Covid-19 presents additional challenges for the new tax year, in particular for those who have lost income but also for the relative minority who have benefited from increased income.
Working from home? Claim deductions
This is an opportunity for employers and employees alike. An employee who works from home can claim a tax deduction of £6 per week (£26 per month) for the costs of using their home as a workplace without having to keep records of specific expenditure.
Alternatively the employer can pay the homeworker the allowance tax and NIC-free.
Any payment in excess of the fixed allowance is taxable unless it reimburses specific expenses deductible under the normal rules for employment expenses wholly, exclusively and necessarily incurred in the course of employment.
Higher rate taxpayers may make the most of gift aid
Gift aid for donations to charity is more flexible than some think. Tax relief can be claimed in the year the donation is made or carried back to the preceding year to reduce that year’s liability and possibly produce a repayment.
Check PAYE codes
PAYE codes may contain adjustments for unpaid tax, deductions or other income, based on preceding years’ figures. The 2021/22 code may be incorrect if additional deductions will be due, or investment income has reduced or is likely to do so.
Make sure current codes are correct and include all claimable deductions.
Self assessment payments on account
The first 2020/21 self-assessment payment on account made on 31 January will have been based on 2019/20’s income and tax liability.
If the liability for 2020/21 can be expected to be lower a claim to reduce the payments on account can be made, not only reducing the July payment but also producing a repayment of the excess payment made in January.
Review company shares for negligible value claims
If a share’s value has become negligible that can produce a loss for CGT purposes.
Better still, if the company concerned is or was carrying on a trade eligible for the Enterprise Investment Scheme (EIS) and the shareholder subscribed for their shares they may be able to claim income tax relief for their loss. The shareholder does not have to have claimed EIS and if it can be established that the company’s value became negligible within the preceding two years the relief may be claimable for an earlier year.
A taxpayer who needs to sell shares to meet liabilities should consider crystallising losses as described above to set against gains on shares sold.
Above all, make sure that all capital losses in the year ended 5 April 2021 are identified and reported. Even if they are not going to be set off against gains for 2020/21 those losses need to be returned to be claimable against future gains.
Complete residential property acquisitions before the SDLT holiday ends
The SDLT temporary reduction in England, Wales and Northern Ireland applies to acquisitions of residential property before 30 September 2021. But the relief is lost if completion takes place after 30 September.
There is a limited relief for purchases where substantial performance of the contract happens before 31 July which is the end of the ‘initial temporary relief period’ and completion takes place before 30 September.
Purchasers need to be mindful that conveyances are taking longer to process and complete than usual and the 3% surcharge on additional residential property is not included in the temporary relief and so is still payable but may be reclaimed where the new property replaces a main residence that tis disposed of within three years of acquisition of the new property.
In Wales the land transaction tax (LTT) holiday has only been extended until 30 June.
Scotland did not extend its land and buildings transaction tax (LBTT) holiday which ended on 30 April.
Missed out on 2020’s Christmas party? Have a summer ball instead
The exemption for employee events may usually be referred to as the ‘Christmas party exemption’ but it applies to all regular events at which employees are entertained.
Employers were unable to hold in-person events in December 2020 but when lockdown rules permit they will be able to hold replacement events instead.
Many employers made the best of things with virtual events which HMRC agreed would fall within the exemption for 2020/21 but such events were a poor substitute for the real thing and entertainment venues would undoubtedly welcome the return of their customers for an event as soon as possible.
Another concern is that we are now in a new tax year so an employer holding last year’s party now, as well as the traditional December event will need to be mindful of the £150 per person limit which applies across all events in any tax year, not per event.
Strictly speaking adding an additional one-off event to the calendar after going virtual in 2020 could be problematic in that that would not fit the definition of an annual event so employers should seek the advice of HMRC before going ahead.