New guidance on tax basis period reforms
New guidance. HMRC’s new guidance note, “Changes to reporting income from self-employment and partnerships” is the first in a series intended for owners of unincorporated businesses and their advisors explaining how the new basis period rules, which took effect on 6 April 2023, will work in practice.
Sole traders and business partners whose accounting years don’t end between 31 March and 5 April will be required to report two sets of figures in their 2023/24 tax return. You’ll be taxed on the overall profit but will automatically have part of the tax bill spread over five years.
Tax-efficient pension contributions for your partner
While your company can pay pension contributions for your spouse or partner it’s not usually tax efficient as it can count as your earnings. To make it tax efficient, transfer some of your shares to your spouse so that when the company contributes to their pension it counts as their dividend income.
Reclaiming VAT on expenses paid by employees
You can reclaim VAT paid by an employee or contractor if the purchase is intended for use in your business and you reimburse them for the full cost. The usual evidence of VAT paid is required but it’s ok if it’s in the employee’s/contractor’s name.