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January questions and answers

Newsletter issue - January 2017.

Q. I am thinking of renting out a small outbuilding that I own to a friend so that he can store his work equipment in it when he's not using it. The rent is likely to be less than £1,000 a year. Will I have to declare this income to HMRC on a self-assessment return? My tax affairs are quite straight-forward - I am employed and currently I don't need to send in a tax return.

A. Two new annual tax allowances of £1,000 each are being introduced from April 2017. One allowance is for trading income and the other is for property income. If your income from property is less than the annual limit, you will not have to declare it to HMRC or pay tax on it.

The new allowances will apply to all types of property and trading income of an individual but not to partnership income from carrying on a trade, profession or property business in partnership where special rules apply.

It is also worth noting that the allowance will not apply in addition to relief given under the rent-a-room rules (currently £7,500 per annum).

Q. Several of my employees have expressed an interest in purchasing electric cars but have pointed out that as our office is situated in a remote location they will be unable to make their whole commute without charging. If the business pays for an electric charging point to be installed at the business premises, would capital allowances be available for the expenditure incurred?

A. As luck would have it, the Autumn Statement announced that from 23 November 2016, businesses (large and small) can claim a 100% first-year allowance (FYA) for qualifying expenditure incurred on the acquisition of new and unused electric charge-points. Initially the allowance will be available until 31 March 2019 for corporation tax purposes and 5 April 2019 for income tax purposes.

Whilst this measure sounds like a big 'giveaway' from the government, prior to the change, the expenditure could have been covered by the capital allowances annual investment allowance (AIA), which means that, in practice, it impacts only on those businesses with qualifying plant and machinery expenditure above the level of the AIA (currently £200,000).

Do note however that there are separate workplace grants available for businesses who install electric charge points for use by their employees. It may be worth investigating this further.

Q. Ten years ago my husband inherited a share of his father's property when he died as a joint owner with his partner. My father-in-law's will specified that his surviving partner could continue living in the property for as long as she wanted. Both my husband and my deceased father-in-law's partner are on the deeds for the property. The partner has recently died and the property is empty. Will my husband have to pay capital gains tax on his share when it is sold, even though he could not live there because the partner was in residence?

A. I am assuming that your husband is now in possession of the whole property, even though originally the partner owned half of it. If so, she must have transferred her half to him. When your husband sells the property, for capital gains tax purposes he will effectively be making two sales, namely the half which he inherited on his father's death and the half he has recently acquired from the deceased partner. I'm afraid he will be liable to capital gains tax on the half he has owned for the last ten years, even though the partner was still living there. He will also be liable to capital gains tax on the recently acquired half. However, the base cost for the second half will be the market value of that half at the date the partner transferred it to him. The higher base cost should help reduce the chargeable gain on that part.

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