fpdteam, Author at Bennetts Accountancy

Hobbies and artificial trades

24th February 2022 by fpdteam

HMRC uses a number of different measures to help determine whether an activity is a trade irrespective of whether the activity leads to a profit or a loss. This includes looking at whether an activity is a hobby or artificial trade.

HMRC manuals implore inspectors to critically examine claims that a trade exists where that claim may have been made to get relief:

that is only available to traders, such as loss relief, or
for the costs of a hobby, or
for investment losses, or
for capital expenses, particularly in group situations, by transmuting them into revenue deductions using an artificial trading company.

In particular, HMRC will consider whether a profit is an isolated event. A taxpayer who wants tax relief for losses, which are not, in truth, trading losses, may point to a profit in a particular year to support the trading assertion. HMRC is clear that this factor would normally carry little weight if that profit was an isolated event in an overall picture of continuing losses. For example, taxpayers using an artificial trade disguised as commercial activity in order to create losses and claim various loss reliefs.

Source:HM Revenue & Customs| 21-02-2022

Tax Diary March/April 2022

22nd February 2022 by fpdteam

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Normally Self-Assessment tax for 2020-21 would need to be paid by 2 March or a 5% surcharge would be incurred. This year HMRC is giving taxpayers more time to pay and no surcharge will be incurred if liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

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

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

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

1 April 2022 – Due date for corporation tax due for the year ended 30 June 2021.

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

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

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

30 April 2022 – 2020-21 tax returns filed after this date may be subject to an additional £10 per day late filing penalty for a maximum of 90 days.

Source:Other| 21-02-2022

Paying tax underpayments via tax code

17th February 2022 by fpdteam

One of the less well-known ways of paying your Self-Assessment tax bill is to do so through your tax code.

This can only be done where all the following apply:

you owe a Self-Assessment balancing payment of less than £3,000;
you already pay tax through PAYE, for example you’re an employee or you get a company pension
you submitted your paper tax return by 31 October or your online tax return online by 30 December

The coding threshold also entitles taxpayers to have tax underpayments collected via their tax code, provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts such as Self-Assessment liabilities, tax credit overpayments and outstanding Class 2 NIC contributions. Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over the tax year along with the usual deductions.

Source:HM Revenue & Customs| 14-02-2022

Car fuel benefits for employees

17th February 2022 by fpdteam

The car fuel benefit rules only apply to company cars that attract a car benefit tax charge. This means the rules do not apply to fuel provided for use in an employee’s own car.

However, employers can pay up to 45p per mile for company related trips in an employee’s own car. If these journeys clock up more than 10,000 miles in any tax year, the rate per mile drops to 25p. As long as the above rates are applied any mileage expenses paid will be tax-free. If rates paid are higher, any excess will be taxed as a benefit. Conversely, if an employer pays less than the approved rates the employee can claim the difference against their tax bill.

Where employees are provided with fuel for their own private use by their employers in a company car, the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount.

The fuel benefit is not applicable when the employee pays for all their private fuel use. This is known as ‘making good’. Private fuel includes the fuel used commuting to and from work. Employees should keep a log of private mileage and can then use the published advisory fuel rates to repay the cost of fuel used for private travel back to their employer. For the 2021-22 tax year, the employer must be reimbursed for private fuel use by 6 July 2022.

Source:HM Revenue & Customs| 14-02-2022

Option to tax (VAT) land and buildings

17th February 2022 by fpdteam

There are special VAT rules that allow businesses to standard rate the supply of most non-residential and commercial land and buildings (known as the option to tax). This means that subsequent supplies by the person making the option to tax will be subject to VAT at the standard rate.

The ability to convert the treatment of VAT exempt land and buildings to taxable can have many benefits. The main benefit is that the person making the option to tax will be able to recover VAT on costs (subject to the usual rules) associated with the property including the purchase and refurbishment of the property.

One interesting aspect of the rules concerns what happens if you make changes to a building after you have opted to tax. HMRC’s guidance sets out the following basic principles that apply to the most changes made:

Extensions. If you have opted to tax a building and you extend it at a later date, upwards, downwards or sideways, your option to tax will apply to the whole of the extended building.

Linked buildings. If prior to their completion buildings are linked by an internal access or covered walkway they are treated as a single building and an option to tax will apply to both parts. If a link is created after both buildings are completed, the option to tax will not flow through with the link.

Forming a complex. If you have a group of units that have been treated as separate buildings for the option to tax and you later decide to enclose them so as to form a complex, and which meets the description of what constitutes a building, then the option to tax will not spread to the un-opted units.

Source:HM Revenue & Customs| 14-02-2022

Beware online rip-offs

17th February 2022 by fpdteam

The Competition and Markets Authority (CMA) has launched a new campaign to help shoppers spot and avoid misleading online practices that could result in them being ripped off.

If the campaign identifies any commercial practices that adversely affect consumers then they can take enforcement action if a firm breaches consumer protection law and fails to respond to warnings.

In a poll of over 2,000 UK adults:

7 out of 10 had experienced misleading online practices
85% believed businesses using them were being dishonest with their customers
And 83% were less likely to buy from them in the future

The misleading online practices, include:

Hidden charges (85% of respondents) – unexpected compulsory fees, charges or taxes being added when someone tries to make an online purchase.
Subscription traps (83%) – – misleading a customer into signing up to, and paying for, an unwanted subscription that can be difficult to cancel.
Fake reviews (80%) – reviews which do not reflect an actual customer’s genuine opinion or experience of a product or service.
Pressure selling (50%) – a tactic used to give a false impression of the limited availability or popularity of a product or service.

The CMA’s Chief Executive, stated:

‘As online shopping grows and grows, we’re increasingly concerned about businesses using misleading sales tactics, like pressure selling or hidden charges, to dupe people into parting with their cash.’

The campaign also has the support of Citizens Advice, to whom consumers can report problems with misleading practices that they have encountered online.

Source:Other| 14-02-2022

Challenging your council tax band

17th February 2022 by fpdteam

The Valuation Office Agency (VOA) is a government body in England and Wales and an executive agency of HMRC. The Agency values properties for the purpose of Council Tax and for non-domestic rates in England and Wales. The council tax bands were set on 1 April 1991 for England and on 1 April 2003 for Wales and range from Band A – F.

If you believe that your council tax listing is incorrect you can challenge this with the VOA. A recent press release from the VOA has highlighted that some 70,000 households are expected to contact them over the coming months to ask for a review of their Council Tax band.

An appeal against your current band can be made online and you need to give a reason for your challenge and provide supporting evidence. Legally, the VOA can only review Council Tax bands where the claimant provides certain types of evidence to show their banding is wrong, or if it meets certain criteria.

This includes:

You disagree with an alteration to your properties banding made by the VOA.
You are new to the property in question and feel the valuation band too high or low.
The property is no longer a dwelling.
The local area has changed.
The property is new or has only recently become used for domestic purposes.
Change in a property e.g., flats merged into a house of vice versa.
The valuation band does not take into account a relevant decision of a local Valuation Tribunal or the High Court.

When submitting an appeal, you should include the reasons why you think the Valuation List should be altered and include documentary evidence where possible. You can also appoint someone else to challenge your council tax listing on your behalf.

If you live in Scotland, then you need to use the Scottish Assessors portal website to check your Council Tax band and if necessary, lodge a claim with them (known as a proposal).

Source:Other| 14-02-2022

Don’t miss out on this tax allowance

17th February 2022 by fpdteam

HMRC used Valentine’s Day to issue a reminder to married couples and those in civil partnerships to sign up for the marriage allowance – if they are eligible and haven’t yet done so.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner doesn’t pay tax or doesn’t pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2021-22).

The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,570 to £50,270 in 2021-22. The limits are somewhat different for those living in Scotland.

The allowance permits the lower earning partner to transfer up to £1,260 of their unused personal tax-free allowance to a spouse or civil partner. This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year.

If you meet the eligibility requirements and have not yet claimed the allowance, then you can backdate your claim as far back as 6 April 2017. This could result in a total tax break of up to £1,220 if you can claim for 2017-18, 2018-19, 2019-20, 2020-21 as well as the current 2021-22 tax year. If you claim now, you can backdate your claim for four years (if eligible) as well as for the current tax year. In fact, even if you are no longer eligible or would have been in all or any of the preceding years then you can claim your entitlement.

Source:HM Revenue & Customs| 14-02-2022

Preparing a charity annual return

10th February 2022 by fpdteam

The Charity Commission requires that charities registered in England or Wales must send an annual return to report their income and expenditure. The deadline for charities with a standard 12-month accounting period ending on 31 December 2021 is 31 October 2022.

Not filing on time means that the charity will go into default with the information being displayed to the public on the charity register. The annual return is separate from the charity’s annual accounts and the charity tax return sent to HMRC.

A full annual return is required if either:

the charity’s income is more than £10,000
the charity is a charitable incorporated organisation

If the charities income is over £25,000 then further documents including a trustee annual report, accounts and independent examiner’s report will also need to be submitted. A full audit is required if the charity has income over £1 million or gross assets over £3.26 million and income over £250,000.

There are different rules if the charity is registered in Scotland or Northern Ireland.

Source:Other| 07-02-2022

How to join MTD ITSA pilot

10th February 2022 by fpdteam

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the MTD for ITSA. Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

HMRC recently shared the following update on the pilot to software developers.

'As we progress the MTD ITSA pilot it is important that we manage it in a controlled way so that we can test and expand effectively. So, from 9th December, customers will only be able to sign up for the MTD ITSA Pilot through their software provider (in essence how it is currently happening). As we expand the pilot, this will enable HMRC and developers to ensure that all customers entering the pilot (and their agents where applicable) receive the support and guidance that they need.

Customers who are already participating in the Pilot can continue to do so. HMRC will be sharing more detail in early 2022 including the Pilot outline plan which will include a roadmap identifying when various customer types will be eligible to join MTD ITSA. MTD also continues to work on the Customer Support Model to support customers more come into the service from April 2022.'

It will be interesting to see what further sign-ups will be enabled once the pilot roadmap is published.

Source:HM Revenue & Customs| 07-02-2022