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June questions and answers

Q. If I take my staff away overnight for an off-site daytime business meeting and evening social function, will the costs be tax deductible for corporation tax purposes?

A. The costs will be allowable for the company, but a benefit-in-kind will arise on the social aspect of the trip. It may be possible to obtain HMRC approval that the benefit falls within the exemption for annual parties and similar functions costing no more than £150 per attendee (if the £150 is exceeded, the whole amount is taxable as a benefit).

You may wish to consider structuring the event to take advantage of a wide-ranging and generous tax exemption for work-related training. The term ‘work-related training’ covers any training course or other activity designed to impart, instil, improve or reinforce any knowledge or skills or personal qualities which is, or is likely to be useful to the employee in performing the duties of any ‘relevant employments’ or which will qualify or better qualify the employee to undertake any relevant employment or such charitable or voluntary activities which could be undertaken in connection with the ‘relevant employment’ (ITEPA 2003, s 251(1)).

It may be possible to sandwich the evening ‘social’ event between actual training, with the evening event designed to be motivational (or achieve some other betterment purpose), but great care is needed here to ensure the costs qualify.

Q. I am in the process of purchasing a new house that I will use as my main residence. I will sell my current main residence as soon as I buy the new house. I also own several other rental properties but I have never lived in any of them. Will I have to pay the higher rate stamp duty land tax (SDLT) charge on my new house? 

A. The basic rule is that the higher SDLT rates apply when you buy a residential property (or a part of one) for £40,000 or more, if:

– it will not be the only residential property worth £40,000 or more that you own (or part own) anywhere in the world;
– you have not sold or given away your previous main home;
– no one else has a lease on it which has more than 21 years left to run.

You may have to pay the higher rates even if you intend to live in the property you’re buying (and regardless of whether or not you already own a residential property).

If you sell or give away your previous main home within 3 years of buying your new home you can apply for a refund of the higher SDLT rate part of your Stamp Duty bill.

From 29 October 2018 onwards, a refund must be claimed within 12 months of either the:

– sale of the previous main residence
– filing date of the SDLT return relating to the new residence, whichever comes later.

Q. I have been running my own business since 1 September 2018 and now wish to complete my 2018/19 tax return. I have not incurred any capital expenditure and my turnover is less than the current VAT registration limit. Should I use 31 March (or 5 April) as my accounting year-end?

A. If you make your business accounts up to 31 March, HMRC will treat this as being made up to 5 April.

One advantage of a 31 March/ 5 April year-end is that no ‘overlap’ profits will be created. Broadly, overlap profits are bought about by being taxed twice in the first two years of trading. You would get relief for this overlap, but potentially this won’t be until a much later stage (for example if you change your accounting date, or if you cease to trade).

One advantage of a 30 April year-end is that tax is paid later. So, for a 30 April 2019 year-end, tax will become due for payment on 31 January 2021, and the tax on profits earned between 1 May 2019 and 30 April 2020 will be payable by 31 January 2022. If the business had a 31 March 2020 year-end, the tax on profits earned between 1 April 2019 and 31 March 2020 would become payable until 31 January 2021. Remember though, if you chose a later year-end, make sure that you keep enough money aside to pay your tax bill when is becomes due.

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