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March 2016

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To March’s Tax Tips & MYOB News!

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March 2016
· The End of Dispensations
· Personal savings allowance update
· Landlords’ replacement wear and tear allowance ends
· Should I register for VAT?
· March Questions and Answers
· March Key Tax Dates
The End of Dispensations top
Until now, if you paid expenses to your employees, you had to report these on a form P11D and the employees then claimed back any tax relief they are entitled to.  That is unless you have previously agreed a ‘dispensation’ with HMRC.  A dispensation is an agreement that specified the expenses and benefits that can be provided to employees without reporting them to HMRC. We have in the past helped our Business Companion Clients apply for these.

From 6 April 2016, dispensations will no longer be necessary. The expenses or benefits in kind will now be exempt from income tax. However you still have to determine the correct tax treatment of the expenses and whether a matching deduction is due. You will still be required to keep records of what has been paid or reimbursed to your employees as you do now.

The exemption will also apply if you pay approved scale rates to your employees (eg for mileage), rather than reimbursing the actual amount of the expense.
Personal savings allowance update top
Landlords’ replacement wear and tear allowance ends
From 6 April 2016, the personal savings allowance (PSA) will allow basic rate taxpayers to receive up to £1,000 of savings income tax-free. For higher rate taxpayers, this limit will be £500. HMRC have published guidance setting out details of what counts as savings income and how the allowance will be calculated, including some useful examples.

Savings income includes account interest from:

– bank and building society accounts;
– accounts with providers like credit unions or National Savings and Investments. Read More
Until 5 April 2016 a deduction for wear and tear may be claimed equal to 10% of the ‘net rents’ from furnished lettings (ie after deducting payments that would normally be borne by the tenant, such as water rates). In addition, a deduction may be claimed for replacing fixtures that are an integral part of a building (eg central heating systems), but excluding additional expenditure on ‘improved’ versions of those items.

But all this will end shortly.
Read More
Should I register for VAT? top
March Questions and Answers top
The general rule is:
1) Register if your turnover exceeds £82,000pa
or below this:
2) Register if you can claim back more VAT than your customers would lose. This occurs when you make lots of standard rated supplies to VAT registered and fully claiming businesses and you have high standard rated costs.

For Example:
Turnover = £40,000, of which:
£10,000 is from VAT registered Companies
£30,000 is from private individuals

Expenses/ costs = £35,000 of which:
£25,000 net (£30,000 gross) to VAT registered businesses, £5,000 is paid to private individuals.

If we register for VAT:
We will charge £30,000 x 20% = 
£6,000, which cannot be recovered by customers.
But we would be able to recover £25,000 x 20% = £5000 from HMRC which (previously) we lost on our costs.

In this case the net loss to the business is:
£6,000 – £5,000 = £1,000.  Therefore in this case don’t register for VAT. 

Q. What are the implications of selling my Scottish home? I own and live in a property in Scotland. What are the implications of me selling the house to a relative, who will buy it using a buy-to-let mortgage, and allow me to stay in it and pay rent to her as a tenant? Answer

Q. Should we register for VAT to reclaim input tax on the costs of conversion? My brother owns a commercial business unit, and we have decided to convert it into residential units. Although I will be project managing the conversion, I will not be charging my brother. As you can imagine, there will be a lot of expenditure on building materials, which are subject to VAT and potentially contractors who are VAT registered. Will it be advantageous to set up a VAT-registered business for the development so that we can claim back the VAT incurred? Answer

Q. Is inheritance tax due on a gift? I have an elderly friend who has said he would like to give me a gift of £10,000 to help with my planned kitchen extension. Will there be any tax to pay on this very generous gift? Answer
March Key Tax Dates top
19/22 – PAYE/NIC, student loan and CIS deductions due for month to 5/3/2016

31 – Last minute tax planning for the 2015/16 tax year. Ensure you use up all exemptions to which you are entitled
Need Help? top
New Clients Welcome top
Please contact us if we can help you with these or any other tax or accounts matters.

In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.

See details of our Business Companion Service.
About Us top
Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Wave, Quickbooks or Clearbooks.

‘All clients using these software packages can benefit from our support. Visit our website for a look at the resource on offer.’

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