December 2021 | DSK Partners LLP

Can you claim the Marriage Allowance?

Posted on December 2, 2021 by Ketan Umretiya

The marriage allowance came into force in 2015 and applies to married couples and those in a civil partnership where a spouse or civil partner doesn’t pay tax or doesn’t pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2020-21).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,570 to £50,270 in 2020-21. The limits are somewhat different for those living in Scotland.

The allowance permits the lower earning partner to transfer up to £1,260 of their unused personal tax-free allowance to a spouse or civil partner. This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year.

If you meet the eligibility requirements and have not yet claimed the allowance, then you can backdate your claim as far back as 6 April 2017. This could result in a total tax break of up to £1,220 if you can claim for 2017-18, 2018-19, 2019-20, 2020-21 as well as the current 2021-22 tax year. If you claim now, you can backdate your claim for four years (if eligible) as well as for the current tax year. In fact, even if you are no longer eligible or would have been in all or any of the preceding years then you can claim your entitlement.

Source: HM Revenue & Customs Sun, 28 Nov 2021 00:00:00 +0100

VAT – driving schools who supplies services?

Posted on December 2, 2021 by Ketan Umretiya

The VAT liability of the supply of driving lessons is an interesting issue that can be of relevance to other supply scenarios such as hairdressers and other workers in the beauty industry.

In HMRC’s internal manuals the guidance identifies three possible scenarios that can apply to someone providing driving lessons to the public:

The driving school employs its own instructors under contracts of service. HMRC comments that this method is probably only used in a minority of cases. When this is the case, the driving school is supplying the tuition to its pupils and must account for output tax on the full value of fees received. The driving school is making the supply of tuition to its customers and there is no supply by the individual instructors, who are simply receiving remuneration (wages) for their services as employees.
The instructors supply their services to the school under a contract of services. They need only account for output tax on these supplies if the value exceeds the registration limits. The school must account for output tax on the full value of the fees received from pupils.
Each individual instructor supplies tuition services directly to their pupils using the driving school as an agent. Output tax is only due on the value of those supplies if an instructor exceeds the registration limits. However, payment made by each instructor to the school is consideration for a supply of agency services by the school, and the school must declare output tax accordingly.

Source: HM Revenue & Customs Sun, 28 Nov 2021 00:00:00 +0100

TOGC overview

Posted on December 2, 2021 by Ketan Umretiya

The transfer of a business as a going concern (TOGC) rules cover the VAT liability on the sale of a business. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

Where the sale of a business includes assets and meets certain conditions, the sale will be categorised as a TOGC. A TOGC is defined as 'neither a supply of goods nor a supply of services' and is therefore outside the scope of VAT. Under the TOGC rules no VAT would be chargeable on a qualifying sale.

All the following conditions are necessary for the TOGC rules to apply:

The assets must be sold as part of a 'business' as a 'going concern'. In essence, the business must be operating as such and not just an 'inert aggregation of assets'.
The purchaser intends to use the assets to carry on the same kind of business as the seller.
Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer.
Where only part of a business is sold it must be capable of separate operation.
There must not be a series of immediately consecutive transfers.
There are further conditions in relation to transactions involving land.

The TOGC rules can be complex, and both the vendor and purchaser of a business must ensure that the rules are properly followed. The TOGC rules are also mandatory which means that it is imperative to establish from the outset whether a sale is or is not a TOGC. For example, if VAT is charged in error, the buyer has no legal right to recover it from HMRC and would have to seek to recover this 'VAT' from the seller.

Source: HM Revenue & Customs Sun, 28 Nov 2021 00:00:00 +0100

Income excluded from a property business

Posted on December 2, 2021 by Ketan Umretiya

HMRC publishes a list of income streams that are excluded from a UK property business. The list includes fishing concerns, hotels and guest houses, tied premises, caravan sites, lodgers and tenants in your own home, extra services to tenants and letting surplus trade accommodation. In most cases the income from these activities will be taxed as income of a trade and not as property income.

In addition, there are certain receipts that can arise out of the use of land, and which are specifically excluded by statute from a rental business. These include yearly interest, income from the occupation of woodlands managed on a commercial basis, income from mines and quarries and income from farming and market gardening.

There is also a £1,000 property income allowance that applies to income from property (including foreign property). If a taxpayer’s annual gross property income is £1,000 or less the amount is exempt from tax and does not need to be reported on a tax return.

Source: HM Revenue & Customs Sun, 28 Nov 2021 00:00:00 +0100

Who needs to register for Self-Assessment

Posted on December 2, 2021 by Ketan Umretiya

There are a number of reasons why you might need to complete a Self-Assessment return. This includes if you are self-employed, a company director, have an annual income over £100,000 and / or have income from savings, investment or property.

Taxpayers that need to complete a Self-Assessment return for the first time should inform HMRC as soon as possible. The latest date that HMRC should be notified is by 5 October following the end of the tax year for which a Self-Assessment return needs to be filed. If you have missed this deadline for the 2020-21 tax year you should still notify HMRC and register as soon as possible. You should also ensure that you file your 2020-21 tax return and pay any tax due by 31 January 2022.

In certain circumstances, HMRC may also ask taxpayers to complete tax returns. HMRC has an online tool www.gov.uk/check-if-you-need-tax-return/ that can help you check if you are required to submit a Self-Assessment return.

The list of taxpayers that are usually required to submit a Self-Assessment return includes:

The self-employed;
Taxpayers who had £2,500 or more in untaxed income;
Those with savings or investment income of £10,000 or more before tax;
Taxpayers who made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
Company directors – unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car;
Taxpayers whose income (or that of their partner’s) was over £50,000 and one of you claimed Child Benefit;
Taxpayers who had income from abroad that was taxable in the UK;
Taxpayers who lived abroad and had a UK income;
Income over £100,000.

Source: HM Revenue & Customs Sun, 28 Nov 2021 00:00:00 +0100

Month: December 2021

Can you claim the Marriage Allowance?

VAT – driving schools who supplies services?

TOGC overview

Income excluded from a property business

Who needs to register for Self-Assessment

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