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When you are looking for an accountant company, you may notice that some businesses are labeled as chartered accountancy firms and some are not. Understanding the difference between the two is critical. This will help you to make sure that you benefit from the best possible service when hiring an account, whether for your personal or business requirements. With that being said, read on to discover what a chartered accountant is, as well as the benefits that are associated with using one.

What is a chartered accountant? What is the difference between a chartered accountant and a standard accountant?

It is vital to understand that chartered accountants tend to have gone through more training when compared with standard accounting. A chartered accounting must have successfully completed an academic postgraduate program. After this, i.e. once they have graduated, they then need to have worked under a mentoring program for at least three years.

This is what is required to be deemed a chartered account. Plus, rather than concentrating on tax returns and other ‘real time’ elements, chartered accounting will focus on ensuring that your business produces accurate financial transaction records and that you’re operating in an efficient manner.

What are the benefits of choosing a chartered accountant?

Now that you know what chartered accounting is, let’s take a look at the advantages that are associated with going down this route. First and foremost, you can have peace of mind that the professional you are hiring has extensive experience and training. As you can see from the explanation that we have provided above, chartered accounts undergo much more training and they have to prove themselves in a real working environment as well.

When you consider this, there is no reason why you would not choose chartered accounting, right? You are going to have a much better chance of experiencing a high-level service when you opt for chartered accounting. Chartered accounts must maintain professional standards and the services that they provide are regulated. Because of this, this gives you the security of knowing that the people you are working with need to work to a particular standard. You also know that you are going to have the best possible advice for your business.

Hiring chartered accountants with such high-level skill, knowledge, and commitment mean that your business is going to be able to capitalize on expert advice that they otherwise may not receive if they simply choose to hire a standard account. Don’t overlook the fact that this is essentially going to benefit your bottom line and ensure your business is running as efficiently as possible.

One thing a lot of people do not consider is the impact that hiring chartered accounting is going to have on their brand image. After all, if you outsource elements of your business to regulated and high-quality professionals, this says a lot about your company and the pride you take in your business. It shows that you operate a professional establishment.

You still need to choose a chartered accountant with care

As you can see, there are many benefits that are associated with choosing a chartered accounting over standard accountants. However, do not let this fool you into thinking you can simply choose the first chartered accounting you stumble upon. You still need to do your research and make sure the firm in question is right for you. We recommend that you take the time to read about the company in question.

Take a look at their history and experience in the industry. Aside from this, find out about the different services that they provide so you can make sure they offer everything you need. Furthermore, take the time to read reviews that have been left by people who have used their services before so that you can make sure they live up to their sales pitch and that they provide a reliable and high-quality service. Check out independent review sites to be sure of the authenticity of the comments.

In April 2020, the UK updated its rules on the reporting of Capital Gains Tax on the sale of UK residential property. Here is a quick guide to these updated rules as they apply to individuals.

CGT reporting is different for residents and non-residents

If you are not a UK resident then you must report the sale of any UK property online and pay the CGT due within 30 days. This applies both to residential and non-residential UK property. If you are a UK resident then further tests apply before you decide whether or not you need to report the sale for CGT.

Please note that the criteria for CGT liability are based on residence, not citizenship. In other words, non-residents would need to declare all sales of UK property even if they were UK nationals. By contrast, non-UK-nationals residents in the UK would apply the same liability tests as UK nationals who live in the UK.

CGT is only applicable on Capital Gains above your annual exemption

For the tax year 2021-2022, individuals have an annual CGT exemption of £12,300. This is forecast to remain the same up to and including the tax year 2025-2026. Obviously, however, there is no guarantee of this so you should always check. This allowance is per person so if a residential property was owned jointly, the potential CGT exemption would be £24,600. If your overall capital gains are below this then you do not have to report them regardless of circumstances. If they are above this, but from residential property, a further test must be applied.

If you sell your main home, you can claim Private Residence Relief

Regardless of how many homes you own, you can only class one of them as your main residence. You can therefore only claim private residence relief on your main home.  If you are informally cohabiting then each half of a couple can have an individual main residence. If, however, you are married or in a civil partnership, then the couple can only have one main residence.

The government has a PRR calculator you can use to calculate how much PRR you can claim. As the rules currently stand, you can claim 100% relief (i.e. pay no CGT) provided that you meet two conditions. Firstly, you have to have lived in the property as your main residence up to the point when you sell it. Secondly, you must not have used it for commercial purposes. If you have done either of the above then you may still qualify for PRR but it will be at a reduced rate.

PRR when you move out

In general, you get full PRR for the time you lived in the property plus nine months. If you sell the property after that time then your PRR is calculated as a percentage of the occupancy period plus nine months. This applies regardless of whether or not the property is occupied or empty.

There are, however, some exemptions to this rule. For example, if you’re disabled or go into long-term residential care, then you may be able to claim full PRR for up to 36 months after moving out. So, for example, if you own a house for five years but only live in it for two, you will qualify for PRR for a total of 33 months out of 60. That means you qualify for PRR on 55% of the Capital Gains. You can use your annual exemption towards the rest.

PRR and lettings relief

If you live with tenants then you can still claim PRR but only on your portion of the house. For example, if you let out a spare bedroom which accounts for 10% of your home, then your PRR is reduced to 90%. The remaining 10% is liable for CGT but you still get your annual exemption.

A word of warning

HMRC expects you to sell your assets for a fair market price. If you sell at a price below HMRC’s expectations then the onus will be on you to show that you did everything possible to achieve the maximum value for your asset. If you do not then you may find yourself paying tax on the expected value rather than the achieved value. Keep this in mind if you are thinking about making a “discounted” sale, perhaps to a relative or friend. It may be best to get professional advice first Capital Gains.

Reporting CGT

If you find that the sale of a residential property does make you liable for CGT then you need to report this online to HMRC and pay the amount due within 30 days of completion of the sale. If you are in self-assessment you will also need to include the gain on your self-assessment form but you will only be charged for it once Capital Gains.

Capital allowances is one of the most misunderstood areas of business taxation in the UK. As a result, many businesses don’t claim back what they are entitled to, leaving a considerable amount of tax relief on the table.

What is Capitals Allowance?

In the UK tax system, a capital allowances can be claimed against taxable profit. This allowance can be claimed for a range of assets that fall under plant and machinery categories. This can be anything from computer equipment, structural office renovations, and research. Depending on the type of asset, the capital allowances can be claimed over several years. Sole Traders, Partnerships, and Companies can all submit capital allowances claim on plant and machinery.

What Is Classed As Allowable?

You can obtain a full list of allowable assets that can be subject to a capital allowances claim which falls under the plant and machinery category. These include:

• Company vehicles (cars, vans, and trucks)
• Research and development (R&D)
• Patent registration
• Office/warehouse renovations

HMRC’s rules on what qualifies for plant and machinery capital allowances are strict, so you need to document everything carefully. You have to be sure that what you are claiming for performs ‘qualifying activity for your business. Depending on your type of business, qualifying items may differ. IT equipment, office desks, and other furniture all qualify. Any machinery necessary to carry out business activity will qualify too.

What Cannot Be Claimed As A Capital Allowance?

Items that cannot be claimed as part of your capital allowance includes:

• Buildings (including doors, windows, land, or other structured)
• Items used in business entertainment
• Any item which is leased

Measuring Capital Expenditure On Plant & Machinery

When it comes to your capital expenditures on plants and machinery, there are three pools. These are known as the main or general, special rate, and single asset pools. Each time you spend money on plants and machinery, you should filter it into one of these three so you know what you can potentially write off. Most plant and machinery purchases will go into the general pool.

The special rate pool is for items that are important to your business premises such as lighting, aircon, and heating. The single asset is actually divided into two sub-pools. The single asset pool is used for purchases such as company vehicles. The other half of this pool is known as the short-life asset pool. Assets with a short life span, which need to be replaced often, will fall into this category.

Annual Investment Allowance (AIA)

This allowance lets businesses deduct the entire value of something that is solely used for the business. There is a limit of £1 million on this allowance. The tax deduction should be claimed in the same year that the item was purchased. The AIA can be used on most plant and machinery purchases excluding vehicles and business gifts.

First-Year Allowances

One of the most tax-efficient ways of utilizing capital allowances claims on plant and machinery is to use the first-year allowance. This means that you can get a deduction of 100% of the price of the asset against that year’s profits. In order to maximize this allowance, you should consult a professional accountant as the rules around this allowance change frequently.

Writing Down Allowances (WDAs)

This type of capital allowances claim allows you to claim tax relief over several years. The WDA is calculated on the initial cost and value of the assets over the period. Assets within the main asset pool can usually be claimed at 18%. Items in the special rate pool can be claimed at 8%. Single asset pool items can be 8% or 18%, but this is dependent on the particular item.

Consulting A Tax Professional

When completing your tax returns, you should work with a tax professional to ensure that you are claiming all of the tax relief and allowances that you are entitled to. They can also help you to get your tax returns in order and compile any supporting information that may be needed. They’ll be able to help you submit your capital allowances claim on plant and machinery for your business.

Conclusion

Capital allowances can be complex but are well worth pursuing as they can be worth a lot of money to businesses. Depending on the type of purchase, the allowance can be claimed in full, during the first year, or across several years. You should keep thorough records of your purchases and their usage case. So that if you are audited or asked to explain your capital allowances claims, you can provide supporting documentation.

There is a lot of confusion and misinformation circulating about the taxation of cryptocurrency in the UK. Many people assume it is outside the scope of general taxation as it has more in common with gambling or having winning numbers on the lottery. Within the UK taxation system, this is not the case.

In March 2021. New guidance was issued by Her Majesty’s Revenue and Customs (HMRC). It set out the guidance on the taxation of crypto assets (under which cryptocurrency is included). It marked a much firmer stance by the UK government on the profits made from cryptocurrency. If you want to avoid any trouble with HMRC, it’s best to understand the rules and ensure that you follow any regulations.

How Does HMRC Class Cryptocurrency?

In the eyes of HMRC, cryptocurrency is technically neither money nor currency. They class it as:

• Exchange tokens – E.g. Bitcoin
• Utility tokens – give the holder access to goods or services
• Security tokens – allow the cryptocurrency holder the right to any profit and loss in a business
• Stable coins – a cryptocurrency that is linked to a stable asset such as gold

While this description lays out the definition of the crypto assets you hold, the type and amount of tax you are liable for depends on how each of these tokes is used.

General Taxation Rules

The taxation of cryptocurrency is dependent on how you are using it. If you have cryptocurrency as part of your personal investment portfolio, then this will be subject to Capital Gains Tax (CGT). You will incur CGT when you dispose of your cryptocurrency. The disposal can include selling it, trading it, or using it to purchase something).

For the purposes of taxation, the capital gain is calculated as the difference between the values of the cryptocurrency you dispose of minus the value of it at the time it was bought.

Capital Gains Tax does not apply to those people who are considered to be trading cryptocurrency. This will be classed as a general business transaction and will instead fall under Income Tax rules. What HMRC classes as ‘trading’ is clearly defined and they will look at each case on its own merits. In these cases, they will look at the activity in terms of the number of transactions and the sophistication of the operation.

Activity that can trigger CGT or income tax includes:

• Selling your cryptocurrency for currency
• Exchanging one cryptocurrency for another
• Paying for goods and services with cryptocurrency
• Gifting cryptocurrency to another person

Personal Allowance 2020/2021

As a UK resident, you are entitled to earn a certain amount per tax year without being liable for tax. In the 2020/2021 tax year, this amount is £12,300.

Gifts to charity or a spouse are also tax-free.

Registering With HMRC

In order to keep compliant with UK tax law, you need to register with HMRC if you do not usually file taxation of cryptocurrency return (for example, if you are in employment and usually pay your tax through PAYE). The deadline for registering with HMRC is six months after the end of the tax year.

It’s important to remember that you will only be liable to pay CGT if and when you dispose of the cryptocurrency. It doesn’t matter what the fluctuations in cryptocurrency do to the value of your taxation of cryptocurrency, it’s only when you benefit from its disposal that you need to pay tax.

How Much Will You Be Taxed?

How much tax you are liable for will depend on a number of factors including how much the cryptocurrency was originally purchased for, the amount that it was sold for, and any other income you make from employment or other channels. If you are already earning over the personal tax allowance threshold, you can expect to pay 10% or 20% depending on your other income.

How Does HRMC Know About My Cryptocurrency Assets?

You might be tempted to think that what HMRC doesn’t know won’t hurt them, but you’d be wrong. They receive trading information from the major exchanges and know who should be paying taxes. So it is better to follow the taxation of cryptocurrency rules rather than get into serious trouble for tax evasion.

Conclusion

Taxation of cryptocurrency in the UK has evolved over recent years, a sign that they are taking the crypto market seriously and want to close any loopholes that allow for large-scale tax avoidance. Depending on the type of cryptocurrency activity you undertake, you can be liable for either CGT or income tax.

More than ever, many of us are working from home. Though some might still be working from the dining room table, others have made more permanent changes to their homes. Garage conversion into a home office is a great way to ensure peace and quiet to help you work while still being at home.

But as with all areas of work, considering the tax implications is a must. If you were redoing your work building, you’d likely be familiar with the tax implications, but when it’s a home, you may be more unsure. Helpfully, the things to look out for with tax implications of garage conversion as a home office are all outlined below.

VAT

With a normal conversion of an office building, the VAT rules would be clearer. When you are converting your home garage, the rules are a bit more complicated. Like with an office building, you can claim back VAT for building costs on a garage conversion into a home office. However, you can only claim back the full VAT for this conversion if the room is only used for work.

If your garage conversion is used as your home office and is used as a nursery on the weekends, you cannot claim full VAT. Instead, you can claim around 70% percent (i.e., 5/7 of the time is used for business uses, 2/7 for personal uses, so VAT is claimed this way). Similarly, if you use half of the space in your garage as a home office and half as a workspace for your painting hobby, you could only claim 50% VAT on your conversion’s building costs.

VAT rules can become a bit more difficult when you use the VAT flat rate. The VAT flat rate is a scheme by the UK government where businesses pay a fixed rate of VAT and keep the difference between the company’s pay to HMRC and the charge to customers. However, under this scheme, companies cannot reclaim VAT on purchases. This is pretty blanket, except for specific capital assets that cost over £2,000.

Obviously, if you are part of this scheme, claiming back VAT won’t be as easy to navigate. The best thing to do if you are unsure in this scenario is to seek professional advice. The other complication with VAT when converting your garage into a home office is that you cannot claim the VAT back if you are not a VAT-registered business.

Capital Gains Tax

Capital gains tax is the tax put on profits when you sell an asset. In this case, the capital gains tax pertains to your house, should you sell it. If your home has increased in value since you bought it, the profit you make in selling it is the portion of the money that is taxed.

Usually, a house used for private living is not subject to capital gains tax. However, now you have converted your garage into a home office, this may no longer be true.

Capital gains tax does apply if you have used a part of your home for business purposes exclusively. If you use a room in your house – such as a garage conversion – as a temporary or occasional office, it doesn’t count as exclusive business use. However, if your garage conversion home office is your only office, you will have to pay capital gains tax if you sell your home and make a profit.

Ironically, taking this tax implication in the context of the previous point, one will run into another. If you don’t use your garage conversion home office exclusively for business – for example, because you also have a home gym in the corner – you cannot claim the full VAT back on the building costs. On the other hand, if you do use it exclusively, you can claim full VAT but have to pay capital gains tax upon selling.

Business Rates

Business rates are a familiar tax to anyone working for a company. However, when it comes to a home office, the rules become less clear. Business rates will apply to your home office if the Valuation Office Agency gives a rateable value to the home in which your office resides. The likelihood of this will depend on several factors. For peace of mind, it can be smart to contact the Valuation Office Agency before beginning to convert, so you know the tax implications for business rates.

You will likely have to pay business rates and council tax if you’ve made changes to your house for your company. On the government website, they give the example of converting a garage into a hairdresser’s. On the other hand, they also state that if you use a small part of your house for your business, you do not need to pay business rates, such as a bedroom office.

Therefore, the likelihood of paying business rates will depend on the kind of company you run or work for.

Expenses

The recent pandemic has slightly loosened claiming tax on expenses. While you can’t claim tax relief if you choose to work from home, if your garage conversion home office came about because you had to work from home (and wanted somewhere comfortable to do so), you can claim tax relief on expenses. Similarly, if your boss requires you to work at home for all or part of the week, you can claim tax relief on expenses. As long as you aren’t specifically choosing to work from home, you are counted.

You can claim tax relief on several expenses. You can most notably claim tax relief on gas, metered water, and business phone calls access. Of course, this tax relief cannot be claimed on the full cost of these expenses – most of the cost will be due to the presence of people living in your house privately. However, the amount it takes to heat the garage conversion or provide internet can be claimed as tax relief.

Equipment you’ve bought for work, such as laptops or stationery, can also be claimed under these rules.

Did you know that if you have a business in the creative and video game industries, you could save up to 20% of your overall production costs, through the help of creative and video game industry tax relief? If you want to understand more about it, see if you are eligible, and find out more, then this is your guide to help.

Video games tax relief

Video Games Tax Relief, known as VGTR, is a tax relief incentive for creative industries, all funded by the UK government. VGTR is there to support UK game developers to grow and expand, but offering a tax rebate against what cash is spent on the testing, production, and design of new games.

How much can be claimed?

Video Games Tax Relief can be worth up to 20% of the production costs of a game. There are two things that video game developers claim tax relief on, whichever is the lower one. This is either 80% of the total expenditure, or the actual expenditure incurred.

Another point to note is that if a game is profitable, then the VGTR is something that can also be used as a way to reduce the video game company’s corporation tax bill. If the video game goes on to make a loss, then any VGTR claimants can get a cash payment back from HMRC, which is at a rate of 25%.

How do you qualify for this tax relief?

In order to qualify for this form of tax relief, funded by the UK government, then there are some criteria that you need to meet. The criteria are as follows:

• Your creative or video game industry business needs to be responsible for the majority of designing, planning, testing, developing, and production of a game. As a result, the company needs to be known as a video games development company. If you mainly outsource to others to test, design and produce the games, then you wouldn’t meet the criteria to qualify.
• The game itself must be created with the intent to release for commercial gain. It shouldn’t be a game that is solely created for advertising, gambling, or promotional purposes.
• The video game is one that should count as being British, as defined by the British Film Institute, through their video games cultural test. If you are British as the creator but are living and working abroad, then you’re unlikely to qualify as it is something that is funded by the Uk government.
• The final criteria is that at least a quarter of the video game production costs needs to have been accrued in the EEA (European Economic Area).

If you can see that you meet the criteria as outlined above, and your game can be played on selected devices, then you are likely to be entitled to the tax relief. The devices that the game needs to be able to be played on are:

• PC
• TV
• Smartphones and mobile devices like tablets
• Video game consoles and portable game devices

What are the key benefits of creative and video game industry tax relief?

One of the top benefits, as has been mentioned above, is that game developers can get up to 20% of their core game development and production costs back. But there are still several other benefits that are worth looking into if you are a business in the creative and video game industry.

Competitive edge

The creative and video game industries are very competitive. Video game tax relief will help you to stay competitive as it can cut the costs of your development. As a result, you can charge less for your games, which will be a winner for consumers. At the same time, you can still invest your money in top-quality content, varied games, and more into your marketing.

Receive a payout quickly

As long as you meet the criteria and all goes to plan, you will be able to receive your tax relief by no more than ten weeks after filing the claim (though it is usually quicker, around four weeks). This is something that is going to be much simpler than trying to get investment from a third party if more funds are required, but it will also be much quicker than trying to get outside investment.

Have full control

If you need more money for your creative or video game industry projects, then securing investment from a third party can come with some strings attached, such as a certain amount of equity or a certain amount that needs to be repaid by a certain date. With the industry tax relief, you will be able to remain in full control of your company, with all voting rights, but still get the additional funding. That means all profits will be the company’s and not have to be paid back to anyone else.

Less risk

Starting a company can come with risks, and when you’re starting a company that develops video games, then it can come with even more risks. The tax relief for the creative and video game industries helps to offset some of the risks. The reason is, you can get a tax rebate against the costs that you incur during the production and development.

What is the process for creative and video games tax relief claims?

In order to claim the video games tax relief, then it is a pretty straightforward process. It can be claimed as part of your company tax return that gets filed with the HMRC. in order to file the claim, you need to have a registered company, and have some documents to prove it. The documents you will need are:

• A cultural certificate from the British Film Institute to show that the game you are developing counts as being British
• Bank statements that show how much you have spent on the development of the game. Ideally, this should be put into categories, showing where and on what, the money was spent on
• A breakdown of the profit and loss for each video game that has been developed and produced. If you are claiming for more than one game, then they need to all be filed separately. When you know if the game will leave you in profit or making a loss, you will know if the claim needs to be used to reduce the tax bill, or if the claim should go down as a loss in order for a cash repayment

The HMRC does have a way of calculating profit and loss that is taxable, for creative and video game industry companies. This should be used as there are some restrictions for working out losses that can be used, but it will depend on if the trade for the video game has finished.