Category: HMRC

Register of Overseas Entity

Update March 2023

Following ICAEW advice. Currently we are not doing this work.

First published 25 August 2022

Any overseas entity owning land or property in England or Wales since 1st January 1999 needs to register and inform Companies House about their beneficial owners (BO).

Register active from 1st August 2022. Time limit is six months i.e. all overseas entities must get their verification done by 31st January 2023.

2.4 Entity will need to update this information annually.

Fine for non-compliance

£500 per day or prison sentence of up to 5 years and restrictions when trying to sell or lease their land.

Step by Step process

7.1 Overseas entity gives the notice to BO

7.2 BO must confirm or correct the notice and supply Identity proof (ID) and address proof (VA)

7.7 Get ID and VA verified then complete the Companies house form with £100 fee.

7.8 Once application accepted Overseas Entity ID will be provided. This ID needs to be provided to Land registry. Please note there is no need to provide OE ID to Land registry if no application of sale/purchase is being made. In this case OE ID should be kept safely for future use in sale/purchase etc. transactions.

Verification

13.12 Obligation to identify the beneficial owners is on the entity.

13.17 Relevant persons are not required to do full ‘know your customer’ checks e.g. as to the source of wealth and source of funds, as required under the MLRs.

What information must be verified?

13.30 Verification involves verifying information about overseas entities, beneficial owners and managing officers. Verification checks for individuals should involve looking at both evidence to match their identity as well as evidence of the condition met to be a beneficial owner (or managing officer).

Check ID and VA of Beneficial Owners.

13.40 Verify passport in person or via video link.

Collect 

  1. Certificate of incorporation
  2. Certificate of incumbency, if any
  3. Register of Members
  4. Register of Directors

13.66 Verification must happen before the information is submitted to Companies House, but not more than three months before.

13.76 Keep records for 5 years.

Source : Technical Guidance

ATED in a nutshell

First published 2 Feb 2020

  1. Applies to Companies owning residential properties valued over £500k
  2. Relief given if let on commercial basis.
  3. Valuation
  • Initial – Date of Purchase
  • Subsequent – 1st April 2012 and then every 5 years i.e. 1st April 2017, 1st April 2022 and so on.
  1. Tax year runs from 1st April to 31st March.
  2. Tax return due date
  • Initial – within 30 days of purchase
  • Subsequent – by 30th April during the tax year i.e. for tax year 1st April 2018 to 31st March 2019. Return must be submitted by 30th April 2018.
  1. ATED UTR – we get a 15 digit UTR on registration
  2. To file a return no need to wait for UTR.

    Source:
    ATED Return Notice
Updated December 2022
SDLTM04042 – Stamp Duty Land Tax on de-enveloping transactions

Shareholders maybe able to de-envelop the property without payment of any SDLT see link SDLTM04042

 

Update March 2023

There are fixed revaluation dates for all properties i.e. every 5 years from 1 April 2012. The latest revaluation date is 1 April 2022. This valuation should be used in your clients return for the 1 April 2023 to 31 March 2024 chargeable period.

Valuation – Self assessment allowed.

See Agent update 105

Incorporating a letting business

Should I transfer my existing properties in a new company ?

Three taxes are considered when considering the question of incorporating a letting business:

  1. Corporation/Income Tax
  2. Capital Gains Tax ; and
  3. Stamp Duty Land Tax (SDLT)
  4. Inheritance tax

1. Corporation/Income Tax

  • Corporation tax rates are lower than income tax rates
  • Continued tax relief on mortgage interest
  • Flexibility in timing of profit extraction.

2. Capital gains tax (CGT)

Transfers between connected parties are deemed at market value (MV).`Incorporation relief ` is available but it will only be available in case of a `business`. Keeping in view case law as in Lord Fisher and Ramsay, it will be a difficult threshold to cross for landlords with one or two BTL properties.

Incorporation relief

No CGT payable if transfer is for shares in the business.

Eligibility conditions:

  • Rental activity is a business. Main case law here is `Ramsay Vs HMRC` to determine whether the activity is really a business. HMRC guidance CG65715 states the activity should be carried for around 20 hours a week personally.

    Please note HMRC no longer provides non-statutory clearances as conformation that a particular property letting is sufficient to qualify as a business. 

  • Consideration in new issued shares only – not a credit in director’s loan account.
  • Transferred as a going concern i.e. profitable business.

Please note annual exemption allowance, currently £11,700 not available to companies

3. SDLT – Usually SDLT is not payable when consideration is nil. But FA 2003 Sec 53 also see SDLTM30220 inserted a special provision to ensure SDLT is payable on Market Value, irrespective of consideration actually paid. 

Future purchase – In case buyer is a company it pays 3% surcharge (threshold £40k) in all cases, whether or not company owns another property or not. Thus landlords cannot avoid the 3% surcharge by buying properties via company.

Also, be aware of 15% SDLT rate for companies but relief maybe avaliable for rental business.

SDLT Calculator

4. Inheritance tax : Property will be a chargeable asset for both individual or owned by a company, as Business Property relief not available see IHT Act 1984 sec 105 (3)

Practical considerations:

  • Refinance costs
  • Increase in interest rates – as bank usually charge more to limited company landlords.
  • Huge SDLT bill on transfer of assets.
  • Other fees – Lawyer, accountant, valuer etc.

Lastly, there is no guarantee HMRC will not change the rules for finance costs relief for companies in the future.

Conclusion:

I think the sensible approach will be to leave the existing portfolio as it is but to buy new properties in a limited company if the aim is to expand the portfolio rather than profit extraction from the business. This will require another article in greater detail.

 

First written in May 2018; updated March 2023

Yearend tax planning for employed (PAYE) individuals

  • Pension contributions 1 – for self, see our detailed blog on this topic.
  • Pension for children or non-working spouse pension. Government top ups contribution of £2,880 by £720 to gross up to £3,600.
  • ISAs – Self, children or life time.
  • Claim employment expenses like subscription, working from home £6 minimum
  • Marriage Allowance
  • Investments in VCT, SEIS or EIS. These are risky investments so beware.
  • Giving to charity via Gift Aid – among a married couple if one is basic and other higher rate payer. One with higher rate should make the donation. Further tax planning scenarios in case income is between £50k-£60k (child benefit) and £100k to £125k (personal allowance reduction).
  • Check your National Insurance record if gaps. See our detailed blog.
  • Premium Bonds
  • Pay off your loans. What you save is what you earn. Start with the one which charges highest interest rate usually credit cards.
  • Use Capital Gains – Annual Exemption limit.
  • Inheritance tax – give away £3k per annum.
  • Buying assets for capital appreciation in children’s name (Bare Trust)as Parental settlement rules are not applicable for CGT. See blogs from Aberdeen and Step Journal.

Slowdown, any action in haste will most likely be regretted.

Plan for next tax year.

Notes:

  1. Pension contribution lowers Income tax not National insurance contributions; unless it is via a Employer’s salary sacrifice scheme.

How to change name, address, telephone number or email address with HMRC

HMRC calls these `designatory details`

For Agent see Link Agent Update 105

For Client see the same link, scroll down a bit and read,
Updating your client’s designatory details
re PAYE – guidance says to call HMRC but this seems incorrect, as changing address on Companies House website automatically updates PAYE records on HMRC website.