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MAY – Birthday Month

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May, in our house in a month of celebrations, with the youngest and oldest members of our family having their birthdays (along with many other friends and family).

For this reason, the May post had to include celebrations, parties and gifts! And as an additional gift to me this post will also cover multiple tax areas.

Employee Gifts – HMRC guidelines allow businesses to spend up to £50 on a gift for an employee without it becoming taxable. This is classed as a “trivial benefit”.  This cost is then tax-deductible within the business accounts and also reduces NIC liability accordingly. WIN WIN!! get gifting to your employees 🙂  but as always in tax it isn’t that simple, there are a few additional rules:

  • The gift must not be stipulated in the employee contract.
  • Cash and cash vouchers are not eligible, however high street vouchers or gift cards can be included.
  • The gift must not be given or perceived as a reward or recognition for employee performance, it must be on a “just because” basis. This makes the festive season the ideal time to utilise the opportunity.
  • For Directors of “close” companies the value of trivial benefits to each Director can not be worth more than £300 in a tax year.

Employee Celebrations – The cost of an annual staff party or similar function is allowed as a deduction for tax purposes, however it is only allowable given certain conditions are met as part of the tax relief rules for employee gifts and celebrations.

  • The event(s) must be for individuals classed as being employed by the business and their guests. (Sorry you can’t just invite your friends)
  • All employees must be invited to the event(s), which must be held at a specific location. (Shocking how many invites get lost these days….only messing)
  • The event(s) must be annual.
  • Former and previous employees don’t qualify, nor do subcontractors or shareholders that do not work in the business. If you entertain anyone else, this counts as ‘business entertaining’ rather than staff entertaining, and you can’t claim either tax relief or VAT on the cost of entertaining those people.
  • The total cost of all annual events for employees must not go above £150 per head including VAT for each person.
  • When calculating the cost per head, all costs must be included, such as transport to and from the event, accommodation and VAT.

Gifts to clients – HMRC allows you to give a business gift worth up to £50 to any one person in a tax year. Note though it must be a business gift for example, a diary. However, for it to be a deductible expense and not classed as entertaining it must contain advertising, or be an item that you would normally trade (a free sample).

If the gift costs more than £50, HMRC will disallow the whole amount, not just the amount over £50!


Inheritance Tax Gifts – There are a number of ‘gift’ rules/allowances for inheritance tax that can result in the gift being tax -free:

  • Gifts more than seven years before you die
  • Gifts to a spouse or UK charity
  • Small Cash Gifts – up to £250 per year to as many people as you like.
  • Wedding Gifts – see previous post
  • normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift

Gifts to Charity – through all taxes gifts to charities are encouraged;

  • giving 10% of your estate to charity could reduce the inheritance tax rate from 40% to 36%,
  • giving to charity can increase the tax rate bands potentially reducing your marginal tax rate form 40% to 20%
  • giving to charities is a deductible business expense for corporation tax.

As if helping a great cause isn’t incentive enough.

Weird and Wonderful

Even in this day an age there are a few Tax Rules I don’t agree with and we are always hearing in the media the outrage of the ‘Tampon Tax’ so I thought I would look into taxes of the past and reassure myself that it is an ever changing and developing system and sometimes it takes a while to catch up. I just thought I would share some of my findings and thoughts with you.

1. Wallpaper Tax – In 1712, England imposed a tax on printed wallpaper. Builders avoided the tax by hanging plain wallpaper and then painting patterns on the walls…

Having been in our new home a year now and having had multiple builders in I don’t think I would have wanted them painting patterns on my walls – no offence. 

2. Clock Tax – In 1797, the British Clock Tax was introduced, covering all timepieces, including watches and clocks. Funnily enough, people stopped buying watches…

This got me thinking, now a days would this include, computers, TV’s, Phones, Ovens, Microwaves?? Seems we are surrounded by the time everywhere we go.  

3. Window Tax –Window Tax, introduced in 1696, was designed to impose tax relative to the prosperity of the taxpayer. Certain rooms, particularly dairies, cheeserooms and milkhouses were exempt providing they were clearly labelled. To avoid the tax, some houses from the period can be seen to have bricked-up window-spaces. It was repealed in 1851.

Any one else want a cheese room? I think it could catch back on. 

4. Fireplace Tax – In 1660, England placed a tax on fireplaces. The tax led to people covering their fireplaces with bricks to conceal them and avoid paying the tax. It was repealed in 1689.

Did they have the right idea in 1660, and could we see something similar coming back in to combat the pollution issues. I love our wood-burner and make sure we only burn the correct fuel so would be gutted if they banned them completely. 

5. Beard Tax – In 1535, King Henry VIII of England, who wore a beard himself, introduced a tax on beards, varying with the wearer’s social standing. His daughter, Elizabeth I of England, reintroduced the beard tax, taxing every beard of more than two-weeks growth.

Cant help but think this would be a big earner for the government these days, beards are everywhere. £££££££££££££

 

As always with tax reading once you start you just can’t stop so I ended up looking further a field I will update you with my overseas bizarre taxes shortly.

Tax Codes – Make sure yours is right

Your tax code is based on the information HMRC holds for you. If anything changes for you financially – new job, second job or a bonus – then be sure HMRC know by updating them through your online Personal Tax Account or giving them a call. If HMRC don’t know something has changed they may end up taking too much or too little tax from you. This could leave you will not enough money now, or a large tax bill at the end of the year. It is always best to just keep your information up to date and keep HMRC informed.

If you haven’t set up your Personal Tax Account online yet visit .gov.uk find out more.

Easter Weekend – Wedding

When thinking of my next post, in true Jo style I immediately went to food; Easter eggs, Hot Cross buns etc however, this easter was a little different for us so I’m not going to cover these. If you’re really intrigued though there is a lot of information out there on VAT of ‘Hot Cross Buns’ just give it a google.

Now onto the real topic – Weddings! Incase you didn’t notice from the heading my easter weekend was even more special as we spent it at the most amazing wedding. And in true Tax Geek style you can’t go to any event without assessing the tax implications so here are a few Wedding Tax Facts.

  1. Wedding Gifts! – There are special inheritance tax rules around wedding gifts that means wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child) are exempt.
  2. The Married Couple Allowance – this lets you transfer £1,250 of your Personal Allowance to your husband, wife or civil partner – if they earn more than you. This reduces their tax by up to £250 in the tax year. To benefit as a couple, one of you must normally have an income below your Personal Allowance.
  3. Wedding Cake – Ok so I still managed to get food in here. VAT Notice 701/14 states Cakes including sponges, fruit cakes, meringues, commemorative cakes such as a wedding, anniversary or birthday cakes are all Zero Rated (Its a small win but a win none-the-less) additionally, non-edible cake decorations on a wedding cake if they are clearly for the cake can also be zero-rated.
  4. Inheritance Tax – Not always the nicest topic but transfers between husband, wife or civil partners are exempt and you also also inherit their unused allowance to allow you to pass on inheritance. Additionally for the last couple of years you have also been able to inherit your spouse or civil partners ISA allowance (this is the amount they have built up in their ISA) please note this is just the allowance and not necessarily the funds.

Hope you all had a lovely long weekend…

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Let Them Eat Cake

The Jaffa cake case of 1991 may not be the most talked about VAT case going forward as another yummy treat was up for debate – the chocolate brownie. To be more specific a ‘raw choc brownie’.

Judge Amanda Brown this month has deemed the Pulsin’s brownies a cake making them exempt from VAT and potentially allowing the manufacturer to claw back £300,000 in VAT. In order for the judge to come to this conclusion she tasted the nutritional bars made of dates, chicory fibre and rice malt alongside Mr Kipling’s French fancies, Victoria sponge cake and Tunnock’s Tea Cakes. However, the reasoning for them being deemed a cake wasn’t the initial claim by Pulsins ‘that they weren’t sweet enough to be confectionary’, the judge said the ingredients used in making the brownies, the manufacturing method, their taste and texture were all “consistent with those of a cake”.

Im sure going forward there will be many more cases surrounding VAT but here are a couple of the nuances we already have:

– Chocolate HobNobs are subject to VAT at 20%, whilst Maynards Chocolate Chip Cookies aren’t.

– Twiglets are exempt from VAT, but Walkers Salt and Vinegar crisps aren’t.

More information can be found here https://www.taxation.co.uk/articles/is-a-brownie-a-cake-or-confectionery

 

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Landlord Tax

Are you a landlord?

Make sure you know what’s happening to tax reliefs for residential landlords, changes to the treatment of finance costs are being phased in from 2017/18 to 2020/21. During these years of change make sure you keep on top of what is needed…or better yet get an accountant to do it for you.

In April we are moving into the penultimate year of phasing in with the finance costs allowable dropping to 25%. Do you know how this will effect you? Don’t be caught out with a bigger than expected tax bill.

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Tax Relief’s

Do you wear a uniform for work?

Make sure you know all the tax reliefs your are entitled to. A commonly over looked relief is the claim for uniform, work clothing and tools. If you haven’t been claiming don’t worry you can claim for the last 5years, this could results in £100s of Tax back. #paytherighttax #taxgeek#smallbusiness
For more info don’t hesitate to get in touch.

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Small Business Tax Help


Money worries are something no business wants to have especially small businesses and startups. 

There are a number of government & private firm grants and initiatives to help. Make sure you know what support is out there for your business in the early stages.
#supportingbusinesses #workingtogether #moneymatters

Check out this .gov page for a start; 
https://www.gov.uk/business-finance-support