Do you own a property that qualifies as a furnished holiday let (FHL)? To qualify the property has to be commercially let for short periods for at least 70 days per year, although this minimum will increase to 105 days from April 2012. There are also some other conditions.
If your property does qualify as a FHL, have you claimed tax relief for all of the equipment included in and attached to that property? FHL properties have advantageous tax rules that permit capital allowances to be claimed for the cost of equipment used in the building, which is not the case for other let residential property.
Since April 2008 it has been easier to claim capital allowances on a range of items attached to buildings that qualify as integral features in addition to the usual fixtures that qualify.
For a typical FHL property capital allowances may be claimed on the following fixtures...
- Bathroom fittings
- Dishwasher
- Cooker
- Fridge-freezer
- Central heating
- Fitted carpets
- Swimming pool
For a new property with fitted kitchen, bathroom and carpets that cost £235,000, perhaps £25,000 would relate to the built-in fixtures. In addition you can claim capital allowances on the cost of furniture and curtains you provide in the property.
Capital allowances must be claimed in your tax return. A capital allowances claim for the tax year 2009/10 should have been included in your tax return submitted by 31 January 2011, but that return can be amended to include a claim before 31 January 2012. If the property is used for private purposes the capital allowance claim must be amended to reflect that private use.
A word of warning: HMRC is considering whether it will continue to accept claims for capital allowances for FHL properties following a Brief it released on 22 October 2010. Clarification of the meaning of this Brief has been requested by the Chartered Institute of Taxation, but has not been provided. In the meantime, if you don't claim, you don't get the tax relief.
Monday 9 May 2011
Tax Efficient Cars
There are quite a few types of car which have CO2 emissions of no more than 110g/km; including certain models of the Mini Cooper, Toyota Prius, Smart, and Fiat 500. If your company buys one of these low emissions cars new (not second hand), it can claim a tax deduction for the full cost in the year of purchase and for all its running costs.
Where the car is provided to a director or employee of the company for their own private use, or for the use of a member of their family (perhaps for son or daughter), the director/ employee will be taxed on 10% of the list price of the car for petrol cars and 13% for diesels.
For example a Mini Cooper 1.6D has CO2 emissions of 104g/km and a list price of £15,730. The director/employee will be taxed on £2,045 per year, and if their top tax rate is 40% this will give in an annual tax bill of £818. The company will also have to pay class 1A NICs of £282 per year, but that cost is tax allowable for the company. The company can also pick up the full cost of all servicing and insurance for the car with no extra tax charges.
Where the car is provided to a director or employee of the company for their own private use, or for the use of a member of their family (perhaps for son or daughter), the director/ employee will be taxed on 10% of the list price of the car for petrol cars and 13% for diesels.
For example a Mini Cooper 1.6D has CO2 emissions of 104g/km and a list price of £15,730. The director/employee will be taxed on £2,045 per year, and if their top tax rate is 40% this will give in an annual tax bill of £818. The company will also have to pay class 1A NICs of £282 per year, but that cost is tax allowable for the company. The company can also pick up the full cost of all servicing and insurance for the car with no extra tax charges.
Paying PAYE on Time
HMRC are encouraging businesses to pay all their taxes electronically. Only large employers with 250 or more employees, are currently required to pay PAYE and other payroll deductions to HMRC by electronic means, but this may become compulsory for all employers from October 2013.
Before then let's hope HMRC will sort out their banking to make it easier for employers to pay on time. At present they do NOT operate the Faster Payment Service (FPS) on any of their bank accounts, so you need to allow at least three working days for an electronic payment to reach the HMRC account. This means electronic payments of PAYE must leave your bank on 19th to arrive on 22nd of the month, assuming none of those days falls on a weekend or bank holiday.
To reduce the likelihood of PAYE payments going missing HMRC ask taxpayers to always include the Accounts Office (AO) reference on any PAYE payment. HMRC also recommend that the year and month the payment relates to should be added on to the end AO reference, without leaving a space. For example, PAYE for month 01 in 2011/12 (due 22 May 2011 for electronic payments), add 1201 to the AO ref.
Before then let's hope HMRC will sort out their banking to make it easier for employers to pay on time. At present they do NOT operate the Faster Payment Service (FPS) on any of their bank accounts, so you need to allow at least three working days for an electronic payment to reach the HMRC account. This means electronic payments of PAYE must leave your bank on 19th to arrive on 22nd of the month, assuming none of those days falls on a weekend or bank holiday.
To reduce the likelihood of PAYE payments going missing HMRC ask taxpayers to always include the Accounts Office (AO) reference on any PAYE payment. HMRC also recommend that the year and month the payment relates to should be added on to the end AO reference, without leaving a space. For example, PAYE for month 01 in 2011/12 (due 22 May 2011 for electronic payments), add 1201 to the AO ref.
Higher Penalties for Late Returns
Your personal self-assessment tax return for the tax year to 5 April 2011 must be submitted to HMRC by 31 January 2012, or by 31 October 2011 if it is submitted in paper form. These deadlines also apply to your separate partnership tax return where you are a member of a partnership.
For tax returns for earlier years you would receive a penalty of £100 if you submitted it later than those dates, but that penalty would be reduced to nil if you were due a tax repayment, or all the tax due was paid by 31 January. There was however no reduction for penalties relating to late partnership returns. For 2010/11 tax returns and later years, the penalties for submitting the return late will not be reduced even if all the tax due has been paid on time.
As well as the initial £100 penalty, there are additional penalties!
If you are...
- More than three months late submitting your return the penalty is charged on a daily basis at £10 per day, up to a maximum of £900.
- Over 6 months late with your tax return you will be hit with an additional penalty calculated as the higher of: £300 and 5% of the tax due.
- Over 12 months late, the same penalty is imposed again.
When a partnership tax return is submitted late those penalties apply to each partner in the partnership.
If you are also late in paying the correct amount of tax you will receive a penalty for paying the tax late. These penalties are calculated as 5% of the outstanding tax due at the following intervals: 30 days late, 6 months late, and 12 months late.
In view of these high penalties it is essential that we work with you to get your tax bill calculated in good time, so you can make the correct payments due and get your return done on time. Please send us the information to complete your accounts and tax return as soon as possible!
For tax returns for earlier years you would receive a penalty of £100 if you submitted it later than those dates, but that penalty would be reduced to nil if you were due a tax repayment, or all the tax due was paid by 31 January. There was however no reduction for penalties relating to late partnership returns. For 2010/11 tax returns and later years, the penalties for submitting the return late will not be reduced even if all the tax due has been paid on time.
As well as the initial £100 penalty, there are additional penalties!
If you are...
- More than three months late submitting your return the penalty is charged on a daily basis at £10 per day, up to a maximum of £900.
- Over 6 months late with your tax return you will be hit with an additional penalty calculated as the higher of: £300 and 5% of the tax due.
- Over 12 months late, the same penalty is imposed again.
When a partnership tax return is submitted late those penalties apply to each partner in the partnership.
If you are also late in paying the correct amount of tax you will receive a penalty for paying the tax late. These penalties are calculated as 5% of the outstanding tax due at the following intervals: 30 days late, 6 months late, and 12 months late.
In view of these high penalties it is essential that we work with you to get your tax bill calculated in good time, so you can make the correct payments due and get your return done on time. Please send us the information to complete your accounts and tax return as soon as possible!
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