Government proposals for a new statutory residence test have been postponed until April 2013. In an unprecedented move, these guidelines will define tax residence for individuals, but not companies. They will in some cases mean that current and past presence in the UK could determine whether or not a person is regarded as a UK resident.
The test will comprise of three parts, they are as follows,
Part A: Non-Residence
An individual will be considered a non-resident if they,
– Are not a resident in the UK in all of the previous three tax years and are in the UK less than 45 days in the current tax year.
– Are resident in the UK in one or more of the previous three tax years and present in the UK less than 10 days in the current tax year.
– They have left the UK to carry out full-time work abroad and are present in the UK less than 90 days in the tax year, with no more than 20 of those spent working in the UK.
Part B: Residence
An individual will be considered a UK resident if they,
– Are present in the UK for 183 days or more in a tax year.
– Have only one home which is in the UK, or have two or more homes all of which are in the UK.
– Carry out full-time work in the UK over a continuous period of more than nine months, this excludes short breaks such as illness and holidays, with no more than 25% of the relevant duties being undertaken outside the UK within that period.
Part C: Connections and Day Counting
This part of the test will take the form of a tie breaker, and it will apply to individuals whose residence status doesn’t fall in to Part A or B. An individual must then compare the number of days they spend in the UK against factors such as whether or not an individual has family living in the UK, whether they have accommodation that they spend time in during the tax year, whether or not they carry out substantive work in the UK and whether or not they have spent 90 days or more in the UK in either of the previous two tax years.
What is it?
Back in the 2011 Autumn statement, the Chancellor George Osborne announced the introduction of an ‘above the line’ tax credit by April 2013 to encourage R&D activity by larger companies. Above the line tax credit will enable loss making companies to claim a payable credit.
The intention behind the credit is to incentivise the investment decision makers in companies.
Who Does it Apply to?
Companies or organisations can only claim R&D Relief if a project seeks to achieve an advance in overall knowledge or capability in a field of science through scientific or technological uncertainty. This is opposed to simply seeking an advance in ones own state of knowledge or capacity.
Defining Your Project
To determine whether your project falls in to the correct category, there are 4 questions that you should take in to consideration, they are as follows,
1) What is the scientific or technological advance?
This is where you should consider what exact scientific or technological advance is being sought, simply stating the name, process and functionality of the project will not suffice.
2) What were the scientific or technological uncertainties involved in the project?
This exists when knowledge of whether the projected outcomes are scientifically possible or technologically feasible is not readily available or deducible by a competent professional working in the field.
3) How and when were the uncertainties actually overcome?
This section is used to describe the methods adopted to overcome the uncertainties, and what analysis and subsequent investigations were undertaken. This section does not have to contain great detail, just a sufficient amount to show that the process was not straightforward.
4) Why was the knowledge being sought not readily deducible by a competent professional?
It might be publicly known that others have attempted to resolve the aforementioned uncertainties and failed, on the other hand the uncertainties may have been resolved however information doesn’t exist in the public domain that show precisely how.
Which Costs Qualify?
There are several costs that fall under the category of R&D, for example,
– Employee Costs.
– Staff Providers
– Payments to Clinical Trials Volunteers.
When to Claim
Claims for R&D Relief must be made in your Company Tax Return or amended return. The average time for making your claim is two years after the end of the relevant Corporation Tax accounting period.
A yacht broker based in Dorset has been jailed for failing to pay VAT on the sale of 6 luxury yachts worth £210,000. HRMC VAT officers became suspicious when it was found that the broker had received around £32,500 in VAT reclaims and charged and collected VAT from UK customers without declaring output tax to HMRC.
What is Entrepreneurs’ Relief?
Entrepreneurs’ Relief aims to reduce the amount of Capital Gains Tax on a disposal of qualifying business assets on or after 6th April 2008. This is provided that you have met the qualifying conditions throughout a one year qualifying period either up to the date of disposal or the date the businesses ceased trading.
The qualifying conditions for each individual are subject to a lifetime limit, they are as follows,
– For disposals on or after 6th April 2008 – 5th April 2010 = £1 million.
– For disposals on or after 6th April 2010 – 22nd June 2010 = 2 million.
– For disposals on or after 23rd June 2010 – 5th April 2011 = £5 million.
– For disposals on or after 6th April 2011 = £10 million.
Entrepreneurs’ Relief is available to individuals and some trustees of settlements. It is not however available to companies or personal representatives of deceased persons or in relation to a trust where the entire trust is a discretionary settlement.
What Can Relief be Claimed On?
Relief can be claimed on a disposal of assets which fall under the following categories,
– Assets used in the business comprised in a disposal of the whole or part of your business. Qualifying business assets in this category include goodwill and business premises, not included are shares, securities and any other assets held as investments.
– Assets that were used in your business or a partnership of which you were a member, providing they were disposed of within the period of three years after the business ceased trading. This category again excludes shares, securities and any other assets held as investments.
– One or more assets consisting of shares in or securities of your personal company. These shares however must be disposed of either while the company is a trading company, or where you hold shares in a holding company of a group, the group of companies is a trading group, or within three years from the date the company ceased trading or being a member of a trading group.
– Assets owned by you personally but used in a business carried on by either a partnership of which you are a member, or by your personal trading company. The disposal will only be able to qualify provided it is associated with a disposal of either your interest in the partnership, or of shares or securities in the company.
The creative sector in the UK is set to receive a welcome boost, earlier this year Chancellor George Osborne announced Corporation Tax Relief will come in to effect from April 2013. Whilst the tax relief is only being valued at what outsiders deem a relatively small amount (£50 million), it comes as a major boost to the creative sector.
The plan is to make the UK a more attractive location for the production of high budget video games, animation and television shows. It is hoped that the tax relief will stem a recent exodus of drama production from the UK, small screen productions such as ‘The Tudors’ and ‘Robin Hood’ have recently been shot abroad because it is cheaper to do so. The UK film industry has enjoyed the benefits of this relief since 2007, which provided £200 million in support in the past year alone.
Research carried out by the TV Coalition predicts that this relief could provide around £350 million per year as a result of high-budget TV productions moving to the UK. Not only this but the job market would also receive a welcome boost, with thousands of jobs being created and thousands more being preserved in what is a highly competitive economy.
Every year you are required to renew your Tax Credits claim, this is to ensure that you have been paid and are continued to be paid the correct amounts of money.
Who Needs to Renew?
If you’ve received an Annual Declaration form with an Annual Review notice then you are required to renew your claim.
If you only receive an Annual Review notice then your claim will be automatically renewed.
It is important to note however that you should contact the Tax Credit office straightaway if,
– You have had any change in circumstances
– Your income is different to what’s shown in the Annual Review notice
– There are details missing or mistakes on the notice.
How to Renew?
If you are required to renew, you will receive the appropriate forms in the post.
To do so, you can renew your claim in either one of two ways, you can either fill in the form and post it in the envelope provided, or if you prefer you can call the Tax Credit Helpline.
There is no option to renew your claim online.
What Happens if You Don’t Renew?
If you fail to renew your claim after being required to do so then your payments will stop, last year 400,000 people had their payments stopped due to their failure to renew.
Should you forget there is some slight leeway, you will have a further 30 days to provide the information required in the renewal pack.
If you fail to provide the information at the second time of asking then you will be required to make a new tax credits claim.
Tax Credits Deadline
The deadline for your Tax Credit renewal is 31st July 2012.
What are Tax Credits?
Tax credits are state benefits that provide extra money to people responsible for either children, disabled workers and other workers on lower incomes.
Tax credits can fall under one of two categories, Child Tax Credits or Working Tax Credits. Whilst they fall under separate categories, depending on your circumstances you may be entitled to both.
Tax credits are tax-free and you are not required to be paying National Insurance or Tax to qualify, Tax Credits are however means tested, and will be tested against your household income and current circumstances.
How much Tax Credit will you get?
The amount you are entitled to is initially based on your current circumstances and your income the previous year.
Anyone applying now for the first time would use their current family circumstance and the income they received in between 6th April 2011 and 5th April 2012.
It is important to note that if your income has fallen since last year, you can ask HMRC to revise your award based on your estimated annual income.
You must however be careful not to overestimate the fall in your income otherwise you may be overpaid tax credits which you’ll have to pay back at the end of the year.
Below are three examples of who may or may not be entitled to receive Tax Credits,
If you have children
If you have children under the age of one and your household income is less than £66,000 per annum then you may be eligible for Tax Credits, if your children are over the age of one then your household income must be less than £58,000 per annum.
If you don’t have children
If you’re single and your income is around £13,000 or less, then you may be entitled to some Tax Credits, if you’re part of a couple and your income is around £18,000 or less and you work at least 30 hour per week then you might also be entitled.
If you are a disabled worker or are over 50
If you’re returning to work after claiming benefits you might still qualify for working tax credits.
Don’t forget to check back tomorrow on Tuesday 24th July for part 2, ‘Renewing your Tax Credits’.
What is Property Tax?
Property Tax is a tax which is levied on property and payable by the owner.
What taxes will you face?
There are three types of tax which are specific to property, they are Council Tax (for residential property), Business Rates (for commercial property) and Stamp Duty Land Tax. It is important to note however, that due to the fact it may initially appear that only a small amount of taxes will apply to property tax, this is far from the truth, property investment is exposed to a huge range of UK taxes.
For example, tax is imposed when property is purchased (Stamp Duty Land Tax), rented out (Income Tax) and then sold (Capital Gains Tax). Tax is also imposed when goods or services are purchased (VAT), when investments through a company are made (Corporation Tax) and unfortunately even when they pass away (Inheritance Tax).
For those classed as Property Traders or Developers, Income Tax and National Insurance will be paid on profits gained from their property sales, or should they be using a company, Corporation Tax will be paid instead. It is also important to note that Property Developers must also account for tax under the Construction Industry Scheme when sub-contractors are used, this applies to even the most routine building work.
If an investor reaches the point where they decide to employ someone to help the business function more efficiently, they will have to pay PAYE and employers National Insurance. Insurance Premium Tax would also most likely be paid, as would Road Tax and duty on petrol bought. Should air miles be accumulated, Air Passenger Duty would also be due.
When faced with this complex and often confusing list, potential investors can be put off, however below we have listed the most important taxes which will apply should you choose to become a property investor.
Which taxes are the most important?
For the majority of property investors, Income Tax and Capital Gains Tax will comprise the majority of any potential tax burden. It will however depend on what type of property investor you are to determine exactly how these taxes will occur.
There are several different categories into which a property business can fall, and it is crucial that you understand how your business will be classified before any attempt at tax planning can be done.
National Insurance will form an additional layer of Income Tax for some classes of investor, Stamp Duty Land Tax and VAT may also have a significant impact.
For investors using a company, Corporation Tax could be of greater importance, Inheritance Tax is also likely to be a major concern for the majority of property investors.
There are many pitfalls in property investment, and it is vital to understand how your investment will be defined and what category it will fall under. If you require any guidance or advice on the subject, then we’re here to help.
Enterprise Investment Schemes (EIS)
95% of firms in the UK have less than 10 staff and in times of growing economic uncertainty, it is to these small businesses the government is turning to provide a welcome boost for our economy.
The one issue many small start ups have however is gaining worthwhile investment. Companies who are listed on the stock exchange will have an easier time finding investors as opposed to those companies who are not, this is where the Enterprise Investment Scheme (EIS) comes in.
The Government is well aware that investment in companies not listed on the stock exchange is smaller when compared to those which are, this is because of the risk factor involved. Due to this a series of tax reliefs are offered to encourage investors to share some of the risk.
What type of tax reliefs are offered?
There are two types of tax relief the EIS can offer and they can be found below,
Income Tax Relief
Capital Gains Tax Relief
Who can qualify?
The rules for qualifying can be quite complicated, however here we have broken them down in to two different sections, and the specific requirements for each can be found below,