January questions and answers

Newsletter issue - January 2017.

Q. I am thinking of renting out a small outbuilding that I own to a friend so that he can store his work equipment in it when he's not using it. The rent is likely to be less than £1,000 a year. Will I have to declare this income to HMRC on a self-assessment return? My tax affairs are quite straight-forward - I am employed and currently I don't need to send in a tax return.

A. Two new annual tax allowances of £1,000 each are being introduced from April 2017. One allowance is for trading income and the other is for property income. If your income from property is less than the annual limit, you will not have to declare it to HMRC or pay tax on it.

The new allowances will apply to all types of property and trading income of an individual but not to partnership income from carrying on a trade, profession or property business in partnership where special rules apply.

It is also worth noting that the allowance will not apply in addition to relief given under the rent-a-room rules (currently £7,500 per annum).

Q. Several of my employees have expressed an interest in purchasing electric cars but have pointed out that as our office is situated in a remote location they will be unable to make their whole commute without charging. If the business pays for an electric charging point to be installed at the business premises, would capital allowances be available for the expenditure incurred?

A. As luck would have it, the Autumn Statement announced that from 23 November 2016, businesses (large and small) can claim a 100% first-year allowance (FYA) for qualifying expenditure incurred on the acquisition of new and unused electric charge-points. Initially the allowance will be available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

Whilst this measure sounds like a big 'giveaway' from the government, prior to the change, the expenditure could have been covered by the capital allowances annual investment allowance (AIA), which means that, in practice, it impacts only on those businesses with qualifying plant and machinery expenditure above the level of the AIA (currently £200,000).

Do note however that there are separate workplace grants available for businesses who install electric charge points for use by their employees. It may be worth investigating this further.

Q. Ten years ago my husband inherited a share of his father's property when he died as a joint owner with his partner. My father-in-law's will specified that his surviving partner could continue living in the property for as long as she wanted. Both my husband and my deceased father-in-law's partner are on the deeds for the property. The partner has recently died and the property is empty. Will my husband have to pay capital gains tax on his share when it is sold, even though he could not live there because the partner was in residence?

A. I am assuming that your husband is now in possession of the whole property, even though originally the partner owned half of it. If so, she must have transferred her half to him. When your husband sells the property, for capital gains tax purposes he will effectively be making two sales, namely the half which he inherited on his father's death and the half he has recently acquired from the deceased partner. I'm afraid he will be liable to capital gains tax on the half he has owned for the last ten years, even though the partner was still living there. He will also be liable to capital gains tax on the recently acquired half. However, the base cost for the second half will be the market value of that half at the date the partner transferred it to him. The higher base cost should help reduce the chargeable gain on that part.

What our clients say about us...

  • "Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."

    ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT

  • "I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."

    Neil Price - Managing Director at Work Relief Charity Recruitment

  • "Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"

    Lee Westrap MBCS - Director - Bulldog IT Services

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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk