Tag: Tax Refund

How do you reclaim CIS deductions?

two man holding white paper

If you don’t have Gross CIS status you may have Construction Industry Scheme (CIS) deductions to reclaim and you will be probably be trying to reclaim now as we have concluded a tax year (5th April and submitted returns due on the 19th April).

Sole traders and partners

At the end of the tax year, send in your Self Assessment tax return as usual. You should record:

  • the full amounts on your invoices as income
  • any deductions contractors have made in the ‘CIS deductions’ field

HM Revenue and Customs (HMRC) will work out your tax and National Insurance bill and take off any deductions made by contractors.

Limited companies

The process for companies is different, companies may well have offset Subcontractors deductions and payroll against deductions made by their clients using CIS132 How to offset Construction Industry Scheme deductions – CIS Offsetting (CIS340 4.13) – Steve J Bicknell Tel 01202 025252

So the first step to work out the net amount to reclaim and check it to the HMRC Government Gateway.

You can choose to:

  1. Form R38 to claim the Refund – Claim an Income Tax refund – GOV.UK (www.gov.uk)
  2. Claim online via your government gateway (agents will use their Agent Services Account) – Claim a refund of Construction Industry Scheme deductions if you’re a limited company or an agent – GOV.UK (www.gov.uk)
  3. Claim by Post

Claim via the Government Gateway

When you click this option ad log in you will get an access code xxx-xxx-xxx, keep a not of this code, the next screen asks you to enter it.

The you can choose

  • New Claim
  • Amendment

I think the amendment option is very helpful in case you make a mistake (shame we don’t get this for other taxes like VAT or PAYE)

Then the questions are

  • Name
  • Agent details and address (if its being claimed by an accountant)
  • Business details
    • Name
    • UTR
    • PAYE reference
    • Tel No
    • Business Address
  • Tax Year for the claim ie 6th April 2021 to 5th April 2022
  • Estimated overpayment (note the word estimated) this the net amount from the CIS132
  • Do you want to offset against other taxes Yes/No
  • Would you like a Cheque or Bank Transfer
  • Bank details for bank transfer
  • E Mail for confirmation

Then you will get a confirmation via E Mail ‘Claim repayment of deductions from your Construction Industry Scheme payments’ it will have another reference xxx-xxxx-xxx

You’ll normally receive a response within 25 days.

Claim by Post

Write to us and make sure that you include:

  • your full company name
  • your PAYE reference numbers
  • the reasons for the overpayment
  • a completed R38 form if you want your refund to be paid to an agent or other representative

If you want us to pay the refund into a bank account, you’ll need to provide the:

  • bank account number
  • sort code
  • account holder’s name

If you want us to deduct your repayment from other amounts you owe for:

  • Corporation Tax — include your Corporation Tax unique tax reference and either the end date of your accounting period or accounting period number
  • VAT — your registration number and the VAT Return period
  • other liabilities — include type of charge, year or period it refers to and any reference numbers you have

You do not have to send any supporting information with your claim, but we may request further details if your claim does not match their records.

Mark your claim ‘CIS’ and send it to:

National Insurance Contributions and Employer Office
HM Revenue and Customs
BX9 1BX
United Kingdom

steve@bicknells.net

Is your tax code correct? millions are wrong!

Tax Refund Green Blue Horizontal

Money Saving Expert reported last week

Revealed: 3.2m tax codes WRONG – check if you’re owed £1,000s

The National Audit Office found a huge number of tax code errors – our unique calc can check if you’re a victim

You’ll find your tax code on:

  • your pay slip
  • your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
  • form P60 – you get this at the end of each tax year
  • form P45 – you get this when you leave a job

You can check your tax using this HMRC link

https://www.gov.uk/check-income-tax

If you think you code is wrong you can inform HMRC using this online form

https://online.hmrc.gov.uk/shortforms/form/P2

Check the following carefully:

  1. P60 – you get this at the end of each tax year
  2. P45 – you get this when you leave a job
  3. PAYE Coding Notice
  4. P11D Expenses and benefits
  5. P9D Expenses payments and income from which tax cannot be deducted
  6. Bank and Building society statements
  7. Pension Tax Deductions

Is your National Insurance correct?

Unlike Income Tax which is cumulative and assessed across all earnings, National Insurance starts from zero on each individual employment and you also pay National Insurance on Self Employed earnings.

So if you are a Director of multiple businesses paid as an employee its easy to see how you could over pay and you might not even realise because National Insurance is not shown on your Self Assessment Return.

You can also over pay National Insurance if you are a part time employee with multiple employers and irratic earnings, this because National Insurance is calculated on a weekly/monthly basis, not a cumulative basis and its by employer.

What you need to do

Write to HM Revenue and Customs confirming:

  • your National Insurance number
  • why you’ve overpaid
  • the tax year(s) you’ve overpaid

You should include your P60 or a statement from your employer showing the tax and National Insurance for each year you’re claiming for.

You should apply within 6 years of the tax year you’re claiming for.

HM Revenue and Customs
Payment Reconciliation
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

steve@bicknells.net

Preregistration VAT confusion

tax refund

When you register for VAT, there’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

  • 4 years for goods you still have, or that were used to make other goods you still have
  • 6 months for services

Accountingweb reported on 12th June that the goal posts seem to have moved, here is their example..

Ken has been a self-employed pest controller for many years. He registered for VAT with effect from 1 May 2015, at which point he held a van that cost him £24,000 on 1 May 2013, and equipment that he bought for £9,000 on 1 May 2012, both inclusive of VAT. He expects to use the van for eight years and the tools for five years.

Previously most VAT advisers would advise Ken to reclaim VAT of £4,000 in respect of the van and £1,500 paid on the equipment.

The new HMRC interpretation of EC VAT Directive 2006/112 article 289 (set out in VAT Input Tax Manual para 32000) is that as the van has been used for 2/8th of its life, just £3,000 (6/8 x 4000) of the input VAT can be reclaimed. For the equipment a similar calculation reduces the VAT reclaim to £600 (2/5 x1500).

Ken is obviously losing out by £1,900 of unrecoverable VAT.

Taxation Magazine also have an article pointing out the goal posts have moved

What is worrying is that as so many tax advisers will have given potentially incorrect advice based on the new interpretation by HMRC (which HMRC say isn’t a change), will this mean that we will see backdated enquiries and penalties for clients?

steve@bicknells.net

 

If your share value falls, so could your tax bill

fictitious newspapers

Did you know that in the case of Mr Brown v HMRC Mr Brown was able to claim a tax deduction for the loss in his share value without having to sell his shares? Its true, its known as a NegligibleValue Claim and HMRC have Help Sheet on it (286).

A negligible value claim enables you to set a capital loss against your income (or against other capital gains if you have them) for earlier years and claim a tax refund.

Many negligible value claims are made by shareholder directors whose company has failed. Their claim is to offset the loss on the shares in their company against their directors’ wages for earlier tax years.

When a taxpayer owns shares which become of negligible value the taxpayer may make a claim under s24 TCGA 1992, resulting in a deemed disposal and reacquisition, which crystallises a capital loss.

steve@bicknells.net

The effect of a negligible value claim is broadly that the taxpayer is treated as if he or she had disposed of the asset and immediately reacquired it for the amount specified in the claim.
Read more at http://www.taxationweb.co.uk/tax-articles/general/negligible-value-claims.html#Hlmd7ytCESlJuT27.99
The effect of a negligible value claim is broadly that the taxpayer is treated as if he or she had disposed of the asset and immediately reacquired it for the amount specified in the claim.
Read more at http://www.taxationweb.co.uk/tax-articles/general/negligible-value-claims.html#Hlmd7ytCESlJuT27.99

Do I have to pay tax on my part time job?

Whether or not you pay tax on your part-time job depends on how much you earn, not on the number of hours you work. Everyone receives a certain amount of income in each tax year on which no tax has to be paid. This is called the Personal Allowance (£8,105 in 2012-2013). If your earnings from your part-time job are below this, then you do not have to pay tax on them. If your earnings are more than this, you will pay tax on the difference.

One advantage to having multiple part time jobs is National Insurance, each job has its own allowance which means you end up not paying any NI (and so could your employer). However, there is a risk of aggregation (treated as from one source) if the jobs are related.

Students often work during the holidays and then return to full time education and use form P50 to reclaim their tax withour waiting till the end of the tax year, here is a link to P50

http://www.hmrc.gov.uk/pdfs/p50.pdf

You don’t have to be a student to use P50 it can be used by anyone stopping work or retiring.

steve@bicknells.net

£12.6 Billion in Unclaimed Tax Relief and Refunds

At a time when HMRC are writing to employees who have underpaid tax because they were on the wrong tax code for 2011/12, it might be worth giving some thought to unclaimed tax reliefs

Here’s the top ten list of our biggest tax wastes:

Area of Tax Wastage Amount of Wastage
Income-related Tax Credits £7.26 billion
Tax relief on pension contributions £2.45 billion
Tax relief on charity donations £997 million
Savings on Inheritance Tax £448 million
Making use of ISAs £403 million
Child Benefit £401 million
Avoiding penalties for late filing of tax return £307 million
Savings on Capital Gains Tax £133 million
Making use of Employee Share Schemes £118 million
Income tax and Personal Allowances  £83 million
Total £12.6 billion

Source: unbiased.co.uk

http://www.lovemoney.com/news/household-bills/tax/11323/six-easy-ways-to-pay-less-tax

£12.6 billion is an incredible amount of money and I am sure many people aren’t even aware that they could be claiming tax relief or refunds, so why not check what you could claim and makesure your tax is right.

steve@bicknells.net

 

 

 

 

Are you claiming your Flat Rate Expense Allowance tax refund?

Back in December I did a Blog about how to make your claim http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

 

But many employees don’t seem to realise that they could be entitled to Flat Rate Expenses

If you have to spend money on tools or specialist clothing for your job you may be entitled to either:

  • tax relief for the actual amounts you spend
  • a flat rate deduction

Flat rate deductions are amounts that HM Revenue & Customs agreed nationally – or sometimes locally if conditions are very different – with trade unions or other bodies.

The deductions cover what’s typically spent each year by employees in different trades. For example, someone working in the clothing industry can get a deduction of £60 each year. A cabinet maker can get a deduction for £140 while the deduction for a stone mason is £120.

You don’t have to be a member of a trade union to get the deduction. You’ll also benefit from less paperwork – you won’t have to keep a record of all the individual amounts you spend.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/IncomeTax/Taxallowancesandreliefs/DG_078378

There is a full list of the Flat Rates at

http://www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm

For example, I am the FD of SCA Group, we employ Scaffolders and the rate for Scaffolders is £140 per year, at 20% tax that means £28 as a tax refund.

steve@bicknells.net

Pay off your Directors Loan and reclaim Corporation Tax

If you’re a company director or ‘participator’ and take money out of your company that’s not a salary or a dividend – over and above any money you’ve put in – you’re classed as having received the benefit of a director’s loan.

If your director’s loan account is not paid off in full within nine months after the end of your company’s accounting period:

  • You must include details of the loan in your Company Tax Return.
  • Your company must pay Corporation Tax on the loan – the current tax rate for directors’ loans is 25 per cent of the loan.

http://www.hmrc.gov.uk/ct/managing/director-loan.htm#5

The good news is that you can reclaim the tax when the loan is repaid (often by paying a Dividend to clear the balance outstanding).

How you do this depends on timing:

  • if your claim is made within 24 months of the end of that accounting period you can amend and resubmit an amended Company Tax Return for that previous accounting period
  • if your claim is made more than 24 months after the end of the previous accounting period you can make a separate claim by writing to HMRC at the same time as you file your Company Tax Return for your most recent accounting period

The Claim was previously known as a S419 claim (S419 ICTA 1988) but its now covered by S455 and S458 Corporation Tax Act 2010

When writing to HMRC makesure you give them as much information as you can for example:

UTR – Unique Taxpayer Reference

Company Name and Details

Amount being reclaimed

Details of the relevant Corporation Tax Returns on which the Directors Loans are shown

Your Bank Account Details for the Refund

You would be surprised at how many businesses never reclaim the S419 tax! makesure you don’t miss out

steve@bicknells.net

Tax Relief for Pre-trading Expenses

By the time you actually start trading, you may have spent thousands of pounds on research and setting up the business.

Provided you have formally notified HM Revenue & Customs that you have started up a business, most of these costs are usually allowable as business expenses in the first year.

Income Tax (Trading and Other Income) Act 2005

Pre-trading expenses

(1)This section applies if a person incurs expenses for the purposes of a trade before (but not more than 7 years before) the date on which the person starts to carry on the trade (“the start date”).
(2)If, in calculating the profits of the trade—
(a)no deduction would otherwise be allowed for the expenses, but
(b)a deduction would be allowed for them if they were incurred on the start date,
the expenses are treated as if they were incurred on the start date (and therefore a deduction is allowed for them).

http://www.legislation.gov.uk/ukpga/2005/5/section/57

http://www.hmrc.gov.uk/manuals/bimmanual/bim46355.htm

VAT Paid Before VAT Registration

You can reclaim any VAT you are charged on goods or services that you use to set up your business.

Normally, this will include:
• VAT on goods you bought for your business within the last 4 years and which you have not yet sold.
• VAT on services, which you received not more than 6 months before your date of registration.

You should include this VAT on your first VAT return. (Notice 700/1 April 2010 4.2)

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageExcise_ShowContent&id=HMCE_CL_000086&propertyType=document#P331_32574

steve@bicknells.net

Tax Refund for Business Mileage

Many employers pay their employees expenses for business mileage, but often the amount they pay is below the HMRC approved rates shown below.

If your employer pays at rates below the HMRC Approved Rates you can claim tax relief on the difference, this can add up to a lot of money particularly for site based staff who can count travel to temporary places of work as business travel or for workers who’s place of work is their home.

You can claim the tax relief via your self assessment return or by writing to HMRC.

steve@bicknells.net

Travel – mileage and fuel allowances

Approved mileage rates
From 2002/03 to 2010/11 First 10,000 business miles in the tax year Each business mile over 10,000 in the tax year
Cars and vans 40p 25p
Motor cycles 24p 24p
Bicycles 20p 20p
Approved mileage rates
From 2011/12 First 10,000 business miles in the tax year Each business mile over 10,000 in the tax year
Cars and vans 45p 25p
Motor cycles 24p 24p
Bicycles 20p 20p