Excuses and Expense Claims: What not to Submit

At Egan Roberts Accountants based in Ribchester, Lancashire we can advise you as to whether your ‘excuses’ and expense claims are reasonable or whether they just won’t cut it with HMRC.

We’ve shared with you below some of the recent claims submitted to HM Revenue and Customs (HMRC).

Late Tax Return Excuses

1. I spilt coffee on it.
2. My ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.
3. My wife has been seeing aliens and won’t let me enter the house to file my return.

Less recent excuses also include:

1. My husband ran over my laptop.
2. My dog ate my tax return.
3. My tax papers were left in the shed and the rat ate them.

All of the above will not be seen as ‘reasonable’ and are likely to suffer a £100 penalty which can be significantly increased the later your return is filed.

Expense Claims

Interesting expense claims have included:

1. A three piece suite for my partner to sit on when I’m doing my accounts.
2. Hotel room service for candles and prosecco.
3. £4.50 for sausage and chips meal for 250 days.

Unsurprisingly, all of these claims were rejected by HMRC.

Need more information?

Follow the links below for some guidance on reasonable excuses and expense claims.

Reasonable Excuse

Self-employed Expense Claims

Alternatively, if you would like to get in touch with us, please use the contact form below, visit our website www.egan.co.uk or call us on 01254 583515.

Enquiry About My Tax

If you think there might be anything amiss with your Tax, or you’re setting up a new business and don’t want to get in any uncomfortable positions with HMRC, contact us for a free meeting to discuss your situation and how we may be able to help now and in the future.

Gift It or Keep It? The Capital Tax Implications

At Egan Roberts Accountants based in Ribchester, Lancashire we can provide you with year round tax advice on capital gains tax and inheritance tax.

Capital Gains Tax (CGT)

CGT is the tax payable on the ‘gain’ you have made from selling an asset which has increased in value.

The gain (proceeds less cost) is reduced by your annual exempt amount of £11,100.

Any remaining gain is taxed at 10% if you are a basic rate tax payer or 20% if you are a higher rate tax payer.

Gift Relief

If you have given the asset away or received less than market value proceeds, you may be able to claim gift relief.

This means the amount chargeable to CGT is the real proceeds you have actually received.

However, this only defers the CGT. The amount of gift relief claimed will become chargeable when the donee sells the asset.

So by reducing your gain, the donee will have a bigger gain later.

More information on gift relief is available here.

Entrepreneur’s Relief (ER)

There are certain criteria which must be met for you to qualify for ER.

The full list is set out here.

In summary, if you are selling all or part of your sole trade or partnership, you must have owned the business for at least 12 months prior to the sale. If you are selling shares (of which you hold at least 5% of total shares), the company must be trading and you must be an employee or officer of the company.

ER reduces the CGT rate to 10% regardless of whether you are a higher rate tax payer.

Gifts to Spouses / Charity

Any assets you gift or sell to your spouse or civil partner are not subject to CGT unless you separated and did not live together for the whole tax year or you have them goods for them to sell on as part of their business.

CGT is not charged on assets given to charity. You may pay some CGT if you sell an asset to charity for more than you paid for it but for less than market value.

Find further information about this here.

Inheritance Tax (IHT)

Lifetime Gifts

If you make a gift during your lifetime to a person, this is known as a PET (potentially exempt transfer), meaning no IHT is payable on the gift.

However, if the donor dies less than 7 years after making the gift, IHT then becomes chargeable at 40%.

Death Estate

If you leave the asset as part of your death estate rather than selling it or gifting it, IHT may be payable at 40%.

Items left to your spouse/civil partner/charity are exempt from IHT.

The value of your remaining estate chargeable to IHT could be reduced with the use of business property relief.

Everybody has a nil rate band of £325,000 which also reduces the amount chargeable to IHT.

This £325,000 is reduced by the gross chargeable transfers of any gifts made within the 7 years before death.

If your spouse did not use all or some of their nil rate band on their death estate, the amount unused can be transferred to you in addition to your £325,000.

The remaining value is then subject to IHT at 40%.

If you would like to get in touch with us, please use the contact formbelow, visit our website www.egan.co.uk or call us on 01254 583515.

What worries do you have about a HMRC enquiry?

What is Tax Fee Protection Service?

HMRC tax and VAT investigations can be daunting, disruptive and expensive. Egan Roberts Fee Protection will assist you every step of the way to answer HMRC’s questions and to demonstrate you are paying the correct amount of tax. This requires the expertise, time, flexibility and expense of your accountant on your behalf and such costs are not included in your regular annual fees.

Just as you take out contents insurance to protect your home or business, our Tax Fee Protection Service protects you against the unforeseen costs incurred by Egan Roberts when dealing with a HMRC enquiry.

Why do I need Tax Fee Protection Service?

All business and personal taxpayers are at risk of enquiry. HMRC activity has been at unprecedented  levels for a number of years to the point where enquiries are commonplace.

Even if the tax man finds no errors, the accountancy costs in dealing with HMRC can still be substantial.

For a modest amount you can enjoy peace of mind that Egan Roberts can deal with the tax authorities on your behalf and you will not be subject to any additional expense. These costs will be covered by Egan Robert’s policy.

What’s excluded?

  • Criminal prosecutions and fraud
  • Enquiries that have commenced prior to subscribing to the service
  • Routine compliance work, e.g. preparing tax returns.

In the event of a Tax or VAT enquiry

Please speak to us straight away, immediate professional advice can make all the difference. Egan Roberts will deal with the claim on your behalf.

The next step

To ensure you are protected in the event of HMRC Enquiry and to receive the necessary representation from Egan Roberts without any concern over the amount of additional fees that will be incurred, please return the enclosed reply slip or contact us without delay.

Contact us

What every small business owner should be aware of when paying HMRC?

Paying HMRC

The Post Office service or personal credit cards will no longer be accepted when paying HMRC from the 15th December 2017 and 13th January 2018 respectively.

Not to worry! There are still various other ways of making payment which HMRC say will save you time and expense. These include:

  • Direct debit
  • Online or telephone banking (including Faster Payments, Bacs and CHAPS)
  • Debit/Corporate Credit card online or by telephone

Specifically for Self-Assessment you can also set up a budget payment plan to give you control over the payments you make.
Making weekly/monthly payments will be more manageable for most people and saves you from being hit with a hefty tax figure on the deadline.

Taxpayers who are unable to pay their tax bill on time may be entitled to pay by instalments or be granted additional time to pay.

You will need to contact HMRC with details of your income, assets etc. and HMRC will decide whether you are entitled based on your circumstances. Interest will be charged on the amount you pay late and HMRC will expect you to pay your tax bill straight away if you don’t meet their criteria.

More information concerning the above can be found at https://www.gov.uk/topic/dealing-with-hmrc/paying-hmrc.

Contact us if you would like to know more about the above

What Accounting Records Should I Keep?

As Chartered Accountants and Financial Advisors based in Lancashire, a question we often get asked here at Egan Roberts is what accounting records we need in order to complete your year end accounts and tax returns.

The most important thing is to be as organised as possible. Accounting software packages such as Xero make this much easier for you.

At Egan Roberts, we are all Xero Certified Advisors to help and support you through your Xero journey. Some may call us Xero Heroes.

Records must be kept for a minimum period of 6 years. Xero has the ability to digitally store images of your invoices and can feed directly through from your bank. This makes record keeping for such long periods of time much easier and will no longer clutter up your spare room!

If HMRC open a tax enquiry into your business within the last 6 years, Egan Roberts offer a fee protection scheme which acts as a type of insurance against any additional work we may need to undertake to assist with the enquiry. See our more detailed blog here for more information about this service.

If you would like to speak to us about any of the above, please call us on 01254 583515 or visit our website www.egan.co.uk

Inheritance Tax: Residence Nil Rate Band (RNRB)

At Egan Roberts Chartered Accountants & Financial Advisors we offer estate planning services including the related tax advice. It is important we now think carefully about the residence nil rate band (RNRB) when estate planning. Please read on if you would like to find out more.

What is the RNRB?

The RNRB was introduced in Finance Act 2015 and applies to deaths after 5 April 2017.

The basic nil rate band currently stands at £325,000 as it has since 6 April 2009 and will not change until 5 April 2021.

Rather than increase the £325k nil rate band to adjust for the effects of inflation and increases in house prices, the RNRB was announced.

The RNRB provides an additional nil rate amount when a person’s main residence is passed to their direct descendant on death.

It is worth noting here that the RNRB is only available on death; it cannot apply to a lifetime gift.

How much is the RNRB?

The RNRB is in addition to the basic nil rate band (£325k) and will be gradually introduced as follows:

Tax Year      RNRB
2017/18    £100,000
2018/19    £125,000
2019/20    £150,000
2020/21    £175,000

After 6 April 2021 the RNRB will increase annually in line with the consumer price index.

When is the RNRB available?

The RNRB is available when a qualifying residential interest is closely inherited.

A qualifying residential interest is a residential property which at some point was occupied by the deceased as their residence.

It will be closely inherited if it is passed to any of the following:
• The deceased’s children or grandchildren and their spouses
• Widowers of those children/grandchildren if they have not remarried
• Step-children, adopted or foster children
• Children for whom the deceased acted as guardian whilst they were under 18 years old

Other information

In the same way as the basic nil rate band, if a person does not use their RNRB in full, any unused percentage can be transferred to the surviving spouse to be used in addition to their own RNRB.

The RNRB will be reduced by £1 for every £2 by which the deceased’s net estate exceeds a threshold of £2m. This threshold will also increase in line with the consumer price index.

As many people move into a smaller home or into residential care, the RNRB is still available on the estate if the person sold their home on or after 8 July 2015.

We hope you found the above information useful. If you would like to discuss estate planning or inheritance tax further, please contact Egan Roberts on 01254 583515.

Further guidance and information is available at https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

Converting to an Academy

One of our specialisms at Egan Roberts is acting for academies, but have you ever wondered how it all starts?

 

There are two types of academy; single academies and multi-academy trusts.

Firstly, to convert to a single academy the school’s latest Ofsted rating must be at least good, student’s attainment and progress must be high and finances must be healthy.
Alternatively, to convert to a multi-academy trust you can join an existing trust or set up a new one. All academies in the trust share staff and expertise and make savings on expenses.

 

However, before the school can apply to convert, the governing body must pass a resolution to convert. If applying to join an existing trust, the trust must confirm they are happy to accept your school.

 

The following steps must be completed to convert a local-authority-maintained school to an academy.

1. Prepare for your school’s application before you apply. It is recommended that you submit a registration of interest form and read the ‘Academies financial handbook’.
2. Complete the application form and notify your local authority
3. Set up or join an academy trust
4. Transfer responsibilities to the academy trust
5. Prepare to open as an academy including appointing officers and auditors, insurance and complaints procedures
6. In the first few months of being open as an academy, publish the final funding agreement on the academy’s website, submit the relevant financial returns, complete the land and buildings valuation within 6 weeks of converting and seek advice from peer-to-peer networks

Peer-to-peer networks include:

• Freedom and Autonomy for Schools – National Association
• The Schools Network
• Institute of School Business Leadership

 

More detailed information is available on the government website here.

Bad Debt Relief

Egan Roberts is a Chartered Accounts & Financial Advisors based in Lancashire. A lot of our clients come to us for advise on old debts that are sat on their sales ledgers, also known as ‘Bad Debts’.

If you are in this situation please give us a call on 01254 583515 and we will be happy to help.

For more details on bad debts and the relief available please read on.

One of our clients came to us with a query regarding a debt on their ledger, which was overdue by more than six months.

After much chasing over a long period, the debtor agreed to pay the debt. However, he was saying that he should only pay the net amount as the debt was more than six months overdue and that our client could, therefore, recover all the VAT under the bad debt relief rules.

This is incorrect and the point was tested up to the Court of Session in the case of Revenue & Customs Commissioners v Simpson & Marwick.

To be able to make a claim for BDR for VAT the creditor must have:
• accounted for the output tax on the supply and paid that output tax over to HMRC;
• written the debt off in the day to day VAT accounts and transferred it to a separate bad debt account, and
• more than six months must have elapsed after the due date for payment or the date of supply, whichever is the later.

However, BDR is calculated on the amount outstanding, so when a debtor makes a part payment of a debt, the payment is treated as being inclusive of VAT. For example, if the debt is £120 including £20 VAT and the debtor pays just £100, leaving £20 outstanding, then the VAT fraction of 1/6 is applied. The debtor is deemed to have paid £83.33 + £16.67 VAT. The VAT element of the outstanding part will be £3.33 and only this sum will be claimable as BDR. The claim is entered in Box 4 of his return.

There is a corresponding rule that applies to the debtor. This means that where he has not paid a creditor and there is an amount outstanding more than six months after the due date for payment, then any input tax claimed on this unpaid element must be repaid to HMRC.

The debtor, in this case, should have repaid the input tax in full to HMRC in the period when the debt went over six months old. Assuming he has done this correctly, if he now pays the net amount only, he will need to treat the amount he pays as VAT inclusive and apply the VAT fraction to see how much of the input tax he can recover, and would put that figure into Box 4 of his return in the period when he makes the payment.

The blog was about bad debts and the relief you can claim on them as this is a question we are often asked.

Again, if you have a similar query or would like any more information on the above please contact Egan Roberts on 01254 583515 and we would be happy to help.

Who you gonna call? Egan Roberts!

 

Don’t get spooked over starting up your business this Halloween. One of our specialisms here at Egan Roberts is working with start-up businesses to help you succeed without the nightmares!

 

Whether you’re at the very beginning of your journey or part way through and think you could use some extra help, we’re here for you.

 

Here are some essential tasks that you might not have thought about yet:

  • Inform HMRC that you are trading
  • Register for self assessment
  • Begin your record keeping, however small you think that receipt is
  • Appoint your accountant
  • Decide the legal structure of your business
  • Set up a business bank account
  • Ensure your software us compatible with Making Tax Digital

 

At Egan Roberts we have experience in multiple accounting softwares and we are all Xero Certified Advisors.

 

If you’re unsure about what records you should be keeping, read our blog here.

 

For more information on Making Tax Digital we have the following blogs available to explain it without the jargon:

 

If you would like to discuss your new business further, please call us on 01254 583515 or visit our website to book a free meeting.

Making Tax Digital Compliant Software

HMRC have updated their list of software which is compliant with Making Tax Digital for VAT.   They are currently working with over 150 suppliers to provide compliant software before April 2019.

 

Suppliers include:

 

  • Xero
  • Iris
  • Sage (UK) Ltd
  • Intuit – Quickbooks
  • Clear Books plc

 

The full list is available here.

 

 

At Egan Roberts we are Xero Advisor Certified and so are fully equipped to provide you with help and guidance in using Xero whether it is for the first time or to help you get the most out of the software.

 

Not sure about Making Tax Digital?

 

Read our other blogs here to better understand Making Tax Digital and how it will affect you and your business.