Fact sheets: Tax Advice Factsheets

This factsheet focuses on the current tax position of business motoring, a core consideration of many businesses. The aim is to provide a clear explanation of the tax deductions available on different types of vehicle expenditure in a variety of business scenarios.

The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However tax relief is available on certain capital expenditure in the form of capital allowances.

A capital gain arises when certain capital (or 'chargeable') assets are sold at a profit. The gain is the sale proceeds (net of selling costs) less the purchase price (including acquisition costs).

The capital gains tax (CGT) exemption for gains made on the sale of your home is one of the most valuable reliefs from which many people benefit during their lifetime. The relief is well known: CGT exemption whatever the level of the capital gain on the sale of any property that has been your main residence. In this factsheet we look at the operation
of the relief and consider factors that may cause it to be restricted.

The current regime for taxing employer provided cars (commonly referred to as company cars) is intended:
• to encourage manufacturers to produce cars which are more environmentally friendly and
• to give employee drivers and their employers a tax incentive to choose more fuel-efficient and environmentally friendly vehicles.

We consider the optional rules which allow small unincorporated businesses to calculate their profits for tax purposes on a cash basis rather than the normal accruals basis.

If you are thinking of making a gift to charity, this factsheet summarises how to make tax-effective gifts.

The High Income Child Benefit charge applies to a taxpayer who has income over £50,000 in a tax year where either they or their partner, if they have one, are in receipt of Child Benefit for the year.

The Construction Industry Scheme (CIS) sets out special rules for tax and national insurance (NI) for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. They may be companies, partnerships or self employed individuals.

Under corporation tax self assessment large companies are required to pay their corporation tax in four quarterly instalment payments. These payments are based on the company’s estimate of its current year tax liability.

The key features include:
• a company is required to pay the tax due in advance of filing a tax return
• a 'process now, check later' enquiry regime when the tax return is submitted
• the inclusion in the tax return, and in a single self assessment, of the liabilities of close companies on loans and advances to shareholders and others, and of liabilities under Controlled Foreign Companies legislation
• the requirement for companies to self assess by reference to transfer pricing legislation.

The Criminal Finances Act 2017 (CFA) came into effect on 30 September 2017, and makes companies and partnerships criminally liable for failing to prevent their employees from criminally facilitating tax evasion. A potential defence can be utilised, in cases where the business has put into place a system of reasonable prevention measures. The CFA does not change what tax fraud is, just who may be liable. Here, we take a look at the key
aspects of the Act and the implications for your business.

Employer supported childcare, commonly by way of childcare voucher, is for many employers and employees a tax and national insurance efficient perk. We consider the implications of this type of benefit on the employer and employee. This tax free benefit is being phased out from 4 October 2018. The scheme is being replaced with Tax-Free Childcare.

Today the remuneration of many directors and employees comprises a package of salary and
benefits.

The purpose of the Enterprise Investment Scheme (EIS) is to help certain types of small higher-risk unquoted trading companies to raise capital. It does so by providing income tax and CGT reliefs for investors in qualifying shares in these companies.

The rules allow the use of a ‘simplified’ fixed rate deduction instead of actual costs paid or incurred. It is optional, but using fixed rates may reduce the need for some of the detailed record keeping and calculations necessary to support tax deductible expenses. The amount of the overall tax allowable deductions could be greater or smaller compared to an actual cost comparison depending on the business circumstances.

Over the last ten years technology has advanced massively. It was not so long ago that mobile phones were the size of a brick. Now emails and the internet can be accessed on the move. However, whilst technology has moved on, travelling has become more and more difficult. Homeworking has become the answer for many but how have the tax rules kept up with these changes?

Over the last ten years technology has advanced massively. It was not so long ago that mobile phones were the size of a brick. Now emails and the internet can be accessed on the move. However, whilst technology has moved on, travelling has become more and more difficult. Homeworking has become the answer for many but how have the tax rules kept up with these changes?

The issue of whether to run your business as a company or a sole trader or partnership is an
important one. In this factsheet, we summarise the potential tax savings available from operating as a company.

Successive governments, concerned at the relatively low level of savings in the UK economy have over the years introduced various means by which individuals can save through a tax-free environment.

Inheritance tax (IHT) is levied on a person’s estate when they die, and certain gifts made during an individual’s lifetime.

Inheritance tax (IHT) was introduced approximately 30 years ago and broadly charges to tax certain lifetime gifts of capital and estates on death.

The ‘IR35’ rules are designed to prevent the avoidance of tax and national insurance
contributions (NICs) through the use of personal service companies and partnerships.

Land and Buildings Transaction Tax (LBTT) is payable by the purchaser in a land transaction which occurs in Scotland. These types of transaction would include a simple conveyance of land such as buying a house but also creating a lease or assigning a lease.

From 1 April 2018, a new Land Transaction Tax (LTT) replaces Stamp Duty Land Tax (SDLT) in Wales. LTT is broadly consistent with SDLT, but also introduces some key changes.

Over the coming years, the government will phase in its landmark Making Tax Digital (MTD) initiative, which will see taxpayers move to a fully digital tax system.

In this factsheet we outline some of the key issues for individuals including the Personal Tax Account and Simple Assessment.

Over the coming years, the government will phase in its landmark Making Tax Digital (MTD) initiative, which will see taxpayers move to a fully digital tax system.

This factsheet outlines some of the key issues for businesses.

Small companies, which qualify as ‘micro-entities’, have a choice of accounting standards:
• to use the same accounting standard – FRS 102 – as larger UK companies but using a reduced disclosure regime (section 1A) within the standard, or
• to apply an alternative standard - FRS 105.

National insurance contributions (NICs) are essentially a tax on earned income. The NICs regime divides income into different classes: Class 1 contributions are payable on earnings from employment, while the profits of the self-employed are liable to Class 2 and 4 contributions.

National insurance contributions (NICs) are essentially a tax on earned income. The NICs regime divides income into different classes: Class 1 contributions are payable on earnings from employment, while the profits of the self-employed are liable to Class 2 and 4 contributions.

An individual who is resident in the UK but is not domiciled (referred to as 'non-dom') may opt to be taxed on what is termed the 'remittance basis' in respect of income and capital gains arising outside the UK. What this means is that instead of being taxed on their actual income/gain arising in the year, they are taxed on the amount of that income/gain
actually brought into the UK in the tax year.

As an employer you will be responsible for operating PAYE and calculating National Insurance
Contributions (NICs). There are also certain statutory payments you may have to make from time to time which you need to be aware of.

We set out below details of how payroll information has to be submitted to HMRC under Real Time Information (RTI).

Alongside the changes from April 2015 to the access of pension funds, significant changes were made to the tax treatment of pension funds on death. This fact sheet summarises the rules which may allow a pension fund to pass free of all taxes on the estate of the deceased and free of all taxes on the beneficiaries of the pension fund.

Dividend and savings allowances are available. We consider the opportunities and pitfalls of the personal tax rules.

Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.

Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.

In recent years, the stock market has had its ups and downs. Add to this the serious loss of public confidence in pension funds as a means of saving for the future and it is not surprising that investors have looked elsewhere.

Investment in property has been and continues to be a popular form of investment for many people. It is seen as a route by which:
• relatively secure capital gains can be made on eventual sale
• income returns can be generated throughout the period of ownership
• mortgage finance is covered in repayment terms by the security of the eventual sale of the property and in interest terms by the rental income.

Research and development (R&D) by UK companies is being actively encouraged by Government through a range of tax incentives. The government views investment in R&D as a key to economic success. It is therefore committed to encouraging more smaller and medium sized (SME) companies to claim R&D tax relief.

The Seed Enterprise Investment Scheme (SEIS) provides tax relief for individuals prepared to invest in new and growing companies. It is the junior version of the Enterprise Investment Scheme (EIS). Investors can obtain generous income tax and capital gains tax (CGT) breaks for their investment and companies can use the relief to attract additional investment to develop their business.

Retaining and motivating staff are key issues for many employers. Research in the UK and USA has shown a clear link between employee share ownership and increases in productivity. The government has therefore introduced a variety of ways in which an employer can provide mechanisms for employees to obtain shares in the employer
company without necessarily suffering a large tax bill. Provided the company meets the qualifying conditions, EMI can be one of the most tax efficient and flexible means available.

A social enterprise entity is a business with primarily social objectives. Any surpluses made are reinvested into the main principle of that entity (or into the community) rather than maximising profit for shareholders. Examples of types of objectives are regeneration of the local environmental area, promoting climate change awareness and training for disadvantaged people.

SDLT is payable by the purchaser in a land transaction occurring in England and Northern
Ireland. Scotland has its own Land & Buildings Transaction Tax (LBTT) and from April 2018 Wales has its own Land Transaction Tax (LTT).

Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP) Statutory Paternity Pay (SPP) and Shared Parental Pay (ShPP) are important regulations to understand as they enforce minimum legal requirements on employers. Each operates in a different way.

The concept of residence in the United Kingdom is fundamental to the determination of UK tax liability for any individual. The Statutory Residence Test (SRT) provides, through a series of tests, a definitive process to determine the UK residence status of any individual. That status applies for income tax, capital gains tax and inheritance tax purposes.

The government has introduced a tax incentive for childcare Tax-Free Childcare (TFC).

Individuals are subject to a system of independent taxation so husbands and wives are taxed
separately. This can give rise to valuable tax planning opportunities. Furthermore, the tax position of any children is important.

Travelling and subsistence expenditure incurred by or on behalf of employees gives rise to many problems. We highlight below the main areas to consider in deciding whether tax relief is available on travel and subsistence.

Trusts are a long established mechanism which allow individuals to benefit from the assets whilst others (the trustees) have the legal ownership and day to day control over the assets. A trust can be extremely flexible and have an existence totally independent of the person who established it and those who benefit from it.

VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.

HMRC have introduced a number of VAT schemes over the years designed to reduce the administrative burden on small businesses. One such scheme is the annual accounting scheme.

It is quite possible within the VAT system for a business to be in the position of having to pay over VAT to HMRC while not having received payment from their customer.

Cash accounting enables a business to account for and pay VAT on the basis of cash received and paid rather than on the basis of invoices issued and received.

The flat rate scheme for small businesses was introduced to reduce the administrative burden
imposed when operating VAT.

This factsheet focuses on VAT matters of relevance to the smaller business. A primary aim is to highlight common risk areas as a better understanding can contribute to a reduction of errors and help to minimise penalties. Another key ingredient in achieving that aim is good record keeping, otherwise there is an increased risk that the VAT return could be prepared on the basis of incomplete or incorrect information.

Venture Capital Trusts (VCTs) are complementary to the Enterprise Investment Scheme (EIS), in that both are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies affected by the equity gap.