Business

More challenges ahead for many small businesses

ALTHOUGHit seems the trials of the last couple of years are far from over, it appears that the next few years will present small businesses with yet more enforced administrative changes to cope with whilst many are still recovering from and rebuilding after the effects of the pandemic.

Making Tax Digital (MTD) has been operating for a few years now for most businesses registered for VAT and will apply to all VAT registered businesses from April 2022. MTD for income tax and corporation tax will follow over the next couple of years.

Although there have been several delays already and further postponements may yet be announced, all businesses and private landlords need to be aware of the proposed changes. The main elements of MTD are the requirement to maintain “digital” (computerised) records and the submission of quarterly returns to HMRC in addition to the current single annual return.

Businesses and landlords with a turnover below £10,000 may be exempt from the rules to begin with but for many small businesses, changes in record keeping procedures will be required and more tax submissions will be needed every year.

Although still under review, some businesses may also be faced with the prospect of altering their existing accounting period end dates if plans to standardise tax periods are followed through.

Whilst there are many advantages to keeping computerised accounting records, the very thought of such a change is horrifying for many business owners –perhaps even more so for those more mature in years and used to doing things a certain way.

We are assisting many clients wishing to move to MTD compliant computerised systems in preparation for the new legislation on the horizon and we would encourage all those affected to not leave their preparations to the last minute.

Rod Podger Underwood Lamb

Rod can be contacted on 01275 332612 or by email rod@ulco.com

Helping your children buy a property –beware of Inheritance Tax

GIFTINGproperty funds to your children or grandchildren can be a rewarding exercise and with the growth of property prices parents in particular have been playing an increasing role in bankrolling their children to help them get into the property market. However there are potential traps which could risk unnecessarily gifting cash to the taxman.

The seven-year rule

Helping children onto the property ladder requires careful consideration about the inheritance tax consequences. Gifting is subject to the "seven-year rule", under which a gift made by a parent or grandparent will be free of inheritance tax if it is made seven years or more before their death.

There is no lifetime limit to how much can be given away. So, in theory, regardless of the amount of funds that a child or grandchild needs to purchase their first home, it can be provided by family members, either in instalments or all at once, without incurring an inheritance tax bill and subject to the seven-year survivorship rule.

Each individual is taxed at a rate of 40pc on all their assets above a threshold £325,000. There is an additional allowance related to the family home . If the nil-rate band is used up and a donor gifts above the allowance, and dies within seven years, IHT is due on a sliding scale based on the period of the donors survival between making the gift and his or her subsequent demise. So for instance if you survive for three or four years the rate of tax on the gift is 32% , six to seven years 8% and seven or more 0%

But if gifts and a final estate amounts to less than £325,000, there is no inheritance tax to pay.

Also Individuals can gift a total of £3,000 worth of assets per tax year. Where this annual exemption is not used in one tax year it can be carried forward for one year only to increase the exempt amount to £6,000.

Marriage gifts

Another useful exemption are gifts made to people who are due to get married or enter into a civil partnership. A parent can gift their child £5,000 on or shortly before their wedding day and it will be tax free. Grandparents can gift a grandchild or great-grandchild £2,500 and for anyone else the threshold is £1,000.

It is always sensible to seek professional advice on these issues.

EDWARD LYONS

Email: enquiries@lyonslaw.co.uk Website: www.lyonslaw.co.uk Telephone: 01275 332168

An established and progressive law firm providing a personal and cost-effective legal service for commercial and individual clients.

l Family & Divorce Law l Co-habitation disputes l Inheritance disputes l Wills and Living Wills l Powers of Attorney l Administration of Trusts l Property – sales and purchases

OFFICES AT: Chew Magna 01275 332168 Westbury-on-Trym 0117 950 6506 Kingswood 0117 967 5252

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