The way that expenses relating to business premises are grouped can often cause problems with HMRC if they are found out to be non-deductible for tax purposes. If you take the correct steps to begin with it makes everything a lot smoother! Before recording any property expenditure, first identify if it is a revenue cost (day-to-day expense) like decoration or maintenance or a capital cost. A capital cost could be divided into two sections: 1. Acquisition/Improvement of building or structure 2. Plant/machinery/ equipment that is permanently attached to the building (lights, water system etc) Remember, if you do your own bookkeeping there is a much higher risk of errors- so double check everything! Revenue costs: if you incur a repair or maintenance cost relating to the premise, a tax deduction for the expense is allowed in the same way that other revenue expenditure (energy bills, staff costs and overheads) are recorded in the profit and loss account. Capital costs: these tend to be extensive and go beyond simple repairs. Capital expenditure should be recorded as a fixed asset on the business’ balance sheet. Hidden capital costs: there can be costs that are normally treated as revenue but can also be related to capital improvements. For example, you may have changed your office into an open plan structure (capital) but now need to paint the walls. This cost is related to capital and not revenue! Timing also comes into play for determining if expenses are capital or revenue. If a building is acquired in a condition that stops it from being used for the purpose it was intended for, expenses incurred to make it fit for use are usually capital even if they fall under the revenue category. Categorization is not always simple and luckily HMRC will accept a common-sense approach to it! No deduction from profits is allowed for capital expenditure if it has been incurred on or after 29 October 2018. However, it may qualify for a special capital allowance deduction known as the structures and buildings allowance (SBA). The tax relief for SBAs is equal to 3% of the costs per year (2% until April 2020). If you need help identifying what is a hidden capital cost and whether your capital costs may be eligible for the SBA, give us a call on 01622 738165- we are here to give you a helping hand!

Direct tax rules are changing in April 2025 and more vehicles are being classed as cars rather than commercial vehicles. VAT is not claimable when buying a new car, however it can be claimed when a car will be used as a tool of trade (e.g. a car hire business, driving school or taxi firm). Input tax can also be claimed on a genuine car that is used for carpooling and made available for use by all staff and not kept overnight at an employee’s home. Input tax can be claimed on a purchase of a commercial vehicle which has three/four wheels (no motorbike!), has been constructed solely/mainly to carry passengers and has roofed accommodation to the rear of the driver’s seat with side windows. Put simply, if it can carry either only one passenger, or over twelve passengers it is not a car and so it does not count. Like most things, there are exceptions to this rule. If the vehicle has an unladen weight of three tonnes or more it will always be classed as a commercial vehicle. Caravans, ambulances and prison vans are commercial vehicles. If you are planning to purchase a car, van or combi-van, it is worth checking out if it is a commercial vehicle. Get in contact today on 01622 738165 and we can advise you on what would be best for you and your business.

Have you noticed that your company has temporarily exceeded the VAT registration threshold? You know that it is unlikely you will exceed the threshold in the foreseeable future, can you just ignore it? As a business owner, you can voluntarily register for VAT as soon as you start or intend to start trading. You have to register when your sales turnover exceeds the registration threshold (£90,000 in any twelve-month period). For VAT purposes, your turnover includes all businesses you own, so if you have two companies, it will be the combined turnover compared with the threshold. You can ask HMRC for an exception from registration by providing evidence that the threshold was only exceeded temporarily. You must be able to convince HMRC that your turnover is not expected to exceed the deregistration threshold of £88,000 at any time in the twelve months following the date on which the registration threshold was exceeded. If you fail to apply for the exception, HMRC may assess you for VAT on all sales from the date you should have registered! So, if your turnover temporarily exceeds the limit, you should apply for registration and ask for the exception by answering 10 questions on the application form. The deadline is often missed but it is not a huge problem. You can make a late application but you will need an explanation with your application explaining how, at the time the registration threshold was exceeded, you could have known that your future turnover would be less than the deregistration threshold. If you need help with this explanation or need further information, give us a call on 01622 738165 and the team will be happy to help.

Any payment or reimbursement of job expenses by an employer is exempt from PAYE tax and NI. However, job-related travel does have its own special set of rules. Any exemptions applies when the travel expense is either: Made in the course of doing your job (if your role involves visiting customers) For a temporary purpose required by your job (you need to check a building site etc) Travel expenses cover all associated costs so this means that things such as hotel bills and subsistence are also included! Even if the expenses are exempt or taxable, it does not affect the business’s right to deduct the cost when working out taxable profits or losses. But, if the expense is not exempt, the employer is liable to Class 1 or Class 1A NI (at 15% for 2025/26!). But, some tax inspectors sometimes argue that some travel costs are more luxurious than they need to be. If so, HMRC has the right to treat the expense as a reward for the employee and so it is not covered by the exemption. This means that at least a part of it would be taxable and liable to NI. To make sure this doesn’t happen, just take a reasonable approach- HMRC can’t dictate what hotel you stay in! If you are challenged about the expenses by HMRC get in contact with us on 01622 738165 and we can help you with the internal guidance.

Selling goods online can bring in a great income, but you must be aware of the VAT rules! If you run an e-commerce business, you usually sell your goods through an online marketplace. It is the online marketplace that is ultimately responsible for any unpaid VAT relating to sellers on the platform. An online marketplace is a business platform like a website or app that is facilitating the sale of goods. It must have set terms and conditions for supplying goods, it must authorise customer payments and must be involved in the ordering/delivery of goods. Overseas sellers may also be involved and so there may be UK VAT implications. For VAT purposes, an overseas seller will have an overseas e-commerce business, but not a business establishment in the UK and make taxable sales of goods to UK customers. On the other hand, a UK-based e-commerce business will have decision-making and central administration in the UK and a permanent presence with resources for taxable sales. When an overseas seller trades and sells goods in the UK via an online marketplace, the online marketplace must be VAT registered and the overseas seller is responsible for paying import VAT and customs duties. If the customer is VAT registered, the sale is made by the overseas seller and not the online marketplace. The overseas seller must register for UK VAT and charge UK VAT on the first sale (the mandatory VAT registration threshold does not apply). If the UK customer is not VAT registered, the sale is made through the online marketplace, therefore it is responsible for charging VAT (the overseas seller is treated as making a zero-rated supply). However, if the goods are stored outside the UK and the value of the sale is less than £135, the online marketplace charges supply VAT. If it is over £135, import VAT is paid by the customer at the UK border. There are rules that must be followed if you are a UK seller conducting business on an online marketplace depending on where the customer is based. For UK-based customers, UK VAT will apply only if the VAT registration threshold is exceeded. For EU-based customers, goods exported to the EU are sero-rated. BUt, local VAT and customs duties may apply. Sales under €150 can be simplified using the ‘Import One Stop Shop’. If you think you will be affected by anything you have read today, give us a call on 01622 738165 and we can give you a helping hand or clarify anything for you.

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Gifts & Taxes

Part 2