Contact me on 020 8819 8673 or andrew.cazalet@lidotax.co.uk

Tax Refunds on Holidays Lets within Europe

Do you own property in Europe….Has it made a loss in any tax year since 2006/07?

Did you know that under new HMRC guidelines you may be able to claim these losses against other income often leading to substantial tax refunds?

The conditions are:

• The property must be situated in the European Economic Area
• It must be let furnished not empty
• Available for Letting at least for 140 days a year
• Must be actually let for at least 60 days in the year
• Not normally occupied by any one tenant for more than 31 days at a time.

Further benefits of the relief are as follows:-

• Losses can offset against general income eg salary, self employed profits
• Entrepreneur’s Relief is usually available on the sale of such properties meaning an effective rate of capital gains tax of 10% not 18%
• Roll- over or Hold Over available to defer gain on sale
• Capital Allowances available on equipment used in the property
• Pension contributions can be paid if the property is profit making
• Possibly qualify for Business Property Relief thus exempting the property from IHT on death or gift to others

Deadline

HMRC have said that the cut off date to claim back these losses for 2006/07 is 31 July 2009.

Please get in touch if you need any help.

Some thoughts and information re the Budget 2009

New Higher Rates of Tax

The new marginal rate of income tax of 50% applies to income over £150,000 starting from April 2010. This is above the planned increase of 45% and a year earlier! What has been less publicised is the progressive withdrawal of the tax free personal allowances by £1 for every £2 income exceeds £100,000. This means those earning between £100,000 and £112950 suffer a marginal rate of income tax of 60%.

Where possible it would seem sensible to advance income and pay tax now before 5 April 2010 at only (!) 40%. Or consider using a company to control the extraction of profit or maybe share options possibly taxed as capital gains at only 10-18%?

Further Extension of Carry Back of Trading Losses

The ability to carry back losses of up to £50,000 up to three years (instead of just one under the old rules) has been extended for unincorporated businesses to 23 November 2010 ie tax years 2008/09 to 2009/10. For limited companies the extension applies to those with accounting periods ending between 24 November 2008 and 23 November 2010.

Help with Time to Pay Taxes

The Business Payment Support Service http://www.hmrc.gov.uk/pbr2008/business-payment.htm has been instructed to accept “time to pay” arrangements in a wider range of circumstances. The advisers have been asked to take account of reasonable estimates of current year losses in pressing for previous years taxes.

Relief for Pension Contributions restricted at Higher Rates

From 6 April 2011 the relief for pension contributions for higher rate taxpayers earning above £150,000 will be restricted gradually so that those individuals with an annual income of £180,000 or more will effectively receive only a 20% tax deduction, the same as a basic rate tax payer. This may mean that some individuals will only receive relief at 20% but will later be taxed on their pension income at 50%.

Furnished Holiday Letting Relief to be abolished

The relief for loss making short term letting businesses will be abolished from 6 April 2010. These rules currently allow the offset of losses often made on holiday letting income against other taxable income subject to certain conditions.

However in the meantime HMRC does accept that it cannot discriminate as it did previously against individuals owning property in the EU – as opposed to in the UK. This means properties within the EEA area now qualify for relief until it’s general abolition in April 2010.

Budget Funny!

Some tweets below captured live on Wednesday from inside the Treasury (allegedly)

“ BUDGET CONSULTATION: Please tweet us your ideas for the Budget as Alistair has not got a clue. The final TwitBudget will be published here.

BUDGET2009. Treasury msg to HMRC: Sh+tting ourselves here, we haven’t finished writing the Budget yet and Alistair has gone AWOL

Budget2009 update: Alistair has locked himself in the toilet and won’t come out. Gordon has called in MetPolice to break down the door.

Budget2009: Back of fag packets currently being assembled into final document

#budget09 Alistair forgot to say “minus” before the growth forecast figures for 2010 and 2011. Next government’s problem anyway “

Hat tip for that to http://twitter.com/HMRevenue

You can follow me on Twitter http://twitter.com/andrewcazalet

There is a good summary of the main general Budget provisions here

Please do get in touch if you have any questions or clarification. Feel free to pass this on if you know anyone who might be interested.

Let the Taxman pay for your bike ride to work!

Under the Cycle To Work scheme an employee is allowed the tax and National Insurance free use of a bicycle for a period agreed between the parties but typically say three to four years.

It would normally be treated as a benefit in kind but in this instance the loan is free of income tax and national insurance. At the end of the term the employee would need to hand back the bike to the employer or more likely purchase it from them.

A purchase price at that point of say 10% or 20% of the original cost would seem possible as the second-hand value of bicycles is of course not very high.

Benefits of Scheme

The loan is free of income tax and national insurance. This would save each higher rate employee 41% of the market interest charged that would otherwise arise on the loan.

Often there is a Salary sacrifice arrangement between the employee and employer where the employee agrees to forgo salary over the life of the loan equivalent to the value of the bicycle at purchase.

Reclaim VAT at 17½% of the cost of the bicycle.

Capital allowances on the cost of the bicycle. Under present rules (possibly to change soon) this means the company would have been able to claim a tax deduction for 66% of the cost of the bicycle after three years. After six years this figure rises to 90% of the cost. Both this and the VAT saving can be passed onto the employee.

Conditions for the Scheme

Bicycle must be owned by the employer for the period of the loan. It cannot be transferred to the absolute ownership of the employee until the end of the loan period. Typically the employee might purchase this for market value at the end of the term.
The bike has to be used mainly for qualifying journeys. There is no statutory definition of “mainly” and the instructions to Revenue Officers in their manuals do state that employees are not required to keep detailed records!
The scheme has to be available to all employees on the same terms.
Please do get in touch if you want me to help you establish the scheme for your company.

Why use a tax adviser or an accountant to prepare your personal tax return?

Rather an odd question for a tax adviser to ask you might think? I was asked recently by someone why they should instruct me specifically to do their tax return which set me thinking…

There are many reasons of course but mainly clients tell me they want to be sure they are doing it right and have not missed anything they can claim ie for peace of mind.

Others are just busy people and want to park the hassle with someone else.

Even for pure advisory clients I find the process of completing the return helps identify areas in which a client had not realised there might be savings.

Some clients want a second opinion on personal and business financial matters. Many clients are in the financial area themselves and they could talk about it with friends and family but some people prefer a more confidential different voice.

There is a good article here which explains why you can do better than just using google and online software. But then I would say that wouldn’t I?

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