UK: Weekly Tax Briefing - Going On Holiday? Remember To Pay Your Tax Bill Before You Go

Last Updated: 17 July 2000

Second 1999/2000 Self Assessment payment on account is due by 31 July

The second instalment of tax for 1999/2000 is due on 31 July so if you are planning to escape the miserable British weather and go abroad in the second half of July, you had better ensure your tax payment is sorted out before you go.

Sharon Linnard, Partner, KPMG Tax Advisers, said: 'In the next couple of weeks, the Inland Revenue should be issuing statements to all taxpayers who are due to make a 31 July payment. If you have not received a statement by about 20 July, and you think you should make a payment, contact your local tax office. The statement will contain details of the amount owing and incorporate a payslip which you should send with your cheque to the Inland Revenue. Do not leave this until the last moment - make sure your cheque arrives on time if you are to avoid an interest charge.'

The tax being collected is predominantly on income from self employed activities and from property rental, and higher rate tax due on dividends and other investment income. In the past, some of this tax used to be paid on 1 July and some of it on 1 December so whether taxpayers have a cashflow advantage or disadvantage depends on their sources of income. But no-one has to pay any capital gains tax until 31 January 2001.

Sharon Linnard said: 'The payments on account are based upon the tax liability (ignoring CGT) for the previous year, ie to 5 April 1999. The first instalment of this tax was due on 31 January this year. Regardless of your actual level of income during 1999/2000, as long as you paid an amount equal to 50% of the tax collected on your self assessment for the previous year, you could not be charged interest on that instalment, even if your final tax liability for 1999/2000 turned out to be higher.'

She added: 'Some people with fluctuating income anticipated in January that their tax bill for 1999/2000 would be much lower than the previous year. As a result, they applied to reduce the January payment on account to a lower level. This was perfectly acceptable but it is important now to review that calculation and make sure that, with hindsight, you did not pay too little. If you did, you are already incurring interest at 8.5% per annum.'

Sharon Linnard concluded: 'If you did not reduce your payment on account at 31 January, perhaps you can do so at the end of July. With luck, you should have a good idea of what your actual income was for 1999/2000 and, if it has proved to be substantially lower than the previous year, you may wish to reduce the payment on account. Bear in mind that the final date for settling your 1999/2000 tax liability is 31 January 2001. If you find, after the end of July, that you have paid too much tax, all you need do is submit your self assessment return to the Inland Revenue and you will be given a repayment.'

Corporate charitable donations

Here is a very simple tax planning idea based on an innovation in the Finance Bill.

Executive summary

  • Trading companies are now able to claim tax relief for virtually all their payments to charities (rather than just some).
  • Non-trading companies are now able to claim tax relief for all donations to charities (rather than just some).
  • The paperwork for both traders and investment companies has been considerably simplified.

Detailed explanation

The Finance Bill provides for the gift by a company of "a sum of money to a charity" to be an annual payment, tax-free in the charity's hands and deductible for the corporate donor as a charge. This applies to both trading and investment companies.

Such a gift will be within the revised corporate Gift Aid regime. It will be payable gross, rather than net, and will not be included on the CT61. Your company will no longer need to complete corporate Gift Aid forms.

To claim the relief, all your company has to do will be to analyse the 'donations' line in the detailed P&L account and exclude (a) political donations, (b) donations to good causes which might have charitable status but in fact do not and (c) payments where the company receives a benefit (because the new relief only applies to gifts). The remaining payments will be deductible as charges on income in your company's tax return.

For accounting periods straddling 1 April 2000, companies will have to identify post-31 March 2000 donations as qualifying for the new relief. Since most companies have probably been in the habit of analysing the donations account to identify disallowables already, the extra compliance cost of claiming the new relief will be minimal.

In addition, trading companies should be able to claim trading deductions for payments where the company receives a benefit.

An action point

There is, however, one point to watch. Where a company has been giving to charity under Gift Aid or deed of covenant, the charity has been able to reclaim basic rate income tax on the donation. Going forward, it will not be able to - because the donations will not be made under deduction of income tax. So, for example, a donation of £78 will be worth £78 to the charity (rather than £78 plus tax refund of £22); if the corporate donor wishes the charity to receive £100, it will have to send the charity a cheque for £100 (rather than £78 as in previous years).

Press releases - w/e 7.7.00

5 July 2000 - Inland Revenue - Making tax law clearer - good news for payroll managers

The Tax Law Rewrite project intends to draft an Income Tax Bill for introduction in Parliament in November 2002, containing the provisions relating to employment

income and some related income. As part of the work for this Bill, the project will rewrite the Pay As You Earn Regulations. A second Income Tax Bill - probably covering trading income, property income and savings and investment income - should follow in November 2003.

5 July 2000 - Inland Revenue and DSS - Saving more for retirement - concurrency announced for stakeholder pensions

The Government has announced that employees (but not controlling directors) who are already in an occupational scheme and whose earnings do not exceed £30,000 will be able to use stakeholder pensions to add to their pension provision.

7 July 2000 - Inland Revenue - Finance Bill - stamp duty and the housing transfer programme

The Finance Bill provides relief from stamp duty for transfers of local authority housing to registered social landlords. The Government has announced that this relief is to be backdated to cover all such transfers on or after 22 March 2000.

For further information, or assistance, please speak to your usual KPMG tax contact.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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