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
Bad and doubtful debts
Cash back on loans
Cost of providing services
Costs due to common ownership
Criminal payments, bribes and similar items
Entertaining expenses and gifts
Expenses for own home
Fees for loan finance and similar items
Insurance premiums and recoveries
Legal and professional costs
Properties not let at a commercial rent
Rates and council tax
Rent paid out
Salaries and wages of employees
Yesterday I presented a 2 hour Masterclass in Making Tax Digital at Scottish Public Sector Taxation Conference, we covered
160 delegates from the Scottish Government, Scottish Council, Scottish NHS and HMRC attended.
What has changed
You can now get relief on purchases made on or after 1 April 2019 if the:
Find a full definition of goodwill and relevant assets on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44060.
Relief you can get
Relief is a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased.
Relief is given yearly until the limit is reached. More information about how to work out the relief can be found on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44093.
How to claim
You must complete a Company Tax Return and include the relief. This will reduce both:
HMRC are getting tough on those who seek ways to avoid tax and the schemes are often treated as Tax Fraud.
The Finance (No. 2) Act 2017 contains some of the most significant changes to tax legislation in recent memory (the 2019 Loan Charge).
The legislation which is retrospective targets Employee Benefit Trusts, Employer Financed Retirement Benefit Schemes, Contractor Loans and many others where an employee was rewarded with a loan from the employer or a trust, but in realty the employee was never going to repay the loan and just wanted tax free money.
The 5th April 2019 Loan charge will require Income Tax and National Insurance to be paid on the balance outstanding, as most of the loans will be high value that probably means 40%/45% income tax and Employee NI at 2% and Employers NI at 13.8%, so that could be 45% + 2% +13.8% = 60.8% tax on the loan, plus possible interest and penalties
How re-describing loans is claimed to work
Scheme users are being told they can sign documents saying that the sums they’ve received from their disguised remuneration scheme under loan agreements are not loans at all. Instead, these sums of money are merely held by them in a ‘fiduciary capacity’ – for example, an individual acts in a fiduciary capacity if they hold money, or assets, for the benefit of someone else, not themselves.
It’s wrong to claim that the loan charge won’t apply because the sums received aren’t loans.
Why you shouldn’t use this scheme
Renaming something now doesn’t change what happened in the past. Attempting to describe a loan as something else doesn’t mean it’s not a loan.
The loan charge will apply to more than just loans, including any form of credit or other right to a payment regardless of what it’s called. If you adopt this approach and choose not to reflect the loan charge on your tax return you may face a significant penalty in addition to the tax charge.
Deliberately misleading, or concealing information from HM Revenue and Customs (HMRC) may result in criminal prosecution.
Doing nothing is not an option, its likely you lead to bigger penalties and possible legal action.
The Advice from HMRC
Any arrangements to avoid the loan charge, which seek to deceive HMRC as to what is really happening, may be fraudulent.
A number of previous cases promoted as being compliant and legal have resulted in criminal convictions for the key people involved and extensive investigation of several hundred users. HMRC will investigate all of these arrangements and is likely to take similar action if it finds any that are seeking to deceive. At the very least, anyone who takes part in an offensive arrangement is likely to face penalty sums, chargeable along with any tax and interest that will be due.
Tax avoidance doesn’t pay. Most arrangements simply don’t work and people can end up paying more than they were trying to avoid. Users may have a long-term requirement to deal with the cost, commercial and tax fallout from these transactions with no support from the promoter of the original arrangement. If users are worried about their financial position, it is better to contact HMRC rather than risk more investigation and what is likely to be a larger bill.
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, firstname.lastname@example.org
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, email@example.com, 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.
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
If you stop trading or using subcontractors
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
Historically many companies have written up board minutes and in some cases declared dividends retrospectively at the end of year, but times are changing!
In the age of cloud accounting and making tax digital HMRC will know exactly when entries are posted and when documents are signed.
Unreliable records were a major factor in Dr Maqbool Baloch v HMRC, Dr Baloch a locum doctor was forced to pay £0.5 million in tax and penalties!
Dr Baloch tried to argue that he was employed via his Limited Company – KSM Medics Ltd – but the paperwork didn’t tie up – there were board minutes for meetings which HMRC could prove didn’t take place. As a result he was treated as Self Employed because he ticked a box that said he was self employed for his agency work even though Dr Baloch argued this was not a contract.
From April 2019 Making Tax Digital will apply to VAT, this will give HMRC access to real time information direct from your accounting records and time stamped.
In order to avoid problems preparing or extracting monthly accounts will mean dividends can be declared in the correct time periods.
Recent tax changes such as Clause 24 Interest Restrictions, 3% extra SDLT and 8% extra Capital Gains Tax have hit landlords hard and these NLA videos explain the full impact
The NLA predict that the changes will mean that 20% of Landlords will sell their portfolios.
Since September lenders to Portfolio Landlords have been required to look at the whole portfolio before lending and this has lead to 70% of landlords with four or more properties saying that they have found it hard to obtain finance.
Overall Residential transactions have seen a slight decline in activity
Since 2015 more and more landlords have been using Limited Companies to purchase property investments even though mortgage interest rates are a around 1% higher there are many advantages:
What if you don’t have all the information you need for the return?
Returns which include provisional or estimated figures should be accepted provided they can be regarded as satisfying the filing requirement.
A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure
An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost. The taxpayer is not required to tick box 20 of the Finishing your Tax Return section of the return page TR 6 (or equivalent in a return for an earlier year) where estimated figures have been used
Is there a reasonable excuse as to why you can’t file the return?
A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:
1. your partner or another close relative died shortly before the tax return or payment deadline
2. you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
3. you had a serious or life-threatening illness
4. your computer or software failed just before or while you were preparing your online return
5. service issues with HM Revenue and Customs (HMRC) online services
6. a fire, flood or theft prevented you from completing your tax return
7. postal delays that you couldn’t have predicted
8. delays related to a disability you have
What if you make a mistake?
If you make a mistake on your tax return, you’ve normally got 12 months from 31 January after the end of the tax year to correct or amend it.
The Self Assessment Return contain additional information boxes, these are known as white space, use these spaces to explain your calculations if you have any doubt about the answers you have given
Penalties for Late Filing
On top of these penalties there are also penalties for non payment