Inheritance Tax is a tax on the estate (the property, money or possessions) of someone who has passed away.
Valuing the estate

• Identify the deceased assets and debts such as savings, investments, mortgages and loans
• Estimate the estates value. This will affect how you report the value, and the deadline for reporting and paying any Inheritance Tax. Most estates are not taxed.
• Report the value of the estate – how you do this depends on whether you need to send full details of the estate and its value.

Identifying assets

• Bank accounts
• Savings
• Pensions
• Property
• Household good
• Personal Items

Identifying debts

• Utility bills
• Mortgages
• Credit cards
• Loans
• Funeral Expenses

There is normally no Inheritance Tax to pay if:

• The value of your estate is below the £325,000 threshold
• You leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

You may need to send full account of details of the estate to HMRC, even if no Tax is due, if the person who died:

• Gave away over £250,000 in the 7 years before they died (£150,000 if the person died before 31 December 2021)
• Gave gifts then continued to benefit from them in the 7 years before they died
• Left an estate worth more than £3 million (more than £1 million if they died before 31 December 2021)
• Died on or before 31 December 2021 and had inherited part of the Inheritance Tax threshold from a previous spouse or civil partner
• Was ‘deemed domiciled’ in the UK
• Had foreign assets worth more than £100,000
• Was living permanently outside the UK when they died but previously lived in the UK
• Had a life insurance policy that paid out to someone other than their spouse or civil partner and also had an annuity
• Had increased value of a lump sum from a personal pension to be paid after their death, while they were terminally ill or in poor health
• Had agreed that a property they’d given away during their lifetime would be part of their estate rather than pay a pre-owned asset charge
• Gave gifts that were paid into trusts
• Held assets worth over £250,000 in trust (£150,000 if the person died on or before 31 December 2021)
• Held more than one trust
• You’ll also need to complete a full account if the deceased died on or before 1 January 2022 and assets held in trust passed to a surviving spouse, civil partner or charity and the trust was worth:
• £1 million or more
• £250,000 or more after the amount passing to the surviving spouse, civil partner or charity has been deducted

Deadlines
There are only deadlines if the estate owes Inheritance Tax
If it does, you’ll need to:

• Send Inheritance Tax forms within one year
• Start paying tax by the end of the sixth month after the person died – you can make a payment before evaluating the estate

Records
HMRC can ask to see your records up to 20 years after Inheritance Tax is paid
You must keep copies of the:

• Will
• Signed Inheritance Tax forms and supporting documents
• Records showing how you worked out the value of assets in the estate
• Documents showing any unused Inheritance Tax threshold that can be transferred to a surviving spouse or civil partner
• Final accounts

Final Accounts
Include any documents showing how you distributed money, property or personal belongings from the estate

• Letters from HMRC confirming that you paid the Inheritance Tax
• Receipts showing debts paid, for example utility bills
• Receipts for your expenses from dealing with the estate
• Written confirmation that ‘beneficiaries’ (anyone who inherited) received their share of the estate

HMRC have informed us that from Tuesday 1st November 2022, we will no longer be able to use the existing VAT online account to file the quarterly or monthly VAT returns.
Businesses that file annual VAT returns will still be able to use their VAT online account until 15th May 2023.
By law, VAT-registered businesses must now sign up to Making Tax Digital and use MTD-compatible software to keep their VAT records and file their VAT returns.
If you are not signed up for MTD yet, please contact us and we can sign you up for it. If you are not signed up to MTD and file your VAT returns through MTD-compatible software, you may have to pay a penalty. The best way for your business to avoid penalties is to sign up today and get used to the change that will be happening later in the year.
If you are already exempt from filing VAT returns online or if your business is subject to an insolvency procedure, you are automatically exempt.
 
If you’re not sure about any of the above, please get in touch.
 
0121 517 0820
[email protected]

Making Tax Digital is a key part of the government’s plans to make it easier for individuals and businesses to get their tax right and keep on top of their affairs. HMRC’s ambition is to become one of the most digitally advanced tax administrations in the world. Making Tax Digital is making fundamental changes to the way the tax system works – transforming tax administration so that it is:

• more effective
• more efficient
• easier for taxpayers to get their tax right

What does this mean for me?

If you’re using spreadsheets, you’ll either need to use bridging software or start using HMRC-recognised software instead. If you haven’t already, it’s important to take action now. Make sure you’re compliant with MTD for VAT by adopting fully compatible software, keeping digital records and signing up before the VAT deadline. Not sure on next steps? Contact us for more information.

VAT-registered businesses must use recognised software to keep digital records and submit VAT to HMRC.

​From 1 March 2021 the domestic reverse charge VAT for Construction & Building Services will come into force and must be used for most supplies of building and construction services.
 
The charge applies to standard and reduced-rate VAT services:

• for individuals or businesses who are registered for VAT in the UK
• reported within the Construction Industry Scheme

​Domestic reverse charge VAT legislation is a change to the way CIS registered construction and building service businesses account for and pay VAT.
​This change had been delayed since October 2019 and will now apply from 1st March 2021.

​The domestic reverse charge VAT procedure is being introduced in the UK for building and construction services, it is designed to combat VAT fraud in the building and construction sector and cut back on fraudulent activities where some companies invoice their customers for large amounts of NET + VAT but have no intention of paying the VAT element over to HMRC. It will have significant impact on VAT compliance and cashflow.
​Its introduction has been delayed until 1 March 2021 due to the coronavirus pandemic.

​It affects VAT registered construction businesses who supply or receive construction and building services, reported under the Construction Industry Scheme (CIS). The reverse charge mechanism shifts the liability for accounting for output VAT from the supplier to the customer. Meaning the customer will now be responsible for the VAT due to HMRC. This prevents the supplier from charging VAT to the customer, but then failing to pay it over to HMRC.

If you are a CIS subcontractor you will no longer charge VAT to your customers. You should instead state on your invoice that your customer is responsible for the VAT due to HMRC under the Domestic reverse charge VAT legislation and advise on the VAT rate that should be applied, i.e. 20%

​If you are a CIS Contractor you will be responsible for reporting both the Input and Output VAT values for the bills provided to you by your CIS Subcontractor.

See table examples for both sub-contractor and contractor below:

​You should account for VAT in the normal way if the rules do not apply to you.

​If your customer informs you reverse charge does not apply, perhaps because they are an end user, for example, you must retain their written confirmation.
 
As stated above, when you raise your invoice to your customer, you must make it clear that reverse charge applies and that the customer is required to account for the VAT.  You should state how much VAT is due and the rate being charged, but do not include the figure in the amount being charged to the customer. Usually a note on the invoice such as:

​Most importantly, as you will no longer be charging VAT on your customer invoices, you may find you start claiming the VAT back from HMRC, rather than paying it. However it is likely that this will have an impact on your short term cash flow as you will no longer be receiving the VAT element of the invoice from your customer. 

​It is up to you to inform your supplier if reverse charge does not apply.  This means you will also need to let your supplier know if you are an end user or intermediary supplier.

• End users are deemed to be consumers or final purchases of the building or construction service.
• Intermediary suppliers are VAT and CIS businesses that are connected or linked to the end users.

Above all, when you receive your supplier’s invoice you should check it is correct and that the services being billed for are eligible for reverse charge.
 
As a contractor you will likely find you have a short term cash flow benefit due to not paying the VAT element to your subcontractors.

​If some of the services on your invoice are subject to reverse charge and some aren’t, you should apply reverse charge to the whole invoice.

​Reverse charge supplies are not accounted for under the Flat Rate Scheme.
​If you receive a reverse charge invoice, you will need to account for the VAT due.

If you would like more information advice on any accounting services of a free consultation, Contact Purple Thistle Accounting & Business Services on 0121 517 0820 or email us at [email protected]

​More information can also be found on the Gov.uk website here.
 
We hope you found this article of help, follow us for regular updates to the ever changing legislations. 

As you know, the global economy is facing its toughest time yet with Covid-19 bringing about great uncertainty for all businesses and those who are self-employed. Various emergency measures have been and continue to be announced for the UK. We have put together a short guide to help with this situation. This will be updated regularly.

Self-employment Income Support Scheme
The government has set up a scheme for self-employed people whose incomes are being hurt by the coronavirus outbreak. It is called the Self-Employed Income Support Scheme.
The scheme isn’t open yet but HMRC aim to contact you by mid May 2020 and look to make payments in early June 2020.
The scheme will give grants to self-employed people to cover 80% of their usual profits up to a maximum of £2,500 per month over three months but may be extended. The grant will be subject to Income Tax and National Insurance contributions but does not need to be repaid.
Those eligible for the scheme will have to have submitted a self-assessment tax return for the April 2018-April 2019 financial year.
If you were already self-employed but haven’t submitted your self-assessment tax return yet, you have until 23 April to do so. If we can be of any help with submitting this for you or if you require any advice, please contact us
​
Who can claim?
You can claim if you’re a self-employed individual or a member of a partnership and you:

• Have submitted your Self-Assessment tax return for the tax year 2018 to 2019
• Traded in the tax year 2019 to 2020
• Are trading when you apply, or would be if not for coronavirus
• Intend to continue to trade in the tax year 2020 to 2021
• Have lost trading profits due to coronavirus

You will need to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC will, as usual, use a risk-based approach to compliance.

Your trading profits must also be no more than £50,000 and more than half of your total income for either:

• The tax year 2018 to 2019
• The average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

You can make a claim for Universal Credit while you wait for the grant, but any grant received will be treated as part of your self-employment income and may affect the amount of Universal Credit you get. Any Universal Credit claims for earlier periods will not be affected.

If you receive the grant you can continue to work or take on other employment including voluntary work.