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Do I need to complete a tax return?
HMRC guidelines say you need to send a tax return if, in the last tax year:
- you were self-employed – you can deduct allowable expenses;
- you got £2,500 or more in untaxed income, for example from tips or renting out a property – contact the helpline if it was less than £2,500;
- your income from savings or investments was £10,000 or more before tax;
- your income from dividends from shares was £10,000 or more before tax;
- you made profits from selling things like shares, a second home or other chargeable assets and need to pay Capital Gains Tax;
- you were a company director;
- your income (or your partner’) was over £50,000 and one of you claimed Child Benefit;
- you had income from abroad that you needed to pay tax on;
- you lived abroad and had a UK income;
- your income was over £100,000;
- you were a trustee of a trust or registered pension scheme;
- you had a P800 from HMRC saying you didn’t pay enough tax last year – and you didn’t pay what you owe through your tax code or with a voluntary payment.
What can you do to reduce my payment on account?
We can plan your dividends for this tax year. This depends on your spending requirements and money you need on a regular basis. As part of our self-assessment procedure, we offer our clients an assessment of future tax liability based on our own estimates. We can then calculate how much tax you are likely to pay and the POA based on this figure. If you have a limited company then the tax department at Rodliffe will liaise with your account manager to calculate the amount you can take which will help you to defer the extra payment of tax. We can reduce this to any amount depending on your cash flow circumstances. Please note that if later you decide to take more dividends than suggested, this will attract more tax. If you are not one of our limited company clients or don’t have a limited company, we can still do an estimated calculation for you. A claim can be made to reduce the tax to nil, or to a fixed amount. Any such claim must state the taxpayer’s belief that there will be no income tax liability for the current tax year or that any such liability will be covered by income tax deducted at source, or the amount due for the current year, after taking into account tax deducted at source, will be a certain amount which is less than the amount of payments on account based on the preceding year, or the claim must include the grounds for that belief. If the claim does not include these details then HMRC could challenge that the claim was fraudulent.
Are computer software and support charges allowable expenses?
Costs of software licences, maintenance and support, used wholly and exclusively for the business, are allowable.
What can be claimed on disposal of a fixed asset?
Capital allowances can be claimed when disposing of fixed assets. Profit and loss can be used mainly when an asset is disposed of, i.e. passed from the business to someone else. If the value of the asset is greater than the value held in the company’s books at that time then this is the “profit on disposal”.
What property costs are allowable as expenses?
Generally, for a small business, where the trading address is the home address then property costs are not allowed by HMRC. Instead, the director can claim rent non vatable (see the section below). For a small business, however, with a separate business property then the following rules apply:- Council Tax Council tax is classed by HMRC as a personal tax and therefore should not be claimed
Insurance costs can be claimed
Business rates can be claimed. Remember rates are paid over 10 months so make sure that any recurring postings take this into account
Rent is usually paid 3 months in advance and is allowable.
For all equipment owned by the business this is an allowable business expense.
Electric, gas, water, oil, etc… are all allowable
Duplication of rent – (contractors)
There are generally two scenarios where duplication of rent occurs:-
- Where the contractor is relocated to take on a new contract. This in turn means extra rent / accommodation costs are incurred.
- Where a contractor chooses to rent accommodation rather than incurring hotel costs because this is more economical.
HMRC sometimes argue that neither of these costs are allowable. Our policy is that we would not suggest you claim these costs. However, if you are prepared to argue with HMRC that the costs associated with either of the two scenarios above are less than the alternatives you have investigated then HMRC may agree. We suggest clients use their own judgement based on our interpretation above.
© Rodliffe Accounting Limited 2020
Registered in England and Wales No. Company number 05673296