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 Newsletter - October 2018


Our newsletter this month includes: the use of spreadsheets for VAT purposes, a change in the law to make invoice discounting easier for suppliers to larger companies, a discussion of what is and is not a reasonable excuse and passport issues if we fail to agree a deal with the EU next year.

Our next newsletter will be published on Thursday, 1st November 2018.

What is a reasonable excuse?
About-turn, you can use spreadsheets
Invoice discounting with larger customers
Passport issues if a “no-deal” Brexit
Tax Diary September/October 2019


INCOME TAX / What is a reasonable excuse?

 

HMRC is still required to obtain certain returns from you even if there is no income or tax to declare. Failure to submit will likely trigger late filing penalties and unfortunately, pleading ignorance of your obligations to file “nil” returns is not a reasonable excuse.

Which begs the question, what is a reasonable excuse?

HMRC had published what may, and what will not, be considered excusable. They say:

A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:
  • your partner or another close relative died shortly before the tax return or payment deadline,
  • you had an unexpected stay in hospital that prevented you from dealing with your tax affairs,
  • you had a serious or life-threatening illness,
  • your computer or software failed just before or while you were preparing your online return,
  • service issues with HM Revenue and Customs (HMRC) online services,
  • a fire, flood or theft prevented you from completing your tax return,
  • postal delays that you couldn’t have predicted,
  • delays related to a disability you have.
You must send your return or payment as soon as possible after your reasonable excuse is resolved.
What won’t count as a reasonable excuse are situations where:
  • you relied on someone else to send your return and they didn’t,
  • your cheque bounced, or payment failed because you didn’t have enough money,
  • you found the HMRC online system too difficult to use,
  • you didn’t get a reminder from HMRC,
  • you made a mistake on your tax return.
Often, failure to file is not a deliberate act. Unfortunately, appealing against what you consider to be an unreasonable stance by HMRC is not that simple, and ignoring the issue is not the way to go.
If you find yourself in dispute with HMRC on a late filing challenge, we can help. Please call us so we can discuss your options.

VALUE ADDED TAX / About-turn, you can use spreadsheets

 The gradual restriction of tax relief for buy-to-let mortgage interest has received much publicity since the process commenced 5 April 2017. From that date, tax relief is converted from a straight forward deduction against business profits into a basic rate tax deduction.

If you continue to be a basic rate taxpayer as these changes roll-out, you will see no increase in your income tax liabilities. You may see an increase if you are, or become, a higher rate or additional rate income tax payer.
The changes have and will occur as follows:
  • 2017-18, relief for 75% of interest costs was given by deduction from rents, the remaining 25% given as a basic rate tax deduction.
  • 2018-19, relief will be given on 50% by deduction from rents and 50% as a basic rate tax deduction.
  • 2019-20, relief will be given on 25% by deduction from rents and 75% as a basic rate tax deduction.
  • 2020-21, and from then on, relief will be given on 100% of interest payments as a basic rate tax deduction.
Buy-to-let landlords need to quantify how these changes will impact their income tax liabilities in the coming years and we can help.

A final planning note, it is possible to borrow money by extending the mortgage on your own home. This makes sense from a cost saving point of view as the arrangement costs of the re-mortgage will likely be less as will the rate of interest charged. However, be sure to take the following into account:
  • You will be allowed tax relief on interest on loans up to the value of the property when it was first let, and
  • The mortgage will likely be secured against your home and the funds to repay the mortgage (or part of it) will come from letting income. This means that if the rental income dries up, and you are unable to sell the rental property to clear the additional loan, you may be faced with selling your home.
Planning is a must-do for prospective, and existing, buy-to-let landlords. Please call if you would like to consider your options. There are no short-cuts. Creating a well rounded business plan that considers the tax changes highlighted above are a prerequisite to achieving success in your property business.

GENERAL / Invoice discounting with larger customers

Suppliers who sell goods and services to larger concerns often find that the terms of their supply, limits or bans the process of factoring the debts to release funds into cash flow.

Cynically, this could be seen as a method these larger customers have used to control options available to their smaller suppliers.

Unfortunately, suppliers who sell predominately to major buyers find themselves in a cleft stick: they generally have to wait for longer periods to be paid and as a result are constantly short of cash.

Invoice factoring or discounting allows say 80% of a sales invoice value to be received when the invoice is issued and accepted by the customer; a specialist finance company or bank steps in to provide the discounting service.

The good news is that there is to be a change in the law to ban these restrictive practices and allow smaller companies to gain access to the funds locked up in their trade debtors.

Under the new proposed laws, any such contractual restrictions entered into after 31 December 2018, with certain exceptions, would have no effect and could be disregarded by small businesses and finance providers, which will help stop larger businesses from abusing their market position.


GENERAL / Passport issues if a “no-deal” Brexit
Guidance on the use of a British passport to travel abroad after 29 March 2019, if there is a “no-deal” Brexit, was issued by government last month. The pertinent facts are reproduced below:

After 29 March 2019, if you’re a British passport holder (including passports issued by the Crown Dependencies and Gibraltar), you’ll be considered a third country national and under the EU Schengen Border Code you will need to comply with different rules to enter and travel around the Schengen area. Third-country nationals are citizens of countries (like Australia, Canada and the USA) which do not belong to the EU or the European Economic Area.

According to the Schengen Border Code, third country passports must:
  • have been issued within the last 10 years on the date of arrival in a Schengen country, and
  • have at least 3 months’ validity remaining on the date of intended departure from the last country visited in the Schengen area. Because third country nationals can remain in the Schengen area for 90 days (approximately 3 months), the actual check carried out could be that the passport has at least 6 months validity remaining on the date of arrival.
If you plan to travel to the Schengen area after 29 March 2019, to avoid any possibility of your adult British passport not complying with the Schengen Border Code we suggest that you check the issue date and make sure your passport is no older than 9 years and 6 months on the day of travel.

For example, if you’re planning to travel to the Schengen area on 30 March 2019, your passport should have an issue date on or after 1 October 2009.

If you are a parent or guardian:
  • For 5-year child passports issued to under-16s, check the expiry date and make sure there will be at least 6 months validity remaining on the date of travel.
  • For example, a child planning to travel to the Schengen area on 30 March 2019 should have a passport with an expiry date on or after 1 October 2019.
  • If a child’s passport does not meet these criteria, they may be denied entry to any of the Schengen area countries, and you should renew their passport before travel.
  • For countries that are in the EU but not in the Schengen area, you’ll need to check the entry requirements for the country you’re travelling to before you travel.
The Schengen Area is an area comprising twenty-six European states that have officially abolished passport and all other types of border control at their mutual borders. The area mostly functions as a single jurisdiction for international travel purposes, with a common visa policy. The area is named after the Schengen Agreement. States in the Schengen Area have strengthened border controls with non-Schengen countries.



TAX DIARY - October / November 2018
1 October 2018 - Due date for Corporation Tax due for the year ended 31 December 2017.

19 October 2018 - PAYE and NIC deductions due for month ended 5 October 2018. (If you pay your tax electronically the due date is 22 October 2018.)

19 October 2018 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2018.

19 October 2018 - CIS tax deducted for the month ended 5 October 2018 is payable by today.

31 October 2018 – Latest date you can file a paper version of your 2018 self-assessment tax return.

1 November 2018 - Due date for Corporation Tax due for the year ended 31 January 2018.

19 November 2018 - PAYE and NIC deductions due for month ended 5 November 2018. (If you pay your tax electronically the due date is 22 November 2018.)

19 November 2018 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2018.

19 November 2018 - CIS tax deducted for the month ended 5 November 2018 is payable by today.

Howdenwhite LLP
Units 16-18, The Boscombe Centre, Mills Way, Amesbury, Salisbury, Wiltshire, SP4 7SD
Tel: 01980 623998  Fax: 01980 624584.

Howdenwhite LLP is a limited liability partnership, registered for VAT under reference 813  1355 63.
The Practice designated member of the firm is a member of the Association of Chartered Certified Accountants (ACCA). This body has its headquarters in the UK and its rules of professional conduct can be obtained from its web site.

DISCLAIMER - PLEASE NOTE: The ideas shared with you in this newsletter are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.