Stirling and Falkirk-based small business specialist, Jonathan Deb of TaxAssist Accountants, answers some frequently asked questions about tax and accountancy matters:
Q. As the furlough scheme has been extended, how will it affect me and my staff?
A. The Coronavirus Job Retention Scheme (also known as the furlough scheme) was due to close at the end of April 2021 but has been extended until the end of September. Employees will continue to receive 80% of their current salary for hours not worked.
As an employer, you will be required to pay 10% towards the hours your employees cannot work in July, followed by 20% in August and September. This is in addition to the employer’s national insurance and pension contributions they are already paying on hours not worked by employees.
For periods ending on or before 30th April 2021, you can claim for employees who were employed on 30th October 2020, as long as you have made a PAYE Real Time Information (RTI) submission to HMRC between the 20th March 2020 and 30th October 2020, notifying a payment of earnings for that employee.
However, for periods starting on or after 1st May 2021, you can now claim for staff members who were employed on 2nd March 2021, as long as you have made a PAYE Real Time Information (RTI) submission to HMRC between 20th March 2020 and 2nd March 2021, notifying a payment of earnings for that employee. You do not need to have previously claimed for an employee before the 2nd March 2021 to claim for periods starting on or after 1st May 2021.
Q. Due to the pandemic, my staff work mainly from home and I need to supply them with a mobile phone, what tax will be due on this benefit?
A. There is good news here because HMRC does not require you report the provision of a mobile phone to a staff member or deduct and pay tax and National Insurance where the following two conditions are met:
– you provide your employee with only one mobile phone
– the phone contract is between the company and the mobile phone supplier
Even if a staff member uses the mobile phone for some private calls, they will still not be required to pay tax on the provision of the mobile phone. It is important to note that this generous tax exemption only applies where the mobile phone contract is made directly with the company and the company pays the bills. The exemption will not apply if you reimburse a staff member’s personal mobile phone bills, or you have supplied them with a landline.
Q. I will be leaving the UK to work overseas and will be renting out my UK property while I am away. How should I go about reporting the rental income to HMRC?
A. If you live abroad and rent out a residential property in the UK, you will be treated as a non-resident landlord by HMRC.
This will mean your UK letting agent, or potentially your tenants, must deduct tax from your net rental income and pay this to HMRC.
As this will have an impact on your cashflow, you can apply to HMRC for its approval to receive the rental income with no tax deducted. The application can be made using form NRL1.
Even if HMRC accepts the application so the rent can be paid without tax deducted, the rental income will still remain liable to UK income tax and you will generally be required to submit a personal tax return to HMRC. The need to complete a tax return will depend on your personal circumstances.
You should also be aware of the need to confirm your UK tax residence status and seek professional advice if you are uncertain about your situation.
You should also be aware that non-UK residents are subject to UK capital gains tax on capital gains arising from direct or indirect disposals of all types of UK land and property, as well as interests in UK property rich entities. HMRC require any disposals to be reported to itself and the tax be paid within 30 days.
Q. I am thinking about getting a hybrid car for my limited company business, but I have heard that there have been changes that could affect my decision.
A. Until the end of March 2021, if you bought a new hybrid vehicle with less than 50g/km it would have qualified for 100% FYA (first year allowance). This meant that the full cost would have been classed as an allowable deduction against your business’ profits, thereby reducing your company’s tax bill.
However, this is no longer the case as only zero emissions/pure electric cars qualify for the above allowance.
While you won’t get full relief from April, it will still qualify for capital allowances, but the amount depends on the CO2 emissions of the hybrid.
Cars with CO2 emissions of between 51g/km and 110g/km will attract an annual writing down allowance (WDA) of 18%. Cars with CO2 emissions exceeding 110g/km will only get WDA of 6%.
Bear in mind that if you are going to use this vehicle for personal journeys (including commuting) you will also be taxed personally. This is called a benefit in kind, which is calculated by using the value of the car and multiplying by a percentage.
For a new hybrid of less than 50g/km, if it can travel 130 + miles on electric, it would be 0% multiplier currently but from April this increases to 1%.
Q. I have just been told that I am being made redundant and my redundancy package is going to be £50,000 and the gift of my company car. I am concerned about my finances, could you tell me how much tax will be taken from this, so I know how much net pay I am left to budget with?
A. The first £30,000 of redundancy pay is not usually taxable or attracts national insurance, because redundancy pay is compensation from your employer for losing your job.
However, if any of the £50,000 is for unpaid wages or as a bonus, these elements will be subject to tax and national insurance as normal.
The car will need to be valued for tax and national insurance purposes and then be counted as part of your overall redundancy package and the total would be subject to the £30,000 limit.
To give you a rough idea of how much tax you may have to pay, perform the following calculation:[(Value of car + £50,000) – £30,000] x your rate of tax (i.e. 19%, 20%, 21%, 41% or 46%)
There are rules with regards to what is exempt to tax and falls within the £30,000 threshold. This calculation will provide you with a ballpark figure for your tax position.
Jonathan Deb specialises in managing tax and accountancy affairs for small businesses and individual taxpayers in Stirling and Falkirk. For more information about the topics covered above contact: 01786 447030 or email email@example.com
These FAQs are intended to inform rather than advise and are based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact Jonathan Deb before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.