Capital Gains Tax on Separation and Divorce
When a married couple or civil partners separate, tax planning is understandably not at the top of their list of thoughts. However, a ‘no gain/no loss’ rule allows capital assets to be transferred between them free of capital gains tax (CGT) up to the end of the tax year in which they permanently separate. Beyond that date, asset transfers between the couple will often give rise to a CGT liability. This is worth careful consideration as divorce settlements can take several months to complete.
The Office of Tax Simplification has recommended to the Treasury that the no gain/no loss rule should be extended to two years from the date of permanent separation. The government have accepted this recommendation, but the change in rules is yet to be legislated.
The actual date that assets are treated as transferred between the separating couple depends upon how the marriage or civil partnership is dissolved.
It is also important to consider private residence relief (PRR) on the family home. It should be noted that where one spouse or civil partner leaves the matrimonial home, they may continue to be eligible for PRR even if they no longer live in the property. There are specific conditions that need to be satisfied for this to apply.
All in all, CGT on separation is a complex area so please do talk to us if any issues may be in point. We understand the sensitivity of the situation and are here to help.
Buying an electric car, does it need to be new?
The shortage of semiconductors has meant long delays in the delivery of new cars. This has caused many company car drivers to choose a second hand car instead, but what are the tax consequences?
Unless the car has zero emissions, the capital allowance rules are the same for new and used cars bought by the business. Plant and machinery capital allowances may be claimed on the purchase price of the car at either 18% or 6%, depending on whether the CO2 emissions for the vehicle are below or above 50g CO2 per km.
Where a zero-emission car is acquired by the business, a special 100% first year allowance only applies to new cars. There is however an exception for certain ex-demonstrator cars. HMRC accept a car is unused and not second hand provided it has been driven for a limited number of miles for the purposes of testing, delivery, and test driven by potential purchasers.
When calculating the P11D benefit of company cars the original list price inclusive of extras should be used, not the purchase price. Hence the P11D value for a second-hand company car may be significantly higher than the price paid for the vehicle.
Drastic changes to ground rent charges
From 30 June, future homebuyers will be freed from expensive ground rent bills when the government’s ban on charging ground rent on new leases in England & Wales comes into force. Ground rent charges, sometimes worth hundreds of pounds a year, provide no clear service in return and can be set to escalate regularly, with a significant financial burden for leaseholders. Landlords will be banned from charging ground rent to future leaseholders, under a new law that will lead to more transparent homeownership for thousands of homebuyers
In preparation, many landlords have already reduced ground rent to zero for homebuyers starting a new lease with them. Anyone preparing to sign a new lease on a home in the next two months should speak to their landlord to ensure their ground rent rate reflects the upcoming changes.
Advisory fuel rate for company cars
Unbelievably there were very few changes to the HMRC advisory fuel rates from 1 March 2022, which may not have been your experience at the filling station! Now that the increased prices have fed through into the HMRC calculations there are some significant increases from 1 June 2022, as set out in the table below. In cases where the employee pays for the car fuel, these mileage rates should be used by the employer to reimburse the employee for business journeys. In cases where the employer pays for the car fuel, these mileage rates should be used by the employee to reimburse the employer for private mileage, if they want to avoid a fuel benefit in kind arising. Where there has been a change, the previous rate is shown in brackets. The previous rates can continue to be used until 30 June 2022, if so desired. It is also worth noting that for hybrid cars, the appropriate petrol or diesel rate should be used.
|1400cc or less
|1600cc or less
|1401cc to 2000cc
|1601 to 2000cc
DIARY OF MAIN TAX EVENTS JUNE/JULY 2022
|PAYE & NIC deductions, and CIS return and tax, for month to 5/6/22 (due 22/06 if you pay electronically)
|Corporation tax for year to 30/9/21 (unless pay quarterly)
|Last date for agreeing PAYE settlement agreements for 2021/22 employee benefits
|Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2021/22
|Deadline for forms P11D and P11D(b) for 2021/22 tax year. Also, deadline for notifying HMRC of shares and options awarded to employees.
|PAYE & NIC deductions, and CIS return and tax, for month to 5/7/22 (due 22/07 if you pay electronically)
|50% payment on account of 2022/23 tax liability due.
Lastly, we would like to thank everyone who took part in our Fantasy Football Competition. We announced the winner on our social media platforms a couple of weeks ago. Again, a huge congratulations to our overall Manager of The Season, Simina McAnally. Thank you to everyone who took part in the competition & we will announce details about the 2022/23 season in the summer.