Tag: Accountant in Hounslow

If you’ve received a tax calculation or simple assessment from HMRC, don’t assume that it’s correct – HMRC can and do make mistakes.

Check your tax calculation

Each year HMRC undertake a PAYE reconciliation for employed individuals who are not required to submit a tax return to check that the correct amount of tax has been paid. Where it has not, HMRC will send out either a P800 tax calculation or a PA302 simple assessment.

P800 tax calculation

A P800 tax calculation may be issued if an employee has paid too much tax, or if they have paid too little and the tax underpayment can be collected automatically through an adjustment to their PAYE tax code. There are various reasons why a person who pays tax under PAYE may have paid the wrong amount of tax. This may be because:

  • they finished one job and started a new one and were paid for both jobs in the same tax month;
  • they started receiving a pension at work; or
  • they received Employment and Support Allowance or Jobseeker’s Allowance (which are taxable).

P800 calculations for 2018/19 are being sent out by HMRC from June to November 2019. 

If the P800 shows that tax has been overpaid, it will say whether a refund can be claimed online. If so, this can be done through the personal tax account. Where a claim is made online, the money should be sent to the claimant’s bank account within 5 working days. In the event a claim is not made within 45 days of the date on the P800, HMRC will send out a cheque. If an online claim is not possible, HMRC will also send out a cheque.

PA302 simple assessment

Instead of a P800 tax calculation, an individual may instead receive a PA302 simple assessment. This is effectively a bill for tax that has been underpaid. HMRC may issue a simple assessment if:

  • the tax that is owed cannot be taken automatically from the individual’s income;
  • the individual owes HMRC tax of more than £3,000; or
  • they have to pay tax on the State Pension.

A simple assessment bill can be paid online.

Check your calculation

If you receive a tax calculation or simple assessment from HMRC, do not simply assume that it is correct – HMRC can and do make mistakes. It is prudent to check that their figures are correct. When checking the calculation, check HMRC’s figures against your records, such as your P60, your bank statements and letters from the DWP. Check that employment income and any pension income is correct, and that relief has been given for expenses and allowances. HMRC have produced a tax checker tool (available on the Gov.uk website at www.gov.uk/check-income-tax) which can be used to check the amount of tax that should have been paid.

If you think that your tax calculation is incorrect, you will need to contact HMRC. This can be done by phone by calling 0800 200 3300. If you do not agree with your simple assessment, you have 60 days to query this with HMRC by phone or in writing. The simple assessment letter explains how to do this.

Partner note: www.gov.uk/tax-overpayments-and-underpayments

To find out more please follow us on Facebook , Twitter or LinkedIn. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

Inspired by Grand Designs? You are entitled for a VAT refund if you build your own home.

VAT refunds for DIY builders

If you build your own house or convert an existing property into a home, you may be eligible to apply for a VAT refund on building materials and services. You do not need to be VAT registered to claim a refund.

What qualifies?

Refunds can be claimed in respect of building materials that are incorporated into the building and which cannot be removed without tools or without damaging the building. Refunds are available for materials used to build both new homes and for certain conversions.

A new home will qualify if it is separate and self-contained and you build it for you and your family to live in. The property must not be used for business purposes, although you are permitted to use one room as a home office.

Conversions will qualify if the property was previously used for non-residential purposes and is converted for residential use. Conversions of residential building will only qualify if they have not been lived in for at least 10 years.

Where you use a builder, the builder’s services will normally be zero-rated where they work on a new home. However, you can claim a refund for VAT charged by a builder working on a conversion.

What does not qualify?

Refunds are not available in respect of:

  • materials or services on which no VAT is payable because they are zero-rated or exempt;
  • professional fees, such as architects’ fees or surveyors’ fees;
  • costs of hiring machinery or equipment;
  • building materials which are not permanently attached to or part of the building;
  • fitted furniture, some gas and electrical appliances, carpets and garden ornaments.

A refund is also denied if the building is not capable of being sold separately, for example, as a result of planning restrictions.

How to claim

The claim is made on form 431NB where it relates to a new build and on form 431 where it relates to a conversion. The forms are available on the Gov.uk website. The claim must be made within three months of the date on which the building work was completed.

You must include all the relevant supporting documentation with your claim, such as valid VAT invoices to support the amount claimed. The refund will normally be issued within 30 days of making the claim.

Partner note: www.gov.uk/vat-building-new-home/eligibility.

To find out more please follow us on Facebook , Twitter or LinkedIn. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474

Today’s blog covers the serious curtailment to letting relief for landlords coming April 2020 – read more here.

Curtailment of letting relief

Landlords have been hit with a number of tax hikes in recent years, and this trend shows no signs of abating. From 6 April 2020, lettings relief – a valuable capital gains tax relief which is available where a property which has at some point been the owner’s only or main residence is let out – is seriously curtailed.

Now

Under the current rules letting relief applies to shelter part of the gain arising on the sale of a property which has been let out as residential accommodation and which at some time was the owner’s only or main residence. The amount of the letting relief is the lowest of the following three amounts:

  • the amount of private residence relief available on the disposal;
  • £40,000; and
  • the gain attributable to the letting.

Under the current rules, periods of residential letting count regardless of whether or not the landlord also lives in the property.

From 6 April 2020

From 6 April 2020, letting relief will only be available where the owner of the property shares occupancy with a tenant. From that date, lettings relief is available where at some point the owner of the property lets out part of their main residence as residential accommodation and shares occupation of that residence with an individual who has no interest in the residence.

To the extent that a gain that would otherwise be chargeable to capital gains tax because it relates to the part of the main residence which is let out as residential accommodation, the availability of lettings relief means that it is only chargeable to capital gains tax to the extent that it exceeds the lower of:

  • the amount of the gain sheltered by private residence relief; and
  • £40,000.

Example 1

Tom owns a property which he lives in as his main residence. He lived in it for a year on his own, then to help pay the bills he let out 40% as residential accommodation.

In June 2020 he sells the property realising a gain of £189,000. He had owned the property for five years and three months (63 months).

The final nine months of ownership are covered by the final period exemption – this equates to £27,000.

For the remaining 54 months, private residence relief is available for the first 12 months and 40% of the remaining 48 months – a total of 31.2 months (12 + (40% x 48)). This is worth £93,600. (31.2/63 x £189,000).

Private residence relief in total is worth £120,600 (£27,000 + £93,600).

The gain attributable to the letting is £68,400 (£189,000 – £120,600). This is taxable to the extent that is exceeds £40,000 (being the lower of £40,000 and £120,600).

Thus the letting relief is worth £40,000 and the chargeable gain is £28,400.

Example 2

Lucy buys a flat for £300,000 which she lives in for one year as her main residence. She then buys a new home which she lives in as her main residence and lets the flat out for three years, before selling it and realising a gain of £96,000.

If she sells it before 6 April 2020, she will be entitled to private residence relief of £60,000 (30/48 x £96,000). The final 18 months are exempt as she lived in the flat for 12 months as her main residence. The gain attributable to letting is £36,000, all of which is sheltered by lettings relief (as less than both private residence relief and £40,000).

If she sells the property after 6 April 2020, the final period exemption only covers the last nine months, reducing the private residence relief to £42,000 (21/48 x £96,000). The remainder of the gain of £54,000, which is attributable to the letting, is chargeable to capital gains tax as letting relief is no longer available as Lucy does not share her home with the tenant.

Consider realising a gain on a let property which has also been a main residence prior to 6 April 2020 to take advantage of the letting relief available prior to that date where a landlord does not share the accommodation with the tenant.

Partner note: TCGA 1992, s. 224; Draft legislation for inclusion in Finance Bill 2019—20 (see https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/816196/Changes_to_ancillary_reliefs_in_Capital_Gains_Tax_Private_Residence_Relief_-_Draft_legislation.pdf).

To find out more please follow us on Facebook , Twitter or LinkedIn. Feel free to contact us on 0333 006 4847 or request a call back by texting to 075 6464 7474