Post-cessation receipts and expenses
Tax relief may be available for post-cessation expenses of a trade. In order to be an allowable post-cessation expense, the trade must have ceased, and the expense must have been deductible in calculating the trading profits.
This means that the expense still has to meet the wholly and exclusively
Basis of assessment changing
Forthcoming ‘basis of assessment’ reforms will change the way trading income is allocated to tax years for the self-employed. The changes will affect sole traders and partnerships that use an accounting date between 6 April and 30 March. There is no change to the rule for companies.
The reforms
Farming – using the herd basis
There are special rules which can apply to farmers and market gardeners that prepare their accounts on accruals basis. This includes special rules for farmers’ averaging relief, dealing with losses and the treatment of compensation for compulsory slaughter.
The special rules also refer to the use
Scope of Trade
There is no statutory definition of ‘trade’. The only statutory reference to the term is that ‘trade’ includes a ‘venture in the nature of trade’. This absence of a formal definition decides if an activity is a trade more difficult. However, over time the courts have set some established guidance.
Demergers
There are special statutory demerger provisions that are designed to make it easier to divide and place into separate corporate ownership the trading activities of a company or group of companies. Using these provisions, an exempt demerger will be deemed to take place and the distribution will
Points to consider when valuing goodwill
Valuing goodwill is a complex process and there are many different methods which can be used and that vary from industry to industry. Goodwill is a way of placing a monetary value on the business’s reputation and customer relationships. Or as HMRC say in their guidance, in accounting terms,
Income excluded from a property business
HMRC publishes a list of income streams that are excluded from a UK property business. The list includes fishing concerns, hotels and guest houses, tied premises, caravan sites, lodgers and tenants in your own home, extra services to tenants and letting surplus trade accommodation. In most cases the
Business gifts
The rules for deciding whether a gift given in the course of business is deductible are complex. The rules for business gifts generally follow those for business entertaining expenditure. This means that HMRC take the view that in general business gifts are not an allowable deduction from profit for
Dividend tax increase announced
The 1,25% increase in NIC contributions from April 2022 will be mirrored by a similar increase in the tax charge on dividends. From April 2022, the dividend tax increases will apply as follows:
Basic rate taxpayers will see an increase from the present 7.5% to 8.75%.
Higher rate taxpayers will
Post cessation receipts and payments
There are special rules for the taxation of post-cessation receipts and expenses after a trade has ceased. These provisions also apply to professions and vocations as they apply to trades.
Tax relief may be available for post-cessation expenses of a trade, although expenses still have to satisfy