Notifying cessation of self-employment

Posted on 23rd June 2022 by Solutions Accountancy

Any taxpayers that have ceased to be self-employed must notify HMRC of their change in status. There are a number of steps that must be followed if a taxpayer ceases trading as a sole trader or if they are ending or leaving a business partnership.

Taxpayers must send in a Self-Assessment return by the relevant deadline and will need to work out their trading income, allowable expenses and any capital allowances. Taxpayers must also determine if they have any Capital Gains Tax (CGT) to pay.

They may also be able to claim back any overpaid tax or National Insurance. It is also important to check if there is an entitlement to tax relief by way of entrepreneurs’ relief, overlap relief and / or terminal loss relief. There are also other reliefs available that may reduce the amount of CGT due.

Taxpayers that owe tax or National Insurance and have difficulty paying it, may be able to negotiate an agreement with HMRC for more time to pay. In addition, where a VAT registration was in place this will also need to be cancelled and anyone who employed staff will need to close their PAYE scheme and submit final payroll reports.

Tax Diary July/August 2022

Posted on 20th June 2022 by Solutions Accountancy

1 July 2022 – Due date for corporation tax due for the year ended 30 September 2021.

6 July 2022 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2022 – Pay Class 1A NICs (by the 22 July 2022 if paid electronically).

19 July 2022 – PAYE and NIC deductions due for month ended 5 July 2022. (If you pay your tax electronically the due date is 22 July 2022).

19 July 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2022.

19 July 2022 – CIS tax deducted for the month ended 5 July 2022 is payable by today.

1 August 2022 – Due date for corporation tax due for the year ended 31 October 2021.

19 August 2022 – PAYE and NIC deductions due for month ended 5 August 2022. (If you pay your tax electronically the due date is 22 August 2022)

19 August 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2022.

19 August 2022 – CIS tax deducted for the month ended 5 August 2022 is payable by today.

What is tax avoidance?

Posted on 16th June 2022 by Solutions Accountancy

There is a distinction to be drawn between tax avoidance and tax evasion. Tax evasion is illegal and describes a situation where someone acts to deliberately evade tax. This could include deliberately submitting false tax returns, falsely claiming repayments or reliefs or hiding income, gains or wealth offshore.

Tax avoidance on the other hand can describe a situation whereby a taxpayer takes advantage of the tax rules to reduce the tax they pay without breaking the law.

However, the lines between the two can get blurred as can be seen in the comments made by HMRC below.

HMRC’s own guidance to help taxpayers spot the signs of tax avoidance, states that ‘tax avoidance involves bending the tax rules to try to gain a tax advantage that was never intended. It usually involves contrived transactions that serve no real purpose other than to artificially reduce the amount of tax that someone has to pay. It is not the same as effective tax planning but is often promoted as such'.

There is of course no restriction on taxpayers taking full advantage of tax reliefs and allowances in the legislation. This is not tax evasion [or tax avoidance in HMRC's terms] rather just paying the minimum allowable without breaking the law. Again, the lines between tax avoidance and tax planning can also get blurred. If you are approached to take part in a tax avoidance scheme, it is important to take proper professional advice and be aware that HMRC does not condone the use of schemes that they see as promoting tax avoidance.

Right to Buy home scheme extended

Posted on 16th June 2022 by Solutions Accountancy

The Right to Buy scheme has been available in various guises since it was first launched in the 1980s and following a relaunch in 2012. In essence the scheme gives qualifying social tenants the opportunity to buy their rented home at a discount.

There is a maximum discount of 70% of the value of the property and a number of conditions must be met to use the scheme. The Prime Minister announced, on 9 June 2022, that the scheme is to be extended to housing association tenants. This move that could benefit some 2.5 million tenants renting their homes in this way.

The government will work closely with the housing association sector on the design of the scheme and has also pledged to build a new social home for every one sold.

The government will also change the rules to incentivise those who are claiming Universal Credit to save for a deposit. Currently, welfare rules taper the amount of Universal Credit received when the claimant’s savings exceed £6,000, and it stops entirely when savings exceed £16,000.

The government have also committed to launching an independent review of access to mortgage finance for first-time buyers, with the aim of making it easier for this group by widening access to low-cost, low-deposit finance such as 95% mortgages.

New grant opportunities for farmers

Posted on 16th June 2022 by Solutions Accountancy

New grant opportunities to help farmers have been announced. The new grants will help farmers boost their businesses and add extra value to their produce. The Adding Value grant opened for applications on 9 June 2022 and will close at midnight on 21 July 2022. The funding will be offered in sums between £25,000 and £300,000.

In total, £30 million worth of funding will be provided from the Farming Investment Fund (FIF) for farmers in England to purchase equipment to process, diversify and add value to their products after they have been harvested or reared. This could include premises and equipment for the preparation or processing of agricultural produce, for example turning milk into cheese or yoghurt, processing meat into sausages, and potatoes into crisps or chips; or equipment such as vending machines and display facilities for selling food direct to customers.

The Environment Secretary, commented:

‘We want to support the choices that farmers make for their businesses. We are spending around £600 million on farm-based innovation over the next three years, and the money announced today will support farmers across England with their investment plans, to improve their profitability and productivity.’

It was also announced that new Slurry Infrastructure grants, worth £13 million, will be available later this year. These new grants will help livestock farmers in England to upgrade their slurry storage and nutrient management systems.

Business Start Up Loans

Posted on 16th June 2022 by Solutions Accountancy

Financing a new Start Up business is one of the most crucial aspects of helping a new venture to succeed. Obtaining finance for a new business can be an arduous process. For example, borrowing money from a mainstream bank may not be an option or only possible with security conditions such as a personal guarantee.

There is a government backed scheme known as the Start Up Loan scheme that may be able to help. This scheme offers personal loans to individuals looking to start or grow a business in the UK. Applicants that are accepted are also paired with a business mentor for 12 months. This loan is unsecured, meaning there is no need to provide any personal assets or guarantors to support an application.

Business owners or partners in a business can individually apply to borrow from £500 – £25,000 each, with a maximum of £100,000 available per business. The average loan amount using this scheme is in the region of £7,200. There is a fixed interest rate of 6% per annum with the option of a 1-to-5 year loan repayment term. There is no application fee and no early repayment fee.

To apply for the loan all of the following must apply:

you live in the UK
you are 18 or over
you have (or plan to start) a UK-based business that has been fully trading for less than 36 months.

Tax and duties on goods sent from abroad

Posted on 16th June 2022 by Solutions Accountancy

There are special rules to ensure that goods sent from abroad are taxed appropriately and thus not disadvantage UK businesses supplying goods in the UK, for example, by having to compete with VAT free imports. This includes goods that are new or used and bought online, bought abroad and shipped to the UK and goods received as gifts.

This means that to receive your goods you may have to pay VAT, Customs Duty or Excise Duty if they were sent to:

Great Britain (England, Wales and Scotland) from outside the UK
Northern Ireland from countries outside the UK and the European Union (EU)

VAT is charged on all goods (except for gifts worth £39 or less) sent from:

outside the UK to Great Britain
outside the UK and the EU to Northern Ireland

Online marketplaces that are involved in facilitating the sale of goods are usually responsible for collecting and accounting for the VAT. If the VAT has not been collected, then you will have to pay VAT to the delivery company either before the goods are delivered or when you collect them. If you have to pay VAT to the delivery company, it is charged on the total package value which includes the value of the goods, postage, packing, insurance and any duty owed.

As a general rule, there is no Customs Duty payable on non-excise goods worth £135 or less. There are various rates payable above this level and on excise goods of any value.

Changes in State Pension age

Posted on 16th June 2022 by Solutions Accountancy

The State Pension age is currently 66 and two further increases are set out in legislation: a gradual rise to 67 for those born on or after April 1960; and a gradual rise to 68 between 2044 and 2046 for those born on or after April 1977.

In March 2016, John Cridland CBE, the former Director General of the Confederation of British Industry (CBI) was appointed by the government to lead an independent review of the state pension age. The review made a number of key recommendations including bringing forward the increase in the State Pension age to 68 over a two-year period starting in 2037 and ending in 2039.

The Department for Work and Pensions has previously confirmed that the Government intends to follow the recommendation made by the independent review to bring forward the State Pension age changes, seven years earlier than planned. The Pensions Act 2014 requires government to regularly review State Pension age, and in accordance with this law, the latest Review must be published by 7 May 2023.

These proposed changes will not affect anyone born before 5th April 1970. However, those born between 6 April 1970 and 5 April 1978 would see their State Pension age increase to between 67 and 68 depending on their date of birth. Those born after 6 April 1978 will see no change to their state pension age which was already set at 68. These changes will require new legislation following the next government State Pension age review.

The independent review also cited some interesting background information addressing the need for these increases to be based on increasing life expectancy and an ageing population. For example, '…. in 1917 King George V sent the first telegrams to those celebrating their 100th birthday. 24 were sent that year. In 2016 around 6,000 people will have received a card from Her Majesty the Queen. In 2050, we expect over 56,000 people to reach this milestone'.

Till fraud targeted by HMRC

Posted on 9th June 2022 by Solutions Accountancy

In the Autumn Budget 2018, the government announced that they would launch a call for evidence to learn more about the nature and scale of till fraud. This specifically looked at businesses that deliberately undertake electronic sales suppression (ESS). ESS occurs when a business deliberately manipulates its electronic sales records in order to hide or reduce the value of individual transactions.

This type of fraud is hard to spot as it aims to reduce the recorded turnover of the business and the corresponding tax liabilities, while providing what appears to be a credible and compliant audit trail.

At Spring Budget 2021, the government announced that new powers would be introduced to tackle ESS. These new powers were included in the Finance Act (2022) introduced in February this year.

HMRC officers have now started to target businesses across the country that are suspected of being involved in making, supplying or promoting ESS systems. These businesses now face fines of up to £50,000 and criminal investigations. HMRC is also actively targeting users of these systems who will also face having to pay back tax evaded, financial penalties and possible criminal convictions.

On 18 May 2022, 30 businesses were visited, including shops, takeaways and restaurants, across nine counties and two men and a woman were arrested in Nottinghamshire as part of a criminal investigation into the alleged supply of ESS software.

Stamp duty refunds scam

Posted on 9th June 2022 by Solutions Accountancy

Over the past few years, there have been some interesting opportunities for making claims for Stamp Duty Land Tax (SDLT) refund claims. It should be noted that to be successful, these claims must meet quite specific criteria. For example, there may be scope for landlords and property investors to recover the 3% SDLT surcharge on the basis that a residential property was uninhabitable at the time of purchase. This could be because the home had no kitchen, bathroom, heating or was missing a roof. There is also the possibility of claiming Multiple Dwellings Relief (MDR) where multiple residential properties were bought as part of a linked transaction.

HMRC has published a press release warning homeowners about cold calls from rogue tax repayment agents advising them to make speculative SDLT refund claims. HMRC is likely to raise enquiries on these claims. If this is after the agent has taken their fee, the homeowner may be liable to pick up the difference. Incorrect refund claims must be repaid with interest, and potentially facing penalties.

HMRC has nine months to enquire into a claim and would look to recover the full tax, with interest, and penalties charged where appropriate from those found to be incorrect.

We would strongly recommend that anyone interested in receiving further information about making a claim or who are contacted ‘out of the blue’ about a Stamp Duty refund claim should seek our advice. Interestingly, HMRC give the same advice in their press release suggesting ‘anyone approached about a Stamp Duty refund claim should check with their original conveyancer, take independent professional advice and check HMRC’s guidance by searching ‘Stamp Duty Land Tax’ on GOV.UK.