The deadline to file your 2018-19 tax returns is fast approaching, the 31 January 2020. Most of our clients will have the reassurance that we have filed their returns online, but for those who still need to file their 2019 return, it’s time to get into action. If you file after 31 January 2020 late filing penalties will be applied.

In an uncharacteristic display of humour, HMRC’s press release published 27 December, was titled: “We've been Santa lot of Elf Assessments”.

Apparently, on Christmas Day and Boxing Day over 12,000 tax returns were filed online. To put this into context, HMRC are expecting over 11million returns to be filed for 2018-19.

Don’t forget to pay your self-assessment tax

The 31 January 2020 is also the time when any underpayment of tax for 2018-19 – and any first payment on account for 2019-20 – are payable.

Clients reading this post, and who may be unsure how much tax they need to pay, should call so we can confirm any amounts that may be due.

End of the 2019-20 tax year

Following fast on the heels of the tax return deadlines for 2018-19 is the end of the 2019-20 tax year.

We recommend that all business clients and high-income earners complete a review of their tax planning options before 6 April 2020. Once that particular Rubicon is passed 99% of tax planning options for the current tax year become ineffective.

The outlook for 2020-21

It is likely that the first Budget of the new government will be presented February 2020, this will no doubt set the tax scene for 2020-21.

Hopefully, the tax goal-posts will not be moved too far from their present position. We will post detailed of any changes as they are announced. During the election campaign the Conservatives did promise that they would not increase most taxes. However, it was suggested that the further planned reduction in corporation tax (from 19% to 17%) will not go ahead. We assume that the current 19% rate will therefore continue.

Happy New Year

Now that political uncertainties have been resolved, let’s hope that business owners across the UK can look forward to the resolution of the numerous challenges that our exit from the EU will likely create. The conclusion of the withdrawal process on 31 January 2020 is just the start of the process. UK businesses will be keen to see the details of the negotiated trade agreement with the EU that is timed to conclude 31 December 2020.

In the meantime, happy new year. And be sure to keep in touch. 

On 13th December, the Department for Business, Energy and Industrial Strategy in collaboration with Office for Product Safety and Standards, issued a cautionary warning to consumers buying toys this Christmas.

Leaving aside the late publication of this information – not all of us are last-minute shoppers – it is worth reproducing the twelve points that make up their press release. They are:

No one wants to take a risk with toy safety, so always bear in mind 12 tips when buying for children.

1. Look for the CE symbol: This means the manufacturer has assessed the toy for safety. Find the symbol on the label or box.
2. Check it’s for kids: Festive novelties can look like toys. Keep them away from kids.
3. Reputation matters: Check the suppliers who have a good reputation for safe and reliable toys. They’ll have good safety standards and refund policies.
4. Button battery safety: Christmas toys may have button batteries – which can prove lethal if ingested. Check they are screwed in safely before giving to a child.
5. Check age restrictions: Toys must be clearly marked with age restrictions, which assess risks such as choking hazards. Always follow the age recommendations.
6. Consider special needs: Remember that children with special needs might be more vulnerable, and make sure to shop accordingly.
7. Choking hazards: Avoid toys with small parts or loose fabric – they can be a choking hazard.
8. Loose parts: Loose ribbons on toys and costumes can be dangerous. Think before you buy.
9. Inspect toy boxes: Wear and tear can make a toy unsafe. Check your children’s toys and get them repaired if necessary.
10. Supervise when you need to: Some toys need an adult on hand during playtime. Read all the instructions so you can keep things under control.
11. Tidy up: Boxes, plastic bags and wire can be a hazard. Clear away all packaging once everything’s unwrapped.
12. Celebrate a safe Christmas: Completing these checks can save you a lot of stress later. Remember to get batteries (and dispose of these safely too)!

Readers who have concerns regarding any of their recent purchases for their children or younger relatives can access material from the consumer campaign page at https://www.gov.uk/guidance/consumer-safety-awareness-campaigns-materials.

Whatever your political motivation most of us will be relieved that last week’s election has created a government with a working majority. At last, there is a light at the end of the uncertainty tunnel.

Brexit

Business readers with any sort of trading platform with the EU need to dot the i’s and cross their t’s regarding post January 2020 changes that we are promised will now happen. At minimum, EU traders should complete their Brexit impact assessments and take steps to mitigate any apparent risks identified.

Please call if you would like our input into this process.

When will the next Budget be announced?

The new government will need to get it’s Budget act together. Our feeling is that parliamentary time will be fully committed to Brexit matters until we leave at the end of January 2020.

Once that process is out of the way we should see a Budget date announced at some time during the first two weeks of February. Ordinarily, we should have had a Budget last month, but other matters prevailed.

Budget issues do need to receive fairly urgent attention as there are a number of Income Tax reliefs that are still to be determined for 2020-21.

As details emerge we will be publishing details and advising clients of any new opportunities to trim their tax bills and take advantage of any new opportunities revealed by the Budget announcements.

Approaching the end of the tax year

Once the Budget changes are announced there should be enough time to consider tax planning options to action before the end of the current fiscal year, 5 April 2020. Please call if you have not yet booked a tax planning review for 2019-20.

It is worth underlining that once the tax year end date passes, 99% of your tax planning options for 2019-20 will cease to be effective.

Post uncertainty

Debate is a valuable tool to resolve what should be done next. Unfortunately, if debate does not lead to informed action then paralysing uncertainty is the likely result.

It will be interesting to see what our new government manages to achieve in the coming months and years now that they have a mandate to act.

Property owners are potentially more at risk from the activities of fraudsters. They have more to lose and there are very real risks that the Land Registry property alert service is set up to counter.

Why consider this service?

Since 2009, HM Land Registry has prevented 254 fraudulent applications being registered by fraudsters. Common attempts to "steal" property Include selling or mortgaging your property without your knowledge.

How the service works

It Is possible to monitor up to ten properties already registered with the Land Registry or those of a relative – you don't have to be the owner of a property to set up an alert.

An example of the type of fraud that can be countered by this service – as published on the gov.uk website – is reproduced below:

Mr Mills rented out his property in England while he lived overseas. He realised that absent landlords are more at risk of property fraud, so he signed up to our Property Alert service.

Sometime later he received an alert email informing him that someone had made an application to register a mortgage on his property worth over £300,000. As Mr Mills wasn’t expecting this, he contacted our property fraud line. As a result of Mr Mills alerting us to the fact that the mortgage request was suspicious, we investigated and prevented the application from being registered once we realised it was fraudulent. As Mr Mills’ contact details were out of date, we advised him to update them so that if we needed to contact him in the future, he would be sure to receive our emails or letters.

As a result of signing up to Property Alert, Mr Mills was able to spot suspicious activity on his property and his prompt action in alerting us meant we were able to stop the fraudulent transaction from being registered.

To set up an alert fill in the online application at https://propertyalert.landregistry.gov.uk/.

Basic terms and conditions of the service

• The property you want to monitor must be situated in England or Wales and registered with HM Land Registry
• You must create a Property Alert account to use the service
• You will receive a HM Land Registry email (please check spam inbox) to enable you to verify your email details
• You must then sign into your account to add a property
• Email alerts are sent when official searches and applications are received against a monitored property
• If you receive an alert about activity that seems suspicious you should take swift action. The alert email will signpost you to who to contact.
• You don't have to own a property to set up an alert
• The same property can be monitored by different people.
• Property, especially flats/apartments, can be registered with two titles. Blocks of flats are often owned by companies (Freehold), and the person owning the individual flat (Leasehold). When registering for this service please choose Leasehold title for individual flats/apartments.
• You can use the service if you are not online. Call the Property Alert team on 0300 006 0478.

There is no simple answer to this question. We have listed below some of the matters that need to be are considered. As self-employed business owners’ profits are subject to income tax and National Insurance – and limited companies to corporation tax – we have divided our comments accordingly.

Before making this distinction it is important to state that profit shown on your accounts is not the figure that is used by HMRC to work out taxes due. Your published figures are adjusted to reflect the following (this is not a comprehensive list):

• Depreciation of assets is always added back and replaced with a capital allowance. Generally, capital allowances claimed will reduce your tax bill and on some occasions the amount claimed can be more than any depreciation charge shown in the accounts.
• Certain business expenses are not allowed for tax purposes. A common example is business entertaining.
• Payments to the owners of the business are treated differently if the business is incorporated or self-employed. Some of these distinctions are set out below.

Self-employed – income tax and Class 4 NIC

Sole traders and partners in trading partnerships (including Limited Liability Partnerships) are subject to income tax and Class 4 NIC. Profits adjusted for tax purposes are treated as the income of the business owner.

The self-employed are not taxed on the funds they withdraw from the business but the profits they earn.

They will pay income tax at 20%, 40% or 45% depending on the amount of profits earned. Additionally, the self-employed pay Class 4 NIC of 9% on profits between £8,632 and £50,000. This 9% rate drops to 2% for profits earned in excess of £50,000.

This exposure to potentially high rates of income tax and NIC is the main reason for considering the incorporation of successful self-employed business.

Limited companies

In the majority of cases limited companies pay corporation tax on their adjusted trading profits at a fixed rate. Currently, corporation tax is charged at 19%.

However, if director/shareholders withdraw money from the company they are taxed separately on those withdrawals. The most common director shareholder rewards are:

• A salary – taxed under the PAYE rules. Salaries and employer NIC charges are an allowable deduction for corporation tax purposes.
• A dividend – dividends are a distribution of taxed profits (company trading profits less corporation tax paid). They are not a cost to the business and do not reduce the company’s corporation tax bill. Any dividends received by shareholders in excess of £2,000 are taxed at hybrid rates of income tax (7.5%, 32.5% or 38.1%) the rate you would pay depends on the level of your overall income.
• A benefit, company car etc – most benefits are treated as income and will increase a beneficiary’s income tax charge. Additionally, companies will be charged extra NIC based on the total value of benefits provided.

Planning note

Working out the best structure for your business should take the above into account. However, there are a range of other “risk” considerations that should be examined. If you are concerned that you may not be operating in the most tax efficient way please call so we can help you work through your options.