Claiming for mobile phones

Posted on 9th June 2022 by Solutions Accountancy

When an employee incurs costs for the provision of mobile phones to employees it is important to understand the correct tax treatment of these expenses. This includes costs for phones provided to employees and reimbursement of employee’s own phone costs.

As a general rule, the provision of one mobile phone to a director or employee for private use is exempt from tax and NIC reporting requirements. The exemption covers the phone itself, any line rental and the cost of private calls paid for by the employer on that phone. The phone contract must be between the employer and the supplier

If the telephone expenses are not exempt, then they must be reported to HMRC, and employers may have to deduct and pay tax and National Insurance.

Various mobile phone expenses are covered by exemptions. For example, if an employee arranges the phone but the employer pays the supplier then you must:

  • report the cost on form P11D
  • pay Class 1 National Insurance through payroll

HMRC also make it clear that there remain devices that have telephone functionality which do not qualify as mobile phones. The tax exemption applies to devices primarily designed for voice communication. For example, the rules do not apply to tablets, PDAs and other similar devices.

Customs declaration service update

Posted on 9th June 2022 by Solutions Accountancy

The Customs Declaration Service (CDS) is a new custom's IT platform that has been designed to modernise the process for completing customs declarations for businesses that import or export goods from the UK. A phased launch of the service started in August 2018. The CDS is used for making import and export declarations when moving goods into and out of the UK.

When the CDS is fully operational, the old Customs Handling of Import and Export Freight (CHIEF) service will be closed. The CHIEF system is over 25 years old and has struggled to cope with complex reporting requirements that could not easily or cost-effectively be accommodated within the existing service. 

HMRC has confirmed that ahead of the 31 March 2023 complete closure, services on CHIEF will be withdrawn in two stages:

  • 30 September 2022: import declarations close on CHIEF
  • 31 March 2023: export declarations close on CHIEF / National Exports System (NES)

The decision to introduce the CDS was system driven to provide a more secure and stable platform and predated Britain’s vote to leave the EU. Importers and exporters should by now be well aware of the CDS system, and they or their agent should be starting to prepare for the further rollout and eventual replacement of the CHIEF system. As the deadline approaches, HMRC is urging businesses to move to the CDS as soon as possible.

Director banned for Bounce Back Loan abuse

Posted on 9th June 2022 by Solutions Accountancy

The Bounce Back Loans scheme was launched in May 2020 to provide financial support to businesses across the UK that were losing revenue and cashflow as a result of the COVID-19 pandemic. The scheme allowed qualifying small businesses to borrow between £2,000 and £50,000 with no fees or interest to pay for the first 12 months. In most cases business receive the cash within 24 hours of approval. The scheme closed to new applications and top-up applications on 31 March 2021.

A director of a small consultancy business applied for a £30,000 Bounce Back Loan on behalf of his company in May 2020, despite the company accounts showing annual turnover of £50,000. The maximum the company was eligible to claim under the scheme was just under £13,000. Part of the loan was spent on personal expenditure in clear breach of the rules. 

The business was placed in voluntary liquidation in March 2021 before the liquidator passed on concerns regarding the director’s conduct to the Insolvency Service for further investigation.

The director admitted applying for a larger Bounce Back Loan than the company was entitled to and using some of the money for personal expenditure. This has resulted in the director being banned from acting as a director for 8 years. 

The Chief Investigator at The Insolvency Service said:

‘We will not hesitate to take action against directors who have abused Covid-19 financial support, and ultimately the taxpayer.’

UKs audit regime to be revamped

Posted on 9th June 2022 by Solutions Accountancy

The government has announced plans to revamp the UK’s corporate reporting and audit regime.

The main changes were summarised as follows in a joint press release published by the Department for Business, Energy & Industrial Strategy, Department for Levelling Up, Housing and Communities, and the Minister for Corporate Responsibility.

  • government will tackle dominance of ‘Big Four’ audit firms and create a new regulator to reduce the risk of sudden big company collapses, safeguard jobs and reinforce the UK’s reputation as a world-leading destination for investment
  • reform is already underway, with the Business Secretary acting today to enable the regulator to ban failing auditors from reviewing large companies’ accounts
  • government commits to review corporate reporting burdens on businesses to maximise the benefits of Brexit and reduce burdens

The reforms are intended to improve the audit regime and corporate transparency will help prevent sudden large-scale collapses like Carillion and BHS, which affected countless small businesses and led to job losses.

The Financial Reporting Council (FRC) will be replaced by a new, stronger regulator – the Audit, Reporting and Governance Authority (ARGA). This is expected to start from April 2023. Large private companies will also come under the scope of the regulator for the first time.

Sign in to Childcare Account

Posted on 1st June 2022 by Solutions Accountancy

HMRC’s Childcare account can be used to claim 30 hours free childcare or to pay for your Tax-Free Childcare. HMRC’s sign in page for the account states that in order ‘…to keep getting your 30 hours free childcare or Tax-Free Childcare, you must sign in every 3 months and confirm your details are up to date’. There are various eligibility rules that must be met to claim the 30 hours free childcare through the Childcare Account. As a starting point you must be the parents of a child three to four years old and living in England. There are different schemes in Scotland, Wales and Northern Ireland

The Childcare Account can also be used to claim under the Tax-Free Childcare (TFC) scheme. The TFC scheme can help parents of children aged up to 11 years old (17 for those with certain disabilities). The TFC scheme helps support working families with their childcare costs. There are many registered childcare providers including childminders, breakfast and after school clubs and approved play schemes signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays. 

The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by Government up to a maximum total of £10,000 per child per year. This will give parents an annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs. 

The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

Deadlines for making voluntary NIC top-ups

Posted on 1st June 2022 by Solutions Accountancy

In certain circumstances it can be beneficial to make voluntary National Insurance Contributions (NICs) to increase entitlement to future benefits, including the State or New State Pension for self-employed persons.

You might want to consider making voluntary NICs if:

  • You are close to State Pension age and do not have enough qualifying years to get the full State Pension
  • You know you will not be able to get the qualifying years you need to get the full State Pension during the remainder of your working life
  • You are self-employed and do not have to pay Class 2 National Insurance contributions due to a history of low profitability
  • You live outside the UK but want to qualify for benefits.

If you fall within any of these categories, it may be beneficial to apply for a State Pension forecast and examine whether you should consider making voluntary NICs to make up missing years, known as topping up. Not everyone will benefit from making voluntary NICs and much will depend on how close you are to retirement age and your NIC payments to date.

Usually, HMRC allow you to pay voluntary contributions for the previous six years. The deadline is 5 April each year. This means that you have until 5 April 2023 to make up for gaps for the tax year 2016-17.

There are also transitional measures in place that allow men born after 5 April 1951 and women born after 5 April 1953 to make up for gaps in NICs between tax years April 2006 and April 2016. This opportunity ends on 5 April 2023 when the maximum allowable number of voluntary contributions will be limited to six years as per the previous paragraph.

Arranging to pay tax bill by instalments

Posted on 1st June 2022 by Solutions Accountancy

Businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs by applying to HMRC’s Time To Pay service.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. Agreements reached with HMRC allow businesses and individuals to pay off their debt by instalments over a period of time.

HMRC will usually offer taxpayers the option of extra time to pay if they think they genuinely cannot pay in full but will be able to pay in the future. If HMRC do not think that more time will help, then they can require immediate payment and start enforcement action if payment is not forthcoming.

An online payment plan for Self-Assessment tax bills can be used to set up instalment arrangements for paying tax liabilities up to £30,000. Taxpayers that qualify for a Time to Pay arrangement using the self-serve Time to Pay facility online, can do so without speaking to an HMRC adviser.

Taxpayers that want to use the online option must also have filed their latest tax return, be within 60 days of the payment deadline and intend to pay their debt off within the next 12 months or less.

Taxpayers with Self-Assessment tax payments that do not meet the above requirements and businesses need to contact HMRC to request a Time To Pay arrangement. 

Last year to claim super-deduction

Posted on 1st June 2022 by Solutions Accountancy

A reminder that the super-deduction, offering 130% first-year tax relief, is available to companies until March 2023. The super-deduction is designed to help companies finance expansion in the wake of the coronavirus pandemic and to drive growth.

The super-deduction tax break was introduced on 1 April 2021 and allows businesses to deduct 130% of the cost of any qualifying purchase of most new plant and equipment that would ordinarily qualify for 18% main rate writing down allowances. This means that for every £1 incorporated businesses invest they can reduce their tax bill by up to 25p. The temporary tax relief applies on qualifying capital asset investments until 31 March 2023. 

In addition, an enhanced first year allowance of 50% on qualifying special rate assets also applies expenditure within the same period. This includes most new plant and machinery investments that would ordinarily qualify for 6% special rate writing down allowances. 

The super-deduction is only for companies, which means that self-employed traders are unable to benefit. However, they could benefit from the temporary increase in the Annual Investment Allowance (AIA) cap to £1 million. The AIA allows for a 100% tax deduction on qualifying expenditure on plant and machinery. The temporary limit of £1 million will also remain in place until 31 March 2023 before reverting to the usual £200,000 limit.

Business Asset Disposal Relief – deadlines and claims

Posted on 1st June 2022 by Solutions Accountancy

Business Asset Disposal Relief (BADR) applies to the sale of a business, shares in a trading company or an individual’s interest in a trading partnership. Where this relief is available CGT of 10% is payable in place of the standard rate. There are a number of qualifying conditions that must be met in order to qualify for the relief.

BADR used to be known as Entrepreneurs’ Relief before 6 April 2020. The name change did not affect the operation of the relief.

You can currently claim a total of £1 million in BADR over your lifetime. The £1m lifetime limit means you can qualify for the relief more than once. The lifetime limit may be higher if you sold assets before 11 March 2020.

Claims for BADR are made through your Self-Assessment tax return or by filling in Section A of the Business Asset Disposal Relief help sheet.

The deadline for claiming relief is as follows:

Tax year when you sold or closed your business Deadline to claim BADR
2021-22    31 January 2024
2020-21 31 January 2023
2019-20 31 January 2022

Accounting periods for Corporation Tax

Posted on 1st June 2022 by Solutions Accountancy

Companies often have to contend with having two different company accounting periods. This is because there are different rules for Companies House filings and for HMRC to whom any Corporation Tax due is paid.

The accounting periods can be the same but can also differ and a change may be needed to ‘sync’ the accounting periods. As a general rule, the Companies House rules are more flexible and under certain circumstances it is possible to make a change to the year end. The Companies House accounting period can sometimes run for more or less than 12 months.

A tax accounting period for Corporation Tax purpose cannot be longer than 12 months. This can create the unusual scenario whereby a company will be required to file two returns with HMRC if an accounting year is longer than twelve months.

If your accounts cover less than 12 months, then your accounting period will normally end on the same day and will also be shorter than 12 months. This can happen if the company stops trading or shortens its company’s year-end date (also known as its accounting reference date).