31 January 2021 – Deadline for 5 April 2020 Tax Return and Payments
The deadline of 31st January 2021 for filing your 2019/20 tax return is fast approaching, with 10 days to go.
For the few who have yet to get in touch with their information – please call the office asap as you are not allowing us enough time to complete the return for you prior to the submission deadline.
Any balancing payment of tax will be due, along with your first payment on account towards the 2020/21 tax bill. Please get in touch if you need any details to make payment to HMRC.
Time to Pay arrangement – self assessment
If you are worried about being able to pay your 2019/20 self-assessment tax liability, you can set up a payment plan online with HMRC, as long as:
- you owe £30,000 or less
- you do not have any other payment plans or debts with HMRC
- your tax returns are up to date
- it’s less than 60 days after the payment deadline
Please let us know if you would like guidance on how to set this up.
Covid-19 – impact on company profits
Clearly the pandemic is having a longer term effect than perhaps first expected and trading conditions remain very challenging for many businesses. Government support and loans have eased the cash flow for some, however, it is important to keep a close eye on your company’s profits when continuing to take dividends. Although cash may be there thanks to Bounce Back or CBILS loans, there is not necessarily income to generate profits, from which dividends can be taken. Companies can end up in a position where they are making losses and dividends from retained losses are not permitted. In this case, money from the business will be treated as salary or a loan, and the tax implications for the directors and the company may be expensive.
Please get in touch if you have some concerns over your profits. We can look at the numbers and the bigger picture and let you know what options you have.
Self-employment Income Support Scheme – Third Grant
The deadline for claiming this third grant under the SEISS scheme, for the self-employed, is 29 January 2021. Claimants must be able to demonstrate a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021 to be eligible. The grant can be claimed online through the taxpayer’s Government Gateway, as with the previous two grants.
Please get in touch if you are not sure how to do so and you need some help.
Top-up grants for retail, hospitality and leisure businesses
On 5 January 2021, Rishi Sunak announced additional funding for retail, hospitality and leisure businesses in the form of a one-off top up grant. The grant is provided on a property by property basis to support businesses forced to close with the latest national lockdown restrictions.
- Small businesses with a rateable value of £15,000 and under will get £4,000.
- Medium-sized businesses with a rateable value of between £15,000 and £51,000 will get £6,000.
- Larger businesses with a rateable value of more than £51,000 will get £9,000.
This is in addition to existing business support, including the Local Restrictions Support Grant and business rates relief.
Supreme Court rules on business policies. What does the latest ruling mean for you?
In September 2020 the High Court ruled against insurance companies which refused to pay out on claims made on business interruption policies. This gave insured businesses the right to take their case to the Supreme Court.
The judgment applies to policies which include any of the following clauses.
- Disease. This is for the consequences of the occurrence of a notifiable disease within a specified radius of your business premises.
- Prevention of access. This is cover where there’s been prevention or hindrance of access to or use of your business premises because of central government or another authority’s action or restrictions.
- Hybrid conditions. This refers to cover which is a hybrid of the first two categories, where restrictions are imposed on your business premises because of a notifiable disease.
The Supreme Court agreed with most aspects of the earlier ruling. This means that if your business suffered loss of income because it was unable to use its premises, or because of other trading restrictions resulting from the government guidance, you’re entitled to be compensated by your insurance company as long as coronavirus was identified in your area.
If you made a claim under a business interruption policy of the type covered by this ruling, you can expect to hear from your insurer in the next few weeks inviting you to provide proof of your losses. If you’re unsure whether you’re covered get in touch with your insurance company straightaway.
HMRC fishing for tax on property sales
Thousands of taxpayers who sold property in 2018/19 will receive letters from HMRC suggesting they may owe tax. We already had a few clients sending us a copy of the letter they received… so far so good as everyone had a good reason not to declare that income to HMRC.
If you get one, how should you respond?
In reality HMRC can’t have sufficient information for it to be sure that CGT is owed. The information it has will show that a property has been sold, and that according to its records it was not the taxpayer’s main home. However, its records could be out of date.
Don’t panic but take action. If you’ve received a letter you should respond as soon as possible. That way you can avoid an investigation or demands for information from HMRC using its special powers.
- If you submitted a tax return for 2018/19, check whether you should have reported the property sale; refer to page 1 of the SA108 notes (see The next step ). If you should have, you can correct your tax return. The normal deadline for doing this is 31 January 2021
- If you weren’t asked by HMRC to complete a 2018/19 tax return say why you believe you weren’t required to report the sale or provide a calculation of the gain you ought to have reported.
Tip. If you’re sure CGT wasn’t payable on the property sale, HMRC can’t do any more than slap you on the wrists for not reporting it. It can’t charge a penalty. If you’re not sure how to work out if there was a taxable capital gain or you now believe you owe tax, you should acknowledge HMRC’s letter straightaway. We suggest you also ask us for advice as soon as possible. If tax is payable HMRC can charge a penalty which will be lower if you respond quickly and provide the information needed.
Just to remind you that since April 2020, all sales of residential properties which capital gains is due on must be reported within 30 days of disposal. The tax liability will also be due at the same time.
EU VAT registration for sales to EU consumers
Following Brexit, there is a key VAT change for businesses selling goods to individual consumers (i.e. not VAT registered businesses) in the EU. Previously there has been a sales threshold in place, meaning that the UK business did not have to be registered for VAT in the EU country where sales were being made. This threshold was removed on 1 January 2021, meaning that a UK business selling to consumers in the EU will need to register for VAT in the relevant EU country. There are a few options which could be taken to deal with this – if you think you will be affected, please let us know if you would like to discuss these.
We hope you find the above useful. Please get in touch with the team if yo have any questions.