fpdteam, Author at Bennetts Accountancy

Still time to claim Marriage Allowance

2nd March 2023 by fpdteam

HMRC is reminding married couples and those in civil partnerships that there is still time to sign up for marriage allowance before the end of the current tax year (5 April 2023) if they are eligible and haven’t yet claimed.

The marriage allowance applies to married couples and those in a civil partnership where a spouse or civil partner does not pay tax or does not 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 2022-23).

The allowance works by permitting the lower earning partner to transfer up to £1,260 of their personal tax-free allowance to their spouse or civil partner. The marriage allowance can only be used when the recipient of the transfer (the higher earning partner) does not 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 2022-23. The limits are somewhat different for those living in Scotland.

This transfer 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. In fact, even if a spouse or civil partner has died after 5 April 2018, the surviving person can still claim the allowance (if they qualify) by contacting HMRC’s Income Tax helpline.

If you meet the eligibility requirements and have not yet claimed the allowance, you can backdate your claim to 6 April 2018. This could result in a total tax-break of up to £1,242 if you can claim for 2018-19, 2019-20, 2020-21, 2021-22 as well as the current 2022-23 tax year. In fact, even if you are no longer eligible but would have been in any of the preceding years then you can still claim your entitlement.

Source:HM Revenue & Customs| 27-02-2023

New VAT penalty regime

2nd March 2023 by fpdteam

The first monthly returns and payments affected by HMRC’s new VAT penalty regime are due by 7 March 2023. The new rules apply to the late submission and / or late payments of VAT returns for VAT return periods beginning on or after 1 January 2023.

Under the new regime, there are separate penalties for late VAT returns and late payment of VAT as well as a new methodology to the way interest is charged. This replaces the old default surcharge regime and for most taxpayers should represent a fairer system.

The new system is points-based. This means that taxpayers will incur a penalty point for each missed VAT submission deadline. At a certain threshold of points, a financial penalty of £200 will be charged and the taxpayer will be notified. The threshold varies depending on the required submission frequency (monthly, quarterly, annual). For quarterly VAT returns, the penalty points threshold will be 4 points. The penalty points will reset to zero following a period of compliance, for quarterly returns this requires 12-months of compliance. There are also time limits after which a point cannot be levied.

In addition, the new system sees the introduction of two new late payment penalties. A first payment penalty of 2% of the unpaid tax that remains outstanding 16-30 days after the due date. The second payment penalty increases to 4% of any unpaid tax that is 31 or more days overdue. To help with the introduction of the new system, HMRC has confirmed that will not be charging a first late payment penalty for the first year of the new regime (1 January – 31 December 2023) once the debt is paid in full within 30-days of the payment due date or if a payment plan is agreed.

Late payment interest will be charged from the date a payment is overdue, until the date it is paid in full. Late payment interest is calculated as the Bank of England base rate plus 2.5%.

Source:HM Revenue & Customs| 27-02-2023

Scottish Winter Payments Support

2nd March 2023 by fpdteam

The Scottish Winter Heating Payment is a new Scottish Government benefit that replaces the Department for Work and Pensions’ (DWP) Cold Weather Payment. It can be claimed by eligible claimants on low incomes living in Scotland from 1 November 2022. The Cold Weather Payment is paid to eligible individuals on benefits in England and Wales. Northern Ireland runs a separate scheme which mirrors the Cold Weather Payment scheme in England and Wales.

The Scottish Winter Heating Payment is not linked to a sustained period of cold weather in a specific location but is a reliable annual £50 payment. The first winter payments to around 400,000 people were processed at the end of February.

Those eligible for the Scottish Winter Heating Payment will receive it automatically, with no need to apply. It is paid through Social Security Scotland and people will get a letter to let them know they are eligible.

The Minister for Social Security Scotland said:

'The Payment will reach significantly more people than the benefit it has replaced. On average only 185,000 people received the equivalent Cold Weather Payments from the UK Government over the last seven years – whereas we will pay everyone eligible every year.

The Scottish Government is investing around £20 million per year compared with an average of £8.3 million annually paid out through Cold Weather Payment. We will also uprate the next Winter Heating Payment by 10.1%, to £55.05.'

Source:The Scottish Government| 27-02-2023

Breaking even – checking the numbers

27th February 2023 by fpdteam

In previous newsfeeds we have described how you can calculate the level of turnover you need to create in order to meet all your costs whether they be fixed costs (rent, rates etc.,) or variable costs (goods you need to buy to convert into goods you sell).

For example, if your fixed costs are £50,000 per annum and your gross profit (the difference between your sales and direct costs) is 25% of your turnover, the annual turnover you need to breakeven will be £200,000. The formula is:

Annual fixed costs divided by 25 (the gross profit percentage) multiplied by 100.

If you have no variable costs, your breakeven turnover will be your fixed costs. And be sure to include your drawings/dividends/salary as part of the fixed costs.

Unfortunately, you will need to make this calculation each month to have any certainty that you have a realistic estimate of your breakeven turnover.

Over time, you could probably place more reliance on any underlying trend in the numbers you calculate.

The main factors that will change your breakeven calculations are increases or decreases in:

The amount you pay for any direct costs, to purchase goods or labour to convert into the products you sell.
The amount you pay for fixed costs – that do not tend to increase or decrease based sales volume. For example, premises costs, professional fees and admin support costs.

While inflation is high these costs will quickly escalate.

And what if you need to invest in your business? If you do not have retained funds to meet investment costs you may need to borrow to fund the investment. This will increase your costs (interest charges) and require that you produce enough retained profits, as a result of your investment and general trading, to meet lending repayments.

We can help. Call if you need help to consider your planning options. To find a way out of the present difficult trading conditions we may all need to do more than just breakeven.

Source:Other| 26-02-2023

Bereavement Support Payment

27th February 2023 by fpdteam

The amount of Bereavement Support Payment you can claim will depend on your relationship to the person who died and when you make your claim.

Your payments will be paid into your bank, building society or credit union account.

If you were married or in a registered civil partnership with the person who died

If you were receiving Child Benefit when your partner died (or did not get it but were entitled to it), you will get the higher rate.

This is made up of:

a first payment of £3,500; and
up to 18 monthly payments of £350.

If you were not entitled to Child Benefit, you’ll get the lower rate unless you were pregnant when your partner died.

This is made up of:

a first payment of £2,500; and
up to 18 monthly payments of £100.

You must claim within 12 months of your partner’s death to get the first payment. If you claim after this time, you will only get monthly payments.

If you were living together as though you were married with the person who died

You’ll get a first payment of £3,500 and then up to 18 monthly payments of £350.

You may get fewer payments if:

your partner died after 9 February 2023, and you claim more than 3-months after your partner’s death; and
your partner died before 30 August 2018.

If you receive benefits

Bereavement Support Payment will not affect your benefits for a year after your first payment. After a year, money you have left from your first payment could affect the amount you get if you renew or make a claim for another benefit.

You must tell your benefits office (for example, your local Jobcentre Plus) when you start receiving Bereavement Support Payments.

Source:Other| 26-02-2023

Tax codes for employees

23rd February 2023 by fpdteam

The P9X form is used to notify employers of the tax codes to use for employees. The latest version of the form has been published and shows the tax codes to use from 6 April 2023. The form states that the basic personal allowance for the tax year starting 6 April 2023 will, as expected, be £12,570 (£12,570 in 2022-23) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 in 2022-23) 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 (2023) form also includes information to help employers in the new tax year. The document also reminds employers that have new employees starting work between 6 April and 24 May 2023 and who provide you with a P45 to follow the instructions at www.gov.uk/new-employee.

Source:HM Revenue & Customs| 20-02-2023

Properties not let at commercial rates

23rd February 2023 by fpdteam

There are special rules where a property is let at less than a commercial rate or isn’t let on commercial terms. These rules also apply if a property is occupied rent free or at less than a commercial rate, for example, a property is occupied by a family member at a reduced or nil rent.

In these circumstances, HMRC can take the view that unless the landlord charges a full market rent for a property and imposes normal market lease conditions, it is unlikely that the expenses of the property are incurred ‘wholly and exclusively’ for business purposes. Problems may also arise when considering the deduction of expenses during periods when the property is lived in by ‘house sitters’ who do not make any payment whilst staying at the property.

HMRC generally accepts that if a property is let at below the market rate (as opposed to providing it rent-free), the landlord can deduct the expenses of that property up to the rent they get from it. This means that the uncommercially let property produces neither a profit nor a loss, but the excess expenses cannot be carried forward to be used in a later year.

If the landlord is actively seeking a tenant and a relative house sits while it is empty, relief will not be restricted as long as the property remains genuinely available for letting. Relief for capital expenditure on uncommercial lettings may also be restricted.

Source:HM Revenue & Customs| 20-02-2023

Miscellaneous benefits in kind

23rd February 2023 by fpdteam

The list of miscellaneous company benefits that can be provided tax-free to employees is quite short. However, some of the benefits that can be provided include the following:

Medical insurance or medical treatment for employees working abroad.
One annual medical health check and / or health-screening assessment.
Exempt loans to employees. There are a number of scenarios where beneficial loans are exempt and employers might not have to report anything to HMRC or pay tax and National Insurance. The most common exemption relates to small loans with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year.
Living accommodation. There are special rules for the provision of living accommodation to employees under certain circumstances. In most cases, employees will pay tax on any living accommodation provided by an employer unless they qualify for an exception.

An exception for living accommodation will usually apply in cases where:

the accommodation is necessary for an employee to do their job properly;
it’s customary to have living accommodation with the job and it means the employee can perform their job better; and
the employee faces a special threat to their security because of their job, and the living accommodation is in place to help protect them.

There is no requirement to pay tax on benefits and expenses covered by concessions or exemptions and they do not need to be included on a tax return.

Source:HM Revenue & Customs| 20-02-2023

Beneficial loans that are exempt

23rd February 2023 by fpdteam

An employee can obtain a benefit when provided with an employment-related cheap or interest-free loan. The benefit is the difference between the interest the employee pays, if any, and the commercial rate the employee would have to pay on a loan obtained elsewhere. These types of loans are referred to as beneficial loans.

There are a number of scenarios where beneficial loans are exempt and employers might not have to report anything to HMRC or pay tax and National Insurance. The most common exemption relates to small loans with a combined outstanding value to an employee of less than £10,000 throughout the whole tax year.

The list also includes loans provided:

in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee);
to an employee for a fixed and invariable period, and at a fixed and invariable rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out;
under identical terms and conditions to the general public as well (this mostly applies to commercial lenders);
that are ‘qualifying loans’, meaning all of the interest qualifies for tax relief; and
using a director’s loan account as long as it’s not overdrawn at any time during the tax year.

Source:HM Revenue & Customs| 20-02-2023

VAT – transfer of business as a going concern

23rd February 2023 by fpdteam

The transfer of a business as a going concern (TOGC) rules concern the VAT liability of the sale of a business. Normally the sale of the assets of a VAT registered or VAT registerable business will be subject to VAT at the appropriate rate.

Where the sale of a business includes assets and meets certain conditions, the sale will be categorised as a TOGC. A TOGC is defined as 'neither a supply of goods nor a supply of services' and is therefore outside the scope of VAT. Under the TOGC rules no VAT would be chargeable on a qualifying sale.

All the following conditions are necessary for the TOGC rules to apply:

The assets must be sold as part of a 'business' as a 'going concern'. In essence, the business must be operating as such and not just an 'inert aggregation of assets'.
The purchaser intends to use the assets to carry on the same kind of business as the seller.
Where the seller is a taxable person, the purchaser must be a taxable person already or become one as the result of the transfer.
Where only part of a business is sold it must be capable of separate operation.
There must not be a series of immediately consecutive transfers.
There are further conditions in relation to transactions involving land.

The TOGC rules can be complex, and both the vendor and purchaser of a business must ensure that the rules are properly followed. The TOGC rules are also mandatory which means that it is imperative to establish from the outset whether a sale is or is not a TOGC. For example, if VAT is charged in error, the buyer has no legal right to recover it from HMRC and would have to seek to recover this 'VAT' from the seller.

Source:HM Revenue & Customs| 20-02-2023