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Tax Diary December 2019/January 2020

1 December 2019 – Due date for Corporation Tax payable for the year ended 28 February 2019.

19 December 2019 – PAYE and NIC deductions due for month ended 5 December 2019. (If you pay your tax electronically the due date is 22 December 2019)

19 December 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2019. 

19 December 2019 – CIS tax deducted for the month ended 5 December 2019 is payable by today.

30 December 2019 – Deadline for filing 2018-19 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2020-21.

1 January 2020 – Due date for Corporation Tax due for the year ended 31 March 2019.

19 January 2020 – PAYE and NIC deductions due for month ended 5 January 2020. (If you pay your tax electronically the due date is 22 January 2020)

19 January 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2020. 

19 January 2020 – CIS tax deducted for the month ended 5 January 2020 is payable by today.

31 January 2020 – Last day to file 2018-19 self-assessment tax returns online.

31 January 2020 – Balance of self-assessment tax owing for 2018-19 due to be settled on or before today. Also due is any first payment on account for 2019-20.

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VAT Standard Retail Schemes

VAT retail schemes are a special set of schemes used by retail businesses to account for VAT.  The schemes are usually used by businesses that sell a significant amount of low value and/or small quantity items to the public with different VAT liabilities.

The use of the scheme can save businesses a significant amount of time in calculating the amount of VAT due to HMRC on each and every sale. In many circumstances it would be extremely difficult for these businesses to account for VAT using standard VAT accounting. By using the VAT retail scheme, retailers are able to calculate VAT due to HMRC at the standard, reduced and zero rates of VAT as a proportion of sales. Usually this is done on a day by day basis.

There are 3 standard VAT retail schemes:

  • Point of Sale Scheme
  • 2 x Apportionment Schemes
  • 2 x Direct Calculation Schemes

There is also the option of using a bespoke scheme. The use of a bespoke scheme is obligatory for retailers with a turnover excluding VAT of £130 million or more. The decision as to which retail scheme to be used is usually driven by a combination of looking at the scheme that provides the best result for the business and the cost of using the scheme. Note, HMRC need to be of the opinion that the chosen scheme is fair and reasonable.

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Life policies and Inheritance Tax

A life policy is a contract with an insurance company. In exchange for premium payments the insurance company provides a lump-sum payment to beneficiaries if the policy holder dies during the terms of their policy. There are various types of life policies available. The main types are 'term', typically covering a set period of time or 'whole of life', meaning that they are active until death.

The policies are often used as Inheritance Tax mitigation and avoidance devices. HMRC is clear that where a person transfers a policy to another, its value at the date of transfer may be taxable as a gift. If a person takes out a policy for the benefit of another person, the cost of effecting the policy will also be taxable as a gift. Similarly, if they pay the premium on a policy owned by somebody else, the amount of the premium considering any exemption due may be a Potentially Exempt Transfer or a chargeable transfer.

When the life assured dies, the proceeds of the policy will be payable to the person who owns the policy or to some other person specified under its terms. In cases where the beneficial owner of a life policy dies before the life assured, there will be a transfer on their death of the life policy with the other assets in the estate.

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Using your own vehicle for work?

If you are an employee and use your own money to buy things you need for your job, you can sometimes claim tax relief for the associated costs. It is usually only possible to claim tax relief for the cost of items used solely for your work.

You may also be able to claim tax relief for using you own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business related mileage.

Employers usually make payments based on a set rate per mile depending on the mode of transport used. There are approved mileage rates published by HMRC. The approved mileage allowance payment rates are available where you use your own car on a business trip. Where the approved mileage rates are used, the payments to you are not regarded as a taxable benefit.

Where an employer pays less than the published rates, you could claim tax relief for the shortfall using mileage allowance relief. For all cars the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. The approved mileage rates are 20p per mile for bicycle travel and 24p per mile for motorcycle travel.

There is an additional passenger payment you can receive of 5p per passenger per business mile from your employer. This is available if you carry fellow employees in your car or van on journeys which are also work journeys for your colleagues. 

We would be happy to help you review any vehicle related expenses to understand any tax relief that may be available.

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Avoiding tax scams

Fraudsters are continuing to target taxpayers with scam emails in advance of the 31 January deadline for submission of Self-Assessment returns.  In fact, over the last year, HMRC received nearly 900,000 reports about suspicious HMRC contacts.

A number of these scams purport to tell taxpayers they are due a rebate / refund of tax from HMRC and ask for bank or credit card details in order to send the fake tax refund. The fraudsters use various means to try and scam people including making contact by phone, text or email. In fact, fraudsters have been known to threaten victims with arrest or imprisonment if a bogus tax bill is not paid immediately.

HMRC’s dedicated Customer Protection team can be contacted to identify and close down scams. For example, HMRC only contact taxpayers due a refund by post and never use emails, text messages or external companies for this activity. Genuine organisations like HMRC and banks will never contact customers asking for their PIN, password or bank details.

If you think you have received a suspicious call or email claiming to be from HMRC, you are asked to forward the details to phishing@hmrc.gov.uk and texts to 60599. If you have suffered financial loss, you should contact Action Fraud on 0300 123 2040 or use their online fraud reporting tool.

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Reporting PAYE information in real time

In December 2018, HMRC wrote to employers to advise of a temporary easement on reporting PAYE information in real time over the Christmas period. This was put in place because many employers pay their employees earlier than usual over the Christmas period.

This can be for a number of reasons, for example during the Christmas period the business may close early or because in certain businesses employees have traditionally received their pay check early in December.

HMRC has now confirmed that following feedback from employers and the Department for Work and Pensions (DWP) this extended Christmas payroll easement is to be made permanent. If employers pay their staff early over the Christmas period, they should report their normal (or contractual) payday as the payment date on their Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.

For example, an employer who pay staff on Friday 20 December 2019, but the normal/contractual payment date is Tuesday 31 December 2019, should report the payment date on the FPS as 31 December and ensure the submission is sent on or before 31 December.

Doing this will help protect Universal Credit claimant’s eligibility for Universal Credit as reporting the payday as the payment date may affect current and future entitlements.

HMRC is clear that the overriding PAYE reporting obligation for employers is unaffected by this announcement and remains that employers must report payments on or before the date the employee is paid, i.e. payday.

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Gifts Hold-Over Relief

Gift Hold-Over Relief is effectively a deferral of Capital Gains Tax (CGT) when assets are given away (including certain shares) or sold for less than they’re worth to help the buyer. The relief means that any gain on the asset is 'Held-Over' until the recipient of the gift sells or disposes of them.

The person gifting a qualifying asset is not subject to CGT on the gift. However, CGT may be payable where the asset is sold for less than it’s worth. Gifts between spouses and civil partners don’t trigger capital gains. A claim for the relief must be made jointly with the person to whom the gift was made.

If you are giving away business assets then you must:

  • be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your 'personal company')
  • use the assets in your business or personal company

You can usually get partial relief if you used the assets only partly for your business.

If you are giving away shares, then the shares must be in a company that's either:

  • not listed on any recognised stock exchange
  • your personal company

The company's main activities must be in trading, for example providing goods or services, rather than non-trading activities like investment.

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Affected by the recent floods?

The Government has put a number of emergency flood measures in place to help those affected by the recent devastating floods. This includes 100% council tax and business rates relief and emergency funding from the Department for Business, Energy and Industrial Strategy.

Affected taxpayers should also contact the Business Payment Support Service (BPSS) if they cannot make tax payments on time. The BPSS is available to all taxpayers (not just businesses).

If you are unable to pay some or all the tax you owe you need to be pro-active and contact HMRC as soon as possible. Avoiding the issue and hoping the problem will go away is only making things worse. You can contact HMRC to seek to make a payment plan and agree a way forward.

The services offered by the BPSS depend on individual circumstances but can include:

  • agreeing instalment arrangements
  • suspending any debt collection proceedings
  • reviewing penalties for missing statutory deadlines
  • reducing any payments on account
  • agreeing to defer payments due to short-term cash flow difficulties

If you have missed a tax payment and have received a payment demand, like a tax bill or a letter threatening you with legal action, then you need to take immediate action. We can also help deal with this on your behalf.

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Basic tax considerations if you come to work in the UK

If you come to live in the UK there are basic tax considerations that you will need to observe. Most importantly, you will be required to pay tax on your income (in excess of any allowances) if you come to live in the UK. Income includes; wages, benefits, your pension and savings interest. If you’re employed your employer will deduct Income Tax from your wages. Otherwise, you will likely be required to prepare and submit a Self-Assessment tax return if you work for yourself or you have other UK income.

You will also usually be required to pay National Insurance if you work in the UK. How much you pay will depend on whether you are employed or self-employed. There are countries with whom the UK has bilateral agreements and where you may not be required to pay National Insurance for the first 52 weeks you are in the UK; as long as you meet the necessary conditions.

You will not have to pay UK tax if you only make short business trips here, for example, a training course or meeting. There is a special process that can be used if you have overpaid tax in the UK and are a foreign national.

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Capital Gains Tax changes for property disposals

A number of significant changes to the way Capital Gains Tax (CGT) is reported and paid come into effect from April 2020.  Currently, the usual due date for paying any CGT owed to HMRC on property disposals is the 31 January following the end of the tax year in which a capital gain was made. From 6 April 2020, any CGT due on the sale of a residential property by a UK resident will need to be reported and paid within 30 days of the completion of the sale transaction.

This change will apply to the sale of residential property that does not qualify for Private Residence Relief (PRR). The new rules will mainly apply if you are selling a buy-to-let property or a second / holiday home. The rules will also apply on the sale of any other residential property that does not qualify or only partially qualifies for PRR.

There are further changes to the PRR rules which will see the final exempt period for CGT purposes being reduced from 18 months to 9 months from April 2020. This relief applies even if you were not living in the property when it was sold. The time period can be extended to 36 months under certain limited circumstances such as if the property owner is disabled or has to move into care.

Finally, if you let all or part of your main residence, you can usually benefit from letting relief of up to £40,000 (£80,000 for a couple). From April 2020, lettings relief will be reformed. This change means that lettings relief will only be available if you continue to live in the property whilst letting a part of your home.

If you are likely to be affected by these changes and are considering selling an affected property in the near future, it may be worth considering a sale prior to 6 April 2020.

For example, if you sell a property at the end of March 2020, any CGT will be due on 31 January 2021 whereas if you sell the property on 6 April 2020, the CGT will be due 30 days later. There will also be the issue of interest and penalties if any CGT due is not paid on time.