Author Archives: Richard Verge - Tax Director

About Richard Verge - Tax Director

T: +44 (0)20 7874 8856

Richard is a personal tax expert and is able to advise high net worth individuals on either immediate tax concerns or a long term plan to ensure that their affairs are structured to take advantage of the tax reliefs available.

His experience from working with HMRC ensures that he is more than adept at understanding the view from the other side, to the benefit of his clients. Richard advises entrepreneurs, owners of family businesses and partners in professional practices and provides advice on planning from both a personal and worklife perspective.

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Party by the Rule Book and Save Some Tax

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 2nd October 2012

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It is that time of year when social committees everywhere start the process of organising the annual Christmas party and for those that are super organised the Summer barbeque.

STOP ! Before you book anything make sure your social committee is aware how far the tax mans generosity (exemption) extends otherwise the implications can be rather expensive.

Provided the annual party is for all staff , the exemption means a taxable benfit in kind will not arise if:

an employer spends up to £150 (including VAT) per head on an annual party,
including transport and accommodation.

BEAWARE the £150 is not an allowance and if the annual party costs per head exceeds the limit by even a £1, all of it will be taxable.

If the employer has more than one annual party for all staff and the combined costs of these parties exceed £150 per head then the tax man will let the employer choose which function can use up the exemption so that it applies in the most beneficial way.

To calculate the cost per head divide the total cost of each party by the total number of people (including non-employees) who attend in order to arrive at the cost per head.

Regardless of the total cost of an event, the employer can claim it in their accounts and with certain exceptions recover the VAT too.

As long as the sums add up there is no reason why the party season should be taxing!

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Can I avoid paying stamp duty on my house purchase?

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 25th September 2012

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Avoid stamp duty land tax on your house purchase and you may end up having to pay not only the tax, but penalties, interest and the scheme promoter’s charges on top.

There are currently a lot of stamp duty land tax (SDLT) avoidance schemes being promoted on the internet. These are of sufficient concern to the Law Society for it to have has written to all of its members warning them of the potential dangers of getting involved in the provision of such schemes. The schemes are mostly targeted at property purchases in excess of £500k, and claim a 100% success rate. Promoters claim that they can legitimately arrange a property purchase in such a way as to result in a nil rate SDLT charge and they will typically charge a fee equivalent to half of the SDLT allegedly saved.

Most of these schemes seek to take advantage of SDLT sub-sale exemption. This is a legitimate exemption which avoids a double charge to tax where there are more than one transfers of property in what is essentially a single sale. A sub-sale may occur for example where a purchaser acquires a large plot of land but does not need it all. The purchaser will arrange to sell the surplus to a third party and direct the vendor to convey that surplus direct to the third party. The scheme promoters believe that by artificially introducing a sub-sale they can achieve a nil rate of SDLT.

What the scheme promoters may not highlight in full is that there is anti-avoidance legislation which applies to many SDLT schemes. Also many of these schemes are already being investigated by HM Revenue and Customs and leading Tax Chambers tell us that they have cases on their books which are queued up waiting for hearing dates. If a scheme is found to be ineffective, HMRC will seek the tax, interest and penalties from those who have used them.

It is telling that the schemes are usually marketed as only being suitable for purchases in excess of £500k. There is no technical reason for this other than the level of fee to the scheme promoter as in theory, if the scheme works, it will work for any level of purchase.

Our advice to you if you are considering using an SDLT avoidance scheme is to treat it with a healthy degree of scepticism.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Capital Allowances on Purchase and Sale of Commercial Property

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 3rd September 2012

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Do you understand your pooling obligations?

I expect the answer to that question for most people is no. However, failing to comply with new legislation introduced in the Finance Act 2012 will prevent the purchaser of a commercial building claiming capital allowances on any fixtures and fittings acquired with the purchase.

The legislation is simple in its concept but as is often the case, will cause significant practical difficulties. The new rules have been introduced because HMRC are convinced that there has been a large scale double counting of capital allowances caused by the purchasers of commercial buildings making a late claim to pool capital expenditure on their original purchase of the property some years after the date of purchase. Such claims generally assume that the seller has not previously made a claim for capital allowances on these fixtures and fittings and, due to the lapse of time between sale and pooling of expenditure, HMRC has not been able to check the records of the seller to make sure this is correct.

In HMRC’s consultation last year the Revenue recognised the fact that there was a natural tension between the purchaser and seller in connection with capital allowances on fixtures and fittings. The seller is likely to seek a low value on capital assets to enable them to claim higher balancing allowances on sale, whereas the purchaser is likely to want to a high value on fixtures and fittings to enable them to claim a larger capital allowance portion of the sale price. The intention of the new legislation is to ensure agreement between the seller and the buyer as to the amount of capital allowance expenditure available.

The practical problem that seems so far to have been overlooked by HMRC is that the seller of the building is under the obligation to identify and pool the relevant capital expenditure but is likely to have less interest in doing so than the purchaser. Essentially the legislation forces the buyer into ensuring that he agrees a section 198 election with the seller to determine the value of the allowable capital expenditure. If the seller refuses to play ball then the purchasers only option is to apply to tax tribunal to agree the capital allowance pool.

It is still early days, however, what has already become clear is that capital allowances will now form a significant part of the negotiations in the purchase and sale of commercial buildings and accordingly you should keep your accountants advised at the earliest stage when considering a disposal or purchase.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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When does a buy-to-let property become a trade?

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 25th May 2012

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When a buy-to-let property is sold it would normally attract capital gains tax at 28% (and sometimes a lot less if the property has been the sellers main residence at some point in time). But what would the position be if it was treated by HM Revenue and Customs as a trade rather than an investment activity? A property developer is taxed very differently from an investor. The profit on sale would be taxed as an income profit at income tax rates of up to 50%. In addition, the computation of a capital gain is different from the computation of an income profit and in some instances the income route may actually be beneficial if borrowing costs are very high as interest charges may be offset against trading income but not against the capital gains of the investor.

Whether a business is a trade or investment business will be a matter of fact and can be heavily influenced by the intention of the trader. If a person purchases a property with the intention of quickly doing up the property in order to sell on at a profit then the facts strongly point towards trading activity. On the other hand if the property is purchased with the intention of letting on a long term basis then this strongly points towards investment. Not all situations are clear cut and intentions can change. A property bought for long term letting could turn into a trading project if say it was decided that current market circumstances favoured a quick sale. Alternatively a property acquired as a development project may turn into an investment if once development has finished it is decided to retain the property for long term letting.

A switch from trade to investment or vice versa can cause problems as the movement to or from stock causes a tax point to arise based on market value at the point of sale. This means that tax will become payable at the point of change rather than on sale and at that point there will be no cash proceeds to fund the tax cost.

If you currently have a property which you are letting or developing and would like to talk to us about its trading or investment status or any other tax or accounting issue related to the property then please contact a member of our property team.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Record Keeping for Business – Mobile Apps

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 25th May 2012

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HMRC have been encouraging the software development industry to provide mobile phone apps to assist small businesses and the self-employed (who are under the VAT threshold) with their basic accounts record keeping. These basic apps can be used on smartphones to record transactions in real time, including taking a photo of receipts.

A list of the currently available apps can be found on HMRCs website http://www.hmrc.gov.uk/softwaredevelopers/mobile-apps/record-keeping.htm
They are proving popular as HMRC say that, at the last count, there had been more than 5,600 apps downloads.

Which app you chose will depend on you mobile phone type but we have tried out a couple of the iphone apps to see how they work.

Free Agent Central – Earnest

Sage – Sage record keeper mobile

Both of these apps have basic functions for recording items of income and expenditure. They both have a facility for taking a photo of the relevant receipt and storing it against the invoice entry. We were hoping that that there would be intelligent analysis of the photo to transfer data directly into the record but alas for the time being this functionality is not yet available.

The apps add the income and expense invoices to give you a running profit total for the tax year to date and allow for simple analysis by expense type. Earnest attempts an estimate of tax liability but disappointingly Sage record keeper only directs you to HMRCs online tax calculator.

The collected data can be simply emailed to your computer as a spread sheet where further analysis and printing can be done. The downloaded information will still need to be analysed before it can be entered on your tax return. The apps also include handy diary reminders for key dates and links to useful pages on the HMRC web site.

We think these apps are an excellent idea and the ones we have tried are simple to use. They will be most useful for people who are out and about and need a practical method of recording details on the move with an easy way to send data back to the office. We can see the biggest user of this type of app being reps completing their expenses claims rather than the intended target of the small business, but they are well worth a try.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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When do I reach pension age?

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 12th May 2011

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Anyone born after 5 April 1950 may well find themselves confused about their pension age. We have been told that men and women’s retirement ages are being equalised by 2020, that they are being increased to 66 between 2018 and 2020 and now that future increases will be linked with increases in average life expectancy. So given all these changes how do we know when we can retire?

The short answer is that we can only retire when we can afford to do so. The retirement age referred to is just the date on which you start to receive your state pension. Now that employers are no longer able to impose a retirement date on their employees, the actual retirement date is likely to become much more variable depending on the circumstances of the individual.

To help you with your retirement planning, you can use the following link to the Direct Gov website to calculate the retirement age for any individual.

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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Owing tax – should you be worried about deflation?

Richard Verge - Tax Director - rverge@goodmanjones.com

Posted on 24th February 2009

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Many people have taken advantage recently of the special arrangements to pay their self assessment tax by instalments. With a lot of talk in the papers about the prospect of deflation, should those people be worrying about the negative impact deflation will have on there overall debt?

The January reduction in interest rates for late paid tax from 4.5% to 3.5% certainly came at a very good time for anyone owing tax, but if deflation is going to increase the value of the debt, will the actual effective interest rate be much higher?

The chart above taken from the National Statistics web site does show a dramatic decline in RPI to only 0.1%, which has no doubt helped fuel the concern over the prospect of deflation, but other indicators suggest that talk of deflation may actually be misplaced. The CPI figure also shown on the same chart, whilst undeniably declining, is still at 3.1% which is above the government’s long term target inflation rate of 2%. Furthermore, if you read the National Statistics small print, the largest downward pressure on both indices is the reduction in fuel costs which have been on a rollercoaster ride over the past year. Surprisingly, no mention is made of the effect of the reduction in VAT by 2.5%, which could apparently account for 1% of the drop. If so, then adjusting for the VAT effect would keep the CPI figure above 4%.

Many of the current economic pressures are actually inflationary rather than deflationary. A low pound, high government borrowing and spending and “quantitative easing” (a polite term for printing lots of paper money) are all inflationary.

So rather than the prospect of deflation, are we in fact facing the more familiar problem of inflation? Inflation with low interest rates – perhaps it is not such a bad time to owe the government money!

The information in this article was correct at the date it was first published.

However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.

If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.

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