction is a higher rates transaction are applied as if there was only one dwelling purchased. If the purchase of a principal dwelling is a first property purchase or a replacement of a main residence the higher rates will not apply.
Multiple dwellings relief may be claimed where there are separate dwellings.
You can also use Multiple Dwellings Relief with the Subsidiary Dwellings Rules, MDR means you divide the property price by the number of dwellings equally then apply SDLT subject to a minimum of 1% SDLT.
SDLT relief for multiple dwellings
You can claim relief when you buy more than one dwelling where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling.
If you claim relief, to work out the rate of tax HMRC charge:
divide the total amount paid for the properties by the number of dwellings
work out the tax due on this figure
multiply this amount of tax by the number of dwellings
The minimum rate of tax under the relief is 1% of the amount paid for the dwellings.
It’s all about control
The best definition I found is this one
Corporation Tax Act 2010
1122 “Connected” persons
(1)This section has effect for the purposes of the provisions of the Corporation Tax Acts which apply this section (or to which this section is applied).
(2)A company is connected with another company if—
(a)the same person has control of both companies,
(b)a person (“A”) has control of one company and persons connected with A have control of the other company,
(c)A has control of one company and A together with persons connected with A have control of the other company, or
(d)a group of two or more persons has control of both companies and the groups either consist of the same persons or could be so regarded if (in one or more cases) a member of either group were replaced by a person with whom the member is connected.
(3)A company is connected with another person (“A”) if—
(a)A has control of the company, or
(b)A together with persons connected with A have control of the company.
(4)In relation to a company, any two or more persons acting together to secure or exercise control of the company are connected with—
(a)one another, and
(b)any person acting on the directions of any of them to secure or exercise control of the company.
(5)An individual (“A”) is connected with another individual (“B”) if—
(a)A is B’s spouse or civil partner,
(b)A is a relative of B,
(c)A is the spouse or civil partner of a relative of B,
(d)A is a relative of B’s spouse or civil partner, or
(e)A is the spouse or civil partner of a relative of B’s spouse or civil partner.
(6)A person, in the capacity as trustee of a settlement, is connected with—
(a)any individual who is a settlor in relation to the settlement,
(b)any person connected with such an individual,
(c)any close company whose participators include the trustees of the settlement,
(d)any non-UK resident company which, if it were UK resident, would be a close company whose participators include the trustees of the settlement,
(e)any body corporate controlled (within the meaning of section 1124) by a company within paragraph (c) or (d),
(f)if the settlement is the principal settlement in relation to one or more sub-fund settlements, a person in the capacity as trustee of such a sub-fund settlement, and
(g)if the settlement is a sub-fund settlement in relation to a principal settlement, a person in the capacity as trustee of any other sub-fund settlements in relation to the principal settlement.
(7)A person who is a partner in a partnership is connected with—
(a)any partner in the partnership,
(b)the spouse or civil partner of any individual who is a partner in the partnership, and
(c)a relative of any individual who is a partner in the partnership.
(8)But subsection (7) does not apply in relation to acquisitions or disposals of assets of the partnership pursuant to genuine commercial arrangements.
Generally mortgage lenders will accept references from
Accountants are constantly asked to give income and mortgage references, factually reporting filed information is fine but why ask accountants to forecast the future or state if the client can afford the payments, no accountant should be asked these questions!
… under the rules of the Institute of Chartered Accountants for England and Wales (ICAEW), the ICAEW specifically precludes firms from providing anything except factual information in response to such requests. Firms are also restricted in relation to provision of information of this kind by our public indemnity insurers. This is because of the risk to the firm of the information being used to support a lending decision, and the potential for us to be contractually obligated if the lending provided is not subsequently repaid. This is also the reason that reference requests are not charged for by ICAEW member firms. https://www.rileyandco.co.uk/2017/05/04/whats-problem-mortgage-references/
Accountants who think they can do references as a one off for clients they don’t act for need to beware, they could be disciplined, back in 2014 ICAEW disciplined and fined one of their members £3,500 for a reference prepared in this way https://www.accountingweb.co.uk/practice/general-practice/accountant-banned-for-reckless-mortgage-references
No one knows your business better than you do, so why don’t mortgage providers just ask the their client to give the forecast? why ask the accountant? We can’t be held responsible for the future of our clients!
Let’s stick to the facts!
You can change your company’s year end (also known as its ‘accounting reference date’) to make your company’s financial year run for more or less than 12 months.
You can only do this for your company’s current financial year or the one immediately before it.
Changing your company’s year end will also change your deadline for filing accounts, unless you’re lengthening your company’s first financial year.
If you shorten your year end by 1 day, you will get an extra 3 months from the date of filing the notice to shorten, so for example, if your year end was 31st March and your changed it to 30th March, due to file on 31st December and filed a notice on the 31st December, you could get until the 31st March to file
The rules are in http://www.legislation.gov.uk/ukpga/2006/46/section/442
If the relevant accounting reference period is treated as shortened by virtue of a notice given by the company under section 392 (alteration of accounting reference date), the period is—
(a)that applicable in accordance with the above provisions, or
(b)three months from the date of the notice under that section,
whichever last expires.