Category: Uncategorized

As we approach the beginning of the next fiscal year, from April 2022 to March 2023, what options do you have to rethink your planning options for your personal and business finances?

The list that follows is not exhaustive, but it does outline some of the opportunities you have to reconsider your options.

Personal finances

• Funding your retirement – could you increase payments to meet the likely increases in the cost of living if inflation is set to become a feature in the coming years?
• Why multiple income streams make sense – considering various options for creating new income streams.
• Estate planning – consideration of inheritance tax issues, and should you reconsider your Will and/or powers of attorney?
• Wealth management – when was the last time you calculated your personal net worth and considered any asset holdings that would be subject to capital gains tax if sold?
• Family issues – reconsider ownership of income producing assets within the family to reduce your family tax footprint.

 

Business development and tax planning

• Working from home – have you claimed for any additional costs of running your business or being required to work from home. What are the tax disadvantages and advantages of building a bespoke garden office or extension at home?
• Tax-free perks – are you taking advantage of tax-free, ‘trivial’ payments?
• Extracting company profits – if your circumstances – business or personal – are changing, should you reconsider the way you extract funds for personal use from your company?
• A new business – like to plan to develop a new business?
• Business exit plan – time to create or review your business exit plans?
• How will HMRC’s Making Tax Digital changes affect you? – getting ready for the need to file quarterly tax and VAT returns.
• The benefits of real-time data – adopting and benefitting from the use of cloud-based accounts software.
• When to incorporate your business – the commercial and tax benefits of a corporate structure.
• When to incorporate a property business
• Planning for corporation tax increase April 2023
• Planning for change to self-employed basis period rules
• Benefits of converting to electric vehicles
• Reviewing salary sacrifice arrangements

 

We can help

If you are interested in discussing your options regarding any of the above issues, please call.

Since January 2021, large companies have been requested to sign up to a government initiative that requires them to set out how effective they are at settling supplier payments.

This information can be a critical factor if you are a small company supplying goods or services to a larger concern and cannot afford to wait for extended periods for your invoices to be paid.

The changes that came into effect from January 2021are:

• requiring a company’s CEO or Finance Director, or the business owner where it is a small business, to personally sign the Code to ensure responsibility for payment practices is taken at the highest level of an organisation
• introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it
• acknowledgement as a condition of signing the Code that suppliers can charge interest on late invoices
• enabling administrators of the Code to investigate breaches based on third-party information

In addition, the new requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021.

The target for larger businesses will remain 95% of invoices within 60 days.

To make it easy to check the reports made by companies there is an online process on the GOV.UK website at https://www.gov.uk/check-when-businesses-pay-invoices.

Simply enter the name of your ‘large business’ customer to access their payment effectiveness reports, these display:

• the average time it takes for a large business to pay its suppliers, and
• the proportion of payments (for example, invoice payments) that it doesn’t pay on time.

If you are considering supplying goods or services to a large company for the first time, this facility should be used to check their payment history. As we have mentioned above, you may be anxious to take their business, but you need to know that your standard credit terms will be met.

The following press release issued by the Charity Commission sets out how to ensure your donations reach those affected by the invasion of Ukraine.

“The Charity Commission and Fundraising Regulator have urged the public to ‘give safely’ to registered charities as people make generous donations to causes helping to support and protect people affected by the invasion of Ukraine.

“As the conflict and ensuing humanitarian situation in Ukraine continues to escalate, it is vital that charitable donations of goods and money reach their intended causes. UK charities are pivotal to a collective response to this crisis.

“The Disasters Emergency Committee, a coalition of 15 leading UK charities, has launched its collective appeal to provide emergency aid and rapid relief to civilians suffering during the conflict. Many registered charities are also helping to provide vital life-saving services, like water, food and healthcare, to those caught up in the conflict, including those forced to flee to neighbouring countries.

“By giving to a registered, regulated charity, the public can have assurance that their funds will be accounted for in line with the charity law framework. Established charities with experience of responding to disasters are usually best placed to reach victims on the ground.

“Members of the public initiating their own informal fundraising appeals that are not linked to established registered charities should be aware of the ongoing responsibilities associated with overseeing and managing funds and ensuring they are applied in line with donors’ wishes.

“People looking to donate to causes working in Ukraine and neighbouring countries, should make a few simple checks before giving:

• check the charity’s name and registration number at www.gov.uk/checkcharity. Most charities with an annual income of £5,000 or more must be registered, and you can use the advanced search function to identify charities working in specific regions and countries,
• make sure the charity is genuine before giving any financial information,
• be careful when responding to emails or clicking on links within them,
• contact or find out more online about the charity that you’re seeking to donate to or work with to understand how they are spending their funds,
• look out for the Fundraising Badge on charity fundraising materials, this is the logo which shows that a charity has committed to fundraise in line with the Code of Fundraising Practice.

Many of us have chosen to donate to relief organisations in the past week as the plight of displaced persons in Ukraine continues to dominate the news.

The following notes explain how you can claim for tax relief on these, and any other charitable donations made this tax year.

Giving from your personal funds

Donations made personally generally qualify for Gift Aid. This is of great benefit to the charities and means they can claim an extra 25p for every £1 you give. It will not cost you any extra.

So that the donations you have made qualify for Gift Aid you will need to make a Gift Aid declaration. You usually do this by filling in a form or checking the appropriate box if donating online. You must give a declaration to each charity you want to donate to through Gift Aid.

Paying enough tax to qualify for Gift Aid

Your donations will qualify as long as they are not more than four times what you have paid in tax in the relevant tax year. The tax could have been paid on income or capital gains. You must tell the charities you support if you stop paying enough tax.

Paying tax at higher rates?

If you pay income tax above the basic rate, you can claim the difference between the rate you pay and basic rate on your donation. It’s the same if you live in Scotland. Do this either:

• through your Self-Assessment tax return
• or by asking HMRC to amend your tax code.

 

For example, if you donate £100 to charity – they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

 

Getting tax relief sooner

On your Self-Assessment tax return, you normally only report things from the previous tax year, but for Gift Aid, you can also claim tax relief on donations you make in the current tax year (up to the date you send your return) against earnings in the previous tax year.

This is a useful way to speed up tax relief or reduce liability in a previous year when your income – and therefore tax paid – was higher than the current tax year.

You cannot do this if you miss the filing deadline (31 January if you file online) or if your donations do not qualify for Gift Aid. Also, your donations from both tax years together must not be more than four times what you paid in tax in the previous year.

 

Giving through your limited company

Companies cannot donate using Gift Aid. Any charitable donations made are treated as a business expense and will reduce profits subject to corporation tax.

High street retailers will be interested in the recent publication of an early-stage consultation that explores the argument for and against an Online Sales Tax. It is argued by the retail sector that business rates discriminate against the high street. The idea is to use any revenue from this tax to fund reductions in business rates for retailers with properties in England and to fund the block grants of the devolved administration so they can also fund rates reductions.

Addressing this issue, a recent Treasury news story states:

“As part of the three-month consultation stakeholders will be asked for their views on the challenges on the design of an Online Sales Tax, including which products and services would be in scope and whether it would be a flat-fee tax based on the number of transactions or deliveries, or a revenue-based tax.

“The consultation delves into what effect an Online Sales Tax would have on consumers and businesses alike, which will also be a key determining factor in policy decisions.”

Offer your point of view

Business owners of shop outlets or online sales facilities can offer their point of view by making a formal submission to the consultation. To access an online response form Google ‘Online Sales Tax: Policy Consultation’.

You could also submit your views on this issue by email to: OSTconsultation@hmtreasury.gov.uk or by post to:

Corporate Tax Team,

1 Yellow, HM Treasury,

1 Horse Guards Road,

London, SW1A 2HQ.

In an attempt to provide a rounded approach to the issue the government acknowledges:

“…that an array of business models operates in UK retail – a mark of the vibrant and innovative sector – and this will lead to a diverse range of opinions. Some retailers with a stronger bricks and mortar presence consider that their sector is overburdened by business rates relative to online competitors. Others view the growing market share of online retail as a signal of consumer choice and innovation which should not be subject to an increased tax burden. Many businesses operate both in-store and online. The government wants to review the evidence in the round.”

HMRC recently published a reminder targeted at married couples with an unused personal tax allowance. They said:

Marriage Allowance allows married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570, and the other is a basic rate taxpayer.

Eligible couples can transfer 10% of their tax-free allowance to their partner, which is £1,260 in the 2021-22 tax year. It means couples can reduce the tax they pay by up to £252 a year. Couples can apply any time, backdate their claims for any of the 4 previous tax years and receive a payment of up to £1,220 at a time when they need it most.

Married couples may have experienced a change in their circumstances which could now mean they are eligible for Marriage Allowance, including:

• a recent marriage or civil partnership
• one partner has retired and the other remains working
• a change in employment due to COVID-19
• a reduction in working hours which means their earnings fall below their Personal Allowance
• unpaid leave or a career break, or
• one partner is studying or in education and not earning above their Personal Allowance

If a spouse or civil partner has died since 5 April 2017, the surviving person can still claim by contacting the Income Tax helpline.

Marriage Allowance claims are automatically renewed every year.

Now that the majority of COVID-19 restrictions are being eased, or removed completely, can we assume that normality can return in place of the unremitting uncertainty of the past two years?

Whilst this may seem to be a welcome prospect, business owners badly affected by this disruption will have two issues holding them back:

• A depleted balance sheet – reserves used to survive extended periods of shut-down or reduced trading.
• The repayment of loans taken out to fund overheads and other fixed costs during lockdown.

Both of these issues will inhibit a sudden rush of activity unless sales are made on a cash basis.

To minimise any downside risks we recommend pausing to create a realistic business plan for at least the next twelve months. This will identify any dips in cash resources and reveal the level of profitability that can be achieved.

Please, pick up the phone if you would like to discuss the best way to build a plan for your business.

You and each member of your family is entitled to make tax-free capital gains of up to £12,300 in the 2021-22 tax year. If you have made no disposals that would trigger a capital gain in 2021-22, consider the following:

If you have assets, shares for example, that you are thinking of selling, you may want to realise enough to produce gains up to the £12,300 limit.

Transfers of assets between married couples or civil partners can be made free of Capital Gains Tax (CGT). In which case, if you have used your £12,300 allowance and still have assets that you want to sell, then transfer enough of these remaining assets to your spouse or civil partner for them to sell and utilise their separate CGT tax-free allowance.

Please note that you may have to pay CGT if you sell a personal possession for £6,000 or more. For example, a sale of:

• jewellery
• paintings
• antiques
• coins and stamps, or
• sets of things, e.g., matching vases or chessmen

You will not have to pay CGT if you dispose of your private car or any personal possession with a limited lifespan, e.g., clocks. The only exception is if a car or other limited lifespan asset was used in a business. Disposals of business assets may create a tax charge.

You usually need the agreement of your company’s directors and shareholders to close a limited company. The way you close the company depends on whether or not it can pay its bills.

If the company can pay its bills (it is ‘solvent’)

You can either:

• apply to get the company struck off the Register of Companies
• start a members’ voluntary liquidation

Striking off the company is usually the cheapest way to close it.

The company can’t pay its bills (it is ‘insolvent’)

When your company is insolvent, the interests of the people your company owes money to (its creditors) legally come before those of the directors or shareholders.

You must arrange the liquidation of your company.

Your company might be forced into compulsory liquidation if you don’t pay creditors.

You may be able to avoid liquidation by applying for a Company Voluntary Arrangement.

If the company doesn’t have a director

You must appoint a new director if your company doesn’t have one, for example if a sole director has died.

Companies House will eventually strike off a company that doesn’t have a director, but this can make it more difficult to manage any company assets.

Shareholders must agree to appoint a new director and may need to vote on it.
If a sole director has died and there aren’t any shareholders the executor of the estate can appoint a new director, as long as the company’s articles allow it.

The new director can close the company.

Your company still needs to pay corporation tax and file a tax return even if there’s no director.

Let the company become dormant

You don’t have to close your company if it’s no longer trading. You can let it become ‘dormant’ for tax as long as it’s not:

• carrying on business activity
• trading
• receiving income

Your company will still be registered at Companies House. You must still send your annual accounts and confirmation statement (previously annual return) to Companies House.

You can keep a limited company dormant for as long as you want.

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Normally Self-Assessment tax for 2020-21 would need to be paid by 2 March or a 5% surcharge would be incurred. This year HMRC is giving taxpayers more time to pay and no surcharge will be incurred if liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2022 – PAYE and NIC deductions due for month ended 5 March 2022 (If you pay your tax electronically the due date is 22 March 2022).

19 March 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2022.

19 March 2022 – CIS tax deducted for the month ended 5 March 2022 is payable by today.

1 April 2022 – Due date for corporation tax due for the year ended 30 June 2021.

19 April 2022 – PAYE and NIC deductions due for month ended 5 April 2022. (If you pay your tax electronically the due date is 22 April 2022).

19 April 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2022.

19 April 2022 – CIS tax deducted for the month ended 5 April 2022 is payable by today.

30 April 2022 – 2020-21 tax returns filed after this date may be subject to an additional £10 per day late filing penalty for a maximum of 90 days.