Buy or lease a company car?

Is it better to lease a car or buy one outright?

Buying a new car, especially if it is a personal purchase, is likely to be the second most expensive purchase you’ll make, after your home. It’s not surprising then that it makes sense to explore the options you have in acquiring such an asset. If you're buying a car for your company to use, then there are a range of considerations to make too.

Buy or lease a company car?Typically, whether the car is a business purchase or personal, one can either buy a car outright or look at the various lease schemes available from car dealers. Of course, how you choose to fund an outright purchase also makes a difference, such as cash from your business’s profits, personal savings if buying for yourself, or a bank loan.

In this article, we’ll look at both personal car purchases, since we assist individuals with their own tax and wealth management issues, and a company car purchase, to highlight some of the main pros and cons between outright purchase and a lease hire arrangement.


If you are in the market for a new car, here are a few questions to consider first:

  • Will it be a company car or for private use only?
  • Will it be a conventional petrol or diesel engine, or will it be electric?
  • Will you be buying it or leasing it?
  • If it’s a private vehicle purchase, will you want to use it for business purposes?

The answer to these questions will help shape the importance and relevance of the information we aim to share in the following article.

Let’s consider purchasing a new car for personal use as many of the financing options are relevant to those available if you are buying a car for a business, However, if you are buying a car for business, then it would be a good idea, in addition to the company car section in this article, for you to read our article on:

“Is it worth buying an electric company car?”

This article explores the business advantages and taxation associated with electric vehicles for company use. It also discusses some of the benefit-in-kind (BiK) issues that surface where company cars are concerned.

What is the basic difference between owning and leasing a car for personal use?

There are two basic routes to putting a new car on your driveway:

Personal contract hire: This is the most typical method of leasing a vehicle, but you never actually own the car.
Outright purchase: You own the vehicle outright or at the end of any financing agreement.

What is personal contract hire?

Personal contract hire or PCH, is a long-term leasing arrangement with a car leasing company. It’s a convenient way to enjoy the experience of a new car without having to stump up the high cost of purchasing one outright. The monthly payments are typically much lower than the financing costs associated with a purchase. This is because you don’t get to keep the car at the end of the agreement period. If you buy a car outright, when you come to sell the vehicle, there will be a resale value to help recoup some of the costs or ownership. So with PCH you are essentially just renting the vehicle and will simply hand it back at the end of the term - assuming it has been well looked after. Also, there may be restrictions on how many miles you can drive in a year.

The other potential benefit of PCH is that some packages include servicing and maintenance. Sometimes they may throw in tax and insurance too, so shop around!

What options exist for outright purchase

By outright purchase, we simply mean that at some point during your financing arrangements, you actually own the car, as opposed to just renting it as with PCH.

First though, why would you want to own your own car?

Most people buy their own car because they are likely not buying a new car. There are many great deals to be had for cars that are just a year or so old, as new cars tend to suffer high depreciation in the first few years. So, you get to enjoy many of the benefits of a relatively new and up-to-date model and a much lower cost*.

Buy or rent a company carOwning your own car means you get to do what you like. You’re not worried about how many miles you drive it or any additions you may make. And, you get to decide whether to keep it for life or sell it the next day. You're not locked into any contracts.

Also, a personal purchase is just that - personal. Buying outright means you’ll have complete freedom as to what vehicle you can buy, as not all models are available for PCH schemes. This opens up the door to more unusual or exotic options, if that’s what your budget or taste demands.

Lastly, you own it, nobody else, it’s yours. For some, that’s a very important factor and an experience that sets you apart from others, if that’s important to you.

There are a number of ways you can finance the car ownership experience.

A cash purchase
If you buy a new car with cash, you may be able to negotiate on price with a dealer, especially if new models are close to hitting the streets.

The main disadvantage is that your purchase will most probably depreciate in value. When you come to sell it, you’ll likely get a lot less back.

The other aspect to consider is ‘cost of ownership’. Buying a car and owning one are two different matters. When you own a car, you have to service it, maintain it, tax it, and insure it. These costs can be considerable each year. Then there’s the actual cost of fuel, but then all cars have that cost.

A loan from the bank

It can be a good option for some, especially if you have a good credit rating and interest rates are favourable. You may also be contributing to the cost of the vehicle, which means you may not need to finance the entire cost of the vehicle. Personal loans are typically unsecured, in other words, they don’t require collateral to loan against. In the case of financing a car, the purchase itself becomes the collateral, i.e. if you don’t pay, they’ll take it away!

The main cost associated with a bank loan is the interest payments. At the end of the loan period, you will have actually paid substantially more than the list price of the vehicle; but then, that’s the price of convenience.

Hire purchase - HP

Hire purchase is probably one of the most recognisable forms of financing. HP is probably what got most families through the 60’s and 70’s. HP allows you to spread the cost of the purchase over an agreed timeframe with regular monthly payments - the longer that is the lower the payments. However, you’ll also be paying interest, which increases the total amount paid. There’s usually also an initial deposit and likely a small fee to pay at the end to take ownership of the vehicle. You’re then free to do with it as you will, such as selling it to recoup some of the costs and perhaps buying another vehicle.

Personal contract purchase or PCP

This is a somewhat different form of hire purchase. Both schemes share an initial deposit and the ability to pay in monthly installments over an agreed financing period. The main difference with PCP is that you are only funding the predicted difference between the purchase price of the vehicle and the residual value at the end of the term. This means that the payments will be a lot less, but then you don’t own the car. However, PCP gives you an option at the end of the term:

  • Make a final ‘balloon payment’ at the end of the period and take outright ownership, or
  • Hand the car back, make a new agreement and buy another car, or walk away.

The cheapest option, if you have cash, is to use cash. The downside is that the ‘liquid’ assets you may need at some point are now reduced. If you need cash in the future, you may have to sell the car quickly and take a hit but not get the best deal.

If you don’t want to use your cash, keeping that for a rainy day, the convenience of low payments, and the option of ownership at the end of the term, PCP may be a good choice. However, if you want to own your car, HP is likely a cheaper option as you are actually contributing to the cost of the purchase over a potentially longer or convenient period

What is the difference between owning and leasing a car for company use?

At some point or another company owners, especially those of smaller firms, give thought to the possibility of buying a new car through their company. After all, why not? Let the company use its profits that you’ve worked long and hard for rather than your taxed dividends or salary. Sounds simple, but of course, the government has thought of that too and so it’s really not that simple. How you plan to use the vehicle in your business has major tax implications for the business and potentially for you too.

Main considerations

For most businesses, cash flow is the lifeblood of the organisation's operation. Without a ready supply of cash to finance day-to-day operations, the company will fail. As such, how the company finances the purchases of its assets is of paramount concern. Of course, cash-rich companies can consider outright cash purchases, especially if the asset is likely to have a reasonable residual trade value. With cars though, ownership is not the goal, sensible financing is.

Leasing, loans, and tax relief
For most companies though, leasing a car is the preferred option. A vehicle lease represents fixed monthly payments over an agreed term. The packages may also include all maintenance and servicing. At the end of the term, the vehicle is simply returned and another one is provided if the contract is continued.

When leasing a vehicle, a business can reclaim VAT back on 50% of the monthly payments, depending on how it is used.

Some companies may still prefer to buy a vehicle. As such, when you take out a loan to finance the vehicle, you can get tax relief of up to 45% on the interest. However, if the car is used for both business and personal use, the amount of relief will be reduced proportionally.

Other allowances

However you decide to finance the purchase of a company car, how you use the vehicle will dictate how you will be taxed and what relief you can claim back.

An important point to note is that under section 38B of the Capital Allowances Act 2001, the cost of a car does not qualify for the AIA. If the car is for business use though, you can use the Write Down Allowance or WDA to deduct a portion of the cost from your company profits.

How will the vehicle be used?

It’s important to point out right away that VAT on company cars can only be claimed back if the car is a genuine pool car and not used for personal use in any way. You’ll have to go to some lengths to prove this too.

VAT aside, a company car purchase represents an asset. As such there are costs you can reclaim each year.

1. Write down allowance (WDA): WDA allows you to claim a percentage of the cost of an asset such as a car each year against profits over a number of years. How much depends on how ‘green’ your car is. In other words, CO2 emissions.

If your car is used as a pool vehicle and has CO2 emissions of less than 110g/km, then it qualifies for an 18% relief as part of the main rate pool allowance.

If your car is above 110g/km, then the rate applied is 8%.

Single asset pool
If the vehicle is a pool vehicle but is also used for both business and personal use, then it has to be allocated to a “single asset pool”. Depending on the CO2 emissions, it will be allocated at a rate of eight 8% or 18%. However, because the vehicle is used for personal use, this rate will be reduced to reflect the percentage of personal vs business use.

Furthermore, the personal use of the vehicle means that an employee is receiving a benefit in kind (BiK).

2. The running costs of a company pool car can be claimed. These include:

  • Fuel
  • Servicing
  • Maintenance
  • Road tax
  • Insurance

Talk to TaxAgility about the purchase of your next company vehicle

Buying a new car for personal use is simply a matter of choosing the finance method most suited to your finances. If you plan to use your vehicle for business use too, then there’s a clear path as to how you can claim back expenses associated with this, such as mileage claims. We can assist you at the time of your tax return preparation and ensure you are claiming the correct amounts.

Where we can really assist is when you want your company to purchase a vehicle for business use. It’s here that we can discuss your needs and what you hope to purchase, and then what allowances may be available and other claims you could make. We can also advise on the implication of you as a director using the vehicle for personal use, along with the associated implication of it being a ‘benefit-in-kind (BiK).

So give us a call today on 020 8108 0090, and find out how we can help with the next purchase of a company car.

*Note: due to disruption in world trade and the supply of essential parts such as semiconductors and raw materials caused by the Covid pandemic and the Ukraine conflict, many manufacturers have had difficulty in producing new vehicles at the rates previously enjoyed. This has led to a significant increase in the price of second-hand vehicles. For some luxury brands where waiting lists are normal, the cost of a relatively new second-hand vehicle can often be more than the list price of a new vehicle.

Buyers of such vehicles should therefore be aware that should trade and manufacturing return to near normal levels, i.e. pre-covid, then it is likely that their ‘expensive’ second-hand purchase may depreciate as quickly as a new vehicle might.


paying tax on cryptocurrency profits

Cryptoassets - what are they and what are the tax implications?

Many ordinary people and businesses, and by that we mean people who don’t usually engage in financial trading, have tried their hand at investing in crypto currencies. Some have fared well, but many over the past year have suffered significant losses, due to recent crashes in this space. As with any traded asset one may make a financial gain or a loss, but the question arises as to how one reports such gains or losses to HMRC. This is especially poignant if as an individual you’re not usually reporting via an SA100, as maybe the case with employees on PAYE, or perhaps exploring their use in your business.

This article explores the world of cryptocurrencies (and NFTs) and explains how HMRC treats them, how to report them to HMRC and what taxes you’ll be expected to pay.

Cryptocurrencies in the news

paying tax on cryptocurrency profitsOver the past few years cryptocurrencies have made the headlines, sometimes because of meteoric price rises and at other times catastrophic crashes. Some have been caught out in what appeared as the new ‘gold rush’ - investing heavily and initially seeing significant gains, but then very quickly watching the currency crash, wiping out almost everything. In short, if you invest in cryptocurrencies you need a strong stomach as you’re in for a wild ride.

That doesn’t deter everyone though, to the point where significant numbers of people not accustomed to financial trading have put their toe in the crypto ocean - and it’s a very large ocean indeed. By March 2022 there were over 18,000 different cryptocurrencies in existence.

What is a cryptocurrency?

The definition given by Wikipedia is this: “A cryptocurrency, crypto-currency, crypto, or coin is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.”

But why is there such an interest in cryptocurrencies? Here is a summary of the main reasons:

  1. It is not a ‘fiat’ currency. This means that it is not a currency controlled by a government - i.e. legal tender, like the Dollar, Pound or Euro. This of course means that because it isn’t backed by a government institution like the Bank of England, its value can vary wildly, as indeed it has recently, just like stock prices. This is why it is considered a more risky form of investment, and some would say a form of gambling. So, in short - it’s owned by everyone and no one: it is decentralised. HMRC refers to cryptocurrency as “DeFi” - Decentralised Finance.
  2. It is almost impossible to manipulate or forge. Unlike centralised ‘fiat’ currencies, which can be forged and manipulated because of a ‘centralised ledger’, crypo’s decentralised basis means there is no central ledger, as it is ‘distributed’, in fact, it’s part of each transaction.
  3. The power of the Blockchain. It’s worth spending a little time understanding the blockchain if you’re considering investing in crypto currencies. A good summary can be found here.

 In short though, the blockchain is a powerful piece of mathematics that encrypts and keeps track of each transaction. Every transaction has a unique code called a ‘hash’ and forms a ‘block’ of information. The block is added to the chain, which is the public database where all blocks are stored. Blocks are added to the chain chronologically and distributed worldwide among millions of computers.

This is why it is almost impossible to forge or manipulate, because someone would have to control a majority of those computers in order to change the blockchain. This would also take an enormous amount of computer resources. The bigger the block chain becomes over time, the harder it is to crack.
  4. Privacy. While cryptocurrencies use mathematics to track transactions between parties, powerful encryption keeps personal information private, in this case the identities of the parties crypto ‘wallets’. This is one reason why cryptocurrencies have drawn bad press because it is the favoured currency of criminal gangs, money launderers and extortionists.
  5. Reduced reliance on the banking network. We’ve all experienced at one time or another, the problems traditional financial institutions have. This ranges from account access issues to network outages, hacked accounts and of course, bank failures, although thankfully less common. Basically, banks are a single point of failure in a system millions of people rely on daily. Cryptocurrencies were intended as a way to move away from this centralisation, making the transaction between two parties, just between the two parties - no middle men. This is another reason why governments and banks are concerned about the rise of crypto.
  6. Money transfer. Sending money to somebody internationally can be a real pain. Even though it is an electronic exchange processed in milliseconds, the institutions still want to charge an ‘arm and a leg’ for the service. Once you understand the process, crypto transfers are very smooth, and you don’t have anyone looking over your shoulder at the amounts or where they came from - no freeze on funds while the bank checks authenticity or reports high value fund moments to the government.

This all makes cryptocurrencies look like fantastic monetary vehicles, and they are, but they’re not without downsides. The main ones are these:

  1. It’s still early days and governments still have the ability to impose regulations over their use.
  2. If you lose your virtual wallet or accidentally delete your currency, game over. For instance the story in the press about a man whose hard drive with £210 million worth of cryptocurrency ended up in the local landfill.
  3. Volatility. The value of a crypto currency can change dramatically quickly.
  4. There’s no regulation in the crypto market, e.g. the FCA and therefore no comeback if a currency disappears or is withdrawn. Your investments are like stocks, can go up or down and are not insured like money in the bank.
  5. The crypto exchanges - the places where currencies are bought and sold, are not immune from hackers. Wallets stored online (hot wallets) can be lost. This is why many investors prefer ‘cold wallets’ - those stored offline - like the man in the press.
  6. Crypto currencies are often the target of scams on social media, with fraudsters trying to trick people into investments using crypto - precisely because they can be traced.

What are NFT’s and are these the same as crypto currency?

We won’t go into detail here as NFT’s are another deep subject to explore, but here’s a quick answer to this question.

NFTs or ‘non-fungible’ tokens are digital assets. This asset represents a real-world object, such as an image, a video, a music file. The digital files that carry the ‘work of art’ are encoded using the very same technology as crypto currencies, but that’s where the similarity ends - they are not currencies. NFTs use crypto currencies to facilitate the sale and purchases of the assets.

Fungible vs non-fungible

Simply put, fungible assets are divisible and non-unique. Cryptocurrencies like BitCoin are fungible as they can be sold in increments. Non-fungible assets are unique items and can’t be divided, like image or video or digital artwork.

NFT’s can be bought and sold just like any other form of investment asset and through exchanges just like crypto currency. Buying and selling NFT’s will however be treated the same way for tax purposes as cryptocurrency.

Should you invest in crypto currencies?

Firstly, Tax Agility is not an investment advisor and so no guidance should be inferred here, what follows is just for interest. 

The relative newness of crypto makes some nervous about significant investments. That said, some of those who dipped their toes in early in this market made absolute fortunes. There are still a lot of opportunities to potentially experience significant gains (and losses), sometimes in the 000’s of percent.

However, like any investment strategy, one should maintain a healthy spread of investments to help offset losses in any one asset. Crypto could be a part of a broader investment strategy, perhaps your more risky investments with potential for high upsides and losses. In short, make sure your eyes are wide open when considering this investment.

The other key point to make here and the original reason for this post, are the tax implications of cryptocurrencies. If there’s a sudden rise or fall in a crypto asset and you decide to exit, you’ll be liable for any gains made. Depending on the value of the crypto asset, this could seriously impact your personal tax circumstances. While this is also true of assets in the form of stocks and shares, the extreme volatility experienced in crypto markets is less frequent in regular investments and so allows for at least some planning or recovery time, and generally allows you to plan a more regimented exit with tax planning considerations. Dumping a large crypto asset in panic, simply because there’s little history in this market, is potentially a different proposition for some.

How are cryptocurrencies and crypto based assets taxed in the UK?

The government’s Cryptoassets Manual provides very clear guidance as to how taxes will apply depending on the circumstances and whether it’s a business or individuals involved.

At the core of this is whether or not a ‘trade’ is being carried on. Profits arising from cryptocurrency asset transactions will be considered as either income or capital gains or for a business, a chargeable gain.

HMRC’s Cryptoassets manual can be found here.

Cryptoasset taxation for individuals

Income from cryptocurrency trading

HMRC makes it clear that only in exceptional circumstances would individuals buying and selling cryptocurrency tokens (such as BitCoin) be considered trading. This would mean that an individual would need to be trading at considerable frequency and be using a degree of sophistication in the tools they use. This is more akin to a financial trading company than an individual, although some day traders may fall into this bracket.

HMRC’s Business Income Manual outlines how it determines if a trade is being carried on or not - referred to as ‘Badges of Trade’.

If the individual can prove that they are indeed trading, then the profits arising from the activity would be considered ‘trading profits’ and be considered as regular income, and therefore subject to income tax.

Most scenarios involving crypto currency trading are likely to be treated similarly to a trade in shares (investments) and therefore profits arising would be treated as capital gains and incurring capital gains tax.

In what other situations would crypto assets be considered as personal income?

Cryptoassets earned through employment

If an employee receives crypto assets as employment income, HMRC considers this as “money’s worth”. As such, this income is subject to both income Tax and National Insurance Contributions based on the value of the assets.

What happens if the employee then sells the asset acquired as employment income?

Profit arriving from the disposal of a cryptoasset token is treated as a capital gain(or loss) and subject to Capital Gains Tax.

Tokens earned through mining activities

Yes, you read that correctly - ’mining’. BitCoin, for instance, has to be ‘dug up’ or mined. This is way beyond the scope of this article, but in simple terms: each ‘coin’ is based on a unique identifier ID derived from a complex mathematical calculation. It’s rather like looking for prime numbers, the bigger they are the harder they are to find and the more computing power it takes to find them. Crypto miners invest significant sums of money in mining equipment - basically very fast, powerful computers used to crunch the numbers. These are not only expensive, but power hungry too and so the rarer a coin - such as BitCoin which has a finite number of 21 million coins (not reached yet), the greater the potential value.

However, many private individuals have tried their hand at crypto mining and need to understand how profits from this activity may be taxed.
As stated earlier, even if you consider your mining activities as ‘carrying on a trade’ and expecting profits to be treated as income rather than capital gains, HMRC will look closely determine this based upon a range of factors, including:

  • Degree of activity
  • Organisation
  • Risk
  • Commerciality

In reality, to show that a trade is being carried on, you’ll need to show significant investments in computing equipment and organisation around it, rather than the activity being based on your home computer being used in its spare time for mining activities.

If you can show a reasonable basis for trading, then any profits will be treated as regular income, otherwise CGT will be applied.

How do you report profits made from the sale of Cryptoassets?

For individuals, this will be reported through the SA100 Self Assessment tax return, specifically supplementary pages SA108 which is used to report capital gains.

Cryptoasset taxation for businesses

Even though cryptoassets may be referred to as ‘currencies’, HMRC does not regard them as such. Instead, HMRC treats cryptocurrency as a traditional asset for tax purposes.

Whether or not the sale of a crypto asset is deemed profit from a trading activity or simply a chargeable gain (or loss) from the sale of an asset, will depend on how HMRC views your firm’s activities. So, the same ‘badge of trade’ tests will be applied.

To trade or not to trade

HMRC’s Business Income Manual outlines how it determines if a trade is being carried on or not - referred to as ‘Badges of Trade’.

For most businesses, it’s likely that the sale of a cryptoasset will be treated as a chargeable gain (or loss), just like regular assets, rather than income from a trade. As such, any expenses associated with the asset may be set against the profit, or indeed any losses incurred in the sale.

More information can be found in the Government’s Cryptoassets Manual for businesses.

Reporting gains made from the sale of cryptoassets is exactly the same as that of the sale of a regular asset and would be shown in your year end company accounts as such.

Whether you’re an individual selling crypto assets or a business trading in business assets, Tax Agility can help

The tax regimes around cryptoassets are still in relative infancy. HMRC, as indeed are many tax authorities around the world, is continually reviewing the development of this new area of finance. If and when HMRC begins to treat cryptocurrency like other fiat currencies is anyone’s guess.

For many, how investments like crypto are taxed can be a little confusing, but rest assured that if you have made investments in crypto, either as an individual or a business, and have received profits or losses from trading them, Tax Agility can help you in reporting them in the correct manner. Just give us a call today on 020 8108 0090 to discuss how we may assist.


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.

Reimbursement

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.

 


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.


Accounting concept

How to find a good accountant in London

Vector image of money, receipt, calculator, pen and laptop screen

If you hadn’t noticed, the business landscape has fundamentally changed and the part your accountant plays in helping you cope is essential to this. Finding a London accountant that thinks about your business and how to improve it, as opposed to just crunching your numbers and filling VAT and tax  returns, should be a high priority for your business. After all, it’s another resource your obliged to pay for to meet regulatory demands, so why not get the best ‘bang-for-your-buck’ you can?

Recent time have seen significant changes in how businesses operate, driven by a pandemic and the need to adjust business models to suit new working practices and employee expectations. Also, supply chain uncertainties due to the pandemic have somewhat overshadowed the main protagonist that was expected to introduce business issues, i.e. Brexit. All in all, it’s been a pretty tough time for firms in the UK.

What should you be looking for in a good accountant?

Start by considering that it’s quite a competitive market in the finance and account space. It’s always been dominated by the larger accounting practices. However, these are not always suitable for small to medium sized businesses, as these benefit from a more personal touch.

Attitude is key. A truly great accountant is going to do two things when you begin to engage with them. The first is, they are going to initially access whether your business is a good fit for them and set out expectations on both sides. This is important, because some accountants may just take on your business, not really caring if they understand it or not. And that’s not good for you!

The second thing they will do, is to understand what is important to you. They will want to get to know your business - not a casual quick chat to try to reassure you, but arrange to sit down and dig a bit deeper.

By seeking to understand your business plan or even help you create a better one, is a sure sign that you’ve found a decent accounting firm. Central to this is being able to build a solid relationship with an accountant at the firm. However, like anything, the ‘proof of the pudding is in the eating’. Initial enthusiasm interest for your business should continue and not be a one off. You should arrange to have meetings on say a quarterly basis to help understand how your business is working and if there are efficiencies in your financial operations that can be made.

If you business is based in London or the greater London area, such as the outlying districts of Richmond, Putney, Wimbledon, Hammersmith, etc., you’ll likely benefit from finding a more personalised service from a local London accountant, like Tax Agility. They re also likely to be a bit cheaper that central London accountants, while still retaining a level of personalised service. Tax Agility are also well placed to assist businesses in Surrey too.

What services should a good accountant offer?

A well-rounded accountant offers services that can address the current and future needs of your business, which can include but not limited to:

  • Company secretary services
  • Corporate tax planning and advice
  • Accounting and bookkeeping
  • Payroll services
  • VAT
  • Cash flow forecast
  • Short and long-term strategies

Essentially, you are looking for someone to take over the administrative work (like bookkeeping and PAYE) as well as someone who can help review your numbers and make sound recommendations so that your business has the best chance to succeed.

Every business is unique too. Perhaps you have just launched a start-up which is in need of funding, a contractor who struggles with IR35, a small business owner whose business is experiencing consistent growth, or you may be looking for an exit strategy – this is why the accountants at Tax Agility are divided to teams that specialise in companies small businesses and individuals in Central and Greater London and also in Surrey. Having expert knowledge in your area means we can provide relevant accounting and tax advice that help you manage and grow your business.

How do I check a London accounting firm's qualifications?

While most people find their business accountant through word-of-mouth referrals, it is always worth checking if they are ICAEW (Institute of Chartered Accountants in England and Wales) accountants.

Guided by strict codes of conduct, ICAEW accountants uphold the highest standards of professional conduct and business ethics. At Tax Agility, we are ICAEW chartered accountants and we follow these principles:

  • Integrity
  • Objectivity
  • Professional competence and due care
  • Confidentiality
  • Professional behaviour

This means that as our client, you will receive honest answers from our knowledgeable accountants who keep abreast with the latest developments in practice, legislation and techniques. We also act diligently and respect confidentiality. With us working alongside you, you know you are in good hands.

Top key traits of a good accountant

  • Attitude. It's amazing what a good set of interpersonal skills can do for a relationship and this starts with the attitude expressed towards you and your business.
  • Knowledge and skills – A good accountant should be able to assist you in areas that you need.
  • Listen to you – Only by understanding your situation first, then your accountant can come up with ideas that will make an impact to your business.
  • Excellent communication skills – Having the ability to interpret data and convey the information in a meaningful way to you.
  • Adaptable – Your needs evolve and how a good accountant assists you should evolve too.
  • Honesty – A good accountant should provide honest answers, as well as excellent work without any hidden charges.
  • Efficient – A good accountant will make sure that your financial records are managed efficiently, so you can concentrate in other aspects of your business.
  • Transparency of fees.

At Tax Agility, our fees are transparent – most of our clients pay a fixed monthly fee with no hidden charges. In the event that you have additional projects that need our attention, we will discuss the work and cost with you upfront.

What can Tax Agility do?

At Tax Agility, our accountants specialise in companies, small businesses and individuals across London and Surrey.

Our standard accounting services include but not limited to:

  • Annual compliance with Companies House
  • Maintenance of statutory books
  • Bookkeeping
  • Management accounts
  • Accounts payable and receivable
  • Cash flow
  • Sales reporting
  • Tax returns
  • Tax planning
  • VAT returns
  • PAYE registration
  • PAYE administration
  • Pensions

We have offices in three locations – Putney, Cavendish Square (Central London) and Richmond. We are also well placed to assist businesses in the county of Surrey.

For more information on our services, talk to us on 020 8108 0090 today or use our enquiry form to get in touch.

If you liked this post, you might also like:

This post is intended to provide information of general interest about current business/ accounting issues. It should not replace professional advice tailored to your specific circumstances.

This post was updated on Jan 11 2022


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.


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.


HMRC Foreign Income Disclosure

Case Study: When HMRC asks about your foreign income

The UK has Automatic Exchange of Information agreements with over 100 countries, so HMRC knows if you have declared your foreign income or not.

According to the UK Parliament, there were 6.2 million people (9% of the total population) living in the UK who had another nationality. Within our Central London, Putney and Richmond offices, we also have foreign-born colleagues who had previously worked in another country. With international migration now a common trend, it is not uncommon to see some people struggling with foreign tax issues, particularly when they thought they had reported in another country but received a letter from HMRC pertaining to the overseas income.

HMRC Foreign Income DisclosureOne of our clients, Victor from Richmond-Upon-Thames, had previously lived and worked in Singapore for a decade, during which time he acquired some shares and a few assets. When Victor came to work in London, he didn’t pay much attention to his tax affairs as he is on PAYE. It also didn’t cross his mind that he had to report the small (and irregular) income he still receives and remains in his bank account there.

But one day Victor received a letter from HMRC about his foreign earnings which he had not reported in the UK. Panicked, Victor came to our Richmond-Upon-Thames office and asked for our help. Our personal tax accountants  analysed Victor’s position and advised on the correct remedy to rectify his tax filing requirements. Seeing how swiftly we acted and provided him with a satisfactory result, Victor has now engaged us to report his future foreign income through Self Assessment tax return service.

Worldwide Disclosure Facility (WDF)

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

The WDF users

HMRC wants anyone needing to disclose a UK tax liability that relates wholly or partly to an offshore issue to use the WDF. An offshore issue includes unpaid or omitted tax relating to:

  • Income arising from a source in a territory outside the UK
  • Assets situated or held in a territory outside the UK
  • Activities carried on wholly or mainly in a territory outside the UK
  • Anything having effect as if it were income, assets or activities of a kind described above

The WDF should also be used when you have funds connected to unpaid or omitted UK tax that you have transferred to a territory outside the UK or are owned in a territory outside the UK.

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 incomes 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.

The WDF process

To use the WDF process, you must first register and HMRC will issue you a unique disclosure reference number.

After the registration process, you have 90 days to:

  • Gather the information you need to fill in your disclosure
  • Calculate the final liabilities including tax, duty, interest and penalties
  • Compete the online form

As the WDF process may not be straightforward, we do encourage those who have foreign assets to come to us for professional advice first or allow us to file on behalf of you.

Don’t underestimate the implications

HMRC wants to send a strong deterrent message to those who don’t disclose their foreign assets. Accordingly, if you fail to make an accurate disclosure or refuse to provide supporting documents allowing HMRC to check the accuracy, you may receive a higher penalty and have your details published on the gov.uk website. Also, HMRC may choose to launch a civil or criminal investigation against you. To save yourself from the headache and unwanted attention, it is best to speak to our qualified personal tax accounts first.

Personal tax accountants at Tax Agility

Tax issues are never straightforward and things can get complicated quickly if you have foreign assets which you may not know that you need to declare and pay tax on.

Fortunately, our personal tax accountants are here to assist. We will first seek to understand your tax affairs and identify what needs to be disclosed through the Worldwide Disclosure Facility (or not).

Should a disclosure is 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 needed. Working with you every step of the way, we can help to make sure 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.


A concept image of starting a business

Starting a part-time business

Not ready to take the leap, consider a business on the side while keeping your main employment.

A concept image of starting a business

Having a full-time job is, for many people, the path to job security and financial security. While employment is a more comfortable choice when compared to setting up, owning and running one’s own business, the pace of technology growth and a less than stable economy in recent times have threatened this supposed ‘safe-haven’.

Many working adults have come to realise that relying on full-time employment as their only source of income is potentially risky, as jobs can be outsourced or replaced, plus changes in business fortunes can leave them facing the stark reality of unemployment. Accordingly, more and more working people are considering starting a business on the side and seeking additional income streams. If you’re facing a similar situation, this post may make a great read.

Benefits of starting a business on the side

Starting your own business on the side while working full-time can seem quite a hill to climb, but the benefits often far outlay the early pains soon. For instance, after getting a business going and experiencing your first success, a side-line business could soon:

  • Provide a second income that supports the payment of your rent or mortgage, or ideally, help to pay down the mortgage more quickly than your main job could do on its own.
  • Lessens the impact of losing your job. In many cases, people who have started their own businesses on the side often quit their jobs to focus on the business full time later. This comes once they are confident that the business has overcome any initial teething problems and can continue to support their dreams.
  • The second income, or additional disposable income, could also help to afford a few extra luxuries in life.
  • Running your own business often brings you into contact with people in a similar situation. These interactions will broaden your circle of acquaintances, leading perhaps to greater opportunities.

While there are many benefits, it pays to be clear about what you want to achieve before setting up a part-time business though. Do you want it to be just a part-time or seasonal thing, or do you see it as a potential replacement for your main job? Setting realistic expectations is critical, and can help you to be better prepared too.

Things to prepare before starting your part-time business

While there are few businesses that just followed an idea and been successful right out of the gate, in reality most entrepreneurs spend a fair amount of time on planning and preparation. The main reason is that even the best and most innovative ideas may not turn into great business concepts, unless there is a nurturing environment to help them flourish.

Write a business plan

The first advice most seasoned business people give to budding entrepreneurs is to write a business plan. While there are no rules on what you should include in your business plan, standard items like stating your goals, highlighting market research, operation plan and financial strategy will help you see your business more thoroughly.

A concept image of resaerchConduct research

At the very least, you should know:

  • The needs and preferences of your target market
  • How are you going to find your customers?
  • Your competitors
  • Their price points versus your pricing strategy
  • Do they have any gaps in their product or service you can exploit?
  • What makes you different from them?

Know your responsibilities

If this is your first attempt at starting a business, you may not be familiar with all the responsibilities and duties of running a business. For example, if you are selling toys, your products need to comply with the provisions of the Toys Regulations 2011, meaning they must bear the CE mark, satisfy the ‘essential safety requirements’ in the regulations, be properly marked to ensure traceability, and be accompanied by instructions for use, along with warnings where necessary.

Crunch some numbers

The first number-crunching exercise you do should be about cost, revenue and profitability – because everyone wants to run a profitable business. Be sensible in how you plan your costs – especially marketing costs, as they are essential to get your products or services to the right people. Equally, be realistic about how much you can make over a period of time. Create a pricing strategy and calculate your break-even point. Find out about the risks you are exposed to and ways to mitigate them.

The second part of finance relates to funding. In essence, your plan to get the funds needed to launch and support the business until it turns a profit. There are a few types of funding – self-funding, funding through debt (borrowing money to start your business), equity (trading away ownership of your company to receive funding), and mezzanine (a combination of debt and equity). Most part-time businesses are either self-funded or through borrowing from friends and family members. Both approaches are helpful, albeit risky, so it is wise to have a back-up plan and know when to source for additional funding later. If you’d like to know more, follow the link to the article The complete guide to business funding.

Choose a company structure

Choosing to start your business as a sole proprietorship or as a limited company can impact how much tax you pay, how far you want to protect your personal liability, how much you want to pay to maintain the company, and how much administrative work you want to do it yourself. At Tax Agility, we help entrepreneurs to set-up a structure that works for them. If you’d like to talk to us about setting up a company, call us on 020 8108 0090 today.

Beware of pitfalls

Working fulltime can be exhausting, and by the end of a long work week, you probably do not have the time and energy to work on your part-time business. Add to that family obligations, and you may quickly find yourself defeated. One way to overcome this is to outsource the work you aren’t good at, if you have the initial investment funds ready. For instance, if you need a website, hire a good web company. If you need advice on company structure, talk to a qualified accountant like us.

Also, beware that those around you may not be as enthusiastic as you are. It goes without saying that to start and run your own business, you need to believe firmly in yourself and know what you want to achieve. Having a clear set of goals and milestones is critical. And, don’t forget to reward yourself a little along the way too.

Once your business takes off, you will soon find yourself spending more time with your clients. The challenge of juggling your time with the new venture may start affecting your day job, leading to undesirable consequences like making mistakes on your job and losing your job before you’re ready to quit.

Popular part-time businesses

Here are a few ideas to help you get started.

  • Selling products on an e-Commerce platform
  • Creating creative products – videos, pictures, jewellery etc
  • Providing handyman services
  • Becoming virtual assistants
  • Becoming a freelance designer
  • Writing for websites

Tax Agility is here to help small business owners

As leading small business accountants in London, Putney and Richmond, we have gladly worked with many entrepreneurs who started small and grew organically over the years. In the process, we become their trusted go-to accountants as well as business advisors.

Our services include:

  • Accounting & Bookkeeping: leave your day-to-day finances to us. We will also provide monthly management accounts, prepare statements and help you set-up cloud accounting.
  • Tax: if you are tax-efficient, you will have more money to invest, expand and create jobs in your community. Let us help you with tax planning, tax computation and tax returns.
  • VAT: from VAT returns to manging VAT on import and export goods, we take care of them so you don’t have to.
  • Payroll: as your team grows, outsource your payroll administration to us so that you and your team can continue to enjoy accurate and on-time payslips every month.
  • Management consultancy: take your business forward with practical advice based on financial data and benchmark analysis.

The beauty of working with us is that you have the freedom to choose the level of engagement you want from us – for instance, you may need us to manage bookkeeping for now, give you tax advice when you need money to invest, add payroll when your team expands, and use our management consultancy service when you are ready to grow. All of our services are competitively priced with no hidden charges, and our small business accountants are always here to assist.

Call us today on 020 8108 0090. Alternatively, you can use the contact us form to get in touch.

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This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.