First a big thank you to our clients and congratulations to our compliance team who successfully filed all except two of our 31st January self-assessment tax returns ahead of the filing deadline (which was Sunday this year) , in what has been a testing and trying year.
At the last minute, Monday 25th January, HMRC announced an extension to the filing deadline, giving taxpayers until 28th February to file their tax return without receiving a late filing penalty. HMRC figures show that a record 1.8 million people missed the January 31st filing deadline, equating to 15% of the 12.1 million returns due. This is nearly double the 958,000 who filed late last year, and we believe the reason for the late decision/announcement by HMRC was to get as many returns filed as possible before extending the deadline. It should be noted that the extension is only for filing, a tax payment was still due on 31st January, and if not paid by that date an interest charge on the unpaid tax at an annual rate of 2.6% is still charged. If you are unable to pay, then please contact HMRC and arrange a payment plan before 28th February, otherwise late payment surcharges will be incurred in addition to the interest.
YEAR-END TAX PLANNING
As the end of another tax year approaches, now is a good time to consider your financial position and check whether you have taken full advantage of the tax reliefs and exemptions that are available, as well as prepare for the new tax year (you have less than two months). We will be contacting our company clients with a 31st March year-end to consider any corporate planning, which will also be a good opportunity to catch up.
Please follow the link below to our individual planning checklist which is intended to provide a guide to the opportunities that we believe may be worth considering. There are many tax-saving measures available and steps that can be taken to improve your tax position, without significant effort. We have listed some planning points to consider which may help reduce your taxes for this tax year (ending 5th April) or prepare for the next, if implemented now. The current environment is challenging for businesses and individuals, and you may think it is not worth taking any actions. However, with a forthcoming Budget, we would advise taking a look and we are on hand to discuss any queries. There has been a lot of speculation about capital gains tax (“CGT”) following The Chancellor asking the Office of Tax Simplification to undertake a broad review of the tax. Our November newsletter summarises the results of the review, in particular, an increase in the CGT non-residential tax rate of 20%. As a result, individuals are considering liquidating portfolios realising gains up to the available annual exempt amount before Budget day. It has been reported in the press that directors and senior employees of large, listed businesses are taking advantage of the stock market recovery and the risk of a capital gains tax increase to cash in on their shareholdings. Consideration can be given to triggering a capital gain now and transferring shares to your ISA, as a tax efficient shelter.
The impact of taxation is only one element in looking at your financial planning – you should also be considering such issues as your savings, investment performance and succession planning. Always take professional advice when deciding your tax planning or investment strategy.
PAYE CODING NOTICES
One area of tax planning that gets overlooked is checking your PAYE coding notice, for those who receive employment or pension income. These notices are issued over the next month via the post and/or via personal tax accounts. The notice determines the level of tax that will be deducted at source and should be checked, as if incorrect, then too much tax will be collected, which can be claimed back or too little tax deducted, which results in having a tax bill to pay in January 2023.
See our blog re the importance of PAYE notices, what they mean and how to get them amended.
The Budget takes place 3rd March 2021, and there is plenty of speculation regarding what is going to happen re tax increases, capital gains tax, online sales tax, reform of property taxes, etc. We are not going to add to the speculation as, with less than three weeks to go, it is a case of wait and see. The Country will still be in lockdown on Budget day, (although we expect shortly after, subject to the Covid infection rate, announcements on the strategy to come out of lockdown), therefore, in our view, the Budget is more likely to be about a map to aid the UK economy out of the pandemic, with current measures being extended or replaced with new measures. It is our hope that The Chancellor only announces limited tax increases in the Budget, but spends more time on measures to help businesses, individuals and the economy emerge from the pandemic.
As we continue through lockdown 3, we continue with our Business Forward Covid-19 Updates. The most recent can be found at HERE.
Our key message is that if you have not yet used any Government support measures and your business is struggling, or will need to invest to trade out of the pandemic when we start to open up, then you should look at the Government backed loans scheme. These loans are due to close on 31 March (unless extended in the Budget) and we are already seeing a number of lenders ceasing to administer the £50,000 Bounce Back Loan due to the levels of fraud. (The National Crime Agency has set up a special team to deal with bounce back loan fraud). Although we don’t advocate taking unnecessary debt, credit will be difficult in the future and putting in place lending now under the Government schemes should help the position.
Over the weekend The Chancellor announced that he would give small businesses “breathing space” to make bounce back loan repayments, which can be repaid over ten years, but borrowers in continuing financial difficulty will be able to choose to make payments of interest only or take payment holidays for up to six months, the scheme being called “pay as you grow.”
LEAVING THE EU
Our summary of the changes and implications can be found HERE.
Government guidance is also now available HERE.
- Rules of Origin - where a product was manufactured, which determines the ‘economic nationality’ of a good for international trade and determines if there is a trade tariff or not. To export tariff-free into the EU, traders must check their goods meet the Rules of Origin requirements set out in the Trade and Cooperation Agreement and have the right documentation.
- Having the right paperwork and ’getting it right first time’ - the French authorities are now checking all vehicles rather than a sample as they were initially, leading to delays of goods into France. The fact that the same paperwork is required to move goods to Northern Ireland, has also caught many businesses out, and some temporary emergency measures have been utilised, which assumes the proper paperwork will follow in a short time.
- Selling goods to individuals or non-VAT registered businesses - whilst a UK business can zero rate the supply to the EU non-business customer, the problem arises where the EU customer will have to account for VAT in the EU on their purchase, which is usually through the postal service or courier. Some customers are refusing to do this and return the goods, so one solution would be to register for VAT in those counties and charge local VAT to customers, however this creates additional administration and cost.
DATES FOR YOUR DIARY
- 1 March 2021 – Construction Industry reverse charge measures take effect after being delayed. The aim of this measure is to combat VAT fraud in the construction sector, known as missing trader fraud, charging VAT on the sale of goods, and then instead of paying this over to HM Customs, simply absconding with the VAT. For further details can be found HERE.
- 3 March 2021 – The Chancellor’s Budget Statement;
- 31 March 2021 – Applications for Bounce Back Loans & Coronavirus Business Interruption Loan Scheme close.
In these difficult times, scammers and fraudsters will continue to try and exploit the coronavirus pandemic as an opportunity for financial crime, so please be vigilant. For example, HMRC will never request your bank details by phone, email or text. There is expected to be an increase in criminal activity as individuals rush to complete house purchases to beat the 31 March stamp duty holiday. Guard your identity, check post, never make any payments to anyone who rings you, confirm who you are making payments to, check details before giving details or transferring money. A fraud protection checklist is available at https://takefive-stopfraud.org.uk/
ASK FOR HELP
We know that this is a very difficult time for all businesses and some difficult decisions are having to be made. We have spoken to hopefully all of you and if not, we would like you to know that we are here ready to help if you need us to provide advice, deal with queries, or just be a business sounding board.
Please do not hesitate to give us a call - 01452 713277
It's vital that everyone follows the guidelines & remember: