We have just issued our latest ‘Tax Tips and News’ which includes:
• CJRS (Furlough Scheme) extended and made flexible
• Self Employed Scheme (SEISS) extended.
• Bounce back loans – a hit!
• VAT: Deferral of payments
• eCommerce businesses thriving and multiplying!
• CGT – PPR changes go ahead.
• Coronavirus and the high-income child benefit charge?
• MTD for VAT: Second phase delayed.
• Zoom video conferencing.
• What does your brand stand for?
• How purpose drives success
• Questions and Answers.
You can download a full pdf copy (and subscribe for future issues automatically) here.
Stay Safe – and call us if we can help!
Dean and Gina
The draft Finance Bill
clauses issued for consultation on 11 July include legislation to extend the
“off-payroll” working rules to the private sector from 6 April 2020. These
changes will have significant implications for workers providing their services
through personal service companies and also the end user organisations that
engage such workers.
End users will be
required to determine whether the worker would have been an employee if
directly engaged and hence the new rules apply to the services provided by the
worker via his or her personal service company. This will be a significant
additional administrative burden on the large and medium-sized businesses who
will be required to operate the new rules. The current CEST (Check Employment
Status for Tax) online tool would be improved before the proposed start date.
the end user decides the worker would have been an employee then they have to deduct
PAYE from the payments owed to the workers company.
“Small” businesses will
be outside of the new obligations and services supplied to such organisations
will continue to be dealt with under the current IR35 rules, with the worker
and his or her personal service company effectively self-assessing whether the
rules apply to that particular engagement.
The draft Finance Bill
confirms that the definition of “small” is linked to the Companies Act 2006
definition – An
eligible company will qualify as small if it meets at
least two out of three of: turnover: not more than £10.2m; balance sheet total:
not more than £5.1m; and. average number of employees: not more than 50.
– this is not your business size it is the size of the company you are working
Q. I borrowed some money from my company to lend to my brother. He is
paying it back in monthly instalments over three years. I am the sole director
and shareholder of the company and I am not charging my brother interest on the
loan. Are there any tax implications I need to consider?
A. The tax implications for the company are that the loan is deemed to
have been made to an associate of a participator in the company, and as such,
it will be caught by what are commonly referred to as the ‘section 455 rules’.
Broadly, these rules mean that the company will have to pay tax at 32.5% on the
amount of the loan outstanding nine months after the accounting year end of the
company. When the loan has subsequently been repaid to the company, HMRC will
refund the tax paid.
There is an exception to this, namely where a loan does not exceed £15,000, but
only when the shareholder does not own more than 5% of the shares.
If an employee of a relative of an employee receives an interest-free loan from
an employer, this will be a benefit-in-kind for the employee. Interest at the
‘official rate’ (currently 2.5%) is calculated, and this deemed interest is
subject to tax. However, there are exceptions to this tax charge where:
– the loan is a ‘qualifying loan’;
– a qualifying or non-qualifying loan is less than £10,000; and
– the employee can show that they received no benefit from the loan to the
Q. My child’s school is asking parents to make a one-off donation to help with much-needed school funds. If I complete a gift aid form for my donation, will I be able to can claim tax back on the payment?
A. If the school is a registered charity, either registered with the Charity Commission or with HMRC, you can make gift aid payments to them – both regular and one-off payments.
Under gift aid your donation is treated as being made net of basic rate tax (at 20%) tax and the charity claims the tax back from the government. So, if you make a donation of £100 under the Gift Aid scheme and you’re a basic rate taxpayer, the charity is able to claim back tax of £25 from the government, which means the charity receives £125, but it costs you only £100.
However, a higher rate taxpayer can claim 20% (the difference between the higher rate of tax at 40% cent and the basic rate of tax at 20%) as a tax deduction on the total value to the charity of the donation. So, on a gift of £100, a higher rate taxpayer can reclaim £25 (20% of the gross donation of £125). The claim is usually made via the individual’s self-assessment tax return.