All companies must deliver correct and complete tax returns.
A company may not be able to do this if its tax accounting arrangements are not fit for purpose. These arrangements will range from how it accounts for its business transactions to how it works out its final tax liability.
Schedule 46 FA09 sets out rules for certain large companies. Those companies must establish and maintain their tax accounting arrangements and their Senior Accounting Officer (SAO) is responsible for ensuring that they do.
This guidance tells the reader about
- the rules that put responsibilities on those companies and particularly their SAOs
- the actions that those companies and SAOs must take
- how HMRC will ensure that they comply with the rules, and
- the penalties chargeable if they fail to comply.
The way in which HMRC ensures compliance with the SAO rules is consistent with HMRC’s wider strategy for Mid-sized and Large Businesses by which we seek to build and maintain open and transparent relationships with companies and to work collaboratively with them in real time to reduce their level of tax compliance risk.
Currently SAO rules only apply to large companies (turnover of £200m plus) but will HMRC extent this to smaller companies?
Senior Accounting Officer Main duty: what is the main duty
The main duty of a Senior Accounting Officer (SAO) is to take reasonable steps to ensure that a qualifying company, see SAOG11000, establishes and maintains appropriate tax accounting arrangements.
This means, in particular, that the SAO must take reasonable steps to
- monitor the accounting arrangements of the company and
- identify any respects in which those arrangements are not appropriate tax accounting arrangements.
A penalty of £5,000 is charged for the following failures:
- Failure by the company to notify HMRC of the name and contact details of its SAO
- Failure by the SAO to carry out their main duty under the rules
- Failure by the SAO to provide a certificate to HMRC, or providing a certificate that contains a careless or deliberate inaccuracy.
The penalty is payable by the person responsible for the failure, as above. The penalties are at a flat rate and cannot be mitigated.
K Thathiah v HMRC  UKFTT 601 (3 August 2017)
The FTT found that a senior accounting officer (SAO) had not breached his main duty under FA 2009 Sch 46.
The case related to VAT errors totaling £1.3m despite providing ‘clean’ certificates, however, it was decided that reasonable steps were being taken to ensure the accuracy of VAT returns for example setting up a team, providing training and using an agent.
I think all SAO’s should take this a warning! get the right systems and procedures or face personal penalties
On the 20th September 2017 HMRC announced
A new service to directly help mid-sized businesses as they expand and grow, has been launched today by HM Revenue and Customs (HMRC).
There are around 170,000 mid-sized businesses registered in the UK. Businesses with either a turnover of more than £10 million or more than 20 employees, and undergoing significant growth, can now seek expert help from HMRC growth support specialists.
Known as the Growth Support Service, HMRC tax experts will offer dedicated support, tailored to the customer’s needs. It has been created to help growing, mid-sized businesses access the information and services they need.
This could include:
helping with tax queries about their growing business
supplying accurate information and co-ordinating technical expertise from across HMRC
supporting them to get their tax right first time and access relevant incentives or reliefs
I wonder if HMRC have plans to help other businesses too?
Clause 24 of the Finance Bill sets out restrictions for individuals on claiming mortgage interest as a cost against their property investment income, for individuals it will work as follows
2017/18 75% of the interest can be claimed in full and 25% will get relief at 20%
2018/19 50% of the interest can be claimed in full and 50% will get relief at 20%
2019/20 25% of the interest can be claimed in full and 75% will get relief at 20%
2020/21 100% will get only 20% relief
These rules will not apply to Companies, Companies will continue to claim full relief.
The rules also don’t apply to Furnished Holiday Lets.
Essentially Section 24 removes Interest from the property expenses and gives you tax relief at 20% (basic rate). So Higher rate tax payers will pay more tax.
The Mortgage Works have a spreadsheet calculator that demonstrates this and also incorporates other profits and income.
There are a lot of companies that can’t file using the HMRC online 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?
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
- 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
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
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
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
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.
You could take the e learning course
Or try the new Toolkit
Or how about a webinar
We have an extremely complicated tax system, so is it any wonder 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 are 62 exclusions!
Why is tax complicated! Here are the facts:
- 6,102 pages of legislation (according to Tolleys in 2012)
- 639 monetary values
- 425 thresholds
- 214 penalties
- 11.26 million SA returns due
- 10.39 million returns were received in total
- Around 870,000 SA returns not submitted by 31st January 2016
- 10.39 million returns received by midnight on 31 January (92% of total issued)
- 9.24 million returns filed online (89%)
- 1.14 million returns filed on paper (11%)
- More than 4.45 million returns received in January 2016 (43% of total received)
- 823,000 returns received on 30 and 31 January (18% of total returns received in January)
- Busiest hour: 14:00 – 15:00 on 29 January – 50,358 returns received (839.3 per minute; 13.9 per second).
- N.B. The figures are sourced from Self Assessment management information from the Computerised Environment for Self Assessment as at 01 February 2016 for the 2014-15 tax year.
Even if the HMRC software is working…
10 most common online self assessment issues
Here are 10 of the most common problems, issues and errors that come up:
- Not leaving enough time to register for Self Assessment – It can take 20 working days (this is usually 4 weeks) to complete the registration process, then for online returns, allow 10 working days (21 if you’re abroad) to register because HM Revenue and Customs (HMRC) posts you an activation code.
- Lost Login details – Your account will be locked for 2 hours if you enter the wrong user ID or password 3 times.If you’ve lost both your user ID and password:
– individuals in Self Assessment can request new ones (allow 7 days to get them by post) or sign up with the GOV.UK Verify trial
– contact HMRC for all other online services
- Leaving it too late to get help – If you need help from an accountant don’t leave it too late as they will need to carryout AML and other checks before they can file your return, they will also need your UTR
- Failing to complete all the parts of the return – For example leaving out PAYE information
- Failing to press ‘submit’ – you would be surprised how many people complete the return and then stop without submitting or leave submission and then forget to do it
- Missing out details of your Pension Provider
- Failing to check the calculation – Most people do a rough calculation of what they owe but fail to check the HMRC calculation only to find out they have made a mistake
- Using invalid characters such as # ‘ ” in boxes where these are not allowed
- Not paying the tax they owe by 31st January
- Failing to explain where estimates and provisional sums have been used
If you don’t already use an accountant, may be 2017 is the year to start?
Each year we a get tax free allowances:
NI Free £8,164
Tax Free Salary £11,500
Capital Gains Tax Allowance £11,300
Rent a Room £7,500
Dividend Allowance £5,000
Personal Savings Allowance £1,000
Then there are many other tax saving opportunities like tax free childcare https://stevejbicknell.com/2016/08/19/childcare-3-part-report-for-childcare-providers-and-parents/
Plus tax free benefits https://stevejbicknell.com/2016/09/21/are-you-making-the-most-of-tax-free-benefits/
Have you tried to use these allowances?
What if you set out each year to take advantage of these tax free opportunities?
You would need your own business to be able to restrict your earnings to £8,164 or £11,500 as National Minimum Wage would mean you will get pay levels above these £7.50 x 37.5 hours x 52 weeks = £14,625, however, directors can pay themselves below NMW.
To use the Capital Gains Allowance you are going to need to have assets to sell and make a gain
Rent a Room is achievable especially if you take in students
Dividend Allowance is great if you have your own company
Everyone should be able to use the PSA
Why not sit down and work out how you could maximise the use of the tax free allowances that are available
The official guidance for Directors is…
As a director of a limited company, you must: