Newsletter May 2013

This month our newsletter includes justification for preparing your Self Assessment return in good time, using charitable donation carry-back rules to good effect, further details of the new anti-abuse tax rule and a reminder that HMRC do not send emails.

Our next newsletter will be published on 6 June 2013.

Self Assessment 2013

We are already two months into the 2013-14 tax year and those readers who need to file a tax return for the year ending 5 April 2013 have until 31 January 2014 to do so if filing online.

In this article we will explain why it is advisable to gather your various P60s and other tax information together and bring them in so we can compute your liability for 2012-13. There are a number of compelling reasons for working through this process as quickly as you can.

As part of the tax return preparation process we will work out your total tax liability for 2012-13 and any balance of tax unpaid for this year. Unpaid tax will need to be paid on or before 31 January 2014 so working out the underpayment early means you have more time to save for any tax due.
Conversely, if you have overpaid tax for 2012-13 we can file your return and obtain a refund for you.
The actual tax liability for 2012-13 also forms the basis for payments on account in January and July 2014. Again, the earlier these amounts are known, the longer you will have to save for payments due.
If your Self Assessment tax liability for 2012-13 is lower than for 2011-12 we may be able to reduce the payment on account due in July to avoid you paying tax and obtaining a refund later. However, to do this we will need to prepare your 2013 return by about the middle of July.
Although most of the tax planning opportunities to reduce tax due for 2012-13 have passed, there is one significant planning option that can be actioned up to the date you file the 2013 return. We have provided more information on this in the following article.

Hopefully, you can now see how you might benefit from getting your tax return records to us sooner rather than later. It pays to be informed.

Re-opening the stable door

Usually, it is necessary to perform an action within a tax year in order to impact your tax liability for that specific year. One notable exception is the ability to carry back charitable donations to the previous tax year in certain circumstances. The following notes are copied from HMRC's website and explain what is involved:

'You can ask for Gift Aid donations to be treated as being paid in the previous tax year if you paid enough tax that year to cover both any Gift Aid gifts you made that year and the ones you want to backdate.

Your request to carry back the donation must be made before or at the same time as you complete your Self Assessment tax return for the previous year but no later than the filing deadline for the tax return, which is 31 October if you file a paper tax return, or 31 January if you file online.'

What HMRC does not mention are the opportunities this facility provides, particularly to higher rate tax payers and those with income in excess of £100,000. Please contact us if you would like more information on this topic.

General Anti-Abuse Rule (GAAR)

Readers may have noted that from the date the Finance Bill 2013 receives a Royal Assent, HMRC will be using new powers to stop abusive tax schemes from reducing a tax payer's liability. The legislation is set out in the GAAR, the General Anti-Abuse Rule.

It is worth noting that HMRC can use the GAAR to counter certain arguments previously used by the judiciary. There are a number of well-known rulings where the tax payer's right to use a tax scheme was endorsed. The following quote is from the judgment of Lord Clyde in the Ayrshire Pullman case:

"No man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores. The Inland Revenue is not slow – and quite rightly – to take every advantage which is open to it under the taxing statutes for the purpose of depleting the taxpayer's pocket. And the taxpayer is, in like manner, entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue."

Following the implementation of GAAR, Parliament is now in a position to side-step these judgments. HMRC have commented on this change of tack:

'Accordingly, it is essential to appreciate that, so far as the operation of the GAAR is concerned, Parliament has decisively rejected this approach and has imposed an overriding statutory limit on the extent to which taxpayers can go on trying to reduce their tax bill. That limit is reached when the arrangements put in place by the taxpayer to achieve that purpose go beyond anything which could reasonably be regarded as a reasonable course of action.'

For taxpayers and their advisors this creates a new dilemma; who defines a reasonable course of action?

We will be keeping a close eye in the months to come on ways in which the GAAR is used to close down tax savings opportunities. Watch this space…

Beware emails purporting to be from HMRC

HMRC have made it clear that they do not send taxpayers emails regarding their tax affairs. So the next time you receive an email purporting to be from HMRC you can safely bet that it is a scam and that it can be safely ignored. Whatever you do, do not follow any links in these emails as they will likely lead to all sorts of computer viruses infecting your computer. And do not provide any personal information, particularly bank details.

If you are in doubt as to authenticity of communications received call HMRC to clarify.

Tax Diary May/June 2013

1 May 2013 - Due date for Corporation Tax due for the year ended 31 July 2012.

19 May 2013 - PAYE and NIC deductions due for month ended 5 May 2013. (If you pay your tax electronically the due date is 22 May 2013.)

19 May 2013 - Filing deadline for the CIS300 monthly return for the month ended 5 May 2013.

19 May 2013 - CIS tax deducted for the month ended 5 May 2013 is payable by today.

19 May 2013 - The payroll forms P35 and P14s must be filed by this date - employers late in filing these forms may receive a penalty.

31 May 2013 - Ensure all employees have been given their P60s for the 2012-13 tax year.

1 June 2013 - Due date for Corporation Tax due for the year ended 31 August 2012.

19 June 2013 - PAYE and NIC deductions due for month ended 5 June 2013. (If you pay your tax electronically the due date is 22 June 2013.)

19 June 2013 - Filing deadline for the CIS300 monthly return for the month ended 5 June 2013.

19 June 2013 - CIS tax deducted for the month ended 5 June 2013 is payable by today.

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