Tax update in taxing times
DESPITE the postponement of the IR35 regulations on tax, we are hearing more cases of freelances being told to invoice as limited companies from the 6 April start of the 2020-2021 tax year, with all the hassle that would entail.
One freelance who contacted us had already submitted an invoice, only to be told they would have to register as a limited company to be paid. We understand they have taken the matter to the Freelance Office.
Changes to the Inland Revenue rule called IR35 were due to have come into force on 6 April, but have been postponed until 6 April 2021. The effect of IR35, as introduced in April 2000, is that people who sell their services through a limited company or a legal partnership have to join the Pay As You Earn (PAYE) tax scheme if - and we approximate here - they otherwise look like an employee. The planned change will make more companies liable - to pay back taxes for example - in the event that they mis-set the tax status of those they engage.
Some corporate clients, in a state of some confusion over IR35, seem to have just laid off their casuals in response.
Those of us who are in enforced idleness with no work are reminded that the start of the new tax year presents an opportunity of sorts. If you have a lot more time on your hands, now is the time to sort out your self-assessment tax return for the tax year April 2019 to April 2020. By doing your taxes now, you will ensure that you have plenty of time available around the 31 January 2021 deadline to submit tax returns - hoping that things will be busier for us by then. This way, you will avoid the usual stressful last minute all-nighters of filling in your tax return over Christmas and New Year.
The deadlines for self-assessment payments on account due to HMRC have been postponed because of Covid-19. Those of us who have payments on account due on 31 July now have until 31 January 2020. Some of you may have received by post a reminder that you have to do self-assessment tax return and that payments on account are due on 31 July. This appears to have been automatically generated and printed and we believe that you can safely ignore any reference it makes to 31 July.
HMRC is now running a covid-18 hotline with advice for those who are experiencing hardship paying their taxes, on 0030 456 3565. HMRC is also holding online webinars - on most days of the week this article went live - on how to apply for the Self-Employed Income Support Scheme (SEISS). Details of the next HMRC webinar on SEISS and how to apply are here. If you are signed up to the QuickBooks package for doing your self-employed taxes, you'll get notifications of these webinars.
The savings threshold that normally makes you ineligible for Universal Credit has been lifted. You can now get UC if you have some savings, but you will have to declare in your application that these savings are set aside for "business purposes" which includes anticipated expenses and taxes you would normally expect to have to pay.