The HMRC’s Making Tax Digital movement for VAT is scheduled to come into play during April 2019. From April 2019, fundamental changes to the processes of submitting a VAT return should be expected. 

In order to ensure our clients are fully informed about all of the Making Tax Digital Movements, we will be running a series on our blog that includes all of the latest announcements and changes.

Failing to coordinate with the Making Tax Digital changes correctly can result in fines and unnecessary stress.

In the pursuit to become a world-leading digital tax authority, the HMRC plan to make Making Tax Digital to all VAT schemes and registrations. This will include annual, retail, flat rate, partial exemptions and all other areas of VAT.

Who has to comply to MTD for VAT in 2019?

Businesses with taxable income above the VAT registration threshold will be required to comply with the new guidelines, this will include having to:

·      Keep records digitally (for VAT purposes only)

·      Provide VAT returns information through MTD compatible software

For companies below the income threshold, it will not be compulsory to file in accordance to Making Tax Digital, however businesses may also opt to file their VAT returns under to regime.

Exemptions

Exemptions that are already applied to electronic VAT returns will be extended to cover digital recordkeeping requirements. This includes businesses:

·      Who the Commissioners are satisfied is practice members of religious society or order whose beliefs are incompatible with the use of electronic communications

·      For whom the commissioners are satisfied it is not reasonably practicable to make a return system for reasons of disability, age, remoteness of location or any other reason not required to make a return required by regulation 25 using an electronic return system.

How MTD will change how businesses file  a VAT return

Businesses who fall under categories required to comply with MTD must use ‘functional compatible software’ to meet the HMRC’s requirements. Software should allow the organization to maintain digital business records and relevant VAT information electronically.

The HMRC have not disclosed a full definition of what falls into ‘functional compatible software. 

Digital record keeping

Businesses will be required to keep and preserve VAT records digitally. For businesses within the scope of MTD, records that relate to the period between mandation and deregistration must be preserved digitally for up to 6 years.

Digital records should include:

·      Business names, principal place of business and VAT registration number

·      The VAT account that each VAT registered business must keep, by law- the VAT account is the link- the audit trail- between primary records and the VAT return

·      Information about supplied made and received

VAT will contain a lot more information

One of the most significant changes to filing VAT after April 2019 is the wider range of information you will be required to report.

Contact us for expert advice on your 2019 VAT tax return

If you are in the process of going through a divorce there are several routes you may take when it comes to your money and property. 

If you can agree

If both parties in the divorce can agree and cooperate, you can avoid all official paperwork declaring how to divide money and property. However, this agreement won’t be legally enforceable by the court.

In order to make your agreement legally binding you must have a solicitor draft a ‘consent order’ and ask the court to approve it.

A consent order is a document that confirms the agreement and includes details over how your assets are going to be divided up.

If you cannot agree

If both parties cannot come to an agreement over the dividing of their assets, after going through mediation, the court can be asked to make a ‘financial order’. The outcome of this can be:

·      A lump sum payment

·      Ownership of property

·      Regular maintenance payments to help children or living expenses

·      A share of your partner’s pension payments

The judge will decide how your assets should be divided according to you:

·      Ages

·      Ability to earn

·      Property and Money

·      Living expenses

·      Standard of Living

·      Standard of living

·      Role in the marriage or civil partnership

Tax on transferred assets

You are not typically required to pay Capital Gains Tax when transferring assets to your partner. In the instance of transferring assets to your ex-partner, you may be subject to paying capital gains tax.
The rules for working out your gains and loss are extremely complex.

For expert advice on Capital Gains Tax on Divorce contact us

Our Client Blaise Collangelo in Mumma Mia

Charitable Giving in the UK can come with several tax perks that most are unaware of. Below is a summary of just some of the tax perks of charitable donations.

Your donations will go to your chosen charity/ CASC untaxed.

The HMRC do not tax donations by individuals to charities/ CASCs. Therefore your donation will go to your chosen charity/ CASC in full. This can happen through the mean of Gift Aid, Payroll giving schemes, land/property/shares or in your will.

• These terms also apply to sole traders and partnerships. There are different tax ruling for limited companies (gift relief is seen through corporation tax).

You can deduct charitable donations off of your total taxable income.

Charitable donations within a set threshold are deductible off of your total taxable income. Donations will qualify for gift aid as long as they do not exceed four times of your paid tax on income or capital gains for that tax year. In order to deduct these donations, you must keep thorough records of your donations. 

• In order to ensure that charitable donation is beneficial for tax purposes, you should contact a tax professional to ensure the charities accountability and legitimacy is recognised by the HMRC.

Our 4 key Donation tax tips

4 Key Tips

§  Make sure to adopt a proactive donation strategy, that aligns with your own finances, and reflects types of causes you care about (don’t be lured in to the responding only to sudden requests such as after a natural disaster)

§  Always conduct research – don’t always trust charities recommended by a third party as you may find a charity that suits your specific desire to help, this also applies to schemes such as door-to-door giving, as they may not always be a reliable source

§  Try to give to charities that have a good track record of dealing with donations efficiently – either financial or physical items

§  Try not to diversify charitable donations too much, as to avoid unnecessary processing of expenses and receiving an overflow of appeals in your inbox

Contact us to find out how you can benefit from Charitable Donations for Tax Purposes

Set Design by Andrezj Goulding 

The UK’s decision to withdraw from the European Union will have ramifications for all people and organizations in one form or another; whether that be through the cost of material or shipping tariffs.

One industry that is likely to be massively affected by Brexit is the creative industry.

As one of the UK’s fastest growing sectors, the creative industry is generally more anti-Brexit than the rest of the country. Reasons for this include the concerns surrounding the free movement of talent, funding and Britain’s reputation throughout the world.

The likely limits to free-movement that will result from Brexit could cause problems for travelling creative professionals i.e. performers touring Europe. Visas may be required in the future which can be expensive and timely.

Already-established acts are likely to feel the brunt of the changes less, however, there are fears it will be counterproductive for up-and-coming creative professionals.

Michael Dugher, former Labor MP, has called on the government to introduce a ‘touring passport’ to get around any limitations to travel.

Foreign studios spent £1.7billion in the UK in 2017- almost double the amount spent four years previously. The majority of this money was sourced from the U.S.A., spurred on by the fall in the value of the pound after the vote to leave the EU, which made it more attractive for U.S. studios of film in the UK. If a wide-ranging free trade deal is established with the US, this trend would be likely to continue.

Contact us for more expert tax advice for creative industry professionals and companies in the UK

Rinat Ashenazi Motion Design https://www.behance.net/hrinat

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Written by Alistair Bambridge
Partner & Founder
About Alistair

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Updated: 24/08/2022

If you are considering withdrawing from your pension early it is important to understand the different components of your pension that may lead to hefty fines. 

A rise in 'Early Pension Release' offerings from companies have been found in recent years. Anybody considering taking advantage of this offering should do so with caution and seek the appropriate advise. Early Release Pensions, some times called 'Pension Unlocking' involves withdrawing money from your pension before the minimum age of 55 (57 from 2028). 

Although not illegal, Early Release Pensions, have often been employed by scammers and sadly many innocent people have lost their savings as a result. Unless you meet specific conditions, you’ll be charged a substantial amount of tax on your early pension withdrawal.

Pension providers may charge you up to 30% on the total sum you withdraw which is a considerable chunk of money to miss out on. Further to this, the pension provider is then required (by law) to notify HMRC that you have withdrawn money from your account. This will be followed by a hefty 55% tax on the remaining amount you're left with after the previous 30% cost was incurred. Whether you felt you were aware of the potential costs or not, HMRC will require you to pay up. You can offer to pay the money back into your pension fund if you are yet to spend it but under certain circumstances, you will not be allowed to do so. 

EXCEPTIONS WHERE YOU MAY AVOID FINES:

There are some early pension tax exceptions that the HMRC allows where you may be able to access your pension pot early. It is important that this be done through certified professionals to ensure that you are eligible and avoid unnecessary expenses. 

1) You are severely ill and need to retire early for health reasons. 

2) Your life expectancy is less than a year

3) you had previously declared a 'protected retirement date' which brought the date of withdrawal forward. This had to have been created before 06/04/2006. This pension privilege is reserved for those in professions that are unrealistic to be in until the standard retirement age. 

In both these cases, your money would be released to your directly from your pension provider. 

Pension release at 55 

Once you have reached the age of 55 you can release money from your personal or work pension. 

Up to 25% can be withdrawn from your pension pot tax-free. This can be done as a lump sum or in smaller instalments.  

For more information on pension tax planning contact us 

Bibliography

• HMRC Pension Exceptions

Retirement planning doesn't have to be complicated but can often be neglected because we like to prioritise our current spending. Failing to pay into a pension or disregarding retirement saving might make your bank account a little fuller in the short-term, but when you reach an age where generating an income isn't as easy as it once was, you'll find yourself high and dry if you don't plan ahead. According to a study by Which? the average household needs £18,000 a year to cover household essentials and this doesn't include costs of any bucket-list items you might have been saving for your wonder years - keep reading to find out if you're doing enough to save for your retirement.

You might want to start by finding out how much you already have saved. While household essentials came in under £20,000, the figure rises to an average of £26,000 when you take into consideration 'luxury' additions like leisure activities (what retirements are made for!). If you check up on your funds and they're underperforming, having a reshuffle and seeing what other plans are available will help maximise your assets.

According to the Bureau of Labor Statistics, the average worker will hold 10 different jobs before the age of 40 and this can make keeping up with your work pension schemes difficult. You may have funds saved you've forgotten about entirely and you wouldn't be alone - at the last count, there was £3 billion of unclaimed savings. Workplace pensions can be traced using 'Pension Tracing Service' and for Personal plans give 'The Pensions Advisory Service' a call. This will make sure you are getting all the funds you're entitled to. You may then wish to place all your funds under the same scheme to make keeping track of your savings easier. While this might not be possible with some savings due to penalties or complex clauses, modern schemes can often be cheaper and more tax-savvy, so explore all your options.

Pensions are tax-friendly so if you can afford to pay more each month into a retirement fund it can really pay off. You will tend to find increasing the amount you pay into a Workplace pension scheme will prompt your employer to match your contributions. With Personal pension plans, savings are from untaxed earnings resulting in a 25% increase on savings where you would have normally paid 20% income tax on any earnings. If you're a higher rate taxpayer, filing your annual tax return will enable you to claim back additional tax you paid on your contributions. 

If you haven't yet started paying into a pension plan, whether it be through work or a personal alternative, it's never too late to start. When taking into consideration tax breaks, even if you haven't accumulated much you'll have dropped into a lower tax band at retirement age and therefore pay less in taxes when you choose to cash out. By law, 25% of the money you take out upon retiring is tax free regardless. 

Contact us for expert tax advice

SO... What is it?

The Museum and Galleries tax relief was introduced in November 2017 as an opportunity to claim back money on the production of Exhibitions. 

The premise of the tax relief is to allow museums and galleries which are charities to claim back some of the cost they incurred to put on their exhibitions, which the government hopes will make promoting the work of creative industries more sustainable. 

Non-touring exhibitions rates of 20% and touring rates of 25% will be applied to the equivalent of £500,000 of qualifying expenditure per exhibition. Current calculations are based on 80% of qualifying expenditure but must be incurred on and after 1 April 2017 but before the 31st March 2022. 

Do I qualify?

Even if you don't currently pay corporation tax, you can apply for the relief as long as you claim through a company that could potentially pay corporation tax. HMRC will cover the tax relief for the company if they don't infect pay corporation tax. Claiming as an individual is not allowed unless you are constituted as a company.

Is my exhibition eligible?

Exhibitions are defined as any scientific, historic, cultural or artistically-related objects, works or artefacts that are displayed. They must be accessible to the general public, but there may not necessarily be a charge to see the items. Your exhibition will not qualify if it for competition purposes or if your main purpose is to sell the products displayed. 

The exhibitions should take place in a building such as a gallery or museum however libraries or exhibiting outside can also qualify. It should be planned, curated and there should be a clear understanding of what your exhibition is set out to achieve. 

Touring exhibitions will qualify is shown in two or more venues and at least 25% of the pieces are shown at every  subsequent venue after the first. A tour is also defined as a series of dates where you exhibit your work, and therefore the time gap between each location cannot exceed 6 months.

So how do I make a claim?

Incurring costs is inevitable when filing a claim due to the administration and resources used but it's important you seek advice prior to ensure you follow correct procedure. Claims go directly through the tax system so you will need to complete a full corporation tax return (CT600) as well as providing a breakdown of your exhibition costs. You will also be asked to provide accounts, tax computations and any evidence of other expenditure that you feel is relevant. You will not receive tax relief for marketing strategies, legal services, or running costs from the day of opening. 

Contact us for more expert creative industry tax advice

Gemma Pearce

Your tax code is a combination of letters and numbers that is used by your employer and pension providers to work out how much Income Tax should be taken from your pay or pension.

The numbers and letters in your tax code indicate to your employer or pension provider how much tax-free income you should receive per tax year.

What the letters mean

In order to read your tax code you will have to understand what the different letters mean

L

You’re entitled to the standard tax-free Personal Allowance

M

Marriage Allowance: you’ve received a transfer of 10% of your partner’s Personal Allowance

N

Marriage Allowance: you’ve transferred 10% of your Personal Allowance to your partner

S

Your income or pension is taxed using the rates in Scotland.

T

Your tax code includes other calculations to work out your Personal Allowance, for example it’s been reduced because your estimated annual income is more than £100,000

0T

Your Personal Allowance has been used up, or you’ve started a new job and your employer doesn’t have the details they need to give you a tax code

BR

All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)

D0

All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)

D1

All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)

NT

You’re not paying any tax on this income

Updating your tax code

There may be some instances where you are required to update your tax code; for instance if you start a new job and are put on an emergency tax code.

The HMRC will update your tax code once you have notified them of your employer details.

Contact us with any of your queries regarding your tax code

Our client Anna Rhodes (Rhodes Studio) work with One Direction

We have worked with both start-ups and established businesses in the creative industry for over 10 years. Our wealth of knowledge in creative industry business tax allows start ups to access all of the exclusive tax breaks they are entitled to, that will enable them comfortably make it through their first year.

 

New Creative Industry Start Up Venture

Cash flow is often the make or break factor of any business. Prompt invoicing and good credit control are essential to you businesses success and survival.

There are a number of tax reliefs that exist to support companies that are just starting out.

 

Pre-Trading Expenditure Relief

Many creative industry entrepreneurs spend years preparing for their businesses launch- buying equipment, such as camera equipment, bit by bit. Whether the purchases were consciously towards your launch or an unconscious contribution towards your unforeseen business, the expenditure is often claimable.

Pre-trading expenditure can be deducted from the turnover of your businesses first accounting period- as if it has been incurred during the first year of trading.

Please note there are some items that do not qualify as a claimable pre-trade expense, such as capital expenses.

 

VAT

Whether you need to register for VAT is likely to be an early consideration.  There are a number of compulsory registration requirements that may well mean that you do not have an option.

If you are likely to be incurring work-related expenses on a regular basis we often recommend you register for VAT from the get go. For instance, if you are a filmmaker and are going to have to upgrade your camera and editing equipment regularly.

 

Pre-registration VAT

If you have decided to register for VAT, you should first consider whether any work related VAT has occurred prior to registration. Pre-registration input VAT may be reclaimed on goods acquired within four years of the effective registration date (EDR), provided the goods are still in use at the EDR, and for services within six months.

 

EDR

If you register for VAT after beginning trade, it is important to ensure the optimum date for recovery of the maximum pre-registration input tax. For voluntary registration, the EDR can be backdated to upto four years.

Early year Losses

It is perfectly normal to make slight losses within your first year of business. To aid start-up losses, the normal one-year carry back facility is extended to the three years preceding the loss. This extension applies to losses incurred in the first four years of trade.

This can be extremely useful for entrepreneurs who were previously employed, as sideways loss claims can lead to a tax refund- providing a cash injection for the your business.

 

Sideways loss Relief

In order to claim sideways loss relief you will need to prepare your accounts and tax return on the accruals basis. The HMRC will deny relief if it determined that the trade is not being pursued on a commercial basis, i.e. it’s actually a hobby.

 

Contact us for expert creative industry tax advice for start ups.

This is a guide for those who run a partnership PLC business. Please not the rules will vary for LLC’s and other business structures.

Tax Deadlines for UK Partnerships

Paper tax returns are due in on the 31st October. While those who file online must do so by the 31st January.

If the HMRC gave you notice to make a Partnership Tax Return after the 31st July of the previous year, you may have longer to file your return.

What does a Partnership Tax return include?

A Partnership Tax Return will ask for the details of your partnership’s income and related information.

The first 8 pages of a Partnership Tax Return covers the income from trades and professions, and interest or alternative finance receipts from banks, building societies or deposit takers. There are also ‘supplementary’ pages covering the less common types of income and disposals of chargeable assets.

As the partner completing the Partnership Tax Return it is your responsibility to make sure that you fill in the correct supplementary pages.

Penalties for failing to file by the deadline

If you fail to file your Partnership Tax Return by the appropriate deadline, the HMRC will charge each partner who was a member of the partnership during the return period a £100 penalty.

As the delay continue, the penalty will increase for each member:

·      Over 3 months late- a penalty for each additional day of the Partnership Tax Return is late for a maximum of 90 days (£900)

·      Over 6 month late- a fixed £300 penalty

·      Over 12 months late- a further fixed £300 penalty

 

Changes in the membership of a partnership

For tax purposes, business carried on in a partnership is regarded as continuous, despite any changes to the members of the partnership, provided there is at least 1 partner who is a member of both sides of the change. It is important to confirm that, where a partner has only been a member of the partnership for a part of the period covered by the Partnership Tax Return this fact is correctly reflected in the partner details section and profit share information provided in the Partnership Statement.

Tax due on shares of partnership income

The information provided to the HMRC in your Partnership Tax Return will be used to check that the partners are paying the correct tax and Class 4 National Insurance Contributions (NICs) due on their share of the partnership profits. Each partner is liable only up to the tax due on his or her share of the partnership profit.

Types of partnerships

A partnership for the purposes of the Partnership Tax Return includes:

·      A partnership governed by the Partnership Act 1890

·      A limited partnership registered under the Limited Partnership Act 1907

·      A limited Partnership under the Limited Partnership Act 1907

·      A limited liability partnership (LLP) registered under the LLP Act 2000 unless the LLP

o   Does not carry on a business with a view to profit

o   Is being formally wounded up

In which instance the LLP may need to file a Corporation Tax Return.

Contact us for expert tax advice for partnerships

As a UK business considering expanding to the US it is essential that you understand that tax obligations and implications you will incur as a foreign business in the US. 

EIN and Form 8832

Before any forms are completed, the firm must obtain an Employee Identification Number (EIN) from the IRS.  When this happens, the IRS will automatically designate the company as either a corporation, partnership, or disregarded entity with one owner.  From there, the foreign company should fill out form 8832 to either confirm this classification or elect a different one. 

W-8 Forms

The most important step in this process is filling out one of the W-8 forms.  This type of form acknowledges that the foreign company intends to take advantage of the tax treaty they have with the US, and therefore will see the 30% withholding tax reduced.  For UK businesses, this rate is reduced to 0%, so they should not have to pay any withholding taxes on payments received from US businesses.  This applies to a wide variety of income types, including interest, dividends, rents, royalties, premiums, annuities, and compensation for services.  In most cases, the company making the payment or the IRS will tell the firm which form to fill out.   Usually, foreign entities will fill out W-8BEN-E while partnerships will use W-8IMY. 

Setting a business up in a physical location of the US

If the UK company decides to set up a physical location in the US, they will be subject to US corporate tax.  The firm should file form 1120 and pay the tax to the IRS.  This income should also be reported on the UK tax return.  However, they may file for double tax relief under the UK/US tax treaty and reduce their UK tax liability by the amount of US tax paid.  If the company does not have a physical location in the US, they do not have to pay US Corporate Tax. 

Form 1065

Additionally, the IRS may request that a company entering the US provide records of their income and expenses for past years.  This is commonly done using Form 1065, and is strictly for reporting, not tax, purposes. 

By following these steps, any UK business can efficiently begin operating in the US while minimizing their tax burden and remain in accordance with all US tax laws.    

Contact us for expert US Corporation tax advice

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Written by Alistail Bambridge
Partner & Founder
About Alistair

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Updated 21st September 2022

As accountants specialists in UK and US investments,  we have experienced increased demand from both clients and our article readers for more information on UK tax on cryptocurrency. 

This article will break down how cryptocurrency is taxed in the U.K and tax planning considerations for cryptocurrency in the future. 

We will update this article as the UK tax treatment of cryptocurrency develops. 

For an explanation of how cryptocurrency is taxed in the US and  how to reduce US tax on cryptocurrency- go to this article 

Disclaimer:

Please note: Recommendations and obligations for crypto investors will vary depending on the circumstance. This article offers a general overview of the topic.

We recommend always consulting a certified UK tax adviser for cryptocurrency to ensure your investments are treated in line with UK tax law and for maximum savings against tax.

Skip to different questions in the articly by selecting from the list below

How is cryptocurrency taxed in the UK?

How Capital Gains Tax is applied to Cryptocurrency 

What can I deduct when calculating my crypto gain/ losses?

Do you pay tax on all crypto gains?

How to pay capital gains tax on cryptocurrency in the UK?

UK Income Tax on cryptocurrency 

What should you know about Paying Employees in crypto-assets

What you should know about Trading (buying and selling) Cryptocurrency?

UK Inheritance Tax on cryptocurrency 

Are gifts of cryptocurrency taxable in the UK?

Tailored advice for UK tax on cryptocurrency

What is Cryptrocurrency?

'Cryptocurrency' is a term often used when referring to ‘virtual currencies. 

Cryptoassets or cryptocurrency- sometimes called “tokens”-are defined by HMRC as “cryptographically secured digital representations of value or contractual rights that can be transferred, stored and traded electronically”. 

Bitcoin is by far the most popular and well-known cryptocurrency. However, there is a wide range of cryptocurrencies available both to invest in and purchase. Some examples of cryptocurrency include

• Bitcoin
• Ethereum
• Tether
• USD Coin
• BNB

Access to all cryptocurrencies in rank order can be found on Coin Market Gap

The value of some types of cryptocurrency has risen at such a rate that ‘bitcoin millionaires’ are becoming a norm. The surge in cryptocurrency income has been followed by an increased interest in how virtual income is taxed in the UK

How is Cryptocurrency Taxed in the United Kingdom?

As with any other currency, there is no specific crypto tax in the UK. Instead, your crypto will be subject to either income tax or capital gains tax.

 Whether you pay income tax or capital gains tax will depend on how you're using crypto and the particular transactions you’re making.

The treatment of cryptocurrency in the UK tax system is an evolving area, we will keep this article up to date with all the latest UK cryptocurrency tax changes.

Save this article to your bookmarks so you always have it to hand when handling UK taxes on your cryptocurrency

How Capital Gains Tax is Applied to Cryptocurrency

In the majority of cases, you will hold crypto assets as a personal investment, usually for capital appreciation or to make particular purchases. In these instances, you will be liable to pay Capital Gains Tax when you dispose of the crypto. 

A ‘disposal’ is a broad concept and includes: 

·      Selling crypto for money

·      Exchanging crypto for a different type of crypto

·      Using crypto to pay for goods or services

·      Giving away crypto to another person (unless it’s a gift to your spouse or civil partner)

View the capital gains thresholds

What Can I deduct When Calculating my Crypto Gain/ Losses?

There are certain allowable expenses/deductions that can be claimed when claiming a loss on your cryptocurrency against tax. These include, but are not limited to: 

·      Transaction fees paid

·      Advertising costs for a purchaser

·      Professional costs eg. to draw up a contract for acquisition or disposal

·      Costs of making a valuation or apportionment to be able to calculate gains or losses

·      Exchange fees

Speak to one of our chartered crypto tax accountants for more information on what you can claim

Help on calculating your crypto gain/loss:

This can be complex, however, with a want for providing you with as much information about UK tax on crypto as possible we have included. If any questions come up just drop us an email. 

Feel free to skip to “Do you pay tax on all crypto gains?” if you would like to avoid technical jargon.

The gain/loss is equal to the disposal proceeds less the base cost of the cryptocurrency.

The base cost is determined by applying specific ordering rules on a cryptocurrency by cryptocurrency basis to acquisitions:

1. On the same day.

2. Within the following 30 days.

3. From the ‘pool’, which effectively means that gains on disposal are calculated using the average cost of the cryptocurrency.

Do You Pay Tax On ALl Crypto Gains?

No, HMRC gives every UK taxpayer a Capital Gains Tax Allowance of £12,300 in the 2021-22 tax year. This means you'll only pay Capital Gains Tax on any capital gains over your £12,300 allowance. 

However, this allowance is not just for cryptocurrency, it includes all capital gains within a tax year eg. gains on shares, securities, property etc.

The rate of tax you will pay for any gain over the allowance will depend on your level of income (10% for basic rate taxpayers and 20% for everyone else).

How to Pay Captial Gains Tax On cryptocurrency in the UK?

You report cryptocurrency gains on the Capital Gains Summary (SA108) pages in your annual Self-Assessment tax return.

As cryptocurrency is neither a listed nor unlisted share, information on any capital gains or losses should be detailed in the section ‘Other property, assets and gains’ in boxes 14 to 22.

In some instances, you may want to declare your ‘buying and selling’ crypto transactions even if you didn’t make a taxable gain. Why? If you made a loss by 'buying and selling cryptocurrency, you have two options. 

1) Your crypto loss can be offset against capital gains of the same tax year. 

2) Your crypto loss can be carried forward indefinitely against gains of future years. 

All UK residents are required to declare taxable cryptocurrency gains on their UK tax return. If you’re a US expatriate living in the UK and have declared crypto gains on your US return, you will still be required to report the gain on a UK tax return. 

For US expatriated holding cryptocurrency the article “us crypto article*title” may also be helpful

For more information on how to report cryptocurrency gains, book an initial consultation with a member of our team today.

How does the UK handle Income Tax On Cryptocurrency?

If you fall into any of circumstances below, you are eligible to pay income tax on your crypto assets: 

• Payment for Work
• Staking Rewards
• Tokens recieved from Mining Crypto
• Airdrop

If you receive cryptocurrency as a form of payment then it will be regarded as taxable income, thus you should pay income tax on your crypto assets.

There are circumstances where the rules and regulations around the taxation of cryptocurrency/ crypto assets remain unclear in the U.K. as the HMRC has little guidance on the matter. These include engage-to-earn or play-to-earn platforms and include: 

• Referral Rewards like Binance Referral

• Learn to earn campaigns, like Coinbase Learning Center 

• Watch to Earn platforms like Odysee

• Browse to Earn platforms like Premission.io browser extension

• Play to Earn games like Axie Infinity

• Shop to Earn through browser extensions like Lolli

• Share Public addresses to earn on platforms like Moon Faucet

However, it can be inferred that earning tokens and coins in this manner can be classed in the same bracket as Mining crypto and Staking Rewards which leaves them eligible for taxation. 

If you do have to pay income tax on your crypto-assets the earnings will fall into the U.K. income tax brackets for the year that you are filing based on the economic worth at the time. 

For complete clarity on whether you owe income tax on any of these earnings, we advise that you speak to a tax professional who is familiar with the taxation of cryptocurrency

What Should you know about paying employees in crypto-assets?

Where you are seen to be making an income from crypto, you will pay income tax. 

Cryptocurrency received as employment income count as ‘money’s worth’ and are subject to Income Tax and National Insurance contributions on the value of the asset.

Cryptocurrencies are readily convertible assets if trading arrangements exist or are likely to come into existence.

Accordingly, employer and employee, NICs will be payable when employees are paid in exchange tokens. The employer must collect the income tax and NICs due and pay it to HMRC through Pay As You Earn (PAYE). This applies even if an employee does not have a cash salary, in which case the employee must “make good” the tax the employer has paid on their behalf within 90 days of the end of the tax year in which the asset was received, otherwise additional income tax and NICs will apply.

If you retain crypto assets that were subject to income tax on the acquisition, CGT may apply on a future disposal.

What Should You know about trading (buying and selling) Cryptocurrency?

Trade in cryptocurrency is very similar in nature to trade in shares, securities and other financial products.

 If your crypto activity is considered to be trading then Income tax will take priority over Capital Gains Tax and will apply to profits (or losses). 

However, it is only in exceptional circumstances would HMRC expect you to buy and sell crypto with such frequency, level of organisation and sophistication that the activity would constitute a financial trade in itself. It’s often the case that you would describe buying and selling crypto as ‘trades’, however, the use of the term ‘trade’ is not sufficient to be regarded as a financial trade for tax purposes.

For most, the activity will not amount to trading but will be regarded as an investment where Capital Gains Tax will apply.

UK Inheritance Tax on cryptocurrency

The HMRC considers cryptocurrency property of the deceased for the purposes of inheritance tax and their value will be calculated at the date of death.

As part of the estate, crypto-assets are treated according to the normal rules on inheritance tax. 

For example:

A total estate of less than £325,000 is currently tax free and over that amount the tax rate will be 40 per cent. 

Estates left wholly to spouses are normally exempt from tax regardless of their value, and donations to charity are always tax-free.

Cryptocurrency can fluctuate in value and a sudden drop could result in beneficiaries paying disproportionate taxes. 

For example:

 Assets could be valued at a certain amount for inheritance tax purposes but could be worth half of that a week later if the market crashes. 

Unlike with other assets, at present, there is no tax relief for this situation.

This means the amount of tax payable would not be updated to reflect a fall in value of crypto-assets after death.

Are gifts of cryptocurrency taxable in the UK?

Gifting crypto in the UK is taxed. 

A gift of cryptocurrency is seen as disposal and is therefore subject to Capital Gains Tax.

The proceeds are considered to be the value of the crypto on the date of the transfer. 

For inheritance tax purposes, the gift will be considered as a ‘potentially exempt transfer’ (PET) and no IHT will apply unless the ‘transferor’ dies within 7 years of the transfer. 

How the UK treats cryptocurrency compared to how cryptocurrency is taxed in the EU?

When comparing the UK’s tax treatment of cryptocurrency to how some countries in the EU we can see major variations. 

There is not currently one set rule for tax on cryptocurrency between EU countries.

In general, members of the EU "charge capital gains tax on cryptocurrency-derived profits at rates of 0-50%", which is very similar to the UK.

However, in the UK, taxation on crypto assets and future developments are seen as less defined than in some European countries. 

“Some countries like Malta and Portugal have gone as far as creating crypto havens.”

Tailiored Advice for UK tax on Cryptocurrency

Recommendations and obligations for crypto investors will vary depending on circumstance. This article offers a general overview of the topic.

We recommend always consulting a certified UK tax adviser for cryptocurrency to ensure your investments are treated in line with UK tax law and for maximum savings against tax.
To speak to one of our certified UK tax advisors drop us a message or book an appointment

Bibliography

• HMRC on cryptoassets
• Notes about Bitcoin
• Notes about Ethereum
• Notes about Tether
• Notes about USD Coin
• Notes about BNB
• View a list of known Cryptocurrencies
• What is cryptocurrency staking?
• HMRC captial gains allowances
• The Financial Times on taxation of cryptocurrency and inheritance tax
• Binance on Crypto tax havens
• Coinbase on non-taxable crypto actions

 

Alistair Bambridge

Congratulations to our founder Alistair Bambridge who has been listed in the newly released Spears 500 2018. The guide is an annual publication that recognises the top private client advisers, wealth managers, lawyers and service providers for high net worth (HNW) individuals.

For expert accounting advice for High-Net-Worth Individuals contact us now

With penalties of up to 4% of annual turnover, the ramifications of not understanding the GDPR could be huge.

On the 25th May 2018, the GDPR legislation comes into play. This article is intended to prepare you and your business.

What is GDPR?

The General Data Protection Regulation (GDPR) is a new legislation that is aimed at strengthening data protection, by giving consumers greater control over how our personal data is stored and used.

The GDPR is the biggest change to data protection in this generation.

Why is it necessary?

Internet and cloud technologies have grown massively since the 1995 EU Data Protection Directive. With the developments, companies have gained new ways of using and sharing personal data. The new legislation has been introduced to regulate how businesses use, share and hold individuals data.

Does Brexit mean that GDPR doesn’t apply to UK businesses?

In short: ‘No’.

The UK will still be a recognised member of the EU on 25th May 2018. Therefore GDPR will automatically become part of domestic law and it is all most certain that it will continue to be part of UK law after we Brexit is complete.

GDPR will be relevant to all organisations that reside within the EU, provide goods or services to individuals within the EU or that process any EU citizen’s information.

What are the penalties?

There are fines of up to 4% of annual worldwide turnover or €29million- whichever is greater

 Below is a video from the Information Commissioner Elizabeth Denham breaking down the importance of GDPR.

 

Contact us for expert tax advice for businesses

Band DNCE photographed by Henry Dean, www.HenryDean.co.uk

One of the first steps that we will take when looking at your accounts is ensuring that you are claiming absolutely every expense you are eligible to as a musician. 

MUSICIANS HAVE A NUMBER OF TAX DEDUCTIONS THAT ARE UNIQUE TO ANY OTHER INDUSTRY.

Below we have put together a list of some of the expense you are entitled to as a musician. 

CLOTHING

Clothing can be an extremely useful expense to claim on your tax return. As a musician you almost definitely spend some of your income on work-related clothing, whether it be clothing for auditions, shoots or rehearsals.

Clothing is definitely one of the more obvious expenses to claim. However for a smooth and painless tax-filing season every year, it is vital that you are aware of your entitlements when claiming this expense. Many musicians are subject to penalties and hold-backs due to over claiming. 

USE OF HOME AS AN OFFICE

Use of home as an office is an expense that all too often missed out by musicians. If you use your home to apply for auditions, rehearse or any other work-related uses you are entitled to claim this expense.

You are able to claim a percentage of your household bills for your use of home as an office.

TRAVEL TICKETS

Part of the nature of being a musician is constantly performing and practicing at different locations. All travel that is work-related is claimable against tax. Therefore flights, train-tickets and bus-rides to photography shoots are claimable. 

It is important to note that if your travel was partly personal-related, i.e. 5 days of your travel were taken as holiday, you must apportion the expense.

Work-related petrol and other motor costs are also claimable.

EQUIPMENT 

Perhaps on of the most obvious expenses to claim for a musician is work-related equipment i.e. your instrument or microphone! This expense can, however, be stretched much further. For example, the equipment need to maintain your instrument. 

Make sure you are identifying all work-related expenses on equipment. Equipment is defined as items that you intend to use for a prolonged period. Your do not include this in your business expenses but instead in an AIA (Annual Investment Allowance), which works to reduce the tax you pay. 

Find out more expenses and deductions you are entitled to as a musician. Contact us now.

 

Our client, Sylvia Flote, Model, Nevs Models

One of the first steps that we will take when looking at your accounts is ensuring that you are claiming absolutely every expense you are eligible to as a make-up artists. 

Make-up artists HAVE A NUMBER OF TAX DEDUCTIONS THAT ARE UNIQUE TO ANY OTHER INDUSTRY.

Below we have put together a list of some of the expense you are entitled to as a make-up artist. 

USE OF HOME AS AN OFFICE

As a make-up artist, it is not unusual to work with clients from your home or for other work-related activities. Use of home is a claimable expense that is all too often missed out, or inaccurately claimed.

You are able to claim a percentage of your household bills for your use of home as an office. This includes expenses on bills such as your mortgage/rent, electricity, heating and wifi

CLOTHING

Clothing can be an extremely useful expense to claim on your tax return. As a make-up artist you almost definitely spend some of your income on work-related clothing, whether it be clothing for meetings or comfy shoes to help you stand all day behind while working behind the scenes.

Clothing is definitely one of the more obvious expenses to claim. However for a smooth and painless tax-filing season every year, it is vital that you are aware of your entitlements when claiming this expense. Many make-up are subject to penalties and hold-backs due to over claiming. 

TRAVEL TICKETS

Part of the nature of being a make-up artist is moving from location to locations, working behind the scenes. All travel that is work-related is claimable against tax. Therefore flights, train-tickets and bus-rides to events are claimable. 

It is important to note that if your travel was partly personal-related, i.e. 5 days of your travel were taken as holiday, you must apportion the expense.

Work-related petrol and other motor costs are also claimable.

EQUIPMENT 

Perhaps on of the most obvious expenses to claim as a make-up artist is work-related equipment i.e. your make-up! This expense can, however, be stretched much further. For example, the equipment need to take a picture of your work for your portfolio.

Make sure you are identifying all work-related expenses on equipment. Equipment is defined as items that you intend to use for a prolonged period. Your do not include this in your business expenses but instead in an AIA (Annual Investment Allowance), which works to reduce the tax you pay. 

ADVERTISING

Getting your name seen and heard is a major part of being a successful make-up artist. Any methods you use to promote yourself in an effort to get ahead in your career is claimable. Whether you pay to be mentioned in an article or directory, run an ad campaign on your make-up blog or any other forms of promotion- it's claimable. 

Contact us to find out the many more expenses, deductions and reliefs you are entitled to as a make up artist

 

Just some of Our Clients Amazing work

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EXPERT SAVING PHOTOGRAPHERS THOUSANDS EVERY YEAR

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We are expert in the complexities and opportunities of tax for photographers. As specialists in accounting for photographers, we save photographers thousands every year by maximising on the unique deductions and reliefs available to photographers.  

We provide a simple and friends, start-to-finish accounting service for individuals and companies. 

Photography by our client, Diego Arroyo

One of the first steps we will take when filing your tax return is ensuring that you are claiming absolutely all expenses you are entitled to.

As a self-employed photographer it is essential that you keep accurate records of you expenses throughout the tax year. The more detailed and accurate your expenses, the more you can claim back. 

Below are some examples of expenses you are entitled to claim as a photographer:

TRAVEL TICKETS

Part of the nature of being a photographer is constantly exploring different locations. All travel that is work-related is claimable against tax. Therefore flights, train-tickets and bus-rides to photography shoots are claimable. 

It is important to note that if your travel was partly personal-related, i.e. 5 days of your travel were taken as holiday, you must apportion the expense.

Work-related petrol and other motor costs are also claimable.

EQUIPMENT 

Perhaps on of the most obvious expenses to claim for a photographer is work-related equipment i.e. your camera! This expense can, however, be stretched much further. For example, the equipment need to look after your camera or lighting equipment. 

Make sure you are identifying all work-related expenses on equipment. Equipment is defined as items that you intend to use for a prolonged period. Your do not include this in your business expenses but instead in an AIA (Annual Investment Allowance), which works to reduce the tax you pay. 

CLOTHING

Clothing can be an extremely useful expense to claim on your tax return. As a photographer you may have clothing that you use wholly and exclusively for work. This clothing is claimable.

It is essential that you only claim clothes that are worn for the purpose of work. Part-personal clothing is not claimable. Wrongfully claiming this expense can lead to setbacks and penalties. 

ADVERTISING

Getting your name seen and heard is a major part of being a successful photographer. Any methods you use to promote yourself in an effort to get ahead in your photography career are claimable. Whether you pay to be mentioned in an article or directory, run an ad campaign on your photography blog or any other forms of promotion- it's claimable. 

Contact us to find out the many more expenses, deductions you are entitled to claim as a photographer