This information sheet sets out some of the far-reaching changes to the capital allowance system.

Annual Investment Allowance (AIA) - Many businesses will benefit from the new annual investment allowance, which will provide 100% deduction for expenditure on plant and machinery (except cars). The relevant legislation allows £50,000 to be written off in any year that qualifying investment is he's made. Individuals most partnership and companies can claim. (Partnerships made up of individuals, companies or trusts will not be eligible for this new allowance.)

Annual Writing down Allowance (WDA) - the rate at writing down allowance given on plant and machinery in the capital allowance pool is reduced from 25% to 20% with effect from 1 April 2008 for companies and 6th April 2008 for income tax businesses.

Small Pool Write Off - if the written down value of expenditure in a pool falls to £1000 or less this can now be written off.

100% write off Low Emission Cars - the existing allowance of 100% for qualifying new cars is extended to 31st of March 2013. The CO2 emissions rating for qualifying vehicles is reduced to 110 g/km.

Integral Features Building - certain expenditure on fixtures in buildings is now to be classified as integral features. This type of expenditure will qualify for a reduced rate of writing down allowance of 10%. The following are listed in the legislation as integral features -- an electrical system including a lighting system; a cold water system; a space or water heating system (includes system of ventilation air cooling or air purification); a lift, escalator or moving walkway; external solar shading.

Industrial and Agricultural Buildings - from the tax year 2007-08 the existing industrial buildings and agricultural buildings allowances are being phased out. The final year of claim will be 2010-11.

Enhanced Capital Allowances - the existing scheme of 100% first-year allowance for expenditure on energy efficient technology and water saving technologies continues. Water technologies will include waste water recovery and reuse systems. The energy technology list will be revised to include four new subcategories; compressed air master controllers; compressed air flow controllers; heat pump dehumidifiers; and white LED lighting. A full list of qualifying technologies can be found at www.eca.gov.uk.

 

 

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 Private residence exemption 
 It is a well-known fact that you can sell your home and pay no tax on any profit you may make on its sale. Unfortunately there are circumstances where this golden rule may not apply. We have listed below a number of circumstances when a sale of your home may trigger a tax charge, and how to minimise or avoid any possible tax due.

Selling part of your garden.

Any land surrounding the house including the house itself, is also eligible for the principal private residence relief. The permitted area is 0.5 hectares. If the area of your property is greater than this it is still possible to avoid tax on a part disposal of the land, if larger grounds are required for the reasonable enjoyment of the dwelling house.

It is not possible to make a disposal of the garden after the building has been sold and avoid capital gains tax using the principal private residence exemption.

More than one property.

An individual can only have one property eligible for the private residence exemption. If more than one property is owned it is possible to elect whichever property should be considered your principal or main residence. Married couples and couples entering into a civil partnership are treated as one person for the private residence exemption. Accordingly they can only have one principal private residence between them.

Occupation of Private residence.

Apart from periods when you actually live in a property, the following additional periods are also deemed to be included; the last 36 months of ownership, and, periods of absence not exceeding three years (for instance if you are required to work abroad). Practically this means you could rent your home after moving out and still make no taxable gain as long as you sell within the final three-year period of ownership.

Lettings relief.

If you rent out a room in your house under the rent-a-room scheme the private residence relief is still available when you sell the house. If you rent out the whole house or a suite of rooms there will be a reduction in the private residence relief you can claim. You could also be eligible for lettings relief. The maximum you can claim is £40,000. If your home is owned jointly with your spouse you are both entitled to the relief and can therefore claim a maximum of £80,000.

 

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 VAT on business disposals 
 In this article we are alerting business owners, who may be contemplating the sale of their business, of a number of key issues that will affect how they treat the disposal for VAT purposes. Three topics are considered:

a sale as a going concern
a sale of business assets
property considerations
Sale as a going concern.

The basic rule is that no VAT output tax is due on the proceeds received from the sale of a business which is sold as a going concern. The key point is that the buyer must be acquiring the actual business and intend to carry on the same type of business as the vendor. To qualify a sale as a going concern be careful to avoid the following situations which would not qualify:

Ensure there are no consecutive transfers of the same business, i.e. from Company A to Company B and immediately sold on to Company C.
There should be no significant gap in trading when the new owners take over the business.
The business must be a going concern at the time of the transfer.
Sale of business assets.

On the other hand if you are made an offer you can't refuse for your business premises, and you decide to sell off your remaining stock and dispose separately of your fixtures and fittings; you would not be selling a continuing business but merely selling the business assets. Under these circumstances you should add VAT output tax to the sales of stock and fixtures and fittings. The VAT consequences of selling business premises are considered below.

Property considerations - Option to tax.

When you purchased your business property you may have made, or taken on, an option to tax election with HMRC. When you sell the property on the face of it you are required to add on VAT at the standard rate.

If the purchaser of the property also makes an election to tax his or her interest in the same property, before they take ownership, then the proceeds of the sale relevant to the property will be outside the scope of VAT. Additionally the purchaser must also confirm in writing to you, the seller, that they will not disapply the option to tax election.

If the purchaser is buying the property to convert it from business use to residential use, the option to tax election is overridden. This means that the sale of the building then becomes an exempt supply, no VAT charged, even though an option to tax election is in place.

 

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 DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

 

 Stephen Andrews & Co Ltd
186 Eaves Lane, Chorley, Lancs, PR6 0AU
Tel: 01257 261112
www.stephenandrews.info

Stephen Andrews & Co is a limited company registered under company number 3496167, regd office:186 Eaves Lane, Chorley, Lancs, PR6 0AU and is registered for VAT under reference 696 3068 95.

Directors of the firm are members of the Association of Accounting and Taxation Technicians. This body has its headquarters in the UK and its rules of professional conduct can be obtained from its web site.
 

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Viewed: 1828 TimesDate: 10/06/2008