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Claiming For Employment Related Expenses

CLAIMING EMPLOYMENT RELATED EXPENSES

What you can claim back

If you are employed, and this will include most directors, you can claim for expenses that you have paid for personally, to be set against your income liabilities for the relevant tax year.
 
You must keep records of the amount you have spent and make a claim to HMRC within four years of the end of the tax year that you spent the money.
 
For every £100 of expenses that you can claim you will receive a refund of:
 
  • £20 if you are a basic rate taxpayer,
  • £40 if you are a higher rate taxpayer, and
  • £45 if you are additional rate tax payer.
 What qualifies for tax relief?
 
  1. Uniforms, work clothing and tools
  2. Business mileage claim for use of your own car on company business (does not include home to work journeys)
  3. Other travel and overnight costs
  4. Professional fees required by your employment
  5. Certain costs for working from home
  6. Buying work related equipment
  7. Other expenditure you have incurred for work purposes only
You can’t make a claim if these costs have been reimbursed by your employer.
 
For claims more than £2,500 you will need to submit on a self-assessment tax return.
 
For claims less than £2,500 you have three choices:
 
  1. If you already complete a self-assessment tax return use this to make the claim.
  2. Complete a form P87 and file online or by post.
  3. You make a claim by phone if you have made a successful claim in previous years and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions).
If your employer gives you a contribution towards any of these expenses, but does not cover the full cost, claim the difference.
 
And finally, if you make a claim you will only receive a tax refund if you have paid tax in the relevant tax year.
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New Data Protection Bill

DATA PROTECTION BILL UPDATE

Wha you need to know

The Government has published the long-awaited Data Protection Bill that will incorporate most of the provisions set out in the EU General Data Protection Regulation. This will apply from 25 May 2018, and many businesses will need to update their data security arrangements to comply with the new regulations.
 
  • The Bill will introduce safeguards to prevent and detect fraud, protect the freedom of the press, allow scientific research and maintain the integrity of professional sports
  • Specifically include measures to allow action against terrorist financing, money laundering and child abuse
  • Processing done for legitimate interests will be allowed if it achieves a balance with individuals’ rights
With individual data rights being strengthened, it is the Government’s view that, as far as possible, existing lawful data processing should be allowed to continue. Consequently, the Bill assures specific UK businesses and organisations the vital data processing they undertake for legal or public interest reasons can continue uninterrupted.
 
It will preserve existing tailored exemptions that have worked well in the Data Protection Act 1998, carrying them over to the new law.
 
The Bill will include exemptions for data processing in the following areas:
 
  • Processing of personal data by journalists for freedom of expression and to expose wrongdoing is to be safeguarded
  • Scientific and historical research organisations such as museums and universities will be exempt from certain obligations which would impair their core functions
  • National bodies responsible for the fight against doping in sport will continue to be able to process data to catch drug cheats
  • In the financial services sector, the pricing of risk or data processing done on suspicion of terrorist financing or money laundering will be protected
  • Where it is justified, the Bill will allow the processing of sensitive and criminal conviction data without consent, including to allow employers to fulfil obligations of employment law
 
Under the new regulations individuals will have more control over their data by having the right to request that their personal data be erased. This will also mean that people can ask social media channels to delete information they posted in their childhood. The reliance on default opt-out or pre-selected ‘tick boxes’, which are largely ignored, to give consent for organisations to collect personal data will also become a thing of the past.

Businesses will be supported to ensure they are able to manage and secure data properly. The data protection regulator, the Information Commissioner’s Office (ICO), will be given more power to defend consumer interests and issue higher fines, of up to £17 million or 4 per cent of global turnover, in cases of the most serious data breaches.

Data protection rules will also be made clearer for those who handle data but they will be made more accountable for the data they process with the priority on personal privacy rights. .
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Landlords..Replacement or Improvement

When a Replacement is an Improvement

We Clarify The DIfference

We are often asked by landlord clients to clarify the difference between a replacement item of furniture, furnishing, household appliances or kitchen ware, and a purchase that may be considered an improvement. The difference is critical, as from April 2016, the 10% wear and tear allowance was scrapped and the new Domestic Items Relief (DIR) introduced. To qualify for the DIR the following points need to be considered:
 
  • Unlike the Wear and Tear allowance, for the Replacement of Domestic Items relief to apply the dwelling house can be unfurnished, part furnished or fully furnished.
  • An expense must be incurred on purchasing a replacement domestic item, ‘the new item’.
  • The new item must also be solely provided for use by the tenants in a dwelling house and the old item must no longer be available for use in that dwelling house.
  • The initial cost of purchasing domestic items for a dwelling house isn’t a deductible expense so no relief is available for these costs. Relief is only available for the replacement item.
It is then necessary to consider if the new item is an improvement of the replaced item. HMRC have outlined the following points:
 
  • If a new sofa would have cost you £400 but a sofa bed cost you £550, you could only claim the £400 as a deduction and no relief is available for the £150 difference.
  • When considering if the new item is an improvement on the old asset, the test is whether the replacement item is or isn’t, the same or substantially the same as the old item.
  • Changing the functionally (from a sofa to a sofa bed for example) means the replacement isn’t substantially the same as the old item.
  • If you later purchase a replacement sofa bed for use in that dwelling house, you would be able to claim the full cost of this new sofa bed. This is if there was no improvement on the old sofa bed and the old sofa bed is no longer available for use in that dwelling house.
  • Changing the material or quality of the item also means the replacement isn’t substantially the same as the old item. If you upgrade from synthetic fabric carpets to woollen carpets, the replacement isn’t substantially the same as the old item so there has been an improvement.
  • If the replacement item is a reasonable modern equivalent, for example a fridge with improved energy efficient rating compared to the old fridge, this isn’t considered to be an improvement and the full cost of the new item is eligible for relief.
One final point. When you first purchase a property to let, make sure that a figure is included in the contract to cover any domestic items included. In this way, when you replace these items at a future date you will be able to claim the DIR.
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Tax Free Dividend Squeeze Confirmed

Tax Free Dividend Squeeze

The rest of the March budget and MTD news

The government reintroduced the remainder of the March budget last week, it’s the part that was held-over to accommodate the May 2017 general election.
 
It confirms two items that will be of interest to smaller business owners.
 
Firstly, that businesses with turnover below the current VAT registration threshold (£85,000 for 2017-18) will not be required to keep digital records – although they may choose to do so – and will not be required to upload quarterly returns of their trading results to HMRC. This is a sensible approach to the Making Tax Digital (MTD) agenda.
 
Traders that are registered for VAT will need to ensure that they are using compatible software from 1 April 2019, when the obligation to file VAT returns using the new MTD platform commences. If we file VAT returns for you, we will make sure that our software applications are compliant. If you file your own returns we can help you select appropriate software.
 
Secondly, the Bill confirms that the £5,000 tax-free dividend allowance is being reduced to £2,000 from April 2018.
 
Small companies, with spare reserves, should ensure that shareholders consider a minimum £5,000 dividend for the current tax year (2017-18). From April 2018, a £5,000 dividend will cost a basic rate income payer £225 in tax. If cash flow is an issue, the dividends can be transferred into a loan account and drawn down when funds are available.
 
For the present, dividends are a return on capital and not remuneration subject to NIC. While this remains the case, it will still pay to adopt the high dividend, low salary approach.
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