Give yourself Time to Pay

Taxpayers who are unable to pay their Self-Assessment (SA) bill can use the option of paying by instalments with a Time to Pay arrangement with HM Revenue & Customs (HMRC).

If you cannot pay a Self-Assessment tax bill you can make your own Time to Pay arrangement using your Government Gateway account, if you:

  • Have filed your latest tax return
  • Owe less than £30,000
  • Are within 60 days of the payment deadline
  • Plan to pay your debt off within the next 12 months or less.

The limit for a self-serve time to pay arrangement, which was increased during the pandemic, remains at £30,000 tax due.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “We understand some customers might be worried about paying their SA bill this year, and we want to support them.”

What you will need to make a Time to Pay arrangement

  • The relevant reference number for the tax you cannot pay, such as your unique tax reference number
  • Your VAT registration number if you are a business
  • Your bank account details
  • Details of any previous payments you have missed

HMRC will ask you:

  • How much you can repay each month
  • If you can pay in full
  • If there are other taxes you need to pay
  • How much money you earn
  • What you usually spend (including bills and entertainment) each month
  • What savings or investments you have.

If you have savings or assets, HMRC will expect you to use these to reduce your debt as much as possible.

If you have received independent debt advice, for example from Citizens Advice, you may have a ‘Standard Financial Statement’. HMRC will accept this as evidence of what you earn and spend each month.

The amount you will be asked to pay each month is based on the money you have left after you pay any rent, food or utility bills and fixed outgoings, like subscriptions.

You will usually be asked to pay around half of what you have left over each month towards the tax you owe.

If taxpayers owe more than £30,000, or need longer to pay, they should phone the self-assessment payment helpline on 0300 200 3822 to make an arrangement.

Link: If you cannot pay your tax bill on time

Cash no longer king as card payments surge in lockdown

Whether it is down to the spread of the Coronavirus or just a general trend to a more cashless society, card payments have boomed in the last couple of years.

While restrictions were in place, hardly anyone accepted cash and it is a trend that looks like it will continue with more and more payments being made through card readers.

According to figures from UK Finance, a trade association for the UK banking and financial services sector, in 2020 over half of all payments in the UK were made using cards.

While overall card payments in 2020 declined during the lockdown, their share of payments increased with over half (52 per cent) of all payments being made by cards in 2020.

This was due to many retailers encouraging card and contactless use, along with many people opting to shop online while physical stores were shut.

So, businesses must be properly prepared with the right equipment to process these transactions.

Security is vital both for customers and businesses and there is a whole range of different debit and credit card machines to choose from. There are three types, a desktop or countertop reader, a portable card reader and a mobile device.

What are the benefits of each device?

Countertop machines are fixed points in your store or restaurant and offer good connectivity.

The portable device is linked to Wi-Fi and is ideal for places like restaurants or pubs, where staff can take payments at the table.

Mobile card readers are battery-powered devices that use a GPRS signal but can link to Wi-Fi to take payments while on the move at places like outdoor markets or hospitality events.

If businesses are choosing card payment facilities, there are several platforms on the market to consider, including:

  • TakePayments
  • Tyl (by Natwest)
  • Paymentsense
  • Shopify WisePad Reader 3
  • SumUp Air
  • Zettle Reader 2
  • Square Reader
  • MyPOS Go
  • Dojo Go
  • Barclaycard Anywhere

What do they cost?

The costs include the device and the cost of payment processing fees. Mobile readers cost between £15 and £30, while desktop or countertop card machines cost between £150 and £200.

You can either buy the device outright or rent the device for a monthly cost. This changes from provider to provider.

What fees will the business have to pay?

Transaction fees are taken by your card payment provider as a percentage of every payment made through your card machine. They are typically between 1.5 per cent and 2 per cent of the value of the transaction.

So, if the customer buys an item costing £50 and your transaction fee is 1.75 per cent, you will be charged around 87p by your provider.

Card payment providers will also advertise a ‘card not present’ (CNP) transaction when neither the cardholder nor their card are present for the transaction – for instance, an online or phone payment, or a recurring payment.

CNP fees are usually around 2.5 per cent. They are higher for the simple reason that there is a greater risk of fraud during these kinds of payments.

Be prepared for changes to Corporation Tax in 2023

The 2023-24 tax year may seem a long way off, but it is important that companies are prepared for changes to the system a little more than year down the line.

The main rate of Corporation Tax (CT) will rise to 25 per cent for the financial year commencing on 1 April 2023, but it is slightly more complicated than the headline figure and the rate will vary depending on company profits.

How will companies be affected?

For companies recording profits of £50,000 or less, the ‘lower profits limit’, the current CT rate of 19 per cent will still apply, but those firms with profits between £50,000 and £250,000, the so-called ‘upper profits limit’, will pay the main CT rate of 25 per cent.

However, they will receive what is known as marginal relief to cut their tax bill which increases the rate incrementally, as profits rise, until the upper limit of 25 per cent is reached for firms with profits of £250,000 or more.

The lower and upper profit limits are reduced proportionately where the accounting period is less than 12 months. They are also reduced where a company has one or more associated firms.

Broadly, a company is associated with another company at a particular time if, at that time or at any other time within the preceding 12 months:

  • One company has control of the other
  • Both companies are under the control of the same person or group of persons.

Effectively, the full amount of CT at the rate of 25 per cent is calculated before marginal relief is deducted. The marginal relief calculations are based on offsetting ‘augmented profits’ against the total taxable profits.

According to HMRC, ‘augmented profits’ are the company’s total taxable profits plus exempt distributions from non-group companies.

These include dividends, distribution of assets or amounts treated as a distribution on the transfer of assets or liabilities or the repayment of share capital.

The calculations are quite complex so your accountant will be able to help you with assessing just how much CT you will have to pay to HMRC.

Link: Corporation Tax Charge

Accountants critical to the success of SMEs

Small and medium-sized enterprises (SMEs) are the lifeblood of the country, accounting for 99.9 per cent of all businesses across the UK.

At the start of 2021, there were estimated to be 5.6 million UK private sector businesses.

But they acknowledge, according to a survey, that their operations would struggle to function efficiently without the assistance of accountants, particularly as COVID-19 has swept across the country.

Strategic guidance vital to SMEs

The survey has confirmed the importance of accountants to SMEs, rating the profession as the go-to business service as firms struggle with problems over the pandemic, Brexit and other areas like moving across to Making Tax Digital (MTD).

This is where the expertise of accountancy firms in the latest cloud accounting technology eases the burden on their clients.

The survey, commissioned by accountancy software supplier Sage, shows 91 per cent of SME owners rating accountants as an important part of their business operation, while 49 per cent are happy to approach them for strategic business guidance.

When asked what services they would go to when first starting a business, more than a third (34 per cent) said accountants would be the first port of call.

The survey also found:

  • Over a quarter (28 per cent) said Covid-19 had driven them to seek out the help of an accountant
  • A fifth (18 per cent) named Brexit as the driving factor. In fact, during the pandemic, over half increased their reliance on accountants
  • Sage also found that two-fifths (39 per cent) of SMEs name Making Tax Digital as the number one reason they sought accountancy services.

Named by small and mid-sized businesses as ‘critical’, the new study discovered a huge 91 per cent of SMEs use the services of an accountant, with half (49 per cent) using their services at least weekly.

Paul Struthers, MD, UK and Ireland, Sage, said: “Accountants play a critical role in accelerating this success and our research shows they are vital to the UK’s economic recovery.

“Our research shows accountants have an open door to become a de-facto strategic partner for their clients – this is an opportunity they must embrace.”

Link: SMEs name accountants as ‘number one’ service, report finds

How the penalty system for late tax submissions is changing

Under new rules set by the Government, the system of penalties for VAT and Income Tax Self-Assessment (ITSA) are changing.

The new system of fines is aimed at tackling non-compliance by taxpayers who repeatedly fail to meet their obligations to provide returns and other information requested by HMRC. Those who make occasional and infrequent mistakes will be less likely to be penalised.

It will see the current system of automatic financial penalties removed and a new points-based system implemented, which will require taxpayers to incur a certain number of points for missed obligations before a financial penalty is issued.

The changes were initially meant to apply to VAT customers for accounting periods beginning on or after 1 April 2022, before being introduced later to ITSA customers with business or property income over £10,000 per year, who are mandated for Making Tax Digital (MTD) for ITSA, from the tax year beginning 6 April 2024, and for all other ITSA customers from the tax year beginning 6 April 2025. However, now the new rules for VAT will be delayed until 1 January 2023.

What will be considered a late submission?

The new rules are part of the ongoing implementation of MTD, which requires taxpayers to submit tax information digitally each quarter using compliant software.

Late submission under the new rules will be a failure to provide either a quarterly MTD update or an annual return on time.

However, it will not apply to other occasional submissions to HMRC, which will continue to be covered by the current penalty regime for the relevant submission.

How do the new late submission penalties work?

Every time you miss a submission deadline you will receive a point, which HMRC will notify you of on each occasion.

After you receive a certain number of points an initial financial penalty of £200 will be charged. The threshold that must be reached for a penalty to be issued is determined by how often a taxpayer is required to make their submission.

However, not only will a penalty be charged for that failure but every subsequent failure to make a submission on time. This means that those who continually fail to meet their obligations could face big fines.

The penalty thresholds are as follows:

The points are only applied to each type of submission you need to make, as you will only have points totals for each obligation.

That means if you miss two deadlines for separate submissions in the same month, you will be penalised separately for each submission type.

It is only where you regularly miss consecutive deadlines for a single type of submission that you will begin to accrue points that lead to a fine.

In general, if a taxpayer makes two or more failures relating to the same submission obligation in the same month, they will only incur a single point for that month.

This is to prevent a taxpayer reaching the points threshold too rapidly to be able to improve their compliance. However, there are exceptions to this rule, which can be found here.

Are late submission penalty points retained over time?

The points that are issued only have a lifetime of two years, after which they expire to prevent historic failures combining with occasional recent failures resulting in a fine. This period begins the month after the month in which the failure occurred.

Points will not expire when a taxpayer is at the penalty threshold. This ensures they must achieve a period of compliance to reset their points.

After a taxpayer has reached the penalty threshold, all the points accrued within that points total will be reset to zero when the taxpayer has met both of the following conditions:

  • A period of compliance; and
  • The taxpayer has provided all submissions due within the preceding 24 months (It does not matter whether these submissions were initially late).

Both requirements must be met before points can be reset. The periods of compliance are:

If a taxpayer is at the penalty threshold and has achieved the period of compliance, but has not submitted outstanding submissions, they will remain at the penalty threshold and continue to be charged penalties for any further failures to make submissions on time.

There will be time limits after which a point cannot be levied. The time limits for levying a point depend on the taxpayer’s submission frequency and start from the day on which the failure occurred, as follows:

The time limit for HMRC to assess a financial penalty will be two years after the failure which gave rise to the penalty.

Can I appeal the issuing of a penalty point?

You can challenge a point or penalty issued by HMRC through its internal review process or via an appeal to the First Tier Tax Tribunal.

To appeal the issuing of points or a penalty you will need to be able to prove you had a reasonable excuse for missing a filing deadline, this could include bereavement or illness.

The appeal process will be the same as the appeal process against an assessment of tax for the relevant tax on which the penalty is based.

Here to help

Although this guidance covers the basics of these upcoming changes there are additional rules that may affect how penalty points are issued against you or your business.

If you are concerned about these changes or would like advice on remaining compliant with MTD for VAT and ITSA, please speak to our team today.

Link: Penalties for late submission