Are you an agent for supplies to your clients? VAT Reply

You’re an agent if you act for, or represent, someone else (your principal) in arranging supplies of goods or services. The supplies that you arrange are made by, or to, the principal you represent.

Principals cannot avoid their liability to account for VAT on their supplies or to pay VAT on their purchases by using an agent.

Persons who carry on a business on their own account sometimes use the words ‘agent’ and ‘agency’ to describe their trading style. For example:

# distributors, sole concessionaires and motor agents usually trade as principals on their own account
# employment agencies and travel agents are not usually agents in all their activities

On the other hand, some people who normally trade as principals, such as solicitors and architects, may occasionally arrange supplies as agents for their clients.

To act as an agent, you must have agreed with your principal to act on their behalf in relation to the particular transaction concerned. This may be a written or oral agreement, or merely inferred from the way you and your principal conduct your business affairs. Whatever form this relationship takes:

# it must always be clearly established between you and your principal, and you must be able to show to HMRC that you’re arranging the transactions for your principal, rather than trading on your own account
# you will not be the owner of any of the goods, or use any of the services which you buy or sell for your principal
# you will not alter the nature or value of any of the supplies made between your principal and third parties

https://www.gov.uk/guidance/vat-guide-notice-700#section22

Supplies made through an undisclosed agent are those where the supplier and purchaser are not known to each other as the agent acts in his own name.

Supplies of goods through an agent acting in his own name are treated as to him and by him and consequently count towards his turnover for VAT registration.

VQOTW: Agency Status and Impact on VAT Turnover

steve@bicknells.net

How can Husband and Wife split Furnished Holiday Let Income? Reply

Normally the rules is that income is split 50/50 but there are some special rules for FHLs

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030

Jointly owned property: husband & wife or civil partners

Husbands and wives or civil partners living together should generally be treated as entitled in equal shares to income from jointly held property.

See:
ICTA88/S282A for years up to 2006-07, and
ITA07/S836 for 2007-08 onwards.

However, this rule will not apply in any of the following instances:
# the income is earned income (or, like furnished holiday lettings, treated as earned income); ICTA88/S282A (4)(a), ITA07/S836 Exception D,
# there is actually a partnership; ICTA88/S282A (4)(b), ITA07/S836 Exception C. In this case the income is divided according to the terms of the partnership agreement,
# both husband and wife, or both civil partners, have signed a declaration under ICTA88/S282B or ITA07/S837 stating their beneficial interests in both the property and the income arising from it. However, a declaration is only valid if their interests in the income and in the property itself correspond.

Further guidance can be found at TSEM9800 onwards. Any problems about joint ownership which cannot be dealt with by reference to the TSEM guidance should be submitted to HMRC Trusts Bootle.

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9820

Property held jointly by married couples or civil partners: The 50/50 rule: Income from furnished holiday lettings

The 50/50 rule does not apply to income arising from a UK property business which consists of, or so far as it includes, the commercial letting of furnished holiday accommodation.

# If a spouse or civil partner carries on the activity alone: that spouse or civil partner is taxable on the income.
# If a spouse or civil partner carries on the activity with others: the income is split for tax purposes in the way the parties have agreed to split the profits amongst themselves.

 

steve@bicknells.net

Do you get relief for unpaid loans? Bad Debts Reply

Lending directly to businesses or via Peer to Peer platforms is becoming very popular, but what happens if the borrower goes bust and can’t repay you?

HS296 Debts and Capital Gains Tax (2019)

https://www.gov.uk/government/publications/debts-and-capital-gains-tax-hs296-self-assessment-helpsheet/hs296-debts-and-capital-gains-tax-2019

Losses on loans to traders

If you make a loan to a trader you may be able to claim an allowable loss if the loan cannot be repaid. The loan must have been used wholly for trade purposes and have become irrecoverable. You cannot claim if the borrower was your spouse or civil partner, either when the loan was made or subsequently.

Example 1
You lend £30,000 to your brother to start a bicycle shop. After trading successfully for a number of years, the business fails. £5,000 of the loan is repaid to you but £25,000 is irrecoverable. You can claim an allowable loss of £25,000. If you claim the relief you’ll be taxable on any amounts of the loan subsequently repaid.

Example 2
Two years after you make the claim your brother is able to repay £10,000. You’re treated as having made a capital gain of £10,000 in the tax year in which the £10,000 is repaid.

Loans that qualify

To qualify for relief the loan must be to a borrower who:

is resident in the UK

uses the money wholly for the purposes of a trade

uses the money to set up a trade, as long as they start trading

A trade includes a profession or vocation, but does not include money lending. If the loan is made to a company, that company can pass the money to another company in the same group to be used in that other company’s trade.

Loans may include credit balances on a director’s loan account but not ordinary trade debts. Exceptionally, trade debts may qualify for relief if there’s a specific agreement to extend the period of credit beyond what’s customary for the trade concerned. But you cannot claim an allowable loss if you’ve claimed the bad debt as a trading expense.

Peer to peer lending

https://www.gov.uk/guidance/peer-to-peer-lending

How peer to peer lending works

Lenders place their money with a peer to peer platform which is then lent to lots of different borrowers as many small loans. Each borrower borrows small amounts from many different lenders to make up the full loan they need. The platform will collect the repayments of interest and capital from each borrower and pass them to the lenders.

Claiming tax relief on unpaid loans

If a peer to peer loan isn’t repaid the lender can set the loss they suffer on the loan against the interest they receive on other peer to peer loans before the income is taxed.

Tax relief is available to peer to peer lenders who:

are liable to UK Income Tax on their peer to peer income

make loans through peer to peer lending platforms that are authorised by the FCA

are the legal lender at the time when its agreed that the loan has gone bad

When relief can be obtained

Tax relief applies when there is no reasonable prospect of the peer to peer loan being repaid, it doesn’t apply to late payment.
The amount of relief available is the peer to peer loan still outstanding from the borrower, less repayments already received.

Relief for bad debts on peer to peer loans can only be set against interest that the lender receives on other peer to peer loans, it cannot be used against any other form of income.

 

steve@bicknells.net

 

Do Directors need to list directorships where they had no income? Self Assessment Returns Reply

This question comes up every year.

“I am a director of lots of companies but only get paid by one company, do I need to list them all?”

Some people make up dummy Payroll Numbers and list directorships, some people list them in the notes, some don’t list them at all, what is the right thing to do?

The answer has to be to follow the HMRC Guidance

 

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/787630/SA150_2019.pdf

As you can see its says

received income as a company director’

‘held an office, such as chairperson, secretary or treasurer and received income for that work

If you didn’t receive income you don’t need to report it as it will not affect your tax.

steve@bicknells.net

 

 

When do you pay Capital Gains Tax on Property Sales? Reply

Currently when you sell a residential investment property you pay CGT via self assessment, so if you sell now, that’s in the tax year to 5th April 2020, due for payment by 31st January 2021, but that’s changing very soon.

From 6 April 2020, when a UK resident disposes of UK land, a CGT return will need to be submitted to HMRC within 30 days of the completion of the disposal, and the full liability will be payable within that same 30 day window.

That’s a big change in time scales!

In order to file potentially complex returns within that time scale, investors will need to

  1. Keep full up to date records
  2. An estimate of the UK Taxpayer full income will be needed to assess the rate of CGT to be applied
  3. Details of the tax payers unused CGT annual exemption
  4. Details of any CGT losses unused

These rules will also apply to Trusts

The rules will apply to UK Properties first and its planned to include overseas property a year later.

steve@bicknells.net

 

What Training expenses do HMRC allow Doctors to claim? Reply

HMRC has identified a number of training courses specific to the medical profession where relief for training costs incurred will qualify for tax relief. https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim32540

Professional body

Course details
Royal College of Anaesthetists Primary FRCA MCQ Exam
Primary FRCA OSCE (Objective Structured Clinical Exam
Primary FRCA SOE (Structured Oral Exam)
Final FRCA Written Exam
Final FRCA SOE (Structured Oral Exam)
Chemical Pathology FRC Path exam
Note: FRC Path means Fellowship of the Royal College of Pathologists
Diagnostic Neuropathology FRC Path exam
Emergency Medicine FRCEM Primary Examination
FRCEM Intermediate Certificate
FRCEM Final Examination
Note: FRCEM was known as Membership of the Royal College of Emergency Medicine (MRCEM) before the tax year 2016 to 2017
The Faculty of Public Health (MFPH) MFPH Part A
MFPH Part B
Forensic Histopathology FRC Path exam
Royal College of General Practitioners MRCGP Applied Knowledge Test
MRCGP Clinical Skills Assessment
Royal College of Obstetrics and Gynaecology MRCOG Part 1
MRCOG Part 2 (Part 2 examination has 2 parts)
MRCOG Part 3
Haematology FRC Path exam
Histopathology FRC Path exam
Faculty of Intensive Care Medicine FFICM MCQ
FFICM final SOE
FFICM final OSCE
Medical Microbiology FRC Path exam
Medical Virology FRC Path exam
Royal College of Ophthalmologists FRCOphth Part 1
Refraction Certificate Exam
FRCOphth Part 2 Written Exam
FRCOphth Part 2 Oral Exam
Paediatric and Perinatel Pathology FRC Path exam
Royal College of Paediatrics and Child Health Foundation of Practice (previously known as MRCPCH Written Exam Part 1A)
Theory and Science (previously known as MRCPCH Written Exam Part 1B)
Applied Knowledge in Practice (previously known as MRCPCH Written Exam Part 2)
MRCPCH Clinical Examination
Royal College of Physicians MRCP Part 1
MRCP Part 2 Written Exam
MRCP Part 2 Clinical Exam (also known as PACES)
Speciality Certificate Examinations (SCE): Dermatology
Speciality Certificate Examinations (SCE): Endocrinology and Diabetes
Speciality Certificate Examinations (SCE): Gastroenterology
Speciality Certificate Examinations (SCE): Geriatric Medicine
Speciality Certificate Examinations (SCE): Infectious Diseases
Speciality Certificate Examinations (SCE): Medical Oncology
Speciality Certificate Examinations (SCE): Nephrology
Speciality Certificate Examinations (SCE): Neurology
Speciality Certificate Examinations (SCE): Palliative Medicine
Speciality Certificate Examinations (SCE): Respiratory Medicine (Advanced Life Support Course is also mandatory)
Speciality Certificate Examinations (SCE): Rhuematology
Royal College of Psychiatrists MRCPsych Paper 1 (also referred to as Paper A)
MRCPsych Paper 2 (also referred to as Paper B)
MRCPsych Paper 3
MRCPsych CASC (Clinical Assessment of Skills and Competencies)
Royal College of Radiologists First FRCR Exam
Final FRCR Exam Part A (Six papers in total referred to as modules 1 to 6)
Final FRCR Exam Part B
Royal College of Surgeons MRCS Part A
MRCS Part B
Speciality Fellowship Exam (on the basis that successful completion of the Speciality Fellowship Exam is a contractual requirement within a speciality training contract)

This list is not exhaustive and may not cover all of the courses that might qualify for tax relief. If a course is not on the list, it may still be eligible for tax relief depending on if the amounts incurred meet the strict conditions stipulated in S336 ITEPA 2003. The contract of employment must be a training contract, and it must meet the requirements outlined in EIM32535.

steve@bicknells.net

What impact does earning over £100k have on my tax code and pension allowance? Reply

Many people don’t realise the impact of earning over £100,000.

Here are a couple things you need to know

Personal Allowance – Tax Code

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,000 or above.

You’ll also need to do a Self Assessment tax return.

Pension Allowance Reduction

To work out if you have a reduced (tapered) annual allowance for a tax year, you’ll need to work out your:
# net income in that tax year
# pension savings in that tax year
# threshold income in that tax year
# adjusted income in that tax year

If your adjusted income is over £150,000 your annual allowance in the same tax year will be reduced.

It will not be reduced if your threshold income for that year is £110,000 or less, no matter what your adjusted income is.

For every £2 your adjusted income goes over £150,000, your annual allowance for that year reduces by £1. The minimum reduced annual allowance you can have is £10,000.

Whichever type of pension scheme you’re in (for example, a career average scheme), you’ll need to know your pension savings so you can work out both your:

# threshold income
# adjusted income

If the pension savings made in the tax year are more than your available annual allowance, you should include the excess amount on your Self Assessment return. Your available annual allowance is your reduced annual allowance plus any unused allowance from the previous 3 tax years.

This amount is added to your taxable income and you will pay Income Tax on it, at the tax rate that applies to you.

The adjusted income includes your pension contributions and for final salary or career schemes pension contributions are the increase in scheme value

steve@bicknells.net

Where can I find a list of HMRC allowable Property Expenses? Reply

Beginning and end of a rental business: commencement

Summary
Usually a rental business begins when letting first commences.
Allowable revenue expenditure incurred before the rental business begins can be relieved under the ITTOIA05/S57 or CTA09/S61 provisions for pre-trading expenditure.

Deductions: main types of expense

PIM2070
Advertising expenses
PIM2072
Bad and doubtful debts
PIM2074
Cash back on loans
PIM2076
Cost of providing services
PIM2078
Costs due to common ownership
PIM2080
Criminal payments, bribes and similar items
PIM2082
Entertaining expenses and gifts
PIM2100
Expenses for own home
PIM2105
Fees for loan finance and similar items
PIM2106
Fines
PIM2110
Insurance premiums and recoveries
PIM2120
Legal and professional costs
PIM2130
Properties not let at a commercial rent
PIM2140
Rates and council tax
PIM2200
Rent collection
PIM2205
Rent paid out
PIM2210
Salaries and wages of employees
PIM2215
Sea walls
PIM2220
Travelling expenses

Are my costs Capital or Revenue expenditure?

Beginning and end of a rental business: cessation

steve@bicknells.net