3 Self Assessment Life Savers – Estimates, Provisional and Corrections

Tax Return Due Now

There are only a few days left to file your Self Assessment Return for 2013 and if you haven’t done it you might be starting to panic! a common reason for last minute filing is being unable to get the information to enter on the return, so what can you do?

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

HMRC SAM121190

Correcting your return

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. For example, if you send your 2012-13 online tax return by 31 January 2014, you have until 31 January 2015 to amendment it.

How to amend an online return

If you sent your tax return online by 31 January, it’s easy to amend it online too. You just need to log into your Self Assessment online account, go to the ‘at a glance’ page and choose the option to amend your tax return.

HMRC Correcting your Tax Return

steve@bicknells.net

Maybe it’s because I’m a Londoner…that I leave tax so late

Big Ben with city bus and flag of England, London

Around one in nine (11%) of the 560,000 people in Inner London who had to send in a tax return last year didn’t do so by the relevant deadline – 31 October for paper returns and 31 January for online submissions.

The one million taxpayers in Outer London were more punctual, with one in 11 (9%) failing to meet the deadline, but they were still the second worst offenders. The tardiest taxpayers outside of London were in the North West of England, with 8% of their 890,000 returns failing to meet the deadline.

Taxpayers in the rest of the English regions fared better. The most punctual were in the South West, with only 6% of their one million tax returns arriving late. The other English regions, as well as Wales, Scotland and Northern Ireland, all registered 7% of late tax returns, which was the UK national average.

HM Revenue and Custom’s (HMRC) Director General of Personal Tax, Ruth Owen, said:

Whether you’re from London, Livingston, Lisburn or Llandudno, the consequences of missing the tax return deadline are the same – an automatic £100 late-filing penalty.

The longer you delay, the more you have to pay. So if you still have to send us your tax return, take action now.

Anyone with an outstanding 2012 to 2013 tax return must send it online, and pay any tax they owe, by 31 January.

Re-blogged from Gov.uk

steve@bicknells.net

Self Assessment Payment – Shipley or Cumbernauld

SA 2012-13 Jan Outdoor poster 1

For all those struggling to work our whether to make a bank transfer to HMRC Shipley or Cumbernauld

Your payslip tells you which HMRC account to use. If you’re not sure, use HMRC Cumbernauld. You must use your UTR as the payment reference.

Sort code Account number Account name
083210 12001039 HMRC Cumbernauld
083210 12001020 HMRC Shipley

If you make a Faster Payment this will clear the same day if the amount is within your bank’s limits.

https://www.gov.uk/pay-self-assessment-tax-bill

steve@bicknells.net

Do I need to do a tax return?

Business woman

If any of the following apply then, YES, you need to do a tax return:

  1. You’re self-employed

  2. You’re a company director, minister, Lloyd’s name or member

  3. Your annual income is £100,000 or more

  4. You have income from savings, investment or property (unless collected via PAYE)

    • £10,000 or more from taxed savings and investments
    • £2,500 or more from untaxed savings and investments
    • £10,000 or more from property (before deducting allowable expenses)
    • £2,500 or more from property (after deducting allowable expenses)
  5. You need to claim expenses or reliefs

  6. You or your partner receive Child Benefit and your income is over £50,000

  7. You’re 65 and receive a reduced age-related allowance

  8. You get income from overseas

  9. You have income from trusts, settlements and estates

  10. You have Capital Gains Tax to pay

  11. You’ve lived or worked abroad or aren’t domiciled in the UK

  12. You’re a trustee

SA 2012-13 Jan Outdoor poster 3

For full details of who needs to do a tax return follow this link http://www.hmrc.gov.uk/sa/need-tax-return.htm

For details of how to register go to http://www.hmrc.gov.uk/sa/register.htm

I know that sometimes people simply don’t realise that they need to do a return, for example a newly appointed Director or someone receiving Dividends. HMRC often don’t know if you should be doing a return (if they think you should be they will contact you), so it is up to you to make sure you file a return and disclose your income to HMRC if any of the above apply.

If you think you have an excuse, think again!

http://stevejbicknell.com/2012/10/15/reasons-excuses-for-filing-your-self-assessment-return-late/

As you will see your chances of HMRC accepting your excuse are slim.

Employment Expenses – Use Form P87

As an employee you can claim tax relief for expenses incurred in doing your job (if not fully reimbursed by your employer), for example business mileage, cycling on business, hotels, meals, business phone calls, in fact anything as long as its business related

If your claim is less than £2500 you can make your claim using Form P87 without the need to do self assessment.

http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

So having workout you need to do a return. and having registered online, and filed your first return with HMRC, what if you later find you have make a mistake, what can you do?

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 it. This is called an ‘amendment’. For example, for the 2011-12 return you have until 31 January 2014 to make an amendment.

http://www.hmrc.gov.uk/sa/correct-repay.htm

What if you don’t file in time?

The penalties for late Self Assessment returns are:

  • an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
  • after three months, additional daily penalties of £10 per day, up to a maximum of £900;
  • after six months, a further penalty of 5 per cent of the tax due or £300, whichever is greater; and
  • after 12 months, another 5 per cent or £300 charge, whichever is greater.

There are also additional penalties for paying late of 5 per cent of the tax unpaid at: 30 days; six months; and 12 months.

What if you don’t have all the answers, can you put in provisional figures?

There are occasions on which some information cannot be finalised within the formal self assessment time limits despite the taxpayer’s best efforts to do so. In such cases the taxpayer should include a ‘best estimate’ of the information in the tax return and, if appropriate, a corresponding provisional figure of the tax due. The provisional figures should be clearly identified as such in the tax return. A tax return containing a provisional figure should only be submitted once it is clear that a more accurate figure will not be available before the filing date.

http://www.hmrc.gov.uk/manuals/salfmanual/salf206.htm

steve@bicknells.net

What are the implications of being a Service Company? Q1 Page TR4 SA100

 

Tax Money

Here is the question:

If you provided your services through a service company (a company which provides your personal services to third
parties), enter the total of the dividends (including the tax credit) and salary (before tax was taken off) you withdrew
from the company in the tax year – read page TRG 21 of the guide
£ • 0 0

This is what the guide says:

Service companies
Box 1 If you provided your services through a service company

Complete this box if you provided your services through a service company.

You provided your services through a service company if:

• you performed services (intellectual, manual or a mixture of both) for a client (or clients), and
• the services were provided under a contract between the client(s) and a company of which you were, at any time during the tax year, a shareholder, and
• the company’s income was, at any time during the tax year, derived wholly or mainly (that is, more than half of it) from services performed by the shareholders personally.
Do not complete this box if all the income you derived from the company
was employment income.

http://www.hmrc.gov.uk/worksheets/sa150.pdf

The majority of limited company contractors are, by definition, ‘personal service companies’ and therefore this box is of relevance.

The question however has no statutory backing and you cannot be penalised for failing or refusing to answer it but if contractors ignore the question when HMRC know full well that their company is a ‘service company’ then they may be drawing unnecessary attention to themselves.

The information to be entered is the total of the gross salary and dividends taken from the contractor’s company in the year ended 5th April 2012.

http://shop.qdosconsulting.com/freelancer/news/2013/01/18/psc-question-on-sa-return

The point is not the whether you answer the question or not, its whether your company falls under IR35 that matters most.

IR35 came into existance in 1999,  it was created to prevent workers previously employed from creating a limited company and then benefiting from lower taxes and national insurance through the use of dividends and expenses.

So you think you are self employed, does HMRC agree?

http://stevejbicknell.com/2012/01/28/so-you-think-you-are-self-employed-does-hmrc-agree/

Can your business pass the HMRC IR35 Business Entity Tests

http://stevejbicknell.com/2012/05/14/can-your-business-pass-the-hmrc-ir35-business-entity-tests/

Consultants beware of IR35

http://stevejbicknell.com/2011/09/10/consultants-beware-of-ir35-use-the-qdos-model-contract-free/

steve@bicknells.net

How will you pay your self assessment tax? HMRC Budget Plan?

Revenue and Customs

So you have done your tax return (SA100), you had a brilliant year but the bad news is that your payments on account for next year 2012-13 are based on 2011-12 and next year things don’t look as good.

Why not reduce your payments on account using http://www.hmrc.gov.uk/sa/forms/sa303.pdf

You can also change your payments on account using HMRC online but its currently set to 2011-12 not 2012-13, the screen asks for:

 This allows you to claim to reduce the payments on account you have been asked to make for tax year ending 05 Apr 2012.

*indicates required information

Step 1 – Please specify amount Help about: Please specify amount - opens in a new window
Reduce each payment on account to: £

e.g. 100.00


Step 2 – Please state reason Help about: Please state reason - opens in a new window
Reason for reduce payment: *

  • Please select an option below
  • My business profits are down/my business has ceased.
  • Other income has gone down.
  • Tax allowances and reliefs have gone up.
  • Tax deducted at source is more than previous year.
If these reasons do not fit your circumstances you will need to contact your HM Revenue & Customs (local) office.
Another option might be a Budget Plan

Budget Payment Plans are only available to Self Assessment customers who are up to date with their payments and who pay by online Direct Debit.

When you set up your Direct Debit you must make sure you select the Budget Payment Plan option.

With a Budget Payment Plan you make regular payments towards the amount you should pay by 31 January/31 July. The plan is flexible and allows you to:

  • decide the amount you want to pay each week or month
  • change the regular payment amount
  • stop making payments for a period of up to six months
  • cancel payments at any time.

http://www.hmrc.gov.uk/payinghmrc/dd-intro/ndds.htm#6a

There are other ways to pay too, follow these links

steve@bicknells.net

Have you filed your 2012 Self Assessment Tax Return?

SA monthly online figures 2011-12

While millions of people were exchanging presents, feasting on turkey, and nodding off in front of the television, 1,548 people decided to take time out from the yuletide festivities and do their tax return online – a 40 per cent increase on Christmas Day 2011, when 1,100 people filed online.

A new HM Revenue and Customs (HMRC) advertising campaign starts this week, urging anyone who still hasn’t sent in their 2011-12 tax return to “do it today, pay what you owe and take a load off your mind”, so they can experience “inner peace” – something that the 20,563 Christmas Eve, Christmas Day and Boxing Day filers are no doubt feeling already.

Images of the new “inner peace” ads, as well as infographics on last year’s filing trends, are available from HMRC’s Flikr channel at http://www.flickr.com/hmrcgovuk

The penalties for late Self Assessment returns are:

  • an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
  • after three months, additional daily penalties of £10 per day, up to a maximum of £900;
  • after six months, a further penalty of 5 per cent of the tax due or £300, whichever is greater; and
  • after 12 months, another 5 per cent or £300 charge, whichever is greater.

There are also additional penalties for paying late of 5 per cent of the tax unpaid at: 30 days; six months; and 12 months.

http://hmrc.presscentre.com/Press-Releases/Many-happy-returns-of-the-season-68585.aspx

You may find some of my previous blogs useful:

Subcontractors

http://stevejbicknell.com/2012/05/07/self-assessment-tips-for-subcontractors/

Late Filing

http://stevejbicknell.com/2012/10/15/reasons-excuses-for-filing-your-self-assessment-return-late/

Pension Payments

http://stevejbicknell.com/2012/10/06/employer-vs-employee-pension-payments-net-relevant-earnings/

Tax Codes

http://stevejbicknell.com/2012/01/21/is-your-tax-code-right/

Loan Interest

http://stevejbicknell.com/2012/01/05/lend-money-to-your-company-and-get-interest/

Dividends

http://stevejbicknell.com/2012/01/04/things-you-need-to-know-about-dividends/

Business Expenses

http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

Business Mileage

http://stevejbicknell.com/2011/12/19/tax-refund-for-business-mileage/

Self Employed

http://stevejbicknell.com/2011/12/23/self-employed-tax-allowances/

Capital Allowances (companies need to file these on their CT600 Corporation Tax Returns)

http://stevejbicknell.com/2012/02/15/the-hidden-capital-allowances-in-your-building/

http://stevejbicknell.com/2012/01/09/capital-investment-appraisal-tax-and-depreciation-the-basics/

Unclaimed Tax Relief  £12.6bn

http://stevejbicknell.com/2012/05/12/12-6-billion-in-unclaimed-tax-relief-and-refunds/

You will need to file on-line, but just in case you would like to see what the 2012 return looks like here is a link:

http://www.hmrc.gov.uk/forms/sa100.pdf

steve@bicknells.net

Reasons (Excuses) for filing your Self Assessment Return Late

Around half a million people who still have not filed tax returns for the 2010/11 tax year are about to receive fines of at least £1,200 as HM Revenue & Customs sends out its latest round of penalty letters.

http://www.guardian.co.uk/money/2012/aug/14/hmrc-penalty-fines-tax-return

So here some examples of reasonable excuses:

  • a failure in the HMRC computer system
  • your computer breaks down just before or during the preparation of your online return
  • a serious illness, disability or serious mental health condition has made you incapable of filing your tax return
  • you registered for HMRC Online Services but didn’t get your Activation Code in time

And some that aren’t acceptable:

  • found the online system too complicated to follow
  • left everything to your accountant to do and they let you down
  • forgot about the deadline
  • did not try to re-submit your return on time once a problem with the IT system was put right
  • registered for HMRC Online Services after the filing deadline (eg 31 January for Self Assessment)

http://www.hmrc.gov.uk/online/excuse-missed-deadline.htm#1

If you need to appeal against a penalties here is a link to form SA370

http://www.hmrc.gov.uk/forms/sa370.pdf

Whats’ your excuse?

steve@bicknells.net

 

How De-pooling Short Life Assets can reduce your tax

In the Finance Bill 2011 the period over which expenditure on plant or machinery can be given “short life assets” (SLA) treatment was extend from 4 year to 8 years.

The change will have effect for expenditure incurred

• on or after 1 April 2011 for businesses within the charge to corporation tax (CT); and

• on or after 6 April 2011 for businesses within the charge to income tax.

If a business elects for plant or machinery to be treated as a short life asset, capital allowances are calculated individually on the asset until a “cut-off” point. This ensures that, if the asset is sold or scrapped before the cut-off point, the total allowances given over the period of ownership equal the actual net cost of the asset to the business.

An election will be beneficial if the asset depreciates faster than the rate at which capital allowances are given, and it is sold before the cut-off date.

Expenditure incurred on an asset given SLA treatment is allocated to a ‘single asset pool’ for the cut-off period. The current four-year cut-off period is four years from the end of the chargeable period in which the expenditure is incurred.

Writing-down allowances are given on the reducing-balance each year, currently at 18 per cent. If the item is scrapped or sold within a ‘four-year cut-off’ period, the remaining balance of expenditure in the pool is compared with the disposal proceeds. A further allowance, or charge, is made for the difference. This ensures that allowances given to this point match the actual net cost of the SLA.

If the Asset was placed in the Main Pool the tax relief would come through in future years through the WDA. So using the SLA will speed up Tax Allowances.

If the asset is not disposed of within the ‘four-year cut-off’ period, the remaining expenditure in the single asset pool is transferred to the main capital allowances pool, where writing-down allowances will continue to be available in the normal way.

The exceptions to SLA treatment are listed in section 84 CAA 2001 and include most cars and all expenditure on ‘long-life assets’ (assets with a useful economic life of at least 25-years) and ‘integral features’ of a building or structure.

A SLA election must be made for corporation tax within two years of the end of the relevant chargeable period in which the expenditure is incurred. For income tax the time limit is normally the anniversary of the 31 January following the tax year in which the end of the relevant chargeable period occurs.

Assets that cannot be treated as SLAs are:

  • assets that were provided for some other purpose including leasing under a long funding lease before being brought into use for a qualifying activity CA23030;
  • assets received as a gift CA23040;
  • assets used for special leasing CA20040;
  • cars apart from cars hired out to people in receipt of certain disability allowances CA23510;
  • long life assets CA23700;
  • special rate expenditure assets CA20150;
  • assets provided for leasing except:
    • those used in the designated period for a qualifying purpose and for no other purpose; and
    • cars provided for disabled people in receipt of certain allowances;
  • assets leased overseas that qualify for WDAs at the 10% rate CA24200;
  • assets leased to two or more persons jointly where at least one lessee is a non- resident who does not use the asset exclusively for earning profits chargeable to tax and the leasing is not protected leasing CA24400;
  • ships CA25000;
  • assets used partly for a qualifying activity and partly for other purposes CA27000;
  • assets that receive a partial depreciation subsidy CA27100.

http://www.hmrc.gov.uk/manuals/camanual/CA23620.htm

steve@bicknells.net

Tax Break – Self Employed to your own Company

When you are Self Employed your pay tax in advance in January and July, but Companies pay tax 9 months after their financial year end.

So if you formed a Company and it started trading in April 2011, its year would end 31st March  2012 and Corporation Tax would be due in December 2012.

As a director of your own company you will be paid as an employee (PAYE) and get paid dividends as a Shareholder. Dividends are paid out of taxed profits.

What this means is that a Director taking a minimal salary, will probably have a tax break of 12 plus 9 = 21 Months.

In addition the company will buy the assets of the sole trader and it may be possible to include a value for goodwill.

steve@bicknells.net