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C-19 Grant funding for business
C-19 Time to pay
C-19 Loan Funding
C-19 VAT Payments
C-19 Business rates
C-19 Company Directors & Shareholders
C-19 IR35 & Off-payroll working
C-19 Insolvency & Directors
C-19 Statutory self-employment pay scheme (SEISS)
C-19 Landlords & tenants
C-19 Late payment interest rate
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Welcome to Adrian Mooy & Co Ltd
like yours grow and be more profitable.
We offer a personal service and welcome new clients.
We are a firm of Chartered Certified Accountants
and tax advisors in Derby helping businesses
From start-up to exit & everything in-between.
Whether you’re struggling with company formation,
Helping you grow your business
Helping you keep more of your income
We understand your needs
Call us on 01332 202660
annual accounts and taxation, payroll or VAT you can
count on us at every step of your business’s journey. For
VAT & payroll please contact us.
If you are looking for a Derby accountant then please contact us.
If you are starting your own business, running it as a sole trader is the quickest and easiest way to do it. However, you will have unlimited liability which means you are personally responsible for business debts.
Another important aspect is that you are taxed on all the profits with little opportunity for tax planning. This is why most businesses will incorporate as profits increase.
We can support you through business registration and provide advice on all aspects of tax including:
◦ Accounts for HMRC ◦ Self assessment ◦ VAT returns ◦
◦ Payroll services ◦ Tax planning ◦
Partnerships are similar to sole trades, except that they are used when more than one person owns the business.
Each profit share is determined by the partners and best practice is to record this in a partnership agreement.
With partnerships each partner has joint and several liability for the debts of the partnership, so that if one partner cannot pay their share of any business debts, the debt will fall on the other partners.
Setting up a partnership agreement from the outset is essential.
Corporate tax planning can result in significant improvements in your bottom line. Our services will help to minimise your corporate tax exposure.
We are a member firm of the Association of Chartered Certified Accountants.
Self assessment tax returns are becoming increasingly complex and failing to submit your return on time, or correctly, can result in substantial penalties.
We use the latest tax software to ensure that tax returns are completed efficiently, accurately and on-time.
Self assessment: Taking
away the hassles of tax
We provide a comprehensive personal tax compliance service for individuals that includes:
Invoicing your contracting work through a limited company is tax efficient. We will advise you on how to structure your contract to minimise IR35 risk. We will ensure you claim all the expenses that you are entitled to and work out if you can save money by joining the VAT Flat Rate Scheme. We will complete your accounts and tax returns and provide you with clarity over your tax payments.
Included in the service • IRIS KashFlow + Snap • Annual accounts • Corporate tax return • Personal tax return • Payroll • Dividend administration • VAT returns • Contract reviews • Dealing with HMRC
VAT • is one of the most complex tax regimes imposed on business. We provide a cost effective service including assistance with registration & completing your returns.
Payroll • Administering your payroll can be time consuming. We provide a comprehensive payroll service.
Your Payroll Solution
Construction Industry Scheme • CIS returns & payments
Book-keeping • Maintenance of accounting records
Provision of management accounts
For more about these services please contact us.
Keeping the Books
If your business does not require a statutory audit then our Assurance Service will provide reassurance that your accounts stand up to close scrutiny from your bank or other finance providers.
Work is tailored to your specific requirements and the level of confidence that you are looking to achieve and will provide credibility to your accounts by the issuing of an assurance review report.
Adrian Mooy & Co is a registered auditor with the Association of Chartered Certified Accountants.
We strive to provide an auditing service that adds more value than merely the statutory compliance requirement of an audit.
We tailor the audit to meet your circumstances and needs. Using the latest techniques and software we deliver a cost-effective audit that provides real value.
Before starting out you may need help with business planning, cash flow and profit & loss forecasts.
You may also want help identifying the best structure for your business. From sole trades and partnerships to limited companies and limited liability partnerships, we have the experience to advise on the best solution for you both operationally and from a tax point of view.
We also advise on accounting software selection, profit improvement, profit extraction & tax saving.
If you wish to know more about our Business Start-up service please contact us on 01332 202660.
Accountancy and taxation of property is a specialist area. We have the expertise and experience to work effectively with private landlords and property investors. We deal with self-assessment tax, accounts preparation & tax advice for all aspects of property portfolios.
Whether you are a first time buy to let landlord or a long established developer we will discuss and understand your situation in order to advise and recommend the most appropriate medium through which to carry out your property investments. We will guide you through the accounting and tax issues and help you to plan effectively.
We take the time to explain your accounts to you so that you understand what is going on in your business.
Up to date, relevant and quickly produced management information for better control.
As part of our accounts service we prepare your annual accounts and complete yearly personal and business tax returns.
As your year-end approaches we will agree a timetable with you for completion of the accounts that minimises disruption to your business and leaves no late surprises when it comes to your tax liabilities.
We can also prepare management accounts to help you run your business and make effective business decisions. Management accounts are also very useful when approaching lending institutions when no year end accounts are available. We offer:
For a meeting to discuss your requirements please call us on 01332 202660.
We understand the issues facing owner-managed businesses.
We provide advice on personal tax & planning opportunities.
Running a small business places many demands on your time. We can help lift the load with our complete payroll service.
Designed to ease your administrative burden, our service removes what is often a time consuming task, leaving you free to concentrate on managing your business.
We can also prepare your benefits and expenses forms and advise you of any filing requirements and national insurance due. Benefits and expenses can be a complicated area and knowing what to report can be tricky.
We can file all your in-year and year end returns with HMRC and provide you with P60s to distribute to your employees at the year end.
We also offer a solution to meet your auto-enrolment obligations.
Businesses dealing with the requirements of VAT legislation will agree that this is often a complex area.
Our compliance services offer support for all stages of completing your VAT returns, whether you need advice on the treatment of specific transactions or have produced your records and would like verification that they are correct.
We can also advise on the pros and cons of voluntary registration, extracting maximum benefit from the rules on de-registration and the Flat rate VAT scheme.
Our consultancy service guides you through the intricacies of the legislation, pinpointing areas where you may be able to relieve or partly relieve the cost of VAT for your business, for example when purchasing new equipment or undertaking new projects such as property development.
For a meeting to discuss VAT and obtain further advice please call us on 01332 202660.
We can conduct a full tax review of your business and determine the most efficient tax structure for you.
We give personal tax advice to a wide variety of individuals, including higher rate tax payers, company directors & sole traders.
We can assist with:
For a meeting to discuss your requirements please call us on 01332 202660.
Understand your needs
Firstly we listen and gain an understanding of your business and what you are aiming to achieve.
We seek your opinions on the service we provide and respond to feedback in order to upgrade and improve what we do.
Build a relationship
Success in business is based around relationships and trust. Our objective is to develop and build strong relationships with our clients, based on two way trust and respect.
Confirm your expectations
Our aim is to help you maximise your business potential and we tailor our service to meet your requirements and agree a timetable for delivering them.
Communication is important to the success of any commercial venture. It is therefore a vital part of our work with you, sharing the knowledge and ideas that help you to realise your ambitions.
Understand your needs
Confirm your expectations
Build a relationship
Straightforward and easy to deal with Adrian Mooy & Co provide an efficient, friendly and professional service - payroll, tax returns, annual accounts and VAT returns are always done on time. Eddie Morris
Call us on 01332 202660
Getting ready for off-payroll working
Over the past ten years, various steps have been taken to improve the effectiveness of the off-payroll (IR35) rules, with limited success. In April 2017 the Government reformed the way in which the rules operate in the public sector by shifting responsibility for determining employment status from an individual contractor to the organisation engaging them. These rules are being extended to medium and large organisations in all sectors of the economy from 6 April 2021 and businesses need to prepare ahead of this date to ensure they are able to meet compliance obligations.
Many organisations will have already started to prepare. However, given the difficulties being faced due to the coronavirus, many businesses will have had to prioritise other matters. With this in mind, HMRC have recently re-launched their package of customer education and support on this subject, hoping that it will help motivate businesses to start preparing.
Businesses that may be affected by the reforms are:
• medium or large sized non-public sector organisations which engage contractors who work through their own intermediary
• employment agencies which supplies contractors who work through their own intermediary
• contractors who provide services through their own limited company or other intermediary.
Preparation work may include the following:
• Looking at the current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through personal service companies
• Determining if the off-payroll rules apply for any contracts that will extend beyond April 2021. The CEST tool can be used to do this (see below).
• Communicating with contractors about whether the off-payroll rules apply to their role.
• Implement processes to determine if the off-payroll rules apply to future engagements. These might include who in an organisation should make a determination and how payments will be made to contractors within the off-payroll rules.
HMRC are running a series of overview webinars, which also include an opportunity to ask questions using an online chat tool. The following webinars are currently available:
• Overview of the off-payroll working rules –an end-to-end overview of the reform
• Overview of the off-payroll working rules for contractors – providing contractors with an overview of the reform and an outline of what they need to do to prepare for April 2021, including the practical accounting requirements for them and their limited company or other intermediary
• Making the determination, disagreements and record keeping – covering HMRC’s view on requirements to make a determination and what constitutes a disagreement. Some aspects of this webinar may be relevant to contractors.
Full details of the webinars, including links to the registration pages, can be found at https://www.gov.uk/guidance/help-and-support-for-off-payroll-working.
HMRC will also be running some topic-based webinars for those who already have an understanding of the basics of the off-payroll working rules. Further information on these webinars can be found at https://www.gov.uk/guidance/help-and-support-for-off-payrollworking
HMRC say they will also be running workshops and education calls for small groups of customers that will be delivered virtually, providing a comprehensive overview of what the changes mean.
The HMRC Employment Status Manual (ESM) has been updated for the new rules and contains detailed guidance and clear explanations of how the rules should be applied. Some pages may be relevant for contractors.
The Check Employment Status for Tax tool (CEST) is already available for organisations and contractors to consider the appropriate employment status for tax for contracts running beyond 6 April 2021.
HMRC have confirmed that they will stand by the results given by the CEST tool, provided it is used in accordance with their guidance and the information entered is accurate, and remains accurate. This is regardless of when the tool is used ahead of April 2021, and means employers can already use the tool for engagements that start in April 2021 onwards.
Business asset disposal relief - sale of the holiday let
Furnished holiday lets benefit from a number of tax advantages which are not available to landlords of residential lets. One of the main advantages is the opportunity to benefit from Business Asset Disposal relief (BADR) on the sale of the property, paying capital gains tax at only 10% above the annual exempt amount rather than at 18% or 28% (depending on whether the gains fall in the basic rate band or not) on the sale of the buy-to-let. Individuals can benefit from BADR on gains up to the lifetime limit of £1 million.
A let must meet certain conditions re availability and letting to qualify as a furnished holiday let for tax purposes.
Nature of the relief
Business Asset Disposal Relief was previously known as Entrepreneurs’ relief. It is available on the disposal of all or part of the business. The commercial letting of furnished holiday lettings, which for certain capital gains tax purposes, including BADR purposes, is treated as a trade, falls within the scope of the relief. Furnished holiday lets qualify for the relief if the let is in the UK or the EEA, but not elsewhere in the world.
The relief is available for a disposal of the whole or part of the business, and for a disposal of the assets used for the purposes of a business that has now ceased. Where the business is operated as a company, relief is available for the disposal of the shares.
In the case where an individual has one property that is let as a holiday let and decides to stop letting and sell the property, relief will be available where:
• the property was used as a FHL at the time that the FHL business ceased;
• the business was owned by the individual making the disposal for a period of two years immediately prior to the cessation of the business; and
• the disposal takes place within three years of the cessation.
The rules allow the landlord three years to sell the property once the FHL business ceases without losing the relief.
Billy has a cottage in Suffolk that he lets as a holiday let. The let meets the conditions for a furnished holiday let. The cottage was purchased as a holiday let in 2010. Billy ceases letting it in May 2020, putting it up for sale. The property is sold in November 2020, realising a gain of £120,000.
The conditions for BADR are met. Assuming Billy has his annual exemption available and has not used up his lifetime allowance of £1 million, he will pay capital gains tax £10,770 on the chargeable gain of £107,700 ((£120,000 - £12,300) @ 10%).
If the property had been a residential let and assuming Billy is a higher rate taxpayer, the capital gains tax bill would have been £30,156 (£107,700 @ 28%).
Problems may arise when the landlord has several properties in his or her furnished holiday letting business. The relief is only available for the sale of the whole or part of the business or assets used at cessation. Thus, where a landlord has multiple properties, but sells one of them while continuing to run the FHL business, that sale may not qualify for BADR and the lower rate of capital gains tax,
In some cases, there may be a part disposal of the business. This may be the case where the landlord has properties in different locations and sells those in one location, but continues to run the FHL business in other locations. It will depend on the facts in each case.
An informal company wind-up
Capital or income
Usually, when a company distributes its profits to its shareholders they are liable to income tax on the payments they receive. However, a special rule means that distributions made in the course of winding up a company are taxed as capital instead. This provides tax-saving opportunities.
Example. Owen and Jane are equal shareholders of Acom Ltd. Both are higher rate taxpayers. They decide to close the business and appoint a liquidator to wind up the company. All distributions of profit left in Acom from this point are capital meaning that Owen and Jane can deduct any unused part of their capital gains tax (CGT) annual exemption (£12,000 for 2019/20) and pay tax on the balance at a maximum of 20%. Assuming Acom has £98,000 to distribute in total, Owen and Jane would each be liable to CGT on £49,000. If their CGT exemptions are available in full they would each have to pay tax of up to £7,400 (£49,000 - £12,000) x 20%) but it would be less if they were entitled to entrepreneurs’ relief (ER).
By comparison, if Acom distributed its profits before starting the winding up process, Owen and Jane would each be liable to income tax of at least £15,925 (£49,000 x 32.5%). By comparison the CGT bill is less than half that, but there’s still room for further tax saving.
Winding up costs
Usually, the tax advantage of capital distributions is only available when you appoint a liquidator to wind up your company. The trouble is a liquidator’s fees can be high and, depending on the value of your company, might significantly eat into or even outweigh the tax saving achieved.
Rather than paying a liquidator to wind up your company you could do it yourself informally by notifying Companies House of your intention. However, CGT treatment will only apply if the amounts available to distribute are no more than £25,000 - any more than that and the whole of any distribution is taxed as income.
Reduce the distributable amount
If your company’s net value is more than £25,000 you’ll need to reduce it before you can use the informal winding up tax break. That will require you to make distributions from your company on which you’ll have to pay income tax. Despite this you can still save on tax and costs. You’ll need to crunch the numbers to see if it’s worthwhile.
Example. Shaun is a higher rate taxpayer and the only shareholder of Bcom Ltd. It has distributable reserves of £35,000. Shaun could formally liquidate Bcom so that what he receives, after paying the liquidator’s fees of, say, £3,000, is liable to CGT. This would leave him with £28,000 after tax. If instead he paid a dividend of £10,000 and then applied to Companies House to dissolve the company, he would net £29,150. Not a massive tax saving but Shaun also avoids the time and red tape that goes with a formal liquidation.
Reduce the value of your company to £25,000 by making distributions to shareholders and informally winding up the company. This will save the cost of a liquidator’s fees. Plus, each shareholder can use their annual capital gains tax exemption to reduce the amount on which they pay tax on their share of the final £25,000 distributed from the company.
Make the most of the dividend allowance
The 2020/21 tax year comes to an end on 5 April 2021. The last few months of the year are a good time to undertake a review and to ensure that allowance for the year is not wasted.
Nature of the dividend allowance
One allowance that is available to all taxpayers, regardless of the rate at which they pay tax, is the dividend allowance. The allowance is set £2,000 for 2020/21.
Although called an ‘allowance’, the dividend allowance is more of a nil rate band. Dividends sheltered by the allowance are taxed at a zero rate of tax. However, the dividends covered by the allowance count towards band earnings.
Once the dividend allowance and any remaining personal allowance have been used up, any further dividend income (treated as the top slice of income) is taxed at the relevant dividend tax rate:
7.5 for dividends falling within the basic rate band;
32.5% for dividends falling within the higher rate band; and
38.1% for dividends falling within the additional rate band.
Personal and family companies
If you have a personal company and have sufficient retained profits, consider paying a dividend if you have not already done so to mop up your dividend allowance and any unused personal allowance. Although dividends are paid from profits which have already suffered corporation tax, the availability of the dividend allowance allows retained profits to be extracted without incurring any additional tax. A further benefit is that there is no National Insurance to pay on dividends.
In a family company scenario, making family members shareholders provides scope for family members to utilise their dividend allowances, allowing profits to be extracted in a tax-efficient manner.
There are some points to watch. Dividends can only be paid from retained profits and must be paid in proportion to shareholdings. However, the use of an alphabet share structure whereby each family member has a different class of shares (e.g. A shares for one person, B shares for another, and so on) provides the flexibility to declare different dividends for each person, depending on their available allowances and their marginal rate of tax.
Mr Wilson is a director of W Ltd. His wife and two adult daughters, Emily and Evie, are both shareholders. The shareholdings are as follows
Mr Wilson – 100 A Ordinary shares;
Mrs Wilson – 100 B Ordinary shares;
Emily Wilson – 100 C Ordinary shares
Evie Wilson – 100 D Ordinary shares.
Mr Wilson is a higher rate taxpayer. None of the family has used their dividend allowance for 2020/21.
Mr Wilson wishes to declare a dividend of £8,000 for 2020/21.
If he declares a dividend £80 per share for A ordinary shares only, he will receive a dividend of £8,000, of which the first £2,000 will be covered by the dividend allowance of £2,000. The remaining £6,000 will be taxed at the higher dividend rate of 32.5%, giving rise to a tax bill of £1,950.
However, if instead, he declares a dividend of £20 per share for A, B C and D Ordinary Shares, each member of the family will receive a dividend of £2,000, which will be sheltered by their dividend allowance and received tax-free. By taking this route, the family’s tax bill is reduced by £1,950.
Selling your main residence with land
Most people do not expect to pay capital gains tax when they sell their only or main home, particularly if the property has been their only home for their entire time that they owned it. However, what is less well known is that the exemption places a limit on the amount of garden that falls within the main residence exemption. This may catch out those who sell their main residence and have large gardens or land.
What is allowed?
The legislation allows grounds up to the ‘permitted area’ to fall within the main residence exemption. This is set at 0.5 of a hectare (1.24 acres). However, a larger area may be allowed where, 'having regard to the size and character of the dwelling’ this is required for the reasonable enjoyment of the property.
The case of Phillips v HMRC UKFTT 381 TC concerned the sale of the Phillips’ main residence, which had a garden of 0.94 of a hectare. As it was their main residence, the Phillips did not declare the gain to HMRC. HMRC investigated the disposal while checking SDLT returns in March 2017, having discovered that at 0.94 of a hectare, the grounds exceeded the permitted area of 0.5 of a hectare allowed by the legislation.
In considering whether the larger grounds were needed for the reasonable enjoyment of the property, recourse was made to previous decisions. These included the case of Longston v Baker 73 TC415, in which the taxpayer contended that land in excess of 0.5 of a hectare was needed to house and graze his horses. However, the judge noted that it was ‘not objectively required, i.e. necessary, to keep horses at houses in order to enjoy them as a residence’.
In the Phillips’ case, the Tribunal found in their favour, ruling that the land was required for the reasonable enjoyment of the property, which is large and in a rural area. However, as previous decisions show, it is far from a given that the Tribunal will always rule in the taxpayer’s favour when it comes to deciding whether land sold with a house falls within the main residence exemption.
Some caution is required when selling a property that has substantial grounds, particularly if some of the land is used for equestrian purposes. The purchaser will pay SDLT, and where this is at mixed property rather than residential rates, a review of the SDLT returns may trigger an investigation.
Doing up properties – Are you trading?
There can be money to be made buying a property in a dilapidated state, renovating it, and selling it for a profit. However, when it comes to tax, it is important to know whether the ‘profit’ element is a capital gain or a trading profit. This will determine how it is taxed and at what rate.
Trading or investment
The tax consequences will depend on whether the property is an investment or whether there is a trade. The question is whether you are a property developer or a property investor.
Much of it comes down to your intention when you bought the property. If the aim was to buy the property, do it up and then let it out, the property will count as an investment property. However, if the intention is to buy, renovate and sell at a profit, HMRC may regard you as trading. However, an intention to sell at a profit at some point in the future does not automatically mean you are trading. Also plans change, and a property purchased as a long-term investment might be sold after a relatively short period of time as a result of a change in personal circumstances.
Badges of trade
The concept of the ‘badges of trade’ has been developed from case law and provides something of a checklist which can be used to determine whether an activity is a trade or an investment. The six badges of trade are as follows:
1. The subject matter of the transaction.
2. The length of the period of ownership.
3. The frequency or number of similar transactions.
4. Reasons for the sale.
5. Motive when acquiring the asset.
Where there is a trade, the property will only be held for as long as it takes to do up and sell. A property developer is likely to develop more than one property, either simultaneously or in succession. Where there is a trade, the property will be sold to realise a profit; for an investment property, the sale may be triggered by other factors.
Case study 1
Paul inherits some money and invests in a property, which he plans to do up and rent out. He completes the renovations and rents out the property for six years before selling it to enable him to buy a larger family home.
The property was purchased as an investment and would be regarded as an investment property. The gain on sale would be liable to capital gains tax.
Case study 2
Mark sees a run-down property on the market and spots the opportunity to make a profit. He buys the property, spends six months renovating it, selling once complete, making a profit of £40,000. He invests the proceeds in another property to renovate and sell.
Mark would be treated as trading. His aim is to sell the properties at a profit. Consequently, he would be liable to income tax rather than capital gains tax on the profit.
Postponed VAT accounting from 1 January 2021
The Brexit transitional period comes to an end of 31 December 2020 and various changes come into effect from 1 January 2021. One of these changes is the introduction of postponed VAT accounting. This will affect you if you are a VAT-registered business and you import goods into the UK, particularly if you do not use duty deferment.
Nature of postponed VAT accounting
Under postponed VAT accounting, you declare and recover VAT on the same VAT return. This is beneficial as it means that you do not have to pay the VAT upfront and recover it later. Normal VAT rules continue to govern what can be reclaimed.
You can use postponed VAT accounting from 1 January 2021 if your business is registered for VAT in the UK and you import goods into Great Britain from anywhere outside the UK or into Northern Ireland from outside the UK and the EU.
There are no changes to the VAT treatment of goods moved between Northern Ireland and the EU, or in the way in which the VAT is accounted for.
Accounting for import VAT on your VAT return
You can account for import VAT on your VAT return if:
• you import goods for use in your business;
• you include your EORI number, which starts with ‘GB’ on your customs declaration; and
• you include your VAT number on your customer’s custom declaration if required.
If you use customs special procedures, you can account for the import VAT on your VAT return when you submit the declaration to release those goods into free circulation.
Completing your VAT return
The introduction of postponed VAT accounting means that there are some changes to the way in which you will complete your VAT return from 1 January 2021.
You will need to download a monthly statement which shows the total import VAT postponed for the previous month which you will need to include on your VAT return. There are also changes to what you need to enter in Boxes 1, 4 and 7.
• In Box 1, include the VAT due in the period on imports accounted for through postponed accounting.
• In Box 4, include VAT reclaimed in this period on imports accounted for through postponed accounting.
• In Box 7, include the total of all imports of goods shown on your online monthly statement, excluding any VAT.
Consignments not exceeding £135
Where the value of the consignment is less than £135, VAT will be collected at the point of sale rather than at the point of importation.
Reduced rate of VAT for hospitality and leisure
The hospitality and leisure industries have been severely affected by the Coronavirus pandemic. To help businesses in these sectors to get back on their feet, a reduced rate of VAT of 5% rather than the standard rate of 20% will apply to certain supplies for a limited period, from 15 July 2020 to 12 January 2021.
Food and drink supplied for consumption in the premises, for example by a restaurant or a bar, and hot takeaway food and beverages are normally liable for VAT at the standard rate of 20%. During the support period, the 5% rate will apply instead to:
• hot and cold food for consumption on the premises on which they are supplied;
• hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied;
• hot takeaway food for consumption off the premises on which it is supplied;
• hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied.
Hotel and holiday accommodation
For businesses supplying hotel and holiday accommodation, the 5% rate VAT applies during the support period to:
• supplies of sleeping accommodation in a hotel or similar establishment;
• certain supplies of holiday accommodation;
• charge fees for caravan pitches and associated facilities;
• charge fees for tent pitches and camping facilities.
Meals provided to guests in long-term holiday accommodation (more than 28 days) will also benefit from the reduced rate, but the hire of motor caravans will not.
Admission to attractions
The reduced rate of 5% also applies during the support period in respect of admission to certain attractions which would normally be liable for VAT at the standard rate. However, if the admission fee is exempt from VAT, this will take precedence over the 5% charge and the admission charge will remain exempt.
The temporary reduction will apply to admissions to shows, theatre, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events where these are not included in the existing cultural exemption.
Impact on flat rate scheme
VAT registered businesses using the flat rate scheme should note that some of the flat rate percentages have been reduced to take account of the temporary reduction in the rate of VAT.
The rent-a-room scheme allows those with a spare room in their home to let it out furnished and to receive rental income of £7,500 tax-free each year without the need to declare it to HMRC. Where more than one person receives the income, each can receive £3,750 tax-free. The limits are not reduced if the accommodation is let for less than 12 months.
The rent-a-room scheme can be used by anyone who lets a furnished room in their own to a lodger. They do no need to own their own home – it can also apply if they rent (but they should check with their landlord whether their lease allows this). The rent-a-room scheme can also be used by those running a guest-house or a bed-and-breakfast establishment and provide services, such as meals and cleaning, as well as accommodation.
The scheme is not available in relation to accommodation which is not in the individual’s main home or which is let unfurnished.
Where the rental receipts are £7,500 or less (or £3,750 or less where more than one person benefits from the rental income), the exemption is automatic. There is no need to tell HMRC about the rental income. Rental receipts are the rental income before deducting expenses, plus any charges made for services such as cleaning or meals.
Using the scheme where rental income exceeds the threshold
The rent-a-room scheme can also be used where the rental receipts exceeds the rent-a-room threshold (£7,500 or £3,750 as appropriate). Where this is a case, the taxable amount is simply the amount by which the rental receipts exceed the rent-a-room threshold. This approach will be beneficial if the rent-a-room threshold is more than actual expenses. However, where using actual figures will produce a loss, it is not beneficial to claim rent-a-room relief as this cannot create a loss and the benefit of the loss will be lost.
Where rental receipts are more than the rent-a-room threshold, a tax return must be completed. If the relief is to be claimed, this can be done by ticking the relevant box in the return.
The election can be made each year, depending on whether it is beneficial to do so.
Mary lets out her spare room to a lodger for £100 a week, earning her £5,200 a year.
As the receipts are less than £7,500, she takes advantage of the automatic exemption for rent-a-room relief. She does not have to declare the income to HMRC.
Polly lets out a room in her home for £10,000 a year. She incurs expenses of £1,000 a year.
If she does not claim rent-a-room relief, she will pay tax on her profit of £9,000. However, by claiming rent-a-room relief, she is only taxed to the extent that her rental income exceeds £7,500. She is therefore able to reduce her taxable profit from £9,000 to £2,500 by claiming the relief.
Tax efficient remuneration using pension contributions
Despite on-going speculation that the government will intervene at some point, for now, making contributions into a pension scheme continues to be a particularly tax-efficient form of savings.
Nearly everyone is entitled to receive tax relief on pension contributions up to an annual maximum - regardless of whether they pay tax or not. The maximum amount on which a non-taxpayer can currently receive basic rate tax relief is £3,600. So an individual can pay in £2,880 a year, but £3,600 will be the amount actually invested by the pension provider.
Moreover, subject to certain conditions, tax relief is still currently available on pension contributions at the highest rate of income tax paid, meaning that basic rate taxpayers get relief on contributions at 20%, higher rate taxpayers at 40%, and additional rate taxpayers at 45%. In Scotland, income tax is banded differently, and pension tax relief is applied in a slightly different way.
The total amount of tax relief available on pension contributions is calculated with reference to ‘relevant UK earnings’. If you own a limited company and you take both salary and dividends, the dividends do not count as ‘relevant UK earnings’. This means that if you take a small salary and a large dividend from your company, your pension tax relief limit will be low - tax charges will apply if the limit is exceeded.
If you want to increase your tax-free contributions limit, you could consider either increasing the amount of salary you take from the company (to increase your 'relevant UK earnings'), or making the pension contribution directly from your company as an employer contribution. Making an employer contribution has additional advantages.
Employer contributions - Qualifying employer contributions count as allowable business expenses, so the company could currently save up to 19% in corporation tax. In order to qualify for a deduction, the pension contributions must be ‘wholly and exclusively’ for the purposes of business. HMRC will check for evidence that this is the case, for example whether other employees are receiving comparable remuneration packages.
Another advantage of making a company contribution is that employer National Insurance Contributions will not be payable on the contributions made, saving the company up to 13.8% on the contribution amount.
This means that the company can potentially save up to 32.8% by paying money directly into your pension rather than paying money in the form of a salary. Depending on your circumstances, this may or may not be more beneficial to you rather than paying personal pension contributions.
Employee benefits - An employer-provided pension can be a significant benefit. Employers can make contributions to occupational or personal pension plans without triggering a tax charge. This can significantly enhance an employee’s remuneration package and is a tax efficient way of rewarding employees. It is also worth noting that, subject to a couple of conditions, there is a tax exemption covering the first £500 worth of pension advice paid for by an employer. The exemption covers advice not only for pensions, but also on the general financial and tax issues relating to pensions.
Pension inequality - The government is currently reviewing feedback from a consultation on pensions tax relief administration, particularly in relation to an anomaly in the tax rules whereby people on low incomes may pay 25% more for their pension contributions due to the way their employers’ pension scheme operate. It is likely that there will be some modification to the rules to iron out this issue. Whether there will be wider-ranging changes or restrictions on pensions tax relief remains to be seen, but it is recommended that anyone considering topping up their pension pot should think about doing it sooner rather than later.
Make the most of your spare time
In the current economic climate, many people are looking for ways to increase household income. The trading allowance may be particularly useful to employees who also have small part time earnings from self-employment as it enables them to receive tax-free income of up to £1,000 with no requirement to report it to HMRC.
The allowance has already proved very popular with individuals with casual or small part time earnings from self-employment, for example, people working in the ‘gig economy’ (Deliveroo workers and such like), or small scale self-employment such as online selling (maybe via eBay or similar). In broad terms, it means that:
• individuals with trading income of £1,000 or less in a tax year will not need to declare or pay tax on that income; and
• individuals with trading income of more than £1,000 can elect to calculate their profits by deducting the allowance from their income, instead of the actual allowable expenses.
There are a few practical implications of the allowance to note. For example, where actual expenses are less than £1,000, deducting the trading allowance will be beneficial, whereas if actual expenses are more than £1,000, deducting these expenses will give a lower profit figure, and ultimately a lower tax bill. In addition, where income is less than £1,000, but the individual makes a loss, an election for the allowance not to apply may be made. In this case, the loss in is dealt with in the usual way with the loss being carried forward against future property profit. The details will need to be declared on the tax return. This in turn, means that loss relief is not wasted.
Example – Income less than £1,000
Peter enjoys cycling and does all his own bike repairs. In his spare time he services bikes for friends and neighbours for a small fee. During the year 2019/20 he received income of £600 from this source, and his expenditure on bike parts was £150. As Peter’s trading income is less than £1,000, he does not need to report it to HMRC nor does he need to pay tax or national insurance contributions (NICs) on it.
Example – Income exceeding £1,000
Jane enjoys baking and makes celebration cakes to order in her spare time. In 2019/20, her income from cake sales was £1,600 and she incurred expenses of £400. As Jane’s expenditure is less than £1,000, she will be better off claiming the trading allowance. Her taxable profit will be £600 (£1,600 less the trading allowance of £1,000).
The trading allowance is available even if the individual has only traded for part of the tax year. For example, if trade started in February 2021, the individual would still be able to claim the full amount of the trading allowance of £1,000 as if they had been trading for the entire 2020/21 tax year.
Although the trading allowance may work well for many small scale traders, care must be taken where an individual’s main source of income is from self-employment and their secondary income is from a completely separate small scale business. HMRC will combine income from all trading and casual activities when considering whether the trading allowance applies. In this type of situation, where the allowance is claimed, the individual will not be able to claim for any expenditure, regardless of how many businesses they have and how much are the total business expenses.
Student loan repayments
A final point worth noting is that where an individual is claiming the trading allowance and they are also repaying a student loan, then the income used to calculate their student loan repayments will be the amount after the trading allowance has been deducted.
More time to pay back deferred VAT and tax
At the start of the pandemic, VAT registered businesses were given the option of deferring payment of any VAT that fell due in the period from 20 March 2020 to 30 June 2020. Self-assessment taxpayers were also given the option of delaying their second payment on account for 2019/20, which was due by 31 July 2020. In his Winter Economy Plan, the Chancellor extended the deadlines by which the deferred tax must be paid, giving further help to those struggling to pay their tax bills as a result of Coronavirus.
VAT-registered businesses which took advantage of the opportunity to delay paying VAT that fell due between 20 March 2020 and 30 June 2020 were originally required to pay the deferred VAT by 31 March 2021. However, there is now another option for those for whom this presents a challenge, and they can instead pay the deferred VAT in smaller equal instalments up to the end of March 2022. Those wishing to take advantage of the instalment option will need to opt into the scheme; failure to do this will mean that the VAT owed will need to be repaid by 31 March 2021. Where businesses are able, they can if they so wish pay the deferred VAT in full by 31 March 2021.
Depending on the business’ VAT quarter dates, deferred VAT will relate to the quarter ending 29 February 2020, the quarter ending 31 March 2020 or the quarter ending 30 April 2020. VAT due after 30 June 2020 (i.e. for the quarter to 31 May 2020 and subsequent quarters) must be paid in full and on time. Where direct debits were cancelled, these should be reinstated if this has not already been done.
Regardless of whether the instalment option is chosen or not, the deferred VAT will need to be paid in addition to the usual VAT payments, and it is prudent to budget for this.
Under the original proposals, self-assessment taxpayers could delay paying their second payment on account for 2019/20 due by 31 July 2020 and instead pay it by 31 January 2021, along with any balancing payment due for 2019/20 and the first payment on account due for 2020/21. For some taxpayers who have been affected financially by the pandemic, this will be something of a stretch. In recognition of this, self-assessment taxpayers who are finding it difficult to pay what they owe can set up an automatic time to pay arrangement online, as long as they do not owe more than £30,000 in tax.
Winding up a business
The decision of how and when to cease a business is usually prompted by a combination of three main factors - market conditions, market forces, and life changes. Unfortunately, many businesses will have been adversely affected by the coronavirus outbreak and some will now be facing closure.
Under the self-assessment regime, the final tax year in which a business is taxed is the tax year in which it actually ceases to trade, so if the business stops trading on 30 September 2020, the final year of assessment will be 2020/21. The tax bill for the year before that is based on the accounting year that ended in the tax year before trading stopped (so if accounts are made up to 30 June each year, the tax bill for 2019/20 is based on profits for the year that ended on 30 June 2019). Profits (if there are any) from the accounting date in the previous tax year (30 June 2019 in this example) to the date on which the business finally stops (30 September 2020), are then charged to tax for the tax year in which the cessation occurs (2020/21). Therefore, that final period may be more or less than 12 months long (15 months in this example – 1 July 2019 to 30 September 2020).
Example - Jack has been trading for many years and makes his accounts up to 30 September each year. He narrows his options to stop trading to one of two dates:
• 30 June 2020
• 31 December 2020
Jack’s annual tax bill is calculated as normal up to and including the 2019/20 tax year (based on accounts for the year ending on 30 September 2019). His final tax bill is for 2020/21 as this is the year he ceases to trade. So, depending on the date he chooses to stop trading, his final tax bill is based on profits for:
• 9 months from 1 October 2019 to 30 June 2020, or
* 15 months from 1 October 2019 to 31 December 2020
If Jack had ‘overlap profits’ when he started his business, and he hasn’t used them during the lifetime of his business (for example, on a change of accounting date), he can claim relief for them against his final year’s tax bill.
Terminal loss relief - A loss in the last 12 months of trading can usually be offset against trading income of the tax year in which the business permanently ceases and the three previous years. Terminal loss relief is given as far as possible against the profits of later years before earlier years, even if the result is that personal tax allowances are wasted. So, if there is a terminal loss in 2020/21, it is set first against income from any other sources in 2020/21 (for example, against employment income). If any loss is left over after it has been set against other income, the balance is set against any income in 2019/20, then 2018/19, and finally against 2017/18. HMRC will issue a refund of tax overpaid or set the refund against any outstanding tax bills.
The time limit for making a claim for terminal loss relief is four years from the end of the tax year in which the loss arises.
Deregistering for taxes - HMRC must be notified when a business ceases. This may include deregistering for Class 2 NICs and VAT.
For VAT-registered businesses, deregistration must be undertaken within 30 days of ‘ceasing to make supplies’ by submitting form VAT 7 (included in the HMRC VAT Notice 700/11: Cancelling your registration) to HMRC. Once HMRC are satisfied that registration should be cancelled, they will confirm the effective date and issue a final VAT return. The business will need to account for VAT on stock and certain assets on hand at the close of business on the day the registration is cancelled.
Recent issues for EMI schemes
When it was first introduced in 2000, the Enterprise Management Incentive (EMI) scheme had an initial life expectancy of around five years, but arrangements proved to be so popular with employers and employees alike that the scheme is still going strong some twenty years on.
In broad terms, the EMI is a tax-advantaged share option scheme designed for smaller companies who are looking to attract and retain key staff by rewarding them with equity participation in the business. The scheme is particularly popular with smaller, entrepreneurial companies that might not be able to match the salaries paid by larger firms.
A share option is a right to acquire shares in a company, on terms set out in an option agreement. This will specify how many shares an employee may acquire, how much he or she will have to pay for the shares, and when the shares can be acquired through exercise of the option. Option exercise may occur, for example, after a specified period of employment, on achieving prescribed performance targets, or the sale of the company.
EMI is open to companies with gross assets of £30m or less, and with fewer than 250 full time equivalent employees that carry on a qualifying trade. It enables them to offer share options worth up to £250,000 over a three-year period as an incentive. If the shares are bought at the market rate at the time the options were granted, employees pay no income tax or national insurance on the difference between what the shares are worth when acquired compared to the price paid. Capital gains tax will be payable on any gains made when the shares are subsequently disposed of.
Example - David is given an EMI option to acquire a 3% shareholding in his employer’s company for its market value of £10,000. Four years later he exercises the option when the shares are worth £100,000, and eventually sells them for £150,000 when the company is taken over.
David will not pay any tax when the option is granted or when he exercises it. When the shares are sold, David will pay capital gains tax on his gain of £140,000 (£150,000 sale proceeds less £10,000 option exercise price). Ignoring any reliefs he may have available, capital gains tax will be charged at a rate of 10%, so tax of £14,000 will be payable.
Covid-19 and the working time requirement - One of the qualifying criteria for EMIs is that employees and directors need to be engaged to work at least 25 hours per week for their company or group or, if less, for at least 75% of their working time. So a part time employee can qualify by working say two days a week for the company, provided that work elsewhere does not amount to more than 25% of the whole.
Some participants in EMI schemes have been unable to meet the working time requirement because of reasons connected to the Coronavirus pandemic.
HMRC have confirmed that if an employee would otherwise have met the scheme requirements but did not do so for reasons connected to the Coronavirus pandemic, the time which they would have spent on the business of the company will count towards their working time.
HMRC accept the following as reasons for which an employee may have been unable to meet the working time requirements - furlough, working reduced hours, unpaid leave.
In all cases the reason must be attributable to the current Coronavirus pandemic and the period must have begun on or after 19 March 2020.
Employers and employees must keep evidence to show that there is a link to the Coronavirus pandemic.
EMI post-transition - HMRC have also recently confirmed that EMI schemes will continue to be available after the Brexit transition period ends on 31 December 2020. Previously, EMI schemes were approved under EU state aid rules and in February 2020 HMRC could only confirm that EMI would be recognised until the end of the transition period. However, HMRC have now stated that schemes will operate from 1 January 2021 under UK law.
Student loan repayments: Increased thresholds from April 2021
Repayment of student loans is a shared responsibility between the Student Loans Company (SLC) and HMRC. Employers have an obligation to deduct student loan repayments in certain circumstances and to account for such payments ‘in like manner as income tax payable under the Taxes Acts’.
There are two plan types for student loan repayments, which have different repayment thresholds. From April 2021, the thresholds are as follows:
• plan 1 with a 2021-22 threshold of £19,895 (£1,658 a month or £382 per week) rising from £19,390 in 2020-21); and
• plan 2 with a 2021-22 threshold of £27,295 (£2,275 a month or £525 per week) rising from £26,575 in 2020-21).
Plan 1 loans are pre-September 2012 Income Contingent Student Loans and repayments will start when the £19,895 threshold is reached. Loans taken out post-September 2012 in England and Wales become eligible for repayment when the higher threshold of £27,295 is reached. Previously plan 2 loans have been repaid outside of the payroll directly to the SLC, but from April 2016 they are to be calculated and repaid via deduction from an employer’s payroll. This means that employers and payroll software must be capable of coping with both types of plans.
From 6 April 2021 HMRC are introducing a new plan type for Scottish Student Loans (SSL) known as Plan 4. The Plan 4 threshold will be £25,000. Student Loan deductions will continue to be calculated at 9% on earnings above the Plan 1, Plan 2 or Plan 4 threshold.
Post-graduate loans - Repayment of postgraduate loans (PGL) via PAYE commenced from April 2019. Broadly, if an individual has a PGL, HMRC will send their employer a Postgraduate start notice (PGL1) to ask them to start taking PGL deductions. Individuals may also be liable to repay a Student Loan Plan Type 1 or 2 concurrently with PGL. HMRC will let their employer know this by continuing to send the normal Student Loan start (SL1) and Student Loan stop (SL2) notices as well as PGL1s and PGL2s.
The Postgraduate Loan threshold will remain at its current level of £21,000 for 2021-22. Earnings above £21,000 will continue to be calculated at 6%.
Repayment - Broadly, an employer must start making student loan deductions from the next available payday using the correct plan type if any of the following apply:
• a new employee’s P45 shows deductions should continue – the employer will need to ascertain which plan type the employee has;
• a new employee confirms they are repaying a student loan – again, the employer will need to confirm the plan type;
• a new employee completes a starter checklist showing they have a student loan - the checklist will tell the employer which plan type to use; or
• HMRC issues form SL1 (Start Notice), which will tell the employer which plan type to use.
Employers are not responsible for handling employees’ student loan queries – the employee must contact SLC for this (https://www.gov.uk/government/organisations/student-loans-company).
While the amount you pay is calculated based on your pre-tax income above £26,575 (£27,295 from April 2021), the money is taken after you've paid tax.
Deductions are rounded down to the nearest pound. Deductions are non-cumulative, and so employers can ignore the question of amounts already deducted by a former employer. HMRC provide tables to assist employers in calculating the deduction each pay day, which (because of rounding) may not be exactly 1/52 of the annual amount.
If an employee has two jobs, the employer does not need to be concerned with the employee’s other income, but should calculate the deduction based only on amounts paid by him. However, if the employee has two employments with the same employer, these should be aggregated for student loan purposes if they are aggregated for NIC purposes.
Employers are required to collect student loan repayments through the PAYE system by making deductions of 9% from an employee’s pay to the extent that earnings exceed the relevant threshold for each plan type, each year (see above).
Each pay day is looked at separately, and so repayments may vary according to how much the employee has been paid in that week or month. If income falls below the starting limit for that week/month, the employer should not make a deduction.
Taxpayers who make repayments through PAYE can swap to repaying by direct debit in the last 23 months of their loan if they so wish. SLC will normally contact individuals shortly before this time to offer this option. This payment method enables account holders to choose a suitable monthly repayment date and ensures that they do not repay too much.
If an employee makes additional student loan repayments direct to SLC, they will have no effect on the size of the repayments made through the payroll – the employer will continue to deduct 9% of earnings above the threshold. The employee will, of course, pay off the loan more quickly.
Reclaiming SSP for periods of self-isolation
The Coronavirus Statutory Sick Pay Rebate Scheme allows smaller employers to reclaim some or all of the Statutory Sick Pay (SSP) paid to employees who are absent from work due to a Coronavirus-related absence.
An employer is eligible to use the scheme if the employer had fewer than 250 employees across all their PAYE payroll schemes on 28 February 2020 and has paid sick pay to an employee who was absent from work as a result of a Coronavirus-related absence.
The ability to reclaim SSP is not limited to that payable to employees with Coronavirus symptoms; it also applies to SSP paid to employees who are required to shield or to self-isolate as a result of Covid-19.
Reclaiming SSP related to periods of self-isolation
An employee is eligible for SSP if:
they are self-isolating because someone that they live with has Coronavirus symptoms or has tested positive for Covid-19;
they have been told to isolate by the NHS or a public health body because they have been in contact with someone who has tested positive for Covid-19; or
they have been notified by the NHS to self-isolate before surgery for up to 14-days.
SSP payable from first day of sickness
The SSP rules have been relaxed in relation to Coronavirus absences and employees can receive SSP from the first day of a Coronavirus-related absence – the three waiting days do not need to be served before SSP is payable (as is the case for non-Covid absences).
As far as periods of self-isolation are concerned, SSP can be paid from the first day that the employee is off work because they are self-isolating where the period of self-isolation:
started on or after 13 March 2020 where someone they live with has Coronavirus symptoms or is self-isolating;
started on or after 28 May 2020 where the employee was notified by the NHS that have come into contact with someone who tested positive for Coronavirus; and
started on or after 26 August 2020 where the employee was notified by the NHS of the need to self-isolate prior to surgery.
Where an employee is required to self-isolate prior to surgery, only the days of self-isolation count as a Coronavirus-related absence. Any SSP paid for the day of the surgery and any recover days is not related to Coronavirus and cannot be reclaimed.
Eligible employers can reclaim up to two weeks’ SSP per employee where the employee has been absent from work due to Coronavirus, including where the employee is self-isolating or shielding. The claim can cover more than one period of absence, but where an employee has been absent from work for more than two weeks due to Coronavirus, the claim is capped at two weeks’ SSP – the employer must bear the cost of any further SSP paid.
Claims can be made online via the portal on the Gov.uk website.
Employees - expenses for working from home
The Covid-19 pandemic has meant that more employees worked from home than ever before. This trend looks set to continue following the Government’s latest advice to continue to work from home where you can do so. Further, many business plan to embrace flexible working beyond the end of the pandemic, allowing employees to work from home some or all of the time where their job allows this.
However, while working from home may save the cost of the commute, there are expenses associated with working from home. Is the employee able to claim tax relief where these are not met by the employer?
Additional household expenses
As a result of working from home, an employee will incur the cost of additional household expenses, such as additional electricity and gas costs, additional cleaning costs, and such like. During the Covid-19 pandemic, HMRC confirmed that employees are able to claim a deduction for additional household expenses attributable to working from home of £6 per week without supporting evidence. Where the actual additional costs are more than £6 per week, tax relief can be claimed for the full amount, as long as the employee can substantiate the claim. For example, this could be done by comparing bills prior to working from home with those during the working at home period.
Employees may have needed to buy office equipment, such as a computer and a printer, to enable them to work from home. Where these costs are not reimbursed by the employer, HMRC have confirmed that employee can claim a tax deduction for the actual expenditure incurred, as long as it was incurred ‘wholly, exclusively and necessarily’ in the performance of the duties of the employment.
To claim relief for other expenses employees will need to pass the general test that the expense was incurred ‘wholly, necessarily and exclusively’ in the performance of the duties of the employment. Care must be taken to distinguish between expenditure which puts the employee in the position to do their job as opposed to being incurred in the performance of it. Childcare, for example, would fall into the former category.
Relief is also denied for dual purpose expenditure, such as an office chair which enables the employee to be comfortable while working, as this fails the ‘exclusively’ part of the test.
Where the conditions for tax relief are met, a deduction can be claimed on form P87 (available on the Gov.uk website) or, where the employee completes a tax return, on the employment pages of the return.
Reasonable excuse – does coronavirus count?
HMRC may allow an appeal against a penalty if the taxpayer has a ‘reasonable excuse’ for why, say, they filed a return late or paid their tax late.
A ‘reasonable excuse’ is something that prevented a taxpayer from meeting a tax obligation despite the fact that they took reasonable care. HMRC take a hard line as regards what they constitute as a ‘reasonable excuse’; providing the following examples of ‘acceptable’ reasonable excuses:
• the taxpayer’s partner or another close relative died shortly before the tax return or payment deadline;
• an unexpected stay in hospital that prevented the taxpayer from dealing with their tax affairs;
• a life threatening illness;
• the failure of a computer or software just before or while the taxpayer was preparing their tax return;
• service issues with HMRC;
• a fire, flood or theft which prevented the completion of a tax return;
• postal delays which could not have been predicted; or
• delays relating to a disability.
By contrast, HMRC cite the following example of excuses that they will not accept as a valid reason for failing to meet a tax obligation:
• relying on someone else to send the return and they failed to send it;
• a cheque or payment bounced due to insufficient funds;
• the taxpayer found HMRC’s online system too complicated;
• the taxpayer did not receive a reminder from HMRC; or
• the taxpayer made a mistake on their return.
Impact of coronavirus
HMRC have confirmed that they will consider coronavirus as a reasonable excuse. Where claiming this, the taxpayer should explain in their appeal how they were affected by coronavirus. As a rule of thumb, HMRC are more likely to accept it as a reasonable excuse where the virus led to one of the circumstances listed above as ‘acceptable reasonable excuses’. Thus the contention that the taxpayer had a reasonable excuse for failing to meet a tax obligation would be strong if a partner or close relative (such as a parent) died of Coronavirus around the tax deadline, the taxpayer was seriously ill with the virus or was in hospital unexpectedly.
Where the taxpayer appeals on the grounds that they had a reasonable excuse for failing to file a return or pay a tax bill, they should file the return or pay the bill as soon as they are able after the reason for the reasonable excuse has been resolved.
Auto-enrolment - Re-enrolment & re-declaration
The Covid-19 pandemic has introduced many challenges for employers. However, despite the pandemic, their responsibilities in relation to auto-enrolment remain the same. The employer’s on-going duties include their re-enrolment and re-declaration obligations.
Every 3 years, the employer must put certain members of staff back into their auto-enrolment pension scheme and complete a declaration to tell the Pensions Regulator that they have done so. This is known as re-enrolment and re-declaration.
The key date is the third anniversary of the employer’s staging date or start date. Thereafter, the re-enrolment and re-declaration processes must be undertaken at three-year intervals.
Under re-enrolment, the employer must check:
whether they have staff to put back into the pension scheme and re-enrol them; and
write to staff who have been re-enrolled.
To do this, the employer will need to assess staff who have left the scheme or who have reduced their contributions.
Staff must be enrolled in a pension scheme automatically if:
they are aged between 22 and State Pension Age.
they earn over £10,000 a year (£833 a month, £192 a week).
If staff who meet the above criteria have previously opted out, they need to be re-enrolled.
Staff who need to be re-enrolled should be put back into the pension scheme within 6 weeks of the re-enrolment date. If this date is missed, it should be done within 6 weeks of the date on which staff were assessed.
If an employee does not want to be a member of the scheme, they can opt out. However, they must be re-enrolled if they are eligible at the re-enrolment date; once re-enrolled they can opt out. Opting out lasts only until the next re-enrolment date, at which time they must be put back in (but can then opt out again if they want to). Employers must re-enrol eligible staff even if they know they want to opt out.
Once staff have been re-enrolled, the employer must deduct employee contributions from their pay and pay them over to the scheme with the employer contributions.
The employer must write to staff who have been re-enrolled to let them know, and also to inform them of the contributions that will be paid and that they can opt out if they want to.
The final stage of the re-enrolment and re-declaration process is to submit the re-declaration of compliance. This has to be done regardless of whether or not staff have been put back into the pension scheme.
The re-declaration of compliance is an online form which confirms to the Pensions Regulator the employer has met their legal obligations in relation to auto-enrolment. The re-declaration of compliance must be filed no later than 5 months from the third anniversary of the duties start date, or staging date, as appropriate. The deadline is the same regardless of whether staff within 6 weeks are assessed within of the re-enrolment date, or at a later date.
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