Medical News Autumn 2019

Welcome to our Autumn 2019 Medical News

In this issue we take a look at

Student loan over payment – check statements

Christmas and staff entertaining

Changes to Capital Gains Tax deadline for property disposals

Tax Investigation Service

Student loans

There has been media coverage with researchers recently discovering that there is more than £28m of overpayments on student loans in England held by the government. This is as a result of student loan repayments continuing to be taken even though the student loan has been paid off entirely.

Student loan repayments are made automatically through the tax system and will continue until the student loan has been settled in full. This will apply whether you are employed or self-employed. For individuals who are employed, student loan repayments will be collected via the PAYE tax system and self-employed individuals will have student loan repayments administered through the Self Assessment tax system.

The Student Loans Company (SLC) issue loan statements in April every year. It is important that you provide this when forwarding your accounting and tax records.

When completing a Self Assessment Tax Return, in addition to calculating your tax and National Insurance Contributions liability, we will automatically calculate your student loan repayment.

We shall review the student loan balance outstanding and consider whether HM Revenue & Customs should be informed. If necessary, an entry on your Self Assessment Tax Return will be included to notify HMRC that the student loan will be fully repaid within the next two years.

If the automatically calculated student loan repayment calculated is greater than the actual balance outstanding, in order that you do not overpay, you can contact The Student Loan Company directly and make a final payment to them.

Alternatively, we can contact HM Revenue & Customs and request for an “informal stand-over” of your student loan. HM Revenue & Customs will effectively “ignore” any potential repayment on the basis that the borrower will arrange with The Student Loans Company to settle the amount outside of the self-assessment Tax Return.

Christmas Gifts

At this time of year, it is worth revisiting the tax rules surrounding Christmas gifts and parties:-

Client Christmas gifts

  • Businesses cannot claim a tax deduction for client entertaining (such as a meal or Christmas drinks for clients)
  • Where clients attend your Christmas party, the costs have to be apportioned between them and employees for tax purposes
  • Business gifts to clients are not normally allowed as a deduction against profits – they are treated in the same way as business entertaining.

There are exceptions:-

  1. Gifts of free samples of your products are 100% tax-deductible
  2. Gifts carrying your business advertising or branding are tax-deductible (e.g. mugs, diaries or pens), but only up to £50 per person per annum. However, gifts of food, drink, tobacco and vouchers receive no tax deduction.
  3. Christmas cards to clients and prospects are considered an office expense and are deductible, provided they carry a clear advertisement for the company sending them.
  4. VAT on client entertaining is not recoverable. You can reclaim the input VAT on gifts acquired for business purposes, which would include gifts for customers which meet the above conditions.

Staff Christmas gifts

A gift to an employee is tax-deductible provided that it is wholly and exclusively incurred for the purpose of your business. A seasonal gift is considered to pass this test. A gift made by an employer to an employee is not taxed as an employment benefit provided that it meets the criteria for being a trivial benefit. A trivial benefit is one that is non-contractual, costs £50 or less per employee, is not cash or a voucher, and is not for services performed. If the cost exceeds £50, the whole benefit is taxed, not just the excess.

HMRC have traditionally treated the following seasonal gifts as ‘trivial’ benefits:-

  1. A turkey
  2. A box of chocolates
  3. A bottle of ordinary wine

Staff Christmas parties

Provided the staff Christmas party meets certain rules, they are free of tax and National Insurance Contributions.

The party must be open to all employees and the cost to the employer must not exceed £150 per head (including VAT, taxis and overnight accommodation), this being the total cost of the party divided by the total number of people attending (including non-employees).

Where the cost is less than £150 per head, the unused element could be spent on another staff function (perhaps in the summer) – provided the annual aggregate spend does not exceed the £150 per head limit. If the limit is exceeded, you can choose the lower costing event as taxable.

Changes to Capital Gains Tax deadline for property disposals

Residential property gains

Although no capital gains tax will arise on the disposal of a property which has been the owner’s only or main residence throughout the period of ownership, a liability may arise on the disposal of a residential property which is or has at some point been a second home or which has been let.

Prior to 6 April 2020, where capital gains tax is payable on a gain arising on the disposal of a residential property, the gain is notified to HMRC on the Self Assessment return and the tax is payable by 31 January after the end of the tax year in which the disposal took place.

However, from 6 April 2020, taxpayers will be required to make a payment on account of the capital gains tax liability arising on the disposal of a residential property. The taxpayer will also be required to make a return to HMRC giving notice of the disposal. The return must be delivered to HMRC within 30 days of the date of completion of the disposal. Payment of any associated tax must be made within the same window.

Capital gains tax on chargeable residential property gains is payable at higher capital gains tax rates of 18% and 28%.

If you are planning on disposing of a second home or buy-to-let property on or after 6 April 2020, speak to your professional adviser to understand how the new return and payment rules will affect you.

Tax Investigation Service

Time consuming and expensive HMRC tax investigations are on the increase, any individual or organisation is at risk of an investigation even if you have done nothing wrong.

Humphrey & Co has offered a Tax Investigation Service (TIS) to our clients for several years now, and we invite all our clients to share in the protection offered. Tax investigations can be costly. Investing a small amount into our tax investigation service now means that you will receive complete support if HMRC targets you.

We believe that we know you and your business best and we want to be there for you when you need us most. We will manage your case from start to finish, reducing stress and providing peace of mind.

Please visit our website for further information on the Tax Investigation Service and how it can protect you.