Hopefully everyone who needs to do a tax return managed to do it before the deadline, but what lessons can we learn for next year?
From your point of view, leaving it to the last minute is stressful and makes it much more likely that mistakes will occur or omissions made. There is no warning of tax liabilities, and trying to find the funds with no notice could create financial difficulties, or may give rise to interest and surcharges from HMRC if the funds cannot be raised in time.
Worse still, if the return is not submitted on time, there are automatic penalties which grow by daily penalties where the delay is prolonged.
From the accountant’s point of view, leaving it to the last minute is equally stressful, and having to work very long hours to deal with late information risks errors being made or estimates having to be used. It’s pretty depressing not to be able to advise clients properly, but instead to have to just react to late information and then deliver bad news about tax liabilities when it’s too late to do anything about it.
So what is the ideal situation?
Keep records up to date month by month during the year, ensuring that income can be pensioned properly.
The confirmation of pensionable versus unpensioned income is one of our biggest problem areas, particularly with the changes in superannuation administration where we’ve lost local NHS specialists. It can take a disproportionate amount of time to:
- Try to track down exactly what has been pensioned and what hasn’t,
- Determine when pension contributions have been paid (tax relief relates to the date of payment, not the period to which it relates)
- Determine whether employer contributions need to be refunded to practices where income didn’t end up being pensioned, or whether contracts have been amended to a new higher gross fee to include what has been paid.
Keep electronic copies of important documents – P60s, P45s, Locum A/B forms, as well as invoices etc. That way if the paper goes astray, you still have the information. Have an accountant folder that a copy of everything relevant goes into as soon as you get it – much easier than trying to remember where you saved or filed them later.
There is plenty of software available to help you to record income and outgoings, including NASGP's own LocumDeck which is being upgraded to soon include a Bookkeeper area, to help run the administrative side of your business too.
In May each year, check that everything for the prior tax year has been recorded, checked and collated and send it to your accountant. Make sure what you send is complete; there is nothing more frustrating than receiving incomplete information and having to stop and start a job as extra details emerge. Don’t forget to tell us of important changes that can affect your tax – maternity leave, child benefit stopping or starting, which of a couple is the higher earner, renting out a property (or selling one that hasn’t been wholly a main residence) and switching between salaried/self-employed or vice versa.
Everything in its place
Ideally, send a compressed zip file with everything in it rather than umpteen emails (I think the record this season was 50 emails from one locum to complete their information!); scattered information risks something being missed or even duplicated. Accountants sell their time, so whether you are on a fixed fee or not, it will eventually be reflected in fee levels if a large part of their time is trying to jigsaw-puzzle together heaps of disorganised emails or papers.
If your accountant gets the information early enough, they will be able to see whether your July tax payment can be reduced; they will be able to warn you about the following January and July tax payment amounts; they will be able to see if there are changes in circumstances that warrant changes in the way you record things or the way you run your business.
If you need a new mortgage later during the year, up-to-date figures will be available immediately – rather than having to wait for accounts and a tax return to be completed to provide the figures that mortgage lenders require. Or you risk paying twice, to get estimated figures as final figures.
Of course, during the year, you should seek advice if something changes that may affect your tax position – don’t leave it until it is too late to do something about it. This is particularly important with UK residence issues – sometimes just a small change can make a big difference to tax liabilities.
Making Tax Digital
When ‘Making Tax Digital’ comes in (supposed to be from April next year), all businesses except tiny ones will need to make quarterly returns of income and expenses (and a year-end ‘tidy up’) – getting in the habit of keeping up to date records now will help you going forward.
So I’ll finish with a heart-felt plea to ‘my’ locums – please let me have your tax information nice and early in the year, and include everything in one go – it will make both of our lives less stressful – and with the pressures that you work under, that can only be a good thing.
Liz Densley is medical specialist Director with Sussex Chartered Accountants, Honey Barrett and secretary of aisma (the association of independent specialist medical accountants). Contact her on 01424 730345 or at email@example.com