Category: HMRC

Understanding the Tax Consequences of s455 Directors Loan: A Guide for UK Business Owners


If you’re a director or shareholder of a UK company, it’s important to understand the tax consequences of s455 Directors Loan. Failure to comply with HMRC regulations can lead to penalties and additional tax liabilities. In this blog post, we will explore the tax implications of s455 Directors Loan, the rate of tax payable, when and how the tax is paid, reclaiming the tax, benefits in kind, board resolutions, bed and breakfasting loans, anti-avoidance rules, relief time period, and including relevant notes in micro accounts.

  1. Understanding s455 Directors Loan:
    S455 Directors Loan refers to money borrowed by a company director or shareholder from their company. If the loan is not repaid within 9 months following the end of the accounting period, it can incur tax implications for both the company and the director.
  2. Rate of Tax Payable:
    The rate of tax payable on s455 Directors Loan is currently set at 33.75% of the outstanding loan amount. This tax is paid by the company, not the individual director or shareholder.CTM61505 – Close companies: loans to participators and arrangements conferring benefit on participator: general – HMRC internal manual – GOV.UK (www.gov.uk)
  3. When is Tax Payable?
    The tax on s455 Directors Loan is typically due at the same time the company’s corporation tax is due – nine months and one day after the end of the accounting period in which the loan was made.
  4. How is Tax Paid?
    Tax payable on s455 Directors Loan is paid by including it as part of the company’s corporation tax liability, which is reported and paid through the Corporation Tax Return (CT600).
  5. Reclaiming the Tax:
    The tax paid on s455 Directors Loan can be reclaimed by the company after the loan has been repaid. LC Forms (hmrc.gov.uk)
  6. Benefit in Kind on Directors Loan:
    If the loan exceeds £10,000, the company may need to report it as a “benefit in kind” for the director. This means that the individual may be subject to personal income tax on the value of the loan unless the Director/Shareholder pays interest on the loan at least at the approved HMRC rate.
  7. Board Resolution for Loans over £10,000:
    To avoid the potential income tax implications of benefit in kind, a board resolution should be implemented authorising the director’s loan. This should be done before the loan is taken or within nine months of the company’s year end. A loan agreement is also recommended.
  8. Bed and Breakfasting Loans:
    To prevent circumventing the 9-month rule, bed and breakfasting occurs when the director repays the loan just before the end of the 9-month period and immediately takes out a new loan. Anti-avoidance rules are in place to discourage this practice. The key rules are the ’30 day rule’ and ‘intentions and arrangements rule’.
  9. Anti-Avoidance Rules:
    HMRC has anti-avoidance rules in place to prevent the abuse of s455 Directors Loan transactions. It is essential to ensure that all loans between directors/shareholders and their companies are conducted fairly and genuinely.
  10. Relief Time Period – 9 Months:
    The relief time period refers to the nine months following the end of a company’s accounting period. If the loan is repaid within this period, the tax paid on s455 Directors Loan can be reclaimed.
  11. Including Notes in Micro Accounts:
    Micro entities are required to prepare and submit detailed notes as part of their financial statements. It is important to include relevant notes regarding any outstanding s455 Directors Loan, as this will provide transparency during the tax assessment process.

Conclusion:
Understanding the tax consequences of s455 Directors Loan is crucial for UK business owners. By addressing the tax liabilities promptly, ensuring compliance with regulations, and seeking professional advice, companies can navigate this complex area of taxation efficiently. Stay informed, keep accurate records, and stay on top of your financial obligations to avoid any unnecessary penalties or additional tax liabilities.

steve@bicknells.net

Spreading your tax costs with Time To Pay

HM Revenue & Customs (HMRC) expects you to pay your taxes on time. But if you’re finding it difficult to pay in full, HMRC can be approached to allow a Time to Pay arrangement.

A Time to Pay arrangement will allow you to pay your debt off in pre-agreed installments, reducing the impact of a large tax bill – and helping you manage your debt and cashflow.

How does Time to Pay work?

If you need to request a Time to Pay arrangement for self-assessment tax, Employer’s PAYE and VAT, these can often be made online using a ‘self-service’ system.

Where you owe other types of tax, or where the conditions for online applications are not met, you’ll need to contact HMRC to discuss your situation.

  • The easiest (although not always the quickest) way to discuss your Time to Pay request is by telephone to 0300 200 3835.
  • HMRC agents will want to know about all taxes you owe, not just the one(s) where you want to spread payment. They will also ask for details of your income and outgoings, and any savings or assets that may be able to be used to reduce the amount owed.
  • Presuming that you agree to a payment plan with HMRC during the call, they will usually want to set up a Direct Debit straight away.

Making use of the self-serve Time to Pay system

If you don’t have any existing payment plans or debts with HMRC, the ‘self-serve’ system may be more straightforward, provided that the applicable tax returns have already been filed. The conditions and amounts vary depending on the particular tax.

For example:

  • Self-Assessment: You must apply no more than 60 days after the payment deadline and owe no more than £30,000.
  • Employer’s PAYE: You must be within 35 days of the deadline, owe no more than £15,000 and have no outstanding penalties. The maximum period over which the amount due can be spread is six months.
  • VAT: For VAT, you need to apply within 28 days of the due date and owe no more than £20,000. You can’t apply for a Time to Pay arrangement through the self-serve scheme if you use either the cash accounting or annual accounting schemes.

The self-serve option for Time to Pay does make the process easier, but remember that HMRC isn’t obliged to offer you the option of settling your taxes owed via installments.

If you fail to pay your taxes, HMRC can take recovery action in the County Court, and apply for the taxpayer to be put into liquidation or made bankrupt where appropriate.

Talk to us about making Time to Pay work for you

One of the best ways to avoid getting into difficulties with your tax liabilities is to work more closely with your accountant. As your tax adviser, we’ll produce regular forecasts so that any financial stresses can be foreseen well in advance.

Where unexpected circumstances do arise, putting a suitable payment plan in place with HMRC is the most sensible way to manage this situation. Ignoring your tax problems won’t make them go away and burying your head in the sand can lead to serious penalties and legal action.

Get in touch to talk about Time to Pay.

Steve@bicknells.net

Maximizing Principle Private Residence Relief: Understanding Deemed Occupation and Qualified Absence

couple walking in the street carrying plants and boxes

Introduction


As a UK accountant, it’s crucial to guide clients on the various tax planning opportunities available. One such opportunity is Principle Private Residence (PPR) Relief, which provides tax benefits to individuals who sell their main residence. In this blog post, we will explore the concept of deemed occupation and qualified absences, including eligibility criteria and examples. So, let’s delve into the details!

Understanding Deemed Occupation


Under certain circumstances, an individual’s absence from their main residence can still be considered as occupation for tax purposes. This concept is known as deemed occupation. It allows individuals to claim PPR Relief even when they are not physically present in their property. Let’s explore the qualifying absences.

Absence Qualifying as Deemed Occupation


a. 3 Years for Any Reason: Individuals can claim deemed occupation for up to three years, regardless of the reason for their absence. It could be due to travel, work-related commitments, or simply personal circumstances.
b. 4 Years for Employment Elsewhere: If an individual is employed elsewhere and occupies the property sporadically during a four-year period, the absences can still qualify as deemed occupation.
c. Any Period Required to Work Abroad: Individuals who are required to work abroad can claim deemed occupation during their period away from their main residence.
d. Up to 2 Years at the Start of Ownership with Qualifying Delay: If there is a delay in occupying the property at the start of ownership due to qualifying reasons, individuals can claim deemed occupation for up to two years.

HMRC CG64555: Armed Forces


Special considerations apply to members of the armed forces. Under HMRC CG64555, individuals serving in the armed forces are entitled to claim deemed occupation even if they have not occupied the property for the qualifying period.

Letting During Qualified Absence


During a qualified absence, individuals may choose to let their property. In this case, they are still eligible for PPR Relief on the periods of deemed occupation.

CG65050 – Residence before/after period of absence

It is a condition of s223(3) TCGA92 that both before and after the period of absence there must be a time in which the dwelling-house was its owner’s only or main residence unless they were prevented from resuming residence as a consequence of their or their spouse or civil partner’s employment requiring them to live elsewhere. The periods of residence do not have to be immediately before and after the period of absence.

Examples of Absence Qualifying as Deemed Occupation

a. Sarah, an engineer, temporarily moves abroad to complete a project for four years. Her home remains vacant during this period. She can claim deemed occupation for the first three years.


b. John, a member of the armed forces, is posted overseas for three years. Although he does not occupy the property during this time, he is entitled to claim deemed occupation for the entire period.

Conclusion


Understanding the concept of deemed occupation and qualified absences is essential for maximizing Principle Private Residence Relief. By being aware of the eligibility criteria and utilizing these provisions effectively, individuals can ensure significant tax savings.

steve@bicknells.net

Massive changes under discussion for the tax of Property Investors!!

woman in white shirt showing frustration

First we had the OTS Property Income Review dated 25th October 2022, since then the Policy Paper has been issued (1st November 2022) so it looks like we will see the adoption of at least some of the recommendations in Autumn Statement on 17th November 2022.

Key findings and priority recommendations

Furnished holiday lettings

  • Short-term rentals meeting the conditions fall into the furnished holiday lettings regime. This regime provides more favourable tax treatment than the main property income rules, with more tax relief for costs, including interest, and potentially a reduced Capital Gains Tax bill on disposal.
  • The OTS recommends that the government consider whether there is continuing benefit to the UK in having a separate tax regime for furnished holiday lettings.
  • If the furnished holiday lettings regime is abolished the OTS recommends that the government consider whether certain property letting activities subject to Income Tax should be treated as trading and whether it would be appropriate to introduce a statutory ‘brightline’ test to define when a property trading business is being carried on.
  • If the regime is retained, the introduction of a private use restriction may allow for relaxation of other requirements to enter the regime, making it simpler to understand and predict whether one is in scope.
  • Should the government conclude that the furnished holiday lettings regime be retained, the OTS recommends that the government then consider:
    • removing the current distortion of allowing the regime for properties in the European Economic Area, either by permitting worldwide properties to qualify, or by limiting the regime to UK properties
    • restricting the regime to properties used for commercial letting by removing the potential for personal occupation. This would permit a simpler approach to defining the regime

Repairs, replacements, and improvements

  • A long-standing area of complexity for taxation of property is whether costs are allowable straight away as repairs and replacements, or represent capital expenditure as improvements and should be disallowed for Income Tax.
  • The OTS recommends that HMRC should enhance the guidance in respect of the boundary between repairs and improvements to include clear examples of common situations, perhaps using flow-charts to lead towards case-by-case answers.
  • The OTS recommends that the government consider introducing a broader immediate Income Tax relief for all property costs – other than where work is part of the capital cost of the building, such as the initial fit-out of properties bought in a dilapidated state or structural work such as extensions to the property.

Jointly owned property

  • HMRC data indicates that almost half (1.5 million) of all taxpayers renting out property do so jointly, mainly with a spouse or civil partner, or with others.
  • Those not married nor in civil partnership will by default declare the split of income based on beneficial ownership, but can instead choose any other split they like without any form of election.
  • Conversely, spouses and civil partners, (providing they are living together) default to equal 50:50 shares for property other than furnished holiday lets, and respondents made very clear that the process to instead use a split based on beneficial ownership (using form 17) is complex and burdensome even for advisers, and taxpayers themselves are normally unaware of the need. This creates an unnecessary complexity and burden, and potentially accidental non-compliance.
  • The OTS recommends that the government should consider removing the anachronistic 50:50 rule for spouses and civil partners and aligning treatment to that of other joint owners and to the position for spouses under Capital Gains Tax and Inheritance Tax. To prevent abuse, the default beneficial ownership position should not be capable of being displaced.
  • The government may also wish to consider removing the ability for joint owners to decide on a split other than beneficial ownership.

Making Tax Digital for Income Tax

  • From April 2024, landlords in scope of Making Tax Digital (MTD) for Income Tax will need to keep digital records and file updates quarterly using compatible software. There was a very high level of concern common to all respondents about how the rules would apply to landlords.
  • The OTS recommends that HMRC should establish a system to deal with MTD for Income Tax for jointly owned properties, for example by making a jointly owned property the MTD filing entity.
  • Landlords may rely on multiple parties to provide information and potentially to support submitting reports.
  • HMRC needs to be able to authorise MTD for Income Tax filing agents alongside tax agents. This is needed because letting agents and bookkeepers will maintain digital records and may support quarterly submissions on behalf of some landlords. Specific professional standards and responsibilities will be needed for MTD for Income Tax filing agents.
  • The gross rental limit for being required to adopt MTD for Income Tax has been set at £10,000. The evidence suggests that a landlord with such low gross rentals will have a modest net profit, if any. The OTS acknowledges that, although there would be an Exchequer impact on raising the threshold, this could be outweighed by lower customer costs, higher levels of compliance and better taxpayer and agent engagement.
  • The OTS recommends that HMRC give consideration to increasing the minimum gross income threshold for MTD for Income Tax for landlords above £10,000, at least for the medium term.
  • As is clear from the points above there are unresolved complexities within MTD for Income Tax.
  • The OTS recommends that MTD for Income Tax should not apply to landlords until these major points have been dealt with by HMRC and by a range of software providers. Time will be needed to test new systems before adoption.

These changes are huge, if implemented there will be widespread confusion about how to report property income, this is already a complex area of tax, most of these changes will probably mean property owners end up paying more tax!

steve@bicknells.net

How do you create a Group using Share Exchange/Swap? Why is it done?

photo of man holding pen

Share for Share exchange is often used when you are re-organising or creating a group and benefits from tax relief.

Basically if you don’t do a share exchange you would need to sell the shares at market value creating both Capital Gains and Stamp Duty costs.

In order to do a Share exchange you must have bona fide commercial reasons for doing it and it can’t be just to avoid tax. So for example you might want to create a group in order to separate trading and investment activities and enable an investment company to obtain mortgage finance (most lenders probably would not lend to a single company doing both trading and investment in the same company as it puts the investment at risk).

Why?

Here is a common scenario, a developer buys a commercial property to develop into residential and sell, but when the project completes the market conditions have changed they want to keep the residential properties and rent them out.

During the development they will have reclaimed VAT and the first grant of residential is Zero Rated, so they get full recovery. An investor would not get this.

So to avoid partial exemption for VAT its best to move to a new company and there are bona fide Commercial Reasons too as previously noted.

Although the reclassification to investment will create a profit and tax charge a group structure will provide Group SDLT relief. See these blogs for details.

What if you move a Property from Fixed Asset Investment to Trading Stock or Vice Versa? Appropriations and Reclassifaction – Steve J Bicknell Tel 01202 025252

Do you pay SDLT on Properties Transfers within a Group? – Steve J Bicknell Tel 01202 025252

How?

The process basically has 4 stages.

Stage 1 – Form the new companies

Assuming you are now creating a new Holding Company with a New Investment Company, these need to be formed first.

Stage 2 – HMRC Clearance

Its not mandatory but it is best practice How to apply for clearance or approval of a transaction from HMRC – GOV.UK (www.gov.uk)

To get clearance you need to write a letter to HMRC setting out all the facts, the group structure and the commercial reasons, typically the letter is 6 to 10 pages long.

You can request advance clearances by sending an email to reconstructions@hmrc.gov.uk. You do not need to send a paper copy.

Attachments should be no larger than 2MB. Do not send self-extracting zip files as HMRC software will block them.

If possible we would like to reply by email, but we need your permission to do so by including the following statement:

‘I confirm that our client understands and accepts the risks associated with email and that they are happy for you to send information concerning their business or personal details to us by email. I also confirm that HMRC can send emails to the following address (or addresses)….’

If you’re making the application on behalf of yourself or your company adapt this wording as necessary.

Stage 3 – The Contract

This is normally done by a solicitor.

The contract deals with the acquiring company and the shareholders of the target company under which the shares are to be acquired with the consideration being shares in the acquiring company.

Stage 4 – Stamp Duty Relief

As the acquiring company is paying consideration for the shares (the issue of its own shares), then the transaction is subject to Stamp Duty. However, relief can be claimed under s77 FA 1986 if the conditions are met and the anti-avoidance rule of s77A FA 1986 does not apply. HMRC guidance is at STSM042000 starting at STSM042410. After the conditions have been checked and a claim prepared, see “How to Claim Relief” on GOV.UK. The claim needs to be made within 30 days of the contract date and, as HMRC outline, various information will need to be attached to the e-mail claim including the stock transfer form.

steve@bicknells.net

Can I just move my Buy to Let into a partnership and then incorporate?

If you have a large portfolio (because that could be seen as business) then this might be possible but not if you only have a single property (or if its a small portfolio).

Forming a partnership has been seen as milestone on the route to incorporation, incorporation will mean that Section 24 interest restrictions don’t apply, which can save substantial amounts of tax.

Incorporation Tax Relief

The Ramsey case set out a basis for incorporation tax

EM Ramsay v HMRC [2013] UKUT 0226 (TCC)

Mrs Ramsey carried out the following activities

  1. Mr & Mrs Ramsey personally met potential tenants
  2. Mrs Ramsey check the quarterly electric bills
  3. Mrs Ramsey arranged insurance
  4. Mrs Ramsey arranged and attended to maintenance issues (drains)
  5. Mrs Ramsey and her son maintained the garages and cleared rubbish
  6. Mrs Ramsey dealt with post
  7. Mrs Ramsey dealt with fire regulation issues
  8. Mrs Ramsey arranged for a fence to be erected
  9. Mrs Ramsey created a flower bed
  10. Shrubs were pruned and leaves swept
  11. The parking area was cleared of weeds
  12. The flag stones were bleached
  13. Communal areas were vacuumed
  14. Security checks were carried out
  15. She took rubbish to tip
  16. She cleaned vacant flats
  17. she helped elderly tenants with utilities

This work equated to at least 20 hours per week and Mrs Ramsey had no other employment.

It is because she did the work herself that her property investment was considered a ‘Business’ and eligible for Incorporation Tax Relief.

SDLT

Partnerships have special rules on SDLT relating to incorporation.

The rules on SDLT for Partnerships are in the Finance Act 2003 Schedule 15 and amendments in the Finance Act 2006 Schedule 24.

http://www.legislation.gov.uk/ukpga/2003/14/schedule/15

http://www.legislation.gov.uk/ukpga/2006/25/schedule/24

It is complicated but essentially it comes down to the following formulae

MV x (100 – sum of lower proportions (SLP))%

What this means is that if the land being put into the partnership is effectively retained by the transferor-partner (or persons connected with the transferor) after the transaction, you basically end up with:

MV x (100-100) = £0

So a husband and wife partnership owning 50% each could transfer the property to a company for 50% of the shares each and in theory there would be no SDLT charge.

What’s the problem for small portfolios

Take a look this tax question of the week My VIP Tax Team question of the week: Finance Costs Restriction (cronertaxwise.com)

Two of my clients, a married couple, have jointly held residential investment property. The husband is a higher rate taxpayer and the wife is a basic rate taxpayer and they would like to change the allocation of the property income. They do not want to change their 50/50 capital interest so have decided to form a general partnership to take advantage of exception C within ITA 2007 S836 to the assumption they are beneficially entitled to the income in equal shares. Their property portfolio is mortgaged. As the husband has income from other sources, he has fully utilised relief for all finance costs attributed to him. The wife has cumulative unrelieved finance costs, due to her personal allowance mitigating her tax liability on the property income. Can those unrelieved finance costs be carried forward and relieved against tax liabilities on property income from the partnership?

Alexandra Fielding – Croner 4/5/22

There are two issues you raise which need to be addressed.

The first is the formation of a partnership to enable more of the property income to be allocated to the wife.

Although, as you say, a partnership means the assumed 50/50 income entitlement of s836 ITA 2007 does not apply, this is not the end of the matter. A non-commercial allocation of profits within a partnership is still within the settlement legislation of s624 ITTOIA 2005 and can apply to all partnerships and LLPs. This is a view confirmed by HMRC at TSEM4215.

The allocation of more of the profits to the wife without a corresponding increase in her share of partnership equity simply to avoid income tax would be caught by the settlement legislation. The exception in s626 ITTOIA 2005 for transfers between spouse/civil partners would not apply as this would be “wholly or substantially a right to income” without a corresponding transfer of partnership equity. If the couple’s particular rental properties require personal involvement of time and effort and such work is only carried out by the wife, or most of it is carried out by the wife, then it may be possible to commercially justify a greater share of the partnership profits to be allocated to the wife. How much would depend on the time spent and the nature of the work undertaken.

I would add that whether the particular rental properties constitute a “business” that meets the requirements of the Partnership Act 1890 depends on the facts involved. Although not an issue actively pursued by HMRC at the moment, there is a published view from HMRC at PM131800 which states:

The letting of jointly owned property does not normally constitute a partnership. Most cases will fall short of the degree of business organisation needed to constitute a business. The provision of significant additional services in return for payment may be an indicator of such business organisation.

The second issue relates to the unrelieved finance costs.

The rules to determine the entitlement to relief of non-deductible costs of a dwelling-related loan for an individual are contained within ITTOIA 2005 S274A and S274AA. Section 274A(3) tells us the relievable amount for a tax year is the total of the individual’s current-year restricted finance costs (if any) for that year in respect of that business and the unrelieved individual’s brought-forward restricted finance costs (if any) for that year in respect of that business.

The legislation restricts the tax reduction for finance costs so that a reduction can only be made against the income tax liability on the same property business to which the finance costs relate.

Although the properties and the individuals carrying on the letting activities will remain the same after the partnership is formed, for income tax purposes the partnership property business is a separate property business to that previously carried on by the individuals (ITTOIA 2005 S859(2)). This rule pre-dates the finance costs restriction and is covered by HMRC at PIM1030.

Therefore, unrelieved dwelling-related loan costs accumulated by the wife will be lost on the formation of the general partnership.

Whilst the wife’s only source of income is property income, she may continue to accumulate unrelieved finance costs. Your clients may want to consider allocating more of the underlying ownership of the property to the wife or transferring other income producing assets to utilise her personal allowance to maximise finance cost tax reductions.

Form 17 – Joint Ownership Proportions

For jointly owned property Form 17 and Declarations of Trust can be used to change the split of ownership.

When you make a declaration it must apply equally to ownership and income and a couple must be married or civil partners, you can’t be separated or divorced or joint tenants.

Form 17 is used to make the declaration

You can use this form to declare a beneficial interest if you hold property jointly and:

• you actually own the property in unequal shares, and

• you are entitled to the income arising in proportion to those shares, and

• you want to be taxed on that basis.

Form 17 must be submitted with in 60 days of completion, in addition a Declaration of Trust is likely to be required.

If there is a change, even a minor change, after submitting the Form 17 it will be invalid and revert to 50/50.

If the property is held in a single name it may be possible to use a declaration of trust to confirm joint beneficial interest.

Income Tax and Capital Gains Tax will be be based on the beneficial interest in the property, so if one spouse is a higher rate tax payer and the other a lower rate tax payer changing the proportion of ownership could have a significant tax advantage.

steve@bicknells.net

VAT Construction Reverse Charge – what does the Subcontractor Invoice need to look like?

laughing male constructor showing thumb up at working desk

For VAT reverse charge to apply the subcontractor must be able to answer these questions

  1. Is the work being done a construction activity (CIS340)
  2. Are both the Subcontractor and Contractor registered for VAT (and the VAT rate isn’t Zero) and CIS
  3. Does the contractor have an onward supply for Construction Services (in other words they aren’t the end user or an intermediary)

Assuming the answer to all 3 questions is YES then VAT reverse charge will apply and the subcontractors invoice need to look like this one.

Under the VAT Regulations 1995 invoices for domestic reverse charge supplies, when the customer is liable for the VAT, must include the reference ‘reverse charge’. The following examples fulfill the legal requirement:

•Reverse charge: VAT Act 1994 Section 55A applies

•Reverse charge: S55A VATA 94 applies

•Reverse charge: Customer to pay the VAT to HMRC  

The Subcontractors VAT return will look this.

All the major software providers have this covered for you, for example on Sage Accounting you just need to tick a box on Customers Account Settings.

steve@bicknells.net

How do you reclaim CIS deductions?

two man holding white paper

If you don’t have Gross CIS status you may have Construction Industry Scheme (CIS) deductions to reclaim and you will be probably be trying to reclaim now as we have concluded a tax year (5th April and submitted returns due on the 19th April).

Sole traders and partners

At the end of the tax year, send in your Self Assessment tax return as usual. You should record:

  • the full amounts on your invoices as income
  • any deductions contractors have made in the ‘CIS deductions’ field

HM Revenue and Customs (HMRC) will work out your tax and National Insurance bill and take off any deductions made by contractors.

Limited companies

The process for companies is different, companies may well have offset Subcontractors deductions and payroll against deductions made by their clients using CIS132 How to offset Construction Industry Scheme deductions – CIS Offsetting (CIS340 4.13) – Steve J Bicknell Tel 01202 025252

So the first step to work out the net amount to reclaim and check it to the HMRC Government Gateway.

You can choose to:

  1. Form R38 to claim the Refund – Claim an Income Tax refund – GOV.UK (www.gov.uk)
  2. Claim online via your government gateway (agents will use their Agent Services Account) – Claim a refund of Construction Industry Scheme deductions if you’re a limited company or an agent – GOV.UK (www.gov.uk)
  3. Claim by Post

Claim via the Government Gateway

When you click this option ad log in you will get an access code xxx-xxx-xxx, keep a not of this code, the next screen asks you to enter it.

The you can choose

  • New Claim
  • Amendment

I think the amendment option is very helpful in case you make a mistake (shame we don’t get this for other taxes like VAT or PAYE)

Then the questions are

  • Name
  • Agent details and address (if its being claimed by an accountant)
  • Business details
    • Name
    • UTR
    • PAYE reference
    • Tel No
    • Business Address
  • Tax Year for the claim ie 6th April 2021 to 5th April 2022
  • Estimated overpayment (note the word estimated) this the net amount from the CIS132
  • Do you want to offset against other taxes Yes/No
  • Would you like a Cheque or Bank Transfer
  • Bank details for bank transfer
  • E Mail for confirmation

Then you will get a confirmation via E Mail ‘Claim repayment of deductions from your Construction Industry Scheme payments’ it will have another reference xxx-xxxx-xxx

You’ll normally receive a response within 25 days.

Claim by Post

Write to us and make sure that you include:

  • your full company name
  • your PAYE reference numbers
  • the reasons for the overpayment
  • a completed R38 form if you want your refund to be paid to an agent or other representative

If you want us to pay the refund into a bank account, you’ll need to provide the:

  • bank account number
  • sort code
  • account holder’s name

If you want us to deduct your repayment from other amounts you owe for:

  • Corporation Tax — include your Corporation Tax unique tax reference and either the end date of your accounting period or accounting period number
  • VAT — your registration number and the VAT Return period
  • other liabilities — include type of charge, year or period it refers to and any reference numbers you have

You do not have to send any supporting information with your claim, but we may request further details if your claim does not match their records.

Mark your claim ‘CIS’ and send it to:

National Insurance Contributions and Employer Office
HM Revenue and Customs
BX9 1BX
United Kingdom

steve@bicknells.net

How are HMRC attacking the use of TOMS for serviced accommodation?

The Tour Operators Margin Scheme (TOMS) was created for holiday companies.

Accommodation that is bought in and sold without material alteration, falls within TOMS. However, where there is material alteration the accommodation becomes an in-house supply and TOMS can not be used.

Further details are in Notice 709/5

7.6 How an in-house supply of accommodation is made

If you own a hotel and supply accommodation within it, you are making an in-house supply of accommodation.

If you hire, lease or rent accommodation under an agreement whereby you take responsibility for the upkeep of the property and you are required to undertake any maintenance to the fabric of the building (that is, not just cleaning and changing towels or bed linen and so on), you are making an in-house supply of accommodation.

Also, if you buy in accommodation and provide catering staff from separate sources, for example a ski chalet with a chalet-maid, you are making an in-house supply, commonly referred to as ‘catered accommodation’.

HMRC are attacking the use of TOMS for Rent to SA

  • Rent to SA is not a tour operator and the services being supplied are not designated travel services – tour operators organise travel in their own name and entrust others with the supply
  • The supply made by the landlord is not a ‘designated travel service’ – taking a lease of residential premises, whether furnished or unfurnished for a term of years is not a relevant service for TOMS
  • The landlord is not supplying hotel accommodation or short-let accommodation
  • If the SA operator furnishes the property that is a material alteration which means TOMS can’t be used
  • If the contract requires the SA operator to replace broken glass or deal with condensation or do maintenance that would go beyond routine cleaning and minor repairs
  • If the SA operator is responsible for utilities and Council Tax these constitute a material alteration to supply

What about the Landlord?

The landlord is not supplying a Furnished Holiday Let unless they meet the Occupancy Conditions set out in HS253 this will not be the case in Rent to SA as they are not doing short lets they are simply renting out residential property on a long let. They will not be able to claim capital allowances and the they will not avoid section 24 interest restrictions.

steve@bicknells.net

Spring Statement 2022

A summary of the Spring Statement 2022 is now available – click here

We have produced this newsletter to cover the main issues that are most likely to be of interest to you. You will also find useful commentaries to help you understand how the proposed changes may affect you personally. In addition, we have included a detailed calendar of the most important dates for 2022/23 that will help you with tax planning ahead of time. If you have any questions concerning the issues covered in this summary, or would like advice on the best possible course of action in a particular area, please contact us – click here