fpdteam, Author at Bennetts Accountancy

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

Employing for the first time

3rd February 2022 by fpdteam

There are a multitude of rules and regulations that you must be aware of when you start employing staff for the first time.

HMRC’s guidance sets out important issues to be aware of when becoming an employer.

Decide how much to pay someone – you must pay your employee at least the National Minimum Wage.
Check if someone has the legal right to work in the UK. You may have to do other employment checks as well.
Check if you need to apply for a DBS check (formerly known as a CRB check) if you work in a field that requires one, e.g., with vulnerable people or security.
Get employment insurance – you need employers’ liability insurance as soon as you become an employer.
Send details of the job (including terms and conditions) in writing to your employee. You need to give your employee a written statement of employment if you’re employing someone for more than 1 month.
Ensure that you register as an employer with HMRC. You can do this up to 4 weeks before you pay your new staff. This process must also be completed by directors of a limited company who employ themselves to work in the company.
Check if you need to automatically enrol your staff into a workplace pension scheme.

When it comes to paying staff, you generally have the choice between using a payroll provider or running your payroll yourself. If you decide to run your own payroll you must choose suitable payroll software.

We can help.

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

Working for yourself

3rd February 2022 by fpdteam

Newly self-employed taxpayers should notify HMRC as soon as practicable when they begin working for themselves. However, HMRC must be officially notified by 5 October following the end of the tax year so that a Self-Assessment return can be issued on time and to avoid any unnecessary penalties.

HMRC’s guidance says that you are probably self-employed if you:

run your business for yourself and take responsibility for its success or failure;
have several customers at the same time;
can decide how, where and when you do your work;
can hire other people at your own expense to help you or to do the work for you;
provide the main items of equipment to do your work;
are responsible for finishing any unsatisfactory work in your own time;
charge an agreed fixed price for your work;
sell goods or services to make a profit (including through websites or apps).

The newly self-employed should also register to pay National Insurance contributions (NICs) and to monitor whether a VAT registration is required.

There is a £1,000 tax allowances for miscellaneous trading income that has been available to taxpayers since April 2017. This is known as the trading allowance.

The exemption from tax applies to taxpayers who have trading income of up to £1,000 from:

self-employment;
casual services, for example, babysitting or gardening;
hiring personal equipment, for example, power tools.

Where this £1,000 allowance covers all the individual’s relevant income (before expenses) the income is tax-free and does not have to be declared to HMRC.

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

Charging charities at lower rates of VAT

3rd February 2022 by fpdteam

There are special rules, under which a VAT-registered business can sell certain goods and services to charities at the zero or reduced rate of VAT. Before charging VAT at a lower rate, you must be able to show evidence that the charity is eligible. This is usually done by obtaining suitable evidence of the charity’s status and a written declaration or ‘certificate’ confirming they meet the conditions for a particular VAT relief.

Charities are legally required to provide an eligibility certificate when you supply qualifying building or construction services to them at zero VAT. A declaration is not required for other supplies but is recommended to prove the charity is eligible for the relief. Completed declarations should be held for at least 4 years.

The reduced VAT rate applies on the sale of fuel and power in certain circumstances to an eligible charity. The zero VAT rate applies on a wider range of supplies including the aforementioned construction supplies and items including certain medical and veterinary equipment, aids for disabled people, advertising and items for collecting donations, drugs and chemicals and equipment for making ‘talking’ books and newspapers.

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

Tax Diary February/March 2022

27th January 2022 by fpdteam

1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

19 February 2022 – PAYE and NIC deductions due for month ended 5 February 2022 (If you pay your tax electronically the due date is 22 February 2022).

19 February 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2022.

19 February 2022 – CIS tax deducted for the month ended 5 February 2022 is payable by today.

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Self-Assessment tax for 2020-21 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2022 – PAYE and NIC deductions due for month ended 5 March 2022 (If you pay your tax electronically the due date is 22 March 2022).

19 March 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2022.

19 March 2022 – CIS tax deducted for the month ended 5 March 2022 is payable by today.

Source:HM Revenue & Customs| 26-01-2022

VAT Flat Rate Scheme exclusions

27th January 2022 by fpdteam

The VAT Flat Rate scheme has been designed to simplify the way a business accounts for VAT and in so doing reduce the administration costs of complying with VAT legislation. Using the 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 is open to businesses that expect their annual taxable turnover in the next 12 months to be no more than £150,000, excluding VAT.

However, there are a number of anti-avoidance exclusions highlighted in HMRC’s internal manuals.

The exclusions are as follows:

Businesses that are eligible for group treatment, or are registered for VAT as a divisional registration, at the time of application – or have been in the preceding 24 months – are excluded. This is designed to reduce the threat of exploitation by larger companies.
Businesses that acquire or intend to acquire capital items that are covered by the capital goods scheme are excluded. Analysis showed that the treatment of FRS businesses as fully taxable presented the potential for abuse by exempt companies and this exclusion is to prevent such avoidance schemes from developing.
Businesses that are associated – or have been in the preceding 24 months – are excluded. This is a catch-all provision to prevent avoidance and abuse.

In addition, a limited cost trader test was introduced in April 2017. If a business meets the definition of a limited cost trader, then this would usually mean it may be more beneficial to leave the scheme and account for VAT using traditional VAT accounting.

Source:HM Revenue & Customs| 24-01-2022

Who should register for Plastic Packaging Tax

27th January 2022 by fpdteam

The new Plastic Packaging Tax will come into effect from 1 April 2022. The tax will not apply to any plastic packaging which contains at least 30% recycled plastic, or any packaging which is not predominantly plastic by weight. The tax will be charged at a rate of £200 per metric tonne and will apply to packaging with less than 30% recycled plastic.

The online service to register and pay will be made available on 1 April 2022 when the tax takes effect. Businesses that have manufactured or imported 10 or more tonnes of plastic packaging within the last 12 months, or plan to do so in the next 30 days are required to register.

The 12-month check is usually a rolling check looking back over the last 12 months. However, as the tax starts on 1 April 2022, this test works differently between 1 April 2022 and 30 March 2023 meaning businesses only need to look back to 1 April 2022.

The requirement includes non-resident taxpayers who import finished plastic packaging into the UK on their own behalf, or manufacture finished plastic packaging in the UK.

Businesses must register for the new tax within 30 days of becoming liable to do so and will need to pay the tax on all components on which it is due, from the day that they become liable to register.

Source:HM Revenue & Customs| 24-01-2022

How CIS off-set works in practice

27th January 2022 by fpdteam

The Construction Industry Scheme (CIS) is a set of special rules for tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and should be aware of the tax implications of the scheme.

Under the scheme, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance.

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment.

Subcontractors do not have to register for the CIS, but contractors must deduct 30% from their payments to unregistered subcontractors. The alternative is to register as a CIS subcontractor where a 20% deduction is taken or to apply for gross payment status whereby the contractor will not make a deduction, and the subcontractor is responsible to pay all their tax and National Insurance at the end of the tax year.

In practice the subcontractor company could apply the off-set rules and must simply reduce their PAYE, NIC, any CIS liabilities and student loan repayments due from company employees or their own subcontractor’s, by the amount of any CIS deductions the subcontractor company made from their payments.

If in any month or quarter the company’s own CIS deductions are greater than the total liabilities due, the company can set-off the excess against future payments of PAYE, NIC, or CIS liabilities and student loan repayments due in the same tax year.

The subcontractor company must keep a record of the amounts set-off in order to fully complete the form P35 at the end of the tax year.

Source:HM Revenue & Customs| 24-01-2022