fpdteam, Author at Bennetts Accountancy

Don’t miss out on this tax allowance

17th February 2022 by fpdteam

HMRC used Valentine’s Day to issue a reminder to married couples and those in civil partnerships to sign up for the marriage allowance – if they are eligible and haven’t yet done so.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner doesn’t pay tax or doesn’t pay tax above the basic rate threshold for Income Tax (i.e., one of the couples must currently earn less than the £12,570 personal allowance for 2021-22).

The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) doesn’t pay more than the basic 20% rate of Income Tax. This would usually mean that their income is between £12,570 to £50,270 in 2021-22. The limits are somewhat different for those living in Scotland.

The allowance permits the lower earning partner to transfer up to £1,260 of their unused personal tax-free allowance to a spouse or civil partner. This could result in a saving of up to £252 for the recipient (20% of £1,260), or £21 a month for the current tax year.

If you meet the eligibility requirements and have not yet claimed the allowance, then you can backdate your claim as far back as 6 April 2017. This could result in a total tax break of up to £1,220 if you can claim for 2017-18, 2018-19, 2019-20, 2020-21 as well as the current 2021-22 tax year. If you claim now, you can backdate your claim for four years (if eligible) as well as for the current tax year. In fact, even if you are no longer eligible or would have been in all or any of the preceding years then you can claim your entitlement.

Source:HM Revenue & Customs| 14-02-2022

Preparing a charity annual return

10th February 2022 by fpdteam

The Charity Commission requires that charities registered in England or Wales must send an annual return to report their income and expenditure. The deadline for charities with a standard 12-month accounting period ending on 31 December 2021 is 31 October 2022.

Not filing on time means that the charity will go into default with the information being displayed to the public on the charity register. The annual return is separate from the charity’s annual accounts and the charity tax return sent to HMRC.

A full annual return is required if either:

the charity’s income is more than £10,000
the charity is a charitable incorporated organisation

If the charities income is over £25,000 then further documents including a trustee annual report, accounts and independent examiner’s report will also need to be submitted. A full audit is required if the charity has income over £1 million or gross assets over £3.26 million and income over £250,000.

There are different rules if the charity is registered in Scotland or Northern Ireland.

Source:Other| 07-02-2022

How to join MTD ITSA pilot

10th February 2022 by fpdteam

Some businesses and agents are already keeping digital records and providing updates to HMRC as part of a live pilot to test and develop the MTD for ITSA. Under the pilot, qualifying landlords and sole traders (or their agents) can use software to keep digital records and send Income Tax updates instead of filing a Self-Assessment tax return.

The option to sign-up as an individual for MTD for ITSA is currently only available to individuals using a recognised provider offering software that is compatible with MTD for ITSA.

HMRC recently shared the following update on the pilot to software developers.

'As we progress the MTD ITSA pilot it is important that we manage it in a controlled way so that we can test and expand effectively. So, from 9th December, customers will only be able to sign up for the MTD ITSA Pilot through their software provider (in essence how it is currently happening). As we expand the pilot, this will enable HMRC and developers to ensure that all customers entering the pilot (and their agents where applicable) receive the support and guidance that they need.

Customers who are already participating in the Pilot can continue to do so. HMRC will be sharing more detail in early 2022 including the Pilot outline plan which will include a roadmap identifying when various customer types will be eligible to join MTD ITSA. MTD also continues to work on the Customer Support Model to support customers more come into the service from April 2022.'

It will be interesting to see what further sign-ups will be enabled once the pilot roadmap is published.

Source:HM Revenue & Customs| 07-02-2022

Extending MTD for Income Tax to businesses and landlords

10th February 2022 by fpdteam

The introduction of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA) is now set to commence from April 2024. MTD for ITSA will fundamentally change the way businesses, the self-employed and landlords interact with HMRC. The regime will require businesses and individuals to register, file, pay and update their information using an online tax account. The rules will initially apply to taxpayers who file Income Tax Self-Assessment tax returns with business or property income over £10,000 annually.

General partnerships will not be required to join MTD for ITSA until a year later, in April 2025. The date other types of partnerships will be required to join will be confirmed in the future. A new system of penalties for the late filing and late payment of tax for ITSA will be aligned with the introduction of MTD for ITSA.

The MTD regime started in April 2019 for VAT purposes only when businesses with a turnover above the VAT threshold were mandated to keep their records digitally and provide their VAT return information to HMRC using MTD compatible software. From April 2022, MTD will be extended to all VAT registered businesses with turnover below the VAT threshold of £85,000.

Source:HM Revenue & Customs| 07-02-2022

19% fail to file on time

10th February 2022 by fpdteam

HMRC has confirmed that more than 10.2 million people submitted their 2020-21 Self-Assessment tax returns by the 31 January deadline. This leaves over 2.3 million taxpayers or 19% that have missed the deadline and are yet to file. Are you among those that missed the 31 January 2021 filing deadline for your 2020-21 Self-Assessment returns?

HMRC has already announced that due to the coronavirus pandemic, fines for taxpayers that file their Self-Assessment returns late will be waived until 28 February 2022. However, interest will be applied to any outstanding balance due from 1 February 2022 so you should try and pay your tax bill as soon as possible. If you are unable to pay your tax bill, then there are a number of options for you to defer the payment that was due on 31 January 2022.

This includes an option to set up an online time to pay payment plan to spread the cost tax due on 31 January 2022 for up to 12 months. This option is available for debts up to £30,000 and the payment plan needs to be set up no later than 60 days after the due date of a debt. This should be done sooner rather than later as a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, before 1 April 2022.

If you owe Self-Assessment tax payments of over £30,000 or need longer than 12 months to pay in full, you can still apply to set up a time to pay arrangement with HMRC, but this cannot be done using the online service.

HMRC’s Director General for Customer Services, said:

'We’re waiving penalties this year, to give those who missed the deadline an extra month. And customers can set up a monthly payment plan online if they’re worried about paying their tax bill. Search ‘Self-Assessment’ on GOV.UK to find out more.'

Source:HM Revenue & Customs| 07-02-2022

Support with rising energy bills

10th February 2022 by fpdteam

The Chancellor, Rishi Sunak delivered a statement to the House of Commons on 3 February 2022 announcing a number of measures to help people cope with fast rising energy costs.

Record increases will see a 54% jump in the energy price cap from 1 April 2022 affecting some 22 million customers across the UK. This will mean the average consumer paying by direct debit will face an annual increase of £693 from £1,277 to £1,971 per year with those paying by prepayment facing even higher costs. The price cap is updated twice a year and tracks wholesale energy and other costs.

The emergency package of measures announced by the Chancellor will see the government offer support with energy bills worth £9.1 billion in 2022-23.

This includes:

A £200 discount on their energy bill this Autumn for domestic electricity customers in Great Britain. This will be paid back automatically over the next 5 years starting in 2023-4 when wholesale gas prices are expected to come down.
A £150 non-repayable Council Tax Rebate payment for all households that are liable for Council Tax in Bands A-D in England.
£144 million of discretionary funding for Local Authorities to support households who need support but are not eligible for the Council Tax Rebate.

The devolved administrations will receive around £715 million funding through the Barnett formula where UK Government support doesn’t cover Scotland, Wales or Northern Ireland.

Source:HM Treasury| 07-02-2022

Donations to overseas charities

10th February 2022 by fpdteam

Taxpayers who make donations to charities in other countries can qualify for tax relief in the UK under certain circumstances. This means that UK charitable tax reliefs are available to certain organisations which are the equivalent of UK charities and Community Amateur Sports Clubs (CASCs) in the EU, Norway, Iceland and Liechtenstein (referred to as the EEA) provided they meet the UK tax definition of a charity. The charity would also need to be recognised by HMRC in order for taxpayers to claim relief.

The treatment of donations to charities outside the EEA area is different and in most cases the donations do not qualify for tax relief as the charities are not recognised entities for charitable purposes. For this reason, many large foreign charities that attract donations from the UK may decide to register with the Charity Commission in England and Wales. There are different rules in Scotland and Northern Ireland. This is quite a complex area and there are many requirements that must be met in order to register as a charity.

If the charity meets the UK definition of a charity, then UK higher rate or additional rate taxpayers, will be entitled to claim relief on the difference between the basic rate and their highest rate of tax made on an eligible donation.

For example:

If a taxpayer donated £5,000 to charity, the total value of the donation to the charity is £6,250. They can claim back additional tax back of:

£1,250 if they pay tax at the higher rate of 40% (£6,250 × 20%),
£1,562.50 if they pay tax at the additional rate of 45% (£6,250 × 20%) plus (£6,250 × 5%).

Higher rate or additional rate taxpayers have the option to carry back charitable donations to the previous tax year. A request to carry back the donation must be made before or at the same time as the previous year’s Self-Assessment return is completed.

Source:HM Revenue & Customs| 07-02-2022

Tax codes for employees

3rd February 2022 by fpdteam

The P9X form is used to notify employers of tax codes to use for employees. The latest version of the form has just been published and shows the tax codes to use from 6 April 2022. The forms states that the basic personal allowance for the tax year starting 6 April 2022 will, as expected, be £12,570 (£12,570 2021-22) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 2021-22) except for those defined as Scottish taxpayers who have a lower basic rate limit as well as an intermediate rate. The new form P9X is available online on GOV.UK to download or print.

The P9X (2022) form also includes information to help employers in the new tax year. The document reminds employers that have new employees starting work between 6 April and 24 May 2022, and who provide you with a P45, to follow the instructions at www.gov.uk/new-employee

Source:HM Revenue & Customs| 31-01-2022

Income Tax set-off of rental business losses

3rd February 2022 by fpdteam

Where a property business makes a loss, the loss can usually be carried forward and set against future rental business profits. HMRC’s guidance is clear that any losses made in one rental business cannot be carried across to any other rental business the customer carries on at the same time in a different legal capacity.

Under limited circumstances property losses can be set against general income of the same year or the following year. However, where a property business claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income.

Income Tax rental business losses can only be set against general income to the extent that they are attributable to:

certain capital allowances,
certain agricultural expenses

A claim has to be made on or before the first anniversary of 31 January following the end of the year of assessment. For example, where relief is to be claimed for the 2021-22 tax year, the normal filing date would be 31 January 2023 and the claim for property loss relief must be made by 31 January 2024.

There are exceptions to the loss relief rules for properties that are let on uncommercial terms (for example, at a nominal rent to a relative).

Source:HM Government| 31-01-2022

IHT – limitations on spouse or civil partner exemptions

3rd February 2022 by fpdteam

Inheritance Tax (IHT) is a tax that is levied on a person’s estate when they die and can also be payable during a person’s lifetime on certain trusts and gifts. The rate of Inheritance Tax payable is 40% on death and 20% on lifetime gifts. There is a nil-rate band, currently £325,000 below which no IHT is payable.

Transfers between married couples and civil partners are not usually subject to IHT, meaning that when the first partner of a couple dies leaving their estate to the other no IHT will be payable. The surviving partner also receives any unused nil-rate band allowance of the deceased.

The main limitations on spouse or civil partner exemption are that it does not apply to

postponed gifts – under certain circumstances, a transfer to a spouse or civil partner is not exempt if it ‘takes effect on the termination after the transfer of value of any interest or period’.
conditional gifts – a gift to a spouse or civil partner is not exempt if it depends on a condition which is not satisfied within twelve months after the transfer.

In addition, the spouse or civil partner exemption does not apply to certain dealings with settled property, including reversionary interests.

Source:HM Revenue & Customs| 31-01-2022