capital expenditure super deductions 2022

Super deductions - how to maximise your business’s tax efficiency

Most business owners understand that it is important to ‘capitalise’ certain company assets. These ‘fixed assets’ can be used to reduce your corporation tax bill. However in April 2021, the Government increased the usual 100% deduction to 130% until April 2023. Read on to find out how you could benefit from this increase.

What is a super deduction?

capital expenditure super deductions 2022Over the years, successive governments try to find ways to incentivise industry or stimulate areas of business. This is especially true during troubled times, such as the financial crisis of 2008 and more recently the problems brought on by the Covid pandemic.

Reducing broad ranging tax rates, such as reducing corporation tax, VAT, capital gains, etc, introduce problems of their own, most often political, as they can appear to favour selective groups in society, so governments look for more niche methods to achieve their aims. The ‘super deduction’ is one of them, as this applies purely to businesses that qualify for corporation tax. It’s also limited in its range, as it can only be applied to new plant and machinery that ordinarily qualify for the 18% main pool rate of writing down allowances.

How does this affect the Annual Investment Allowance?

Essentially, it compliments it. Since January 1 2019, companies have been able to annually invest up £1 million in qualifying assets, these already benefit from 100% relief. This is known as the ‘Annual Investment Allowance’. Prior to 2019, the AIA was set at £200,000.

The £1 million limit has been extended to March 31 2023.  The Introduction of an extra 30% deduction is, therefore,  a most attractive additional incentive for owners to invest in their businesses - or even start new ones.

What is the SR Allowance that was also announced?

Along with the Super Deduction, the Government also introduced the SR Allowance.

Not all purchases can qualify for the super deduction, such as those that qualify for the 6% write down allowance rate - typically long life assets such as those associated with buildings and property. To incentivise this industry, the Government has introduced a ‘special rate for first year allowance’ - the SR allowance. This affords new plant or machinery in this bracket with a 50% first year allowance.

What businesses qualify for Super Deduction?

This benefit is only available to those entities who qualify for corporation tax. In other words, it is not applicable to those in business as individuals, sole traders, or partnerships.

What purchases qualify for the Super Deduction?

There are a wide range of asset types that can take advantage of the SD beyond the most obvious forms of fixed assets, such as computers, IT systems, manufacturing equipment and the like. In short, most purchases that contribute to the operation and functioning of your business should be treated as an asset, rather than an expense, and capitalised accordingly.

However, there are other less obvious expenditures that can close be capitalised and gain SD relief. The most common of these include:

Development costs: Under FRS 102 costs associated with bringing a system into working condition, such as those attributed to the development, can be classified as tangible fixed assets. For example, developing a new website or piece of software, could be treated as such and gain the SD allowance benefit.

Borrowing costs: When developing a new product or building a new manufacturing plant or product line, a business may be required to finance the operation. The costs of borrowing may be capitalised.

Hire purchase: Assets on hire purchase or similar purchase contracts where possession rather than ownership passes to the business can also benefit from super deduction, but only at the point where the asset began use.

The most obvious test of applying the SD benefit is that the purchased plant or machinery needs to be new and not second hand. Also, you cannot decide to capitalise something bough in prior accounting periods just to take advantage of the SD.

What happens if I don’t make a profit, can I still apply the Super Deduction?

carry over super deduction allowanceYes. Not all businesses make a profit each year. Indeed, some businesses may choose to capitalise equipment porches in a  financial year specifically to reduce their tax bill to zero - typically smaller businesses. If you make a loss in a year where capital purchases were made, you may carry any unused deductions forward to use as losses.

Selling an asset that qualified for Super Deduction

It may enter the minds of some that as the government is giving away an extra 30% in the form of a tax deduction, which is true, if they quickly sold the purchase, they may benefit further. Also, there are legitimate reasons why a firm may have to sell assets that benefited from the SD. So what happens and how is this accounted for?

Naturally, the Government is going to want their ‘pound of flesh’ in this instance. You will need to carefully track any asset that benefited from the SD, so when it comes to selling the correct treatment can be applied.

The first thing to note is that if the disposal of an SD qualifying asset is before April 1 2023, its disposal value is 1.3 times the actual disposal value. This income should then be treated as taxable profits and not allocated to ‘pools’.

Read more about the government's super deduction scheme here.

Is this a good time to start a business?

This may indeed be a good time to start a new business if that business is going to need significant investment in new capital equipment. Furthermore, if your established business is an entity in the form of a sole-proprietorship or partnership and you are looking to grow, this may be a good time to incorporate.

Talk to Tax Agility about how your business can take advantage of the super deduction scheme.

Tax Agility are chartered tax accountants operating in the Richmond, Putney and Wimbledon area. We specialise in assisting small and medium sized businesses navigate the complexities of company taxation. Our goal is to ensure your business is as tax efficient as possible and to effectively exploit incentives such as the super deduction scheme.

Why not call us today on 020 8108 0090and discuss how we can help take your business to the next level of tax efficiency.

declaring your overseas income

What are the differences for tax purposes between domiciled and non-domiciled status?

A few months ago we published a case study concerning HMRC enquiring about foreign income. This can happen if you are a foreign national and are now living and working in the UK. An area we didn’t touch on was associated with how HMRC views your domiciliary status. The recent news about Rishi Sunak’s wife has highlighted this is somewhat complex and often misunderstood area of tax law. In this short post we’d like to help explain what it means to be ‘domiciled’ or ‘non-domiciled’ where tax in the UK is concerned.

What does ‘domicile’ mean?

declaring your overseas incomeIn a nutshell, ‘domicile’ refers to that country a person treats as their main or permanent home. Also, it concerns where they actually live and maintain a ‘substantial’ connection with.

If you read our article on “Living Overseas - Do I Need Top Pay Tax if I Leave The UK?”, then you’ll be familiar with the tests that HMRC apply to decide how to treat your current tax residency status. As part of the Automatic UK Test, HMRC looks at your sufficient ties to the UK and whether they point to whether or not you’ve actually left the UK or still have reasons to come back, perhaps regularly. These tests help HMRC determine if you are legitimately living overseas for tax purposes or if perhaps you’re trying to avoid paying UK taxes by staying out of the country for 183 days a year.

Domicile of origin and domicile of choice.

Where UK tax law is concerned, there are three types of domicile - domicile of origin, domicile of choice and domicile of dependence. In the UK, you acquire domicile or origin at birth through your father, although this doesn’t mean the country the person was born in, but most often does. So, if your father is from India, India is your domicile, unless you choose otherwise.

Domicile is different to residency. In UK common law, every individual has one domicile, you can’t have two or have no domicile.

Your domicile of origin cannot be lost easily. Simply by moving overseas for an extended period, becoming a tax resident here or elsewhere, does not automatically remove for domicile status.

However, domicile of choice is a little harder to consider. Take for instance, a UK national. If they move abroad ‘permanently’ to settle in another country. Permanent means ‘indefinitely as it is really up to the person concerned, as is domicile of choice. It comes down to intention’s: if the new country will be their permanent residence, will they have family interests there, a business or other social interests. Do they own a property in that country? And, what about the existence of a Will and where that was created.

It’s quite a tricky area, as there are many variables and many ways to interpret somebody’s intentions. Hence, arguments with HMRC can arise and as always, you’ll need to prove your ‘innocence’ in the matter.

Domicile of dependence is for children under the age of 16 and their domicile will follow that of the person on whom they are legally dependent. However, it must be noted that if the domicile of the parent or legal guardian changes, the child will automatically acquire the same domicile and the child’s domicile of origin will be displaced.

[Read more about what happens if HMRC make enquires about you overseas income]

Important tax issues to consider

It is quite understandable why somebody would not wish to give up their domiciliary, as there may be intentions to return home, the UK being transitory, even though it may appear as somebody’s permanent home.

As tax specialists based in the London area, we are conveniently located to assist foreign nationals, non-domiciled in the London and the surrounding counties, with their unique tax issues and concerns. We've assisted many individuals navigate the complexity of foreign income taxation, whether you are domiciled in the UK or are considered non-domiciled.

Take for instance somebody from India who has been living and working in the UK for many years. Their family may still predominantly be in India. They may’ve family business interests there too, or even own property there. In short, there may still be clear intent to return one day.

This means that although a foreign national living and working in the UK maybe a ‘tax resident’ and pay taxes on the income generated through their work here, their ‘non-domicile’ status will mean that their worldwide income does not have to be reported in the UK, as that will no doubt be payable to the tax authorities in the domiciled country. This highlights two options for non-domicile tax residents - being taxed on an arising or remittance basis

Taxed on an ‘arising’ or ‘remittance’ basis

If you are ordinarily considered as UK domiciled and a tax resident, then you are charged on an arising basis. This means that you pay tax on your worldwide income and you’re allowed to use your personal tax allowances and any annual exemptions to offset that income.

However, things are little different and often highly beneficial if you are considered ‘non-domiciled’ while a tax resident in the UK. In this case, you can choose to be taxed on a remittance basis, if that treatment is more favourable than the arising basis. By choosing the remittance basis, you’ll only be taxed on UK sourced income, not worldwide income, unless you decide to ‘remit’ that income. For instance, if you’re a Singapore domiciled national living and working in the UK as a tax resident and a retirement or an assurance policy matures yielding a gain. If you leave the gain in Singapore, no tax is due. If you bring that money into the UK - remit it, then tax falls due.

It’s important to note though that if you choose the remittance basis, you’ll lose your tax allowances and exemptions.

Other factors to consider when using the remittance basis

Do I need to claim to use the remittance basis?

Not necessarily. If your ‘unremitted’ foreign income and gains for the tax year are less than £2000, the remittance basis applies automatically, so you don’t need to claim. Also, it should be noted that at this level, you won’t lose your personal allowance or capital gains annual exemption either. This also allies, even if you are considered ‘domiciled’ for UK tax purposes.

If I choose to remit my income, how will it be taxed?

If you decide to bring some of the income you have earned overseas into the UK, that income will be taxed at the standard (non-savings) tax rates - 20% for basic rate earners, 40% for higher rate payers and 45% for the top tier incomes over £150,000.

Note though that dividend income, where you’d normally see these taxed at 8.75%, 33.75% and 39.35%, will be taxed as ordinary income - which would not be the case if you’d decided to opt for the ‘arising’ basis as opposed to ‘remittance’ basis.

How does the remittance basis work if I am a long term resident?

As the saying goes - “there’s no such thing as a free lunch”. At some point, HMRC will see your long term residency in the UK as a way of reducing your tax exposure and will look to make you pay for that entitlement. So, two bands of charges apply:

Resident for 7 out of the previous 9 tax years. For the privilege of maintaining your remittance basis, you’ll need to pay £30,000 per year.

Resident for 12 out of the previous 14 tax years. For the privilege of maintaining your remittance basis, you’ll need to pay £60,000 per year.

This is HMRC’s way of encouraging people to convert to the ‘arising' basis.

When am I automatically considered domiciled in the UK?

If you have been resident in the UK for 15 out of the previous 20 years, you are deemed as domiciled for tax purposes.

Domiciliary status for tax purposes is a complicated area, seek help

We have presented in rather simple terms the most commonly encountered tax aspects of being domiciled or non-domiciled in the UK. This subject is very complicated as the range of income sources can be extensive as can your ties to the UK if you are non-domiciled. Inheritance tax is another area affected by domiciled status that we haven’t covered here. Rules covering IHT and domiciled status changed in 2017.

If you are encountering issues with taxation as applied to domicile status, it’s likely that you require specialist tax assistance. We're based in London and our offices are conveniently located in Richmond-Upon-Thames, Putney and Cavendish Square. Our tax advisers are on-hand to help you navigate these difficult waters and arrive at an outcome best suited to your personal circumstances. Call 020 8108 0090 or use connect using the form here.

claiming covid-19 related expenses for work

Working from home and claiming tax relief on expenses

As more of us are now working from home, more often, because of the recent impact has had on businesses and attitudes concerning the practice of working from home, how can employees be reimbursed for the extra expenses they incur working from home, and what exactly can they claim for?

It comes as no surprise to find that many of us have had to work from home over the past couple of years. While in most cases this was forced upon us, it has had a significant effect on the attitudes of employers towards this practice.

Many employees have found it beneficial, as indeed have some employers, and want to continue, at least for part of the working week. Working from home imposes a range of costs on both employer and employee that prior to the recent pandemic, haven’t drawn that much attention. So when employees spend a considerable part of their work time working from their own home, how much of the extra expense can they claim, and what exactly is claimable?claiming covid-19 related expenses for work

What types of working from home expenses are we talking about?

Enabling an employee to work effectively from home requires more than a little thought and planning, there are real costs and expenses to consider. These may include:

  • The cost of a laptop or other computer
  • An internet connection
  • A printer
  • Printer and general office consumables
  • A home office space and furniture
  • Heating
  • Lighting
  • Telephone / mobile phone

Most people typically discover that while working from home can be a great convenience, their household bills start to increase, especially if normally both adults are at work, working the typical 9 to 5 office shift.

Then there are other considerations that are often forgotten, issues such as insurance come to the fore, personal and for additional equipment. Also, can an employee now claim expenses for a trip to the employer’s office?

Reimbursement vs tax exemption

It is important to understand how expenses are treated for tax purposes.


If, as an employee, your employer reimburses the expenses you incur as a part of your job, HMRC must be satisfied that:

  • No matter who did the job, the expense would have been incurred.
  • It was necessary to perform your job.
  • It was incurred in the performance of your duties.
  • It was incurred and paid back to you.
  • The expense was wholly and exclusively for your work.

If HMRC isn’t satisfied, you’ll run the risk of expense payment being treated as additional income and be taxed accordingly.

Tax exemption

If your employer doesn’t reimburse you for expenses incurred during the performance of your duties, you may be able to claim these against your income. That may be the case if for example your employer doesn’t reimburse you for the additional expenses of working from home. You must be able to prove, just like reimbursed expenses, that they were purchased wholly and exclusively for your job.

If this is the case then your expenses can be claimed against your income. For instance, if you earn £30,000 and you incur £5,000 of expenses, you will only pay income tax on £25,000.

Some common questions about claiming working from home expenses

Implications exist for both employers and employees where claiming expenses related to working from home are concerned. Let’s look at some of these.

Can employers reimburse homeworkers for their household expenses tax free?

The simple answer is ‘yes’ an employer can reimburse its employees when they work from home with your full agreement, provided they are ‘reasonable’ and provided that the employee working from home is a regular occurrence.

HMRC allows different levels of payment to be paid free of tax and national insurance without supporting evidence. For weekly paid employees, this is up to £6, and monthly paid employees can expect £26 a month.

Can an employee be reimbursed tax free for working expenses greater than these figures? Again, yes. However, you must be able to prove that the payments are wholly in relation to ‘reasonable additional household expenses’ and that you have supporting evidence to this effect.

When employees are given equipment for home use, is there an income tax charge?

Income tax charges for this type of expense usually arise because the equipment concerned is also being used for personal use. As such it’s considered a benefit and tax arises as a result. So, if the equipment is supplied and owned by the company and supplied for business use, not personal use, then a tax charge will not arise. The other condition is that this ‘benefit exemption’ is offered to all employees with similar employment terms. The equipment must also be returned when the home working ends or when an employee leaves, if not a chargeable benefit will arise.

[Learn more about how benefits in kind are treated by HMRC here]

If an employee purchases their own home-working equipment, can we reimburse them tax free?

As a consequence of Covid-19, there was a government scheme in place up to April 5th 2022 that allowed employees to be reimbursed tax free for home-office equipment purchases, provided the same benefit was available to other employees in a similar role. This has not been extended beyond April 6th 2022.

Can homeworkers claim tax relief on household expenses?

Yes, because not every employer will cover the cost of an employee working from home. However, there are limits. Firstly, just like an employer reimbursing employees for home use, it has to be fully justified as an expense incurred wholly, exclusively and necessarily in the performance of their duties. Usually this is difficult to achieve as the employee should not have had a choice to work from home - i.e. it was forced upon them by the employer. If they did have a choice in the matter, then this would not be allowed.

However, because of Covid-19, an employee can now claim the same weekly £6 or monthly £26 allowance through their Government Portal for tax years 2020/21 and 2021/22. This claim is possible even if the employee was asked to work from home on a single day in either tax year. For a person on the basic tax rate of 20%, they are able to claim £6 per week which equates to £1.20 per week, or £62.40 per year. 40% taxpayers can claim double this.

Again, it is possible to claim more, but as ever, complete records demonstrating the authenticity of the claim must be kept and be justifiable.

If an employee works from home can they claim tax relief on travel expenses for trips to the office?

This is a difficult and complex area. It requires the definition of what is an employee's permanent workplace and temporary workplace. It also depends on whether the employee is permanent or part-time.

HMRC considers a permanent place of employment that location where an employee attends in performance of their duties. Regular relates to the frequency of attendance or pattern of attendance. This means that going to the office everyday is a requirement, a visit once a week, fortnightly or monthly, may apply.

On the other hand, HMRC considers a temporary workplace a location an employee attends while fulfilling a temporary role or one of limited duration. If an employee spends more than 40% of their time at one location over a 24 month period, HMRC will consider this as a permanent workplace.

So, if an employee ordinarily works from home full-time and is required to travel to the office, the employee can claim unreimbursed expenses tax free - provided the travel is not made regularly, else it may be considered that the office is the permanent place of employment.

Accordingly, if an employee shares their time between two locations, such as a home-office and their real office, HMRC will consider this as ordinary commuting between two ‘permanent’ places of work.

Can you backdate working from home allowance?

Yes, HMRC will accept backdated claims for up to 4 years.

Am I eligible for working from home tax relief?

Yes, provided you had no choice in the matter and your employer asked you to. Then you can claim £6 per week / £26 per month (monthly workers).

Note that you cannot claim this allowance if your employer reimbursed your expenses for doing so or paid you an allowance.

How do you claim payment for working from home?

You can make a claim if you have a government portal account or through your regular SA100 tax return.

Record keeping

Making expense claims is one thing, making sure you have the evidence to support them is quite another. Most employees are used to claiming ad-hoc expenses from their employer, such as when they attend an off-site client meeting, attend a trade show, stay overnight somewhere or claim subsistence expenses. When it comes to claiming expenses that relate to the use of your home, HMRC quite naturally regards these claims with little more skepticism.

It’s essential that you keep accurate documents in relation to what you are claiming. If you are claiming for heating that you might ordinarily expect not to have to pay because ordinarily you work in an office from 9 to 5, then make sure you apportion a reasonable amount of the bill. Don't, for instance, claim for heating your entire house when in reality you’re using just one room.

When you’re unsure, talk to a tax expert like TaxAgility

Personal tax addition can be a complicated area and making claims for expenses if not properly validated and justified, can lead to serious consequences with HMRC. If you have any doubts or would like a tax expert to help you in making claims for tax relief, call TaxAgility today on: 020 8108 0090 and speak to one of our personal tax experts.


is it time for an electric company car

Has the time come to have an electric company car?

With petrol prices at levels not seen before, even during previous oil and global crises, it comes as no surprise that the economics of owning an electric car are improving. But are there any other HMRC incentives that may ease the costs of purchase that individuals and company employees can consider in their calculations? It turns out that there are.

IsWhile this article will focus on the business considerations of electric vehicles, for the time being, it should be noted that the government is also offering purchase incentives to private individuals on new electric vehicles.

Price of electric vehicles are coming down and choices are expanding

Over the past couple of years we’ve seen the growing introduction of a range of electric cars, e-cars. New models and even completely new new manufacturers have appeared alongside new electrified versions from the well known car manufacturer brands. Until now they’ve been expensive to buy compared to their petrol drinking cousins. Although they still are comparatively expensive, they are getting cheaper as the technology matures, economies of scale improve and competition increases.

The government has for the past year offered favourable tax treatment on electric vehicles purchased for business use. This is set to continue, albeit at slightly reduced levels, but with other favourable market conditions factoring in, the company car is now an interesting prospect once again.

Tax in Benefits in Kind for company electric cars

  • 2021/22: 0%
  • 2022/23: 1%
  • 2023/24: 2%


Considerations when buying an electric car

Should I buy a new or used electric vehicle for business use?

Most of the benefit for a business buying an electric vehicle is achieved by buying a new vehicle. New electric vehicles qualify for 100% first year allowance (FYA). That means you can deduct the full cost of the vehicle purchase price from your profits - potentially a significant tax saving.

Buying second hand can still be advantageous, but the cost won’t receive the same FYA benefit. Currently, you’ll be able to claim 18% of the purchase price.

Can my business claim for electric vehicle charging points and electricity?

This is an interesting one. A business can claim a 100% first year allowance for installing new charging points at or close to an employee's place of work. This incentive is currently available until March 31 2023.

How a business chooses to let the employee use the charging point is also interesting.

Charging an electric vehicle at the place of work - private or company owned.

Currently, there is no chargeable benefit to an employee if the company allows them to recharge their own vehicle (private use) at their place of work. This is because electricity isn’t considered a fuel. If it were, simply charging your phone or a laptop might be a chargeable benefit. This is a similar treatment to that of tax free car parking. Naturally, an employee cannot claim for recharging their personal vehicle from other locations, such as a service station.

Charging at third party charging points

Similarly, if an employer pays for the cost of charging a company owned electric vehicle at other locations, there is no chargeable benefit, again because electricity is not considered a fuel.

If an employee pays to recharge a company vehicle from a third party source such as at home or a service station charging point, they can make a claim of 4p per mile.

Can I lease an electric vehicle and claim similar benefits?

Yes, but there are a couple of points to note here. The type of contract is important. Only operational lease contracts are able to qualify for full relief on rental payments. Operating leases differ from the other type of lease - typically a personal contract purchase (PCP), in that once the operational contract ends, the vehicle concerned is simply returned to the lease company. In short, there’s no ownership.

Can I claim back VAT on an electric vehicle purchase?

The answer is yes and there’s no difference here to that of a business buying a regular vehicle. The catch though, is that it must be for 100% business use. HMRC will likely ask you to prove this too, which is notoriously hard to do. if the vehicle is used by employees for personal reasons, then only 50% can be claimed.

The other point to note is that this only applies to vehicles that are classified as low emissions - less than 50g/km CO2. Not a problem for an electric vehicle and the business can claim full relief on rental payments. Above this figure though, only 85% can be claimed.

What can I claim if I used my personal electric vehicle for business use?

Since it became unattractive to have a company car, many people use their own vehicles for business use from time to time. As such regular vehicle owners have been able to make an expense claim for mileage use. If you use your electric vehicle for business use, the rates are exactly the same. The normal tax free mileage allowance is 45p per mile  up to 10,000 miles, thereafter 25p per mile.

What about the benefits of electric vans?

Many small business owners and self employed people can benefit here by being an electric van as opposed to a ‘car’.

A van is different from a car because its sole purpose is trade or business related. Also, it qualifies for the same FYA as electric cars do. Accordingly, a van can be used from both business and private use, without the employer or employee incurring a benefit in kind.

What are ‘super-deductions’ and do they apply to electric vehicles?

Super-deductions were announced in the March 2021 budget and relate to ‘qualifying assets’. A super-deduction 130% FYA can be deducted on the full cost of such assets.

But what are qualifying assets? Where electric vehicles are concerned, they are not qualifying assets, which are normally assets acquired to carry on a trade - e.g. office equipment, machinery, computers, etc. Cars are not treated as ‘main pool’ plant and machinery and thus do not qualify for capital allowance purposes.

The good news though is that if your business plans to install charging points for company electric vehicles, these do qualify for a super-deduction of 130%. In other words, for every £10,000 spent, your business can claim back £13,000.

This benefit lasts through 31 march 2023.

What government grants and schemes are currently available ?

Buying an electric vehicle through an employer’s salary sacrifice scheme.

This represents a method by which an employer can offer an employee an electric vehicle in a cost-neutral way through salary deductions. This takes advantage of the employer’s VAT deductions and the employee’s ‘pre-taxed’ salary. This is no different from the way a company may attract top talent by offering healthcare, gym membership, childcare, etc. It is an attractive option because it reduces the employee’s overall taxable income. In some circumstances it could move an employee into a lower tax band.

However, while still an attractive scheme, the government made changes in the scheme in 2017. Since then an employee is required to pay income tax on the value of the car or the amount of salary sacrificed. Those employees on salary sacrifice schemes prior to April 2017 lost this income tax allowance in April 2021.

Fully electric cars however, renew the attractiveness of this scheme as the incentives for electric vehicle purchase and company use remain. The grants offered though only apply to vehicles with a purchase price of less than £32,000.

Here are a few examples. Note these are based on ‘no salary sacrifice scheme implemented’.

Higher value vehicle examples

Example: A regular petrol vehicle

  • Purchase price: £45,000
  • Engine size and CO2: <1400cc)- 125g/km
  • Car benefit charge : £13,050
  • Tax liability:  20% = £2610, 40% = £5220

Example: Similar value e-car

  • Purchase price: £45,000
  • Car benefit charge - £450
  • Tax liability - 20%=£90, 40% = £180
  • Government grant: Does not apply.

Typical lower cost cars

Example: Fully electric:  e.g. Vauxhall Corsa-e

  • Purchase price: £25805 inc options
  • Car benefit charge - £258
  • Tax liability - 20%=£51.6, 40% = £103.20
  • £1500 government grant

Example: Regular petrol Cosa  (<1400cc - 125g/km)

  • Purchase price: £16,445
  • Car benefit charge - £4769
  • Tax liability - 20%=£953.80, 40% = £1907.60

Other grants available

For vans

  • A grant of £3000 available for small vans up to 2500kg.
  • A grant of £6000 for vans between 2500kg and 3000kg.

Homecharge scheme

  • Employees can make use of the Electric Vehicle Homecharge scheme. This provides 75% towards the cost of and installing a single charge point, up to a maximum of £350 per household per eligible vehicle.

Road tax

  • Electric cars are exempt from road tax
  • Hybrid  vehicles are taxed between £0 and £135 per year depending on CO2 emissions.

How tax Agility can help your business navigate the electric vehicle opportunity

We’ve been assisting small businesses and the self-employed in and around Richmond and Putney for many years. We’re intimately familiar with the issues faced by businesses looking to offer benefits to their employees in a tax efficient manner and also improving the business’s own tax efficiency.

E-vehicles are or have come of age, depending on your point of view. However, there’s no denying that at present there are some significant attractors to a business (or individuals) purchasing a new electric vehicle for business use. We can help you assess the value and benefit to your business, as each business is different.

Call tax Agility today and talk to us about electric vehicle ownership and how it can benefit your business.

Do I pay UK tax if I move overseas

Living Overseas - Do I need to pay tax if I leave the UK?

On the face of it, this seems like a simple question and is indeed one many people ask. For some it’s because they are genuinely emigrating to another country, for others, they plan on being away for extended periods of time, perhaps because they are ‘snow birds’, choosing to winter in warmer climes. And then, there are others that look to understand how they can reduce their tax burden because they move around, such as ‘digital nomads’. The reality is though, it’s not that simple.

Do I pay UK tax if I move overseasA common question from UK tax payers spending time overseas in different countries, sometimes for relatively short periods is: “Do I still need to pay tax and if so, to whom?” The answer is “most likely and to somebody”. It all depends on where you are, where you’re considered a tax resident and how much time you have spent there. A common mistake is in interpreting what is known as the 183 day rule. We’ll explore that and other points to consider in this article.

Necessity is the mother of invention

Over the past few years, much about everyday life has changed, especially where work and travel is concerned. Some people have been forced out of necessity to make changes, others driven more by lifestyle changes. Taxation is on the rise in the UK and likely so in many parts of Europe. It’s only natural then, for people prepared to move overseas to think about where they will get the best value for money, where their assets may be taxed less and the impact of tax on their retirement plans. Resourceful savers will seek out the best overseas locations with attractive taxation regimes and likely move.

As people retire, some consider the option of retiring abroad. While in the past, as part of the EU, retiring to the warmer climates of Spain and Portugal was high on the list for British people, Brexit and other restrictions have made for an uncertain future resulting in more than a few people returning to the UK, potentially complicating their tax affairs. Still though, consider plans further afield, such as South East Asia or even Central America. A number of countries offer attractive expat or retirement opportunities for those who can afford the residency and immigration fees.

The key question though remains - what will be my UK tax liability and how do i figure this out?

Enter the Digital Nomad

Even before recent pandemic issues, a new breed of worker emerged - the digital nomad. Digital nomads vary greatly in demographic; some are young adventurous travellers seeking to combine work and the joy or travelling, or even just to be based in a different country for an extended period. Others maybe more mature in years, seeking to leverage overseas property or even rent for an extended period to afford a new work location, or perhaps to avoid the inclement weather in the UK.

A number of countries offer attractive digital nomad packages - often for up to 12 months. For these adventurous individuals, it’s natural to ask the question about tax or indeed if they are able to reduce their tax burden by making such changes to their location and lifestyle, and the specific benefits their own circumstances my lead to in regard to UK tax.

So how do you figure out what tax you owe to whom?

Let’s start by considering when you cease to become a UK Tax Resident.

Many people have heard of the “183 day rule”. Simply applied, this means that if you spend 183 days or more in the UK you become a tax resident and need to pay taxes here. If this is the case for you, then the trail stops here. But what does it mean if you spend less than 183 days in the UK - are you automatically treated as a non-tax resident? This is where mistakes are made and people get caught out. Being out of the UK for more than183 days does not automatically mean you are non-tax resident. To work this out we need to refer to the Statutory Residence Test, from which the 183 day rule emerges.

Introducing the Statutory Residence Test - SRT

Ultimately, whether you are tax resident or not will come down to how you fare when you take the “Statutory Residence Test” or SRT.

There are four main parts to the SRT:

  1. How much time you have spent in the UK in a tax year.
  2. Automatic Overseas Test.
  3. Automatic UK Tests.
  4. Sufficient Ties Test.

Part one: How much time you’ve spent in the UK during the tax year 

As we said earlier; if you spend 183 days or more in the UK then you’re a UK tax resident and the test stops here. However, the problem people experience is more evident if the 183 day rule is stated another way: If you’re in the UK for less than 183 days, then you’re not a tax resident. It comes down to how you count, why you’re actually in the UK and what you are up to.

On the face of it, the 183 day rule seems easy to comprehend. In practice though, how HMRC calculates the number of days is not so simple. Let’s start with what HMRC consider as a day? Generally, HMRC considers you as having spent a day in the UK if you were in the UK from Midnight onwards. But, as you’ve probably guessed, other factors apply. In fact, three other considerations need to be made:

  1. The ‘deeming rule.
  2. Transiting the UK - transit days.
  3. Exceptional circumstances.

The deeming rule

As one might reasonably expect, not everyone may spend a full day in the UK if they are not permanently based here. They may be here for meetings or to visit a relative. Perhaps not too surprisingly, HMRC needs to be sure that people are not trying to avoid tax by being based outside of the UK and coming in on a regular basis for part of a day - always a possibility if somebody is based in a close neighbouring EU country or other tax haven.

The deeming rule assesses the following conditions:

  1. Whether you have been a resident in the UK for 1 or more years in the past 3 tax years.
  2. Whether during the tax year under consideration, you had more than 3 ties to the UK. These include: A family tie, an accommodation tie, a work tie or a 90 day tie. See Ties Test.
  3. Whether you were present in the UK on more than 30 days without being present at the end of the day (qualifying day) in the tax year of interest.

More on the deeming rule can be found here.

What’s the impact of the deeming rule?

It basically means that if you meet all the deeming rule’s conditions, after the first 30 qualifying days, all subsequent days within the tax year are treated as days spent in the UK. HMRC gives examples as to how this applies, but in summary, it means that although it may appear that under the SRT you are a non-resident for tax purposes, because of your ties here and previous tax status in the UK, even though you spend less than 183 days here, you may still be treated as a tax resident.

This is quite a complicated consideration and so it is best that you consult with a Tax Agility expert on this issue.

Note: You should still check your tax liabilities with the country you have spent time with though, as their rules may be different and you may still owe tax there. Also check out whether they have a dual taxation agreement with the UK, as this means that any tax you have to pay overseas may be eligible for a tax credit in the UK, lessening your tax liability here.

Transit days

A transit day is a day where you travel to and from other countries via the UK. These are usually not considered full days under the SRT. However, care must be taken here as it may appear tempting to use a transit day as an opportunity to conduct business in the UK or see friends and family. HMRC is quite clear that any activity that is ‘to a substantial extent unrelated to your passage through the UK’, means the day concerned can be counted as a qualifying day. Simply meeting your boss for breakfast or going out on the evening of your arrival with friends, could turn a non-qualifying day into a qualifying day and count towards your allowance. If in doubt, talk to us.

Exceptional circumstances

Sometimes people are forced to return to this country, perhaps because of a death in the family or a sick parent. HMRC are not blind to this and you may be granted special conditions in regard to the total number of days you can spend in the UK.

This may be affected by the number of days you have already spent in the UK, how much work you have engaged in, the location and the type of work involved. Be sure to get clarification on this first though.

Part 2: The Automatic Overseas Test

There are three parts to this test.

First Test: You will be considered as non-resident if you spent fewer than 16 days in the UK during the tax year and were resident in the UK for one or more of the 3 tax years before the current tax year.

Second test: If you were not resident in the UK in any of the three prior tax years and spend less than 46 days in the UK in the tax year of interest, you will be considered as non-resident.

Third test: If you worked overseas full-time over the tax year concerned and:

  • spent less than 91 days in the UK in that tax year.
  • spent less than 31 days where you worked for more than 3 hours a day in the UK.
  • there was no significant break in your overseas work.

A significant break is considered where at least 31 days go by where you’ve worked for more than 3 hours overseas, or would have worked for more than three hours but didn’t because of annual leave, sick leave or parenting leave.

Part 3: The Automatic UK Test

There are three parts to this test.

First automatic UK test: If you’ve spent 183 days or more in the UK, you are a tax resident.

Second automatic UK test: If, for the tax year, you’ve had a home in the UK for all or part of that year and if all the following apply, you’ll be a tax resident:

  • one period of 91 consecutive days where you had a home in the UK.
  • at least 30 of these 91 days fall in the tax year when you have a home in the UK and you’ve been present in that home for at least 30 days at any time during the year.
  • at that time you had no overseas home, or if you had an overseas home, you were present in it for fewer than 30 days in the tax year.
  • if you have more than one home, each home should be considered separately for the test and meet the test for one of them.

Third automatic test: You’ll be a tax resident if all the following apply:

  • you work full-time in the UK for any period of 365 days, which falls in the tax year.
  • more than 75% of the total number of days in the 365 day period when you do more than 3 hours work are days when you do more than 3 hours work in the UK.
  • at least one day which has to be both in the 365 day period and the tax year is a day on which you do more than 3 hours work in the UK.

Sufficiency ties test

If you are still in doubt and do not appear to meet the automatic overseas test or the automatic Uk test, then you’ll have to look at your ties to the UK. This will help determine if your time in the UK along with the ties you have here, will make you a tax resident or not. The ties to consider are:

  • a family tie.
  • an accommodation tie.
  • a work tie.
  • a 90 day tie.

Also, if in the prior three years you were a UK resident, you’ll need to consider if you have a country tie too. Essentially, the more ties you have to the UK, the less time you can spend here without becoming a tax resident.You can find out more about this here.

Are you considered domiciled in the UK or non-domiciled?

Domicile is another question that often crops up. This typically applies to foreign nationals living and working in the UK. The answer can have a significant impact on your tax liabilities in the UK.

The exact nature of your domicile can change, but ordinarily it is the country of birth for your farther or mother. While you may be considered a UK resident for tax purposes, your domicile status can impact tax on overseas income and inheritance.  The exact impact on your tax affairs needs to be very carefully considered and planned out with a qualified tax advisor. If you have questions concerning tax and your domicile status, talk to our tax advisors.

In conclusion

Tax residency status has a habit of being misunderstood simply because of the belief in the 183 day rule. For sure, if you’ve been in the UK for longer than 183 days then unless you’re looking to qualify under non-domiciliary conditions, you’re almost certainly a tax resident. However, for most people concerned about their tax residency status, it’s more likely they are counting days under 183 and fall foul of the other conditions that HMRC will test your status against. These could potentially limit your time to 16 days in some cases, particularly if you’re based overseas and coming to the UK fairly often or still have many ties to the UK.

Our advice is, don’t assume. Talk to a qualified tax advisor before you travel and discuss your plans for the tax year.

HMRC SA100 Extension 2022

Good news for those with self-assessment tax bills

HMRC has extended the ‘season to be jolly’, well, just a little. Announced today that it has extended the filling period, usually January 31st, and when late payment penalties will become due. Good news, but there's still a catch - interest will still be charged.

HMRC will not charge late ‘filing’ penalties if filings are made by February 28th 2022. The penalty is 5%  and is charged on any unpaid tax due.  Similarly, it won’t apply late ‘payment' penalties, provided payment for tax due is made by April 1st 2022, or a payment plan has been set up by that date.

HMRC SA100 Extension 2022This is consistent with the same waivers HMRC made last year and provides customers and tax representatives with some much needed breathing space, given the difficulties of the past year.

Payment plans are still available

Payment plans, known as ‘Time to pay’ options, are still available and allow self assessment bills up to £30,000 to be spread over 12 months.

However, it should be noted and this is the catch: The actual filing and payment deadlines have not changed. Even though you can choose to file and pay later, interest will still be applied based on the existing deadlines. This means that late payment ‘interest’ still applies during this period, i.e. from Jan 31st onwards. The current late payment interest rate is 2.75%.

HMRC have said:

  • A return received online in February will be treated as a return received late where there is a valid reasonable excuse for the lateness. This means that:
    • There will be an extended enquiry window
    • For returns filed after 28‌‌ ‌February the other late filing penalties (daily penalties from 3 months, 6 and 12 month penalties) will operate as usual
    • A 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1‌‌ ‌April 2022. Further late payment penalties will be charged at the usual 6 and 12 month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up.
  • We will not charge late filing penalties for SA700s and SA970s received in February – these returns can only be filed on paper
  • For SA800s and SA900s we will not charge a late filing penalty if customers file online by the end of February – the deadline for filing SA800s and SA900s on paper was 31‌‌ ‌October. Customers who file late on paper will be charged a late filing penalty in the normal way, they can appeal against this penalty if they have a reasonable excuse for filing their paper return late
  • Self-employed customers who need to claim certain contributory benefits soon after 31‌‌ ‌January 2022, need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time – this is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 balancing payment that is due to be paid by 31‌‌ ‌January 2022. Benefit entitlements may be affected if they:
    • Couldn’t pay their balancing payment by 31‌‌ ‌January 2022, and:
    • Have entered into a Time to Pay arrangement to pay off the balancing payment and other self assessment tax liabilities through instalments.

Still have questions?

We understand that HMRC statements and guidelines are not the easiest things to interpret, so if you still have questions and want us to assist you with your SA100 Tax return, call us today on 020 8108 0090 and talk with one of our specialists in either our London Richmond-Upon-Thames office or our London Putney Office.

Thinking about exiting your business? Here’s what you need to know?

There comes a time with many businesses, especially those that are owner / managed, where the owner thinks about exiting. In this article we will explore some of the ways this can be achieved.

Some family businesses may be in the fortunate position to be able to pass down the business ownership / management to a younger family member. This way the business continues and there’s a chance that other family members can benefit, while still offering the possibility of providing a lucrative income for the current family member owner - likely a parent, for their retirement. For others though, that luxury may not exist and the business owner, deciding that the time is right to step back, is forced to look at the options they have to exit the business.

planning to sell your businessYou’ll note that we didn’t say close the business down. While that is a last resort many may follow, other options exist, and these may be more beneficial if they are possible to achieve. The key issue here is to be planning early enough and not deciding one day to get out and then seek quick alternatives to closing the business.

When planning a business exit, what do you want to achieve?

While this may sound like a silly question, it’s important to get your expectations right. Ultimately, what do you want from this business exit? The four most common reasons are to:

  • Pass on the business to somebody you trust, like a family member.
  • Sell the business for a decent return.
  • Merge the business with another firm and eventually walk away.
  • Shut the business down and bank any profits that may still exist in the business.

Let’s look at the practical aspects of each of these in turn.

Passing on your business to a family member.

This may appear the most sensible option for many family run businesses, and indeed for many it is. However, this isn’t a step that happens over night. It needs to be planned thoroughly. For one thing, the family member you’re considering for the succession naturally needs to be fully bought in to this plan, else it will come to nothing quickly. It’s normal for company succession to be planed and prepared for some years before the event. This way, the person in question can be fully up to speed in the role, but perhaps more importantly, will have had time to develop the required relationships within the firm, its clients and any supply chain.

If there are multiple ‘suitors’ involved, things can get quite tricky, as each person and their role needs to be defined precisely. If they are not to be involved in the day-to-day operations of the business, but you still want them to benefit from the business, then the type of shares they have will likely differ from those involved in actually day-to-day operations. For instance: shares may be voting or non-voting shares, but the non-voting shares may still have preferential rights to dividends. You will also likely decide on share ownership percentages based on how much a child contributes to the operations of the company (or has done to date) and the seniority of their role. Be prepared though, as these discussions can get quite tricky as emotions and egos get involved, depending on how ‘functional’ your family is. In the short term, if you are concerned, you could always opt to retain a majority of the voting rights. Additionally, you could arrange to be retained as a ‘consultant’ to the business, as this would also enable you to continue to benefit directly through income and boost any earning you may receive through dividends as a smaller shareholder.

Whatever you decide to do though, needs to be recorded and set out either in a shareholders agreement or in revised articles of association.

Selling your business for a profit

If you are the sole owner of a business and don’t have family members to pass the business on to, or simply don’t want to continue the business, selling it maybe the best option for you.

If you have partners in the business, then naturally, this offers a similar opportunity to passing it on to a family member, only here, they would be presented with an opportunity to buy you out or find somebody else to buy you out and take over your role.

Selling your business requires significant preparation, often a year or two in advance. This allows sufficient time to gather the information needed, ensure you have a good set of metrics upon which to base a valuation and also to improve the business’s performance in its last years of ownership by yourself.

So what are the steps you need to take to sell your business?

  1. Start by getting a professional valuation.
    This isn’t something you can really do yourself as personal attachment tends to lead to unrealistic valuations, especially where market dynamics and current business realities are concerned. There are ‘rules-of-thumb’ to help you obtain a view to help set your expectations. For instance, small businesses are often worth between two and five times their annual cashflow, although there are many caveats to this, including its ‘actual’ financial health. However, it’s not just cashflow that will decide whether a business is worth it’s valuation or not. For one thing, new investors / owners, will want to consider how the business will survive if you are no longer driving it, especially if the business is ‘account’ based and those relationships relied upon your presence.
  2. Improve your bottom line.
    A business that makes a lot of sales but yields little return is unlikely to be of interest to prospective purchasers. If you are planning an exit by selling your business, you would be best served by focusing the year or two prior to sale on cleaning up your business, reducing unnecessary costs, streamlining processes and systems, and increasing your sales. Essentially, spend what time you have by working to increase your net profit margin.
  3. Provide a solid business view.
    As an owner, you’ll no doubt be looking at the business’s past performance. Having a well documented set of accounts dating back 3 to 5 years is essential to providing provenance for the business. However, new owners will be looking at future potential, so one also needs to present a balanced view of how the business could perform, the market forces in play and the expectations you may have. Also, providing information on your clients, within the bounds of confidentiality, will help the prospective purchasers assess value and risk. The interested parties will of course conduct their own due diligence, but it helps to present your own as confidence will receive a considerable boost if both party’s views essentially come to the same conclusions after the due diligence is done. This will significantly help your negotiating position too.
  4. Due diligence on your part.
    Many business sales fall through, as many as half of these because of complication that arise through due diligence. It’s therefore to be realistic and it’s important that when you prepare for exit that you spend some time putting yourself in the shoes of a prospective buyer, not just you as the seller. A little on-line research will give you a very good idea as to the process a potential buyer will go through and the questions they will want answering along with the supporting data they will need.
  5. Buyer qualification.
    It’s very easy to get excited when somebody becomes interested in buying your company and starts asking questions. However, the phrase ‘seller beware’ is important to consider. Selling a company is a detailed and often frustrating process given the number of ‘hoops’ you will likely be asked to jump through to prove the value and overall potential of the company. It’s important then, to ensure the people asking the questions are:

    • Genuine and realistically placed to buy and are not simply on an information gathering exercise.
    • A good match for your business and have the experience necessary.
    • Have the funds available to close the sale and not have to go and seek funding that could ultimately fall through and waste everyone’s time.
    • Not fraudsters or con-artists, either trying to trick you out of fees, deposits or vital information.
    • Working within a reasonable timeframe, one you can work to without compromising your own due diligence and exit planning. If you are being hurried in to decisions, consider the previous point about fraudsters or time wasters.
  6. Tax planning.
    Without proper guidance and advice, you could wind up loosing a significant portion of the proceeds of a business sale, as it is considered as a capital gain. How much you pay depends on your particular circumstances and inheritance planning. Other considerations an accounting firm like Tax Agility can assist with include whether you qualify for schemes like ‘entrepreneur’s relief’ - now called ‘business assets disposal relief’.
  7. Use a third party business broker.
    Unless you have already got potential suitors lined up, this is probably the best way forward. For one thing, you’re likely to get a much more balanced view of the sale potential. A broker can assist with many aspects of the sale, some will handle all of it for you. Of particular importance are aspects such as:

    • Valuation.
    • Due diligence on your part and due diligence throughout the sale process.
    • Identifying potential buyers.
    • Buyer qualification.
    • Negotiation assistance.

Merging your business before personally exiting

Another particularly attractive way to exit your business, is to merge your firm with another. This is very popular within the professional services industry. Law firms and accounting practices often experience mergers where a senior partner in a firm merges the firm with another practice. That partner can benefit from the years of developing the business, take equity that’s owed to them and walk away. In reality many scenarios see the partner retained for a period of time to assist with the hand-over and to ease confidence with existing and key staff members (and clients) that the acquiring firm would wish to retain.

Many mergers happen between firms that are known to each other or through brokers that know the parties. Quite often the merger may be the brain child of the partners in two firms that have known each other your years and bring in an experienced broker to help the process along professionally. That said, third party brokers are equally capable of arrange suitable mergers as well as complete acquisitions.

Shutting down the business and banking profits

The last option we will consider here is where an owner of a business just wants to call it quits and get out - where the person doesn’t want the hassle of a merger or acquisition and has no interest on passing on the business. Basically, they just want to sell off any assets they have and bank any cash in the business.

The main issue here is on how the owner can get their hands on the cash in a tax efficient manner. Any cash in the business, often retained earnings or cash gained from the sale of assets, would be taxable if taken directly by the owner.

If the owner simply closed the business and took the cash, that would result in a significant taxable event. Without good tax planning you could lose a significant portion of the proceeds. Closing your business is unlike selling your business, as you are likely the sole owner and simply want to take the cash out of the business.

Your options are somewhat limited but do include the following opportunities:

  1. Take dividends up to your basic rate tax limit and if you really need the cash, pay a higher rate of tax on the rest as earnings.
  2. Make a pension contribution. Your company can make a contribution to your personal pension up to £40,000 per year. This is an allowable business expense and so helps reduce your company’s overall tax burden. So, if you are considering an exit of this nature, forward planning can really help, as you could max out on dividends and pension contributions. The main disadvantage of this is that any pension payments made will become inaccessible until the pension is payable and then only in amounts payable through the annuity you purchase (or 25% cash tax free).

For most owners, option 2 with a combination of pension and dividends likely is the most obvious option.

One could also consider not closing the company, minimising all overheads, and have it pay dividends each year. The main draw back with this is that the cash will likely lose value through inflation, as it will remain uninvested and likely to attract poor interest payments. It depends to a high degree on what monetary amounts are involved. You could also consider investing the company’s money, to help increase its longer term value.

Business closing costs

Shutting down a company is not free. You will need to pay an accounting firm (or in some circumstances, an insolvency practitioner) to assist in closing your business properly.

The simplest method, for a solvent company, especially one with a single share holder, is through ‘Company Dissolution’. The company must follow strict guidelines though, including: ensuring all creditors are paid in full, telling HMRC, closing the bank accounts, and having your accountant prepare final accounts. The company must also cease trading three months prior to closure.

There are other closure options depending on the ownership share structure or the company and whether it is solvent or not. These include:

  • Member’s voluntary liquidation (MVL) - typically for more complicated share structures where multiple owners / partners are involved. It’s more expensive as you need to involve a licensed insolvency practitioner (IP).
  • Creditors’ Voluntary Liquidation (CVL) - used where the companies creditors / shareholders take control of the closure process and force the company’s directors to liquidate the company so they may recover some of their investment.
  • Compulsory liquidation  - where creditors take legal action to wind up a company.

Are you considering exiting from your business? If so, talk to Tax Agility first.

The team at tax Agility have knowledge and experience that can guide you through the options and help you come to the right decision that matches your personal circumstances and needs. In addition, our experts can help you with all the tax planning considerations and wealth management issues that may arise from a sale or closure of your business.

Call us today on 020 8108 0090 and tax through your business exit plans with one of our specialists in either our London Richmond-Upon-Thames office or our London Putney Office.

reporting irish income from property in the UK

UK tax on Irish rental income

An Irish citizen working in London is asked by HMRC to declare her rental income from Ireland

The Republic of Ireland is a short hop away from London and has a long-standing Common Travel Area (CTA) arrangement with the UK. Under the CTA, Irish citizens can live and work in the UK without a visa, residence permit or employment permit. This ease of movement may explain why many Irish citizens are working in London and contributing to the UK’s economy.

reporting irish income from property in the UKWhile some Irish citizens may end up putting their roots down in the UK, others still prefer to retire in the Emerald Isle someday in the future. And considering the property market in Ireland is booming, it is not uncommon to see savvy investors getting a buy-to-let in Ireland now with the aim that they may move into the property later.

Mary, our client, was doing just that. She purchased a lovely family home in a tree-lined residential street in Dublin a few years ago and now rents it out while she works in London. In the UK, she is on PAYE and in Ireland, she files the relevant Irish tax return each year. To Mary, her financial affairs are rather straight forward and there is no need to do additional reporting. Unfortunately, HMRC sees it very differently.

Declaring a rental in Ireland to HMRC

It is important to point out that every case is different and that you should always seek professional advice from a personal tax accountant first. In the case of Mary, the rental profits that she gets from renting out her Dublin property is subject to the Irish tax. However, Mary is also a tax resident in the UK and therefore, HMRC believes she should have declared her rental income from Ireland.

Declaring your overseas income may not result in you paying tax twice, but not declaring it may see you fined and penalised. Whether or not one has to pay tax twice on the same income source depends on the existence of a double-taxation agreement between the country of your foreign income and the country where you are a tax resident. In this case, Ireland has a double-taxation agreement with the UK and one should not be paying tax twice on the same income source.

Worldwide Disclosure Facility (WDF)

HMRC launched the Worldwide Disclosure Facility on 5 September 2016. The idea behind this is to encourage UK tax residents who have foreign sources of income to disclose them voluntarily. Considering that over 100 countries now share and exchange information under the Organisation for Economic Co-operation and Development’s Common Reporting Standard (CRS), the WDF should help to increase international tax transparency.

If you have foreign interests, chances are you need to make a disclosure through the WDF, and preferably you do it before HMRC sends you a letter. Not declaring may put you in an unfavourable position, as HMRC may think that you’re negligent or worse, you choose to conceal your foreign income deliberately.

If you aren’t sure if a disclosure is required, talk to our qualified personal tax accountants. You can choose to work with us and we can review your specific circumstance and make the best recommendations.

Examples of tax liabilities that you need to declare

  • Income from letting residential property or land
  • Capital Gains from assets that increased in value between the time you bought them and the time you sold or transferred them
  • Income from running a business
  • Income from freelance or commission-based work
  • Income from accepting credit card or debit card payments
  • Investment income
  • Any other income that you should have paid tax on

Call Tax Agility on 020 8108 0090 about disclosing your foreign income on the Worldwide Disclosure Facility today.

Becoming your tax agent for Worldwide Disclosure

When Mary came to see our personal tax accountant, she was at a loss and naturally worried that she might be penalised financially. We worked with her to understand her circumstance and became her tax agent, representing her and helping her complete forms and calculate tax credits – in this particular case, since Mary has paid tax in Ireland, she was entitled to a credit which reduced her UK tax liabilities.

Upon seeing our work, Mary subsequently engaged us to handle her Self Assessment whereby we advised her how much tax to pay and when, if a tax credit is applicable, and prepare and submit her SA100 personal tax return to HMRC.

Personal tax accountants at Tax Agility

Tax issues can quickly become more complicated when you start to report foreign income to HMRC. Concerns such as one's domicile, the difference in tax year, or if double-taxation is applicable are valid and should be addressed professionally.

Thankfully, our personal tax experts are here to assist. Our top advice is don’t wait for HMRC to send you a letter. Instead, be proactive and let us understand if your tax affairs need to be disclosed through the Worldwide Disclosure Facility (or not).

Should a disclosure be needed, we can help to register you, prepare and submit your disclosure, work out how much tax, interest and penalties you may need to pay, and negotiate a payment arrangement if it is required. Working with you every step of the way, we can help ensure that you aren’t paying more than you should, and the disclosure matter will be completed quickly, efficiently and professionally.

Call us today on 020 8108 0090 and speak to a knowledgeable tax specialist in either our London Richmond-Upon-Thames office or our London Putney Office.

vat on shipping in EU and rest of the world

VAT on shipping in the UK and overseas

VAT has always been one of the more complicated taxes. It’s applicable to most products but not all and the rate of tax varies. The arrival of Brexit and the UK’s withdrawal from the European Union have done little to improve the reputation of VAT and make the situation seem clearer. There is still confusion around how VAT works when doing business with Europe.

vat on shipping in EU and rest of the worldAn area that causes misunderstanding is how VAT relates to shipping. Shopping online has seen a significant increase as a result of the pandemic and consumers are often surprised by the shipping costs, and VAT charges, applied even when buying from inside the UK.

While VAT might seem a tricky grey area that really isn’t the case when it comes to shipping costs. Whether you’re buying online or sending products for your business the basic principles of VAT are more straightforward than you might think.

What is VAT?

Value Added Tax (VAT) is a consumption tax. It’s applied to the majority of goods and services at a rate of 20%, 5% or zero per cent. Do note at this point that it relates to products consumed in the UK as well as services.

A small number of items are exempt from VAT and these include things like postage stamps and insurance.

Businesses with a turnover of VAT rated goods above £85,000 are required to register for VAT. It is possible to register prior to that voluntarily which means you must charge VAT but can also claim it back.

Don’t forget VAT is a tax. Don’t think of it as income for the company making the charge. Instead, remind yourself that it is being collected by them and passed on to the government.

VAT on shipping in the UK

It can be a bit of a surprise to realise that VAT is charged on shipping in the UK. When we buy something in a shop on the High Street we don’t really think about VAT because it is included in the price. When you order something online if the company is VAT registered then VAT is added to the delivery cost. This is because it is a tax applied on services as well as goods. Arranging postage and delivery of an order is considered to be a service. You may have spotted above that postage stamps are exempt from VAT and that wasn’t a typo. Postage stamps themselves are VAT free but when you post an item to a customer you are providing a service and that’s where VAT comes in.

Additionally, not charging VAT on shipping would create an opportunity for tax evasion that HMRC would be keen to avoid. If delivery was VAT free then the cost of goods could be reduced and shipping costs pushed up as a way to avoid paying tax.

How much VAT is charged on delivery is based on the VAT rate of goods. So it’s easy if everything you sell has the same rate. However, an online shop that sold goods with a mix of rates would need to take this into account when adding VAT to their shipping rate. The tax needs to be applied proportionally by looking at the percentage of the total goods at each rate makeup.

To calculate this look at the cost of the goods before applying the shipping charge and see what percentage of the total is made up of goods at each rate. Then apply that breakdown to the shipping total. For example, if a £10 purchase is made up of a £7.50 item rated at 20% and a £2.50 item rated at 5% then 25% of the shipping cost will have 5% VAT and the remaining 75% will need the 20% rate applying.

If you’re not certain of the VAT rate for an item check the list on the HMRC website or talk to our VAT specialist at Tax agility.

The VAT should always be added to the total of the invoice and it’s this that can be off-putting for consumers online when they realise how much their shipping will cost. Of course, customers will only be playing a single shipping charge and some may use this as a reason to buy more and justify the cost. Others may abandon their baskets particularly if they are buying lower-cost products.

There’s no clear way to stop VAT on shipping from impacting your sales. However, there are a few approaches retailers can explore. Encouraging making more than one purchase may work as it will give a lower ratio of postage to item. Alternatively, increasing prices slightly and introducing free delivery for sales above a certain amount may make the difference. Free shipping is also VAT free but means the company will have to bear the cost of it and potentially make it up in the price of goods.

How does Brexit impact VAT on shipping?

With Brexit blamed for introducing extra complications and paperwork, it’s not unreasonable to assume that it must have an impact on VAT, and probably a negative one.

After all, in 2014, the introduction of VAT charges for digital products in the EU caused consternation amongst small businesses as it required the vendor to pay VAT on products in the country the purchaser lived in. Given the UK’s high minimum threshold for VAT, many small businesses were not registered and the potential costs associated with the change would have likely put them out of business.

But when it comes to the question of whether UK companies need to charge VAT on shipping post Brexit, the answer is clear.

VAT is charged in the country where the goods are used or the services are carried out. So for EU customers VAT applied is the location they reside in.

This means that VAT does not need to be charged in the UK on goods sent overseas or on international shipping. A rate of zero can be applied which extends to the shipping. Companies will need to ensure that they have paperwork in place to show that the items went outside the UK. Keeping the paperwork for 6 years is a requirement.

It is worth noting though that while there is no VAT on shipping, there is a good chance that the country you are shipping to will require import VAT to be paid. This is charged by the country that you are shipping to and as a result, will vary. To find out if this is the case, the process and whether it can be charged at the point of sale, you’ll need to check with their equivalent of the HMRC.

An exception to the above is Northern Ireland where the rate charged will depend on whether goods are going to the EU or the rest of the World.

VAT and Shipping

Applying the basic principles of VAT makes understanding how it relates to charges on carriage quite straightforward. It doesn’t need to be confusing when it comes to shipping internationally or in the UK.

Just remember:

  • VAT registered companies in the UK have to charge VAT on shipping costs because it is a service.
  • The VAT charged on shipping is proportional to the VAT rates applied to the goods. The government refers to this as, “follows the liability of the goods”.
  • Goods shipped overseas are not subject to VAT in the UK and there is no VAT on their shipping.
  • Individual countries, including the UK, usually charge import VAT in the final place of consumption.
  • Businesses need to keep their VAT paperwork.

VAT is a broad area of taxation and to ensure that your business complies it’s always best to consult VAT experts like Tax Agility who know the ins and outs of the legislation.

Accounts Assistant

Accounts Assistant Job Description

We’re not the average accountant – we merge traditional accounting with innovative thinking to add value to our clients’ businesses. This philosophy sets us apart; you’ll see it echoed in the people we employ and the products and services we offer.

We focus strongly on accounting for small to medium businesses in Putney, Fulham, Wimbledon, Chelsea, Richmond (and surrounding areas) and Central London. We provide a wide range of both financial and business support services, as well as individual advice for directors and high net worth individuals.

We are looking for an excellent candidate with good all-round experience or having studied subjects in accounts and finance. Working in a small team, you will be reporting into a qualified Accountant, assisting them on projects and day to day jobs.

Required skills:

  • Strong Excel skills;
  • Experience with any accounting software (Sage, Xero, QuickBooks and FreeAgent) is preferred
  • Ability to work autonomously or as part of a team;
  • Good written and oral communication skills in English;
  • Good attention to detail, accuracy, problem-solving skills; and
  • Ability to build internal and external relationships.

Finally, the candidate should have ambitions to complete the ATT, CTA or ACCA qualifications.

The spectrum of work includes:

  • Preparation of Financial Accounts and Corporate Tax Returns
  • VAT Returns
  • Management Accounts
  • Bookkeeping
  • Payroll
  • Self Assessment Tax Returns
  • In conjunction with principal/senior colleague:
    • Taxation consultancy;
    • Financial valuations and consultancy to include advising on management & sale of businesses