15 December 2020

More time to pay taxes

In his Winter Economy Plan, the Chancellor announced that the self-employed and other taxpayers will be given more time to pay taxes due in January 2021. Self-assessment payments due on 31 July 2020 were initially deferred until 31 January 2021 but now, under the Chancellor’s enhanced Time to Pay scheme, taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s online self-service Time to Pay facility to secure a plan to pay over an additional 12 months.

This means that self-assessment liabilities originally due in July 2020 will not need to be paid in full until January 2022. Find out more here.

Airbnb – Fresh tax implications

Popular sites like Airbnb are inspiring some homeowners to let out part or all of their home, but this could mean there is tax to pay on the income this generates.

A fresh development is news that Airbnb has confirmed it is now reporting letting income details of the hosts who use the platform to HMRC, enabling targeted tax enquiries.

Many Airbnb hosts mainly let out spare rooms and qualify for the rent-a-room relief (currently £7,500 per year) that is available if letting part of your main residence and which doesn’t create a tax-reporting obligation if the rents are within that figure.

However, letting a second or third home that generates income in excess of £1,000 in a tax year will create a tax reporting obligation. If a landlord hasn’t declared rental income, and it is not covered by rent-a-room relief or the miscellaneous property income allowance,

it’s advisable to talk to an adviser to get your tax affairs in order. Find out more information here

HMRC crackdown on residential property disposals

HMRC is to contact thousands of people it believes made a taxable residential property disposal in the 2018/19 tax year without declaring it on their tax return.

Letters will give details of the information HMRC wants to check and ask recipients to consider whether they should have paid capital gains tax on the disposal. It advises them to either amend their return or use HMRC’s digital disclosure service, if necessary.

Previous letter campaigns focused on taxpayers whom HMRC suspected of having offshore assets that they had not disclosed and contained a controversial request for the recipients to sign and return a certificate of their tax position.

Letters regarding property disposals will not contain this request, but taxpayers and their advisers should carefully consider the best response to any letter, especially if a disclosure is required.

HMRC steps up enquiries into Entrepreneur Relief claims

Entrepreneurs’ Relief (ER) is a very valuable tax relief. In recent months HMRC appears to have been reviewing ER claims more frequently and in greater depth to ensure they are valid.

These enquiries involve clarification and confirmation that the necessary conditions for ER have been met and can be supported by documentary evidence. HMRC will consider the activity of the company in question to confirm its trading status, together with reviews of the company’s accounts and share register to ensure ER conditions are met.

We recommend seeking professional advice prior to making a claim to avoid any pitfalls or issues that may at a later date inadvertently invalidate it.

VAT – Important upcoming changes

Construction industry reverse charge

Business involved in supplying or receiving construction services should be aware of VAT reverse charge arrangements that will apply from 1 March 2021.

From that date, suppliers will no longer charge VAT on affected supplies and instead their customers will account for the VAT as a supply to themselves.

The changes affect any business registered for both VAT and the Construction Industry Scheme (CIS) that is supplying construction services subject to VAT at either 5% or 20%, and any business receiving construction services. More information is available here.

Deferred VAT payment

Businesses that deferred VAT due in March to June 2020 now have the option to spread their payments over the financial year 2021/22 in 11 equal, interest-free instalments.

All businesses that took advantage of the VAT deferral are eligible to use the new scheme – but they will need to opt in using a process HMRC will launch in early 2021. Those that can pay their deferred VAT can still do so by 31 March 2021. Find out more information here.

MTD for VAT

Making Tax Digital (MTD) is to be extended to include all VAT-registered businesses, regardless of turnover, from 1 April 2022.

Currently all VAT-registered business with a taxable turnover less than £85,000 are exempt from compliance with MTD for VAT, which requires a business to keep digital records and use MTD-compliant software to file their VAT returns.

Businesses can sign up to MTD for VAT any time in the run up to 1 April 2022. It will however be mandatory for them to have signed up before their first VAT return period starting on or after 1 April 2022.  Find out more here.

Can we help?

If you need further guidance about any of the tax changes outlined here, please speak with your usual Shipleys contact or one of our team of specialists shown on this page.

Specific advice should be obtained before taking action, or refraining from taking action, in relation to this summary. If you would like advice or further information, please speak to your usual Shipleys contact or one of our specialists shown on this page.

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