TAX AVOIDANCE BY LANDLORDS INCREASES

There was a 51% rise in residential landlords being pursued by HMRC for underpaid or undeclared tax on letting income in 2018.

8,704 property landlords were investigated last year under HMRC’s Let Property Campaign which began in 2013.  A scheme where an individual landlord letting out residential property, here or abroad, voluntary informs HMRC of any undisclosed income from said property.  In return they receive the best possible terms to pay the tax owed!  The scheme was to run for a minimum of 18 months but is now running until further notice.

In 2018 HMRC saw a 67% increase in the amount of income tax clawed back from landlords, equivalent to £32.8m.  The value of the fines being £5.6m.

Property landlords who underpay tax on their letting income can be fined up to 100% of the value of the unpaid tax plus criminal charges can also be brought.  Those property landlords who disclose genuine errors are dealt with less severely with HMRC going back just 6 years and smaller fines if any.  If you voluntarily inform HMRC of undisclosed letting income you have 90 days to pay the correct amount plus any interest or penalties.

Chris Norris, of the National Landlords Association said “Tax can be a complicated and confusing process for landlords who are trying to cut costs by doing their returns themselves, rather than seeking specialist advice. It is possible some landlords have unwittingly disclosed less tax on letting income than they should have.” John Stewart, of the Residential Landlords Association, said: “The tax system is becoming ever more complex in the private rented sector, and communication from HMRC on changes to mortgage interest relief has not been sufficient.”

If you require any assistance on this matter, then please call us on 0113 286 4486.

Source: The Daily Telegraph (09/02/19)/TaxAssist Accountants

If you have shares in a company, either your own or another, then you may receive a dividend payment.  Tax may be payable on these dividends if it is above your dividend allowance for that tax year.

The dividend allowance,

• 6 April 2018 to 5 April 2019 – £2,000
• 6 April 2017 to 5 April 2018 – £5,000
• 6 April 2016 to 5 April 2017 – £5,000

The tax you pay depends on which Income Tax Band (those below are 2018/19 Bands) you are in,

• Basic rate (£11,851 – £46,350 taxable income) – 7.5%
• Higher rate (£46,351 – £150,000 taxable income) – 32.5%
• Additional rate (over £150,000 taxable income) – 38.1%

You need to add your income from dividends to any taxable income you receive to work out your tax band.  Tax could be payable at more than one rate and any dividends that fall within your Personal Allowance (i.e. up to £11,850) do not count towards your dividend allowance.

For example, £3,000 is paid in dividends in the 2018/19 tax year.  The dividend allowance is £2000 therefore the remaining £1000 is taxable.  Your taxable income is £35,000 and with your £3000 dividend gives a total taxable income of £38,000.  Therefore you pay 7.5% on £1000 of dividends as your total taxable income is within the basic tax band.

How you pay this tax depends on the amount of dividend income you receive in the tax year.

Up to £10,000 dividends

Tell HMRC by,

• Contacting the helpline 0300 200 3300
• Asking HMRC to change your tax code – the tax will then be taken from your wages or pension through PAYE
• Completing a Self Assessment tax return, if you already complete one.

If the dividends you receive are within your dividend allowance for the tax year then you do not need to inform HMRC.

Over £10,000 dividends

You will need to complete a Self Assessment tax return.  If you have not completed one before you need to register by 5 October following the tax year you had the income.

If you need further information or help on this then please get in touch 0113 286 4486.

Source: HMRC

Making Tax Digital (MTD) comes into effect on 1 April which is just a few days’ away.  If you are still not sure what MTD is and whether this applies to your business, it is where VAT registered businesses with an annual turnover of £85,000 or more need to file their VAT return online via cloud accounting software e.g. QuickBooks, Xero etc.

MPs were warned last month that MTD will seriously effect small businesses with Martin McTague, policy and advocacy chairman at the Federation of Small Businesses, informing the Treasury committee: “HMRC has underestimated the reaction they are going to get. We are literally weeks away so we are very, very close to a very serious problem for a lot of companies.”

HMRC have reported that only 70,000 businesses have signed up for MTD (as of 1 week to go) out of the estimated 1.2m that need to do so, despite research at the end of last year indicating that 83% of businesses knew about MTD and had begun preparing for it!  At present they have stated that about 3,000 are signing up each day to register and they have written to every business about the need to sign up.

HMRC have said that 1 April is not a “cliff edge” as businesses only need to sign up when they need to file their VAT.  Therefore, the first businesses that will need to file via MTD are those that have a quarter end of 30^th June, due in August.  Though you may have until August it is best to start the process now and not leave too late.

For those that have software at present they need to ensure that it is MTD compatible and need to sign up for the new service and authorise their software for MTD.  For those that do not use software or not represented by an accountant will need to choose a software to use and authorise the new software for the online service.  There are over 220 software products available for businesses to choose offering different levels of functionality at various price points, including some that are free.

During a business’ first year of mandation, HMRC have said that they will be more lenient in issuing filing or record keeping penalties if the business is doing their best to comply.  However, penalties will still apply where there is deliberate non-compliance in order to safeguard VAT revenue.

There is caution with this in that HMRC will still apply penalties for late payment so ensure that your VAT bill is paid on time.

If you need further information about MTD or bookkeeping software, then please get in touch on 0113 2864486.

Source: Accountancy Daily & The Times

Photo: Photo by Helloquence on Unsplash

The Advisory Fuel Rates (AFR) as of 1 March,

Engine size                                         Petrol – amount per mile                             LPG – amount per mile

1400cc or less                                     11 pence                                                           7 pence

1401cc to 2000cc                                14 pence                                                           8 pence

Over 2000cc                                        21 pence                                                         13 pence

Engine size                                         Diesel – amount per mile

1600cc or less                                     10 pence

1601cc to 2000cc                                11 pence

Over 2000cc                                        13 pence

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The Advisory Electric Rate (AER) which was introduced in September for 100% electric cars will remain the same at 4p per mile.  Electricity is not a fuel for car fuel benefit purposes.

The AFR and AER are deemed to be tax and National Insurance free.

Both rates can be applied for fuel per mile,

• to reimburse employees for business travel in their company cars.
• when you require employees to repay the cost of fuel used for private travel.

If your employee does not repay the private fuel used during the tax year then you will need to,

• report on their P11D
• pay Class 1A National Insurance on the value of the fuel benefit

If you travel as a result of running your business (other than home to work) and

• are unsure on what you can claim
• are considering your options regarding the company purchasing a vehicle
• want to understand the rules around company car benefits in kind
• or anything else associated with business travel

Please contact us so that we can ensure the advice you are given is specific to your circumstances on 0113 2864486

Source: HMRC

The Budget, what does it mean for businesses and the taxpayer?

Personal Allowance

The personal allowance threshold and the higher rate income tax threshold are both to increase from April 2019.

• The personal allowance threshold will rise from £11,850 to £12,500, when 20% income tax is paid. This will be maintained in 2020.
• The higher rate income tax threshold, for those paying 40% tax, will increase from £46,350 to £50,000.

National Insurance

The National Insurance (NI) threshold will also rise.  NI is paid by those 16 years or over.

National Living & National Minimum Wage

The national living wage will increase by 4.9% and the national minimum wage from between 3.5% and 5.5% dependant on age.

Business

• Business rates bills for premises with a rateable value of £51,000 or less will be cut by 1/3 over 2 years. This will help 90% of independent shops, pubs and restaurants to cut bills by £8,000.
• The Annual Investment Allowance will increase from £200,000 to £1 million to assist businesses invest and grow from 1 January 2019 to 31 December 2020.
  • From October 2018 businesses can deduct 2% of the cost of any new non-residential structures and buildings off their profits before they pay tax.
• From April 2019 large businesses will be able to invest up to 25% of their apprenticeship levy to support apprentices. With the apprenticeship levy reducing from 10% to 5% for small companies and the government paying the remaining 95%.  Further details of this will be given in early 2019.

For further information regarding the 2018 Budget then go to http://bit.ly/BWBudget2018hmrc

Despite the economic uncertainty, Companies House have released figures showing that the number of new business start-ups last year increased to 663,272. This is up by 5.7% from the downturn of 2017, which saw a 4.6% drop.

Though the capital saw the largest increase, cities throughout the country including Birmingham, Manchester, Leeds and Bristol also saw a sharp increase in new ventures being started.   London saw an increase of 5.2% to 216,204.  Birmingham recorded 18,590 business formations for last year up from 13,165 the previous year.  In Scotland, Glasgow and Edinburgh saw a decrease in new business start-up. Glasgow was ahead of Edinburgh, for the third year running, with 6,396 formations compared to 5,439 in Edinburgh.  Thus, indicating that Glasgow is still the business hub of Scotland.

“It is encouraging to see formation numbers recover and hit a new high”, says Matt Smith, director of the Centre of Entrepreneurs.  “These figures demonstrate the resilience and confidence of entrepreneurs across the country.”

However, though The Organisation for Economic Co-operation and Development ranked the UK as thirds for start-ups, it fell to thirteenth in the world for scale-ups in 2017.  An early-stage investor, Malcolm Evans, says “Scale-ups, which are what matter, require changing the shape of the commercial world around you by showing precision and human flair. It’s quality over quantity.”

Source: Centre for Entrepreneurs/The Sunday Times

The minimum pension contributions are increasing from 6 April 2019 for both the employees and employers.

So how does this effect business?

• If you have eligible employees in an auto enrolment pension scheme, you will have to ensure that the minimum amount is paid by both yourself, the employer and your employee(s). You can pay more than the minimum if you so wish.
• If none of your employees are eligible for an auto enrolment pension scheme, then you need take no further action.

From 6 April 2019

• The employee’s contribution will be increasing from 3% to 5%
• The employer’s contribution will be increasing from 2% to 3%

Therefore, the total minimum contribution will be 8% when the new rates come into effect.

Under the Pensions Act 2008 it is the employer’s responsibility to ensure that the correct minimum contributions are paid.  If you pay above the minimum contribution, then you do not need to do anything unless you wish to increase the amount yourself.  As an employer you should inform your staff of the increases that will be taking place.

Also, you have an ongoing responsibility in relation to auto enrolment duties.  Each time you pay your employees you need to assess whether they meet the necessary auto enrolment criteria. If they do, they will need to be enrolled into the pension scheme, unless they decide to opt out.

If you wish to discuss auto enrolment and how we can help, then please call on 0113 286 4486.

With just a few weeks to go before the deadline, is it important that you file your self-assessment tax return online (for tax year 2017/18) by the 31^st January 2019.  In addition, if you need to pay any tax due by the dates required.  If you miss any of these deadlines, then penalties will apply.

The deadline for paying any tax owed for the 2017/18 tax year along with your first payment on account for the 2018/19 tax year is also 31^st January 2019.  Your second payment on account being due on 31^st July 2019.

If you are late in filing your self-assessment, you will face penalty fees and interest charges.

• 1 day late, a penalty of £100 is applied, even if no tax is due.
• Up to 3 months late, there is a daily charge of £10 per day, up to a maximum of £900. In addition to the initial fine above.
• 6 months late, the penalty is 5% of the tax due or £300, whichever is greater. In addition to the penalties above.
• 12 months late, is a further 5% of the tax due or £300, whichever is greater. Again, in addition to the penalties above.
• In particularly serious cases, you may be fined 100% of the tax due, thereby doubling your tax bill.

If you are in a business partnership, you will also need to complete a partnership tax return.  Again, penalties apply to both the late submission of the partnership return and the individual partner’s returns.

Late payment penalties:

• Interest will be charged from the date the payment was due. Check the HMRC website for current rates.
• A 5% surcharge will be levied if any tax remains unpaid by 28 February 2019
• An additional 5% imposed if it is still unpaid by 31 July 2019.

It is your responsibility to declare all sources of income on your self-assessment tax return.  If you do not, you could face penalties, possible court action or even criminal convictions.

HMRC offers a wide range of help during this period. Help and advice is available from the GOV.UK website or the Self-Assessment helpline on 0300 200 3310 (open Monday to Friday 8am to 8pm, Saturday 8am to 4pm and Sundays 9am to 5pm).

If you are concerned about your tax return and require any assistance call us on 0113 2864486.

Source: Which

Here at Business Works we are ready for Making Tax Digital (MTD) for our clients with all our accountants now qualified as QuickBooks Making Tax Digital ProAdvisor’s.

MTD is for those businesses whose turnover is £85,000 or above, the current VAT threshold.  Our earlier blog provides more detailed information http://bit.ly/BWMTD.  MTD is to help reduce business tax administration errors as well as increase productivity for your company with less time spent on the former.

HMRC have sent out about 200,000 letter informing businesses of the new MTD service and how VAT records and submissions will be changing from April 2019.  Have you received yours?

If your business has received a letter from HMRC, then you will need to comply with MTD.  Therefore, you will need to keep your records digitally and submit the VAT data via a functional compatible software e.g. QuickBooks, Sage, Xero etc.

We would encourage all businesses to start using a bookkeeping software package as this will ensure that your records are up to date and therefore MTD compliant.

If you need further information about MTD or bookkeeping software, then please get in touch on 0113 2864486.

The Advisory Fuel Rates (AFR) from 1 December will be,

Engine size                                         Petrol – amount per mile                             LPG – amount per mile

1400cc or less                                     12 pence                                                           8 pence

1401cc to 2000cc                                15 pence                                                         10 pence

Over 2000cc                                        22 pence                                                        15 pence

Engine size                                         Diesel – amount per mile

1600cc or less                                     10 pence

1601cc to 2000cc                                12 pence

Over 2000cc                                        14 pence

Hybrid cars are treated as either petrol or diesel cars for this purpose.

The Advisory Electric Rate (AER) which was introduced in September for 100% electric cars will remain the same at 4p per mile.  Electricity is not a fuel for car fuel benefit purposes.

The AFR and AER are deemed to be tax and National Insurance free.

Both rates can be applied for fuel per mile,

• to reimburse employees for business travel in their company cars.
• when you require employees to repay the cost of fuel used for private travel.

If your employee does not repay the private fuel used during the tax year then you will need to,

• report on their P11D
• pay Class 1A National Insurance on the value of the fuel benefit

If you travel as a result of running your business (other than home to work) and

• are unsure on what you can claim
• are considering your options regarding the company purchasing a vehicle
• want to understand the rules around company car benefits in kind
• or anything else associated with business travel

Please contact us so that we can ensure the advice you are given is specific to your circumstances on 0113 2864486

Source: HMRC