Tax Issues Archives - Page 19 of 20

News,May 2018

Here’s All You Need to Know About UK Split Year Treatment

George10/02/2021Accounting Issues , Tax Issues

The number of people who left the UK in 2020 was unprecedented. A lot of people considered the coronavirus as one of the main reasons for the departure. According to credible stats, around 700,000 people left the UK in 2020. The exact period was around 15 months to September 2020. One of the main concerns of people in this regard is tax residence. You’ll find all about the split-year treatment here: Let’s Find Out More About Residence and Split Year Treatment When you take a look at a respective tax year, you figure out that someone is a UK resident or a non-UK resident for a period of time. This is sent out by the statutory residence test sent out by Finance Act 2013, Sch. 45. However, if they part ways throughout a tax year, it’s important to note that the tax year will split into UK and overseas part. Please note that the personal allowance is allowed to you for a complete year. This is completely irrespective of the fact that it will be allowed to you in the coming years. Take into account the fact that this personal allowance will be available to you for a full year. You might not be able to avail this offer in the coming years. So maybe, its a good idea to take an opportunity to avail it this year. Let’s Find Out More About Income Tax and CGT It’s important to note that all the income coming from abroad if they’re charged in the UK part, and not any other EU part. All the foreign gains will be charged CGT only in some parts of the UK. If you’re considering only the UK gains, the only gains charged will be that on the property that cannot be moved. That’s considered immovable UK property in the overseas part. It’s completely subject to all the rules allowed for temporary non-residence. Please note that it’s applicable if the residence is resumed within five years. If you’re looking forward to avoiding double taxation, now is the right time to go for it. You might want to save more. This is profoundly valuable for staying away from double taxation. Also, extensive reserve funds might be made by timing income and gains to correspond with the abroad piece of the year where the country the individual is getting occupant in has more positive tax rates than the UK. In any case, split-year treatment doesn’t apply in all cases (however where it does it is programmed and not discretionary), so it is vital to comprehend the standards and be sure of the date the abroad period begins to keep away from botches. The tax position in the new nation of occupant should be thought of, so guidance should be taken likewise. The pertinent double tax treaty (in the event that one exists) ought to likewise be consulted. Note that the split-year administers possibly should be thought of if the individual is an occupant in the UK under the SRT. On the off chance that the test gives a non-resident result for the year, non-UK pay and gains won’t be dependent upon UK tax at any rate – regardless of whether they are gotten or emerge before the flight date. Available UK gains are confined to those emerging on undaunted UK property. Recollect that if again on UK property emerges, it should be accounted for utilizing the UK property gains announcing administration inside 30 days of completion. There could be not, at this point a possibility for non-residents who complete self-assessment gets back to postpone detailing the gain until the return is recorded – the change was made for removals made on or after 6 April 2020. It ought to likewise be noticed that the split-year treatment doesn’t influence genuine residence under any double tax treaty.

Constant Vigilance Spotting and Reporting Tax Return Scams

George04/02/2021Personal Tax , Tax Issues , Tax Saving Tips

The National Fraud Intelligence Bureau reported that coronavirus-related scams skyrocketed 400% in the first month of lockdown in the UK in March 2020. Over 100 cases were recorded, with losses totalling £970,000. The scams continued over the course of the year. At the beginning of 2021, fraudsters are now targeting citizens who are filing personal taxes. HM Revenue and Customs (HMRC) reported copycat HMRC websites, phishing scams, and fake text messages sent to trick people into disclosing account information and personal details. In this article, we will cover the methods of tax return scams, how tax return scams work, how to spot it and what to do if you have been scammed. How Tax Return Scams Work Tax return scams usually start in the same way. A fraudster will communicate with you over landline, text message, or email, claiming to be from the HMRC. They will say that you can claim financial help or that you’re due a tax refund. Sophisticated fraudsters even reference your Government Gateway Account and create email graphics that look official. You will then be led to a portal that requires you to enter all your details, bank account information, and other data, including your Unique Taxpayer Reference Number (UTR). If successful, the fraudsters will be able to claim your refund or even get into your bank account. Fraudsters are leveraging technology in increasingly creative ways, so you need to be vigilant whenever you receive text messages or emails from seemingly official channels. It’s best to keep from clicking any of them, even if they’re simple promo texts from your favourite retail store! Simply accessing a suspicious link may make your phone or computer vulnerable to malware or viruses. How to Spot a Tax Return Scam For tax return scams, in particular, spotting them is simple: HMRC does not contact customers through email or text. It always sends all tax return communications via post. If you are employed and don’t usually fill in your tax return, any HMRC communication is a scam. If you do fill in a Self Assessment Tax Return form or VAT returns, HMRC will communicate with you via email. It’s important to always check that the email is sent from an email address ending in hmrc.gov.uk. HMRC will never ask for your bank account information, passwords, or PINs. It’s best never to enter any of this information in an online form that’s in any way suspicious. If in doubt, you can get in touch with HMRC to check if the communication is genuine. You can forward suspicious emails to [email protected] and texts to 60599. What to Do If You’ve Been Scammed If you think you’ve been the victim of a scam, check your bank accounts immediately and see if you’ve lost any money. Contact your bank and ask for advice on how to protect your accounts. You may have to change your passwords, create a new account, or cancel your card. Check your accounts with HMRC as well, and let them talk you through how you can retrieve lost money. Conclusion Fraudsters continuously come up with new and creative ways to scam people into giving away personal information. It’s more important than ever to be vigilant and to protect yourself from these attempts. Double-check email addresses and website URLs before clicking links and entering any personal details. HMRC sends all tax refund communication via post, so report any suspicious texts or emails to their official channels. Are you looking for affordable accounting services in Croydon to help you with your tax filing and avoid tax return scams? CruseBurke provides affordable accounting and taxation services to individuals and small businesses. We have over 100 years of combined experience in providing a broad range of services, such as self-assessment tax returns, corporate tax, auditing, and more. Contact us today!

How Can a Self Employed Personnel Benefit From £2,000 Dividend Allowance 2020/2021

George01/02/2021Limited Company , Tax Issues , Tax Saving Tips

All taxpayers can claim their tax-free dividend allowance. Dividend Allowance 2020/21 is set at £2,000. This is a golden opportunity for all the self-employed personnel to registered for self-employed. If you’re thinking of making the switch, you need to do it right now. Let’s Discuss the Nature of Allowance If you own a limited company, and you’ve registered it as a self-employed. The good news is that you can take out some money as dividend allowance 2020/21. You can even take out these dividends if you’ve got some shares in the company. The ‘dividend allowance’ is at zero rate band. You don’t have to pay taxes on these dividends, but these count towards band earnings. If you’ve not utilized any personal allowance, you can also avail dividends under the personal allowance. These will be counted as free of tax. What Dividends are Not Covered by the Allowance If your dividends are not shrouded under dividend allowance or personal allowance, count them as taxable. These dividends will be taxed under regular tax rates. Dividends are considered as the prime source of income if the taxpayer has other sources of income too. The dividend is taxed at 7.5% such that it falls under the basic rate band. At 32.5% to the extent that it falls within the higher rate band and at 38.1% to the extent that it falls within the additional rate band. All these tax rates are applicable in 2020/2021. How to Use the Dividend Allowance 2020/2021? If you’re not using the dividend allowance in 2020/2021, you might end up losing it. The tax year comes to an end in 5th April 2021, so it’s a good option to review what dividends you’ve taken up, and what dividends do you wish to take up in the future? The COVID-19 may have an impact on your shared income. And this changes things overall for you. Whether you’re a self-employed individual or taking up dividends from a family investment, you might want to take up more of these dividends to make sure that you’re utilizing your allowance. Remember that dividends can be only paid from retained earnings. Can you Pay Dividends if your Business is Facing any Losses? Paying Dividends from your company’s income is not affected by losses. If your business faced loss in 2020/2021, and there are any chances of profit that can compensate for the losses as well as for the dividends then go forward and avail them. It’s important to go by the company law requirements and pay your dividend allowance 2020/21 using the alphabetic share structure if you own family business. Like one shareholder has A-class share, another shareholder has B class share. This is helpful in using all your family member’s dividends.

Here’s All you Need to Know About Cross Border VAT

George22/01/2021Tax Issues , VAT

With the end of 2020 period in Brexit that ends on 31 December 2020. Apparently, there will be a lot of changes in how VAT treatment is done for international goods and services. The entire process of VAT will become cumbersome and manual as all the applications are paper-based. These will be sent to individual member states related to VAT. Cross border VAT is one thing everyone is so concerned about. Let’s dig into more details you might be interested in. UK exited EU VAT regime, custom union, and single market from 1st January 2021. This means the compliance specifications are completely different. This also makes sure all the customs declarations, goods regulations, services, and import VAT are different. So what were the important points of the cooperation agreement deal and Cross Border VAT? Let’s find out: Know More About Cross Border VAT Changes Here’s a major list of changes for UK and EU businesses. EU is completely separate from UK as of now. So the VAT directives for the EU are completely different. For Example, there’s no longer an obligation to maintain a minimum VAT rate of 15% When you say that the VAT rate is already 20% and consumption tax accounts for almost a third of tax revenues, there are likely no chances of reduction. UK is seen to have complete control of its reduced VAT rates. These are currently restricted due to the EU VAT directive. However, there’s a conflict between the two countries over the subject matter. EU believes that it needs to have full power for setting the rates. All movements are now imports or exports subject to UK and EU import VAT. Businesses need to have two EORI numbers to move their goods between UK and EU. By way of compensation, UK introduced a postponed VAT accounting import deferral scheme. This makes sure no cash payments are made by business importers to UK customs. But many UK businesses do not offer the same compensation for other EU countries that are importing their goods. There’s a loss of distance selling thresholds for UK e-commerce sellers of goods and EU sellers. These are completely subject to UK or EU VAT imports. Please note that the EU e-commerce sellers need to register for UK if the purchase takes place under the £90,000 threshold. If you’re a UK business with foreign VAT registration in EU, you’ve got to make sure that you appoint a special VAT fiscal representative. This is highly applicable in 19 out of 27 EU states. All these agents hold liability for any unpaid VAT. We hope you’ve found all the information useful. All these cross border VAT directories for the UK apply specifically for the year 2021. Disclaimer: The information about the cross-border VAT provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

Environmental Taxes, Reliefs and Schemes For Businesses

George11/01/2021Accountants , Tax Issues , Tax Saving Tips

Adapting regulations regarding environmental taxes in the UK makes your business more environmental friendly and protects our environment. There are different taxes and schemes to encourage you to adopt these regulations. If you are running a business then: You may be consuming a lot of energy Small businesses with fewer energy needs You go on to buy energy-efficient solutions Climate Change Levy (CCL) CCL is an environmental tax charged on the energy used by businesses in industrial, commercial, and public service sectors. There are two CCL rate categories: Main Rates: Apply to gas, electricity, and solid fuels. Carbon Price Support (CPS) Rates: Apply to fossil fuels used for electricity generation. Current (2025) Main Rates: Electricity: 0.775 p/kWh Gas: 0.775 p/kWh LPG: 2.175 p/kg Other Fuels: 6.064 p/kg You do not pay the main rate if your business has low energy needs, is for domestic use, or is involved in charity-related activities. CCL is collected by HMRC and includes VAT on top. Emissions Trading The EU ETS affects businesses from energy-driven sectors and areas. This includes industries related to energy and manufacturers of certain kinds. This scheme allows your business to trade greenhouse allowances. This means you can buy and sell greenhouse gas emission allowances. Allowance trading reduces your business’s environmental impact. Under EU ETS, your business has to meet the target by cutting its emissions and trading emission allowances. Capital Allowances on Energy-Efficient Items You can avail this allowance if you purchase environmentally friendly equipment for your business. You can pay less tax after this. Your business will also be eligible for enhanced capital allowance on equipment that includes: Vehicles with a low carbon footprint Energy-efficient equipment and machinery Gas and biofuel technology Water-saving gadget Zero-emission vehicles As of 2025, a new Climate Change Agreement (CCA) Scheme is opening to support energy-efficient investments. Landfill Taxes Businesses have to pay taxes on dumping their waste through landfill sites. This tax is independent of the landfill fee. Your business will have to register for it in under 30 days. You will have to face fine and penalties if the period expires. There are two rates: Lower rate of £2.65 per tonne for waste that includes rock and soil The standard rate of £84.40 per tonne for active waste Aggregate Levy This levied tax is applicable on rock soil, sand and other earth material dredged from the ground or waters. Your business will have to pay £2 per tonne for it. Environmental taxes in the UK ensure that you reduce your carbon footprint and contribute to the environment. Also, these green taxes will help you bring down your operational costs significantly. Conclusion Environmental taxes in the UK aim to reduce the carbon footprint of businesses while promoting greener practices. By complying with these regulations, your business not only contributes to protecting the environment but may also benefit from tax savings and operational efficiency.

Get your Way Around Common VAT Problems

George06/01/2021Accountants , Accountants for Contractors , Accounting Issues , Tax Issues , VAT

As an accountant, we have to do a lot of problem-solving each day. Let’s take a look at the top ten VAT problems, and identify solutions for each one of these too. Businesses want to end up paying as little as possible, and getting your VAT right is one way to make sure you’re not overspending. Having the right accountant by your side is all you need to get everything right and avoid VAT payment problems. Know that VAT can go wrong in limitless ways. It’s a self-assessed tax being handled by ten other people. What are the chances that there might be zero chances of a human error? Then the team of accountants ends up saying ‘if only’ multiple times when they get themselves into serious VAT payment problems. If only a business owner would have ended up checking the VAT position before signing a contract or checking up on the VAT position before letting out a property, things would’ve been different. Most business owners even agree on a transaction without working out its VAT. Normally, people don’t consider VAT while carrying out the transactions and it’s troubling for them when they’re issuing their invoices or submitting VAT returns. As tax advisors, the accountants at Cruse and Burke always encourage you to keep all these situations in mind to make sure you don’t end up in a mess. It’s been seen in prior situations too that businesses that have problems with paying VAT in their minds before carrying out transactions see their commercial outputs improve significantly. You’ll not only improve profits but also make sure that you’re avoiding losses to the maximum. So let’s take a look at some of the common issues faced while getting your VAT done and help you overcome major VAT problems down the road: Having a lead in time always helps out in keeping VAT problems at bay. Enough time helps you carefully prepare for regulations, return forms, and systems for registering taxpayers and processing VAT returns and payments. Plus having prior experience is a benefit, and it always helps out. Sometimes small enterprises or companies are responsible for doing new invoices and working on the bookkeeping requirements. The problem arises especially among people going for VAT upon imports. Small enterprises have vigorously opposed the idea since the department in charge of internal taxes has been given the job primarily. Another major problem encountered by people of developing countries is that the staff number is not specified for resolving all the VAT issues. This is one problem of high concern for these countries. As VAT is something completely different from a general sales tax. VAT is considered as a modern tax of nature. So many countries demand that it must be dealt with in separate organizations. According to many developing countries, VAT should be dealt in a completely separate organization apart from general income tax, let’s say. We’ve not only identified potential problems that can get you into serious trouble but also identified solutions for all of them. VAT issues are common and you’ll try your best to avoid them to the maximum keeping in view the solutions above. We wish you good luck in getting everything right and pressing on the long-term measures to sort out everything the perfect way.

Here’s All You Need to Know About Making Tax Digital Signup (MTD)

George22/12/2020Making Tax Digital , Tax Issues , VAT

You’re looking forward to finding out more about the abbreviation MTD. So basically, what is MTD? MTD stands for making tax digital. This blog further guides you about all you need to know about making tax digital signup, and debunks common myths HMRC has eased up the manual accounting and VAT process and made everything digital. The system has been in place since 1st April 2019. Since that date, HMRC has made sure all the digital records are kept digitally. There are no laws enforcing the system. Still, a lot of businesses have manual records too. So what’s the hype about Making VAT Digital? How does it work out? Making VAT digital requires VAT registered businesses to use compatible software to sort out transactions and report HMRC VAT. MVD commences for the first VAT accounting period commencing after 1st April 2019. It applies to VAT-registered business with a turnover above the VAT threshold (currently £85,000) Certain businesses are deemed as complex for VAT, their MVD start date is deferred and commences on the first VAT accounting periods on or after 1 October 2019. Your business might end up getting labelled as complex by HMRC. What are the Common Myths About Making Tax Digital Signup(MTD)? Most people are inferring that MTD won’t reduce errors. Most of the people end up losing their receipts, and when their accountants have to file their taxes, they don’t have any. MTD might end up reducing the errors as no manual transportation of data is involved. It’s also a common misperception that once a business is part of the Making Tax Digital Campaign, they can’t use spreadsheets. There are no restrictions to use spreadsheets. Business can use them for record-keeping and calculations. There are plenty of bridging software available, which help out businesses transport the data to HMRC. So that’s what works out in this case. It’s also a common misperception that HMRC doesn’t encourage small businesses to use the tools. That’s also not true. According to HMRC, there are already 11 products completely free to use. You’ve just got to take care of the conditions. What if you get wrong with the entire process? It’s a common misperception that HMRC may penalize you for it. That’s also not true. HMRC completely understands that when a business is adopting a new idea, it might take some time for the staff to understand it. As of now, HMRC is taking all the errors lightly.

HMRC Tax Inspections: What to Expect and How to Prepare?

George22/12/2020Personal Tax , Tax Issues

HMRC conducts random compliance checks against businesses and individuals. They usually smell irregularities through suspicious activities and tax inspections to find any substance. This is a routine process to encourage businesses and other taxpayers to follow the laws and regulations. If you ever notice that you are under the tax investigation of HMRC, don’t think of it as an end process for your business. They don’t want to shut your company. Their end goal is to recover whatever dues owed to them. The more you facilitate this procedure the more things get easy for you. Here are some of the tips on how to go through this phase: Don’t panic First thing’s first, don’t get edgy. You can not swing the tide your way by just simply panicking. The best way to weather the process is by cooperating and staying calm. If things go beyond your grip, seek professional help who can provide you with technical advice. Negotiate a Time to Pay Agreement Sometimes HMRC negotiates to reach an agreement. They consider the time to pay agreements as well. Time to pay clearly outlined plans for the debt repayments. Willingness to pay back to the HMRC will go on to represent a gesture of good faith that certainly helps with the cause. Adopt complete honesty If you lie at any stage of the tax inspections, it will permanently dent your reputation. You will be designated as a non-cooperating individual. Forging documents, falsifying evidence or concealing information from HMRC will make things worse. HMRC uses a state-of-the-art software ‘connect’ that feeds on data and information to sniff their targets. If you adopt a complete honest policy with HMRC, you can expect to survive the investigation. Respect HMRC timeframes During HMRC tax inspections, you may come across any communication by the HMRC that usually comes with a Compliance Check letter. The letter will want you to contact them by the given time scale. The time scale may be intended to spur you into action. But you have to respect the given timeframe. Sitting quite will prompt their measures. Disclaimer: The information about the tax inspections burden provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.

What Tax Relief One Must Expect on Loans for Small Business?

George17/12/2020Business Growth Ideas , Personal Tax , Tax Issues

You always need help when you’re looking forward to investing in a new business prospect. But how much tax relief one must expect on all those loans for small businesses? Christmas is one of the most trending topics these days, and people are grabbing every opportunity to invest in a long-term plan. But what about the interest on these loans? Do you have to pay taxes and VAT on all these loans for small businesses too? HMRC doesn’t consider the capital element of loans for income tax relief purposes. If the loans are exclusively for business purposes, interest paid on loans would be a deductible revenue expense. Let’s say you’re looking forward to investing in the machinery for your small business. The machinery is counted as a revenue expense, therefore it’s allowable for income tax or corporation tax. The loan you ask for in the form of cash is deductible for tax. Especially if the business owner is to borrow the loan personally. He may opt to introduce the cash in the form of a loan. The person borrowing a specific amount should make sure that they’re not just figuring out the tax amount but also maintaining whatever amount is due to them. You must know what you aim to do with the cash you’re borrowing for a loan. If you’re aiming to buy capital, its always a good idea to go for the capital. Make sure you take care of this part. Also, note that the capital may not be qualified if Broadly, the loan will become non-qualifying if either the capital ceases to be used for a qualifying purpose or is deemed to be repaid. For example, Bob borrows £100,000, secured on his house, and lends this to his business. The loan is a qualifying loan, so he can initially claim tax relief on the interest payments. Unfortunately, the rules relating to the repayment of qualifying capital mean that each time a capital credit is made to the account it is deemed to be the repayment of a qualifying loan. Since the capital value of the loan is reduced every time a payment is made, credits totalling £50,000 per year will mean that all tax relief is lost within just two years. Re-borrowing shortly after making repayment is not a qualifying purpose so future relief is also lost. It is also worth noting that a business cannot claim a deduction for notional interest that might have been obtained if money had been invested rather than spent on (for example) repairs. Double counting is not permitted, so if interest receives relief under the qualifying loan rules, it cannot also be deducted against profits so as to give double tax relief. Restrictions under the Cash Basis Tax relief on loan interest is restricted where the ‘cash basis’ is used by a business to calculate taxable profits. Broadly, businesses using the cash basis are taxed on the basis of the cash that passes through their books, rather than being asked to undertake complex and time-consuming accruals calculations. Under the cash basis, bank and loan interest costs and financing costs, which include bank loan arrangement fees, are allowed up to an annual amount of £500. If a business has interest and finance costs of less than £500 then the split between business costs and any personal interest charges does not have to be calculated. Businesses should review annual business interest costs – if it is anticipated that these costs will be more than £500, it may be more appropriate for the business to opt out of the cash basis and obtain tax relief for all the business-related financing costs. Private Use of Assets Where a loan is used to buy an asset that is partly used for business and partly for private purposes, only the business proportion of the interest is generally tax-deductible. Commonly cars and other vehicles used in a business fall into this category. Note, however, that a deduction for finance costs is not allowable where a fixed-rate mileage deduction is claimed. Example Bob takes out a loan to buy a car and calculates that he uses it in the business 40% of the time. The interest on the loan he took out to buy the car is £500 during 2020/21. He can therefore deduct £200 (£500 x 40%) for loan interest in calculating his trading profits. Finally, interest paid on loans used to fund the business owner’s overdrawn current or capital account is generally not deductible for tax purposes.

Utilise the Trivial Benefits Exemption to Provide Tax-Free Christmas Gifts

George16/12/2020Tax Issues , Tax Saving Tips

How will people approach the Christmas office party is one question in the minds of so many of us. It’s certainly not off the menu. Employees will make sure to spread some holiday cheer among their workers. These are people who have been furloughed or working from home for 2020. Taxes fade away the happiness at your end, no matter how excited you may be. You definitely want to hear more about all the trivial benefits offered at this point and time. What tax-exempt Christmas gifts are there? How do they help you keep your costs low? If you’re a business already struggling with finances, you probably want to hear more about these exemptions. Let’s Find More About the Nature of the Exemptions When the following conditions are met, a benefit is exempt from income tax and national insurance. If your benefit costs less than £50. If the benefit is not in the form of cash or non-cash voucher. If the employee is not contractually entitled to the benefit. If the benefit is not given out as an achievement award for the services provided as part of the employment duties. Then another thing that bothers many of the employees is what happens when a benefit is given to more than one person. It’s impractical to work out the exact cost in every single receipt. Average cost really helps you out whether the benefit is trivial or no. If you’re the director of a close company, you can receive tax-free benefits to a maximum of Directors of close companies £300 in a tax year (this includes the members of your family and household too). For other recipients, there is no annual limit (but each individual trivial benefit must cost £50 or less). Let’s Dig into Seasonal gifts Use trivial benefits exemptions to give out tax-free Christmas gifts to your employees. Let’s dig into a few examples: Example 1 An employer decides to buy 100 turkeys for their employees. The total bill around £4,800. The turkeys are not priced individually. So how does one work out the cost? The average cost of the benefit would be around £48. Let’s say all other trivial benefit exemption conditions are met, the turkey will be considered as a gift that’s not in any way given to the employer as a reward of their service, etc. What’s the Gift Card Trap? Take special care of gift cards topped on several occasions. Rather than evaluating each use of the card for trivial benefits exemption, HMRC takes the total cost of benefits for the calculations for one tax year. Let’s explain it better with this example: Gift Card Trap Example You’ve given a card to your employer for the exchange of a gift at a particular store. The total cost of the card will be around £30. What happens when the card is topped up with £30 for another special occasion? The card is topped up by a further £30 on the employee’s birthday. The employee is still eligible for the trivial benefits exemption. The moment he spends more than £60, he’ll be unqualified to claim the tax exemption. Now that we’re clear on the tax exemptions on Christmas gifts, let’s make sure that we’re treating our employees right while doing our tax exemptions right.