Research & Development (R&D)

by Leah McGarvey | 26 Nov, 2019 | Business, Tax

Research & Development (R&D)

A study by an independent organisation concluded recently that there was approximately £84 billion in unclaimed research and development relief.

Consequently, I am seeking to raise awareness to ensure all company owners understand when they might be entitled to claim some tax relief. This is not just the domain of research facilities and scientists in lab coats!

So who could potentially qualify for the generous tax relief? Companies that invest in trying out something new and innovate. This involves testing an idea, to create something that is not already available in the marketplace.

The project should be seeking to gain advancement in understanding in a scientific or technological field. The process should seek to resolve some significant uncertainties which could not easily be resolved by a competent professional in the relevant field of expertise.

During the last 15 years or so, I have compiled R&D claims for companies that design new chemicals for cleaning products, that write software to optimise internet search engines, that use engineering skills to design weather-resistant feeders for agriculture to a company that has implemented new and innovative techniques in animal husbandry.

If you feel you are doing something innovative, and have not already discussed R&D, I would love to hear from you!

Head to our contact page or give us a call on 03303 307 777.

Director’s and personal tax returns

by Leah McGarvey | 13 Jun, 2019 | Business, Tax

Director’s and personal tax returns

For years HMRC insisted that a director must register for self-assessment and complete a tax return even if there was no income to report. This was not a legal requirement, but an HMRC imposed requirement! In 2015/16 at a First Tier Tribunal (FTT) the judge said that no one has a statutory obligation to do anything in relation to income tax simply because they are a director of a company that in not a not-for profit company! Being a director per se does not entitle a person to dividends. The tribunal concluded that if dividends received from the company of which a person is a director were to generate an income tax liability, then there is a duty to notify HMRC of the chargeability to income tax but not because of being a director!

Finally HMRC have amended their guidance to say that a director does not have to complete a tax return simply by being a director as long as their income is below £50,000 and they have no other taxable income.

Capital Allowances

by Leah McGarvey | 7 Jun, 2019 | Tax

Capital Allowances

Three changes of note were announced in the 2018 budget, each with different implementation dates;

1. The special writing down allowance rate has been reduced from 8% to 6% from 1/6 April 2019. This mainly applies to motor vehicles with CO2 emissions greater than 110g /km, integral fixtures and fittings and long life assets.

2. The cynical amongst you might think that this has occurred in order to pay for the new structure and buildings allowance (SBA) for expenditure on or after 29 October 2018 and will be given at a straight line rate of 2% on new shops, hotels, farms and offices as well as industrial units. On sale the remaining relief available transfers to the new owner.

3. The annual investment allowance has been increased from £200,000 to £1,000,000 for qualifying expenditure incurred between 1 January 2019 and 31 December 2020. But do be aware of the pitfalls. Where an accounting period straddles the 31 December 2020, and a company acquires a qualifying asset on say 1 February 2021 for £60,000 it will in fact only be able to claim 90/365 x £200,000 = £49,315 irrespective of the fact that might be their only capital expenditure in the whole of the year 1 April 2020 to 31 March 2021. HMRC are not sympathetic to this unfair result – you should get the timing right seems to be their attitude.

Directors’ overdrawn loan accounts and section 455 tax

by Leah McGarvey | 29 May, 2019 | Business, Tax

Directors’ overdrawn loan accounts and section 455 tax

If a director’s loan account has been repaid and the previous section 455 tax can be reclaimed (25% of the amount ‘loaned’ up to 5 April 2016, 32.5% from 6 April 2016) there is a time limit of four years from the end of the accounting period to make the claim.

As HMRC do not record on the self-assessment account for companies the split between ‘normal’ corporation tax and ‘sec 455 tax’ the company must keep good records of the sec 455 tax paid and set up the corresponding debtor so it is not overlooked. Don’t just assume it is additional corporation tax and write it off to profit and loss!

Form R40 – Tax Repayment Claims

by Leah McGarvey | 6 May, 2019 | Tax

Form R40 – Tax Repayment Claims

Trust income is a problem! Where a taxpayer has a received income from an interest in possession trust the HMRC computer is not calculating the correct repayment due. This appears to stem from the introduction of the personal savings allowance and dividend allowance from 6 April 2016.

HMRC has said it has identified a workaround that should address this issue in most cases, but it has no method of searching through all the R40s submitted to check if the tax repayment was correct.

So the advice is to check the tax calculation that HMRC issue.

There appear to be no plans to fix the problem so it might be better to complete a self-assessment tax return.

Also HMRC have claimed that due to a change in banking regulations they need to have a taxpayer’s paying in slip in order to pay the refund electronically to their account! There is no space on the R40 to give these details so HMRC will send out a cheque! So much for progress and the inconvenience that this causes. Again it might be better to use the self-assessment system to obtain the repayment and it is likely to be quicker!

Post-transaction valuation check

by Leah McGarvey | 2 May, 2019 | Tax

Post-transaction valuation check

It is possible to ask HMRC to check valuations (for capital gains tax) after a disposal has been made but before you submit the relevant tax return. This service is available to trustees, companies and individuals.

This service can also be used for negligible value claims where one has a chargeable asset which is worth significantly less than it cost (something more than 95% less is a benchmark) and you would to treat the asset as disposed of and reacquired at its negligible value.

The form for requesting post transaction checks is a CG34.

HMRC have recently announced that the time you should allow them to check a valuation is now three months (it was two months), so do not leave it until the last moment.

If agreement is reached with HMRC then there should be no enquiry into the valuation when it is used to complete the self-assessment tax return.