Oops! HMRC software not working Reply

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

In 2016:

  • 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:

  1. 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.
  2. 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
  3. 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
  4. Failing to complete all the parts of the return – For example leaving out PAYE information
  5. 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
  6. Missing out details of your Pension Provider
  7. 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
  8. Using invalid characters such as # ‘ ” in boxes where these are not allowed
  9. Not paying the tax they owe by 31st January
  10. 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?

steve@bicknells.net

Do Directors really have to do self assessment returns? read What happened to a Property Company Director Reply

The official guidance for Directors is…

As a director of a limited company, you must:

You don’t need to register for Self Assessment or send a tax return if your company is a non-profit organisation (for example, a charity) and you didn’t get any pay or benefits, like a company car.

https://www.gov.uk/running-a-limited-company

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

So, basically, if you are a director you must register!

Many accountants think that this one size fits all approach is a little over the top and returns for salaried directors are unnecessary in some cases but the rules are absolutely clear, Directors must register!

So the latest case involving a property company came as a surprise to many accountants

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j9898/TC05929.pdf

Mohammed Salem Kadhem (case TC05929) became a director of a property company on 21 May 2014. He received no pay or dividends from that company and didn’t register for self-assessment.

It was reported in full at http://www.accountingweb.co.uk/tax/hmrc-policy/tribunal-company-directors-dont-have-to-submit-tax-returns?utm_medium=email&utm_campaign=AWUKPOW210617&utm_content=AWUKPOW210617+CID_b1f3f98189c6021fa5eaf5a489ca5e3d&utm_source=internal_cm&utm_term=Company%20directors%20dont%20have%20to%20submit%20tax%20returns

Basically HMRC made mistakes in their approach to the case basically arguing that a notice to file had been sent but were unable to prove the notice was sent and Mohammed Salem Kadhem won.

The tribunal accepted that he had a reasonable excuse for filing a late return and all the penalties were quashed.

This doesn’t change the fact that all directors must register and a file self assessment returns. Don’t risk it, its better to file returns!

steve@bicknells.net

If your accountant prepares your self assessment return is there a taxable benefit? 2

Tax Return Mailing Income Envelope 3d Illustration

Over the years I have heard lots of comments on this, some say a tax return is a personal expense some say its a business expense if the cost is incidental to the accounting work.

For example, lets consider a sole trader, he has to prepare accounts and the only way to report the tax due is on a self assessment return. In many cases the only entries will be the self employed boxes.

Company Directors are probably only doing self assessment returns because they are directors and only the Salary and Dividend boxes will be completed.

We actually specify on our engagement letters to clients who have a businesses that we will complete the Self Assessment Return for Free (FOC) as part of an overall package of fixed fee services.

HMRC guidance states [BIM46450]

There is, however, a longstanding practice of allowing normal recurring legal, accountancy etc expenses incurred in preparing accounts, or agreeing the tax liability, see Statement of Practice SP 16/91 reproduced at EM3981. This has been approved by the courts as a reasonable response to the practical difficulties of apportionment…

It is the practice to allow, in computing profits assessable under Part 2 Chapter 4 of ITTOIA 2005 and under Case I & II Schedule D for companies, the normal accountancy expenses incurred in preparing accounts or accounts information and in assisting with the self assessment of tax liabilities.

So having just started working with Croner Taxwise for client tax investigation insurance, I gave them a call to check the rules and in summary, if the Self Assessment is incidental to the main accounting and tax work then it isn’t a benefit in kind and a separate fee does not need to charged (or assessed) to the business owner.

However, if the client doesn’t have a business, or has complicated tax affairs including capital gains, then they should pay a fee personally.

Equally you can’t claim accountants fees if you are an employee who has to do returns as these are clearly standalone costs and not required as part of your employment as explained in this case – Peter Figg v HMRC TC03703 16th June 2014.

On another note Tax Investigation Insurance is not a tax deductible expense, the reason for this is that you can only claim it as an expense if you are successful in any investigation, if HMRC are successful the fee is non deductible for tax. As you don’t know when or what you might be investigated for its impossible to say whether you will be successful so the best advice is not to deduct the cost against taxable income.

steve@bicknells.net

 

Only 8 days left to file your Self Assessment! don’t panic Reply

Red help button concept.

Over 4 Million Self Assessment Returns (over 40%) will be filed in January 2017, last year the 29th January saw the highest level of filing with 50,358 returns filed between 2pm and 3pm on that day!

Its likely that many of those who haven’t yet filed their 5th April 2016 returns will either start to panic now or the panic will set in and increase in the next few days.

Here are some things to ease that panic.

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

HMRC SAM121190

Is there a reasonable excuse as to why you can’t file the return?

Here are some excuses that HMRC have accepted

  1. a failure in the HMRC computer system
  2. your computer breaks down just before or during the preparation of your online return
  3. a serious illness, disability or serious mental health condition has made you incapable of filing your tax return
  4. you registered for HMRC Online Services but didn’t get your Activation Code in time
  5. it was lost in the post HMD Response International v’s HMRC 2011 The accountant produced a contemporaneous note in his office diary for 16 May showing that he had filed the return.

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.

What if you don’t know where to send the payment?

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

What if you don’t know how much to pay because of payments on account?

You can check the amount by logging onto HMRC or by asking your accountant to check with their Agent Login.

If you make payments on account you will have made payments in January 2016 and July 2016 towards the final payment to be made in January 2017.

What are the penalties for missing the deadline?

HMRC have tool to help you estimate the penalties and interest

https://www.gov.uk/estimate-self-assessment-penalties

steve@bicknells.net

It’s Self Assessment season, it’s time to call your accountant Reply

As we get closer to the 31st January taxpayers across the land will start to worry about their self assessment tax returns.

Many tax payers will be frustated and confused by the information needed, just like the lady in the video above.

You’ll need to send a tax return if, in the last tax year:

  • you were self-employed – you can deduct allowable expenses
  • you got £2,500 or more in untaxed income, for example from renting out a property or savings and investments – contact the helpline if it was less than £2,500
  • your savings or investment income was £10,000 or more before tax
  • you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax
  • you were a company director – unless it was for a non-profit organisation (such as a charity) and you didn’t get any pay or benefits, like a company car
  • your income (or your partner’s) was over £50,000 and one of you claimed Child Benefit
  • you had income from abroad that you needed to pay tax on
  • you lived abroad and had a UK income
  • you got dividends from shares and you’re a higher or additional rate taxpayer – but if you don’t need to send a return for any other reason, contact the helpline instead
  • your income was over £100,000
  • you were a trustee of a trust or registered pension scheme
  • you had a P800 from HMRC saying you didn’t pay enough tax last year – and you didn’t pay what you owe through your tax code or with a voluntary payment

If you have a question and don’t have an accountant taxpayers have 3 main ways to contact HMRC:

  • Online
  • Phone
  • Post

Based on last year it could take 47 minutes at this time of year to get to speak to someone at HMRC!

An overworked office worker

Here are 10 of the most common problems faced by tax payers who don’t have an accountant

  1. 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.
  2. 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:
  3. 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
  4. Failing to complete all the parts of the return – For example leaving out PAYE information
  5. 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
  6. Missing out details of your Pension Provider
  7. 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
  8. Using invalid characters such as # ‘ ” in boxes where these are not allowed
  9. Not paying the tax they owe by 31st January
  10. Failing to explain where estimates and provisional sums have been used

To complete a self assessment return, the most common things you will need to know are:

  • Employment Income – P60 and P11D
  • Child Benefit
  • Pension Contributions – statement from provider
  • Donations to Charity
  • Bank and Building Society Interest
  • Dividends
  • Buy to Let Investments, Holiday Lets and Second Homes
  • Other Income
  • Employment Expenses not paid by your employer including mileage to approved rates and clothing
  • Professional Memberships related to your job and on HMRC List 3
  • Home Office Expenses
  • Capital Gains

Many tax payers are unaware of tax allowances and expenses that they can claim and often this means they end up paying too much tax.

For example employment expenses such as Flat Rate and Mileage.

Property Investors should be claiming

  • Mortgage or Loan Interest (but not capital)
  • Repairs and maintenance (but not improvements)
  • Decorating
  • Gardening
  • Cleaning
  • Travel costs to and from your properties for lettings or meetings
  • Advertising costs
  • Agents fees
  • Buildings and contents insurance
  • Ground Rent
  • Accountants Fees
  • Rent insurance (if you claim the income will need to be declared)
  • Legal fees relating to eviction

Using an accountant will help you get your tax affairs right

steve@bicknells.net

hashtag-sa

 

When do you do your Self Assessment Return? Reply

sa-monthly-online-figures-2011-12

2014-15 Self Assessment facts summary:

  • 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.

Procrastination - do it now or tomorrow sticky note

There are three different types of penalties that can be charged if a return is outstanding after the return due date or is filed late. These are

  • Late filing fixed penalty (see SAM61220)
  • Daily penalties (see SAM61230)
  • Late filing (tax geared) penalty (see SAM61240)

HMRC even have a calculator to help work out how much the penalty might be…

https://www.gov.uk/estimate-self-assessment-penalties

Here are 10 of the most common problems, issues and errors that come up.

  1. 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.
  2. 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:
  3. 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
  4. Failing to complete all the parts of the return – For example leaving out PAYE information
  5. 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
  6. Missing out details of your Pension Provider
  7. 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
  8. Using invalid characters such as # ‘ ” in boxes where these are not allowed
  9. Not paying the tax they owe by 31st January
  10. Failing to explain where estimates and provisional sums have been used

Why leave till January! do it now

steve@bicknells.net

HMRC – please don’t leave me hanging on telephone! Reply

genervte frau am telefon

Taxpayers have 3 main ways to contact HMRC:

  • Online
  • Phone
  • Post

Often taxpayers want to ask questions and get quick answers, which is why they like to use the phone. The NAO have published a report and the key facts are below.

https://www.nao.org.uk/wp-content/uploads/2016/05/The-quality-of-service-for-personal-taxpayers.pdf

hmrc-nao

We also know that taxpayers often leave things till close to the deadline

sa-monthly-online-figures-2011-12

So if you don’t want to spend 47 minutes waiting to speak to HMRC only to find out they can’t answer your question because its too specific or requires an opinion why not use an accountant?

Accountants

steve@bicknells.net

How can you spread your Tax Payments Reply

Pay up.

With the next self assessment payment on account due at the end of July many tax payers are wondering if they can spread their tax payments.

HMRC say..

Contact HM Revenue and Customs (HMRC) as soon as possible if you can’t pay all your tax on time.

You may be able to either:

  • get more time to pay

  • pay your bill in instalments by direct debit

But HMRC are generally reluctant to agree time to pay unless there are exceptional circumstances.

So an alternative might to use interest free credit cards.

Here is some great advice from Martin Lewis

Do it right and credit cards are the cheapest way to borrow. You can get 0% for up to 27 months – yet get it wrong and you’ll be stuck in debt for years.

Done right, it’s possible to borrow at no cost.

  • Make at LEAST the minimum repaymentsEnsure you set up a direct debit for at least the minimum repayment as soon as you are accepted. Even though you’re paying 0%, you still need to make repayments. If you miss one, you will lose your 0% deal, so the rate will jump and you’ll get a £12 charge.

    However, don’t almost clear your card in full – clear it IN FULL if you can. For example, if you’ve £1,000 debt from spending on a credit card and pay off £999, the fact it’s not cleared IN FULL means you pay a month’s interest on the whole amount.

    So if you can nearly clear your card, do what you can to totally clear it (even if it’s a 0% spending card it’s a good habit to get into).

  • Clear the card within the 0% periodGo even one month beyond the promotional period and the rate rockets, so calculate the amount needed to clear the balance by then. For example, borrow £600 on a year’s 0% card, divide the spend by the number of months (£600 / 12) to get the monthly repayment – in this case £50 – and set up a direct debit to do that.
  • Diarise the end datesIt’s incredibly vital you make a note of the 0% end dates (or use the Tart Alert) to make sure you pay off the debt in time, or be ready to switch to a new Best Balance Transfer deal. If you forget to switch when the deal ends, the interest cost will swiftly outweigh the card’s benefit.

You can see Martins full advice at http://www.moneysavingexpert.com/credit-cards/best-0-credit-cards

steve@bicknells.net

Time to prepare for tax year end April 2016 1

Fotolia_91134201_XS Advice

Now you have filed your April 2015 Return (50% will have been filed in January 2016) you only have 2 months left to take action to save tax on your April 2016 tax return.

What should you be doing right now to save tax?

Contribute to your Pension

Transitional rules, for 2015/16 only, mean that there’s an annual allowance of £80,000, although only £40,000 of this can be used between 9 July 2015 and 5 April 2016. You may also have unused annual allowances from the three previous tax years.

These Transitional rules are to align PIP’s (Pension Input Periods) with the Tax Year.

Pensions have huge tax saving advantages

How a family pension scheme will save you tax

Optimise your 2015/16 Salary

You can’t carry forward any unused personal allowances so generally the optimum salary will be £10,600

What is the optimum tax efficient salary 2015-16?

Take Dividends now

When you take dividends has never been more critical due to changes in the Summer Budget 2015, so if you have distributable reserves you might want to take more dividends this tax year.

Dividend tax rates before April 2016

Tax band Effective dividend tax rate
Basic rate (20%) (and non-taxpayers) 0%
Higher rate (40%) 25%
Additional rate (45%) 30.56%

 

This will change from April 2016, see the table below

Dividend tax rates after April 2016

Tax band Effective dividend tax rate
Tax Free £5,000 0%
Basic Rate Tax Payers (20%) 7.5%
Higher Rate Tax Payers (40%) 32.5%
 Additional Rate Tax Payers (45%)  38.1%

 

Capital Gains Tax Allowance

Each year individuals get a capital gains tax allowance, this year its £11,100. If you have capital gains it could worth phasing them to use up the capital gains tax allowance.

Here are some great blogs on how you could transfer a personally owned property or sell shares in a property company to take gains in stages

https://stevejbicknell.com/2014/08/13/how-do-you-give-away-property-in-stages/

https://stevejbicknell.com/2015/08/24/5-reasons-why-you-need-a-property-investment-company/

Other Ideas

steve@bicknells.net

act now icon

Have you done your Self Assessment Return? Reply

SA100 tax return form with calculator and pencil lying on table

In January 2015, HMRC reported…

A record 85.5% of these were sent online, with the busiest days for filing coming on 30 and 31 January, when HMRC received 980,000 returns. The busiest hour was between 1pm and 2pm on 30 January, when almost 50,000 returns were received – 830 per minute.

The busiest hour on deadline day was between 11 am and midday, when almost 32,000 returns were received – 530 per minute. HMRC also answered 95% of calls first time on deadline day.

Around 4.3 million customers (42%) left it until January to file their returns, which HMRC issued in April 2014.

By the end of January, more than a million Self Assessment-only customers (self-employed, with no other source of income, no employees and not VAT-registered) opted to receive electronic messages from HMRC, rather than paper communications. If you are eligible, you can sign up by logging into your Self Assessment online account and following the prompts.

There are three different types of penalties that can be charged if a return is outstanding after the return due date or is filed late. These are

  • Late filing fixed penalty (see SAM61220)
  • Daily penalties (see SAM61230)
  • Late filing (tax geared) penalty (see SAM61240)

Customers may appeal against any late filing penalty on the grounds that there was a reasonable excuse for the late submission of the return.

HMRC even have a calculator to help work out how much the penalty might be…

https://www.gov.uk/estimate-self-assessment-penalties

Don’t be late, do it today!

steve@bicknells.net

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