Jointly owned property by a married couple

We accountants are often faced by situations where a rental property is owned jointly by a married couple. Usually the husband is in the higher tax band and wife in basic rate band.

In such cases, HMRC assumes that each of them is entitled to equal share of the income and tax is computed accordingly.

Clients enquire if there is any tax planning that could be done to lower the tax bill.

The simplest solution is to transfer a part of the property to the husband/wife in a lower tax band. Main hurdle is SDLT and lawyer fee. HMRC has a fantastic guidance on SDLT issue. Click here

Every situation is different and in some cases this course should be seriously thought about but usually my advice is not to let the tail wag the dog.

 

VAT on Vouchers issued by restaurants

New VAT rules for vouchers coming from 1st January 2019

VAT rules are changing from 1st January 2019 for vouchers.

The rules are not concerned with if VAT is due, they concern when it’s due.

New rules apply to any vouchers issued on, or after, 1 January 2019. This legislation only affects vouchers for which a payment has been made and which will be used to buy something.

Vouchers are divided in two types.

Single purpose vouchers (SPV) – A voucher where the place of supply and VAT rate is known.
VAT will be due at the time of payment for the voucher – not at redemption.

Multi Purpose Vouchers – MPVs – A voucher which is not a single purpose voucher. These are effectively gift vouchers, where a payment has been made but the exact nature of what is to be provided is not known at the time of payment.

 

How restaurants will be effected?

Restaurants usually issue SPVs.

Presently, VAT arises when the voucher is redeemed.

Example, if a restaurant sells a voucher for £100 to a customer via an intermediary which acts as the restaurant’s agent. The customer pays the £100 to the intermediary, which passes the money back to the restaurant after having deducted its £5 agent’s commission.  The intermediary also gives an invoice for its commission to the retailer.

The customer goes into the restaurant and spends £150, he pays his bill by redeeming £100 voucher and rest in cash.

The accounting will be as follows:

~ The intermediary will charge the retailer output VAT on the £5 commission which is consideration for its intermediary services.  The intermediary will also be able to deduct any input VAT on its expenditure in providing the intermediary service;

~ The retailer will charge output VAT on the total bill of £150 when the voucher is redeemed in its shop.  It will also deduct the input tax on the intermediary’s commission charge.

 

From 1st January, 2019 :

VAT will arise when the voucher is sold to the customer.

The accounting will be as follows:

~ The intermediary will charge the retailer VAT on the £5 commission which is consideration for its intermediary services.  The intermediary will also be able to deduct any input VAT on its expenditure in providing the intermediary service;

~ The retailer will charge output VAT on sale of voucher of £100. It will also deduct the input tax on the intermediary’s commission charge.

~ When the customer comes to redeem the voucher. Restaurant will out charge output VAT on £50 as it has already charged VAT on voucher part of the consideration.

 

Conclusion

We accountants will have to change some processes to correctly account for VAT. We will also need to speak with EPOS providers to amend their systems to ensure correct VAT is charged to the customer on sale of goods and services.

Transition – we will have to be mindful of treating vouchers issued before and after 1st January 2019 differently.

 

Source:

HMRC Consultation document

Taxation of Political parties: India and UK

A comparison of taxation aspects of political parties in India and UK

India

As an individual coming from India, I was used to seeing the political class enjoying all kind of privileges. As an accountant I came to know early in my career that political parties in India are exempt from paying tax.

Also, donations made by individual or company are also allowed as deductions under section 80 GGC and 80 GGB respectively on the Indian Income Tax Act.

India recently introduced a new way of funding political parties called `Electoral bonds`. Under this new system – donor, recipient and amount all will remain unknown and yet according to the Government it will increase transparency.

I will not give any glowing example of political donation scandals in India due to limitation of memory of my computer and time at my hands.

 

United Kingdom

Political parties pay tax on their income in the UK.

Further, Donations made to political parties are not allowed as deductions in in calculating the profits of a trade as they are almost always made wholly or partly for non-trade purposes. (BIM 47405). See also Taxation query.

This is not to say political parties do not get donations in the UK and if they get they do not get influenced by them. Transparency International UK has highlighted the case of Lycamobile.

Also, see Reuters article on how wealthy individuals are donating via their companies and avoiding tax but HMRC is avoiding to look into this difficult question.

 

Conclusion

I draw your attention to the facts. Please draw your own conclusions.