Reporting residential property sales

The rules have changed this year and you need to act to avoid penalties

The rules on selling residential property in the UK have changed and I want to make sure that you have all the information that you need to remain compliant.

The main point to know is that, if you have sold a residential property in the UK after April 2020, then you must report it and pay any tax due on the property using a ‘Capital Gains Tax on UK property’ account within 30 days of selling it. If you do not report the gains on the property within this timeframe, you may also have to pay interest and a penalty fee.

This reporting applies to:

• The sale of residential UK property or land
• The sale of non-residential UK property or land
• Mixed use UK property or land (a ‘mixed use’ property is one that has both residential and non-residential elements)
• Rights to assets that derive at least 75% of their value from UK land (indirect disposals)

You must report and pay non-resident Capital Gains Tax if you are a:

• Non-resident individual
• Personal representative of a non-resident who has passed away
• Non-resident who is in a partnership
• Non-resident landlord
• Non-resident trustee
• UK resident meeting split year conditions and the disposal is made in the overseas part of the tax year

Again, for all of the above, the capital gains must be reported within 30 days of the sale.

If you fall into any of the above categories and want some support or guidance, or if you are not sure whether the above applies to you, then please do not hesitate to send me an email or give me a call.

tony@octaveaccountants.co.uk
02380 176190

Octave – your resident tax expert

Self-assessment: there’s no such thing as a silly question

Do I need to complete a self-assessment tax return?

You must complete one if you earned more than £1,000 from self-employment, if you rent out a property that earned you more than £2,500, if you earned £2,500 or more from untaxed income, if your gross income from savings or investments was more than £10,000, if you’re a company director (unless it’s a non-profit organisation), if you or your partner’s income was over £50,000 and you claim Child Benefit, if you have income from overseas and need to pay tax, if you live overseas but have an income in the UK, if your taxable income was £100,000 or more, if you earn £50,001 or more and pay pension contributions, if you are a trustee of a pension scheme or trust, if your State Pension was your sole source of income and was more than your taxable allowance, or if you received a P800 from HMRC because you did not pay enough tax last year. (You are liable for Capital Gains Tax on profits from selling such things as works of art, shares or a second home.)

What are the important self-assessment dates?

You must register as self-employed by early October. (In 2020, it was 5th October.) If your self-assessment is paper based, you must submit it by the end of October; if online, by the end of January. And 31st January is also the deadline for paying any tax owed.

How do I complete self-assessment?

You will need your 10 digit Unique Tax Reference (UTR), your National Insurance Number, data relating to your untaxed income, self-employed income, share dividends, pensions and so on, records of all expenses related to self-employment, details of pension or charity contributions, P60 or other records of income on which you’ve already paid tax. You do not need to complete the self-assessment at one sitting, and there is a lot of help online on the government websites.

I am worried about expenses

It is very important that you calculate self-employed expenses correctly. Again, there is guidance online. You do not have to submit receipts but you should keep these for five years.

How do I pay my tax bill?

You will be told how much tax and National Insurance you need to pay, and you must pay this by 31st January, via BACS, CHAPS, online banking, a company credit or debit card, direct debit or cheque.

What if I miss the deadline?

You will have to pay a penalty. Up to three months late, it’s £100, and after that, it increases.

What if I make a mistake?

You have until the filing deadline next year to make changes.

What if I can’t pay?

If that is because of the pandemic, look at the help that the government has provided for businesses. If you don’t think you’re eligible, contact HMRC and ask their advice. If you simply can’t afford to pay, contact the HMRC Business Payment Support Service: they will consider if you should have more time to pay.

If you still think that you need more help, please do contact us (we would say that, wouldn’t we?!) – we can advise you and even perhaps take on the burden of self-assessment for you, leaving you to get on with making more money, free from stress, knowing that your assessment will be accurate and on time, and that your company will be compliant in the eyes of the government.

Making Tax Digital: a future we all have to embrace

Making Tax Digital (MTD) is a government programme that aims to move businesses and individuals in the UK away from using paper records and towards digital record keeping. It will make it easier to get your tax right and for you to have a clearer picture of your financial position. It is more effective, more efficient and will make paying your tax bill more straightforward, meaning it’s less likely that mistakes will be made.

MTD means that all businesses will be required to use digital record keeping tools and will need to submit their tax return from those tools. There are lots of tools that you can use to keep your records up to date and, depending on your needs, you should choose the appropriate one for you and your business. Studies have also shown that using these tools increases your productivity, as well as that of your accountant and bookkeeper (meaning our bills may be lower!)

There are four phases to MTD, so here is your timeline:

1. Any business that is VAT registered with a taxable annual turnover of more than £85,000 had to move to MTD by the 1st April 2019.
2. From April 2022, all VAT registered businesses, not just those over the earning threshold, will need to be registered for MTD.
3. The third phase is from the 6th April 2023, when all unincorporated businesses and landlords with a turnover of more than £10,000 will need to complete a digital return for their income tax.
4. The final stage will be to extend this to all incorporated business who are liable to pay corporation tax, but no date is set yet.

Some businesses may not be able to go digital, and, if they are unable to, they will not be required to do so. Businesses that choose to use spreadsheets to maintain their records and perform their tax calculations, will need their spreadsheets to interface with some form of bridging software, that will allow their VAT return data to be sent to HMRC from the spreadsheet. Due to Coronavirus, the launch dates for MTD for 2020 have been extended to 31st March 2021.

What does MTD mean for you?

• It imposes new quarterly filing and potentially new payment obligations for businesses and landlords.
• There will be a new late filing and payment penalty system that will apply to quarterly returns.
• You or your accountant will still need to prepare your year-end accounts.
• A year-end declaration will need to be filed, instead of a self-assessment return or corporation tax return.
• HMRC will pre-populate some of the return figures, such as income from employment and pensions.
• You will still need to check that the pre-populated information is correct.
• Businesses and individuals who do not at present use MTD-related software, will have to do so, however HMRC will provide the software free of charge.
• I would say this, wouldn’t I?! But the best way to switch to MTD successfully is to have an accountant work with you on it, in order to make the process as smooth and simple as possible.

MTD has some major advantages, but may be tricky for smaller businesses, particularly those who do not currently work with an accountant. This is because you will need to understand all of the small print, as well as learning to use new software. The best piece of advice I can give you is to work with a professional on this, not your mate down the pub who says he understands MTD!

Of course, I am one of those qualified accountants who knows the ins and outs of MTD, so if you want to get ahead of the game, and ensure it’s all done right first time, then please do get in touch.

tony@octaveaccountants.co.uk
02380 176190

Octave – making sure you’re perfectly in tune with MTD

Octave: a review of the first three months

“What a long, strange trip it’s already been!”

In September 2019, I finally decided to take the huge and nerve-wracking step of branching out on my own, something I had been considering for a while.  I agreed a timescale for my departure from the company I had helped form some 17 years before, and which clients I would be taking with me, amongst other things.  I then arranged for my new office premises, software, website, insurance and all the other things that are required.  My start date was set to be March 2020.  I was all prepared.  Octave Accountants Limited was ready……

...And then came a pandemic, the like of which had not been seen for over 100 years. 

I can honestly say that for the first week of lockdown I hardly slept, probably like many others in the country.

Then the Chancellor started announcing ways in which the government was going to help businesses: VAT liabilities could be deferred; Self-Assessment could be delayed; banks were going to lend money; and, most importantly, the Job Retention Scheme was announced.

All of a sudden, my phone was red hot.  Clients wanted to know if they could take advantage of the schemes, and if so, could I assist them in making the claims…….or rather

“You handle everything, Tony.  Is that ok?”

New clients popped up.  So many of them hadn’t filed their 2019 tax returns and these needed submitting if they were to take advantage of the Self Employment Scheme.  Within a few days, my work appeared to have trebled with the additional elements.  That’s ok, I thought.  I had planned for expanding anyway, with additional staff.

“Oh, what?  You live with someone who is vulnerable and is on the 12-week isolation list?” 

…..is not something I thought to ask at interview!  Several frantic calls to IT Support later, and all staff are suddenly working remotely.

Now, as we enter June, I look back over the first three months or so of Octave Accountants…… with a smile on my face.  Clients have received the support they have needed and are slowly returning to trading.  Claims have been made to the various Covid schemes, overdue tax returns have been filed and clients have been advised on their tax positions now and going forward.

So, we now enter what the media are terming the “new normal.”  

Lots of businesses must adapt to new regulations on how they operate.  Government support will slowly be withdrawn.  And banks will go back to being miserly in their lending!

One constant, though, is that Octave will be on hand to assist and advise.  And, in these different times, which demand different business practices and approaches, it may well be that you will want us to assist you in different ways.

Annual information is probably no longer enough – now, monthly accounts and regular cashflow forecasting can help you to keep a constant eye on costs and profitability – and to help you to plan for the future from a more informed position.

Maybe you want to gain yourself more management time by outsourcing your payroll and/or bookkeeping functions to us.  Is now the right time to harness all the benefits of a cloud-based bookkeeping system like Xero, Quickbooks or Sage?  We can assist you with the transfer, providing training if required.  Away from accountancy, we can offer you the help of our trusted HR contacts and the business turnaround experts with whom we work.

If any of the above sounds interesting to you, please just give me a call – obviously, without obligation and in compete confidence.

I would just like to end this blog with a thank you. 

Firstly, a huge thank you to my clients who have been fantastic.  Yes, it’s been stressful for us all but you have been wonderful, and your kind comments have helped me through these unusual times. Secondly, to my fellow accountants whom I have spoken to during this period: we may work for different companies but the mutual support and the ‘sounding board’ we have provided for each other have been invaluable.  And lastly, thank you to my family and my staff who have been understanding, supportive and conscientious in equal measures.  Thank you all.

Government changes to off-payroll working (AKA IR35) are delayed

The government has announced that it is delaying the reform of off-payroll working rules (also known as IR35) for one year from 6 April 2020 until 6 April 2021. These rules were going to apply to people outside the public sector, contracting their services to medium to large-sized companies.

The decision was taken as one of a number of measures introduced to give support to businesses and individuals in the light of the economic impact of the Corona Virus (COVID-19.)  It means that the existing rules will continue to apply until April 2021.

We would stress that this is a delay and not a cancellation: the government is still determined in the longer term to introduce the new rules to ensure that people who basically work like employees (but through their own limited company) pay roughly the same level of tax as the corresponding individuals who are directly employed by an organisation.

As always, and particularly in these uncertain times, when the Government is liable to change things quickly, if you have any questions at all about this or any other accounting, taxation or general financial matter, please do not hesitate to get in touch with us.

Octave Accountants: the reliable accompaniment to your continued business performance