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Residential Landlords

As a private, residential landlord myself I found both of the following of interest but note before you read, the first piece of advice is totally kosha whilst the second……………….well I’ll leave you to make up your own minds.

1. There is a 100% allowance of up to £1,500 available to private, residential landlords  per dwelling per tax year when energy efficiency improvements are made to the dwelling.

  • The claim can be made for:
  • loft insulation;
  • cavity and solid wall insulation;
  • draught proofing;
  • hot water supply insulation;
  • floor insulation.

Unsurprisingly there are a number of conditions:

  • The allowance cannot be claimed if ‘rent-a-room’ relief is claimed on that particular property.
  • The claim is exclusively for private, residential landlords and doesn’t apply to commercial or furnished holiday let accommodation.
  • It is applied per dwelling and not per building so for a house converted into two or more flats the maximum allowance is £4,500.
  • The claim is for expenditure incurred before 1 April 2015 for corporate landlords and 6 April 2015 for individual landlords.
  • The allowance is separate from the Annual Investment Allowance.
  • The allowance is available on an existing dwelling only.

2. If you go away on an extended holiday and let out your home on a on a short-term residential let while you are away, is rent a room relief available?

  • Well the property was your home prior to going away and will be your home when you return.
  • On the assumption that you stay only in temporary accommodation whilst away you don’t have another home established.
  • It is always your intention to return home.
  • The income you receive is below the £4,250 rent a room limit.

If you decide it is a goer then the only advice I would give you is to put the details in the white box on your tax return.

Happy letting!

Train Fare Rises

I am in the fortunate position of living where I work and don’t have to face the daily grind of travel with it’s associated costs. I am therefore very happy to pass on, from an article in the Mail on Sunday, some tips for those of you who travel daily by rail.

The recently announced train fare rises come into effect from January 2015 so, depending on the anticipated increase, it could be worth renewing your pass early. You just need to do the maths to see if sacrificing a couple of weeks to get the 2014 prices is worthwhile.

Use a cash back card to purchase your pass, a google check will show you which cards operate  on National Rail and Transport for London.

Don’t forget that season pass holders can claim refunds for delayed trains, this refund is higher if there has been a period of sustained poor performance.

Are you using the most economical start point for your journey or, by travelling a little further by car, bus, bike or on foot, could you reduce your rail fare costs?

If commuting is not an issue for you but you use rail transport regularly then don’t forget that buying early, buying a railcard or booking online can also ensure cheaper travel.

It can actually been simpler than that as I discovered at the weekend. I rolled up at my local station to travel 30 miles or so south and as I was getting a lift back requested a single to my destination. The very helpful gentleman in the ticket office suggested that I may like to buy a return ticket instead, a suggestion which I was about to politely decline when he added, ” a single is £10.40 but the return is £6.00″.

Happy travelling!

That’s not fur, VAT zero-rated?

Having worked exclusively as a VAT consultant for a number of years I was aware that I did not (and still don’t) know everything there is to know about this often confusing subject. Until last week, however, I was fairly certain that I understood the rules for childrens’ clothing. It is zero-rated rated isn’t it? Ah well actually not all of it. Thanks to an item on radio 4 last week I have now discovered that it will depend on what materials are used.

Apparently any articles made wholly or partly of fur skin are standard rated. Okay got it, ‘simples’………oh no hang on a minute HMRC guidance goes on to say that actually the following items are still zero-rated:

  • Articles made using artificial fur;
  • Clothing made of rabbit skin, or sheep or lamb skin;
  • Articles made from the skin, if neither tanned nor dressed, of bovine cattle (including buffalo), equine animals, goats or kids (other than Yemen, Mongolian and Tibetan goats or kids), swine (including peccary ), chamois, gazelles, deer or dogs;
  • Fur and fur-lined headgear, belts, gloves and footwear;
  • Articles only trimmed with fur – unless the area of the trim is more than one fifth of the surface area or, if the garment is new, the cost to the manufacturer of the trimming is more than the cost of the material of the garment, and
  • Fur lined boots.

I am beginning to feel sorry for the retailer who has to make the decision based on that, and if that’s not enough having decided that they are dealing an item that is clothing or footwear and not made of fur – oh yes the HMRC guidance actually says this – they must then decide if it is actually ‘designed’ for children.

The decision as to whether a piece of clothing or footwear has been designed for children depends on the size of the article in question. To assist (and I use that word cautiously) HMRC have a chart which must be followed in coming to a conclusion. If you have ever looked at this chart you will understand why I am in doubt as to whether the chart is helpful!.

So good luck if this is your trade sector – rather you than me.

Can’t file VAT returns online?

VAT registered traders who can prove to HMRC that they cannot file their VAT returns online, telephone filing can now be approved as an alternative. It may also be possible still to file paper VAT returns if HMRC can be satisfied that it is not ‘reasonably practicable’ for them to be filed online.

In true HMRC form a brief was published which outlined the changes and which came into effect from 1 July 2014, but this was only announced three weeks later.

For those of you still unaware of the changes  they are as follows:

  • Enabling HMRC to approve telephone filing as an alternative method of electronic filing for use by businesses that satisfy HMRC that it is not reasonably practicable for them to use the current method of online filing
  • Providing an additional exemption from electronic filing for businesses that satisfy HMRC that it is not reasonably practicable for them to use an online channel with the result that such businesses will be able to file on paper

HMRC have stated that the changes were in response to LG Bishop Electrical Co v HMRC [2013] UKFTT 522 (TC), which ruled UK VAT law failed to take into account a person’s ability to comply on account of age, disability, computer illiteracy and remoteness of location. This omission was found to be a beach of the European Convention on Human Rights.

Now I am generally speaking not a fan of the aforementioned convention however, in this case, the decision would seem to be quite reasonable. I am in the very fortunate position of having two of my three sons working in the computer industry and they will confirm that I am constantly in need of their assistance when things ‘go t..s up’. Not such a convenient form of assistance is available to all!

Don’t, however, assume that HMRC will roll over and allow everybody who applies to them to access these alternatives to efiling, I am sure there will be battles to be fought.

HMRC inspectors up, finding errors down

At a time when many small businesses are, quite rightly, employing their resources fully in keeping the business afloat we now hear that our friends at HMRC, whilst increasing their number of inspections, are failing to find errors in 73% of their visits.

Introduced in April 2011, the ‘business record check’ (BRC) programme entails a visit by HMRC to a company during which the accounts and employment records are closely inspected. The programme faltered in its early stages and was temporarily withdrawn due to complaints from both companies and accountants. It was reintroduced in November 2012.

Perversely although HMRC did not have sufficient manpower to reach its inspection target figures the rate of inspections is growing. Figures compiled by PFP have shown that in excess of 5,500 companies were visited in the year to April 2104, an increase of over 2,000 when compared to the period from April 2011 to February 2012.

So the time and resources of 5,500 small businesses were engaged with HMRC in BRC checks in one year and you would have thought that many would have found themselves having to pay the £3,000 fine, on top of any underpaid tax – a very satisfying take for HMRC. But no almost three quarters of the businesses visited were found ‘not guilty’ of significant errors or anomalies.

An HMRC spokesman has said that the programme has been scaled down and was being better targeted at businesses ‘at risk of having inadequate records’. This apparently enables HMRC to better help those with record keeping problems and to reduce the burden on ‘the good guys’.

I am not sure how HMRC goes about distinguishing the wheat from the chaff but one thing is certain, they will continue to target specific business sectors where they can be fairly certain of yielding a ‘tax take’.

Anyone receiving notification of a BRC should immediately contact their accountant for guidance and assistance.

Pension Drawdowners

As most ‘approaching pension drawdowners’ will be aware from next year millions of people reaching retirement age will have more flexibility in the way in which they take their pensions.

Announced in the Budget, the requirement on many people with defined contribution pensions to buy an annuity will be removed. An annuity is a financial product that guarantees income till death.

According to the government the measure will give those reaching retirement more flexibility to do what they want with their pension pots. Unsurprisingly Labour is wary about this change and say that this policy has the potential to be “reckless”.

The following are some of the areas of concern recently expressed:

• With all of this money available to them the temptation may be there to blow the lot using the rationale ” well you can’t take it with you.” The state will then have to bear the burden of support.

• Unless they have a taxation adviser the potential for having to bear tax at 40% on some, if not all of the income, could come as a mighty shock. Anyone considering taking large sums should consult a chartered tax specialist before doing so.

• As a pension pot can be taken as cash it becomes part of the pensioners’ estate. However, unless it is invested in a way that avoids inheritance tax, it could push the assets left in a will over the £325,000 threshold that means inheritance tax will be levied. Again consultation with a chartered tax specialist is vital.

• If further investments are looked for some think it could be in property which in turn could push up the average house price. However, the counter argument to this is that the majority of pensioners will not have sufficient in the pot to enable them to buy property.

• For those who decide to continue to purchase an annuity there are, as always, opposing schools of thought those who believe that annuity companies will improve their rates and those who believe annuities may become more expensive as less people buy them.

• Unfortunately mis-selling may raise its ugly head abut to counter this the government has today announced that free, impartial advice will be available.

As with everything in life, “you pays your money and you takes your choice”.

Those of us who have already bought an annuity may feel a tad annoyed that this new option wasn’t available to us. But you know I think that I would still have opted for the annuity content in the knowledge that I have not been tempted to ‘blow the lot’ on a holiday pad in Lanzarote or a Harley Davidson!

Chicken avoiding UK tax

It would appear that Nando’s are the latest bad boys in respect of tax avoidance which sees the South African chain’s capital flow through Malta, the Isle of Man, Guernsey, the Nederlands, Ireland, Luxembourg, Panama and the British Virgin Islands.

The profits ultimately end up in a trust in Jersey and no prizes for guessing whose trust it is……..none other than the owner, Dick Enthoven. It is rumoured that the trust, which of course is not liable for UK tax, contains a minimum of £750m.

There is absolutely nothing illegal in the set up which significantly reduces the amount of tax paid, not only in the UK but also around the world. In the UK Nando’s owners can legally reduce their corporation tax bill by making various allowable payments offshore before paying UK corporation tax on the remaining profits.

In their own defence Nando’s have said that  last year they paid over £12m in corporation tax, 23% of the operating profit made. The year before £10.4m was paid. They will undoubtedly be looking forward to 2015 when the rate of corporation tax reduces to 20% across the board.

Apparently serving chicken in so many different places makes the parent group’s structure complex, and Nando’s say that they have always been open and honest about the tax paid in the UK adding, that they are disappointed in how their success has been interpreted in the media.

Although galling the problem lies not with Nando’s, et al, but with HMRC’s inability to close a multitude of loopholes which enable companies to avoid paying UK corporation tax.

Further reading

“Serving chicken in so many different places does make our parent group’s financial structure complex, but we have always been open and honest about the tax we pay in the UK.

“We provided The Guardian with all of this information and further details on how our company is structured both in the UK and internationally. We are really disappointed with how they have chosen to interpret our success.”

Snowball’s VAT Classification

In another one of those mystifying, but ultimately satisfying, decisions a First Tier Tribunal has ruled in favour of two Lanarkshire based confectionery firms in respect of the VAT classification of Snowballs.

Claims for a £2.8m VAT rebate had previously been rejected by HM Revenue & Customs who had insisted that Snowballs did not enjoy the same VAT exemption as tea cakes, classifying them as ‘standard rated confectionery’.

Now this is a tribunal at which I wouldn’t have objected to being a judge as they were presented with a plate of Jaffa Cakes, Bakewell tarts, tea cakes, meringues and Snowballs to assist them in arriving at their decision.

Apparently, according to one of the judges, all were tasted ‘in moderation’ and it was decided that a Snowball looks like a cake, it not out of place on a plate full of cakes and has the ‘mouth feel’ of a cake. The lady judge added ‘Most people would prefer to be sitting when eating a Snowball and possibly, or preferably……with a plate, a napkin or a piece of paper or even just a bare table so that pieces of coconut which fly off do not create a great deal of mess’. (Just tell that to your children –  )

So a windfall (surely snowfall) tax rebate is on its way.

Flexible working hours

So from today up to 20 million employees will gain the right to request more flexible working hours as the right, previously only available to carers, or people who look after children, is now extended to all employees who have worked for their employers for more than 26 weeks.

Those who know these things have suggested that this new right will be of particular interest to those approaching retirement and, at the other end of the scale, to young people joining the labour market who may want to also continue with some ongoing education.

Nick Clegg reckons that flexible working boosts productivity and staff morale and helps businesses to keep top talent, enabling them to grow. He says ‘It’s about time we brought working practices bang up to date with the needs, and choices, of modern families’. (Not to mention gaining a few votes for the general election next year).

Now before everyone jumps up and down in excitement there are a couple of things about which you need to be aware:

  • An employee can only make one application per year; and
  • Employers do not have to grant the request if they can prove that it would cause disruption to their business.

As always most silver linings come equipped with their very own cloud!

General Election “Mansion Tax”

With the general election less than a year away, it is interesting to note that Ed Balls last night announced changes to Labour’s “mansion tax” plans to bring it more in line with Liberal Democrat proposals.

Let’s compare the similarities:

  • Labour want the charge to be levied on properties worth more than £2m – so do the Liberal Democrats
  • Labour want the charge to be increased in line with house price inflation rising in bands of £2m to £5m, £5m to £10m, £10m to £20m and £20m plus – the Liberal Democrats want to introduce higher tax bands on properties that are more valuable than £2m.

Ed Balls says that the scheme is designed to raise money for a new 10p starting rate of income. Now where have I heard of that before? Oh yes it was introduced by Gordon Brown in 1999 and abolished by him in 2007.

Now forgive me if I’m being a tad sceptical but it would appear to me that this ‘change’ has little to do with funding a lower starting rate of tax and everything to do with cosying up to the Liberal Democrats ahead of another hung parliament.