The UK tax code, the laws that govern how much tax we pay, is one of the largest in the developed global economies. Unless you have a reasonable grasp of the multitude of tax rules and regulations, attempting to manage your own tax affairs is like driving with a blind-fold over your eyes.

HMRC are keen to befriend you, you are referred to as their “customer”. Whilst this is laudable, you will likely receive more flack from HMRC based on what is wrong with your tax affairs, rather than strategic options available to reduce your tax and NIC liabilities.

For example, there are reported to be two million couples who are eligible to transfer unused personal allowance (from one spouse not paying tax to the other who is paying tax). HMRC have enough data to automatically make this transfer on behalf of eligible couples, but you must make a claim, and many couples are unaware of this possibility.

HMRC seem to be a reactive organisation. They wait for you to make a mistake or send in a claim to reduce your taxes, before they will act.

Which is why professional advice makes sense. Advisors plug the information gap, they make sure you are kept up-to-date and any useful tax strategies are implemented in good time. It is, after all, what you don’t know that will trip you up.

If you are struggling to manage your own tax affairs we can help. Please call, we would be delighted to discuss your tax planning options. Take off the blindfold…

HMRC have asserted that charities are missing out on up to £600m a year of funding due to donations not being confirmed under the Gift Aid rules.

They said:

The research, published today by HM Revenue & Customs (HMRC), shows that a third of eligible donations made to many of the UK’s 200,000 charities did not add Gift Aid when they could have done. This means that charities are losing out on extra funding worth nearly £600 million a year.

Gift Aid allows charities and community amateur sports clubs (CASC) to claim an extra 25p for every £1 donated. To add Gift Aid to a donation, you must have paid income or capital gains tax that year worth at least the value of the Gift Aid being added and give the charity permission to claim it. Gift Aid costs no extra to add on to your donation.

As a donor, you can only tick the Gift Aid box if you have paid income tax or capital gains tax in the same tax year of at least the amount of the Gift Aid claimed.

Charities will receive 25p from the government for every £1 donated under the Gift Aid scheme. Donors who pay tax at the basic rate will gain no additional tax benefit, however, donors who pay tax at the higher rates will be able to claim the higher rate elements on their tax returns.

The next time you are requested to complete a declaration when you donate or buy from a charity, take time to fill in the form. This will help the charity receive the extra government funding that is presently languishing in the Treasury’s coffers.

The only time you should decline is if you paid little or no tax, as this may result in a bill from the tax office.

Firstly, the Chancellor’s announcement to Parliament last week was not a budget speech. There were no tax changes announced, in fact, the only change that was announced was to bring forward the expected business rates rebasing exercise one year, to April 2021.

He described his announcements as the first Spring Statement updating Parliament on the economy and other fiscal matters. Which means that the speech was full of the good news: increasing employment, rising GDP growth and manufacturing output, and falling inflation and government borrowing.

Although there were no formal changes to tax announced, the Chancellor did reveal several new consultations on tax issues. These are possible future changes about which HMRC is seeking outside commentary from “interested parties” before considering legislation. They include:

• Reducing single-use plastic waste through the tax system. This will look at ways to reduce the impact of plastic waste in our environment such as disposable plastic cups, cutlery and foam trays. Some of the tax revenue raised will be used to fund research into new ways to encourage a more responsible use of plastic.
• Making sure multinational digital businesses pay a fair share of tax. This is an ongoing attempt to ensure that the larger digital players pay tax in the UK on sales they make in the UK.
• Seeking views on the role of cash in the new economy. Will cash become less relevant as digital payment processes become more widely used? This and the prevention of the use of cash to avoid tax and to launder the proceeds of criminal activity will be opened to a wider debate.
• Supporting people to get the skills they need. Improving skills to benefit growth in the economy by investing in upskilling and retraining, especially by the self-employed.

There was much speculation and bluster in his presentation, but the Chancellor revealed little of substance. It will be some time before the outcome of the above consultations become law, perhaps some of the issues will be part of the Autumn Budget later this year.

Watch this space.

According to recent press commentary, Ken Dodd married his long-time partner, Anne Jones, just two days before he died. With an estate estimated to be £7m, the executors were facing an Inheritance Tax bill of over £2m, but tying the knot means that assets transferred to Anne can now be made tax-free.

Many years ago, Ken brushed off tax evasion accusations by HMRC. He was accused of numerous counts of tax fraud, and although he settled tax arrears in full, including penalties, he was cleared by the jury in the court case of fraud.

Ken and Anne’s recent actions highlight the tax-free status of transactions between husband and wife, and civil partners. If the receiving spouse is domiciled in the UK, then any assets transferred on death or during life can be made with no liability to capital gains tax or inheritance tax.

As a bonus, Anne will see an uplift in the base cost of any assets subject to capital gains tax, that she receives from Ken’s estate.

For readers with significant estates, who find themselves in a similar position, being married, for tax purposes, is a compelling argument if you want to maximise the value of your after-tax estate for your family.

We offer advice on estate planning and would recommend that you consider your options sooner than two days from your expected demise. Being married is just one of many strategies that you can make to ensure your hard-won assets are protected from taxation on your death.

From April 2019, certain self-employed businesses will be required to file VAT returns direct to their online personal tax accounts with HMRC. Eventually, all income and allowances will be kept in the digital account that HMRC are setting up to calculate your tax liabilities. HMRC are still hedging their bets, but it is unlikely that business accounts information will need to be uploaded before April 2020.

How will this affect your tax affairs?

It will shift the emphasis from reporting historical data on a tax return or VAT return, to uploading real-time data to your personal tax account.

Banks, building societies, pension providers and employers will be required to “push” information to HMRC. And you will be obliged, in most cases, to upload quarterly information to HMRC on the profitability of your business or property letting income business.

Q: How will I have to send information; all I have is a spreadsheet?

A: The upload will have to be done electronically and if you already use bookkeeping software that we have recommended, this facility will be in place in good time. If you haven’t considered the use of accounts software, please call. We can help you get everything ready before the upload obligations begin from April 2019 when VAT returns will need to be filed in this way.

Q: How will I know if the information I am sending means I will pay too much tax or VAT?

A: Once the changes are fully implemented, certainly not before April 2020, we will be offering a service to check your accounts data for you before it’s uploaded. This check will also include a review of VAT uploads. We will also check your personal tax account at least once a year (at the end of each tax year) to make sure that the income tax liability assessed is correct. The year’s end review will include a look at ideas to reduce your tax bill, if appropriate planning opportunities are available.

If you are likely to be affected by these changes and are still undecided which accounts software to use, please call so that we can get you prepared.

A reminder that the General Data Protection Regulation is due to become law 25 May 2018. At the time of writing this blog, that’s 75 days to become compliant.

Why should you take the GDPR seriously?

Basically, because there are significant financial penalties for getting it wrong: fines of up to 4% of an organisation’s worldwide turnover. Which is why larger corporations are sitting up and taking notice of the GDPR; this new regulation places respect for the rights of an individual for privacy squarely at the feet of the UK business community.

Aside from the penalties that may be levied for non-compliance there are also compelling commercial reasons for getting to grips with GDPR. For example, your customers – to achieve GDPR compliance – will be required to make sure that any organisation that handles their personal data is also GDPR compliant, and that may mean you. If they ask you for confirmation that you are compliant, and you are unable to confirm, they may be obliged to seek an alternative supplier.

Accordingly, the GDPR will affect all our businesses. We will also need to respect it’s legal standing, as Brexit or no Brexit, the GDPR is being adopted into UK law.

New requirements, not in the present Data Protection Act 1998, include:

• Reporting data breaches.
• Cross-border considerations.
• New rights for customers: need to inform them how you are using their personal data and their rights under the GDPR to request that personal data is deleted.
• Need to demonstrate that your business is mitigating against risks of misuse of personal data.

Business owners and staff need to appreciate that from 25 May 2018, assessing and protecting customers, suppliers and staff personal data (essentially protecting their privacy) needs to be of paramount concern.

As you would expect, the Spring Statement delivered by the Chancellor Philip Hammond, to Parliament on 13 March 2018, was peppered with party political jibes no doubt intended to lift the spirits of his own party and dismay the opposition parties.

There was very little “promised” in terms of new tax or other strategic items that we are used to in a Budget speech; we will need to wait until autumn 2018 for news of changes to government spending and changes to the tax code.

The new-style spring statements are intended to deliver:

• An update on the health of the UK economy and Office for Budgetary Responsibility (OBR) forecasts,
• An update on progress made since Autumn Budget 2017, and
• Invitations for interested parties to give their views on proposed policy changes.

A summary of the matters that were disclosed follow:

1. Economy and fiscal forecasts

• Indicators for GDP growth, manufacturing output, and employment are forecast to rise.
• The indicators for inflation and government borrowing are forecast to fall.

The Chancellor’s message in this part of his presentation was upbeat but cautious. He would consider relaxing his expenditure criteria, but only if the positive indicators continued. His consistent message was “there is a light at the end of the tunnel, but caution is still required”.

2. Progress since Autumn Budget 2017 items cited included:

• Housing challenges: progress is being made to meet housing needs by working with local authorities and other parties. Mention was made of the 60,000 first time buyers who have benefitted from the stamp duty concessions announced last year.

• Helping households: cited increases in basic tax allowances at the last budget and increases in the National Living Wage to £7.83 per hour.

• The Chancellor also announced that the next business rates revaluation will take place a year earlier than planned, in 2021, with further reviews every three years starting 2024.

• Improving transport in English cities; plans to allocate the £1.7bn of funding announced in the Autumn Budget 2017. Half the funding has been allocated to Combined Authorities with mayors, the balance to cities across the UK via an invitation to bid.

• Improving the UK’s digital connectivity. The aim is to roll out full-fibre to local areas.

3. Inviting views on future changes to the tax system.

These will include:

• Reducing single-use plastic waste through the tax system. This will look at ways to reduce the impact of plastic waste in our environment such as disposable plastic cups, cutlery and foam trays. Some of the tax revenue raised will be used to fund research into new ways to encourage a more responsible use of plastic.

• Making sure multinational digital businesses pay a fair share of tax. This is an ongoing attempt to ensure that the larger digital players pay tax in the UK on sales they make in the UK.

• Seeking views on the role of cash in the new economy. Will cash become less relevant as digital payment processes become more widely used? This and the prevention of the use of cash to avoid tax and to launder the proceeds of criminal activity will be opened to a wider debate.

• Supporting people to get the skills they need. Improving skills to benefit growth in the economy by investing in upskilling and retraining, especially by the self-employed.

As mentioned in our introduction today, there was much “padding” to the Chancellor’s presentation, but the overall impression was a “steady as you go” approach. It will be interesting to see how wider political issues, such as the forthcoming Brexit negotiations, will play their part in the shaping of future fiscal policy. Only time will tell.

From the 1 March 2018, the old-style £10 notes featuring Charles Darwin, ceased to be legal tender. A recent announcement by Companies House suggests the following actions:

Time is ticking for the old paper £10 banknote. We’re advising all businesses to take ‘note’, as there’s just a few days left to spend your old ‘tenners’.

Figures from the Bank of England suggest there’s still £2.2 billion of old paper £10 notes in circulation. But, from midnight on 1 March 2018, these old paper notes will stop being legal tender. This means that from this date, you’ll no longer be able to spend the old paper notes, featuring Charles Darwin.

Changing your old banknotes

From 1 March, most shops and other businesses will only accept the new polymer or ‘plastic’ £10 notes, featuring Jane Austen. But, you’ll still be able to exchange any old paper tenners for free at the Bank of England, either by post or in person.

Some retailers, banks and building societies may choose to accept the old notes after this deadline. But, they don’t have to.

New polymer notes

Paper banknotes of £5, £10 and £20, are being gradually replaced by polymer ones, which are more secure and harder to counterfeit. These new banknotes also have raised bumps and dots, to help blind and partially-sighted users identify each banknote by touch.

They’re also more resistant to dirt and wear, so last longer. According to the Bank of England, this means they’re better for the environment, with a lower carbon footprint than the old paper notes.

Other banknotes

The old paper £5 note has already been replaced, and a new polymer £20 banknote will be issued in 2020. The Bank of England hasn’t confirmed if the £50 note will be replaced.

If you have petty cash boxes or a safe where old notes may be hoarded time to see if your bank will exchange them, if not, you will need to organise a trip to the Bank of England or check out their website at https://www.bankofengland.co.uk/banknotes/exchanging-old-banknotes where you can pick up instructions on how to exchanges notes by post.

In a recent case considered by the courts a company was fined £297,845 for being one day late in paying their VAT.

The case highlights the unpredictable, and seemingly harsh outcomes of HMRC’s VAT surcharging rules.

If you pay your VAT on time, whether quarterly or monthly, and you make sure that you file your VAT returns in good time, before the filing deadlines, you need have no fear of incurring VAT surcharge liabilities. They only arise if you are a late filer or late payer.

A key point to remember is that the VAT default surcharges increase each time a default occurs: from 2%, 5%, 10% and 15%. The only way to reset the penalty clock back to zero is to be free of default events for a complete calendar year.

In the case highlighted in this article, the company had various past default events and had reached the 10% penalty band. It’s VAT liability was £2,978,459, and therefore the penalty was £297,845.

Unfortunately, the company could produce no compelling excuse for the late payment and the court upheld the surcharge.

Whilst the outcome of this case was exceptional, £297,845 seems an extraordinary amount to pay for being one day late in settling a bill, it is a salutary reminder to file and pay VAT returns before the due dates so that you do not find yourself on the default surcharge treadmill. And if you do default, redouble efforts to file and pay on time for a full year to reset the default clock to zero.

1 March 2018 – Due date for corporation tax due for the year ended 31 May 2017.

2 March 2018 – Self assessment tax for 2016/17 paid after this date will incur a 5% surcharge.

19 March 2018 – PAYE and NIC deductions due for month ended 5 March 2018. (If you pay your tax electronically the due date is 22 March 2018)

19 March 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2018.

19 March 2018 – CIS tax deducted for the month ended 5 March 2018 is payable by today.

1 April 2018 – Due date for corporation tax due for the year ended 30 June 2017.

19 April 2018 – PAYE and NIC deductions due for month ended 5 April 2018. (If you pay your tax electronically the due date is 22 April 2018)

19 April 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2018.

19 April 2018 – CIS tax deducted for the month ended 5 April 2018 is payable by today.

30 April 2018 – 2016-17 tax returns filed after this date will be subject to an additional £10 per day late filing penalty.