VAT on building a new home

If you’re building a new home, you may be able to reclaim the VAT back on the materials used, potentially making a lot of difference to the final costs.

You can apply for a VAT refund on building materials and services if you’re:

  • building a new home
  • converting a property into a home
  • building a non-profit communal residence – e.g. a hospice
  • building a property for a charity

The building work and materials have to qualify and you must apply to HM Revenue and Customs (HMRC) within 3 months of completing the work.

To qualify for the reclaim of VAT, you must meet the following conditions:

  • You may claim a VAT refund for building materials that are incorporated into the building and can’t be removed without tools or damaging the building.
  • The building must be for one of the following purposes:
  • Non-business – you can’t charge a fee for the use of the building
  • Charitable, for example a hospice
  • Residential, for example a children’s home

What doesn’t qualify?

  • building projects in the Channel Islands
  • materials or services that don’t have any VAT – for example, they were zero-rated or exempt
  • professional or supervisory fees – for example, architects or surveyors
  • hiring machinery or equipment
  • buildings for business purposes
  • buildings that can’t be sold or used separately from another property because of a planning permission condition
  • building materials that aren’t permanently attached to or part of the building itself
  • fitted furniture, some electrical and gas appliances, carpets or garden ornaments

How to claim

Fill in form 431NB to claim a VAT refund on a new build, or 431C to claim for a conversion.

There are lots of useful guidance notes included with these forms.

For further information or help on the above, please call the office on 0116 242 3400 or emails on info@torrwaterfield.co.uk 

James Yarnall, Accounts 

Clause 24 in the Finance Act – Is it affecting you?

We have known for some time that Landlords have been hit hard by recent tax changes:

  • Clause 24 restricting relief for interest;
  • 8% extra capital gains tax;
  • 3% extra stamp duty.

Clause 24 of the Finance Act set out restrictions for individuals on claiming loan interest as a cost against property investment income, for individuals it works as follows:

  • For the tax year just ended 2017/2018, 75% of the interest can be claimed in full and 25% will get relief at 20%;
  • For this tax year just started 2018/19, 50% of the interest can be claimed in full and 50% will get relief at 20%;
  • From 6 April next year to 5 April 2020, 25% of the interest can be claimed in full and 75% will get relief at 20%;
  • And finally from 6 April 2021, 100% will get only 20% relief.

Essentially Clause 24 removes Interest from the allowable property expenses, and gives you tax relief at 20% instead, so that Higher Rate tax payers will pay more tax.

However, these rules do not apply to companies and therefore they will continue to claim full relief.

If you would like to discuss any of this further please get in touch on 0116 2423400 or info@torrwaterfield.co.uk

Paul Witherington, Accounts & Tax 

P11Ds – Return of Expenses and Benefits

It is that time of year again when your organisation’s P11D forms will need to be prepared and submitted to the Inland Revenue. The most common entries being the car or van benefit, with or without fuel for private use.

In addition to the above, directors/employees are sometimes provided with private health insurance.  The best way of dealing with this is to ensure that the contract is between the employer and the insurance company and therefore the amount is treated as a benefit in kind and reported on a P11D 

However, sometimes the employer will offer to pay the employee’s personal medical insurance directly.  In this case the contract for the health insurance will be between the insurance company and the director/employee and the payment is treated very differently to the above.  If the company pays the bill on behalf of the employee the amount is entered onto the P11D for tax purposes but is dealt with through the payroll for National Insurance.  This, as you can imagine, gets very messy.

This does not just apply to medical insurance but also any contract in the director/employee’s name that the employer settles on behalf of the director/employee.  Another common one that springs to mind is a mobile phone bill. 

The moral of the above is to set up medical insurance/mobile phone contracts between the employer and the supplier directly which simplifies the treatment of dealing with the whole reporting process.

The above is just a small part of the P11D system so please get in touch if you require any help. 0116 24243400 or info@torrwaterfield.co.uk

Julia Harrison , Tax Manager 

Why has my tax code changed?

“How do I know if my tax code is correct?”

Your tax code is used by your employer to calculate how much tax needs to be deducted from your pay. HMRC tells your employer which code to use to collect the right amount of tax from you. You can check your income tax online to see what your tax code is, how your tax code has been worked out and how much tax you have paid and are likely to pay in the coming months.

“What does my tax code actually mean?”

Your tax code represents how much tax free income you have for that tax year, for example the standard tax code for the 2018/19 tax year is 1185L and this means you have a tax free income of £11,850.

“What does the letter in my tax code mean?”

The letter in your tax code represents your situation and how that affects your tax free income, for example:

  • L = You’re entitled to the standard tax free allowance.
  • M & N = Marriage Allowance, this means you have either transferred or received personal allowance to or from your partner.
  • 0T = Your personal allowance has been used up or you’ve started a new job and your employer doesn’t have all of your starter details.

To see the full list on the HMRC website please click here.

“Why is there a W1/M1 at the end of my tax code?”

The W1/M1 means that the tax code is non-cumulative; in these cases tax will be calculated purely based on the taxable pay for that pay period. Each pay day is treated as if it is the first week or month of the tax year. All previous pay and tax are ignored.

There are a few reasons you may have been put on this type of code, for example:

  • Started a new job
  • Getting Company benefits or state pension
  • Becoming employed after being self employed

These tax codes are generally temporary and you or your employer can update this.

“How do I change my tax code?”

 You can use the HMRC online services to tell HMRC about any missing or incorrect information. They will then update this by sending you and your employer a P6 tax coding notice. If you can’t use the online services you can call HMRC on 0300 200 3300 and they will help guide you through and get your tax code updated.

If you would like to discuss this further then please get in touch on 0116 242 3400.

Polly Dennis, Payroll Assistant 

The following Tax Events are due on 19th April 2018.

The following Tax Events are due on 19th April 2018:

Business Tax Events

PAYE quarterly payments are due for small employers for the pay periods 6th January 2018 to 5th April 2018.

This deadline is relevant to small employers and contractors only. As a small employer with income tax, national insurance and student loan deductions of less than £1,500 a month you are required to make payment to HMRC of the income tax, national insurance and student loan deductions on a quarterly basis.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

PAYE, Student loan and CIS deductions are due for the month to 5th April 2018.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Employers are required to make payment to HMRC of the income tax, national insurance and student loan deductions. Contractors are required to make payment to HMRC of the tax deductions made from subcontractors under the CIS.

Postal payments for month/quarter ended 5 April should reach your HMRC Accounts Office by this date.

Where the payment is made electronically the deadline for receipt of cleared payment is Friday 20th April 2018 unless you are able to arrange a ‘Faster Payment’ to clear on or by Sunday 22nd April.

Penalties apply if payment is made late.

Automatic interest is charged where PAYE tax, Student loan deductions, Class 1 NI or CIS deductions for 2017/18 are not paid by today. Penalties may also apply if any payments have been made late throughout the tax year.

This deadline is relevant to employers who have made PAYE deductions from their employees’ salaries and to contractors who have paid subcontractors under the CIS.

Deadline for employers’ final PAYE return to be submitted online for 2017/18.

This deadline is relevant to employers.

This is the last day by which your final Full Payment Summary (FPS) for the 2017/18 tax year should be sent to HMRC.

You will not be able to file an FPS relating to 2017/18 after 19th April. If you need to make an amendment or correction to the details reported on a 2017/18 FPS you will need to submit an Earlier Year Update (EYU).

Please be aware that if we deal with the payroll on your behalf that we will ensure that this matter is dealt with on a timely basis.

If you would like to discuss this any further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk 

We send monthly reminders about all upcoming tax deadlines and other important business related deadlines. If you would like to receive these email notifications please register here https://www.torrwaterfield.co.uk/registration/register 

 

 

How do you complete a Monthly CIS Return?

What is CIS?

The Construction Industry Scheme is a method of deducting tax from subcontractors in the building sector. Contractors deduct a percentage of the money owed on their payments to subcontractors and pass it over directly to HMRC. The amounts are effectively taxed at source as the sub-contractor does not get the money.  The deducted CIS tax counts as advance payments towards the tax and National Insurance contributions that will be calculated upon completion of the subcontractor’s self-assessment tax return.

What do I need to complete a return?

Monthly CIS returns need to be submitted by the contractor to HMRC to disclose the amount of CIS which has been deducted and is therefore due to be paid over to HMRC.

The contractor needs from the subcontractor an invoice which states the money they are owed.

The invoice should split out the materials and labour with CIS only being deductible on the labour element of the invoice. CIS is deducted at 20% providing the subcontractor has a UTR (unique tax reference) number which should be displayed on the invoice. If there is no UTR number then CIS will be deducted at 30%.

How do I do it?

CIS periods run from the 6th of the month to the 5th of the month following – for example, 6th March – 5th April. The CIS return then needs to be submitted and the liability paid over within two weeks of the period end – 19th April for example in order to avoid facing late filing charges. The return can be manually entered under the contractor’s logon on the HMRC website or it can be submitted via numerous accounting software programmes. The CIS is payable to HMRC upon payment of the invoice and not the date the invoice is issued, so it should only be included on the CIS return at this point. Once the return has been submitted to HMRC, statements should be sent out to all subcontractors for their own records.

If you wish to discuss any of this further then please get in touch 0116 2423400 or info@torrwaterfield.co.uk

Brook Lucas, Accounts & Tax 

Are You Washing Away Your Potential Tax Refund?

If you wear a uniform or protective clothing at work and you have to wash it yourself you may be due a tax refund from HMRC, and if you don’t claim it, you’ll lose it after 4 years.

This typically applies to:

Retail staff

Hospitality & catering

Nurses, doctors, dentists and other healthcare workers

Police officers

Airline staff / cabin crew / pilots

Public transport (London Underground staff, train conductors, bus drivers)

Engineers & mechanics

Builders / plumbers / carpenters

PE teachers

However any item of clothing with a company logo on it can be claimed for!

How much can I claim?

The amount you can claim depends on your job. If claiming for the full 4 years, the standard rebate for most employees is £48. However for certain professions HMRC has agreed higher allowances. There are numerous calculators online that will inform you how much you are entitled to based on your circumstances.

How do I claim?

There are currently three ways to claim your refund:

  • By entering it as a deduction on your Self-Assessment tax return if you already fill one in.

 

 

  • By phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000.

 

If you require any more information please contact the office on 0116 242 3400.

Tom Luckett, Accounts & Tax 

Employer Update March 2018

National Living/Minimum Wage Changes from 1 April 2018

From 1 April 2018 the National Living/Minimum Wage rates will increase as follows:

  • £7.83 an hour for workers aged 25 and over – previously £7.50
  • £7.38 an hour for workers aged 21 to 24 – previously £7.05
  • £5.90 an hour for workers aged 18 to 20 – previously £5.60
  • £4.20 an hour for workers aged 16 to 17 – previously £4.05
  • £3.70 an hour for apprentices under 19 or in their first year – previously £3.50

If you are paying any employees with reference to the National Living/Minimum Wage you will need to amend the hourly rates accordingly.

Auto-enrolment: Minimum contributions increase with effect from 6 April 2018.

Under auto-enrolment all employers have to automatically enrol certain employees into a pension scheme and make minimum contributions into that scheme. From 6 April 2018 these minimum contributions will increase as part of the phasing in, and employers need to take steps now to ensure they comply with this change.

If the qualifying earnings basis is being used, the current minimum contribution until 5 April 2018 is 2% with at least 1% from the employer.

Between 6 April 2018 and 5 April 2019 the minimum contribution is 5% with at least 2% from the employer, so contributions should be reviewed now in readiness for this.

Looking ahead, from 6 April 2019 the minimum contribution will be 8% with at least 3% from the employer.

For more information see The Pensions Regulator contribution levels guidance here.

If you have any questions on the above, please do not hesitate to contact me.

Regards

Rebecca Edwards, Payroll Manager

Tax Free Allowances – Are you making the most of them?

With the self-assessment tax return deadline now well passed, we can start to look forward to 2017-18’s income and consider whether you are fully utilising your tax free allowances.

Using the following to their full potential can often be the most tax efficient way of accessing the income in your company or savings.

Personal Allowance

This is a tax free amount that everybody starts with which can be used against any type of income. For 2017-18 the personal allowance is £11,500, however, this figure may be reduced should your income go above £100,000.

If you are not using the entire personal allowance, then it may be an option to transfer 10% of this to your spouse under the marriage allowance. This can only be done though if they’re a basic rate tax payer. It means that they would receive an additional £1,150 of personal allowance thus saving them £230 in tax.

Starting Rate

For those that have a fairly minimal salary but a lot of savings income, the starting rate is something that can be used. It is an additional 0% rate band if the first £5,000 of taxable income (i.e above the personal allowance) is savings. This could be especially useful for those with large credit balances on director’s loans in limited companies as they can charge interest on this which would not only be tax free for the individual but tax deductible for the company.

Dividend Allowance

Changes in the 2016-17 tax year meant that the traditional method of receiving tax credits on dividends were scrapped and replaced instead with the ‘Dividend Allowance’. This is a £5,000 tax free band on dividends for everyone regardless of their other income. For those with a limited company this could be utilised by a spouse shareholder, regardless of if the work elsewhere, to get an additional £5,000 tax free income.

Personal Savings Allowance

The final tax free allowance is the personal savings allowance which you receive regardless of if you earn from other sources. These do however vary based on the tax band you are in as follows:                   

Basic rate £1,000
Higher rate £500
Additional rate Nil

These could potentially be utilised in the same way as the starting rate by charging a limited company interest on credit director’s loan account balances.

As each case is different, please contact us on 0116 242 3400 if you wish to discuss tax free allowances any further.

Sam Jefferson, Accounts & Tax 

Tax-free childcare roll out

The implementation of Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare, is being rolled out to eligible parents in stages.

The scheme first made its debut in April 2017 and although there have been initial systems problems, HMRC’s aim is to have the scheme open to all eligible parents by 14 February 2018. Application is made online through the Childcare Choices site www.childcarechoices.gov.uk and applications can be made for all eligible children at the same time.

Under Tax-Free Childcare, for every £8 the parent pays, the government provides a £2 top-up, to a maximum of £2,000 per child each year – with a higher limit of £4,000 for disabled children. This gives a total childcare pot of £10,000, or £20,000 for disabled children. To be eligible, parents must generally have minimum weekly earnings of at least £120 each. There is also an upper earnings limit of £100,000.

Compensation may be available in certain circumstances where a parent:

  • is unable to complete an application for Tax-Free Childcare
  • is unable to access their childcare account
  • or doesn’t get a decision about whether they are eligible, without explanation, for more than 20 days.

Those employing a nanny should be able to use the childcare account to pay their PAYE tax and National Insurance. Delays in getting this system working may also give grounds for compensation. Application is made online GOV.UK childcare-service-compensation 

If you would like to discuss any of this further then please get in touch 0116 2423400 or https://www.torrwaterfield.co.uk/contact-us