Historically many companies have written up board minutes and in some cases declared dividends retrospectively at the end of year, but times are changing!
In the age of cloud accounting and making tax digital HMRC will know exactly when entries are posted and when documents are signed.
Unreliable records were a major factor in Dr Maqbool Baloch v HMRC, Dr Baloch a locum doctor was forced to pay £0.5 million in tax and penalties!
Dr Baloch tried to argue that he was employed via his Limited Company – KSM Medics Ltd – but the paperwork didn’t tie up – there were board minutes for meetings which HMRC could prove didn’t take place. As a result he was treated as Self Employed because he ticked a box that said he was self employed for his agency work even though Dr Baloch argued this was not a contract.
From April 2019 Making Tax Digital will apply to VAT, this will give HMRC access to real time information direct from your accounting records and time stamped.
In order to avoid problems preparing or extracting monthly accounts will mean dividends can be declared in the correct time periods.
Recent tax changes such as Clause 24 Interest Restrictions, 3% extra SDLT and 8% extra Capital Gains Tax have hit landlords hard and these NLA videos explain the full impact
The NLA predict that the changes will mean that 20% of Landlords will sell their portfolios.
Since September lenders to Portfolio Landlords have been required to look at the whole portfolio before lending and this has lead to 70% of landlords with four or more properties saying that they have found it hard to obtain finance.
Overall Residential transactions have seen a slight decline in activity
Since 2015 more and more landlords have been using Limited Companies to purchase property investments even though mortgage interest rates are a around 1% higher there are many advantages:
- Clause 24 Interest Rate Restrictions don’t apply to companies
- Lenders can take a specific change and a debenture over a company and this is why separate companies for each investment can be an advantage
- If you sell the company shares rather than the property the buyer will pay 0.5% SDLT on the shares, the capital gains tax on shares is 8% lower than on residential property and the potentially the company purchaser can takeover the existing debt without needing to refinance
- Corporation Tax is 19% where as Landlords pay Income Tax rates, which means companies can help you to build a portfolio quicker as you retain more profit
What if you don’t have all the information you need for the return?
Returns which include provisional or estimated figures should be accepted provided they can be regarded as satisfying the filing requirement.
A provisional figure is one which the taxpayer / agent has supplied pending the submission of the final / accurate figure
An estimated figure is one which the taxpayer / agent wishes to be accepted as the final figure because it is not possible to provide an accurate figure for example where the records have been lost. The taxpayer is not required to tick box 20 of the Finishing your Tax Return section of the return page TR 6 (or equivalent in a return for an earlier year) where estimated figures have been used
Is there a reasonable excuse as to why you can’t file the return?
A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:
1. your partner or another close relative died shortly before the tax return or payment deadline
2. you had an unexpected stay in hospital that prevented you from dealing with your tax affairs
3. you had a serious or life-threatening illness
4. your computer or software failed just before or while you were preparing your online return
5. service issues with HM Revenue and Customs (HMRC) online services
6. a fire, flood or theft prevented you from completing your tax return
7. postal delays that you couldn’t have predicted
8. delays related to a disability you have
What if you make a mistake?
If you make a mistake on your tax return, you’ve normally got 12 months from 31 January after the end of the tax year to correct or amend it.
The Self Assessment Return contain additional information boxes, these are known as white space, use these spaces to explain your calculations if you have any doubt about the answers you have given
Penalties for Late Filing
- 1st Feb 2018 – £100 for missing the deadline
- 30th April 2018 – £10 per day for 90 days after your are 3 months late (£900 in total)
- 31st July 2018 – 5% or £300 which is ever is greater if you are 12 months late
- 31st Jan 2019 – £300 or possibly 100% of tax due if deliberate
On top of these penalties there are also penalties for non payment
On the 15th December 2017 you will no longer be able to pay tax at any Post Office Branch, fantastic timing! just in time for the January self assessment payment rush
The contract with Santander which allowed this method of payment expires on that date and Santander and HMRC have not reached agreement on a new contract.
To make things worse from the 13th January 2018 you won’t be able to pay by Credit Card either!
So your options will be
- Debit card
- Online Banking
- Cheque in the Post
- Direct Debit
These changes are likely to come as shock to many taxpayers and any reduction in ways to pay can only be bad news for taxpayers!
In a company Capital Gains and Trading activity are both taxed at Corporation Tax Rates.
The downside to holding CryptoCurrency as an investment is that if you have a trading company it could put your trading status at risk for entrepreneurs relief if more that 20% of the business becomes investment related.
The best known Virtual Currency is Bitcoin and since 2014 there have been calls for tighter control of these currencies.
The European Banking Authority, the EBA, called on national supervisory authorities to discourage banks and credit institutions from buying, holding or selling virtual currencies. It called for regulation of market participants at the interface between conventional and virtual currencies. Over the longer-term, the EBA is calling for a ‘substantial body’ of regulation to be applied to virtual currency market participants, including the creation of ‘scheme governing authorities’ accountable for the integrity of a virtual currency scheme and the imposition of capital requirements. In the short term, the EBA is calling for national authorities to ‘shield regulated financial services from virtual currencies’.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.
If you thought you were going to pay your tax bill with a personal credit card in January 2018, then think again!
EU rules are forcing HMRC to change their policy in January.
You won’t be able to pay with a personal credit card from 13 January 2018.
This change was instigated by the Second Payment Services Directive (PSD2), which outlined that there could be no onward charging consumers for credit or debit cards. This includes HMRC who have said that they cannot absorb the costs of the merchant providers for credit card facilities and therefore no payments will be taken by credit card. Debit cards payments will still be possible, as the underlying costs are not as high.
This is happening at the peak of self assessment time! so it will be a nightmare for tax payers
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?
You could take the e learning course
Or try the new Toolkit
Or how about a webinar