Tax Insider 3 x Newsletter Bundle 

Penalties: Let’s be reasonable!

Tax return filing season is well and truly here. Unfortunately, many individuals within self-assessment will submit their return after the filing deadline (i.e. normally 31 January after the end of the tax year) and face a penalty from HM Revenue and Customs (HMRC).

Mark McLaughlin looks at when penalties for late tax returns might be set aside due to a reasonable excuse for the late filing.

Extra cash from renting out your spare room

The rent-a-room scheme is an optional tax exemption scheme, which allows individuals to receive up to £7,500 of tax-free gross income (i.e. income before expenses) from renting out spare rooms in their only or main home. 

As the Coronavirus continues to impact on household incomes, Sarah Laing points out that renting out a spare room can provide a tax-free cash boost.

Late or missing VAT returns: What happens next?

The deadline for submitting the return online and paying HMRC are usually the same - one calendar month and seven days after the end of an accounting period. One day late and a default will be recorded.  

Andrew Needham looks at the consequences of submitting a late return or not sending one in at all.

Losses: When can you use them?

A major, yet fairly basic, part of income and corporation tax planning consists of the efficient use of losses, i.e. offsetting those losses against other profits. Many of the infamous tax avoidance schemes involved the (artificial) creation of losses to offset against other income and thus reduce or claim back tax. 

Chris Thorpe offers an overview on the tax-efficient use of losses for tax purposes.

Move over! Husband and wife companies

The term ‘income shifting’ is used to describe the transfer of income-producing assets between family members (usually spouses or civil partners) either where one pays income tax at a lower marginal rate than the other, or to ensure that personal allowances are fully utilised. Income shifting (or splitting) is a legitimate form of tax planning, provided you are careful not to trigger any anti-avoidance rules.

Jennifer Adams considers the tax implications of transferring income producing assets between spouses.

Leaving the UK? Don’t come back too soon!

The statutory residence test (which took effect in April 2013) has made it possible to ascertain, with reasonable certainty, whether you are resident or non-resident in the UK for a particular tax year. 

Kevin Read reminds readers of the anti-avoidance rules affecting temporary non-residents.

Ho ho ho…Christmas gifting without the IHT sting!

Inheritance tax (IHT), contrary to popular belief, is not a death tax but a gift tax, which means that a taxpayer can be taxed in life as well as on their estate at death. 

Meg Saksida explains which gifts should be free from inheritance tax consequences this Christmas.

Q&As with Arthur Weller

Incorporation: The price is right?

Sole traders or partnerships often incorporate, so that the business operates through a company. This can be done in various ways. 

Mark McLaughlin highlights a case in which the valuation of a business on incorporation proved costly to the vendor. 

Unpaid tax bills: Easing the burden

The Covid-19 pandemic has caused financial hardship for many businesses and individuals. In recognition of this, the government has put in place various measures to allow taxpayers to delay tax payments. In setting out his Winter Economy Plan in late September 2020, the Chancellor outlined further measures to give taxpayers the option to defer payment of VAT and tax due under self-assessment in instalments.   

Sarah Bradford explores the options available for those struggling to pay their tax bills.

The trials and tribulations of ‘bad’ business loans

Always ready to tax you on any kind of profit or gain you’ve made, HMRC are much slower to allow relief for losses; a prime example is in the area of loans that an individual has made to someone else for the purpose of a trade, which turn out to be bad. 

Alan Pink looks at ways of achieving and maximising effective tax relief for irrecoverable loans to other businesses by individuals.

Dividends: Is that ‘settled’?

Lee Sharpe looks at the key points to beware when transferring shares to make dividend payments to other family members. 

Smaller owner-managed companies may be feeling a little unloved by the Chancellor right now. 

Q&As with Arthur Weller

PPR relief: Three (refusals) in a row!

Principal private residence (PPR) relief for capital gains tax purposes is available on most disposals by individuals of their dwelling-house. The assumption is normally that any capital gain will be subject to PPR relief. 

Mark McLaughlin highlights a case in which claims for capital gains tax principal private residence relief on the disposal of three properties in consecutive tax years all failed. 

Keep it simple! Vehicle expenses for landlords

Most people would prefer to spend less time dealing with administration, and landlords are no exception. When it comes to working out what expenses a landlord can deduct in calculating the profits of their property rental business, there are ways to save work. 

Sarah Bradford explains how using simplified expenses for vehicle costs can save work.

Minimising property profits in the pandemic

Arguably, landlords are being expected to shoulder an unfair burden in the context of the current government action against Coronavirus. 

Alan Pink considers the scope for buy-to-let landlords to reduce their taxable profits in the current general financial difficulties.

How can HMRC find out about my rental income?

Paying tax on income from rented residential and commercial property is a necessary part of running a property business. However, a new landlord could be forgiven for overlooking this in the hustle and bustle of purchasing the property, making any renovations/repairs essential for letting, negotiating agents fees, finding tenants, arranging insurance and so many other (e.g. fire and health and safety) obligations to deal with. 

Mark McLaughlin highlights an income tax anti-avoidance provision that merits careful attention. 

Q&As with Arthur Weller