HMRC notices

There are special rules in place when a limited company gives to a charity. This can include Corporation Tax relief for qualifying donations made to registered charities or community amateur sports clubs (CASC), as well as Capital Allowances for giving away equipment that has been used by a company.

However, the rules are different if the company is given something in return for making a donation, such as tickets for an event.

Donation amount	Maximum value of benefit that is acceptable
Up to £100	25% of the donation
£101 – £1,000	£25
£1,001 and over	5% of the donation (up to a maximum of £2,500)

These rules apply to benefits given to any person or company connected with your company, including close relatives.

Charity sponsorship payments are different from donations because the company gets something related to the business in return. A company can deduct sponsorship payments from its business profits before it pays tax by treating them as business expenses.

Payments qualify as business expenses if the charity:

• publicly supports the company’s goods or services


• has links from their website to the company’s


• permits them to sell their goods or services at the charity’s events or premises


• allows the company to use their logo in company’s printed material.

HMRC has now written to over 145,000 VAT-registered businesses across the UK with a Brexit update. The letters explain changes to customs, excise and VAT in the event that the UK leaves the EU without a deal, and what businesses can do to prepare. There are a number of different versions of the letters some of which are specific to the circumstances of businesses in Northern Ireland.

If the UK leaves the EU without a deal then UK businesses will be responsible for making customs declarations. HMRC is encouraging businesses that trade with the EU to ensure they register for a UK Economic Operator Registration and Identification (EORI) number. This identification number will be required even if the business appoints a customs agent to assist in making customs declarations.

HMRC is also introducing a new Transitional Simplified Procedures (TSP) for customs, to make importing easier for the initial period after the UK leaves the EU, should there be no deal. The TSP will allow businesses to transport goods from the EU into the UK without having to make a full customs declaration at the border and postpone paying any import duties.

The procedures outlined above do not currently apply to importing or exporting goods between Northern Ireland and Ireland. The government continues to stress that it will do everything possible to avoid a hard border between Northern Ireland and Ireland whatever the circumstances of a ‘no deal’ Brexit.

The Enterprise Investment Scheme (EIS) is designed to help smaller higher-risk trading companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies.

In order for investors to be able to claim EIS tax reliefs, the company which issues the shares has to meet a number of rules regarding the kind of company it is, the amount of money it can raise, how and when that money must be employed for the purposes of the trade, and the trading activities carried on.

The amount of Income Tax relief for individual investors in the EIS is 30%, and the maximum annual amount that an individual can invest through the EIS is £1 million. The generous tax allowances are designed to off-set the fact that making investments in these types of companies can carry a high-risk. 

There is an Income Tax relief restriction that effectively denies EIS relief for connected parties. This measure is in place partly to ensure that the scheme attracts outside investors. The legislation defines associates as including business partners, trustees of any settlement of which the investor is a settlor or beneficiary, and relatives. Relatives are defined as spouses and civil partners, parents and grandparents, children and grandchildren. This means, for example, that parents could not invest in their children’s businesses. 

However, the list of associates does not include ‘family’ members such as brothers and sisters, aunts and uncles, nephews and nieces, unmarried partners and in-laws. This leaves some scope to attract investment from one’s extended family.

The Furnished Holiday Let (FHL) rules, allow holiday lettings of properties that meet certain conditions to be treated as a trade for some specific tax purposes.

In order to qualify as a furnished holiday letting, the following criteria need to be met:

• The property must be let on a commercial basis with a view to the realisation of profits. Second homes or properties that are only let occasionally or to family and friends do not qualify.
• The property must be located in the UK, or in a country within the EEA.
• The property must be available for commercial letting at commercial rates for at least 30 weeks (210 days) per year.
• The property must be let for at least 15 weeks (105 days) per year and home owners should be able to demonstrate the income from these lettings. 
• The property must not be used for more than 155 days for longer term occupation (i.e. a continuous period of more than 31 days).
• Where there are a number of furnished holiday lettings properties in a business, it is possible to average the days of lettings for the purposes of qualifying for the 15 weeks threshold. This is called an averaging election.

There is a special period of grace election which allows homeowners to treat a year as a qualifying year for the purposes of the furnished holiday let rules, where they genuinely intended to meet the occupancy threshold but were unable to do so subject to a number of qualifying conditions.

In any other cases, where the qualifying conditions are not met the normal property income rules apply. Trading losses from a furnished holiday lettings business can only be set off against qualifying future FHL profits.

Planning note

This is a good time to review your actual occupancy in the current tax year and if necessary, look for further bookings before the end of the current tax year. This should be done to ensure that you have met the minimum qualifying requirements and to benefit from the special FHL tax rules. If you need help crunching the numbers, please call.

There are special customs requirements for commercial goods or samples which are imported or exported by passengers in their accompanied baggage (hand carried). This is known as Merchandise In Baggage or MIB.

MIB goods include the following:

• goods acquired for company use
• goods for sale
• spare parts
• trade samples

whether or not they are:

• permanently imported/exported
• temporarily imported/exported
• in transit
• liable to customs charges

These goods must be declared electronically to CHIEF or exceptionally a paper C88/ESS form may be completed. If you are taking MIB, you can have your declaration endorsed by Border Force when you leave the EU as proof of export to zero-rated goods for VAT purposes. The process can take some time and HMRC recommends that passengers allow enough time before their flight or voyage to clear the goods at the relevant airport or port.

Any taxpayers that have ceased to be self-employed must advise HMRC of their change in status. There are a number of steps that must be followed if a taxpayer stops trading as a sole trader or if they are ending or leaving a business partnership. This is required so that HMRC can help to get the taxpayers affairs in order.

Taxpayers must send in a Self Assessment return by the relevant deadline and will need to work out their trading income, allowable expenses and any Capital Allowances. Taxpayers must also determine if they have any Capital Gains Tax (CGT) to pay.

They may also be able to claim back any overpaid tax or National Insurance. It is also important to check if there is an entitlement to tax relief by way of entrepreneurs’ relief, overlap relief and / or terminal loss relief. There are also other reliefs available that may reduce the amount of CGT due

Taxpayers that owe tax or National Insurance and have difficulty paying it, may be able to negotiate an agreement with HMRC for more time to pay. In addition, where a VAT registration was in place this will also need to be cancelled and anyone who employed staff will need to close their PAYE scheme and submit final payroll reports.

Students that have finished their studies and entered the workforce, must begin to make loan repayments from the April after they have finished their studies or when their income begins to exceed the annual threshold.

The annual threshold amounts for 2019-20 have been confirmed by the Department of Education. The thresholds will increase to £18,935 (2018-19: £18,330) for plan 1 and to £25,725 (2018-19: £25,000) for plan 2.

The terms of loan repayment for courses of study started before 01 September 2012 are referred to as ‘Plan 1’, and those started after 01 September 2012, are referred to as ‘Plan 2’. Repayments are deducted at a rate of 9% of income over the threshold.

The loans are also subject to varying levels of interest. The interest rates for Plan 2 repayments are based on the Retail Prices Index plus a variable rate dependent on income. The interest rates for Plan 1 repayments are significantly lower than for Plan 2 repayments.

Student Loans are part of the government’s financial support package for students in higher education in the UK. They are available to help students meet their expenses while they are studying, and it is HMRC’s responsibility to collect repayments where the borrower is working in the UK.

The Student Loans Company (SLC) is directly responsible for collecting the loans of borrowers outside the UK tax system. Maintenance grants are also available under certain circumstances. The grants do not have to be repaid but do reduce the amount of maintenance loan a student is entitled to.

If 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 may give rise to a chargeable gain based broadly on the difference between the market value of the assets and their original cost.

A number of options exist in such situations. One of these involves arranging the incorporation of the business so that it satisfies the conditions necessary to secure incorporation relief. One such condition is that the entire business must be transferred as a going concern 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.

However, there may be certain circumstances where this relief may not always be advantageous, and 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 2018-19 must be made by 31 January 2022. 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.