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Claiming tax relief for work related expenses

Employees who need to buy equipment to use as part of their employment may be able to claim tax relief based on the cost of the equipment acquired. In most cases you can claim tax relief on the full cost of this type of equipment as it usually qualifies for a type of Capital Allowance called annual investment allowance. Any tax relief would be reduced if the employer provides a contribution towards buying the item.

The way to claim tax relief depends on the amount you’re claiming. HMRC provides the following information on making a claim:

Claims up to £2,500

You should make your claim:

using a Self-Assessment tax return if you already fill one in
online or by printing and posting form P87 if you don’t already fill in a tax return
by phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions).


Claims over £2,500

You can only claim using a Self-Assessment tax return. You will need to register if you don’t already complete a return.
There are different rules for employees who use their own uniforms, work clothing and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a ‘flat rate deduction’. However, an employee cannot claim relief on the initial cost of buying small tools or clothing for work.

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Changes to duty free shopping

The government has published the new rules for duty free and tax free shopping that will come into effect from 1 January 2021. The changes are wide ranging.

For anyone who smokes or drinks there will be no duty charged on alcohol or tobacco products from January 2021. This will apply irrespective of whether you are travelling to an EU or non-EU country. The new rules will apply to British ports, airports, international rail stations and sales on ships, trains and planes.

There will also be new increased personal limits on what you can bring home. This means that passengers coming to Britain will be able to bring back, for example, three crates of beer, two cases of still wine and one case of sparkling wine or 4 litres of spirits to GB without paying UK duties.

The government has also announced the ending of all tax free sales from January 2021. This will apply to relevant sales of tax-free transactions in airports of goods in sectors such as: electronics, fashion and beauty products and will apply to passengers travelling to non-EU countries.

It has also been announced that the VAT Retail Export Scheme is to be scrapped from 1 January 2021. This means that VAT refunds for overseas visitors in British shops will be removed. The only exception will be when an item is shipped directly from the seller to the home address of the foreign customer.

The changes will apply in England, Wales and Scotland. The rules in Northern Ireland are still under discussion.

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Venues required to record contact details

It has become a requirement for premises and venues across England to have a system in place to record contact details of their customers, visitors and staff. This move is intended to help trace people should a venue be linked to a coronavirus outbreak.

The government has said that further guidance and, where necessary, regulations will be published specifying the settings affected by the changes. The scope will cover the hospitality industry, such as pubs, bars, restaurants and cafes, as well as close contact services and other tourism and leisure venues.

These businesses and organisations had been advised to collect and share data, with many effectively doing so. However, the data collection programme has now been formally mandated since 18 September 2020 and will support the NHS Test and Trace service.

The main requirements for collecting contact details are as follows:

Details to be stored for 21 days and shared with NHS Test and Trace if required
Contact details required include name, contact number, date of visit, arrival, and departure time (if possible)
Fixed penalties for organisations that do not comply
Venues will also be in breach of the law if they take individual bookings of more than six people
Customers who do not provide details may be refused entry.
All collected data must comply with GDPR and should not be kept for longer than necessary.
Further details are expected to be published shortly and clarified in future regulations.

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The new Winter Economy Plan – Summary of Measurement

The Chancellor, Rishi Sunak, has yesterday delivered a statement to the House of Commons outlining plans to help protect jobs across the UK whilst the country faces a resurgence of coronavirus and a winter of uncertainty. The Chancellor was facing mounting pressure to reveal future changes as many of the schemes and reliefs previously announced are coming to an end including the furlough scheme at the end of October.

It has also been confirmed that the Budget that was expected to be delivered in the autumn will now take place next year. The measures announced yesterday are more clearly focused on keeping the economy ticking over during the coming weeks and months.

The main focus of the Chancellor’s announcements is a new Job Support Scheme and an extension to the Self Employment Income Support Scheme as well as additional flexibilities for businesses who have borrowed money as a result of the pandemic.

Details of these announcements follow:

Job Support Scheme

A new 6-month scheme starting from 1 November 2020.
This scheme has been designed to support viable jobs and employees must work at least one-third of their hours, paid as normal, in order to qualify for the scheme. The government and employer will then each cover one-third of any remaining hours the employee is not working.
Employees will therefore forego one-third of their pay for the hours that they have not been working. This means that employees working the minimum one-third of their hours will still receive at least 77% of their pay.
The level of the grant will be calculated based on an employee’s usual salary but subject to a cap.
The Chancellor said that the scheme will be open to all small and medium-sized businesses, but larger businesses will only qualify when their turnover has fallen as a result of the pandemic.
You can still use this scheme even if you have not previously participated in the Coronavirus Job Retention Scheme.
The previously announced Job Retention Bonus, allowing qualifying businesses to claim a £1,000 for each CJRS participating employee, will remain. Employers can claim both the Job Retention Bonus and funding through the Job Support Scheme.


Self-Employment Income Support Scheme extension

The Chancellor announced additional help for the self-employed based on similar terms and conditions as the new Jobs Support Scheme.
The extended scheme will apply for 6 months from 1 November 2020 with an initial taxable grant made available to those who continue to trade and are currently eligible for SEISS.
The initial lump sum will cover three months of profits from 1 November 2020 calculated as 20% of average monthly profits, up to a total of £1,875.
An additional second grant will be available from 1 February 2021 to 30 April 2021, but the level of this second grant amount is subject to review.


Loan deadlines extended

Businesses that have taken out a Bounce Back Loan will be able to benefit from a new Pay As You Grow flexible repayment system.
This will include an extension in the loan term from six to ten years. There will also be new options for interest-only repayments for up to six months as well as payment holidays.
The Coronavirus Business Interruption Loans will also have their Government guarantee extended to ten years.
The deadline for applying for all the Government’s coronavirus loan schemes will be standardised and pushed back until 30 November 2020.
A new successor loan guarantee programme is also expected to be introduced early next year.


New VAT Payment Scheme

Businesses had the option to defer the payment of any VAT liabilities due between 20 March 2020 and 30 June 2020.
The deferred payment was due to be paid in full to HMRC by 31 March 2021.
The Chancellor has now confirmed that businesses will instead be able to make 11 smaller interest-free payments during the 2021-22 financial year.
Self-Assessment payment deadlines

Taxpayers that were due to make their second payment on account for the 2019-20 tax year had the option to have the payment due date deferred until 31 January 2021.
It will now be possible to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility for this payment and also for payments due in January 2021 extending the deadline until January 2022.


VAT reduction for hospitality and tourism sector

The VAT reduction that was announced as part of the Summer Economic update was scheduled to end on 12th January 2021.
The end date for the VAT cut has now been extended until 31 March 2021 to give the affected sectors more time to adjust to the difficult trading conditions. This means that VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes and pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5% until the end of March 2021.
The new incentives announced today should be welcomed as the government continues to try and cope with this unprecedented pandemic. Managing the economic ramifications are causing great difficulties for many people and businesses across the country. These steps, at least, give affected businesses and individuals a degree of certainty as to the level of government assistance available to them throughout the coming months.

As more details emerge on the various schemes announced yestarday we will update you further.

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Relief for self-employed trading losses

There are a number of tax reliefs available for self-employed taxpayers that make a loss carrying on their trade, profession or vocation (collectively referred to as a ‘trade’) and for their share of trading loss for any partnerships they are involved with.

For the 2020-21 tax year, trade losses can be relieved in a number of ways. This includes the following:

* By using the loss to reduce income for the year ended 5 April 2020 and / or 5 April 2019. If there are still trade losses remaining (after your income has been reduced to nil) then you may be able to set-off some or all of the remaining loss against chargeable gains.
* A claim can also be made for losses made in the first 4 years of trade known as early trade losses relief. Taxpayers need to look at the earliest year first (i.e. 2016-17) and use any remaining loss in 2017-18 and then in 2018-19. The time limit for making claims for 2019 to 2020 losses is 31 January 2022.
* Taxpayers can carry forward any loss against future profits of the same trade or income from the company (where you transfer your trade to a company in exchange for shares in that company), or post cessation receipts
* Terminal loss relief is available for businesses that suffer a loss in the last 12 months of trade of a business. Terminal loss relief allows for the carry back of any trading losses that occur in the final 12 months of trading to be set off against profits made during the final tax year or any or all of the previous three tax years.
* Self-employed taxpayers who were previously employed can offset trading losses against employment earnings or other earned income in the current or preceding tax year.


There is also an overall cap on certain Income Tax reliefs. The cap is set at 25% of income or £50,000, whichever is the greater.

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Carry Corporation Tax losses back

Corporation Tax relief may be available where your company or organisation makes a trading loss. The loss may be used to claim relief from Corporation Tax by offsetting the loss against other gains or profits of the business in the same accounting period.

Where the amount of a trading loss exceeds the profits of the same accounting period, the company may claim to carry back the excess against the profits of preceding accounting periods. The preceding accounting periods are those falling wholly or partly within the preceding period.

Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.

Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for Corporation Tax purposes is worked out by making the usual tax adjustments to the figure of profit or loss shown in the company’s or organisation’s financial accounts.

If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, most recent first.

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Furlough Scheme changes September 2020

As our readers will no doubt be aware, the Coronavirus Job Retention Scheme (CJRS) is closing on 31 October 2020. The scheme moved to a more flexible working arrangement from 1 July 2020 to allow employees to resume part-time working and to begin to ease employers away from their reliance on the scheme.

These changes continued with effect from 1 September when government support for the scheme was reduced from 80% to 70% of usual wages up to a cap of £2,187.50 per month for the hours furloughed employees do not work. Employees will also have to continue to cover employers’ NIC and pension costs for the hours the employee does not work. From October 2020, the government support for the scheme will be reduced further to 60%, with state support for furloughed workers reduced to a maximum of £1,875 with the same rules for NIC and pension costs.

Since the furlough scheme was introduced, many employers have been topping up the government support payments. Employers can of course continue to top up employee wages above the relevant percentage caps for the hours not worked at their own expense. This is obviously becoming more expensive as government support for the scheme tapers off. Employers have to pay their employees for the hours worked as normal.

Once the furlough scheme ends, a new Job Retention Bonus will start. The bonus payment has been designed to help encourage employers to bring back furloughed workers. The new bonus scheme will provide a £1,000 bonus payment to employers that bring back an employee that was furloughed, and continuously employ them for at least 3 months after the end of the CJRS.

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Witnessing wills remotely

A statutory instrument will be issued September 2020 that will legitimise the witnessing of wills by video conferencing methods. This extension to the witness process will apply from 31 January 2020 for two years.

The new law will amend the Wills Act 1837 to stipulate that where wills must be signed in the ‘presence’ of at least two witnesses, their presence can be either physical or virtual.

An increasing number of people have sought to make wills during the COVID-19 pandemic, but for people shielding or self-isolating it is extremely challenging to follow the normal legalities of making a will – namely it being witnessed by two people.

To reflect this, the will-maker could use the following example phrase:

‘I first name, surname, wish to make a will of my own free will and sign it here before these witnesses, who are witnessing me doing this remotely’.

Witnessing pre-recorded videos will not be permissible – the witnesses must see the will being signed in real-time. The person making the will must be acting with capacity and in the absence of undue influence. If possible, the whole video-signing and witnessing process should be recorded and the recording retained. This may assist a court in the event of a will being challenged – both in terms of whether the will was made in a legally valid way, but also to try and detect any indications of undue influence, fraud or lack of capacity.

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Working from home tax claim

If you do not receive compensation from your employer you can still claim tax relief for some expenses that result from home working. HMRC will usually allow you to claim tax relief if you use your own money for things that you must buy for your job and you only use these items for work. You must make a claim within 4 years of the end of the tax year that you spent the money.

For example, if you use your own uniforms, work clothing and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job as an employee (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a ‘flat rate deduction’. However, you cannot make a claim for relief for the initial cost of buying small tools or work clothing.

You may also be able to claim tax relief for using your own vehicle, be it a car, van, motorcycle or bike. As a general rule, there is no tax relief for ordinary commuting to and from your work. The rules are different for temporary workplaces where the expense is usually allowable and if you use your own vehicle to do other business related mileage.

Note, that if you have agreed with your employer to work at home voluntarily, or you choose to work at home, you cannot claim tax relief on the bills you have to pay.

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Cars – it’s all online

If you have access to the internet there are a bewildering number of online resources that you can access to help you manage recurring tasks. This week we have listed a number of these with links to the relevant website pages.

1. Book a theory test – https://www.gov.uk/book-theory-test .
2, Get vehicle information from DVLA – https://www.gov.uk/get-vehicle-information-from-dvla .
3. Tell DVLA if you have sold, transferred or bought a vehicle – https://www.gov.uk/sold-bought-vehicle .
4. View or share your driving license information, useful when you hire a car – https://www.gov.uk/view-driving-licence .
5. Check MOT status of a vehicle – https://www.gov.uk/check-mot-status .
6. Book your driving test – https://www.gov.uk/book-driving-test . 7. Check if a vehicle is taxed – https://www.gov.uk/check-vehicle-tax .
8. Tax your vehicle – https://www.gov.uk/vehicle-tax .
9. Check the MOT history of a vehicle – https://www.gov.uk/check-mot-history .


Another tip for motorists unrelated to the above services is that many insurance companies have been offering discounts to drivers – who because of COVID-19 restrictions have limited mileage on the clock – obviously, the less you drive the lower the risk of claims. Worth a call to your broker or insurance company.

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