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.
recent years the number of ‘online traders’ or ‘Ecommerce’ businesses has grown
considerably and in the next ten years we believe the market will at least double!
& Co began advised several substantial eBay traders over ten years ago and due
to the significant growth of Amazon FBA (and many other markets) we have been very
fortunate to have attracted a significant number of these businesses as clients
from across the UK (and overseas).
consider ourselves to be ‘the specialists’ in this area. We are regularly contacted
by businesses whose accountants just don’t handle (or understand) this
of these businesses need (and expect) an online bookkeeping system that caters
for the complex reports flowing from Amazon, PayPal, Stripe etc. They also need confidence that their VAT and
taxes are being properly handled.
know of an Ecommerce business proprietor that is struggling for advice from
their advisors and accountants or need certainty about their bookkeeping, VAT
registration requirements (including EU / international), VAT calculations and
schemes (and of course MTD) please ask them to contact us for a chat!
Under new rules due to come in on
1 October 2019 builders, sub-contractors and other trades associated with the
construction industry will have start using a new method of accounting for VAT.
the new rules, supplies of standard or reduced-rated building services between
VAT-registered businesses in the supply chain will not be invoiced in the
normal way. Under the reverse charge, a main contractor would account for the
VAT on the services of any sub-contractor and the supplier does not invoice for
VAT. The customer (main contractor) would then account for VAT on the net value
of the supplier’s invoice and at the same time deduct that VAT from the payment
to the sub-contractor.
is intended to ensure that VAT is correctly accounted for on supplies by
new reverse charge will apply to a wide range of services in the building
trade, primarily those activities covered by the construction industry (CIS)
payment rules. Note that normal VAT invoices will continue to be issued to
contact us if you are likely to be affected by these changes and we can work
with you to ensure you are ready for the new system.