25,000 companies receive penalties for the late filing of accounts in just one month

The latest data from Companies House shows that thousands of penalties were handed out for the late filing of company accounts, with more than 25,000 companies missing a deadline on 30 September.

This date marks a common deadline for companies, according to Companies House, with a further 643 companies narrowly avoiding a penalty by filing their accounts in the final hours.

The penalties issued in September are on top of the 223,640 late filing penalties issued in 2018 (the most recent year for which data is held). This includes all corporate bodies to which late filing penalties apply, such as private limited companies and limited liability partnerships.

Limited companies are required to file annual statutory accounts with Companies House. The deadline for this filing depends on when a company incorporated. A company will automatically be assigned a date for the company’s ‘end of financial year’ and this date is the last day in the month that the limited company was incorporated.

Companies House Senior Enforcement Manager, Ian Gronland said: “September can be a busy time for many people. However, if you are a company director you should be aware of your responsibilities to file annual accounts with Companies House on time. Failure to do so will result in a late filing penalty.

“Filing electronically is easier and faster, and our digital services have in-built checks to ensure that any necessary information is provided before accounts can be submitted.”

Link: Thousands of companies missed crucial accounts deadline last year

New figures show a sharp increase in Inheritance Tax (IHT) receipts

New figures published by HM Revenue & Customs (HMRC) have revealed a significant increase in the number and value of Inheritance Tax (IHT) receipts.

The figures, which relate to the 2016/17 tax year, show a 15 per cent increase in the number of estates paying IHT in comparison with the previous year, rising from 24,500 to 28,100.

At the same time, there was a three per cent increase in IHT receipts from £5.2 billion to £5.4 billion.

The average IHT bill in 2016/17 was £179,000, with 72 per cent coming from estates worth more than £1 million.

The increase follows a trend that has continued since 2009 and which has been widely attributed to the freezing of the £325,000 IHT threshold.

The new figures predate the introduction of the Residence Nil-Rate Band (RNRB) in 2017/18, which provides an additional tax-free threshold to people who leave their main residence to a direct descendant, such as a child or grandchild.

Link: Inheritance tax hits more estates in record receipts of £5.4 bn

Tax investigations reap in £13 billion for the treasury

The latest official data from HM Revenue & Customs (HMRC) shows that the actual cash collected from all tax investigations hit £13 billion in 2018/19.

This was up 27 per cent from the previous tax year in which £10.3 billion was collected. The data also showed that transfer pricing fines for multinationals have risen to £413,000.

The greater yield from tax investigations seems to have been driven in part due to payments HMRC has received ahead of the loan charge being introduced in April 2019.

A considerable amount was also recovered as a result of HMRC’s offshore tax campaign last year.

In addition, technology is playing a greater role in investigations, as HMRC has become more successful at identifying cases for investigation that are likely to result in large amounts of extra tax being collected.

Despite the headline figure, the bulk of this increase is made up of hypothetical estimates, such as ‘revenue losses prevented’ and ‘future revenue benefit’.

Meanwhile, HMRC’s crackdown on aggressive use of transfer pricing has seen the fines imposed on multinational businesses increase tenfold, indicating that the new country-by-country reporting (CBCR) rules are having an impact on compliance.

In 2018/19 HMRC imposed £413,437 in fines, compared to just £45,600 in 2015/16. The clampdown on these irregularities has also helped the tax authority to secure an additional £6.5 billion of tax in the years between 2012/13 and 2017/18.

Link: HMRC annual report and accounts: 2018 to 2019

MTD for VAT filing deadline missed by one in ten businesses

HM Revenue & Customs (HMRC) has reassured the 120,000 businesses that failed to meet the 7 August deadline for Making Tax Digital (MTD) for VAT that the tax authority will not be issuing fines to them for missing the date.

Under MTD, all businesses with a turnover of £85,000 or more must keep computer-based records and file their VAT return using HMRC-compliant software.

The latest figures suggest that around one in four firms failed to meet the deadline, meaning that the taxman could have issued tens of millions of pounds in fines, which could be between £100 and £400, depending on the turnover of the business.

However, HMRC has said that it will adopt a ‘light touch’ approach to penalties in the first instance and, according to officials, the organisation is also giving leeway to businesses because of the possibility of a no-deal Brexit.

Although the taxman is showing leniency now, it has been clear that late filings will be punishable with fines after the ‘soft landing’ period ends in April 2020, even though recent research has found that the majority of business owners say they feel unprepared for MTD.

The research, conducted by YouGov, found that only 12 per cent of business owners said they were ‘very prepared’ for MTD, and 28 per cent of small firms said they were worried about the costs of ensuring compliance. More worryingly, 12 per cent of those polled said they had not even heard of MTD, despite the 7 August deadline, which has now passed.

Link: One in 10 business miss MTD VAT filing deadline

Principal Private Residence Relief and Lettings Relief changes due in April 2020

The start of the next tax year in April 2020 will see key changes come into effect in respect of Principal Private Residence Relief (PPR) and Lettings Relief, both of which can be used to soften the impact of Capital Gains Tax (CGT) on property disposals.

From next April, Lettings Relief will be restricted to property owners who share occupancy of a property with their tenant. At the moment, people who let a property that either is currently or used to be their main residence and who sell it can claim relief of up to £40,000, with double that being available to a married or civil partnered couple.

At the same time, the Final Period Exemption (FPE), which means that people do not need to pay CGT on the gains made in the final 18 months that they owned the property, will be cut to just nine months.

There are special rules available that do not affect people moving to care homes and people with a disability that are not affected by the changes.

Link: Principal residence relief final period exemption

Employment Allowance to be restricted from next year

At the moment businesses and charities of all sizes can benefit from Employment Allowance. However, from the start of the new tax year in April 2020, the allowance will only be available to employers with a secondary National Insurance Contributions bill in the current tax year of less than £100,000.

Employers need to ensure that they update their payroll systems accordingly and cease to select any options within payroll software indicating that they will claim the allowance if they are no longer eligible.

Furthermore, in circumstances where an employer becomes connected with another employer that is excluded from Employment Allowance as a consequence of their secondary Class 1 bill having exceeded £100,000, they will also become excluded.

Required information regarding Employment Allowance must be provided to HM Revenue & Customs (HMRC) using the Employment Payment Summary (EPS) of the Real-Time Information (RTI) system.

Link: From April 2020, the employment allowance is to be restricted to those with only secondary class 1 National Insurance Contribution of less than £100,000

HMRC outlines changes to Capital Gains Tax treatment on second homes

From April 2020, the date at which Capital Gains Tax (CGT) must be paid on a second home property disposal is changing.

After this date, taxpayers will only have 30 days to file their return and make an advance payment towards their tax bill.

This differs drastically from the current rules, which allows people to pay CGT on the disposal of a property up to 22 months after the sale as part of the self-assessment cycle.

These changes have been known for some time, however, recent research by HM Revenue & Customs (HMRC) suggests that the level of awareness of the CGT changes remains low, with many taxpayers confused about the new rules.

In its report, HMRC said that both individuals and intermediaries, such as accountants, reviewing HMRC’s policy documents had found it “difficult to understand due to long paragraphs containing financial terminology and unfamiliar terms related to CGT”.

“As a result, neither audience felt confident that they had fully understood the policy changes and felt they would need to refer to a professional for clarification,” HMRC concluded.

Links: Capital Gains Tax communications research

Taxpayers’ bills delayed by payment on account errors

The Association of Taxation Technicians (ATT) has revealed that problems with HMRC’s IT systems earlier this year, relating to calculations for payment on account, mean that some taxpayers will not receive tax demands this month.

The glitches in the tax authority’s systems during the self-assessment tax return season also mean that calculations for payment on account on some returns may not be adjusted correctly.

It was apparently made clear at the time that HMRC’s systems had not processed payments on account for 2018/19 correctly. Unless affected taxpayers contacted HMRC to correct the position, they will not have received a demand in June or July for the second payment on account due by 31 July 2019.

Instead, those affected by this HMRC failure will need to pay their total 2018/19 self-assessment tax bill by the end of January 2020 and the ATT is advising them to set additional money aside to make sure their bill is covered.

Jon Stride, Co-Chair of the ATT’s technical steering group, said: “If a taxpayer does not make any payments on account during 2019, then their tax bill in January 2020 could be significantly larger than they are expecting and could come as quite a shock.

“Individuals who do not receive expected demands should either set aside the funds needed ready for next year or, if they wish, they can make a voluntary payment on account to HMRC of their July payment – and their January payment if that was also missed.”

The ATT has been told by HMRC that if no 2018/19 payments on account have been demanded, then the taxpayer will receive a demand from HMRC for the full amount of tax in January 2020.

Self-assessment taxpayers with annual tax demands of £1,000 or less do not have to make payments on account, while those in the regime who have 80 per cent or more of their total annual tax collected at source, such as by PAYE, do not have to make payments on account either.

Link: Missing 2018-19 payments on account – what to do

Remember to pay the annual data protection charge

Businesses across the UK are being reminded that, if they process personal data, they are subject to a legal requirement to pay the Information Commissioner’s Office (ICO) an annual data protection charge, unless they have a relevant exemption.

Any businesses that fail to pay the correct charge are at risk of a fine of up to £4,350. A list of businesses that have paid the charge is published on the ICO’s register of data controllers.

The amounts that businesses must pay are determined by their size, with micro organisations and sole traders paying £40 a year, SMEs and equivalent organisations paying £60 and large organisations paying £2,900.

Where an organisation pays the charge by direct debit, they will receive a £5 deduction.

There is a tool available on the ICO website here so that organisations can determine whether they are subject to the charge.

Link: Employer bulletin June 2019