Tax Diary May/June 2019

1 May 2019 – Due date for Corporation Tax due for the year ended 30 July 2018.

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

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

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

31 May 2019 – Ensure all employees have been given their P60s for the 2018-19 tax year.

1 June 2019 – Due date for Corporation Tax due for the year ended 31 August 2018.

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

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

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

Do not forget the payslips

If you are an employer, you have a statutory duty to provide your employees with a copy of their P60 (pay and tax details for 2018-19) on or before the end of May 2019.

If you distribute P60s and then discover that changes need to be made you will need to give employees a replacement P60 – a paper or electronic version – or a letter confirming the change.

This requirement is additional to your other filing deadlines related to your payroll and later in the year you will need to deal with the reporting of expenses and benefits to HMRC.

If we take care of your payroll for you, these matters can be dealt with in a timely manner. If we don’t take care of your payroll, and you would like to be relieved of this tiresome chore, please call so we can discuss your needs.

Expenses you can set-off against rental income

The expenses you claim against your property income will need to follow the usual HMRC ruling that the costs must be incurred wholly and exclusively for the purpose of renting out the property.

An example set out on the Gov.uk website illustrates the point:

If you buy a new vacuum cleaner for your own home, and also use it to clean your rental property between tenants, you can’t claim the cost of the vacuum cleaner as an expense against your rental income.

However, you could claim the cost of any cleaning products you bought specifically for cleaning the rental property.

Where costs are incurred partly for your rental business and partly for some other purpose you may be able to claim a proportion of that cost if that part can be separately identified as being incurred wholly and exclusively for the purposes of the property rental business.

Expenses you can and can’t claim are summarised below.

Expenses you can claim include:

  • Mortgage interest – a proportion of this cost is now limited to basic rate Income Tax relief,
  • General maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
  • Water rates, council tax, gas and electricity
  • Insurance, such as landlords’ policies for buildings, contents and public liability
  • Costs of services, including the wages of gardeners and cleaners
  • Letting agent fees and management fees
  • Legal fees for lets of a year or less, or for renewing a lease for less than 50 years
  • Accountant’s fees
  • Rents (if you’re sub-letting), ground rents and service charges
  • Direct costs such as phone calls, stationery and advertising for new tenants
  • Vehicle running costs (only the proportion used for your rental business) including mileage rate deductions for business motoring costs

Expenses you can’t claim a deduction for include:

  • The full amount of your mortgage payment – only the interest element of your mortgage payment can be offset against your income,
  • Private telephone calls – you can only claim for the cost of calls relating to your property rental business,
  • Clothing – for example if you bought a suit to wear to a meeting relating to your property rental business, you can’t claim for the cost as wearing the suit is partly for your rental business and partly to keep you warm – no identifiable part is for your property rental business,
  • Personal expenses – you can’t claim for any expense that was not incurred solely for your property rental business.

Can you change a will after death?

On the face of it, this sounds implausible. How can you change your will if you have died?

In reality, as long as any beneficiaries left worse off after any change, agree, you can change a person’s will after their death.

Any change must be completed within two years of the death.

The circumstances that such a change can be agreed are to:

  • Reduce the amount of Capital Gains Tax or Inheritance Tax payable,
  • Provide for someone who was left out of the will,
  • Move the deceased’s assets into a trust,
  • Clear up any uncertainty over the will.

Executors will need to make a variation to the will to accomplish the above, this will involve:

  • Preparing a variation document that satisfies certain legal requirements, and
  • If there is more Inheritance Tax to pay, a copy of the variation must be sent to HMRC within six months of making it. This condition does not apply if the variation does not change the amount of Inheritance Tax payable.

This ability to change a will after death can often resolve family disputes if the affected beneficiaries agree. However, the process is best managed by a professional advisor to ensure that all the formalities are dealt with correctly.

Who inherits if you die without a will?

If you die without stating your wishes, the law will determine how your assets are distributed amongst your family. The rules that govern the process are set out in the intestacy rules. And there are regional differences.

Consider a parent whose personal assets amount to more than £1m.

In England and Wales

The husband, wife or civil partner keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value. The remainder of the estate will be shared as follows:

  • the husband, wife or civil partner gets an absolute interest in half of the remainder
  • the other half is then divided equally between the surviving children.

If a son or daughter (or other child where the deceased had a parental role) has already died, their children will inherit in their place.

In Scotland

The husband, wife or civil partner gets the house up to a value of £473,000. They also get a lump sum of £473,000 if the house is worth more and may have to sell off the property.

They also get:

  • furniture and moveable household goods up to the value of £29,000
  • up to £50,000 in cash
  • a third of the rest of the estate.

The children will get two-thirds of the rest of the estate.

If a son or daughter has already died, their children (the grandchildren of the deceased) will inherit in their place.

In Northern Ireland

The husband, wife or civil partner keeps all the assets (including property), up to £250,000, and all the personal possessions, whatever their value.

The husband, wife or civil partner must survive the deceased by at least 28 days to inherit.

They also get one third of the rest of the estate.

The remaining two-thirds are shared between their children.

If a son or daughter has already died, their children (the grandchildren of the deceased) will inherit in their place.

Make a will

As you can see, if the wishes of the deceased are going to conflict with these outcomes, there is only one course of action that will remedy the situation: make a will.

Employing family, younger persons or volunteers

The following notes set out some of the factors you will need to consider if you are considering employing members of your family, younger workers or volunteers in your business.

If you hire family members you must:

  • avoid special treatment in terms of pay, promotion and working conditions
  • make sure tax and National Insurance contributions are still paid
  • follow working time regulations for younger family members
  • have employer’s liability insurance that covers any young family members
  • check if you need to provide them with a workplace pension scheme

If you have volunteers or voluntary staff working in your business, you will need to consider the following matters:

  • you are responsible for their health and safety, and you
  • must give inductions and training in the tasks they’re going to do.

You can employ young people if they are 13 years or over but there are special rules about how long they can work and what jobs they can do. Once someone is 18, they are classed as an ‘adult worker’ and different rules apply.

As well as following these rules you must do a risk assessment before taking on young workers.

Young people may also have certain employment rights, for example:

  • statutory maternity pay and ordinary statutory paternity pay if they qualify as a result of their continuous employment,
  • paid time off for study and training, and
  • redundancy pay.

As the employer, you should also be mindful of the National Minimum Wage regulations. Young workers and apprentices have different rates from adult workers for the National Minimum Wage purposes.

If employing your spouse or children, you should be especially careful to observe the above points. In particular, document their duties and make sure that they are paid a commercial rate per hour for the type of work that they undertake.

Investing in new equipment?

For most of us in business the recent, and continuing, Brexit fiasco has meant that making meaningful investment decisions has proved to be problematic. What will our future trading relationship with Europe look like and how will that affect our own trading results?

And yet in the UK we have an extremely generous tax allowance, aptly called the Annual Investment Allowance (AIA), that means we can write off the full cost of qualifying assets against our profits for tax purposes.

Although many small businesses are now incorporated those who still trade in partnership or as a sole trader and pay income tax on profits at the 40% or 45% rate, could see a significant tax saving by utilising the AIA.

The current scope of the AIA is set out in a summarised form below:

  1. You can claim AIA on most purchases of plant and other equipment, computers or commercial vehicles.
  2. You cannot claim AIA for the acquisition of cars, items you owned for another reason before you started using them in your business, or items given to you or your business.
  3. From 1 January 2019 to 31 December 2020, the amount you can claim under the AIA is limited to £1m.
  4. You can only claim the AIA in the accounting period when you bought the item. The date bought is defined as when you signed the contract to purchase – if payment is due within four months – or when payment is due if it’s more than four months.
  5. If your business closes you cannot claim the AIA in the final period of trading.

If you are considering an investment in new plant – and don’t forget that you should have a compelling commercial reason for making the investment – any tax relief is a welcome bonus. Please call so that we can help you quantify how much tax benefit you would be entitled to and also look at the wider commercial rationale for making your investment.

When do you pay capital gains tax?

If you personally disposed of an asset that is subject to a capital gains tax (CGT) charge, at any time during the tax year ending 5 April 2019, any CGT due will need to be paid 31 January 2020.

Accordingly, if you know the amount of the taxable gain, and the amount of CGT payable, you still have more than ten months to organise the funds to pay the tax.

Hopefully, when you sold the asset you were advised of the likely tax charge and reserved funds from the sale proceeds to settle the liability; after undertaking the necessary research – or professional advice – to claim any available exemptions or reliefs?

And there is still time to consider CGT planning.

Although the stable door has been closed – the gain has crystallised during the 2018-19 tax year, claims for any reliefs can still be made as part of your self-assessment return for 2018-19.

It is beyond the scope of this article to list all the reliefs that can be claimed to reduce a CGT bill, but we can help you consider your options. Please call for advice. We will need to know the following details to better consider these options:

  • A description of the asset(s) sold,
  • The disposal proceeds,
  • Any costs associated with the sale,
  • The date and costs of the purchase of the disposed assets.
  • Any costs you have incurred since acquiring the asset that have improved it in some way: for example, an extension to a property.

You have plenty of time to plan for the payment of your CGT liability for 2018-19 – latest date to pay is 31 January 2020 – and we recommend that you fully consider your planning options before submitting your 2018-19 tax return.

If you don’t submit an annual tax return, you will need to submit details to HMRC using the “real time” capital gains tax service. The following instructions on this option are reproduced below. However, even if you use this option, it is still advisable to take professional advice on the computation of the chargeable gain to ensure you only pay what is due and no more.

You can use the ‘real time’ Capital Gains Tax service if you’re a UK resident. You’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one when you report and pay. When you use the service, you’ll need to upload PDF or JPG files showing how your capital gains and Capital Gains Tax were calculated.

When to report

You can use this service as soon as you’ve calculated your gains and the tax you owe. You do not need to wait until the end of the tax year. You must report by 31 December after the tax year when you had the gains.

After you’ve reported your gains, HMRC will send you a letter or email giving you a payment reference number and telling you ways to pay. Do not pay your Capital Gains Tax bill until you’ve received your payment reference number.

What is a Debt Relief Order?

The first Debt Relief Order (DRO) was approved 10 years ago in April 2009 with the aim of assisting people with small levels of assets and little surplus income deal with their debts*.

Since then, the Insolvency Service has approved more than 254,000 DROs to people with debts worth an average of £9,400.

People apply for a DRO through an authorised debt adviser, from organisations such as Citizens Advice, StepChange and PayPlan, who submit applications on-line to the Official Receiver on their client’s behalf.

Approximately 99% of DROs are approved within 48 hours of the application being received into the team in Plymouth and 2018 saw the Insolvency Service issue approximately £312 million of debt relief – the largest amount for a single year.

A DRO normally runs for 12 months after which the debts are written off and between 2009 and 2017, while 64% of DROs were granted to women, both genders experienced similar levels of average debt – £9,200 for women compared to £9,100 for men.

In the same period, 25% of DROs were granted to people aged between 25 and 34. London experienced the lowest rate of DROs in every year since 2009 – 3 per 10,000 adults – compared to both the North East and South West where the average rate of DROs per 10,000 adults was 7.8.

In October 2015, the upper limit for qualifying debt was raised from £15,000 to £20,000, and the asset limit was raised from £300 to £1,000.

There are 12 competent authorities: Angel Advance, Advice UK, Christian Against Poverty, Citizens Advice, CMAS, Debt Advisory Centre, Insolvency Practitioners Association, Institute of Money Advisors, Money Advice Trust, PayPlan, Shelter and Step Change.

Readers of this post who feel that their management of personal debt is running away from them, should contact one of the above support organisations to see if a DRO would be available.

Green light for pension dashboards

The government has given the green light to allow pension providers to create user-friendly services that display pension information for individuals on-line.

Savers will be in the driving seat with all the facts and figures about their pensions and potential retirement income at their fingertips in one place for the first time – on smartphones, tablets and computers.

Work and Pensions Secretary Amber Rudd said:

With record numbers saving for retirement as a result of our revolutionary reforms, it’s more important than ever that people understand their pensions and prepare for financial security in later life.

Dashboards have the potential to transform the way we all think about and plan for retirement, providing clear and simple information regarding pension savings in one place online. I’m looking forward to seeing the first industry dashboards later this year.

Key details of the government’s plans, published today in its response to a consultation on dashboards, include:

  • a commitment to bring forward legislation at the earliest opportunity to compel all pension providers to make consumers’ data available to them through a dashboard,
  • an expectation that the majority of schemes will be ready to ‘go live’ with their data within a 3 to 4 year window,
  • confirmation that State Pension information will be included as soon as possible,
  • dashboards will help to reconnect people with ‘lost’ pension pots, benefitting savers and providers.

Ministers support the development of multiple industry-led dashboards displaying the same basic information. Industry have told government that initial models will be developed and tested from this year. A non-commercial dashboard will be delivered and overseen by the new Single Financial Guidance Body (SFGB).

An industry delivery group will be brought together by the SFGB which will set out a clear timetable and roadmap to drive progress towards fully operational dashboards, setting standards and ensuring security to protect users and their information.