Archive for January, 2021

Business relief for Inheritance Tax

Thursday, January 28th, 2021

It is possible that your estate will pay no IHT on the valuation of any business assets. The amount of relief available depends on the type of assets held at death. Your estate may be able to claim 50% or possibly 100% relief.

You can get 100% Business Relief on:

  • a business or interest in a business,
  • shares in an unlisted company.

You can get 50% Business Relief on:

  • shares controlling more than 50% of the voting rights in a listed company,
  • land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled,
  • land, buildings or machinery used in the business and held in a trust that it has the right to benefit from.

You can only get relief if the deceased owned the business or asset for at least two years before they died.

What doesn’t qualify for Business Relief?

You can’t claim Business Relief if the company:

  • mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments,
  • is a not-for-profit organisation,
  • is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company,
  • is being wound up, unless this is part of a process to allow the business of the company to carry on.

You can’t claim Business Relief on an asset if it:

  • also qualifies for Agricultural Relief,
  • wasn’t used mainly for business in the 2 years before it was either passed on as a gift or as part of the will,
  • isn’t needed for future use in the business.

If part of a non-qualifying asset is used in the business, that part might qualify for Business Relief.

For example, if you use one room in a building as a shop and the other rooms are used as your home, the shop will qualify for Business Relief, but the rooms will not.

Relief for agricultural property

You may be able to get Business Relief on a transfer of agricultural property (e.g., farmland, buildings or farm equipment) which isn’t eligible for agricultural relief.

Please call if you need more information on this topic or any other aspect of your family estate tax planning.

Do you continue to trade with the EU?

Tuesday, January 26th, 2021

Government have set out a list of six actions that all businesses who continue to trade with EU customers or suppliers should complete now that the formal transition has ended..

The list is:

  1. Goods – if you import or export goods to the EU, you must get an EORI number, make customs declarations or employ an agent to do them for you, check if your goods require extra papers (like plant or animal products) and speak to the EU business you’re trading with to make sure they’re completing the right EU paperwork. There are also special rules that apply to Northern Ireland. Hauliers must obtain a Kent Access Permit and have a negative COVID test before they head to port in Kent.                                     
  2. Services – if you deliver services to the EU, you must check whether your professional qualification is recognised by the appropriate EU regulator.                  
  3. People – if you need to hire skilled staff from the EU, you must apply to become a licensed sponsor.                                                                                         
  4. Travel – if you need to travel to the EU for business, you must check whether you need a visa or work permit.                                                                        
  5. Data – if your goods are protected by Intellectual Property (IP), you will need to check the new rules for parallel exporting IP protected goods from the UK to the EU, Norway, Iceland and Liechtenstein. You risk infringing on IP rights if you do not follow the new rules.                                                                      
  6. Accounting and reporting – if your business has a presence in the EU you may need to change how you undertake accounting and reporting to ensure compliance with the relevant requirements.

These six key actions should act as a guide for every business affected by the new rules, with more detailed, personalised advice available through the checker tool on gov.uk/transition.

Private residence, court actions available on separation or divorce

Thursday, January 21st, 2021

Couples may have experienced the difficulties that can arise when couples separate or divorce. One area where they may need to resolve are the options that courts have to direct ownership of the marital home. The courts can exercise their jurisdiction in the following ways.

  • By recognising an existing equitable interest of the spouse or civil partner who does not have legal title to the dwelling house.
  • By ordering the spouse or civil partner owning the home (or an interest in it) to transfer it to the other spouse or civil partner.
  • By ordering the spouse or civil partner owning the home (or an interest in it) to hold it on trust for the other spouse or civil partner for a limited period.
  • By ordering the spouse or civil partner owning the home to sell it and to pay the other spouse or civil partner a capital sum out of the proceeds of sale.
  • By both determining that one of the spouses or civil partners had an equitable interest in the home and ordering the other spouse or other civil partner to transfer some or all of their interest in the home or to pay a capital sum out of their share of the sale proceeds.

Where the marital home is the couple’s main asset the outcome of these deliberations is clearly significant.

1st March – Big Changes for VAT in Construction

Wednesday, January 20th, 2021

20th January 2021

After some delays, it seems the new “reverse charge” system of VAT for many construction projects will come into force on 1st March.  Everybody who is in the construction sector, or commissioning building and construction works, might stop to have a read:

Construction VAT Reverse Charge Guide Jan 21

If you have any questions on this, why not speak to our VAT manager, Helen Goodwin?

Helen.Goodwin@MilneCraig.co.uk

 

Consider online tax payment plans

Tuesday, January 19th, 2021

January is the month that taxpayers registered for self-assessment need to pay their taxes. Usually, this amounts to any underpayment for the previous tax year and a first payment on account for the current tax year.

Unfortunately, HMRC will base their payment on account for 2020-21 on the self-assessment liability for the previous tax year, 2019-20. As may traders have experienced a downturn in profits during the period of COVID disruption since February 2019, they need to reduce their payments on account for 2020-21 to reflect the lower profit compared to that for 2019-20.

In this way you can recalculate any payments on account for 2020-21 based on the reduced activity.

Even with these reductions in the January 2021, payment on account, many taxpayers will be faced with paying tax bills and have no funds to do so.

In a recent press release, HMRC explained the current support they are prepared to offer taxpayers to spread any tax payments over twelve monthly instalments.

They said:

Almost 25,000 Self-Assessment customers have set up an online payment plan to manage their tax liabilities in up to 12 monthly instalments, totalling £69.1 million, HM Revenue and Customs (HMRC) has revealed today (13 January 2021).

In October, HMRC increased the threshold for self-serve Time to Pay arrangements from £10,000 to £30,000 for Self-Assessment customers. Once they have completed their 2019-20 tax return and know how much tax they owe, customers can use the self-serve facility to set up monthly direct debits and spread the cost of their tax bill.

Visit GOV.UK to find out more about Payments on Account.

The self-serve Time to Pay threshold was increased to help businesses and individuals who have been affected by the coronavirus pandemic. Supporting Self-Assessment customers to manage their tax bills can help ease their financial commitments into more manageable monthly payments. To date, the average value of payment plans set up online is £2,821.

Customers can apply for the payment plan via GOV.UK. However, they must meet the following requirements:

  • they need to have no:
    • outstanding tax returns
    • other tax debts
    • other HMRC payment plans set up
  • the debt needs to be between £32 and £30,000
  • the payment plan needs to be set up no later than 60 days after the due date of a debt

 

NOTE: Be aware of copycat HMRC websites and phishing scams. Taxpayers should always type in the full online address www.gov.uk/hmrc to get the correct link for their Self-Assessment tax return online securely and free of charge.

They also need to be alert if someone calls, emails or texts claiming to be from HMRC, saying that they can claim financial help, are due a tax refund or owe tax. It might be a scam. Check GOV.UK for information on how to recognise genuine HMRC contact.

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