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Changes to furnished holiday lettings. Are you affected?

Jun 17, 2011   //   by Ralph   //   Latest News  //  Comments Off on Changes to furnished holiday lettings. Are you affected?

This article is adapted from our article published in Llangollen News June 2011

 

Changes to the rules regarding furnished holiday lettings properties came into effect on the 6th April 2011 which may affect owners of holiday properties.

Offsetting losses against future profits

In previous years, it was possible to offset losses incurred against other sources of income, effectively reducing  tax liabilities arising from other business activities or employment.

From 6th April 2011, it will only be possible to offset any trading losses against future profits of the same holiday lettings business.

For profitable holiday home owners, this won’t be a problem, but could be bad news for those diversifying from other areas such as farming or retail.

It will still be possible to offset losses incurred against tax paid on other income for four years up to and including the 2010/2011 tax years, possibly allowing you to reclaim some tax.

Accommodation availability

There have also been changes to the number of days that the property must be available to let (and actually let) in order to qualify for tax breaks.  In previous years, the property must have been available to let for at least 140 days and actually let for at least 70 days.

In order to qualify from 6th April 2011, the property must be available to let for 210 days, and actually let for 105 days.

If these limits are not met, you can opt to continue receiving Furnished Holiday Letting relief for a period of 2 years before the property reverts to normal “investment property” rules.

Furnished Holiday Letting properties and Inheritance Tax

Whilst the value of your letting property can be considerable, and it’s usually considered to be a business asset (attracting Entrepreneur’s Relief on sale), letting out a property alone is not considered to be a “business” for the purposes of inheritance tax.

As such, the entire value of the property will be included in your estate when you die, and could be taxed at 40%, leaving your heirs liable for a hefty bill.

In order for the property to be eligible for business property relief (effectively removing it from your ‘chargeable’ estate) the owners of the property must be actively involved in the business.  This means more than cleaning the property and providing a welcome to your paying guests. Extra services such as childminding, provision of meals or the organising of excursions or trips for your guest should be offered.

Additional Tax Breaks

Allowances for ‘integral features’ are often overlooked by owners of holiday letting properties and can result in significant savings in some cases. Contact Us for more details if you’re not sure that you’re claiming all of the available allowances.

Are B&B owners affected?

Owner managed B&B owners are not affected by these changes, although the ‘split’ of the property between the space available to let and that retained for personal use needs to be taken into account.  Contact Us if you’re running a B&B and need advice on your tax affairs.

 

Contact T A Gittins & Company for help and advice with all aspects of running your holiday home business

Accountants Corner May 2011

May 17, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner May 2011

This article was first published in Llangollen News May 2011

Hello again and welcome to another edition of Accountants Corner. Easter has come and gone, we have had a royal wedding and we are now nearly one month into the new tax year. As promised last month, below is a brief resume of the main points of the 2011 budget.

Many of the measures that came into effect on the 6th April were announced in the budget on 22nd June last year, such as the £1,000 increase in personal allowance and the increases in the national insurance contributions.

Corporation Tax Despite some tax increases, the budget was warmly welcomed by the business community. There was a headline grabbing reduction in the rate of corporation tax by two percent to 26% but the small companies rate that applies to the majority of owner managed businesses only reduces by 1% to 20% effective from 1st April 2011. With the increases in National Insurance it may be worth considering the merits of converting your business to a limited company

Furnished Holiday Lettings Given the nature of our town, many people in and around Llangollen operate furnished holiday lettings. There are new rules that mean that in order to keep the tax breaks the number of days the accommodation is available and actually let have increased to 210 & 105 respectively, compared to 140 & 70 previously.

Approved mileage allowance payments. As from 6th April 2011 the rate for the first 10,000 miles has increased to 45p per mile (up from 40p), but the 25p rate remains the same. The passenger rate of 5p per mile per person is extended to volunteers.

Company Car Benefits The tax burden of owning a company car has increased in this tax year. The free fuel multiplier has increased to £18,800.

Childcare The rules have been changed to effectively restrict relief to that of basic rate taxpayers if you join the scheme after 6th April 2011

Capital Allowances. The maximum amount of annual investment allowance (AIA) is to be reduced from £100,000 to £25,000 from April 2012. There are transitional rules to cover those whose accounting period straddles the tax year end. It may be worth changing your year end to maximise the allowances available. Additionally there is a reduction in the rate of capital allowances available from 2012.

Capital Gains Tax. The main change is the increase in the lifetime limit for entrepreneurs relief to £10m from £5m. The annual exemption increases to £10,600.

Inheritance tax. As from 6th April 2012 there is a reduced rate of 36% for those that give at least 10% of the estate to charity. The threshold remains unchanged at £325,000.

Value Added Tax. The registration threshold increases to £73,000 from £70,000.

I apologise for the rather dry nature of this article but unfortunately to detail the budget proposals necessitates it. However we accountants view the world in a slightly different way. People usually see their glass as either half full or half empty, however we think the glass is twice as big as it needs to be.

 

Llangollen resident Ralph Robson can be contacted at the Wrexham offices of T A Gittins & Company on 01978 264846 for further advice in relation to the above or other taxation queries.

Accountants Corner April 2011

May 17, 2011   //   by Ralph   //   Latest News  //  Comments Off on Accountants Corner April 2011

This article was first published in the April edition of Llangollen News

Hello and welcome to Accountants Corner. I’m Ralph Robson FCCA a partner in TA Gittins & Company Chartered Accountants. We are a friendly client focussed firm that was established nearly 80 years ago with offices in Wrexham & Oswestry

In the coming months I hope in this article to be able to give highlights of the latest developments in the world of taxation and business and some things to consider if you are a business owner, an employee, or enjoying your retirement.

As the old adage says there are only two certainties in life – death and taxes. Unfortunately little can be done about the former, but by arranging one’s affairs efficiently it is possible to minimize the latter.

Many people will journey through life believing that they don’t need an accountant, but with the tax legislation of the United Kingdom being amongst the most voluminous in the world one can easily, and innocently, fall foul of the rules.

By the time you read this we will have had the 2011 budget, and you will no doubt have been bombarded in the press with facts and figures on how this will affect us. However the headline grabbing increases in alcohol and tobacco duty amongst others are less likely to make a difference than the details that are very often overlooked. Next month this article will give a brief overview of the budget proposals & the affect that they might have upon us all.

Notwithstanding the budget there have been several items worthy of note.

  • If you read this article soon after publication then there may be time before 5th April 2011 (the end of the 2010/11 tax year) to make sure all tax allowances and exemptions have been claimed.
  • The ISA investment limit for 2010/11 is £10,200 including a cash maximum of £5,100.
  • If you are paid mileage by your employer at a rate of less than 40p/mile for the first 10,000 miles and 25p/mile thereafter you are able to claim tax relief on the difference. This often applies to those in the care industry, but might equally apply to others who use their car for business.
  • HMRC are focussing on self-employed plumbers and associated trades and offering them minimal penalties and a restriction of five years to the review, in return for a full disclosure of undeclared income. This is the first trade to be targeted and no doubt other HMRC initiatives will follow.
  • As from 6th April the tax allowance in 2011/12 is increasing by £1,000 to £7,475, (£143.75 per week) and the lower earnings limit for National Insurance contributions is increasing to £102 per week.

No doubt there are many other things that spring to mind but the above is just a selection.

There are many ways to define an accountant but one that sometimes rings true is that an accountant will solve a problem you didn’t know you had in a way you don’t understand. I hope the future articles will help change this view.

Ralph Robson can be contacted at the Wrexham offices of T A Gittins & Company on 01978 264846 for further advice in relation to the above or other taxation queries.

Wrexham office refurbishment

May 17, 2011   //   by Ralph   //   Latest News  //  1 Comment

 

We are currently having the Wrexham offices refurbished, however they are still open for business as usual.

 

We apologise for any inconvenience caused. It is anticipated that the works will be completed by the end of May.

T A Gittins & Company sponsoring Breidden Rally 2011

May 11, 2011   //   by Ralph   //   Latest News  //  Comments Off on T A Gittins & Company sponsoring Breidden Rally 2011
We are pleased to announce that for the third year we will be sponsoring the Breidden Road Rally organised by Wesh Border Car Club.
The event based in Welshpool rallies over some of the best lanes in the country.
Full details of the event will be found on the Welsh Border car Club website www.welshborder.co.uk.
The October event has been voted best Welsh event in previous years.
Our Ralph Robson will be out on the night marshalling so let’s hope the Weather is dry.

New Pension Contribution Limits

Oct 14, 2010   //   by Ralph   //   Latest News  //  Comments Off on New Pension Contribution Limits

The main points of the statement made on 14th October 2010 by the Financial Secretary to the Treasury, Mark Hoban, are as follows:-

  • From April 2011 the annual allowance will be reduced from £255,000 to £50,000.
  • From April 2012 the lifetime allowance will be reduced from £1.8m to £1.5m
  • Defined benefit schemes will be valued using a flat factor of 16
  • Unused annual allowance from up to three previous years can be carried forward
  • Further consultaion will take place in November 2010 regarding flexibility over the payment of charges where limits have been breached

Please contact us if you wish to discuss the implications of the Minister’s statement

VAT increase January 2011

Oct 12, 2010   //   by Ralph   //   Latest News  //  Comments Off on VAT increase January 2011

From 4th January 2011 the main rate of VAT rises from 17.5% to 20%. This will affect all VAT registered traders. The rates for those on flat rate schemes also change on the same date. There are various antiforestalling provisons in the Finance Act to prevent losses to the exchequer. To discuss how the VAT rate change may affect you please contact us.

 

Changes to HMRC Penalty Regime

Oct 15, 2009   //   by Ralph   //   Latest News  //  Comments Off on Changes to HMRC Penalty Regime

2009 returns will be the first to come under HMRC’s new penalty regime. In order for taxpayers to avoid a penalty charge following an enquiry by HMRC for not taking reasonable care the taxpayer must be able to prove the following:

  1. the taxpayer has appoionted an accountant/tax advisor who they beleive to be competent for the work required.
  2. all necessary information was provided to the accountant/tax advisor to enable the work to be completed
  3. the taxpayer checks the return before it is submitted.

If the taxpayer brings the records in mid-January to be completed this will also be construed by HMRC  as not taking reasonable care.

Complete records need to be provided, again to avoid a panalty for failing to take reasonable care.

If you have any queries please do not hesitate to contact us.

VAT Returns and Payments

Oct 9, 2009   //   by Ralph   //   Latest News  //  Comments Off on VAT Returns and Payments

 

As from 1st April 2010 all VAT registered businesses with a turnover of more than £100,000 (excluding VAT) and all businesses newly registering for VAT regardless of turnover must file their returns online and pay electronically.

If your business falls into one of the above categories the changes will apply to return periods beginning on or after 1st April 2010.

Paper returns can still be filed for those that fall without the above categories but this will be reveiwed in the run up to 2012.

If you require any assistance please call us on 01978 264846 (Wrexham) or 01691 654246 (Oswestry)

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