IDEAL SALARY FOR 2021-22
As the owner and director of your own company you decide how much salary to take each year.
Paying yourself a small
salary can be a good way
to maintain your national
insurance record to build up
state benefit entitlements.
In the tax year 2021-22 if you take a salary of
between £6,240 and £9,568 (£797 per month) you
will pay no NIC but you will get an NIC credit
towards your state pension.
Where your company employs at least one other
person in the year it may qualify for the employment
allowance of £4,000 which covers the cost of employer's
Class 1 NIC up to that cap. We can help you check if
your company can claim the employment allowance
for 2021-22.
The ideal salary of a director will depend on a number
of factors. We can help confirm what the optimal
salary is for you in 2021-22. Directors who are also
shareholders of their company often extract further
cash as dividends using the £2,000 dividend allowance
and the lower dividend tax rates of 7.5% and 32.5% to
minimise their tax bills.
Everyone's financial circumstances are different so
please discuss your position with us before deciding
on the level of salary and dividends to take for the year.
Complexity is added for groups and associated
companies as the profit thresholds of £50,000 and
£250,000 will have to be divided by the number of
associated companies. The companies counted as
being in a group or associated will be those which
are under the common control of
a person, a company or a group of
persons.
We can help
confirm what
the optimal salary
is for you in 2021-22
FOURTH SEISS GRANT
Self-employed individuals will be able to apply for the fourth SEISS
grant from late April if they submitted their tax return for 2019-
20 by midnight on 2 March 2021 (it was due by 31 Januar y 2021).
MRC has asked for additional evidence from two
categories of taxpayer. This will need to be provided
very quickly otherwise HMRC will block the SEISS
application.
New traders must respond to a letter and phone call
from HMRC and upload a copy of their ID plus three
months of bank statements from 2019-20 to a Dropbox
link provided by HMRC. If you started your business
after 5 April 2019 you will fall into this category.
Ensure that HMRC has your current
telephone number by calling 0800
0241222. Do not delay once you have
received the Dropbox link as it will expire
after two days.
Where the 2019-20 tax return included a box checked
to say that the self-employed business had ceased
or changed (eg from a partnership to a sole trader)
the taxpayer will have received an email from HMRC
asking for more details. If you fall into this
category you need to email the SEISS compliance team
at HMRC on seisscomplianceteam@hmrc.gov.uk.
To prove that your business is active, or is only
temporarily suspended due to Covid-19 and that
you intend to carry on trading beyond the SEISS
grant application date in late April, HMRC will require
evidence of your trading activity or preparations to
continue trading such as:
- advertising booked by the business;
- business receipts or sales invoices;
- contracts to provide goods or services;
or
- payments made through a business bank account.
Other forms of evidence may be accepted but act
quickly as the window to provide this evidence is
very short.
HMRC will require
evidence of your
trading activity or
preparations to
continue trading
FREE COVID-19 TESTS FOR EMPLOYEES
These are to be used for
employees who do not have
Covid-19 symptoms and who
cannot work from home, eg
retail staff.
The aim of this program is
to identify workers who are
infected with Covid-19 but display no symptoms.
These people can still infect others without realising.
If an employee has Covid-19 symptoms they should
isolate at home and order a PCR test to be undertaken
at a secure test site or at home.
The free lateral flow tests are designed to be used
in the workplace and should not be taken to the
employee's home. The basic test kits are provided free
by the government but if the employer wants a private
provider to organise and run the workplace testing
they must pay for that service.
There is no tax charge on the benefit to the employee
of having a free Covid-19 test.
The lateral flow test kits are only available to businesses
registered in England as Wales, Scotland and Northern
Ireland have made other arrangements for businesses.
There is no
tax charge
on the benefit
to the employee
of having a free
Covid-19 test
PREPARE FOR OFF-PAYROLL WORKING
The IR35 rules have been around for over 20 years but those
rules have been redrawn and renamed 'off-payroll working'.
In the public sector the engager
(the end client) determines whether
off-payroll working applies to a
contract operated by a personal
service company (PSC).
This will also be the case for
contracts with large and mediumsized private sector engagers from
6 April 2021. The engager will have
to determine whether contracts
operated through PSCs fall under
the off-payroll rules or not. The
private sector off-payroll rules only
apply to work performed after 5
April 2021, not to all contractor
invoices paid after that date.
If the engager determines that
the rules do bite, the contractor's
invoices must be paid under PAYE
with tax and NIC deducted and the
engager must pay the employer's
NIC. The entity that pays the PSC
(usually the employment agency)
is responsible for deducting and
paying PAYE and NIC due on the
contractor's fee.
Contractors who only offer their
services to 'small' private businesses
will see no change in their working
relationship with their clients. The
engager should tell its contractors
whether it is classified as a small
entity or not.
HMRC has said it will not impose
penalties in the first 12 months
where the engager has taken
reasonable care to apply the rules
correctly. However it will raise
penalties where the engager
or other entity in the chain has
deliberately not applied the offpayroll working rules.
Individual contractors have little
powers or rights under off-payroll
working rules other than to ask for a
review of the status determination
made by the engager.
SDLT SURCHARGE FOR NON-RESIDENTS
Stamp duty land tax (SDLT) applies to purchases of most land and buildings in
England and Northern Ireland. Wales and Scotland impose different land taxes.
For purchases of residential property completed from
1 April 2021, a 2% surcharge will apply where any of
the joint purchasers are not UK-resident. This covers
individuals, partnerships, companies and trusts that are
defined as not UK resident at the time of the purchase.
The surcharge applies on top of the 3% surcharge on
the purchase of second homes.
A complication is that the definition of UK residence
for SDLT is different from the statutory
residence test which
defines non-residence for other taxes. This means that
it is possible for an individual who is UK tax resident
to be non-resident for SDLT purposes. Individuals who
are returning to the UK could be caught by this new
surcharge.
Please ask us for guidance before committing to a
property purchase.
VAT DEBT PAID IN INSTALMENTS
A year ago, at the star t of the Covid-19 pandemic, the Government automatically
deferred all VAT due to be paid to HMRC between 20 March to 30 June 2020.
The direct debit to collect that VAT was not activated
by HMRC and no interest or late payment surcharges
have been charged on that debt until now.
To avoid interest starting to accrue at 2.6% on the VAT
due you must either pay the deferred amount due in
full by 31 March 2021 or agree to pay HMRC by monthly
instalments so that it is all paid off by 31 January 2022.
The easiest way to arrange a payment plan is through
the HMRC online portal which is open until 21 June
2021. You need to access this using your Government
Gateway ID and have submitted all your outstanding
VAT returns for the last four years. You can set up a
Government Gateway account as part of the process if
you do not already have one.
The earlier you set up the payment plan the
more instalments you
will have available to spread the debt. For example,
if you arrange the payment plan before 21 April 2021
you can spread the debt over 10 months.
You must be ready to pay the first instalment
immediately and set up a direct debit to pay the
remainder of the debt by monthly payments. If you
do not have the authority on your own to set up a
direct debit you must call HMRC on 0800 024 1222. We
cannot arrange a VAT payment plan on your behalf as
we cannot agree to make payments from your business
bank account.
HMRC will allow you to arrange a payment plan for the
deferred VAT even if you have already entered a time
to pay arrangement for other taxes.
FRAUD IN TAX REPAYMENTS
It is a sad fact that some fraudsters have obtained SEISS grants by
using innocent taxpayers' Government Gateway IDs and passwords.
Once the ID has been
proven to work, the
fraudsters attempt to
double their money
by submitting false tax
returns to claim tax
refunds.
HMRC is aware of this
scam and is writing to taxpayers who have claimed a
tax refund that looks out of place based on their tax
history. There are two versions of this letter which are
used in different circumstances.
Where a taxpayer's unique tax refence number (UTR)
has been used the taxpayer is asked to call HMRC and
confirm certain details.
In more serious cases the taxpayer is asked to complete
an R38 tax refund form and return it with evidence
of their ID and other personal information that the
fraudster may not know, such as current employment
or pension details. If a tax agent completed the tax
refund claim the taxpayer is asked to tell HMRC what
the fee for this work was.
If you receive one of these letters from HMRC please
discuss it with us with some urgency. We need to
respond to HMRC quickly to ensure that your tax
records are not compromised and that you are not
blocked from receiving a genuine tax repayment.
We need to respond to
HMRC quickly to
ensure that your
tax records are
not compromised
POSTPONED IMPORT VAT ACCOUNTING
Life outside of the EU is considerably more complicated
for businesses in Great Britain who impor t goods, as
import VAT applies to the value of most goods that come in.
There are different rules for businesses in Northern
Ireland.
There are three options for dealing with this import
VAT and the UK buyer needs to communicate clearly
to their freight agent which of these will apply:
Freight agent pays the import VAT in order to release
the goods from UK Customs. Freight agent recharges
these costs to the UK buyer plus an admin fee.
UK buyer has their own VAT deferment account and
freight agent uses the buyer's deferment account to
release the goods without payment of VAT. HMRC
takes payment for the VAT by direct debit around 45
days later.
UK buyer uses postponed import VAT accounting
(PIVA) and instructs freight agent that PIVA is to be
applied when goods enter the UK. The goods are
released with freight agent or buyer paying HMRC
and buyer accounts for import VAT as a reverse
charge entry on their VAT return.
In all of the above, import duty may also be due on
the goods in addition to VAT.
The UK buyer does not have to ask HMRC to use PIVA
but it does need to register with HMRC to access the
monthly PIVA statements from an online account
which it will need to complete its VAT return.
You can access the registration system through this
page: www.gov.uk/guidance/get-your-postponedimport-vat-statement and clicking the 'Start Now'
button. The business' Government Gateway ID and
password will be needed at the next screen. You
also need to have your EORI number to hand which
is needed for any business imports.
The PIVA statements for the previous calendar month
are available to view from the sixth working day of
the following month. These statements should be
downloaded regularly as they are only held online
for six months.
We can help you get your VAT returns right using
PIVA but you need to download the statements
showing your import VAT.
