April 2022 | DSK Partners LLP

Accountancy expenses arising out of an enquiry

Posted on April 28, 2022 by

HMRC’s internal manual offer some revealing insights as to the treatment of accountancy expenses arising out of an enquiry. As a matter of course, HMRC allows companies to claim a tax deduction for normal accountancy expenses incurred in preparing accounts or accounts information and in assisting with preparing Self-Assessment tax returns.

In respect of accountancy expenses arising out of an enquiry HMRC’s manuals state the following:

Additional accountancy expenses arising out of an enquiry into the accounts information in a particular year’s return will not be allowed where the enquiry reveals discrepancies and additional liabilities for the year of enquiry, or any earlier year, which arise as a result of:

negligent or fraudulent conduct or
for periods beginning on or after 1 April 2008 where the filing date for the return is on or after 1 April 2009, careless or deliberate behaviour.

Where, however, the enquiry results in no addition to profits, or an adjustment to the profits for the year of enquiry only and that adjustment does not arise as a result of:

negligent or fraudulent conduct or
for periods beginning on or after 1 April 2008 where the filing date for the return is on or after 1 April 2009, careless or deliberate behaviour

the additional accountancy expenses will be allowable.

This guidance was originally published in Tax Bulletin 37 (October 1998) and supersedes Statement of Practice SP16/91 which applied to pre-SA periods.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

Reclaiming VAT

Posted on April 28, 2022 by

For most fully taxable businesses, VAT can be reclaimed on goods and services used in the course and furtherance of their business activities. This means that businesses must consider where there is personal or private use of goods or services bought for the business and can usually only reclaim the business proportion of any VAT charged.

For example, VAT is recoverable on all the costs of mobile phones provided to employees where no personal use is allowed. Where businesses allow private calls to be made at no charge the VAT recovery must be apportioned on a fair and reasonable basis. Where employees pay for the private use of their phones the business is allowed to reclaim the input tax in full provided an output tax charge is accounted for in respect of private use.

You cannot reclaim VAT for:

anything that is only for private use;
goods and services your business uses to make VAT-exempt supplies;
business entertainment costs;
goods sold to you under one of the VAT second-hand margin schemes;
business assets that are transferred to you as a going concern.

There are different rules for a business that incurs expenditure on taxable and exempt business activities. These businesses are partially exempt for VAT purposes and are required to make an apportionment between their activities using a 'partial exemption method' in order to calculate how much input tax is recoverable.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

PAYE settlement agreements

Posted on April 28, 2022 by

A PAYE Settlement Agreement (PSA) allows employers to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for their employees.

The expenses or benefits included in a PSA must belong to one of the following categories;

minor – e.g., a small birthday present
irregular – e.g., one-off relocation expenses over £8,000 (these are tax-free below £8,000)
impracticable (difficult to work out the value of or divide up between individual employees) – e.g., shared cars or taxi journeys.

Employers that are required to notify HMRC of the value of items included in a PAYE settlement agreement (PSA) must do so using form PSA1. The deadline for applying for a PSA for 2021-22 is 5 July 2022.

A PSA agreement will continue until either the employer or HMRC cancels the agreement or if changes are required. Employers do not need to renew the PSA each tax year.

The deadline for an electronic payment for a PSA for the year ended 5 April 2022 – to clear into HMRC’s bank account – is 22 October 2022. Employers that pay by cheque must ensure that the payment reaches HMRC’s Accounts Office by 19 October 2022. There may be interest and / or a late payment penalty due where the payment is made late.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

Tell HMRC if your company is dormant

Posted on April 28, 2022 by

If a company has stopped trading and has no other income, then the company is usually classed as dormant for Corporation Tax purposes.
A company is usually dormant for Corporation Tax if it:

has stopped trading and has no other income, for example investments
is a new limited company that hasn’t started trading
is an unincorporated association or club owing less than £100 Corporation Tax
is a flat management company.

There is a special online form that can be used to advise HMRC if a company is dormant. The form can be found at www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax. In order to complete the form, you will need the company’s name, 10-digit Unique Taxpayer Reference (UTR) and the date the company ceased trading.

HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax and dormant according to Companies House. A company defined as 'small' by Companies House can instead file 'dormant accounts' and does not have to include an auditor’s report.

A company can stay dormant indefinitely, however there are costs associated with this option. This might usually be done if for example a company is restructuring its operations or wants to retain use of a company name, brand or trademark.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

Check which EORI number is required

Posted on April 28, 2022 by

The Economic Operators' Registration and Identification System (EORI) was setup as a European Union (EU) wide initiative that helps businesses communicate with customs officials when they are importing and exporting goods. The EORI allows businesses to provide pre-arrival/pre-departure information for goods.

Following the end of the Brexit transition period, businesses in the UK are still required to hold an EORI number for the movement of goods in the following scenarios:

between Great Britain (England, Scotland and Wales) or the Isle of Man and any other country (including the EU)
between Great Britain and Northern Ireland
between Great Britain and the Channel Islands
between Northern Ireland and countries outside the EU

Which type of EORI number you need and where you get it from depends on where you’re moving goods to and from. You may need more than one. If you move goods to or from Great Britain, you must get an EORI number that starts with GB. Most are then followed by a 12-digit number based on the businesses VAT number.

You may also need an EORI number starting with XI if you move goods to or from Northern Ireland. If a business will be making declarations or getting a customs decision in the EU, then they may need an EU EORI number from an EU country.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

Tax Diary May/June 2022

Posted on April 26, 2022 by

1 May 2022 – Due date for corporation tax due for the year ended 30 July 2021.

19 May 2022 – PAYE and NIC deductions due for month ended 5 May 2022. (If you pay your tax electronically the due date is 22 May 2022).

19 May 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2022.

19 May 2022 – CIS tax deducted for the month ended 5 May 2022 is payable by today.

31 May 2022 – Ensure all employees have been given their P60s for the 2021/22 tax year.

1 June 2022 – Due date for corporation tax due for the year ended 31 August 2021.

19 June 2022 – PAYE and NIC deductions due for month ended 5 June 2022. (If you pay your tax electronically the due date is 22 June 2022)

19 June 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2022.

19 June 2022 – CIS tax deducted for the month ended 5 June 2022 is payable by today.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

Paying staff on jury service

Posted on April 26, 2022 by

If you have staff that have been called up to serve on a jury, then you must allow them the necessary time off. You can ask them to request to delay their jury service if their absence would seriously harm your business. Your employee would need to agree to this request and would need to provide written evidence explaining why a delay has been requested. The request to delay jury service can only be made once in a 12-month period, and the employee must say on the jury summons when they will be available.

Whilst employers must provide time off to allow for jury service, there is no legal requirement to pay employees whilst they are serving.

However, the employee can continue to be paid as normal. If this is the case, the employer cannot reclaim money paid to the employee or that the business has lost during the jury service.

If an employer does not pay their employee, then they can claim a loss of earnings allowance from the court. The employer will need to prepare a certificate of loss of earnings for their employee. This form comes together with the jury service letter.

Employers can also decide to top up the ‘loss of earnings allowance’ by subtracting the court allowance from their employee’s usual take-home pay.

Source: HM Revenue & Customs Tue, 26 Apr 2022 00:00:00 +0100

Tax-free mileage expenses

Posted on April 21, 2022 by

If you use your own vehicle for business journeys, then you may be able to claim a tax-free allowance from your employer known as a Mileage Allowance Payment or MAP. The allowance is paid when employees use their own car, van, motorcycle or bike for work purposes. It is important to note that this tax-free allowance is not available for journeys to and from work but is available where employees use their own vehicles to do other business-related mileage.

Employers usually make payments based on a set rate per mile depending on the mode of transport. There are approved mileage rates published by HMRC. For cars, the approved mileage allowance payment for the first 10,000 business miles is 45p per mile and 25p per mile for every additional business mile. An equivalent payment of 20p per mile is available for bicycle travel and 24p per mile for motorcycle travel. These rates have been fixed for many years and HMRC has confirmed that they will continue to apply for the current 2022-23 tax year.

If an employee travels with business colleagues, they can claim an additional 5p per passenger per business mile for each qualifying passenger. Where an employer pays less than the published rates, the employee can make a tax relief claim for the shortfall using Mileage Allowance Relief (MAR). There is no equivalent to MAR for passenger payments, which means that if the employer pays less than 5p per mile to carry a passenger, the driver cannot claim any tax relief on the difference.

Please note that if employees are paid more than the approved mileage rates then the excess is treated as a Benefit in Kind. Conversely, if employees are paid less than the published rates, they can make a tax claim for the shortfall using Mileage Allowance Relief (MAR). There is no equivalent to MAR for passenger payments.

Source: HM Revenue & Customs Tue, 19 Apr 2022 00:00:00 +0100

Basic principles of domicile

Posted on April 21, 2022 by

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong. However, actually determining domicile status can be complex. In fact, HMRC’s guidance states that domicile cannot be defined precisely, but the concept rests on various basic principles.

Every individual must have a domicile at all times. The law ascribes a domicile to those individuals it regards as lacking capacity to choose one.
An individual cannot have more than one domicile at the same time for the same purpose.
An existing domicile is presumed to continue until it is proven that a new domicile has been acquired.

Your first domicile, known as a domicile of origin, is based on that of your parents, usually your father. Your domicile will change if you acquire a new domicile of choice. To do this, you usually have to move to another country and establish a permanent intention to remain there.

Although domicile can change, there is generally a presumption in favour of the continuation of an existing domicile. To change a domicile, lots of factors are considered. For example, the location family, property and business interests. The issues that need to be considered are one of the primary reasons that many of these complex cases are decided in court.

It is also possible for an individual to have two domiciles although this is unusual. Further, there is a concept in the UK of deemed domicile, whereby any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes.

Source: HM Revenue & Customs Tue, 19 Apr 2022 00:00:00 +0100

Asset disposals not subject to Capital Gains Tax

Posted on April 21, 2022 by

Capital Gains Tax (CGT) is a tax on the profit made from selling certain assets such as property, shares or other investments. CGT is usually charged at a flat rate of 20% and applies to most chargeable gains made by individuals.

If taxpayers only pay basic rate tax and make a small capital gain, they may only be subject to CGT at a reduced rate of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. An 8% surcharge applies to the sale of chargeable residential property (apart from a principal private residence) and carried interest (the share of profits or gains that is paid to asset managers). There is also an annual CGT exemption for individuals that is currently £12,300.

There are a number of asset disposals, which are not subject to CGT.

These include:

your car
your main residence – known as a principal private residence, but there are some important caveats to be aware of
personal possessions worth up to £6,000 each, such as jewellery, paintings or antiques
stocks and shares you hold in tax-free investment savings accounts, such as ISAs and PEPs
UK Government or 'gilt-edged' securities, for example, National Savings Certificates, Premium Bonds and loan stock issued by the Treasury
betting, lottery or pools winnings
personal injury compensation
foreign currency you bought for your own or your family's personal use outside the UK

So, if you are lucky enough to win the National Lottery this weekend, it is unlikely you will have to pay CGT!

Note that none of the above exemptions apply when the gains arise through trading or business activities as distinct from occasional sales and disposals.

Source: HM Revenue & Customs Tue, 19 Apr 2022 00:00:00 +0100

Month: April 2022

Accountancy expenses arising out of an enquiry

Reclaiming VAT

PAYE settlement agreements

Tell HMRC if your company is dormant

Check which EORI number is required

Tax Diary May/June 2022

Paying staff on jury service

Tax-free mileage expenses

Basic principles of domicile

Asset disposals not subject to Capital Gains Tax

Explore More

Newsletter SignUp