Tax Diary February/March 2021

1 February 2021 – Due date for Corporation Tax payable for the year ended 30 April 2020.

19 February 2021 – PAYE and NIC deductions due for month ended 5 February 2021. (If you pay your tax electronically the due date is 22 February 2021)

19 February 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2021. 

19 February 2021 – CIS tax deducted for the month ended 5 February 2021 is payable by today.

1 March 2021 – Due date for Corporation Tax due for the year ended 31 May 2020.

2 March 2021 – Self assessment tax for 2019/20 paid after this date will incur a 5% surcharge.

19 March 2021 – PAYE and NIC deductions due for month ended 5 March 2021. (If you pay your tax electronically the due date is 22 March 2021)

19 March 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2021. 

19 March 2021 – CIS tax deducted for the month ended 5 March 2021 is payable by today.

Drifting into the HICBC

The High Income Child Benefit Charge (HICBC) could apply to your clients if their income exceeds £50,000 for the first time this year and they are in receipt of child benefit. The charge effectively claws back the financial benefit of receiving child benefit either by reducing or removing the benefit entirely.

If a taxpayer (or their partner) exceeded the £50,000 threshold for the first time during the current tax year (2020-21) then they must act. If both partners have an income that exceeds £50,000, the charge will apply to the partner with the highest income.

Taxpayers that continue to receive child benefit (and earn over the relevant limits) must pay any tax owed for 2020-21 on or before 31 January 2022. The child benefit charge is charged at the rate of 1% of the full child benefit award for each £100 of income between £50,000 and £60,000. If income exceeds £60,000, the amount of the charge will equal the amount of child benefit received.

If the HICBC applies it is usually still beneficial to claim Child Benefit as it can help to protect State Pension entitlement and will make sure the taxpayer's child receives a National Insurance number. However, taxpayers have the choice to keep receiving child benefit and pay the tax charge or elect to stop receiving child benefit and not pay the charge.

Claiming the NIC Employment Allowance

The Employment Allowance allows eligible employers to reduce their National Insurance liability. The allowance increased to £4,000 (was £3,000) from 6 April 2020. An employer can claim less than the maximum if this will cover their total Class 1 NIC bill. 

The allowance is only available to employers that have employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. The Employment Allowance can be used against employer Class 1 NICs liability. It cannot be used against Class 1A or Class 1B NICs liabilities. The allowance can only be claimed once for all employer’s PAYE schemes or connected companies. 

Since April 2020, Employment Allowance claims will also need to be submitted each tax year. This means that claims will not automatically roll over from the previous tax year as was previously the case. There are currently a number of excluded categories where employers cannot claim the employment allowance. This includes limited companies with a single director and no other employees as well as employees whose earnings are within IR35 ‘off-payroll working rules’.

Flat Rate Scheme annual review

Using the VAT Flat Rate scheme, businesses pay VAT as a fixed percentage of their VAT inclusive turnover. The actual percentage used depends on the type of business. The scheme has been designed to simplify the way a business accounts for VAT and in so doing reduce the administration costs of complying with the VAT legislation.

The scheme is open to businesses that expect their annual taxable turnover in the next 12 months to be no more than £150,000, excluding VAT. The annual taxable turnover limit is the total of business sales during the year. It includes standard, reduced rate or zero rate sales and other supplies. It excludes the actual VAT charged, VAT exempt sales and sales of any capital assets.

As part of an annual review, it may be advisable to check that clients using the scheme continue to qualify. Businesses that have joined the scheme can continue using the scheme provided their total business income does not exceed £230,000 in a 12 month period. There are also special rules where increased turnover is temporary.

A limited cost trader test was introduced in April 2017. Businesses that meet the definition of a 'limited cost trader' are required to use a fixed rate of 16.5%. The highest 'regular' rate is 14.5%. If your clients meet the definition of a limited cost trader then it would be worth investigating if it would be more beneficial for them to leave the scheme and account for VAT using standard VAT accounting.

Making good fuel provided for private motoring

Where an employee with a company car is provided with fuel for their own private use by their employer, the default position is that the employee is required to pay the car fuel benefit charge. The charge is determined by reference to the CO2 rating of the car, applied to the car fuel benefit multiplier, currently £24,500.

The car fuel benefit charge is not applicable when the employee pays for all their private fuel. This is known as ‘making good’. Private fuel includes the fuel used commuting to and from work. Employees should keep a log of private mileage and use the published advisory fuel rates to repay the cost of fuel used for private travel. The advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly.

If private fuel costs are repaid to the employer, HMRC will accept that there is no car fuel benefit charge. It will usually be cheaper to repay your employer for private fuel than to pay the Income Tax charge, especially if private mileage is relatively low.

The car-fuel benefit charge will still be payable if it cannot be demonstrated to HMRC that the driver of the car has paid for all fuel used for private journeys, this includes commuting to and from work. To ensure that this does not occur, employees will need to keep a log of private mileage and ensure that they make good the cost of all fuel provided for private use.

Carry a company trading loss back to previous years

Corporation Tax relief may be available where your company or organisation makes a trading loss. A qualifying trading loss may be used to claim relief from Corporation Tax by offsetting the loss against profits in previous years.

This could be an especially useful option for the many companies that have been adversely affected during the pandemic and may have incurred significant losses. Carrying back a trading loss would allow companies to seek relief for the losses by carrying them back to an earlier profit-making period resulting in a possible reclaim of Corporation Tax.

Usually, such a claim could only be made once a Corporation Tax return has been prepared and submitted to HMRC. However, in exceptional cases HMRC will allow claims to be carried back based on anticipated losses before the end of a current accounting period. Companies making a submission to HMRC requesting the early carry back of losses would need to provide HMRC with full evidence to support such claims.

Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.

Any claim for trading losses forms part of the Company Tax Return. 

Different rules apply if a company makes a loss in its final period of trading.

Keep your business moving

An interesting press release published jointly by the Department for Business, Energy & Industrial Strategy and Business Minister, Paul Scully has highlighted some important actions that businesses should ensure they undertake now that the UK has left the EU single market and customs union.

In his message to keep business moving, the Minister highlighted six key actions that many firms need to take. 

They are: 

  1. Goods – if you import or export goods to the EU, you must get an EORI number, make customs declarations or employ an agent to do them for you, check if your goods require extra papers (like plant or animal products) and speak to the EU business you’re trading with to make sure they’re completing the right EU paperwork. There are also special rules that apply to Northern Ireland. Hauliers must obtain a Kent Access Permit and have a negative COVID test before they head to port in Kent.
  2. Services – if you deliver services to the EU, you must check whether your professional qualification is recognised by the appropriate EU regulator.
  3. People – if you need to hire skilled staff from the EU, you must apply to become a licensed sponsor.
  4. Travel – if you need to travel to the EU for business, you must check whether you need a visa or work permit.
  5. Data – if your goods are protected by Intellectual Property (IP), you will need to check the new rules for parallel exporting IP protected goods from the UK to the EU, Norway, Iceland and Liechtenstein. You risk infringing on IP rights if you do not follow the new rules.
  6. Accounting and reporting – if your business has a presence in the EU you may need to change how you undertake accounting and reporting to ensure compliance with the relevant requirements.

The government has also launched a series of new on-demand videos to help businesses familiarise themselves with the new rules. Topics include importing and exporting, trade, data, and audit and accounting. Businesses can select which videos to view from the list or can choose their sector and see videos that are recommended for them.

No late online filing penalties until 28 February 2021

HMRC has announced that fines for taxpayers that file their Self-Assessment returns late will be waived until 28 February 2021. The filing deadline for 2019-20 returns remains at 31 January 2021. HMRC is still encouraging taxpayers to try and meet this deadline. Taxpayers remain obliged to pay their tax bill by 31 January and interest will be charged from 1 February 2021 on any outstanding liabilities.

There has been heavy lobbying from the accountancy industry and other interested parties asking the government to soften its stance on late filing penalties in view of the pandemic situation and inadequate helpline capacity. The confirmation that no late filing penalty will be issued, giving one month’s grace has been broadly welcomed. 

HMRC expects more than 12.1 million people to complete a Self-Assessment tax return for the 2019-20 and almost 9 million returns have already been submitted. 

HMRC’s Chief Executive, Jim Harra, said:

‘We recognise the immense pressure that many people are facing in these unprecedented times and it has become increasingly clear that some people will not be able to file their return by 31 January.

Not charging late filing penalties for late online tax returns submitted in February will give them the breathing space they need to complete and file their returns, without worrying about receiving a penalty.

We can reasonably assume most of these people will have a valid reason for filing late, caused by the pandemic.’

There are also a number of options for taxpayers to defer payments due on 31 January 2021 and pay by instalments over 12 months. This includes a self-serve Time to Pay facility online for debts up to £30,000 or by making an arrangement with HMRC.

Funding to get young people into work

Employers can now apply for a £1000 cash boost to help them take on new trainees.

The new scheme will support young people to gain the skills and experience they need from the very start, helping them to get a job, an apprenticeship, or pursue further study. The cash boost – which is available until 31 July 2021 – will help businesses with the cost of providing a high-quality work placement for a trainee. This includes providing facilities, uniforms or helping with travel costs. Businesses offering new traineeship opportunities will receive the £1,000 bonus for every trainee they take on with up to a maximum of 10 trainees. Employers can claim the cash incentive for all work placements that have been completed since 1 September.

The programmes last between 6 weeks and 12 months, and focus on developing vital employability skills, alongside additional English, maths and digital skills, combined with a work placement lasting a minimum of 70 hours. Young people have completed work placements in a range of exciting industries including construction, education and health and social care.

The launch of the incentive scheme follows the announcement in July 2020 by the Chancellor, as part of his Plan for Jobs, of an additional £111 million investment to support the largest-ever expansion of traineeships so more young people have the skills and confidence they need to get on in life.

This new cash boost is in addition to the apprentice scheme announced last year, which offers employers £2,000 for each new apprentice they hire aged under 25, and £1,500 for apprentice aged 25 and over. This includes taking on an apprentice who has been made redundant. More than 10,000 employers have already taken up the offer, which is available until March 2021.

Landlords need to embrace a digital approach

HMRC are slowly rolling out their Making Tax Digital (MTD) scheme. Eventually, selected landlords submitting their rental income and outgoings via self-assessment will need to embrace this new MTD requirement. 

What will it involve?

Self-employed landlords with property income above £10,000 will need to follow the MTD for Income Tax rules from their next accounting period starting on or after 6 April 2023.

Essentially, affected landlords will need to upload quarterly figures – kept electronically – from their accounting software directly to HMRC’s servers. Most accounting software providers will provide this functionality.

And therein lies the rub. If your property business has income above £10,000, from April 2023, you need to be using accounting software that complies with MTD.

Many landlords still record their income and outgoings manually or use spreadsheets. Unless the spreadsheets can be adapted to provide the necessary upload functionality a more digitally responsive approach will be necessary.

Time to embrace a digital approach?

Although the MTD requirement is still some two years away, converting manual systems to a computerised approach takes time. We can help you select and convert your present accounting records to a software solution that can cope with MTD.

And there are real benefits. With a click of your computer mouse, you can access reports that give you real time information about your property business as well as satisfying the needs for MTD digital uploads to HMRC.

Please call if you would like to discuss your options.