Tax Newsletter October 2018

Welcome to this month's newsletter.

Our newsletter this month includes: the use of spreadsheets for VAT purposes, a change in the law to make invoice discounting easier for suppliers to larger companies, a discussion of what is and is not a reasonable excuse and passport issues if we fail to agree a deal with the EU next year.

Our next newsletter will be published on Thursday, 1st November 2018

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Newsletter October 2018


What is a reasonable excuse?

HMRC is still required to obtain certain returns from you even if there is no income or tax to declare. Failure to submit will likely trigger late filing penalties and unfortunately, pleading ignorance of your obligations to file “nil” returns is not a reasonable excuse.

 

Which begs the question, what is a reasonable excuse?

 

HMRC had published what may, and what will not, be considered excusable. They say:

 

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 couldn’t 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.

 

What won’t count as a reasonable excuse are situations where:

 

  • you relied on someone else to send your return and they didn’t,
  • your cheque bounced, or payment failed because you didn’t have enough money,
  • you found the HMRC online system too difficult to use,
  • you didn’t get a reminder from HMRC,
  • you made a mistake on your tax return.

 

Often, failure to file is not a deliberate act. Unfortunately, appealing against what you consider to be an unreasonable stance by HMRC is not that simple, and ignoring the issue is not the way to go.

 

If you find yourself in dispute with HMRC on a late filing challenge, we may be able to help.


 

Making Tax Digital for VAT

HMRC has now published VAT Notice 700/22: Making Tax Digital for VAT (MTD). MTD for VAT is due to commence from 1 April 2019, and the notice sets out who needs to follow the MTD rules, what records need to be kept, and what agents need to do.

 

From 1 April 2019, if your taxable turnover is above the VAT registration threshold - currently £85,000, you are within MTD for VAT and must follow the VAT rules set out in the Notice.

 

Under MTD for VAT businesses must keep records digitally with functional compatible software. This is software which can:

 

  • record and preserve digital records,

 

  • provide HMRC with information and returns electronically using an API feed,

 

  • receive information from HMRC electronically via the API platform.

 

The most efficient way to ensure you are using compatible software is to switch to an already recognised record-keeping system. However, of you feel a maintaining a commercial record-keeping system is not for you, there are still alternatives:

 

  • Continue to keep records on spreadsheets – from April 2019, individual transactions will need to be transferred to functional compatible software, and from April 2020 spreadsheets will need to be in a format which can be digitally linked to compatible software – it will not be acceptable to manually transfer data from spreadsheets to other software by copy and paste for example. Software companies are currently developing ways to link spreadsheets to MTD compatible software, but at present there is much uncertainty about the most efficient way to achieve this, and what the additional cost will be. We expect more information to be available in the coming weeks;
  • Engage us to provide book-keeping services for you – you will need to provide us with your base records i.e. invoices, bank statements, receipts etc. for us to enter transactions individually into compatible software. This would be a tailored service for which we can provide a quote on request.

 

Whatever you decide to do - you will need to make changes, doing nothing is not an option.


 

Invoice discounting with larger customers

Suppliers who sell goods and services to larger concerns often find that the terms of their supply, limits or bans the process of factoring the debts to release funds into cash flow.

 

Cynically, this could be seen as a method these larger customers have used to control options available to their smaller suppliers.

 

Unfortunately, suppliers who sell predominately to major buyers find themselves in a cleft stick: they generally have to wait for longer periods to be paid and as a result are constantly short of cash.

 

Invoice factoring or discounting allows say 80% of a sales invoice value to be received when the invoice is issued and accepted by the customer; a specialist finance company or bank steps in to provide the discounting service.

 

The good news is that there is to be a change in the law to ban these restrictive practices and allow smaller companies to gain access to the funds locked up in their trade debtors.

 

Under the new proposed laws, any such contractual restrictions entered into after 31 December 2018, with certain exceptions, would have no effect and could be disregarded by small businesses and finance providers, which will help stop larger businesses from abusing their market position.

 


 

Passport issues if a “no-deal” Brexit

Guidance on the use of a British passport to travel abroad after 29 March 2019, if there is a “no-deal” Brexit, was issued by government last month. The pertinent facts are reproduced below:

 

After 29 March 2019, if you’re a British passport holder (including passports issued by the Crown Dependencies and Gibraltar), you’ll be considered a third country national and under the EU Schengen Border Code you will need to comply with different rules to enter and travel around the Schengen area. Third-country nationals are citizens of countries (like Australia, Canada and the USA) which do not belong to the EU or the European Economic Area.

 

According to the Schengen Border Code, third country passports must:

 

  • have been issued within the last 10 years on the date of arrival in a Schengen country, and
  • have at least 3 months’ validity remaining on the date of intended departure from the last country visited in the Schengen area. Because third country nationals can remain in the Schengen area for 90 days (approximately 3 months), the actual check carried out could be that the passport has at least 6 months validity remaining on the date of arrival.

 

If you plan to travel to the Schengen area after 29 March 2019, to avoid any possibility of your adult British passport not complying with the Schengen Border Code we suggest that you check the issue date and make sure your passport is no older than 9 years and 6 months on the day of travel.

 

For example, if you’re planning to travel to the Schengen area on 30 March 2019, your passport should have an issue date on or after 1 October 2009.

 

If you are a parent or guardian:

 

  • For 5-year child passports issued to under-16s, check the expiry date and make sure there will be at least 6 months validity remaining on the date of travel.
  • For example, a child planning to travel to the Schengen area on 30 March 2019 should have a passport with an expiry date on or after 1 October 2019.
  • If a child’s passport does not meet these criteria, they may be denied entry to any of the Schengen area countries, and you should renew their passport before travel.
  • For countries that are in the EU but not in the Schengen area, you’ll need to check the entry requirements for the country you’re travelling to before you travel.

 

The Schengen Area is an area comprising twenty-six European states that have officially abolished passport and all other types of border control at their mutual borders. The area mostly functions as a single jurisdiction for international travel purposes, with a common visa policy. The area is named after the Schengen Agreement. States in the Schengen Area have strengthened border controls with non-Schengen countries.


 

 

Tax Diary October/November 2018

1 October 2018 - Due date for Corporation Tax due for the year ended 31 December 2017.

 

19 October 2018 - PAYE and NIC deductions due for month ended 5 October 2018. (If you pay your tax electronically the due date is 22 October 2018.)

 

19 October 2018 - Filing deadline for the CIS300 monthly return for the month ended 5 October 2018.

 

19 October 2018 - CIS tax deducted for the month ended 5 October 2018 is payable by today.

 

31 October 2018 – Latest date you can file a paper version of your 2018 self-assessment tax return.

 

1 November 2018 - Due date for Corporation Tax due for the year ended 31 January 2018.

 

19 November 2018 - PAYE and NIC deductions due for month ended 5 November 2018. (If you pay your tax electronically the due date is 22 November 2018.)

 

19 November 2018 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2018.

19 November 2018 - CIS tax deducted for the month ended 5 November 2018 is payable by today

 


DISCLAIMER - PLEASE NOTE: The ideas shared with you in this email are intended to inform rather than advise. Taxpayers circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.