Change to benefits rule could impact on pensioners

Elderly People

 

According to an article in The Guardian, changes to benefits rules could result in pensioners losing up to £7,000 a year in top-ups.

From the 15th May 2019, new pensioners whose partners are younger than the retirement age of 65 can no longer claim the pension credit top-up.

The universal credit rate for couples is just over £110 a week; when compared to the £255 for couples receiving pension credit, this results in a potential loss per year of just over £7,300.

 

Tax is going digital – a reminder

Digital Tax

As part of the Government’s ‘Making Tax Digital’ programme, from April 2019 VAT registered businesses who have a taxable turnover above the threshold limit (currently £85,000) will have to keep digital records for VAT and submit their returns to HMRC through a compatible software system.

If you don’t currently use an accounting package which allows for this change, you will need to start looking into options. Please contact us if you are uncertain about anything. We currently use Xero software for some of our clients who fall into this category and will be happy to talk to you about joining this package. Alternatively, we can offer advice on other options.

Those that are under the threshold are not affected by this change.

Student loans repayment threshold increase

The government has increased the loan repayment thresholds for student loans by 2.9%

The increase in Student Loan Plan 1 and Plan 2 thresholds will take effect from 6 April 2019.

The thresholds of Plan 1 and Plan 2 Student Loans are increasing from April 2019 in line with inflation at 2.9%.

The Department for Education (DfE) has confirmed that from 6 April 2019 the thresholds will increase for tax year 2019/20 to:
• Plan 1 – £18,935, up from £18,300 for tax year 2018/19; and
• Plan 2 – £25,725, up from £25,000.

Student loan deductions will remain the same at 9% for Plan 1 and Plan 2 loans.

Celebrities and tax

We were interested to read this article from accountingweb which shows that even celebrities are subject to tax reviews.

The article referenced an interview that ITV host Eamonn Holmes gave with the Mail on Sunday, where he revealed that HMRC has launched a “test case” against him, claiming unpaid taxes from the past seven years.

Whilst no verdict has yet been announced from the case, it’s an interesting discussion over freelance versus employment and how that can impact on tax bills.

In essence, HMRC is challenging the pay that Eamonn Holmes received through his limited company and if found to bein breach of IR35 rules, it is believed his company’s tax bill could be as much as £2m.

If you have any questions about IR35 or any other tax questions, please do get in touch.

Making Tax Digital checklist – how to ensure you are ready for MTD

MTD Checklist

Sage.com have published a useful checklist to ensure you are ready for MTD which can be viewed here :

Making Tax Digital checklist: How to ensure you’re ready for MTD

From the 1st April 2019, UK businesses which are VAT-registered will need to submit their VAT returns using compatible software, all as part of plans from the HMRC for Making Tax Digital.

Any businesses whose VATable turnover is above the VAT threshold will have to submit their returns from April 2019 using software.

The 4 parts of the checklist are :

  • How to figure out if your business will be impacted by Making Tax Digital for VAT
  • How to work out which of your business processed need to be adapted
  • How to ensure you have the correct software
  • Work out when to make the switch to Making Tax Digital for VAT

Once you have read the article, if you have any questions about the topic, or any other accountancy questions, please do get in touch.

Bogus emails pretending to be from HMRC

HMRC Bogus

Bogus emails pretending to be from HMRC are still prevalent and HMRC have issued the following advice :

Customers are advised to lookout for a new bogus email scam, claiming to be from HMRC.
If you receive an email with a subject that reads “You have received new messages from HMRC”, that also has an attachment, please send it to phishing@hmrc.gsi.gov.uk and then delete it.

HMRC will never ask for any personal, or financial details over emails or text messages.
For more advice on scams, phishing and genuine HMRC contact, please visit GOV.UK and search ‘phishing’.

HMRC issues tax rebate scam warning

Scam

HM Revenue & Customs is warning UK taxpayers to remain alert for fraudulent tax rebate emails and SMS texts that are doing the rounds nationwide.

The messages sent to UK taxpayers promise tax refunds following the submission of self assessment Tax Returns for the 2017-18 financial year. Fraudsters hope to gain access to individuals’ personal tax accounts and subsequent personal details.

Many of the fraudulent emails and texts incorporate phishing links which transfer users to unsecure websites pretending to be HM Revenue & Customs (HMRC). Individuals are then asked to submit personal information on these fake web pages, allowing cyber-criminals to steal it.

Mel Stride MP, Financial Secretary to the Treasury, said: “HMRC only informs you about tax refunds through the post or through your pay via your employer.

“All emails, text messages or voicemail messages saying you have a tax refund are a scam.

“Do not click on any links in these messages and forward them to HMRC’s phishing email address and phone number.

“We know that criminals will try and use events like the end of the financial year, the self-assessment deadline and the issuing of tax refunds to target the public and attempt to get them to reveal their personal data. It is important to be alert to the danger.”

In March 2018, some 2,672 phishing websites purporting to be HMRC were taken down thanks to 84,549 phishing reports received by UK taxpayers.

These phishing attacks are expected to continue throughout the summer as HMRC prepares to distribute any genuine tax rebates between June and October. The official rebates will include a tax calculation letter, either a P800 or a Simple Assessment letter, documenting the amount owed back to the taxpayer once income tax had been calculated for the 6th April 2017 to 5th April 2018 period.

3 simple steps to guard against phishing attacks

HMRC has advised customers to adopt the following three steps to protect themselves against the threat of online fraud:

Be aware of the signs
High street banks and HMRC will never contact you asking for your logins, PINs, passwords or bank details. HMRC published a handy guide to help you to spot genuine HMRC communications.

Stay vigilant online
Never disclose your personal data, respond to SMS texts, download email attachments or click on links in emails you weren’t anticipating.

Act fast
If you suspect you’ve been involved in a phishing attack from someone claiming to be HMRC, email phishing@hmrc.gsi.gov.uk, text 60599 or call Action Fraud immediately on 0300 123 2040. Action Fraud also has an online tool to report suspected online fraud.

HMRC investigations

HMRC

HMRC investigations

What to expect when the Revenue comes knocking.

Anyone whose business comes under the Revenue’s microscope is usually in for a roller-coaster ride.

HMRC has upped its game in recent years when it comes to probing businesses or sole traders who may be suspected of falsely reporting or underpaying tax.

Nobody appears to be beyond its remit, whether you’re the chief executive of a Premier League football club or the owner of a microbusiness with a much more modest turnover.

Despite its reputation, HMRC’s first approach is to negotiate to bring in as much of the money it is owed as possible as cost-effectively as possible – and that usually means pursuing settlements over prosecutions.

There are various ways to keep you or your business off HMRC’s radar, with the most basic method being maintaining accurate records for us to process.

Triggers

If a small business suddenly makes a large VAT claim or a big firm declares an unusually low amount of tax, it’s likely to set alarm bells ringing at HMRC headquarters – and it doesn’t stop there.

Businesses may become the target of an investigation if:

  • HMRC receives a tip-off
  • your business routinely takes cash payments
  • you consistently file late tax returns with major inconsistencies
  • your business operates in a sector HMRC has specifically targeted
  • it is randomly selected by HMRC for investigation.

Taxes

The biggest misconception is that HMRC purely investigates matters relating to income tax. It doesn’t – HMRC probes all kinds of other tax including, and not limited to:

  • capital gains tax
  • corporation tax
  • landfill tax
  • national insurance contributions

Stages

There are three levels of HMRC inquiry:

Random

Just to keep businesses of all sizes on their toes, HMRC has the ability to select and investigate your enterprise entirely at random. There’s usually no rhyme or reason to this.

Aspect

HMRC is worried about a particular part (or parts) of your accounts and wants more detail.

These are usually straightforward mistakes or misunderstandings rather than deliberate attempts at tax evasion, such as forgetting to include all your savings income on your self-assessment tax return.

These types of inquiry may appear less stressful than full investigations, but they should still be treated seriously.

If HMRC uncovers anything else during its inquiry, they may upscale it to a full inquiry.

Full A full inquiry looks at cases where HMRC believes there is significant risk of error in the tax return.

If you’re subject to a full inquiry, you can expect the Revenue to undertake a comprehensive review of your records.

For businesses, this may include scrutinising the personal financial records of directors or the business owner as well as all business-related records.

The process

First contact

HMRC will initiate contact with you, usually by letter or phone, with a query over your accounts.

If you receive a brown letter through the post, don’t panic. It’s perfectly acceptable to ask them to contact us at this stage as we’re happy to liaise with HMRC on your behalf.

We will find out the severity of the inquiry (full, aspect or random) and the information HMRC requires to resolve its investigation.

Information

What details HMRC requires will depend on the severity of the inquiry, but you will be expected to supply the information which formed the basis of the tax return being scrutinised.

If there is any information missing in your tax return, you may be required to track down replacement copies to back up your claim.

This should also be the stage of the investigation to hold your hands up and inform HMRC if you have knowingly made a mistake. Owning up now will stand you in good stead further down the line.

Investigation

The Revenue will formally commence its investigation once it has all the records it needs. In many cases where minor discrepancies are involved, these can be resolved fairly quickly.

For example, you’re a sole trader with no income protection policy who required two months out with a broken leg after falling from a ladder.

Your annual income for the financial year in question declined by a sixth as a result, but HMRC will be unaware of this until you inform them.

HMRC may request further information when more complicated investigations are under way.

In such cases, HMRC may ask to meet you at your business or accountant’s office. You can ask us or your legal adviser to attend and request a pre-agreed agenda.

Outcomes

What happens next depends on what HMRC finds. Some of the more common resolutions include:

Underpaid tax

If the investigation finds you are short on your tax bill, you will have 30 days to settle it with HMRC.

Failure to do so will result in you incurring a penalty, which is calculated as follows:

  • lack of reasonable care: a penalty of up to 30% of the extra tax due
  • deliberate errors: a penalty of between 20% and 70% of the extra tax due
  • deliberate and concealed errors: a penalty of between 30% and 100% of the extra tax due.

Overpaid tax

You may receive a tax rebate through the post in the event you have paid too much tax.

If you don’t, and you have overpaid tax, you will need to make a claim with HMRC for a tax repayment.

Deliberate wrongdoing

In the most serious cases where HMRC believes you have committed fraud, you may be subjected to criminal proceedings.

You may also have to pay a penalty depending on:

  • why you underpaid tax
  • if you told HMRC about any mistakes as soon as possible
  • if you were fully cooperative during the inquiry.

Resolution

HMRC will formally conclude its investigation by a decision notice or agreeing a contract settlement.

decision notice arrives in the form of a letter, which outlines HMRC’s assessment plus any penalty notices and its final stance.

contract settlement legally binds you to pay the money owed to HMRC, which agrees not to use its powers to chase you for the settlement.

Avoidance tips

No business owner can do anything to prevent a random investigation, but there are other ways to ensure you remain off HMRC’s radar.

  • keeping good records will go a long way to ensuring you are compliant
  • find out when your tax bills are due, put money aside to cover the costs and pay on time
  • ask us if you are unsure about any aspect of your finances at any point during the year
  • ensure your tax returns are filed accurately (we can handle this on your behalf)

explain any changes or unusual activity from one tax year to the next.

 

Making Tax Digital – latest update

A pilot for Making Tax Digital for VAT was introduced at the end 2017 and started with small-scale, private testing. This has now been followed by a wider, live pilot. This will allow for well over a year of testing before any businesses are mandated to use the system. No business will be mandated before 2019.

From April 2019 businesses above the VAT threshold will be mandated to keep their records digitally and provide quarterly updates to HMRC for their VAT.

The government has committed that it will not widen the scope of Making Tax Digital for Business beyond VAT before the system has been shown to work well, and not before April 2020 at the earliest. This will ensure that there is time to test the system fully and for digital record keeping to become more widespread.

HMRC say ‘We will continue to work in close partnership with the software industry and agents to ensure successful implementation of Making Tax Digital for Business’.

Alert: Fraudsters claiming to be from HMRC

Please be aware that fraudsters are claiming to be from HM Revenue & Customs (HMRC) and are tricking people into paying bogus debts and taxes using iTunes gift cards.

More information is available at the following article: https://actionfraud.police.uk/news/alert-fraudsters-claiming-to-be-from-hmrc-jun17.

How to protect yourself

  • HMRC will never use texts to tell you about a tax rebate or penalty or ever ask for payment in this way.
  • Telephone numbers and text messages can easily be spoofed. You should never trust the number you see on your telephones display.
  • If you receive a suspicious cold call, end it immediately.

How we can help

As well as helping sole traders and partnerships with their Self Assessment Tax Return each year, we can also help with the following :

  • Limited Companies – advise on the responsibilities of directors and annual returns
  • Bookkeeping – whether you have just set up as sole trader or are a well-established corporation, we are able to offer help with book-keeping. Maintaining accurate and up-to-date accounting records is fundamental to running a successful business
  • VAT – we can advise you of the pro’s and con’s of registering for VAT and can complete the registration process for you, and we can prepare and submit your quarterly VAT returns and also send reminders when your VAT is due.
  • Business start-ups – we can give you a free consultation to see what needs to be done, after which we can set everything up for you, so you can focus your attention on what you do best and start the pounds rolling in.
  • Subcontractors and Contractors – we can register you for the Construction Industry Scheme (CIS).

Have a question?  Just ask.

Deadlines for self assessment online tax returns 2017

Just a reminder that the tax return deadline (if you file online) is the 31st January 2018.

For more information on tax deadlines, visit the HMRC website.

At BTS Accountancy we offer a personal service, treating clients as individuals, whilst providing great value solutions to address all your accounts and taxation needs.  If you have any questions about tax returns or other areas of accountancy, do get in touch.

Are you ready for Making Tax Digital?

Making Tax Digital is the government’s initiative to make it easier for businesses (and individuals) to have more control and visibility of their tax. The aim is to bring an an end to the annual tax return by clients keeping digital records and sending quarterly updates to the HMRC.

Announced in the budget of March 2015, this is part of the government’s vision to modernise the tax system.

So, are you ready?

In the budget of 2017 the government announced that 3.1 million small businesses have until 2019 before they are required to keep digital records alongside sending HMRC quarterly updates.

The 4 key parts of Making Tax Digital

Better use of information

By having digital tax accounts, business owners will be able to (at any time) view the information that HMRC holds about them to make sure it is correct.

Real time tax

With the HMRC collecting tax information when it happens, business owners can know how much tax they should pay straightaway, rather than waiting until the end of the year.

One financial account

The goal is that by 2020, taxpayers will be able to see all of their liabilities and entitlements in one digital financial account.

Digital interaction with the HMRC

With business owner’s digital record keeping software being linked directly to HMRC software systems, the software itself will be able to send and receive information.

What happens next

These changes are being gradually introduced, starting in 2018 with Income Tax for businesses, self-employed people and landlords with annual turnover above the VAT threshold.

In 2019-20 the Income Tax elements of Making Tax Digital will be extended to all businesses, self-employed people and landlords with annual turnover above £10,000.

VAT will be addressed in 2019 and Corporation Tax in 2020.

The changes are currently being piloted with businesses.


If you have any questions about this or any aspect of your accounts and taxation needs, do get in touch.

HMRC have launched a fraud hotline

In April 2017, the HMRC launched a new service to simplify the fraud reporting process. A new telephone number and online form have replaced two separate tax evasion and customs hotlines.

People wishing to report fraud or evasion from 4th April will be able to contact HMRC using either:

As well as making it easier for people to report fraud, streamlining the service will also create more time for analysis of intelligence, so cases are quickly passed into the hands of investigators.

Accountancy – what would you like to know?

The world of accounting changes regularly and we we want to make sure you are informed and kept up to date. One way we are going to start doing that is via this blog page.

Is there a topic you would like us to talk about? Just let us know and we will hopefully include it in a future blog post.

Osborne warns of Brexit tax hike

George Osborne will today warn that a vote to leave the UK will result in an emergency budget, where he will have to hike taxes and slash spending.

Osborne and the former chancellor Alastair Darling will publish an illustrative budget, outlining £15bn of tax rises and £15bn spending cuts. According to the Guardian, these measures include a 2p rise in the basic rate of income tax, a 3p rise in the higher rate, and a 5% inheritance tax rate to 45p.

Vote Leave campaigner Iain Duncan Smith, Liam Fox and Owen Paterson dismissed Osborne’s warning, saying “If he were to proceed with these proposals, the chancellor’s position would become untenable.”

My dog ate my tax return

Dog ate tax return

HMRC revealed top 10 worst excuses for missing the Self Assessment deadline

Earlier this year, HM Revenue and Customs (HMRC) revealed their ten worst excuses for missing their 31st January Self Assessment deadline for 2014 and it makes amusing reading.

Their list of top ten excuses which were all used in unsuccessful appeals were :

  1. My tax papers were left in the shed and the rat ate them
  2. I’m not a paperwork orientated person – I always relied on my sister to complete my returns but we have now fallen out
  3. My accountant has been ill
  4. My dog ate my tax return
  5. I will be abroad on deadline day with no internet access so will be unable to file
  6. My laptop broke, so did my washing machine
  7. My niece had moved in – she made the house so untidy I could not find my log in details to complete my return online
  8. My husband ran over my laptop
  9. I had an argument with my wife and went to Italy for 5 years
  10. I had a cold which took a long time to go

HMRC do recognise that a number of taxpayers may have difficulties completing their tax return on time and have opened a Tax Helpline to give practical help and advice to people affected by severe weather and flooding – 0800 904 7900.

CLICK HERE to read the article in full.

BUDGET 2016 – KEY POINTS FOR CLIENTS

On 16th March 2016 the government delivered the 2016 Budget and I highlight in this article some key points for applicable for small businesses.

Some of these announcements will come into effect now and others will be phased in over the next year or beyond.

Income tax

The personal allowance for 16/17 (6th April 2016 to 5th April 2017) is set at £11,000, this will now increase to £11,500 for 17/18, whilst the higher tax band, which is set at £43,000 for 16/17 will increase to £45,000 for 17/18.

Class 2 National Insurance (Self-Employed)

It’s a while off, but from 2018 Class 2 NI for the self-employed will be no more so if you’re self-employed you should only have one category of national insurance to worry about (currently known as Class 4). This is a much needed simplification of the national insurance system for the self-employed.

Directors Loans

The tax paid on directors loan balances that remain unpaid within 9 months of the end of an accounting year, known as s455 tax, will increase from 25% to 32.5% for any loans that are made from 6th April 2016.

VAT registration threshold

The VAT registration threshold which is currently £82,000 will increase to £83,000 from 1 April 2016.

Corporation tax

Corporation tax will drop from the current rate of 20% to 19% from April 2017 (this was already known). However corporation tax was expected to drop again to 18% by 2020 but this has now been reduced further down to 17%. This, along with the increased personal allowance and higher tax band should help mitigate the extra tax payable due to the changes to dividend tax.

Lifetime ISA

This came as a nice surprise, it doesn’t come in for a year, but from April 2017 there will be a new savings structure called the ‘Lifetime ISA’. If you’re under 40 you’ll be able to open a Lifetime ISA and save up to £4,000 per tax year and you will get a 25% bonus from the government. So for every £4 you pay into the Lifetime ISA the government will put £1 in. You will be able to pay into the ISA and get the government bonus 25% until you’re 50. There are various rules about when you can withdraw the cash and potential tax consequences. HMRC have a fact sheet about the Lifetime ISA. Click on link.

The general overall ISA limit (total for all your ISA’s) will also be increasing from April 2017 –  from £15,240 to £20,000. Click on link for HMRC factsheet. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508117/Lifetime_ISA_explained.pdf

Capital Gains Tax

This was somewhat un-expected – from 6th April 2016 capital gains tax rates are reducing. The higher rate will reduce from 28% to 20% and the basic rate will reduce from 18% to 10%. There will be various rules and details about this to come out, one of them being that these new lower rates do not apply to residential property (i.e. buy-to-lets) which will continue to be taxed at current capital gains tax rates.

 My conclusion

 I believe that for many of my clients; sole traders and Ltd Companies, the 2016 Budget has been a positive result. The government has focused on increasing personal allowances and higher rate tax bands whilst also decreasing Corporation Tax rates which will have a huge impact on small businesses and individuals alike.

Also the abolition of Class 2 NIC’s is a welcome change and in my opinion long overdue!

Chancellor drops pension tax changes from Budget

Only a week or so away from the Budget and the rumour mill is working overtime. Keep checking for Budget info as and when it happens!

Chancellor George Osborne has abandoned plans to reform pension tax in next week’s Budget but experts say it’s a stay of execution.

Update: Pension experts have welcomed the chancellor’s decision to not make any radical changes to pension tax relief in this year’s Budget, but the months of speculation are expected to have cost the government £1.5 billion.

Last week it was reported the chancellor, George Osborne, was in favour of overhauling pension tax relief to create an ISA-style system.

However, on Friday night it was reported he had reversed his thinking. ‘George has always been clear he wouldn’t do anything to damage saving,’ a source close to the chancellor told The Times.

‘He’s listened to what people have said and concluded that now isn’t the right time, with uncertainty in the global economy and reforms such as auto-enrolment still bedding in, to turn things on their head.

‘It is also clear that employers wouldn’t welcome a wholesale change in the way they administer schemes. So he is not going to tear up the system of pension tax relief. There won’t be any changes to tax relief at all in the Budget.’

 

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