If you are a sole trader or an individual member of a partnership you will likely be subject to income tax, and possibly National Insurance, on your earnings.

Unfortunately, tax being taxing, earnings for tax purposes may not be the same as the monthly drawings you take from your business.

For example, you may decide to take no “wages” from your business in order to build up cash reserves, but if your business is profitable you will still pay tax. Why is this?

HMRC will largely ignore any drawings you take from your business when considering how much tax and NIC you are liable to pay. Instead, they will look at your profit for the relevant trading period.

Accordingly, if you want to judge how much you will be paying to HMRC you will need to look at your business profit and loss account and not the amount of cash you have withdrawn to meet your private expenditure.

As with all matters relating to tax HMRC will not simply take your accounts profits as your income; they adjust your profits. Common adjustments include:

• HMRC will add back any deduction you have made to depreciate your assets (plant, equipment, vehicles and other relevant assets) and replace this with a capital allowance claim. The amount of the claim allowed will depend on the amount and type of asset purchased.
• Entertaining costs are generally disallowed.
• Any costs you have claimed that have a personal use element: motor expenses for example; will be disallowed.

Your profits for tax purposes may also be increased if you have sold equipment.

As you will probably be paying any income tax or NIC from your business bank account it is sensible to prepare your accounts as soon as you can following your year end. In this way your adviser can calculate liabilities and you will have advance notice of the amounts payable. This will also give you time to accumulate funds to meet the tax and NIC payments when they fall due.

UK readers who are anticipating the sale of a residential property on which a capital gains tax (CGT) charge may apply would be advised to consider the changes to the reporting and payment of this CGT charge from 6 April 2020.

The general rule will be that for relevant disposals on or after this date (6 April 2020) a return in respect of the disposal must be delivered to HMRC within a ‘payment window’ of 30 days following the completion of the disposal, and a payment on account made at the same time. The self-assessed calculation of the amount payable on account takes will take into consideration unused losses and the person’s annual exempt amount. The rate of tax for individuals is determined after making a reasonable estimate of the amount of taxable income for the year.

Gains on disposals reported on the new return can be ignored when determining whether to register for self-assessment. Enquiries into the return will be able to be made separately from any self-assessment return that may be due.

For disposals by UK residents, the new reporting and payment requirements will not apply where the gain on the disposal (or the total gain where more than one residential property disposal is made in the year of assessment) is not chargeable to CGT (for example where the gains are covered by private residence relief, unused losses or the annual exempt amount), arise from the disposal of a foreign residential property in a country covered by a CGT double taxation agreement, or arise to a person taxed on the remittance basis.

For non-residents, the reporting requirement is expanded from 6 April 2019 to include all companies. However, an exception from making a payment on account for those that make self-assessment returns will cease for disposals on or after 6 April 2020 in line with the introduction of payment on account for UK residents.

This is a radical change and will require taxpayers and their advisers to gather data, calculate and report the relevant gains within the 30 day reporting window.

Readers who are contemplating the sale of a residential property that may trigger a CGT charge might be advised to complete the sale before 6 April 2020. Sales before this date will be reported on your self-assessment tax return for 2019-20. The filing deadline for this return is 31 January 2021.

If you are involved in the transport of goods to and from the EU HMRC have posted useful guidance on what you will need to do to accommodate a no-deal Brexit on 31st of this month.

The guidance can be downloaded as a PDF from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/836920/transporting-goods-between-the-uk-and-eu-in-a-no-deal-brexit-guidance-for-hauliers.pdf

Transitional arrangements are in place regarding licenses and permits.

The EU has agreed that for a transitional period UK hauliers will be able to continue using their current licences to do journeys to and from the EU. This currently applies until 31 December 2019 and is likely to be extended to 31 July 2020.

Hauliers holding a Community Licence will be able to continue using these after a no-deal Brexit for the transitional period. Hauliers applying for or renewing a Community Licence after a no-deal Brexit will instead receive a ‘UK Licence for the Community’, which will give the same rights.

A copy of the Community Licence (or the new ‘UK Licence for the Community’) has to be carried on board all vehicles when working in the EU.

The Community Licence (or the new ‘UK Licence for the Community’) will not be valid for international road haulage journeys made by UK hauliers through the EU to countries outside the EU and EEA – these will require ECMT permits.

Some ‘cross-trade’ (movements between two EU countries) and ‘cabotage’ (movements within an EU country) will be permitted in the transitional period. Until 31 December 2019 at least up to 2 loaded cabotage or cross-trade journeys will be possible per week.

As there is still no “certain” outcome for Brexit, please note that the above comments only apply to a no-deal scenario. If you need help sorting the wood from the trees, please call.

1 October 2019 – Due date for Corporation Tax due for the year ended 31 December 2018.

19 October 2019 – PAYE and NIC deductions due for month ended 5 October 2019. (If you pay your tax electronically the due date is 22 October 2019.)

19 October 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2019.

19 October 2019 – CIS tax deducted for the month ended 5 October 2019 is payable by today.

31 October 2019 – Latest date you can file a paper version of your 2018-19 self-assessment tax return.

1 November 2019 – Due date for Corporation Tax due for the year ended 31 January 2019.

19 November 2019 – PAYE and NIC deductions due for month ended 5 November 2019. (If you pay your tax electronically the due date is 22 November 2019.)

19 November 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2019.

19 November 2019 – CIS tax deducted for the month ended 5 November 2019 is payable by today.

The following press release was published by HMRC last month. Extracts are reproduced below:

Sir Amyas Morse, the former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), will lead an independent review of the Loan Charge…

The review will consider whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.

The disguised remuneration Loan Charge was introduced to tackle contrived schemes where a person’s income is paid as a loan which does not have to be repaid.

Disguised remuneration loan schemes were used by tens of thousands of people, and concerns have been raised about the use of the Loan Charge as a way of drawing a line under these schemes. The government is clear that disguised remuneration schemes do not work and that their use is unfair to the 99.8 per cent of taxpayers who do not use them.

The Treasury has asked Sir Amyas Morse to report back by mid-November, giving taxpayers certainty ahead of the January Self-Assessment deadline.

We will report on this issue as soon as the results of this review are published.