Instead for many years, owners of partly furnished residential lettings used the non statutory renewals basis which was a concessionary treatment allowed by HMRC. On the original acquisition of an asset, such as a fridge, no tax deduction could be made against the letting income. However, when the fridge was replaced a full deduction could then be made.
Owners of fully furnished residential lettings were allowed to either use a 10% ‘wear and tear’ allowance which is based on rents received less some standard expenses or the non statutory renewals basis.
Pensioners will, from later this year, be able to purchase up to a maximum of £25 per week extra State Pension. This has been introduced by the Government so that those pensioners who have done less favourably under the existing State Pension rules get an opportunity to top up their State Pension, before the new flat rate State Pension system is introduced.
Existing pensioners and those who reach State Pension age before 6 April 2016 can gain this additional State Pension by paying Class 3A Voluntary National Insurance contributions. In essence it will provide an opportunity for pensioners to improve their retirement income by obtaining inflation-proofed extra State Pension.
In order to qualify there are two entitlement conditions:
- You must have reached State Pension age before 6 April 2016, and
- You must have an entitlement to a UK State Pension (either basic State Pension or additional State Pension).
In Budget 2014 the Government announced that it would consult on options to improve the operation of the CIS and on the introduction of mandatory online CIS filing for contractors. The consultation has now taken place and the legislative process will commence in April 2015.
Turnover test for gross payment status
Currently the turnover test for gross payment status requires businesses to have a construction turnover, excluding VAT and the cost of materials, of at least £30,000 each year for a sole trader, or £30,000 for each partner or director, with a minimum turnover level of £200,000 for the whole partnership or company. This limit has been in place since 1999 and it is estimated that 90% of sole trader subcontractors have turnover below the £30,000 limit.
There is no intention to change the £30,000 turnover test for sole traders but the proposals to take effect from April 2016 are to lower the threshold for the entity turnover test to help more established businesses with multiple partners or directors qualify for gross payment status. The current threshold of £200,000 is to reduce to £100,000.
Should a client face an enquiry from HMRC into their tax return and accounts, a common area that is reviewed is any deduction that may have been claimed in the accounts for repairs and renewals. This arises because whilst a repair to an asset is an allowable item of expenditure for tax purposes, if the asset is altered, improved or replaced the expenditure is capital expenditure and is not allowable. Capital allowances may or may not be allowable on this capital expenditure.
Recently, HMRC have published revised guidance in their internal manuals about what they accept is a repair for tax purposes.
One point that the guidance focuses on is the concept of the entirety. Over many years there have been a number of court decisions on this area following disagreements between taxpayers and HMRC. In general terms if the entire asset has been replaced this will be treated as capital expenditure, whereas if less than the entire asset has been replaced this will be treated as revenue expenditure and is therefore tax deductible.
Owner managers have increasingly chosen to operate their businesses through the company medium in recent years as some regulation has reduced for the smaller company and because it is more conducive to minimising personal tax and National Insurance liabilities. Various reliefs exist for those who start as an unincorporated business who wish to transfer into a company arrangement so that tax costs can be minimised. However, it is considered that some of these reliefs are too generous with some obtaining a potentially unfair tax advantage so two key changes took place with effect from 3 December 2014.
2014/15 introduced the Employer Allowance, an up to £2,000 saving on Employer Class 1 National Insurance contributions (ERNIC) for many businesses and for charities. As the tax year draws to a close it is worth checking whether your business was entitled to claim and ensuring the claim has been made.
This allowance continues into 2015/16 with an extension of the relief from 6 April 2015 to individuals who employ care and support workers. This amendment has been made because the allowance was not available in 2014/15 for those individuals employing staff for purposes connected to their personal, family or household affairs. It still remains the position that the relief is not available for staff employed in other domestic capacities such as ‘nannies’.
No ERNIC on staff under 21
Until this announcement SDLT was charged at a single percentage of the price paid for the property, depending on the rate band within which the purchase price falls. This created a distortion as the tax due jumped at set thresholds and deterred potential purchasers. For example a house with a value of £255,000 attracted a charge of £7,650 as it was subject to the 3% rate yet if sold for £250,000 (or less) only a 1% charge applied reducing the cost to £2,500.
For contracts which complete on or after 4 December 2014 SDLT will be payable at each rate on the portion of the purchase price which falls within each band, rather than at a single rate on the whole transaction value as follows:
The provision of a company car to an employee is one of the many benefits that can be provided to employees. The provision of the car has its own special rules to tax the benefit of having the car available for private use on the employee.
In broad terms the regime for taxing these cars is intended:
- to encourage manufacturers to produce cars which are environmentally friendly and
- to give employee drivers and their employers a tax incentive to choose more environmentally friendly vehicles.
Company cars are taxed according to the list price of the car but graduated according to the level of its carbon dioxide (CO2) emissions. The percentage charge for most cars has generally been between 10% and 35%. However, changes have been announced to the emissions tables which now extend to the 2019/20 tax year.
The emissions tables for the current 2014/15 tax year and the 2015/16 tax year are set out below.