The individuals who are not able to file the self-assessment tax return by 31^st January will not receive a penalty for late online tax return if it is filed on/or before 28^th February 2021.

Individuals are still obliged to pay their bill by 31^st January. Interest will be charged from 01^st February 2021 on any outstanding liabilities.

Individuals who cannot afford to pay their tax bill on time can apply online to spread their bill over up to 12 months. self assessment tax returnsTax return for tax year 19.20 has to be filed before setting more time to pay arrangement. It takes at least 48 hours after the tax return has been filed before you can setup Time to Pay arrangement online. Interest is payable on Time to Pay instalments.

Normally, late filing penalties are applied to all returns filed after the 31 January deadline. Penalties would have cancelled if the customer had a reasonable excuse for late filing. This year HMRC is not issuing late filing penalties for a month to help individuals who are unable to meet the deadline.

For further details and help, please contact us

After the introduction of section 24 of the finance act from tax year 2017/18, many residential landlords can no longer deduct mortgage interest and other finance costs from their rental income before calculating their tax liability. Landlords are only able to claim relief for finance costs at basic tax rate of 20%. This has resulted to a huge shift in buying properties through limited companies. Many landlords are now considering whether they should transfer existing property portfolio to a limited company.

Transferring buy-to-let property to a limited company is an important decision to take. It depends upon the size of the portfolio, financial situation and future plan of the landlord. It is an expensive process as costs like CGT, SDLT, conveyancing costs, refinancing costs, legal costs will incur. Incorporation relief may be available. The decision should be taken with care as any wrong decision may incur huge tax cost. Get in touch with us for professional advice.

Pros:

• Restrictions on mortgage interest relief do not apply to a limited company.
• Corporation tax rates are lower than income tax rates
• Separate legal status
• Opportunities for tax planning- expenses and dividend
• Stamp duty: Landlords could consider the option of selling the company instead of property. Stamp duty payable on shares at 0.5% making it more attractive for the purchase
• Inheritance tax planning: Succession planning is a lot easier with limited companies

Cons:

• Capital Gains Tax and SDLT may be payable
• Few lenders will provide mortgages for limited company buy-to-let and mortgage rates are high
• Taking your dividend profits will subject to tax
• Annual Tax on Enveloped Dwellings (ATED) return if the value of the property is above £500,000.
• Compliance costs like accountancy fees to manage a company statutory obligation.

In case you having any query of want expert advice, please contact us on 020 8309 8553 or [email protected]         

The Government have announced that the new reverse charge rules for the construction industry will now take effect on 01 March 2021. These new rules, which were originally scheduled to start back in October 2019, have already been delayed twice as there was a lack of awareness of the changes in the industry. The new ‘reverse charge’ system of VAT returns in UK accounting will affect sub-contractors supplying their services to main contractors in the construction industry.

Under the new rules, supplies of standard or reduced-rated building services between VAT-registered businesses in the supply chain will not be invoiced in the normal way. Under the new reverse charge system, the sub-contractor will not show VAT on their invoice to the main contractor and will not account for output VAT.

This is intended to ensure that VAT is correctly accounted for on supplies by sub-contractors, some of whom were allegedly not paying over the VAT charged to HMRC.
– It will only apply to individuals or business registered for VAT in the UK.
– It will affect individuals or business that supply or receive specified services that are reported under the Construction Industry Scheme (CIS).

Preparing for reverse charge

• Checking whether the new rules of reverse charge affects the sales, purchases or both.

• Ensuring the accounting software/systems can deal with reverse charge

• Ensuring bookkeeper/staff who are responsible for VAT accounting have sufficient knowledge of reverse charge and how it will operate and

• Considering whether the change will have potential cash flow impact

Cash flow considerations

The implications on cash flow will be as follows:

For example, if you invoice another builder for £30,000 on 15th March 2021, you will no longer be able to charge £6,000 VAT. You would have collected £36,000 in March or April 2021 but not paid the VAT of £6000 to HMRC until 07 July 2021 (payment date of May 2021 VAT return). This has impacted your cashflow by £6000.00.

Monthly VAT returns could be an option if all your work will be subject to reverse charge. If all your sales are subject to reverse charge, it will put you in a VAT repayment position and opting for monthly VAT returns in UK will speed up the input VAT recovery.

For further details and help

Please contact us if you are likely to be affected by these changes. We can work with you to ensure you are ready for the new system when it commences. If you are a sub-contractor using the VAT flat rate scheme, it may be beneficial to leave that scheme as you may be entitled to a VAT refund on your expenses from 1 March 2021.

The individuals who are unable to pay the tax due under self-assessment on 31^st January 2021 can agree and set up a payment plan provided the following conditions are met:

• Tax due is less than £30,000
• You do not have any other payment plans or debt with HMRC
• Your tax returns are up to date
• It’s less than 60 days after the payment deadline

The government have already agreed that the amounts due under self-assessment from July 2020, any outstanding tax owed for 2019/20 and first payment on account bill for tax 2020/21 in monthly instalments, up to 12 months.

You can either set up a payment plan online by logging into your HMRC online personal tax account or call the HMRC Payment Support service.

Important things to know

Tax return has to be prepared and filed early so that tax bill owed to HMRC at 31^st January 2021 can be determined

It takes at least 48 hours after the tax return has been filed before you can set up Time to Pay arrangement online.

Interest is payable on Time to Pay instalments

If Time to Pay instalments are agreed before they become due and the tax owed under the arrangement are paid on time the late payment penalties can be avoided.

For further details and help, please contact us