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Stamp Duty

The Chancellor announced that he will enforce temporary reductions in residential property Stamp Duty Land Tax Rates (SDLT) between 8th July 2020 – 31st March 2021, which is of great benefit to those currently looking to get onto the property ladder or purchase a new property. You will only pay SDLT on the amount that you pay for the property above £500,000. This rate applies to both first time buyers and existing homeowners. The temporary SDLT rates are:

                                             Property or lease premium or transfer valueSDLT Rate
Up to £500,000Zero
The next £425,000 (Costing £500,001 to £925,000)5%
The next £575,000 (Costing £925,001 to £1.5 million)10%
The remaining amount (Costing above £1.5 million)12%


The existing rules for first time buyers are temporarily replaced by the reduced rates shown above. 

If purchasing an additional property, there is a 3% higher rate, which applies on top of the above rates. For example, on a buy-to-let or second home, the temporary rates become:

Property or lease premium or transfer valueSDLT Rate
Up to £500,0003%
The next £425,000 (Costing £500,001 to £925,000)8%
The next £575,000 (Costing £925,001 to £1.5 million)13%
The remaining amount (Costing above £1.5 million)15%


Businesses buying residential property worth less than £500,000 will also benefit from these changes at the additional 3% SDLT rate.

As of the 1st April 2021, the reduced rates shown in the above tables will revert to the rates of SDLT that were in place prior to 8 July 2020.

For further details on the SDLT temporary changes click here:

https://www.gov.uk/guidance/stamp-duty-land-tax-temporary-reduced-rates

Green Homes Grant

The Government has set aside £2 billion for homeowners in England to make green home upgrades. Homeowners in England will be able to apply for vouchers from the  The Green Homes Grant scheme, to pay for improvements such as loft, wall and floor insulation. This could save some households hundreds of pounds a year on their energy bills and create thousands of jobs for tradespeople. This is aimed to help to boost home efficiencies.

The Government has not yet announced a timescale for this scheme. 

(E) enquiries@advaloremgroup.uk  (T) 01908 219100

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George Bruce – Senior Business Development Manager

Since lockdown, those working from home have found themselves saving money on daily expenses such as travel, lunches and the daily coffee purchasing. However, these costs may have been reattributed to other outgoings that align with working from home, such as business telephone calls or electricity and heating bills.

If you have been forced to work from home (not if you’ve chosen to work from home), then you may be able to claim tax relief on some of the bills you have had to pay, due to working from home on a regular basis. 

How much can I claim?

HMRC have put in place a ‘blanket’ costing approach in order to pay everyone as quickly and efficiently as possible, rather than working out exact electricity bill costs vs usage. 

HMRC now allows you to claim up to £6 per week of expenses without having to provide bills or paperwork as evidence. This doesn’t directly mean you save £6 a week but instead you save the tax you would have paid on it. From 6th April 2020, this works out to be £1.20 a week for a basic rate taxpayer, or £2.40 a week for a higher rate taxpayer. 

In order to make a claim you must have had to work from home (haven’t chosen to do so) and incurred extra costs due to working from home. It is also possible to claim more than £6 per week, but you have to provide paperwork to support your claim. 

If your employer does choose to provide a ‘working from home allowance’, that would be tax free up to £6 per week, which means you can’t make an additional claim for tax relief on top. 

How can I claim?

If you normally complete a Self-Assessment tax return, you can include your claim details on there. If you do not complete a Self-Assessment, you can claim by completing a P87 form, either online or by post. 

These allowances have been available for years, but awareness has grown since the pandemic forced many offices to close.

For further details, please see the Government Guidance on Employees Working at Home 

(E) enquiries@advaloremgroup.uk  (T) 01908 219100

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We are in the process of sending out our annual P11D checklists summaries to our clients to gather information about any taxable benefits that may have been provided over the 2019/20 tax year.

What are taxable benefits?

If you provide certain benefits to any company employees or directors then they may generate a taxable benefit that need to be reported to HMRC.

Below are some examples of taxable benefits:

Ø  Business Mileage – if paid above HMRC approved rates

Ø  Company Cars & Vans

Ø  Interest free loan

Ø  Private medical / Dental insurance

Ø  Assets provided for personal use

Ø  Personal payments – e.g. school fees, gym membership, home phone charges

  

Ø  Company credit cards provided for personal use

Ø  Living Accommodation

Ø  Relocation Expenses

Ø  Trivial benefits – there are different limits for employees and Directors

Ø  Shares at less than Market Value

Ø  Mobile Phones

 

Business Mileage

If the company pays mileage for business use of a personal car ABOVE 45p per mile for the first 10,000 miles and 25p thereafter please provide details of the number of miles paid and the rate applied for each employee.

Company Cars

If company cars have been made available to employees or a member of their family to use privately, please let us know and we will request further details

Company Vans

If the company provided a van to employees or a member of their family to use privately and paid for the fuel.

Please note that personal use does not include:

  • Home to site trips that are exclusively for business (including very small detours such as to buy a newspaper)
  • Very few small, local personal trips such as to take a mattress to the tip (limited to no more than 2 per year)

Interest Free Loan

If an employee has been provided with a loan which exceeds £10,000 in the year then please let us know and we will request further details.

Assets provided for personal use

If employees are provided with assets which they can use for personal use (which are not listed elsewhere in this blog) please let us know and we will request further details.

This includes furniture provided in company accommodation.

Please note that this does not include:

  • The use of an asset where private use is not significant
  • 1 mobile phone per employee that is in the company name

Living Accommodation

If employees have been provided with living accommodation that is owned or rented by the company please let us know and we will request further details.

Relocation Expenses

If any expenses have been paid by the company for the relocation of an employee above £8,000 then please provide details of the amounts paid for each employee.

Mobile Phones

As above 1 mobile phone provided per employee that is in the company name is not a taxable benefit.

If you reimburse any calls that have been made on an employees personal mobile phone then this is a taxable benefit and we will need details of the amounts paid for each employee.

Trivial Benefits

There is a statutory exemption for ‘trivial benefits’ given to an employee.

A trivial benefit is one that:

  • Costs £50 or less to provide (including VAT)
  • If it is a retail store voucher that is not convertible into cash
  • Isn’t a reward for service e.g. Birthday, Christmas, Wedding anniversary etc.
  • Isn’t in the terms of the employee’s contract
  • Is not reimbursed

There is no limit on the number of trivial benefits that can be provided in the tax year for an employee.

Where the individual is a director of a close company the total value of trivial benefits cannot exceed £300 per annum.

Examples of common trivial benefits are:

Ø  Christmas Hampers

Ø  Fireworks

Ø  Vouchers for high street stores

Ø  Tickets to the theatre

Ø  Tickets to a football game

Ø  Wedding Anniversary champagne

 

How are these benefits reported?

Details of these benefits have to be entered into a software which will generate forms P11D & P11D(b).

A P11D is generated for each employee and needs to be distributed to each individual by the employer by 6th July 2020, the amount that is reported will be included in the employees’ tax code which will be updated once HMRC have received the submission.

A P11D(b) is generated for each company which reports the total taxable benefits from all employees. This has to be submitted to HMRC by 6th July 2020. There will be Class 1A NIC due on this amount which is calculated at 13.8%. This is payable by the employer and must be paid by 19th July 2020 (if payment is made via cheque) or by 22nd July 2020 if payment is being made electronically.

 

If you have provided any of the above items or have any queries then please contact us and we will be able to inform you whether anything needs to be reported to HMRC.

(E) enquiries@advaloremgroup.uk or (T) 01908 219100

 

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My mate says… ‘I can reduce my tax bill by paying wages to my spouse and family’.

The answer to this is yes and no!

As with any expenses for a self-employed person they must be wholly and exclusively for the purposes of the trade.

So, if you employ a spouse any claim for their wages must be commensurate with the duties they carry out, the hours worked and must also be in  line with what would be expected if an unconnected person were employed to do the work.  So, for example if your spouse worked part time in your business carrying out general administration duties and you paid them a salary of £40,000 a year HMRC would consider this to be excessive and would be likely to disallow the claim.  Also, one other crucial point is that the wages must actually be paid.  A transfer to an account in the spouse’s name or a joint account would suffice but not a transfer to the business proprietor’s own solely named bank account as HMRC would consider this drawings and the claim would be likely to be disallowed.

Payments for wages to children must also follow similar principles and caution is needed if wages are paid to minors to ensure that working regulations are not breached.  Again, the rate of pay must be in line with the work carried out but be careful not to pay at a level that HMRC would be likely to consider this “pocket money”.

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Yesterday the Government gave this year’s first budget update. Here are some key points which may affect you:

Measures to mitigate the effects of Coronavirus:

  • £12 billion package of tax and spending measures including grants and hardship funds for people a businesses affected.
  • Statutory Sick Pay to be payable from first day’s absence and fully funded by the Government for 14 days.
  • Business rates relief for the next year increased from 50% to 100% for retail businesses with rateable values up to £51,000.

Tax measures with immediate effect:

  • Lifetime limit for gains eligible for Entrepreneurs’ Relief (taxed at 10% instead of 20%) reduced from £10m to £1m for disposals from Budget day.
  • Duty on alcoholic drinks and fuel frozen.
Tax year 2020/21:
  • No change to personal income tax allowances and rates: 2019/20 figures continue for a second year, as expected.
  • Increase in threshold for National Insurance Contributions from £8,632 to £9,500.
  • Research & Development expenditure credit increase from 12% to 13%.
  • Structures and Buildings Allowance increased from 2% to 3%

Tax measures coming into effect later:

  • VAT ‘Domestic Reverse Charge’ on construction services, deferred from 1st October 2019, confirmed introduction on 1st October 2020.
  • VAT zero-rating to apply digital versions of newspapers and books as well as printed versions from 1st December 2020.

Click here to view our full Budget Summary document.

As you would expect we are taking reasonable measures to prevent the spread of Coronavirus to protect our clients and staff. Therefore we have decided to digitalise our Budget Update seminar and we will be recording and sending this out to you via email.

If you have any questions regarding the governments steps to mitigate the impact of COVID-19 or anything else within the budget summary,  please don’t hesitate to contact us.

Ad Valorem Accountancy Services
01908 219100
enquiries@advaloremgroup.uk