UK Tax News

Final period of deemed occupation to reduce

Published: 22 Feb 2014

Updated: 12 Oct 2020

Written by Ray Coman

The final nine months of ownership are a deemed period of occupation provided the property has been lived in by its owner at some stage.  The months are counted back from the date of exchange and are included as periods of occupation for the purpose of caluclating prinicpal private residence relief.  It is not necessary for the owner to occupy the property during the final period for the deeming provision to apply.   

Update: Prior to 6 April 2020 the period of absence was 18 months and the reduction was announced in the 2018 Budget.

As from 6 April 2014 the rules change affecting taxpayers who own property that was previously their home.

Each person is entitled to dispose of a property occupied as their home without suffering any capital gains tax. However, for any other property an exposure to capital gains tax arises. The tax system will allow a person to continuing to treat their former home as exempt from capital gains tax during certain periods of absence. These periods are referred to as deemed periods of occupation.

One deemed period of occupation is the final period of ownership. The final period of ownership would provide exemption from capital gains tax in the situation where a person has moved home but their pervious place is still on the market. The final period used to be 36 months, but for properties exchanged after 6 April 2014 it will reduce to 18 months.

Principal Private Residence relief can significantly reduce a person’s tax liability. The reduction in effectiveness of the relief will increase the potential tax burden on eventual disposal of a property. Please contact Coman & Co if you are concerned about the impact of the proposals on your exposure to capital gains tax.

Magazine Articles

Published: 21 Dec 2013

Updated: 21 Dec 2013

Ray Coman writes on the topic of taxation for a number of magazines.

This section includes a selection of offline articles in publication.

Sole trader or company

Published: 21 Dec 2013

Updated: 30 Jan 2014

When you are self-employed a limited company is often worth considering. To help you decide, an accountant responds to some of the usual queries.

I am not sure whether the tax savings will make it worthwhile.

A company can be suitable for various reasons. Your accountant should help you to understand if and when a company would be right for you.

Is having a company going to take up a lot of my time?

You would probably spend an extra hour a year being a company rather than a sole trader. This could be a worthy investment of time when compared with the benefits and tax savings of having a company.

There would be more penalties

Yes, there are penalties for late filing of accounts with Companies House, which would not apply to a sole trader. The deadline for company accounts is typically nine months after the year end, which is about the same as for a personal Tax Return. Most companies are able to meet the deadlines, and so avoid any penalties.

The tax would be more complicated

If anything company tax is simpler to understand. There is often no national insurance liability and, in many cases, no payments on account. Sole traders typically have to make payments on account to HMRC for estimated, future tax liabilities. As such, the system for sole traders can make liabilities harder to predict and bring about cash flow shortages.

If I am registered as a company, does that mean I also have to be registered for VAT?

No, the VAT registration threshold (currently £79,000) applies to both sole traders and Companies alike.

All my business details would be public

Your can register your company at your accountant's address. Therefore, your home address would not be on any public record. For businesses with a turnover less than £6.5 million, the accounts which get filed with Companies House are abbreviated and as such do not include a profit and loss.

Don't I lose out on state pensions with a company?

There is a risk that you could forfeit state pension by changing the business to a company. However, if the company is arranged properly to pay you a salary each month then your social security should stay protected.

It's not as easy to close the business down

The procedure for closing down a limited company is now straightforward.

Is there now a lot of paperwork when I want to pay myself from the company?

Not really, you can simply transfer money from the company bank account to your personal bank account at any time. The money you withdraw will be treated as a mixture of salary and dividend. Most of the reporting of dividends takes place once-a-year after the year end. Usually, the only restriction is to keep about a fifth in the company bank for tax.

I would like a further discussion

At Coman & Co., we can respond to your query by email and, if suitable, arrange for a free, initial meeting.

HMRC offer incentive to bring Tax Returns up to date

Published: 25 Jul 2013

Updated: 25 Jul 2013

Written by Ray Coman

HMRC have this month put forward an incentive to taxpayers with overdue Tax returns. A new facility, 'My Tax Return Catch Up', has been made available for filing a tax return for any year up to 2011-12.

By taking advantage of the facility, penalties that would otherwise be due will be significantly reduced. Although late filing penalties, late payment penalties and interest would still apply, HMRC have offered the best terms available for those that file using the 'Catch Up' facility. In particular, HMRC have announced that they would not apply the highest penalty to those taking part in the campaign. This is a late filing penalty of equal to 100% of the tax due for Tax returns which are more than 12 months' late.

In addition to being spared the higher penalty, participants in the initiative would also avoid:

• Determinations. A determination is essentially an estimate of tax liability made by HMRC;
• Referral to debt collection which could result in unwanted telephone calls and visits; and
• Possible court action.

With the aide of intelligence gathering software, Connect, HMRC is expected to contact relevant individuals. The proposal is aimed at taxpayers who have received a notice to file a tax return for any tax year up to and including 2011-12. The 'Catch Up' offer will expire on 15 October 2013.
Coman & co can assist:

• Prepare your Tax Returns for outstanding tax years.
• Take advantage of the offer made by HMRC in the 'My Tax Return Catch Up' campaign.
• Calculate any tax payable or repayable, late filing late payment penalties and any interest thereon.

Please contact us to discuss how we can assist with the above

2013 Budget commentary

Published: 20 Mar 2013

Updated: 01 Apr 2014

Written by Ray Coman

In his first Budget since the loss of Britain’s credit rating, the chancellor has put forward accelerated plans for encouraging growth, spending and employment in the economy.  The personal allowance increase and the corporation tax rate cut will both occur a year sooner than previously announced.  Tax savings will also come to smaller businesses in the form of an employment allowance.

The most significant announcement came in the form of a new tax break for employers.  Starting from 6 April 2014, all businesses will be entitled to an Employment Allowance which will cover the first £2,000 of employers’ national insurance liability.

As an illustration, employers would pay no national insurance on a £22,400 salary paid to one of their employees.  This results from a rate of employer’s national insurance equal to 13.8% on any payments over approximately £7,900.  To provide another example, the effect of the allowance is the same as eradicating national insurance on the hiring of four staff at the minimum wage (of say £11,525 per year.)

The announcement will be particularly helpful to small business seeking to hire their first employee.  The incentive is well designed to relieve unemployment which remains stubbornly high among jobseekers in the 18-24 age band.

There was good news for larger business as well.  The full rate of corporation tax is now to reduce by a further 1% to 20% starting in April 2015.  In previous announcements the full rate of corporation tax was set to be reduced to 23% in April 2013, to 22% in April 2014 and 21% in April 2015.  Following the budget proposal of today, the rate will be further reduced to 20% in April 2015.

The overall rate has so far dropped 2% a year since the year starting in April 2010 when it was 28%.  Eventually, the most recent scheduled tax cut will put Britain’s rate of corporation tax the lowest in the Western world; lower than Luxembourg at 21%.

The personal allowance will increase from 6 April 2014 to £10,000.  As a result, the increase is now taking place one year sooner than previously announced.

From April 2015, parents will be able to have up to 20% of their childcare costs paid tax free, subject to a yearly maximum £1,200 per child.

With a triple dip looming in the economy, the further cuts announced today are hoped to re-spirit the economy over the remaining term of the coalition.  Opportunities will arise among individuals, families and small business to take advantage of these tax cuts.  Please contact us if you would like to discuss your tax plans in further detail.