June Questions and Answers
Newsletter issue - June 2021
Q. I've been going over some old tax returns to try to track down some capital losses. However, whilst doing this I've noticed that I missed including my considerable pension contributions off the 2018/19 return. From what I can see online, I've just missed the deadline to amend it. Is there any way to claim the extra relief? It's worth around £2,000 which would be very helpful at the moment.
A: You should make a claim under the provisions for Overpayment Relief. This permits a claim to be made up to four years after the end of the tax year in question where there are no other means to recover the overpaid tax. You need to be very careful when drafting the claim, as it must contain specified information (see HMRC's guidance here). It must also be signed by you personally an advisor can't sign it on your behalf (though they could help you draft the letter).
Q. We make a relatively high number of B2C sales to EU-based customers - usually over the summer months. We also use the flat rate scheme, and I've heard that Brexit may cause issues for us. Is that the case and if so can we leave the scheme for the summer months?
A: Yes - the problem arises because all sales to EU customers are now zero rated, so you aren't collecting input tax. However, you still have to apply the flat rate percentage to these sales. If a lot of your sales are zero rated, it will probably make sense to leave the scheme. You can do this at any time, just make sure you inform HMRC of your chosen leaving date. However, once you leave you cannot rejoin for at least 12 months, so you can't just leave for a few months then come back to it after the summer.
Q. Following the Covid-19 pandemic, I've decided to change my year end to 31 March (from 31 December) in order to utilise overlap relief that I've been carrying forward. However, I'm not sure exactly what profits to include on my return.
A: This will depend on exactly how you enact the change. If you prepare accounts for the 15 months to 31 March 2021, your return for 2020/21 will include the results for the full 15 months, less the overlap relief. If you prepare accounts for the three months to 31 March 2021, you will have two accounting periods (one 12 months and one three months) in the basis period for 2020/21 and you will include the results from both, again deducting the overlap relief. Of course, it's possible that you are referring to your current year, i.e. you will prepare accounts to 31 March 2022. In that case, the change won't take place until the 2021/22 year and you should just report your results to 31 December 2020 on the 2020/21 return in the usual way.