Showing posts with label profit. Show all posts
Showing posts with label profit. Show all posts

Sunday, 2 March 2014

Rental income on residential property

You are receiving taxable income that you need to declare if you are receiving rental income in the UK from residential property.

This applies whether you are in the UK or overseas.

There are penalties for failure to declare and HM Revenue & Customs have advised that they are clamping down on undeclared income in this area.

If you have not previously notified HM Revenue & Customs of this income, they are currently offering an opportunity for you to bring your affairs up to date on more favourable terms than would normally be available.

There are various reliefs and deductions available so it would be wise to consult a good accountant if you are in this situation. The potential savings could well outweigh their fee.

If you have never lived in the property you will have to pay capital gains tax on any profit when you sell.

Unless you have lived in your house for the whole period of ownership, you may still have capital gains tax to pay on some of the profit.

There are a couple of recent changes that you should be aware of.

If you have let the house in which you have lived, you are eligible for principal private residence (PPR) and lettings relief against any capital gain. Under the current rules since 6 April 2014' the last 18 months are added to the period in which you lived in the property to work out the proportion of time for principal private residence relief. Before 6 April 2014, this additional period was 36 months.

Prior to April 2015, if you were overseas and not a UK tax payer, you were not subject to capital gains tax on the sale of a UK residential property. This changed from 6 April 2015. Capital Gains Tax  will be payable on the post 6 April 2015 gain at 18% and/or 28% depending on the amount if gain and your individual circumstances in relation to UK personal tax.

Property can be a complex area for UK taxes. Apart from income tax and capital gains tax, you may need to consider VAT and stamp duty land tax. Good planning is crucial.
If you have specific questions, please drop me an email.



Wednesday, 11 December 2013

Pensions and the Lifetime Allowance - do you need to act before 6 April 2014?

The amount that an individual in the UK can accumulate in their pension scheme before it will be hit by a tax charge is called their Lifetime Allowance ("LTA").

As of 6 April 2012, this was reduced from £1.8m to £1.5m. A further reduction to £1.25m will take place on 6 April 2014.

If you have a pension pot that you expect to be over £1.25m by the time you take your benefits, you can apply for protection to retain the higher £1.5m lifetime allowance. There are conditions attached that include making no further pension contributions. There are two forms of protection available, both of which can be applied for, but one must be claimed by 5 April 2014.

This situation applies to more people than is immediately apparent.

Consider two examples with no further pension contributions:

- You are now 45, looking to retire at 60 and currently have a pot of £450,000.
With average annual growth higher just 7%, your pot will exceed £1.25m by the time you retire.

- You are now 40, looking to retire at 65 and current have a pot of just £225,000.
If we again assume an average annual growth rate over 7% , your pot will be over the threshold when you reach 65.

Please note that one of the condition for this protection to remain in place is that you do not make further pension contributions so Once auto enrolment arrives for you, you will need to opt out of it within 1 month in order to retain this protection.

If this siuation might apply to you, you should take proper professional advice as soon as possible.

Bear in mind that if you have a reasonable pension pot and you are in a position to make additional contributions this year, it may be advantageous to do so.

If you have further questions or would like an introduction to a very helpful wealth planner, who can review your pension arrangements, please drop me an email ( philip.gale@businessorchard.com )

If you know of someone else who may be affected by this, please pass this on. 

Failure to act now could be very expensive.

Sunday, 16 June 2013

HMRC revised toolkits to help minimise common errors



HMRC has published the updated Business Profits and Capital v Revenue Toolkits to assist agents when completing their clients' 2012-13 returns. These can be useful to individuals who have an understanding of the tax rules and wish to prepare their own tax returns. Links are provided here and they should should be read in conjunction with the essential information reproduced below.

If in any doubt contact an accountant to assist you.

If  you don't have one,why not try;

Business Orchard

Individuals, business and corporations

Trusts and Estates


Toolkits to help reduce errors - essential information
These toolkits are aimed at helping and supporting tax agents and advisers. They are part of HM Revenue & Customs' (HMRC's) wider approach to improving tax compliance, which is focused on help and support to ensure that returns are correct.
The toolkits have been developed with the benefit of input from agents and their representatives, including the Compliance Reform Forum. However, the content is based on HMRC's view of how tax law should be applied.
The application of these toolkits to specific cases will depend on the law at the relevant time and on the precise facts.

Overview

Each toolkit has three key elements:
  • A checklist - to help you to address the areas of possible error that HMRC identifies as key.
  • Explanatory notes - which identify the underlying types of error, how to mitigate those errors and a brief outline of the tax treatment. HMRC recommends that you review these notes, even if you are confident about answering the questions in the checklist.
  • Cross references - linking to the relevant guidance available online, so you can easily find more detailed guidance if required.
By being more open on the errors that HMRC sees in returns, and suggesting the steps that you can take to reduce those errors, the toolkits will help you to assure the completeness and accuracy of your clients’ returns.
Use of the toolkits is voluntary and you can use them in whatever way best suits you and your clients.
Examples of how the toolkits are used include:
  • as a straightforward checklist
  • to complement or check and refresh your existing processes
  • as a training aid for your staff
It should not be necessary for you to refer to all of the toolkits, only those that are relevant to your clients' circumstances and the return being completed.

Scope

Each toolkit is focused on errors which HMRC finds commonly occur. They are not comprehensive statements of all types of error that may arise in any particular return. For areas not dealt with in the toolkits you should refer to the full HMRC guidance.
Each toolkit will be updated each year to reflect any changes arising from the relevant Finance Act, where applicable, and released for use with that year’s returns.
Where there are changes to legislation, the toolkits provide a brief summary of those changes. The types of error that may arise from new legislation will not be immediately apparent, but if HMRC encounters particular areas of common error, they will seek to address these errors by releasing an updated version.
HMRC's guidance is updated regularly. There will however be occasions when the draft guidance has not yet been published. Where that is the case, the toolkits provide a link to the latest publication available on the HMRC website.
The toolkits do not cover tax avoidance or deliberate attempts to evade tax, which are outside the scope of the toolkits and are subject to HMRC's normal compliance procedures.

Taking reasonable care

Under the penalty legislation, there will not be a penalty for an error in a return or other document where the person has taken reasonable care that the return or document is accurate. As part of their efforts to take reasonable care, a person may seek professional advice and may appoint an agent to help them.
Where a person appoints an agent, this does not relieve them of their responsibility for their tax affairs. They still have a duty to take reasonable care, within their ability and competence, and this includes the person taking reasonable care to avoid inaccuracy by their agent.
The aim of these toolkits is to highlight errors which HMRC finds commonly occur and to help you avoid inaccuracies in your clients' returns that may otherwise lead to penalties. Their use remains entirely voluntary. Whether reasonable care has been taken in any particular case will be a question of fact and will not depend on whether a toolkit has or has not been used.