What are your tax planning options for 2018-19?

Options for adopting 99% of tax planning opportunities for 2018-19 ends on 5 April 2019, just a couple of months away.

This applies equally to individuals and all businesses with an accounting year end close to, but prior to 5 April 2019.

More importantly, this planning option applies to all taxes: Income Tax, Capital Gains Tax and Corporation Tax; and in some cases, to National Insurance and VAT.

Organise a tax planning review now.

If your personal or business tax affairs are complex, make sure you avail yourself of this moment of reflection before 5 April 2019. Once the date is passed, there is no chance the clock can be turned back.

2019 will likely be marked out as the year when our present relationship with the rest of Europe changes, once again adding to the usual pressures faced by UK businesses. There has never been a more opportune moment to take time out from running your business to consider your planning options for the current tax year.

As time is limited please call now to discuss your options.

What can you give away before the end of the tax year?

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’.

You can carry any unused annual exemption forward to the next year – but only for one year.

Each tax year, you can also give away:

  • wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
  • normal gifts out of your income, for example Christmas or birthday presents – you must be able to maintain your standard of living after making the gift
  • payments to help with another person’s living costs, such as an elderly relative or a child under 18
  • gifts to charities and political parties

You can use more than one of these exemptions on the same person – for example, you could give your grandchild gifts for her birthday and wedding in the same tax year.

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you have not used another exemption on the same person.

What is the government doing to prepare us for Brexit?

According to a recent announcement on the GOV.UK website, preparations include:

  • Recruitment of 700 new staff to work on EU Exit policy using additional funding allocated by HM Treasury for Brexit preparedness.
  • Passing of new legislation to lay the groundwork for our future outside the EU with 57 out of 63 required statutory instruments required by Exit day, including new laws for a nuclear safeguards regime that will maintain the UK industry’s ability to trade in the nuclear sector while ensuring the UK remains on track to meet its international obligations on day one of exit.
  • Laying of legislation and the putting in place of new measures to ensure a robust and effective product safety and metrology regime post-Exit by the Office for Product Safety and Standards.
  • The publication of 28 technical notices, including oil and gas, climate change, company law and state aid. These will continue to be updated. These notices also include guidance about what actions businesses need to take in order to carry on exporting and importing a range of goods and services,
  • Continuing to work closely with the UK research community to maintain collaboration with the EU while laying legislation to ensure laws governing areas like employment rights and renewable energy remain world-leading after we leave.
  • Retaining a general system for recognition where UK regulators will be required to recognise EEA and Swiss qualifications which are of an equivalent standard to UK qualifications in scope, content and level.
  • Working with Ofgem, the Northern Ireland Utility Regulator and interconnector operators to put in place arrangements that aim to ensure that electricity and gas continue to flow across borders through interconnectors.
  • Signing Nuclear Cooperation Agreements (NCA) with Australia, Canada and the United States. The NCAs allow the UK to continue civil nuclear cooperation when current European Atomic Energy Community (Euratom) arrangements cease to apply in the UK.
  • Protecting our climate ambition by taking steps to ensure that, if we leave the EU Emissions Trading Scheme, on day one companies will still have to report their carbon emissions and there will be a carbon tax of equivalent impact – to make sure that these important emissions don’t increase as a result of a no deal scenario.
  • Publishing a package of secondary legislation in December to ensure our energy laws function effectively after exit day, including: European Network Codes, Electricity and Gas Acts, and EU regulations under the Third Energy Package.
  • £92 million of funding work on the development of options for a UK Global Navigation Satellite System; and
  • Working with Cabinet Office, DExEU and other departments to ensure all business sectors are appropriately informed on all major issues.

Tax Diary February/March 2019

1 February 2019 – Due date for Corporation Tax payable for the year ended 30 April 2018.

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

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

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

1 March 2019 – Due date for Corporation Tax due for the year ended 31 May 2018.

2 March 2019 – Self assessment tax for 2017/18 paid after this date will incur a 5% surcharge.

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

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

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

Government fiddles over Brexit

Leaving aside the fact that there were no violins available, it’s interesting to seek a comparison between the supposed musical antics of Nero in AD64 as Rome burned and our government, preoccupied with important political matters as British industry slips ever closer to the cliff edge of a no-deal Brexit.

There are just under 60 days left until the present withdrawal deadline is reached, 29 March 2019.

Last month, HMRC published an update for businesses on what to do before 29 March in the event that we disengage from the EU with no agreement.

They suggest that there are three actions you should be considering now:

According to HMRC this is what you should do

 

  1. Register for a UK Economic Operator Registration and Identification (EORI) number at www.gov.uk/hmrc/get-eori. You’ll need an EORI number: to continue to import or export goods with the EU after 29 March 2019, if the UK leaves the EU without a deal; before you can apply for authorisations that will make customs processes easier for you – we’ll tell you more about applying for these early next year.
  2. Decide if you want to hire an agent to make import and/or export declarations for you or if you want to make these declarations yourself (by buying software that interacts with HMRC’s systems). If you want to: declare through an agent, contact one to find out what information they’ll need from you; use software to make declarations yourself, talk to a software provider to make sure that their product meets your needs, depending on whether you import, export or both.
  3. Contact the organisation that moves your goods (for example, a haulage firm) to find out if you will need to supply additional information to them so that they can make the safety and security declarations for your goods, or whether you will need to submit these declarations yourself.

Readers in Northern Ireland should take note that the instructions are slightly different.

Are your contractors disguised employees

What is a disguised employee? Very definitely, it is not an individual holding a clock card in fancy dress. It is contractor, usually in the guise of a limited company, that is undertaking work as if an employee, but more importantly, is being paid as a business contractor: this saves the “employer” paying National Insurance and gives the employee/contractor opportunities to apply some useful tax planning.

What do HMRC make of this?

Unsurprisingly, HMRC were not enamoured of this tactic and way back in 2000 they introduced the notorious IR35 legislation. In effect, IR35 dictates that where certain criteria are met the contractor has to treat his income from contracts where he or she is basically an employee, as if they were a salary, thus precluding any tax or NIC advantages for the contractor.

The problem with IR35 is the definition of the “certain criteria” that contractors need to follow in order to decide if a contract falls under IR35 or not.

A shift in emphasis

HMRC have lost numerous tax cases since 2000 on this issue, and clearly the revenue they were gaining hardly matched the costs of chasing contractors to comply.

Their solution seems to be to shift the responsibility for deciding if a contractor should be treated as a de facto employee, from the contractor to the “employer”.

Public Sector Bodies (PSBs) were the guinea pigs for this change in emphasis.

Following the apparent success of shifting the responsibility for a decision – if a contractor was, or was not, a disguised employee, to PSBs – HMRC have now resolved that this system will be rolled out to the private sector.

Who will be affected and when?

Draft legislation is expected by September 2019, and HMRC have intimated that the legislation will only be applied to medium and large companies – the 1.5m small companies will be exempt.

There is no doubt that shifting the responsibility for deciding if an engager/contractor is an arms-length commercial arrangement or disguised employment will likely be as problematic as the existing IR35 regulations.

We will be keeping a keen eye on these changes and will report back as they unwind later this year.

Unbelievable excuses and dubious expenses

HMRC seem to be working on their people skills, either that or they have decided to soften their hard sales approach to tax compliance by injecting a little humour. Last week they published the following responses they had received for late payment of tax and claims for expenses that failed.

This what they said:

Excuses for not paying tax on time

As the deadline approaches for submitting returns and paying tax for 2017-18, HMRC reveals some of the most bizarre excuses it has received for not paying on time.

Most of our customers complete their tax returns honestly and on time but every year HM Revenue and Customs (HMRC) receives some outlandish excuses and expense claims.

Some of the most bizarre excuses HMRC received from customers who missed the Self-Assessment deadline include being too short to reach the post box and having fingers too cold to type. Here are some of the strangest from the past year:

  • my mother-in-law is a witch and put a curse on me
  • I’m too short to reach the post box
  • I was just too busy – my first maid left, my second maid stole from me, and my third maid was very slow to learn
  • our junior member of staff registered our client in Self-Assessment by mistake because they were not wearing their glasses
  • my boiler had broken, and my fingers were too cold to type

Claims for dubious expenses

As well as unbelievable excuses, every year we also receive some dubious expenses claims for unconvincing items like woolly underwear and pet insurance for a dog. Some of the most questionable include:

  • a carpenter claiming £900 for a 55-inch TV and sound bar to help him price his jobs
  • £40 on extra woolly underwear, for 5 years
  • £756 for my pet dog insurance
  • a music subscription, so I can listen to music while I work
  • a family holiday to Nigeria

All these excuses and expenses were unsuccessful.

How do we prepare for Brexit when so much is undecided?

It is hardly surprising that Brexit is fast becoming as big a turnoff as tax. How on earth are we supposed to react or adapt to such far-reaching changes when the exact details of our exit are still undecided just a few weeks before the March 2019 deadline?

Businesses that buy or sell goods to the EU must be pulling their corporate hair out – just how will their supply lines be affected?

A new government website covering possible Brexit consequences

The government has already published a bunch of documentation setting out the consequences of a no-deal outcome and they have now doubled up this resource by creating an EU exit website aimed at advising UK businesses.

The HM Government site’s URL is https://euexitbusiness.campaign.gov.uk/

The main points of focus are:

  • Employing EU citizens
  • Importing, exporting and transporting
  • Operating in the EU
  • Regulations and standards for products and goods
  • Using personal data
  • European and domestic funding
  • Intellectual property
  • Energy and climate, and
  • Public sector procurement.

If you have neither time or inclination to for this level of detail what can be done to safeguard your situation and have ongoing benefits for your business?

Action to take now to avoid downside risks of Brexit

It would seem to make sense to take a hard look at supply line issues by undertaking a formal impact assessment and we are aware that many importers and exporters already have this process underway.

The other action you could consider is to work on your business fitness. If, as has been suggested by the pundits, Brexit does create a slowdown in economic activity, then being in good financial shape will not be wasted effort.

If you think this is an idea with traction please call so we can discuss your options.

Why does the UK tax year end 5th April?

A bit of history this week but with a practical outcome for 2019.

Up to 1582, Europe used the Julian calendar introduced by the Romans in 45BC. Unfortunately, the Julian calendar differed from the solar calendar by 11 ½ minutes; after 500 years this small difference meant that the Julian calendar was 10 days off the solar calendar.

To remedy this error, Pope Gregory introduced the Gregorian calendar in most of Europe under his influence, 1582. There was a notable exception, you guessed right, the British Empire. Sound familiar?

The Brits stoically maintained their use of the Julian calendar until 1752 by which time the Empire was 11 days off the dates in Europe, they then adopted the Gregorian version.

Up to the change, the 25th March was the start of the new tax year. Therefore, following the change the new beginning of the tax year was advanced 11 days (so the Treasury didn’t lose 11 days of revenue). The beginning of tax year was therefore advanced to 5 April.

But just a minute, the current tax year ends 5th April and begins 6th April?

The final twist occurred in the year 1800. This year was a leap year in the old Julian system but not in the new Gregorian calendar. Accordingly, the Treasury moved the tax year back one further day and thus, from 1800, the tax year has ended on the 5th April and begins on 6th April.

Have you received your tax statement?

HMRC normally send out a tax statement this time of the year to all self-assessment taxpayers that have submitted a tax return for 2017-18.

As we reported last week, this will list any balance of tax due for 2017-18 and the amount of any payment on account required for 2018-19 (if any is due). Both amounts will need to be settled on or before 31 January 2019 to avoid interest and possible late payment penalties.

If you don’t receive a statement, but you know how much you need to pay, simply organise an online bank payment to:

HMRC Cumbernauld – sort code 08 32 10 – account number 12001039, or

HMRC Shipley – sort code 08 32 10 – account number 12001020

If you don’t know which account to use send your payment to Cumbernauld.

In either case be sure to quote your ten digit Unique Tax Refence number followed by the letter “K”. For example: 1234567899K. DO NOT make a payment without this number as HMRC will not know who to allocate the payment to.

If you don’t know how much to pay, contact your tax advisor or login to your online tax account.

Will your income be lower 2018-19 compared to 2017-18?

If you believe that your taxable income will be less than the previous tax year, you may be able to elect to reduce any payments on account for 2018-19 that have been calculated as if your tax due for 2018-19 is going to be the same as 2017-18.

Your tax adviser can do this for you or you could contact HMRC’s helpline for advice on how to proceed.

And as we have advised in previous posts on this topic, if you cannot fund your 31 January 2019 tax payment, call HMRC Business Payment Support Service: 0300 200 3835 to organise an agreed repayment schedule. Generally, you will need to clear any arrears before any further tax liabilities fall due for payment.