HR Expert: Planning Annual Leave During Christmas Period

Q- My client wants to put plans in place to manage time off over Christmas and New Year, how should they do this?

A- Annual leave can be an important topic in any workplace, particularly in the period around Christmas and New Year, which is often the end of the leave year. Your client may be concerned at the thought of handling an influx of annual leave requests during this time, however, this can easily be done so long as they plan accordingly.  Read More

Tax Question of the Week: Pension Contributions

Q- My client takes most of their funds from the company via dividends. How much can they and/or the company contribute to their pension?

A- When an individual contributes to their pension, they must ensure that the amount they contribute is less than 100% of their ‘relevant UK earnings’ for that tax year or £3,600 (£2,880 net). Any personal contributions made above that amount will not get any tax relief. The individual must notify their pension provider if they go above this amount so the pension provider can ensure the correct amount of tax relief is claimed or refunded to HMRC. Read More

HR EXPERT: Tipping Waiters

Q- My client has heard that the law on dealing with tips is going to change. He runs a restaurant and currently passes on only 75% of tips to the employees. Will he be able to carry on doing this?

A- Recently, many high-profile businesses have attracted criticism for making tip deductions and using the funds to cover business charges in other areas. Although taking a percentage of tips given to employees can be common practice for employers it can also be significantly frustrating for the workforce. Despite the fact that a voluntary code of conduct for fair tipping procedures exists there is currently no law prohibiting employers from making deductions from tips. However, this position is due to change. Read More

Vat Question of the Week: What do HMRC mean by Taxable Turnover for Making Tax Digital

Q-My client works through her own limited company, providing public relations and marketing consultancy to businesses in the UK and all over the world. The business is VAT registered in the UK on a voluntary basis; is she going to be affected by Making Tax Digital?

A- Any entity with a taxable turnover that is above the VAT registration threshold on 1 April 2019 must follow the Making Tax Digital (MTD) rules, so essentially the question here is what is included within “taxable turnover”?

Taxable turnover for MTD is the same as taxable turnover for VAT registration purposes. HMRC’s VAT Notice on MTD (700/22) rather ambiguously states that “VAT taxable turnover is the total value of everything you sell that is not exempt from VAT”. It refers readers to VAT Notice 700/1: Should I be registered for VAT, which provides details in section 2, but this is not simple to understand, so we have provided some general clarification below.  Read More

Tax Question of the Week: Incorporation of a Letting Business

Q- A client has a rental portfolio of 8 properties and wishes to claim incorporation relief under section 162 TCGA 1992. 

A- Many clients who have a portfolio of rental properties are becoming increasingly aware of the changes to income tax relief in respect of mortgage interest relief. They wish to incorporate the property business and if possible take advantage of incorporation relief.

The starting point to answer a question like this would be to consider whether or not the property portfolio is a ‘business’ or a passive investment asset because this is the basic requirement to qualify for incorporation relief. Unfortunately, the word ‘business’ is not defined in section 162 TCGA 1992, the legislation which deals with incorporation relief.  Read More

HR EXPERT: Contractual Sick Pay

Q- My client pays contractual sick pay and one of their employees is having elective surgery. Do they still have to pay them?

A- As elective surgeries such as plastic or cosmetic procedures continue to grow in popularity it is important to apply a consistent approach to this issue but remember that it may also need to be flexible. It can be frustrating for employers when their employees take prolonged periods of time off work due to illness but your client should ensure they are fully aware of the obligations placed upon them during this time. Read More

Tax Question of the Week: Disposals to Connected Person

Q- A client has recently sold an asset, for what he believes to be the market value, to his sister-in-law. A capital loss has arisen and he would like to know how he could use this loss.

A- The first thing to be aware of when making a disposal of an asset to a connected person is that TCGA1992 s18 deems it to be a transaction made for a consideration equal to open market value, regardless of the actual proceeds.

The question then is who is a connected person and which relatives are included? The definition of this term is found within TCG1992 s286 – they are certain relatives, trustees, partners, and companies. As your client’s disposal was to his sister-in-law, we shall concentrate

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VAT Question of the Week: VAT – Too Late to Claim?

Q- My client has been approached by a builder, who carried out repair work to the client’s factory some years ago. The builder was late registering for VAT and is now looking to issue VAT only invoices to my client for the supplies in question. I have several concerns: is the supplier liable to account for the VAT if the supplies were made more than 4 years ago? Is my client obliged to pay and if so can he now recover the VAT given that the original invoices were dated more than 4 years ago?

A- The supplier will be liable to account for VAT on supplies made since the effective date of registration. HMRC will treat the income as VAT inclusive, but the supplier has the option of issuing VAT only invoices if the customers agree to pay the extra, usually on the basis they can recover it. Read More

Tax Question of the Week: Property Swap

Q- Jack and Jill jointly own two investment properties and wish to swap their interests so that they each have ownership of one of the properties. As tenants in common they currently equally own Cornfield with a market value of £210,000 and the original cost of £50,000 and Wheatfield with a market value of £200,000 and the original cost of £49,000. Jack is to have Cornfield and Jill is to have Wheatfield. What are the CGT and SDLT implications?

A- For CGT there is a form of roll-over relief on the disposal of joint interests in land in s 248A TCGA 1992 where conditions A to E in that section is satisfied. Condition A is that there is a joint holding of land or separate holdings in land; condition B is that there is a disposal of an interest to one or more co-owners; condition C is that the consideration includes an interest in a joint holding in land; condition D is that in consequence of the disposals the co-owners become sole-owners and condition E is that the acquired interest is not an interest in excluded land. Read More

VAT Question of the Week: A Building for a Charity – VAT or Not?

Q. My client owns and rents out commercial properties; mainly office blocks. A local charity has asked to take a lease on one of his buildings but is saying that VAT should not be charged on the premium or rent. My client has opted to tax all of his properties because he does not want to be partly exempt and, more importantly, this particular building is within the capital goods scheme. I have forewarned my client that if he were to make exempt supplies during the term of the scheme he may have to repay some of the VAT he claimed on the building and, understandably, he isn’t happy about that. Does he have any choice in this matter? 

A. To be fair to both parties, if the amount of VAT at stake for your client is relatively small it may be possible to factor this in when negotiating the lease. However, whether a property owner facing a significant VAT loss has any scope to refuse to disapply his option to tax depends on how the charity intends to use the property. Read More