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Losses from a property business are calculated in the same way as losses from a trade. Losses made on the same type of property are automatically offset against profits made on other properties in the same portfolio for the same period – being ‘pooled’ together. Separate ‘pools’ are used for similar types of property, e.g. those not let on a commercial basis and foreign properties. Thus, two distinct and separate ‘pools’ will be created should there be both ... Continue Reading

Regardless of whether you are running your business as a sole trader, a company or a partnership, you need to tell HMRC.If you are a sole trader or an individual partner in a partnership you must register for self-assessment. This can be done online by following on the GOV.UK website at https://www.gov.uk/log-in-register-hmrc-online-services. HMRC will set up records from the information provided.A sole trader or individual partner also needs to register to pay Class 2 National Insurance contributions. ... Continue Reading

If you own an asset that has become worthless you can make a claim to treat the asset as if you had sold it and immediately reacquired it at the time of the claim for its value at that time.The claim, known as a negligible value claim, enables relief to be given for the loss in value of the asset.The loss is treated as arising in the year in which the claim is made, or at a time specified in the claim in the two preceding tax years during which time the conditions for the claim were met.Example:John ... Continue Reading

Capital allowances cannot generally be claimed by landlords who let residential property. They are more likely to be claimed by landlords of commercial property (e.g. hotels), as ‘plant and machinery’. The claim encompasses such assets as lifts, central heating and air-conditioning. Furnished holiday lettings are deemed to be a ‘trade’ and, as such, capital allowances can be claimed.The Annual Investment Allowance (AIA) is a 100% allowance on the cost of investment in standard ... Continue Reading

LITRG has asked the Government to delay changes to National Insurance contributions (NICs) for the self-employed to ensure the impact is fair and those affected understand the implications. Background The 2015 Budget confirmed the Government’s intention to abolish Class 2 NICs. This means that instead of paying two classes of NICs (Class 2 and Class 4), the self-employed will pay just one (Class 4) in the future. To the extent that this is a simplification, it is welcomed by LITRG – ... Continue Reading

A business must register for VAT if the VAT taxable turnover in the previous 12 months is more than the VAT registration threshold (£82,000 from 1 April 2015) or it is expected that this threshold will be exceeded within the next 30 days.A business whose turnover is below this level does not have to register for VAT but may choose to register voluntarily. This will allow VAT suffered on purchases and expenses to be reclaimed. This may offset the burden of charging VAT and accounting for it ... Continue Reading

Although the basic rate of income tax at 20% is the same as the rate of corporation tax (20% in financial year 2015), it can still be beneficial to incorporate and extract funds by way of dividends.This is because dividends do not attract National Insurance Contributions so by incorporating you will save Class 2 and Class 4 National Insurance Contributions. For 2015/16 you can also pay dividends until your income reaches the higher rate threshold without having to pay any more tax on those dividends ... Continue Reading

Currently a ‘Wear and Tear’ allowance can only be claimed on rental property that is let as fully furnished, that is when the property includes such items as a cooker, fridge, sofa, etc. The allowance cannot be claimed on unfurnished or partly furnished properties. The usual ‘test’ of status is whether the tenant can walk into the property and live there immediately. It would also confirm the situation if the lease included the word ‘furnished’.The claim is an ... Continue Reading

TW Ed raises some questions about government policy and corporate tax. Past Form: Roll Up, Roll Up The interaction of the dividend tax regime with Corporation Tax has meant that there has been a strong tax-based incentive for individuals or smaller family-type companies (broadly, Owner-Managed Businesses) to incorporate. This has subsisted for well over a decade, and through various governments.  It was, for instance, a government of a very different colour to now, that unveiled the nil starting ... Continue Reading

When setting up a limited company consider creating different classes of shares to allow the flexibility for different rights to be attributed to different shareholders. For example, dividends must be paid out in accordance with shareholdings. By creating different classes of shares it is possible to declare a dividend for one class and not for another, or to declare different dividends for different classes of shares. This allows the flexibility to extract profits in a tax-efficient manner.Likewise, ... Continue Reading