fpdteam, Author at Bennetts Accountancy

Tax relief for job-related expenses

24th February 2022 by fpdteam

If you receive no compensation from your employer for work related expenses you have paid, you can still claim tax relief for some expenses that relate to working from home. HMRC will usually allow you to claim tax relief if you use your own money for things that you must buy for your job, and you only use these items for work. You must make a claim within 4 years of the end of the tax year that you spent the money.

For example, if you use your own uniforms, work clothing and tools for work it is possible to claim for the cost of repairing or replacing small tools you need to do your job as an employee (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a 'flat rate deduction'. However, you cannot make a claim for relief on the initial cost of buying small tools or clothing for work.

Note, you cannot claim tax relief for Personal Protective Equipment (PPE). If your job requires you to use PPE, your employer should either:

give you PPE free of charge
ask you to buy it and reimburse you the costs

You may also be able to claim tax relief for using your own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your place of work. The rules are different for temporary workplaces where the expense is allowable and if you use your own vehicle to undertake other business-related mileage.

Source:HM Revenue & Customs| 21-02-2022

Tax relief if working from home

24th February 2022 by fpdteam

If you are an employee working from home, you may be able to claim tax relief for some of the bills you pay that are related to your work.

Employers can reimburse employees for the additional household expenses incurred by working at home. The relief covers expenses such as business telephone calls or heating and lighting costs for the room you are working in. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment they have bought, such as a laptop, chair or mobile phone.

Employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee’s additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount.

If the expenses or allowances are not paid by the employer, then you can claim tax relief directly from HMRC. You will get tax relief based on your highest tax rate. For example, if you pay the basic (20%) rate of tax and claim tax relief on £6 a week, then you would get £1.20 per week in tax relief (20% of £6). You can claim more than the quoted amount but will need to provide evidence to HMRC. HMRC will accept backdated claims for up to 4 years.

These tax reliefs are available to anyone who has been asked to work from home on a regular basis, either for all or part of the week including working from home because of coronavirus.

Source:HM Revenue & Customs| 21-02-2022

Spreading the cost of tax bills

24th February 2022 by fpdteam

One of the announcements by HMRC at the start of the coronavirus pandemic was the introduction of emergency measures to help those affected by COVID-19 using the existing Time to Pay service. Many businesses and self-employed people with outstanding tax liabilities were eligible to receive support with their tax affairs through this service.

Since April 2021, Self-Assessment taxpayers have used the online Time to Pay service to pay more than £310 million worth of tax in instalments. The option to spread your tax bill remains available for the 2020-21 tax year.

Once you have filed your Self-Assessment return for 2020-21 there is an option to set up an online Time to Pay arrangement to spread the cost of any 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 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 from 1 February 2022 so you should try and pay your tax bill or enter a suitable payment arrangement as soon as possible.

Source:HM Revenue & Customs| 21-02-2022

Hobbies and artificial trades

24th February 2022 by fpdteam

HMRC uses a number of different measures to help determine whether an activity is a trade irrespective of whether the activity leads to a profit or a loss. This includes looking at whether an activity is a hobby or artificial trade.

HMRC manuals implore inspectors to critically examine claims that a trade exists where that claim may have been made to get relief:

that is only available to traders, such as loss relief, or
for the costs of a hobby, or
for investment losses, or
for capital expenses, particularly in group situations, by transmuting them into revenue deductions using an artificial trading company.

In particular, HMRC will consider whether a profit is an isolated event. A taxpayer who wants tax relief for losses, which are not, in truth, trading losses, may point to a profit in a particular year to support the trading assertion. HMRC is clear that this factor would normally carry little weight if that profit was an isolated event in an overall picture of continuing losses. For example, taxpayers using an artificial trade disguised as commercial activity in order to create losses and claim various loss reliefs.

Source:HM Revenue & Customs| 21-02-2022

Tax Diary March/April 2022

22nd February 2022 by fpdteam

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

2 March 2022 – Normally Self-Assessment tax for 2020-21 would need to be paid by 2 March or a 5% surcharge would be incurred. This year HMRC is giving taxpayers more time to pay and no surcharge will be incurred if 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.

1 April 2022 – Due date for corporation tax due for the year ended 30 June 2021.

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

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

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

30 April 2022 – 2020-21 tax returns filed after this date may be subject to an additional £10 per day late filing penalty for a maximum of 90 days.

Source:Other| 21-02-2022

Paying tax underpayments via tax code

17th February 2022 by fpdteam

One of the less well-known ways of paying your Self-Assessment tax bill is to do so through your tax code.

This can only be done where all the following apply:

you owe a Self-Assessment balancing payment of less than £3,000;
you already pay tax through PAYE, for example you’re an employee or you get a company pension
you submitted your paper tax return by 31 October or your online tax return online by 30 December

The coding threshold also entitles taxpayers to have tax underpayments collected via their tax code, provided they are in employment or in receipt of a UK-based pension. The coding applies to certain debts such as Self-Assessment liabilities, tax credit overpayments and outstanding Class 2 NIC contributions. Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over the tax year along with the usual deductions.

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

Car fuel benefits for employees

17th February 2022 by fpdteam

The car fuel benefit rules only apply to company cars that attract a car benefit tax charge. This means the rules do not apply to fuel provided for use in an employee’s own car.

However, employers can pay up to 45p per mile for company related trips in an employee’s own car. If these journeys clock up more than 10,000 miles in any tax year, the rate per mile drops to 25p. As long as the above rates are applied any mileage expenses paid will be tax-free. If rates paid are higher, any excess will be taxed as a benefit. Conversely, if an employer pays less than the approved rates the employee can claim the difference against their tax bill.

Where employees are provided with fuel for their own private use by their employers in a company car, the car fuel benefit charge is applicable. The fuel benefit charge is determined by reference to the CO2 rating of the car, applied to a fixed amount.

The fuel benefit is not applicable when the employee pays for all their private fuel use. 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 can then use the published advisory fuel rates to repay the cost of fuel used for private travel back to their employer. For the 2021-22 tax year, the employer must be reimbursed for private fuel use by 6 July 2022.

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

Option to tax (VAT) land and buildings

17th February 2022 by fpdteam

There are special VAT rules that allow businesses to standard rate the supply of most non-residential and commercial land and buildings (known as the option to tax). This means that subsequent supplies by the person making the option to tax will be subject to VAT at the standard rate.

The ability to convert the treatment of VAT exempt land and buildings to taxable can have many benefits. The main benefit is that the person making the option to tax will be able to recover VAT on costs (subject to the usual rules) associated with the property including the purchase and refurbishment of the property.

One interesting aspect of the rules concerns what happens if you make changes to a building after you have opted to tax. HMRC’s guidance sets out the following basic principles that apply to the most changes made:

Extensions. If you have opted to tax a building and you extend it at a later date, upwards, downwards or sideways, your option to tax will apply to the whole of the extended building.

Linked buildings. If prior to their completion buildings are linked by an internal access or covered walkway they are treated as a single building and an option to tax will apply to both parts. If a link is created after both buildings are completed, the option to tax will not flow through with the link.

Forming a complex. If you have a group of units that have been treated as separate buildings for the option to tax and you later decide to enclose them so as to form a complex, and which meets the description of what constitutes a building, then the option to tax will not spread to the un-opted units.

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

Beware online rip-offs

17th February 2022 by fpdteam

The Competition and Markets Authority (CMA) has launched a new campaign to help shoppers spot and avoid misleading online practices that could result in them being ripped off.

If the campaign identifies any commercial practices that adversely affect consumers then they can take enforcement action if a firm breaches consumer protection law and fails to respond to warnings.

In a poll of over 2,000 UK adults:

7 out of 10 had experienced misleading online practices
85% believed businesses using them were being dishonest with their customers
And 83% were less likely to buy from them in the future

The misleading online practices, include:

Hidden charges (85% of respondents) – unexpected compulsory fees, charges or taxes being added when someone tries to make an online purchase.
Subscription traps (83%) – – misleading a customer into signing up to, and paying for, an unwanted subscription that can be difficult to cancel.
Fake reviews (80%) – reviews which do not reflect an actual customer’s genuine opinion or experience of a product or service.
Pressure selling (50%) – a tactic used to give a false impression of the limited availability or popularity of a product or service.

The CMA’s Chief Executive, stated:

‘As online shopping grows and grows, we’re increasingly concerned about businesses using misleading sales tactics, like pressure selling or hidden charges, to dupe people into parting with their cash.’

The campaign also has the support of Citizens Advice, to whom consumers can report problems with misleading practices that they have encountered online.

Source:Other| 14-02-2022

Challenging your council tax band

17th February 2022 by fpdteam

The Valuation Office Agency (VOA) is a government body in England and Wales and an executive agency of HMRC. The Agency values properties for the purpose of Council Tax and for non-domestic rates in England and Wales. The council tax bands were set on 1 April 1991 for England and on 1 April 2003 for Wales and range from Band A – F.

If you believe that your council tax listing is incorrect you can challenge this with the VOA. A recent press release from the VOA has highlighted that some 70,000 households are expected to contact them over the coming months to ask for a review of their Council Tax band.

An appeal against your current band can be made online and you need to give a reason for your challenge and provide supporting evidence. Legally, the VOA can only review Council Tax bands where the claimant provides certain types of evidence to show their banding is wrong, or if it meets certain criteria.

This includes:

You disagree with an alteration to your properties banding made by the VOA.
You are new to the property in question and feel the valuation band too high or low.
The property is no longer a dwelling.
The local area has changed.
The property is new or has only recently become used for domestic purposes.
Change in a property e.g., flats merged into a house of vice versa.
The valuation band does not take into account a relevant decision of a local Valuation Tribunal or the High Court.

When submitting an appeal, you should include the reasons why you think the Valuation List should be altered and include documentary evidence where possible. You can also appoint someone else to challenge your council tax listing on your behalf.

If you live in Scotland, then you need to use the Scottish Assessors portal website to check your Council Tax band and if necessary, lodge a claim with them (known as a proposal).

Source:Other| 14-02-2022