by Jay Redman | Aug 4, 2023 | UK Updates
Does HMRC check bank accounts?
Yes, your pay-as-you-earn (PAYE) records and the information you supply on your self-assessment tax return can be used by HMRC to determine how much you earn. That’s just the numbers you’re providing them with.
If you have further undeclared income, HMRC will use “Connect” and other means to locate it and ensure that you pay the tax due. You’ll also have to pay back taxes.
You may also be considering the UK’s tax evasion punishment regime, which is fairly harsh.
Non-Compliant with UK Tax Laws: Can HMRC ask for my bank and other information?
1) HMRC has the authority to demand information from taxpayers to ensure that they are paying the correct amount of income tax, capital gains tax, corporation tax, and VAT.
This information is occasionally held by third parties, and HMRC can issue a “third party notice” if they want to examine it. Banks and other financial organizations, as well as lawyers, accountants, and real estate brokers, are examples of third parties.
2) HMRC can check your bank accounts through other means that include working with third-party agencies as well as issuing notices directly to commercial banks.
HMRC must notify citizens of such actions, but this is not always the case as investigations usually occur without the knowledge of some citizens.
- DVLA, DWP, Land Registry, Border Agency, Companies House, electoral function, and council tax records are some of the other government departments and agencies.
- Income tax, value-added tax (VAT), corporate tax, and PAYE returns are all included.
- U.K building societies and banks, credit agencies, cryptocurrency platforms, and payment providers online all keep records.
- The common reporting standard, a new global plan to combat tax havens, will provide financial information about your condition in other nations, including the UK.
HMRC can check your bank account
Back in July 2020, HMRC announced the creation of a new ‘financial institution notice’ to speed up the process of obtaining information about a known taxpayer’s tax position from banks and other organizations.
Instead of altering its powers for all third-party notices, HMRC will now create this new notice. Financial institution notices will not require taxpayer or tax tribunal permission, although HMRC argues there will be safeguards: the information must be fairly required.
However, it appears that HMRC can assess what is reasonably required, as notices must be approved by an ‘authorized officer’ of HMRC).
- The financial institution should not have to work too hard to gather the data.
- Unless a tax tribunal ruled that this condition should not apply (in which case the third party will not be allowed to inform the taxpayer about the request), the taxpayer would receive a summary of why the information is needed.
- The financial institution can appeal any penalty it receives for failing to comply.
How Can HMRC Check Your Personal Bank Account?
Unless a tax tribunal finds that this condition should not apply, HMRC will have to tell the taxpayer why they’re requesting the information. As a result, HMRC may be able to request financial information from taxpayers without their agreement.
In the end, HMRC intends to reduce the time it takes to obtain information, bringing the U.K. into line with worldwide standards.
Why does HMRC have the right to check my bank account?
HMRC can check your bank account and/or work with other agencies to verify compliance with the tax law.
At present, HMRC can gauge your payments and income by looking at VAT bills, but they can equally work with other UK agencies to determine if HMRC has broad rights to obtain the information they need to collect tax on people’s earnings, including access to your bank account.
They don’t provide all of the data sources that they use to feed Connect, but if HMRC requires your data from a bank, they notify them of the needed information, and banks are required to comply with HMRC.
Frequently Asked Questions
What happens when I’m investigated by HMRC?
The first step is to get a letter from HMRC informing you of your circumstances. An investigation can be triggered by inconsistencies on your tax return, a tip-off from someone. By this point, the HMRC can use any number of means to obtain relevant information.
What if the HMRC investigation is confidential?
Even if HMRC has obtained permission from the tribunal to keep its tax investigation confidential, the third party is still legally permitted to alert the taxpayer that information has been requested.
Can HMRC Check my bank account without my consent?
HMRC cannot issue a third-party notice without the permission of the taxpayer or the tax tribunal. However, HMRC must demonstrate that the information sought is “reasonably required and will help the investigation in one way or another.
Conclusion
A notice from HMRC will have to be approved by a tax tribunal, an independent body that is responsible for any appeals against HMRC.
by Jay Redman | Apr 15, 2022 | UK Updates
COVID-19 caused the government of the UK to take on a set of measures to reduce the negative impact of border closures and social distancing measures on businesses. However, there are some notable changes to the budget that include cooperation tax, personal allowances and incentives for green packaging that stand out from the Fiscal bill for your financial tax year. In this article, we look at the different laws and legislation that have been passed in the last financial year, which is April 6th 2020 – April 5th 2021. This article equally looks at ten changes to the Fiscal tax bill that has an impact on businesses across the UK.
The Personal Allowance Limit
The government will increase the personal expenditure allowance in line with the rate of inflation for 2021 and 2022. As a result, the personal allowance will increase to £12,570, while the basic limit rate is set at £37,700 for 2021 and 2022.
Similarly, the higher threshold for the personal allowance will increase to £50,270 for 2021 – 2022.
Upper Earnings Limit and Upper Profits for the national insurance contribution will be aligned to the higher threshold at £50,270. These changes are applicable across the UK and will positively impact the disposable income of consumers.
The Standard Lifetime Allowance
In the 2021 Finance bill, legislation will equally be introduced in order to remove links to the Consumer Price Index for the next five fiscal years. This leaves the standard lifetime allowance at £1,073,100 for the tax years 2021 – 2026.
Inheritance tax nil-rate band and residence nil-rate band
The inheritance tax nil-rate bands will remain at current levels until April 2026, following a bill to amend the current Finance bill. The nil-band rate is £325,000, while the resident band rate stays at £175,000.
As a result of this, qualifying estates will continue to transfer £500,000 to spouses or civil partners and avoid a tax on £1 million inheritance from April 6th 2021, until April 5th 2026.
Financial Tax Year: Capital Gains Tax Annual Exempt Amount (AEA)
The government will introduce legislation in Finance Bill 2021 that maintains the current Capital Gains Tax annual exempt amount of £12,300 for individuals.
This was equally maintained at £6,150 for trustees of most settlements for the tax years until 2025 to 2026, as announced in Budget and will go into effect on April 6, 2021.
Corporation tax: Main Rate
The financial year beginning 1 April 2022 saw the introduction of legislation that set the main rate of corporation tax at 19 per cent. A bill will be introduced in order to raise the corporation tax rate to 25 per cent for the tax year beginning 1st April 2023.
Corporation tax: Small Profits Rate
The government would impose a small profits rate of 19 percent for the financial year April 2023. The small profits rate will be applied to £50,000 or less of profits.
Companies having profits of £50,000 to £250,000 will be taxed at the standard rate of 25 percent, but may be eligible for marginal relief.
There are a few cases where this rate may be marginally lower, so not all businesses will be subject to paying a huge portion of their earnings.
Temporary Extension of Carry Back of Trading Losses
The government will act in Finance Bill 2021, as indicated in Budget 2021, to temporarily extend the period for incorporated and unincorporated firms to carry back trading losses from one year to three years.
Unincorporated companies will be able to carry forward up to £2,000,000 in unused trading losses from the tax years 2020 – 2021 and 2021 – 2022.
The £2,000,000 maximum will be subject to a group-level limit, requiring groups with firms capable of carrying back losses in excess of £200,000 to divide the cap among their companies.
In due course, more information on the group limit will be released.
Capital Allowances: Super-deduction and 50% first-year allowances
Investments in main-rate assets will be lowered by a 130 percent super-deduction, while investments in special-rate assets will benefit from a 50 percent first-year allowance under this plan.
These measures will be included in addition to any necessary amendments to the Capital Allowances Act 2001.
Indirect Tax: VAT reduced rate for tourism and hospitality
The government has decided to extend the temporarily lower VAT rate of 5% for hotels, vacation rentals, and attractions until September 30, 2021.
Following that, on October 1, 2021, a new reduced rate of 12.5 per cent will be implemented, which will last until March 31, 2022, when it will revert to the usual rate.
Plastic Packaging Tax
The government will implement a new Plastic Packaging Tax on April 1, 2022, as stated in Budget 2018 and confirmed in Budget 2020, with basic legislation introduced in Finance Bill 2021.
The tariff will encourage the use of recycled plastic in packaging rather than normal plastic packaging.
The tax will be levied at a rate of £200 per tonne of plastic packaging that contains less than 30 per cent recycled plastic material, according to Budget 2020.
Following a technical consultation, some changes to the draft legislation have been made to improve clarity in response to stakeholder feedback.
by Jay Redman | Apr 15, 2022 | European VAT
How do I register for VAT?
If you are a business or an entrepreneur, you may register for VAT online, including partnerships as well as groups of companies. You will need to create a VAT online account – equally referred to as the ‘Government Gateway account’.
You may appoint an agent to enable you to register for a VAT account or register via post. Upon registering for a the account, you will receive a VAT number from HMRC, which will be used in all transactions and dealings with HMRC.
What is MTD and how does it work?
VAT registered businesses with taxable turnovers of over £85,000 should equally follow the rules from Her Majesty Customs and Revenues on ‘Making Tax Digital for VAT’.
If you have signed up for the Making Tax Digital, the records you must keep are not different for any VAT-registered business. However, you’ll need to keep some digital records.
You may be wondering what your VAT account should look like, but all of them are standardised and accessible via the HMRC website. This article will look at how to register for a VAT account and what a VAT account should look like.
7 Rules on what should a VAT account look like
1. Using HMRC Gateway to file VAT online
You should sign up or sign in to your VAT account using the HMRC Government Gateway account. The first rule of the VAT account is that you should sign in using your government gateway account, and you will arrive at the landing page.
2. Choosing the right account when signing up in HMRC Gateway
When you sign up for the HMRC account, you should ensure that you choose the right account and answer the questions related to adding the tax correctly. Your VAT account should have a white landing page and you should determine whether you are doing business in the UK.
3. Finding help in using HMRC Gateway
Your landing page has a range of information in the last icon for any questions or helps you may need.
It should have GOV.Uk on the top left-hand corner for questions related to your account, technical glitches, and other information that may be necessary for your HMRC account.
4. Knowing the different services offered in HMRC Gateway
HMRC will ask you several questions related to tax payments and other questions that will have a range of options, which you can select or highlight with a black dot. On your landing page, the top left-hand corner should have the icon labeled “Your HMRC services”.
5. Managing VAT account in HMRC Gateway
From your landing page, you should be able to access your account, manage your messages and track your forms. The landing page for most VAT accounts is pretty similar, as they have the same icons and tabs that are pretty much used by most businesses.
The landing page should have very little information about you, but rather what service you intend on using at the time when you are logged in to the Government Gateway Account.
6. Collecting and paying VAT through MTD
There should be a “Making Tax Digital” icon on the bottom left, where you can view your VAT account.
Every VAT account has this icon as HMRC is currently encouraging entrepreneurs and businesses to digitize the process of collecting and paying their VATs. It is one of the must-have features of any VAT account.
7. Knowing the next VAT due
Under the “Manage your VAT” icon, you can view when your next payment is due as well as VAT certificates. This is similar for all VAT accounts, regardless of what type of business you are. Your business tax account can be accessed under the icon “Your VAT account”.
There might be slight differences when you are registering your business, but the VAT account from HMRC has a similar look and feel for businesses and entrepreneurs.
Frequently Asked Questions
When is my next tax bill due?
You may be an entrepreneur that has very little time and needs to know when your next VAT bill is due. Go to “Your VAT account”, and the icon immediately below will tell you exactly when you must pay your next tax bill.
When should I sign up for my VAT account?
Make sure you do not sign up seven days before and up to five days after your due date. If you make your payments via direct debit, you are required to keep your account open to make payments twice.
When can I sign up to make tax digital?
If your taxable turnover is less than £85,000, you are required to sign up for making tax digital. You need to submit your VAT using the right software and save all digital records for up to ten years to ensure HMRC has access to all your records.
Conclusion
Reporting and paying VAT are different and how you link your purchases to your VAT account differs based on the software you use. However, some inescapable features are accessible by all businesses and entrepreneurs.
Some businesses may choose to report or justify expenses differently, but they ultimately got to the HMRC Gateway account to pay their bill.
Your VAT account should be organised so you have all the relevant information for regulators and HMRC as needed. This will ensure that you keep the right records at all times, and there is helpful accounting software to automate such tasks.
As a result, your VAT account can enable you to make an account for payments without very much effort.
by Jay Redman | Dec 13, 2021 | UK Updates
UK Tax Tips: Get the basics of accounting right
Even if you do not have an accounting background, it is essential to have a solid understanding of your finances. It is important to keep records from the start, and making this process straightforward could save you time and boost efficiency.
You should set up a verifiable record-keeping system and register your firm with HMRC before or after you open a bank account.
This will ensure that your revenue and VAT are operated digitally.
Worry about your cash flow
Cash flow is the lifeblood of a company as it ensures you can pay your financial obligations on time and prevent any late fines. It is important to have a regular source of income while managing your expenses in a manner that supports your regular payments, not least VAT.
Maintain a close eye on your cash flow and keep note of your credits and debts. Always plan for how much money you will be making and how much you will be spending in order to ensure that your financial affairs are in order at all times.
Comply with HMRC legislation
Complying with complex tax legislation is not easy. However, you must have a solid understanding of your responsibilities with HMRC and you must design a system that works effectively to ensure that you pay your taxes on time and get your returns in line with the legislation.
Register for a VAT number if your VAT exceeds the £85,000 threshold and stays up to date with the relevant business legislation in the budget.
Registering for VAT number with HMRC
Do not wait too long to register for your VAT number, as this will prevent you from paying late fines. You can apply for a VAT number to ensure you pay your taxes on time and get your tax returns as needed.
Even if you are unsure whether you may breach the threshold, it’s better to register for a VAT number.
Set key performance indicators (KPIs) and stick to them
Set KPIs to determine whether you are making any operational or efficiency gains. This will enable you to better understand your expenditures and whether you are paying the right amount of taxes.
It is important to set clear goals that are Specific, Measurable, Achievable, Realistic, and Time-bound.
Understand your customer base
Knowing our consumers inside out is important. It should be an integral part of any business or entrepreneur. Your business wouldn’t exist without your customers, which is why you should make an effort to get to know them and how they consume.
This will improve your record-keeping over time and enable you to adjust faster to changes.
Get organised & stay organised
Businesses with solid accounting records can perform better over time by deciding what to spend and how to spend their revenues. Being effective can equally enable you to pay taxes more effectively. It might allow you to quickly identify opportunities to generate returns.
Being organised could save you money and prevent additional accounting fees, possibly bank fines for late payments, or unexpected tax payments later on.
Get the right accounting software
It is important to get the right accounting software, which comes with a variety of tools and features to assist you in keeping track of your accounts.
Accounting software that is simple to use and has time-saving features might assist you in meeting your business objectives and ensuring that you record transactions properly.
Choosing the correct accounting software is critical for small business owners. This can be accomplished by taking into account usability criteria such as the following:
- Access for multiple users: Look for accounting software that allows you to invite your team or other users, providing them access to data and allowing them to perform certain duties remotely. There is a useful software that allows you to share and work with employees from different locations.
- Multi-Business Assistance: You may require accounting software that can give you extensive support and eliminate the need to set up accounts or get add-on services at higher costs.
- Cloud-Based Software: Cloud-based software is used by the majority of top accounting systems for all types of enterprises. As a result, you will be able to manage your account from any internet-connected computer from any location. This is ideal for SMEs operating from many locations.
- Mobile Access: Some accounting software equally has mobile apps that allow you to monitor and complete basic duties. It is useful to have accounting software that is accessible on your mobile.
Think of Add-on Services
Tax Preparation: Accounting software is useful as it assists you in managing your revenues and expenses as well as benefiting from features such as automatic tax computations.
Add-on Services: You might want to consider adding some other services, such as payroll and payment processing. Doing this will make it easier to collect payments and pay staff.
Frequently Asked Questions
What is the VAT Flat Rate
VAT is still charged at 20%, but it is paid to HMRC at a reduced rate (depending on your profession or trade), leaving a discrepancy that the business can profit from.
When to use VAT Cash Accounting?
This option is open to any company with an annual turnover of less than the current limit of £85,000. It is different from the regular plan in that VAT is not calculated until an invoice is paid.
How can I save time using software automation?
by Jay Redman | Dec 8, 2021 | Uncategorized
What is a VAT account?
A VAT account keeps track of how much VAT you charge and how much VAT you pay on your transactions. Your VAT return is based on the difference between the VAT you charge and what you pay for goods and services.
The following items are included in VAT accounts:
- VAT sales and purchases total
- The amount of VAT you owe
- You are entitled to a VAT refund
- VAT on purchases or sales in the EU
- Your Flat Rate % and its associated turnover, if applicable
How to pay your VAT bill
In order to pay effectively, it is important to have a VAT account. You might be required to go through a two-step verification process to access your account. Your account has your VAT number, and you can directly pay your VAT bill from your account.
You can pay for your VAT bill directly by clicking here. Before paying, ensure the deadline has not passed as different deadlines are used for the Accounting Scheme and payments on accounts. You can pay online or through telephone banking for faster payments.
You can equally use your online bank account or CHAPS. These systems have the benefit of getting your payments to HMRC on the same day and will prevent you from incurring any late fees.
Businesses using the Annual Accounting Scheme should use the standing orders, which take three days to clear. Ask to pay by standing order on your HMRC application form.
After receiving a letter from HMRC, you can pay using this form or other means such as online and telephone banking.
Alternative ways to pay your VAT bill
There are a few alternative payment options, but you’ll have to do everything manually. Because all VAT payments must clear in HMRC’s account by the payment deadline, you’ll need to be aware of the processing times.
Payments can be made the same day or the next day – online or via phone banking (faster payments). Direct Debit, BACS, debit or credit card payments, and bank or building society payments all require three working days to clear.
If the payment deadline comes on a weekend or a public holiday, ensure VAT payments reach HMRC on the last working day before the deadline.
Making VAT payments
Direct Debit, Faster Payments through internet/telephone banking, CHAPs, BACS Direct Credit, Online debit or credit card utilising BillPay, and Bank Giro Credit are all options for electronic payments.
Setting up a Direct Debit is the best approach to ensure that payments are made on time.
Payments are deducted automatically from your account, and all you have to do is make sure your VAT return is filed on time.
The other VAT payment methods need your involvement and awareness of payment processing times, which could lead to late payments.
Key Deadlines for filing your VAT returns
Unless a company is in debt to HMRC or gets regular payments, it will usually file its VAT returns quarterly or annually.
Quarterly — File your VAT returns with HMRC online if you submit them quarterly. Ensure your dues are paid by midnight one calendar month and seven days at the end of the quarter.
That means that if you’re filing a VAT return for the quarter ending March 31, 2021, the deadline to pay your bill is May 7, 2021.
Annually — For VAT purposes, some businesses adopt the Annual Accounting Scheme. In that situation, you must file your VAT return once a year and make advance payments toward your next year’s VAT bill depending on your previous return.
Payments on account are what they’re called. If you use the Annual Accounting Scheme, you must file and pay your VAT return two months following the end of the accounting period.
HMRC may ask you to file and pay your VAT return every month if you have had trouble making payments in the past or if you routinely exceed the quarterly payment threshold.
You must file your return and make your payment one month and seven days after the term ends in this scenario. So, if your period expires on December 31, 2021, you must submit your return and payment by February 7, 2022.
Frequently Asked Questions
Can I pay VAT monthly?
If your turnover is less than £1,350,000, use the Annual accounting scheme. This allows you to pay HMRC monthly instalments based on your VAT liability from the previous year. Instead of the usual one month, the return must be submitted two months after the end of the period.
What happens if I cannot pay on time?
If you can’t make a payment on time, contact HMRC’s business payment support service and explain your situation. You should be able to set up a payment schedule and avoid late payment penalties.
What are the penalties for paying my VAT late?
HMRC can take enforcement action by collecting your debt through various means if you fail to pay your VAT on time.
