Tax agents dig in for deadline-packed weekend
Accountants should mark their calendars for a range of filing deadlines falling in the last three days of January 2021 – there’s more to consider than self-assessment.
With wintry storm clouds looming, accountants are also bracing themselves for multiple deadlines falling over the final weekend of January. On 31 January 2021, the cut-offs relate to IR35, NIC, trusts and tax credits, as well as self-assessment tax returns for the last three tax years, not to mention sundry claims and elections.
In an added twist, this year’s busy season also features a deadline to relating to the self-employed income support scheme (SEISS).
I have no idea why the deadline for applying for the third SEISS grant was set at midnight on Friday 29 January 2021, but it was. Eligible self-employed taxpayers need to apply for this grant online using their government gateway ID and password.
Tax agents can’t apply on behalf of clients, but they can check the amount of the grant awarded and help clients appeal if the calculations appear wrong. To qualify for this third grant the taxpayer must declare that their trade has been impacted by reduced demand due to coronavirus.
On 2 November 2020 Chancellor Sunak repeated his promise that a fourth SEISS grant would be made available to help businesses survive the three months to 30 April 2021. But there is still no indication of when traders will be able to apply for this fourth grant, how much it will be, or what profits it will be based on.
It’s possible that the fourth SEISS grant will be partially based on profits reported in the 2019/20 tax return, due in by midnight on 31 January 2021.
Self assessment returns
If taxpayers are late in submitting their 2019/20 tax return, they will not only receive an automatic £100 late filing penalty (which can be appealed), but they may be disqualified for applying for the fourth SIESS grant.
To avoid missing out on this valuable SEISS grant, you can submit the 2021/20 tax return with estimated or provisional figures. This will be accepted by HMRC, pending submission of the final figures (as explained in HMRC’s self assessment manual SA121190).
But the taxpayer must still declare that the return is to the best of their knowledge correct and complete (TMA 1970, s 8(2)).
Where figures on the return are estimated this needs to be fully declared in the further information space on the tax return, including the basis on which the estimates have been prepared. Beware that HMRC warns in its SA manual: “Where it appears that a particular agent is filing a significant proportion of returns with provisional or estimated figures, you should inform the compliance manager.”
If the 2018/19 tax return has not been submitted by 31 January 2021, a penalty calculated as the greater of: 5% of the outstanding tax, or £300, will be imposed. This is also the last day to amend a 2018/19 tax return which has already been submitted.
Where the 2017/18 tax return is outstanding and HMRC has issued a determination to collect an estimated amount of tax for that year, that determination can only be overturned if the outstanding tax return is submitted by 31 January 2021.
If IR35 has applied to contracts in 2019/20, and a deemed payment was required to be made by 5 April 2020, this often has to be estimated. The employer has until 31 January 2021 to finalise that deemed payment and pay the outstanding PAYE and NIC, to avoid penalties arising for failure to make the final RTI returns by the due date.
Class 2 NIC
Where the taxpayer commenced self-employment in 2019/20 they must notify HMRC of the liability to pay class 2 NIC by 31 January 2021 to avoid a penalty for failure to notify.
Tax credit claimants who have not been transferred to universal credit need to renew their tax credits claim for 2020/21 by 31 July 2020, and finalise the 2019/20 claim by the same date. If estimated figures were provided in July 2020 the final figures need to be provided to HMRC by 31 January 2021.
Trust registration service (TRS)
Trusts that first incur a tax liability (including land taxes) in 2019/20 need to update the TRS, or confirm there is no change to data previously entered in the TRS, by 31 January 2021.
If there has been a notifiable change in the trust before 6 April 2020 which affects tax payable in the three years to 2019/20, the TRS must be updated by 31 January 2021.
Claims and elections
The general limit for income tax claims is four years after the end of the tax year to which the claim relates, so by 5 April 2021 for claims relating to 2016/17.
However, a number of elections need to be made or revoked within a year after the tax return final filing deadline for the tax year for which they relate. Thus, elections affecting tax due in 2018/19 need to be reviewed by 31 January 2021.