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How to Finish the Tax Year and Prepare for IR35 Changes

As we head towards April, now is the time to think about pre-tax year planning, doing the year end administration and filing the necessary forms to HMRC.

Time is running out to make the most of your tax allowances this year.  The first step to making the most of your tax allowances can mean looking closely at your pension. UK residents under 75 can add money to a pension and receive tax relief on it. You’ll automatically get basic rate tax relief (currently 20%) paid into your pension by the government. 

If you pay tax at a higher rate you could get up to a further 25%, but you will need to claim it by declaring any pension contributions you have made on your tax return.

The annual allowance is the maximum you can invest in your pension each year that would be eligible for tax relief. It is currently £40,000, or your entire income, whichever is the smaller and there are lifetime allowances to consider.

If you run a limited company then there are some actions you could consider such as dividend and salary planning, purchasing capital items to maximise capital allowances, research and development tax credits and a range of other matters.   

HM Revenue & Customs

Payroll administration 

If you run your own payroll, it is time to look at the end of year payroll tasks for the current year and key changes affecting payroll for 2021-22.

HMRC have updated their webpage on annual reporting and tasks needed before 5 April 2021. This covers sending your final payroll report, updating employee payroll records, updating payroll software, issuing P60s and reporting expenses and benefits. See: https://www.gov.uk/payroll-annual-reporting

HMRC have issued their guidance on P9X: Tax codes, to assist in understanding which PAYE tax codes to change, how to change them and which codes to carry forward ready for the new tax year. See:  https://www.gov.uk/government/publications/p9x-tax-codes

For the 2021-22 rates and thresholds for employers when you operate your payroll or provide expenses and benefits to your employees see: https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2021-to-2022

If we prepare your payroll we will of course file the necessary tax year end forms for you and keep you informed of any changes.

Prepare for tax changes if you engage or supply contractors – Off-payroll working rules (IR35)

If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on 6 April 2021.

For all contractors working through their own limited company, you will need to:

  • identify contractors who work in this way
  • decide if they are inside or outside the rules
  • inform your contractors of their status determination, and any agencies you engage with
  • be ready to add them to payroll if needed
  • be ready to deal with any disputes
  • maintain an audit trail, and test your processes, systems and controls

If you are an employment agency which supplies contractors who work through their own limited company or other intermediary, you need to understand the changes and may also need to take action. You need to:

  • identify contractors who work in this way
  • be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto payroll
  • maintain an audit trail, and test your processes, systems and controls

You can find more information about the actions you need to take to prepare here: https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35

Please talk to us about pre-tax year end planning for your business – we are here to support you in preparing for the new tax year and beyond! 

COVID-19 Government Support News

Below is our weekly roundup of changes to government support information generally and for businesses, employers and the self-employed. Please contact us if you need help.

HMRC have published their latest information about financial support schemes available, including the VAT deferral new payment scheme and the Coronavirus Job Retention Scheme (CJRS).

VAT deferral – apply now to spread your payments

The VAT deferral new payment scheme is open for all businesses who deferred VAT due between 20 March and 30 June 2020 and still have payments to make, or who are unable to pay in full by 31 March 2021. This includes those on Payment on Account and Annual Accounting schemes.

Apply now to spread these payments over a number of months – the later you join the fewer instalments are available to you. Join from 19 March 2021 to benefit from the maximum number of 11 instalments.

You can join the scheme online without the need to call HMRC. To find out more information, including the things you need to do before joining, go to GOV.UK and search ‘VAT deferral’.

CJRS claims for March

You can now submit your CJRS claims for periods in March 2021. These must be made by Wednesday 14 April. 

You can claim before, during or after you process your payroll. If you can, it’s best to make a claim once you’re sure of the exact number of hours your employees will work so you don’t have to amend your claim later. Check if you and your employees are eligible and work out how much you can claim using our CJRS calculator and examples, by searching ‘Job Retention Scheme’ on GOV.UK.

What you need to do now:

  1. If you haven’t submitted your claim for February but believe that you have a reasonable excuse for missing the deadline, check if you can make a late claim by searching ‘claim for wages’ on GOV.UK.
  2. Submit any claims for March no later than Wednesday 14 April.
  3. Keep records that support the amount of CJRS grants you claim, in case HMRC needs to check them.

Extension to the CJRS

As announced in the 2021 Spring Budget, the CJRS has been extended until the end of September 2021.

For periods from 1 May 2021 onwards, you will be able to claim for eligible employees who were on your PAYE payroll on 2 March 2021. This means you must have made a PAYE Real Time Information (RTI) submission between 20 March 2020 and 2 March 2021, notifying HMRC of earnings for that employee.

The government will continue to pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, up to the end of June 2021.

For periods in July, CJRS grants will cover 70% of employees’ usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this will then reduce to 60% of employees’ usual wages up to a cap of £1,875.

You will need to continue to pay your furloughed employees at least 80% of their usual wages for the hours they do not work during this time, up to a cap of £2,500 per month. This means, for periods between July and September, you will need to fund the difference between this and the CJRS grants yourself. You can also top up wages above the 80% if you wish, but you are not required to do so.

You must continue to pay Employer National Insurance contributions and pension contributions on subsidised furlough pay from your own funds.

See: https://content.govdelivery.com/accounts/UKHMRCED/bulletins/2c7619c

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