0113 288 8111
Tax Returns deadline - have you done yours?
This month, Darren Stone, partner at Leon and Company Chartered Accountants writes about the upcoming tax return deadline and what is involved.
It’s that time of year again. And I don’t just mean the festive season! Most accountants are now getting busy for the upcoming deadline for submitting self-assessment tax returns for the year-ending 5 April 2017. Notwithstanding the changes on the horizon with the much publicized ‘Making Tax Digital’, which promises to change how we report our income, most of us still file online - and we have until 31 January 2018.
So, do we have to file a tax return? In the main, it is for those of us with non-standard income, including reporting our annual business results from self-employment or a partnership, reporting capital gains (e.g. the “profit” on the sale of a rental property), dividends, trust income, property rentals less qualifying expenses (you can still claim full mortgage interest for one last year only, but please note that wear and tear allowance was abolished from last year!), bank and building society interest received, taxable foreign income, etc. This income, for the period ending 5 April 2017, needs to be reported in our tax returns alongside regular income taxed at source, such as regular PAYE and pension income.
We should also report what private pension contributions we have made during the year, along with any charitable donations made under Gift Aid (possibly including annual synagogue subs!). This is particularly relevant if you are a higher-rate tax payer as you can get some tax relief on these payments. We should also disclose any Child Benefit received where our income is over £50k, and also disclose if a student loan is still being paid off.
The bottom line is that if any of the above applies to you, and you are not already completing a tax return, then you may very well have to register as soon as possible.
The last point to make is if we submit our tax return just one day late, then we incur an automatic £100 penalty, with an increasing penalty scale the longer we leave it. There is also a separate regime of penalties for paying tax late as well. So, a late tax return, and late payment can be even more costly!
If you would like more information on whether you should be registered, then we would be delighted to have a chat. In the meantime, enjoy those festivities…
In this blog, Darren Stone of Leon and Company Chartered Accountants in Leeds answers your burning tax queries.
As accountants, we often get approached by clients and the public with all sorts of tax questions. So, over the next few articles, we continue to answer some of the more common questions. Here is just a selection of recent queries:
Is it true I can claim for eye tests and spectacles as a business expense? A business can, in certain circumstances, claim for eye tests and spectacles for employees using a VDU in their line of duty. But the spectacles must be prescribed specifically for VDU-use, or a taxable benefit will arise. This doesn’t extend to the self-employed individual as it applies to employees only.
Can I claim tax relief on health insurance and school fees? If you have a company, it may pay for these type of expenses; but be aware you would be taxed as if you had received extra income to cover those costs. However, certain insurances that protect the business can be allowable; examples can include key-person cover and relevant life policies. The payment of such premiums is extremely tax efficient.
Can I claim for meals out, including when I treat a perspective new customer to lunch? If you are working away from your main base, then subsistence costs can be claimed, including lunch, possibly dinner and refreshments. That being said, the cost of food and drink must be demonstrably reasonable. If you treat a customer (or any contact!), then this is considered ‘entertaining’ and although it is a legitimate business expenses, no tax relief is granted on such hospitality expenditure.
Can I claim professional fees incurred during the year? Certain legal fees attract tax relief; mainly those relating to trade issues such as drafting a contract, supplier disputes, and employee issues. But be careful, as legal fees relating to shareholders, the company’s structure, and even certain property lease work are not necessarily tax allowable. In general, other professional fees do attract tax relief, including architects, surveyors for business premises, and even accountancy fees! But you should remember that your accountant’s fees for preparing your own, personal, tax return is not actually a business expense – so is not usually claimed.
So far, it sounds like there is so much I can’t claim for. Is there any good news? Certainly! You can claim for all sorts of areas, including stock, equipment, advertising, insurance, repairs, postage, stationery, travel, staff, etc. These can be claimed in your accounts as a deduction against your income; therefore, allowable for tax purposes. So long as the costs are wholly connected with your business, then they would qualify for 100% tax relief.
This is just the tip of the ice-berg with tax questions. In all cases, this article should not be relied upon to make decisions - always seek professional advice first.
Making Tax Digital (MTD)
Until recently, we were facing radical changes to the tax system to accommodate this objective. Businesses (including landlords) were to be required to upload summarised accounts data from their accounts software on a quarterly basis. This information, plus details of other income was to be collected in a personal tax account which would automatically calculate future tax liabilities.
The process was timed to be commencing in April 2018 and be completed by April 2020.
The accountancy profession was united in opposition to the undue haste of the implementation process and the obligation that all businesses with turnover more than £10,000 would be required to invest in acceptable accounts software and make quarterly uploads.
It would seem the government has listened. Last week they announced:
Under the new timetable:
• only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
• they will only need to do so from 2019
• businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020
Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.
This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.
As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.
It seems clear from this announcement that MTD is proceeding, but at a much more sensible pace.
VAT registered traders will need to have MTD compatible software in place by April 2019, and all businesses including property businesses with turnover above the VAT registration threshold (currently £85,000), will need to be ready to make the quarterly uploads of accounts data by April 2020.
Businesses with turnover below the VAT threshold will be under no obligation to use the MTD process, but can join in on a voluntary basis.
We will continue to work with clients to ensure they are ready to meet their obligations. It is gratifying to see the pace of change in this area slow down. This will give affected business owners and their advisors more time to implement the changes required and make more considered decisions about the software they will use to implement their links to HMRC’s MTD systems.
Tel : 0113 288 8111
100 High Ash Drive, Leeds, LS17 8RE
We are ICAEW members which means we have access to world-leading information resources, technical guidance, advisory services and local member networks.