This week we report on a new tax, take a closer look at property ownership and trading styles, and what works best when running a business, as a sole trader or via a company? Late payment interest rises again and you can still book for our latest Tax Work-out.
If you are considering investing in rental property and creating some kind of property business, you will need to decide whether to hold the property as an individual, jointly with a friend or relative, or via a limited company.
From a tax perspective this decision is far from straightforward, in fact it is way more complicated than if you were deciding to start a trading business. Why is it so complicated? Well, for landlords ‘one size does not fit all’ and there are many different taxes to consider at each stage of your journey in business. Each taxpayer ideally needs to re-evaluate their choices according to their personal circumstances and make changes as time passes. Our detailed guide for landlords and for business owners are featured below.
The government created a new tax this week. The ‘Public Interest Business Protection’ tax aims to stop large companies monetising the energy supply crisis; as the tax bodies noted, the new tax has been introduced without any warning or consultation. It remains to be seen whether this is just hot air.
We are running another of our Tax Work-outs this Thursday, do sign up for that.
Nichola Ross Martin FCA CTA (Fellow)
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Quick News (Freeview)
Late payment interest rate rises again
Following the Bank of England’s recent announcement increasing the base rate, HMRC have announced that their late payment interest rate will also increase by 0.25% to 3% from 21 February 2022.
DEFRA progresses direct payments to farmers' consultation
The Department for Environment, Food and Rural Affairs (DEFRA) has responsed to its consultation ‘Direct Payments to farmers: Lump sum exit scheme and delinked payments in England’. This covers the support which will replace the existing direct payments to farmers.
Public Interest Business Protection Tax
A new tax has appeared in Finance Bill 2022. The Public Interest Business Protection tax is intended to act as a deterrent for large companies seeking to monetise valuable assets that may cause energy supply companies to cease trading.
Call for evidence on State Pension age
The Department for Work and Pensions (DWP) has published a 'Call for evidence, Second State Pension age review'. It seeks views on what metrics should be considered when setting the State Pension age.
Buy-to-let ownership: personal v. company? (Subscribers)
What is the most tax-efficient option to own rental property? Personally or via a company? What are the income and Corporation Tax, CGT, IHT, ATED, SDLT, or VAT issues? With tips on profit extraction, other planning points and case studies.
Tax Data Card 2022-23
NEW: A summary of key tax rates and allowances for 2022-23 and 2021-22.
Virtual Tax Partner: Tax Work-outs 2022
Come and get tax-fit!
Guides & Updates (subscribers)
Sole Trader v Limited Company 2021-22
UPDATE: Starting in business or thinking of expanding. What trading style is going to be best for you?
Land & Property
Restricting mortgage interest relief (subscriber guide)
From April 2020 relief for finance costs for individual landlords is limited to the basic rate. How is the relief calculated? How were the provisions introduced?
A company may wish to transfer its residential property to its shareholders, this is known as ‘de-enveloping’. There is no specific tax relief for de-enveloping: the result is that it needs to be carefully planned in order to mitigate tax charges.
Directors & Companies
Tax-efficient extraction of profits: toolkit (2021/22)
UPDATE: This toolkit is designed to help a company and its owner decide how company profits are to be extracted.
Directors: Tax planning toolkit for 2021/22
UPDATE: This planner looks at a range of director tax issues, including company profit extraction.
Employment Status: mutuality of obligation
What is mutuality of obligation? Why is mutuality of obligation not considered by HMRC's Check Employment Status for Tax tool?
RTI: Real-Time Information for PAYE
What is RTI: Real-Time Information (RTI) reporting for PAYE? How does it work?
Insufficient quality of occupation for PRR
In Mumtaz Hussain v HMRC  TC8366, the First Tier Tribunal (FTT) denied a claim for Private Residence Relief (PRR) on the sale of a former hospital. The taxpayer had not occupied the property as his main residence.
FTT unable to rule on alleged unfair treatment by HMRC
In MegaBlue Technologies (in liquidation) v HMRC  TC08376, the First Tier Tribunal (FTT) dismissed an appeal brought for unfair treatment by HMRC as it was outside of the powers of the tribunal to rule on such matters.
Lost deposit: Not allowable for CGT
In Christopher Drake v HMRC  TC08377, the First Tier Tribunal (FTT) found that a deposit lost on the acquisition of a lease that did not complete did not result in an allowable loss for Capital Gains Tax (CGT) purposes.
Tax advisers' lack of scrutiny over tax return entries proves expensive
In Jason Callen v HMRC  TC8392, a tax adviser who copied and pasted tax return entries on the advice of a tax scheme promoter without further independent thought on the merits of those entries, was careless. His actions allowed Discovery tax assessments by HMRC.
VAT Cases & Guides
Revenue and Customs Brief 2 (2022): VAT early termination fees and compensation payments
HMRC have published Revenue and Customs Brief 2 (2022) ‘VAT early termination fees and compensation payments’. This details their revised policy effective from 1 April 2022 and clarifies the VAT treatment of dilapidations.
Be a winner with our game-changing tax diagnostics tools for Business Asset Disposal Relief, SDLT & annexes/subsidiary properties, Company reorganisations, R & D Zone and TAAR on winding up. Sign up now!
Virtual Tax Partner© Support
Have a tax query? Need a second option? Open a ticket and ask a question. A team of tax experts with a very wide range of expertise: covering direct and indirect tax, as well as accounting, R&D claims, reorganisations and much more.
CPD for lunch
Byte-sized chunks of CPD for subscribers
- CPD: Business Asset Disposal Relief
- CPD: Appeals: How to Appeal a Tax Penalty
- CPD: VAT: Land and Property
More at CPD Index
Missed last time's Web-update?
- Virtual Tax Partner: Tax Work-outs
- Calendar of tax deadlines and new tax measures
- Making Tax Digital: Survival guide
- National Insurance: Rates
- A landlord? Start here...
- Capital allowances on nuclear site: FTT erred in law
- Accountant and liquidator failures not reasonable excuses for late appeal
- Sub-sale relief avoidance scheme failed to save £250,000 SDLT
- Discrimination due to military service cannot be prevented by FTT
- Dog grooming courses: Not VAT exempt
- Accounting for a change in VAT rate
- Basis Period reform
- Creating an office at home or converting part of a home into an office
- Directors' loan accounts: Toolkit (subscribers)
- Tax-free benefits and perks
- Negligible value claims
- Investors' Relief ...More
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