1 October 2017 – Due date for Corporation Tax due for the year ended 31 December 2016.

19 October 2017 – PAYE and NIC deductions due for month ended 5 October 2017. (If you pay your tax electronically the due date is 22 October 2017.)

19 October 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2017.

19 October 2017 – CIS tax deducted for the month ended 5 October 2017 is payable by today.

31 October 2017 – Latest date you can file a paper version of your 2017 self-assessment tax return.

1 November 2017 – Due date for Corporation Tax due for the year ended 31 January 2017.

19 November 2017 – PAYE and NIC deductions due for month ended 5 November 2017. (If you pay your tax electronically the due date is 22 November 2017.)

19 November 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2017.

19 November 2017 – CIS tax deducted for the month ended 5 November 2017 is payable by today.

Tax losses can arise due to a difficult trading period. They can also be created if you invest in qualifying equipment and you are able to set this cost against your trading profits – if the cost of the assets exceeds your profits you will have a tax loss.

There are three ways you can utilise these losses:

1. Against income or possibly against capital gains of the same year or an earlier year.
2. Against profit of the same trade.
3. Against income from a company to which you transferred your trade.

Not all losses may be claimed in these ways and sometimes the amount of loss you claim is restricted or limited. Loss relief is one of the reliefs where there is a limit, it is the higher of £50,000 and 25% of the adjusted total income of the year. HS227 Losses (2017)

Additionally, the amount of loss relief you claim against income or capital gains may be restricted or limited for example if you:

1. have worked for less than 10 hours a week on average on commercial activities of the trade,
2. are a Limited Partner or a member of a Limited Liability Partnership,
3. have a trade which is carried out wholly overseas,
4. have claimed certain capital allowances,
5. have income from oil extraction activities or oil rights.

You can also claim relief for losses in the final 12 months of the trade, against profits in the trade during the three previous years.

Another key planning objective when considering the best way to use losses is to aim to reduce your income, and therefore tax liability, in a year when tax was paid. In this way, the loss relief claim will result in a tax refund.

Calculation and utilisation of losses is not a simple matter. As discussed above, the aim should be converting the loss into a cash flow boost – a tax refund. We would be happy to discuss your options.

Most of us are aware that we pay Stamp Duty Land Tax (SDLT), or the regional equivalents, when we buy a property, but that is just the tip of the iceberg. For example, if you give something of value in exchange for land or property, it will also count towards the chargeable consideration and therefore the amount of SDLT payable.

As well as money, you can exchange property for: goods, works or services, release from a debt, or transfer of (taking on) a debt. Another example where a mix of money and other consideration is taken into account is when two people, who own a house together, then split up and one pays the other for their share of the equity and also takes on their outstanding mortgage liability.

The chargeable consideration includes anything paid for assets that form part of the land or property. These can include:

• buildings and structures that are part of the land, for example farm buildings

• fixtures and fittings, including bathroom and kitchen fittings

• intangible assets, for example the value of goodwill attached to the land

• the estimated value of a commitment to do work or services, for example a promise from the seller to repair the property.

• any VAT you pay on the transaction.

Chargeable consideration does not include carpets, curtains, free-standing furniture or other household consumables. When the sale price includes a payment for items that aren’t part of the chargeable consideration, they must be valued at a rate reflecting their fair market value.

For example, if the seller includes carpets in the sale, the buyer and seller must agree a fair price bearing in mind their age and quality. Subtract this from the price paid to find the chargeable consideration.

The Government has published the long-awaited Data Protection Bill that will incorporate most of the provisions set out in the EU General Data Protection Regulation. This will apply from 25 May 2018, and many businesses will need to update their data security arrangements to comply with the new regulations.

• The Bill will introduce safeguards to prevent and detect fraud, protect the freedom of the press, allow scientific research and maintain the integrity of professional sports
• Specifically include measures to allow action against terrorist financing, money laundering and child abuse
• Processing done for legitimate interests will be allowed if it achieves a balance with individuals’ rights

With individual data rights being strengthened, it is the Government’s view that, as far as possible, existing lawful data processing should be allowed to continue. Consequently, the Bill assures specific UK businesses and organisations the vital data processing they undertake for legal or public interest reasons can continue uninterrupted.

It will preserve existing tailored exemptions that have worked well in the Data Protection Act 1998, carrying them over to the new law.

The Bill will include exemptions for data processing in the following areas:

• Processing of personal data by journalists for freedom of expression and to expose wrongdoing is to be safeguarded
• Scientific and historical research organisations such as museums and universities will be exempt from certain obligations which would impair their core functions
• National bodies responsible for the fight against doping in sport will continue to be able to process data to catch drug cheats
• In the financial services sector, the pricing of risk or data processing done on suspicion of terrorist financing or money laundering will be protected
• Where it is justified, the Bill will allow the processing of sensitive and criminal conviction data without consent, including to allow employers to fulfil obligations of employment law

Under the new regulations individuals will have more control over their data by having the right to request that their personal data be erased. This will also mean that people can ask social media channels to delete information they posted in their childhood. The reliance on default opt-out or pre-selected ‘tick boxes’, which are largely ignored, to give consent for organisations to collect personal data will also become a thing of the past.

Businesses will be supported to ensure they are able to manage and secure data properly. The data protection regulator, the Information Commissioner’s Office (ICO), will be given more power to defend consumer interests and issue higher fines, of up to £17 million or 4 per cent of global turnover, in cases of the most serious data breaches.

Data protection rules will also be made clearer for those who handle data but they will be made more accountable for the data they process with the priority on personal privacy rights.

If you are employed, and this will include most directors, you can claim for expenses that you have paid for personally, to be set against your income liabilities for the relevant tax year.

You must keep records of the amount you have spent and make a claim to HMRC within four years of the end of the tax year that you spent the money.

For every £100 of expenses that you can claim you will receive a refund of:

• £20 if you are a basic rate taxpayer,
• £40 if you are a higher rate taxpayer, and
• £45 if you are a higher rate tax payer.

What qualifies for tax relief?

1. Uniforms, work clothing and tools
2. Business mileage claim for use of your own car on company business (does not include home to work journeys)
3. Other travel and overnight costs
4. Professional fees required by your employment
5. Certain costs for working from home
6. Buying work related equipment
7. Any other expenditure you have incurred for work purposes only

You can’t make a claim if these costs have been reimbursed by your employer.

For claims more than £2,500 you will need to submit on a self-assessment tax return.

For claims less than £2,500 you have three choices:

1. If you already complete a self-assessment tax return use this to make the claim.
2. Complete a form P87 and file online or by post.
3. You make a claim by phone if you have made a successful claim in previous years and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions).

If your employer gives you a contribution towards any of these expenses, but does not cover the full cost, claim the difference.

And finally, if you make a claim you will only receive a tax refund if you have paid tax in the relevant tax year.

We are often asked by landlord clients to clarify the difference between a replacement item of furniture, furnishing, household appliances or kitchen ware, and a purchase that may be considered an improvement. The difference is critical, as from April 2016, the 10% wear and tear allowance was scrapped and the new Domestic Items Relief (DIR) introduced. To qualify for the DIR the following points need to be considered:

• Unlike the Wear and Tear allowance, for the Replacement of Domestic Items relief to apply the dwelling house can be unfurnished, part furnished or fully furnished.

• An expense must be incurred on purchasing a replacement domestic item, ‘the new item’.

• The new item must also be solely provided for use by the tenants in a dwelling house and the old item must no longer be available for use in that dwelling house.

• The initial cost of purchasing domestic items for a dwelling house isn’t a deductible expense so no relief is available for these costs. Relief is only available for the replacement item.

It is then necessary to consider if the new item is an improvement of the replaced item. HMRC have outlined the following points:

• If a new sofa would have cost you £400 but a sofa bed cost you £550, you could only claim the £400 as a deduction and no relief is available for the £150 difference.

• When considering if the new item is an improvement on the old asset, the test is whether the replacement item is or isn’t, the same or substantially the same as the old item.

• Changing the functionally (from a sofa to a sofa bed for example) means the replacement isn’t substantially the same as the old item.

• If you later purchase a replacement sofa bed for use in that dwelling house, you would be able to claim the full cost of this new sofa bed. This is if there was no improvement on the old sofa bed and the old sofa bed is no longer available for use in that dwelling house.

• Changing the material or quality of the item also means the replacement isn’t substantially the same as the old item. If you upgrade from synthetic fabric carpets to woollen carpets, the replacement isn’t substantially the same as the old item so there has been an improvement.

• If the replacement item is a reasonable modern equivalent, for example a fridge with improved energy efficient rating compared to the old fridge, this isn’t considered to be an improvement and the full cost of the new item is eligible for relief.

One final point. When you first purchase a property to let, make sure that a figure is included in the contract to cover any domestic items included. In this way, when you replace these items at a future date you will be able to claim the DIR. 

The government reintroduced the remainder of the March budget last week, it’s the part that was held-over to accommodate the May 2017 general election.

It confirms two items that will be of interest to smaller business owners.

Firstly, that businesses with turnover below the current VAT registration threshold (£85,000 for 2017-18) will not be required to keep digital records – although they may choose to do so – and will not be required to upload quarterly returns of their trading results to HMRC. This is a sensible approach to the Making Tax Digital (MTD) agenda.

Traders that are registered for VAT will need to ensure that they are using compatible software from 1 April 2019, when the obligation to file VAT returns using the new MTD platform commences. If we file VAT returns for you, we will make sure that our software applications are compliant. If you file your own returns we can help you select appropriate software.

Secondly, the Bill confirms that the £5,000 tax-free dividend allowance is being reduced to £2,000 from April 2018.

Small companies, with spare reserves, should ensure that shareholders consider a minimum £5,000 dividend for the current tax year (2017-18). From April 2018, a £5,000 dividend will cost a basic rate income payer £225 in tax. If cash flow is an issue, the dividends can be transferred into a loan account and drawn down when funds are available.

For the present, dividends are a return on capital and not remuneration subject to NIC. While this remains the case, it will still pay to adopt the high dividend, low salary approach.

The Department for Education released the following press release last week regarding the new childcare support offer that commences from 1 September 2017. They said:

Parents of three and four-year olds who have registered for a place will join the 15,000 families benefitting in the 12 areas of the country that introduced the offer early.

The offer should save families around £5,000 per year on childcare, helping them to balance their jobs and family lives, and around 390,000 working families are eligible to benefit. The latest evaluation shows 8 out of 10 childcare providers were willing and able to double their current 15 hours offer.

The providers in the 12 areas across the country that implemented the offer early have helped to share examples of best practice for other providers to follow. This has been bolstered by the work of local authorities across the country in supporting their local early years sector to deliver the offer.

To be eligible for the 30 hours the following conditions apply:

• You, and any partner, must each expect to earn (on average) at least £120 a week (equal to 16 hours at the National Minimum or Living Wage).
• If you, or your partner, are on maternity, paternity or adoption leave, or you're unable to work because you are disabled or have caring responsibilities, you could still be eligible.
• You can't get 30 hours free childcare if you, or your partner, expect to earn £100,000 or more.
• Available to parents of age 3 and 4-year-olds born on or after 1 September 2012.

The scheme can be accessed at:

•  
• Nurseries and nursery classes
• Playgroups and pre-school
• Childminders
• Sure Start Children's Centres

If eligible, you would be entitled to an extra 570 hours of free childcare a year to use flexibly, so 1140 hours in total.

The first eight Early Implementer areas were Hertfordshire, Newham, Northumberland, Portsmouth, Staffordshire, Swindon, Wigan and York, launching 30 hours in September 2016. Dorset, Leicestershire, North Yorkshire and Tower Hamlets joined the scheme in April 2017.

The Childcare Choices website provides information on the government’s childcare schemes and explains how parents can pre-register or apply. It also includes a childcare calculator to show eligible families how much they could receive. https://www.childcarechoices.gov.uk/

To qualify for the full, new State Pension you will need to have 35 years of contributions. At present, the self-employed pay Class 2 (a fixed weekly amount of £2.85) and Class 4 contributions (9% of profits between £8,164 and £45,000, and 2% of profits over £45,000), but only the Class 2 payments contribute towards your 35 years.

From April 2018, Class 2 contributions are being abolished.

It is likely that from April 2018, if you are self-employed and earn more than the small profits limit (SPL), currently £6,025 for 2017-18, but less than the current lower profits limit (LPL), £8,164 for 2017-18), you will not have to pay Class 4 NIC but you will still receive credits towards your new State Pension entitlement.

Thus far good news for the lower paid self-employed.

Unfortunately, the news is not quite so good if you earn less than the SPL threshold. Up to April 2018, you could top up your State Pension contributions by making Class 2 contributions, at £2.85 per week. From April 2018, you would need to make Class 3 voluntary contributions, and these are currently £14.25 a week.

The annual cost of protecting your State Pension rights would therefore increase from £148.20 to £741.

Self-employed with income below the SPL may be able to achieve the same result if they are claiming other benefits: for example, tax credits, child benefit or Universal Credit. If this is the case they would not need to pay the Class 3 contributions and would still receive credits towards their State Pension entitlement.

HMRC has published a list of popular misconceptions that taxpayers have about letting property. We have listed below a summary of situations where you will need to declare rental earnings to HMRC:

• If you inherit property and let it out.
• If you buy a property as an investment and let it out.
• Divorcing partners, who decide to let out their jointly owned property, will need to declare their share of any rental profits on their individual tax returns.
• You may move to a new house due to employment considerations and let out the house you are moving from.
• You may move into a care home and let out your present home to help pay for the fees.
• You may buy a property for your son or daughter to use while at university, and they may sub-let to friends on an informal basis and charge a nominal rent, which you use to defray costs. Any surplus monies received from this sort of arrangement will still need to be declared.
• Moving to tied accommodation can create problems if you keep your existing home and let it out. If the rents you receive cover your mortgage repayments (capital and interest) you may consider that you have not made a profit, but the capital part of your mortgage repayments are not an allowable deduction for income tax purposes.

Also, watch out for the effects of the changes to the rules for repairs and finance costs (interest) that we have covered in recent issues.

If you are concerned that you may be required to declare your rental income, and you have not yet done so, we can help. There is a tried and tested process to bring matters up-to-date. Please call for more information.