Since our last issue of Taxing Times the date for leaving the EU has been pushed back into the Autumn and now we are looking for a new Prime Minister. You will have noticed that the government is currently distracted and not getting on with other parliamentary business like running the country. However we might be in for a roller coaster ride - between Michael Gove's proposal to abolish VAT and Boris Johnson's tax code changes for higher earners.
In the meantime here are some topics that have arisen in the last couple of months which I hope you find useful. If you require any further information on any of these or any accounting matter please give us a call. As always “thank you for your business”
Ian Vogan FCA CTA Director
Making Tax Digital (MTD)
After months of preparation and positioning MTD for VAT is now in place. Our early registrations have gone smoothly and we even have a client submitting monthly returns who has filed their first MTD return with no major problems. Remember that if your turnover is above the VAT registration threshold you must keep your records digitally and file your returns electronically, the old government gateway process is no longer valid. You must also register to use the system.
MTD for VAT applies to the first return that you submit that begins on or after 1 April 2019. If you have any questions on how or when to register or any other questions please contact us. We aim to make the process as seamless as possible, for many clients you won’t even know anything has changed.
HMRC’s two step security verification
HMRC are moving towards a two step security verification procedure when you contact them for VAT or self assessment. When you log in they send a code to another device that you have to enter before you can access your tax payer account. At the moment you can opt out of this procedure but it will be compulsory in the near future. We have had clients who have had problems because they gave a landline number to receive the text message with the code and then weren’t able to access that landline for the code.
When you do use the system it may be more helpful for you to provide a mobile phone number and ensure that that mobile phone is available to allow you to enter the code and access HMRC site easily.
Do you need receipts to claim expenses for tax relief?
This is a regular question we get asked and our answer is “yes” – but all is not lost if you do not have a receipt or you have lost it. As a general rule you do need the receipt to support your expense claim but in a recent case before a tax tribunal a lap dancer was allowed to claim expenses even though she had receipts to cover less than 20% of the claim. This may be because no-one from HMRC asked the question about receipts as the tribunal was concerned with the question of whether the amounts claimed were allowable expenses, not whether she had documentation to prove the expenses.
Our advice has always been to claim for the expense, if you do not have the receipt then we would look for alternative evidence to support the expense. This could be the physical existence of the item or proof that a service has been carried out. In the electronic world you may even be able to get a duplicate from a merchant where you made the purchase. Even a VAT officer, in carrying out a review will allow the VAT to be reclaimed if there is proper evidence that VAT would have been paid.
As before, if you have incurred expenditure that you believe should be allowed for tax relief include it in your records, when we prepare the accounts and your tax return we can exclude it if we do not believe that it is a valid claim.
Many of our clients ask whether or not they will be caught by the new rules on off-payroll working (where you supply your services to your client using a limited company). Getting the status right is important as there are penalties if you don’t. HMRC have brought out a tool “Check Employment Status for Tax (CEST)” which will help, but beware. The result will only help in a dispute with HMRC if all of the questions are answered correctly and even HMRC have conceded that CEST only provides a determination in 85% of cases. If you do have concerns about your status use CEST but speak to us about how you have answered the questions and if the result is correct.
Dates of birth on Self-Assessment returns must be accurate
Dates of birth on self-assessment returns are used by HMRC to update at least 16 different systems. An incorrect date of birth can affect state pension records and the ability of clients to get through security when phoning HMRC. We strive to ensure that the information on the SA return is correct, but please always check your return, just in case.