Financial Monitor (May 2009)
Furnished Holiday Lettings (FHL) – Loss of Special Tax Reliefs
Qualifying furnished holiday lettings in the United Kingdom are treated as a trading activity, which means that profits are earnings for pension contribution purposes and losses are available for relief against general income; that the usual capital allowance bar on plant and machinery used in a dwelling does not apply; and that the 50:50 rule for assets jointly owned by spouses or civil partners is disapplied. For capital gains tax purposes, FHLs qualify for roll-over relief on acquisition or disposal, for hold-over relief as gifts of business assets, and for entrepreneur’s relief.
To qualify for the special tax treatment a property must fulfil the following requirements:
- Be available for letting at least 140 days each tax year;
- Be let as holiday accommodation for at least 70 days during the tax year (a letting exceeding 31 days to the same person is not a holiday let);
- When not let for holidays it must not be rented out for any other reason for more than 155 days per year.
These special tax benefits will be removed from 5 April 2010 and FHLs will be treated exactly the same of other let property.
In the meantime, however, the existing special tax reliefs are being extended to properties that are owned in the European Economic Area (EEA) and not just the United Kingdom. In addition the extension of these reliefs is being back dated to the year ended 5 April 2007, although a claim for this year must be made by 31 July 2009. Claims for the year ended 5 April 2008 must be made by 31 January 2010.
If you have made losses since April 2006 on properties qualifying as FHLs which are in the EEA or have sold such properties, please let us know immediately so that we can investigate whether any claims may now be available.
There is also a window of opportunity before 5 April 2010 to maximise any loss relief claims for FHLs, perhaps by undertaking some necessary repairs which could create a loss that could be set against other income to reduce tax liabilities.
Value Added Tax on Commercial Property
The concept of the option to tax relating to VAT on Commercial Property was introduced on 1 August 1989 and the rules allow such options to be revoked after 20 years. If you are buying commercial property after August 2009 which has an option to tax ask the vendor how long the option has been in force. If it is more than 20 years, and you cannot take advantage of the transfer of property business as a going concern rules, ask the vendor to revoke the option. This will avoid you having to fund the VAT payable on the sale which at best saves you the VAT if you could not recover it, or at worst gives you a cash flow advantage. It will also give a stamp duty saving as stamp duty is calculated on the VAT inclusive amount of the sale proceeds.
Payroll Round-Up
Since 6 April 2009, all employers with more than 50 staff must file in-year forms P45(1), P45(3), P46(PEN), and P46(EXPAT) online. Employers with 50 staff or more who file in-year paper forms will be penalised.
All employers must file their P9D, P11D and P11D(b) online or on paper by 6 July 2009 and pay their Class 1A NIC by 19 July 2009 (or 22 July if paid electronically). Whether submitted online or on paper, the filing penalties for P11D/D(b) returns:
- automatic £100 per month for every 50 staff for late submission and possibly;
- up to £300 per P11D(b)
- up to £60 per day for failure to submit on time
- up to £3,000 per incorrect return.
From 6 April 2009 the weekly amounts of statutory maternity pay, adoption pay and paternity pay increased to £123.06 and statutory sick pay increased to £79.15 per week. Statutory holidays increased to 28 days a year (for a 5 day week), this figure includes Bank Holidays.
From 6 April 2009, temporary staff have equal employment rights (including pension, sickness and maternity rights)after 12 weeks of employment. Parents with children up to age 16 years have the right to request flexible working conditions.
Tax Free Day Subsistence Rates
HMRC have introduced a system of ‘benchmark’ day subsistence rates. Where an employee has incurred subsistence expenses while travelling on business, HMRC will accept that flat rate allowances paid at or below the ‘benchmark’ rates may be paid free of tax and National Insurance contributions. However, a number of ‘terms and conditions’ apply.
The ‘benchmark’ rates apply only when the employee is not staying away from home overnight, but is travelling in the performance of his duties, or to a temporary place of work. They apply only where he actually incurs subsistence expenditure and not when, for example, he does not eat at all or takes a packed lunch from home.
The benchmark rates are:
Breakfast £5 This may only be paid where the employee leaves home earlier than usual and before 6 am. It may not be paid where the employee regularly starts work before 6 am.
One meal rate £5 This may be paid where the employee has been away from his home and his normal place of work for at least five hours.
Two meal rate £10 This may be paid where the employee has been away from his home and his normal place of work for at least 10 hours.
Late evening meal rate £15 This may be paid where the employee has to work later than usual, finishing after 8 pm and has to buy a meal that he would usually eat at home. It may be paid in addition to the ‘one meal’ or ‘two meal’ rate, as appropriate. However, it may not be paid if the employee regularly finishes work late.
There is an overriding maximum of three payments for any one day (ie. breakfast, ten hours and late evening meal).
The benchmark rates may only be used as part of a PAYE Dispensation agreement. They will not displace higher rates agreed for the purpose of existing Dispensations. When an existing Dispensation comes up for review (they are generally reviewed every five years) the employer will be able to choose between adopting the ‘benchmark’ rates or negotiating his own scale rates (which will require him to ‘undertake a statistically valid sampling exercise’ to establish the average expenditure actually incurred by his employees).
HMRC has also given notice that, as dispensations are reviewed, they will no longer allow tax-free overnight subsistence payments to be made where an employee stays with family or friends.
Compulsory on-line Filing of VAT Returns
On-line filing of VAT Returns and electronic payment of VAT will be required for existing business with an annual turnover of £100,000 or more for VAT accounting periods starting after 31 March 2010. For quarterly returns, the first return will be that for the quarter ended 30 June 2010. All businesses registering after 1 April 2010 will be required to file on-line and pay electronically. It is expected that existing businesses with a turnover below £100,000 will need to file on-line and pay electronically from April 2012.
We can assist with registering you for on-line filing or in filing returns on your behalf if required.
Health in Pregnancy Grant
On 6 April 2009 the Government launched the Health in Pregnancy Grant: a one-off payment intended to help pregnant mothers maintain a healthy lifestyle during pregnancy.
The grant is £190 (per pregnancy) and is not means tested. It can be claimed from the 25th week of pregnancy, after receiving health advice from a midwife or other health professional.
Expectant mothers will be given a claim form to sign and send off, which they must do within 31 days. When the claim is approved, the money is paid directly into a bank or building society account. The grant is being administered by HMRC.
Apprenticeships – Help with Locating Suitable Personnel and Funding the Training
An on-line apprenticeship vacancy matching system allows employers to advertise their vacancies to potential apprentices – www.apprenticeships.org.uk This free on-line apprentice recruitment service puts employers in touch with interested candidates within their area.
Employers hoping to provide apprenticeships across any sector can receive help, support and funding assistance from the Learning and Skills Council and the National Apprenticeship Service. They will pay all or part of the total cost of training, depending on factors such as the apprentice’s age or the type of business sector you operate in. The size of the contribution varies from £1,500 to £15,000.
There are now over 180 types of apprenticeships available – from the traditional blue-collar roles to sectors ranging from accountancy to construction.
Whilst every care has been taken in the preparation of these notes we can accept no responsibility for errors or omissions contained in them or for any loss arising from their use unless we have been consulted professionally prior to any action being taken.
UHY Wingfield Slater
Wellington House, 39 Wellington Street, Sheffield S1 1XB
Tel: 0114 275 1544 Facsimile: 0114 275 1366 Email: info@uhy-wingfieldslater.com Web Site: www.uhy-wingfieldslater.com
Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales
A member of the UHY Hacker Young Group of independent UK partnerships. A member of UHY, an international association of independent accounting and consulting firms.
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