Author: Wellden User

The deadline for submitting 2017/18 self assessment tax returns online is 31 January 2019, HMRC is urging tax payers to complete their tax returns early, in order to avoid the last minute rush. An automatic penalty of £100 applies if the return is late.

HMRC advise that last year, more than 11 million tax payers completed a 2016/17 Self Assessment tax return, with 10.7 million completing on time. There were 4,852,744 taxpayers who filed in January 2018 (44.8% of the total), and 758,707 on 31 January, the deadline day.

You may be required to file a tax return if: 

• You are self employed or a partner in a partnership
• You are a company director
• You have large amounts of savings or investment income
• You have untaxed savings or investment income
• You own land or property that is being let
• Your household receives Child Benefit and you have income in excess of £50,000
• You have income from overseas
• You have sold or given an asset away (such as a holiday home or some shares)
• You’ve lived or worked abroad or aren’t domiciled in the UK

If you want to make sure you are paying the right amount of tax, you should contact one of our tax professionals.

Wellden Turnbull will take the worry away when it comes to self assessment tax returns, we can:

• Complete your tax return
• Calculate your tax liability
• File your return online
• Liaise with you on the amounts to be paid and when they are due

Our tax team will also analyse your tax return to see if any tax savings can be made and review the calculations to see if there are any anomalies that need to be looked into before the return is submitted.

Angela MacDonald, HMRC’s Director General for Customer Services, said:

“The deadline for completing Self Assessment tax returns may be less than 100 days away, yet many of us wait until January to start the process. Time flies once the festive period is underway, yet the “niggle” to file your return remains.”

Let us take the stress of filing your tax return away, contact our tax professionals today.

A number of changes to capital allowances were announced at the Budget, including an increase in the Annual Investment Allowance (AIA), for two years to £1 million, in relation to qualifying expenditure incurred from 1 January 2019. The AIA is currently £200,000 per annum. Complex calculations may apply to accounting periods which straddle 1 January 2019.

Other changes to the rules include:

• a reduction in the rate of writing down allowance on the special rate pool of plant and machinery, including long-life assets, thermal insulation, integral features and expenditure on cars with CO2 emissions of more that 110g/km, from 8% to 6% from April 2019. Complex calculations may apply to accounting periods which straddle this date.
• clarification as to precisely which costs of altering land for the purposes of installing qualifying plant or machinery qualify for capital allowances , for claims on or after 29 October 2018
• the end of the 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List from April 2020.
• an extension of the current 100% first year allowance for expenditure incurred on electric charge-point equipment until 2023.

In addition, a new capital allowances regime will be introduced for structures and buildings. It will be known as the Structures and Buildings Allowance and will apply to new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% on a straight-line basis.

 

With less than six months to go until the first staging date for implementation, we outline what you need to know about Making Tax Digital (“MTD”) and guide you through what measures to take to prepare for the change.

What’s the reason behind MTD?

The latest figures published by HMRC estimate that the tax gap stands at £33 billion which is 5.7% of tax liabilities. 41% (13.7 billion) of the tax gap is attributed to small businesses.

According to the Office for National Statistics, although 99% of VAT returns are submitted online, only about 13% of those are submitted via software. The other 87% of VAT returns are manually entered into HMRC’s Government Gateway.

HMRC’s ambition is for the UK to become one of the most digitally advanced tax administrations in the world. It is hoped that MTD will help for the following reasons:

• Digital records should eliminate errors with calculations
• Help is built-in to the software products
• Information is sent directly to HMRC from the digital records avoiding errors as data is transferred from one system-to-another

What will change under MTD for VAT?

Under the rules, from April 2019 VAT registered businesses with a taxable turnover above the VAT threshold (currently £85,000) will be required to keep digital records and will no longer be able to use the Government Gateway website.

VAT returns will need to be maintained digitally and submitted via MTD complaint software. Hand written records will be a thing of the past for businesses affected by MTD for VAT.

HMRC have created a list of suppliers who provide MTD compliant software, which you can find here:

https://www.gov.uk/government/collections/commercial-software-developers

Overseas businesses that have UK taxable turnover above the UK VAT registration threshold will also be subject to the requirements of MTD for VAT.

Need help with MTD?

Contact one of our partners who would be pleased to meet with you and undertake an MTD compliance review of your business.

https://www.wtca.co.uk/meet-the-team

The government has decided not to proceed with plans to abolish Class 2 National Insurance Contributions ( NICs) from April 2019.

Class 2 NICs are currently paid at a rate of £2.95 per week by self-employed individuals with profits of £6,205 or more per year. The government had planned to scrap the Class 2 contribution and had been investigating ways in which self-employed individuals with low profits, could maintain their State Pension entitlement if this inexpensive contribution had been abolished.

In a written statement to MPs, Robert Jenrick, Exchequer Secretary to the Treasury, stated that:

“This change was originally intended to simplify the tax system for the self-employed. We delayed the implementation of this policy in November to consider concerns relating to the impact on self-employed individuals with low profits. We have since engaged with interested parties to explore the issue and further options for addressing any unintended consequences.”

“A significant number of self-employed individuals on the lowest profits would have seen the voluntary payment they make to maintain access to the State Pension rise substantially. Having listened to those likely to be affected by this change we have concluded that it would not be right to proceed during this parliament, given the negative impacts it could have on some of the lowest earning in our society.”

Internet link: Parliament written statement

 

As we say goodbye to a lovely bright summer, now is a good time to shine the light on your finances and file your tax return early to avoid the winter blues.

The one good thing about the tax return deadline is that it always remains the same, which means that a little bit of organisation and the help of your accountant, you should be able to avoid facing penalties by maintaining easily accessible and up-to-date records of your income and expenses throughout the year.

Yet people still leave it until the last minute – 2.6 million taxpayers had still not filed their return two days before the 31st January 2018 deadline.

File now, pay later

Calculating your tax liabilities and filing your return now will allow you time to start budgeting and managing your cash flow, and to plan for paying any tax you may owe. Speeding through your tax return at the last minute increases the risk of mistakes being made, and HM Revenue & Customs has declared it will – and does- issue fines for errors. If you pay your tax bill late, HMRC will charge you interest and possibly even late payment penalties. Filing your tax return early does not mean you are obliged to pay any tax liability before the 31st January.

Get a tax refund sooner

Refunds of tax can often arise for employees or directors when HMRC has made errors with its tax codes. Also, it is not unusual for building subcontractors operating under the Construction Industry Scheme to receive tax refunds.

Therefore, the earlier you file your tax return, the sooner any refund you may be eligible for will be processed. So why wait until January when refunds usually take longer to be issued as this is HMRC’s busiest time?

We can help file your tax return 

Tax has become an ever-changing and increasingly complex field and unless you have expert knowledge, you may be left bewildered and miss out on all the reliefs you are eligible for. Without the help of an advisor, you could end up paying too much tax without realising, or accidently pay too little and risk an investigation.

So why wait, call our Tax Partner Simon Odam  01932 868 444 today, beat the deadline and be safe in the knowledge that you can be relaxed about your tax.

 

The revenue authority’s inheritance tax take has increased by 13% compared to the £4.7bn collected in 2016-17.

HMRC collected a record £5.3bn in inheritance tax in the year to February 2018, according to a private client law firm.

The inheritance tax threshold freeze at £325,000 has meant that more families are being subject to tax bills on their inheritance following several years of residential property price inflation.

No one wants their children or other dependants to have to pick up hefty inheritance tax bills, so it is important to plan ahead as early as possible how to pass wealth onto children and grandchildren. We can help you with this.

Family and Children Tax Planning

The Wellden Turnbull budget seminar with Dominic Raab, MP for Esher and Walton and Robin John, tax partner at Wellden Turnbull was held at the Cobham Curve on Friday 24th November.  Dominic gave a presentation on the state of the UK economy and key budget measures.  Robin John spoke about the budget including sources of revenue and where the money goes! Did you know debt interest is the fourth biggest expenditure!  Robin also spoke about potential new taxes for non UK owners of UK commercial property.

Delegates received responses to a wide variety of questions ranging from VAT, stamp duty and issues relating to Brexit.

If you would like to watch Robin’s presentation please click here

In most businesses an element of business travel is involved, employees and employers can be confused about how to reimburse employees (or even themselves) for the fuel they use to travel for business purposes.  The guidance I am outlining below only applies to employees using their own cars – company cars have different rules.  We are also only dealing with fossil-fuelled cars here (including hybrids) rather than purely electric vehicles (which include electric cars with a small petrol motor to charge the battery to get you home such as the BMW i3).

Wellden Turnbull Limited is a professional firm of accountants in Surrey.  We specialise in Small and medium-sized businesses and have a number of specialities including Tax planning, Statutory compliance, and day-to-day business assistance.   If you require assistance with this or any other subject area please contact either me or one of my team for tailored advice.

Corporate tax deductions

This is a tax-deductible expense, which makes (I will use a Limited Company for my examples) up part of the taxable profit at the end of a year – importantly this means that you do not need to make any claims to HMRC in order to get the tax deductions.

In order to get the corporate tax deduction, HMRC requires you to use the official mileage rates. The way to do this is a simple formula:

<miles travelled> x <mileage rate> = <amount to reimburse to employee>.

For example, if I travel 100 miles in a car, I would claim 45 per mile which would mean I would be reimbursed £45 and the company would get a taxable deduction of £45.

Most people who are office-based will find that the above example will apply.  Some people, such as mobile workers, or salespeople may travel significant distances every tax year (6 April – 5 April).  If it is the case that they travel over 10,000 miles then every mile over 10,000 must be reclaimed at 25p per mile rather than the higher 45p per mile.

VAT reclaims

If your company is VAT registered then you may be able (there are certain conditions which mean you cannot reclaim the VAT) to reclaim the VAT on the mileage reclaim.  In order to reclaim VAT, in most circumstances, a VAT receipt for fuel will be required alongside the claim.

You will not be entering this VAT receipt into your accounting records, nor will you reclaim the VAT detailed on that receipt.  This is evidence that the fuel used has been purchased ‘VAT paid’.

Frustratingly, the VAT element is not as simple as the Corporate tax deduction.   HMRC says that only a certain element of the 45p (being the fuel element, as the whole amount is a combined fuel and wear and tear allowance) is within the scope of VAT – meaning you can claim it back in your VAT return.

You, again, will need a different set of VAT mileage rates from HMRC (https://www.gov.uk/government/publications/advisory-fuel-rates/advisory-fuel-rates-from-1-march-2016)

This is to calculate the VAT element of the mileage reclaim – 45p/25p is considered the Gross (or total including VAT) amount of the reclaim.

Furthermore, you will need more information about your car, specifically the cylinder size (usually the engine size but be careful as manufacturers can sometimes round 1,990cc to 2l when advertising) and fuel type (Petrol/Diesel/LPG).

I will use 2 examples here: one petrol and one diesel.

Petrol Car – 1.4l (1,390cc)

If I travel 100 miles in this car, I apply for (with a VAT receipt) and receive my reimbursement of £45 – nothing more to do from an employee/director side here.

The company records this a little differently:

1. we need to work out the VAT element of the gross amount :
   <number of miles> x <VAT fuel rate> = deemed fuel gross amount inclusive of VAT;
   100 x 11p = £11.
2. We need the VAT element of this:
   <Gross amount> x ( <VAT rate in whole numbers>/ <VAT rate in whole numbers + 100>) = VAT element
   £11 x (20/120) = £1.833333 (round up to the nearest penny for VAT)so £1.84.
3. split the original £45 into Net (pre-VAT total) and VAT:
   Net = £45 – £1.84 = £43.16
   VAT = £1.84
   Gross = £45.
   You should include these on the respective parts of your VAT return by recording the VAT/Net split appropriately in your accounting software.

For completeness, here is the same example with Diesel cars:

Diesel Car – 2.2l (2,100 cc)

If I travel 100 miles in this car, I apply for (with a VAT receipt) and receive my reimbursement of £45 – nothing more to do from an employee/director side here.

The company records this a little differently:

1. we need to work out the VAT element of the gross amount:
   <number of miles> x <VAT fuel rate> = deemed fuel gross amount inclusive of VAT;
   100 x 12p = £12.
2. We need the VAT element of this:
   <Gross amount> x ( <VAT rate in whole numbers>/ <VAT rate in whole numbers + 100>) = VAT element
   £12 x (20/120) = £2.
3. split the original £45 into Net (pre-VAT total) and VAT:
   Net = £45 – £2 = £43
   VAT = £2.00
   Gross = £45.
   You should include these on the respective parts of your VAT return by recording the VAT/Net split appropriately in your accounting software.

Other points to note

• As a matter of course, employees should keep a mileage log – you can only claim for business mileage – this does not include a commute to a permanent place of work.   Here our employees tend to go out to client sites for a week or so, so would record each day trip on their expense claim detailing the start and end point of their trip and the miles they are claiming.  It would be wise to assume anyone checking your mileage claims will sense check them against google maps or an online route planner.
• Mobile workers may want to keep a mileage log diary in their car – a photocopy of the appropriate page attached to a monthly mileage claim is sufficient.
• If you start your journey from home you MUST remove the miles you would usually do to get to work.  For business mileage claims, you should assume your starting point is your main place of work.  If you are visiting a site that is closer to home than your office is then there is no mileage claim to be made.
• When checking against a route planner, it does not take precedence over the miles travelled.  A standard route calculated by a computer, after the event, will not take into account diversions or traffic.  But remember that a reasonable route from Heathrow Airport to Gatwick Airport by car would not include a stopover in Glasgow. That doesn’t mean to say that if you were called to Glasgow halfway on your way to Gatwick that you wouldn’t include the additional diversionary miles in your now new mileage claim to Scotland, which google maps wouldn’t reproduce in a route plan.
• Always document your expense claims – they make up part of your statutory accounting records and every tax-deductible expense must have reasonable supporting documentation – any expense that doesn’t may be reclassified as personal expenditure or loans by the tax man.
• If you are reclaiming the VAT, get a VAT receipt for fuel, and make sure it is current.  you are trying to support the purchase of the fuel you have used, so a receipt from 2 years ago will not be considered appropriate evidence.
• You cannot mix and match company fuel allowances and employee mileage claims.  They are mutually exclusive.  If you have a company car with a fuel allowance, you cannot reclaim anything and the tax is dealt with differently.  If your company car is unavailable and you need to use a privately owned car, then in that instance this guidance applies to you – you must not reclaim petrol receipts as you may do with your company car.
• Don’t forget that using a car for business purposes falls into a different insurance category – if you only have Social, Domestic, Pleasure and Commuting cover then you are not covered for business travel and are effectively driving around uninsured.
• The mileage allowance covers an element of wear and tear – not just fuel.  This is a contribution towards tyre/brake wear, servicing costs, insurance etc.

Finally

HMRC have outlined what they consider to be acceptable tax deductions for mileage reimbursements.  That does not mean you cannot pay whatever rate you choose (if you pay less then you may have an issue with staff going forward, so I would recommend you consider these to be the minimum rates).  You can pay more generous rates, however, you will only get a tax deduction on the proportion of those rates as detailed above.  depending on the number of miles and additional generosity, you and your employees may have other tax issues to consider.

The general guidance above is given without prejudice, and should not be taken as advice that applies to your circumstances.  Every company/business is different and there are complexities in the rules that I have not covered.  Wellden Turnbull Limited accepts no responsibility as to how you use or apply the information above.

All of the points I have outlined above are for guidance on the principles only, the rates used were up to date on the day of writing but you should refer to official sources for up-to-date rates.  The advice given is based on the tax rules at the date of writing and may not be updated.

If you want to share my guidance, please feel free to do so using the original link to my website and give me credit for the work.

24/10/2017 – Oli Spevack FCCA ACA, Partner

Wellden Turnbull Limited,
Munro House,
Portsmouth Road, Cobham,
Surrey KT11 1PP

E: o.spevack@wtca.co.uk
D: 01932 584 439
T: 01932 868 444

Excellent skills and great sportsmanship were shown by all the players on Sunday, at the Cobham Rugby Minis Festival.

Oli Spevack, a partner at Wellden Turnbull, was honoured to present the teams playing in the under 10’s with their trophies.

A wonderful opportunity to support a local event.