Selling overseas property

Posted on 29th June 2023 by Solutions Accountancy

As a general rule, if you are resident in the UK, you are liable to pay Capital Gains Tax (CGT) when you sell (or dispose of) an overseas property at a gain.

The annual exempt amount applicable to CGT was reduced to £6,000 (from £12,300) for the current 2023-24 tax year. CGT is normally charged at a simple flat rate of 20% and this applies to most chargeable gains made by individuals. If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT.

A higher rate of CGT applies to gains on the disposal of residential property (apart from a principal private residence). The rates are 18% for basic rate taxpayers and 28% for higher rate taxpayers.

You may also have to pay tax in the country where the overseas property was located. If you are subject to paying double taxation, there may be reliefs available depending on what tax agreements are in place with the UK and the country where you made the taxable gain. There is also additional guidance available for dual residents.

There are special rules if you are resident in the UK, but your permanent home or domicile is abroad.

Marriage Allowance how it works

Posted on 29th June 2023 by Solutions Accountancy

The marriage allowance is available to married couples and those in a civil partnership where a spouse or civil partner does not pay tax or does not pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2023-24).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) does not pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,571 to £50,270 for the 2023-24 tax year. The limits for those living in Scotland may vary slightly from these figures.

Claiming the allowance could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year. In fact, even if a spouse or civil partner has died since 5 April 2018, the surviving person can still claim the allowance (if they qualify) by contacting HMRC’s Income Tax helpline.

If you meet the eligibility requirements and have not yet claimed the allowance, you can backdate your claim to 6 April 2017. This could result in a total tax refund of up to £1,242 if you can claim for 2019-20, 2020-21, 2021-22, 2022-23 as well as the current 2023-24 tax year. Even if you are no longer eligible, but you would have been in all or any of the preceding years, you can still claim your entitlement.

Duty free limits if you are travelling abroad

Posted on 29th June 2023 by Solutions Accountancy

If you are travelling from outside the UK and arriving home in Great Britain (England, Wales and Scotland), you are allowed to bring back the following goods for your own use without any UK tax or duty liabilities.

200 cigarettes or 100 cigarillos or 50 cigars or 250g of tobacco or 200 sticks of tobacco for electronic heated tobacco devices. This allowance can be split, so you could bring in 100 cigarettes and 25 cigars (both half of your allowance).
18 litres of still table wine.
42 litres of beer.
4 litres of spirits or strong liqueurs over 22% volume or 9 litres of fortified wine (such as port or sherry), sparkling wine or other alcoholic beverages of less than 22% volume. This allowance can be split, for example you could bring 4.5 litres of fortified wine and 2 litres of spirits (both half of your allowance).
£390 limit for of all other goods including perfume and souvenirs. If you are arriving by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270 tax free.

Northern Ireland

There are no limits on tobacco or alcohol brought into Northern Ireland from another EU country. This means that no duties or tax will be payable as long as you can demonstrate that the goods are for your own use and that you paid the relevant taxes and duties on the purchase.

However, HMRC provide the following guidelines as to an acceptable maximum for personal use. If you exceed these limits, you are more likely to be subject to further questioning.

800 cigarettes
200 cigars
400 cigarillos
1kg of tobacco
110 litres of beer
90 litres of wine
10 litres of spirits
20 litres of fortified wine (for example port or sherry).

Protecting intellectual property

Posted on 27th June 2023 by Solutions Accountancy

Having the right type of intellectual property protection helps you stop people stealing or copying:

the names of your products or brands;
your inventions;
the design or look of your products; and
things you write, make or produce.

Copyright, patents, designs and trademarks are all types of intellectual property protection. You get some types of protection automatically, others you have to apply for.

You own intellectual property if you:

created it (and it meets the requirements for copyright, a patent or a design);
bought intellectual property rights from the creator or a previous owner; and
have a brand that could be a trademark, for example, a well-known product name.

Intellectual property can have more than one owner, belong to people or businesses, and be sold or transferred.

If you have concerns that your ideas or business brands are vulnerable contact a professional patent or trademark attorney.

Offshore taxpayers offered chance to come clean

Posted on 22nd June 2023 by Solutions Accountancy

HMRC is currently writing to UK residents who were named in the leaked Pandora Papers and offering them the chance to regularise their tax affairs. The letters are being sent to UK residents named in the files of 14 offshore financial service providers.

During 2021 and 2022, the International Consortium of Investigative Journalists released more than 11 million records from 14 offshore service providers, this is known as the Pandora Papers. HMRC has been analysing this data, which is the largest ever release of financial documents to identify UK residents with untaxed offshore assets.

HMRC’s letters, which started distribution earlier this month, warn recipients to report all their overseas income or gains on which they owe UK tax or face penalties of up to 200% of any tax due or prosecution.

There are typically two methods for making a disclosure.

The Contractual Disclosure Facility (CDF) is a facility for taxpayers to disclose serious tax fraud to HMRC. The CDF is only suitable for taxpayers who want to confess to tax fraud. It is not a method to notify HMRC about errors, mistakes or avoidance schemes where no fraud has taken place. HMRC will not criminally investigate and prosecute taxpayers over fraud disclosed as part of the CDF contract. This is in return for the taxpayer meeting some important conditions including making a full, open, and honest disclosure of all the tax fraud committed. If all the conditions are met, the investigation will be conducted using civil powers, with a view to a civil settlement for tax, interest and a financial penalty.
The Worldwide Disclosure Facility (WDF) was launched in September 2016 and is open to those who want to disclose a UK tax liability that relates wholly or partly to an offshore issue. Unlike previous disclosure opportunities, the WDF does not offer any special terms for settling tax affairs and in most cases any interest and penalties levied will be charged in full. The WDF Facility does not provide any protection from prosecution and so where there is deliberate and/or fraudulent conduct, such as evasion, the CDF is the more appropriate facility.

Recipients of these letters should seek professional advice as a matter of urgency.

Deadline to top-up NIC contributions extended

Posted on 22nd June 2023 by Solutions Accountancy

In certain circumstances it can be beneficial to make voluntary National Insurance Contributions (NICs) to increase your entitlement to benefits, including the State or New State Pension.

Usually, HMRC allow you to pay voluntary contributions for the past 6 tax years. The deadline is 5 April each year. However, there is currently an opportunity for people to make up for gaps in their NICs for the tax years from April 2006 to April 2017 as part of transitional measures to the new State Pension.

This deadline was set to expire on 5 April 2023 but had been extended until 31 July 2023. The deadline has now been further extended until 5 April 2025 to help allay continued concerns that the existing deadline would not have allowed many taxpayers to fill gaps in their NIC records. HMRC’s helplines have been struggling to meet the demands for information and processing claims to pay additional NIC contributions.

HMRC has also confirmed that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022-23 until 5 April 2025.

You might want to consider making voluntary NICs if:

You are close to State Pension age and do not have enough qualifying years to get the full State Pension.
You know you will not be able to get the qualifying years you need to get the full State Pension during the remainder of your working life.
You are self-employed and do not have to pay Class 2 National Insurance contributions because they have low profits.
You live outside the UK but want to qualify for benefits.

If you fall within any of these categories, it may be beneficial to get a State Pension forecast and examine whether you should consider making voluntary NICs to make up missing years, known as topping up. Not everyone will benefit from making voluntary NICs and a lot depends on how close you are to retirement age and your NIC payments to date. If you think this opportunity may be relevant to your circumstances, please be in touch.

HMRC’s Self-Assessment line summer closure

Posted on 22nd June 2023 by Solutions Accountancy

HMRC’s Self-Assessment helpline closed on 12 June 2023 and will re-open on 4 September 2023. This closure is part of a trial to direct Self-Assessment queries from the helpline to HMRC’s digital services, including online guidance, digital assistant and webchat.

This move has been planned for a ‘quiet’ time for Self-Assessment queries and the helpline will reopen on 4 September 2023 so taxpayers can receive expert support in the 5 months running up to the Self-Assessment deadline on 31 January 2024.

HMRC says that the helpline receives far fewer calls over the summer, with calls around 50% higher between January and April compared with June to August. It remains to be seen what the impact of the closure will be, but this is likely to result in significant disruption for taxpayers.

The Chair of the Treasury Committee said:

'Given the potentially significant impact closing the Self-Assessment helpline may have on taxpayers, we’re looking for clarification that HMRC has fully considered the costs and benefits of this decision.

There are also concerns around the short notice with which this was announced. HMRC must be open, upfront and transparent when making decisions which could impact so many individuals.'

HMRC has stressed that this trial will free up 350 advisers (full-time equivalent) to take urgent calls on other lines and answer customer correspondence. HMRC also stresses that the vast majority of Self-Assessment taxpayers use HMRC’s online services, with 97% filing online.

If you have any Self-Assessment queries and are unable to reach HMRC, please call, we will be happy to assist.

Regulated businesses hit with Anti-Money Laundering fines

Posted on 22nd June 2023 by Solutions Accountancy

The Money Laundering Regulations (MLR) are designed to protect the UK financial system and put in place certain controls to prevent businesses being used for money laundering by criminals and terrorists.

HMRC has named 240 supervised businesses that have been fined a total of £3.2 million for not complying with the anti-money laundering rules. The fines were issued between 1 July and 31 December 2022 for breaches of the regulations designed to stop criminals laundering money from illegal activity.

One of the businesses, based in London, was hit with a large fine of £1.4 million for failing to carry out risk assessments, not having appropriate anti-money laundering controls, and failing to conduct proper due diligence checks.

This crackdown on money service businesses has resulted in a significant reduction in these types of firms over the last number of years.

HMRC is clear that money service businesses provide vital services to the community, offering currency exchange, money transmission and cheque cashing. However, criminals can exploit them to launder the proceeds of crime and so must have a robust risk assessment and policies, controls, and procedures to prevent this.

Capital Gains Tax Gift Hold-Over Relief

Posted on 22nd June 2023 by Solutions Accountancy

Gift Hold-Over Relief is a tax relief that results in a deferral of Capital Gains Tax (CGT). The relief can be claimed when assets are given away (including certain shares) or sold for less than they are worth to help benefit the buyer. The relief means that any gain on the asset is 'held-over' until the recipient of the gift sells or disposes of them. This is done by reducing the donee's acquisition cost by the amount of the held over gain.

The person gifting a qualifying asset is not subject to CGT on the gift. However, CGT may be payable where the asset is sold for less than it’s worth. Gifts between spouses and civil partners don’t trigger capital gains. A claim for the relief must be made jointly with the person to whom the gift was made.

If you are giving away business assets, you must:

be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company'); and
use the assets in your business or personal company.

You can usually get partial relief if you used the assets only partly for your business.

If you are giving away shares, then the shares must be in a company that is either:

not listed on any recognised stock exchange; or
your personal company.

The company's main activities must be of a trading nature, for example, providing goods or services rather than non-trading activities like investment.

VAT Exempt services

Posted on 22nd June 2023 by Solutions Accountancy

A business that incurs expenditure on taxable and exempt business activities is partially exempt for VAT purposes.

This means that the business is required to make an apportionment between the activities using a 'partial exemption method' in order to calculate how much input tax is recoverable.

Businesses that make both taxable and exempt supplies must keep a separate record of exempt supplies along with details of how much VAT has been reclaimed.

There are a number of partial exemption methods available. The standard method of recovering any remaining input tax is to apply the ratio of the value of taxable supplies to total supplies, subject to the exclusion of certain items which could prove distortive. The standard method is automatically overridden where it produces a result that differs substantially from one based on the actual use of inputs. It is possible to agree a special method with HMRC.

The VAT incurred on exempt supplies can be recovered subject to two parallel de-minimis limits.

The tests are met where the total value of exempt input tax:

Is under £625 a month (£1,875 a quarter/£7,500 a year); and
Is less than half of the total input tax incurred.

If both tests are met the VAT can be recovered. Businesses that are partially exempt, need to complete this calculation on a quarterly basis as well as completing an annual calculation.