Author Archive: Muhammad Zia

What can you do to help your employees? Handy tips to help them cope with the cost of living crisis

With the ongoing cost of living crisis, people are continually looking for ways to save money.

Whilst buying discounted food, choosing cheaper brands of clothing, or strategically filling the car up are all ways you can cut costs, there are several other ways to save money.

There is also the question of what employers can do to help their staff.

Many employers have already made a “cost of living” payment, intended to help their employees through the current economic crisis.

This might not be viable for all businesses, but there are other ways to help your employees.

We’ll discuss some of how employers can help their employees, covering things like the provision of mobile phones, cycle-to-work schemes, tax relief, and vouchers.

Ways to help your employees

Many organisations are also feeling the impact of the cost of living crisis, so simply offering a pay rise to your staff might not be viable.

However, suitable alternatives can be found which will indirectly help your staff, including:

  • Cycle to work scheme: In short, an employer buys a bike for their employee to ride to work. It is paid for through salary sacrifice over some time.
  • Vouchers: These can be for numerous purposes, including food shopping or childcare.
  • Provision of a mobile phone: To claim tax relief on a mobile phone, employers can set up a contract between their business and the service provider.

Being proactive in signposting employees to tax relief they could be eligible for is also a great way to support them.

There are also numerous tax-efficient benefits including:

  • Health screening and medical check-ups, up to one a year
  • Annual dinner and Christmas parties for staff as long as the cost per head does not exceed £150pa. This cost for all staff functions must be aggregated.

What is tax relief?

Put simply, tax relief is a reduction in the amount of tax you have to pay.

It is important to note that the amount of tax relief you are entitled to will not be the same as the total amount of expenses you have claimed for.

This is because tax relief is based on your tax rate.

Individuals looking for ways to save money should check if they can make an expenses claim.

This can be done via the gov.uk website.

If you need advice on tax relief, contact us today.

 

 

Furnished Holiday Lets – What tax reliefs are available?

The UK has seen a boom in the ownership of Furnished Holiday Lets thanks to the increase in staycations.

As the summer holidays draw to a close many of us may be considering purchasing a holiday let to boost our income, but there are some very specific tax reliefs to consider when doing so.

What is a Furnished Holiday Let?

These types of properties are considered separate from other residential and commercial properties by HM Revenue & Customs (HMRC) and are classified as trading businesses.

To qualify for the tax benefits that come with this, your holiday let must be actively promoted and let commercially, be furnished for normal occupation and be operated with the intent of making a profit.

It must also:

  • Be available for commercial holiday letting to guests and holidaymakers for at least 210 days (30 weeks) per year; and
  • Not be rented out by the same person for more than 31 days: and
  • There shouldn’t be more than 155 days (+22 weeks) of this type of ‘long-term’ occupation per year; and
  • It must be rented out as holiday accommodation to the public for at least 105 days (15 weeks) of the 210 days you have made it available.

If you or your family use the property this doesn’t count towards this total.

How are Furnished Holiday Lets taxed?

They are taxed in the same way as any other trading business and offer several tax benefits as a result, including being taxed on profits rather than an individual income, when set up as a limited company.

This can allow owners to enjoy a lower rate of Corporation Tax and mean that income is treated as tax-free earnings for pension purposes.

Capital Gains Tax (CGT) reliefs can also be applied when a property is sold or transferred, including:

  • Rollover Relief
  • Gift Relief
  • Business Asset Disposal Relief

Owners of Furnished Holiday Lets can also benefit from some capital allowances, such as the Annual Investment Allowance, on certain assets used and fixtures inherent in the property, such as heating, lighting, ventilation, data and power installations.

This expenditure can be deducted from the profits of the business for Corporation Tax purposes.

Owners can also benefit from profit sharing and no National Insurance contributions on income from their Furnished Holiday Let.

Links: Furnished Holiday Lettings

MPs support move to crackdown on unqualified accountants

The Government could move to crack down on anyone providing accountancy services who is not professionally qualified.

As the law stands there is no requirement for these individuals, who can set up and start advising clients, to have professional qualifications.

High profile campaigns

A survey by the Association of Accounting Technicians (AAT) and conducted by YouGov shows that eight out of 10 MPs agree that anyone employed to deliver tax and accountancy services should be professionally qualified.

It follows HM Revenue & Customs (HMRC) research published last year which revealed that 82 per cent of unregulated and unaffiliated tax agents are not qualified.

The AAT has previously run high-profile campaigns calling on the Government to make it compulsory for anyone offering tax and accountancy services to be a member of a professional body.

Fears of tax evasion and money laundering

It says those without relevant qualifications are jeopardising the delivery of services such as budgeting, tax returns and payroll for their customers or employers.

HMRC says two-thirds of agent-related complaints to them are about the one-third of agents who are unregulated with a consequent cost to the taxpayer.

This is not just because of poor advice but also due to tax evasion, egregious avoidance and money laundering.

Top tips for securing finance for new businesses

There were stunning figures released in a new survey about business start-ups recently.

Data from small business lender iwoca showed that 93 new businesses were created every hour.

Despite economic headwinds, rising inflation and rocketing energy costs, the number jumped by 18 per cent year on year.

Data from Companies House show over 402,000 businesses were also registered between January and June 2022.

However, despite this surge in new businesses and demand for funding, many still struggle to secure the finance they need.

Lenders want security for loans

Commercial lenders want to know their money will be secure when they lend to a new business.

They want to be sure that the borrower can repay, or have their assets liquidated should they default.

Securing financing for a start-up is especially challenging, as it is inherently riskier than financing an existing business.

There are many ways of raising finance, including alternative methods, outside of traditional loans, such as angel investors, peer-to-peer platforms, crowdfunding or credit unions.

How can businesses improve their chances?

Measures that might persuade lenders to provide finance include:

  • Having a strong, concise and clear business plan – Show the potential lender you have done your research, know your market and have the expertise and systems in place to execute your plan.
  • Improving credit rating – Run your personal and commercial credit score before applying for a loan. If it is low, spend a couple of months working to improve it.
  • Finding the right type of loan – Make sure the funding fits your needs, like an instalment loan, short-term loan or simpler line of credit.
  • Provide collateral for the loan – Some lenders may ask for a guarantee before lending to you, such as business premises if owned by you, or assets such as plant machinery, which may make a lender willing to offer a secured loan. Some lenders may even ask you to put personal assets forward, such as your home.

Before trying to secure finance from a bank, it’s a smart move to speak to an accountant.

Rejected? Then start again

Find out why your application was rejected. Get as many specifics as possible for the rejection, so an updated plan can be presented.

Ask for recommendations from other potential lenders who might specialise in your field and then re-apply.

However, be careful not to make too many applications, as this could affect your credit score.

Companies House service goes digital

The march of the digital age and the effects of the pandemic have led to a Government institution closing its physical doors.

After two years of closure due to the pandemic, Companies House has confirmed that it will permanently close its office in London with all filing being transferred online.

It has also permanently shut the public counters in Cardiff, Belfast and Edinburgh.

Online services will be available 24 hours a day, seven days a week.

Back to basics: Job expenses

Expenses incurred by employees are generally the responsibility of the employer.

Quite often, however, employees have to bear the cost themselves when travelling for work, having meals and even providing clothes, which in most cases are not tax deductible.

What employment expenses qualify for tax relief in the UK?

Work-related travel

Having to travel to a different location from the workplace is an essential travel expense. The commute to and from the location will be tax-deductible.

Clothing

This could be for any ‘specialist’ or protective work clothes which are not paid for by the employer – these are known as flat rate expenses.

You cannot usually claim for buying tools and specialist clothing, but you can claim for their upkeep, for example, repairing, cleaning or replacing them.

You may be able to claim a standard £60 allowance per year for the cost of upkeep and replacement of specialist or protective clothing. The tax reduction you get is usually 20 per cent of the allowance.

Subsistence costs

Accommodation and upkeep are tax-deductible when an employee is away from home on work trips.

Professional subscriptions

Professional organizations’ subscriptions may also qualify for tax relief. However, the subscription should be related to your job and be made to a professional association authorized by HMRC.

Working from home

Working from home became commonplace during the pandemic.

Employers can make tax and NIC-free payments to an employee in respect of reasonable additional costs incurred for working at home, for example, gas, electricity, telephone and internet.

However, HMRC allows a tax and NIC-free flat rate reimbursement of up to £6 a week without providing evidence of extra costs. Anything above that will require receipts or bills as evidence.

The tax relief works by taking off the amount from your employment income, reducing the taxable income and the tax you have to pay.

This has led to coining the phrase ‘tax deductible’ or ‘allowable’ expenses. You may have to claim to obtain this tax relief.

Link: What if I incur expenses in relation to my job?

New law delivers even-handed treatment for separating couples

New measures have been introduced for the even-handed treatment of spouses and civil partners who are in the process of separation, divorce or dissolution.

The new legislation clarifies Capital Gains Tax (CGT) rules that apply to transfers of assets between spouses and civil partners, giving them up to three years in which to make no-gain or no-loss transfers of assets between themselves when they cease to live together, and unlimited time if the assets are the subject of a formal divorce agreement.

The new measure gives those who are separating more time to transfer assets between themselves without incurring a CGT charge.

The legislation also ensures that a partner who retains an interest in the former matrimonial home be given an option to claim Private Residence Relief (PRR) when it is sold.

These changes apply to disposals that occur on or after 6 April 2023.

Link: Capital Gains Tax: separation and divorce