Private residence, court actions available on separation or divorce

Couples may have experienced the difficulties that can arise when couples separate or divorce. One area where they may need to resolve are the options that courts have to direct ownership of the marital home. The courts can exercise their jurisdiction in the following ways.

  • By recognising an existing equitable interest of the spouse or civil partner who does not have legal title to the dwelling house.
  • By ordering the spouse or civil partner owning the home (or an interest in it) to transfer it to the other spouse or civil partner.
  • By ordering the spouse or civil partner owning the home (or an interest in it) to hold it on trust for the other spouse or civil partner for a limited period.
  • By ordering the spouse or civil partner owning the home to sell it and to pay the other spouse or civil partner a capital sum out of the proceeds of sale.
  • By both determining that one of the spouses or civil partners had an equitable interest in the home and ordering the other spouse or other civil partner to transfer some or all of their interest in the home or to pay a capital sum out of their share of the sale proceeds.

Where the marital home is the couple’s main asset the outcome of these deliberations is clearly significant.

Consider online tax payment plans

January is the month that taxpayers registered for self-assessment need to pay their taxes. Usually, this amounts to any underpayment for the previous tax year and a first payment on account for the current tax year.

Unfortunately, HMRC will base their payment on account for 2020-21 on the self-assessment liability for the previous tax year, 2019-20. As may traders have experienced a downturn in profits during the period of COVID disruption since February 2019, they need to reduce their payments on account for 2020-21 to reflect the lower profit compared to that for 2019-20.

In this way you can recalculate any payments on account for 2020-21 based on the reduced activity.

Even with these reductions in the January 2021, payment on account, many taxpayers will be faced with paying tax bills and have no funds to do so.

In a recent press release, HMRC explained the current support they are prepared to offer taxpayers to spread any tax payments over twelve monthly instalments.

They said:

Almost 25,000 Self-Assessment customers have set up an online payment plan to manage their tax liabilities in up to 12 monthly instalments, totalling £69.1 million, HM Revenue and Customs (HMRC) has revealed today (13 January 2021).

In October, HMRC increased the threshold for self-serve Time to Pay arrangements from £10,000 to £30,000 for Self-Assessment customers. Once they have completed their 2019-20 tax return and know how much tax they owe, customers can use the self-serve facility to set up monthly direct debits and spread the cost of their tax bill.

Visit GOV.UK to find out more about Payments on Account.

The self-serve Time to Pay threshold was increased to help businesses and individuals who have been affected by the coronavirus pandemic. Supporting Self-Assessment customers to manage their tax bills can help ease their financial commitments into more manageable monthly payments. To date, the average value of payment plans set up online is £2,821.

Customers can apply for the payment plan via GOV.UK. However, they must meet the following requirements:

  • they need to have no:
    • outstanding tax returns
    • other tax debts
    • other HMRC payment plans set up
  • the debt needs to be between £32 and £30,000
  • the payment plan needs to be set up no later than 60 days after the due date of a debt

 

NOTE: Be aware of copycat HMRC websites and phishing scams. Taxpayers should always type in the full online address www.gov.uk/hmrc to get the correct link for their Self-Assessment tax return online securely and free of charge.

They also need to be alert if someone calls, emails or texts claiming to be from HMRC, saying that they can claim financial help, are due a tax refund or owe tax. It might be a scam. Check GOV.UK for information on how to recognise genuine HMRC contact.

Why go digital?

There is a major advantage to recording business transactions digitally; once the basic data has been entered it can be interrogated and represented in endless types of reports.

During the present COVID disruption this ability to drill down or summarise data should be used to support business owners in making appropriate decisions. Accounting software, used effectively, will provide you with information in real time to identify problem areas and direct your efforts to enact counter measures.

Most businesses use accounts software to monitor their bank balances, chase unpaid bills and keep an eye on bills they need to pay.

Whilst these are all valuable features, and they do enable you to manage daily “housekeeping” chores, they do not inform you of impending cashflow, profitability or solvency issues. To address these additional needs, you will need to review the standard reports that all accounts software packages provide. If necessary, you may also need to create new reports – linked to your accounts data – that provide you with the additional evidence you need.

There are very few business owners that would not benefit from recording and interrogating their business data digitally.

Some may only need fairly basic functionality; others would benefit from a more in-depth approach. We recommend:

  • There is no excuse for avoiding the recording of your business transactions digitally. If you are completely computer phobic we can offer bookkeeping support.
  • Those that already use accounting software should review the number and type of reports they produce to see if additional reports are required.

During COVID disruption – to individual businesses and to the wider economy – information as well as cash is king.

With very little effort, new reports can be created to help you manage specific problems and once created, they will be available to you instantly, at the click of your mouse button. Don’t get left behind or stressed by lack of information. Go digital…

Business Lock-down summary January 2021

We have prepared the following lists from information published on the GOV.UK website. It sets out which businesses are required to close, and which can remain open during the current COVID lock-down.

Those required to close face compounded financial difficulties as their ability to create revenue is at best restricted and in many cases stopped completely.

We can help. Please call so we can help you consider your options.

Businesses and venues which must close in England

  • non-essential retail, such as clothing and homeware stores, vehicle showrooms (other than for rental), betting shops, tailors, tobacco and vape shops, electronic goods and mobile phone shops, auction houses (except for auctions of livestock or agricultural equipment) and market stalls selling non-essential goods. These venues can continue to be able to operate click-and-collect (where goods are pre-ordered and collected without entering the premises) and delivery services.

  • hospitality venues such as cafes, restaurants, pubs, bars and social clubs; with the exception of providing food and non-alcoholic drinks for takeaway (until 11pm), click-and-collect and drive-through. All food and drink (including alcohol) can continue to be provided by delivery.

  • accommodation such as hotels, hostels, guest houses and campsites, except for specific circumstances, such as where these act as someone’s main residence, where the person cannot return home, for providing accommodation or support to the homeless, or where it is essential to stay there for work purposes

  • leisure and sports facilities such as leisure centres and gyms, swimming pools, sports courts, fitness and dance studios, riding centres, climbing walls, and golf courses.

  • entertainment venues such as theatres, concert halls, cinemas, museums and galleries, casinos, amusement arcades, bingo halls, bowling alleys, skating rinks, go-karting venues, indoor play and soft play centres and areas (including inflatable parks and trampolining centres), circuses, fairgrounds, funfairs, water parks and theme parks

  • animal attractions (such as zoos, safari parks, aquariums, and wildlife centres)

  • indoor attractions at venues such as botanical gardens, heritage homes and landmarks must also close, though outdoor grounds of these premises can stay open for outdoor exercise.

  • personal care facilities such as hair, beauty, tanning and nail salons. Tattoo parlours, spas, massage parlours, body and skin piercing services must also close. These services should not be provided in other people’s homes

  • community centres and halls must close except for a limited number of exempt activities, as set out below. Libraries can also remain open to provide access to IT and digital services – for example for people who do not have it at home – and for click-and-collect services

 

Some of these businesses and places will also be permitted to be open for a small number of exempt activities. A full list of exemptions can be found in the guidance on closing certain businesses and venues in England, but includes:

  • education and training – for schools to use sports, leisure and community facilities where that is part of their normal provision

  • childcare purposes and supervised activities for those children eligible to attend

  • hosting blood donation sessions and food banks

  • to provide medical treatment

  • for elite sports persons to train and compete (in indoor and outdoor sports facilities), and professional dancers and choreographers to work (in fitness and dance studios)

  • for training and rehearsal without an audience (in theatres and concert halls)

  • for the purposes of film and TV filming

Businesses and venues which can remain open in England

  • essential retail such as food shops, supermarkets, pharmacies, garden centres, building merchants and suppliers of building products and off-licences

  • market stalls selling essential retail may also stay open

  • businesses providing repair services may also stay open, where they primarily offer repair services

  • petrol stations, automatic (but not manual) car washes, vehicle repair garages and MOT services, bicycle shops, and taxi and vehicle hire businesses

  • banks, building societies, post offices, short-term loan providers and money transfer businesses

  • funeral directors

  • laundrettes and dry cleaners

  • medical and dental services

  • vets and retailers of products and food for the upkeep and welfare of animals

  • animal rescue centres, boarding facilities and animal groomers (may continue to be used for animal welfare, rather than aesthetic purposes)

  • agricultural supplies shops

  • mobility and disability support shops

  • storage and distribution facilities

  • car parks, public toilets and motorway service areas

  • outdoor playgrounds

  • outdoor parts of botanical gardens and heritage sites for exercise

  • places of worship

  • crematoriums and burial grounds

 

Regional variations

As regulations created to manage the COVID epidemic are organised and sanctioned regionally, you will need to refer to the regional authorities in Wales, Scotland and Northern Ireland as their instructions may be different to those listed above.

Is your 2019-20 tax return filed?

Readers who have not yet filed their 2019-20 self-assessment tax return for 2019-20 have less than one month to do so. The online filing deadline is 31 January 2021.

Could clients reading this article, who have not supplied all the information we have requested to complete their outstanding 2019-20 returns, please contact us with any missing information without delay. We are now entering that period of ground-rush where the deadline approaches at ever increasing speed.

Initially, late filing – after 31 January 2021 – will trigger a penalty of £100. After three months this increases to a daily penalty of £10 for a maximum of 90 days. Followed by further penalties beyond this period.

There are excuses for late filing that HMRC may accept to mitigate any penalties. HMRC classify these as reasonable excuses. A reasonable excuse is something that stopped you meeting a tax obligation that you took reasonable care to meet, for example:

  • your partner or another close relative died shortly before the tax return or payment deadline

  • you had an unexpected stay in hospital that prevented you from dealing with your tax affairs

  • you had a serious or life-threatening illness

  • your computer or software failed just before or while you were preparing your online return

  • service issues with HM Revenue and Customs (HMRC) online services

  • a fire, flood or theft prevented you from completing your tax return

  • postal delays that you could not have predicted

  • delays related to a disability you have

You must send your return or payment as soon as possible after your reasonable excuse is resolved.

If you’re affected by coronavirus (COVID-19)

HMRC will consider coronavirus as a reasonable excuse for missing some tax obligations (such as payments or filing dates).

Explain how you were affected by coronavirus in your appeal. You must still make the return or payment as soon as you can.

What will not count as a reasonable excuse

The following will not be accepted as a reasonable excuse:

  • you relied on someone else to send your return and they did not

  • your cheque bounced or payment failed because you did not have enough money

  • you found the HMRC online system too difficult to use

  • you did not get a reminder from HMRC

  • you made a mistake on your tax return

Filing your return will not only avoid any penalties for late filing but will also crystalise the amount of tax and other liabilities – NIC and student loan repayments – that may also be due for payment 31 January 2021.

Best wishes for 2021

The turning of the old year into the potential for the new year has usually generated the Happy New Year salutation. And indeed, we do wish our readers all the very best for 2021.

But what challenges we face. Will schools reopen, are we facing a further national lock-down, will our already extended business owners be able to ride out the continuing challenges to their finances?

HNY looks like wishful thinking and yet if we lose sight of that possibility any return to normality is likely to be uphill and unpleasant.

On the bright side, the Oxford vaccine joins the fray to oppose COVID and Brexit is finally, finally over. Whatever the consequences of both issues we can now apply our national grit to meeting any future challenges. COVID is still unpredictable and it is likely to push our overworked NHS to the limit. There will no doubt be delays at cross border areas as hauliers accustom themselves to the new raft of customs red tape and other regulatory changes, but in both cases these obstacles may not be insurmountable.

Business owners who have suffered adverse effects on their businesses in 2020 will see little evidence that their circumstances will change significantly in the first half of 2021.

During 2020, the only workable solution to the COVID outbreak was to suppress economic activity in sectors that relied on social contact, the hospitality and entertainment trades for example. The vaccines will be the magic bullet to restore a more open and socially engaged economy but rolling out the vaccinations and waiting for immunity to build is likely to take some time.

Meantime, what can we do to survive this process and emerge from COVID disruption with our hard-won businesses intact?

Our advice is to engage in rigorous planning activity. The curtains are starting to draw back on uncertainty. We now have nine months experience of dealing with COVID disruption and Brexit uncertainty and have enough data to predict what is likely to happen in the next six months.

Time to dust off your business forecasts.

Activity spent on business planning now will reveal any short-comings to cash-flow or solvency and disclose challenges before they reveal themselves as crises. Planning will open up the opportunity to plan your way through.

If you don’t know how to undertake this process, please call, we can help. Happy New Year may not be our immediate experience of 2021, but it will not always be that way.

Scammers posing as HMRC

We already have more than our fair share of adversity to deal with at present, don’t let criminals add to your woes by defrauding you of hard-earned cash resources.

HMRC has recently published a warning to taxpayers about scammers posing as HMRC employees. They said:

Self-Assessment customers should be alert to criminals claiming to be from HMRC.

The department knows that fraudsters use calls, emails or texts to contact customers. In the last 12 months, HMRC has responded to more than 846,000 referrals of suspicious HMRC contact from the public and reported over 15,500 malicious web pages to internet service providers to be taken down. Almost 500,000 of the referrals from the public offered bogus tax rebates.

HMRC offer the following tips to spot a tax scam. It could be a scam if it:

  • is unexpected
  • offers a refund, tax rebate or grant
  • asks for personal information like bank details
  • is threatening
  • tells you to transfer money

Clients in receipt of similar requests, either online or by telephone, should call us so that we can check if the contact is genuine or fraudulent.

Other readers should not respond to any request received by email, text or a direct call. In particular, do not divulge any personal data. Simply access the GOV.UK website and search for HMRC’s published contact numbers. Call HMRC and explain the request you have received and ask if they could check to see if it is genuine.

The end is nigh

In just three short months the present tax year – 2020-21 – will end midnight, 5th April 2021.

The UK’s tax code is predominantly time limited. Any reliefs and exemptions from UK taxes for 2020-21 will mostly expire at the end of the tax year. Accordingly, there is an imperative to review your tax affairs before this date to ensure that available reliefs are utilised or that penalising tax charges are legitimately avoided.

For example, for 2020-21:

  • Every UK taxpayer is allowed to realise £12,300 of taxable gains without being subject to a Capital Gains Tax charge. Any unused allowance cannot be carried forward.
  • For Inheritance Tax purposes there are a range of gifts that can be made tax-free.
  • Taxpayers with income exceeding £100,000, perhaps for the first time, may have an opportunity to reduce the impact of loss of their personal tax allowance and avoid a marginal Income Tax rate of 60%.
  • There is still time to consult with your pensions adviser to see if you could make additional contributions within the permitted limits. This may be the last year that higher rate tax relief is allowed if the Chancellor makes expected changes to restrict this relief in the forthcoming budget.

Clearly, we all have different personal and financial circumstances so there is no one-size-fits-all approach that can be taken. There are no guarantees that you could take advantage of current exemptions and reliefs, but please call if you would like to discuss your options.

Strategies for the self-employed

The end of the calendar year is a popular accounting date for many businesses, but for those of us with a year-end accounting date of 31 March 2020, reviewing your management accounts for the nine months to the end of December 2020 can have real benefits. For example:

  • If you are self-employed and for the nine months you are predicting lower profits for 2020-21 (compared to 2019-20) it may be possible to reduce your self-assessment payment on account due at the end of January 2021. Many self-employed persons adversely affected by COVID disruption will be in this position. Contact us so we can file an appropriate election.
  • If you are self-employed and your profits are predicted to be higher for 2020-21, then you may have underpaid your self-assessment tax for 2020-21. Again, contact us so we can estimate this possible underpayment and work out a realistic savings plan to accumulate the necessary funds.
  • When working out your taxable profits for 2020-21, don’t forget to include any Self-Employed Income Support received or other COVID related grants.
  • Use the nine months figures to update your financial budgets for 2020-21. We recommend that all businesses undertake this task as it will identify high points and low points in your cash flow and solvency. Please call if you need help with this task. If you have never created a budget before we can help you crunch the necessary numbers.

Needless to say, if you are concerned by the historical results to 31 December 2020 or the outlook for 2021, let’s get together and see how best to meet these challenges. With the external pressures that EU disengagement may pose for your business this is not a time for wishful thinking. Be prepared.

Tax Diary January/February 2021

1 January 2021 – Due date for Corporation Tax due for the year ended 31 March 2020.

19 January 2021 – PAYE and NIC deductions due for month ended 5 January 2021. (If you pay your tax electronically the due date is 22 January 2021)

19 January 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2021.

19 January 2021 – CIS tax deducted for the month ended 5 January 2021 is payable by today.

31 January 2021 – Last day to file 2019-20 self-assessment tax returns online.

31 January 2021 – Balance of self-assessment tax owing for 2019-20 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with HMRC. Also due is any first payment on account for 2020-21.

1 February 2021 – Due date for Corporation Tax payable for the year ended 30 April 2020.

19 February 2021 – PAYE and NIC deductions due for month ended 5 February 2021. (If you pay your tax electronically the due date is 22 February 2021)

19 February 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2021.

19 February 2021 – CIS tax deducted for the month ended 5 February 2021 is payable by today.