Archive for February, 2019

HMRC\’s drive towards digitisation

Thursday, February 28th, 2019

Digitisation is simply the conversion of text, pictures, numbers and sound into a form that can be processed by a computer.

Add to this the replacement of feet on the ground with algorithms and programs that respond to certain criteria and we can start to see where the management of our tax system is drifting.

To aid this process, taxpayers (business owners and property landlords) will eventually – if Making Tax Digital (MTD) is expanded beyond the filing of VAT returns – be required to upload their financial data on a regular basis and this data will be used to generate firstly, computations and estimates of tax and NIC due, and secondly, demands for payment. Apart from the technicians required to keep the IT running, no human hands – apart from yours – will touch a key-board.

Much of the present printed output that HMRC sends in their trademark brown envelopes are computer generated documents: statements of tax due, tax code notices and reminders to pay tax.

There are still help lines, and they are answered by HMRC’s staff, but in order to answer your questions they will dial up the data on a computer screen. The days of paper files and monumental filing systems are long gone.

VAT registered traders with turnover above £85,000 will experience first-hand the effects of this march towards digitisation as they start to file their VAT returns using HMRC’s MTD, linked software requirements for return periods starting on or after 1 April 2019. A similar process is promised for the upload of accounts information – for income and corporation tax purposes – but not before April 2020.

At some undefinable future date all the data required to compute your tax liability and deal with payment thereof, will be digitised. It will be pushed from third parties (your employer, your bank, and your business accounts software) by direct links to your tax account with HMRC.

Let us hope that HMRC are securing our data and observing the requirements of data management required by the General Data Protection Regulations. If the future is digital, one can only imagine the chaos that would result in the event of a catastrophic data loss by HMRC. We suggest that readers of this article take a hard look at their in-house data security arrangements. If HMRC did ever lose their data, it would be handy to have secure back-ups of your own systems to fall back on.

What is TSP?

Tuesday, February 26th, 2019

HMRC have issued a letter to VAT registered traders that either export or import goods to and from the EU. They are introducing new Transitional Simplified Procedures (TSPs) for customs purposes.

For importers the text says:

HMRC is introducing new Transitional Simplified Procedures (TSP) for customs, to make importing easier for the initial period after the UK leaves the EU, should there be no deal. Once you’re registered, you’ll be able to transport your goods into the UK without having to make a full customs declaration at the border, and you will be able to postpone paying your import duties. However, for controlled goods you will have to provide some information before import:

For further guidance, including which ports TSP applies to, please go to www.gov.uk/hmrc/eu-simple-importing.

They also underlined how to make customs declarations in the event of a no-deal Brexit. They are:

You will be responsible for making customs declarations for your UK-EU trade in a no deal scenario. Many businesses find the simplest way to make customs declarations is to appoint a customs agent to manage the process for them.

So that you are ready you should now:

  • register for your Economic Operator Registration and Identification (EORI) number if you haven’t done so already at www.gov.uk/hmrc/get-eori.

Then:

  • if you want to make declarations through a customs agent, appoint one as soon as possible. If you cannot appoint an agent, or do not think this is the right solution for your business and if you intend to import or export regularly, you should now
  • make sure someone in your business is trained to make customs declarations
  • buy specialist software that links to HMRC’s customs systems
  • if you’re exporting, register for the National Export System at www.gov.uk/guidance/export-declarations-andthe-national-export-system-export-procedures .

For further information, go to www.gov.uk/hmrc/trade-with-the-eu .

As the political process grinds to a, as yet, unresolved conclusion, we recommend that importers and exporters to the EU take a close look at the links embedded in this article and act as appropriate.

How lean is your business?

Thursday, February 21st, 2019

There are obvious benefits to your personal wellbeing if you sweat it out at the gym three times a week: improved stamina, enviable muscle tone, endorphin buzz and unwanted pounds shed. But could your business benefit from a similar process?

We are not suggesting that business owners and their staff leap to their feet and jog on the spot, beneficial as that may be, but there are ways that you can approach business fitness that have enduring and continuing benefits. For example:

• Could you speed up the collection of cash – the time you allow customers to pay your bills? For many business owners the focus is on selling, and important as this is, converting a sale into cash in your bank account – rather than allowing your customers to keep your money in their bank account – is no less important.

• Do you have redundant assets or stock that you could sell at a discount? This might free up storage space for more productive uses and add to your cash reserves.

• Do you have surplus floor space? Are there opportunities to sub-let these spaces and create new income streams?

• Do you really need new cars/commercial vehicles? With a little tender care from your local service centre could use of your vehicles be extended for a few years? This would free up investment capital for more productive uses.

• Are you ready for life after Brexit? Have you examined your supply chains? Do you understand and are ready to implement changes to import/export processes? 

It is important to stress that this is not just another reminder to get ready for Brexit, important as this may be. Working on your business fitness has no downsides. Taking time out to consider cash flow, utilisation and management of assets, organisation of capital and funding, has no downsides. It will be time well spent and will have enduring benefits.

In the same way that a personal fitness program will help to keep you well and active, so too will a structured approach to business fitness keep your business in good shape. Call now if you would like to discuss your options for undertaking a fitness assessment, it's never too late to start…

Parliament eases through Finance Act 2019

Tuesday, February 19th, 2019

According to a recent government announcement, 32 million people will be better off as the Finance Bill 2018-19 receives Royal Assent.  

Treasury pundits who wrote the announcement said:

A basic rate taxpayer will payat least £1,200 less income tax than they did in 2010, thanks to the government’s changes, giving people more help with the cost of living.

As well as cutting taxes for millions of people a year earlier than planned, fuel duty has been frozen for a ninth year in a row, and beer, cider and spirits duty have also all been frozen.

The Act means first-time buyers will be eligible for relief from stamp duty on shared-ownership homes, to help them realise their dream of owning their own homes.

And businesses will benefit from a new capital allowance for qualifying non-residential structures and buildings and an increase to the Annual Investment Allowance to £1 million for two years – helping to maintain our economic success by increasing investment and productivity.

Finally, the government’s commitment to a fair and sustainable tax system is further realised in this Finance Bill, through making individuals or entities that reduce their tax bill by holding intangible property in low-tax jurisdictions liable to pay the tax they owe in the UK, making non-residents liable for capital gains tax on the sale of all immovable UK property, and introducing rules to prevent firms fragmenting profits between unrelated entities to avoid tax. 

It is interesting that there is no mention of the likely outcome of the Brexit negotiations on our business community, and how this might affect these 32 million taxpayers.

Fingers crossed that all will be well, and the present uncertainties will be resolved before the end of March.

Goodbye 2017-18 and hello to 2018-19

Thursday, February 14th, 2019

The deadline for filing 2017-18 self-assessment tax returns without paying a penalty for late submission has passed (31 January 2019).

But a new and pressing deadline now presents itself: 5 April 2019.

As we have outlined in previous posts, most tax planning needs to be considered and actioned before the end of the tax year to be effective. For example, have you considered the following?

Tax planning options for 2018-19

Income tax:

  • If your income is approaching £100,000 have you considered the loss of all or part of your personal tax allowance?
  • If you receive child benefits, and the income of either parent is set to exceed £50,000 you will have to repay all, or part of the benefits received and file a self-assessment tax return.
  • Have you maximised payment of pension contributions?
  • Have you considered the tax advantages of making charitable donations?
  • If you have unused personal allowance, and your spouse (civil partner) is a basic rate taxpayer, have you considered transferring part of the unused tax relief?

Capital gains tax:

  • Have you fully utilised your tax free exempt amount for 2018-19, £11,700?
  • Could you transfer assets that you are about to sell into joint ownership with your spouse and divide the gains between you?
  • If you have purchased a second home during 2018-19, have you considered your private residence relief options?

Inheritance tax:

  • Have you utilised the various annual, tax-free gifts exemptions for 2018-19?
  • If your personal circumstances have changed during 2018-19 (marriage, divorce, bereavement) have you changed your Will and/or considered the IHT consequences?
  • Have you made any significant gifts in excess of tax-free limits? What are the IHT consequences?

Holiday let property owners

  • Have you checked your occupancy numbers for 2018-19? Will you still qualify for the various Furnished Holiday Lets tax advantages?

The above list is the tip of the tax planning iceberg. Every tax payer’s circumstances are unique and require individual attention and consideration.

 

If we have not yet had an opportunity to discuss your tax planning options for 2018-19 please call; once the 5 April 2019 deadline passes so too do the majority of your options to reduce your tax liability for 2018-19.

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