Our newsletter this month includes: a review of recent forecasts regarding the forthcoming Budget, a note of how to spread tax arrears under self-assessment, the carry back rules for charitable donations and a reminder that March year end companies will need to settle their corporation tax bill on or before 1 January 2018.
There is continuing speculation in the financial press about the likely changes that Philip Hammond will introduce in his Budget announcements on 22 November 2017.
Politically, he is being encouraged to be radical, to offer more to younger voters. Changes mooted include:
If you file your 2016-17 self-assessment tax return on or before 30 December 2017, you can elect to spread the repayment of any underpayment of tax for 2016-17 to the tax year 2018-19. This is done by amending your tax code for 2018-19 such that any arrears are repaid by increasing your tax payments each pay period.
There are caveats to the use of this facility, one of which we have already mentioned, that you need to file your 2016-17 return online by 30 December 2017 (if you still file a paper return the filing deadline has passed, 31 October 2017, and so this option would not be available unless you filed prior to this date).
There are two further limitations:
Additionally, you won’t be able to repay outstanding tax via your tax code if:
One of the few remaining options to carry back tax allowable payments to a previous tax year is the facility to set off certain charitable donations made after 5 April 2017, to the tax year 2016-17.
Allowable donations have the effect of extending the amount of income you can earn at the basic rate of income tax - the donations extend the basic rate tax band. This can be a useful planning device if say your income for 2016-17 included a one-off boost that meant you paid higher rate tax (40%), but your income for 2017-18 would only be taxed at basic rate (20%). By carrying back any charitable donations made after 5 April 2017, you would decrease your higher rate tax liability for 2016-17.
You automatically qualify for basic rate income tax relief on your gift aid donations, you effectively pay a net of tax figure to the charity and they reclaim the deemed basic rate tax from HMRC. Accordingly, this carry back option will have no impact on your tax liabilities if you are a basic rate tax payer in both years. The carry back will also have no effect on the charities’ finances.
Taxpayers need to be careful when considering their options as you can only qualify for relief if your tax payments in a year equal or exceed the deemed basic rate tax credits deducted from your donations. HMRC notes confirm:
But for Gift Aid, you can also claim tax relief on donations you make in the current tax year (up to the date you send your return) if you either:
You can’t do this if:
Many companies have adopted the end of March each year as their accounting year end date.
Corporation tax is payable by most smaller companies nine months and one day after the end of their accounts year end. Accordingly, companies that have adopted a 31 March date will need to pay any corporation tax liability for the year to 31 March 2017 on or before 1 January 2018; just a few weeks away.
The same dates also determine the payment of additional corporation tax if certain overdrawn director’s loans (at 31 March 2017) are not repaid before the end of the year. Additional corporation tax due will be based on 32.5% of any applicable director’s or shareholder loans affected by this ruling. The tax can be recovered, but there will be a delay. Repayments cannot be made until the effective payment date for the accounting year during which the loans were cleared. Effectively, if the loans are paid back May 2018, a refund will not be made until 1 January 2020.
1 November 2017 - Due date for corporation tax due for the year ended 31 January 2017.
19 November 2017 - PAYE and NIC deductions due for month ended 5 November 2017. (If you pay your tax electronically the due date is 22 November 2017.)
19 November 2017 - Filing deadline for the CIS300 monthly return for the month ended 5 November 2017.
19 November 2017 - CIS tax deducted for the month ended 5 November 2017 is payable by today.
1 December 2017 - Due date for corporation tax due for the year ended 29 February 2017.
19 December 2017 - PAYE and NIC deductions due for month ended 5 December 2017. (If you pay your tax electronically the due date is 22 December 2017)
19 December 2017 - Filing deadline for the CIS300 monthly return for the month ended 5 December 2017.
19 December 2017 - CIS tax deducted for the month ended 5 December 2017 is payable by today.
30 December 2017 - Deadline for filing 2016-17 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2018-19.