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Tax Tips from Simon Robinson, ATT (Fellow) FMAAT.
11.7 million returns due. 94% were filed online. Just over 700k filed on the 31st. 26.5K filed in the last hour. Last year, last filing was with 17 seconds to go! However just short of 1 million missed the deadline.
Late filing penalties
£100 late filing penalty. If still unfiled after three months (30 April 2020) then £10 per day up to £900. If still unfiled after 6 months, 5% of tax due or £300 if greater. Same again at 12 months. Latter penalties capped at 100% of tax due.
Late payment penalties
Interest accrues from day one (3.25%). If unpaid at 30 days, 5% of tax due. At six months, 5% of any tax outstanding. Ditto 12 months.
Example: File and pay on 1 February 2021 (1 year and a day late). Liability £10,000. Interest and penalties would total £3,825.
How to avoid this
Speak to an adviser/accountant! Keep good records as you go, it is easier and aids budgeting. Aim to file as early as possible, no adverse effect on payment/amendment dates and gives more notice of any liability.
If you are late, don’t panic. Aim to complete asap to limit penalties. Also consider making an estimated tax payment to limit interest and penalties in respect of late payment.
You can appeal penalties if you have a reasonable excuse, but the acceptable list is limited (bereavement, hospital stay, HMRC technical issues).
Common business expenses to make sure you claim
Use of home as office - £4 per week with no evidence, more if properly calculated
Mileage for business miles – 45 per mile for the first 10,000 miles, 25 thereafter. Keep mileage log
Accountancy costs(!) – for company accounts and returns or personal tax return if self-employed
IR35 changes
Or ‘off-payroll working’. Where an individual works via a personal service company (PSC) and would otherwise be considered an employee. Rules in place since 2000 but notoriously hard to enforce.
Previously if applied, the PSC was the deemed employer so any income was (broadly) taxed as if PAYE. This stopped the income tax efficient profit extraction profile of relatively low salary and dividends. From April 2020, the emphasis switches to the engaging party to operate the tests and decide whether the rules apply. If they do, payments are treated as employment income.
Contract for a project or ongoing services? Paid by time or for a task? Mutual obligation?Right of control/substitution?Own tools/equipment?Multiple clients?Financial risk (work rejected and remedied at your cost)?
Entrepreneurs and saving 10%
If concerning Capital Gains Tax (CGT), need to make sure shares in company qualify (need to be a 5% holding and an officer/employee) or if assets in self-employed business check that their use qualifies and they are sold around the time the business ends/is sold.
If general taxation, best advice is to get an adviser if they do not have one! Should easily be able to save you 10% in maximising expense claims and giving you back time to increase income.
Topical tax tip would be to consider an electric car. For 2020/2021, there will be on benefit in kind (and therefore no income tax or class 1a NI) on providing an electric company car. The company can claim 100% of lease payment or purchase price and running costs against corporation tax. 1% and 2% rates confirmed for the following two years.
Simon Robinson ATT (Fellow) FMAAT
srobinson@lesliewardanddrew.co.uk www.lesliewardanddrew.co.uk
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