Iain, Author at Iain Wallis

Pot Holes! Does Fiscal Phil build our Wonderland?

October 30, 2018 By Iain

Introduction

Fiscal Phil in his 2018 Budget provides a few nasty surprises. The Budget yesterday had all the potential to be a fairy tale, but no!

The annual forecasts are set to rise with more people forecast to be in jobs by 2022. As a result the tax receipt projections are up, making more spending possible!

Fiscal Phil For Business

Fiscal Phil put the focus on building business in the 2018 Budget. There’s a generous extra allowances for spending on Plant and Machinery. It’s up from £200,000 to a massive £1 million for one year from 1^st January 2019 to 31^st December 2019. Takecare when planning capital expenditure. This is very important especially when a business year end straggles those 2 dates. Unless your year end is December the allowance will be apportioned.

The same timing considerations should be given when building or improving a commercial property. The new Structures and Buildings Allowance (SBA) will be a great help.Those of you constructing or renovating a commercial building take note.

There’s also a welcome reduction of one third in the business rates for the small shops, bars, cafes and restaurants. Who could his toilet humour with a complete waiver of business rates on public loos. It’s now cheaper to do business on the High Street!

Fiscal Phil For Individuals

This Budget has hit business and property owners big time! The rules have changed for those wishing to dispose of their shares in their own company at a reduced rate of tax. The criteria for claiming Entrepreneurs Relief (ER) has also tightened. It’s also exceedingly gloomy on the house front. If you rent out a former home there’s no good news at all. The final period for the private residence relief has been reduced. In addition to the Letting Relief has all but disappeared.

But on the positive side all individual basic rate taxpayers will be £130 per annum better off as the increase in personal allowances is brought forward by one year.

Action

Are you interested in receiving further information or would you like to book a strategic consultation with Iain. Please contact Jacqueline on telephone 0191 603 0270 or email admin@iainwallis.com Let him show you where he can help you legally avoid tax.

What’s the new rent a room relief legislation?

October 11, 2018 By Iain

From 6th April 2019, new legislation, and not necessarily for the better, will come into effect.

It will mean that you won’t be entitled to rent a room relief unless you are living in your home for some or all of the time that you let your rooms to lodgers.

Current Situation

The current situation is that any property owner who lets all or part of their homes to lodgers receives rent a room relief. This is in the form of tax free income, the lesser of £7,500 or £3,750 per year. So, for a property owned jointly, each owner would be allowed to earn £3,750 tax free.

However, this current legislation is going to change. To help with domestic finances, there has been an increase in people letting out rooms. This is either from people working away from home and supplementing their income or short term cash benefits from sporting events. In July 2018, HMRC proposed new legislation with the aim of preventing this from happening in the future.

Changes to Rent a Room Relief

From 6 April 2019, as a property owner, in order to claim rent a room relief, you will have to live in your home for at least one day during the period when you have tenants. If you rent out your rooms or home on an Airbnb basis, rent a room relief is still available as long as you live in your home for at least one day during every period of letting. The legislation is slightly woolly. It refers to wholly or partly so that would suggest a minimum of one day.

Whilst not as generous, there is some good news. When rent a room relief doesn’t apply, you will be able to claim £1,000 tax free property allowance.

It is worth considering how these new rules may affect you. If there are any significant changes to the final proposed version of the legislation when the Finance Bill 2019 is published in December 2018, we will update you with a new blog.

Action

If you are interested in receiving further information or booking a strategic consultation with Iain to see where he can help you legally avoid tax, please contact Jacqueline on telephone 0191 603 0270 or email admin@iainwallis.com

What’s George up to?

July 10, 2015 By Iain

George Osborne delivered a headline grabbing budget and unusually for all the landlords and property investors out there, there is much to consider.

The biggest impact will be the restriction on relief for finance costs on property to the basic rate of income tax. These costs include:

• mortgage interest
• interest on loans to buy furnishings
• fees incurred when refinancing your properties

For higher rate taxpayers that could become very expensive and increase your tax bill by 25%.

This will be introduced gradually from 6 April 2017, so there is still time to organise your affairs to make your portfolio more tax efficient, but you will need to take action now to get everything in place.

So maybe now is time to consider incorporation though as you’ve heard me say many times “it depends” Incorporation may trigger capital gains tax, stamp duty land tax and possibly moving away from a very nice interest rate. Short term pain may help the long term gains and it’s always much easier to shelter wealth within a limited company.

Those of you who let your properties furnished will from April 2016 no longer be able to claim the wear and tear allowance which will be replaced by allowing residential landlords to deduct the actual cost of replacing furnishings.

There is however some good news with the increase in rent a room relief so it’s not all bad!

Despite the bold newspaper headlines announcing an increase to the nil-rate band for IHT to £1m, this will be gradually phased over the next four/five years and will only apply if your estate is passed to direct descendants. So, if you’re planning on leaving your hard earned wealth to someone other than your kids or you’ve assets exposed to Inheritance tax it’s as important as ever to get everything organised. So now may be the time to undertake our Inheritance Tax Risk Assessment Audit to identify where any liability could be reduced and to ensure that your affairs are in order.

Most of our compliance clients have taken out our Fee Protection Insurance, protecting themselves in case of an HMRC enquiry. For those who haven’t, please be aware that George also announced that he’ll be spending around £300 million over the next 5 years to tackle non-compliance by small and mid-sized businesses, public bodies and affluent individuals. This measure will result in additional tax receipts of over £2 billion by 2020-21 – so you have been warned!

Finally, if you’re one of the estimated million buy-to-let and other private landlords hoping to keep beneath HMRC’s radar, then please don’t think that anymore! HMRC will be employing more investigators and giving them the power to acquire data from online and electronic payment providers to help find you. It’s far better to come clean and disclose to HMRC before they find you and to help you do this, HMRC are providing a digital disclosure channel to make it easier to disclose any undeclared liabilities. Find HMRC before they find you!

Why are HMRC so inefficient?

July 10, 2015 By Iain

These days HMRC call us customers but alas they’ve yet to discover the concept of customer service and the ability to deliver a great customer experience.

As agents we get a dedicated number to phone them and whilst they take an age to answer that, if you have to call them arm yourself with a large cup of coffee and prepare yourself for a long wait

But even that’s not enough! A recent survey found that nearly 50% of calls to HMRC went unanswered! Do you think you could survive as a business if you behaved like that? Their incompetence knows no bounds and how much time do you waste waiting listening to that dreadful music.

So here’s four things that you can do to avoid losing the will to live when calling HMRC
1. Start early: yes they do take calls from 8 am so call then before the lines get too busy and while they are alert
2. Don’t call just before lines close as they all want to rush home so your call will not be answered
3. Be prepared like any good scout and have key information to hand, know why you are calling them and what you want to achieve
4. Dial on speaker phone and do other work while waiting for them to answer.

Good luck and remember you’re a customer not a taxpayer!

It’s not always a bunch of Roses

February 13, 2015 By Iain

Congratulations to anyone who may be intending to ‘pop the question’ over a romantic candle lit meal this evening.

To those of you who consider yourself ‘unromantic’ or think it all to be ‘a bit of stuff and nonsense’ or ‘created by florists to make more money’, and yes I have some sympathy for that view, bear in mind there could be costly implications – and that’s not just the ring!!

Unmarried couples are not recognised as a legal entity and this becomes even more of an issue where children are involved. Legally, you become stuck in no-man’s land somewhere between land and complex trust law and in the event the relationship breaks down, you could find yourself in all sorts of problems and not just of the emotional type. Who gets the CD collection will be the least of your worries!

It’s far better to try and get things in order at the outset, to provide both of you with some degree of reassurance before it gets to the stage of arguing over what’s what:

• The first, a Cohabitation Agreement deals with the ownership of assets and the distribution of these.

• Second, a Declaration of Trust reflects the contribution of each individual to any assets such as property.

• For those in business together, a Partnership Deed, which deals with each party’s interest in the business.

• Finally a Will. Cohabitees are not entitled to automatically inherit from their partner’s estate. If you wish your partner to inherit, particularly any assets jointly owned, you need to have a Will in place.

For further information or to book a strategic session with Iain, please contact Jacqueline on 0191 6030 270 or email admin@iainwallis.com.

Landlord & Letting Show Coventry 26-27 November

October 28, 2014 By Iain

We will be exhibiting at the Landlord & Letting Show taking place at Hall 2, Stoneleigh Park, Coventry, on Wednesday 26th & Thursday 27th November 2014, and we hope you can join us! Maybe on day two help us celebrate as we are finalists in the prestigious Landlord & Letting Show Awards with the winners to be announced during the show.
It’s free to attend and the event aims to educate and inform property professionals by offering access to:
• A comprehensive product and services exhibition

• Free seminars covering a wide range of topics delivered by leading industry experts.

• There are two presentations from me entitled “5 Top Tax Tips to Legally Avoid Property Taxes” one on Wednesday at 11.30 and one on Thursday at 14.00. These are always full so be sure to be there in plenty of time

• Associations and Government Bodies
• Fantastic networking opportunities
• Information on the latest legislation
Visit the website at http:www.warwickshire.landlordshow.info to find out more and book free show tickets, then come along and visit us on stand 38.

Always happy to chat legal tax avoidance and share the love.

Be careful how you treat Grandma’s house

June 27, 2014 By Iain

Have you noticed how the recent rise in house prices has encouraged a spot of optimism and got everyone to talk up the value of their property? All well and good until someone inherits a property and then the value rather interestingly seems to head the opposite way, downwards!

Understandable maybe, because with the Inheritance Tax (IHT) nil rate band remaining frozen at £325,000 and the rising property market pushing middle England into the arena of Inheritance Tax; next of kin are keen to make sure they don’t hand over too much IHT to the tax man. Regardless of who you are HMRC will take a flat 40% of all your estate over £325,000. OUCH!

A note of caution though, in 2012/13 HMRC collected an extra £108 million of IHT by challenging and “adjusting” property valuations. They have the right to investigate valuations and over the last few years have been exercising this more aggressively than in the past. This trend is I’m sure going to continue given the improving state of the property market and HMRC coming under even more pressure to maximise revenues.

HMRC has four years from the end of the tax year in which someone dies to challenge an IHT calculation, longer if it can prove that executors did not ensure the calculation was correct or they had been perhaps ‘negligent’. This gives them plenty of time to check and compare similar properties with the Land Registry. So, take care! If you decide to sell granny’s house not long after the funeral for a price markedly higher than the value declared on the IHT form you could be heading for trouble. If you declare a value which seems low compared to what granny paid for it beware! Both will raise the suspicions of HMRC and could see you with a fine of up to 100% of the extra liability. The average amount of tax collected from this type of investigation in 2012/13 was £34,000 – imagine yourself as a beneficiary and having to find that amount of extra tax totally out of the blue!

As with all IHT planning, it’s all about being prepared. If you’re a beneficiary or an executor of an estate take steps as soon as you can to record the condition of the property i.e. by taking photographs and keep records of any repairs you undertake.

Whilst it will cost you in fees, these could possibly be reclaimed from the estate later, have a professional valuation undertaken by a Chartered Surveyor, who specialises in valuing land and buildings for people’s estates. Ask them to provide a realistic price of the property’s market value – the ‘open market’ value and ensure they take into account anything which might increase or decrease the value, such as:

a) If the property is in need of repair, ask the valuer to consider reducing the value to take this work into account.

b) There may be something about the property which makes it particular appealing to buyers i.e. an unusually large garden or access to other development land. If the property has features which make it more attractive then the valuation may need to increase.

It’s probably less likely that HMRC will challenge a valuation carried out by a Chartered Surveyor, compared to one say done by the local estate agent or by yourself, so it may be worth paying someone to give you that peace of mind.

It’s not all bad though, if you discover that the property had been over valued at the time of probate and sold for less, then you have up to four years from the death to claim the IHT overpayment back from HMRC.

If you need any help with IHT planning, or are interested in receiving further information or booking a strategic session with Iain, please contact Jacqueline on 0191 206 4080 or email admin@iainwallis.com.

Happy Valentines Day

February 14, 2014 By Iain

Congratulations to anyone who may be intending to ‘pop the question’ over a romantic candle lit meal this evening.

It’s far better to try and get things in order at the outset, to provide both of you with some degree of reassurance before it gets to the stage of arguing over what’s what:

• The first, a Cohabitation Agreement deals with the ownership of assets and the distribution of these.

• Second, a Declaration of Trust reflects the contribution of each individual to any assets such as property.

• For those in business together, a Partnership Deed, which deals with each party’s interest in the business.

For further information or to book a strategic session with Iain, please contact Jacqueline on 0191 206 4080 or email admin@iainwallis.com.

2013/14 Tax Return Deadline …… “Use the White Space”

January 10, 2014 By Iain

So, you were too busy and missed the self-assessment deadline of 31 October 2013 and are now you are frantically trying to complete and submit online by 31 January to avoid the £100 penalty, interest and potential penalties.

Yep that deadline is approaching far faster than you appreciate but equally with every passing day goes the need to be stuck in some detox vortex where you are forced to have a green smoothie for breakfast and eat more greens than a rabbit does in an average year.

However, what to do when you and/or your accountant , (though hopefully not your accountant but you’d be surprised ) can’t decide what or how to declare a complex transaction or one which may be open to a different interpretation by HMRC?

The law states “you must provide any additional information you think HMRC will need to check your tax bill” and this is where the ‘white space’ comes into its own. That said there is a degree of crystal ball gazing as who knows what HMRC think some days

Here are a few situations where I’d suggest you use the white space:

1. To back up a complicated entry on a tax return, for example, a capital gains tax calculation on the sale of your home where you have used part of it for business.

2. Where you’re claiming Principal Private Residence Relief on a property that’s been let out but used to be your main home.

3. Where you aren’t sure of a figure for example, where the tax rules require you to make a judgement, say, on the amount of a business expense to claim

In the majority of cases, not using the white space to explain a questionable tax return won’t cause you any trouble, but should HMRC question your tax return and thinks you haven’t declared information you ought to have, the result may be a penalty charge or a greater penalty if it turns out you made a mistake. Remember that the law does not require perfection, more that you take reasonable care when preparing the return.

As a reminder, you are responsible for the entries on your tax return, even where your accountant completes it for you. So, please don’t just check the figures; make sure the white space entry is completed if appropriate.

If you are struggling with the deadline approaching or are interested in receiving further information or booking a strategic session with Iain, please contact Jacqueline on 0191 206 4080 or email admin@iainwallis.com.

Nigella’s Late Christmas Gift from HMRC!

January 7, 2014 By Iain

You may be aware or at least your accountant should be that tax relief is allowed by HMRC for the cost of capital equipment used in your business.

Rather surprisingly however, tax deductions are also allowed in the form of capital allowances (CAs) on items such as computers, tablets and other equipment purchased as gifts by others, but used in the course of your business.

For CA purposes you must value the gift when you first use it for business (& you were all back at work straight after Boxing Day weren’t you) and reduce this figure to take account of any non-business use. You can then claim this on the Employment pages of your 2013/14 tax return.

A simple example:

Nigella receives a PC as a gift for Christmas
Like all electrical equipment it fell in value as soon as it left the shop, so a value of 90-95% of its purchase price would be reasonable i.e. market value of £3,000
Nigella estimates personal use of 15% i.e. £450
Nigella can therefore claim CAs of £2,550, which since she is a 45% taxpayer will reduce her 2013/14 tax bill by £1,147.50

Tip 1:
If employed then Nigella can speed any tax relief by asking her tax office to include the £2,550 CAs in her 2013/14 code number. That way £1,147.50 will be given to her by April 2014 as a reduction in the PAYE tax she pays on her salary.

Tip 2:
Even better more tax and NI can be saved if Nigella sells the computer to her business at market value. The company pays the market value to Nigella on which no tax or NI is payable and Nigella reduces her salary by the same amount, so there’s no net cost to the company. This results in a saving to Nigella of £1,350 in tax and £60 NI and the company also saves £414 on the employers’ NI it would have paid on the £3,000 salary sacrifice. A little bit for the geeks but hey it’s worth being a geek to save some tax.

So what gifts did Santa leave you that you can claim tax relief on?

If you are interested in receiving further information or booking a strategic session with Iain to see where you can legally avoid tax, please contact Jacqueline Campbell on telephone 0191 206 4080 or email admin@iainwallis.com.