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Making Tax Digital Delayed until April 2024

The government announced yesterday that they will delay Making Tax Digital for the Self-Employed and Landlords until April 2024.  This is a year later than originally planned.

Therefore, from 6th April 2024, for all self-employed businesses and landlords with a turnover of over £10,000, the government will replace the Self-Assessment Tax Return with Making Tax Digital.

General partnerships must join Making Tax Digital from the tax year beginning in April 2025.  The government will confirm the date for other types of partnerships in the future.

How do I become Making Tax Digital compliant?

Making Tax Digital will require five filings a year in an electronic format.  Four quarterly reports and a year-end final declaration. 

Whilst HMRC have approved a range of filing formats, submitting these reports on paper will not be an option.

Therefore, if you are not already using systems for your record-keeping and accounts preparation you will need to do the following:

Hence, you can configure the software to remind you when to file and there will also be a cumulative calculation of the tax due for the year based on the data submitted.

What are the payments and when will they be due?

The tax payment due date for 2024-25 will remain the 31st January of the following year.  However, HMRC are indicating that there will be a method to make voluntarily payments based on each submission.

A likely outcome of Making Tax Digital for the Self-Employed and Landlords is that, at some point, these payments will become compulsory.

For the first year there will be additional complexity because your 2023-24 tax return will still be due by 31st January 2025.

The first submission under Making Tax Digital will be due, the government expects, in the fourth month of the accounting period, followed by submissions on a three-monthly basis.

An example Making Tax Digital scenario

If your trading year aligns to the tax year, you must submit your report in August 2024 and the overall calendar will be:

We appreciate that “Making Tax Digital Delayed” may seem an age away with an additional cost in terms of time and money. However, our advice is to embrace the change now.  Ultimately, Making Tax Digital will give you a better overview of your business.

We are already implementing cost-effective solutions for clients to get them ready for Making Tax Digital.

Wondering if you need to submit a tax return? Please see our blog post here to help you answer this question.

If you have any queries or would like any assistance to ensure you are ready, please do not hesitate to contact us on tax@cooperfaure.co.uk.

You can find the official gov.co.uk new release here.

Tax relief available to employees working from home

You are eligible for working from home tax relief if your employer requires that you work from home on a regular basis. This applies to both part time or full time home working scenarios. You may calculate your expenses based on the additional costs you incur as a result of working from home. 

However, you cannot claim tax relief if your employer has either directly reimbursed your expenses or paid you an allowance to cover them.

Many offices have been closed since the start of the 2020-21 tax year due to COVID-19. This means that millions more employees are now eligible.  You may make a claim as part of your Self-Assessment Tax Return if you are already obliged to submit one.

You can claim tax relief on:

What can I include in my working from home expenses?

You may claim the full annual allowance whether you have worked from home for the full year or only a small part of it. Theoretically this applies even if you worked from home for just one day. You just need to show that your employer requests that you do so.

The areas where you may be able to claim working from home tax relief are:

Where you claim the actual costs, you will need to be able to provide evidence to the HMRC. This will be in the form of invoices, receipts or contracts.

In addition, for the costs of equipment, you have two key considerations in determining whether it is eligible for tax relief:

For instance, if you have purchased a laptop and your employer has a policy restricting private use, this would support it was purchased for work purposes.

Do I need to submit a tax return?

Unlike many other countries, not everyone in the United Kingdom has to submit an annual personal tax return.  However, more and more people do. Have a look over the list below and keep in mind that you must submit a return if you;

At CooperFaure, we will work with you to ensure that you know your tax position as soon as is practicable after the end of the tax year. 

Are you eligible for tax relief?

You may be entitled to a tax relief that you are unaware of.  For instance, many employees will be entitled to a rebate against the costs of working from home in the 2020-21 and 2021-22 tax years.  Details of what you can claim are here (link to blog).

As of 2021 we will be sending out an online questionnaire which will guide you through the process step-by-step.

If you have a rebate due, HMRC usually makes the payment within four weeks of the submission of your tax return.

If you have tax to pay, the deadline remains 31st January irrespective of when you submit your tax return .  Early submission enables you to plan your cashflow.

If you have earned between £2,000 and £10,000 from share dividends or between £1,000 and £2,500 in any other untaxed income, such as airbnb or eBay, you need to inform HMRC here – https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

Change is coming, are you ready?

From the 6th April 2023, Making Tax Digital will replace tax return submissions for all self-employed businesses and landlords with a turnover of over £10,000.

This will require five filings a year in an electronic format.  If your trading year is aligned to the tax year, your first report will be due in August 2023.

Whilst this may seem like an age away, we are implementing cost-effective solutions to get you ready for Making Tax Digital. 

How to Claim Income Tax Relief on Venture Capital Investments

For individuals with disposable income, making Venture Capital investments is growing in popularity, mainly through the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS).

Under the schemes, the government is encouraging investment in eligible companies by offering a range of tax reliefs to investors who purchase new shares in those companies.

The initial tax relief is on Income Tax and this is usually claimed through your personal tax return.

A crucial point is that claiming Income Tax relief is a requirement to be able to apply the Capital Gains Tax exemption should the investment make a return in the future.

In a scenario where you have invested £5,000 each under EIS in four companies in the tax year, this gives you potential Income Tax relief of £6,000.  However, your Income Tax paid in the year is £3,000 with nothing in the preceding year.  As a result, the maximum relief you can claim is £3,000 to bring your Income Tax paid back to zero.

Whilst including the details of two of the investments would meet the arithmetic goal of clearing down your Income Tax, you need to include the details of all four venture capital investments and split the relief across them.

In order to claim the Income Tax relief on venture capital investments, you must have received a Compliance Certificate from the company that you have invested in which will provide the following information for your tax return:

The Compliance Certificates do not need to be submitted with your personal tax return but should been kept safely as HMRC make ask for them in the future.


You can find more information about SEIS/EIS using the following links:

Our blog post on EIS – https://cooperfaure.designmindshost.com/enterprise-investment-scheme/

Tax relief on investments (EIS)

An interview with Jon Cooper regarding tax relief on investments (EIS).

Here at CooperFaure we’re always trying to think of exciting new ways of how to engage with our clients. That’s why we’ve launched a video series called ‘Making Accounting Simple’ which aims to cut through the complexity of accounting, including this very important topic – Tax relief on investments.

This episode we sat down with our director, Jon Cooper and talked through the ins and outs of the EIS from a company’s and investor’s point of view (Tax relief on investments).

The Enterprise Investment Scheme (EIS) has been made available by the government to help small to medium sized companies grow by acquiring investments. It is one of four schemes available and it provides Tax relief on investments for investors who purchase shares. Therefore, it acts as an incentive for individuals to invest into small to medium sized companies and in turn assisting the government’s goal of growth. It is a win-win situation for both parties.

We at CooperFaure believe that EIS is a great scheme for most companies to attract investors in order to grow their company. We have assisted numerous clients with the EIS process and have found that as long as all the information is correctly provided to SCEC and all conditions are met there is no reason for the company not to be eligible for EIS.

We at CooperFaure can assist in compiling all of the following which is required for an Advanced Assurance Application:

There’s more for you to read regarding EIS in our blog – https://cooperfaure.designmindshost.com/enterprise-investment-scheme/

If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at welcome@cooperfaure.co.uk.

Enterprise Investment Scheme (EIS)

Here is a useful an overview which should help you to better understand what the Enterprise Investment Scheme is and whether or not your eligible to apply for one.

 

Enterprise Investment Scheme provides the investors with a tax relief on their investment and has been made available by the government to aid growth. The investors receive a tax relief for the amount invested and in turn acts as an incentive, easing the process to attract investors. It is one of four schemes available under the venture capital schemes.

The following applies under EIS:

There are certain rules that you must follow to ensure your investors receive their tax relief. These rules must also be followed for at least 3 years after the investment has been received.

The money received from the investor is limited to be spent on qualifying business activities:

If more than 20% of you trade includes any of the following it does not qualify:

The money raised through EIS must be used within 2 years of the investment or if trade has not commenced it is on the start date of trading. The key is to use the money to grow your business, it cannot simply be used to purchase another business. Therefore, growth can be for example an increase in revenue, client base or the number of staff. This is part of the risk to capital condition that was introduced this summer. This condition also includes that the investment should be a risk to the investor’s capital and therefore within the agreement between the company and the investor there cannot be arrangements in place to reduce the risk. If the investment is in any way protected, for example by assured future income streams or capital repayment, the investment is unlikely to meet the risk condition. For more information regarding the risk to capital condition please click here – https://cooperfaure.co.uk/risk-to-capital-condition/).

Additionally, in order to qualify for the scheme your business must be permanently established in the UK without being on the stock market. Additionally, the company cannot be controlled or control another company.

To apply for EIS a compliance statement (EIS1) along with the following documents must be submitted, per share issue once a minimum of 4 months qualifying business activities has occurred:

If successful you will receive the authority to issue certificate (EIS2) and compliance certificate (EIS3) from HMRC. The EIS3 certificate must be passed on to the investor as without it they will not receive their tax relief.

In the past we would have strongly recommended to apply for Advanced Assurance as it provides you with a confirmation if you will be eligible for EIS before submitting EIS1. However, the HMRC has recently amended the requirements and you are no longer allowed to provide speculative plans within the Advanced Assurance application (EIS(AA)). Therefore, you must have particular investors in mind before submitting the EIS(AA). This has removed the ability to use the Advanced Assurances as a mechanism to attract investors by showing that you will be eligible. Nevertheless, if the investor is reluctant to commit we would still recommend to use EIS(AA) but you should bear in mind that this will prolong the process.

For further information please visit the HMRC’s website: https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-enterprise-investment-scheme

You can also listen to an interview of Jon Cooper on this topic, in our blog, here – https://cooperfaure.designmindshost.com/eis-tax-relief-on-investments/(opens in a new tab)

At CooperFaure, we have vast experience of helping businesses to secure investments and, in particular, benefit from government schemes. If you have any questions regarding Venture Capital Schemes, please email us at welcome@cooperfaure.co.uk.