New Data Protection Regulations – Be Prepared

The General Data Protection Regulation (GDPR) will come into force on 28th May 2018. This replaces the existing data protection legislation and preserves existing rights but will provide new rights and enhanced protection for individuals. Failure to comply with the provisions of the GDPR may lead to greatly increased fines so any company processing personal data needs to be aware of the changes.

New data subject rights include the right to erasure, requiring a company to delete the personal data it holds. This data could include personnel records, computer data, CCTV, electronic access records, etc.

Individuals will also have the right to rectification of any inaccurate personal data.

Under the current regulations an individual can make a subject access request to find out what information a company holds them to verify whether it is lawful and correct. Under the GDPR the right to charge a fee for this information is abolished and the time to provide the information reduced to one month.

The GDPR allows companies to refuse to respond a such a request where it is manifestly unfounded or excessive, however they should seek legal advice before making such a decision.

Are you eligible for R&D tax relief?

It is estimated that only 10% of eligible companies claim the R&D tax relief to which they are entitled, so small business owners need to consider whether they are eligible.

A company can claim the tax relief if it “seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty – and not simply an advance in its own state of knowledge or capability”. This is not the most clear definition but in addition to what can be considered pure R&D (such as pharmaceutical research) it would include such things as software development or research to create or improve processes, products or services.

The key to a successful claim is to prove to HMRC that the R&D project meets the requirements fully and that the constituent activities and costs qualify. To be able to do this it is necessary to keep accurate records of times and costs throughout the project from planning to completion.

In order to increase the likelihood of a claim being processed smoothly applicants may choose to use a R&D tax specialist to assist in the preparation of the claim by providing the information that HMRC would expect to see. This would include a company background, a description of the R&D project and why it meets the official definition and a breakdown of qualifying costs.

Using a third party tax specialist may increase the likelihood of a successful claim but it comes at a cost. R&D tax specialists charge a fee based upon a proportion of the tax saved so it is in their interests to maximise the claim.

If you think that you are able to claim for R&D costs then please contact us.

Changes to tax relief for residential landlords

From April 2017 landlords of buy-to-let residential property will only be able to claim relief for finance costs at the basic rate of income tax. This applies to properties let by individuals or through a partnership. It does not affect landlords of furnished holiday lettings or properties let by limited companies.

If the loan is for a dual purpose, say for both residential and commercial properties, then the finance costs would have to be apportioned to calculate the residential property element.

This restriction is being phased in gradually from April 2017 and will be fully in place from 6 April 2020. During the transition period finance costs will be deductible but the amount will be reduced each year.

  Proportion of finance costs deductible from rental income: Proportion of costs available as a basic rate deduction:
2017/18 75% 25%
2018/19 50% 50%
2019/20 25% 75%
2020/21   – 100%

The calculation is quite complicated and if you are a basic rate taxpayer you may find that you are a higher rate taxpayer once the finance costs are disallowed. This is because it increases the rental profits. If you do become a higher rate taxpayer then you will lose the higher rate tax relief on the finance costs.

Increasing taxable profits may also have affects upon tax credits and if it increases income to over £50,000 it could result in the loss of child benefit.

Where income is close to the higher rate threshold then the landlord may wish to consider making additional pension contributions or gift aid payments to ensure that they remain under the higher rate tax band.