Enjoy a tax-free Christmas bash

Follow the outline below to ensure that the cost of your annual staff party will not create tax issues for you or your staff.

  1. The event must be open to all employees at a specific location.
  2. An annual Christmas party, or other annual event offered to staff, generally is not taxable on those attending, provided that the average cost per head of the functions does not exceed £150 p.a. (including VAT). The guests of staff attending are included in the head count when computing the cost per head attending.
  3. All costs must be considered, including the costs of transport to and from the event, accommodation provided, and VAT. The total cost of the event is divided by the number attending to find the average cost. If the limit is exceeded then individual members of staff will be taxable on their average cost, plus the cost for any guests they were permitted to bring.
  4. VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event, the input tax should be apportioned, as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

The loan charge controversy continues

The following press release was published by HMRC last month. Extracts are reproduced below:

Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), will lead an independent review of the Loan Charge…

The review will consider whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.

The disguised remuneration Loan Charge was introduced to tackle contrived schemes where a person’s income is paid as a loan which does not have to be repaid.

Disguised remuneration loan schemes were used by tens of thousands of people, and concerns have been raised about the use of the Loan Charge as a way of drawing a line under these schemes. The government is clear that disguised remuneration schemes do not work and that their use is unfair to the 99.8 per cent of taxpayers who do not use them.

The Treasury has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self-Assessment deadline.

We will report on this issue as soon as the results of this review are published.

Tax Diary October/November 2019

1 October 2019 – Due date for Corporation Tax due for the year ended 31 December 2018.

19 October 2019 – PAYE and NIC deductions due for month ended 5 October 2019. (If you pay your tax electronically the due date is 22 October 2019.)

19 October 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2019.

19 October 2019 – CIS tax deducted for the month ended 5 October 2019 is payable by today.

31 October 2019 – Latest date you can file a paper version of your 2018-19 self-assessment tax return.

1 November 2019 – Due date for Corporation Tax due for the year ended 31 January 2019.

19 November 2019 – PAYE and NIC deductions due for month ended 5 November 2019. (If you pay your tax electronically the due date is 22 November 2019.)

19 November 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2019.

19 November 2019 – CIS tax deducted for the month ended 5 November 2019 is payable by today.

Do you need to file a tax return?

The following guidelines are reproduced from the government’s website:

You must send a tax return if, in the last tax year (6 April to 5 April), you were:

  • self-employed as a ‘sole trader’ and earned more than £1,000
  • a partner in a business partnership

You will not usually need to send a return if your only income is from your wages or pension. But you may need to send one if you have any other untaxed income, such as:

  • money from renting out a property
  • tips and commission
  • income from savings, investments and dividends
  • foreign income

Other reasons for sending a return

You can choose to fill in a tax return to:

  • claim some Income Tax reliefs
  • prove you’re self-employed, for example to claim Tax-Free Childcare or Maternity Allowance

If your income (or your partner’s, if you have one) was over £50,000, you may need to send a return and pay the High Income Child Benefit Charge.

Unfortunately, this is just the tip of the iceberg. For example, you may have to submit a return if you have made significant capital gains in a tax year.

If you are at all uncertain if you do need to file, please call. There are significant penalties for failing to register and submit a return. The deadline to register for the tax year 2018-19 is imminent, 5 October 2019, and so action should not be delayed.

If your circumstances have only recently changed – during the current 2019-20 tax year – you have more time, but it is worth getting the registration process completed so you can start to plan for any tax payments that may fall due 2020 and beyond.

All is not lost

If your business makes a trading loss its ability to survive the loss will depend on a number of issues. They include:

  • Did your business have sufficient reserves to absorb the loss?
  • If not, are the business owners able to introduce new capital to cover the losses? Or,
  • Are the business bankers willing to step in and support the business with additional funding?

In all cases, due regard will need to be made to the reasons for the loss and how likely it may be that the losses will continue.

Clearly, planning for the management of losses is critical; digging into the reasons for the loss may reveal that the company has little chance of re-establishing profits or that the loss was occasioned by temporary factors and a clear path back to profitability can be reasonably expected.

Tax planning for the use of losses is also a factor that needs to be considered. Can losses be utilised in such a way that refunds of previously paid tax can be recovered?

Whilst this may only produce modest refunds for companies, corporation tax rates are below 20%, self-employed business owners – particularly those who have paid income tax at the higher rates of 40% or 45% – may be able to recover significant cash refunds to offset the effects of qualifying trading losses.

Again, planning is critical to ensure that any claims for loss relief are not lost. For example, there are annual limits to the amount of certain reliefs that can be claimed and the self-employed must take care that loss claims do not result in a waste of personal tax allowances.

If your management accounts reveal that your business is making losses, please contact us sooner rather than later so we can help you develop strategies to minimise the down-side effects on your business.