Some self-employed profits may be taxed twice in the opening years of a business, or on a change of accounting date. Relief for these profits (overlap profits) is given in the form of overlap relief. However, time is running short to benefit from the relief.

Key dates

Claims for overlap relief for the 2023/24 tax year must be made in the Self-Assessment tax return for that year, which must be filed by midnight on 31 January 2025.

This note explains how relief for overlap profits can be claimed on the transition to the tax year basis of assessment.

Basis period reform

The way in which the profits of an unincorporated business are taxed is changing. For 2022/23 and earlier tax years, self-employed traders were taxed on the profits of the accounting period which ended in the tax year. This is known as the current year basis. From 2024/25 onwards, you will be taxed on the profits of the tax year. This is known as the tax year basis. To move from the current year basis to the tax year basis, the 2023/24 tax year is a transition year. During this year, relief may be given for any remaining overlap profits.

The 2023/24 transition year

Under the tax year basis, you will be taxed on the profits for the tax year. If you prepare your accounts to 31st March or a date between 1st and 5th April, your accounting period is treated as being equivalent to the tax year. However, if you prepare your accounts to another date, you will be assessed on more than 12 months’ profits in 2023/24 in order to move from a current-year basis of assessment to a tax-year basis of assessment. From 2024/25 onwards, you will need to apportion the profits from two accounting periods to arrive at the profits for the tax year.

The profits assessed for 2023/24 comprise the 12 months from the end of the basis period for 2022/23 plus the remainder of the 2023/24 tax year, less any overlap relief. For example, if you prepare your accounts to 31st December each year, the profit for the year to 31 December 2022 is taxed in 2022/23. In 2023/24, you are taxed on the profits from 1 January 2023 to 31 December 2023 plus the profits from 1 January 2024 to 5 April 2024, less any overlap relief. The profits for the period from 1 January 2023 to 5 April 2023 are known as the transition profits. Overlap relief can only be deducted from the transition profits. These profits, less overlap relief, are spread and taxed over the five tax years from 2023/24 to 2027/28 inclusive unless you elect otherwise.

Overlap profits

Overlap profits are simply profits that have been taxed twice. Overlap profits may arise under the current year basis in the opening years of a business or if you changed your accounting date. Under the current year basis, relief for overlap profits could be given either when the business ceased or in a tax year in which there was a change of accounting date and the basis period in that tax year was more than 12 months.

If you have overlap profits for which relief has not yet been given, the 2023/24 tax year is the last chance to obtain relief for those profits. Relief can only be given against the transition profits assessable in 2023/24.

Determining overlap relief

In order to claim overlap relief, you will need to identify your overlap profits. This information may not be to hand, particularly if you started your business many years ago. This information is required before submitting your 2023/24 Self-Assessment tax return.

HMRC is launching an online form that can be used to submit requests for details about overlap relief. They will only be able to provide information on overlap relief if the figures are recorded in their systems, taken from tax returns that you submitted previously. It should be noted, that if the information was not provided to HMRC in your tax returns, HMRC will be unable to provide it.

When making a request for overlap relief information, you need to supply details about your business to HMRC. You can make a request ahead of the launch of the online form. If you choose to do this, you will need to supply the following information:

• your name;
• your National Insurance number or your Unique Taxpayer Reference (UTR);
• a name or description of your business, or both;
• whether you operate as a sole trader or are in a partnership;
• the date that you commenced as a sole trader or the date of commencement of the partnership, as applicable.

Relief for overlap profits that are not claimed in 2023/24 will be lost.

If you need more information regarding any of the topics covered in this update or indeed any other accounting issues, please call An Accounting Gem The Tax specialist in Ipswich, Suffolk on 744700.

To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/international-cat-day-8th-august/

Disclaimer: This blog is not intended to provide legal or financial advice. This blog is for informational purposes only. The information provided on this blog is not intended to be a substitute for professional advice. Before taking any action, you should seek advice from a qualified professional. The author of this blog is not liable for any losses, damages, or expenses incurred as a result of using the information provided on this blog.

Taxpayers must undertake certain tasks, such as filing returns and paying tax, by certain dates. If these deadlines are missed, HMRC may charge late filing and late payment penalties. Interest is also charged on taxes paid late.

Key dates

The key dates in August 2023 are 1 August for corporation tax payments, 2 August for filing of P46(Car), 7 August for filing and payment of VAT, 18 August for payment of PAYE and NIC by cheque, and 22 August for payment of PAYE and NIC electronically

This note explains some important tax deadlines which must be met in August 2023.

1st August 2023

Corporation tax for accounting periods ending on 31 October 2022 must be paid by 1 August 2023. However, a company has until 12 months from the end of the accounting period to file their company tax return, so while the corporation tax for the year to 31 October 2022 must be paid by 1 August 2023, the company has until 31 October 2023 to file its Company Tax Return.

2 August 2023

If you have not opted to payroll company cars, you would need to tell HMRC on form P46(car) if you provided a car, or a further car, to an employee or a director in the quarter to 5 July 2023, or if a car that was provided to an employee or a director was withdrawn in that quarter. The form can either be filed online or completed on screen, printed, and sent to HMRC (see www.gov.uk/tell-hmrc-company-car).

5 August 2023

PAYE tax month 4 ends on 5 August 2023.

7 August 2023

VAT-registered businesses must file their VAT return for the quarter to 30 June 2023 online by 7 August 2023 and pay any associated VAT by the same date.

18 August 2023

Employers who pay their PAYE and NIC by cheque must ensure that their payment for month 4 (to 5 August 2023) reaches the Accounts Office by 18 August 2023 as the normal filing date of the 19^th of the month falls on a Saturday. Cheques received by HMRC on Saturday 19 August will be treated as received on Monday 21 August, with the result that the payment will be regarded as late. While HMRC does operate a three-day period of grace for payments received within three days of the due date, it is prudent to post the cheque in sufficient time for it to reach HMRC by 18 August.

22 August 2023

Employers who pay their PAYE and NIC electronically enjoy a later deadline than those who pay by cheque. The deadline for electronic payments is the 22^nd of the month. If you pay your PAYE and NIC electronically, you will need to ensure that your payment of PAYE and NIC for month 4 clears HMRC’s account by 22 August 2023.

31 August 2023

If your company prepared its accounts to 30 November 2022, you would need to ensure that your accounts are filed at Companies House by 31 August 2023.

If you need more information regarding any of the topics covered in this update or indeed any other accounting issues, please call An Accounting Gem The Tax specialist in Ipswich, Suffolk on 744700.

To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/check-your-state-pension-forecast/

Disclaimer: This blog is not intended to provide legal or financial advice. This blog is for informational purposes only. The information provided on this blog is not intended to be a substitute for professional advice. Before taking any action, you should seek advice from a qualified professional. The author of this blog is not liable for any losses, damages, or expenses incurred as a result of using the information provided on this blog.

Home Responsibilities Protection (HRP) reduced the number of years that a person in receipt of child benefit needed in order to qualify for a full state pension. Some people who were entitled to HRP may have it missing from their National Insurance record. This may affect their state pension entitlement.

Key dates

Home Responsibilities Protection (HRP) was a scheme that operated from 6 April 1978 to 5 April 2010. It was replaced by National Insurance credits from 6 April 2010. From Autumn 2023, HMRC will contact those who they believe may have HRP missing from their National Insurance record.

This note explains what you need to do if you have HRP missing from your National Insurance record.

Nature of HRP

The HRP scheme was a scheme that help to protect parents’ and carers’ entitlement to the statement pension by reducing the amount of qualifying years that they needed in order to be eligible for the state pension. The scheme operated from 6 April 1978 until 5 April 2010.

Are you affected by missing HRP?

If you claimed Child Benefit before May 2000 and did not provide your National Insurance number when you made your claim, the HRP to which you were entitled may not have been credited to your National Insurance record. If your National Insurance record does not show the correct number of years for which you were eligible for HRP, this may adversely affect your entitlement to the state pension. Women who are now in their 60s and 70s are most likely to be affected by this omission.

Although HRP continued to be available until 2010, if you first claimed Child Benefit after May 2000, you should not be affected by missing HRP; from May 2000 it became compulsory to provide your National Insurance number when making a claim for Child Benefit.

The Department of Work and Pensions (DWP) and HMRC are working to identify those affected by missing HRP so that their National Insurance records can be corrected and to ensure that they receive the state pension to which they are entitled.

National Insurance credits awarded from 6 April 2010 onwards have been recorded correctly.

Identifying those affected

Child Benefit records are deleted five years after the claim ends. This means that records are no longer available for everyone who may have been eligible for HRP. Consequently, it is not possible to identify everyone whose records are incorrect.

HMRC are using National Insurance records to identify as many people as possible who might have been entitled to HRP between 1978 and 2010 and who have no HRP on their National Insurance records. They are writing to people who meet this criteria to check whether they are eligible to claim.

What you need to do

If you receive a letter and you are eligible to claim because you were awarded Child Benefit during this period, you will be able to make a claim online. HMRC will update your National Insurance record once the claim has been processed. If you are over the state pension age and unable to make a claim online, you can contact HMRC’s National Insurance helpline on 0300 200 3500 for help.

Once this has been done, the DWP will recalculate your state pension entitlement if you are over state pension age. They will write to you to tell you your recalculated state pension and whether you are due any arrears.

The DWP will also inform HMRC of your recalculated state pension entitlement. This may affect the amount of tax that you pay or the benefits, including pension credit, that you receive. HMRC will collect any income tax that is due on any increase in your state pension or on any state pension arrears that are paid to you.

Timescale

HMRC will start contacting people who may be affected by missing HRP from Autumn 2023. Those over the state pension age will be contacted first. Thereafter, people will be contracted in stages depending on how close they are to the state pension age.

If a person whose National Insurance record did not reflect the HRP to which they were entitled has died, their families will be able to make a claim for any arrears that would have been due to them.

HMRC will update their guidance on this topic on the Gov.uk regularly. Please see this HMRC link for more information: https://www.gov.uk/home-responsibilities-protection-hrp

If you need more information regarding any of the topics covered in this update or indeed any other accounting issues, please call An Accounting Gem The Tax specialist in Ipswich, Suffolk on 744700.

To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/new-employees-taking-on-a-new-employee/

Disclaimer: This blog is not intended to provide legal or financial advice. This blog is for informational purposes only. The information provided on this blog is not intended to be a substitute for professional advice. Before taking any action, you should seek advice from a qualified professional. The author of this blog is not liable for any losses, damages, or expenses incurred as a result of using the information provided on this blog.

Taxpayers must undertake certain tasks, such as filing returns and paying tax, by certain dates. If these deadlines are missed, HMRC may charge late filing and late payment penalties. Interest is also charged on tax paid late.

Key dates

Expenses and benefit returns for 2022/23 must be filed by 6 July 2023. PAYE and NIC for month 3 (to 5 July 2023) must reach HMRC by 21 July where paid electronically. Where tax is paid under Self Assessment, the second payment on account for 2022/23 must reach HMRC by 31 July 2023.

This note explains some important tax deadlines which must be met in July 2023.

5 July 2023

PAYE tax month 3 comes to an end on 5 July 2023. It is also the end of the first quarter for employers who pay their PAYE quarterly.

Employers who want to use a PAYE Settlement Agreement (PSA) to settle tax on certain benefits and expenses provided to employees during the 2022/23 tax year and who do not already have a PSA in place must agree one by 5 July 2023. Employers who need to amend or cancel an existing PSA must do so by 5 July 2023.

6 July 2023

Employers who provided employees with taxable expenses and benefits in 2022/23 which were not payrolled must report these to HMRC on form P11D by 6 July 2023. A P11D(b) must be filed by the same date. A P11D(b) is required even if there are no P11Ds to file. The returns must be filed online.

Employers must also give employees a copy of their P11D or details of their taxable benefits and expenses for 2022/23 by 6 July 2023.

Employers who have a share scheme, such as Share Incentive Plan, a Company Share Option Plan, a Save as You Earn scheme, or who have provided Enterprise Management Incentives, must file their annual share scheme return for 2022/23 by 6 July 2023.

7 July 2023

VAT-registered businesses must file their VAT return for the quarter to 31 May 2023 online by 7 July 2023 and pay any associated VAT by the same date.

19 July 2023

Employers who pay their PAYE and NIC by cheque must ensure that their payment for month 3 (to 5 July 2023) reaches the Accounts Office by 19 July 2023. Small employers who pay their PAYE quarterly and who pay by cheque, will also need to ensure that their payment for the quarter to 5 July 2023 reaches HMRC by the same date. Remember to post the payment in sufficient time for it to reach HMRC by 19 July.

21 July 2023

Employers who pay their PAYE and NIC electronically enjoy a later deadline than those who pay by cheque. The normal deadline for electronic payment is the 22^nd of the month. However, as 22 July 2023 falls on a Saturday, employers who pay electronically will need to ensure that their payment of PAYE and NIC for month 3 clears HMRC’s account by 21 July 2023 if payment is made electronically.

Small employers who are paying their PAYE and NIC for the quarter to 5 July 2023 electronically will also need to ensure that their payment for the quarter to 5 July 2023 clears HMRC’s bank account by 21 July 2023.

31 July 2023

Taxpayers who are within Self Assessment and who are required to make payments on account must ensure that their second payment on account for 2022/23 reaches HMRC by 31 July 2023.

Please see the HMRC link for further advice: https://www.gov.uk/self-assessment-tax-returns/deadlines

If you need more information regarding any of the topics covered in this update or indeed any other accounting issues, please call An Accounting Gem The Tax specialist in Ipswich, Suffolk on 744700.

To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/diesel-company-cars-key-letters/

Disclaimer: This blog is not intended to provide legal or financial advice. This blog is for informational purposes only. The information provided on this blog is not intended to be a substitute for professional advice. Before taking any action, you should seek advice from a qualified professional. The author of this blog is not liable for any losses, damages, or expenses incurred as a result of using the information provided on this blog.

If you are a new parent, you can now claim Child Benefit via the HMRC app. However, high earners should note that some or all of the benefit may be clawed back via the High Income Child Benefit Charge.

Key dates

Child Benefit can be claimed from the day after that on which you registered the birth of your child, or once a child comes to live with you. Claims can be backdated for up to three months.

This note explains the nature of the child benefit, how to claim, and the impact of the High Income Child Benefit Charge.

Nature Child Benefit

You will normally be eligible to claim Child Benefit it you are responsible for a child under the age of 16 (or under the age of 20 where your child has stayed in approved education or training). Child benefit is also available if you foster a child, as long as you are not receiving anything towards their accommodation or maintenance from your local council. If you adopt a child, you can apply as soon as the child comes to live with you – you do not need to wait until the adoption process is complete.

Only one person can claim child benefit. Consequently, it may be necessary to decide who claims.

For 2023/24 child benefit is payable at the rate of £24.00 per week for the first child and £15.90 per week for the second and any subsequent children. For two children, it is worth just over £2,000 a year.

Other advantages

Claiming Child Benefit confers advantages in addition to the actual payments. By claiming child benefit, you will receive National Insurance credits which will help you to build up qualifying years for state benefit purposes. This is particularly advantageous if you will not pay sufficient National Insurance for the year to be a qualifying year. This may be the case if you do not do any paid work, for example, if you are a stay-at-home parent, or if your earnings are less than the lower earnings threshold of £123 per week if you are an employee or if you are self-employed, your profits are less than the small profits threshold of £6,725 a year. You need 35 qualifying years to earn a full state pension and at least 10 qualifying years for a reduced state pension. If you have at least one child, claiming child benefit will provide you with 16 qualifying years or more.

Claiming child benefit will also mean that your child is allocated a National Insurance number automatically when they reach the age of 16.

Consequently, it is always worth claiming Child Benefit, even if you elect not to receive the payments where they would claw back by the High-Income Child Benefit Charge.

Claiming Child Benefit

There are various ways in which a claim for Child Benefit can be made.

You can now claim via the HMRC app. If you do not already have the app you can download it from the App Store for iOS or from the Google Play Store for Android. You will need to sign into the app using your Government ID and password. If you do not already have one, you will be able to create one on the sign-in page. The app has a dedicated Child Benefit section from which you will be able to make an online claim. Once you have made a claim, you will also be able to view your payments and other details.

You can also claim online via the Gov.uk website at www.gov.uk/child-benefit/how-to-claim.

To make a claim, you will need to have the following to hand:

• your child’s birth certificate or adoption certificate;
• your bank or building society details;
• your National Insurance number: and
• your partner’s National Insurance number if you have a partner.

Claims can also be made by post by completing the child benefit form CH2 (available to download from the Gov.uk website at www.gov.uk/government/publications/claim-child-benefit-if-you-cannot-claim-online) and sending it to the address on the form.

You can also claim by calling HMRC’s Child Benefit helpline on 0300 200 3100.

As claims can only be backdated by three months, it is advisable to claim as soon as you are able so that you do not lose out.

High-Income Child Benefit Charge

The High-Income Child Benefit Charge (HICBC) is a tax charge that claws back some or all of the child benefit that you have received if either you or your partner have an income of more than £50,000. Any maintenance from a former partner is not taken into account. Where both partners have income in excess of £50,000, the charge is levied on the person with the highest income.

It should be noted that your partner may be liable for the charge, even if they are not a biological parent of the child/children in respect of whom the child benefit is paid.

The charge claws back 1% of the child benefit paid for every £100 by which income exceeds £50,000. Once income reaches £60,000, the tax charge is equal to the child benefit paid in the tax year.

To avoid having to repay the benefit, you can elect not to receive it. However, it is still beneficial to make a claim to benefit from the associated National Insurance credits.

If you need more information regarding any of the topics covered in this update or indeed any other accounting issues, please call An Accounting Gem The Tax specialist in Ipswich, Suffolk on 744700.

To see another An Accounting Gem blog check out this link: https://www.aag-accountants.co.uk/witty-guide-to-celebrating-midsummer-day/

Disclaimer: This blog is not intended to provide legal or financial advice. This blog is for informational purposes only. The information provided on this blog is not intended to be a substitute for professional advice. Before taking any action, you should seek advice from a qualified professional. The author of this blog is not liable for any losses, damages, or expenses incurred as a result of using the information provided on this blog.