Your tax queries answered by Nick Casson of TaxAssist
I still haven't completed myÂ taxÂ return I've been working non-stop since I started my own business, but this has meant that I haven't yet got around to submitting my 2015/16 taxÂ return. How much will it cost me in penalties?
You will be liable to pay at least an initial £100 penalty – even if there is less than £100 tax to pay. Do bear in mind that the longer you delay submitting your tax return, the more it will cost you.
Following that initial £100 penalty, you will be subject to:
· After three months: additional daily penalties of £10 per day – up to a maximum of £900
· After six months: a further penalty of 5% of the tax due or £300 – whichever is greater
· After 12 months: another 5% of the tax due or £300 – whichever is greater. In more serious cases, the penalty after 12 months can be up to 100% of the tax due
Each of these penalties is in addition to one another, meaning a tax return filed a year late could be subject to penalties of at least £1,600 – which could increase, depending on the level of tax due.
You may also be liable for interest and late payment penalties on top if you delay paying any tax due. Tax payments are normally due on 31st January and sometimes the following 31st July – depending on the level of tax liability.
Splitting income from properties between married couples
Q. My wife and I have some properties in joint names but as I put in the most money to buy the properties, it seems only fair that I get the lion’s share of the income from them too. However, I have been told that any income from the properties must be split 50/50 - is this true?
A. I’m afraid to say it is the position by default. If you live with your spouse or civil partner, the income from property held in joint names will be split equally for tax purposes. However, if a married couple wish to be taxed using a different ratio, they could consider changing their beneficial interests in the property and making a special tax election. It can be complicated and other taxes need to be considered so you should seek advice from a professional such as your local TaxAssist Accountant before taking any action.
When will Making Tax Digital affect me?
I’ve heard that there has been delay in introducing the Making Tax Digital initiative, but could you tell me when it will affect my business?
Philip Hammond stated that Making Tax Digital would be deferred by one year until April 2019 for unincorporated businesses and landlords with turnovers below the VAT registration threshold of £85,000.
This is intended to provide them with additional time to prepare for digital record keeping and quarterly updates. At the date of writing,Making Tax Digital will be rolled out as follows:
April 2018 – Quarterly reporting will begin for businesses (including landlords) who have a turnover above the VAT registration threshold of £85,000.
April 2019 – Quarterly reporting for businesses (including landlords) who have turnovers under the £85,000 VAT registration threshold. Digital quarterly reporting for VAT is also due to start.
April 2020 – Quarterly reporting for companies will be introduced. Businesses, self-employed people and landlords who have a turnover below £10,000 are exempt from these requirements. If you are in employment and have secondary income of more than £10,000 per year through self-employment, you will also need to use the digital service.
If you do not have a 5th April accounts year end your obligations may be slightly different.
Please be aware that the dates listed above may be subject to change following the snap General Election on 8th June and feedback from a pilot scheme which began on 3rd April 2017.
Making Tax Digital and partnerships:
What implications will Making Tax Digital have on my business partnership – will all my partners have to update our digital records?
HM Revenue & Customs carried out an impact assessment that revealed about 400,000 partnerships will be affected by Making TaxDigital.
However, only one nominated partner will be required to fulfil your company’s Making Tax Digital obligations. This will include ensuring your business’ digital records are kept up to date and providing regular updates on behalf of all the partners. Each partner’s estimated income should be based on the profit allocation as reported to HM Revenue & Customs (HMRC). This means each partner will not be required to have their own copy of the software, maintain their own digital records or regularly update HMRC – unless they have other business interests.
Although it has yet to be confirmed what the exact thresholds for partnerships will be, it is likely that the largest partnerships with fee income more than £10 million will not have to report under Making Tax Digital. As with all matters relating to Making Tax Digital, these could be subject to change after Making Tax Digital was removed from a revised Finance Bill 2017 due to the snap General Election on 8th June.