There are things you can do to give your business the best chance of survival and success, during and after the pandemic. These steps often go hand-in-hand with the services and advice of an accountant. A key to staying on top of your business’ financial affairs is knowing exactly where you stand. This means knowing your business’ cash flow, as well as upcoming and future tax liabilities. We can provide you with the information to plan and make proactive decisions by preparing your accounts and tax returns. Lockdown is the perfect time to sort out business records and get your accounts up-to-date. As tax advisers and accountants, we regularly contact our clients with updates of any government measures or news that we think may be relevant to them individually. This includes talking to clients about the Bounce Back Loan Scheme which will provide a vital lifeline to many businesses over the coming months. The self-employed, partnerships and companies can all apply for this loan up to a maximum of £50,000. Even if your business does not currently need this loan, it may be worth discussing whether it will be needed in the future, as the knock-on effects of the pandemic on business are uncertain. For clients with employees, we are calculating and submitting furlough claims on their behalf, as well as processing their payroll. We are helping our clients identify which tax payments can be reduced or deferred to support their cashflow over the coming months. We also keep everyone informed of deadlines so that they do not fall behind. All of us at Forths Tax are fully contactable and providing our services as normal via email, over the phone, and through the post. We are also able to speak to you through Zoom, WhatsApp, or Facetime if you prefer. If you are local to Leeds or Manchester and would prefer to drop off your business records, we can arrange a time to meet you at our offices whilst maintaining social distancing. If you would like to speak to us about how we can help you, please call us on 0808 169 9090 or fill out an Enquiry Form and we will contact you directly to discuss your circumstances.
Individuals are quite rightly constantly looking for ways to mitigate their tax position and legitimately minimise what they have to pay to HMRC. The key to this sentence is clearly the word legitimate. In May 2020, the press reported the criminal prosecution of former HMRC employee, Martyn Arthur, for submitting inaccurate tax returns and cheating the public purse out of £120,000, who in 2009 published a book entitled ‘The Taxpayer Strikes Back’ about how to stand up to HMRC. Ironically, it would appear as though he has failed to heed his own advice. Obviously, simply not declaring your legitimate taxable income is not a plausible tax planning strategy and we would certainly not want any of our clients to be in the same position as Mr Arthur. We recognise, however, that there are numerous different ways that individuals can find themselves in a position where they have an issue with HMRC that will be causing them stress and anxiety. Our unequivocal recommendation when individuals find themselves in this position is to contact an appropriately qualified and experienced tax investigation specialist to guide them through what may seem like a maze. A tax investigation specialist with an in depth knowledge of the relevant process will robustly present the tax payers position from a technical perspective and also provide assurance that all features of their case have been properly considered. Further information about our specialist tax investigation and disclosures services are available on www.taxdisclosures.co.uk We provide both tax planning and tax investigation services. To discuss your circumstances, call us on 0808 169 9090 or fill out an Enquiry Form and we will contact you directly.
Come the end of a tax year, or in the run up to that point, it is obviously very important that tax payers ensure that they have in mind all of the reliefs that they are entitled to claim in order to mitigate their tax liability. There is clearly nothing wrong in optimising these reliefs as they are enshrined in tax law to be utilised as appropriate. There are certain reliefs that apply to all taxpayers such as relief for personal pension contributions or charitable donations and, conversely, there are reliefs that only potentially apply to a very small subsection of the population by virtue of their specific nature. One such example is the seafarers earning deduction. This is a potential relief that is available for UK tax residents who are employed and have worked on a ship at sea but who have worked outside of the UK long enough to qualify for the deduction, usually a minimum of 365 days. So what is the impact of this relief? For qualifying individuals the effect is to get all of the Income Tax that they have paid in a qualifying period back as a refund, hence the impact can be considerable. Time is definitely of essence. Currently, relevant individuals are able to only make a claim for the Tax Year ended 5 April 2017 onwards. In order to make a claim for this tax relief, the following information would need to be provided to HMRC: a completed working sheet HS205 relevant air tickets or other travel vouchers hotel bills or other receipts passports and visas seafarer’s discharge book freeboard logs of the ships you carried out duties on. The claims process will involve the submission of a tax return for the Tax Years that a deduction is being claimed. If you consider that you are entitled to claim this relief and require any assistance in presenting the same (including assistance in completing the HS205 working sheet) then please do not hesitate to contact our experienced tax compliance team on 0808 169 9090 or fill out an Enquiry Form and we will contact you directly.
If you are a business owner there is a new business loan scheme that has been announced by the government. The details that have been announced so far are: • Businesses will be able to borrow between £2,000 and £50,000 (up to a maximum of 25% of the business’ turnover) • Businesses will be able to access the cash within days • The government will guarantee 100% of the loan (compared to the Coronavirus Business Interruption Loan Scheme where only 80% of the loan was backed by the government) • The government will pay any interest and fees due for the first 12 months and no repayments from the business will be due during the first 12 months • Loan terms will be up to 6 years • The government are looking to agree low interest rates for the remaining period of the loan • The application is meant to be a short and simple form filled in online • The scheme will launch for applications on Monday 4th May, when we expect to be provided with further information. The guidance says that you can apply for a loan if your business: • Is based in the UK • Existed on 1st March 2020 • Has been negatively affected by the coronavirus • Was not an ‘undertaking in difficulty’ on 31st December 2019 • Have not already claiming the Coronavirus Business Interruption Loan Scheme (although you can arrange with your lender for this loan to be transferred into the Bounce Back Loan scheme until 4th November 2020). If you would like to discuss your business circumstances with a member of our team, you can call us on 0808 169 9090 or fill out an Enquiry Form and we will contact you.
As of 6 April 2020 two significant changes in legislation have come into effect for Capital Gains Tax. These changes are relevant for the sale of residential properties where the property was not your main residence. 30-day Capital Gains Tax Return If you sell a residential property and make a gain over the tax free allowance (£12,300 for 2020/21), you will now need to report this gain to HMRC by submitting a Capital Gains Tax return within 30 days of the sale. You will no longer be able to defer reporting and payment of Capital Gains Tax via your Self Assessment return, and any tax owed must be paid within the 30-day reporting and payment period. Removal of Lettings Relief This change will impact you if you rent out a property that you once lived in as your main residence. Under the previous rules, if you once lived in the property and have since let it out, you could claim Lettings Relief to make up to £40,000 of the gain exempt from Capital Gains Tax. The new rules state that you can only receive Lettings Relief if you still live in the property and rent out part of the property to a tenant. For the majority of landlords this will not be the case. The removal of Letting Relief could have a significant impact on the amount of tax due if you sell a property you once lived in but then let out. How we can help The first change in legislation means that any Capital Gains Tax due on the sale of a residential property will need to be reported and paid to HMRC much sooner than under the previous rules. The second change could result in a higher amount of Capital Gains Tax being due in particular circumstances. Therefore if you are thinking of selling a residential property, we can estimate the potential Capital Gains Tax for you advance. On sale of the property we can also prepare and submit the Capital Gains Tax return to HMRC on your behalf within the 30-day deadline. For more information or to discuss your circumstances with a member of our team, call us on 0808 169 9090 or fill out an Enquiry Form and we will contact you.
Here at Forths Tax we are continually reviewing information and guidance in relation to the coronavirus pandemic. Our focus has been on ensuring that we have robust business continuity strategies in places to continue to service the needs of our clients, whilst heeding advice from experts and government to ensure the safety of clients, staff and the general public. To this end we have developed stress tested and comprehensive home working contingencies for staff as required. Throughout this difficult period our team will still be on hand to provide our normal level of service, and should you need to contact us for any reason, please do not hesitate. If there is anything case specific, or generally, that you would like to discuss with us, please: Call us on 0808 169 9090 Email us at enquiries@forthstax.co.uk Fill out a Contact Form Finally, we would like to send our best wishes in this challenging time. The Forths Team
Please note that the office will be closed from 2pm on Friday 13th December for our office party. Monday 23rd Dec – 9am to 5.30pm Tuesday 24th Dec – 9am to 4pm Friday 27th Dec – 9am to 4pm Monday 30th Dec – 9am to 5.30pm Tuesday 31st Dec – 9am to 4pm Thursday 2nd Jan – 9am to 5.30pm Friday 3rd Jan – 9am to 5.30pm
Quite simply, what is IR35? IR35 is known as the intermediary’s legislation that initially came into force way back in April 2000. Essentially a law to collect taxes from contractors who were engaged through their own personal service companies and that HMRC believes should be directly employed What’s new? Prior to April 2018 in the public sector and April 2020 in the private sector, contractors were themselves responsible for determining their status and whether they would fall under IR35. This led to a raft of HMRC IR35 challenges whereby the contractor had to prove to HMRC that they were in fact contracting and were not part of the employed workforce. From April 2020 both Public and Private sectors and the “end client” (businesses) will now need to determine a contractor’s status. Whilst a relatively subtle change in legislation, this will cause lots of head scratching and soul searching amongst those businesses that use contractors. We are already seeing in the public sector that the MOD, NHS and HMRC themselves are choosing to stop using contractors. No public body wants to be challenged over their use of contractors and put themselves at risk of a financial settlement and potential embarrassment. It is only a matter of time until the we see the use of contractors constrict within the private sector. The rules that govern employment status are not an easy read and the deluge of high profile IR35 cases making their way through the tax tribunal has many business people wary of the potential for not only a financial settlement but also a long running and expensive HMRC challenge. We are sure that Finance Directors and HR personnel are already planning to implement new checks and balances, sadly it is likely that a good proportion of private business, as already seen in the public sector, will make blanket decisions on the use of contractors rather than looking to introduce robust policies around the use of contractors. But could this be the end of the contractor? We certainly do not believe it is. There is an army of people who are contracting within the public and private sector, who are happy to be contractors, they are flexible, hardworking and essential to UK companies. Genuine contractors will always have a place with in the private and public sector and provided that the correct proactive advice is sought, there is no reason to see their demise. Our specialist tax advisers assist individuals and businesses in relation to the complexities of IR35 and its implications. To discuss your circumstances, contact us here .
The British Medical Association has warned that the NHS is facing a future staffing crisis because of tax liabilities incurred by higher-earning employees as a result of recent pension rule changes. In a recent survey, 60% of 4,000 consultants questioned stated that they are currently considering early retirement plans, many as a result of the taxation of pension contributions (source: The London Economic ). Current annual contribution rules Ending in the tax year 2010/2011, an individual could deposit £255,000 per annum into their pension pot enjoying tax relief of between 20% to 45%/50% on those deposits. In the 2010 Autumn Statement, that amount taxpayers could now deposit annually reduced dramatically to £50,000 and it was further reduced to £40,000 in 2014. When the annual threshold was reduced, an additional tapering rule was introduced which reduced by £1 the threshold for every £2 earn above £150,000. The current situation is that anyone earning over £210,000 now only has a £10,000 annual pension threshold. Many high earners missed this announcement. Someone who earned £210,000 and invested £40,000 into their pension pot in the mistaken belief that all £40,000 of the contribution would be eligible for tax relief would now have to pay additional tax to HMRC in the sum of £13,500 (45% tax on the £30,000 paid above the threshold). Some financial advisors were able to, for a short time, completely mitigate the effects on higher earners because the current pension regulation allows taxpayers to carry forward unused pension allowances for three years. An HMRC spokesman, speaking to the I newspaper , defended the situation by stating that "The annual allowance (AA) taper affects only the wealthiest pension savers. “This change helps control the cost of pensions tax relief and ensures that the benefit they receive is not disproportionate to that of other pension savers.” Current lifetime contribution rules The current lifetime allowance for pension savings is £1,055,000 and it increases in line with inflation every year. Any payments to a pension pot which exceed the allowance are charged at 25% if paid as a pension (if you pay yourself a regular income through a drawdown plan or you purchase an annuity) or 55% if you pay the contribution in as a cash lump sum. The NHS Pension Scheme People working for the NHS are automatically enrolled into the organisation’s Pension Scheme (although they are free to withdraw from it at any time) (source: Unison ). The current rates of contributions made by members is between 5% and 14% of the “full-time equivalent pensionable pay”. In comparison to many other sectors, the contribution rate of up to 14% of pay towards a pension is high and, following the changes to pension rules in the last decade, higher earning NHS staff (medical, administerial, and leadership) are losing out because of this. Under advice from their accountants, many front-line medical staff are reducing the amount of work they do to avoid the pensions-related tax liabilities they are incurring. BBC News reports that NHS staff earning more than £110,000 a year were at risk and that those staff already near the thresholds were either taking early retirement, cutting back on their homes, or leaving the NHS pension scheme. According to GP Online , GPs in their 30s have been advised to reduce their hours because of the tax liabilities incurred by their pension contributions. According to a Guardian report in July 2019, NHS services are at threat of “meltdown” and the survival of the NHS is under “existential threat”. Large tax bills received as a result of pensions contributions have led to some senior NHS staff re-mortgaging their property to pay HMRC. Dr Tony Goldstone, a consultant radiologist and clinical director at Hull University Teaching Hospitals NHS trust, told health policy reporter Denis Campbell that, "colleagues who used to help prop up services by working additional weekends, on top of their already onerous working rotas, can no longer afford to do this. I am hearing of operating theatres not being utilised because of the inability to staff them, and rota gaps not being filled as senior staff are unable to help out." To address the situation, the government has proposed a new option for affected and potentially-affected NHS staff – the initiative is called “50:50” (source: FT Advisor ). Whereas a scheme member’s full-time equivalent pensionable pay is now used to calculate contributions, members would instead be permitted to elect half of their current pension contributions. This reduction in contribution levels would result in the size of their pension pots not increasing as quickly allowing them greater headroom under the contribution limits. New Prime Minster Boris Johnson commented that "it cannot be right that so many GPs and consultants are leaving the service, or cutting their hours, for fear of whopping tax bills. It is clear that something has gone badly wrong in the taxation of doctors’ pensions. So this government is listening. We are fixing it." The British Medical Association however has argued that the 50:50 proposal will not have the desired effect – they believe that doctors will still cut their hours and that the only viable solution to the issue to the scrap the tapering of the allowance when a doctor’s full-time equivalent pensionable pay exceeds £150,000. Tax Advice The current crisis is leading to an exodus from the NHS Pensions Scheme at a rate five times higher than other publicly-run pension funds, reports FT Adviser . If you feel that you may have overpaid tax as a result of the changes to pensions law and the size of the contribution, please contact us. We have assisted individuals and businesses in their dealings with HMRC and are experts in representing our clients in complex and challenging cases. Please call 0113 387 5670 or email enquiries@forthsonline.co.uk for more information.
Even if you have left the shores of the United Kingdom to live and work abroad, you should not believe that HMRC has lost interest in you and your tax affairs – especially if you still earn income from work carried out and/or assets situated in Britain. In this article, Forths summarises the current situation from a general perspective of the current residency tests used to determine liability for UK taxes and the taxes themselves. Do you have to pay tax to HMRC? Ideally, you should have completed and returned HMRC’s P85 form prior to moving abroad. The P85 form tells HMRC that you either intend to leave the UK permanently or that you intend to work abroad for at least one full tax year (running from 6 April to 5 April). For employees, Parts 2 and 3 of your P45 should be included with your P85 but, if you are self-employed and you complete a self-assessment form every year, you will need to include one with your P85 completing the “residence” section in that form. As soon as HMRC consider you non-resident and from the day on which you leave the country, you no longer have to pay income tax or capital gains tax on any activity carried outside the UK, depending on how the range of different statutory residence tests apply to you. Statutory residence test For most non-residents who have left the UK, they will still spend a certain amount of time in Britain during the year. Therefore, HMRC, when considering your liability for taxes, splits the tax year into two periods – the time during which that you are not present in the UK and the time during which that you are. Under the “split year treatment” assessment, you will likely be deemed as a UK resident for tax purposes meaning that you will need to pay HMRC the due amount of tax on all UK and non-UK income you receive if: you spend more than 183 days in the UK, or you own, live, or rent a UK property (and this property is your only home) for at least 91 days during the tax year and you lived in that property for at least thirty days. HMRC will consider you to be a non-UK resident if: you have been a UK resident in one or more of the last three tax years but you’ve spent no more than 16 days in Britain during the current tax year if you have been a non-resident for the last three years and you have been in the UK for no more than 45 days in this tax year you work full-time abroad but you’ve worked for no more than 30 days in the UK (spending no more than 3 hours a day working) and you’ve spent no more than 90 days in the UK. Forths wealth warning Although the above tests may seem straight forward, they are not. And the reason that an increasing number of people fall foul of these rules is because HMRC frequently have different interpretations of the rules and how and under what circumstances they apply to taxpayers. HMRC also use a “Sufficient Ties” test in assessing whether your ties – your children, spouse, or civil partner – affected your actual residency status. When all factors are considered together, the actual application of the test onto your circumstances is both ferociously complex and open to individual interpretation. It is always better to take continuing advice from a qualified professional on all matters regarding taxation to prevent yourself being presented with an unexpected tax bill that you thought you’d successfully avoided. Remember that, if you get this wrong, HMRC has a claim over your worldwide income, even if your overseas income has been taxed by that country’s relevant authorities. Paying tax on earned income and gains Assuming that you have been deemed as a non-resident by HMRC and even though you may spend all your time living abroad, you may need to complete a self-assessment form in certain circumstances. Self Assessment criteria If any of the following situations apply to you, you may have to complete a self-assessment: you are the director of a UK company you earn income through self-employment in the UK most or all of the work you do is in the UK you are a partner in an unincorporated partnership or LLP you receive income from rental properties you make a profit from selling or disposing of assets based in the UK Under current UK legislation, you are expected to register for self-assessment if you believe that you’re obliged to complete one – you should not expect HMRC to send you the relevant forms automatically. There is an extensive series of fines and penalties that can be levied against taxpayers who fail to register for self-assessment when they should and for taxpayers who do not submit their forms on time, even if there is nothing owed to HMRC. Annual personal allowance The current UK personal allowance – that is, the amount of money you can earn prior to paying income tax – is £12,500. Non-resident UK citizens have to claim their Personal Allowance at the end of each tax year by using form R43 . If you live in a country with a double taxation agreement with the UK, you may also be entitled to a personal allowance. Income derived from property Non-resident citizens renting out property in the UK must register with the Non-Resident Landlord Scheme. For HMRC’s purposes, a non-resident landlord is a landlord who lives abroad for more than 6 months of the year. Tax generated as a result of rental income is then paid to the Non-Resident Landlord Scheme service direct either by your letting agent or your tenant. If you sell any of your UK properties, you will need to inform HMRC via a non-resident Capital Gains Tax return within 30 days of completion. Help with HMRC In just over 1,000 words, we have tried to sum up the most pertinent points of the taxation service from HMRC’s perspective for non-resident UK citizens. This is one of the most forensic areas of current accounting practice and we respectfully suggest to each reader of this article that your situation is unique and it needs its own individual consideration. The views of taxpayers and HMRC on a person’s actual residency status, the nature of their ties to the UK, self assessment requirements, treatment of taxes for residents in countries with double taxation agreements, and so on requires careful and detailed consideration by a professional with years of experience doing this. Forths has successfully represented taxpayers where there is or there may be a dispute over tax on UK income for non-residents and, in our experience, it’s better to take control of the situation yourself as soon as possible rather than wait for HMRC to contact you. For more information or to discuss a potential case, talk to our team on 0808 169 9090, email enquiries@forthstax.co.uk or fill out an Enquiry Form .