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July update

Personal service company,travelling abroad and renting out your home

Victoria Elvy :: Monday 16th July 2018 :: Latest Blog Posts

What a lot has happened since the last Downsman article – the Big Sessions – another great event well done the organisers! Donald Trump has arrived in the UK,  various members of Parliament resigning and the sun has been out, will it change now the school holidays are upon us?!  You should have paid your second payment on account which was due by 31 July 2018 and notified the Child and Working tax credit of your anticipated income for 2017/18 and if there will be any changes for 2018/19.

I have been pondering on what to include this month and have received a couple of queries on the tax legislation on "personal service companies" and a couple who decided to go travelling and decided to let out their property out.

Personal Service Company

So, what is a "personal service company" and are you caught under the special tax rules.    The easiest way to explain this is by way of an example.

Background: 

Summer Holiday is the sole director and employee of Holiday Limited.  A contract is in place between Holiday Limited and Suntan Limited where Summer provides services under a contract.   Summer is told the hours she must do, she is supervised, any errors that she makes she puts right in the hours she is working for Suntan Limited, uses Suntan Limited's equipment and Holiday Limited does not have any insurance.

If Holiday Limited was not in the equation Summer would be an employee of Suntan Limited.  Therefore, this scenario is caught under the "personal service company" legislation, otherwise known as IR35.

At present it is Holiday Limited who decides whether the Personal Service Company (IR35) rules apply.  However, it is likely that after the November Budget this will be amended so the "client" (Suntan Limited) will need to determine whether these rules apply or not.  If they do, then Summer will be taxed as though she is an employee of Suntan Limited.

Couple travelling

Another query we have had this month, relates to a couple who had decided to go travelling for four and half months and had rented their property out whilst they were away.  We were asked what the tax implications of this would be as they had read somewhere the income whilst away is not taxable.  Unfortunately, we had to explain this was not the case!

As they were only away for less than 183 days then they are still treated as being resident in the UK for tax purposes.  However, if they were away for more than six months, they should have applied to HM Revenue & Customs for the rental income to be treated under the Non-Resident Landlords (NRL) Scheme as otherwise whether you have a management company, the company should deduct basic rate tax and if not, the tenant should deduct basic rate tax unless you have applied to join the Scheme.

Although strictly an individual is either resident or non-resident for the whole of a tax year, the tax year can be split if their circumstances fall within various cases outlined on HMRC website :  www.gov.uk/tax-foreign-income/residence 

Time is ticking....

You only have six months until your personal tax returns need to be submitted to HM Revenue & Customs (31 January 2019), so ideal time to start gathering the information and passing it to your accountant.

If you need any assistance with anything mentioned above, please do not hesitate to give me, Catherine,  a call on 01258 840306.

Until next time.....

If you need assistance with any accountancy or tax related matters, please contact Catherine at CBA Services Limited on 01258 840306/07895 913546/Catherine@cba-services.co.uk  We offer evening and weekend appointments and there is no charge for the first meeting.

Whilst care has been taken in preparing this publication it is for information only.  It is not, and should not be construed, as advice and accordingly no reliance should be placed on the information contained herein