Category Archives: Bicknell Business Adviser

Are Free Lease Extensions Taxable? Reply

Bicknell Business Adviser • Tags:

As with so many things the answer is may be!

Many Freeholds are owned by a Company in which the tenants hold the shares.

When the Company was set up to buy the freehold often the tenants will grant new long leases as part of the purchase process and have their articles of association changed to set out their entitlement to leases. The lease terms are often different lengths and values so you could have £1 voting shares and then separate non voting shares for the payments above the £1 at the time the company buys the Freehold.

In order to offer free extensions in the future the company would be set up as a Bare Trust for the tenants/nominees, this could allow the company to issue free lease extensions.

However, if this wasn’t done then a company would normally be expected to charge arms length market prices for leases or for the lease to be taxable on the tenant as a distribution or benefit.

steve@bicknells.net

 

Tax Strategies for 2018-19 Reply

Bicknell Business Adviser • Tags:

Could you be paying more tax than is necessary?

With the UK economy forecast for growth, now is a good time to carefully plan your finances. It is essential to regularly review your plans to ensure that you are on course to achieve your business and financial goals.

Click on the image above to download our report

 

steve@bicknells.net

Beware of fake HMRC Texts and E Mails Reply

Bicknell Business Adviser • Tags: , ,

Clients regularly tell me they have had Messages from HMRC, some are almost believable!

HMRC will never notify you of a tax rebate by email or text. HMRC also won’t ask you to disclose personal or payment information by email or text.

If you have the slightest doubt that a HMRC email or text is fake, my advice is:

do not open attachments, they could contain a virus
do not click on links, they could take you to a fake HMRC site
do not disclose personal/confidential information
forward suspicious HMRC text messages to 60599 (charged at your network rate)
forward suspicious emails to the HMRC phishing team at, phishing@hmrc.gsi.gov.uk
check our security guidance: Dealing with HMRC Phishing and scams.

If you think you have disclosed personal information in response to a scam HMRC email or text, act immediately. Contact the HMRC security team at, security.custcon@hmrc.gsi.gov.uk, provide brief details of what you disclosed (e.g. name, address, HMRC User ID, password). Do not give your personal details in the email.

Protect yourself by reporting your suspicions to us and promoting our cyber security messages.

You can also report incidents to Action Fraud.

steve@bicknells.net

 

Can I move income from my investment to my spouse? Reply

Bicknell Business Adviser • Tags: , ,

We have covered this topic before in Are property transfers between spouses taxed?

That blog discussed Capital Gains and SDLT.

We also explained the process in this blog How do you share property ownership income between spouses?

That blog covered Form 17 and Declaration of Beneficial Interest

Today there was a great blog from Croner Taxwise that I wanted to share it

Can I assign the income from my investment property to my spouse so it is taxed at a lower rate?

A. Due to the abundance of legislation that applies to land transactions and gifts, various tax implications are of concern.
Where only an income stream is transferred and the transferor retains an interest in the capital value of the property generating the income, the income is treated for income tax purposes of the income of the transferor under the settlement legislation at ITTOIA 2005 s.624.
To effect a transfer of the income stream and achieve the client’s objective, the transferor must also transfer a proportionate capital interest. To transfer 50% of the income stream effectively, a 50% interest in the capital value of the property also must be transferred.
Capital assets are transferred between spouses at nil gain or loss for capital gains tax purposes. The deemed consideration is so much as would secure a net gain of £0 after accounting for enhancement expenditure, costs to transfer, etc. There are exceptions to this rule where the spouses are not living together so do not assume tax neutrality will apply.
Take additional care where the property in question was previously the main residence of the transferring spouse, as private residence relief may be inadvertently lost. A transferee spouse will only acquire the ownership and occupation history of the transferor where the property is transferred whilst it is the main residence of both spouses (TCGA 1992, s.222(7)). If the property is not their main residence, a gain which would have been 100% relieved in the hands of the transferring spouse will come into charge on a future disposal by the acquiring spouse.
The final tax charge to consider is Stamp Duty Land Tax. There is no exemption from SDLT for transfers between spouses. SDLT is chargeable where the acquiring spouse provides consideration for their interest in the property, including assuming liability for debt.
Although not technically a tax issue, it is of note that a transfer of beneficial ownership of a property does not require a conveyance of legal title. Although a trust arrangement does not need to be written to be effective, a written declaration which is signed and dated can prevent disputes with HMRC over the validity and commencement of the transfer, particularly where income continues to be deposited into a joint bank account.

 

steve@bicknells.net

 

How do you de-register for CIS? Reply

Bicknell Business Adviser • Tags: , , , ,

Under the Construction Industry Scheme (CIS), contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs (HMRC).

The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors must register for the scheme. Subcontractors don’t have to register, but deductions are taken from their payments at a higher rate if they’re not registered.

HMRC make it easy to join CIS but its hard to find the instructions on how to leave or cancel CIS.

For those who have struggled to find the instructions here they are

https://www.gov.uk/what-you-must-do-as-a-cis-contractor/tell-hmrc-about-changes

If you stop trading or using subcontractors

You must:

tell HMRC

stop filing monthly CIS reports

Do this even if you’ve stopped using subcontractors temporarily, for example because you’re using your own employees to carry out work.

In general I find a letter works best as you can send it recorded delivery and prove it was sent, you write to this address

National Insurance Contributions and Employers Office
HM Revenue and Customs
BX9 1BX

steve@bicknells.net

How do you keep up with company secretarial work? Reply

Bicknell Business Adviser • Tags: ,

In business everything is run by dates.

There are so many filing and payment dates its hard to keep track of them and if you are an accountant the problem is multiplied by the number of clients.

We use inform direct for all the companies we work with, its a brilliant system that monitors everything for you and helps you produce the paperwork needed.

On their website they have published the 2018 Review of UK Company Formations

634,116 new businesses were formed in the UK in 2017.

52,411 businesses registered in Dorset at the end of 2017.

https://www.informdirect.co.uk/company-formations-2017/dorset/

steve@bicknells.net

Rising rents and clause 24 Reply

Bicknell Business Adviser • Tags: ,

On the 28th February 2018, MSN and the Daily Mail reported

Experts warn of buy-to-let crunch as landlords sell off unprofitable properties and hike rents

David Cox, ARLA Propertymark chief executive, said it pointed to ‘a rough ride’ for renters in 2018.
‘Housing stock is falling as rising taxes continue to force established landlords out of the market and deter entry into the sector,’ he said.
‘And the volume of renters is increasing as the cost of buying a home is moving further out of reach for many. The fact that one in five tenants is experiencing rent increases is just another blow.
‘Ultimately, until the prospect of investing in the buy-to-let market is more attractive for prospective landlords, and stock subsequently increases, tenants will continue to feel the burn.’

We have known for some time that Landlords have been hit hard by recent tax changes:

  • Clause 24 restricting relief for interest
  • 8% extra capital gains tax
  • 3% extra stamp duty

https://stevejbicknell.com/2018/01/29/how-much-extra-tax-do-property-investors-pay/

We also know that Companies are a better way to invest in property for most investors because

  • Clause 24 doesn’t apply
  • The extra 8% capital gains tax doesn’t apply to Share Sales
  • The stamp duty on shares is 0.5%

It hardly surprising that individual property investors will be increasing rent to cover the extra taxes.

Some landlords with high levels of borrowing will definitely start selling off properties to avoid clause 24, which will lead to some landlords becoming insolvent.

https://stevejbicknell.com/2017/09/18/how-will-clause-24-affect-you/

But for those Landlords investing via Companies, the higher rents will lead to enhanced profits.

steve@bicknells.net

 

 

If you build a new building is it covered by the previous buildings option to tax? Reply

Bicknell Business Adviser • Tags: ,

Croner Taxwise question of the week covered this

My client purchased a small industrial unit in 2010 on which he was charged VAT. He lodged an option to tax on the building and charged the tenant VAT on the rent. The last tenancy expired in 2014 but he found he could not get a new tenant easily because the unit was built in the early 1970s and businesses looking to rent space were more attracted by newer units with modern facilities. My client decided that to reap real benefit from the investment he would demolish the existing unit and build a new one on the site, which would then command a higher rental figure. He has now done this at a cost of around £100,000 and is ready to market the unit for rental. He is assuming that he will not charge VAT on rents to any new tenant as he has not lodged an option to tax on the new property. Is he able to do this?

Legislation on the option to tax underwent some changes in 2008 and since then it has no longer been possible to opt land and buildings separately. This means that the option to tax made on the unit in 2010 covers not only the original unit, but also the land on which it was built and also to any buildings later constructed on that land if the original building is demolished. Therefore in your client’s case, as he opted to tax the unit, the option is still in force and will apply to his supplies of the new unit, and allow him input tax recovery on the redevelopment.

The corollary is also true that if he had placed an option to tax on the land then that option would apply to any buildings on the land at the time of the option and to any future buildings constructed on the land. However, where the option to tax has been made on land, rather than on a building, it is possible to exclude a new building constructed on the opted land from the option to tax, provided the new building is not within the curtilage of any existing building. Notice 742A explains how this is done in paragraph 2.7.

VAT Notice 742A

2.4 What is covered by the option to tax?

2.7.1 In what circumstances can I exclude a new building from the effect of an option?
If you construct a new building on opted land (and that building is not within the curtilage of an existing building – for the meaning of ‘curtilage’, see paragraph 2.4) you may exclude the new building (and land within its curtilage) from the effect of the option to tax by notifying us of the exclusion.
If you decide to do this, the new building will be permanently excluded from the effect of your existing option to tax. But you may, if you wish, make a fresh option to tax in the future, subject to obtaining permission from us if appropriate – see Section 5.
If you choose to exclude a new building from the effect of an option to tax this may affect your entitlement to recover input tax on your costs. See Section 9 for further information about input tax.

 

steve@bicknells.net

What is the optimum pay for business owners in 2018/19? Reply

Bicknell Business Adviser • Tags: ,

Directors aren’t subject to Minimum Wage rules and if they are the only paid employee then they don’t need an auto enrolment pension.

So assuming they don’t get a salary from another job, it generally makes sense for Directors to be paid above the NI Lower Earnings Limit and below the Employee’s primary class 1 contributions level.

The LEL for 2018/19 is £116 per week and the Primary Threshold is £162 per week.

So that’s £6,032 to £8,424 per year.

Earning above the LEL means directors will qualify for certain state benefits.

If the company has other employees and they earn sufficient to incur national insurance then you could pay more to the director and take advantage of the Employment Allowance of £3,000 which offsets employers national insurance.

The personal allowance will be £11,850 for 2018/19, that’s how much you can earn tax free.

Higher rate tax starts when total earning hit £46,350.

The Dividend Allowance drops from £5,000 to £2,000 in 2018/19

steve@bicknells.net