Newsletter issue - April 2010.
Q. I was trying to sell my business before the new tax year, to avoid a potentially large tax bill from an increase in the rate of capital gains tax. I haven't been able to, so what's the position for the 2010/11 tax year.
A. The rate of capital gains tax (CGT) has been kept at 18% for 2010/11, so you have not lost out by delaying the sale into the 2010/11 tax year. In fact you may benefit from entrepreneurs' relief that applies to gains on the disposal of businesses, and reduces the effective rate of CGT down to 10%. The cap on this relief has been doubled to £2 million for gains made on and after 6 April 2010.
Q. I work as a consultant through my own company based in Surrey. I have just secured a contract in Manchester, which is expected to last eight months. Due to the distances involved I will need to stay in Manchester for at least four nights a week. If I rent a small flat, rather than stay in a Bed & Breakfast place, can my company reimburse all the expenses associated with the flat, such as cleaning costs and cooking utensils?
A. Your workplace in Manchester will qualify as a temporary workplace as the contract is expected to last for less than 24 months. Thus all reasonable travelling and accommodation expenses connected with that assignment can be reimbursed to you by your company. You should provide receipts for all the expenses, unless the amount is covered by a dispensation agreement your company has with the Tax Office, such as for mileage claims.
Q. My company has recently taken on an industrial unit that needs extensive fitting-out before it can be used by the business. How can I ensure that all the fittings I use will qualify for the maximum amount of capital allowances?
A. The cost of fittings that qualify as plant or integral features can be set against your company's Annual Investment Allowance (AIA), which will give 100% capital allowance in the year of acquisition. The AIA cap has been increased to £100,000 per year for expenditure incurred on and after 1 April 2010. Plant is broadly something that is not fixed permanently to the building, such as shelves or display units. Integral features are fixed to the building and fall into these five categories:
- Cold water systems (not hot)
- Electrical systems (including lighting)
- Space or water heating systems, including a powered system of ventilation, air cooling or air purification
- Lifts, escalators or moving walkways
- External solar shading
If the fitment does not qualify as plant or integral features it can qualify for 100% enhanced capital allowance (ECA) if it has energy or water saving qualities, and it has been included on the approved ECA list at www.eca.gov.uk.