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Tax claims if working from home

Thursday, February 18th, 2021

Many employed persons will have spent a large chunk of the current tax year, 2020-21, working from home due to COVID restrictions. HMRC will accept a claim to cover any additional costs you may have incurred.

Must be required to work from home

You may be able to claim tax relief for additional household costs if you have to work at home on a regular basis, either for all or part of the week. This includes if you have to work from home because of coronavirus (COVID-19).

You cannot claim tax relief if you choose to work from home.

Costs you can recover

 

Additional costs you can reclaim include heating, metered water bills, home contents insurance, business calls or a new broadband connection. They do not include costs that would stay the same whether you were working at home or in an office, such as mortgage interest, rent or council tax.

How much can you claim

You have two choices:

  • Claim £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs.
  • Or claim the exact amount of extra costs you have incurred above the weekly amount – you will need evidence such as receipts, bills or contracts.

You will get tax relief based on the rate at which you pay tax. For example, if you pay the 20{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} of £6).

Buying equipment

You can only claim tax relief for equipment expenses if you need it to do your job and you use the equipment for work and there is no significant private use – this includes using the equipment according to your organisation’s policy.

If your employer gives you money to compensate

Reduce the amount you claim tax relief on by the amount of money your employer gives you as an allowance to cover working from home or to buy equipment.

To make a claim

We can help you make a claim if and when we complete your tax return for 2020-21.

If you don’t submit a tax return you may need to call HMRC to discuss how to claim.

UK Pensions Bill receives Royal Assent

Tuesday, February 16th, 2021

The UK Pensions Act will bolster protections for savers and further the government’s green agenda by supporting progress towards net zero.

New powers to penalise errant bosses

The Act will strengthen protections for pension savers by extending the powers of the Pensions Regulator, introducing the power to issue civil penalties of up to £1 million, alongside three new criminal offences.

A tough new sentence has been created – with a maximum penalty of seven years in prison – for bosses who run pension schemes into the ground, or plunder pots to line their own pockets. This will deter employers from making reckless decisions with their defined benefit schemes and strengthen the regulators’ powers to take efficient and timely actions to protect members’ hard-earned savings.

Online access for pension savers

The introduction of pensions dashboards will hail a digital revolution for savers, creating one single platform to more easily access and review pension pots. Savers will be able to see how much they can expect each month in retirement and find out how they can improve their retirement prospects.

Other changes

The Act ensures pensions play their part in our transition to a net zero future through climate risk reporting, and changes to requirements around pension scheme funding to improve financial sustainability.

The Act also legislates for the creation of a new style of pension scheme – Collective Defined Contributions (CDCs). Developed in cooperation with trade unions, CDCs have the potential to increase returns for millions, whilst being more sustainable for both workers and employers.

Prospects for 2021

Thursday, February 11th, 2021

The short-term outlook for UK businesses operating in sectors badly affected by the present COVID lock-down directives is not good.

Many cannot trade, many others are facing reduced turnover. Both will be struggling to maintain reserves – stay solvent – and cash-flow.

There are strategies that affected businesses can use to reduce fixed costs and minimise demands on their hard-won cash and reserves, but there is a limit to what can be achieved if the present demands to reduce infection continue.

A silver lining?

The present success in rolling out vaccines to counter COVID provide evidence that there may be a silver lining.

The issue is when will lock-down be eased, when will businesses be able to trade, and freely?

A summer return to normality would be most welcome and even the most pessimistic observers would agree that a relaxation is likely to be on the cards before autumn 2021.

What will happen when normality returns?

The UK economy is driven by consumer expenditure. For the last year most of us, apart from the occasional foray online to spend, have saved more than we used to if income levels have remained fairly steady.

It is likely that when restrictions ease apart from heading for the High Street or the local pub we will want to relax and spend. It is that pent-up need to socialise and spend that will drive recovery.

Businesses that manage to weather the present depressed conditions need to batten down the hatches, ready to emerge when lock-down eases to win their share of the released consumer largesse.

How to survive?

We can help. If you would like to brainstorm ideas to keep your business afloat during these exceptional times pleas call so we can consider your options.

Whilst the short-term outlook may be grim, there is every chance that 2021 may see out the worst that COVID has to disrupt our normal economic activity. Hang in there…

New UK subsidies to replace EU State Aid

Wednesday, February 10th, 2021

The following announcement provides encouragement that a replacement for the EU State Aid process is in development. Details from a recent Government press release are set out below.

A new UK-wide system for providing more flexible and tailored financial support to businesses has been set out under plans by the Business Secretary, taking advantage of the UK’s newfound freedoms as an independent trading nation.

The new subsidy control system, which will be the long-term replacement for the EU’s prescriptive state aid regime, will allow the UK to be more dynamic in providing support to businesses, including in innovative, R&D-focused industries, to encourage job creation and growth across all parts of the UK.

Previously, public authorities had to follow a bureaucratic, detailed set of EU controls – and may have needed prior approval from the European Commission before providing vital funds to viable businesses or pursuing key domestic policy objectives.

Under the proposed UK system, local authorities, public bodies and the devolved administrations in Edinburgh, Cardiff and Belfast will be empowered to decide if they can issue taxpayer subsidies by following a set of UK-wide principles. These principles will ensure subsidies are designed in such a way that they deliver strong benefits and good value for money for the UK taxpayer, while being awarded in a timely and effective way.

The new system will be designed to be more flexible, agile and tailored to support business growth and innovation as well as maintain a competitive market economy and protect the UK internal market. At the same time, it will help protect against wasteful spending.

The system would also better enable the government to deliver on key priorities such as levelling up economic growth in the regions, tackling climate change, as well as supporting our economic recovery as we build back better from the COVID-19 pandemic.

Current tax year will still end 5 April 2021

Thursday, February 4th, 2021

It is doubtful that HMRC will change the tax year end date. The current tax year will therefore come to an end on 5 April 2021.

Which means that tax-payers still have two months (February and March 2021) to take advantage of any tax planning strategies that may advantage their tax liabilities for 2020-21.

As COVID disruption is likely to take most of 2021 to unwind – and may spill over to 2022 – any action you can take to reduce a drain on cash flow by saving tax should be considered.

For example:

  • If your self-employed business income has dropped significantly during 2020-21, any tax losses created may be available to carry back to previous tax years when you paid tax. As a result, it may be possible to boost your cash flow with a tax repayment.
  • You still have time to fully utilise any capital gains tax exemptions for 2020-21.
  • Have you considered the annual gifts allowances that are basically tax-free for 2020-21?

If your finances allow, have you considered:

  • Topping up your pension contributions?
  • Making further charitable donations to reduce higher rate tax?
  • Strategies to reduce your income below £100,000 and thus avoid losing all or part of your personal tax allowance.
  • If you or your spouse has increased their taxable income to more than £50,000 during 2020-21, and you claim child benefits, this may trigger an additional tax charge to recover all or part of the child benefits you have received.

To check out these and numerous other tax-saving opportunities please call so that we can discuss your options. Your chance to take advantage of tax planning ideas for 2020-21 will end for individuals on 5 April 2021.

Tax office moves the penalty spot

Tuesday, February 2nd, 2021

During the last week of January, HMRC finally accepted that many tax-payers would not make the filing deadline – 31 January 2021 – for their 2019-20 self-assessment tax return; due, in the main, to continuing COVID disruption.

As a gesture, they have confirmed that:

Self-Assessment tax-payers who cannot file their tax return by the 31 January 2021 deadline will not receive a late filing penalty if they file online by 28 February.

Whilst this a welcome recognition of the difficulties many tax-payers face as they struggle with lock-down or are actually infected by the virus, the filing deadline has not changed, only the date from which late filing penalties will apply.

Accordingly, any tax or NIC due on 31 January 2021 – determined when 2019-20 returns are finally filed – will still be payable by 31 January 2021. Payments made after this date will be subject to interest charges.

If COVID has depleted your cash reserves and you are struggling to pay any tax due on 31 January, you can apply to HMRC to spread the payments up to twelve months. In their press release issued 25 January 2021, HMRC said:

Tax-payers are still obliged to pay their bill by 31 January. Interest will be charged from 1 February on any outstanding liabilities. They can pay online, or via their bank, or by post before they file. More information on how to pay is at GOV.UK.

Tax-payers who cannot afford to pay their tax bill on time can apply online to spread their bill over up to 12 months. But they will need to file their 2019-20 tax return before setting up a time to pay arrangement, so HMRC is encouraging everyone to do this as soon as possible.

In other words, to make a formal agreement to spread the cost of any tax payments, tax-payers will need to file their 2019-20 return.

The late filing penalty deferred is the automatic £100 fine. This will now be applied if your tax return is still outstanding after 28 February 2021.

Repay private petrol and save tax

Monday, February 1st, 2021

At first sight, company cars drivers whose private fuel costs are met by their employers may seem to be onto a good thing, but there is a nasty tax hit…

Enter, the Car Fuel Benefit charge.

When the current tax year ends, 5 April 2021, the illustration below demonstrates how a cash payment to an employer to payback any private fuel provided can create overall cash savings. This will not apply to all company car drivers, but it is well worth checking to see if a repayment is possible.

Let’s say the following circumstances apply:

  • list price of your company car when new was £30,000
  • your employer pays for all your private fuel
  • CO2 emissions are 147 g/km, and
  • the car has a diesel engine, 2000 cc.

The 2020-21 benefit in kind charge for the use of the car (this is added to your taxable income for the year) is £10,200. This would cost a standard rate taxpayer £170 a month in Income Tax.

But then the provision of private fuel would trigger an additional Car Fuel Benefit charge of £8,330. This would cost a standard rate taxpayer an extra £138 a month.

As the title of this article suggests, it is possible to reimburse your employer for private fuel provided and avoid this Car Fuel Benefit charge completely. Here’s what you would need to do:

  • First of all, calculate your private mileage for the 2020-21 tax year. Estimates won’t do, you will need to create evidence, a mileage log for example.
  • Multiply this private mileage by HMRC’s Advisory Fuel Rate. The present rate per mile for a 2000 cc diesel car is 10p.

Armed with this information you can now do the sums. In the above example, if the driver’s private mileage was 5,000 miles during 2020-21, the amount that needs to be repaid to the employer is £500. That’s just £42 per month.

Which means, for an effective outlay of £500, the car driver – if a basic rate tax payer – will save £1,666 in tax (£8,330 x 20{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e}). That’s an overall cash saving of £1,166.

If you are receiving private fuel from your employer, or indeed providing private fuel for your employees, it is well worth crunching the numbers to see if there is a cash advantage to repaying any private fuel.

There are deadlines to consider and we can help you with the math and the reporting processes required.

Final planning notes for employers

The car fuel benefit charge not only creates a tax charge for the employee it also creates a National Insurance charge for the employer. And so, allowing employees to repay their private fuel costs will also reduce your NIC costs. A classic win-win outcome.

Did you defer VAT payments last year?

Monday, February 1st, 2021

If you took advantage of the offer to defer VAT payments falling due between 20 March 2020 and 30 June 2020 – to help out with the impact of COVID disruption – your now have three choices. You can:

  • pay the deferred VAT in full on or before 31 March 2021
  • opt in to the VAT deferral new payment scheme when it launches in 2021
  • contact HMRC if you need more help to pay

If you want to opt in to the new payment scheme

You cannot opt in yet. The online opt-in process will be available in early 2021. You must opt-in yourself, we cannot do this for you. Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.

The scheme will allow you to:

  • pay your deferred VAT in instalments without adding interest
  • select the number of instalments from 2 to 11 equal monthly payments

To use this scheme, you must:

  • still have deferred VAT to pay
  • be up to date with your VAT returns
  • opt-in before the end of March 2021
  • pay the first instalment before the end of March 2021
  • be able to pay the deferred VAT by Direct Debit

If you opt-in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

Get ready to opt in to the new payment scheme

Before opting in you must:

  • create your own Government Gateway account if you don’t already have one
  • submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
  • correct errors on your VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in your deferred VAT balance
  • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid

You should also:

  • pay what you can as soon as possible to allow HMRC to show the correct deferred VAT balance
  • consider the number of equal instalments you’ll need, from 2 to 11 months

Tax Diary February/March 2021

Monday, February 1st, 2021

1 February 2021 – Due date for Corporation Tax payable for the year ended 30 April 2020.

19 February 2021 – PAYE and NIC deductions due for month ended 5 February 2021. (If you pay your tax electronically the due date is 22 February 2021)

19 February 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2021.

19 February 2021 – CIS tax deducted for the month ended 5 February 2021 is payable by today.

1 March 2021 – Due date for Corporation Tax due for the year ended 31 May 2020.

2 March 2021 – Self assessment tax for 2019/20 paid after this date will incur a 5{11092aa1eab99d85b02efc0ee3c04dc4f5b81bebfc2bd8f608402c1b0eb15b7e} surcharge.

19 March 2021 – PAYE and NIC deductions due for month ended 5 March 2021. (If you pay your tax electronically the due date is 22 March 2021)

19 March 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2021.

19 March 2021 – CIS tax deducted for the month ended 5 March 2021 is payable by today.

Reminder of CIS VAT changes

Monday, February 1st, 2021

Contractors and subcontractors registered for VAT and the Construction Industry Scheme will need to use the VAT reverse charge process for building and construction services from 1 March 2021.

VAT registered subcontractors affected by this change will no longer add VAT to their invoices to contractors. Instead, the contractors’ accounting system will need to add the deemed VAT to their VAT return on behalf of subcontractors, and at the same time, deduct the same amount as input VAT on the same return.

This will sound complicated but most accounting software can cope with the entries required. If you need help to set this up please call.

Contractors will only pay their VAT registered subcontractors the VAT-free amount invoiced, and as the reverse charge adjustment increases both input and output VAT by the same amount there is no cash penalty for either party

This new process only applies to certain types of services provided by subcontractors.

Please check with us if you feel you are affected but don’t know how to make or judge what you need to do.

If you have bookkeeping software that can be adapted to deal with this change then once appropriate changes are made, processing subcontractors’ invoices should be no more difficult than before the change to the reverse charge.

Latest Blog
18
Feb

Tax claims if working from home

Many employed persons will have spent a large chunk of the current tax year, 2020-21,...

Read More
16
Feb

UK Pensions Bill receives Royal Assent

The UK Pensions Act will bolster protections for savers and further the government&rs...

Read More
11
Feb

Prospects for 2021

The short-term outlook for UK businesses operating in sectors badly affected by the p...

Read More
10
Feb

New UK subsidies to replace EU State Aid

The following announcement provides encouragement that a replacement for the EU State...

Read More

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