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Is it better to file your Self Assessment tax return end of the tax year?

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This month’s newsletter includes articles covering: Filing strategy for the 2015-16 Self Assessment tax return, Allowable business expenditure, Transferring ISAs and spoof calls purporting to be from HMRC.

Sooner or later?

Is it better to file your Self Assessment tax return as soon as possible after the end of the tax year?

Self Assessment tax return

You are not obliged to file your tax return for 2015-16, online, before the 31 January 2017. However, if you leave the process of completing your return until close to this date, it will not give you much time to calculate and fund the amount of tax you may owe on the same date, 31 January 2017.

When we prepare a Self Assessment tax return for clients there are four distinct phases:

  • Gathering the information from clients to complete the return.
  • Completing the return and considering any explanatory narrative.
  • Agreeing the submission with our clients, and
  • Filing the return.

It makes good sense to move through the first three phases as quickly as possible after the end of the tax year. For the 2015-16 year, it should be possible to collect and process the relevant data by midsummer, say 31 July 2016. Clients who facilitate this sort of timetable should then be in a position to know what their balance of tax owing (or tax overpaid) is several months before the 31 January 2017 filing and payment deadline.

It is possible to delay the actual filing of the return to any date up to and including 31 January 2017. There may be good reasons for doing this. For example:

Higher rate tax payers have an opportunity to carry back gift aid donations to the previous tax year. In order to do this, they must pay the donations and include the appropriate election before they file the tax return for the tax year they are carrying back to. I.e. in order to secure extra tax relief for 2015-16, the gift aid donations made after 5 April 2016 must be completed before the 2015-16 tax return is filed.

On the other hand, self-employed business owners whose profits have been falling during 2015-16 (compared to 2014-15) may find that the actual tax and NIC that is due is less than the payments on account being made 31 January 2016 and 31 July 2016. If this is highlighted by completing the return early in the tax year, an application can be made to reduce the second payment on account due 31 July 2016.

Readers should also note that HMRC have 12 months from the date they receive your return to raise enquiries regarding the return. Early filing starts the enquiry “clock” ticking sooner.

Business expenses you can claim

Basically, you can claim for most expenses that are incurred wholly and exclusively for the purposes of a trade. Unfortunately, most of the decision making by HMRC on this topic is guided by tax law, which has been inconsistent.
That aside, the following will provide you with guidance in areas where the outcome is reasonably predictable:

  • Professional fees, your accountant for example: allowable in most cases unless the fees relate to:
  • The purchase of a property or other business asset (in which case they can be used to reduce any Capital Gains Tax liability when the asset is sold).
  • The costs of settling tax disputes.
  • Fines for breaking the law, for example, parking or speeding fines.
  • Entertaining: even though entertaining produces new business, all expenditure under this category is deemed a non-allowable expense for tax purposes.
  • Motoring costs: the costs of running a business car for business related journeys are allowable. The costs of private motoring with a business vehicle are not. Home to work journeys are generally considered private.
  • Travel expenses: All business related travel costs are allowable. Home to work travel costs are not tax allowable.
  • Bank and credit card charges: bank charges and bank interest charges on loans or overdrafts taken out for purely business purposes are tax allowable. The capital repayment of these loans is not.
  • Cost of goods: goods bought for resale by your business, or that are consumed during the day-to-day business activities are tax deductible, goods taken for private use are not.
  • Cost of assets: the cost of plant, vehicles and equipment purchased for business use is held on your balance sheet as assets. The cost is gradually written off against your profits by making a depreciation charge – this writes off the asset cost over the useful life of the asset. Even though this depreciation charge is a reduction in profits it is not allowed as a tax deduction. Instead, HMRC grant a capital allowance, which can vary from 8% to 100% of the allowable asset cost, or its written down value for tax purposes (if you acquired the asset in previous years).
  • Bad debts: if a customer fails to pay an invoice and the debt is considered irrecoverable the sales value can be written off for tax purposes. Debts relating to assets or general provisions for bad debts are not allowable.

Obviously, this is only a sample of the range of costs and expenditure you may need to layout when running your business. If you are unsure if a future cost will qualify for tax relief, please call to discuss the matter.

Transferring ISAs

ISA investors may be interested to read the following guidance issued by HMRC regarding the transfer of ISAs from one provider to another.

ISA

What you can transfer

You can transfer a cash ISA to another cash ISA with a different provider. You can do the same with stocks and shares ISAs. You can also transfer a cash ISA to a stocks and shares ISA or vice versa.
If you want to transfer money you’ve invested in an ISA this current year, you must transfer all of it. For previous years, you can choose to transfer all or part of your savings.
Check with your provider for any restrictions they may have on transferring ISAs. They may also make you pay a charge.

How to transfer your ISA

To switch providers, contact the ISA provider you want to move to and fill out an ISA transfer form to move your account. If you withdraw the money without doing this, you won’t be able to reinvest that part of your allowance again.

Deadlines and complaints

ISA transfers should take no longer than:

  • 15 working days for a cash ISA
  • 30 working days for a stocks and shares ISA

If your transfer takes longer than this, contact your ISA provider. If you’re unhappy with the response, you can take the matter up with the Financial Ombudsman Service.

Financial Ombudsman Service
Telephone: 0845 080 1800
Monday to Friday, 8am to 8pm
Saturday, 9am to 1pm

Bogus emails and now, bogus phone calls

The “phishing” emails sent by nefarious individuals, purporting to be from HMRC, have now been joined by bogus phone calls.

We have received information that taxpayers are being called, apparently by HMRC, and advised that they have significant tax bills to pay and the caller encourages the offended taxpayer to settle the bill during the phone call.

We have reproduced below a warning issued by Action Fraud involving the use of iTunes gift cards:

Action Fraud is warning people of a new trend that has hit the UK where fraudsters contact victims claiming to be from HM Revenue & Customs (HMRC) and trick them into paying bogus debts and taxes using iTunes gift cards.

Victims are being contacted in a variety of methods by fraudsters claiming to be from HMRC and are told they owe an outstanding debt. In the hundreds of cases reported to Action Fraud in the past month, the fraudsters all ask for payment in iTunes gift card voucher codes.

Fraudsters are now moving onto iTunes gift cards to collect money from victims because they can be easily redeemed and easily sold on. The scammers don’t need the physical card to redeem the value and instead get victims to read out the serial code on the back over the phone.

Fraudsters are contacting victims in three ways:

  • Voicemails: Fraudsters are leaving victims automated voicemails saying that they owe HMRC unpaid taxes. When victims call back on the number provided, they are told that there is a warrant out in their name and if they don’t pay, the police will arrest them.
  • Spoofed calls: Fraudsters are cold calling victims using a spoofed 0300 200 3300 number and convincing them that they owe unpaid tax to HMRC.
  • Text messages: Fraudsters are sending text messages that require victims to urgently call back on the number provided. When victims call back, they are told that there is a case being built against them for an outstanding debt and they must pay immediately.

How to protect yourself:

  • HMRC will never use texts to tell you about a tax rebate or penalty or ever ask for payment in this way.
  • Telephone numbers and text messages can easily be spoofed. You should never trust the number you see on your telephones display.
  • If you receive a suspicious cold call, end it immediately.

You can also report a fraud and receive a police crime reference number, call Action Fraud on 0300 123 2040.

Tax Diary July/August 2016

1 July 2016 – Due date for Corporation Tax due for the year ended 30 September 2015.

6 July 2016 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs, and give copies of the information to your employees.

19 July 2016 – Pay Class 1A NICs (by the 22 July 2016 if paid electronically).

19 July 2016 – PAYE and NIC deductions due for month ended 5 July 2016. (If you pay your tax electronically the due date is 22 July 2016)

19 July 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2016.

19 July 2016 – CIS tax deducted for the month ended 5 July 2016 is payable by today.

1 August 2016 – Due date for Corporation Tax due for the year ended 31 October 2015.

19 August 2016 – PAYE and NIC deductions due for month ended 5 August 2016. (If you pay your tax electronically the due date is 22 August 2016)

19 August 2016 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2016.

19 August 2016 – CIS tax deducted for the month ended 5 August 2016 is payable by today.

Hire a Chartered Certified Accountant in London and Essex, UK and forget all worries of managing financial assets of your firm.

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