You should have a written agreement with each of the landlords that clearly states that the landlord is the principal who is making a contract with the holiday-maker, and you are their agent.
All invoices you issue should show your fees as separate items to the cost of the holiday accommodation.
If the holiday-maker pays you for the use of the holiday-let, the bill they pay should clearly show the amount due to the landlord, and the amount due to you as the agent. Ideally the two amounts would be shown on separate invoices.
The law will be changed by the Finance Bill 2011 so that:
- FHL in both the UK and EEA will be eligible as qualifying FHL within the (revised) special tax rules. This is the current situation but is not within the legislation
- The minimum period over which a qualifying property must be available for letting to the public in the relevant period is increased from 140 days to 210 days in a year with effect from April 2012
- The minimum period over which a qualifying property is actually let to the public in the relevant period is increased from 70 days to 105 days in a year with effect from April 2012
- Losses made in a qualifying UK or EEA FHL business may only be set against income from the same UK or EEA FHL business (existing rules allow set-off against general income)
- A ‘period of grace’ will be introduced to allow businesses that do not continue to meet the ‘actually let’ requirement for one or two years to elect to continue to qualify throughout that period
- Set up proceedures
- Tax and NI to pay
- Record keeping and responsibilities
- Financial and personal liability
- Financing the business
- Management and control
There are many structures you can choose to do business. If you are not sure which best suits your business and personal needs, you can get advise from us.
Residency and Tax
You are UK resident in any year in which you spend more than 183 days in the UK.
You are resident if you are regularly in the UK for more than 91 days. HMRC consider each year and the average number of days spent in the UK over the last four years. (You may ignore some days spent in the UK, for example, dealing with family bereavement)
From 6th April 2008 each day that an individual is physically present in the UK at midnight will be counted as a UK day, therefore days of departure are not counted. Prior to 6th April 2008 both days of arrival in and departure from the UK were ignored.
You may be treated as being UK resident if you owned or leased accommodation in the UK for three years or more.
You are resident if, when you came to the UK, you intended to remain for two years or more.
You can be resident in another country at the same time as being resident in the UK
- Ordinary Residence
There is no legal definition of Ordinary resident.
Broadly it denotes more permanent residence that the term “resident” (above).
If you are resident year after year you are “ordinarily resident”.
In any year you may be ordinarily resident but not resident, or
In any year you may be resident without being ordinarily resident If you have already lived in the UK for three years or more, then you would normally be regarded as ordinarily resident.
If you have lived in the UK for less than that it does not mean that you are not ordinarily resident, an individual can become ordinarily resident from the first day they arrive in the UK
You cannot be without a domicile.
You can only have one domicile at a time.
Your existing domicile will continue until you can prove you have another one
You normally acquire your domicile of origin from your father, it need not be the country in which you were born
Your domicile of origin can be replaced by your domicile of choice. This will be the country in which you live if you can show that you intend to stay there.
Other factors in determining a domicile of choice will include your intentions, your business interests, your social and family interests, your ownership of property, the form of the Will that you have made.
You will have difficulty in displacing a domicile of choice after living in the UK for seventeen years.
An individual who comes to the UK to take up employment that is expected to last for at least two years will be regarded as resident only from the date of his arrival.An individual arriving in the UK for a period expected to last less than two years “especially if he only lives in temporary furnished accommodation” will only be regarded as resident in the UK in any tax year in which he spends more than 182 days in the UK.An individual leaving the UK permanently or taking up full time employment abroad will only be deemed to be resident up to the date of his departure.
- Ordinary residence
As stated above, individuals who came to the UK with the intention of remaining in the UK for at least two years but who had no clear intention of remaining in the UK for at least 3 years, would have been regarded at not ordinarily resident form the date of their arrival. They would remain Resident & Not Ordinarily Resident until the beginning of the UK tax year following the third anniversary of their arrival unless they formed an intention to remain in the UK for a period of at least 3 years prior to this date.HMRC 6 which replaces IR 20 with effect from 6 April 2009, confirms a change in approach. It now states that individuals who have been regarded as Resident & Not Ordinarily Resident and who are still in the UK on the day after their third anniversary of their arrival, will be regarded as Resident & Ordinarily Resident from the beginning of the UK tax year in which the third anniversary of their arrival falls.This is an important change as this reduces by one year the period that relevant individuals will be able to claim “Overseas Workday” relief in respect of earnings attributable to any duties performed outside the UK.
If you are resident in the UK, you will be taxed in the UK on all your worldwide earnings.
There are occasions when you may be able to get tax relief on overseas workdays. However you should be aware that there are a number of important conditions which need to be met. In particular, you must not remit these earnings to the UK otherwise they will become taxable.
UK residents are normally liable to UK tax on the whole of their worldwide income arising and gains accruing in a tax year – the arising basis. The remittance basis is available to UK resident individuals who are not domiciled here or not ordinarily resident. It provides for foreign sourced income (including republic of Ireland) and gains to be charged to tax by reference to the extent to which they are remitted to or receive in the UK. Where remittance basis applies it allows the taxpayer to defer tax on income or gains that have arisen until amounts in respect of the income or gains are received in the UK. There is no time limit between the income or gains arising and the receipt in the UK.
The remittance basis is available on relevant foreign income, employment income and capital gains. It is up to UK individuals who are UK resident but not domiciled or not ordinarily resident to decide whether they wish to be taxed on remittance basis for each tax year. Those eligible will be able to choose from one tax year to another whether they wish to be taxed on this basis.
This will not apply to those whose un-remitted income and/or gains for a tax year are less than £2,000. They will be taxed on remittance basis for that year automatically without the need for a claim.
Under the new legislation those who make a claim to be taxed on the remittance basis (S809b) will lose their entitlement to various personal tax allowances. For income tax purposes this will include, personal allowance, blind person’s allowance, tax reductions for married couples and civil partners and payments for life insurance and for CGT the annual exemptions. This does not apply to individuals who are eligible to use the remittance basis without a claim in a tax year because their un-remitted income/gains for a tax year are less than £2,000 (S809c). They retain their entitlement to all these various allowances and reliefs
- Motor expenses.
- Travel expenses.
- Postage & stationary.
- Computer consumables.
- Bank charges on a business account.
- Telephone/mobile phone charges.
- Accountancy charges.
If you have expenses that are not on this list you may be able to claim them. Keep a full record of all expenses and discuss them with us. They may be tax deductible.
The wages have to be for actual work done; the wages have to be physically paid and the rate of pay must match the duties performed. In order to justify any such payments, it may help to create a job specification first. Simply list the tasks that are involved, making appointments, doing the bookkeeping, arranging tests etc. Then you need to establish the market rate for such a job. How much would you have to pay someone else to do these tasks for you? Keep a simple diary note of the hours worked per week, then make regular payments via cheque for the wages due in relation to the hours worked. As mentioned above, you need to pay the going rate for the job. If this exceeds either £116 per week or £502 per month you may need to operate a full payroll scheme, which would need to be registered with HMRC. If you do set up a payroll there may have advantages as your spouse or partner could receive some much needed National Insurance credits. It is recommended that you speak to your accountant before you make payments to ensure you do not breach of rules. Whilst speaking to your accountant you should also ask about forming a partnership to help reduce your tax bill – it may be a better option than specifically paying your spouse / partner.
- Bank transactions, including payments from and deposits into the bank.
- Cash payments and receipts
- Credit card payments
When deciding on how to record these transactions provision should be made to identify which receipts / payments are cash, bank or credit card. For cash receipts, it is important to identify any cash not deposited in the bank but used for sundry cash expenses or general living expenses. Personal drawings from the business should also be easily identified. One area HMRC looks at is funding of personal expenses. If you have separate business and private accounts, either make transfers between accounts or write yourself a cheque from the business account. Mileage records are also important. Even if you use your car almost exclusively for business some form of record should be kept to validate this. HMRC are keen to challenge business mileage where records are not complete. Given that a high proportion of your mileage will be business related, one method is to record your car’s total mileage at the start of your accounting year and only record your private journeys made during the year.
At the end of the accounting year, work out the total mileage and deduct the private mileage. The difference is your business miles. If you do not have sufficient evidence to support your business expenses then an investigation can mean an increased tax bill. HMRC may also make similar adjustments to the previous years tax bills, add on interest charges and impose penalties. Please also bear in mind that bookkeeping records and supporting receipts should be retained for 5 year 9 months after being submitted to HMRC.