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.
Using strategic planning tools, we can suggest methods to maximise both your business and your personal wealth, while also helping to keep your tax liabilities to a minimum.
With this in mind, here is our 26 page 2021/22 Tax and Financial Strategies Brochure, which explores some of the key planning opportunities that could help to protect and make the most of your finances.
on the anniversary of joining, your turnover in the last 12 months was more than £230,000 (including VAT) – or you expect it to be in the next 12 months
you expect your total income in the next 30 days alone to be more than £230,000 (including VAT)
What are the Flat Rates?
Hotel or accommodation before 15 July 2020
Hotel or accommodation from 15 July 2020 to 30 September 2021
Hotel or accommodation from 1 October 2021 to 31 March 2022
Why would Flat Rate VAThelp?
Example You bill a client for £1,200 including VAT, so thats £1,000 plus 20% VAT.
You’re a Holiday Let, so the VAT flat rate for your business is 0%.
Your flat rate payment will be 0% of £1,200, so nothing to pay
This is great news for Furnished Holiday Lets especially if they are just crossing the £85,000 VAT Threshold
Most Holiday Lets can’t increase their prices to incorporate VAT when they cross the VAT threshold because they would be uncompetitive so VAT is direct hit to their profits.
On the basis that the accommodation fee is unchanged but now includes a VAT element, if Flat Rate is used and the rate is 0% then no VAT is paid to HMRC.
That may not work for every business, it depends on whether you have a high level of VAT expenses which would offset the VAT and could result in a refund for example when you first register you may be able to reclaim VAT on pre-registration costs. Flat Rate restricts the recovery of expenses, you cannot reclaim the VAT on your purchases – except for certain capital assets over £2,000
Its also a problem if you’re classed as a ‘limited cost business’ if your goods cost less than either:
Most property investors fit within the size criteria
No Directors Report
A company meets the qualifying conditions for a micro-entity if it meets at least two out of three of the following thresholds:
Turnover: Not more than £632,000
Balance sheet total: Not more than £316,000
Average number of employees: Not more than 10
The FRC (Financial Reporting Council) aren’t big fans of Micro Entity reporting due to concerns about the minimal accounts giving a ‘true and fair’ view but the whole reason for FRS105 and Micro Entity Accounts was to simplify reporting for SME’s and they definitely do that.
There are certain companies which can not qualify as micro entities regardless of their size
Members of a group preparing group accounts.
Financial holdings undertakings
Article 2 of the Accounting Directive – 2013/34/EU as follows:
2(13) ‧associated undertaking‧ means an undertaking in which another undertaking has a participating interest, and over whose operating and financial policies that other undertaking exercises significant influence. An undertaking is presumed to exercise a significant influence over another undertaking where it has 20 % or more of the shareholders’ or members’ voting rights in that other undertaking;
2(14)‧investment undertakings‧ means: a)undertakings the sole object of which is to invest their funds in various securities, real property and other assets, with the sole aim of spreading investment risks and giving their shareholders the benefit of the results of the management of their assets, (b) undertakings associated with investment undertakings with fixed capital, if the sole object of those associated undertakings is to acquire fully paid shares issued by those investment undertakings without prejudice to point (h) of Article 22(1) of Directive 2012/30/EU;
2(15) ‧financial holding undertakings‧ means undertakings the sole object of which is to acquire holdings in other undertakings and to manage such holdings and turn them to profit, without involving themselves directly or indirectly in the management of those undertakings, without prejudice to their rights as shareholders
Is this a problem for Property Investment Companies?
No, most property investment companies are not Investment Undertakings!
I know that sounds odd as it is a property investment and the investment makes it sound like an Investment Undertaking so lets look at this in more detail
Are there multiple shareholders? generally not its often owned by a husband and wife (or civil partners) – if you have lots of passive investors that could make it an Investment Undertaking, we would need to look at the primary purpose of why the passive investors invested
Are there shareholders with no involvement in the operation or management of the business? if their primary purpose was investment then it could be an Investment Undertaking – generally that’s not the case because normally property is funded by loans not shares (if you do use external investors you could fall within FCA regulations)
Are there multiple properties in the same company? This could be seen as spreading the risk which might be an Investment Undertaking but most portfolio investors are seen by HMRC and others as running a property business and they are active in running it, many new investors have multiple companies with a single property in each Company – its better for lenders (charge on property and debenture over company), its better when you sell GCT is based on the share value (net worth) and the purchaser gets very low SDLT 0.5% and may not need to refinance
Is a small property portfolio a risk management strategy? No, the assets are all of the same class so how can it be a risk management strategy!
What about a company with one property used by a related party or member of a group? there is no management or spreading of risk so its not an Investment Undertaking
What does CT61 apply to and what form do you need?
If your company or organisation pays interest, royalties, alternative finance payments, manufactured payments, relevant distributions or any similar recurring payment, you must generally make these payments after deducting Income Tax at the basic rate – currently 20%. You need to tell HMRC about these payments and pay the Income Tax that you’ve collected. Use form CT61 for companies.
If you are an LLP you must send a letter and clearly state that you are a LLP and quote your Unique Taxpayer reference with details of the payment made and the tax deducted to:
Self Assessment HM Revenue and Customs BX9 1AS
How do apply for CT61?
To get a CT61 you have to complete the e mail template