Tag Archives: hmrc

When do you need to submit a self-assessment?

Despite ongoing consultations and efforts to simplify the system, many taxpayers are still left unsure of what it is they’re meant to do.

Since filing a self-assessment late carries a hefty penalty fee, knowing when you’re required to complete a tax return is very important.

The chances are that, if you completed a self-assessment for the last tax year, you’ll need to do it again this year. HMRC tend to issue letters informing people when completing Self Assessment forms are no longer necessary, and they actively urge taxpayers to tell them as soon as their situation changes.

A spokesperson for HM Revenue and Customs stated “people with slightly more complex affairs may have to fill in a tax return but it all depends on their personal circumstances.

“We don’t want anyone to fill in a tax return unless it’s absolutely necessary.”

So, how do you know if it is necessary for you? HMRC will judge whether or not they need you to complete a Self Assessment based on a few different factors. Here are some of the more important points to consider –

Your income

As a rule, anyone with a taxable income of more that £100,000 will automatically be required to fill out a self-assessment form.

If you make any income over £10,000 from savings, investments or shares, you’ll also need to report it to HMRC.

Say you sold your holiday home or some shares to your business in the last year. You would need to disclose that income on a self-assessment in order to pay the Capital Gains Tax that you owe.

In most cases, though, if your only income comes from your wages as a non-shareholding employee/director or pension, you won’t need to submit a return.

Your role

If you’re self-employed, or were self-employed at any point over the past tax year, you will need to submit a Self Assessment. You will be allowed to deduct some allowable business expenses from your income before working out how much you owe in tax.

Company directors also need to complete a Self Assessment unless they work for a non-profit organisation and do not receive any pay or benefits. Trust and registered pension scheme trustees must complete tax returns.

As a landlord, you may not think of yourself as self-employed or as a business owner. But, in HMRC’s eyes, you are. You must report all income you receive in rent but you will be able to deduct revenue expenditure from your profits to reduce your tax liability.

Depending on your individual circumstances, you may need to send a return even if you do not fall into any of these categories. For example, religious ministers and Lloyd’s underwriters are also liable for self-assessment.

Other types of income

Even if your usual income does not meet the HMRC criteria for requiring a Self Assessment, other factors may mean you still need to fill out a tax return.

This could include your partner’s income too. If one of you makes more than £50,000 a year, and either you or your partner are claiming child benefit at the same time, you will need to report it on a self-assessment form.

Income from overseas is also taken into consideration. Any tax owed on income in other countries must be put on your tax return. Even if you were living abroad yourself, you’ll need to pay the tax on any UK income you made during that time.

If you have received a P800 from HMRC saying you didn’t pay enough in the last tax year, and you have not already payed what you owe through your tax code or voluntary payment, it will be added onto your total tax bill.

Work with us

In any case, if you receive a letter or HMRC telling you to send in a tax return, you must submit the form. Even if you don’t have any tax to pay, going against HMRC could result in fines or even trigger an official investigation.

The Self Assessment process can seem daunting, especially with new tax changes being announced every year. If you need any advice or guidance through submitting your tax return, speak to us today on 01872 271655, or email us on enquiries@kelsallsteele.co.uk

Could your hobby be a trade?

Do you make money doing what you love?

Thanks to a huge number of popular online platforms, more and more people are now able to make a bit of extra money in their spare time.

Whether it’s buying and selling items on eBay, selling your crafts on Etsy, or listing your talents on People Per Hour, your hobby could provide extra income for you to put to one side for a rainy day.

But with HMRC cracking down on tax evaders, how do you know when your pastime has become a business activity?

What HMRC have to say

There is no single definition as to what counts as a business, or any specified allowance you may earn before you need to register as one. This can lead to a lot of confusion where tax liabilities are concerned.

Tax specialist at BDO Global, Dawn Register, says that “few people consider the tax implications of selling items through eBay and Amazon, Gumtree and Etsy, and may think it is just a hobby.

“Getting it wrong could involve paying back taxes, late payment interest and penalties to HMRC,” says Register. So, figuring out the turning point at which your hobby becomes a taxable trade is absolutely vital.

HMRC’s “badges of trade” are a good starting point. These are the semi-official criteria for determining whether or not an activity should be classed as business.

HMRC will consider:

  • Whether or not the item was purchased solely to make a profit from selling it.
  • How many transactions you make, for example if your sales are regular and repeated, or if you just sell things every now and then.
  • If you bought the asset with the intention of selling it for a profit, or if it is no longer useful to you or brought you ‘pride of possession’
  • How the sale was carried out, either like a trading organisation or as an effort to raise emergency funds
  • If you made any modifications, repairs or improvements to the item, and if these were made in order to sell the item or sell it for a greater profit.
  • The time between you purchasing the asset and putting it up for sale, which will suggest whether you bought the item to sell off quickly or if you originally planned to keep it.
  • If you borrowed money to buy the asset and if the resale was necessary to pay back the loan.
  • Whether the item was bought yourself, inherited, or received as a gift.

If HMRC decide your hobby is in fact a trading operation, you will have to pay tax on your profits.

In the past, you needed to report to the taxman for every single pound you made. This has changed with the introduction of the Trading Allowance introduced earlier this year. People now have a £1,000 tax free allowance for “trading activities”. This £1,000 is turnover and not profit – please remember that.

Changes to the Trading Allowance

Making every effort to encourage a “digital and sharing economy”, the government announced that they would be instating this new allowance for trading income. The bill was published in September, but applies to activities made since April 2017.

Simplifying income tax obligations for hobby traders, the allowance means those who turn over less than £1,000 a year from trading will no longer have to pay income tax. They’ll also no longer be obliged to register their business or file any tax returns.

If your annual turnover exceeds £1,000 at any point, however, you will need to complete a self-assessment form.

Are you a trader?

If you believe your hobby may be a trade, you’re obliged to notify HMRC yourself. This should be done by the end of the tax year in which you started trading.

For example, a business that starts trading between 6th April 2017 and 5th April 2018 would need to register with HMRC by 5th October 2019.

You can register your business online, and you’ll also need to register for Income Tax and Class 2 National Insurance Contributions.

Establishing your hobby as a trade does not have to be complicated process. Our highly experienced team, here at Kelsall Steele can guide you through every step of the process. Call us today on 01872 271655 or email enquiries@kelsallsteele.co.uk

Making Tax Digital: New Timetable

HMRC have announced significant changes to the timetable for the implementation of Making Tax Digital. We have previously written about HMRC‘s original plans for the implementation of Making Tax Digital, which would have come into effect from April 2018 for a number of businesses and landlords with gross income exceeding the VAT threshold (currently £85,000), and April 2019 for those below the threshold – however these timescales have now been relaxed.

Following HMRC’s newly reformed timetable, only VAT Registered businesses will be required to keep digital records from April 2019 – and only for VAT reporting purposes. The previous requirements for the reporting of other taxes quarterly to HMRC will not come into effect until at least 2020. This means businesses and landlords with turnovers below the VAT threshold will have at least 2 years before having to adopt a new digital system.

While the Government and HMRC are wholly supportive of MTD and the need to move to a more modern and streamlined system for the reporting of businesses tax affairs this is a significant slackening in the more imminent timescales that were previously expected. These changes have been well received by businesses and software providers alike who both recognise that more time is required to be able to make a comfortable transition to a new digital system of working.



Self-employment Business start-ups – FAQ

Self Employment FAQ

Starting-up in business, becoming self-employed, can be a bit of a daunting process, especially if you are not sure of some of the steps you need to go through. There are a few ‘hoops’ you need to jump through so we have put together a few basic pointers for those who are thinking of making that move in self-employment.

We can help you at every step of the way, so please feel free to contact us if there is anything you would like further information on or help with.

  1. Do I need to tell HMRC?
    • You will need to register as self-employed with HMRC and the easiest way to do this is online at gov.uk. Tell them as soon as possible after your self-employment begins.
  2. What will they ask me?
    • Your National Insurance number, address, date of birth and details of the business including nature of the business, date it began trading and your business address. If you have previously registered as self-employed you would have had a 10 digit unique taxpayer reference number. They will ask for this if you have it.
  3. Do I need to register for VAT?
    • You only need to register for VAT when your sales exceed £83,000 in a rolling 12 month period. However, you may wish to voluntarily register to enable you to claim back the input VAT on your expenses. This does mean you have to charge output VAT on your sales so it’s only advisable to voluntarily register if this will not affect your competitiveness e.g. if your customers are VAT registered and can reclaim the VAT you charge them.

Don’t forget that if you become VAT Registered you will need to file VAT Returns online with H M Revenue & Customs. You will need to create a Government Gateway account and register to file VAT Returns online. Make sure you allow enough time for this process before your first VAT Return becomes due!

  1. Do I pay myself a salary?
    • No, the money you draw from your business is not classed as a salary and is not a business expense. You do not pay tax on the money you draw from the business, only on the business profits. You can of course employ other people and pay them a salary which is a business expense.
  2. When do I pay tax?
    • Your first tax return will run from the day you start self-employment up to the following 5 April. Any tax will be due on the 31 January following that e.g. if you start self-employment on 1 June 2016, your first tax return will run to 5 April 2017 and if you have made a taxable profit, you will pay tax on 31 January 2018.
  3. Do I need to register for national insurance?
    • When you register as self-employed you will automatically be registered to pay national insurance. If your income is high enough, you will pay national insurance at the same time as any income tax.
  4. What records should I keep?
    • You need to keep records of your business income and expenditure. This will include bank statements, sales invoices and purchase invoices, details of the entries on your VAT Return and payroll records if you employ people. Keep records for at least 5 years from the 31 January following the tax year e.g. you must keep your records for the year ended 5 April 2016 at least until 31 January 2022.
  5. What happens once I’ve registered as self-employed?
    • HMRC will issue you with a unique taxpayer reference number and send you a notice to complete a tax return. You will need to enter on this tax return all your business income and expenditure to calculate your taxable profit and any tax that may be due. The tax return needs to be filed by the 31 January following the tax year end date (e.g. tax returns for the year ended 5 April 2016 are due to be filed by 31 January 2017).
  6. Aren’t things changing soon?
    • Yes! Over the next few years the Government’s plans to ‘make tax digital’ (MTD) will be rolled out and, depending on the size of your business, you may have simpler rules to follow for reporting your income and expenditure. You will also have to report more regularly, probably 4 times a year. More details will follow as they come through!

Pre-Registration VAT Expenses

Pre-registration claims for VAT – looking back

If you have recently become VAT registered and are about to prepare your first VAT Return, don’t forget to look back at your previous expenditure to see if there’s any pre-registration expenses that can be claimed for.

If you have purchased goods in the last 4 years that you still have in stock at the date of registration, then you can enter these on your VAT Return and re-claim the input VAT paid. Also, if you have purchased assets in the last 4 years, e.g. machinery and equipment, that you still hold at the date of registration , then you can re-claim the input VAT paid on these.

You can also re-claim input VAT on services that you received within the 6 months prior to registration. However they must relate to the ongoing business and not to completed projects or to goods that were used up before registration e.g. you cannot claim for repairs to a machine that was sold before you registered for VAT.

You need to have the invoices on record to be able to back up your claim in case H M Revenue & Customs were to query it.

Don’t forget that you need to register online to be able to file your first VAT Return. You can do this using your government gateway account.

If you have any queries with respect to preparing or filing your VAT Return, don’t hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk

Tax Credits Renewal 2016

Deadline Day

The deadline for Tax Credits Renewal is fast approaching! Renewals must be completed and returned to H M Revenue & Customs by 31 July 2016 so if you haven’t done so already, now is a good time to tick this off the list.

If you miss the deadline your tax credits payments will stop.

In a change to the renewal process, some claimants may find that they do not need to actively renew their tax credits as those not requiring any changes will be renewed automatically.

How do I know whether to renew or not?

If your renewal pack has a red line across the first page and states ‘reply now’ then you must renew your tax credits online or via phone/post.

If your renewal pack states ‘check now’ then you should check all the details within your renewal pack, and provided there are no changes required you will not need to do anything and your claim will be renewed automatically.

If anything is incorrect, you must tell HMRC by 31st July 2016 else payments can stop and fines be imposed. As with the renewal, you can notify of changes changes to your tax credits online or via phone/post.

Self Employed

If you are self-employed, you may not yet have completed your Tax Return for the year ended 5 April 2016 so you may have to provide estimated figures. Remember to provide actual figures by as soon as possible, as your income level will affect the amount of tax credits you receive.

For the self-employed, remember that there are other reliefs available also, for example, if you have self-employed losses you can offset these against other income and also carry forward the balance to set against any future profits for Tax Credits purposes.

If you need any help with your Tax Credits renewal, or if you think you may be entitled to Tax Credits but are not currently claiming them, please contact Lydia Williams  at Lydia.williams@kelsallsteele.co.uk or one of the team on 01872 271655.

Changes to Dividend Tax

Dividend Tax Credits

Up until 5 April 2016 dividends paid by UK Companies normally had an attached 10% tax credit of the grossed dividend. Therefore if you received a dividend of £90, there would be a deemed tax credit of £10, making the total gross dividend £100.

This dividend tax credit was non-refundable but could be offset against a taxpayer’s other income tax liabilities.

Dividend Allowance

From 6 April 2016 the entire gross dividend is paid to the recipient with no “attached” dividend tax credit. However, a new £5,000 tax free dividend allowance has been introduced.  Dividends above this level will be taxed at 7.5% for basic rate (20%) taxpayers, 32.5% for higher rate (40%) taxpayers and 38.1% for additional rate (45%) taxpayers.

Do note that dividends received through ISA’s will be unaffected.

Taxpayers who receive dividends in excess of £5,000 will from 6 April 2016 be required to complete a Tax Return form in order that the tax charge can be collected by HMRC. This is in contrast to earlier years where basic rate taxpayers had no additional liability due to the benefit of the attached tax credits and hence no need to contact HMRC.

If you would like further information on this topic, please don’t hesitate to contact Martyn Gillingham on 01872 271655 or via email at martyn.gillingham@kelsallsteele.co.uk

Budget 2016


  • Income tax personal allowance to rise to £11,500 for 2017/18
  • Introduction of a Lifetime ISA for under 40’s
  • Abolition of Class 2 NI
  • Reforms to corporate tax losses
  • Reduction in the Corporation Tax rate
  • Changes to Entrepreneurs’ relief

Budget 2016 Summary

The Chancellor’s 2016 Budget contained some important announcements and confirmed a number of changes planned for the new tax year. Following this, we have put together a Budget Summary PDF which contains the latest tax and financial information, which we trust you will find useful.

There is also a handy Tax Data Card for 2016/17, giving details of all the allowances and limits you’ll need to know. You can download both the PDFs for free via the links below:

Our summary goes into more detail on all of the points raised in the budget, aimed to give you a clearer picture of the announcements and how the changes will affect you and your business. however, as always, if there is anything you would like to discuss, please do not hesitate to contact us on 01872 271655 or via email at enquiries@kelsallsteele.co.uk

Entrepreneurs’ Relief and Furnished Holiday Lettings

HMRC back down!

Entrepreneurs’ Relief is a valuable Capital Gains Tax (‘CGT’) provision intended to reduce the burden of taxation payable on capital gains made by individuals on certain business assets disposed of in certain circumstances. If you can benefit from entrepreneurs’ relief you can reduce your rate of CGT from the top rate of 28% (or the flat rate of 18%) to just 10%.

Entrepreneurs’ relief applies mainly to gains made by individuals on the disposal of certain qualifying business assets where it can be shown that the assets in question have been sold as part of disposing of all or part of a business.

Our clients operate a Furnished Holiday Lettings business which consisted of a number of properties in different locations. Back in 2010 they decided that one of those properties did not quite fit with the rest of the business. It was located some way from the rest of their properties and offered a different holiday to the rest of the business. They decided to sell it.

The sale of the property included passing on advance deposits received from people who had booked the property for the coming season. It included all the fixtures and fittings in the cottage together with all the furniture. Our clients wrote to their former customers advising them that the property was being sold and that the new owners would continue to offer it for Furnished Holiday Lettings in the future.

The capital gain was duly calculated and entered on our clients Tax Returns for the year ended 5th April 2011. The self-assessment tax was calculated on the basis that our clients had disposed of part of their business and were, therefore, entitled to claim Entrepreneurs’ Relief.

Some months after the Tax Returns were filed HMRC wrote requesting further details of the sale. Once these were provided HMRC suggested that Entrepreneurs’ Relief was not due as our clients had sold only an asset used in a business and not ‘part of the business’ itself. We demonstrated that our client’s business turnover had reduced and that their profits were reduced as a result and that the new owners were operating the property as a going concern – so clearly part of the business had been sold. HMRC disagreed and refused the claim for Entrepreneurs’ Relief.

We appealed against the decision and requested it be reviewed. HMRC steadfastly refused to change its position and suggested that the only solution would be to take the matter to a hearing before the First Tier Tax Tribunal. We suggested that we might meet with HMRC under the Alternative Dispute Resolution system to discuss our different views of our client’s entitlement. HMRC refused this course of action and listed the matter for a hearing.

There followed months of correspondence between us. Vast quantities of paperwork were produced as we and HMRC prepared our respective cases for the hearing. HMRC maintained their view that ‘part of the business’ had not been sold. Our clients maintained their determination to see the argument through.

After two and a half years of stalemate in April 2015 HMRC backed down.  Suggesting that a change to viewpoint had led them to revise their opinion, the claim for Entrepreneurs’ Relief was allowed and it was accepted that our clients Tax Returns were correct all along.

The moral of this story – any valuable tax relief is worth fighting for and make sure you get the experts on your side.

Please contact us if you have a CGT enquiry.

HMRC Tax Codes 2015-2016

New tax year, new tax code

HMRC have been issuing new tax codes over the last few months for the 2015-2016 tax year. You may well have received a Coding Notice explaining your new tax code, particularly if you have more than one job, or income from more than one pension, or even a combination of both.

HMRC also informs your employer or pension provider of your new tax code, so from 6 April 2015 they should be able to deduct the correct amount of tax from your income.

Cracking the PAYE Code

You need to have a different tax code for each of your sources of income to ensure that you get the full benefit of your personal allowance (for those under 65 this is £10,600 for the 2015-2016 tax year). For example, if your earnings from one job exceed your personal allowance, then HMRC will offset your personal allowance fully against that income and deduct tax at basic rate (or higher rate) from your second source of income.

Difficulties can arise if both your sources of income fall below the personal allowance. If this is the case, HMRC have to apportion the personal allowance between them, for example, they may allow £6,600 against your first job and £4,000 against your second job. If at the end of the tax year, the income from your first job was less than £6,600 or the income from your second job was less than £4,000 then you will not have received the full benefit of your personal allowance and should be due a tax refund.

Additional Reliefs

As well as your personal allowance, other reliefs that you are entitled to may be included in your tax code, for example, blind persons allowancemarried couples allowance (for those born before 5 April 1935) and also the new Marriage Allowance, allowing you to transfer 10% of your unused personal allowance to your spouse, or vice versa . You may also be entitled to relief for expenses you pay that HMRC deem to be tax deductible, the most common of which is professional subscriptions or higher rate tax relief on gift aid payments.

You may also see negative entries on your Coding Notice which reduce the reliefs available against your income. These may include amounts of unpaid tax in previous years, an estimate of other income receivable in the year (for example rental income) or taxable company benefits that you receive.

Check Your P60!

Although your Coding Notice is designed to try and ensure that you pay the right amount of tax throughout the year, it is still important to look at the figures entered on your P60’s at the end of the tax year and check that you are happy that the correct amount of tax has been deducted. If you have any concerns with this, please contact us and we will be happy to help.

If you are unsure about any entries on your Coding Notice, you can contact HMRC using the contact details on the Coding Notice. For more information, please don’t hesitate to contact us on 01872 271655.

Tax Credits – Time to Act

It’s that time of the year again when thousands of us receive Tax Credits renewal packs through our door. The deadline for completing these and returning them to H M Revenue & Customs is 31 July 2015 so if you haven’t already, it’s definitely a good idea to get this job ticked off the list as soon as possible. If you miss the deadline your tax credits payments will stop.

Some people are able to renew tax credits online, providing they have no changes to report but many will need to renew by phone or by post. You must renew by phone if you don’t receive your renewal pack by 30 June 2015.

It’s important to check through your Annual Review form carefully to make sure your circumstances are still the same. You then keep this form for your records and only return the Annual Declaration to HMRC.

You should also have received help notes which explain what needs to be entered in each box on the Annual Declaration. These also contain workings sheets which are very useful, for example, in the working sheet for ‘other income’ HMRC confirm that the first £300 of other income does not need to be declared. You are also able to deduct gift-aid payments and personal pension contributions from your employed or self-employed income.

If you are self-employed, you may not yet have completed your Tax Return for the year ended 5 April 2015 so you may have to enter estimated figures. Remember to provide actual figures by 31 January 2016 to ensure that you are paid the correct amount.

For the self-employed, remember that there are other reliefs available also, for example, if you have self-employed losses you can offset these against other income and also carry forward the balance to set against any future profits for Tax Credits purposes.

If you need any help completing your Tax Credits renewal form, or if you think you may be entitled to Tax Credits but are not currently claiming them, please contact Lydia Williams  at Lydia.williams@kelsallsteele.co.uk or one of the team on 01872 271655.

Paying HMRC

A question we get asked quite regularly is “How do I pay HMRC?”, below is a summary of the key ways of paying HMRC for Corporation Tax, VAT and Personal Tax:

Corporation Tax

If your taxable profits are less than £1.5m HMRC will expect you to pay the Corporation Tax in one go, the deadline for this is 9 months and 1 day after the end of your accounting period. If the payment is late then HMRC will charge you interest based on the amount of Corporation Tax owed.

  • At the Post Office – For payments up to £10,000 you can pay at the Post Office by debit card, cash or cheque made payable to ‘Post Office Ltd’. You will need a payslip which HMRC will send to you after we have electronically submitted your Company Tax Return.
  • Online or telephone banking – There are two bank accounts you can use to pay your Corporation Tax to HMRC, the payslip which HMRC send you will detail which account to use, but if in doubt use Cumbernauld. As the reference, use your 17 character Corporation Tax reference which can be found from the payslip HMRC will send you.
Account Name Sort Code Account Number
HMRC Cumbernauld 083210 12001039
HMRC Shipley 083210 12001020
  • Online by Debit or Credit Card – You can pay directly to HMRC online using the following link. You will need your 17 character reference number which can be obtained from the payslip HMRC will send you. It is worth noting that HMRC will charge you 1.4% of the payment value if you pay by Credit card.

If your taxable profits exceed £1.5m HMRC will expect quarterly payments.

Value Added Tax – VAT

The deadline for paying your VAT is normally the same as the filing deadline, being 1 month and 7 days after the end of the VAT period. There are several ways to pay your VAT:

  • Direct Debit – The easiest way to pay your VAT is to set up a Direct Debit, once you have submitted a VAT return HMRC will automatically set up to take the payment owed, or if you are due a repayment this will be made directly into your bank.
  • Online or telephone banking – You can make your VAT payment using online banking or telephone banking using the account details just below. The reference you will need to include will be your 9 digit VAT registration number which can be found on your VAT registration certificate.
Account Name Sort Code Account Number
HMRC VAT 083200 11963155
  • Bank or Building society – You can pay at your local bank or building society, however you will need order paying-in slips from HMRC, these can take up to 6 weeks to arrive. Payment can be made using cash or a cheque made payable to ‘HM Revenue & Customs only’ followed by your 9 digit VAT registration number.

Personal Tax

Payments for personal tax are generally required to be made to HMRC twice a year. On 31 January you are required to pay the prior year’s tax (Balancing payment), and also the first payment on account for the year ahead. On 31 July you need to make your second payment on account.

  • At the Post Office – For payments up to £10,000 you can pay at the Post Office by debit card, cash or cheque made payable to ‘Post Office Ltd’. However, you will need to still be getting paper statements from HMRC and also have the paying-in slip which HMRC sent you.
  • Online or telephone banking – There are two bank accounts you can use to pay your personal tax to HMRC, your bill should tell you which account to use, but if in doubt use Cumbernauld. As the reference use your 11 character Unique Taxpayer Reference (UTR) followed by the letter “K” which can be found on your tax return or your HMRC online account.
Account Name Sort Code Account Number
HMRC Cumbernauld 083210 12001039
HMRC Shipley 083210 12001020
  • Online by Debit or Credit Card – You can pay using your credit or debit card using the following links. You will need your 11 character Unique Taxpayer Reference (UTR) followed by the letter “K” which can be found on your tax return or your HMRC online account.

Pay HMRC online via Debit Card

Pay HMRC online via Credit Card  – (Incurs 1.4% fee)

  • Post a cheque – You can post a cheque to HMRC, the cheque will need to be made payable to ‘HM Revenue & Customs only’ followed by your Unique Taxpayer Reference (UTR). You will need to send the cheque with a payslip, if you did not receive a payslip from HMRC you can create your own payslip online.

The cheque and payslip should not be folded or fastened together, they should then be sent to the following address:

HM Revenue & Customs
DB98 1YY

Excuses, excuses….

HMRC have recently released their list of the all time worst excuses offered by taxpayers who were late in filing their self assessment returns.

With this year’s deadline of 31st January fast approaching, now is the time to get your accounts in order and submit your return to the revenue.

Although HMRC will accept reasonable, legitimate excuses for late filing, any of the following excuses are not likely to be enough to swerve that £100 fine!

  • My pet dog ate my tax return…and all the reminders.
  • I was up a mountain in Wales, and couldn’t find a postbox or get an Internet signal.
  • I fell in with the wrong crowd.
  • I’ve been travelling the world, trying to escape from a foreign intelligence agency.
  • Barack Obama is in charge of my finances.
  • I’ve been busy looking after a flock of escaped parrots and some fox cubs.
  • A work colleague borrowed my tax return, to photocopy it, and didn’t give it back.
  • I live in a campervan in a supermarket car park.
  • My girlfriend’s pregnant.
  • I was in Australia.

The deadline for filing by paper return passed at the end of October 2014, so any outstanding returns for the 2013/14 tax year must now be filed online before the deadline of 31 January.

While HMRC have highlighted a number of excuses given by taxpayers, it’s nice to know that us taxpayers are not the only ones with the excuses. Here are a number of excuses that HMRC gave in regards to inquiries on the state of client’s tax affairs:

  • Please can you call back in about an hour, Mr X (the Inspector) has just gone for a lie-down (that one was used by HMRC a few years ago).
  • We can’t issue your tax repayment, as shown in your Corporate Tax Self-Assessment, because it’s on a work list.
  • It’s in a pile and because it hasn’t been two weeks since we received it we don’t have to look at it yet.
  • Automated HMRC message: ‘If it’s less than 4 weeks since you submitted the return to us, please call later’.
  • Automated HMRC message: ‘We are very busy at this time’ and the call cuts out.

* Source http://economia.icaew.com/


Self Assessment 2014 – don’t miss the deadline!

Self Assessment 2014

Welcome to January – a time for new beginnings, resolutions, dieting and for thousands of people, it is also time for that last minute panic to complete and file their tax return by the deadline of 31 January. And as accountants, don’t we know it!

If you still haven’t gathered together your income and expenditure records for the year ended 5 April 2014 then this does need to be done sooner rather than later. Remember, if H M Revenue & Customs have issued you with a Tax Return, you do need to submit one, regardless of whether you have anything to report on it.

A penalty of £100 per late Return will be charged whether you have any tax to pay or not, and for partnerships, this can prove quite expensive as it is £100 per partner for a late partnership Tax Return plus £100 for each personal Tax Return.

The information that needs to go on your Tax Return would be the following (where applicable):


  • Self employment income, expenses and details of purchases of any capital items relating to the accounts year ending in the 2013-14 tax year;
  • Employment income, tax deducted and any benefits in kind;
  • Pension income and tax deducted;
  • Rental income and associated expenses;
  • Savings income and dividend income and tax deducted;
  • Capital gains from the sale of assets;
  • Total amount of Child Benefit received by you and your partner (including details of the number of children you received the Benefit for)


  • Personal pension and annuity contributions;
  • Interest paid on loans used for a qualifying purpose;
  • Charitable donations made under the Gift Aid scheme.

If you are not sure if you have been issued with a Tax Return or if you need any help at all in completing the Return, please do not hesitate to contact us.

Charities: Payments to overseas bodies

Updated Guidance

HMRC has announced that it has updated the section on Payments to overseas bodies in the detailed guidance notes for charities.

Charities might like to take a look at this guidance, which deals with payments to bodies outside the UK and whether these can be considered to be charitable expenditure.

In general, a payment by a charity, which is in accordance with its charitable purpose, is classed as charitable expenditure. However, where the payment is to an overseas body, there are additional conditions that must be met in order for the payment to be charitable expenditure for UK tax purposes.

The criteria are that:

  • The payment is made to a foreign supplier of goods or services in the ordinary course of the charity’s activities; or
  • The charity takes reasonable steps to ensure that the payment is applied for charitable purposes.

Trustees are required to carry out appropriate research in relation to the overseas body in order to minimise risk to the charity’s finances and provide information and supporting documentation about:-

  • The person or persons to whom the payment was given
  • The specific charitable purpose for which the payment was given, the reasons, and how the decision to provide the payment was arrived at
  • The guarantees or assurances that have been obtained from the overseas body that the payment will be applied for the purpose for which it was given (such as a partnership or other written enforceable agreements), and what financial controls were in place, including sufficiently detailed financial records providing robust audit trails
  • The steps the trustees took to ensure the payment will in fact be applied for charitable purposes (such as safeguards, monitoring and oversight)
  • The follow-up action taken by the trustees to confirm that payments were applied properly

For more detailed information and examples please see HMRC’s Guidance on Payments to overseas bodies.

Class 2 NI (National Insurance)

NI Contributions

When you first inform H M Revenue & Customs that you are self-employed, you will automatically be registered to pay Class 2 National Insurance (NI) contributions. These are £2.75 per week for everyone over the age of 16 and under pension age, and are normally payable by Direct Debit either monthly or 6 monthly.

Small Earnings Exception

However, if your self-employed earnings (i.e. income less expenses) are less than £5,885 for the year, you can apply for a Certificate of Small Earnings Exception using form CF10 from H M Revenue & Customs. Once you have this certificate you will no longer pay Class 2 NI contributions. You can however continue to make payments even if your earnings are low. If you are not making any other NI contributions, you may want to keep paying your Class 2 NI to ensure you are still entitled to a full basic state pension when you retire. Employees earning over £153 per week will be paying Class 1 NI so if you are self-employed and also employed, you may not need to pay Class 2 NI to keep your entitlement to basic state pension.

State Pension Entitlement

The amount of state pension that you can claim when you reach retirement age is based on the National Insurance contributions you have paid. For those who will reach state pension age after 6 April 2016, 35 qualifying years of National Insurance contributions are needed to enable receipt of the full basic state pension.

Class 2 NI Credits

If you are unable to work for complete weeks at a time, or if you receive certain carer benefits, you may be able to apply for Class 2 NI credits. These credits allow you to keep the benefits that Class 2 NI provides without you actually making any payments.

NI Payments & Pension Forecast

To find out how many qualifying years of NI payments you currently have, you can apply online for your NI account from H M Revenue & Customs.

You can also apply for a state pension forecast. This forecast will be able to tell you if you need to make any additional NI contributions to ensure you are entitled to your full basic state pension.

If you would like any help in checking your NI record, or would like any further information about making NI contributions, please contact Lydia Williams on Lydia.williams@kelsallsteele.co.uk or on 01872 271655

VAT Accounting Schemes

Keep it simple

In order to simplify the VAT preparation process, HM Revenue & Customs do allow several alternative VAT accounting schemes for certain business types. If you are eligible, they could save you time and money.

A summary of the main alternative VAT accounting schemes are as follows :

Annual Accounting Scheme

If your estimated VAT taxable turnover for the following 12 months does not exceed £1.35million, you are not part of a group, you have not used the scheme within the last 12 months and you are up to date with your VAT payments then you will be eligible for this scheme.

Instead of completely quarterly VAT Returns, you can complete just one annual Return. Throughout the year, you make interim payments (either 9 monthly or 3 quarterly) based on your previous years actual VAT payments. When you submit your VAT Return, you will then make a balancing payment or receive a balancing refund.

The main benefit of this scheme is to aid with cash flow management.

Cash Accounting Scheme

If your estimated VAT taxable turnover for the following 12 months does not exceed £1.35million and you are up to date with your VAT Returns and payments then you can apply to use this VAT scheme.

Instead of entering items on your VAT Return at the date they have been invoiced, you only enter them at the date they have been paid or received by you. There are some exceptions to this, for example, assets bought on hire purchase or lease purchase must still be entered at the invoice date.

The main benefit is again a cash flow management one, as you only have to pay over output VAT when you have received the cash from the customer. If the customer never pays you, you will never pay over the output VAT.

Flat Rate Scheme

If your VAT taxable turnover is less than £150,000, you are not part of a group and you haven’t used the scheme within the last 24 months then you will be eligible to apply.

Instead of declaring output VAT on your taxable sales and claiming input VAT on your purchases, you can simply pay over a fixed percentage of your total VAT inclusive turnover each quarter. Each business type has a different HMRC approved percentage rate, (e.g. hotels would pay over 10.5% of their total income), but newly VAT registered businesses can reduce the percentage by 1% for the first 12 months. This percentage must be applied to your total sales, which would also include zero-rated and exempt sales. If a large proportion of your sales are zero-rated or exempt, i.e. you do not have to charge VAT on them under the standard VAT rules, then this scheme may not be beneficial for you.

You cannot claim back the input VAT on your purchases with the exception of capital asset purchases with a VAT-inclusive cost of £2,000 or more.

The main benefit of this scheme is to reduce the burden of the paperwork required to complete a standard VAT Return and for some businesses, it could significantly reduce the overall VAT payable to HM Revenue & Customs.

HMRC’s website contains a list of the approved Flat Rate Scheme percentage rates you would have to charge if you changed to the Flat Rate Scheme.

Contact Us

If you think you could benefit from using any of these schemes, or would like any further information, please do not hesitate to contact us and we will be happy to help.

Phishing Scams: HMRC Refunds

Looking through your inbox, you’re drawn to the subject ‘Tax Refund Notification’ and your first thought is ‘how much am I due?’

As you read further into the email it claims to be from HMRC and that you have an amount waiting to be returned to you. The email appears harmless enough as it asks you to click on a link, or fill out a form, in order to provide your bank details for the refund but STOP RIGHT THERE!

What you have been sent is not from HMRC, but someone impersonating them; this type of scam is what’s known as phishing,

Phishing for information

Phishing emails are designed to deceive you into sharing your sensitive information to an unknown third party. The cyber criminals behind these phishing scams are looking to gain your bank account details, credit card information or even account passwords; all of which you’d rather not share with someone else.

How can you be sure the email is from who they say they are? Some of the more obvious signs for detecting a phishing email are:

• Spelling mistakes and poor grammar
• Emails requiring “immediate” or “urgent” action
• The email starts with a generic greeting such as “Dear Customer”
• Illegitimate “from” addresses

Protect yourself

If you see the signs, chances are it’s a phishing email. The main thing is to stay safe and keep your information private. There are a couple of easy ways you can do this, such as:

Never responding to emails that request personal financial information
HMRC, banks and reputable organisations will not usually ask you to disclose personal information, bank, or credit card information through email. If you follow a link in an email that requests any of this information STOP and check with the organisation supposedly sending the email.

Keeping a check on your accounts
Regularly check the activity on your bank, credit card and online payment systems. Any unusual activity or transactions you weren’t expecting, report to your bank or financial institution immediately.

Further Information

Most large organisations will provide information regarding recent phishing scams circulating, and the way in which you can report these. For example, HMRC have a page detailing how to recognise and report suspicious emails. Banks and credit card companies will often have similar pages.

There are many other ways of checking if an email is legitimate and for keeping your information and online presence safe from cyber criminals. If this is something you would like us to help you with, please speak to Cara Dale on 01872 271655 or email on cara.dale@kelsallsteele.co.uk

The Health and Wellbeing Tax Plan

The Health and Wellbeing Tax Plan is an initiative launched by HM Revenue and Customs (HMRC) in early October 2013. It affects health professionals but not doctors and dentists (who were the subject of an earlier initiative) or nurses and social workers. Its aim is to offer health professionals a chance to bring their tax affairs up to date by telling HM Revenue and Customs by 31 December 2013 that they wish to join the plan and they have until 6 April 2014 to provide details of any undeclared income and pay any tax, interest and penalties due.

In particular, the plan covers medical professionals:

  • Physical therapists such as chiropodists, chiropractors, occupational therapists, osteopaths, physiotherapists and podiatrists;
  • Alternative therapists such as acupuncturists, dieticians, homeopaths, nutritional therapists, psychologists and reflexologists; and
  • Other therapists such as speech, language and art therapists.

By taking advantage of the initiative those medical professionals who voluntarily come forward will find that any penalty they might have to pay will be lower than if HMRC come to them first. From 1 January 2014 HMRC will be taking a much closer look at the tax affairs of the health professionals mentioned above.

After the opportunity closes on 6 April 2014, HMRC will be following up with the individuals identified as having outstanding taxes due and they could face significant penalties. HMRC will use information it holds from third parties and regulatory bodies to identify people who have not paid what they owe.

For further information on the campaign including how to make a disclosure please see  The Health and Wellbeing Tax Plan campaign website or contact Lydia Williams on 01872 271655 or lydia.williams@kelsallsteele.co.uk