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We offer cloud-based accounting solutions. Using good technology saves time. With the power of cloud accounting in your hands, you can access accurate real-time data on the go, accept instant payments and even automate repetitive tasks like invoicing. Fast, easy, touch-of-a-button software can make a real difference to the way you run your business.
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Welcome to Adrian Mooy & Co Ltd
like yours grow and be more profitable.
We offer a personal service and welcome new clients.
We are a firm of Chartered Certified Accountants
and tax advisors in Derby helping businesses
From start-up to exit & everything in-between.
Whether you’re struggling with company formation,
C-19 Job Support Scheme - on hold
C-19 Job Retention Bonus - on hold
Employer-provided PPE & testing
Helping you grow your business
Helping you keep more of your income
We understand your needs
Call us on 01332 202660
annual accounts and taxation, payroll or VAT you can
count on us at every step of your business’s journey. For
VAT & payroll please contact us.
If you are looking for a Derby accountant then please contact us.
If you are starting your own business, running it as a sole trader is the quickest and easiest way to do it. However, you will have unlimited liability which means you are personally responsible for business debts.
Another important aspect is that you are taxed on all the profits with little opportunity for tax planning. This is why most businesses will incorporate as profits increase.
We can support you through business registration and provide advice on all aspects of tax including:
◦ Accounts for HMRC ◦ Self assessment ◦ VAT returns ◦
◦ Payroll services ◦ Tax planning ◦
Partnerships are similar to sole trades, except that they are used when more than one person owns the business.
Each profit share is determined by the partners and best practice is to record this in a partnership agreement.
With partnerships each partner has joint and several liability for the debts of the partnership, so that if one partner cannot pay their share of any business debts, the debt will fall on the other partners.
Setting up a partnership agreement from the outset is essential.
Corporate tax planning can result in significant improvements in your bottom line. Our services will help to minimise your corporate tax exposure.
We are a member firm of the Association of Chartered Certified Accountants.
Self assessment tax returns are becoming increasingly complex and failing to submit your return on time, or correctly, can result in substantial penalties.
We use the latest tax software to ensure that tax returns are completed efficiently, accurately and on-time.
Self assessment: Taking
away the hassles of tax
We provide a comprehensive personal tax compliance service for individuals that includes:
Invoicing your contracting work through a limited company is tax efficient. We will advise you on how to structure your contract to minimise IR35 risk. We will ensure you claim all the expenses that you are entitled to and work out if you can save money by joining the VAT Flat Rate Scheme. We will complete your accounts and tax returns and provide you with clarity over your tax payments.
Included in the service • IRIS KashFlow + Snap • Annual accounts • Corporate tax return • Personal tax return • Payroll • Dividend administration • VAT returns • Contract reviews • Dealing with HMRC
VAT • is one of the most complex tax regimes imposed on business. We provide a cost effective service including assistance with registration & completing your returns.
Payroll • Administering your payroll can be time consuming. We provide a comprehensive payroll service.
Your Payroll Solution
Construction Industry Scheme • CIS returns & payments
Book-keeping • Maintenance of accounting records
Provision of management accounts
For more about these services please contact us.
Keeping the Books
If your business does not require a statutory audit then our Assurance Service will provide reassurance that your accounts stand up to close scrutiny from your bank or other finance providers.
Work is tailored to your specific requirements and the level of confidence that you are looking to achieve and will provide credibility to your accounts by the issuing of an assurance review report.
Adrian Mooy & Co is a registered auditor with the Association of Chartered Certified Accountants.
We strive to provide an auditing service that adds more value than merely the statutory compliance requirement of an audit.
We tailor the audit to meet your circumstances and needs. Using the latest techniques and software we deliver a cost-effective audit that provides real value.
Before starting out you may need help with business planning, cash flow and profit & loss forecasts.
You may also want help identifying the best structure for your business. From sole trades and partnerships to limited companies and limited liability partnerships, we have the experience to advise on the best solution for you both operationally and from a tax point of view.
We also advise on accounting software selection, profit improvement, profit extraction & tax saving.
If you wish to know more about our Business Start-up service please contact us on 01332 202660.
Accountancy and taxation of property is a specialist area. We have the expertise and experience to work effectively with private landlords and property investors. We deal with self-assessment tax, accounts preparation & tax advice for all aspects of property portfolios.
Whether you are a first time buy to let landlord or a long established developer we will discuss and understand your situation in order to advise and recommend the most appropriate medium through which to carry out your property investments. We will guide you through the accounting and tax issues and help you to plan effectively.
We take the time to explain your accounts to you so that you understand what is going on in your business.
Up to date, relevant and quickly produced management information for better control.
As part of our accounts service we prepare your annual accounts and complete yearly personal and business tax returns.
As your year-end approaches we will agree a timetable with you for completion of the accounts that minimises disruption to your business and leaves no late surprises when it comes to your tax liabilities.
We can also prepare management accounts to help you run your business and make effective business decisions. Management accounts are also very useful when approaching lending institutions when no year end accounts are available. We offer:
For a meeting to discuss your requirements please call us on 01332 202660.
We understand the issues facing owner-managed businesses.
We provide advice on personal tax & planning opportunities.
Running a small business places many demands on your time. We can help lift the load with our complete payroll service.
Designed to ease your administrative burden, our service removes what is often a time consuming task, leaving you free to concentrate on managing your business.
We can also prepare your benefits and expenses forms and advise you of any filing requirements and national insurance due. Benefits and expenses can be a complicated area and knowing what to report can be tricky.
We can file all your in-year and year end returns with HMRC and provide you with P60s to distribute to your employees at the year end.
We also offer a solution to meet your auto-enrolment obligations.
Businesses dealing with the requirements of VAT legislation will agree that this is often a complex area.
Our compliance services offer support for all stages of completing your VAT returns, whether you need advice on the treatment of specific transactions or have produced your records and would like verification that they are correct.
We can also advise on the pros and cons of voluntary registration, extracting maximum benefit from the rules on de-registration and the Flat rate VAT scheme.
Our consultancy service guides you through the intricacies of the legislation, pinpointing areas where you may be able to relieve or partly relieve the cost of VAT for your business, for example when purchasing new equipment or undertaking new projects such as property development.
For a meeting to discuss VAT and obtain further advice please call us on 01332 202660.
We can conduct a full tax review of your business and determine the most efficient tax structure for you.
We give personal tax advice to a wide variety of individuals, including higher rate tax payers, company directors & sole traders.
We can assist with:
For a meeting to discuss your requirements please call us on 01332 202660.
Understand your needs
Firstly we listen and gain an understanding of your business and what you are aiming to achieve.
We seek your opinions on the service we provide and respond to feedback in order to upgrade and improve what we do.
Build a relationship
Success in business is based around relationships and trust. Our objective is to develop and build strong relationships with our clients, based on two way trust and respect.
Confirm your expectations
Our aim is to help you maximise your business potential and we tailor our service to meet your requirements and agree a timetable for delivering them.
Communication is important to the success of any commercial venture. It is therefore a vital part of our work with you, sharing the knowledge and ideas that help you to realise your ambitions.
Understand your needs
Confirm your expectations
Build a relationship
Straightforward and easy to deal with Adrian Mooy & Co provide an efficient, friendly and professional service - payroll, tax returns, annual accounts and VAT returns are always done on time. Eddie Morris
Call us on 01332 202660
What tax do I need to pay by 31 January 2021?
The self-assessment tax return for 2019/20 must be filed by midnight on 31 January 2021. If you miss this deadline, you will automatically receive a late filing penalty of £100, regardless of whether you owe any tax, unless you are able to convince HMRC that you have a reasonable excuse for filing your tax return after the deadline.
You must also pay any outstanding tax that you owe for 2019/20 by 31 January 2021, unless you have agreed a Time to Pay agreement with HMRC. The amount of tax that is outstanding for 2019/20 will depend on whether you opted to defer payment of the second payment on account for 2019/20, which would ordinarily have been due by 31 July 2020.
To help taxpayers who were struggling financially as a result of the Covid-19 pandemic, self-assessment taxpayers could opt to delay payment of the second payment on account for 2019/20, paying it instead by 31 January 2021. Where this option was taken, the balance owing for 2019/20 will be the total liability for the year (tax plus, where relevant, Class 2 and Class 4 National Insurance), less any amount paid on account by 31 January 2020.
If you decided instead to pay your July payment on account as normal (or if you paid it later than normal but have now paid it in full), you will only owe tax for 2019/20 if the total liability is more than what has already been paid on account.
Payments on account
If your total tax and Class 4 National Insurance liability was at least £1,000 for 2019/20 and less than 80% of your total liability is collected at source, for example, under PAYE, you will need to make payments on account for 2020/21. Each payment is 50% of the 2019/20 tax and Class 4 National Insurance liability. The first payment is due by 31 January 2021, along with any tax owing for 2019/20. The second payment should be paid by 31 July 2021.
Struggling to pay
For many, 2020 has been a difficult year financially. Where the option to delay the July 2020 payment on account has been taken, taxpayers may struggle to pay the higher than normal January tax bill in full by 31 January 2021. Where this is the case, they can agree with HMRC to pay the tax that they owe in instalments over the year to 31 January 2021.
If the amount that is owed is £30,000 or less, an agreement can be set up online. Where the amount outstanding is more than £30,000 or the taxpayer needs more than 12 months to pay, contact HMRC to discuss setting up an arrangement to suit.
As payments on account for 2020/21 are based on pre-pandemic profits, consider reducing the payments if profits for 2020/21 are likely to be lower.
Tax implications of student lets
As the new academic year begins, for student starting or returning to university, the 2020/21 academic year looks very different to normal. While many students may opt to stay at home and study online, those studying away will need somewhere to live – for many, this will be in private rental accommodation. The student market provides opportunities for landlords.
Letting an entire property
Landlords with a whole house to let can either let the house as a whole or can let individual rooms to unconnected tenants.
When letting to multiple households, landlords will need to be aware of the ‘house in multiple occupation’ (HMO) rules. A property is an HMO if there are at least three tenants forming more than one household and toilet, bathroom or kitchen facilities are shared. If at least five tenants live in the house forming more than one household and share toilet, bathroom or kitchen facilities, the property is a large HMO. The landlord will need to obtain a licence (and application for which can be made online on the Gov.uk website) and comply with the rules.
From a tax perspective, rental income from the let is taxed under the property income rules. All let properties which are owned by the same person or persons form a property rental business, with the taxable profits computed for the business as a whole rather than separately for each individual property. The landlord must declare the income to HMRC on the property pages of the self-assessment tax return unless it is less than £1,000 per year.
Letting a room in your main home
If you live near a university or college and have one or more spare rooms in your home, you may consider letting them to students to earn some extra cash. Where the rooms are let furnished, you can take advantage of the rent-a-room scheme. Under this scheme, as long as the rental income is less than £7,500 (or less than £3,750 where the rental income is shared with another person), you do not need to tell HMRC or pay tax on it.
If the rental income is more than £7,500 (or, £3,750, as appropriate), you can choose to pay tax on the excess or calculate the profit in accordance with usual rules. You will need to complete a tax return where this is the case.
An informal company wind-up
Capital or income
Usually, when a company distributes its profits to its shareholders they are liable to income tax on the payments they receive. However, a special rule means that distributions made in the course of winding up a company are taxed as capital instead. This provides tax-saving opportunities.
Example. Owen and Jane are equal shareholders of Acom Ltd. Both are higher rate taxpayers. They decide to close the business and appoint a liquidator to wind up the company. All distributions of profit left in Acom from this point are capital meaning that Owen and Jane can deduct any unused part of their capital gains tax (CGT) annual exemption (£12,000 for 2019/20) and pay tax on the balance at a maximum of 20%. Assuming Acom has £98,000 to distribute in total, Owen and Jane would each be liable to CGT on £49,000. If their CGT exemptions are available in full they would each have to pay tax of up to £7,400 (£49,000 - £12,000) x 20%) but it would be less if they were entitled to entrepreneurs’ relief (ER).
By comparison, if Acom distributed its profits before starting the winding up process, Owen and Jane would each be liable to income tax of at least £15,925 (£49,000 x 32.5%). By comparison the CGT bill is less than half that, but there’s still room for further tax saving.
Winding up costs
Usually, the tax advantage of capital distributions is only available when you appoint a liquidator to wind up your company. The trouble is a liquidator’s fees can be high and, depending on the value of your company, might significantly eat into or even outweigh the tax saving achieved.
Rather than paying a liquidator to wind up your company you could do it yourself informally by notifying Companies House of your intention. However, CGT treatment will only apply if the amounts available to distribute are no more than £25,000 - any more than that and the whole of any distribution is taxed as income.
Reduce the distributable amount
If your company’s net value is more than £25,000 you’ll need to reduce it before you can use the informal winding up tax break. That will require you to make distributions from your company on which you’ll have to pay income tax. Despite this you can still save on tax and costs. You’ll need to crunch the numbers to see if it’s worthwhile.
Example. Shaun is a higher rate taxpayer and the only shareholder of Bcom Ltd. It has distributable reserves of £35,000. Shaun could formally liquidate Bcom so that what he receives, after paying the liquidator’s fees of, say, £3,000, is liable to CGT. This would leave him with £28,000 after tax. If instead he paid a dividend of £10,000 and then applied to Companies House to dissolve the company, he would net £29,150. Not a massive tax saving but Shaun also avoids the time and red tape that goes with a formal liquidation.
Reduce the value of your company to £25,000 by making distributions to shareholders and informally winding up the company. This will save the cost of a liquidator’s fees. Plus, each shareholder can use their annual capital gains tax exemption to reduce the amount on which they pay tax on their share of the final £25,000 distributed from the company.
Make the most of the dividend allowance
The 2020/21 tax year comes to an end on 5 April 2021. The last few months of the year are a good time to undertake a review and to ensure that allowance for the year is not wasted.
Nature of the dividend allowance
One allowance that is available to all taxpayers, regardless of the rate at which they pay tax, is the dividend allowance. The allowance is set £2,000 for 2020/21.
Although called an ‘allowance’, the dividend allowance is more of a nil rate band. Dividends sheltered by the allowance are taxed at a zero rate of tax. However, the dividends covered by the allowance count towards band earnings.
Once the dividend allowance and any remaining personal allowance have been used up, any further dividend income (treated as the top slice of income) is taxed at the relevant dividend tax rate:
7.5 for dividends falling within the basic rate band;
32.5% for dividends falling within the higher rate band; and
38.1% for dividends falling within the additional rate band.
Personal and family companies
If you have a personal company and have sufficient retained profits, consider paying a dividend if you have not already done so to mop up your dividend allowance and any unused personal allowance. Although dividends are paid from profits which have already suffered corporation tax, the availability of the dividend allowance allows retained profits to be extracted without incurring any additional tax. A further benefit is that there is no National Insurance to pay on dividends.
In a family company scenario, making family members shareholders provides scope for family members to utilise their dividend allowances, allowing profits to be extracted in a tax-efficient manner.
There are some points to watch. Dividends can only be paid from retained profits and must be paid in proportion to shareholdings. However, the use of an alphabet share structure whereby each family member has a different class of shares (e.g. A shares for one person, B shares for another, and so on) provides the flexibility to declare different dividends for each person, depending on their available allowances and their marginal rate of tax.
Mr Wilson is a director of W Ltd. His wife and two adult daughters, Emily and Evie, are both shareholders. The shareholdings are as follows
Mr Wilson – 100 A Ordinary shares;
Mrs Wilson – 100 B Ordinary shares;
Emily Wilson – 100 C Ordinary shares
Evie Wilson – 100 D Ordinary shares.
Mr Wilson is a higher rate taxpayer. None of the family has used their dividend allowance for 2020/21.
Mr Wilson wishes to declare a dividend of £8,000 for 2020/21.
If he declares a dividend £80 per share for A ordinary shares only, he will receive a dividend of £8,000, of which the first £2,000 will be covered by the dividend allowance of £2,000. The remaining £6,000 will be taxed at the higher dividend rate of 32.5%, giving rise to a tax bill of £1,950.
However, if instead, he declares a dividend of £20 per share for A, B C and D Ordinary Shares, each member of the family will receive a dividend of £2,000, which will be sheltered by their dividend allowance and received tax-free. By taking this route, the family’s tax bill is reduced by £1,950.
Selling a property at below the probate value
The property market is often volatile but throw a Coronavirus pandemic and a stamp duty holiday into the mix and it is easy to see how property prices can vary dramatically, even in a relatively short period.
Where a deceased’s estate includes land, inheritance tax is computed by reference to the probate value. However, this may be substantially different to the amount that is realised by the executors when the land is finally sold. If the sale proceeds are less than the probate value, the estate may have paid inheritance tax on a value that was never realised.
However, the tax legislation provides for a specific inheritance tax relief where there is a loss on the sale of the land.
The relief applies where the appropriate person – usually the executor – sells an interest in land included in the deceased estate within four years of death for a value different to its value at the date of death. Where this is the case, the executor can make a claim for the sale value to be substituted for the value on death.
Harold died in September 2019. His estate included his home which was valued for probate purposes at £800,000. It was subsequently sold for £750,000 in June 2020.
His executor claimed to have the sale price substituted for the probate value, reducing the inheritance tax payable on his estate.
The sting in the tail
A problem can arise if the deceased’s estate includes more than one property. Where relief is claimed, the sale price must be substituted for the probate value for all properties sold within the four-year period. The executors cannot choose the value which gives the best result – the same approach must be applied consistently.
Bill died leaving his family home and three investment properties. The investment properties were valued for probate purposes at, respectively, £200,000, £300,000 and £500,000. All three properties were sold within four years of Bill’s death realising, respectively, £250,000, £290,000 and £540,000.
Despite the fact that the second property sold for less than its probate value, it is not worthwhile making a claim to substitute the sale price for the probate value as this would also apply to properties 1 and 3, increasing the value of the three properties for inheritance tax purposes from £1 million to £1,040,000 – an increase of £40,000.
SEISS extended again
The Self Employment Income Support Scheme (SEISS) provided help the self-employed whose businesses were adversely affected by Coronavirus. The second payment under the scheme, which was payable from mid-August, was due to be the final payment under the scheme.
However, as cases continue to rise and many businesses continue to be adversely affected by the virus, the scheme has been extended. The extension will run for six months from 1 November and will provide for two further grant payments, albeit at a much lower level than previously. Following the announcement of the national lockdown in England from 5 November 2020 to 2 December 2020, the level of the first grant was further increased.
To claim a grant under the extended SEISS, self-employed individuals (including individual members of partnerships) must:
• be currently eligible for the SEISS scheme (although it is not necessary to have claimed either the first or the second grant);
• declare that they are currently actively trading and intend to continue to trade; and
• declare that they are impacted by reduced demand due to Coronavirus in the qualifying period, which is between 1 November and the date of the claim).
To recap, to be currently eligible under the SEISS, the trade must:
• have submitted their self-assessment tax return for 2018/19 by 23 April 2020;
• traded in 2019/20;
• be continuing to trade when they claim the grant, or would be except for the Coronavirus pandemic; and
• intend to continue to trade in 2020/21.
The grant is limited to traders whose trading profits are not more than £50,000 either for 2018/19 or on average for the three years 2016/17 to 2018/19 inclusive. Profits from self-employment must also comprise at least 50% of the individual’s income.
Amount of the grant
Each grant will cover a three-month period. The first grant will cover the period from 1 November 2020 to 31 January 2021 and the second grant will cover the period from 1 February 2021 to 30 April 2021.
Self-employed traders will receive 80% of their average monthly profits for November and 40% of their average monthly profits for December and January. This means that the The first grant will be worth 55% of three months’ average trading profits over 2016/17, 2017/18 and 2018/19, capped at £5,150. The level of the second grant has yet to be set. Grant payments are taxable and liable for National Insurance.
HMRC are to provide details as to how claims can be made in due course.
Postponed VAT accounting from 1 January 2021
The Brexit transitional period comes to an end of 31 December 2020 and various changes come into effect from 1 January 2021. One of these changes is the introduction of postponed VAT accounting. This will affect you if you are a VAT-registered business and you import goods into the UK, particularly if you do not use duty deferment.
Nature of postponed VAT accounting
Under postponed VAT accounting, you declare and recover VAT on the same VAT return. This is beneficial as it means that you do not have to pay the VAT upfront and recover it later. Normal VAT rules continue to govern what can be reclaimed.
You can use postponed VAT accounting from 1 January 2021 if your business is registered for VAT in the UK and you import goods into Great Britain from anywhere outside the UK or into Northern Ireland from outside the UK and the EU.
There are no changes to the VAT treatment of goods moved between Northern Ireland and the EU, or in the way in which the VAT is accounted for.
Accounting for import VAT on your VAT return
You can account for import VAT on your VAT return if:
• you import goods for use in your business;
• you include your EORI number, which starts with ‘GB’ on your customs declaration; and
• you include your VAT number on your customer’s custom declaration if required.
If you use customs special procedures, you can account for the import VAT on your VAT return when you submit the declaration to release those goods into free circulation.
Completing your VAT return
The introduction of postponed VAT accounting means that there are some changes to the way in which you will complete your VAT return from 1 January 2021.
You will need to download a monthly statement which shows the total import VAT postponed for the previous month which you will need to include on your VAT return. There are also changes to what you need to enter in Boxes 1, 4 and 7.
• In Box 1, include the VAT due in the period on imports accounted for through postponed accounting.
• In Box 4, include VAT reclaimed in this period on imports accounted for through postponed accounting.
• In Box 7, include the total of all imports of goods shown on your online monthly statement, excluding any VAT.
Consignments not exceeding £135
Where the value of the consignment is less than £135, VAT will be collected at the point of sale rather than at the point of importation.
Reduced rate of VAT for hospitality and leisure
The hospitality and leisure industries have been severely affected by the Coronavirus pandemic. To help businesses in these sectors to get back on their feet, a reduced rate of VAT of 5% rather than the standard rate of 20% will apply to certain supplies for a limited period, from 15 July 2020 to 12 January 2021.
Food and drink supplied for consumption in the premises, for example by a restaurant or a bar, and hot takeaway food and beverages are normally liable for VAT at the standard rate of 20%. During the support period, the 5% rate will apply instead to:
• hot and cold food for consumption on the premises on which they are supplied;
• hot and cold non-alcoholic beverages for consumption on the premises on which they are supplied;
• hot takeaway food for consumption off the premises on which it is supplied;
• hot takeaway non-alcoholic beverages for consumption off the premises on which they are supplied.
Hotel and holiday accommodation
For businesses supplying hotel and holiday accommodation, the 5% rate VAT applies during the support period to:
• supplies of sleeping accommodation in a hotel or similar establishment;
• certain supplies of holiday accommodation;
• charge fees for caravan pitches and associated facilities;
• charge fees for tent pitches and camping facilities.
Meals provided to guests in long-term holiday accommodation (more than 28 days) will also benefit from the reduced rate, but the hire of motor caravans will not.
Admission to attractions
The reduced rate of 5% also applies during the support period in respect of admission to certain attractions which would normally be liable for VAT at the standard rate. However, if the admission fee is exempt from VAT, this will take precedence over the 5% charge and the admission charge will remain exempt.
The temporary reduction will apply to admissions to shows, theatre, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events where these are not included in the existing cultural exemption.
Impact on flat rate scheme
VAT registered businesses using the flat rate scheme should note that some of the flat rate percentages have been reduced to take account of the temporary reduction in the rate of VAT.
Separation, divorce, and private residence relief
Where a couple separate or divorce, one party may move out of the matrimonial home, with the other party buying them out. This could have capital gains tax implications.
While a couple are married and in a civil partnership and living together, they can transfer assets between them at a value that gives rise to neither a gain nor a loss. Furthermore, for private residence relief purposes, they can only have one main residence between them.
However, if the couple separate permanently, any transfers between them that take place after the end of the tax year in which they separate are at market value – the no gain/no loss rule ceases to apply. Further, they are no longer restricted to having only one main residence between them – each partner is entitled to private residence relief on their own main residence.
Beware the nine-month window
The final period exemption was reduced from 18 months to nine months from 6 April 2020. This reduction may impact on couples who separate or divorce.
Where as part of a financial settlement on separation or divorce or on the dissolution of a civil partnership, the spouse or civil partner who has ceased to occupy the marital home transfers an interest in that property to the other spouse or civil partner and the date on which the transfer takes place is more than nine months (for disposals after 6 April 2020) after the date on which they last occupied the property as their main residence, full private residence relief will not be due. The final period exemption now only shelters the last nine months of ownership.
However, help may be at hand in the form of a special relief.
The former matrimonial home can be treated as the main residence of the transferring spouse or civil partner from the date that his or her occupation ceased until the earlier of the date on transfer and the date on which the spouse or civil partner to whom the property is transferred ceases to use this as their main residence. The transferring spouse or civil partner must elect for this relief to apply.
Aside from the final nine month of ownership, relief for one property cannot be given at the same time as relief for another property. As a result, where the transferring spouse has acquired another residence, they may prefer that property to be their main residence. Consequently, this relief may not be beneficial in all cases.
Should I reduce my payments on account?
The deadline for filing your 2019/20 tax return is fast approaching, as is the due date for the first payment on account for 2020/21. Now is the time to think about whether you can reduce your payments on account.
Need to make payments on account
If you pay tax under self-assessment you may need to make payments on account. These are advance payment towards your tax and Class 4 National Insurance bill.
You will need to make payments on account if your last self-assessment bill was at least £1,000 unless you paid at least 80% of what you owe under deduction at source, for example, under PAYE.
Payments on account based on previous year’s liability
When making payments on account, the assumption is that the current year’s liability will be roughly the same as the previous year’s liability. Thus each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability. Class 2 National Insurance contributions are not taken into account in working out payments on account.
When are they due?
Payments on account are due on 31 January in the tax year and 31 July after the end of the tax year. Consequently, payments on account for 2020/21 are due on 31 January 2021 and 31 July 2021.
Payments on account for 2020/21 are based on profits for 2019/20. Thus, where a business has been adversely affected by the Covid-19 pandemic, the payments on account will not reflect this because they will be based on pre-pandemic profits.
Where pandemic has taken its toll, cashflow is likely to be tight and there is little sense in making higher payments on account than are needed. You can elect to reduce your payments on account so that they better reflect your likely taxable profits for 2020/21. However, when working out your projected profits for 2020/21, remember to take into account any SEISS grants and other taxable Government support payments that you received.
Reduce your payments on account
There are various ways in which you can tell HMRC that you want to reduce your payment on account. This can be done by signing into your online personal tax account via the Government Gateway and using the ‘reduce payments on account’ option or by completing form SA303 and sending it to HMRC. You can also tell HMRC that you want to reduce your payments on account in the other information box on the self-assessment tax return. You will need to specify what you want to pay and the reason for the reduction.
Beware paying too little
Where cashflow is tight, it may be tempting to reduce payments on account to reduce your outgoings in January and July. However, if you reduce your payments below the actual amount that is due (i.e. 50% of the liability for that year), you will be charged interest on the shortfall between what you should have paid and what you have paid. Remember, if you are struggling to pay tax due on 31 January 2021, you can set up a 'Time to Pay' agreement to pay your tax in instalments. As long as you do not owe more than £30,000, this can be done online.
Have you got your EORI number?
From 1 January 2021, you will need an Economic Operators Registration and Identification (EORI) number to move goods between Great Britain and the EU. Prior to 1 January 2021, you only needed an EORI number if you move goods between the UK and non-EU countries.
If you do not already have an EORI number, you will need to obtain one in order to move goods between Great Britain and the EU. You may also need one you move goods between Northern Ireland and non-EU countries.
Applying for an EORI number
From 1 January 2021, you will need an EORI number that starts with ‘GB’ to move goods between Great Britain and other countries.
If you do not already have an EORI number that starts with ‘GB’ and you have yet to apply for one, this should be done as soon as possible.
Applications for an EORI number can be made online.
To make an application, you will need:
• your VAT number and the effective date of your registration (which can be found on your VAT registration certificate);
• your National Insurance number (if you are applying as an individual);
• your Unique Taxpayer Reference (UTR);
• the date that your business started and its Standard Industrial Classification (SIC) code (which can be found on the Companies House register for a company); and
• your Government Gateway User ID and password.
Making an application using the online service should only take 5—10 minutes. You will receive your EORI number straight away unless HMRC need to make further checks, in which case it will take up to five working days.
Once an application has been made, the status of that application can be checked online.
Moving goods between Great Britain and Northern Ireland
The Northern Ireland Protocol comes into effect on 1 January 2021. Special rules apply to the movement of goods between Great Britain and Northern Ireland. From that date, an EORI number that starts with ‘XI’ will be needed to:
• move goods between Northern Ireland and other countries;
• make a declaration in Northern Ireland; or
• get a customs decision in Northern Ireland.
To obtain a EORI number that starts with ‘XI’ you will need to have one that starts with ‘GB’ – if you don’t, you will need to apply for one first. If you already have an EORI number that starts with ‘GB’ and HMRC have identified that you are likely to need one that starts with ‘XI’, then they should send you one automatically, Expect to receive this from mid-December 2020.
Trader Support Service
If you move goods between Great Britain and Northern Ireland, sign up to the Trader Support Service (see www.gov.uk/guidance/trader-support-service) for help and support on moving goods between Great Britain and Northern Ireland.
More time to pay back deferred VAT and tax
At the start of the pandemic, VAT registered businesses were given the option of deferring payment of any VAT that fell due in the period from 20 March 2020 to 30 June 2020. Self-assessment taxpayers were also given the option of delaying their second payment on account for 2019/20, which was due by 31 July 2020. In his Winter Economy Plan, the Chancellor extended the deadlines by which the deferred tax must be paid, giving further help to those struggling to pay their tax bills as a result of Coronavirus.
VAT-registered businesses which took advantage of the opportunity to delay paying VAT that fell due between 20 March 2020 and 30 June 2020 were originally required to pay the deferred VAT by 31 March 2021. However, there is now another option for those for whom this presents a challenge, and they can instead pay the deferred VAT in smaller equal instalments up to the end of March 2022. Those wishing to take advantage of the instalment option will need to opt into the scheme; failure to do this will mean that the VAT owed will need to be repaid by 31 March 2021. Where businesses are able, they can if they so wish pay the deferred VAT in full by 31 March 2021.
Depending on the business’ VAT quarter dates, deferred VAT will relate to the quarter ending 29 February 2020, the quarter ending 31 March 2020 or the quarter ending 30 April 2020. VAT due after 30 June 2020 (i.e. for the quarter to 31 May 2020 and subsequent quarters) must be paid in full and on time. Where direct debits were cancelled, these should be reinstated if this has not already been done.
Regardless of whether the instalment option is chosen or not, the deferred VAT will need to be paid in addition to the usual VAT payments, and it is prudent to budget for this.
Under the original proposals, self-assessment taxpayers could delay paying their second payment on account for 2019/20 due by 31 July 2020 and instead pay it by 31 January 2021, along with any balancing payment due for 2019/20 and the first payment on account due for 2020/21. For some taxpayers who have been affected financially by the pandemic, this will be something of a stretch. In recognition of this, self-assessment taxpayers who are finding it difficult to pay what they owe can set up an automatic time to pay arrangement online, as long as they do not owe more than £30,000 in tax.
Winding up a business
The decision of how and when to cease a business is usually prompted by a combination of three main factors - market conditions, market forces, and life changes. Unfortunately, many businesses will have been adversely affected by the coronavirus outbreak and some will now be facing closure.
Under the self-assessment regime, the final tax year in which a business is taxed is the tax year in which it actually ceases to trade, so if the business stops trading on 30 September 2020, the final year of assessment will be 2020/21. The tax bill for the year before that is based on the accounting year that ended in the tax year before trading stopped (so if accounts are made up to 30 June each year, the tax bill for 2019/20 is based on profits for the year that ended on 30 June 2019). Profits (if there are any) from the accounting date in the previous tax year (30 June 2019 in this example) to the date on which the business finally stops (30 September 2020), are then charged to tax for the tax year in which the cessation occurs (2020/21). Therefore, that final period may be more or less than 12 months long (15 months in this example – 1 July 2019 to 30 September 2020).
Example - Jack has been trading for many years and makes his accounts up to 30 September each year. He narrows his options to stop trading to one of two dates:
• 30 June 2020
• 31 December 2020
Jack’s annual tax bill is calculated as normal up to and including the 2019/20 tax year (based on accounts for the year ending on 30 September 2019). His final tax bill is for 2020/21 as this is the year he ceases to trade. So, depending on the date he chooses to stop trading, his final tax bill is based on profits for:
• 9 months from 1 October 2019 to 30 June 2020, or
* 15 months from 1 October 2019 to 31 December 2020
If Jack had ‘overlap profits’ when he started his business, and he hasn’t used them during the lifetime of his business (for example, on a change of accounting date), he can claim relief for them against his final year’s tax bill.
Terminal loss relief - A loss in the last 12 months of trading can usually be offset against trading income of the tax year in which the business permanently ceases and the three previous years. Terminal loss relief is given as far as possible against the profits of later years before earlier years, even if the result is that personal tax allowances are wasted. So, if there is a terminal loss in 2020/21, it is set first against income from any other sources in 2020/21 (for example, against employment income). If any loss is left over after it has been set against other income, the balance is set against any income in 2019/20, then 2018/19, and finally against 2017/18. HMRC will issue a refund of tax overpaid or set the refund against any outstanding tax bills.
The time limit for making a claim for terminal loss relief is four years from the end of the tax year in which the loss arises.
Deregistering for taxes - HMRC must be notified when a business ceases. This may include deregistering for Class 2 NICs and VAT.
For VAT-registered businesses, deregistration must be undertaken within 30 days of ‘ceasing to make supplies’ by submitting form VAT 7 (included in the HMRC VAT Notice 700/11: Cancelling your registration) to HMRC. Once HMRC are satisfied that registration should be cancelled, they will confirm the effective date and issue a final VAT return. The business will need to account for VAT on stock and certain assets on hand at the close of business on the day the registration is cancelled.
Statutory redundancy pay and furloughed employees
Employers may face the difficult decision to make some employees redundant. Legislation was introduced at the end of July to protect furloughed employees.
An employee is entitled to statutory redundancy pay if they have at least two years’ continuous employment when they are made redundant. Where an employee has been furloughed during the Coronavirus pandemic, the time that they are on furlough counts as part of their continuous employment.
The amount of statutory redundancy pay to which an employee is entitled depends on:
• how many complete years they have been employed at the date that they are made redundant;
• their age at the date of redundancy; and
• how much they are paid.
It is paid at the rate of:
• one and a half week’s pay for each full year the employee was aged 41 or older;
• one week’s pay for each full year the employee was 22 or older but younger than 41; and
• half a week’s pay for each full year that the employee was younger than 22.
The number of years’ service that is taken into account in calculating statutory redundancy pay is capped at 20 and is counted back from the date of the redundancy. This works in the employee’s favour as the rate at which statutory redundancy is paid increases with age.
Pay is also capped. For 2020/21, the cap is set at £538 per week, meaning that the maximum statutory redundancy pay that is payable for 2020/21 is £16,140 (£538 x 1.5 x 20).
Pay and furloughed employees
Where an employee has been furloughed and a grant claimed under the Coronavirus Job Retention Scheme, the employee may only be receiving minimum furlough pay of 80% of their pay to a maximum of £2,500 per month, rather than their usual pay.
However, when working out an employee’s statutory redundancy pay, the employee’s pre-furlough pay is used rather than their furlough pay where this is lower. This applies where the calculation date for statutory redundancy pay is on or before 31 October 2020 (the date on which the furlough scheme comes to an end).
Where the employee’s pay varies, statutory redundancy pay is based on average pay over the previous 12 weeks. Where that period includes at least one week where the employee was furloughed, the averaging calculation must be performed over 12 weeks of full pay.
Exploiting the staycation trend – Buying a holiday let
Those looking to buy an investment property may wish to consider a holiday let. Not only do the second and subsequent homes benefit from SDLT savings as a result of the temporary increase in the SDLT threshold, they can also benefit from the favourable tax regime for furnished holiday lettings.
There are special tax rules for properties that qualify as furnished holiday lettings:
• plant and machinery capital allowances can be claimed for furniture, equipment and fixtures;
• capital gains tax reliefs for traders – business asset disposal relief, business asset rollover relief, relief for gifts of business assets --- are available;
• profits count as earnings for pension purposes.
However, to qualify, the let must meet the conditions to qualify as an FHL.
The property must be in the UK or in the EEA, it must be let commercially and it must be let furnished. In addition, it must meet three occupancy conditions:
1. pattern of occupancy condition -- the total of all lettings that exceed 31 days is not more than 155 days in the year;
2. the availability condition -- the property must be available for letting as furnished holiday accommodation for at least 210 days in the tax year (excluding any days in which the landlord stays in the property); and
3. the letting condition –the property must be let commercially as furnished holiday accommodation to the public for at least 105 days in the year (ignoring lets of more than 31 days unless the let exceeds 31 days as a result of unforeseen circumstances and lets to family or friends).
If the let does not meet the letting condition (which may be the case, for example, if there are further lockdowns) all is not lost. Where the landlord has more than one property let as a FHL, the letting condition is treated as met if the average rate of occupancy for all properties is at least 105 days in the year. To take advantage of this, the landlord must make an averaging election no later than one year from 31 January following the end of the tax year (i.e. by 31 January 2023 in respect of an election for 2020/21).
The second way of qualifying as a FHL in a year where the letting condition has not been met is to make a period of grace election. This route can be taken where there was a genuine intention to meet the condition but this did not happen due to unforeseen circumstances (such as letting cancelled due to lockdowns). To be eligible to make an election, the pattern of occupation and the availability conditions must have been met and, for the first year for which a period of grace election is made, the lettings condition was met in the previous tax year. Where a period of grace election is made, the lettings condition is treated as met. A further period of grace election can be made for the following year if the lettings condition is not met that year. However, if after two successive period of grace elections the letting condition is not met, the property will cease to qualify as a FHL.
Separate FHL business
Lettings that are FHLs are taxed as a separate FHL property business.
The residential SDLT threshold is increased to £500,000 where completion takes place between 8 July 2020 and 31 March 2020. This also benefits those purchasing second and subsequent residential properties as the 3% supplement is added to the residential rates, as reduced. However, the clock is running and completion must take place by 31 March 2021 to benefit from the savings.
Reclaiming SSP for periods of self-isolation
The Coronavirus Statutory Sick Pay Rebate Scheme allows smaller employers to reclaim some or all of the Statutory Sick Pay (SSP) paid to employees who are absent from work due to a Coronavirus-related absence.
An employer is eligible to use the scheme if the employer had fewer than 250 employees across all their PAYE payroll schemes on 28 February 2020 and has paid sick pay to an employee who was absent from work as a result of a Coronavirus-related absence.
The ability to reclaim SSP is not limited to that payable to employees with Coronavirus symptoms; it also applies to SSP paid to employees who are required to shield or to self-isolate as a result of Covid-19.
Reclaiming SSP related to periods of self-isolation
An employee is eligible for SSP if:
they are self-isolating because someone that they live with has Coronavirus symptoms or has tested positive for Covid-19;
they have been told to isolate by the NHS or a public health body because they have been in contact with someone who has tested positive for Covid-19; or
they have been notified by the NHS to self-isolate before surgery for up to 14-days.
SSP payable from first day of sickness
The SSP rules have been relaxed in relation to Coronavirus absences and employees can receive SSP from the first day of a Coronavirus-related absence – the three waiting days do not need to be served before SSP is payable (as is the case for non-Covid absences).
As far as periods of self-isolation are concerned, SSP can be paid from the first day that the employee is off work because they are self-isolating where the period of self-isolation:
started on or after 13 March 2020 where someone they live with has Coronavirus symptoms or is self-isolating;
started on or after 28 May 2020 where the employee was notified by the NHS that have come into contact with someone who tested positive for Coronavirus; and
started on or after 26 August 2020 where the employee was notified by the NHS of the need to self-isolate prior to surgery.
Where an employee is required to self-isolate prior to surgery, only the days of self-isolation count as a Coronavirus-related absence. Any SSP paid for the day of the surgery and any recover days is not related to Coronavirus and cannot be reclaimed.
Eligible employers can reclaim up to two weeks’ SSP per employee where the employee has been absent from work due to Coronavirus, including where the employee is self-isolating or shielding. The claim can cover more than one period of absence, but where an employee has been absent from work for more than two weeks due to Coronavirus, the claim is capped at two weeks’ SSP – the employer must bear the cost of any further SSP paid.
Claims can be made online via the portal on the Gov.uk website.
Employees - expenses for working from home
The Covid-19 pandemic has meant that more employees worked from home than ever before. This trend looks set to continue following the Government’s latest advice to continue to work from home where you can do so. Further, many business plan to embrace flexible working beyond the end of the pandemic, allowing employees to work from home some or all of the time where their job allows this.
However, while working from home may save the cost of the commute, there are expenses associated with working from home. Is the employee able to claim tax relief where these are not met by the employer?
Additional household expenses
As a result of working from home, an employee will incur the cost of additional household expenses, such as additional electricity and gas costs, additional cleaning costs, and such like. During the Covid-19 pandemic, HMRC confirmed that employees are able to claim a deduction for additional household expenses attributable to working from home of £6 per week without supporting evidence. Where the actual additional costs are more than £6 per week, tax relief can be claimed for the full amount, as long as the employee can substantiate the claim. For example, this could be done by comparing bills prior to working from home with those during the working at home period.
Employees may have needed to buy office equipment, such as a computer and a printer, to enable them to work from home. Where these costs are not reimbursed by the employer, HMRC have confirmed that employee can claim a tax deduction for the actual expenditure incurred, as long as it was incurred ‘wholly, exclusively and necessarily’ in the performance of the duties of the employment.
To claim relief for other expenses employees will need to pass the general test that the expense was incurred ‘wholly, necessarily and exclusively’ in the performance of the duties of the employment. Care must be taken to distinguish between expenditure which puts the employee in the position to do their job as opposed to being incurred in the performance of it. Childcare, for example, would fall into the former category.
Relief is also denied for dual purpose expenditure, such as an office chair which enables the employee to be comfortable while working, as this fails the ‘exclusively’ part of the test.
Where the conditions for tax relief are met, a deduction can be claimed on form P87 (available on the Gov.uk website) or, where the employee completes a tax return, on the employment pages of the return.
Reasonable excuse – does coronavirus count?
HMRC may allow an appeal against a penalty if the taxpayer has a ‘reasonable excuse’ for why, say, they filed a return late or paid their tax late.
A ‘reasonable excuse’ is something that prevented a taxpayer from meeting a tax obligation despite the fact that they took reasonable care. HMRC take a hard line as regards what they constitute as a ‘reasonable excuse’; providing the following examples of ‘acceptable’ reasonable excuses:
• the taxpayer’s partner or another close relative died shortly before the tax return or payment deadline;
• an unexpected stay in hospital that prevented the taxpayer from dealing with their tax affairs;
• a life threatening illness;
• the failure of a computer or software just before or while the taxpayer was preparing their tax return;
• service issues with HMRC;
• a fire, flood or theft which prevented the completion of a tax return;
• postal delays which could not have been predicted; or
• delays relating to a disability.
By contrast, HMRC cite the following example of excuses that they will not accept as a valid reason for failing to meet a tax obligation:
• relying on someone else to send the return and they failed to send it;
• a cheque or payment bounced due to insufficient funds;
• the taxpayer found HMRC’s online system too complicated;
• the taxpayer did not receive a reminder from HMRC; or
• the taxpayer made a mistake on their return.
Impact of coronavirus
HMRC have confirmed that they will consider coronavirus as a reasonable excuse. Where claiming this, the taxpayer should explain in their appeal how they were affected by coronavirus. As a rule of thumb, HMRC are more likely to accept it as a reasonable excuse where the virus led to one of the circumstances listed above as ‘acceptable reasonable excuses’. Thus the contention that the taxpayer had a reasonable excuse for failing to meet a tax obligation would be strong if a partner or close relative (such as a parent) died of Coronavirus around the tax deadline, the taxpayer was seriously ill with the virus or was in hospital unexpectedly.
Where the taxpayer appeals on the grounds that they had a reasonable excuse for failing to file a return or pay a tax bill, they should file the return or pay the bill as soon as they are able after the reason for the reasonable excuse has been resolved.
Leaving the VAT Flat Rate Scheme
The VAT Flat rate scheme is a simplified scheme for smaller businesses.
Under the flat rate scheme, VAT-registered traders pay a fixed percentage of their VAT inclusive turnover to HMRC instead of the difference between the VAT that they charge and the VAT than they incur. The flat rate percentage depends on the business sector within which the trader operates. With the exception of certain capital assets costing more than £2,000, the trader cannot reclaim the VAT on purchases; the flat rate percentage includes an allowance for input VAT.
Joining the scheme
Traders can apply to join the flat rate scheme if their turnover, excluding VAT, is £150,000 or less.
Leaving the scheme
Once in the flat rate scheme, a trader must leave it if:
they are no longer eligible to be in the scheme;
on the anniversary of joining turnover in the last 12 months (including VAT) was more than £230,000;
turnover in the next 30 days is expected to be more than £230,000 (including VAT);
they become a tour operator and have to account for VAT using the Tour Operator’s Margin Scheme;
the trader intends to buy capital goods covered by the Capital Goods Scheme;
the trader becomes eligible to join an existing VAT group; or
the trader becomes associated with another business.
Traders also choose to leave the scheme if they decide it is no longer for them.
Once a trader has left the scheme, they cannot rejoin it for at least 12 months.
It the scheme still worthwhile?
The flat rate percentage for limited cost businesses is 16.5% of VAT-inclusive turnover. This equates to 19.8% of VAT-exclusive turnover, which means that virtually all the VAT charged to customers is paid over to HMRC, with very little allowance to cover input VAT. A business is a limited cost business if the cost of its relevant goods is less than 2% of its turnover. However, the list of relevant goods excludes all service and fuel. Consequently, a business that has significant expenditure on non-relevant goods, may not recover the associated input VAT in full. In this situation, the trader may be better off using traditional VAT accounting and opt leave the flat rate scheme voluntarily.
How to leave
Traders wishing to leave the Flat Rate Scheme should write to HMRC at the following address:
BT VAT, HM Revenue and Customs, BX9 1WR
HMRC would normally expect traders to leave at the end of a VAT accounting period, although they can leave voluntarily at any time. HMRC will confirm the leaving date in writing.
Once a trader has left the scheme, they must not account for VAT using the flat rate percentages.
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Adrian Mooy & Co Ltd - 61 Friar Gate Derby DE1 1DJ -
Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd. Registered in England No. 05770414.
Registered to carry out audit work in the UK by The Association of Chartered Certified Accountants.
Details of audit registration can be viewed at www.auditregister.org.uk under number 8011438.
Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ
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