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Capital Gains Tax liabilities

by mike tombs
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Capital Gains Tax (CGT) is defined by the Government as: "Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It’s the gain you make that’s taxed, not the amount of money you receive." So, you will pay CGT on an item such as a painting, but not on your house, provided that it is your primary residence. You are liable to pay CGT at certain times of the year. If you personally disposed of an asset that is subject to a CGT charge, at any time during [...]

Child benefit tax trap

by mike tombs
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This post is a reminder that a family claiming the weekly Child Benefit (currently, £20.70 a week for eldest or only child and £13.70 a week for additional children) may get an unwelcome tax bill if either parents’ income exceeds £50,000 during a tax year.   If either parent had income over £50,000 for the tax year 2018-19, and:   either partner received Child Benefit, or someone else received Child Benefit for a child living with you and they contribute at least an equal amount towards the child’s upkeep.   Then part or all of the Child Benefit received may [...]

What will HMRC avoid telling you?

by mike tombs
in Tax
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There are three things that you can count on that HMRC will do:   Calculate the amount of tax you owe based on the information they have gathered. Chase you for payment of this tax if not recovered by PAYE. Pursue you if they believe you have under-declared your taxable income or made excessive claims to reduce your tax.   What they will not do is advise you to maximise the benefit of reliefs and allowances to which you are entitled to claim.   HMRC rely to some extent on the age-old principal that ignorance of the law is not, [...]

Are home to work travel costs ever allowed?

by mike tombs
in Tax
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Ordinary commuting between home and work incurs costs: either shoe leather, if you walk, or the cost of transport. For most employees these costs are considered to be personal costs and are not deductible for tax purposes.   This is so even if your employer requests that you attend out of hours, say the weekend. According the HMRC:   If an employee is sometimes required by his employer to attend their permanent workplace outside normal working hours, often at the weekend. This may mean that they incur extra costs on bus fares, meals eaten at their desk and sometimes even [...]

Don’t look back!

by mike tombs
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One of the many quotes bandied around by people is: “don’t look back, you’re not going that way…” Like many clichés, this one contains a grain of truth, and never more so than when understanding the difference between financial and management accountancy. Financial accountancy is a simple record-keeping exercise that shows you a summary of what has happened in the previous year. It is used mainly by accountants to work out how much tax is due to HMRC. This process, filing your tax return and statutory accounts, and making any necessary payments, are a legal responsibility. Financial accounting is viewed [...]

Turkey dinner and tax returns

by mike tombs
in Tax
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Completing your tax return may not have been top of your priorities on Christmas Day, but that didn’t stop 2,616 taxpayers from filing their Self-Assessment returns on 25 December 2018. For some taxpayers completing their return on Christmas Day is as traditional as spending time with family and friends or waiting for the Boxing Day sales to start. The peak filing time, according to HMRC, was between 1pm and 2pm, when more than 230 customers filed. Angela MacDonald, HMRC’s Director General for Customer Services, said: This year, more than 2,600 taxpayers chose to file their returns on Christmas Day. Whether [...]

Brexit may be in limbo, but Making Tax Digital is not

by mike tombs
in VAT
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As we have highlighted in many posts to this blog, from 1 April 2019, ALL VAT registered businesses with turnover above the £85,000 VAT registration threshold will have to submit their VAT returns from within software that can link with HMRC’s networks. In techno- speak, your data will need to be transferred using a designated API (HMRC’s application programming interface).   The fact that you have always prepared your VAT returns electronically, for example, by using a spreadsheet to record transactions and create the data for your VAT returns, will not be enough. Your spreadsheet will not have the functionality [...]

A possible, unwelcome increase in service charges

by mike tombs
in VAT
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From 1 November 2018, owners of properties on estates or sites that are obliged to pay service charges to a management company - for example, for the maintenance of common areas, gardens, or the employment of a site warden or caretaker - may be in for an unwelcome surprise.   It would seem that HMRC have applied a concession in the past that allowed the management companies to treat service charges collected on behalf of a landlord as part of an exempt supply for VAT purposes – in other words, when the management company charged a resident, no VAT was [...]

Keep private bank accounts private

by mike tombs
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Many small businesses, including landlords, use personal bank accounts to lodge business receipts and make business payments. If traders in this situation are subject to a HMRC enquiry into their business affairs, HMRC would be entitled to request sight of all bank accounts that record business transactions even if those accounts are essentially, personal bank accounts.   As many of the transactions in these accounts are personal, you may need to explain to HMRC where credits to the account came from and provide evidence that the credits are nothing to do with your business.   Without this confirmation or evidence, [...]