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In the Autumn statement last year, George Osborne believed it was his priority to rebuild Britain.  He conceded that world growth forecasts had been revised, in part because of ongoing problems in the Eurozone. In the UK, the economy is expected to grow a little faster than originally predicted over the next two years, before slowing down somewhat towards the end of the decade.

Higher than expected tax revenues and lower interest payments on government debt handed the Chancellor more flexibility than many analysts expected.

Business, enterprise and employment in 2016/17

In a boost for SMEs, the Chancellor confirmed that the small business rate relief scheme would be extended for another year. Around 600,000 firms are expected to benefit as a result.

The apprenticeship levy is expected to raise £3billion a year. This will be set at 0.5 per cent of the payroll bill, although the Chancellor has claimed that only two per cent of employers will be eligible to pay.

Pushing ahead with his plans to devolve greater spending powers to local authorities, Mr Osborne said that 26 new or extended enterprise zones were being created around the country.

The Government will be doing away with uniform business rates and devolving power to set the rates to local councils. The local authorities will soon also be able to keep this revenue, rather than having to hand over money for ministers to reallocate.

The continuing economic recovery is expected to facilitate the creation of “more than a million” extra jobs during the next five years.

There is, however, likely to be concern that the Department for Business budget is to be slashed by 17 per cent.

Tax

A new, increased rate of stamp duty land tax is to be introduced for buy-to-let and second homes. This will be three per cent higher than the normal rate and takes effect from April 2016. The Chancellor said this will raise £1 billion by 2021, although there are concerns it will have a significant impact on the buy-to-let sector. There will also be a consultation on accelerating the stamp duty land tax on transactions from 30 days to 14.

From 2019, Mr Osborne announced that Capital Gains Tax (CGT) will need to be paid within 30 days of selling a residential property.

It was proposed that the rate of cooperation tax will continue at 20% from 1st April 2016.

Tax evasion, avoidance and aggressive tax planning

Mr Osborne pledged to tackle tax avoidance and announced that the Government would work to create one of the most “digitally advanced” tax systems on the planet.

By the end of this Parliament, everyone in the UK will have digital tax accounts. The reduction in administration costs form part of £1.9 billion savings for HMRC. 

Need more help?

This feature aims to give some informal hints and tips.  McPhersons are offering businesses free advice so get in touch now to arrange your meeting. Simply email Ainsley Gill info@mcphersons.co.uk  or call our Head Office on 01424 730000 for a free consultation at McPhersons’ London, Bexhill or Hastings offices.

Every month, the directors at McPhersons share some useful financial tips especially for Business in Hastings readers. This month, Ainsley Gill looks at whether your buy-to-let property could be more tax-efficient. Are you claiming back all of the allowable expenses?

Here is our guide of what is allowable and what isn’t which will help you to keep your dreaded tax bill to a minimum.

Capital Expenses

Let’s start with the expenses you can’t claim for. These fall mainly in the category of Capital Expenses. For example, the purchase price of the property, conveyancing fees and estate agent fees can’t be claimed for. You also can’t claim for improvements against rents received for permanent works such as extensions that have enhanced the value of the property at the date of sale, although these can be claimed for capital gains tax purposes.

So, what exactly can you claim for?

Fees if you are using a Letting agent

If you use an agent to let and manage the property, you will typically pay 10-15% in fees. All of this can be claimed back against  your tax. On a property with rent of £1000 per month, this is £150 per month or £1800 per annum you can claim as an expense.

Your costs to find tenants if you are not using a letting agent

Any costs associated with finding a tenant. For example, advertising, legal documents, credit checks, obtaining references, can all be claimed against tax.

Interest if you have a mortgage on the property

Every penny of interest you pay on your mortgage can be used to offset your tax bill. It is wise to keep your property mortgaged for this very reason otherwise you will miss out on this big tax break. For example, if the price of the buy-to-let property is £200,000 and you take on a repayment mortgage for this amount over 25 years, your total payments will be £1,055 repayment plus £667 interest. The £667 can be offset against your tax. For an interest only mortgage, the whole amount can be offset. Many landlords take this option with a longer term view that the housing market will rise.

Mortgage fees

Although the costs associated with buying the property weren’t allowable, any arrangement fees or mortgage broker fees are tax deductible in that year.

General upkeep, repairs and maintenance

As long as it doesn’t fall under the renovations, extensions restriction, you can claim any reasonable expense relating to the upkeep of the property or furniture within it. For example, repairing the microwave, fridge, oven, painting and decorating, cleaning carpets and the services of a gardener are all claimable. Note, you can clean the carpet and claim but if you replaced the carpet, this will come under improvements.

Assuming the property is let out furnished, you can claim a ‘wear and tear’ allowance of 10% of rent per annum. This can be claimed without HMRC requiring any proof.

Leasehold-related costs

Service charges, ground rent and similar charges paid to a freeholder are allowance expenses.

Bills paid on behalf of the tenant

As a landlord, you can opt to pay for a tenant’s council tax, water, electricity etc. – all of which can be claimed back against tax. This is also relevant when the property is empty.

Insurance

Landlords require landlord insurance which covers liability, buildings, loss of rent amongst other things. This is an allowable expense.

Other direct costs

Any phone calls, travel to your property, postage, stationery that are related to renting your property are allowable. In fact, if you use an accountant to do your tax return, their fees are also tax deductible! At McPhersons, our best advice is to keep all your receipts so we can prove all the expenses are genuine!

Need more help?

This feature aims to give some informal hints and McPhersons are offering businesses free advice so get in touch now to arrange your free meeting 01424 730000

 

UK government borrowing has fallen in May due to a rise in income tax and VAT receipts, official figures have shown. The Office for National Statistics (ONS) said that the borrowing fell to £10.13 billion last month, which is down from £12.35 billion the year before. This was also the lowest borrowing figure in that month for eight years.

Excluding public sector banks, public sector net debt stands at £1.5 trillion, which is 80.8% of gross domestic product (GDP), according to the ONS.

Income tax receipts had not been this high during May for four years but it rose £0.5 billion, which is 5.3%, from a year before to £10.8 billion. VAT receipts however rose by £0.6 billion, which is 5.6%, to £10.7 billion. An estimation by the ONS stated that the total public sector borrowing in the financial year to March 2015 was £89.2 billion, or 4.9% of GDP. This figure was £9.3 billion lower than the previous year’s total despite it being higher than the previous estimate.

According to analysts, the drop in government borrowing during May is good news for the chancellor George Osborne at the start of the new fiscal year.

Every month, the directors at McPhersons share some useful financial tips especially for Business in Hastings readers. This month, Ainsley Gill looks at the recent announcement regarding paper tax forms being replaced with digital accounts.

Changing over to digital could make it much easier for over 11 million taxpayers and 12 million companies.

The Chancellor, George Osborne announced the end of the paper annual tax form and he promises to bring in digital tax accounts for all individuals and small businesses.

These new tax accounts unveiled in the March Budget and will be accessible at any time from a computer, smartphone or iPad. They will perform just like an online bank account.

The Treasury are selling the idea as a concept that will make it much easier for the 11 million taxpayers and 12 million companies who currently fill in an annual tax form to pay the right tax at the right time without filing a return. It describes the current system as complex, costly and time consuming.

Many believe the digital process is more to do with transparency for the Government and Treasury. When people log on to their account, they will be able to see how their tax is calculated as HM Revenue & Customs automatically updates it with information from employers, the Department for Work and Pensions, pension providers and banks. People will be able to pay their taxes when it is most convenient to them by linking to a bank account and arranging payments by instalments or by Direct Debit.

Instead, firms will be able to provide details in ‘real time’, the Government will benefit from prompt payments from this up to date information.

This change should help growing companies who will no longer have to pay a ‘one off’ big end of financial year tax demand because HMRC has calculated their payments on the previous year’s information.

According to the Treasury, the switch will be completed by 2020. In early 2016, 5 million small businesses and the some 10 million individuals will have access to their own digital tax account (or their accountant may access it for them).

By 2017, the first group of people with simple tax affairs will no longer have to complete an annual return. By 2020, businesses will be able to link their accounting software to their digital tax account so they can feed in information as they choose.

People who currently do their tax return on paper can continue to do so if they wish, but over time this is thought to reduce in favour of digital returns.

Need more help?

This feature aims to give some informal hints and McPhersons are offering small businesses free advice so get in touch now to arrange your free meeting 01424 730000.

Technology companies such as Facebook, Apple and Google have been told they need to stop extreme tax planning, according to the man charged with reforming global tax rules who told the BBC.

New standards would require businesses to pay even more tax in the countries where they have sold goods or created revenues, said Pascal Saint-Amans who runs the OECD’s Centre for Tax Policy. Companies should not use tax havens to shelter their profits, he said.

Mr Saint-Amans’ involvement is because of years of complicated negotiations and endless summits on reforming the issue of where large, multi-national companies pay their taxes. There should be an international agreement on possible upcoming tax laws ready for the G20 summit of global leaders in November, he revealed.

Before 2020, the implementation phase should mean that the rules are in place. According to Mr Saint-Amans, this will also mean that technology companies such as Facebook, Apple and Google have to pay more tax to the UK Treasury. In addition to this, they will also be required to pay more tax in a number of other countries and publish, country-by-country, how much they pay.

The UK has already agreed to new rules on the taxation of multi-nationals and the government predicts that companies that operate in the UK but paying tax in other jurisdictions, such as Google, will be obliged to pay hundreds of millions of pounds more in tax in Britain.

The technology companies that have been found by tax campaigners say that they continue to follow all of the rules laid down by governments and that it is for the governments to decide how they tax businesses, therefore they have not broken tax rules.

Posted by: In: events, Tax and Expenses 15 Sep 2014 Comments: 0 Tags: , ,

If you’re just starting out in business and find tax issues confusing and daunting then this free monthly seminar will be worth going to.

Russell Accounting are now offering a monthly free Tax Surgery for small businesses and individuals.

This will take place on the first Monday of each month, from 5 pm onwards, in our office at the Creative Media Centre. Bookings can be made by telephone to 01424 205360 – or by e-mail to hello@russellaccounting.co.uk.