If you invest through a firm of financial advisers, you may well receive a repayment of commission from that firm each year. In previous years any refunded commission was rolled into the earnings from your investments or set against charges, so you may not have been aware of it. However, from 6 April 2013 the financial adviser must deduct tax from any refunded commission and show the amounts paid and deducted separately on your annual statement .
You should look out for these refunded amounts on your investment statement for 2013/14, as it must be declared on your 2013/14 tax return. However, don't add it into your interest, or dividend income. The correct place to declare the refunded commission is in box 16 on your self-assessment tax return under "other taxable income", with an explanation of the income in box 20.
We will do this for you when we complete your tax return, but please remember to provide us a copy of your investment statement that shows the refunded commission.
Showing posts with label investment advice. Show all posts
Showing posts with label investment advice. Show all posts
Monday, 4 August 2014
Thursday, 31 January 2013
SEIS - The Opportunity
The Seed Enterprise Investment Scheme (SEIS) will have a limited life - only five years to 5 April 2017. It allows investors to receive 50% income tax relief on the amount invested and up to 28% capital gains tax relief for a limited period. Also if you make a loss on the SEIS shares you can get further income tax relief for that loss.
This sounds very attractive, but you need to be aware of the various traps and limitations of the SEIS before you commit your money. In particular SIES can only be used to invest in small companies (asset value of no more than £200,000 and up to 25 employees), which the SEIS investor can't control. In fact the SEIS investor together with his associates must not own more than 30% of the company. Each company can raise up to £150,000 of investment under SEIS in its lifetime, and each investor can invest up to £100,000 per tax year.
The greatest amount of tax relief is achieved by reinvesting a capital gain made in the year ended 5 April 2013 in SEIS shares, when you get both the income tax relief at 50% and full exemption from tax on the reinvested gain. The SEIS shares must be eligible for income tax relief for 2012/13. This means the SEIS shares must be issued in 2012/13 or issued in 2013/14 and subject to an election to carry back the tax relief to 2012/13.
If you are thinking of investing under SEIS or using SEIS to attract an outside investor to your company, please talk to us first as there are lots of hoops to jump through.
This sounds very attractive, but you need to be aware of the various traps and limitations of the SEIS before you commit your money. In particular SIES can only be used to invest in small companies (asset value of no more than £200,000 and up to 25 employees), which the SEIS investor can't control. In fact the SEIS investor together with his associates must not own more than 30% of the company. Each company can raise up to £150,000 of investment under SEIS in its lifetime, and each investor can invest up to £100,000 per tax year.
The greatest amount of tax relief is achieved by reinvesting a capital gain made in the year ended 5 April 2013 in SEIS shares, when you get both the income tax relief at 50% and full exemption from tax on the reinvested gain. The SEIS shares must be eligible for income tax relief for 2012/13. This means the SEIS shares must be issued in 2012/13 or issued in 2013/14 and subject to an election to carry back the tax relief to 2012/13.
If you are thinking of investing under SEIS or using SEIS to attract an outside investor to your company, please talk to us first as there are lots of hoops to jump through.
Monday, 7 January 2013
Increased Annual Investment Allowance
The annual investment allowance (AIA) gives a 100% deduction for tax purposes for the cost of plant, equipment and certain fixtures in buildings, which qualify for capital allowances. The AIA has an annual cap. This started at £50,000 in 2008, was increased to £100,000 by the previous government, and was cut to £25,000 in April 2012 by the current incumbents.
Now the AIA cap will temporarily increase to £250,000 for expenditure incurred in the two years from 1 January 2013. Equipment bought on and after 1 January 2015 will be subject to the reduced AIA cap of £25,000, unless the Chancellor of the day has another change of mind. Expenditure that qualifies for capital allowances, but which exceeds the available AIA cap for the business is given tax relief at the rate of 18% or 8% per year, depending on the nature of the item purchased.
The AIA cap for accounting periods that end on 31 December 2013 and 31 December 2014 will be £250,000, fair and square. But where your business has an accounting period that straddles 1 January 2013, the calculation of the AIA cap is complicated. Say your accounting period ends on 31 March 2013. You need to split the accounting period (for AIA purposes only), into:
a. 1 April 2012 to 31 December 2012 (portion of £25,000 AIA); and
b. 1 January 2013 to 31 March 2013 (portion of £250,000 AIA).
The maximum AIA for the business is the sum of the portions of the AIA cap due for each of those sub-periods a) and b). However, the expenditure must also be spread over those two periods to gain the maximum advantage from the AIA. The business cannot spend its maximum AIA in the period from 1 January 2013 to 31 March 2013.
The complications do not stop there, as there is protection for businesses that have already spent their maximum AIA of £25,000 in 2012. Please ask us to check how much the AIA cap will be for your business before you purchase any expensive equipment.
Now the AIA cap will temporarily increase to £250,000 for expenditure incurred in the two years from 1 January 2013. Equipment bought on and after 1 January 2015 will be subject to the reduced AIA cap of £25,000, unless the Chancellor of the day has another change of mind. Expenditure that qualifies for capital allowances, but which exceeds the available AIA cap for the business is given tax relief at the rate of 18% or 8% per year, depending on the nature of the item purchased.
The AIA cap for accounting periods that end on 31 December 2013 and 31 December 2014 will be £250,000, fair and square. But where your business has an accounting period that straddles 1 January 2013, the calculation of the AIA cap is complicated. Say your accounting period ends on 31 March 2013. You need to split the accounting period (for AIA purposes only), into:
a. 1 April 2012 to 31 December 2012 (portion of £25,000 AIA); and
b. 1 January 2013 to 31 March 2013 (portion of £250,000 AIA).
The maximum AIA for the business is the sum of the portions of the AIA cap due for each of those sub-periods a) and b). However, the expenditure must also be spread over those two periods to gain the maximum advantage from the AIA. The business cannot spend its maximum AIA in the period from 1 January 2013 to 31 March 2013.
The complications do not stop there, as there is protection for businesses that have already spent their maximum AIA of £25,000 in 2012. Please ask us to check how much the AIA cap will be for your business before you purchase any expensive equipment.
Thursday, 1 March 2012
Tax Efficient Investments
Most allowances for tax efficient investments are fixed for each tax year and cannot be carried over to the next year if not used. If you have money to invest you may want use your allowance for 2011/12, or in some cases wait until 2012/13 when new rules and new limits apply.
Here is a brief summary of the 2011/12 and 2012/13 investment limits:
EIS
Investors who subscribe for shares under the Enterprise Investment Scheme (EIS) can currently receive income tax relief at 30% of up to £500,000 invested in one year. This annual cap will rise to £1 million from 6 April 2012. However, any amount can be invested in EIS shares to defer tax due on a capital gain made in the period up to three years before the EIS shares were acquired, or to up to one year later. An investment in EIS shares can be treated as if it was made in the previous tax year, to apply the income tax relief against the taxpayer's tax due for the earlier year.
The conditions companies need to meet to raise funds using EIS are also being relaxed from April 2012. These conditions are still very complex so talk to us first before making a decision to use the EIS scheme.
SEIS
The Seed Enterprise Investment Scheme (SEIS) is a new scheme due to start from 6 April 2012, subject to the law being passed by Parliament. This will operate like a mini version of the EIS, but the scheme will only be available for five years. The maximum investment by a taxpayer in one tax year will be £100,000, with income tax relief given at 50% of the invested amount. Any gains made on the SEIS shares will also be tax free as long as the investment conditions are not broken and the shares are held for at least three years. In addition if you make a capital gain in 2012/13 (on any asset), you can invest that gain in SEIS shares and achieve 100% tax exemption on that gain. Thus the maximum tax relief for investing in SEIS shares could be 78% of the amount invested.
VCT
Investing in shares issued by a Venture Capital Trust (VCT) will give you 30% income tax relief on the amount invested, capped at £200,000 per tax year. This investment limit is not expected to increase in 2012/13. Dividends and gains from the VCT are tax free if the VCT shares are held for at least five years.
ISA
Individual Savings Accounts (ISAs) can be taken out as cash only accounts (maximum £5,340) or stocks and shares accounts up to £10,680. These limits are for 2011/12. The investment limits for 2012/13 are £5,640 for cash only accounts and £11,280 for stocks and shares.
You can now open a Junior ISA (up to £3,600 per year) for children aged under 18, who do not already have a child trust fund account in their name. Individuals who are aged 16 or 17 can also open a standard cash only ISA in addition to the Junior ISA.
Here is a brief summary of the 2011/12 and 2012/13 investment limits:
EIS
Investors who subscribe for shares under the Enterprise Investment Scheme (EIS) can currently receive income tax relief at 30% of up to £500,000 invested in one year. This annual cap will rise to £1 million from 6 April 2012. However, any amount can be invested in EIS shares to defer tax due on a capital gain made in the period up to three years before the EIS shares were acquired, or to up to one year later. An investment in EIS shares can be treated as if it was made in the previous tax year, to apply the income tax relief against the taxpayer's tax due for the earlier year.
The conditions companies need to meet to raise funds using EIS are also being relaxed from April 2012. These conditions are still very complex so talk to us first before making a decision to use the EIS scheme.
SEIS
The Seed Enterprise Investment Scheme (SEIS) is a new scheme due to start from 6 April 2012, subject to the law being passed by Parliament. This will operate like a mini version of the EIS, but the scheme will only be available for five years. The maximum investment by a taxpayer in one tax year will be £100,000, with income tax relief given at 50% of the invested amount. Any gains made on the SEIS shares will also be tax free as long as the investment conditions are not broken and the shares are held for at least three years. In addition if you make a capital gain in 2012/13 (on any asset), you can invest that gain in SEIS shares and achieve 100% tax exemption on that gain. Thus the maximum tax relief for investing in SEIS shares could be 78% of the amount invested.
VCT
Investing in shares issued by a Venture Capital Trust (VCT) will give you 30% income tax relief on the amount invested, capped at £200,000 per tax year. This investment limit is not expected to increase in 2012/13. Dividends and gains from the VCT are tax free if the VCT shares are held for at least five years.
ISA
Individual Savings Accounts (ISAs) can be taken out as cash only accounts (maximum £5,340) or stocks and shares accounts up to £10,680. These limits are for 2011/12. The investment limits for 2012/13 are £5,640 for cash only accounts and £11,280 for stocks and shares.
You can now open a Junior ISA (up to £3,600 per year) for children aged under 18, who do not already have a child trust fund account in their name. Individuals who are aged 16 or 17 can also open a standard cash only ISA in addition to the Junior ISA.
Subscribe to:
Posts (Atom)
