As it’s self-assessment day, we thought we publish some thoughts focused specifically on the nuances which face those of our clients with self-employment.
Don’t forget today (31 January) is the day to complete and pay your tax bill, this year (2021) HMRC have said they won’t issue penalty notices for late filing of tax returns so long as the returns are filed before the end of February. The catch? Your income tax must still be paid on time, tricky to do unless your return is ready to be filed.
If you think you’ll struggle to pay your tax bill before the 31 January deadline, you can come to a Time to Pay arrangement with HMRC to settle your bill in instalments over the next 12 months.
Time to Pay isn’t a new service. But HMRC has relaxed the rules this year to make it easier to apply for an arrangement online, without needing to call.
You can use the service if you owe up to £30,000. If you owe more, you’ll have to ring HMRC. You need to file your return before the deadline to set up a plan.
The Chancellor of the Exchequer, Rishi Sunak, has announced that the government will publish the Budget on Wednesday 3 March 2021.
The Budget will set out the next phase of the plan to tackle the virus and protect jobs and will be published alongside the latest forecasts from the Office for Budget Responsibility (OBR).
Beware Snake Oil Salesmen
One industry which has boomed during the various lockdowns is that of “scammers” – we’re regularly hearing from clients telling us they’ve had text messages and telephone calls “from HMRC” saying that the police are on their way to arrest the taxpayer for underpaid tax.
Whilst most people don’t realize that the HMRC are a blue-light service with powers a constable may be envious of these calls and texts are a scam. As are the very convincing emails, often promising refunds as a way to acquire your bank details.
HMRC say that over the last year they have received reports of almost 850,000 scam attempts, 500,000 of using the promise of a tax refund to snare the unsuspecting public.
Any correspondence purportedly from HMRC which:
- is unexpected
- offers a refund, tax rebate or grant
- asks for personal information like bank details
- is threatening
- tells you to transfer money
Could be a scam. So, validate the communication with your chartered account, chartered tax adviser or by independently contacting HMRC yourself (find the contact details on your historic HMRC communications – do not use the contact details on the suspicious communication!) Remember, if you’ve registered via the Government Gateway, you can also check your tax information by logging into your tax account.
Forward suspicious emails claiming to be from HMRC to firstname.lastname@example.org and texts to 60599 – if you think you’ve been scammed, get in touch with your bank straight away and report it to Action Fraud
The government has extended the Self-Employment Income Support Scheme. The extension will last for 6 months, from November 2020 to April 2021. Grants will be paid in 2 lump sum instalments each covering 3 months as a grant calculated at 80% of 3 months average monthly trading profits, paid out in a single instalment and capped at £7,500 in total. This is an increase from the previously announced amount of 55%.
To be eligible for the grant extension self-employed individuals, including members of partnerships, must:
- have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
- declare that they intend to continue to trade and either:
- are currently actively trading but are impacted by reduced demand due to coronavirus
- were previously trading but are temporarily unable to do so due to coronavirus
Remember that as the grants are “taxable income” it’s important to accrue for your future income tax and national insurance contributions for this “income”.
Claims should be made via gov.uk, your chartered accountant or your chartered tax adviser. Avoid all other facilitators, irrespective of how convincing and legitimate they may look
The implementation of the new “off-payroll working” rules for the private sector should have happened in April last year but was delayed due to coronavirus. All the indicators suggest that these rules will come into force in April this year.
Why? HMRC doesn’t want individuals who are essentially employees to enjoy the same tax efficiency as those who are genuinely self-employed. Nor does HMRC want employers enjoying the advantage of not paying employers’ National Insurance contributions or giving contractors employee benefits.
When the public sector version was subject to a similar tightening of rules we saw a ‘blanket’ risk-free approach – choosing not to engage contractors at all. The risk in the private sector extends not just to self-employed contractors, but also the firms who engage them, as (medium-sized and larger) businesses who employ contractors will now be responsible for working out a contractor’s employment status, rather than the contractor themselves. They’ll also be responsible if they get the decision wrong, which could lead to severe penalties for the business.
Let’s get going
No one will have missed noticing that the BREXIT transition period has finished. The government is promoting the ‘The UK’s new start: let’s get going’. We recommend all business people utilise the government’s online tool to establish if they will be impacted by the new rules (in force and being phased in) with particular regard to:
- importing goods from the EU
- exporting goods to the EU
- moving goods to or from Northern Ireland
- travelling to the EU
- living and working in the EU
- staying in the UK if you’re an EU citizen
As with all of our posts please note that this based on our understanding of the situation today, and things do change!