Newsletter - August 2024
Posted on 16th August 2024
If you're considering a business sale, talk to us about Business Asset Disposal Relief - which might be time-sensitive, particularly ahead of any potential changes in the next Budget. If you receive Child Benefit there is some admin to do once your child reaches 16 - read on to find out if you need to take any action. We've included a reminder on company filing obligations - the dates are worth noting to avoid penalties. Our final article covers CGT Incorporation Relief, something to be aware of if you are converting from sole trader or partnership status to a company. This month's diary deadlines cover a six-week period taking us up to the middle of September. As with all changes or developments, please do get on touch so we can help in any way you might need.
Thinking of selling your business?
Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual's interest in a trading partnership. When the relief is available, Capital Gains Tax (CGT) of 10% is payable in place of the standard rate. This can mean a substantial CGT saving for someone looking to exit their business.
There are a number of conditions that must be met in order to qualify for the relief. BADR used to be known as Entrepreneurs' Relief before 6 April 2020 but the name change did not affect its operation.
You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.
Claims for BADR are made either through your self-assessment tax return or by filling in Section A of the Business Asset Disposal Relief helpsheet.
The deadline for claiming relief is as follows:
|
Tax year when you sold or closed your business |
Deadline to claim BADR |
|
2022 - 23 |
31 January 2025 |
|
2023 - 24 |
31 January 2026 |
|
2024 - 25 |
31 January 2027 |
Although there have been no specific announcements affecting this relief there are likely to be significant tax changes when the new Chancellor, Rachel Reeves, delivers her first Budget later this year. If you are thinking about selling your business we can help you consider your options.
Child benefit for 16 to 19 year olds
The weekly child benefit rates for the only or eldest child in a family is currently £25.60 and the rate for all other children is £16.95.
Taxpayers entitled to child benefit should be aware that HMRC usually stops paying child benefit on 31 August following a child's 16th Birthday. Under qualifying circumstances, the child benefit payment can continue until a child reaches their 20th birthday if they stay in approved education or training. A qualifying young person is someone aged 16, 17, 18 or 19 in full-time, non-advanced education or on unpaid approved training courses.
HMRC has just sent more than 1.4 million reconfirmation letters to parents whose child may be affected. The letters include a QR code which, when scanned, directs them to GOV.UK to update their claim quickly and easily online. This can also be done on the HMRC app.
Parents have until 31 August 2024 to tell HMRC that their 16-year-old is continuing their education or training, and their intention to continue receiving Child Benefit. No child benefit is payable after a young person reaches the age of 20 years.
HMRC's Director General for Customer Services recently said:
'Child Benefit is an important financial support for many families, so make sure you don't miss out on any payments if your teenager intends to continue approved education or training. You can quickly and easily extend your claim online or via the HMRC app, just search 'Child Benefit when your child turns 16' on GOV.UK.'
Child benefit is usually payable for children who come to the UK. However, there are some rules which must be met before making a claim. HMRC must be notified immediately if a child receiving child benefit moves permanently abroad.
Company filing obligations
It is important that anyone responsible for the accounts and tax filing regime for private limited companies is aware of their obligations.
After the end of its financial year, a private limited company must prepare full annual accounts and a company tax return. The deadline for filing the first set of accounts with Companies House is 21 months after the date the company was registered with Companies House. Annual accounts must be submitted 9 months after the company's financial year ends.
There is a fixed date for the payment of Corporation Tax which is 9 months and 1 day after the end of the relevant accounting period. Note that a company is usually required to pay the tax due in advance of the filing deadline for a company tax return.
In most cases a company's tax return must be submitted within 12 months from the end of their accounting period. Online Corporation Tax filing is compulsory for company tax returns. Company tax returns have to be filed using the iXBRL data standard using either HMRC's own software or third-party commercial software.
The accounting period for Corporation Tax is normally the same twelve months as the company financial year covered by the annual accounts. Note that there are penalties for late filing with Companies House and HMRC.
CGT Incorporation Relief
Where a taxpayer owns a business as a sole trader or in partnership, a capital gain will be deemed to arise if the business is converted into a company by reference to the market value of the business assets including goodwill. This could give rise to a chargeable gain based on the difference between the market value of the assets and their original cost.
However, in most cases the incorporation of the business will be done in such a way as to satisfy the conditions necessary to secure incorporation relief. One condition is that the entire business with the whole of its assets (or the whole of its assets other than cash) must be transferred as a going concern wholly or partly in exchange for shares in the new company.
It is important to note that where the necessary conditions are met, incorporation relief is given automatically and there is no need to make a claim. The relief works by reducing the base cost of the new assets by a proportion of the gain arising from the disposal of the old assets.
Although the relief is automatic it is possible to make an election in writing for incorporation relief not to apply. An election must be made before the second anniversary of 31 January next following the tax year in which the transfer took place e.g., an election in respect of a transfer made in the current 2024-25 tax year must be made by 31 January 2028. The election deadline is reduced by one year if the shares are disposed of in the year following that in which the business was incorporated.
Tax Diary August/September 2024
1 August 2024 - Due date for corporation tax due for the year ended 31 October 2023.
19 August 2024 - PAYE and NIC deductions due for month ended 5 August 2024. (If you pay your tax electronically the due date is 22 August 2024)
19 August 2024 - Filing deadline for the CIS300 monthly return for the month ended 5 August 2024.
19 August 2024 - CIS tax deducted for the month ended 5 August 2024 is payable by today.
1 September 2024 - Due date for corporation tax due for the year ended 30 November 2023.
19 September 2024 - PAYE and NIC deductions due for month ended 5 September 2024. (If you pay your tax electronically the due date is 22 September 2024)
19 September 2024 - Filing deadline for the CIS300 monthly return for the month ended 5 September 2024.
19 September 2024 - CIS tax deducted for the month ended 5 September 2024 is payable by today.
Tagged as: Business Asset Disposal Relief, CGT Incorporation Relief, Child Benefit, Company Filing Obligations, Newsletters
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