March 2022

Time flashes by when you’re having fun doesn’t it.  The intention to be a bit more pro-active on our News Page got derailed by actually doing all those unpleasant Tax Returns.  But as some of you will have noticed, we had a couple of things crop up that we thought it would be wise to share with you because there was something of a pressing nature before the Revenue start talking to us about them.

CRYPTO-CURRENCY

Firstly, as I’m sure most of you are already aware, Crypto currencies are becoming more popular as a way to invest.  We have started to see this being reflected on the bank statements of a number of our clients and HMRC have now clarified their initial stance on investments of this kind and how they are to be dealt with for Tax purposes.

For now, and this is subject to change over the coming years, Crypto investments are to be dealt with under Capital Gains rules in the same way as stocks and shares.  This means that any gains over £12,300 must be declared on your Tax Return – this also applies if you’ve had sale proceeds of over £49,200 in the tax year or have made a Capital loss on which no Capital Gains tax is payable.  However, if your proceeds from sales amount to gains over and above this threshold, Capital Gains Tax of 10% (basic rate band) or 20% (higher rate band) will be due on the gains over £12,300.

If we have spotted transactions from Coinbase or other sites going through your bank statements, we may have already been in touch regarding this but what we are asking is that anyone who either has been or is currently involved in Crypto Currency in any form contacts us to make us aware.  We will then let you know in more detail what we require in order to meet requirements on your Tax Return and/or if any of your recent Tax Returns need amending.

Likewise, investment in precious metals such as Gold are also treated in the same way and so again, please let us know should you have invested in this area.  The whole area remains a bit messy because at a certain point, this way of investing becomes a business rather than buying and selling stuff to make a Capital Gain.  So far there is no real guidance on this, mainly because it’s very difficult to say that if you have a hundred transactions (say) it’s a business.  That is an attitude of mind rather than a fixed number of transactions.

COVID GRANTS – ALL TAXABLE?

Secondly, and a further clarification from HMRC.  HMRC have, very late in the day, less than two weeks before the 31 January deadline, confirmed that they are treating all COVID support grants as income for tax purposes, just as the SEISS grants were.  This means grants such as those from the Arts Council and the MU Coronavirus Hardship Fund which we may not have initially treated as taxable based on the information we had at the time, will now need to be added to your Tax Return, meaning amendment and re-filing will be necessary.  For those that this affects, it may of course also alter your Tax liability and so for most affected, more tax will be due.

This is all a bit grey and no doubt, people with deep pockets will be arguing the toss about this, but the MU after legal advice, seem to have accepted this as appropriate.  Undoubtedly there will be some grants/support that do not fall into the taxable category, mainly those which are just aimed at general hardship rather than specific to your industry.

As with the above, please can we ask that all individuals in receipt of such COVID support grants (not including SEISS as these were always deemed taxable) get in touch with details regarding the grant amount and payer, so that we can determine if these need to be declared as taxable income.

This stance from HMRC will also carry forward into the current 2021/22 Tax Year.  Therefore, please make us aware of any grants received between 6 April 2021 and 5 April 2022 when sending in your next set of accounts and/or Tax return Information Form. Get back to us

VOLUNTARY CLASS 2 NI CONTRIBUTIONS

If you are self-employed, your pension and benefit rights are based on your having paid Class 2 NI contributions.  That’s a flat amount of around £160 added to your tax bill plus a percentage of your profits over £9,500.  But if you earned less than around £6,500 you don’t have to pay either of these and the Revenue assume that’s your choice.  It remains an option to voluntarily pay the Class 2 NI.  It keeps your pension/benefit rights for the year metaphorically ticked and is a lot cheaper as a way to add years if you’re struggling to make the grade for a full-whack state pension. However, a subtlety is that you have to make this payment by 31 January each year.  Fail to pay and you can’t do tthis and your only alternative is voluntaery Class 3 contributions which cost £800/year.

When the Revenue delayed their 31 Jan deadline for Tax Return submission I’d assumed that this moved this deadline too, but no – even though a Return was due in by 28 February, the payment for voluntary Class 2 NI had to have been made by 31 January.  The trick to adding cheap years to your pension remains, but the money does have to be paid promptly.

October 2021

BUDGET 2021

In a bygone age, the Budget was quite a thing.  When I worked for a Big Firm (Touche Ross, now subsumed into Deloittes), we used to treat it as a massively exciting thing.  People wrote material for a booklet that was put together in the 2-3 hours following the announcements; we had an in-house printer and by 7 or 8pm we were enveloping fancy glossy booklets to send out to clients.  Pizzas and alcohol were involved – it was an adrenalin rush.

Many years later, it’s all a bit of a damp squib.  The announcements are by and large trailed, leaked or announced in advance.  This is partly to soften the blows of unpopular moves, to blow the trumpet for popular ones and sometimes to sound out the public mood.  Lessons have been learned since the stupidity of the Pasty Tax if you remember that.  So now, 80% was known before Sunak stood up and even the rabbits out of the hat were rumoured.  

But what does it mean for Joe and Jo Public (assuming they’re musicians or similar)?  Well bugger all frankly.  The tax that you will be paying in 2021/22 will be very similar to what you’ll pay in 2022/23.  Because the tax rates remain at 20% and 40% and the tax-free allowance is staying at £12,570 next year.  The point where you’re going to go from paying at 20% to 40% remains £50,270,  This is what’s known as fiscal drag – allowances should rise with inflation so when they don’t it constitutes a tax rise.

And of course (old news) you’ll be paying an extra 1.25% in National Insurance if you’re self-employed or employed and employers get to pay an extra 1.25% too.  This is the biggest source of funds to pay for Rishi’s Magic Money Tree – that’s 2.5% off the total wage packets of the UK and into the Chancellor’s pockets.  Notice that this is a rise in National Insurance for 2022/23 but after April 2023 it will morph into a separate additional surcharge that is also going to be applied to the over-66 year olds, wage packets or self-employed profits.  Watch for this insidious little spike if you’re going to be over pensionable age in 2023.  And if your income is based on property rentals, savings and pensions then you get off scot-free.  

There are things that have an indirect effect on the entertainment industry, chief amongst which is the 50% cut in Business Rates for “shops, restaurants, bars & gyms”.  But a little study shows that this category includes music venues and theatres.  Phew.  So venues will be getting a boost which will at least offset the additional costs of Covid-screening a West End show.  I doubt whether it’s all going to get passed on, but at least it will take some pressure off managements.

No doubt the reduction in duty on beer will affect brass sections, whilst the strings will be revelling in the reduction of the cost of Prosecco, whilst the red wine drinkers in percussion will have to cough up more.

Finally for the moment, drivers will welcome the lack of a rise in fuel duty, but I do find it hilarious to see this being trumpeted as a great thing by the government.  Since this time last year the price of fuel has gone up about 25p/litre, so they’re copping for 4p/litre extra in VAT.  Hence they aren’t being that magnanimous by passing up on a fuel duty rise, are they?!

MAKING TAX DIGITAL – DELAYED AGAIN (Phew)

Some time in the dim mists of time (when George Osborn was Chancellor), the Revenue came up with a new ‘thing’ called Making Tax Digital.  The idea is to simplify self-employed people’s tax returns by making them file four quarterly mini-Returns, working out the tax payable for each of them and handing over the money.  This was supposed to be allied to digital accounting systems that would generate automatic filing and that it would help people stay on top of their tax liabilities and of course get HMRC their money sooner rather than later.  Personally I think it’s crazy madness – only the smallest of businesses were to be exempted (turnover less than £10K pa) and no concessions for anyone who isn’t naturally one of nature’s bookkeepers.  Much complaint ensued and although an MTD system was brought in to account for VAT for those who are registered, the pandemic has led to HMRC recognising that now is not the time for a further layer of bureaucracy for smallish businesses.  We now have a delay announced again, with the system coming in from April 2024.  The test of low turnover to escape involvement will be on turnover during the 2022/23 tax year.

People continue to protest that this is a unnecessary burden for people who are one-man professionals but the Revenue continue to resist any request to have a more sensible limit.  I’d love to think it will be delayed even further down the road, or that there would prove to be a much higher threshold so that ordinary jobbing musicians and such like would be exempted.

Although we’d love to stick our head in the sand, we continue to keep across this nonsense and will keep you posted a long way in advance before you have to do something about it.

LAST CALL FOR GUARANTEED ACCOUNTS

We will always try to do accounts by the end of January no matter when we get them, but the plain fact is that if we have not got them to start on by mid-October, then we can’t guarantee managing that deadline.  That might sound harsh but the arrival of accounts figures tends to bunch into the weeks running up to the 31 January deadline (no flexibility this year) and when your set of figures arrives on the same day as 10 others, it can be problematic.  But we do guarantee to get them done if we have the raw material by 15 Octobers, so get them to us pronto if you are dithering on them today (10th Oct).

September 2021

After a bit of a hiatus – the website is back up and running.  Some kind person seemed to have hijacked the page for a few days and it’s necessitated a bit of a rebuild.  With Geoff back on board, there should be more regular news and nonsense in this area.  SEISS 5 is now well under way and the Revenue’s explanation isn’t bad at all: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

It’s quite a route map to determine whether or not there is a possibility that the Revenue will pay you anything, but they should have weeded out those who don’t qualify and only those who do will get invited.  But you also then have to run through a series of tests to see if you’re the person they’re looking for and if so, whether your turnover in 2020/21 is down by over 30% from what it was in 2019/20 or 2018/19 (leads you to an 80% grant – max of £7,500) or down by less than 30% (leads you to a 30% grant – max of £2,850).

Summer 2021

HMRC have clarified their position on when each of the SEISS grants will be taxable and this will be the Tax Year in which they were received.  This means grants 1, 2 and 3 will be taxable in the 2020/21 Tax Year, irrespective of your accounting year end, with grants 4 and 5 being taxable in the 2021/22 Tax Year.

The grants will not be included in the turnover shown on your Accounts but will be included separately within the self-employment pages of your Tax Return.  However, the total of the grants received within the Tax Year will be added to your Accounts profits, to give the ‘Profit from self-employment’ figure that will be shown on your Tax Calculation.

Those of you who are eligible to receive the 4th SEISS grant should receive communication from HMRC around mid-April with your personal claim date.  The grant will be claimable from late-April till the end of May.

Details regarding the 5th SEISS grant are not yet fully available and so we will update this page in due course.  The link below is to the HMRC page which you may wish to keep an eye on:

https://www.gov.uk/government/publications/self-employment-income-support-scheme-grant-extension/self-employment-income-support-scheme-grant-extension

This year our usual Tax Return Information Form will be emailed out to clients.  If you would like a paper copy, please let us know and we will get one posted out to you.  Alternatively, go to the ‘Deadlines, Links & Forms’ page where you can download one in either word or pdf format.

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