Are you a connected party? Reply

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.

steve@bicknells.net

Mortgage References – Let’s stick to the Facts Reply

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!

steve@bicknells.net

 

 

 

Do you need extra time to file your accounts? Reply

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.

https://www.gov.uk/change-your-companys-year-end

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.

steve@bicknells.net

Simple Probate Reply

We have a new company Simple Probate Limited which has now been authorised by the Institute of Chartered Accountants in England & Wales to carry out the reserved legal activity on non-contentious probate in England and Wales.

Details of our probate registration are available to be viewed at icaew.com/probate under our registration number C006147902.

Probate is the legal process to obtain the right to deal with someone’s property, money and possessions (their ‘Estate’) when they die.

Please see our website for more details http://www.simple-probate.co.uk/

Can you offset trading losses against interest received? Reply

Many property investors lend to other property companies via their company, often in a Joint Venture approach because 100% LTV isn’t available.

Their property business could have losses from their trading activity but the losses can’t be offset against interest received unless its an integral part of the business.

General test – whether an integral part of the business

The general test is that interest normally rank as trade receipts only where it is an integral part of the business operations to employ capital to produce such income, for example, in the case of banks and other financial concerns.

HMRC practice regarding interest

In the particular case of interest on investments, the HMRC view is that interest on an investment may be treated as trading income if:
# the investment is for a short term and
# it is an integral feature of the trading activity to make such an investment and
# the funds deposited can be regarded as continuing to be employed in the business and to form part of the current working capital.

Investments made in the course of banking, insurance and other financial trades will normally meet these conditions.

Investments by non-financial concerns are unlikely to meet these conditions, if for example they:

# endure from one period of account to another, or
# represent capital even if it is only temporarily surplus to requirements, or
# although short term, represent part of a series of deposits which together constitute a long term setting aside of part of the capital.

The rules are in

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim62201

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40800

https://www.gov.uk/hmrc-internal-manuals/corporate-finance-manual/cfm32020

https://www.legislation.gov.uk/ukpga/2009/4/section/298

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim40805

 

steve@bicknells.net

 

 

Budget Update 2018 Reply

 

How will yesterday’s budget affect you?

Download our report to find out Click Here

Budget Highlights 2018

Income Tax
• The personal allowance threshold, the rate at which people start paying income tax at 20%, to rise from £11,850 to £12,500 in April – a year earlier than planned
• The higher rate income tax threshold, the point at which people start paying tax at 40%, to rise from £46,350 to £50,000 in April
• After that, the two rates will rise in line with inflation
• National Living Wage increasing by 4.9%, from £7.83 to £8.21 an hour, from April 2019.

Off Payroll IR35
• The employer will be responsible for deduction of tax and NI for personal service companies
• Small organisations will be exempt
• The crackdown is the biggest revenue-raising measure in this year’s Budget

Support for the High Street
• Small retail businesses will see their business rates bills cut by a third for two years from April 2019, saving them £900 million.
• Local high streets will benefit from £675 million to improve transport links, re-develop empty shops as homes and offices and restore and re-use old and historic properties.
• Public lavatories will receive 100% business rates relief.
• This adds to previous reductions in business rates since Budget 2016 which will save firms over £12 billion over the next five years.

Annual Investment Allowance
• The government will increase the Annual Investment Allowance five-fold from £200,000 to £1 million to help businesses to invest and grow.
• Also, from October 2018, businesses will be able to deduct 2% of the cost of any new non-residential structures and buildings off their profits before they pay tax.

Property Tax Webinars for Accountants Reply

Following the success of my Making Tax Digital Seminars and I am making 3 filmed webinars for MBL on Property Tax

Furnished Holiday Lets & Serviced Accommodation – Tax Matters

http://www.mblseminars.com/Outline/Furnished-Holiday-Lets-_-Serviced-Accommodation—Tax-Matters—Webinar/9685

Using a Company Vehicle for Property Investment – A Guide for Accountants

http://www.mblseminars.com/Outline/Using-a-Company-Vehicle-for-Property-Investment—A-Guide-for-Accountants—Webinar/9690

Option to Tax on Commercial Property Conversions – A Guide for Accountants & Tax Advisors

www.mblseminars.com/Outline/Option-to-Tax-on-Commercial-Property-Conversions—A-Guide-for-Accountants-_-Tax-Advisors—Webinar/9684

These are a useful guide to current tax and accounting rules and include tips on how to avoid problems.

steve@bicknells.net

Tax Efficient Life Insurance for Company Directors Reply

I have recently taken out Relevant Life Insurance and this explain why.

When you are formally employed and working for a large company, you can benefit from group life schemes and death in service.

When you work for yourself however, as a contractor and company Director, you will likely be paying for life insurance out of your own pocket and taxed income.

This no longer needs to be the case.

Relevant Life Insurance was designed to afford small businesses the opportunity to benefit from the same tax breaks large corporations enjoy through group life schemes. Essentially,
a Relevant Life Policy allows for you to pay your personal life insurance through your company and as a business expense, rather than through taxed income.

Paying for your life insurance through your business in this way means that you can make significant savings:

Let’s use the example that you own your own business and pay £100 a month on life insurance from your own pocket.

If you’re a 40% taxpayer, there’s income tax and 2% employee national insurance contribution, plus 13.8% employers’ national insurance contribution.

In fact, after 19% corporation tax relief the net cost to your company works out at £158.93

If you pay £100 a month for a Relevant Life Plan you won’t pay any national insurance contributions or income tax on the premiums but you still get the 19% corporation tax relief which means the net cost is only £81.

That’s a saving of £77.93 a month or £935.16 over the year.

To qualify for a Relevant Life Insurance policy you or your client simply need to be a salaried Director or an employee of a limited company and resident in the UK.

steve@bicknells.net