If you choose to take money out of the business in a way that isn’t accounted for by one of these options, then it will be recorded through a director’s loan account (DLA).

Essentially, you are borrowing money from your own company.

While this can be a simple way of accessing high levels of capital when you need it, there are tax implications which you’ll need to consider.

Failing to do so could result in major penalties, as in the recent case of HM Revenue & Customs (HMRC) and David Kingsmill Plumpton, Director of Botleigh Grange Hotel, Southampton.

Although HMRC was forced to reduce the £90,000 penalty, Mr Plumpton still faced a £200,000 bill and £30,000 fine for improperly filling out Income Tax Self-Assessment (ITSA) when he received the funds.

So, how do you avoid getting in trouble with HMRC? Let’s investigate.

Income Tax

You generally don’t have to pay Income Tax on director’s loans as the tax liability sits with your business.

However, if the loan is ‘written off’ or ‘released’, i.e. it is not repaid, then you must report it via ITSA and pay Income Tax on the loan.

Your company must also deduct Class 1 National Insurance (NI) through its payroll.

Director’s loans as benefits in kind (BIKs)

If a director’s loan is £10,000 or over and free from interest, HMRC will consider it to be a benefit in kind (BIK) – a benefit which an employee or director receives which is not included in their salary, typically provided to the individual at low or no cost.

For a loan of this size, you will need to report it via ITSA.

Your company will also need to deduct Class 1 NI Contributions.

Corporation Tax

Some director’s loans create a Corporation Tax liability, reported to HMRC by form CT600A.

This occurs if a loan or advance has been made to the Director or shareholder from a close company.

A close company must be resident in the UK and controlled by either:

• Five or fewer participators (shareholders or any other person(s) who have shares or an interest in the company capital or income); or
• Any number of directors who are also shareholders.

Under Section 455 CTA 2010, a loan to a close company is subject to Corporation Tax. Therefore, the company, rather than the participator is liable for the tax on the loan.

You should try to repay the loan within nine months of the end of your business’ accounting period (AP) to avoid additional tax on the loan.

If you do this, then your company will pay Corporation Tax according to the following:

• A loan of more than £5,000 (and another loan of £5,000 or more was taken out up to 30 days before or after the original loan was repaid) – Corporation Tax is due at 33.75 per cent.
• If the loan was more than £15,000 (and another loan was arranged upon repayment) – Corporation Tax is due at 33.75 per cent.

If you don’t repay your loan within the given period, then your company will pay Corporation Tax on the outstanding amount at 33.75 per cent, as shown on the Company Tax Return.

After the loan is repaid, your company can reclaim Corporation Tax.

Exception to Section 455

An exception exists for directors and employees of the company or its associated companies when:

• The individual is employed full-time by the company or its associated companies;
• The loan or advance does not exceed £15,000; and
• The individual holds no material interest in the company (i.e. no more than five per cent of the ordinary share capital, or five per cent of the company’s assets).

Record-keeping and planning

Director’s loans come under the purview of financial management and compliance.

For this reason, you must keep detailed records of any money which you have withdrawn from the business or paid into it, as well as any tax you have paid and details of any written-off loans.

This can help you avoid non-compliance with tax regulations and support you if HMRC asks you for more information.

For further advice on director’s loans and financial planning, please contact our team.

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Those in this band do not automatically need to send a Self-Assessment tax return for the 2023/24 financial year if they meet the following criteria:

• They are taxed through Pay-As-You-Earn (PAYE)
• They submitted a 2022/23 tax return showing income within the stated band
• They have no other income
• They do not meet any other criteria for requiring Self-Assessment, such as being self-employed and earning over £1,000 from self-employment
• They do not pay the High Income Child Benefit Charge (HICBC)
• They are not a partner in a registered business partnership
• They do not receive any untaxed income over £2,500.

Net adjusted income refers to total taxable income before your Personal Allowance is applied, but after certain reliefs, such as charitable donations via Gift Aid.

Anyone earning between £100,000 and £150,000 annually who does not meet all these criteria will need to submit a Self-Assessment return for the previous financial year as normal.

If you need to send a return for the 2023/24 financial year, you must register by 5 October 2024 and submit it by 31 January 2025.

Are further changes coming?

2023/24 was a transition year towards completely removing the requirement for PAYE-only taxpayers to submit a Self-Assessment return.

In the most recent financial year, those earning over £150,000 per annum were still required to submit a return, despite paying tax through PAYE only.

For the 2024/25 financial year onward, this requirement has been removed entirely.

Those that need to submit a Self-Assessment return for 2023/24 should remember that the Personal Allowance decreases by £1 for every £2 that you earn over £100,000 – effectively removing the Personal Allowance for incomes of £125,140 or more.

For advice on Self-Assessment and optimising your personal taxes, please contact our team.

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Understanding the Salaried Member legislation

The Salaried Member legislation essentially treats LLP members as employees for tax purposes if they fail to satisfy certain conditions.

These conditions, known as Condition A, Condition B, and Condition C, serve as benchmarks to determine the tax status of LLP members.

The conditions

• Condition A – Disguised salary. This condition examines whether at least 80 per cent of a member’s profit share resembles a fixed salary rather than a variable share linked to the overall profits of the LLP.
• Condition B – Significant influence. This evaluates whether the member’s rights and duties within the LLP present significant influence over its affairs.
• Condition C – Capital contribution. This condition assesses whether the member’s capital contribution to the LLP falls below 25 per cent of their expected disguised salary.

The focus of the recent amendments revolves around Condition C, particularly concerning a member’s capital contribution and its implications for tax treatment.

What’s changed?

HMRC’s updated guidance sheds light on how they interpret the legislation, although the legislation itself remains unchanged.

Notably, HMRC has emphasised its stance on Condition C and its application, especially in light of the Targeted Anti Avoidance Rule (TAAR).

The TAAR aims to disregard any arrangements designed to avoid the application of the salaried members rules.

While the original guidance implied that HMRC would only invoke the TAAR in extreme cases, the recent changes suggest a more vigilant approach, particularly regarding Condition C.

Previously, HMRC had advised that a genuine, enduring capital contribution with real risk would not trigger the TAAR.

However, the advice now includes a clause specifying that financing arrangements aimed at avoiding the salaried members rules may indeed trigger the TAAR.

In light of these amendments, LLPs and their members must be wary when structuring capital contributions and arrangements.

It is important to ensure that capital contributions are genuine, enduring, and not solely aimed at avoiding tax obligations.

Are you affected by these changes?

If your LLP or its members are grappling with the implications of HMRC’s updated guidance, then we are here to help.

Our team of experienced accountants specialises in navigating complex tax regulations and can provide tailored solutions to ensure compliance and mitigate risks.

Don’t let uncertainty about tax regulations impact your business. Contact us today for expert advice and personalised assistance.

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According to HMRC, travel from an employee’s home to their main office is not eligible for tax relief.

As the adoption of hybrid working models increases among office-based employees, there has been a significant discourse around whether trips to the office should be considered as ‘journeys in the performance of the duties of employment’.

Typically, travel expenses that are necessary for performing one’s job are eligible for tax relief.

However, HMRC maintains that commuting to and from the workplace, unless it is a temporary place of work, does not qualify for tax relief.

The rationale provided is that choosing to live at a particular location is a personal decision, and thus the costs associated with commuting from home to work are deemed personal expenses, not essential job requirements.

Nevertheless, HMRC has specified that if an employee performs substantial duties from home, as often seen in predominantly remote contracts, they may be entitled to tax relief for travel costs to the office.

This applies if such travel is necessary for the performance of their duties or is stipulated by their contract.

For those eligible, tax relief can be claimed at the following rates:

• 45p for cars and vans for the first ten thousand miles in each tax year
• 25p for cars and vans for each mile over ten thousand miles
• 24p for motorcycles
• 20p for bicycles

HMRC also offers a convenient online tool to help determine if individuals can claim relief on expenses incurred while performing their duties.

For further guidance on claiming tax relief on work-related expenses and to check your eligibility, please consult our expert team today.

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We entered the 2024/25 fiscal year on 6 April and now is the perfect opportunity to take advantage of the allowances, reliefs, and exemptions that your business can claim within the next 12 months.

“These can give you a distinct tax advantage over your competitors and reduce your overall expenses significantly,” says Nimesh Patel, Tax Partner.

“The best way to manage and apply for these is through your accountant and tax adviser – we can streamline the process considerably and guide you on which ones to apply for and when.”

However, if you are yet to engage an accountant, here are some of the many options we’ll be advising clients on this year.

The VAT registration threshold has increased

The threshold for VAT registration has risen from £85,000 to £90,000 from 1 April 2024, as part of the Chancellor’s attempt to support small businesses in the Spring Budget.

“This change will simplify your tax compliance and may mean that you can defer your VAT registration,” says Nimesh Patel, Tax Partner.

“You may need to reassess your growth strategies in light of the new threshold and strategically plan for when you register for VAT as a result.”

Registering for VAT before your turnover reaches the threshold can allow you to reclaim VAT on your business expenses, enhancing your cash flow and presenting your business as more established to potential clients and suppliers.

Business investment advice

The Annual Investment Allowance, which remains at £1 million this year, enables you to immediately deduct the cost of assets from your profits.

Full expensing also allows you to fully deduct the cost of qualifying new plant and machinery from your taxable profits in the year you make the investment. Until 31 March 2026, you can take advantage of this to significantly reduce your taxable income and tax bill by writing off 100 per cent of these investments immediately.

“This is especially valuable if you’re investing in plant machinery, as it allows for a full deduction in the year of purchase, effectively reducing your taxable profit.”

Additionally, “it encourages you to accelerate your investment plans, promoting growth and innovation within your business,” says Nimesh Patel, Tax Partner.

Equally, R&D tax relief can help you promote innovation, reducing your taxable profits, but it is important to be aware of the merged schemes that are now in place.

The combined scheme of R&D Expenditure Credit (RDEC) and Enhanced R&D Intensive Support (ERIS) supersedes the previous RDEC and Small and Medium-Sized Enterprise (SME) schemes.

Under this merged regime, companies, regardless of size, will receive an above-the-line credit, except for R&D-intensive SMEs​, which will qualify for an enhanced rate.

The merged scheme has reduced the R&D intensity threshold from 40 per cent to 30 per cent for accounting periods beginning on or after 1 April 2024.

This makes it easier for more SMEs to qualify for enhanced support if their R&D expenditure constitutes at least 30 per cent of their total expenditure.

Moreover, a one-year grace period is available for companies that fail to meet the 30% intensity threshold but have done so in the previous year, allowing them to continue claiming enhanced support​​.

Similarly, looking into the future, investments in digital and green technologies may offer future tax benefits and allow you to claim Enhanced Capital Allowances against your profits.

A note on salaries, bonuses, and dividends

“Balancing remuneration types can significantly reduce your tax burdens, with the NIC reduction from 6 April affecting optimal salary and dividend structuring,” says Nimesh Patel, Tax Partner.

As with all other forms of remuneration, it’s best to discuss this with your accountant or payroll specialist before you proceed.

Compliance considerations this tax year

The Making Tax Digital (MTD) scheme means that, from April 2026, all unincorporated businesses will need to submit digital records and quarterly submissions when their income exceeds £50,000.

However, we are advising that our clients prepare for this change early and employ MTD-compliant software before the deadline date and before they reach the £50,000 threshold.

The Spring Budget also brought in added compliance considerations through the “basis period reform.”

Nimesh Patel, Tax Partner says; “Basis period reform will also align unincorporated business’s income assessment with the tax year and increase your need for comprehensive reporting and documentation procedures.

“In 2024/25, properly transitioning and understanding these new compliance requirements is going to be crucial for businesses.”

Is this the year for incorporation?

“Incorporating – becoming a limited company – can lead to lower Corporation Tax rates and flexible tax planning and many of our clients are now considering this as a tax mitigation strategy.

“This is a great way for sole traders and partners to reduce their Income Tax liabilities by paying Corporation Tax instead,” says Nimesh Patel, Tax Partner.

Incorporated companies with profits of up to £50,000 pay a Corporation Tax rate of 19 per cent, while those with profits over £250,000 face a higher rate of 25 per cent.

Profits falling between these amounts enter a tapered rate system, where marginal relief applies, effectively creating a gradual increase in the tax rate from 19 per cent to 25 per cent as profits rise.

“This tiered system makes it crucial for you to manage your profitability to optimise your tax liabilities.”

Don’t forget that managing dividends and salaries within a limited company also further optimises your tax liabilities.

Speaking to your accountant

The best way to reduce your expenses this tax year, and remain compliant throughout, is to speak to your accountant at the earliest opportunity.

We can help you reduce your tax liabilities and plan efficiently for the year ahead.

Please get in touch for more information or tailored guidance based on your business’s unique circumstances. 

The post Corporate tax planning strategies for this tax year appeared first on Grunberg & Co.

The substantial policy change affects how taxpayers learn about repayments.

Starting from 8 April, HMRC will cease issuing letters to individuals or their agents to announce a repayment for Corporation Tax or Income Tax Self-Assessment (ITSA).

Repayments will proceed as usual and will appear on the HMRC online services accessible to both agents and taxpayers.

There is no extra action required to secure these repayments.

HMRC explains that the move to discontinue confirmation letters comes in response to the confusion caused by letters arriving post-repayment, leading to a surge in enquiries for clarification from taxpayers.

How will I be affected?

You, as a taxpayer, will now need to pay closer attention to your online account with HMRC.

It is crucial to become acquainted with the HMRC online services, paying particular detail to the sections where tax repayment information will appear.

If you manage your tax affairs through an agent, it is vital that your agent checks their account frequently and updates you on any tax repayment communications.

Furthermore, stay vigilant for any letters about tax repayments in the future, as they could be scams.

HMRC and its taxpayers are often the targets of fraudulent schemes, especially when there’s a notable change (such as the discontinuation of a standard HMRC letter).

It is important you are wary of potential fraudulent letters – these might feature:

• An incorrect department address
• An invalid phone number or email address
• Incorrect personal information

If you still receive letters from HMRC about repayments and suspect fraud, it is important to report them to the department.

Keeping informed about HMRC’s communication methods is crucial to help identify and report any fraudulent letters and information.

For assistance with tax repayments and navigating HMRC communications, contact a member of our team for support.

The post Are you owed a tax refund? Watch out for changes to your account appeared first on Grunberg & Co.

As well as providing up-to-date information, the app can help you manage your tax payments, find out benefits you may be entitled to, and get in contact with HMRC.

It is a great alternative to accessing HMRC services online.

Accessing the app

You can download the app from either the App Store or Google Play for free. Once you have downloaded the app to your device, you will need to sign in for the first time using your Government Gateway Credentials.

Once you have signed in for the first time, you can access the app using either:

• A six-digit pin
• Your fingerprint
• Facial recognition

When this has all been set up, you are free to access the app as and when you need.

Available information

On the app, you will be able to access information about your taxes both past and present. This will include:

• Your Unique Taxpayer Number (UTR) for Self Assessment
• Your National Insurance number
• Your employment income for the current and previous five tax years
• Your income and benefits
• Your Child Benefit
• Your State Pension

From here, you will be able to store your National Insurance number in your digital wallet, so you can more easily access it when you need to.

Making payments

The app can help you to stay on top of your tax payments.

From the app, you will be able to see how much Self-Assessment tax you owe. You can also make payments for this using open banking.

As well as making payments, you will be able to calculate your take-home pay and apply for any tax refunds.

HMRC communications

You can access letters and communications from HMRC in the app if you opt to communicate digitally. This allows you easy access to important information and makes you less likely to miss important messages.

Any forms that you have submitted can also have their progress tracked via the app so that you can be sure that everything is running smoothly.

Any updates to your personal or financial details can be updated through the app. This includes any changes to your name, address, and bank details.

New services

A recent update has expanded what the HMRC app allows you to do. As well as the above, you are now able to:

• Manage your Child Benefit
• View your National Insurance history
• Check your State Pension forecast

This allows you to have a better idea of your financial past, present, and future.

Moving towards Making Tax Digital (MTD)

As the future of HMRC moves towards digital-only services, getting onboard early is the best practice.

The app is a step towards this digitisation of the tax system, with more updates to come, including the requirement to be more accessible to individual taxpayers.

MTD will be compulsory for the self-employed and landlords earning over £50,000 from April 2026. For those with an income above £30,000 but below £50,000, this will be from April 2027.

After these dates, you will be required to:

• Maintain digital tax records
• Use MTD-compliant software
• Submit quarterly updates

If you are struggling to adapt to HMRC’s digital services, one of our experts can help.

Contact us today for help and advice with managing and accessing HMRC’s digital services.

The post Could the HMRC app help you manage your taxes? appeared first on Grunberg & Co.

The start of the new tax year on 6 April is fast approaching. Now more than ever businesses may find themselves targeted by criminals posing as HM Revenue & Customs (HMRC) through phishing attempts and tax avoidance scams.

At this time of year, it is best to be cautious about the communications you receive.

Pay close attention to the latest HMRC guidance on common scams played on businesses around the changes to the tax year.

What scams are out there?

Whilst new scams are emerging all the time, many recurring scams target individuals and businesses year on year. Some of these include:

• HMRC tax refund scams related to COVID-19
• Tax rebate email scams
• Automated phone call scams claiming HMRC is filing a lawsuit or offering a tax refund
• Social media and refund companies impersonating HMRC
• Scams on parcels and customs duty.

These scams all aim to get vital personal or financial information about you or your business. It is best not to disclose any information to the people you are talking to unless you are 100 per cent sure that you are talking directly to HMRC.

If you believe that you have received any of the above, you should report them directly to HMRC here.

How do you avoid scams?

Education is the best way to avoid getting scammed.

You should run regular training sessions for yourself and your team that cover the latest scam techniques and examples of how they can manifest.

Training should also include the communication practices of HMRC. The guidance includes the information that HMRC will never ask for, such as:

• Personal or financial information over email or text
• Payment in gifts or payment vouchers

These will help employees recognise any attempts at fraud.

How do you improve security?

It is vital that all communications with HMRC or any other financial institution are only conducted through secure and verified sources.

You should verify the authenticity of any requests for information or payments before any sensitive information is shared.

It is also vital to implement robust security measures such as encrypted connections and secure networks or business transactions. You should also create multi-factor authentication for sensitive accounts and regularly update passwords to be strong and unique.

As part of increasing your security, you should also limit the amount of personal, business, and financial information that is shared online. Employees should be trained in data privacy and the best practices to prevent the accidental dissemination of sensitive data.

You can also establish internal controls to verify payment requests, especially those that are unusual or deviate from standard procedures.

Recording and reporting scams

To prevent scams, you should take an active stance on monitoring and reporting any suspicious activities to HMRC.

This will also allow your business to stay up to date with the latest scam trends and help other businesses to do the same.

You can also keep on top of scam prevention by contacting your company’s accountant. They can provide insights into the best practices for scam prevention and ensure your business has adequate insurance coverage against fraud and cybercrime.

Get in touch today to find out how we can help you avoid scammers.

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These will require a special category of planning permission for property owners – including you. 

If you own an Airbnb or other short-term let properties, you will be introduced to the new planning legislation. 

This is expected to come in by Summer 2024 – your potential non-compliance might lead to new fees and penalties. 

The background to the changes 

The aim of these changes is to provide local authorities and councils with more control over the number of short-term let licences issued.   

The market for short-term lets has expanded in past years, and more people are deciding to enter the field on a casual basis.  

Currently, an Airbnb host in the UK earns an average of approximately £6,000 per year.  

High demand and rapidly evolving trends, combined with industries that have lots of players, mean regulation has struggled to keep up with the short-term rental market.   

Critics have stressed the difficulty of managing the quality and number of lets in areas where the need for family housing is elevated.  

This has resulted in providers such as Airbnb, and Government bodies, being subjected to criticism by consumers for failing to maintain proper licencing and security.   

What are the new requirements? 

The Government will require all owners of new short-term lets in England to secure planning permission with their local authority to use their property in this way.   

It will also introduce a new use class to planning permission regulations – this is to avoid confusion with any existing classes.  

Any current lets will automatically be reclassified and will not require planning permission.   

New regulations will also introduce a mandatory national register to record all short-term lets in England.   

The Government has considered the potential for annual registration, plus a registration fee, but this has not yet been confirmed.   

How will these new regulations affect me and my short-term let? 

What property do you let and how often do you do so? 

How these new regulations affect you will depend on these factors. 

The rules will apply to owners of new lets and will not be reviewed. 

Therefore, they will not apply to properties that you already rent out.   

You might need to put off or reconsider the purchase of a new let, however this will depend on your individual situation.   

If you are a homeowner and let out your sole or main home for up to 90 nights per year, these new regulations will also not apply to you. 

The existing ‘change of use’ charges range from £120 to £258, with the majority set at £120, however the cost of planning permission has not yet been clarified so it is important you keep an eye out for updates. 

The mandatory register might also have some unexpected consequences for business owners.   

It is suggested that HM Revenue & Customs (HMRC) could have access to the register. 

Due to this, we must stress the importance of tax compliance for anyone operating a short-term let in England.   

Contact us for support  

Planning is crucial to maintaining compliance with new regulations. 

You must ensure that your business has the funds and other resources to meet these requirements.   

We will help you to plan around the additional costs of obtaining planning permission and any continuing compliance costs.   

If you operate your short-term lets as your main business or wish to grow a side business, we will also advise you on incorporating these compliance measures into your business plan.   

Don’t let your business become non-compliant. Get in touch with our team today.    

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This form is also used in conjunction with your primary SA100 Self-Assessment form. 

You can submit your SA107 alongside your SA100. 

Or, if you are using HMRC’s online service, this form will become part of your tax return. 

Reporting income gained from the estate of someone who has died, income gained from a trust, or income gained from a settlement, means you must remain compliant with legislation. 

Failure to do so can result in significant financial penalties. 

I’ve just obtained an income from a settlement – when will I need to use an SA107? 

You will need to file an SA107 if you have any of the following income: 

• Beneficiary of a trust/settlement – this means you must file if you have received or are entitled to income (this excludes income from bare trusts) 
• Settlor contributions – this is necessary if you have contributed money or assets to a trust or settlement 
• Income from deceased estates – if you have received income from an estate of someone who has passed away 
• Income from settlor-interested trusts – applicable if you are taxable on income arising to trustees where you, as a settlor, have an interest 
• Income to minor children – this is essential if your minor children receive income from a property you have placed in settlement, and you are taxable on this income. 

Once you have received this income (either from a trust, a settlement, or an estate), you need to ensure you understand the ins and outs of the SA107 form before you submit your Self-Assessment tax return to remain compliant and up-to-date with legislation set out by HMRC. 

How can I complete the SA107 form? 

If you file your Self-Assessment via paper, you will need to download the form and fill it out manually. 

If you file your Self-Assessment online, you won’t need to fill out and file an SA107 form. 

However, it is not possible currently to do this using HMRC’s online service – you will have to use an approved third-party accounting software to attach an SA107 to your tax return online. 

Using this method means you will be able to get an extended filing deadline, allowing you to correctly file your tax returns regarding your newly obtained income. 

It is crucial you report any tax correctly, using our advice to keep you on track. 

Filing and filling in an SA107 form might sound confusing but that’s because it is – the help of our experts will support you as you navigate through the complexities of an SA107 form. 

If you would like further information about an SA107 form, get in touch with us today. 

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