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Self-assessment: last minute filing

Written by admin on . Posted in self-assessment, Tax. No Comments on Self-assessment: last minute filing

I’m sitting here musing about the number of calls I’m still taking from (potential) clients regarding taking them on for this year’s self-assessment submissions. It’s got me thinking. Why do some people leave this to the last minute? After all, it is now exactly 11 days to the end of the month, and if, as I read somewhere a few weeks ago, some 2,700 taxpayers took time out from their Christmas day festivities to go online and file their self-assessment tax return for 2019/20, why at the start of this month have a reputed 45% of taxpayers (some 5.4 million) still not filed their returns by the start of January?

To those still looking for someone to help file their 2019-2020 tax returns, it may just be that you’ll have to make the submission yourself. If this is you, a word of caution: it is very easy to make mistakes – especially when left to the last moment – so here are some tips which might help you with your filing:

Online help

If you received any casual income, new interactive guidance is available to check whether the income has to be declared. This might include:

  • selling things, maybe online, or at car boot sales and auctions;
  • doing casual work, such as gardening, food delivery or babysitting;
  • charging for the use of equipment and tools; and
  • renting out property or part of your home.

Don’t forget expenses

For employees and directors, make sure you claim tax relief for any job-related expenses which your employer has not reimbursed. With professional fees or subscriptions, remember to include the amount paid during 2019/20, as these usually increase annually.

Where your own car, motorcycle or bicycle is used for work, a deduction can be claimed based on HMRC approved mileage rates. Remember that travel to and from work only counts if it’s to temporary workplaces.

If you have been required to work from home due to Covid-19 or otherwise, you can claim £4 a week for 2019/20 to cover the additional cost.

Don’t forget income

For employees and directors, don’t forget to include any taxable benefits listed on your P11D if not automatically included by HMRC. Include interest and dividends received, although you can ignore ISA income.

However, for the self-employed, none of the Covid-19 grants paid so far are to be included for 2019/20. It’s now too late to have any tax due collected via your PAYE coding, so make sure you are set up ready to pay HMRC by 31 January.

At the time of writing, it has been reported that HMRC are going to waive fines for anyone who files late this year if the delay is due to Covid-19. Any fines may be waived if you explain how you were affected in your appeal. You must still make the return or payment as soon as you can. The Chancellor is also apparently considering extending the filing deadline for everybody, moving it from 31 January to 31 March, although this has not yet been confirmed.

HMRC provides live webinars on how to complete your tax return, although the sessions covering employment and self-employment are only available just before the filing deadline. Registration details can be found on their website.

Photo by Markus Winkler on Unsplash

 

Update on new measures for Covid business support

Written by admin on . Posted in Business Rates, COVID-19. No Comments on Update on new measures for Covid business support

Admittedly, this is coming to you a little later than planned, but hopefully, this blog will provide some useful insight into the measures introduced following the announcement on January 5th of the current national lockdown in which the Treasury announced another round of one-off cash grants for retail, hospitality and leisure businesses to help them through to the spring. There is also further discretionary funding to support other impacted businesses.

The new grants are only for businesses situated in England, with the devolved administrations of Scotland, Wales and Northern Ireland providing their own support.

Grants will be paid on a per-property basis, with the amount dependent on the property’s rateable value:

Rateable value Amount of grant
£15,000 or under £4,000
Between £15,000 and £51,000 £6,000
Over £51,000 £9,000

 

To qualify, a business needs to be legally required to close and not able to operate effectively remotely. The new grants are in addition to any previous business support, such as the recent local restrictions support grant. Grants may well be paid automatically but keep an eye on your local authority’s website in case you need to register or apply.

Discretionary grants

Businesses not eligible for a cash grant can apply to their local authority for financial help if they are affected by the restrictions. Help is aimed at smaller businesses which do not pay business rates but have relatively high ongoing fixed property-related costs. This might include:

  • those in shared offices or other flexible work spaces;
  • market traders;
  • bed and breakfast businesses paying council tax instead of business rates.

 Other recent announcements

Just before Parliament broke for Christmas, the Chancellor extended the employee furlough scheme by another month to the end of April, with the government-backed bounce back loan scheme now available up to 31 March – it was due to end on 31 January. The business interruption loan schemes have been similarly extended.

You can find out what Covid-19 financial support is available for your business by working through the government’s business support finder.

Photo by Kevin Grieve on Unsplash

Lockdown 3.0 – What To Expect

Written by admin on . Posted in COVID-19, Employment Law, Employment Tax, Self-Employed, Tax. No Comments on Lockdown 3.0 – What To Expect

As the third Covid-19 lockdown took effect on 5 January 2021, the Chancellor announced a further £4.6 billion in grants to the retail, hospitality and leisure sectors. This new round of support follows extensions to the job retention and loan schemes revealed on 17 December 2020. There may be more to come with the Budget on Wednesday 3 March 2021.

New lockdown 3.0 grants

An extra £4.6 billion in lockdown grants has been directed at the worst affected sectors.

New one-off grants for closed retail, hospitality and leisure businesses have been announced. The new grants are in addition to all other forms of support, such as the Lockdown Restrictions Support Grant (LRSG (Closed) Addendum) which applied to businesses that were forced to close between 5 November  and 2 December 2020.

The new grants in England will be:

  • £4,000 for businesses with a rateable value of £15,000 or under;
  • £6,000 for businesses with a rateable value between £15,000 and £51,000; and
  • £9,000 for businesses with a rateable value of over £51,000.

In addition, £594 million is being made available for Local Authorities and the Devolved Administrations to support other businesses not eligible for the above grants, that might be affected by the latest restrictions. Businesses should apply to their Local Authorities.

The Devolved Administrations will be receiving additional funding in line with the English measures, with £375 million for Scotland, £227 million for Wales and £127 million for Northern Ireland.

The announcement of the new grants talks of helping business “through to the Spring”, with the Chancellor hinting that additional support measures are to come in the Budget on 3 March 2021.

Coronavirus Job Retention Scheme (CJRS)

The CJRS furlough scheme is now running through to April 2021.

On 17 December 2020, the Chancellor announced a further one-month extension of financial support under the Coronavirus Job Retention Scheme (CJRS) to the end of April 2021. As currently, the government will pay 80% of the salary of employees for hours not worked up to a maximum of £2,500. Employers will only be required to pay wages. National Insurance Contributions (NICs) and pensions for hours worked, and NICs and pensions for hours not worked.

Claims for furloughed employees can only be made for those who were employed and on payroll on 30 October 2020. The employer must have made a PAYE RTI submission to HMRC between 20 March and 30 October 2020, notifying a payment of earnings for that employee. This may differ where an employee has been made redundant, or they stopped working on or after 23 September 2020 and have subsequently been re-employed.

Self-employed Income Support Scheme (SEISS)

No change.

No changes to the SEISS were announced alongside the CJRS extension, as the SEISS already runs through to the end of April 2021. Details of the fourth SEISS grant that will cover the three months from February to April have not yet been released.

Loan schemes

Most schemes extended to 31 March 2021.

On 17 December the Chancellor extended access to the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) until the end of March.

Additional support measures

In November 2020 the Financial Conduct Authority (FCA) published fresh guidance across a range of issues including mortgages and consumer credit and loans. The thrust of these was to limit the maximum payment holiday to six months, which had to be agreed three months at a time.

Content supplied by Taxbriefs. Photo by Priscilla Du Preez on Unsplash

Is An Increase in Capital Gains Tax Inevitable?

Written by admin on . Posted in Budget, Capital Gains Tax, Tax. No Comments on Is An Increase in Capital Gains Tax Inevitable?

A recent report could herald changes to capital gains tax.

Last July the Chancellor asked the Office of Tax Simplification (OTS) to undertake a review of capital gains tax (CGT) “in relation to individuals and smaller companies”. The request was something of a surprise for two reasons. Firstly, there had been no suggestion that Mr Sunak wanted to reform capital gains tax. Secondly, two earlier reports on another capital tax, inheritance tax, had been sitting in the Treasury’s in-tray for over a year, awaiting attention.

Cynics pointed out that while the Conservatives’ 2019 manifesto promised no increases to the rates of income tax, VAT and national insurance, there was no such protection for CGT. Certainly, the ideas put forward by the OTS would raise extra revenue for the Treasury’s depleted coffers, but probably not the £14bn seen in some of the November headlines.

The OTS made eleven proposals for the government to consider. The more significant were:

  • CGT rates should be more closely aligned with income tax rates, implying the maximum tax rate on most gains could rise from 20% to 45%.
  • The annual exempt amount, currently £12,300 of gains, should be reduced to a ‘true de minimis level’ of between £2,000 and £4,000.

When inheritance tax relief applies to an asset, there should be no automatic resetting of CGT base values at death, as currently occurs. The OTS also suggested that the government should consider whether to end all rebasing at death, meaning that the person inheriting an asset would be treated as acquiring it at the base cost of the person who has died.

The £1m Business Asset Disposal Relief, which only replaced the £10m Entrepreneurs’ Relief in March 2020, should itself be replaced with a new relief more focused on retirement.

The OTS paper underlines just how favourably capital gains are currently treated relative to income. As the tax year end approaches the report is also a reminder to examine your use-it-or-lose-it options for the 2020/21 annual exemption.

Photo by Kelly Sikkema on Unsplash

 

Changes to the National Minimum and Living Wages

Written by admin on . Posted in Budget, Employment Law, Employment Tax, Tax. No Comments on Changes to the National Minimum and Living Wages

One of the announcements to come out of the Chancellor’s Spending Review was welcome increases to minimum wages.

From 1 April 2021, the National Living Wage will get a 19p increase, going up to £8.91 per hour, with this rate being extended to employees aged 23 and over. It currently applies to employees aged 25 year and over.

The original plan was for a more substantial increase, but the Low Pay Commission advised against this as it would have had a negative effect on businesses already struggling from Covid-19 restrictions. National Minimum Wage rate increases are similarly constrained, although the apprentice rate will go up by 3.6%. Future and current rates are:

Age From 1 April 2021 Current
National Living Wage 23 and over (currently 25 and over) £8.91 £8.72
National Minimum Wage 21 to 22 (currently 21 to 24) £8.36 £8.20
National Minimum Wage 18 to 20 £6.56 £6.45
National Minimum Wage 16 to 17 £4.62 £4.55
Apprentices under 19 or in first year £4.30 £4.15

 

Apprentices over 19 who have completed the first year of their apprenticeship are entitled to the rate for their age. The provision of accommodation is the only benefit that counts towards national minimum pay, with the maximum offset increasing to £8.36 per day (£58.52 per week).

What counts as working time?

If you are required to work off-site from the main premises, deciding when to charge for your time is not always straightforward. For example:

  • Count time on standby near the workplace, or waiting to collect goods, meet someone for work or start a job, but not rest breaks.
  • Count time travelling in connection with work (including travelling from one assignment to another) and for training, but not travelling between home and work.

For example, if an employee has an appointment in the morning, then travels to the office to work there she should be paid minimum wage for the duration of the appointment plus the journey to the office. The break she takes for lunch at the office, however, is unpaid.

HMRC has a calculator to check if you paying the correct amounts of National Living Wage and National Minimum.

Social media suggestion
The government announced increases to both the National Living and National Minimum wages, although Covid-19 curtailed more substantial rises.

Photo by Annie Spratt on Unsplash

 

Tougher criteria for third SEISS grant

Written by admin on . Posted in COVID-19, Self-Employed, Tax. No Comments on Tougher criteria for third SEISS grant

Applications for the third Self-Employment Income Support Scheme (SEISS) grant opened from 30 November, and you have until   29 January 2021 to make a claim. Be warned, however, that some of the conditions for this grant are different from those applicable to the previous grants.

Due to Covid-19, you must either:

  • Be currently trading but impacted by reduced demand, or
  • Have been trading but are temporarily unable to do so.

This status must be met during the period 1 November 2020 to 29 January 2021.

Additionally, you must declare that:

  • You intend to continue to trade, and
  • You reasonably believe there will be a significant reduction in your trading profits.

Make sure you keep evidence showing how your business has been unable to operate as normal due to Covid-19, so that your case for a loan is robust. The criteria are defined as follows.

  • Reduced demand – You have fewer customers or clients than you would normally expect, or contracts have been cancelled and not replaced. Simply having increased costs is not a reason for making a claim.
  • Temporarily unable to trade – Your business has had to close due to government restrictions, or you have been instructed to shield, self-isolate, have tested positive for Covid-19 or cannot work due to parental caring responsibilities. You cannot claim if you can work from home or have to self-isolate after going abroad.
  • Significant reduction – There must be a reduction in your trading profit for the whole accounting period, not just between 1 November and 29 January 2021. If you prepare accounts to 31 March or 5 April this shouldn’t be too difficult to establish, although there is a disincentive to work longer hours to make up lost income. It is impossible to apply if you are just starting your accounting period with, say, a 31 October 2021 year end, but it seems likely that HMRC will overlook this as profits will not be reported until 31 January 2023. The first two SEISS grants must be included in your 2020/21 trading profit.

HMRC has further guidance on what is meant by reduced demand and temporary closure, along with some examples.

If you are planning on applying for the third SEISS grant and need clarification, please get in touch.

Photo by Arthur Osipyan on Unsplash

Surviving Winter In the Midst of A Pandemic

Written by admin on . Posted in Bounce Back Loans, COVID-19, Restructuring & Insolvency. No Comments on Surviving Winter In the Midst of A Pandemic

A recent survey of small businesses has revealed that only a quarter of them are confident of their survival into 2021, with many worried about cash flow. Those businesses that took out Bounce Back Loans (BBLs) have already used up most of this funding.

Cash flow

Some two-thirds of businesses are waiting longer to be paid, with a significant number having had their customer payment terms renegotiated to three months or more. As they wait longer for cash to come in, these businesses in turn are withholding payments to suppliers.

If cash flow is an issue, businesses need to view sales and contracts in a completely different light. Payment terms are likely to be more important than short-term profitability.

The latest high-profile corporate collapse will see creditors of the Arcadia Group badly hit. With such giants of the high street unable to survive, it is essential to check a customer’s financial health before going ahead with a large sale or contract.

Coronavirus Business Interruption Loan Scheme (CBILS)

The CBILS is going to be the key to winter survival for many cash-strapped businesses. Now, here’s the really interesting bit; whilst it is not possible to benefit from both the CBIL and a BBL, a BBL can normally be refinanced into a CBILS. The CBILS borrowing limit is £5 million, so considerably more than the BBL maximum of £50,000, and with four times the number of lenders in the CBILS, there is much more choice.

There are, however, some downsides:

  • The government only guarantees 80% of the loan, rather than 100%.
  • Interest rates are set by the lender, rather than a set rate of 2.5%.
  • The application process can be more onerous, rather than just making a self-declaration.
  • Repayment terms are stricter, with, for example, no automatic repayment holiday.

The CBILS runs until 31 January 2021, although, with lenders reporting high levels of demand, don’t wait to apply.

Details of how to apply for a CBILS can be found on the British Business Bank’s website.

 Photo by Matthias Kinsella on Unsplash

Known Knowns and Not knowing What You Don’t Know

Written by admin on . Posted in BREXIT. No Comments on Known Knowns and Not knowing What You Don’t Know

One of my favourite quotes from the Bush II administration (and there were a few) is the famous quote from then Secretary of Defence, Donald Rumsfeld who famously said:

“Reports that say that something hasn’t happened are always interesting to me because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.”

Reliable reports have it that with less than a month to go until the Brexit transition period ends, just one in five businesses have a good understanding of the risks and enough preparations in place, according to a survey by one of the largest accountancy firms EY. Many firms believe that after some initial challenges, business as usual will resume soon after 1 January 2021. In reality, whether or not the UK and EU succeed in negotiating a trade deal, there will be massive changes to the UK’s trading, regulatory and immigration systems. Business disruptions are guaranteed and it is still unclear how many new processes will work effectively.

Businesses that trade goods with the EU will be significantly affected, regardless of whether there is a trade deal. And getting ready for the new processes takes time. Businesses that trade with Europe will have to make customs declarations for, and pay the relevant tariffs on, goods moved between the UK and Europe. You may need to take advantage of one of the specialist services available to complete the often complex forms. Some businesses may be able to delay declarations and duty payments, but there are conditions.

Moving goods between Great Britain and Northern Ireland will be subject to special rules under the Northern Ireland Protocol. Businesses involved in such trade can sign up to a free government trader support service but need to be preparing now.

There will also be new rules for providing services. If you rely on professional qualifications to practice in the EU, you may need to act to get them recognised by EU regulators. You may need a work permit or visa if you travel on business to the EU and Brexit will also affect the cross-border transfer of personal data.

It will be more difficult for businesses to hire workers from the EU. A points-based immigration system will treat EU and non-EU citizens equally and only businesses registered as licensed sponsors will be able to hire non-UK workers.

Opportunities to supply the public sector in the UK will be advertised on a new UK internet portal instead of on the EU Tenders Electronic Daily.

The UK will also leave EU intellectual property systems and this will affect how the rules for trademarks and designs operate. You may have to take steps to ensure your intellectual property is protected in your main markets.

So, returning to Mr Rumsfeld’s quote, I’ve come up with a shorter version: “Whilst I May Not Know What I Don’t Know, I Do Know What I Do Know” and the above represent just some of the known changes. It is essential that businesses watch out for announcements of changes to UK and EU guidance and be ready to act upon them. Further information on some of these issues is available at https://www.gov.uk/transition.

Photo by KE ATLAS on Unsplash

Friday Afternoon Meanderings; What Is The Future of The Company Car Benefit?

Written by admin on . Posted in Company Car Tax, Employment Law, Tax. No Comments on Friday Afternoon Meanderings; What Is The Future of The Company Car Benefit?

It’s not often I get nostalgic, but every once in a while, I harken back to my days in the Revenue (now “HMRC”) and in practice as a tax consultant;  to a time when the company car was the fringe benefit that every employee wanted. As my somewhat fuzzy memory recalls, you had ‘made it’ once you had the keys to a car with no worries about servicing, insuring or, sometimes, even fuel costs. It could also make plenty of tax sense, as the cost of the car was not fully reflected in the amount on which tax was charged. Go back far enough and two company cars were not uncommon for some senior executives.

Unsurprisingly, the days of company cars as tax-efficient remuneration have largely passed, other than for electric vehicles. The government approach to company cars brings to mind the comment of Jean-Batiste Colbert, a 17th century French Minister of Finance, who said “the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”.

Some 400 years later, successive UK chancellors have steadily notched up the company car benefit scales to raise additional revenue from a stable to shrinking number of company car drivers. For example, the latest HMRC data show that between 2010/11 and 2018/19, the average company car taxable value has risen by 57% against a 19% increase in inflation over the same period.

Similarly, the taxable value of ‘free’ fuel (i.e. employer-funded fuel) has risen by 44%. As the graph shows, the popularity of ‘free’ fuel has steadily fallen – only about one in eight company car drivers now pays nothing to fill up their tank. If you are one of that minority, do make sure you have enough private mileage to justify the tax you pay. The main reason for the drop in ‘free’ fuel numbers is that for many employees, the tax bill would be greater than their personal refuelling cost.

The gradual demise of the company car is a lesson in how the tax system can subtly alter over time. A major revamp in the treatment of salary sacrifice schemes introduced in 2017 changed the tax landscape for other fringe benefits, too. The one that has survived and still remains attractive – at least for now – is salary sacrifice to fund pension contributions.

Source: HMRC September 2020

 

 

Brain Teaser For The Self Employed – Thinking of Retiring?

Written by admin on . Posted in Self-Employed. No Comments on Brain Teaser For The Self Employed – Thinking of Retiring?

My regular readers will know that I like to ponder out loud, my meandering musings in my blogs, so they won’t be surprised I’ve come up with another quick quiz:

  • Are you self-employed?
  • If so, have you contributed to a private pension in the last year?

The Institute for Fiscal Studies (IFS) examined the answers to these two questions and found the probability of answering yes to both is much the same. Drawing on government data, the IFS calculated that in 2018:

  • 1% of the UK workforce – some 4.8 million people – were self-employed.
  • Just 16% of the self-employed contributed to a private pension.

As the graph shows, the proportion of pension contributors among the employed and self-employed workforce was on a steady decline from 1998 until 2012. In October 2012, pension automatic enrolment was launched, and by March 2019, over 10 million workers had joined a workplace pension arrangement. The self-employed were left out of auto-enrolment, hence the sharp divergence of the employee and self-employed lines from 2012 onwards.

The IFS research struggled to establish why only one in six of the self-employed were saving in a private pension, two thirds less than 20 years ago. It found that the characteristics of the self-employed workforce have changed over that period – it now consists of more females, an older demographic and an increase in part-time workers  – but none of these factors were enough to account for the fall in pension contributions. Given the tax relief which pension contributions attract, one surprising discovery was that the largest decline in self-employed contributions came from the higher-income bracket and the long-term self-employed.

If you answered yes to the first question and no to the second, then you may be expecting the state pension to make up the largest slice of your retirement income, a view shared by more than a quarter of the self-employed.  At present, the state pension amounts to £175.20 a week. If that sounds like a less than comfortable retirement plan, perhaps you need to rethink the answer to that second question…and please don’t turn to me, I’m just a lowly solicitor. I’m not qualified to advise on pensions. I just like to muse about these things. Especially on a Friday evening!