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March 22 News Blog

 

Hello

A little later than intended welcome to our March 2022 newsletter/blog looking at some of what has happened since February and a few items that come into place in the near future which I hope is of interest to our clients.

 

In this month’s issue: 

Own your own Limited Company? Last chance to reduce your tax

Payrolling Benefits in Kind

VAT Registered - Are you ready for Making Tax Digital?

More nudge letters

Change in basis year of assessment

We can help

 

Own your own Limited Company? Last chance to reduce your tax

In September 2021 the Chancellor announced increases to National Insurance Contributions (NIC) by 1.25% on both employee and employer NIC. These were temporary increases which will be replaced by the Health and Social Care Levy from 6 April 2023.

At the same time he announced an increase in tax on dividends by 1.25% also from 5 April 2022.

However, this dividend tax increase is permanent and not temporary. It will apply to all dividends taken from all companies, where the total dividend income exceeds the taxpayer’s dividend allowance which has been held at £2,000 for 2002/23, see table.

 

Dividends falling within:

2022/23              2021/22

Basic rate band                                                                                  8.75%                7.50%

Dividend allowance                                                                          £2,000                £2,000

Higher rate band                                                                               33.75%               32.50%

Dividend allowance                                                                          £2,000                £2,000

Additional rate band                                                                          39.35%              38.10%

Dividend allowance                                                                          £2,000                £2,000

This tax increase is significant. For a director of an owner managed company, who takes a salary of £12,570 and dividends of £37,700 per year, their tax will increase by £442.44 in 2022/23.

That’s a tax increase of nearly 14.5% in one year. The rate of corporation tax charged on overdrawn directors’ loan accounts (s 455 charge), is currently set at 32.5% to match the tax on dividends in the higher rate band. It is likely that this rate will also increase to 33.75% from 6 April 2022, but this wasn’t mentioned in the Budget announcements.

If you own a limited company and have sufficient reserves, then there is a short time to carry out some simple tax planning to keep the level of tax on your dividends at the lower tax levels. Speak to us about paying dividends before 5 April 2022. Dividends cannot be backdated so you need to act now.

 

VAT Registered - Are you ready for Making Tax Digital?

 

From 1 April 2022, less than 1 month away, a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

Also be aware that Income Tax for Self Assessment will be start from 2024 and limited companies will be forced to join from around 2026.

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

Speak to us for more details.

 

Change in basis year of assessment

 

Despite still consulting on the matter HMRC have made it clear that they will be progressing with a change in the basis period for assessment for sole traders and partnerships.

If you are a sole trader or partnership with a year end that is not 31 March/5 April, then from 2024 the period on which you pay tax will not be the same as the accounts year. You will need to pay tax on the profits earned in the fiscal tax year 6 April to 5 April (1 April to 31 March will also be allowed). This will mean apportioning the profits for 2 accounts years and if your year end is late in the year this may mean making estimates.

For example a December year end would need to include profits from the accounts to December which is only 1 month before the filing deadline for the return.

During the change a period of more than 12 months could be subject to being taxed in a year. With the Covid 19 pandemic having affected the level of profits now would seem to be a good period to take advantage of lower profits rather than wait until they go up again.

We are therefore now urging all sole traders and partnerships which do not have a 31 March/5 April year end to change the year end now rather than wait.

Whilst we plan to talk to you about this you can pre-empt the discussion by speaking to us now.

 

Payrolling Benefits in Kind

 

HMRC are encouraging more employers to payroll employee benefits in kind rather than declaring benefits on the end of year P11D. They have included guidance on registering to use the scheme in their latest employer bulletin.

If employers haven’t already done so they can register online now or before 5 April 2022 to payroll employee benefits for the 2022/23 tax year.

The advantages of payrolling benefits in kind are:

  • employers no longer need to submit P11D and P46(Car) forms to HMRC
  • simpler PAYE codes mean HR teams receive fewer queries from employees regarding tax
  • tax deductions in monthly payroll will be more accurate
  • tax codes for individuals should change less frequently
  • fewer forms for employers to complete at year-end

If you are not yet in a position to move to payrolling you can still move away from legacy paper P11D forms by submitting them online. You can submit them in one click without worrying about posting them to HMRC. It is also a useful first step towards payrolling of benefits in kind and bringing your payrolling processes into the digital age.

We prepare forms P11d for many clients each year. If you would prefer to payroll the benefits or just have us submit the forms for you then please let us know and we can start the process.

 

More nudge letters

 

We have warned you previously about the HMRC nudge letters and since then the tax authority has found three more topics to write to taxpayers about.

Receiving one of these letters it doesn’t necessarily mean the taxpayer has done anything wrong, it’s just a nudge to check the amounts claimed on the 2019/20 tax return are correct.

 

Property finance

The tax return for 2019/20 was the last opportunity for individual landlords to claim any deduction for finance costs, and they could only deduct 25% of such costs from their rental income.

HMRC is writing to landlords who let property in 2019/20, who may have deducted more than the allowable proportion of 25% of finance costs. Note that HMRC has not checked whether the taxpayer has claimed any deduction for finance costs, or even if they claimed the right amount of deduction.

Letters are being sent sometimes to us as agents and sometimes directly to landlords with us copied in (sometimes!) as the agent suggesting that finance costs need to be checked.

 

Employment expenses

A nudge letter may be sent to all those taxpayers who have claimed employment expenses on their SA tax return for 2019/20.

The HMRC letter lists the five conditions which must all be met for an expense to be claimed against employment income and asks the taxpayer to keep evidence of the expenses incurred.

HMRC is known to be concerned about the activities of High Volume Agents who submit employment-related expense claims to generate tax repayments, without checking the details.

These nudge letters could potentially uncover fraudulent claims where the taxpayer’s online Govt Gateway credentials have been used to submit a tax return including an expense claim, without the taxpayer’s knowledge.

 

Gift Aid carry back

Gift Aid donations made in the current tax year (2021/22) can be claimed on the 2020/21 return, if that return has not yet been filed.

The carry back of Gift Aid donations cannot be made by amending an earlier tax return, it can only be included on the original version of that return which was submitted - crazy, but that’s the law

HMRC is nudging taxpayers who have amended a declaration of Gift Aid in an earlier return. That amendment to box 8 of the tax return is not valid, although the tax software may have allowed it to be submitted, and HMRC initially accepted the amended return, and issued a tax repayment.

If the tax return is not corrected to reinstate the original figure of Gift Aid, HMRC will make an amendment under TMA 1970, s 9ZA or it may open a formal enquiry

If you receive any letter from HMRC it is essential that we are sent a copy as soon as possible. Do not assume that you have done anything wrong or that here is a problem or error. However we will need to review any letter so make sure that the correct amount shave been claimed.

 

We can help

 

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.

 

I wish you the best for the next month.

 

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Finally, don’t forget to make time for yourself and do not let your business run you, you should run your business.

 

Regards

Simon

 

February 22 News Blog

 

Hello

Welcome to our February 2022 newsletter/blog looking at some of what has happened since December and a few items that come into place in the near future which I hope is of interest to our clients.

The start of a new year is a time for hope and expectation. I encourage you to look forward to this year with more optimism than the last 2 years have provided.

There was no newsletter/blog for January as we were working hard to get as many tax returns finished before the 31 January deadline. I do not understand why so many clients leave it to the last minute to send us their tax return information. As we have so many returns to complete  at the last minute our time is at a premium and we are now charging extra to complete returns where we do not have the information in time. We send out many reminders during the year so there is no real excuse.

However, for the second year running, HMRC have announced an amnesty for the £100 late filing penalty for returns as long as they are filed by 28 February 2022. This amnesty does not extend to late payment of the tax due so it is still essential that if you have not yet submitted your return that you pay the tax even if the return will be late.

Speak to us urgently if you still need to submit your 2021 return.

 

In this month’s issue:

Own your own Limited Company? Act now to reduce your tax

 

 

Challenging SEISS grants

Government aims to level playing field for small businesses

 

 

More nudge letters

VAT Registered - Are you ready for Making Tax Digital?

 

 

We can help

Change in basis year of assessment

 

 

 

 

 

 

Own your own Limited Company? Act now to reduce your tax

 

 

In September 2021 the Chancellor announced increases to National Insurance Contributions (NIC) by 1.25% on both employee and employer NIC. These were temporary increases which will be replaced by the Health and Social Care Levy from 6 April 2023.

 

At the same time he announced an increase in tax on dividends by 1.25% also from 5 April 2022.

 

However, this dividend tax increase is permanent and not temporary. It will apply to all dividends taken from all companies, where the total dividend income exceeds the taxpayer’s dividend allowance which has been held at £2,000 for 2002/23, see table.

 

 

 

Dividends falling within:

2022/23

2021/22

Basic rate band

 

Dividend allowance

8.75%

 

£2,000

7.5%

 

£2,000

Higher rate band

 

Dividend allowance

33.75%

 

£2,000

32.5%

 

£2,000

Additional rate band

 

Dividend allowance

39.35%

 

£2,000

38.1%

 

£2,000

 

 

This tax increase is significant. For a director of an owner managed company, who takes a salary of £12,570 and dividends of £37,700 per year, their tax will increase by £442.44 in 2022/23.

 

That’s a tax increase of nearly 14.5% in one year. The rate of corporation tax charged on overdrawn directors’ loan accounts (s 455 charge), is currently set at 32.5% to match the tax on dividends in the higher rate band. It is likely that this rate will also increase to 33.75% from 6 April 2022, but this wasn’t mentioned in the Budget announcements.

 

If you own a limited company and have sufficient reserves, then there is a short time to carry out some simple tax planning to keep the level of tax on your dividends at the lower tax levels. Speak to us about paying dividends before 5 April 2022. Dividends cannot be backdated so you need to act now.

 

 

Government aims to level playing field for small businesses

 

 

The government wants to give smaller businesses better access to the £50 billion worth of public contracts - which can include anything from supplying hospital equipment to providing public sector pensions - and which are tendered each year.

 

The Selling To Government Guide provides SMEs with essential information on how to find government contract opportunities and how to bid for and win them. It includes tips on how small firms can make sure they are showcasing their strengths during the bidding process. The guide will be backed up by online webinar sessions for small businesses.

 

The guide also offers advice on how small firms can get work through supply chains by working with larger companies to help deliver services such as long-running IT or catering projects. The government considers social value when choosing suppliers which gives smaller enterprises the chance to highlight the work they do in their communities and could offer them a better chance of winning government contracts.

 

The government is bringing in "sweeping procurement rules changes", according to Lord Agnew (Cabinet Office Minister), to make it easier for SMEs to win government work. The measures will remove barriers for smaller suppliers by getting rid of "unnecessarily complicated regulations".

 

Lord Agnew said: "We are simplifying the bidding process to make it easier for SMEs to secure contracts by creating one single central platform which suppliers have to register on, so they only have to submit their data once to qualify for any public sector procurement."

 

 

VAT Registered - Are you ready for Making Tax Digital?

 

 

From 1 April 2022 (only 2 months away!) a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

 

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

 

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

 

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

 

Also be aware that Income Tax for Self Assessment will be start from 2024 and limited companies will be forced to join from around 2026.

 

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

 

Speak to us for more details.

 

 

Change in basis year of assessment

 

 

Despite still consulting on the matter HMRC have made it clear that they will be progressing with a change in the basis period for assessment for sole traders and partnerships.

 

If you are a sole trader or partnership with a year end that is not 31 March/5 April, then from 2024 the period on which you pay tax will not be the same as the accounts year. You will need to pay tax on the profits earned in the fiscal tax year 6 April to 5 April (1 April to 31 March will also be allowed). This will mean apportioning the profits for 2 accounts years and if your year end is late in the year this may mean making estimates.

 

For example a December year end would need to include profits from the accounts to December which is only 1 month before the filing deadline for the return.

 

During the change a period of more than 12 months could be subject to being taxed in a year. With the Covid 19 pandemic having affected the level of profits now would seem to be a good period to take advantage of lower profits rather than wait until they go up again.

 

We are therefore now urging all sole traders and partnerships which do not have a 31 March/5 April year end to change the year end now rather than wait.

 

Whilst we plan to talk to you about this you can pre-empt the discussion by speaking to us now.

 

 

Challenging SEISS grants

 

 

The Self-employed Income Support Scheme (SEISS) grants were designed to help small unincorporated businesses survive the COVID pandemic, when they were unable to trade, or were subject to restrictions.

 

Applications for the fifth and final SEISS grants closed on 30 September 2021, and the grants should have been paid out by the end of October 2021. However, it is not too late to challenge the amount of grant paid, even where HMRC decided the taxpayer was due nothing at all.

 

The first step should be to check the calculation of turnover for the tax year 2020/21, which for this purpose is the level of sales in the 12 months ending on 31 March/ 5 April 2021 (or some day in between).

 

The HMRC guidance was initially misleading as it said the 2020/21 figure of turnover would be found on the 2020/21 tax return, but that would not be the case if the business has an accounting period which does not align with the tax year. Also, an accurate figure of sales in 2020/21 may not have been available by 30 September 2021.

 

Once the quantum of drop in turnover had been established (up to 30% or more than 30%), the amount of SEISS grant was based on the average trading profits (not turnover) for the past 4 years.

 

There was scope for a lot of confusion and error in these calculations.

 

If you think you were underpaid an SEISS grant you should contact HMRC by 28 February 2022 and provide all of the following:

 

  • the grant claim reference
  • client’s NI and UTR numbers
  • client’s Government Gateway user ID used to make the claim
  • why you think the grant amount is too low

 

If you did not make a claim for an SEISS grant because of an HMRC error (perhaps your tax return had not been processed), or exception circumstances existed, you can now contact HMRC to submit a claim.

 

If you need assistance with challenging a claim we look at your situation and hopefully help you.

 

 

More nudge letters

 

 

We have warned you previously about the HMRC nudge letters and since then the tax authority has found three more topics to write to taxpayers about.

 

Receiving one of these letters it doesn’t necessarily mean the taxpayer has done anything wrong, it’s just a nudge to check the amounts claimed on the 2019/20 tax return are correct.

 

Property finance

 

The tax return for 2019/20 was the last opportunity for individual landlords to claim any deduction for finance costs, and they could only deduct 25% of such costs from their rental income.

 

HMRC is writing to landlords who let property in 2019/20, who may have deducted more than the allowable proportion of 25% of finance costs. Note that HMRC has not checked whether the taxpayer has claimed any deduction for finance costs, or even if they claimed the right amount of deduction.

 

Letters are being sent sometimes to us as agents and sometimes directly to landlords with us copied in (sometimes!) as the agent suggesting that finance costs need to be checked.

 

Employment expenses

 

A nudge letter may be sent to all those taxpayers who have claimed employment expenses on their SA tax return for 2019/20.

 

The HMRC letter lists the five conditions which must all be met for an expense to be claimed against employment income and asks the taxpayer to keep evidence of the expenses incurred.

 

HMRC is known to be concerned about the activities of High Volume Agents who submit employment-related expense claims to generate tax repayments, without checking the details.

 

These nudge letters could potentially uncover fraudulent claims where the taxpayer’s online Govt Gateway credentials have been used to submit a tax return including an expense claim, without the taxpayer’s knowledge.

 

Gift Aid carry back

 

Gift Aid donations made in the current tax year (2021/22) can be claimed on the 2020/21 return, if that return has not yet been filed.

 

The carry back of Gift Aid donations cannot be made by amending an earlier tax return, it can only be included on the original version of that return which was submitted - crazy, but that’s the law

 

HMRC is nudging taxpayers who have amended a declaration of Gift Aid in an earlier return. That amendment to box 8 of the tax return is not valid, although the tax software may have allowed it to be submitted, and HMRC initially accepted the amended return, and issued a tax repayment.

 

If the tax return is not corrected to reinstate the original figure of Gift Aid, HMRC will make an amendment under TMA 1970, s 9ZA or it may open a formal enquiry

 

If you receive any letter from HMRC it is essential that we are sent a copy as soon as possible. Do not assume that you have done anything wrong or that here is a problem or error. However we will need to review any letter so make sure that the correct amount shave been claimed.

 

The deadline for making adjustments to a 2019/20 tax return is 31 January 2022 so if you do receive such a letter do not delay in letting us know.

 

We can help

 

 

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

 

We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.

 

 

 

I wish you the best for the next month.

 

If you have any queries you can book a free 15 minute zoom meeting with me.

 

Finally we hope that you are still managing to keep your New Year Resolutions. We offer a mentoring service to help hold you to account so that your plans and goals for the year can be achieved. Don’t forget to make time for yourself and do not let your business run you, you should run your business.

 

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December 21 News Blog

 

Hello

We wish everyone the best of the season and hope it is a peaceful and quiet one for all

Welcome to our December newsletter/blog looking at some of what has happened over the month of November and a few items that come into place in December or later which I hope is of interest to our clients.

 

Tax returns!

It is now less than 2 months until your 2021 tax returns have to be filed with MHRC. If you have not let us have the information to complete them then do not delay. January is a busy month for us and we cannot guarantee to get the returns submitted if you leave it until next year to let us have the information.

 

HMRC issues scam alert as tax deadline looms

HMRC has warned customers(!) to watch out for fraudulent tax rebate emails and texts after a year in which nearly 800,000 tax-related scams were reported.

The warning comes as HMRC is preparing to send more than four million emails and SMS text messages to self assessment customers ahead of the 31 January 2022 deadline, prompting them to pay their tax bill and pointing them to guidance and support if they are unable to pay in full.

However, HMRC has warned that scammers typically use this time to try and steal money or personal information from unsuspecting individuals and it is urging customers (I hate that word being used by HMRC) not be taken in by malicious emails, phone calls or texts. In the last year, almost 800,000 tax-related scams were reported, of which nearly 360,000 were bogus tax rebate referrals.

"If someone contacts you saying they're from HMRC, wanting you to urgently transfer money or give personal information, be on your guard," said Myrtle Lloyd, HMRC's director general for customer services.

"HMRC will also never ring up threatening arrest. Only criminals do that. Scams come in many forms. Some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing, so if you are in any doubt whether the email, phone call or text is genuine, you can check the 'HMRC scams' advice on GOV.UK and find out how to report them to us."

Criminals often mimic government messages to make them appear authentic. If you are in any doubt about a contact from HMRC speak to us as soon as possible.

Our advice is:

  • Take a moment to think before parting with your money or information;
  • If a phone call, text or email is unexpected, don't give out private information or reply, and don't download attachments or click on links before checking on GOV.UK that the contact is genuine;
  • Do not trust caller ID on phones. Numbers can be spoofed;
  • It's ok to reject, refuse or ignore any requests - only criminals will try to rush or panic you;
  • Go to GOV.UK for information on how to recognise genuine HMRC contact and how to avoid and report scams;
  • Contact your bank immediately if you think you've fallen victim to a scam, and report it to Action Fraud.
  • Contact us before doing anything if you are in any way unsure about a HMRC contact.

Don’t forget that we are here to assist you with any business queries you may have.

 

In this month’s issue:

 

SEISS Letters

 

New Fuel Rates for Company Cars

NIC increases

 

MTD for Self Assessment delayed

VAT Registered - Are you ready for Making Tax Digital?

 

Capital Gains on the sale of Residential Property

Change in basis year of assessment

 

Why don’t you ask us?

 

SEISS Letters

As part of the application for any of the first three SEISS grants the taxpayer had to declare that their business met all of the following conditions:

  • traded in the tax year 2019/20
  • intended to continue to trade in the tax year 2020/21
  • the trade was adversely affected by coronavirus.

 

The taxpayer also had to have submitted their 2018/19 SA tax return by 23 April 2020.

 

HMRC is now looking at the 2019/20 SA tax returns which should have been submitted by 31 January 2021. These returns should include income from self-employment if completed by a taxpayer who claimed an SEISS grant.

 

If the taxpayer ceased trading permanently in 2019/20, they were not eligible for the SEISS grant. However, a temporary break in the trade and the commencement of the same or a different self-employed trade is permissible within the SEISS rules.

 

Individuals who took a break from self-employment due to maternity or adoption leave in 2019/20 were treated as if they continued to trade throughout the period.

 

HMRC is now writing to those SEISS claimants who have either:

 

  • Not submitted their 2019/20 SA tax return; or
  • The 2019/20 return does not include any self-employed income.

The taxpayer is reminded that they must repay the SEISS grant if they we not eligible to claim it. Penalties may be imposed if the grant is repaid later than: 20 October 2020 or 90 days after it was received.

The HMRC letter gives the taxpayer a 30-day deadline to submit or correct their 2019/20 SA tax return or repay the SEISS grants received in full.

As agents we do not receive copies of these letters and would not be aware that one had been sent. If you receive one you should contact us immediately so that we may advise you of how to respond.

 

NIC increases

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On 7 September the Prime Minister, Boris Johnson, announced an increase in National Insurance Contributions and dividend tax which would raise £36bn for frontline services in the next three years and be the "biggest catch-up programme in the history of the NHS". He accepted the tax and NIC increases broke a manifesto pledge, but said the global pandemic was in no one's manifesto.

It was confirmed in the budget that there will be a 1.25% rise in National Insurance Contributions (NICs) from April 2022 paid by both employers and workers and will then become a separate tax on earned income from 2023 - calculated in the same way as NIC and appearing on an employee's payslip. Note that the 1.25% increase applies to the Class 4 contributions paid by the self-employed on their profits as well as the Class 1 contributions paid by employees increasing the rates to 10.25% and 13.25%. The employers Class 1 rate will increase from 12.8% to 14.05% however many small businesses are able to set off a £4,000 employment allowance against their employers NIC liability.

Those above State Pension Age who are earning or self-employed will start paying NIC and the new Health and Social Care Levy from 2023/24.

The 1.25% additional levy doesn’t just apply to national insurance contributions, it is proposed that the income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax increase. This would mean that after the current £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year.

This is obviously a tax rise by any other name and it will effect everyone, even those who have income other than the state pension.

 

VAT Registered - Are you ready for Making Tax Digital?

From 1 April 2022 (only 4 months away!) a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

Also be aware that Income Tax for Self Assessment will be start from 2024 and limited companies will be forced to join from around 2026.

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

Speak to us for more details.

 

Change in basis year of assessment

Despite still consulting on the matter HMRC have made it clear that they will be progressing with a change in the basis period for assessment for sole traders and partnerships.

If you are a sole trader or partnership with a year end that is not 31 March/5 April, then from 2024 the period on which you pay tax will not be the same as the accounts year. You will need to pay tax on the profits earned in the fiscal tax year 6 April to 5 April (1 April to 31 march will also be allowed). This will mean apportioning the profits for 2 accounts years and if your year end is late int eh year this may mean making estimates.

For example a December year end would need to include profits from the accounts to December which is only 1 month before the filing deadline for the return.

During the change a period of more than 12 months could be subject to being taxed in a year. With the Covid 19 pandemic having affected the level of profits now would seem to be a good period to take advantage of lower profits rather than wait until they go up again.

We are therefore now urging all sole traders and partnerships which do not have a 31 March/5 April year end to change the year end now rather than wait.

 

New Fuel Rates for Company Cars

 

As the result of recent increases in fuel prices, HMRC have increased the advisory fuel rates that apply for the reimbursement of employees' private fuel for their company cars. The same rates apply when the employer reimburses employees for fuel used for business journeys in their company car.

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The new rates apply from 1 December 2021, but you can continue to use the previous rates for up to 1 month from the date the new rates apply. Note that the electric car reimbursement rate also increases from 4p to 5p a mile.

Where there has been a change, the previous rate is shown in brackets: -

 

Engine Size

Petrol

Diesel

LPG

1400cc or less

13p

(12p)

 

9p

(7p)

1600cc or less

 

11p

(10p)

 

1401cc to 2000cc

15p

(14p)

 

10p

(8p)

1601 to 2000cc

 

13p

(12p)

 

Over 2000cc

22p

(20p)

16p

(15p)

15p

(12p)

 

 

Note that for hybrid cars you must use the petrol or diesel rate which may differ significantly from the actual fuel costs. The advisory electricity rate for fully electric cars is 5 pence per mile (was 4p).

Employees should carefully consider whether it is advantageous having private fuel provided for their company car. Remember that the P11d benefit for having private fuel provided for a company car in 2021/22 is £24,600 multiplied by the CO2 emissions percentage for that vehicle, rising to £25,300 for 2022/23.

For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% x £24,600 = £9,102 for 2021/22. If they are a higher rate taxpayer that would mean £3,641 tax. That is an awful lot of private fuel!

On top of that there would be 13.8% Class 1A NIC payable by the employer = £1,256 (15.05% next year = £1,409).

 

 

MTD for Self Assessment delayed

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The government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.

This may seem a long time away but the start date will come round quicker than you may think. Don’t delay, talk to us now about planning for this major change in taxation.

 

 

Capital Gains on the sale of Residential Property

Taxpayers who make a taxable gain on the disposal of a UK residential property have to report this gain and pay the CGT due within 60 days of the property deal completion date. These actions both have to be performed using the badly designed UK property reporting service.

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This online property reporting service does not transfer data about the disposal or the tax paid into the SA tax return system, so the reporting and payment functions have to be repeated at when submitting the SA tax return. This is an unnecessary duplication of tax compliance work, which also requires the taxpayer to separately authorise their tax agent to act for them on two different HMRC systems.

Where the taxpayer cannot manage the digital process, perhaps because they don’t have the UK documents which will allow them to complete the online ID checks, a paper return of the property disposal can be submitted.

However, where a paper return has been filed the CGT can‘t be paid until HMRC issue a payment reference and a demand for the tax due. This can take from three to six months, as HMRC has a backlog of paper returns to process.

HMRC has now confirmed that taxpayers will have 30 days from the issue of a demand to pay, rather than 14 days to pay. A late payment penalty will not be issued if the tax is paid within 30 days of the manual demand charge. However, a late filing penalty may apply if the paper return was not submitted within 60 days of the completion date – this can be appealed.

 

We have a number of clients who have sold residential properties over the past few months and we have assisted them in the preparation of CGT computations and have also walked them through the HMRC registration process and submission of returns.

If you are in the process of selling a residential property or have recently done so then talk to us about the whole process and how we can ensure that you are compliant with the rules an make sure the returns and tax are submitted on time.

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Why don’t you ask us?

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.

 

Finally we wish all our readers the best of this festive season. Make time for yourself and do not let your business run you in this time of celebration.

 

If you have any queries you can book a free 15 minute zoom meeting with me.

 

 

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November 21 blog

 

Hello

Welcome to our November newsletter/blog looking at some of what has happened over the month of October and a few items that come into place in November or later which I hope is of interest to our clients.

The month started with panic buying at the pumps, the shortage of HGV drivers, and a looming winter energy crisis many of us are running our businesses in an ever increasing level of uncertainty. It all seems a long time ago now!

If you are concerned about the future of your business then take some time to reflect on where you are and what could happen in the next few months.

It is now vitally important for all businesses to plan ahead for a range of scenarios. Cash flow and business planning in these uncertain times may appear difficult but there are some practical steps you can take to minimise potential disruption to your business. 

  • Review your Budgets and set realistic and achievable targets for the remainder of 2021.
  • Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues. 
  • Review and flow chart the main processes in your business (e.g. Sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
  • Put extra effort into making sure your relationships with your customers are solid.
  • Review your list of products and services and eliminate those that are unprofitable or not core products/services.
  • Pull everyone together and explain the business strategy and get their buy-in.

The month finished with the budget. Most of what was announced had already been revealed and anything new was mostly for larger businesses. The reduction in business rates for hospitality continues and there were cuts in the duty on alcohol. The way the duty is assessed is also to be revamped.

One good point was the extension of the deadline to declare and submit Capital Gains Tax details on the sale of residential property. This has now been extended from 30 days to 60 days.

We have already assisted clients in making these declarations and the additional time is very welcome. The system however is still clunky and the way payments are dealt with does need to be sorted out.

More details on the budget can currently be found on the news pages of our website.

Don’t forget that we are here to assist you with any business queries you may have.

In this month’s issue:

NIC increases

 

MTD for Self Assessment delayed

VAT Registered - Are you ready for Making Tax Digital?

 

Capital Gains on the sale of Residential Property

Change in basis year of assessment

 

Why don’t you ask us?

     

 

NIC increases

On 7 September the Prime Minister, Boris Johnson, announced an increase in National Insurance Contributions and dividend tax which would raise £36bn for frontline services in the next three years and be the "biggest catch-up programme in the history of the NHS". He accepted the tax and NIC increases broke a manifesto pledge, but said the global pandemic was in no one's manifesto.

 

It is was confirmed in the budget that there will be a 1.25% rise in National Insurance Contributions (NICs) from April 2022 paid by both employers and workers and will then become a separate tax on earned income from 2023 - calculated in the same way as NIC and appearing on an employee's payslip. Note that the 1.25% increase applies to the Class 4 contributions paid by the self-employed on their profits as well as the Class 1 contributions paid by employees increasing the rates to 10.25% and 13.25%. The employers Class 1 rate will increase from 12.8% to 14.05% however many small businesses are able to set off a £4,000 employment allowance against their employers NIC liability.

Those above State Pension Age who are earning or self-employed will start paying NIC and the new Health and Social Care Levy from 2023/24.

The 1.25% additional levy doesn’t just apply to national insurance contributions, it is proposed that the income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax increase. This would mean that after the current £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year.

This is obviously a tax rise by any other name and it will effect everyone, even those who have income other than the state pension.

 

VAT Registered - Are you ready for Making Tax Digital?

From 1 April 2022 (only 6 months away!) a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

 

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

Also be aware that Income Tax for Self Assessment will be start from 2024 and limited companies will be forced to join from around 2026.

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

Speak to us for more details.

 

Change in basis year of assessment

Despite still consulting on the matter HMRC have made it clear that they will be progressing with a change in the basis period for assessment for sole traders and partnerships.

If you are a sole trader or partnership with a year end that is not 31 March/5 April, then from 2024 the period on which you pay tax will not be the same as the accounts year. You will need to pay tax on the profits earned in the fiscal tax year 6 April to 5 April (1 April to 31 march will also be allowed). This will mean apportioning the profits for 2 accounts years and if your year end is late int eh year this may mean making estimates.

For example a December year end would need to include profits from the accounts to December which is only 1 month before the filing deadline for the return.

During the change a period of more than 12 months could be subject to being taxed in a year. With the Covid 19 pandemic having affected the level of profits now would seem to be a good period to take advantage of lower profits rather than wait until they go up again.

We are therefore now urging all sole traders and partnerships which do not have a 31 March/5 April year end to change the year end now rather than wait.

 

MTD for Self Assessment delayed

The government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.

 

Capital Gains on the sale of Residential Property

Taxpayers who make a taxable gain on the disposal of a UK residential property have to report this gain and pay the CGT due within 60 days of the property deal completion date. These actions both have to be performed using the badly designed UK property reporting service.

This online property reporting service does not transfer data about the disposal or the tax paid into the SA tax return system, so the reporting and payment functions have to be repeated at when submitting the SA tax return. This is an unnecessary duplication of tax compliance work, which also requires the taxpayer to separately authorise their tax agent to act for them on two different HMRC systems.

Where the taxpayer cannot manage the digital process, perhaps because they don’t have the UK documents which will allow them to complete the online ID checks, a paper return of the property disposal can be submitted.

However, where a paper return has been filed the CGT can‘t be paid until HMRC issue a payment reference and a demand for the tax due. This can take from three to six months, as HMRC has a backlog of paper returns to process.

HMRC has now confirmed that taxpayers will have 30 days from the issue of a demand to pay, rather than 14 days to pay. A late payment penalty will not be issued if the tax is paid within 30 days of the manual demand charge. However, a late filing penalty may apply if the paper return was not submitted within 60 days of the completion date – this can be appealed.

We have a number of clients who have sold residential properties over the past few months and we have assisted them in the preparation of CGT computations and have also walked them through the HMRC registration process and submission of returns.

If you are in the process of selling a residential property or have recently done so then talk to us about the whole process and how we can ensure that you are compliant with the rules an make sure the returns and tax are submitted on time.

 

Why don’t you ask us?

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.

 

I wish you the best for the next month.

 

If you have any queries you can book a free 15 minute zoom meeting with me.

 

Regards 

Simon

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October 21 News Blog

 

Hello

 

Welcome to our October newsletter/blog looking at some of what has happened over the month of September and a few items that come into place in October or later which I hope is of interest to our clients.

 

Wow, what month September was!

 

Multiple Government announcements from a new National Insurance rate to deferring MTD for Self Assessment. Please read the summaries below. We will be issuing more information over the coming weeks about various items.

 

Don’t forget that we are here to assist you with any business queries you may have.

 

In this month’s issue:

 

NIC increases

 

 

On 7 September the Prime Minister, Boris Johnson, announced an increase in National Insurance Contributions and dividend tax which would raise £36bn for frontline services in the next three years and be the "biggest catch-up programme in the history of the NHS". He accepted the tax and NIC increases broke a manifesto pledge, but said the global pandemic was in no one's manifesto.

 

It is proposed that there will be a 1.25% rise in National Insurance Contributions (NICs) from April 2022 paid by both employers and workers and will then become a separate tax on earned income from 2023 - calculated in the same way as NIC and appearing on an employee's payslip. Note that the 1.25% increase applies to the Class 4 contributions paid by the self-employed on their profits as well as the Class 1 contributions paid by employees increasing the rates to 10.25% and 13.25%. The employers Class 1 rate will increase from 12.8% to 14.05% however many small businesses are able to set off a £4,000 employment allowance against their employers NIC liability.

 

Those above State Pension Age who are earning or self-employed will start paying NIC and the new Health and Social Care Levy from 2023/24.

 

The 1.25% additional levy doesn’t just apply to national insurance contributions, it is proposed that the income from share dividends, earned by those who own shares in companies, will also see a 1.25% tax increase. This would mean that after the current £2,000 tax free dividend allowance the rate of tax would be 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for those with income in excess of £150,000 a year.

 

This is obviously a tax rise by any other name and it will effect everyone, even those who have income other than the state pension.

 

 Budget date announced

 

 

The government has confirmed that a full Spending Review will be held alongside the Budget on 27 October 2021. The Budget will bring into law many of the new announcements made this month, especially the new National Insurance rises detailed above.

  

VAT Registered - Are you ready for Making Tax Digital?

 

 

From 1 April 2022 (only 6 months away!) a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

 

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

 

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

 

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

 

Also be aware that Income Tax for Self Assessment will be start from 2024 and limited companies will be forced to join from around 2026.

 

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

 

Speak to us for more details.

 

 

MTD for Self Assessment delayed

 

 

The government have announced that they will introduce Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) a year later than planned, in the tax year beginning in April 2024.This will give the self-employed and buy to let landlords an extra year to prepare for the digitalisation of Income Tax and also allow HMRC more time for customer testing of the pilot system.The start date for partnerships to join MTD for ITSA has been put back still further to the tax year beginning in April 2025.

There has been no change to the £10,000 per annum gross income threshold which means that most self-employed traders and buy to let landlords will be mandated to comply with MTD for income tax from April 2024.

 

The change in basis year for tax assessment has also been pushed back a year to the 2023/24 tax year. The change in the basis of taxation will mean that for the self employed a 31 March/ 5 April year end will be the best year end to have. Now is the time to consider changing your year end if you do not already make your self employment accounts up to his date.

 

We will be issuing a Tax Briefing on the whole MTD ITSA situation in the next month. If you are not a client and want a copy then please contact us at mail@stewartpartners.co.uk to request a copy.

 

New VAT rate

From 1 October there will be a new rate of VAT of 12.5%. This rate replaces the previous 5% rate for the tourism and hospitality sectors. If you have been able to take advantage of the reduced 5% rate in the recent past then the rate will rise to 12.5% from 1 October 2021.

 

VAT on these sectors will remain at this level until 31 March 2022 when they will revert back to the standard rate of 20%.

 

If you have any queries about the rate change or need assistance in updating your software please get in touch.

 

Capital Gains on the sale of Residential Property

 

 

Taxpayers who make a taxable gain on the disposal of a UK residential property have to report this gain and pay the CGT due within 30 days of the property deal completion date. These actions both have to be performed using the badly designed UK property reporting service.

 This online property reporting service does not transfer data about the disposal or the tax paid into the SA tax return system, so the reporting and payment functions have to be repeated at when submitting the SA tax return. This is an unnecessary duplication of tax compliance work, which also requires the taxpayer to separately authorise their tax agent to act for them on two different HMRC systems.

 Where the taxpayer cannot manage the digital process, perhaps because they don’t have the UK documents which will allow them to complete the online ID checks, a paper return of the property disposal can be submitted.

 However, where a paper return has been filed the CGT can‘t be paid until HMRC issue a payment reference and a demand for the tax due. This can take from three to six months, as HMRC has a backlog of paper returns to process.

 

HMRC has now confirmed that taxpayers will have 30 days from the issue of a demand to pay, rather than 14 days to pay. A late payment penalty will not be issued if the tax is paid within 30 days of the manual demand charge. However, a late filing penalty may apply if the paper return was not submitted within 30 days of the completion date – this can be appealed.

 We have a number of clients who have sold residential properties over the past few months and we have assisted them in the preparation oof CGT computations and have also walked them through the HMRC registration process and submission of returns.

 If you are in the process of selling a residential property or have recently done so then talk to us about the whole process and how we can ensure that you are compliant with the rules an make sure the returns and tax are submitted on time.

 

Coronavirus Job Retention Scheme (CJRS) - update

 

 

The CJRS has finished and no more grants will be paid by the Government. We are finalising the last grant claims at the moment.

 

If you making the grant claim yourself you have until 15 October to make the claim.

 

Getting back to business

 

 

Most businesses have now opened fully again and although things are slow they are getting back to earning money.

 There is a temptation to reduce prices to bring in customers, both old and new. In my opinion this is an error. Your services or products have a value and you should be charging a fair price for what you are offering. If you discount now it will be difficult to raise prices for the same product later once things are starting to look up.

 Most businesses will be focussing short term on their recovery and in the medium term on being resilient, improving profitability and growing turnover. If taxes rise to fund government spending, we recommend all businesses should map out a range of scenarios with “what if” analysis to understand their available future strategies for success. 

Please talk to us about scenario planning – we have the tools to help you prepare for the future and set realistic and achievable targets.   

  

Why don’t you ask us?

 

 

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

 

In addition to scenario planning mentioned above we have a broad range of experience that goes far beyond just preparing accounts and tax returns. Get in touch as we will probably have an answer to help you with your challenges.

 

  

I wish you the best for the next month.

 

If you have any queries you can book a free 15 minute zoom meeting with me.

 

Also there is the client zoom drop in session which continues for clients at 11.00am every Wednesday.

 

Zoom meeting details:

 

Meeting URL:

 https://us02web.zoom.us/j/86149133301?pwd=VkZuWURZQ0gxM0t2WnZiWjNneUpnZz09

Meeting ID: 861 4913 3301

Password: 054121

 

Please note that the meeting details have changed from the old meeting URL

 

 

Regards

 

 

Simon

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September News Blog

 

Hello

 Here is our September newsletter/blog looking at some of what has happened over the month of August and a few items that come into place in September or later which I hope is of interest to our clients.

 

A picture containing person, indoorDescription automatically generatedThree quarters of adults in the UK have now received both doses of a COVID-19 vaccine, as the public continues to do what it can to protect themselves and their community. With the furlough scheme finishing at the end of September there will be a return back towards what was considered “normal” before the pandemic started.

 

I predict that there will not be a full return to the way things were pre-pandemic as many businesses have found that they can work just as effectively or with lower overheads during the past 18 months.

Many businesses have found other income streams and more efficient ways of working.

With the Government support winding down business will have to get back to trading fully again and this should give a boost to the economy. If you are not sure how you will restart or if you are having concerns about getting going again please get in touch so that we can hand hold you through the restart.

Don’t forget that we are here to assist you with any business queries you may have.

There are many new initiatives being put in place as restrictions finish and therefore there are a few more items in this month’s list of action points.

In this month’s issue:

Self-Employment Income Support Scheme (SEISS)

Coronavirus Job Retention Scheme (CJRS) – Last month!

Off-Payroll Working – Will HMRC accept CEST result?

Commercial rent debts: policy statement

Are you ready for Making Tax Digital?

Abolition of tax basis periods and new tax year end?

Eviction protection

Research & Development – Not for you 

 

National Minimum Wage

Getting back to business

Why don’t you ask us?

 

Self-Employment Income Support Scheme (SEISS)

The online claims service for the 5th SEISS grant opened in late July and closes on 30 September 2021. No late claims will be allowed.

The fifth grant will be determined by a turnover test for most taxpayers. The test considers how much a businesses’ turnover has gone down by in the 2020-21 tax year due to the pandemic. More information is given on the .GOV web site.

In summary you will need to have 2 turnover figures ready when making the claim:

·        The pandemic turnover is for the 12 months from 1 April 2020 to 31 March 2021 no matter your year end. (if you have a 5 April year end this is considered to be the same period).

·        The pre-pandemic turnover is the turnover declared in your 2019/20 tax return. This is can be a different accounting year that you are comparing to. If the 2020 figures are unusual then the turnover in the 2019 return should be taken.

Taxpayers who were not eligible for the fourth grant, will not be eligible for the fifth grant either as HMRC are using the same tax returns to determine eligibility for both grants. If you were eligible but did not claim the forth grant you should be able to claim the fifth grant.

The grant is taxable and will be paid out in a single instalment.

To be eligible for the grant you must be a self-employed individual or a member of a partnership.

For members of a partnership or LLP the turnover comparison is based on the turnover of the partnership. However, where the partner also has another business a proportion of partnership turnover is used.

We cannot make the claim on your behalf as agents. You have to make the claim yourself.

https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme

 

Coronavirus Job Retention Scheme (CJRS) – last month!

 

 

The CJRS has finishes on 30 September 2021.

For September 2021, the government will pay 60% of wages up to a maximum cap of £1,875.00 for the hours the employee is on furlough.

Employers will top up employees’ wages to make sure they receive 80% of wages (up to £2,500) in total for the hours the employee is on furlough. The caps are proportional to the hours not worked.

Off-Payroll Working – Will HMRC accept CEST result?

 

Since 6 April 2021 large and medium-sized organisations, based on the Companies Act criteria, have had to determine whether or not a worker supplying his services via their own personal service company would be treated as an employee if directly engaged. This replaced the IR35 rules for these larger organisations.

HMRC suggest organisations use their Check Employment Status for Tax (CEST) tool on their website to check the worker’s status, although that is not obligatory. The tool is an interactive database of questions and will normally provide a ruling after 15 to 20 questions depending on the answers given about the contractual relationship.

See: Check employment status for tax - GOV.UK (www.gov.uk)

HMRC have recently confirmed that they will be bound by the result of the software provided the information is accurate and it is used in accordance with their guidance.

See: ESM11010 - Employment Status Manual - HMRC internal manual - GOV.UK (www.gov.uk)

HMRC have also stated that they will not stand by results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome. They would see that as deliberate non-compliance, and potentially levy financial penalties.

Note that the end-user organisation is required to issue a Status Determination Statement to the worker with a copy to any agency to be passed to any fee payer in the labour supply chain making payments to the personal service company.

 

Commercial rent debts: policy statement

 

The government will legislate to ringfence rent debt accrued during the pandemic by businesses affected by enforced closures and set out a process of binding arbitration to be undertaken between landlords and tenants.

This is to be used as a last resort, after bilateral negotiations have been undertaken and only where landlords and tenants cannot otherwise come to a resolution. Ahead of the system being put in place, the government will publish the principles which they will seek to put into legislation in a revised Code of Practice, to allow landlords and tenants time to negotiate on that basis.

Section 82 (England and Wales) and Section 83 (Northern Ireland) of the Coronavirus Act 2020, which prevents landlords of commercial properties from being able to evict tenants for the non-payment of rent, will continue until 25 March 2022, unless legislation is passed ahead of this, to provide sufficient time for this new process to be put in place.

Government is clear that those tenants who have not been affected by closures and who have the means to pay, should pay. Additionally, government expects commercial tenants to begin paying rent as per their lease from the point of restrictions being lifted for their sector.

A sign on a windowDescription automatically generated with medium confidenceAs soon as legislation is passed, the commercial tenant protection measures will only apply to ringfenced arrears. This includes rent debt accrued from March 2020 by commercial tenants affected by COVID-19 business closures until restrictions for their sector are removed.

 This means that landlords will be able to evict tenants for the non-payment of rent prior to March 2020 and after the end of restrictions for their sector and who have not been affected by business closures during this period.

 For the full policy statement see: Supporting businesses with commercial rent debts: policy statement - GOV.UK (www.gov.uk)

 

 

Are you ready for Making Tax Digital?

 

From 1 April 2022 a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

Also be aware that other taxpayers will be required to join the MTD project from 2023 for matters such as property landlords and self assessment. Limited companies will be forced to join form around 2026.

If your VAT quarter end does not align with your year end then you could have to make returns in 8 different months during a year. If there is rental income as well then there could be as many as 12 monthly returns that need to be made. Now is the time to plan so that the number of months in which returns are required is minimised.

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

Speak to us for more details.

 

Abolition of tax basis periods and new tax year end?

We are awaiting further information on MTD from HMRC this summer but one significant announcement on 20 July was draft legislation to abolish basis periods for unincorporated businesses for the 2023/24 tax year to simplify MTD reporting.

This would mean that businesses (not companies) would be taxed on their profits for the period 1 April to 31 March each year, no matter what their year end is. (6 April to 5 April is allowable). This has the potential to cause major problems for some clients who have, for example, December year ends meaning that the December accounts would have to be prepared and finalised in 1 month so that the appropriate information could be extracted. Quarterly reporting for MTD would help this but there would still be little time to get figures together for the return to be filed in January.

You may wish to consider whether a change in year end would be beneficial for your business.

That change would apply to sole traders, partnerships, as well as trusts with trading and property rental income. There would also be complicated transitional rules for 2022/23 which could result in a big tax bill that year for some traders.

A picture containing text, building, outdoor, oldDescription automatically generatedThe Treasury are also consulting on changing the tax year itself from the archaic 5 April year end to 31 March or even 31 December. A calendar tax year would bring the UK into line with most other countries at last!

 

We will keep you updated when more information comes available.

 

 

Eviction protection

 

 

Tenants who have been hit hard by the pandemic maybe worried sick that they can’t pay the rent for their business premises and so face eviction.

The good news is that the moratorium against forfeiture of a commercial lease for non-payment of rent, which was due to end on 25 June 2021, has been extended to 25 March 2022.

The temporary restriction stopping landlords from bringing Commercial Rent Arrears Recovery (CRAR) proceedings against commercial tenants in arrears has also been extended to 25 March 2022.

The temporary prohibition that stops landlords from using statutory demands against commercial tenants who are in arrears of rent because of COVID-19 has also been extended, but only to 30 September 2021. This prevents the landlord from petitioning the court to have the tenant wound up if they do not pay a statutory demand for rent within 21 days.

The rent arrears don’t disappear once these restrictions are lifted, and businesses should pay their rent as soon as they are able to trade from their premises again. However, the government is proposing to bring in a new law to require landlords and tenants to go to arbitration to agree to waive some portion of the unpaid rent that built up during the pandemic.

Protection for tenants extended

  

Research & Development – Not for you?

 

For a number of years the Government have been generous in providing tax credits for expenditure on research and Development (R&D).

The grants are there to support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.

A few people in a labDescription automatically generated with low confidence

The amount that can be claimed as a small business is an additional 130% of the expenditure on the project on top of the actual expenditure incurred.

 

In order to be able to claim the grant the work must be part of a specific project to make an advance in science or technology. It cannot be an advance within a social science - like economics - or a theoretical field - such as pure maths.

 

The project must relate to the company’s trade - either an existing one, or one that you intend to start up based on the results of the R&D.

To get R&D relief you need to explain how a project:

  • looked for an advance in science and technology
  • had to overcome uncertainty
  • tried to overcome this uncertainty
  • could not be easily worked out by a professional in the field

Your project may research or develop a new process, product or service or improve on an existing one.

Many businesses have not even considered that they may be eligible for the R&D tax credits. However if you have recently carried out some research into a new process or system it may be worthwhile considering making a claim.

We have access to a number of specialists who deal with R&D claims and we would be happy to discuss your projects with you and put you in touch with the right specialist. Fees are normally success based so you have nothing to lose from talking to a specialist.

Contact us to see if you could reduce your tax.

 

National Minimum Wage

HMRC have published a list of “excuses” employers have used to defend not paying the minimum wages to their employees.

Whilst some of these are humorous there is no excuse for not paying the minimum wage. Please make sure that you are complying with the legislation.

 

Getting back to business

Most businesses have now opened fully again and although things are slow they are getting back to earning money.

There is a temptation to reduce prices to bring in customers, both old and new. In my opinion this is an error. Your services or products have a value and you should be charging a fair price for what you are offering. If you discount now it will be difficult to raise prices for the same product later once things are starting to look up.

Most businesses will be focussing short term on their recovery and in the medium term on being resilient, improving profitability and growing turnover. If taxes rise to fund government spending, we recommend all businesses should map out a range of scenarios with “what if” analysis to understand their available future strategies for success. For example, here is a smaller business’s “what if” scenario planning results: 

 

Please talk to us about scenario planning – we have the tools to help you prepare for the future and set realistic and achievable targets.   

Why don’t you ask us?

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

In addition to scenario planning mentioned above we have a broad range of experience that goes far beyond just preparing accounts and tax returns. Get in touch as we will probably have an answer to help you with your challenges.

 

I wish you the best for the next month.

If you have any queries you can book a free 15 minute zoom meeting with me.

Also there is the client zoom drop in session which continues for clients at 11.00am every Wednesday.

Zoom meeting details:

Meeting URL: https://us02web.zoom.us/j/83879726978  

Meeting ID: 838 7972 6978

 

 

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August News Blog

 

Hello

  

 

Here is our August newsletter/blog looking at some of what has happened over the month of July and a few items that come into place in August or later which I hope is of interest to our clients.

  

Don’t forget that we are here to assist you with any business queries you may have.

 

In this month’s issue:

Self-Employment Income Support Scheme (SEISS)

Coronavirus Job Retention Scheme (CJRS) – update

National Minimum Wage rate reminder

Off-Payroll Working – Will HMRC accept CEST result?

Understanding the possession action process: guidance for landlords and tenants

Are you ready for Making Tax Digital?

Abolition of tax basis periods and new tax year end?

Getting back to business

Why don’t you ask us?

 

Self-Employment Income Support Scheme (SEISS)

Details of the fifth SEISS grant have now been announced. The online claims service opened in late July. If you are eligible HMRC should have contacted you with a date from which you can make the claim. This is the earliest date from which the claim can be made.

If you have not yet been contacted by HMRC then it is possible to check if you can claim on the HMRC web site.

The fifth grant will be determined by a turnover test for most taxpayers. The test considers how much a businesses’ turnover has gone down by in the 2020-21 tax year due to the pandemic. More information is given on the .GOV web site.

In summary you will need to have 2 turnover figures ready when making the claim:

·         The pandemic turnover is for the 12 months from 1 April 2020 to 31 March 2021 no matter your year end. (if you have a 5 April year end this is considered to be the same period).

·         The pre-pandemic turnover is the turnover declared in your 2019/20 tax return. This is can be a different accounting year that you are comparing to. If the 2020 figures are unusual then the turnover in the 2019 return should be taken.

 

Taxpayers who were not eligible for the fourth grant, will not be eligible for the fifth grant either as HMRC are using the same tax returns to determine eligibility for both grants. If you were eligible but did not claim the forth grant you should be able to claim the fifth grant.

The grant is taxable and will be paid out in a single instalment.

To be eligible for the grant you must be a self-employed individual or a member of a partnership.

For members of a partnership or LLP the turnover comparison is based on the turnover of the partnership. However, where the partner also has another business a proportion of partnership turnover is used.

We cannot make the claim on your behalf as agents. You have to make the claim yourself.

https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme

HMRC have provided a new video about the SEISS fifth grant.

 

 

 

Coronavirus Job Retention Scheme (CJRS) - update

The CJRS has been extended until 30 September 2021. From 1 July 2021, the government will pay 70% of wages up to a maximum cap of £2,187.50 for the hours the employee is on furlough.

Employers will top up employees’ wages to make sure they receive 80% of wages (up to £2,500) in total for the hours the employee is on furlough. The caps are proportional to the hours not worked.

 

From 1 August 2021, the government will pay 60% of wages for furlough employees up to £1,875. From 1 July 2021, employers will top up employees’ wages to make sure they receive 80% of wages (up to £2,500).

 

National Minimum Wage rate reminder for employers

 

 

All workers are legally entitled to be paid the National Minimum Wage (NMW). This includes temporary seasonal staff, who often work short-term contracts in bars, hotels, shops and warehouses over the summer.

The National Minimum Wage hourly rates from 1 April 2021 are:

  • £8.91 - age 23 or over (National Living Wage)
  • £8.36 - age 21 to 22
  • £6.56 - age 18 to 20
  • £4.62 - age under 18
  • £4.30 – apprentice

 

Employers who do not pay the NMW can be publicly ‘named and shamed’ and those who blatantly fail to comply can face criminal prosecution.

Employers can contact the Acas helpline for free help and advice or visit GOV.UK to find out more.

 

Off-Payroll Working – Will HMRC accept CEST result?

Since 6 April 2021 large and medium-sized organisations, based on the Companies Act criteria, have had to determine whether or not a worker supplying his services via their own personal service company would be treated as an employee if directly engaged. This replaced the IR35 rules for these larger organisations.

HMRC suggest organisations use their Check Employment Status for Tax (CEST) tool on their website to check the worker’s status, although that is not obligatory. The tool is an interactive database of questions and will normally provide a ruling after 15 to 20 questions depending on the answers given about the contractual relationship.

See: Check employment status for tax - GOV.UK (www.gov.uk)

HMRC have recently confirmed that they will be bound by the result of the software provided the information is accurate and it is used in accordance with their guidance.

See: ESM11010 - Employment Status Manual - HMRC internal manual - GOV.UK (www.gov.uk)

HMRC have also stated that they will not stand by results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome. They would see that as deliberate non-compliance, and potentially levy financial penalties.

Note that the end-user organisation is required to issue a Status Determination Statement to the worker with a copy to any agency to be passed to any fee payer in the labour supply chain making payments to the personal service company.

 

Understanding the possession action process: guidance for landlords and tenants

There has been a ban on residential property repossessions since the first lockdown started. Things have now changed since then.

Guidance for landlords and tenants in the private and social rented sectors explains the possession action process in the county courts in England and Wales has been updated to reflect changes to notice periods and bailiff enforcement in Wales.

 

Are you ready for Making Tax Digital?

From 1 April 2022 a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software

Also be aware that other taxpayers will be required to join the MTD project from 2023 for matters such as property landlords and self assessment. Limited companies will be forced to join form around 2026.

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

Speak to us for more details.

 

Abolition of tax basis periods and new tax year end?

We are awaiting further information on MTD from HMRC this summer but one significant announcement on 20 July was draft legislation to abolish basis periods for unincorporated businesses for the 2023/24 tax year to simplify MTD reporting.

That change would apply to sole traders, partnerships, as well as trusts with trading and property rental income. There would also be complicated transitional rules for 2022/23 which could result in a big tax bill that year for some traders.

The Treasury are also consulting on changing the tax year itself from the archaic 5 April year end to 31 March or even 31 December. A calendar tax year would bring the UK into line with most other countries at last!

We will keep you updated when more information comes available.

 

Getting back to business

With the proposed lockdown restrictions being lifted on 21 June (hopefully!) many businesses are deciding how to recommence trading fully.

There is a temptation to reduce prices to bring in customers, both old and new. In my opinion this is an error. Your services or products have a value and you should be charging a fair price for what you are offering. If you discount now it will be difficult to raise prices for the same product later once things are starting to look up.

Most businesses will be focussing short term on their recovery and in the medium term on being resilient, improving profitability and growing turnover. If taxes rise to fund government spending, we recommend all businesses should map out a range of scenarios with “what if” analysis to understand their available future strategies for success. For example, here is a smaller business’s “what if” scenario planning results: 

Please talk to us about scenario planning – we have the tools to help you prepare for the future and set realistic and achievable targets.   

 

 

Why don’t you ask us?

Are you considering starting something new as you come out of Covid hibernation and your business opens up again or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.

In addition to scenario planning mentioned above we have a broad range of experience that goes far beyond just preparing accounts and tax returns. Get in touch as we will probably have an answer to help you with your challenges.

 

 

I wish you the best for the next month.

 

If you have any queries you can book a free 15 minute zoom meeting with me.

 

Regards

 

Simon

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New tax briefing gudes online

I have today added two new tax briefing guides to the Free Stuff part of the web site.

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Who is gong to pay for your social care?

Check out these briefings for important information that could affect you.

CONTACT

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