Author Archive: Muhammad Zia

Avoid the pitfalls of the SEISS scheme

Thousands of taxpayers benefited from the Self-Employment Income Support Scheme (SEISS) as the pandemic raged over the last two years, before its closure last year.

The scheme, which involved five grant payments, was set up by the Government to provide support for the self-employed, for example sole traders, provided certain eligibility criteria were met.

However, there are many pitfalls facing taxpayers as HM Revenue & Customs (HMRC) claws the money back and it appears many individuals may have misunderstood the rules.

Payment difference

You must tell HMRC if you received more than they said you were entitled to.

The tax office expects you to report this without further prompting.

Accountants in the dark

Many accountants may not have the full details of SEISS grants claimed by individuals and cannot, therefore, advise self-employed workers on the tax implications this year.

This is because the grants had to be claimed through an individual’s personal Government Gateway, which accountants were locked out of to speed up the payments to those in dire need.

Taxpayers should immediately make their accountants aware of the situation if they have claimed so that it can be incorporated into tax calculations and during reporting.

Claims not showing on the tax return

The first three grants were paid before 6 April 2021, so they should have been declared on the taxpayer’s 2020/21 tax return.

HMRC created new boxes on the return forms to report grants and so the self-employed needed to be particularly careful to include the SEISS grants in the box relating to the self-employed grants, not the box for ‘any other income’ or ‘support payments such as CJRS’.

Incorrect declaration on tax return

If the total value of SEISS grants declared on the 2020/21 tax return did not match SEISS grants one to three, which HMRC believes it paid out to that taxpayer, it has confirmed that it will automatically correct the Self-Assessment calculation.

When you receive or assess your tax bill it is important to check in case HMRC has corrected or included a grant.

The tax authority has said some individuals’ tax identities may have been misused to submit a fraudulent claim.

Payments on account

The system assumes the taxpayer will receive at least the same amount of taxable income in 2021/22 as in 2020/21. But the SEISS grants received in 2021/22 are likely to be lower as a maximum of £15,000 could be received in that year compared to a cap of £21,570 in 2020/21.

As a taxpayer, you can apply to reduce the payments on account for 2021/22 through the personal tax account online service or a paper form SA303.

It is important to note that the SEISS grant should not generally be included in the turnover of the business for the period.

Making payment into the wrong account

You can also tell HMRC if you want to voluntarily pay back some or all of the grants you received. You can do this at any time.

The SEISS repayment has to be made to a specific HMRC bank account set up for the purpose and be accompanied by the grant claim reference. The taxpayer should not repay the grant into their Self-Assessment tax account.

For help and advice on SEISS taxation, you should speak to an accountant at the earliest opportunity.

Link: SEISS – A dangerous legacy

Company tax returns must include COVID-19 grants says HMRC

Taxpayers are being reminded that COVID-19 support grants or payments should be declared on company tax returns as they are taxable.

HM Revenue & Customs (HMRC) has issued a reminder that the filing deadline for company tax returns (CT600) is 12 months after the end of the accounting period it covers.

The deadline to pay Corporation Tax will depend on any taxable profits and when the end of the accounting period occurs.

HMRC says that Coronavirus Job Retention Scheme (CJRS) grants, Eat Out to Help Out (EOHO) payments, or any other support payments made by local authorities or Government, must also be reported as income when calculating taxable profits.

Company tax return

If you received a CJRS grant or an EOHO payment, you will need to do both of the following:

  • Include it as income when calculating your taxable profits in line with the relevant accounting standards
  • Report it separately on your Company Tax Return using the CJRS and EOHO boxes.

You should record all other taxable COVID-19 payments as income when you calculate your taxable profits.

If you have already filed a return and have not declared your Coronavirus support grants or payment as taxable income, you will need to submit an amended return.

CJRS grants or EOHO payments must be reported separately in the boxes provided on the CT600 corporate tax return. These boxes were added on 6 April 2021.

It is important to update third-party software by downloading the latest version to be able to complete the relevant boxes in the company tax return.

Taxable grants include:

  • Test and trace or self-isolation payments in England, Scotland and Wales
  • Coronavirus Statutory Sick Pay Rebate
  • Coronavirus Business Support Grants (also known as local authority grants or business rate grants).

When furloughed employees were paid through real-time information (RTI), the employer was responsible for making the usual PAYE, National Insurance contributions (NIC) and automatic enrolment deductions.

Employers must treat the grant as taxable income for Corporation/Income Tax purposes but can deduct employment costs as normal when calculating their taxable profits.

Link: Covid grants must be reported on company tax returns

HMRC focuses on backlog of work by shuttering telephone services

HM Revenue & Customs (HMRC) has announced that it is having to prioritise its essential services by temporarily closing some of its telephone hotlines, following a surge in enquiries during and since the pandemic.

It has said that it is focusing on stabilising its phone service and tax credits/child benefits service at the start of this year and must take extra steps to meet its targets and support those customers most at risk.

During December, the tax authority ran a test on closing their Corporation Tax (CT) and VAT helplines (except bereavement) to assess the impact across three Fridays – using the time gained to clear a backlog of other enquiries.

Based on the success of these tests the CT and VAT telephony lines will see a further “telephony shuttering exercise” on Fridays between the following dates:

  • CT – 25 February to 25 March 2022
  • VAT (excluding bereavement) – 25 February to 25 March 2022 (excluding 4 March).

Businesses that are reliant on these phone lines need to be aware of this change and prepare for it if they need to contact HMRC about CT and VAT matters on these days.

Brexit: new competition rules to replace retained EU laws

The Government is set to repeal EU laws that discourage “efficiencies, investment, and innovation” and replace them with regulations that work for British businesses, it has been announced.

If you own a business, here’s what you need to know.

What is changing?

After the UK officially left the European Union in January last year, a number of EU rules and regulations were retained to ease the transition.

Several of these pertained to competition law.

These laws exempt businesses from competition law in certain circumstances, but impose unnecessary burdens in other areas, discouraging partnership and innovation in the UK.

The Competition and Markets Authority (CMA) recommended a “new, bespoke competition law exemption” for the UK to replace retained EU legislation, which expires on 31 May 2022.

How will this benefit British businesses?

The new rules will encourage “vertical agreements” – defined as agreements between companies at different levels of the supply chain, such as farmers and supermarkets.

Vertical agreements are good for businesses as they result in efficiencies, investment, and innovation – and ultimately lower operation costs.

According to the report, the benefits include:

  • Removing wide retail parity obligations from the exemptions, such as those specifying that a product may not be offered on better terms on any other indirect sales channels
  • creating a more level playing field for high streets and brick-and-mortar retailers by expanding the exemptions to cover agreements that treat online and offline sales differently; and
  • more flexibility for businesses to design their distribution systems.

Further reading

To learn more about the Draft Vertical Agreements Block Exemption Order, please click here.

Get advice today

For help and advice with related matters, please get in touch with our team today.

Rents continue to rise as tenant demand grows

In recent years, landlords have benefitted from a surging demand and fierce competition for rental properties in large parts of the UK.

This has allowed them to keep increasing rents to keep up with the rest of the market – a situation that many hope will remain for some time to come.

According to Zoopla’s new data, this doesn’t look to be changing any time soon. They have reported that the number of available rental properties is 43 per cent below the five-year average – increasing demand among tenants searching for a new home.

As a result of this, despite the challenges of the pandemic, UK rents increased on average by 4.6 per cent year-on-year between September 2020 and September 2021.

In fact, if you exclude the Greater London area, where rent rises have been more subdued, average rents rose by 8.6 per cent during that same period according to Rightmove. This is the highest growth on record in the last 13 years.

Chris Norris, Policy Director for the National Residential Landlords Association said: “2021 showed some signs of recovery for the private rented sector, which tends to be counter-cyclical in nature, with economic uncertainty leading more people to rent rather than commit to large purchases.

“Demand for rental accommodation increased across the UK, with some early indications that tenants are also returning to London after many left during lockdown.”

Looking ahead, experts have said that rent rises in the next 12 months will, in part, depend on whether demand continues to outstrip the number of suitable homes.

As a result of this, Propertymark has explained that some estate agents are warning cautious landlords to retain their portfolios, despite the demands of new regulations and tax rules.

Nathan Emerson, Chief Executive of Propertymark, added: “Looking into the private rented sector, rental income is poised to remain strong as demand holds steady.”

If you need advice regarding your property portfolio and the impact of rising rents, please speak to us.

Growth in house prices slows, but activity back to pre-COVID 19 levels

The dramatic rise in house prices has slowed, with January showing the lowest monthly growth since June.

The price slowdown comes as new figures show house sales returned to pre-COVID 19 levels.

However, affordability remains at historically low levels as house price rises continue to outstrip earnings growth.

According to the latest Halifax Price Index survey, prices rose by 0.3 per cent in January, although the annual rate of growth was nearly 10 per cent.

The average house price now stands at £276,759 after a quarterly growth of 3.1 per cent and yearly growth of 9.7 per cent was recorded in the survey.

Figures at a glance

Average price: £276,759

Monthly change: +0.3 per cent

Quarterly change: +3.1 per cent

Annual change: +9.7 per cent

While remaining the weakest performing area of the UK, London delivered its strongest performance in over a year with annual house price inflation rising for a third straight month to stand at 4.5 per cent, double the rate recorded in December.

Across England, the North West was once again the strongest performing region – up 12 per cent year-on-year, average house price of £213,200 – and now has the second-highest rate of annual growth in the UK.

Regional performance was pretty much in keeping with last year with Wales the strongest performing nation, with price inflation of 13.9 per cent and the average house price down slightly to £205,253.

Northern Ireland also continues to record strong price growth, with prices up 10.2 per cent on last year, giving an average property value in January of £170,982.

It was a similar story in Scotland, although the annual rate of inflation slowed to 8.9 per cent, with the average property price edging down to £192,698.

Commenting on the figures, Halifax managing director said:  “Affordability remains at historically low levels as house price rises continue to outstrip earnings growth.

“Despite record levels of first-time buyers stepping onto the ladder last year, younger generations still face significant barriers to home ownership as deposit requirements remain challenging.

“This situation is expected to become more acute in the short-term as household budgets face even greater pressure from an increase in the cost of living, and rises in interest rates begin to feed through to mortgage rates.”

The Halifax House Price Index is the UK’s longest-running monthly house price series with data covering the whole country going back to January 1983. The annual change figure is calculated by comparing the current month’s non-seasonally adjusted figure with the same month a year earlier.

For help and advice with residential property matters, please get in touch with our expert team today.

Data shows homes in northern cities remain seven times less expensive than London

You would probably have been living in a cave for several years not to know that houses in London are much more expensive than in most other parts of the UK.

But new research shows that they are now a staggering seven times more expensive than houses in the north of the country, according to data produced by investment company Open Property Group.

The data used in the survey was house price per square metre, with an average house price in the capital of £7,731 per square metre.

In comparison, houses in Stoke-on-Trent sell for an average of £1,104 per square metre, while Bradford is close behind, selling at £1,307 per square metre.

Major cities in the north also lagged substantially behind the capital, falling below £2,000 per square metre.

Here are the top results of the Open Property Group study:

City  House price per square metre
London £7,731
Leeds   £1,684
Manchester  £1,684
Newcastle  £1,534
Sheffield £1,553
Liverpool £1,309
Bradford £1,307
Stoke-on-Trent £1,104

According to separate data from HM Land Registry, on average, house prices have decreased 1.1 per cent since September 2021, but there has been an overall annual price rise of 10.2 per cent, which makes the average property in the UK valued at £268,349.

Open Property Group’ Managing Director, Jason Harris-Cohen, explained that while the British public is used to seeing a house price that reflects the entire property package, knowing the actual cost per square metre is ‘a far more effective way’ of evaluating value for money.

“Using this method, buyers can compare the price of a like-for-like size property anywhere in the country, without superficial factors in the equation, which is essential for buy-to-let purchasers or anyone looking to add value,” he said.

For help and advice on purchasing or selling a property, including the tax and stamp duty implications, please get in touch.

Government is set to close tax loophole for second homeowners

The Government has announced its intention to close a tax loophole that could leave second homeowners facing higher bills.

Michael Gove, Secretary of State for Housing, Communities and Local Government, has confirmed that the Government will introduce new rules next year that will only allow second homeowners to register for business rates relief if they can prove they rent out their properties for at least 70 days per year.

Owners could face paying more than £1,000 a year under plans to close the loophole.

As the rules stand, second homeowners pay business rates, which are cheaper than council tax, if they make their property available for letting for 140 days in the coming year.

But once the change takes place in April next year, homeowners will have to prove they are let for at least 70 days a year or be forced to pay council tax instead.

The move comes following a surge in the number of holiday lets in England, with around 65,000 residential units currently registered, up from 50,960 in 2019.

The Department for Levelling Up, Housing and Communities (DLUHC) also says that there is currently ‘no requirement’ to produce evidence that a second home has actually been let out – not just left empty.

The DLUHC says the move would protect ‘genuine’ small holiday letting businesses and ensure second-home owners paid a ‘fair’ contribution towards public services.

Mr Gove’s plans come after a consultation launched in 2018 and threats last year by the Treasury to close the loophole.

According to reports, the number of holiday lets in England has been increasing year on year from 50,960 in 2019 to 65,000 now.

The Covid pandemic is said to have fuelled the trend, as London and other city dwellers sought to escape to the countryside.

According to HMRC rules, to qualify as a furnished holiday letting (FHL) it must:

  • Be in the UK or in the European Economic Area (EEA) – the EEA includes Iceland, Liechtenstein and Norway
  • There must be sufficient furniture provided for normal occupation and your visitors must be entitled to use the furniture

The property must be commercially let (you must intend to make a profit). If you let the property out of season to cover costs but did not make a profit, the letting will still be treated as commercial.

All FHLs in the UK are taxed as a single UK FHL business and all FHLs in other EEA states are taxed as a single EEA FHL business. Owners will need to keep separate records for each FHL business because the losses from one FHL business cannot be used against profits of the other.

For help and advice on property tax, please get in touch with our expert team today.