The 6th April marks the beginning of a new tax, and for the coming year, unprecedented challenges. As with most things in life, problems are a necessary precursor to finding solutions. We have listed below a few reminders of the issues you may want to consider as worthy of including in your 2020-21 tax planning to-do list.
We are all likely to experience a drop in earnings this year. The scale of the reduction will vary, but very few will be able to maintain their business profits or personal income at pre-COVID-19 levels. Apart from the obvious reduction in taxes paid due to the reduction, what else should we consider? We have listed below just two options that you may like to consider.
1.If you are Self-employed
Most self-assessment tax falling due for payment in 2020 will include payments on account for 2019-20. HMRC has indicated that it will allow you to defer the 31 July 2020 payment until 31 January 2021. However, if you can demonstrate that your actual profits for 2019-20 were lower than those for 2018-19, you can formally apply to reduce your payments on account.
Action note: to do this prepare your accounts taxed in 2019-20 (usually the year ending 31 March or 5th April 2020) as soon as you can. We can then make the necessary postponement election for you based on the results – if they show a drop in profits.
A BONUS – if you prepare accounts quickly, you can also use the figures to support any application for bank funding to see you through the COVID-19 disruption.
2. Reduce benefit-in-kind charges
If your business is closed due to COVID-19, it is likely that directors and employees may not have been using their company cars since the lock-down started to bite in the last two months. Accordingly, if you can confirm that company cars were not made available to directors and employees in this time, and record this on your P11D return for 2019-20, then taxable benefits for 2019-20 can be reduced.
As directors and employees will have estimated benefit in kind amounts adjusted for in their tax codes for 2019-20, based on information for 2018-19, any resulting reduction could potentially create refunds of tax for 2019-20.
Action note: let us have the details of car usage asap. We can then file P11D’s sooner rather than later and apply for any overpayments in your tax paid for 2019-20.
When profits and income reduce this should encourage us to prepare accounts and tax returns quickly in order to challenge any overpayments of tax and NIC in previous years.
And as a bonus, the information produced will support applications to banks and other parties for financial support during this difficult time.
Please get in touch as soon as you can if you would like us to fast-track your accounts and tax return for 2019-20 and to quantify, and recover, any taxes you may have overpaid.All news