e0a698c6 e9a4 4844 be93 4cf3d3eb507d 800x380 - Rules on waiving income or donating to charities

Rules on waiving income or donating to charities

HMRC has published a new press release that provides some advice for people choosing to give up their income to support their business or donate to charity during the Coronavirus (COVID-19) pandemic.

Employers, directors and employees have several options to support a business or employer, including:

  • Waiving their salary or bonuses before they are paid. A ‘waiver of remuneration’ happens when an employee gives up rights to remuneration and gets nothing in return. If an employee and employer agree to a reduction in the employee’s remuneration before they are paid, for example to support company cashflow during the pandemic, then no Income Tax or National Insurance contributions (NICs) will be due on the amount given up.
  • Waiving the right to any dividends. This can be actioned by directors or other shareholders, including employees. a Deed of Waiver must be formally executed, dated and signed by shareholders and witnessed and returned to the company. The waiver must be in place before the right to receive a dividend arises.
  • Giving salary or dividends back to their employer after they have been paid. It is not possible to claim back the Income Tax and NICs that would already have been deducted from the salary or bonuses on payment.

There are also options to donate to charities. The Payroll Giving scheme allows employees to make a tax free donation to charity directly from their pay if their employer runs a payroll giving scheme which has been approved by HMRC.

Gift Aid Donations allow charities and community amateur sports to claim 25p worth of tax relief on every pound donated. Higher rate or additional rate taxpayer can claim additional tax relief on the difference between the basic rate and their highest rate of tax.

Source: HM Revenue & Customs Wed, 27 May 2020 05:00:00 +0100
32aa2ad4 6ce4 43da 8242 61ed83cd5fb4 800x380 - Lost your job? What to do…

Lost your job? What to do…

If you lost your job after 28 February 2020, your previous employer could have agreed to re-hire you and then place you on furlough. However, there is no compulsion on the part of your ex-employer to do this and many firms have been reluctant to make such a move.

You may also have been disadvantaged if you lost your job before the 28 February 2020 deadline or started a new job or were not on the PAYE payroll of a new employer on or before 19 March 2020.

The jobs market is obviously limited at the moment with large numbers of people looking for work. However, there are still opportunities in industries that have extra work available due to Coronavirus.

If you have lost your job, you may be able to access Universal Credit. You can also ask for an advance payment if you do not have enough money to live on whilst waiting for benefit payments.

Guidance from the Department for Work and Pensions says that you might also be able to:

  • apply for 'new style' Employment and Support Allowance, if you have a disability or health condition that affects how much you can work
  • apply online for 'new style' Jobseeker’s Allowance

You do not need to go into a Jobcentre Plus office to apply or get a payment.

Source: HM Revenue & Customs Wed, 13 May 2020 05:00:00 +0100
2016 08 18 406774 800x380 - Gift Aid donations only available to taxpayers

Gift Aid donations only available to taxpayers

The Gift Aid scheme is available to all UK taxpayers, but in order to sign up to the Gift Aid scheme when you make a donation, you must be paying UK income tax.

There are clear advantages for charities if you make your donation in this way. The charity or Community Amateur Sports Clubs (CASC) concerned can take your donation and, provided all the qualifying conditions are met, can reclaim the basic rate tax, which means that the value of your donation increases by 25p for every pound donated to charity.

Higher rate and additional rate taxpayers can also claim additional income tax relief. This is based on the difference between the basic rate and their highest rate of tax.

For example:

If a taxpayer donates £500 to charity, the total value of the donation to the charity is £625; the charity claim the £125 difference from HMRC. The taxpayer can also claim additional tax back of:

  • £125 if they pay tax at 40% (£625 × 20%),
  • £156.25 if they pay tax at 45% (£625 × 20%) plus (£625 × 5%).

Planning warning. One of the conditions for an effective claim for Gift Aid is that you must have paid enough tax in the relevant tax year to cover the tax credit that the charity can claim from HMRC. The rules state that your donations will qualify for tax relief as long as they are not more than 4 times what you have paid in tax in that tax year. If you have claimed more tax relief than you are entitled to you will need to notify the charity and pay back any excess tax relief.

2017 07 13 306131 800x380 - Online filing exclusions for 2016-17

Online filing exclusions for 2016-17

HMRC’s list of exclusions from online filing for 2016-17 continues to multiply. The list of exclusions has been updated with the publication of version 4.0 of the document. There are now a total of 32 live exclusions on the list including 5 new additions to the list.

Many of these issues exist as HMRC has been unable to update its software to properly deal with all the various combinations arising from the changes to the dividend tax, personal allowance and savings allowances from April 2016. It is thought that a relatively small number of taxpayers will be affected by these issues. However, this will cause problems for those affected and some will be required to step back in time and submit tax returns in paper form.

In other words, the legislation in these areas has outpaced the ability of HMRC’s programmers to update their online filing software.

The exclusions include:

  • Taxpayers with savings and non-savings income over £32,000 of which the non-savings income is between £11,000 and £16,000.
  • The basic rate band is extended incorrectly for dividends of more than £118,000 where the taxpayer is liable to additional rate tax.

In a recent update HMRC said:

‘HMRC is working hard to ensure that no tax is incorrectly assessed for a very small number of self assessment customers, who have a very unusual combination of income types. HMRC is committed to helping customers file online for 2016/17 and is discussing how best to achieve this with agent representatives and software providers. Further information will be provided, as soon as it becomes available.’

Planning note: If you are affected by the inability of HMRC’s software to cope with your return, and you need to file a paper return for 2016-17, HMRC will accept the late return of a paper return up to 31 January 2018 on the basis that the taxpayer had a reasonable excuse for late submission. HMRC advises that a reasonable excuse claim should be sent together with the paper return. HMRC has said that they expect to be able to fix these issues for 2017-18, and subsequent tax years.

Please call if you need help in dealing with these formalities.