SA302 Madness Reply

In order to get a mortgage, brokers and lenders ask employees for payslips and P60’s and for business owners they ask for SA302’s and Tax Overviews (often lenders also want an accountants certificate to certify the clients trading results).

The SA302 shows:

  • Pay from all employments
  • Profits from self employments
  • Property Profits
  • Dividends
  • Tax and National Insurance due

You can get copies of SA302’s from HMRC https://www.gov.uk/sa302-tax-calculation

The Tax Overview shows:

  • Tax Due
  • Tax Paid

You can only get Tax Overviews from your online HMRC account.

Lenders and Brokers are often insisting on HMRC SA302’s (which can take several day or even a couple of weeks to obtain).

On the 25th August HMRC wrote

Agents have told us that not all their client’s lenders will accept the self-serve copy printed from their HMRC online account or the commercial software used to file the SA return, or their commercial software does not print.

We have been working with the Council of Mortgage Lenders to understand their requirements and the changes necessary to accept self-served copies of the tax calculation from the HMRC online account or the commercial software used to file the SA return. We have also liaised with commercial software companies to ensure their software offers a print facility.

A list of lenders who will accept self-serve copies can be found in the HMRC’s guidance, Mortgage providers and lenders who accept a SA302 tax calculation and a tax year overview.

It is always worth checking with the lender or mortgage provider what they require as evidence of income. And should another third party require a copy of the tax calculation, you may wish to ask if they accept a self-serve copy.

Now that we have made all the changes required to allow agents to self-serve online, we will no longer be issuing paper copies of the tax calculations directly to agents from the 5 September 2017.

So basically, clients will have to call HMRC if they need an SA302 with the HMRC logo and the lender won’t accept a self serve or agents copy.

Why are lenders and brokers being so picky! surely if an accountant provides the information that will be sufficient?

steve@bicknells.net

DIY Corporation Tax Filing – are you excluded? Reply

There are a lot of companies that can’t file using the HMRC online service…

Who can’t use the service

You won’t be able to use the HMRC free service if any of the following apply:

  • your accounts require an audit or have been audited
  • your company turnover is above £632,000 per year
  • your charity turnover is above £6.5 million per year
  • your company must pay its Corporation Tax in instalments
  • your company is part of a group
  • your company is not registered in the UK
  • your company is in liquidation or receivership
  • your company is an insurance company – not including independent insurance brokers
  • your company is an investment company
  • your company is a credit union
  • your company is a commercial property management company
  • the Corporation Tax accounting period for the return is covered by more than one set of statutory accounts
  • you need to claim a repayment of a loan to a participator (for example, a director’s loan), more than 9 months after the end of the accounting period

If you can’t use HMRC’s free online service, you can use commercial software to submit your online return.

As we are moving towards Making Tax Digital, how is this going to enable businesses to file online?

Clearly they could buy third party software, such as BTC https://www.btcsoftware.co.uk/

I use BTC and this its brilliant, there are of course many other products available.

But as Tax is complicated, despite a constant effort to simplify it (which so far hasn’t really worked), surely HMRC are encouraging companies to turn to tax agents for help?

I thought the strategy was to reduce taxpayer reliance on Tax Agents?

steve@bicknells.net

 

The Seminar Tour starts this week! Reply

The government may have postponed Making Tax Digital but the Seminars continue.

The first one is this Friday (1st September) in Bristol, its an epic production.

6 Hours of CPD

110 PowerPoint Slides

229 pages of handouts

The seminar has 7 sections

  • HMRC MTD route map
  • The Requirements of MTD
  • Client transition planning and client communications
  • How will MTD change the way clients work with accountants
  • Case Studies
  • Software
  • Sanctions & Penalties

With contributions from Xero, Sage, MyFirmsApp, Free Agent, BTC, Practice Track and Clear Books

This is probably one of the most comprehensive seminars ever given on Making Tax Digital

Click here to find out about the seminars in Cambridge, Manchester and London.

I look forward to seeing you there

steve@bicknells.net

Making Tax Digital – HMRC Case Studies 1

HMRC have 4 fictional case studies, they are on the are on the Overview of Making Tax Digital page of the HMRC website and this was last updated on 13th July 2017

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/485372/Making_tax_digital_-_case_studies.pdf

  • Geeta – the teacher who also does some tuition
  • Richard – the landscape gardener who has just become VAT registered
  • Helen – retired
  • Dave and his Wife – who are directors of a small plumbing company

Basically

Geeta uses a App on her smartphone for record keeping

Richard was using an agent but then moves to a digital tax account

Helen uses a Personal Tax Account

Dave uses an App to provide information to his accountant

So Apps are very popular!

HMRC seem to assume that most people want to do their own record keeping and that small businesses like Geeta and Richard will no longer use accountants or book keepers.

We have an extremely complicated tax system, so how realistic is that, even HMRC struggle to calculate your tax correctly!

The way that allowances are applied for dividends, allowances, savings and other items all impact on each other.

Many tax payers will be working on their 2016/17 returns (to 5th April 2017 due by 31st January 2018) over the coming months and find that they can’t use the HMRC software because it doesn’t work properly.

As reported by Accounting Web

Rob Ellis, CEO of BTCSoftware, can’t remember a year when there have been so many exclusions from filing SA tax returns online. For the 2016/17 tax returns 16 new examples have been added to the online filing exclusions list, which is now in version 4;  there is a version 5 of this list under construction.

You can read the full list of exclusion on this link https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/622426/2017-exc-indi.pdf

There were 62 exclusions! HMRC have fixed some but aren’t intending to fix them all

 

steve@bicknells.net

If my company pays me interest will it be taxed? Reply

Companies often borrow from their directors, especially property companies as 100% loan to value loans may not be available from lenders.

If the company pays interest on the loan it will have to register with HMRC and prepare CT61 returns

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/383833/ct61-notes-2010.pdf

The CT61 requires the company to deduct 20% tax on the interest.

The Director may be entitled to the interest tax free

Personal Savings Allowance

You may also get up to £1,000 of interest tax-free depending on which Income Tax band you’re in. This is your Personal Savings Allowance.

Income Tax band Tax-free savings income
Basic rate £1,000
Higher rate £500
Additional rate £0

Savings covered by your allowance

Your allowance applies to interest from:

  • bank and building society accounts
  • savings and credit union accounts
  • unit trusts, investment trusts and open-ended investment companies
  • peer-to-peer lending

So the Personal Savings Allowance should cover Directors Loans as explained in accountingweb

https://www.accountingweb.co.uk/tax/business-tax/paying-interest-to-the-director

If you are lending to your company you should make sure that its at a market rate and you may want to consider your security for the loan.

You could opt for a charge at Companies House but at the very least you should have a loan agreement.

steve@bicknells.net

How much SDLT do you pay on Overage? Reply

What is Overage

http://www.propertylawuk.net/propertytransactionsoverage.html

When land is sold, the vendor will normally do his best to sell at the best possible price – indeed, if the vendor is a public sector authority or a charity, he may be obliged to sell at the best possible price. Sometimes, however, the best possible price may only be available at some time in the future, or not at all. The most common example of this is where planning permission may be granted for a more valuable use of the land, but it is by no means certain that the permission will be forthcoming and, in any event, this is unlikely to happen for some time. Similarly, if land is sold for a particular purpose, such as for the development of 50 houses, and the developer in fact manages to build 60, then the land will obviously be more valuable with 60 houses on it rather than the original 50.

HMRC Rules

https://www.gov.uk/guidance/stamp-duty-land-tax-the-amount-used-to-calculate-whats-payable#cc

Payment depending on the outcome of future events

A transaction could include an amount that the buyer will only pay if some future event happens. This is known as the ‘contingent consideration’.

For example, a developer might agree to pay an extra sum, on condition that they get planning permission for redevelopment.

In these cases you pay SDLT on the assumption that the contingency will happen. The buyer can apply to defer payment of SDLT on the contingent amount. But HMRC still charge the tax at the appropriate rate for the total chargeable consideration.

For example, a builder buys a plot for £400,000 and agrees to pay a further £200,000 if he gets planning permission for a new building. He can apply for deferment on SDLT on the conditional £200,000 but will pay SDLT on the initial payment now. The SDLT due on the initial payment will be at 4%, because the total potential payment is above the £500,000 threshold.

Payment depending on uncertain future events

Some transactions may include a later payment which depends on an unknown variable. This is known as the ‘uncertain or unascertained consideration’.

For example, future payments based on the turnover of a business.

In these cases, calculate the SDLT on the basis of a ‘just and reasonable estimate’ of the amount involved. The buyer can apply to defer payment of the uncertain or unascertainable part. Otherwise, make an appropriate adjustment when the amount of consideration is certain.

steve@bicknells.net

 

Rent a Room – What if Rent exceeds £7,500? Reply

Many people think that Rent a Room is a tax free allowance, a bit like the personal allowance, but its not quite as simple as that.

If your total rent from a room in your home is less than £7,500 then that’s fine, but if your rent is above £7,500 these rules will apply

3.2 If your gross receipts are more than the Rent-a-Room limit

If your gross receipts are more than £7,500 (or £3,750), you can choose how you want to work out your tax:

Method A

You pay tax on your actual profit – your total receipts less any expenses and capital allowances.

Method B

You pay tax on your gross receipts over the Rent-a-Room limit – that is, your gross receipts minus £7,500 (or £3,750). You can’t deduct any expenses or capital allowances if you choose this method.

HMRC will automatically use your actual profit (Method A) to work out your tax.

If you want to pay tax using Method B, you need to tell HMRC within the time limit. You will continue to pay tax on your gross receipts over the Rent-a-Room limit until you tell HMRC that you want to change back to paying tax on your actual profit (Method A).

If you pay tax using Method B, this automatically stops if your rental income drops below the £7,500 (or £3,750) limit.

https://www.gov.uk/government/publications/rent-a-room-for-traders-hs223-self-assessment-helpsheet/hs223-rent-a-room-scheme-2017

So in most cases if you have rent above £7,500 you probably won’t want to claim Rent a Room because you will not be able to offset any expenses!

steve@bicknells.net

WAT a mess! Reply

The Widening Access Training scheme (WAT) was developed for NHS workers to save tax and national insurance.

In fact in many cases the training was free of all tax and NI, the problem has been in its operation.

We have clients in 2 different NHS trusts, they initially got refunds, then had to repay the refunds, and then got refunds direct from HMRC.

Unite have information on their website..

NHS Payroll departments have been contacting staff who may be eligible to receive a refund of Tax and National Insurance (NI) contributions, paid in error, whilst they were in full-time education.

Her Majesty’s Revenue and Customs (HMRC) have stated that employed staff also in full-time education are exempt from Tax and NI up to an annual allowance on earnings of £15,480, whilst in training, provided they meet the following conditions: 

The claimant must have been:

  • An existing NHS employee when starting a training scheme (this could have been at another NHS organisation). 
  • Looking to widen their knowledge. 
  • In full-time attendance at an educational establishment for at least one academic year, and must have attended the course for at least 20 weeks in that academic year. If the course is longer, the employee must attend for at least 20 weeks on average in an academic year over the period of the course.  

Claims for refunds of tax and NI can be made for the period September 1999 to March 2013.  

HMRC normally only accept refund claims for the previous 6 tax years. However, this restriction has been extended back to September 1999, to coincide with the start of a specific training scheme; the Widening Access Training Scheme

This the advice from HMRC to NHS Payrolls

Responsibility for refunds

Training courses attended before 6 April 2013

HM Revenue and Customs (HMRC) will deal with the refund if your employee attended a qualifying WAT course starting before 6 April 2013.

You should submit claims to HMRC on behalf of your NHS employees, providing full details of all eligible workers.

Trusts/authorities should notify HMRC by submitting a schedule by email to the mailbox. nhswat.mailbox@hmrc.gsi.gov.uk

Workers have been advised to contact you to confirm if you’ve already sent a claim to HMRC on their behalf. You may need to ask them for further information or evidence to support their application for a refund.

Training courses attended after 6 April 2013

If workers attended a qualifying WAT course starting on or after the 6 April 2013 the refund should be dealt with by you through your payroll system.

Training course only

If an employee attended a qualifying WAT course and is entitled to a refund, you should complete a Full Payment Submission (FPS):

  1. Enter the full amount of training income paid to the employee in the field ‘Value of payments not subject to Income Tax or NICs in pay period’.
  2. Enter the tax code for the year.
  3. Don’t complete any of the NICs fields.

Training course and paid work

If the employee did a combination of training and paid work and is entitled to a refund for the training income, you should complete an FPS:

  1. Separate the training income from the earned income.
  2. Subject any additional earnings to Income Tax and NICs in the normal way.
  3. Enter the amount of training income received in the field ‘Value of payments not subject to tax or NICs in pay period’.
  4. Enter the tax code number for the year.

If you’ve already sent your final FPS for the years starting 6 April 2014 onwards, you should complete an Earlier Year Update.

The main HMRC links are

Its easy to see why there is confusion!

Hopefully, all those on the WAT schemes will get the correct refunds

steve@bicknells.net

The Second Finance Bill 2017 changes the timetable for Making Tax Digital – what are we doing now? Reply

The previous timetable for Making Tax Digital was

  • April 2018 – quarterly reporting for income tax purposes for unincorporated businesses with a turnover over £85,000
  • April 2019 – quarterly reporting for both incorporated and unincorporated businesses for income tax and VAT
  • April 2020 – quarterly reporting for corporation tax purposes

The new timetable will be

  • Only VAT registered businesses will need to keep digital records and only for VAT purposes.
  • They will only need to do so from April 2019.
  • Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original dates had implementation from April 2019).

If you are VAT registered then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts).

This is massive change in timetable and one that many small businesses and landlords will welcome.

Whilst this now gives smaller businesses longer to prepare, MTDfB is still coming in 2020 and expected to require unincorporated businesses to report the information noted below, so its still worth starting preparations and using cloud based accounting systems.

The details below are an extract from gov.uk for Quarterly Reporting

Non-property businesses

Income:

  • turnover, takings, fees, sales or money earned
  • any other business income

Expenses:

  • cost of goods bought for resale or goods used
  • construction industry – payments to subcontractors
  • wages, salaries and other staff costs
  • car, van and travel expenses
  • rent, rates, power and insurance costs
  • repairs and renewals of property and equipment
  • phone, fax, stationary and other office costs
  • advertising and business entertaining costs
  • interest on bank and other charges
  • bank, credit card and other financial charges
  • irrecoverable debts written off
  • accountancy, legal and other professional fees
  • depreciation and loss/profit on sale of assets
  • other business expenses
  • goods and services for your own use
  • income, receipts and other profits included in business income or expenses but not taxable as business profits
  • disallowable element for each category

Property businesses

Income – furnished holiday lettings:

  • rental income and any income for services provided to tenants

Expenses – furnished holiday lettings:

  • tax taken off income
  • rent paid, repairs, insurance and cost of services provided
  • loan interest and other financial costs
  • legal, management and other professional fees
  • other allowable property expenses
  • private use adjustment
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • property repairs and maintenance
  • costs of services provided, including wages

Income – property:

  • rental income and other income from property

Expenses – property:

  • tax taken off any income from total rents
  • premiums for the grant of a lease
  • reverse premiums and inducements
  • rent, rates, insurance, ground rents etc.
  • property repairs and maintenance
  • loan interest for residential properties and other related financial costs
  • other loan interest and financial costs
  • legal, management and other professional fees
  • costs of services provided, including wages
  • other allowable property expenses
  • private use adjustment

To find out all the latest information why not come to one of my seminars

steve@bicknells.net