Category: News

What is a tax investigation?

A tax investigation is an enquiry into your tax affairs by HMRC. HMRC are conducting more and more tax investigations.  This means that even the most careful taxpayers could come under the microscope at some point. You may think you have everything in order, but detailed inquiries from the tax man can cause stress and anxiety and take up a great deal of your time. If you are on the receiving end of a tax investigation, it is vital that you receive expert advice.

What happens during the investigation process?

HMRC will send you a written notice. You will then be asked to provide information to HMRC.  It is important to respond promptly.  Help HMRC where you can and provide the requested records. However, before sending information, make sure it gives an accurate picture, and does not raise more questions. If you think that the information that you send might raise questions in HMRC’s mind, you might find it speeds things up if you explain any apparent inconsistencies when you send it.

How long will the investigation take?

The length of time a tax investigation takes varies widely depending on how complex it is and the size of your business. A full investigation takes on average 16 months.

How we can help

If you are already in dispute with HMRC our experienced tax specialists can help.

We can help with preparing disclosure reports as required under Code of Practice 9 (suspected serious tax fraud)  and resolving tax investigations being conducted under Code of Practice 8 (tax avoidance).

If tax has been underpaid, there may be a penalty in addition to the unpaid tax.  Penalties can vary from nil (that is, with any penalty being suspended) to as much as 200% of the tax due.  How you deal with the enquiry makes a big difference to the final amount of the penalty.

Where we submit your tax returns, we can provide cover against the cost of tax enquiries.

If you would like more information or advice, please call us on 01932 868444 or email info@wtca.co.uk to arrange a free no obligation meeting.

Under our Probate licence, we are required by the ICAEW to complete a diversity data survey and to publish a summary of results on our website.

We have just completed our survey and are pleased to confirm the results of the survey reflect our company policy on equality and diversity.

We do not discriminate against anyone of the grounds of age, colour, race, ethnic or national origin, sex, sexual orientation, religion or disability.

We are also committed against unlawful discrimination of clients.

Now there is some breathing space after the 31 January tax deadline, it’s a good time to give your finances some TLC.

This could be something small – for example, in order to prevent that big January credit card bill after Christmas, I took some advice from the oracle that is my mother and set up a Christmas bank account. I set a weekly standing order transferring £10 (the cost of a few coffees) from my current account to this account. By the end of the year, I save enough to not worry about whacking everyone’s presents, the turkey and the inevitable overspend on drinking during the festive period on my credit card. Simple, but effective!

Suggestion two – we sometimes find that people struggle finding the funds to pay their corporation tax and VAT bill. Say you are a VAT-registered contractor running through a limited company, a simple, yet often ignored mantra, is to set aside 30% of any receipts from customers into a separate bank account as soon as it is received. This will cover the VAT on the invoice, and will cover most of the corporation tax due.

For example, you receive money from a customer of £1,200. £200 of this is owed to the VAT man, leaving you £1,000. If you don’t have any expenses, you’d then generally have to pay tax on this £1,000 at 19%, which is £190. Together, this is £390, and 33% of your original £1,200. Of course, you may have some expenses such as a tax-efficient salary, claims for your use of home as office or travel costs, so maybe save 30% instead, whatever works for you, its better than dreading the bill at the end of the quarter/year.

This way, you can also help to ensure you don’t take out too much money from the company as this can lead you to having an overdrawn director’s loan account (where you owe the company money), which has nasty tax consequences of its own.

Suggestion three – Have a think about what VAT scheme you are on – if your turnover is £1.35million or less, you can join the cash scheme, which means you only pay VAT on your sales when your customers pay you. You do need to consider that you can only reclaim VAT on your purchases when you have paid your supplier, but this can help ease cash flow where people are a bit slow at paying you.

Suggestion four – Go Digital. Lots of businesses are moving their accounting to cloud software such as Xero – this lets you see really clearly, how much VAT you owe at any point and what profits you have made for the year-to-date, so you can estimate your CT bill.

The better, more up to date information you have, the more comfort you can feel that your finances are on track.

You can update your expenses and invoice customers on the go on your mobile, link it up to your business bank account so that keeping on track of who owes you what is really easy, and is MTD (Making Tax Digital) for VAT ready, so you don’t have to worry about the changes coming in April this year.

Its also pretty reasonable – with most business able to use their standard package, which is £22 + VAT per month.

Get in touch if you would like more information, we’d be happy to talk through how Xero could help your business.

e.green@wtca.co.uk

The Institute of Chartered Accountants in England and Wales (ICAEW) has reminded small business owners and taxpayers it’s no longer possible to pay for their outstanding tax via personal credit cards.

Last year, HM Revenue and Customs (HMRC) brought an end to paying self-assessment tax bills using personal credit cards.

The deadline for online self-assessment tax returns for the 2017-18 financial year is 31st January 2019.

There are several different payment options available, including:

• Debit card
• Direct debit
• Online/telephone banking
• BACS
• CHAPS
• Cheque
• Bank/building society

If are going to have difficulties making a payment, it’s important that you contact HMRC at your earliest convenience, so they can help advise you on what options you have. Caroline Miskin, Technical Tax Manager, ICAEW, suggested the Time To Pay Arrangement and Budget Payment Plans could also be an option for some taxpayers, depending on their unique circumstances. 

The most common reasons a tax return may be required are as follows:

• You’re self-employed or working in a partnership
• You have significant savings or investment income
• You have untaxed savings or investment income
• You are a buy-to-let property landlord
• Your household receives Child Benefit and your income is in excess of £50,000
• You have income from outside the UK
• You have recently sold or given away asset(s)

If you need help with any of the above, don’t delay, call us today 01932 868 444 or  contact us our friendly and experienced team can work with you to prepare your self-assessment tax return ahead of the 31st January 2019 deadline.

More than 10,000 self assessment tax returns were submitted online during Christmas Day and Boxing Day, according to new figures released by HM Revenue & Customs (HMRC).

11.5 million UK-based taxpayers are expected to submit a self-assessment tax return for the 2017/18 financial year by 31st January 2019, some 88% of the six million-plus tax returns already filed for the 2017/18 have been submitted online, indicating that the vast majority of UK taxpayers are adapting well to the shift towards “Making Tax  Digital” (MTD).

The most common reasons a tax return may be required are as follows:

• You’re self employed or working in a partnership
• You have significant savings or investment income
• You have untaxed savings or investment income
• You are a buy-to-let property landlord
• Your household receives Child Benefit and your income is in excess of £50,000
• You have income from outside the UK
• You have recently sold or given away assest(s)

The consequences of filing your tax return late

A late tax return is subject to the following penalty regime.

• An initial £100 penalty, which will apply even if there is less than £100 tax to pay
• After 3 months, additional daily penalties of £10 per day  – up to a maximum of £900
• After 6 months, a further penalty of 5% of the tax due or £300 – whichever is greater
• After 12 months, another 5% of the tax due or £300 – whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due

Each of these penalties is in addition to one another, so a tax return filed a year late could face numerous penalties.

Don’t leave it until 31st January. The more time you leave yourself to prepare your tax return, the better.

Last year, the busiest days for filing were 30th and 31st January, when 60,596 tax returns were received – a staggering 1,010 per minute.

So don’t leave your tax return until the final day, as HMRC’s website and call centres will be under tremendous pressure.

Wellden Turnbull can help take care of all your tax affairs, so don’t delay, call us today 01932 868 444 https://www.wtca.co.uk/contact-us/

Ahead of the roll-out of Making Tax Digital for VAT in April 2019, HM Revenue and Customs has recently sent businesses within the scope of MTDfV “encouragement letters”.

These letters were sent to 200,000 businesses which are eligible to join the pilot scheme.

HMRC must continue to raise awareness of Making Tax Digital, The Economic Affairs Committee has warned HMRC that small businesses “could pay a heavy price” for Making Tax Digital for VAT (MTDfV).  We can support small business making this transaction easier.

In its “Taxing Times” report, The Federation of Small Businesses (FSB) has revealed small businesses spend up to 15 working days a year on average maintaining their tax compliance activities.

“Done correctly”, the roll-out of Making Tax Digital in April should help to arrest this shocking waste of time and money.

For professional advice feel free to contact our friendly team .

Christmas, the traditional time for giving is fast approaching.

Many employers choose this time to reward their staff for the hard work and commitment over the past year by giving them gifts (benefits) in the form of non-cash items. Unfortunately, unless handled correctly the gifts may give rise to income tax and national insurance contribution liabilities for the employee, not quite the consequence that the employer wanted.

A tax exemption is available which should help employers ensure that the benefits provided are exempt, it must satisfy the following conditions:

• the cost of providing the benefit does not exceed £50 per employee (or on average when gifts made to multiple employees)
• the benefit is not cash or a cash voucher
• the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
• the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
• where the employer is a “close” company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exceptions or allowable deductions.

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost of each employee cannot be established, an average could be used. Some HMRC examples consider gifts of turkeys, a bottle of wine or alternatively a gift voucher.

Further details on how the exemption will work, including family member situations, are contained in the HMRC manual

If you are still unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.

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

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