Tax or treat? Don’t be spooked! 5 ways to avoid a tax fright

The leaves are falling and the jack-o’-lanterns are out, which means one thing… Halloween season is amongst us.

Ensure that your tax affairs do not turn into a nightmare. Here are our 5 tax tips to avoid a horror story emerging for you this tax year.

1. Double, double toil and trouble. Get your tax return in or you’ll be in trouble!

31 October may be associated with Halloween but it is also the deadline to file a paper tax return with HMRC. Also, the 31 January deadline for filing your tax return online is less than 100 days away. It is always best to get your self-assessment tax return sorted sooner rather than later to avoid an eerie feeling come January.

HMRC charge penalties for the late filing of tax returns so you should ensure that your tax return is filed on time to avoid a spine-chilling situation.

2. Skeletons in the closet? Make a voluntary disclosure to HMRC

HMRC’s information gathering powers have increased over the last decade, especially with HMRC entering into Automatic Exchange of Information agreements with other countries around the world.

This has allowed HMRC to gather information on undisclosed income and gains. Where there has been a non-disclosure of income and/or gains, HMRC will seek to charge penalties and the penalties can be significant. The penalties charged depend on the behaviour of the taxpayer and whether the disclosure is prompted or unprompted.

Waving a magic wand will not make it disappear and penalties can be mitigated by making a  disclosure to HMRC.

3. Pumpkin spiced and don’t get taxed twice!

It can be gruesome to discover that you could potentially be taxed twice on the same income or asset. This could include:

Overseas income –There is the potential to be taxed in both the UK and an overseas jurisdiction on the same income or gain. Fortunately, this can often be mitigated by claiming Double Tax Relief where you can claim a tax credit for the foreign tax paid or the Double Tax Treaty may stipulate that the income or gain is only taxable in one country. This is a complex area and specific tax advice should be sought.

Gifts with reservation of benefit – Inheritance Tax anti-avoidance provisions can apply where someone gives away an asset (such as a house) but continues to benefit from the asset given away (such as continuing to live in the house). These rules can prevent the asset from falling outside of your estate for IHT purposes so it will be treated as still being in the death estate of the donor and liable to IHT. This could result in the same gift being taxed twice, but there are provisions which can provide relief in these circumstances. A lifetime gift could also give rise to an unexpected CGT charge on the eventual disposal of the asset. Tax advice should be sought prior to transferring assets to avoid unwelcome tax consequences.

4. Occupation away from the ‘haunted’ house

Private Residence Relief (PRR) is one of the best-known Capital Gains Tax (CGT) reliefs and is available when an individual disposes of their only or main residence. However, you may get a fright to discover that living away from the property could cause a CGT charge to arise. Contact us to discuss this further.

5.Treat your employees

Sometimes providing sweets to employees at Halloween is not the best way to incentivise them to help grow the business.

Similarly, simply gifting shares to employees or using non-tax-advantaged share options can cause income tax and national insurance issues for employees.

Instead, consider utilising tax-advantaged share schemes such as a Company Share Option Plan (CSOP) or Enterprise Management Incentive (EMI) scheme to reward or incentivise employees which will help mitigate their tax liabilities.

Who you gonna call?

Tax laws and regulations can change on a regular basis. Therefore, we would always recommend consulting a tax professional who can provide tailored advice based on your individual circumstances.

At Hawsons, we have a dedicated team of tax experts at our offices in Sheffield, Doncaster and Northampton.

If you would like any tax advice, please do not hesitate to contact us.

We offer a free initial meeting to discuss your particular circumstances – contact us to arrange your free initial consultation using the form below.

Happy Halloween from everyone at Hawsons.