fpdteam, Author at Bennetts Accountancy

Old style £20 and £50 notes

14th July 2022 by fpdteam

The Bank of England will be withdrawing legal tender status of paper £20 and £50 banknotes after 30 September 2022. This means that if you have any old £20 or £50 notes you should use them or deposit them at your bank or Post Office by the end of September.

A recent Bank of England press release states that ‘while the majority of paper £20 and £50 banknotes in circulation have been replaced with new polymer versions, there are still over £6 billion worth of paper £20 featuring the economist Adam Smith, and over £8 billion worth of paper £50 banknotes featuring the engineers Boulton and Watt, in circulation. That’s more than 300 million individual £20 banknotes, and 160 million paper £50 banknotes’.

The new polymer £20 note entered into circulation on 20 February 2020 and features the image of the artist JMW Turner. The new polymer £50 note features an image of the scientist Alan Turing and entered into circulation on 23 June 2021. Polymer is a thin flexible plastic that includes a number of important new security features. Polymer notes are cleaner, safer and stronger than existing paper notes.

Even after the notes no longer have legal tender status they can be presented for exchange either in person at the Bank of England’s premises in London, or sent by post (at the sender’s risk).

Source:Other| 10-07-2022

Tax gap remains at 5.1%

14th July 2022 by fpdteam

The tax gap for the 2020-21 tax year has been published and remains at 5.1%. This is the second lowest recorded percentage and remains unchanged from the previous 2019-20 tax year.

The tax gap is basically the difference between the amount of tax that should have been paid to HMRC and the amount of tax collected by the Exchequer. The gap includes tax that has been avoided in the UK’s black economy, by criminal activities, through tax avoidance and evasion. However, it also includes simple errors made by taxpayers in calculating the tax they owe as well as outstanding tax due from businesses that have become insolvent.

In monetary terms, the tax gap is equivalent to lost tax of £32 billion. This is £2 billion less than the tax gap in 2019-20. This is due to the fact that total amount of tax due fell from £672 billion in 2019-20 to £635 billion in 2020-21 because of the economic impact of COVID-19.

The key findings from HMRC’s Measuring the Tax Gap publication include:

The UK tax gap in 2020-21 is estimated to be 5.1% of total theoretical tax liabilities (£32 billion), which means HMRC protected 94.9% of all tax due.
The tax gap reduced from 7.5% in the tax year 2005-6 to 5.1% in 2020-21.
The tax gap for Income Tax, National Insurance contributions and Capital Gains Tax (IT, NICs and CGT) is 3.5% in 2020-21 at £12.7 billion – this is the biggest share of the total tax gap when viewed by type of tax (39.5%).
The tax gap for VAT is 7% in 2020-21 and is the second biggest share of the total tax gap at £9 billion (28.0%).
The tax gap for Corporation Tax reduced from 11.5% in 2005-6 to 9.2% in 2020-21 reaching a low of 6.5% in 2011 to 2012 and remaining stable since 2014-15.

HMRC’s press release on the tax gap states that ‘the reduction is a result of the government’s action to help taxpayers get their tax right first time, whilst bearing down on the small minority who are deliberately non-compliant’. The tax gap was estimated to be as high as 7.5% in 2005-6.

Source:HM Revenue & Customs| 10-07-2022

Changes at HM Treasury

14th July 2022 by fpdteam

Last week saw the resignation of the previous Chancellor Rishi Sunak from the Government. The previous Chancellor said he could no longer continue in his role in good conscience.

The Prime Minister almost immediately sought to fill this role and appointed Nadhim Zahawi as Chancellor of the Exchequer. However, the Prime Ministers move to shore up his support, in the face of mass resignations, was short lived and within 2 days Boris Johnson had announced his intention to resign as Prime Minister.

As things stand, it seems likely that a new Prime Minister will be appointed by September with Boris Johnson remaining in his role until then. The new Chancellor also appears to be remaining in his role, but it is unlikely there will be any far-reaching changes to UK taxes until a new Prime Minister is in place.

There was also another new appointment to the ministerial team at the Treasury with Alan Mak appointed Exchequer Secretary on 7 July 2022.

The new Prime Minister and his or her Chancellor will want to stamp their authority on legislation when in post in which case it is possible that we will have an early Autumn Budget that may see major fiscal changes.

Source:HM Government| 10-07-2022

Tax Diary August/September 2022

12th July 2022 by fpdteam

1 August 2022 – Due date for corporation tax due for the year ended 31 October 2021.

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

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

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

1 September 2022 – Due date for corporation tax due for the year ended 30 November 2021.

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

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

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

Source:HM Revenue & Customs| 11-07-2022

National Insurance for company directors

7th July 2022 by fpdteam

Directors are classed as employees and pay National Insurance on annual income from salary and bonuses that exceeds the Primary Threshold. The annual threshold is pro-rated this year following the increase to £12,570 from 6 July 2022 (£9,880 from 6 April 2022 – 5 July 2022).

Many director shareholders take a minimum salary and any balance of remuneration as dividends. This tends to reduce National Insurance Contributions (NICs), and in some case Income Tax. The planning strategy is to pay a salary at a level that qualifies the director for state benefits, including the State Pension, but does not involve payment of any NICs.

A director’s liability to NI is worked out based on their annual (or pro-rata annual) earnings. This differs from regular employees whose liability is calculated based on their actual pay period usually weekly or monthly. Payments on account of a director’s NICs can be made in a similar way as for employees, however, an annual adjustment must be made at the end of the tax year.

Directors, who are first appointed during a tax year, are only entitled to a pro rata annual earnings band which depends on the actual date appointed and the amount of time remaining in the tax year. Care needs to be taken in these circumstances not to incur an unexpected liability to pay NIC.

There are a number of considerations to consider when setting the most tax/NIC efficient salary.

Source:HM Revenue & Customs| 04-07-2022

Standards for tax agents

7th July 2022 by fpdteam

HMRC last published guidance on the standard for agents in January 2018 (updating the first set of standards published in February 2016). The standard applies to all tax agents who transact with HMRC and to any professional who advises or acts on behalf of others in relation to their tax affairs. HMRC’s guidance sets out what agents can expect from HMRC and vice versa.

What to expect from HMRC

If a taxpayer wants an agent to deal with HMRC on their behalf, HMRC will deal with that agent courteously and professionally. HMRC want to provide agents with a service that is fair, accurate and based on mutual trust and respect. HMRC also want to make it as easy as possible for agents to get things right.

What HMRC expects from an agent

HMRC expects all agents who want to interact with HMRC to meet the HMRC standard which requires all tax agents to maintain high standards that promote tax compliance.

This includes that the agents demonstrate:

Integrity,
Professional competence and due care,
Professional behaviour,
They meet specific standards when advising on tax planning.

The largest accountancy and tax professional bodies share a standard known as ‘Professional Conduct in Relation to Taxation’ (PCRT). Where agents meet the PCRT standard, HMRC does not envisage that their standards will place further onerous requirements on agents.

Source:HM Revenue & Customs| 04-07-2022

Tax if living abroad and selling UK home

7th July 2022 by fpdteam

One of the most often used and valuable of the Capital Gains Tax (CGT) exemptions arises on the sale of the family home. In general, there is no CGT to pay on a property that has been used as the main family residence. An investment property which has never been used will not qualify. This relief from CGT is commonly known as private residence relief or PRR.

The rules are different if you live abroad. A CGT charge on the sale of UK residential property by non-UK residents was introduced in April 2015. Only the amount of the overall gain relating to the period after 5 April 2015 is chargeable to tax. In certain circumstances PRR may apply where the property is the owner’s only or main residence.

A UK non-resident that sells UK residential property needs to deliver a non-resident CGT (NRCGT) return and pay any CGT within 60 days of selling a relevant property. The return must be made whether or not there is any NRCGT to be paid and even if there is a loss on the disposal, or where the taxpayer is due to report the disposal on their Self-Assessment tax return.

There are penalties for failing to file the NRCGT return within the deadline as well as for failing to pay any tax due on time.

Source:HM Revenue & Customs| 04-07-2022

Pensions triple lock to be reinstated

7th July 2022 by fpdteam

The triple lock guarantee on pensions that was suspended for the current 2022-23 tax year is to be restored from April 2023. In September 2021, the government announced that its triple lock guarantee on pensions was to be abandoned for one year due to unprecedented fluctuations to earnings caused by the COVID-19 pandemic.

The triple lock guarantee was first introduced in 2010 and had remained in place until April 2022. The guarantee had seen the full yearly State Pension increase by over £2,050 in this period. The triple lock is the mechanism used to calculate increases to the state pension each year. Under the triple lock guarantees the basic state pension rises by whichever is the highest out of average earnings growth, inflation or 2.5%.

The confirmation that the government will reinstate the triple lock from April 2023 means that the state pension increase will be based on the reading of the consumer price index (CPI) for September 2022. Based on current forecasts this is likely to be significantly higher than the forecast inflation rate for 2023-24 and likely to be in the range of a 10% increase.

The change was announced in Parliament by the Chief Secretary to the Treasury and remains subject to the Secretary of State’s review. This decision will bring some cheer to many of those in receipt of the State Pension especially following the changes this tax year and the inflationary pressures affecting the real value of their pension.

Source:HM Government| 04-07-2022

Childcare top-up to cover summer activities

7th July 2022 by fpdteam

As the school holidays fast approach, many parents face having to organise extra school holiday childcare over the summer months. Working families can use the Tax-Free Childcare (TFC) scheme to help if they have children aged up to 11 years old (17 for those with certain disabilities).

The TFC scheme helps support working families with their childcare costs and can be used to pay for accredited holiday clubs, childminders or sports activities during the school holidays. There are many registered childcare providers including school, football, art and tennis clubs signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays.

The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by Government up to a maximum total of £10,000 per child per year. This will give parents an annual savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17) in childcare costs.

The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

Source:HM Revenue & Customs| 04-07-2022

Tax credits renewal deadline reminder

7th July 2022 by fpdteam

31 July 2022 is the final day for families and individuals that receive tax credits to tell HMRC about any changes to their circumstances or income and to renew their tax credit. As in previous years, there is likely to be a huge last-minute rush and it may be difficult to contact HMRC by phone. Renewing a claim online (either on the HMRC APP or GOV.UK) is the preferred method. It is also possible to renew by post or phone. At the beginning of July, there were still 323,700 claims that had to be renewed.

Once the deadline has expired, anyone who has not yet renewed their tax credits should still ensure they do so as soon as possible as otherwise their payments may be stopped, and monies received since last April may have to be repaid. We would strongly advise any of our readers still to renew their tax credits to do so as a matter of urgency.

Over 2.1 million renewal packs were sent out by HMRC between late April and early June. A renewal is required if the pack has a red line across the first page and it says, 'reply now'. If the pack has a black line and says ‘check now’, recipients will need to check the details are correct. If the details are correct the tax credit awards will be renewed automatically.

Taxpayers need to notify HMRC where there have been changes to the living arrangements, childcare costs, number of hours worked and salary (increase or decrease). Details of previous year's income also need to be completed on the form to allow HMRC to check if the correct tax credits have been paid.

Source:HM Revenue & Customs| 04-07-2022