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July 2016
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To July’s Tax Tips & MYOB News, Simple Accounting’s monthly e-newsletter.

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July 2016
· Charging your Business Rent for your Home Office
· Reporting Benefits & Expenses
· Reclaiming VAT on Workers’ Expenses
· FRS 102 guidance on directors’ loans revised
· July 2016 Questions and Answers
· July 2016 Key Tax Dates
Charging your Business Rent for Your Home Office top
Getting your company to pay rent for use of part of your home for office accommodation still works as a tax efficient way of extracting income from the business. The company will get a tax deduction for the rent paid (provided it’s not excessive).

You need to decide what expenses are properly attributable to the provision of (furnished) accommodation to your company. The total of these is then used to set the level of rent received from the company. The rent can be lower than market value, but must not exceed it.

Expenses would include:
•    an appropriate proportion of heating and lighting costs
•    maintenance and repair costs
•    a proportion of mortgage interest
•    any expense you incur at your company’s specific request

Back this up with a formal rent agreement between the company and the property owners (ie you), just stating what has been agreed 

Provided you are not being visited by clients, business rates will not be due on your use of your home office. To avoid any ‘exclusively-used for business challenge’ state in the rental agreement that the facilities are only let to the company for designated hours each week, for example 9.00am to 5.00 pm, Monday to Friday.

You will have to declare rental income on your personal tax return, but if, for example, you can get £50 a week treated as rent, but matched with £50 of expenses there will be no tax to pay.  Meanwhile your company would be able to reclaim £2500 taxable expenses, reducing its corporation tax by £500. 

We can help with the necessary paperwork.
Reporting Benefits & Expenses
Reclaiming VAT on Workers’ Expenses top
Employers will be aware that various changes have been made to the reporting requirements for employee benefits and expenses from April 2016, which mean that some employers will no longer have to complete annual return forms P11D.
The three main changes are:

– The dispensations regime has been replaced with an expenses exemption – broadly, where an employee would have been entitled to tax relief in full for a benefit or expense, the employer does not need to deduct tax or NICs, and they do not need to report it to HMRC;
– Employers can now account for tax on certain benefits provided to employees through PAYE (known as ‘voluntary payrolling’), which dispenses with the need to report such benefits on forms P11D. Benefits relating to accommodation, beneficial loans, credit tokens and vouchers cannot be processed through voluntary payrolling. Note also that employers wishing to use the scheme for 2016-17 had to register with HMRC prior to 6 April 2016; and
– The introduction of a statutory exemption for trivial benefits.
Read More
Where an employee buys something that’s used by your business, you have the right to reclaim VAT on the cost.  For example a site worker might purchase small items of equipment to use while away on a job. Where he pays for these from his own funds, it’s likely the invoices or receipts will be in his name, but actually the supply is for your business.  As long as you reimburse him for the expense you can reclaim the VAT. 

However an employee’s expenses claim for reibursement of costs isn’t sufficient to support a claim for VAT.  HMRC expect you to have the corresponding invoice or receipt even where this is in an employee’s name.

The right to reclaim VAT on expenses paid by workers can also apply where they are a contractor rather than an employee.  However more conditions apply in this situation.  
FRS 102 guidance on directors’ loans revised top
July 2016 Questions and Answers top
HMRC have recently updated their online toolkit on directors’ loan accounts to help tax advisers and agents preparing 2015/16 company tax returns. The update reflects the changes to reporting requirements under UK GAAP, as taxing debt will now be largely driven by FRS 102 requirements for financial instruments.

If an entity makes loans to/from directors/employees where there is no explicit interest rate or the interest rate charged is not at a market rate, then the prescribed accounting treatment will depend on which accounting framework the entity has adopted.
Read More
Q1. My mother died last year and left my brother and me a commercial business unit. Probate is nearly complete now. If we sell the property in the future, what are the capital gains tax implications on the sale?

Q2. I have recently registered for VAT. I am not very good when it comes to administration and I have heard that the flat rate scheme might help me. How does the scheme work? Answer

Q3. I have a part time job and I earn about £8,000 a year. As my earnings are less than the tax-free personal allowance, can I transfer the unused amount to my husband? Answer
July 2016 Key Tax Dates top
5 – Deadline for PAYE settlement agreement for 2015/16

6 – Deadline for 2015/16 forms P11Db, P11D and P9D to be submitted and copies of P11D and P9D to be issued to relevant employees

Deadline for employers to report share incentives for 2015/16 – form 42

14 – Return and Payment of CT61 tax due for quarter to 30 June 2016

19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/7/2016 or quarter 1 of 2016/17 for small employers

Class 1A NIC due in respect of the tax year 2015/16

31 – Second self assessment payment on account due for 2015/16

Second 5% penalty surcharge on any 2014/15 outstanding tax due on 31 January 2016 still unpaid

Deadline for Tax Credits to finalise claims for 2015/16 and renew claims for 2016/17

Half yearly Class 2 NIC payment due

Penalty of 5% of tax due or £300, whichever is greater for 2014/15 personal tax returns still not filed.
Need Help? top
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