IT rental business losses can be set against general income only to the extent that they are attributable to:
- certain capital allowances,
- certain agricultural expenses (see PIM4224).
Until the 2010-11 tax year, relief against general income could be claimed to the extent the loss was due to furnished holiday lettings. This is not available for tax years 2011-12 onwards, see PIM4130. Losses of a furnished holiday lettings business may now only be carried forward to use against future profits of that same furnished holiday lettings business.
Where a customer claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income. They can’t opt to take a smaller amount, either they claim for the full loss or they claim for none (ITA07/S121).
The largest capital allowances are likely to be from Annual Investment Allowance claims.
Any taxpayer seeking to obtain in excess of £50,000 of otherwise unlimited income tax reliefs in any one year will find their deductions ‘capped’ (ITA 2007, s 24A). The ‘cap’ is the greater of:
- 25% of their total income; or
If you have suffered deductions from your income its generally reclaimed
- The Self Employed enter the CIS suffered on their self assessment return, its then part of their tax calculation
- Companies reclaim via their Payroll – Companies can also offset
Companies that have deductions taken from their income as subcontractors should set-off these deductions against the amounts payable monthly or quarterly for PAYE, National Insurance contributions and Student Loan repayments due from their employees and CIS deductions from their subcontractors. This should be done monthly (or quarterly, as appropriate) and the calculation should be shown on the company’s EPS.
Companies should simply reduce the amount of PAYE, National Insurance contributions, Student Loan repayments and any scheme deductions they pay over to our accounts office by the amount of CIS deductions made from their income.
The CIS132 is used to keep a record of the offsets, you could create a spreadsheet to keep these records.
This is a 3 stage process
1. Register for a Gateway
HMRC services: sign in or register
You will then be asked questions and get a Government Gateway ID
You will be asked choose the type of account from these 3 options
- Register as an Individual
- Register as an Organisation
- Register as an Agent
You need to register as an Organisation
2. Add PAYE/CIS, Corporation Tax, VAT
Watch this HMRC Video to see how its done
CIS is part of PAYE
You will need your Tax Reference Numbers
PAYE Office and Employer Numbers
3. Add your Accountant
Login to your business gateway
Click Manage Account – its in the horizontal menu bar at the top of the screen
Choose Accountants from the list in the middle of the screen
Click the services you wish to add us to
Click Authorise an Agent
Clients are always looking for new ways to make money and recently we have had a couple of clients ask how CFD’s and Spread Betting are treated for Tax Purposes.
The general rule is that its considered to be gambling unless the badges of trade are present.
BIM22016 – Meaning of trade: exceptions and alternatives: betting and gambling – what is a bet?
The first, and obvious, question is simply what is a bet? A definition of a bet or ‘wager’ was given by Hawkins J in Carlill v Carbolic Smoke Ball Company  2QB484 and has been followed in later cases:
‘It is not easy to define with precision what amounts to a wagering contract, nor the narrow line of demarcation which separates a wagering from an ordinary contract; but, according to my view, a wagering contract is one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent on the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties. It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known.’
BIM56900 – Financial traders – instruments and shares: contracts for differences and spread betting
Contracts for differences (CFDs) are defined in CFM50380, and this definition includes financial spread bets. CFDs fall within the definition of derivative contracts for Corporation Tax purposes, so for companies the derivative contracts regime applies in most cases.
Individuals and others not within the charge to Corporation Tax
For individuals and others not within the charge to Corporation Tax the position is different. In such cases you will need to examine the contract to see if it is a gambling or wagering one. There is guidance on this at BIM22016. The profits or losses from gambling or wagering contracts are outside the scope of Income Tax (see BIM22015). However, this will not apply if the spread bet is used for a commercial purpose such as a hedge where the guidance at BIM56880 should be followed.
Directors sometimes borrow money from their company, when this happens there are several tax issues:
CT600A S455 CTM61505 – loans not repaid with 9 months of year end are taxed at 32.5%
Broadly, where a close company (either directly or through an intermediary):
- makes any loan to,
- advances any money to, or
- confers a benefit on,
an individual who is a participator (or an associate of a participator) in the close company, then the close company is due to pay tax under CTA10/S455. The exception to this (in the case of a loan or advance) is if the loan or advance was made in the ordinary course of the close company’s business and that business includes the lending of money (see CTM61520). S455 applies only if the company is a close company at the time the loan or advance is made.
Although the company is charged to tax under CTA10/S455 “as if it were an amount of CT…”, this does not mean a loan or advance is, by itself, a distribution of the company or income in the hands of the recipient.
- the tests for determining whether a company is a close company, see CTM60100 onwards,
- the meaning of loan or advance, see CTM61535,
- the definitions of participator and associate of a participator, see CTM60107 onwards,
- the exclusion of certain loans to directors or employees, see CTM61540,
- the meaning of ‘confers a benefit’, see CTM61580,
- reciprocal arrangements, see CTM61550 to CTM61555,
- extension of CTA10/S455 to loans by controlled companies, see CTM61700 to CTM61750
Benefit in Kind – If the loan was more than £10,000
If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must:
You must report the loan on a personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest (or pay interest to the company on the loan)
The Current Official Rate of Interest is 2.5% Beneficial loan arrangements – HMRC official rates – GOV.UK (www.gov.uk)
Loans over £10,000 need Shareholder Approval
A private company may make a loan to one of its directors, or give a guarantee or provide security in connection with a loan made by a third party to such a director. However, the transaction must first be approved by an ordinary resolution of the shareholders.
Exception for loans under £10,000 in aggregate
If the aggregate value of the loan and other related loans to a director does not exceed £10,000, there is no need to obtain shareholders’ approval (note that the £10,000 is an aggregate value, meaning that if a multiple of small loans to a director combine to a value over £10,000, it would require shareholder approval.)
Notes in the Accounts
Related party transactions are noted in the accounts, this even applies to Micro Entity Accounts.