Entries from July 2006 ↓

Many people have asked us why the tax year starts on 6 April. Historically, the start of the legal year was 25th March, or Lady Day. So why has it moved back to April?

Back in 1752 the UK switched from the Julian calendar to the more widely used Gregorian calendar. It was calculated that up to 1752, the Julian calendar had fallen 11 days behind the Gregorian calendar since its inception in 46BC. Therefore, the day after 2 Sep 1752 was revised to be 14 Sep 1752.

So that the Government didn’t lose 11 days of tax revenues in that year, the start of the next legal year was pushed back to 6 April and its been 12 monthly ever since!

If you own properties and rent them out you can offset property related expenditure against the gross rents received. However, when the property is empty the Taxman may resist some types of expenditure.

Pre-letting expenditure
You can claim expenses incurred prior to the first time a property is let. The time limit is seven years and the costs include advertising, phone calls, travel expenses etc.

Between tenants
If your property is temporarily vacant while you are looking for a new tenant, your normal expenses should still be tax dedutcible. You may have to demonstrate that you have been actively searching for a new tenant and the longer the vacant period the more the Taxman is likely to challenge your expenses. However, we have seen costs incurred during vacant periods of up to 3 years allowed if the circumstances are right.

Selling the property
Once you decide to sell a property, the expenses associated with it will no longer be tax deductible against rental income. However, you may be able to claim them against the sale proceeds of the property to reduce your capital gains tax bill.

The HMRC approved mileage rates for company cars have been increased from 1 July 2006.

HMRC state that these mileage rates are for business journeys in company cars and are intended to reflect actual average fuel costs at the time they are set.

The rates only apply where employers either reimburse employees for business travel in their company cars, or require employees to repay the cost of fuel used for private travel.