Making Tax Trendy!
The word ‘tax’ can be incredibly overwhelming and a burdening topic for the majority of us during the best of times, never mind during 2020 – the year over 8.9 million Britons were furloughed at the peak of the scheme in May, businesses relied on the government’s Bounce Back Loans to stay on track, and when many small businesses are banking on vaccines to avoid a double-dip recession.
It was then especially refreshing to hear that the HM Revenue and Customs (HMRC) are doing what they can to help the ‘engine room of the British economy’ AKA Small to Medium businesses and entrepreneurs, according to Karen Pearson, from Jackson and Green Accountants.
On Wednesday 9th December we saw Karen sit down for our third instalment of our Winter Webinar Series to talk all thing Tax. Karen turned the subject on its head and made it one of the best webinar’s Prosper² have seen yet. Even in times of complete turbulence, we left the webinar with a huge sigh of relief, reassured that come 2021 we won’t be scared of the previously dreaded HMRC.
While we highly recommend you watch the webinar (if you haven’t already!), we have put together a list of what we learnt from the ‘Managing your tax liabilities so that it doesn’t kill your cashflow’ webinar, so you don’t have to.
Pay what you can!
Karen made it clear that you need to ensure you look committed to paying your tax before contacting HMRC to arrange a monthly payment schedule. In terms of your corporation tax, HMRC want you to prove that you have a payment plan and that you are prepared that you can pay via Direct Debit – mainly to demonstrate that you are committed. Make sure you get your first payment in first.
HMRC need and want to work with you because it is in their best interests to be flexible, to be understanding, and for easy communication for all.
Keep an eye on your tax bracket!
You may have been within the cohort of small businesses or sole traders who benefitted from the furlough and rates grants that were made available. Karen highlighted that those who made a profit during the trading period, it will still count the same as normal trading income, and HMRC will tax you at your prevailing rate.
If you have been a 20% taxpayer all of this time but because of the grants it nudges you into the 40% there is a possibility you have lost more of your grant plus your NI, Karen emphasised that every time you get receive a supplement from HMRC, that you do put some of that away, and keep an eye on the maths.
It is also important to take a step-back and question whether you really need the grants, so you aren’t over-claiming.
Get ready to leave the EU!
With the Prime Minister still not having secured a deal with the EU, it is incredibly difficult to navigate what we must do in terms of importing and exporting goods. But what we do know is that we must be ready to take action to ensure a smooth transition.
HMRC are in the process of writing to all VAT registered businesses highlighting actions that should be taken if they plan to continue trading with the EU after 1st January 2021.
If this affects you, the key actions that you must take are:
- Appoint a specialist to deal with import and export declarations. Most businesses use a third party such as a freight forwarder or fast parcel operator to deal with this, and do not do their customs declarations themselves.
- Check to see if you will be able to delay your declarations or duty payments.
- Register for the free-to-use Trader Support Service if you plan on moving goods into Northern Ireland from 1st January 2021 Trader Support Service (TSS)
One of the main take-aways from the webinar was to not put your head in the sand, take action and to be in constant communication with your accountant to ensure that nothing is a surprise come the end of the tax year.
Karen touches upon a number of topics throughout the webinar, including changes in construction VAT, Buy-to-Let, Bounce Back Loans, and Making Tax Digital. If you want to know more you can watch the webinar, here. You can also read Business Advice’s article, here.