COVID_ 19_ –_ Government_ help_ for_ Self_ employed_ Barristers_ and_ related_ tax_ matters
I recently presented via Zoom to a group of Barristers organised by the Middle Temple Hall Committee. The following details the key points that were raised.
There have been a number of recent changes introduced by the Government to assist sole traders in these challenging times together with a few tax issues following on from this.
Deferral of tax.
The second payment on account in respect of 20/21 which falls due for payment on the 31st July this year can be deferred until 31st January next year without interest. There is no application process to defer this payment. Please remember the liability will fall due on the 31st January 2021 together with the usual January payment so please remember to set the funds aside/ring-fence them.
If profits to be assessed in 2020/21 are likely to be less than the previous tax year then potentially the payments on account can be reduced in January and July next year depending on the accounting reference date.
If you are struggling to settle older Revenue liabilities, there is now a coronavirus helpline 08000 159 559.
HMRC have introduced a deferral for VAT liabilities incurred from 20th March 2020 to 30th June 2020. This would include VAT returns quarters ended 28th February, 31st March and 30th April. However, the VAT return for the quarter ended 31st May 2020 is not part of the deferral scheme at this time as the liability fall due on 7th July at the latest. The deferred liabilities must be paid by the 31st March 2021. If you wish to defer the VAT payment and you pay your VAT by direct debit then you must cancel the DD.
VAT returns still need to be filed by the due dates otherwise you will be subject to the usual late filing penalties.
The Self-Employed Income Support Scheme (SEISS), (taxable government grant).
If your profits have been adversely affected by coronavirus and your average profits for the three years to 5th April 2019 are less than £50,000 then a claim can be made. The taxable grant is based on 80% of the average profits for three months to 31st May with a maximum of £2,500 per month, therefore, £7,500 for the three months to 31st May. The application must be made by 31st July so there is still time.
Last week the Chancellor extended the scheme to cover the period from 1st June to 31st August but reduced the % to 70% so the maximum amount claimable would reduce from £2,500 per month to £2,190 per month making the maximum for the three months £6570.
Accountants are unable to make the claim on behalf of their clients.
The Government-backed Bounce Back Loan.
Sole traders can apply for loans of up to 25% of turnover capped at a maximum loan of £50,000. The loans are backed 100% by the government, no personal guarantees are required and are interest-free for the first year, thereafter 2.5% per annum. Again, one of the requirements is that the business has been adversely affected by coronavirus. The loans are available until 4th December 2020.
Making Tax Digital
The second phase of Making Tax Digital which was meant to commence on the 1st April this year was delayed last October. At that time, we were given no idea how long the delay would be for however, we understand because of recent events the delay may now be for several years.
With respect to claiming business expenses now that we are all working much more from home, I want to consider whether there are additional expenses that can be claimed. I would remind everyone that the basic definition of a business expense has not altered, being any expense with the exception of entertaining, incurred wholly and exclusively for the purposes of your trade.Such expenses as stationery, phone usage and additional costs incurred for light & heat being a reasonable apportionment of household expenditure would probably be allowed. Additional capital items such as desk, chairs, shelves, computers and printers would seem reasonable.
HMRC allows a flat-rate amount to be acclaimed as an expense based on the average number of business hours worked from home. 51 to 100hrs per month £18 per month increasing to £26 per month for 101 hours+ /month.
For clients renting their homes, I consider working more at home does raise the possibility of increasing the % of rent claimed for business use however I would consider this on an individual client basis.
Should you require any further advice with respect to any of the points raised or have any other accounting or tax questions please email me firstname.lastname@example.org or call at our office on 0207 383 3200.