May 2024 Newsletter

Tiny insect on fluffy dandelions in meadow

Welcome to the May 2024 edition of our monthly tax newsletter!

We hope you find this information useful. As always, please don’t hesitate to contact us if you have any questions about the topics covered or anything else tax-related.

Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) Pilot Testing

While Making Tax Digital for Income Tax Self-Assessment (MTD ITSA) isn’t mandatory until April 2026, HMRC has reopened their pilot testing program on April 22nd, 2024.

Who can participate?

  • Individuals with up-to-date tax returns
  • Those with relatively straightforward tax affairs (not in partnerships, subject to the High-Income Child Benefit Charge, or with jointly owned rentals/furnished holiday lettings)

We can help you get ready!

If you’re interested in joining the pilot, let us know. Once our professional tax software is compatible, we can help you prepare for the new system.

Updated HMRC Guidance on Work Travel

The cost of travel between home and your normal workplace (ordinary commuting) isn’t tax-deductible, especially if your employer reimburses you. Exceptions include late-night taxi rides home paid for by your employer for safety reasons.

Travel to a “temporary workplace” is a qualifying business expense, and any associated costs, such as overnight stays, are tax-free benefits.

With more employees working remotely, be sure to review the latest HMRC guidance on such arrangements, particularly HMRC Booklet 490.

Tax Relief for Working From Home

Whether your home qualifies as a workplace for tax purposes doesn’t automatically grant tax relief for travel expenses. Travel from home to a permanent workplace is only eligible if it’s considered “in the performance of your duties.”

Even if your home office is accepted, travel relief between home and your permanent workplace might still be denied. This is because your choice of residence is considered personal, and commuting costs are a consequence of that choice.

HMRC may accept your home as a workplace if:

  • Performing substantive duties at home is an objective requirement of your job.
  • The necessary facilities are only available at home.

They will typically reject claims if:

  • Your employer provides suitable facilities elsewhere.
  • Working from home is a matter of personal preference.

Even with an accepted home office, travel relief is only available for days when your home functions as a workplace (travelling between two workplaces). On other days, it’s considered ordinary commuting.

Late Night Taxis Paid for by Employers

Employer-paid late-night taxis are tax-exempt if:

  • Car-sharing arrangements fail (conditions apply)
  • All four late-night working conditions are met.
  • The employee receives no more than 60 such journeys per tax year

The four late-night working conditions are:

  1. Required to work past 9 pm.
  2. This occurs irregularly.
  3. Public transport has ceased or is unreasonable to use by the time work ends.
  4. Transportation is by taxi or similar road transport.

The 60-journey limit applies to both late-night journeys and failed car-sharing arrangements combined.

Beneficial Loan Interest Rate Remains at 2.25% for 2024/25

HMRC has confirmed that the official interest rate for employee and director loans remains at 2.25% for the 2024/25 tax year despite a higher Bank of England base rate. This means the taxable benefit for employer loans exceeding £10,000 is the difference between 2.25% and the interest paid on the outstanding loan amount.

Investing in Unquoted Trading Companies

Investing in unquoted trading companies carries the risk of losing your money. However, potential tax relief is available for loans that meet specific conditions, particularly if the funds are used solely for the company’s trade (excluding money lending).

Tax Relief Options for Losses on Unquoted Trading Companies

  • Loan Losses: Relief may be claimed against capital gains if the loan becomes irrecoverable and certain conditions are met (e.g., borrower not a spouse or connected company).
  • Share Losses: For subscribers of new shares in unquoted trading companies, claiming a “negligible value claim” on worthless shares can generate a capital loss offset against income at your tax rate (up to 45% for additional rate taxpayers).

Converting Loans to Shares in an Unquoted Trading Company

Converting a loan to shares allows claiming losses on the shares against income (potentially at a higher tax rate than capital gains). However, to avoid HMRC challenges, ensure the company isn’t already insolvent.

Tax Relief Under the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS)

Investing in qualifying EIS or Seed EIS companies offers even greater tax relief:

  • Income Tax Relief: Up to 30% (EIS) or 50% (Seed EIS) of the investment amount deducted from your income tax liability (for the current or previous year).
  • Capital Gains Tax Exemption: Gains from disposing of the shares are exempt from Capital Gains Tax.
  • Minimum Holding Period: Shares must be held for at least three years to retain benefits.

May/June 2024 Key Tax Dates

01/05/2024Corporation tax payment (companies ending year 31/07/23)
19/05/2024 (or 22/05/2024 electronically)PAYE & NIC deductions and CIS return/tax (for the month to 05/06/24)
01/06/2024Corporation tax payment (companies ending year 31/08/23)
19/06/2024 (or 22/06/2024 electronically)PAYE & NIC deductions and CIS return/tax (for month to 05/06/24)

We hope this newsletter provides valuable tax information. Please don’t hesitate to contact us with any questions!

About Graham

Accountant specialising in tax, property, and estate planning. A regular speaker at landlord, property Investor, and later life planning events.

13178 Image Size: 1600 x 1067