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.

HMRC has about-faced regarding the ban on using spreadsheets to work out your VAT return data from 1 April 2019, when the new requirement to file VAT returns using Making Tax Digital (MTD) format is introduced.
Bowing to pressure from industry, the accountancy profession and Parliamentary committees, HMRC has now agreed that you can use spreadsheets for VAT purposes; unfortunately, there is a large “but”.
The rationale behind the development of MTD is that HMRC wants your returns of data through its MTD portal to be linked directly to the source material, the accounting entries that make up the returns. They do not want you to cut and paste data from your accounting records (including spreadsheets) into HMRC’s digital accounts.
Accordingly, they have agreed to the use of spreadsheets as long as the data is transferred using bridging software that is compatible with its MTD systems.
Software developers are now faced with creating this bridging solution and we will be reviewing solutions to settle on the best-fit option for clients.

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.

Tax Diary August/September 2018

1 September 2018 – Due date for Corporation Tax due for the year ended 30 November 2017.
19 September 2018 – PAYE and NIC deductions due for month ended 5 September 2018. (If you pay your tax electronically the due date is 22 September 2018)
19 September 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2018.
19 September 2018 – CIS tax deducted for the month ended 5 September 2018 is payable by today.
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.

Up to £20 million is being made available to increase productivity and sustainability in crop and ruminant agriculture systems through the Industrial Strategy Challenge Fund.
Innovate UK are looking for projects that improve productivity and sustainability in crop and ruminant agriculture.
There is £20 million to be shared across 2 types of project:
• productivity solutions, which develop a single intervention within a supply chain or production system,
• supply chain solutions, which develop multiple interventions across at least 3 parts of the supply chain, for example: beef producers, beef processors and supermarket retailers; plant breeders, arable producers and food manufacturers.
Projects should focus on one of two themes, to:
• drive productivity and improve environmental outcomes in crop and ruminant production systems,
• develop new, highly efficient, high-value production systems that maximise productivity and improve environmental performance.
This could include:
• combining digital technologies and engineering solutions with biological, environment or social science to improve productivity,
• developing technologies and systems that connect farms and supply chains,
• transferring an innovative technology from another sector into agriculture.
More details on the GOV.uk website at https://www.gov.uk/government/news/efficient-and-sustainable-agriculture-apply-for-funding

A government think-tank, the Office for Tax Simplification (OTS), was briefed to consider a non-tax issue, a restricted form of limited liability for sole traders.
At present, a sole trader’s personal assets (including their home) are vulnerable to a claim by business creditors if the sole trader business becomes insolvent.
The principle behind this Sole Enterprise with Protected Assets (SEPA) scheme is that it will allow an individual to continue to trade as a sole trader whilst offering protection for their primary residence against claims arising from the business. The primary residence will not be protected from personal claims nor will any other asset be protected.
In essence, SEPA offers a limited, limited liability vehicle for sole traders.
In conclusion the OTS report says:
The case for SEPA’s introduction is not by any means cast iron. But our work indicates that SEPA has the potential to be a useful simplification for those that would otherwise consider incorporation. Furthermore, it could provide a boost to enterprise.
Accordingly, we recommend that it should be developed into a formal proposal. While doing so, one would have to address some of the issues that we have raised in this report as well as fully assessing any impact on the creditor and debt collection markets.
Which in plain speaking means SPEA is a good idea, but don’t hold your breath. We will have to wait and see if the required changes in legislation appear at some future date

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.

If a business owner makes a loss as a self-employed person, they can set off the losses against any other earnings of the same year. In effect, the business losses are moved side-ways against other earnings.
However, in order for loss relief to be allowed, the loss making business must be able to demonstrate that it was managed on a commercial basis and with a view to making profits.
Many cases have come to the courts when HMRC has not been satisfied that a business venture does demonstrate commerciality, and accordingly, losses have not been allowed as a set off against other earnings.
In a recent case, Beacon v HMRC, Beacon purchased a property in Tuscany. In the first two years of active trading the taxpayer made losses amounting to £218,967 and £139,936. These losses were claimed in Beacon’s tax return against their other earnings in the relevant years.
HMRC disputed the loss relief claims on the basis that the letting business was not run on a commercial basis and the matter was taken to the First Tier Tribunal.
The court disagreed with HMRC. They pointed to a number of factors that suggested a commercial basis, including:
• The property refurbishment had been financed by bank loans and these were backed up by detailed business plans and projections.
• The fact that the business was blown off-course was due in part to the financial crisis of 2008.
The court were also critical of HMRC’s evidence on several other fronts that suggested a lack of commerciality.
The loss relief claims were therefore allowed as claimed

 

1 July 2018 – Due date for corporation tax due for the year ended 30 September 2017.

6 July 2018 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2018 – Pay Class 1A NICs (by the 22 July 2018 if paid electronically).

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

19 July 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2018.

19 July 2018 – CIS tax deducted for the month ended 5 July 2018 is payable by today.

31 July 2018 – Deadline for payment of second instalment self-assessment for 2017-18.

1 August 2018 – Due date for corporation tax due for the year ended 31 October 2017.

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

19 August 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2018.

19 August 2018 – CIS tax deducted for the month ended 5 August 2018 is payable by today.

 

A reminder that from April 2019, HMRC’s much vaunted Making Tax Digital (MTD) scheme will apply to certain businesses.

The April 2019 launch will only apply to VAT registered traders. More specifically, MTD will apply to businesses who have a turnover above the VAT threshold – the smallest businesses will not be required to use the system, although they can choose to do so voluntarily.

Live pilot studies are already being carried out and the first businesses have started keeping digital records and providing updates to HMRC to test and develop the MTD service for income tax and NICs. HMRC is keen to expand this pilot.

HMRC announced in 2017:

We will start to pilot Making Tax Digital for VAT starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system. No business will be mandated before 2019.

From April 2019, businesses above the VAT threshold will be mandated to keep their records digitally and provide quarterly updates to HMRC for their VAT.

We will keep an eye on the results of the pilot studies and monitor the progress of accounting software providers to create the necessary links with HMRC’s digital systems.

If you are registered for VAT, have annual turnover above the current £85,000 limit, and have not yet considered how you are going to cope with MTD, please call so that we can help you research your options.