Tax Top Tips - Three “must do” things for April 2021

Business Owners

1

Complete your employment related securities Annual Return

Gifts and awards of shares in companies (often referred to as employment related securities) are a great way of providing a benefit to your employees and rewarding loyalty without incurring a cash cost to the business. Also, when using a HMRC approved share scheme, they can be very tax efficient for the employee. Movements in ERS’s are required to be reported to HMRC annually however, by 6 July 2021. Often this obligation is forgotten about or left to last minute, starting early in preparation of completing the ERS Annual Return is recommended, as the late filing penalties can rack up quickly.

2

Review the benefits you are providing

With the end of the tax year (5 April), comes with it the deadline for reporting the taxable benefits you have provided to your employees in that year on form P11D. This also needs to be submitted to HMRC by 6 July 2021.

When gathering the information to complete that exercise, now is an opportune time to review the tax efficiency of the benefits you are providing to your employees, to see if any improvements can be made in the packages offered, as benefits are seen as an important part of the total remuneration package.

3

Plan ahead

It is never too early to plan ahead, and I would encourage all business owners to have a 3–5 year business strategy, and a clear succession plan.

With announced increases in the corporation tax rate to 25% in 2023, increased super allowances of up to 130% available for capital expenditure for a two year period, and enhanced loss carry back rules for a two year period, it is more important than ever to plan ahead and discuss with your tax advisor your plans, to ensure that you are optimising your tax positions.

Individuals

1

Prepare your tax Return early

Sending in your tax Return early is a win-win. Whilst there might be a reluctance to think about preparing the tax Return for the 2020/21 tax year so soon after passing the deadline for the previous year, filing early can bring with it some key benefits. Not only does submitting early avoid a last minute rush, but preparing the Return in advance of 31 July ensures only the right amount of tax needs to be paid on account, and it can bring finality of the Return sooner since the normal enquiry window starts from the date of submission of the Return.

2

Entitlement to Child Benefit

With COVID-19 having an impact on household income, now is an appropriate time to review entitlement to Child Benefit and, where appropriate, start claiming the benefit again. An individual living in the UK will normally qualify for Child Benefit if they are responsible for a child under the age of 16. The weekly rates for the 2021/22 tax year are £21.15 for the first child and £14 for each additional child. Where the individual or their partner earns over £50,000 the Child Benefit received starts to be paid back to HMRC on a sliding scale until the whole of the Child Benefit is recovered by HMRC for incomes in excess of £60,000.

3

Jointly held assets

Spouses and civil partners should review their combined tax position and consider transferring income-producing assets between themselves to ensure they fully utilise personal allowances and lower rates of income tax available to them in the tax year ahead. This can be particularly effective where one spouse or civil partner pays income tax at the higher or additional rate of tax, and the other at the basic rate or is a non-tax payer.