1 February 2022 – Due date for Corporation Tax payable for the year ended 30 April 2021.

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

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

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

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Self-Assessment tax for 2020-21 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

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

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

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

HMRC has confirmed that four million out of twelve point two million taxpayers have yet to file their 2020-21 self-assessment tax returns. Which means that an equivalent proportion of taxes due 31 January 2022 will remain unpaid; at least for the foreseeable future.

We have reported on our blog earlier in January 2022, that HMRC will allow a further month, until 28 February 2022, for unfiled 2020-21 returns to be filed without incurring a late filing penalty.

And further, anyone who cannot pay their tax liabilities by the 31 January 2022 deadline will not receive a late payment penalty if they pay their tax in full, or set up a time to pay arrangement, by 1 April 2022.

Which begs the question, why bother filing a return earlier in the tax cycle?

Two reasons for filing – or preparing a return for filing – earlier in the tax cycle, are:

• Preparing a 2020-21 return quantifies any income tax or NIC that will need to be paid on 31 January 2022. In a nut-shell, taxpayers who prepare their returns shortly after the end of the relevant tax year, will have more time to save funds to clear tax due the following January. In theory you could prepare your 2020-21 return during April 2021 which would give you nine months to save for any tax due.
• The 2020-21 return will reveal any balance of taxes due for 2020-21 and also set the amount of any payments on account for 2021-22 (these payments on account are due 31 January and 31 July 2022). If you consider that taxable earnings in 2021-22 are going to be lower than those during 2020-21, you can elect to reduce payments on account for the later year.

The four million taxpayers, who we are advised are still to file for 2020-21, may be in for a shock when their liabilities are finally revealed in the coming month. Although HMRC have been generous in forgoing late filing and late payment penalties for restricted periods, interest will still be charged on tax paid after due dates.

We have all suffered from the impact of the pandemic to some degree, either personally or in a business capacity in the last two years, but the old maxim, be prepared, still holds water; and we would advise all taxpayers to adopt the sooner rather than later approach when they come to consider tackling their self-assessment tax returns for 2021-22.

In between the other political distractions of the last few weeks, England has returned to the COVID measures set out in Plan A. This means:

• The government is no longer asking people to work from home if they can. People should now talk to their employers to agree arrangements to return to the office.
• Face coverings are no longer advised for staff and pupils in secondary school and college classrooms.
• Face coverings are no longer advised for staff and pupils in communal areas of secondary schools, nor for staff in communal areas of primaries.
• There is no longer a legal requirement to wear a face covering. The government suggests that you continue to wear a face covering in crowded and enclosed spaces where you may come into contact with other people you do not normally meet.
• Venues and events are no longer required by law to check visitors’ NHS COVID Pass. The NHS COVID Pass can still be used on a voluntary basis.

High Street traders and businesses in the hospitality and entertainment sectors will welcome these changes as they are desperate to return to pre-COVID trading conditions.

Regional variations

Wales

From 28th January changes are:

• nightclubs will be able to re-open
• COVID Pass needed for large indoor events, nightclubs, cinemas, theatres, and concert halls
• working from home remains important but moves from law to guidance
• in hospitality, no restrictions on meeting people and no requirement for table service or 2 metre physical distancing
• face coverings still required on public transport and in most indoor public places

Scotland

Current published regulations are:

• get the vaccine or the vaccine booster,
• if you don’t have symptoms take regular lateral flow tests – especially before mixing with other people and visiting hospitals and care homes,
• if mixing with others keep gatherings small – keep your distance from people not in your group,
• if you have symptoms – self isolate and book a PCR test,
• wash your hands regularly, and cover your nose and mouth if coughing or sneezing,
• open windows when meeting indoors,
• a mixture of home and office working is allowed,
• use the apps: COVID status (vaccine passport), Protect Scotland and Check-in Scotland.

Northern Ireland

The current range of COVID-19 regulations for Northern Ireland are best reviewed on the https://nidirect.gov.uk website.

Paying someone to act as your nanny, housekeeper or gardener may result in you being considered an employer. In turn, this may involve you needing to meet statutory employment rights and deducting any tax or National Insurance contributions from their wages.

These obligations will not apply if:

• They are self-employed, or
• Paid through an agency.

Au pairs

Au pairs usually live with the family they work for and are unlikely to be classed as workers or employees. They are not entitled to the National Minimum Wage or paid holidays.

They’re treated as a member of the family they live with and get ‘pocket money’ instead – usually at least £90 a week.

Carers and personal assistants

You are classed as an employer if you pay a carer or personal assistant directly, even if you get money from your local council or the NHS to pay for them.

There are organisations that can help with your employer responsibilities, such as recruiting and paying your carer.

Employee rights

Anyone you employ must:

• have an employment contract
• be given payslips
• not work more than the maximum hours allowed per week
• be paid at least the National Minimum Wage

If they meet the eligibility requirements, they are also entitled to:

• Statutory Maternity Pay
• Statutory Sick Pay
• paid holiday
• redundancy pay
• a workplace pension

Tax issues

As an “employer” you are required to comply with the following tax obligations:

• check if the person can work in the UK
• have employers’ liability insurance
• register as an employer
• set up and run payroll, or pay someone else to do it on your behalf (even if you pay the employee in cash)
• pay statutory benefits, for example maternity pay and sick pay
• deduct and pay the employee’s Income Tax and National Insurance contributions

If you employ a nanny and you are eligible for Tax-Free Childcare, you can use your childcare account to pay their Income Tax and National Insurance contributions.

HMRC make it clear that you cannot ask your employee to become self-employed to avoid these obligations as an employer.

A reminder that business in the hospitality, leisure and accommodation sectors in England may be due support funding from their local authority.

Recently, local authorities were reminded by government that they needed to process grants quickly. Extracts from a letter sent to authorities is reproduced below:

“As you will know, the spread of the Omicron variant is creating further challenges for businesses and workers. The virus has had a particular impact on the hospitality, leisure, and accommodation sectors, with declining footfalls and a growing number of cancellations.

“This is why we have announced a £1 billion support package, including hundreds of millions of pounds in further grant funding. Eligible businesses in the hospitality, leisure and accommodation sectors will be able to apply for one-off grants of up to £6,000 per premises, depending on rateable value:

• Businesses with a rateable value of £51,000 or above: £6,000,
• Businesses with a rateable value between £15,000 and £51,000: £4,000,
• Businesses with a rateable value of £15,000 or below: £2,667.

“The Government has chosen to provide generous grants of the same value as those given to hospitality businesses when they were fully closed last year – despite businesses still being able to trade. In total, we are providing £635 million directly to businesses across the UK, with councils being responsible for processing applications and distributing the funds.

“On top of this, we are also providing over £100 million in top-up funding for the Additional Restrictions Grant (ARG), introduced last year to help businesses. This is intended to help other businesses impacted by Omicron, such as those that supply the hospitality and leisure sectors.

“Local authorities will have discretion to allocate this funding to businesses most in need. I have personally written to those local authorities who have more than 5 per cent of previous funds left over, instructing them to distribute the money to those that need it.”

The message is clear enough, and if you are a business in one of the affected sectors or you are a supplier to those sectors and have been affected by recent disruption, call your local authority now to ensure you receive any grants to which you may be entitled.

We are often asked why a self-employed person is paying so much tax when their drawings from their self-employed business are minimal.

The reason for this is that sole traders and partners (individuals) pay tax on the profits they earn not on the amount of cash they withdraw from their business.

For example, consider Sue, a self-employed electrician, who made a profit of £15,000 in her first year to 31 March 2021. As she also had a part-time employed job in the same year, that covered most of her living expenses, her drawing from her own business amounted to just £5,000.

Sue was expecting to pay £1,000 in tax; 20% of her drawings. She was shocked to receive a statement from HMRC that showed she owed £3,000 (£15,000 x 20%).

During a subsequent conversation with a tax adviser, she consulted to sort out this apparently excessive tax bill, she added that on 15 April 2021 she had invested £10,000 and bought a second-hand van for her business.

Imagine her further dismay when the tax adviser told her that if she had purchased the van a month earlier the £10,000 could have been deducted from her £15,000 profits as a capital allowance (Vans qualify for a 100% deduction under the Annual Investment Allowance rules).

Ironically, this would have reduced her tax bill for 2020-21 to £1,000.

We have sketched out this example to illustrate the value of tax advice. If you are new to business, it is important to consider how your future tax bills will be calculated and when these taxes are payable.

And, as Sue’s experience shows, if she had consulted with an adviser before her 31 March year end and requested advice on the best time to purchase her van, she would have saved £2,000 in tax: an effective 20% discount on her van purchase.

If you are considering a new business venture or have managed your own tax affairs to this point, please call so that we can help you explore any tax planning options that you may have missed.

The following definitions set out how property income is calculated and taxed:

• Rental income – includes rents, amounts received to cover use of furniture, cleaning of communal areas, hot water, heating and repairs to property.
• Allowable expenses – any expense that you have laid out “wholly and exclusively” for the purposes of renting out a property can be deducted when working out net property income subject to tax. Costs include:
  • general maintenance and repairs to the property, but not improvements (such as replacing a laminate kitchen worktop with a granite worktop)
  • water rates, council tax, gas and electricity
  • insurance, such as landlords’ policies for buildings, contents and public liability
  • costs of services, including the wages of gardeners and cleaners
  • letting agent fees and management fees
  • legal fees for lets of a year or less, or for renewing a lease for less than 50 years
  • accountant’s fees
  • rents (if you’re sub-letting), ground rents and service charges
  • direct costs such as phone calls, stationery and advertising for new tenants
  • vehicle running costs (only the proportion used for your rental business) including mileage rate deductions for business motoring costs

• Expenses you cannot claim – include:
  • private phone calls
  • personal expenses
  • repayment of loan capital – you can only claim for interest on the loan but see following section.
• Interest paid on mortgages and loans – individuals that run a property business can only claim a 20% tax credit. The gross interest paid is no longer deductible as an expense. This means that tax relief is restricted to 20%. This does not apply if you have incorporated your property business.
• Incorporating your property business – if you run your property business inside a limited company structure, any profits and gains will be taxed at corporation tax rates, currently 19%. As indicated above, companies can deduct mortgage and loan interest as an expense.

Unsurprisingly, there are grey areas that you will need to consider. Before embarking on the acquisition or disposal of a rental property, perhaps for the first time, it is well worth investing in a planning session to consider the most tax efficient way to organise matters. We can help. Please call to discuss your options.

HMRC is responding to the pressures we all feel as the new COVID-19 variant, Omicron, makes normal life difficult once more.

The offer by HMRC is generous. Basically, they have announced that taxpayers who have still not filed their self-assessment tax returns for 2020-21, will be granted an extra month to file online without triggering a penalty, and an easing of late payment penalties if unable to meet tax payments falling due on 31 January 2022.

In a recent press release issued 6 January 2022, they said:

“HMRC is waiving late filing and late payment penalties for Self-Assessment taxpayers for one month – giving them extra time, if they need it, to complete their 2020 to 2021 tax return and pay any tax due.

“HMRC is encouraging taxpayers to file and pay on time if they can, as the department reveals that, of the 12.2 million taxpayers who need to submit their tax return by 31 January 2022, almost 6.5 million have already done so.”

This is a staggering admission by HMRC. Almost 50% of self-assessment returns due to be filed for 2020-21 – by 31 January 2022 – are still not filed.

In an admission of the pressures faced by tax practitioners and their clients, they go on to say:

“HMRC recognises the pressure faced this year by Self-Assessment taxpayers and their agents. COVID-19 is affecting the capacity of some agents and taxpayers to meet their obligations in time for the 31 January deadline. The penalty waivers give taxpayers who need it more time to complete and file their return online and pay the tax due without worrying about receiving a penalty.

“The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that:

• anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February 2022.
• anyone who cannot pay their Self-Assessment tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April 2022.

“Interest will be payable from 1 February, as usual, so it is still better to pay on time if possible.”

Businesses are reminded to take steps to prepare for Making Tax Digital for Value Added Tax (VAT) before it becomes mandatory for all VAT-registered businesses from 1 April this year.

Making Tax Digital is designed to help businesses eliminate common errors and save time managing their tax affairs.

Making Tax Digital for VAT is part of the overall digitalisation of UK Tax. In a recent independent study of over 2,000 businesses, 69% reported experiencing at least one benefit from Making Tax Digital. These included preparing and submitting returns faster and increased confidence that they were getting tax right. Sixty-seven percent of businesses also felt Making Tax Digital had reduced the potential for mistakes in at least one aspect of the record keeping, preparing and submitting returns process.

As of December 2021, nearly 1.6 million taxpayers had joined Making Tax Digital for VAT with more than 11 million returns successfully submitted. Around a third of VAT-registered businesses with taxable turnover below £85,000 have voluntarily signed up to Making Tax Digital for VAT ahead of April 2022, and thousands more are signing up each week.

Since April 2019, businesses with a taxable turnover above £85,000 have already been required to follow Making Tax Digital, keeping digital records and filing VAT returns using Making Tax Digital compatible software.

In July 2020, it was announced that all VAT-registered businesses must file digitally through Making Tax Digital from April 2022, regardless of turnover. HMRC is now reminding businesses below the £85,000 threshold of the steps which they need to take to be ready.

HMRC have issued the following guidance to taxpayers who may have received COVID-19 grants during the 2020-21 tax year.

“If you claimed Self-Employment Income Support Scheme (SEISS) or received Coronavirus Job Retention Scheme grants, you’ll need to include details of all the taxable coronavirus support scheme payments you received during the 2020 to 2021 tax year.

“If you are employed and received Coronavirus Job Retention Scheme (furlough) payments during the 2020-21 tax year, you will need to enter your earnings and Income Tax as stated on your P60. Your P60 will include any furlough payments you received up to 5 April 2021, so you do not need to include furlough payments on your tax return.

“If you are self-employed or in a partnership and received any coronavirus financial support, you will need to declare it on your Self-Assessment tax return.”

SEISS grants you may have received during 2020-21 include:

• SEISS 1: 13 May 2020 to 13 July 2020
• SEISS 2: 17 August 2020 to 19 October 2020
• SEISS 3: 29 November 2020 to 29 January 2021

Grants received after 5 April 2021 will need to be declared as taxable income in the current tax year, 2021-22.

Apart from the furlough and SEISS grants you will also need to declare grants received from the following support schemes:

You need to report grants and payments from COVID-19 support schemes. These include:

• test and trace or self-isolation payments in England, Scotland and Wales
• Eat Out to Help Out
• Coronavirus Statutory Sick Pay Rebate
• Coronavirus Business Support Grants

Coronavirus Business Support Grants

These are grants or payments made by one of the following:

• local authorities
• devolved administrations
• any other public authority

They are also known as local authority grants or business rate grants and in all cases are taxable.

Examples of these grants in England include:

• Small Business Grant Fund
• Retail, Hospitality and Leisure Grant Fund
• Local Authority Discretionary Grant Fund
• Fisheries Response Fund

Examples of these grants in Wales include:

• Welsh Government Business Grants (Grants 1 & 2)
• Economic Resilience Fund

Examples of these grants in Scotland include:

• Business Support Fund
• Newly Self-Employed Hardship Fund
• Creative, Tourism & Hospitality Enterprises Hardship Fund
• Pivotal Enterprise Resilience Fund
• Aquaculture Hardship Fund
• Sea Fisheries Hardship Fund

Examples of these grants in Northern Ireland include:

• Small Business Support Grant Scheme
• Retail, Hospitality, Tourism and Leisure Grant
• other business-related coronavirus emergency and hardship funds

If you need more advice regarding which grants need to be declared as income, please call. We can help.