Stamp duty and mortgages

by Leah McGarvey | 7 Oct, 2016 | Property, Tax

Stamp duty and mortgages

When Is Stamp Duty Payable on a Mortgage Transfer?

Stamp Duty Land Tax (SDLT) is generally not payable when property is transferred with no consideration. However, an exception applies when a mortgage is wholly or partly transferred.

If one party assumes responsibility for a mortgage, this is treated as consideration for SDLT purposes. If this amount exceeds £40,000, SDLT may be due, particularly when the transferee owns multiple residential properties.

How SDLT Applies to Mortgage Transfers

If the value of the mortgage assumed is over £40,000, and the transferee owns another residential property, the 3% additional SDLT rate applies on the portion of the mortgage taken on, up to £125,000.

For example:

A property is transferred with a £100,000 mortgage, and the new owner assumes £50,000 of that mortgage.
Since the consideration exceeds £40,000, SDLT is triggered.
If the new owner already owns another property, the 3% additional rate applies to the £50,000 mortgage share.

Unlike some tax reliefs, there is no SDLT exemption for transfers between spouses. Spousal property transfers that involve mortgage assumptions can still result in an SDLT charge.

How We Can Help

At Lewis Brownlee, we provide expert Stamp Duty and mortgages advice to ensure tax-efficient property transactions. We help clients understand their SDLT liabilities and plan property transfers strategically.

We offer a free introductory meeting to discuss your property tax concerns. Help is at hand!

For professional tax advice, contact us today.

Understanding Stamp Duty and mortgages is crucial when transferring property with an existing mortgage. Planning ahead can help minimise unexpected tax liabilities and ensure compliance with SDLT rules.

Rent a room relief and bed and breakfast income

by Leah McGarvey | 26 Sep, 2016 | Business, Tax

Rent a room relief and bed and breakfast income

Understanding Rent a Room Relief for B&B Income

Rent a Room Relief allows homeowners to earn up to £7,500 tax-free (previously £4,250 before 2016/17) by letting out furnished rooms in their home. Many assume this relief only applies to long-term lodgers, but it can also be claimed against bed and breakfast (B&B) income, even though this type of letting is considered a trading activity.

This means that if you rent out rooms on a short-term basis, such as during major events like Goodwood Week or the Festival of Speed, you could still pay no income tax on earnings up to the threshold.

How Rent a Room Relief Works for B&Bs

To qualify for Rent a Room Relief for B&B income, you must:

Let out furnished accommodation in your main home.
Not use the property solely for rental purposes (e.g., a dedicated B&B business would not qualify).
Ensure total rental income does not exceed £7,500 per year.

If your rental income exceeds the limit, you can choose between two tax treatments:

Pay tax on the rental profit (income minus expenses).
Use the Rent a Room Relief threshold and only pay tax on income exceeding £7,500.

For many occasional B&B hosts, option two is the simplest way to minimise tax liability.

How We Can Help

At Lewis Brownlee, we specialise in tax-efficient property income strategies, including Rent a Room Relief for B&B income. Whether you let out rooms during Goodwood Week or other events, we can ensure you remain compliant and tax-efficient.

We offer a free introductory meeting to discuss your rental income and tax options. Help is at hand!

For expert tax advice, contact us today.

Understanding Rent a Room Relief for B&B income can help occasional hosts maximise tax-free earnings while staying compliant with HMRC rules. Proper planning ensures financial efficiency.

Farmers’ losses and tax relief

by Leah McGarvey | 20 Sep, 2016 | Business, Tax

Farmers’ losses and tax relief

Restrictions on Claiming Tax Relief for Farming Losses

Many farmers rely on tax relief for farming losses to offset profits from other income. However, a restriction applies if farming losses occur for five consecutive years. After this period, relief against other taxable income is no longer available, potentially impacting cash flow and tax planning strategies.

This rule is in place to prevent persistent loss-making farming operations from being used to offset profits from other income indefinitely. If a farm continues to operate at a loss beyond five years, those losses can only be carried forward to offset future farming profits, rather than being used against other taxable earnings.

Understanding how HMRC assesses farmers’ losses is crucial to ensuring compliance and maximising available tax reliefs.

Why Fiscal Year Calculations Matter

One common mistake when assessing farmers’ losses and tax relief is focusing solely on the accounting year profit or loss. Regardless of a business’s chosen accounting period, losses must be calculated on a fiscal year basis (6 April – 5 April) to determine whether restrictions apply.

This means that even if annual accounts show a profit, a fiscal year loss could still exist—and HMRC will enforce the restriction accordingly.

To avoid tax complications, farmers must track their losses on a fiscal year basis and ensure that any profitable periods are correctly reported. Failing to do so can lead to unexpected restrictions on tax relief claims, resulting in higher tax liabilities.

How Farmers Can Minimise Tax Impact

If a farm is consistently making losses, farmers should consider strategic tax planning to prevent reaching the five-year limit. Potential solutions include:

Reviewing operational costs to determine areas for profitability improvement.
Diversifying farm income (e.g., offering tourism services, farm shops, or renewable energy production).
Adjusting accounting methods to ensure that taxable profits are maximised where possible.

Taking early action can help protect tax relief eligibility and ensure long-term financial sustainability.

How We Can Help

At Lewis Brownlee, we specialise in advising on farmers’ losses and tax relief, helping agricultural businesses maximise available deductions while staying compliant.

We offer a free introductory meeting to review your farming accounts and tax strategy. Our experts can help you plan effectively to avoid unnecessary tax liabilities. Help is at hand!

For expert tax advice, contact us today.

Managing farmers’ losses and tax relief correctly is vital for long-term financial planning. Proper monitoring of fiscal year figures can help avoid unexpected tax restrictions and protect farm profitability.

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Suspended penalties HMRC

by Leah McGarvey | 19 Sep, 2016 | Tax

Suspended penalties HMRC

When HMRC identifies carelessness in tax filings, they may issue a penalty. However, in some cases, suspended penalties HMRC applies allow taxpayers to avoid an immediate financial charge if they meet specific conditions.

Suspended penalties work like a probation period—if a taxpayer meets HMRC’s conditions, the penalty is eventually cancelled. If they fail, the penalty is enforced.

HMRC has discretion over whether to suspend a penalty, and some officers may refuse suspension without proper justification. If this happens, taxpayers have the right to challenge the decision.

When Can a Penalty Be Suspended?

To qualify for suspended penalties HMRC, the taxpayer must:

Demonstrate that the error was due to carelessness, not deliberate wrongdoing.
Agree to meet specific conditions set by HMRC to prevent future mistakes.
Not have repeated compliance failures in similar circumstances.

A suspension period typically lasts between 6 to 24 months, during which the taxpayer must demonstrate compliance. If they adhere to HMRC’s conditions, the penalty is cancelled at the end of the period.

HMRC must provide clear reasoning if they refuse to suspend a penalty. If an officer rejects a suspension without explanation, it is worth challenging the decision.

How to Challenge an HMRC Penalty Decision

If HMRC refuses to suspend a penalty, taxpayers can:

Request a formal review of the decision.
Provide additional evidence showing how the issue will be prevented in future.
Appeal the penalty through HMRC’s dispute resolution process.

HMRC should only reject a suspension if they believe conditions cannot be set to improve compliance. In many cases, a well-documented challenge can lead to a successful outcome.

If you are facing an HMRC penalty, it is essential to act quickly. Seeking professional tax advice can help you challenge unjust penalties effectively.

How We Can Help

At Lewis Brownlee, we specialise in challenging HMRC penalties and helping clients apply for suspended penalties HMRC allows when conditions are met.

We offer a free introductory meeting to discuss your penalty situation and assess whether an appeal is viable. We’ll help you understand your rights and options so you can make an informed decision. Help is at hand!

For expert tax advice, contact us today.

Final Thoughts

Understanding suspended penalties HMRC applies can help taxpayers reduce financial penalties and challenge unfair refusals. Proper tax compliance and expert advice can protect against future penalties and unnecessary financial burdens.

Charitable trusts and the single rate band

by Leah McGarvey | 23 Aug, 2016 | Tax

Charitable trusts and the single rate band

Charitable trusts are typically exempt from income tax, making them a useful structure for managing donations and assets intended for charitable causes. However, complications arise when the settlor of a charitable trust has also made discretionary family settlements.

Under UK tax rules, the £1,000 starting rate band for discretionary trusts must be divided between all settlements created by the same settlor. This means that if a settlor has multiple trusts, including charitable and discretionary family trusts, the starting rate band is shared, potentially creating tax liabilities.

Although the tax owed is unlikely to be substantial, the administrative burden of calculating the correct amount can be time-consuming.

The Impact of Multiple Trusts on Tax Treatment

When a settlor establishes both charitable and discretionary trusts, the divided rate band can result in unexpected tax charges. Some key implications include:

Reduced tax-free allowance per trust, increasing taxable income within discretionary trusts.
Complex reporting requirements, requiring trustees to correctly allocate tax across multiple trusts.
Potential tax inefficiencies, making tax planning essential to avoid unnecessary liabilities.

Trustees need to monitor tax treatment carefully and ensure that all relevant tax exemptions are applied correctly.

How We Can Help

At Lewis Brownlee, we specialise in advising on charitable trusts and the single rate band, helping trustees manage tax efficiently and compliantly. With leaders specialising in charities accounting, we can easily clarify the complexities. So, when you’re ready, we’re ready!

Do take us up on one of our free introductory meeting to discuss your trusts and tax strategy. Together, let’s see how we can partner in your charities success!

For expert tax advice or fr any other accountancy-related concern, contact us today.

Final Thoughts

Managing charitable trusts and the single rate band requires careful planning. Understanding how discretionary trusts impact tax exemptions can help reduce administrative burdens and optimise tax efficiency.

Deemed domicile and residency

by Leah McGarvey | 9 Aug, 2016 | Tax

Deemed domicile and residency

Individuals will be deemed UK domiciled from 6 April 2017 if:

They have been resident in the UK for at least 15 of the last 20 years
They were born in the UK with a UK domicile of origin and are UK resident (‘returning non-doms’)

This will mean that some taxpayers who currently have access to the ‘remittance’ basis of taxation will no longer have this available to them (for income tax and capital gains tax) from 6 April 2017.

So if you could be adversely affected you might need to leave the UK by 5 April 2017 (if originally born in the UK with a UK domicile of origin) or if not, if you have been present in the UK for too long and need to have a six year stint outside.