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Tax

Renting home office space to your company | Home Office Accountant Advice | Advice on Home Office Set-Up | Accountancy Support Bristol
Renting home office space to your company 758 513 Stepping Stones Accountancy

Renting home office space to your company

The last few years have seen more of us working from home and although life is slowly returning to normal, many organisations have realised there are many benefits of home working and are encouraging staff to make this change, whether full or part time, more permanent.

Naturally this change in work location incurs additional costs and this is recognised by HMRC with their work from home allowance. Whilst this allowance enables people to reclaim a proportion of the costs of running a home office, it does not allow directors of companies to claim for a percentage of their rent or mortgage interest charges.

To mitigate this, directors are entitled to charge rent to their company for the use of their property, with this then being declared as commercial rent on the directors’ personal tax return and enabling them to also declare a proportion of costs.

It is essential that a rental agreement is put in place between the director and the company so that the director can become the landlord and in turn charge commercial rent. If the rent is charged at the same rate as the costs, then income offsets costs and thus no rental profit needs to be declared. As rental income is not subject to National Insurance many see this as a cost-effective way to release money from your business.

Prior to setting up a formal rental agreement there are some elements that must be considered:

  • Will your mortgage provider/landlord allow you to enter into the agreement and how will it affect your home insurance?
  • Ensure that the agreement only covers trading hours as it is normal for a home office to be utilised for personal use outside of these hours.
  • The proposal to put an agreement in place must be evidenced in the board minutes and cannot be backdated.
  • The agreement must be in joint names if the property is joint owned.
  • Rental costs may include service charges for a proportion of heating, light and power costs.
  • The rental cost must not exceed local commercial rental values, or it may be deemed by HMRC as disguised distributions.
  • The director must genuinely work from home and be able to evidence the costs that are being claimed for.
  • If you are leasing a substantial part of your property or separate buildings then a formal lease agreement would be more appropriate and this must be drawn up with the help of a solicitor as it would be covered by the Landlord and Tenant Act and would have implications for Capital Gains Tax and Business Rates.

If you have any questions or need some accountancy help, please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk. You can also book a free 30 minute call with Yarka – https://calendly.com/yarka-ssa/30min

Why do we need quarterly updates with Making Tax Digital (MTD) | Tax Advice MTD | Advice on Making Tax Digital
Why do we need quarterly updates with Making Tax Digital (MTD)? 758 513 Stepping Stones Accountancy

Why do we need quarterly updates with Making Tax Digital (MTD)?

As the Making Tax Digital (MTD) scheme continues to gather momentum there are many business owners still unsure of their commitments. However, the requirements can be broken down into 4 key measures which determine why taxpayers (even those who may have a small turnover as little as £10k) are required to provide a breakdown of income and expenses. This needs to be done via an online accounting platform which is approved by MTD and submitted every quarter.

Keeping up to date

By submitting a quarterly return, a business is keeping up to date with their returns and complying with their commitments to MTD. The regulations state that a quarterly filing deadline needs to be submitted online.

More accurate provision for tax payments

Any profit which is reported within the quarterly updates will allow the HMRC to provide an estimate of the tax payments a business might have to make during the tax year. The clear benefit of this is that a business will know how much tax they need to pay and when they will need to pay it, thus allowing for accurate budgeting.

Vital business analysis

Whilst a small business might think their quarterly tax return is only important to them, it is also a very useful tool for the HMRC. Being able to evaluate the data received from tax returns enables them to provide some informed and critical business analysis in relation the state of the economy.

Penalties for late submissions

To ensure businesses recognise the importance of quarterly submissions, HMRC will be implementing penalties to anybody who fails to comply. Penalties will be based around a points system, where any late submission means points added to an account. When a designated number of points are accrued a fine will be issued. Points will stay on record for 24-months after which they will be wiped from the record. To find our more please follow this link – https://www.gov.uk/government/publications/penalties-for-late-submission/penalties-for-late-submission

If you have any questions in relation to Making Tax Digital our team would be happy to help. Please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

A Simplified Tax Reporting for Small Businesses | Making Tax Digital (MTD) | Simplifying Tax
A simplified tax reporting for small businesses 758 513 Stepping Stones Accountancy

A simplified tax reporting for small businesses

As part of the Government’s Making Tax Digital (MTD) plans to simplify the tax system and to speed up the time it takes for self-employed professionals and small business owners to complete their tax returns, the Government are proposing changes to the existing tax reporting rules.

The changes, planned by 2023, would mean that any business not incorporated would be taxed on profits arising in the tax year as opposed to profits on accounts ending in the tax year.

In short, the changes will see all businesses having to align their basis period with the 5/6th April tax year. Whilst the majority of businesses already do this, there are about 7% of sole traders who choose not to as it fits better with their business model.

For example, a business who runs their accounts to the 30th of June each year, their income tax for 2023/24 would currently be based on profits for the year ending 30th June 2023. Under the new rules the income tax for 2023/24 would be based on 3/12 of the income for the year ending 30th June 2023 in addition to 9/12 of the income for the year ending 30th June 2024.

The Government estimates that around 3% of sole traders and 15% of partners will face an increase in costs as a result of these proposed changes but believes that they will reduce errors and overpayments and bring tax returns in line with other assessments such as property income.

Whilst the changes are broadly welcomed and the consensus is that it will simplify life for business owners, the consultation period is due to conclude on 31st August. Some claim that this is too quick and businesses need more time to prepare and propose a delay of 12 months in order for business to provide proper feedback and ensure that the scheme works for everyone.

If you have any questions or would like to discuss this further please feel free to call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

5 Tips To A Smooth Tax Return 150 150 Stepping Stones Accountancy

5 Tips To A Smooth Tax Return

If you apply our simple tips you can be assured that your tax return will be a lot easier to complete.

Complete your tax return in June 150 150 Stepping Stones Accountancy

Complete your tax return in June

In our latest animated video we explain why you should completed your tax return in June.

Gain Control of your Self Assessment | Help with Self Assessment | Self Assessment Hints & Tips
Gain control of your self assessment 758 513 Stepping Stones Accountancy

Gain control of your self assessment

It is surprising how a to-do list can achieve so much. The art of writing down a list of actions and then following them through to completion is nothing new but it still remains an incredibly powerful tool for efficient people. So how can this method help you get control of your self assessment?

Quite simply, if you follow some specific instructions to a set timeframe every year then you will have complete control of your self assessment. For example, if we look at the period of 2021 to 2022, it really is a very simple process based on 5 key steps:

  1. Monthly – keep track of all your monthly business transactions, logging a record of invoices, receipts and expenses.
  2. Register for self assessment by 5th October 2021 (if you have never done this before)
  3. When filing online submit your return by midnight on 31st January 2022
  4. Ensure relevant tax payments are made by midnight on 31st January 2022

In order to complete the self assessment you will need the following:

  • Your 10-digit unique taxpayer reference (UTR)
  • Your national insurance number
  • All details of your untaxed income for the period 2021/22 (this will include income from self-employment, dividends and interest on any shares
  • All records of expenses in relation to self-employment
  • Charity or pension contributions that should be eligible for tax relief
  • A P60 or any other records to demonstrate how much income you have received which has been paid on

Keeping in control of your self assessment can be a very simple exercise just follow your to-do list. Otherwise simply delegate and get your accountant to look after it for you.

Should you have any questions or need any help in relation to your self assessment please call us on 01173 700 079 or e-mail hello@steppingstonesaccountancy.co.uk.

Help With Self Assessment Deadline 150 150 Stepping Stones Accountancy

Help With Self Assessment Deadline

Do you know what the self-assessment deadline is? Do you know what expenses you can claim? This video will explain all about it.

Contractors and Construction Industry Scheme | Accountancy Advice
Contractors and the Construction Industry Scheme 758 513 Stepping Stones Accountancy

Contractors and the Construction Industry Scheme

The Construction Industry Scheme (CIS) requires contractors to deduct payments from any subcontractors that they use in order to make advance payments towards the subcontractor’s tax and National Insurance.

It is a legal requirement that all contractors register for the scheme, whether a sole trader or a limited company, if:

  • they pay subcontractors to do construction work
  • their business doesn’t do construction work but usually spends more than £1 million a year on construction

There are a number of professions within the construction industry though who are exempt from the CIS including architecture, surveying, planning and civil/structural engineers. Such peculiarities can make the scheme a little tricky to understand.

For those companies who are required to register though there are some very specific guidelines that must be followed:

  • they must register for CIS before taking on their first subcontractor
  • they must check if they should employ the person instead of subcontracting the work. There may be a penalty if they should be an employee instead
  • they must check with HM Revenue and Customs (HMRC) that their subcontractors are registered with CIS
  • when paying subcontractors, they usually need to make deductions from their payments and pay the money to HMRC.
  • they need to file monthly returns and keep full CIS records – they may get a penalty if they don’t
  • they must let HMRC know about any changes to their business

Whilst more information is available from GOV.UK , the rules surrounding the Construction Industry Scheme can be somewhat confusing so it always best to get professional advice if you are unsure.

At Stepping Stones we work with many companies within the construction industry and as such are well placed to provide advice and guidance to both contractors and subcontractors. Why not give us a call and see how we can help you, we would be delighted to work with you.

 

Changes to Tax Relief for Residential Landlords | Financial Advice for Property Investors
Changes to Tax Relief for Residential Landlords 758 513 Stepping Stones Accountancy

Changes to Tax Relief for Residential Landlords

For many years, investors have seen their buy-to-let properties as an excellent source of income. However, the Government has acknowledged the need to discourage savvy investors from procuring properties that would otherwise have been sorely welcomed by first time buyers.

As of 6th April 2017, a phased implementation began of new rules, designed to restrict the relief available for higher rate taxpayers. When calculating taxable profits, landlords will no longer be allowed to deduct the interest costs of their mortgage. In its place, tax relief on mortgage interest payments will be reduced incrementally until 2020, with tax calculated on the total rental income instead.

Despite the changes taking place gradually until 6th April 2020, the changes could have huge implications for individuals that are near the higher tax rate threshold. For those with high interest costs, the new rules could push them over the tax threshold without them being aware.

For detailed information on how these changes will impact investors go to the GOV.UK website where there are some clear examples on what this means in practice. Essentially though, the changes certainly mean larger tax bills for property investors and in turn lower profits.

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