Do not let COVID-19 payments slip off the radar

The clock is ticking down to complete Self Assessment tax returns with HM Revenue and Customs (HMRC) reminding customers not to forget to include a very important payment.

More than 2.9 million people claimed at least one Self-Employment Income Support Scheme (SEISS) payment up to 5 April 2022. These grants are taxable and should be declared on tax returns for the 2021 to 2022 tax year before the deadline on 31 January 2023.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We want to help customers get their tax returns right, first time. We have videos and guidance available online to support you with your Self Assessment.”

Support scheme payments

SEISS is not the only COVID-19 support scheme that should be declared on tax returns. If customers received other support payments during the 2021 to 2022 tax year, they may need to report this on their tax return if they are:

  • self-employed
  • in a partnership
  • a business

Customers can check which COVID-19 grants or payments they need to report to HMRC on GOV.UK.

More than 66,000 taxpayers beat the clock and filed their tax return on 6 April – the first day of the new tax year. HMRC is encouraging others to complete their return as soon as they can, so they know what they owe and can budget to make the payment by the end of January. This also means that if a repayment is due, it can be claimed back sooner.

Don’t miss deadline

Completing a tax return using HMRC’s online filing service is simple and convenient. Last year, more than 95 per cent of customers filed online with many choosing to start it, save their progress and go back to it as many times as they needed before it was ready to submit. Those who submit their returns early still have until 31 January to pay.

Ms Lloyd said: “With less than 100 days to go until the online deadline, there’s still time to complete your tax return, to budget and look into the range of payment options if you need to.”

Filing early also means having plenty of time to access the number of payment options available including:

  • paying via the free and secure HMRC App
  • setting up an online monthly payment plan (self-serve Time to Pay)
  • paying through PAYE tax code (subject to eligibility)
  • payment on account

Advice available

Those who are unable to pay their tax bill in full can access the support and advice that’s available on GOV.UK. HMRC may be able to help by arranging an affordable payment plan.

All Self Assessment customers need to be aware of the risk of scams and HMRC is reminding them never to share their login details.

If you need any support, please get in touch.

Christmas gifts for your staff

Business owners who are minded to celebrate the forthcoming Christmas break with their staff are reminded that there is a tax-free allowance for the provision of an annual party or other event for the benefit of staff and their partners. The present limit to tax relief is £150 per head. If this amount is exceeded, the full cost of the benefit is taxable not the excess over £150.

Where it’s not possible to calculate individual costs an averaging process can be adopted. There are also other considerations that must be met to qualify for this relief.

Another way to benefit staff tax-free for Christmas is to consider making small gifts.

You don’t have to pay tax on a benefit (gift) to your employee if all of the following apply:

  • it cost you £50 or less to provide
  • it isn’t cash or a cash voucher
  • it isn’t a reward for their work or performance
  • it isn’t in the terms of their contract

Gifts that fall into this category are known as a ‘trivial benefit’; and whilst they may be much more than trivial in substance, you don’t need to pay tax or National Insurance or let HMRC know you are making the gift.

Any gifts that do not meet this definition will likely be taxable.

Gifts to directors are treated in a similar fashion with one over-riding condition: a director cannot receive trivial gifts of more than £300 in total each tax year. This restriction only applies to the directors of “close companies”. A close company is a limited company with five or fewer shareholders.

Watch out for VAT charge

If you recover the input tax charged when you buy gifts for employees, and if the total value of gifts given to an employee in a tax year exceeds £50, then you will have to account for VAT on the total value of gifts provided. If this is the case, you may be advised to avoid recovering the VAT in the first place.

Why the anti-fragile approach will support your business

Brexit. COVID-19. Cost of living. Energy prices. Number 10. Bank rates. Economic freefall.

It’s fair to say businesses have faced an unprecedented number of challenges over the past two years and if you’ve felt like curling up under a blanket until it’s all gone away, then you are not alone.

But there is an increasing number of people who want to say: “Bring it on. Do your worst”.

And these people have an ‘antifragile’ mindset.

The concept was introduced by writer, statistician and risk analyst Nassim Nicholas Taleb in his book Antifragile: Things That Gain From Disorder.

He explains that being antifragile is akin to a step-up from being simply resilient. Not only can you deal with life’s challenges, but you can also use them to your advantage.

And in the face of everything that is happening right now, being antifragile as a business owner can help you not only deal with the issues, but also make you stronger for the future.

Cash flow to build resilience

It’s tempting when times are good to enjoy the fruits of your labour. However, ensuring your business is prepared for future change and challenges means retaining sufficient funds to weather future storms. What does this look like? Most experts recommend three to six months of operating expenses to be held in your bank.

Skills and talent

Do you have the team you need now to support your business growth for the next 12 to 24 months? For most businesses, it’s the skills, talent and innovative nature of employees that can help sail you through choppy waters. Take time to assess your current team and consider what your customers could need in the future. Identify any skills gaps so your business can evolve to meet those needs.

Building an agile ecosystem

If you needed to pivot your business model to keep up with customer demand, could you? If, for any reason, your business had to focus on a new market to make sales, you would need to ensure the resources are at hand to deliver that change. And it’s not just your staff; it’s your software, processes and mentality of senior leadership that will be able to  support and guide these types of changes.

For business owners, becoming anti-fragile is about more than just a mentality shift; it’s acknowledging that change is constant and positioning yourself and your business in a place of strength and resilience.

Tax Diary November/December 2022

1 November 2022 – Due date for Corporation Tax due for the year ended 31 January 2022.

19 November 2022 – PAYE and NIC deductions due for month ended 5 November 2022. (If you pay your tax electronically the due date is 22 November 2022.)

19 November 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2022.

19 November 2022 – CIS tax deducted for the month ended 5 November 2022 is payable by today.

1 December 2022 – Due date for Corporation Tax payable for the year ended 28 February 2022.

19 December 2022 – PAYE and NIC deductions due for month ended 5 December 2022. (If you pay your tax electronically the due date is 22 December 2022).

19 December 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2022.

19 December 2022 – CIS tax deducted for the month ended 5 December 2022 is payable by today.

30 December 2022 – Deadline for filing 2021-22 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2023-24.

Self-assessment scams warning

Criminals claiming to be from HMRC have targeted individuals by email, text and phone with their communications ranging from offering bogus tax rebates to threatening arrest for tax evasion. Contacts like these should sound alarm bells – HMRC would never call threatening arrest.

Anyone contacted by someone claiming to be from HMRC in a way that arouses suspicion is advised to take their time and check the scams advice on GOV.UK.

Taxpayers can report any suspicious activity to HMRC. They can forward suspicious texts claiming to be from HMRC to 60599 and emails to phishing@hmrc.gov.uk. Any tax scam phone calls can be reported to HMRC using the online form on GOV.UK.

VAT registration changes

The way businesses register for VAT changed on 1 August 2022. A new VAT Registration Service (VRS) has been created to manage the process. 

One of the key features of the new VRS is that every business will be automatically signed up to Making Tax Digital (MTD) VAT as part of registration. This removes the need for businesses to take that extra step.   

To complete a VAT registration, you will need your:

• name 

• date of birth 

• National Insurance number 

• ID, such as your passport or driving licence 

• details of turnover and nature of business 

• bank account details (or a reason if no bank account details are provided) 

• Unique Tax Reference (UTR) number 

 

If you are registering a limited company, they must have a Company Registration Number and a Corporation Tax Unique Taxpayer Reference (UTR) to complete the VAT registration process. Individuals and Partnerships do not need to have a Self-assessment UTR to register for VAT, but if they do have one, they must supply it. 

HMRC recommend that you have this information to hand when starting an application. If you are waiting for information to register you can save and edit the application for 7 days by clicking ‘Save and Exit’. This will soon be increased to 28 days. 

Mini-budget reversals

The tax reductions set out in the Kwarteng/Truss mini-budget of 22 September 2022 have been scrapped, apart from the cancellation of the NIC increase for 2022-23, the withdrawal of the Healthcare Levy from April 2023, the changes to Stamp Duty Land Tax and the increase in the Annual Investment Allowance.

As we are presented with yet another new face at 10 Downing Street, the cabinet has delayed its fiscal statement until 17 November. We will be reporting on these developments in the next newsletter.

Hopefully, the new government will be mindful that recent changes in political circles have had a disastrous impact on small businesses across the UK. Double digit inflation and higher interest rates are compounding external pressures and making life difficult across multiple business sectors.

Challenges are to be overcome – let us help you

A rising number of businesses are failing as the Government’s pandemic support is withdrawn and banks push their credit score limits higher making it harder to borrow.

The Office for National Statistics has reported that there were 5,600 registered company insolvencies from April to June this year, a 13 per cent increase from the first quarter of 2022.

But what is more disturbing is that it represents an 81 per cent increase from the same period last year.

Help has disappeared

When COVID-19 appeared on the scene, many businesses applied successfully for Government support to help them through that difficult period. But that help is no longer there and for many businesses, it is exposing cracks that had been papered over.

At the same time Experian has noted a nine per cent drop in credit scores across SMEs, making the challenge of borrowing money to sustain a business even more difficult.

With banks increasing the credit score threshold for borrowing money, businesses have nowhere to turn to find the financing to keep them afloat.

The current political situation with controversial mini-Budgets, U-turns and PM resignations is adding to the problem as risk-averse banks hold back from lending until the economic outlook becomes more stable.

What you can do

The question is, what steps can a business owner take to try to avoid their company becoming another statistic?

  • Look for efficiencies within your business. No matter how small they may seem, it will all add up.
  • Take a good look at your finances. Analyse where the money is going and work out if it is all necessary expenditure.
  • Keep a good cashflow. Have you got outstanding debtors? Chase the money in.
  • Loyalty is a fine attribute, but if your regular supplier can’t match the quote of a competitor, you need to put your business needs first.
  • Talk to us. We are here to advise and may be able to see something that you have overlooked.
  • Don’t give up. Nothing lasts for ever. Batten down the hatches and wait for the storm to pass.

Green light for energy efficiency funding support

Homeowners looking to introduce energy efficiency measures into their homes will soon be able to take advantage of new green finance products.

The Government has launched a fund to boost the choice of affordable products for homeowners to help them reduce energy consumption.

Ministers are keen to scale up the green finance market and provide households with more choice of affordable finance options to retrofit their homes, helping them spend less on energy. It is part of wider efforts towards ensuring as many homes as possible to EPC band C by 2035 as possible.

Minister for Business, Energy and Corporate Responsibility, Lord Callanan, said: “Driving up the energy efficiency of homes won’t only reduce our impact on the climate, but will also help houses stay warmer for longer.

Green Home Finance Accelerator

“Green finance products will allow households with greater means to spread costs over time, empowering them to be able to invest in their properties, improving their energy efficiency and resale value.”

Up to £20 million is being made available for lenders and other organisations, through the Green Home Finance Accelerator, to develop new lending products which provide upfront and affordable capital to those who can afford it, to help make their homes more comfortable, cheaper to run and with lower carbon footprints.

The funding will be used to support lenders and other providers to develop, test, and pilot new and innovative green finance products that can help a wide range of homeowners overcome the upfront costs of larger retrofit. It also seeks to boost knowledge and understanding about green finance and how energy efficiency can make homes cheaper to run.

It follows the launch of the new Energy Price Guarantee, which has capped the bill for a typical UK household to an average of around £2,500 a year until April next year. It also comes in addition to the £400 energy bills discount for all UK households.

Upgrades for heating

Twenty per cent of emissions come from buildings and nearly two-thirds of owner-occupied homes are below EPC C rating, meaning their energy bills could be hundreds of pounds more than homes with a higher EPC rating.

The average EPC rating of owner-occupied homes is D. Owners of these properties can help push their homes to EPC C through various measures, depending on the property. This can often be by fitting small things like LED bulbs or heating controls. On other properties it might mean installing cavity wall and loft insulation and possibly insulating draughty floors, which together would cost on average £6,500. But these could save households over £300 a year on their energy bills.

“This funding will give more companies in the financial sector the opportunity to create and offer these products, and in so doing help households reap the benefits both in the investment to their properties, and in the savings they can make on their energy bills.

The announcement is the latest in a raft of measures designed to help improve the energy efficiency of the country’s housing stock.

The Government’s £12 billion Help to Heat schemes includes the £450 million Boiler Upgrade Scheme, which opened to voucher applications in May 2022. This is already incentivising people to move towards low carbon heating, offering grants of £5,000 towards the upfront cost of the installation of an air source heat pump, and £6,000 for a ground source heat pump.

The government is providing £4 billion between 2022 and 2026 to improve the energy efficiency of buildings, with 450,000 low-income households having their homes retrofitted with the likes of wall and loft insulation, solar panels and modern heating controls.

Do not forget top-up childcare payments

As families struggle to manage household finances with the cost-of-living crisis, parents are being reminded that there is cash available to help towards childcare costs.

Up to £2,000 a year is available to help pay for half-term holiday clubs and wraparound care during school terms.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “Tax-Free Childcare can make a big difference to families, helping with the bills for things like holiday clubs, nurseries, childminders and after school clubs. It’s easy to register – search ‘Tax-Free Childcare’ on GOV.UK.”

Money in your pocket

More than 391,000 families saved money on their childcare costs in June this year, worth a total of £41.6 million in top-up payments, and HMRC is urging thousands of other families to not miss the chance to save up to £500 every three months, or £1,000 if their child is disabled.

Families can sign up to Tax-Free Childcare to help pay for holiday schemes, before and after-school clubs, childminders and nurseries, and other approved childcare schemes. It is available to families with children up to the age of 11, or 17 if their child has a disability.

The Government will pay 20 per cent of childcare costs by topping up the money paid into a Tax-Free Childcare account. This means for every £8 paid into the online account, families will automatically receive an additional £2 in government top-up.

For thousands of families who use Tax-Free Childcare, the money they save each month on their childcare costs is money that goes back into their pockets. Accounts can be opened at any time of the year and can be used straight away. Money can be deposited at any time and used when needed. Any unused money that is deposited can be simply withdrawn at any time.

Find out more

More than one million families in the UK are entitled to some form of government childcare support and the Government is encouraging those eligible to not miss out on their entitlements.

Families can find out more about Tax-Free Childcare via the Childcare Choices website.