1 million missed the tax deadline. Did they know they can claim 100% tax on a Tesla? Listen to learn how you can

This week on the silver fox entrepreneurs, we're going to be talking about tax, how much you can say through deductions as a self employed person, and the impact of the new green card tax policy, which means that you could have a Tesla tax free as your company car. Welcome to The Silver Fox entrepreneurs podcast, the show for mature men with enterprise. Simon Robinson, welcome to The Silver Fox entrepreneurs podcast. Thank you very much for joining us.

Thank you. lovely to be here. Thanks. So I work for a firm of accountants based in Chippenham called Leslie Ward & Drew. I myself have worked here for just coming up on 10 years now, having previously worked for a top 10 firm and started my career. They're members of the Association of tax technicians, and also accounting technicians.

Now speaking of tax, of course, January, the 31st was filing, how many people managed to file on time Simon, share with us some statistics if you've got them.

thickers Yeah, I think the revenue we're reasonably happy with, with the figures. So we've got so end of January filing, just over 11.7 million returns were due to be filed. And they, they believe that about 94% of those were filed online, about 700,000 of them on the last day on the 31st. And for those who really like driving, so the last minute, about 26 and a half in the last hour. And I did manage to find some stats from previous year, suggesting that the last ones go in, then had 17 seconds to go. So they're very, very much leaving it to

say their bandwidth wasn't going to go find the

1 million, 1 million who missed it, unfortunately. So they have either filed since then, or or are still yet to do so.

And what happens and if people have not got the filing in on time, Simon, it always fills me with dread To be honest, the tax. You help people with that sort of stress reduction? What What can people do out there? If they have missed the deadline?

Yeah, so that my first piece of advice would be be not to panic. I mean, ultimately, it's it's happened. So what you're looking to do then is to rectify it as quickly as possible. You know, next tip would be if you're not comfortable doing it yourself, and possibly if, if you're one of those people who've missed it, that that's the case, then, you know, do look to find an advice or an accountant, because for relatively low costs, they can not only help you with that, but but hopefully help you throughout the year and along the way, as well and make a lot of other suggestions, which would more than cover the cost.

What are the cost. So if, you're fining penalty?

there is there is fine penalties. Yeah. So unless you fall into the category of reasonable excuse. This is the revenues definitions. Reasonable excuse would would really only apply to someone who had a hospital stay or or family bereavement, or if they themselves have a technical issue, they let you off under those circumstances, they're less forgiving with with your own technical issues. But there is a an automatic 100 pounds late fine penalty for the return. So that's if you go if that person, the earlier example was was half a minute later, they've got the 100 pound penalty, just just straight up 100 pounds. If you then don't get your act together before the end of April. So three months later, you then start getting into the nasty penalty regime, and that's 10 pounds a day, up to a maximum of 900 pounds. So we can potentially get to a 1000 pounds of late filing penalty. Wow. But just before the end of June

Wow, on't you if

You do Yeah, because it does, it does get worse as well. So they they then go on to sort of tax good penalties. So at six months and 12 months, you're then looking at a 5% of the tax due or 300 pounds, whichever, whichever is the greater figure. So you actually have an example of how bad this this just sort of worked example of how bad this could get. So what I've what I've, what I've gone with is is someone who had a 10,000 tax liability, not an unreasonable figure for someone who's who's self employed. They don't file their tax return, and they don't file it for the full year. So they decided to finally file on the first December 2021, their return that was due now, the previous January, they also don't make that tax payment until the first of Feb. So both are a year late 10,000 pounds of tax, the total amount owing because of that lateness would then become 13,825 pounds. So it's very, very expensive, is 2000 pounds for sending the return late 1500 pounds paying the tax bill late, and the 325, 26 pounds of interest there. So it really can mount up.

Wow, that's expensive money. So the moral of the story is really to talk to somebody quite quickly. And what where would people go then Simon? To find an accountant like yourself?

Yeah, so so there's various accountancy bodies. So there's obviously the two that I'm that I'm a member of the Association of Tax Rechnicians and the Association of Accounting Technicians. Then there's also the sort of the, the next level up from that if you want the Chartered Institute of tax, and the ICAW. So the Institute for chartered accountants, they would all have information and possibly lists on their on their websites. But otherwise, it's it's a, it's a good old fashioned Google search. And, you know, just it, it obviously comes down to whether somebody would like to have someone that's, that's local to them, if they prefer face to face contact? Or if they're happy to deal with someone. electronically. Obviously, that's that's a growing area for everyone as well. You know, you can have clients from from quite far, far reaching areas compared to where you're based, as you know, we do we can deal certainly, with with compliance work, we can deal with that. Completely electronically.

Yeah, well, that is how you and I met, of course, when you are handling our affairs when we were in China, right? We were We were those people that were always behind, and what fees should people expect to pay? Is it based on, you know, how much they've earned? Or on how much time it takes how complex it is? What's the sort of charging structure in the industry?

It should, it should really be based on on the time spent, because obviously, it's, it's wouldn't really be fair for someone to charge more simply because there's a couple of zeros extra on the numbers. So really, it's going to depend on on two factors. One would be the level and sort of quality of the firm that you've gone to, to do the work. And I think then the other factor would be the level of complexity of that individual's tax affairs themselves. So obviously, there's a big difference between someone who might might be working predominantly for one other business, maybe 12 invoices a year and a few expenses, that's a relatively straightforward case, compared to someone who, who might have 1000s of customers and lots of data to, to work through. So but obviously, in both those circumstances that on the face of it, that they're in the same scenario, though, they're in business in their own account, but it's a very different, different scenario.

And presumably, a big part of the cost comes from being disorganized. And there are more and more of the services like crunch that are kind of offering the keep your books up to date, month to month. What's your view Simon on that, because that does seem to be a large amount of the cost is where, you know, in December, people are January trying to collect all the old receipts and rushing across to you. So what's your view on what's best to use as a software for example, or an approach?

I think software probably comes down to the to the user, because the most important that there are lots of options on the software front. You've mentioned Crunch, zero QuickBooks. There's a lot of firms out there now, both new to sort of bookkeeping and accountancy, software and the previous desktop based account very much accountant based software providers are now also doing online cloud based systems that are very much intended for the the end user, the client rather than their advisor. So really, that comes down to how, how much you feel you can get out of it and how it might link in with your other software, you know that often it's the case that if you're using a another, you know, maybe a time recording piece of software, or a payroll piece of software, you want them ideally, to be able to talk to one another, so that you can transfer the data across. So they all do roughly the same thing. what's what's important is, is, as you said, the approach is getting people to use them, as they're incurring these costs, as they're raising these invoices, because the sooner you enter that information, the easier it's going to be, you've you've just done the job, you it's all fresh in your mind, you know what you were doing when you were doing it, you can put all that information in there, and then forget about it, essentially. Whereas if you're trying to do the catch up, as you mentioned, in December, you had a pile of receipts, you don't remember what half of them before. So it's the chance right now, or missing something is much higher. And a lot of them give you sort of real time data as well. So you can you can really monitor the performance of the business in much more accurately than you would do with just sort of banging it all in a carrier bag and taking it in.

Yeah. And the people know, do you think what they can claim for? Because I've just moved back from overseas, and I'm not quite sure of the expenses I can claim for? Can you give us sort of a top 10 top five ways that an entrepreneur can can save money? What can they claim for?

Yeah, sure. I mean, obviously, it does very much depend on on the nature of their business. But let's, let's say they're away from the obvious stuff of obviously, if you sell a product, obviously, the cost of that product is there as well as your expenses. Let's say you're you're selling your time as some kind of advisory business. It's less obvious then what what you can charge for. One of the the easiest ones to charge for would be a use of home as office. Yeah, if of course you do work from from home.

And how much can you claim? Because I think a lot of people do i do that a couple of days a week for example.

Yeah. So So with no evidence whatsoever, the revenue, they give away various sort of rates and allowances, a lot of them are very historical. And the figures haven't been changed for a long time. So they don't always sound all that generous, but no evidence whatsoever, you can claim four pounds per week use of homers office.

Wow, four pounds, right.

All of that, yeah. But in their defense, that's with no evidence, if you if you want to claim more you can do. But you have to start thinking about, you know, calculating it properly on the basis of the, like you said length of time that you were working at home floor space that you're using, and taking a proportion of all the bills. So it's a bit more of a convoluted calculation, but it's possible

Can I charge for the desk and computer? Can i, that i bought for the office at home and the camera and all that.

So it would depend very much on on whether whether you or if it was a separate company, whether it was the company that owned the the asset? So if obviously the company wanted to buy it, then yes, it could claim it as an expense if if you were buying a personal laptop, and then using it for business some of the time, what you probably do is claim a proportion of that.

If you're a sole trader, what do you get?

So so that that would be the case there if if you if you bought a laptop and let's say bought two laptops once once for personal use ones for your business. In that case, you could obviously claim 100% of the cost of the business laptop, if you just bought the one you'd look at, you know how often you're using it within the business. If it was 50/50 you could claim half of the cost of it. So it's just about sort of fair, fair apportionment of the of the cost, you know, based on on the hour long you're using it in that business,

And what exact, travel car rental, leasing

Yeah, so obviously any, any sort of one off travel costs a taxi or train fare or hotel stay for a business trip is, you know, fairly obviously allowable. If you were, if you were running your own car privately and and doing business mileage either as a sole trader or as a director shareholder over a limited company, you could claim a mileage rate. Now that one, that one can be quite, quite lucrative obviously, it does depend on the on the vehicle that you're running. But yeah, it's 45 pence per mile for the first 10,000 miles, which an average, you know, sort of standard car, you should you should be able to run a calf for that rate, and maybe maybe sort of make a few pence on that one is 25 p after 10,000 miles. So it does does drop with I think the logic being that obviously some of the the fixed annual costs, like your road fund license, you're servicing and an insurance drop away a little bit as you're going through a higher mileage advice there would just be to keep a mileage log. It's either a full mileage log

Is there a software for that, or is it you just keep it

I'm not aware of a standalone one? Yeah. I mean, historically, people have done it with, you know, maybe a notebook in the car, because then it's worth them all the time. But it, you don't have to record the whole mileage of the car, if you don't want to, obviously, that's a very definitive record. If you just wanted to keep a log of the business trips, right, that's fine. And I would, I would say, you know, perhaps a spreadsheet.

And that's not going to inform the office. Right, that's going out to a meeting from the office, you can't claim for the daily commute?

That's absolutely right. Yeah. So so that would be if you do if you do have a, you know, a base away from home, obviously, lots of people who work for themselves are based permanently at home. So, you know, for them, it would be a case of pretty much all business journeys would start from home. If you are based elsewhere, you've rented some office space or whatever, then you're absolutely right. It starts from there, effectively.

Right, that's great. What else can we say that's great

Yeah. A little bit of a plug. Accountancy costs. So if you did, if you did choose to, you know, appoint an advisor, obviously, that costs either paid by you as a sole trader or or paid by the company, or allowable. So, you know, obviously, that's useful in bringing that advice down slightly.

Yeah. And I think that's really worth pointing out that actually, it's an investment and isn't it. There's no point in saving money to get a cheap accountant, because you can claim that money back against tax anyway.

It the tax savings certainly helps, doesn't it and say, I think if someone if someone's in business by themselves, and they don't have an advisor, I would be a bit disappointed in the advisor if they couldn't, couldn't find, you know, some way to help them, you know, set aside some time Yeah. point out something that they're not claiming something there that they could, that they could help with, because ultimately, you know, particularly for your your subscribers, they they want to focus on doing what they want to do. not dealing with the the compliance that has to come with that. It's, it's better to focus on what you're best at and leave and leave the bit to someone else?

And what what if people are in this position with this of payroll working, where some people are, if you like, almost semi permanent, freelance with one employer can just talk us through the changes to this new what is IR 35 assignment? Because that must be quite a few people.

It stands to affect quite a lot of people. Yes. So IR35 is a sort of revenue code, if you like for a directive that they released some time ago, around about 2000. And it was basically to combat the, what became known as the sort of leave on Friday, start on Monday, principle where where employees would leave their employment and then rejoin carry out exactly the same role exactly the same task the next week, it's just that they would do it with a personal service company in between. So a limited company of which their sole direct turns our holder, and they invoice their previous employer via that company for the work that they're doing. That allowed them to extract their money, rather than just having a potentially quite high salary and suffering the high tax rates upon that, they could shelter their earnings in the company and choose to take it as salary and dividends, they could adjust the rate accordingly. It saved them a lot of tax, but in most cases, Now, obviously,

What is the situation there. And

So that's, that's obviously not a great situation as far as the revenue are concerned, because it dropped their, their tax revenues. And I think also, it doesn't really represent the true relationship here, the true relationship continued to be one as an employer and an employee. What's happening more recently, is that the IR35 rule, which was a calculation to try and bring those types of companies back in to the a bit more of the employer employee situation is changing, who is responsible for carrying out the assessment. So up until now, it has been the personal service company, so to the individual effectively, to sort of self certify, if you like, and apply the rules. And as you can imagine, very few people have applied these rules to themselves. And it's very, very hard for the revenue to chase it down. There's there's been infamous cases in the in the courts, and they, they just can't win. So what they've done is they're they're now placing the emphasis on the engaging company, to say you need to work out whether this person is effectively still an employee, when whether these rules apply. And if they do, even if you're paying their personal service company, you have to treat it as if it's being paid as employment income. So what's going to happen there, of course, is all of the engaging companies who previously weren't weren't interested in what wasn't? right? Exactly, yeah, they, they could just pay the invoice have the work done, they weren't weren't interested, it's now become the case that they very much do need to be interested. Because they have to withhold the tax that they have to then pay that tax over to the revenue. And they have to make submissions via their their own payroll scheme about those payments. So it's, it's given them a real vested interest in getting it right. And it's highly possible that a lot of relationships that have gone on for a number of years in this way, the payments are now going to have to change because they they're going to fall into this trap.

And presumably some some companies may sort almost throw their freelancers under a bus a little bit if people don't comply, right? Because otherwise they create a liability on their own books.

I think they I think they they'll have to that and of course for a lot of them are are doing to to avoid the risk. And the the unknown if you like, that. They're saying they're sort of going back and saying we we just want to take people on as employees, because then everybody knows where they stand. And there's no risk of anything coming up in future. So it happened in the public sector first. So that's been going on for a while. And we have heard of cases like the BBC. Yeah. And and ironically enough, the revenue themselves who were using a lot of contractors for their it work. And, you know, they've either had to say, You're all coming back on as employees or like in the revenues case, they've really struggled to get stuff done. Because their entire it and coding staff, of which they need quite a few. We're all freelancers. And they've all turned around yet, but we'll go and work somewhere else. They obviously had that that option, which is great for them individually, but for the revenue. It's it's less than that a bit short.

When there's some somewhere I didn't know that. So as a solution should then so these people are freelancers grouped together then to make proper companies what would be a solution then for those people or is it simply they just have to file and maybe increase their prices? because presumably they're having to pay Yeah. I mean, how getting net less income.

Yes, yeah. So the, the obvious and an easy answer, albeit the expensive one is to either, you know, accept an employment roll if if one's available, or as you say, to accept this, this change of calculation and, you know, either adjust the price or, or take the hit, right,

From a from a percentage point of view with the need to increase their price by 10, 15, 20%.

It's very hard to say, to be honest, it would depend on on how much we were talking about, but a mean, income tax is your personal allowance, and then 20%, up to around about 50,000 pounds of earnings 40%. Thereafter, until you get way above 100, whereas a dividend, dividend tax would be same person balance. First, first 2000 pounds of dividends, no tax. And then instead of your 20% basic rate is seven and a half

So a big difference, right? So

big difference. Yeah, there's obviously the if you've got the company entity in the way there that had does a corporation tax bill to factor in as well. But then you, you don't pay national insurance on dividends, because that's, that's the bit that a lot of people forget about when they talk about taxation is, you know, a basic rate taxpayer isn't really just paying 20%, they're paying more like 32 if you're in the National Insurance, which is tax by all but name. So so you know, it does still work out that it's, it's cheaper to do the I'll take a small salary and the balance of dividends from my my own company, rather than just a full full salary. So it it's still better to be in that status. It Yeah, it can get very complicated.

So people really should seek seek some advice. And then is there something that you think that entrepreneurs could take advantage of?

So quite a topical one, for me would be, would be considering a switch to an electric car.

Tell me about that sense,

From April, the rate for a pure electric car. So there's not hybrids for a second, they've got some different categories, but one that has no tailpipe emission at all, will be 0%. So there will be no effect, no benefit and kind of value for next year for an electric car. So that the company could buy that vehicle, it would get 100% capital allowances on on that vehicle. So in year one, it would be able to set the cost of buying that vehicle against its profit. So it would save corporation tax, you would it would then provide it for you any running costs, tires, servicing, etc. Would can be paid for by the company and claimed against corporation tax. And you as the individual would would pay nothing in tax.

And does it apply to sole traders. So an individual sole proprietor could buy an electric car and then use the offset that against their income.

So so they they it wouldn't work in quite the same way for them, they would still be able to claim the capital allowances against their against their business profits. Absolutely. If the what you look for there, because obviously the business is still in their name. So you know, they and the business are one entity as opposed to the business being a separate entity within the company. It would be a bit like the laptop example we had earlier on, it would be a case of looking at how much of the use of the car is his personal and how much is his business and the capital allowances and the running cost would be apportioned on that on that basis.

So Simon, if people want to find out more about you, and all the fantastic information you shared today in a very short amount of time, how can people find out about you

So they're more than welcome to to give us a ring or or drop me, drop me an email s. robinson. And that's @lesliewardanddrew.co.uk. And our telephone number is 01249660088

Simon, thank you very much for sharing so generously with the silverfox community and we look forward to hearing from you again.

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