If you use standard VAT accounting – pay VAT on sales when invoiced and claim back VAT on purchases when invoiced – you may have availed yourself of the six months claim for bad debt relief on unpaid invoices. This would have allowed you to claw back VAT paid to HMRC on invoices that are more than six months old and still unpaid.
This is a welcome relief, as it returns to your bank account VAT you have paid to HMRC, but never received from your customer.
Unfortunately, this is not the whole story.
As indicated above, you will also need to take a careful look, prior to completing your periodic VAT return, to see if there are old invoices in dispute on your purchase ledger – invoices that you receive from suppliers. If they are more than six months old you will have to pay any VAT input tax you have previously claimed back to HMRC.
Accordingly, vetting your sales and purchases in this way should be part of the process you undertake before submitting a VAT return.
An alternative approach to VAT accounting may be available to you. If your turnover, before VAT, is £1.35 million or less, you could change to the VAT cash accounting scheme. Using this scheme, you will only pay output VAT, or claim back input tax, when payment is received from a customer or paid to a supplier. This generally works best if your business is consistently owed more from its customers than it owes to suppliers.
Please call if you would like more information about the VAT special schemes, or help more generally with completing your VAT returns.

If you are a client, and registered to submit a Self Assessment tax return, we can provide you with a statement that you can use as evidence of earnings for mortgage purposes.
If you are not a client, there are many ways you can obtain this data direct from employers and other sources. For example, you could use the following as evidence of earnings:
• A P60 from your employer, you should receive this on or before the 1 May following the end of each tax year.
• Alternatively, you can contact HMRC and request a tax year overview. This will take approximately two weeks to arrive so you should possibly request this information before you apply for your mortgage or loan.
If you submit your own tax return using HMRC’s online portal, you should be able to download and print the evidence you need.
The evidence of earning that you should request from HMRC is called an SA302. You should be able to obtain copies for up to four years in this format.

If your employment requires that you obtain and maintain membership of a professional organisation, you can make a claim to set the cost against your taxable earnings for income tax purposes. As you would expect there are a few hoops you will need to jump through to claim this relief. They are:
• You must have the professional membership to do your job or if membership helps you with your work.
• You can only claim back subscriptions to organisations approved by HMRC.
• You cannot claim back fees for life membership subscriptions.
• You cannot claim subscriptions you have not paid yourself, for example, your employer has paid them for you.
To see the full list of professional organisations and other learned societies that are approved by the tax office visit this page on the GOV.UK website:
https://www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3/approved-professional-organisations-and-learned-societies

HMRC has published a list of popular misconceptions that taxpayers have about letting property. We have listed below a summary of situations where you will need to declare rental earnings to HMRC:
• If you inherit property and let it out.
• If you buy a property as an investment and let it out.
• Divorcing partners, who decide to let out their jointly owned property, will need to declare their share of any rental profits on their individual tax returns.
• You may move to a new house due to employment considerations and let out the house you are moving from.
• You may move into a care home and let out your present home to help pay for the fees.
• You may buy a property for your son or daughter to use while at university, and they may sub-let to friends on an informal basis and charge a nominal rent, which you use to defray costs. Any surplus monies received from this sort of arrangement will still need to be declared.
• Moving to tied accommodation can create problems if you keep your existing home and let it out. If the rents you receive cover your mortgage repayments (capital and interest) you may consider that you have not made a profit, but the capital part of your mortgage repayments are not an allowable deduction for income tax purposes.
Also, watch out for the effects of the changes to the rules for repairs and finance costs (interest) that we have covered in recent issues.
If you are concerned that you may be required to declare your rental income, and you have not yet done so, we can help. There is a tried and tested process to bring matters up-to-date. Please call for more information.

1 August 2017 – Due date for Corporation Tax due for the year ended 31 October 2016.

19 August 2017 – PAYE and NIC deductions due for month ended 5 August 2017. (If you pay your tax electronically the due date is 22 August 2017)

19 August 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2017.

19 August 2017 – CIS tax deducted for the month ended 5 August 2017 is payable by today.

1 September 2017 – Due date for Corporation Tax due for the year ended 30 November 2016.

19 September 2017 – PAYE and NIC deductions due for month ended 5 September 2017. (If you pay your tax electronically the due date is 22 September 2017)

19 September 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2017.

19 September 2017 – CIS tax deducted for the month ended 5 September 2017 is payable by today.

Many director shareholders take a minimum salary and any balance of remuneration as dividends. This tends to reduce NIC, and, in some cases, Income Tax.

The planning strategy is to pay a salary at a level that qualifies the director for State benefits, including the State Pension, but does not involve payment of any NIC.

For 2017/18 the NIC rate is set at 0% for annual earnings in the range of £5,876 to £8,164 inclusive.  Earnings in this band range qualify for NIC credit for State benefit purposes. At £112.99 per week (£5,875 p.a.) no NIC credit is obtained for State benefit purposes. At £157.01 plus per week (£8,165 p.a.) NICs start to be paid at the rate of 12%.

Directors, who are first appointed during a tax year, are only entitled to a pro rata annual earnings band which depends on the actual date appointed. Care needs to be taken in these circumstances not to incur an unexpected liability to pay NIC.

Directors resigning during the year still have the full annual earnings band quoted above, so care is needed to ensure that earnings for the whole tax year are within the range of £5,876 to £8,164.

Directors considering their planning options for the first time are advised to take professional advice as there are a number of considerations to take into account when setting the most tax/NI efficient salary. We, of course, would be delighted to help.

Making Tax Digital (MTD) is the government’s latest attempt to fully digitise the process of collecting data from taxpayers so they can speed up the process of calculating how much tax you owe.

Until recently, we were facing radical changes to the tax system to accommodate this objective. Businesses (including landlords) were to be required to upload summarised accounts data from their accounts software on a quarterly basis. This information, plus details of other income was to be collected in a personal tax account which would automatically calculate future tax liabilities.

The process was timed to commence April 2018 and be completed April 2020.

The accountancy profession was united in opposition to the undue haste of the implementation process and the obligation that all businesses with turnover more than £10,000 would be required to invest in acceptable accounts software and make quarterly uploads.

It would seem the government has listened. Last week they announced:

Under the new timetable:

• only businesses with a turnover above the VAT threshold (currently £85,000) will have to keep digital records and only for VAT purposes
• they will only need to do so from 2019
• businesses will not be asked to keep digital records, or to update HMRC quarterly, for other taxes until at least 2020

Making Tax Digital will be available on a voluntary basis for the smallest businesses, and for other taxes.

This means that businesses and landlords with a turnover below the VAT threshold will be able to choose when to move to the new digital system.

As VAT already requires quarterly returns, no business will need to provide information to HMRC more regularly during this initial phase than they do now.

It seems clear from this announcement that MTD is proceeding, but at a much more sensible pace.

VAT registered traders will need to have MTD compatible software in place by April 2019, and all businesses including property businesses with turnover above the VAT registration threshold (currently £85,000), will need to be ready to make the quarterly uploads of accounts data by April 2020.

Businesses with turnover below the VAT threshold will be under no obligation to use the MTD process, but can join in on a voluntary basis.

We will continue to work with clients to ensure they are ready to meet their obligations. It is gratifying to see the pace of change in this area slow down. This will give affected business owners and their advisors more time to implement the changes required and make more considered decisions about the software they will use to implement their links to HMRC’s MTD systems.

There is a government department, the Office for Tax Simplification (OTS), that has been charged with investigating ways that the UK’s tax rules can be changed to make them easier to understand and easier to use.

The OTS has recently issued a new report on the proposal to simplify the Corporation Tax assessment process for companies, particularly smaller concerns.

Their report sets out some significant steps towards creating what they describe as “a 21st-century Corporation Tax system in the UK”. The aim is to make the calculation of Corporation Tax simpler, with fewer changes and more time to plan. The report also recognises the importance of reducing the burden on small businesses, and “keeping this Country an attractive destination for trade and investment in a post Brexit world”.

The report takes an in-depth and innovative look across four broad themes:

• simpler tax for smaller companies;
• aligning the tax rules more closely with accounting rules where appropriate;
• simplifying tax relief for capital investment;
• a range of further issues affecting the largest companies.

It also highlights the links with HMRC’s work on Making Tax Digital, which offers a real impetus to move towards a simpler system by use of technology.

The OTS recommendations are not legislative changes, they are suggestions. These will now have to be taken up by the Treasury and HMRC to consider changes to tax law in future Budgets.

It is possible to claim for the cost of repairing or replacing small tools you need to do your job as an employee (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots).

If you need to buy other equipment to use in your employment, you can claim capital allowances instead. A capital allowance is an agreed percentage of the cost of the equipment, that can be deducted from your taxable income. In most cases, this sort of claim should enable you to write off the full cost of any qualifying expenditure made.

What you can claim.

You can claim for the amount you have spent, or a ‘flat rate deduction’.

If you are claiming for the amount you have spent you will need to keep a receipt.

Flat rate deductions are fixed amounts that HM Revenue and Customs has agreed are typically spent each year by employees in different occupations. They range from £60 to £140 depending on listed occupations.

If your occupation isn’t listed, you may still be able to claim a standard annual amount of £60 in tax relief.

You don’t need to keep records of what you’ve paid for if you claim a flat rate deduction.

1 July 2017 – Due date for Corporation Tax due for the year ended 30 September 2016.

6 July 2017 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2017 – Pay Class 1A NICs (by the 22 July 2017 if paid electronically).

19 July 2017 – PAYE and NIC deductions due for month ended 5 July 2017. (If you pay your tax electronically the due date is 22 July 2017)

19 July 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2017.

19 July 2017 – CIS tax deducted for the month ended 5 July 2017 is payable by today.

1 August 2017 – Due date for Corporation Tax due for the year ended 31 October 2016.

19 August 2017 – PAYE and NIC deductions due for month ended 5 August 2017. (If you pay your tax electronically the due date is 22 August 2017)

19 August 2017 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2017.

19 August 2017 – CIS tax deducted for the month ended 5 August 2017 is payable by today.