Tax return pitfalls

Tax return pitfalls

We’re now into the 2014/15 tax year, which must mean it’s time to start thinking about the joy of completing your 2013/14 tax return!  Many contractors will leave this task to their contractor accountant, but if you do complete it yourself you should be mindful of a few common mistakes.  Here’s our lucky top 13.

  • tax return is a summary of all income received during a year, regardless of whether or not it has already been taxed.  Make sure to include bank interest and other taxed income as it can affect the rate of tax you pay on your untaxed income.  You can however ignore an ISA.
  • If you had a student loan with a balance outstanding during the year make sure you include it.  You will need to repay the loan at the rate of 9% on any income above £16,365, so check now to see if you’re better off simply repaying the loan in full – the tax return will calculate the 9% regardless of the loan balance, and it’s a long process to get any overpayment refunded.
  • Do you own a property and receive rental income, but make an overall loss?  If so, make sure it is included so that HMRC are aware you have losses to carry forward against future profits.
  • If this is your first year of filing a tax return, have you got a Government Gateway account, and registered for Self Assessment?  If not, do it now.  It can take weeks to set up, so leaving it to the last minute could mean you’re unable to file on time.
  • Do you want your tax collected through your tax code?  Make sure you file by 30thDecember (not the 31st!)
  • Changes to the Self Assessment system in 2013 mean that you now have to declare Child Benefit if you or your partner earn over £50,000.  Make sure you know the rules of who has to declare and repay the benefit.
  • If you were in a Partnership during the year make sure you file a return for the Partnership itself too.  If you don’t, it will be subject to a £100 late filing penalty just like an individual would.
  • Have you included all employments during the year?  One of the common mistakes we see with new contractors is that they include their own company income but forget to include the details from their old employer (check your P45 for the information you’ll need).
  • Remember that dividends are received net of a 10% tax credit and must be grossed up before being added to your return.  A dividend of £1,000 is actually £1,111 with tax paid of £111.
  • Did you receive Jobseekers Allowance or other taxable benefits in the year?  Make sure these are included too.  You should have a P45 or P60 from the Job Centre with the details.
  • Do you pay into a personal pension?  Include the details on your return and it will increase your basic rate tax band, potentially decreasing the tax you owe.  Be careful though, pension contributions made by your employer do not get included here.
  • Donations to charity also increase your basic rate band and should be included on your tax return.  If you’re not a UK taxpayer though you should check whether they are being made under the gift aid scheme, as you’ll be liable to pay the tax on the donation if they are.
  • If you owe tax for a prior year make sure it’s included on your return, otherwise HMRC could refund you only to ask for it back later, which confuses things all round.

 

Remember that even if you do ask a contractor accountant to complete the return for you, it’s still your legal responsibility to check it is correct as you will be the one held accountable for any errors or omissions.  Review the return and check it through before you sign it!

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

HMRC slammed in House of Lords Report – IR35 update

IR35 update

The House of Lords Select Committee has published a report on Personal Service Companies in which they make a series of recommendations, many of which do not show HMRC in a good light and no doubt reflect what many Contractors have been thinking for a long time!

The first recommendation suggests that HMRC carry out a detailed assessment of how much IR35 costs to enforce, so that a better assessment can be made on whether it’s having the intended effect and is proportionate.   The Committee accept that abolition of IR35 as proposed by the Office of Tax Simplification would be attractive, yet sadly deems it unwise if the legislation does indeed have the effect that HMRC claim.  HMRC have stated in the past that IR35 saves £550m so it will be interesting to see this figure justified.

The paper then goes on to acknowledge that the IR35 rules demand a great deal of time and effort by Contractors, and that it can be difficult for them to quickly and accurately know what their tax liabilities are given the contract by contract nature of IR35 and the need to have an understanding of case law.  Our own experience in talking to Contractors reflects this, with many feeling very exposed due to not having the time or expertise to really feel sure of their own status.

The Business Entity Tests also feature, which the Report suggests should be reviewed to see if they can work better to provide certainty for taxpayers.  HMRC’s Contract Review Service should also be publicised more, although how many Contractors trust HMRC to be impartial is another matter!

Other interesting points in the report concern making the Service Company question on the P35 and Tax Return mandatory fields, if HMRC deem them necessary, and a further review on the possibility of merging tax and National Insurance.

It will be interesting to see where this goes, so we’ll keep you updated as we know more.

Read the full report via the PCG website.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Louisa Cupper joins Intouch contractor accountants in Bournemouth

Louisa Cupper joins Intouch Accounting

Intouch contractor accounting, the specialist accountants to contractors and freelancers operating via personal service companies in the UK, is delighted to announce the addition of Louisa Cupper to its advisory team. Louisa joins Intouch as a Portfolio Manager where she will have direct and personal client responsibility.

Louisa has worked specifically with contractors and freelancers since 2008, looking after her own portfolio of clients since 2010. She thrives on helping clients with any queries, to make sure they understand how to operate their contractor business most effectively and efficiently. Louisa is an expert in IR35 legislation, and the tasks that need to be handled when new contractors to the market are starting out. She will handle all areas from incorporation of a new company, advice on how to deal with HMRC, and the personal tax affairs of her clients.

According to Louisa one of the most often asked questions from her clients is “how do I maximise my take home pay and claim all my expenses?” That’s the kind of challenge she enjoys and one of the key reasons why she joined Intouch Contractor Accounting.

Prior to joining Intouch, Louisa was working for another professional services firm in the contracting and SME market however was keen to focus her experience on the provision of a high quality and entirely personal service to freelancers and contractor clients only.  Whilst maintaining a large portfolio, she is now determined to make sure that clients have the personal touch and receive all the support they require.

Louisa is also concentrating on extending her professional qualifications and will re-commence her training as a chartered accountant in the near future, she already holds both accounting and taxation technician qualifications.

She is looking forward to working with some like-minded people and is ready to take on any challenges thrown her way.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.