We are approaching the end of the calendar year, goodbye 2019, and the end of the of the current tax year, 2019-20, will draw to a close 5 April 2020.

Add to this self-assessment deadlines, Brexit changes, election results and will we – won’t we – have a budget speech any time soon, and it’s clear that the outlook for businesses, taxpayers and their advisers is changeable and hectic.

We are approaching a period of significant change in multiple areas that have an impact on our financial affairs. In our opinion, there has never been a more crucial time for serious planning. In particular:

• All businesses should be availing themselves of the reporting benefits of keeping their accounts electronically. There are a number of online, cloud-based systems available at low cost that can take the misery out of this repetitive chore. Benefits are legion, improved: cash-flow, credit control, and real-time management information.
• All self-assessment taxpayers should have their tax returns for last year filed and be aware of tax payments due on or before 31 January 2020.
• Have you taken advantage of our year-end tax planning review? Many of the opportunities to reduce your annual tax bills need to be actioned before the end of the tax year, 5 April 2020.

Add to this a rethink of your capital gains tax and inheritance tax position for 2019-20. Again, action needs to be taken before the end of the tax year.

If you have significant business interests and/or personal income sources that are approaching or exceeding the higher rate tax band triggers, and you have not yet examined opportunities to reduce your liabilities, please call, the clock is ticking.

Most buy-to-let property is let on short leases to a single tenant. The income from rents is treated as a property business, but a number of reliefs available to other trading businesses are not available to buy-to-let landlords.

However, if these same properties were let as Furnished Holiday Let (FHLs) property, more advantageous tax benefits may apply.

If you let properties that qualify as FHLs:

• you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans to traders),
• you are entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures, and
• the profits count as earnings for pension purposes.

To benefit from these rules, you will need to work out the profit or loss from your FHLs separately from any other rental business.

Accommodation can only qualify as an FHL if it passes 3 occupancy tests

1. If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition is not met so your property will not be an FHL for that year.
2. Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year. Do not count any days when you’re staying in the property. HMRC do not consider the property to be available for letting while you are staying there.
3. You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year. Do not count any days when you let the property to friends or relatives at zero or reduced rates as this is not a commercial let.

Do not count longer-term lets of more than 31 days, unless the 31 days is exceeded because something unforeseen happens. For example, if the holidaymaker either: falls ill or has an accident, and cannot leave on time or has to extend their holiday due to a delayed flight

These notes cover the basics and there are other rules that may help you to average occupancy stats to meet the above criteria.

There are significant CGT benefits to reorganising appropriate lets as FHLs and we would encourage landlords who would like to consider this option, to contact us for more information.

Businesses that have a significant number of workers who are paid at the National Minimum Wage or National Living Wage (NLW) rates should probably read the recent independent report that suggests rates of NLW could rise, as internationally, there is evident that realistic rises have little impact on employment levels but do have a positive impact on the take home pay of lower paid workers.

The report says:

The review, published Monday 4 November, concludes minimum wages in a range of countries have had a negligible or zero effect on jobs, but significantly increased the earnings of the lowest paid. The Chancellor has pledged a more ambitious NLW so that on current projections it is set to reach £10.50 per hour by 2024, as part of his commitment to do more to end low pay.

Chancellor of the Exchequer, Sajid Javid, said:

The evidence is clear that our approach is the right one.

We will end low pay by putting the National Living Wage on a path to increase to £10.50 over the next five years.

The previous NLW target was to reach 60% of median earnings by 2020. In line with the conclusions of the Dube Review, the Chancellor Sajid Javid has pledged to increase the NLW towards a new target of two-thirds of median earnings by 2024, provided economic conditions allow. The Chancellor additionally committed to expand the living wage to more young people by bringing down the age threshold for the NLW to cover all workers over the age of 21.

These recommended changes do not mean that the NLW will increase in line with the above comments. However, affected businesses may like to incorporate the possible increases into their medium term planning forecasts.

Believe it or not, HMRC will consider you are the employer of a nanny, housekeeper, gardener or anyone else who works in your home if both the following criteria apply:

• you hire them, and
• they are not self-employed or paid through an agency.

If these criteria do apply this means you have certain responsibilities, like meeting the employee’s rights and deducting the right tax.

There are special rules for au pairs, who are not usually considered workers or employees.

You are classed as an employer if you pay a carer or personal assistant directly, even if you get money from your local council (‘direct payments’) or the NHS to pay for them.

Anyone you employ must:

• have an employment contract
• be given payslips
• not work more than the maximum hours allowed per week
• be paid at least the National Minimum Wage

If they meet the eligibility requirements, they are also entitled to things like:

• Statutory Maternity Pay
• Statutory Sick Pay
• paid holiday
• redundancy pay
• a workplace pension

In effect, you would be treated as an employer and would need to comply with the usual obligations to register and apply the PAYE regulations.

If you are concerned that you may be affected we can help you set up and maintain the necessary payroll records.

Occasionally, the tax system in the UK throws up an issue that does not make sense. For example, how can you create a tax loss for capital gains tax (CGT) purposes without disposing of the asset?

After all, CGT applies when an asset subject to CGT is sold or otherwise disposed. If you sell an asset for more than you acquire it you make a gain for CGT purposes and if you dispose of an asset for less that you paid for it then you make a loss for CGT purposes.

So far, so good…

What if you own shares in a quoted company that are currently worth much less than you paid for them? You may consider that there is a possibility – perhaps a remote possibility – that the share price will recover in which case you may want to keep the shares.

But what if the present value of the shares means you are sitting on a significant CGT tax loss, a tax loss that you may be able to utilise against other chargeable gains?

Which brings us back to the opening comment of this post, how can you create a tax loss for capital gains tax (CGT) purposes without disposing of the asset?

The answer in to make what is called a Negligible Value Claim. This what HMRC offer in guidance on this topic:

If you own an asset which has become of negligible value in your ownership then you may choose to make a negligible value claim so that you’re treated as having disposed of an asset even though you remain the owner.

The claim is made when we receive it, even if you choose to use a tax return to make the claim. The conditions for making a claim are that:

• you must still own the asset when you make the claim,
• the asset must have become of negligible value while you owned it.

So, if the asset was of negligible value when you acquired it then it could not become of negligible value when you owned it. An asset is of negligible value if it is worth next to nothing.

If you make a competent negligible value claim then you’ll be treated as though you had disposed of the asset and immediately reacquired it at the time the claim is made for an amount equal to the value which you specified in the claim. That time will be after the year to which the tax return relates.

When you make the claim, you may choose to specify an earlier time when you will be treated as though you had disposed of and immediately reacquired the asset. If you want to specify an earlier time then you have to meet all of the necessary conditions to make the claim at the time the claim is made that are explained above.

If, by chance, you have a shareholding in your portfolio that is of no real value and you could utilise any CGT loss to good advantage, please get in touch and we will help you submit a formal claim to HMRC.