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Make it count
Your quarterly newsletter from Bains Financial Management
Welcome!
Welcome to our autumn edition, and while the
temperature may be dropping, we’ll be keeping the
heat on to get your business finances right! We start
by talking through the difference between capital
and revenue expenses, below, before focusing on
taking time out of your day to develop your business
(page 2).
Also overleaf – if you’re married, why not check if the
marriage allowance can brighten up your day.
For limited company directors, we run through a
reminder of the optimal salary levels to draw from
your company (page 3) and for all businesses we
talk through HMRC’s technical guidance in the
event of a ‘no deal’ Brexit scenario in March 2019.
Finally, on page 4, we bring you a reminder of the importance of getting your accounts and
income tax returns right over the years. Our tribunal example of a man who let errors build
up over the years doesn’t make for light reading!
Jagjit Bains, FCMA, CGMA
Autumn 2018
INSIDE
GROW YOUR BUSINESS
Take time to do it properly and sustainably
MARRIAGE ALLOWANCE
Reduce your tax bill
THE RIGHT WAGE
How much should you be taking from
your company?
DEAL OR NO DEAL?
What does Brexit mean for us?
PLAY BY THE RULES!
Don’t ignore your tax obligations
LETTING ON THE
RIGHT TERMS
Make sure you’re getting the most
out of your property business
If you run a property letting business, do you
know what your accountant means by ‘capital
versus revenue’ expenditure?
First things first, if expenditure can be classified
as revenue then it is generally allowable and can
reduce profit and tax on your property income.
Conversely, if it is capital expenditure, it will not
be an allowable expense – but depending on
the nature of the capital expenditure it may be
possible to claim capital allowances to reduce tax.
REVENUE
Any expenses incurred in the day-to-day running
of your business can be described as revenue
expenditure. Examples would be repairs to the
property which return it to its original state rather
than improve it; some of the interest paid on the
mortgage; managing agent fees; and council tax
for vacant periods.
If the expense is incurred
for mixed purposes (ie
both private and business),
the business element will
be allowable in cases where the expenditure can be
accurately apportioned. It’s important to remember
that if the letting falls under ‘rent a room relief’,
then the costs of repairs are not allowable as a
deduction, unless the property owner opts out of
the scheme.
CAPITAL
Capital expenditure is the purchase or
improvement of an asset used for the property
business – for example, an extension or
renovation; purchase of assets such as office
equipment; vehicles acquired for business use;
or furniture for a furnished property. Capital
allowances can be claimed for the purchases of
‘plant and machinery’ such as computers and
vehicles, but not on furniture and household
equipment for a furnished property.
There are, however, exceptions for furnished
holiday lets, so check with your accountant if
you are unsure! Also, be aware of ‘replacement
domestic items relief’ with regards to furniture
and household appliances, as this can be claimed
for the cost of replacing domestic items.
If you buy a run-down property for a reduced
price and subsequently restore it to the required
state to attract tenants (eg rewiring), this would
be capital expenditure. Painting and decorating
would be an allowable repair, however, on the
basis that it will be required every few years.