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Monday 4 March 2024

Newsletter 186

 

MARCH 2024

In this month’s Enews we look at HMRC’s latest guidance on MTD for ITSA and the numbers from the self assessment deadline. We also update you on the tax authority’s latest scam warning and HMRC’s reversal of guidance on double cab pickups. With companies named and shamed for failing to pay the minimum wage and the new advisory fuel rates, there is a lot to update you on.

HMRC publishes guidance on MTD for ITSA for sole traders and landlords

HMRC has published guidance on the Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) requirements for sole traders and landlords.

MTD for ITSA will require businesses and landlords with qualifying income to maintain digital records and update HMRC each quarter via compatible software.

In the guidance, HMRC stated that MTD for ITSA will be introduced in two phases:

  • from April 2026 for those with qualifying income over £50,000
  • from April 2027 for those with qualifying income over £30,000.

HMRC said that MTD will exploit ‘the opportunities offered by digitalisation to make it easier for everyone to get tax right'.

It said that digitalising government tax services helps to reduce the risk of unintentional customer errors; saves taxpayers time when they submit their tax returns; supports wider productivity and less time managing paperwork; and enables HMRC to better tailor its services to its customers.

In its latest guidance, HMRC estimates an average transitional cost of £115 for businesses mandated to use MTD for ITSA. Businesses within the £30,000 to £50,000 threshold are estimated to incur an average cost of £350 while those above £50,000 may incur an average cost of £285.

Internet link: GOV.UK

 

Over one million miss self assessment deadline

Over one million self assessment taxpayers missed the filing deadline at midnight on 31 January, according to data published by HMRC.

A record 11.5 million taxpayers did file their 2022/23 self assessment tax returns by the deadline.

HMRC’s figures also showed that 1.1 million missed the deadline.

The final day saw 778,068 beat the clock to complete their return.

The peak hour for filing on 31 January was between 16:00 and 16:59 when 61,549 taxpayers submitted their returns. 32,958 filed between 23:00 and 23:59.

HMRC has urged anyone who missed the deadline to submit their tax return as soon as possible – late filing and late payment penalties apply for those who failed to submit by the deadline. It stated that there are many ways to pay, including online, using the HMRC app, by bank transfer or via a Time to Pay payment plan.

Myrtle Lloyd, Director General for Customer Services at HMRC, said:

'Thank you to the millions of self assessment customers and agents who met the deadline. Anyone who has yet to file and is concerned that they cannot pay in full may be able to spread the cost of what they owe with a payment plan. Search 'pay your self assessment' on GOV.UK to find out more.'

Internet link: HMRC press release

 

HMRC warns self assessment taxpayers as scam referrals rise

HMRC is warning people to be wary of bogus tax refund offers following the self assessment deadline on 31 January.

The tax authority says that fraudsters could set their sights on self assessment taxpayers, with more than 11.5 million submitting a tax return by last month's deadline.

HMRC warns that taxpayers who completed their tax return for the 2022/23 tax year by the 31 January deadline might be taken in by an email, phone call or text message offering a tax rebate.

These phishing scams are designed to use personal details for selling on to criminals, or to access people's bank accounts, says HMRC.

The warning comes after HMRC responded to 207,800 referrals from the public of suspicious contact in the past year to January. This is a 14% increase from the 181,873 reported for the previous 12 months. More than 79,000 of those referrals offered bogus tax rebates.

Kelly Paterson, HMRC's Chief Security Officer, said:

'With the deadline for tax returns behind us, criminals will now try to trick people with fake offers of tax rebates.

'Scammers will attempt to dupe people by email, phone or texts that mimic government messages to make them appear authentic.'

Internet link: HMRC press release

 

Double-cab pickups go back to being vans as guidance reversed

Just a week after HMRC released new guidance that classed double-cab pickups as cars rather than vans, the government reversed the decision.

On 19 February, HMRC confirmed that it’s reversing the updated guidance announced on 12 February, meaning that double-cab pickups will continue to be treated as goods vehicles rather than cars.

The government said it reversed its decision after listening to concerns from farmers and the motoring industry on the impact of the changes to the tax treatment.

The government has acknowledged that the 2020 court decision and resultant guidance update could have an impact on businesses and individuals in a way that is not consistent with the government’s wider aims to support businesses

Double-cab pickups will continue to be goods vehicles for tax purposes and the tax on benefits in kind will not increase when employers provide these vehicles to their employees.

Nigel Huddleston, Financial Secretary to the Treasury, said:

‘We will change the law at the next available Finance Bill in order to avoid tax outcomes that could inadvertently harm farmers, van drivers and the UK’s economy.’

Internet link: GOV.UK

 

Pensions income needed to retire rises

The amount needed for a single person to have a moderate retirement has risen to £31,300, according to the Pensions and Lifetime Savings Association (PLSA).

The rising cost of living and an increased importance on socialising following the pandemic had pushed up the income required by £8,000, the PLSA said.

The PLSA uses evidence from focus groups to make the estimates, and they are intended as a guide for those planning their retirement savings.

The calculations are pitched at three different levels - minimum, moderate and comfortable - and are developed and maintained independently by the Centre for Research in Social Policy at Loughborough University.

They estimated that a single person needed £14,400 a year for a minimum lifestyle, and £43,100 a year for a comfortable retirement.

Couples required a joint £22,400 at the minimum level, £43,100 at a moderate level and £59,000 at a comfortable level.

Nigel Peaple, Director for Policy and Advocacy at the PLSA, said:

'The cost of living has put enormous pressure on household finances over the last year and, as the research shows, this is no different for retirees.'

Internet link: PLSA website

 

More than 500 firms named and shamed for underpaying staff

The government has named and shamed over 500 UK employers for underpaying their employees.

524 businesses were named for failing to pay the minimum wage to 172,000 workers, with offending employers ordered to pay nearly £16 million plus an additional financial penalty.

The National Living Wage (NLW) is set to rise to £11.44 an hour from 1 April 2024.

Offending employers include major high street brands, the government said. It stated that anyone entitled to be paid the minimum wage should receive it, and that enforcement action will be taken against employers who do not pay their staff correctly.

Patricia Rice, Independent Commissioner at the Low Pay Commission (LPC), said:

'Since its introduction nearly 25 years ago, the National Minimum Wage (NMW) has played a vital role in protecting the earnings of the lowest-paid workers in the UK. At a time when the cost of living is rising, it is more important than ever that these workers receive the pay to which they are entitled.

'NMW underpayment not only cheats workers of their rightful due, it leaves compliant firms undercut by those who do not abide by the law. By naming the firms responsible for significant underpayment, we raise awareness of the nature and the scale of underpayment and encourage all employers to ensure that they fully comply with the law.'

Internet link: GOV.UK

 

Latest guidance for employers

HMRC has published the latest issue of the Employer Bulletin. The February issue has information on various topics, including:

  • 2024 National Insurance contributions rate changes
  • end of year reporting
  • basis period reform
  • simplifying the reporting of income tax and National Insurance contributions on benefits in kind
  • Help for Households
  • upcoming changes to Paternity Leave and Pay.

Please contact us for help with tax matters.

Internet link: Employer Bulletin

 

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 March 2024.

The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2024 are:

 

Engine sizePetrol
1400cc or less13p
1401cc - 2000cc15p
Over 2000cc24p

 

Engine sizeDiesel
1600cc or less12p
1601cc - 2000cc14p
Over 2000cc19p

 

Engine sizeLPG
1400cc or less11p
1401cc - 2000cc13p
Over 2000cc21p

HMRC guidance states that the rates only apply when you either:

  • reimburse employees for business travel in their company cars
  • require employees to repay the cost of fuel used for private travel.

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 9p per mile.

If you would like to discuss your company car policy, please contact us.

Internet link: GOV.UK AFR

 

Tuesday 6 February 2024

Newsletter 185

 

FEBRUARY 2024

In this month’s Enews, we look at the potential and pitfalls of tax cuts at the Spring Budget. We also update you on the tax implications of trading in cryptoassets and take a look at calls to raise the VAT threshold. With news on global trade and the advance of AI, there is a lot to update you on.

Government borrowing falls as Chancellor hints at tax cuts in Spring Budget

Government borrowing fell to £7.8 billion in December 2023 giving Chancellor Jeremy Hunt more scope to make the tax cuts he has hinted at in the Spring Budget.

The Office for National Statistics (ONS) data revealed that government borrowing for last December was around half of that borrowed in December 2022.

It also showed that interest payable on government debt fell to £4 billion in December 2023, down by £14.1 billion when compared to December 2022.

During the World Economic Forum's annual meeting in Davos, Switzerland, Mr Hunt hinted that he wants to cut taxes

The Chancellor said:

'In terms of the direction of travel we look around the world and we note that the economies growing faster than us in North America and Asia tend to have lower taxes, and I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS.

'That's the direction of travel we would like to go in but it is too early to say what we are going to do.'

The Chancellor will present the Spring Budget on Wednesday 6 March 2024.

Internet link: ONS website GOV.UK

Tax cuts may have to be scrapped due to 'economic bind', warns IFS

Tax cut promises may need to be scrapped as a result of the UK being in an 'unfortunate economic and fiscal bind', the Institute for Fiscal Studies (IFS) has warned.

The next government is likely to face some of the most difficult economic and fiscal choices the UK has faced outside of pandemics, conflicts and financial crises, according to an IFS report. 

The IFS said that a combination of high debt interest payments and low expected growth is forecast to make it more difficult to reduce debt as a fraction of national income than in any parliament since at least the 1950s.

The think tank also warned that whilst tax rises and cuts for public services are built into current government plans, public services are 'showing signs of strain' and are 'performing less well than they were in 2010'.

IFS Director Paul Johnson said:

‘Now more than ever, as a country, we face some big decisions and trade-offs over what we want the state to do and how we’re going to pay for it. Those looking to form the next government should be honest about these trade-offs.

‘If they are promising tax cuts, let’s hear where the spending cuts will fall. If they are going to raise, or even protect, spending, they should tell us where taxes will rise. Or parties might think that further increases in government debt are justified: in which case they should make the argument for why debt should be rising.

‘If to govern is to choose, then to campaign should be to present clear choices and trade-offs to the electorate. If the parties don’t do that clearly and honestly over the next year, we at IFS will do what we can to plug that gap.’

Internet links: IFS website

HMRC sends warning to cryptoasset users

As the use of cryptoassets continues to grow HMRC is warning people to check if they need to complete a self assessment tax return for the 2022/23 tax year to avoid potential penalties.

Anyone with cryptoassets should declare any income or gains above the tax-free allowance on a tax return.

Tax may be due when a person:

  • receives cryptoassets from employment, if they are held as part of a trade, or are involved in crypto-related activities that generate an income
  • sells or exchanges cryptoassets, including:

        o    selling cryptoassets for money

O    exchanging one type of cryptoasset for another

O   using cryptoassets to make purchases

O   gifting cryptoassets to another person

O   donating cryptoassets to charity.

Myrtle Lloyd, HMRC's Director General for Customer Services, said:

'People sometimes forget that information about crypto-related income and gains need to be included in their tax return. Some people affected may not have had to do a tax return before, so it is important people check.'

Internet link: HMRC press release

Raise VAT threshold to £100,000, says FSB

The government should raise the turnover threshold for VAT from £85,000 to £100,000, according to the Federation of Small Businesses (FSB).

The business group said that this would give firms stepping into the VAT-paying ring crucial breathing space. It would also be an incentive to grow their turnover without fear of having to charge customers an extra 20% overnight, the FSB added.

The FSB also suggested bringing in a smoothing mechanism to ease the transition for small firms, owner-managed companies and some of the self-employed who go just over the threshold.

At the moment, thousands of small firms keep their turnover just below the £85,000 threshold, according to the Office for Budget Responsibility (OBR).

The OBR said that hundreds of millions of pounds of potential economic activity could be lost due to this 'bunching' just below the threshold.

Tina McKenzie, FSB's Policy Chair, said:

'VAT compliance flattens small firms by stifling their growth and emptying their coffers. It's crying out for a modern makeover to match today's economic landscape.

‘We can’t let it squash the ambitions of small businesses, strivers, and budding entrepreneurs.

'The flaws in our current system are glaringly obvious. We are at a breaking point – a drastic overhaul of VAT is needed.

'Raising the threshold to reflect inflation, introducing a buffer to soften the blow for those just over the limit and demystifying the rules to save small business owners from a VAT-induced headache could unlock hundreds of millions in extra economic activity.'

Internet link: FSB website

Clarity on new border checks is vital, says BCC

The government must clarify plans around new customs processes as firms remain in the dark about crucial aspects of their operation, says the British Chambers of Commerce (BCC).

The first phase of the UK’s Border Target Operating Model began on 31 January, with imports of plant and animal products now requiring export health certificates.

It is the first time for decades that EU firms will have to provide this documentation for goods they are sending to Great Britain. The BCC says it is unclear how prepared they are for the change.

The business group says there is more concern over a lack of clarity around physical checks of consignments, due to start in April.

Government figures show the UK imports just under 30% of all the food it consumes from the EU.

William Bain, Head of Trade Policy at the BCC, said:

‘The government is finally implementing major changes to Great Britain’s inbound border controls and customs checks stemming from Brexit, but there are still unanswered questions around its plans.

‘Especially, as businesses are already facing a tough start to the year, with container shipping prices quadrupling as the Red Sea disruption continues.

“The initial changes … should not cause many noticeable hold ups for inbound goods, although EU firms will be facing new charges to get export health certificates and will need to find vets to sign them.

‘The bigger issue is physical checks on a proportion of these imports, which are due to start in April.’

Internet link: BCC website 

Artificial Intelligence will affect jobs and worsen inequality, says IMF

Artificial intelligence (AI) will affect almost 40% of all jobs around the world and deepen inequality, the International Monetary Fund (IMF) has warned.

In a new analysis, IMF researchers examined the potential impact of AI on the global labour market. It found that, in advanced economies, around 60% of jobs may be impacted by AI. In contrast, in emerging markets, exposure to AI is expected to affect 40% of jobs.

The IMF also suggested that AI could affect income and wealth inequality within countries. Workers able to make effective use of AI may see an increase in their wages and productivity, whilst those who cannot risk falling behind.

The IMF says policymakers should review the rise of AI in the workplace in order to prevent it from stoking social tensions. It has called for a careful balance of policies to tap into AI's potential.

Kristalina Georgieva, Managing Director at the IMF, said:

‘In most scenarios, AI will likely worsen overall inequality, a troubling trend that policymakers must proactively address to prevent the technology from further stoking social tensions.

'It is crucial for countries to establish comprehensive social safety nets and offer retaining programmes for vulnerable workers. In doing so, we can make the AI transition more inclusive, protecting livelihoods and curbing inequality.'

Internet links: IMF website

Over 50s bucking decline in freelance numbers

Tens of thousands more over 50s are now running their own businesses despite an overall decline in self-employment since 2020, according to the Association of Independent Professionals and the Self-Employed (IPSE).

IPSE's research found that the number of self-employed business owners aged 50 and over increased to 1.1 million in 2023 – 89,000 more than in 2020.

In the same period the total solo self-employed population fell by 154,000.

Additionally, of those aged 50 and over in self-employment, as many as one in six launched their businesses within the past three years.

IPSE's Director of Policy, Andy Chamberlain, said:

'It's clear that self-employment's offer of independence and autonomy in work are particularly attractive to experienced professionals, especially if they have lost an employed role or have become disillusioned with the nine-to-five.

'Many harbour dreams of starting their own business, whether it's to pursue a lifelong dream, increase their income or find a better work-life balance.

'But the over 50s, now in the prime of their careers and with decades of experience under their belt, likely have even more confidence in their ability to make a success of it.'

Internet link: IPSE website

Only a third of UK adults confident with self assessment

Just 35% of UK adults are confident they could complete the self assessment tax return form correctly, according to research by Standard Life.

Three in ten UK adults admit they do not feel confident they could complete the form correctly. A further 18% said they felt neither confident nor unconfident while 17% were not sure.

The research highlighted a widespread lack of awareness around self assessment timings, with more than half not knowing when the deadline for filing is.

In addition, among those who are currently, or soon will be, in the higher income tax bracket, 41% are unaware that they might need to fill in a self assessment tax return to claim all their pension tax relief.

Internet link: Standard Life website

Monday 8 January 2024

Newsletter 184

 

January 2024

In this month’s Enews, we look at the upcoming Spring Budget and the latest on the UK economy. We also update you on the latest on off payroll working compliance and the self assessment deadline. With news on export red tape and protection from energy costs for business, there is a lot to update you on.

 

Spring Budget 2024 date confirmed for 6 March

Chancellor Jeremy Hunt will deliver the 2024 Spring Budget on 6 March, the government has confirmed.

The Budget will include the government's tax and spending plans as well as new growth and borrowing forecasts.

It could be the last chance for the government to announce significant changes to tax policy before the general election.

The Chancellor used his last big fiscal speech, the Autumn Statement, to extend tax breaks for business and cut National Insurance contributions (NICs).

The Office for Budget Responsibility has been formally commissioned to publish economic forecasts on 6 March.

Internet link: GOV.UK

 

UK at risk of recession after economy shrinks

The UK is at risk of recession after revised figures showed the economy shrank between July and September, according to data from the Office for National Statistics (ONS).

Gross domestic product, which measures the health of the economy, contracted by 0.1% after previous estimates suggested growth has been flat.

Meanwhile, there was zero growth between April and June, after it was first calculated to have risen by 0.2%.

A recession is typically defined as when the economy shrinks for two three-month periods - or quarters - in a row.

Meanwhile, the UK's inflation rate fell to 3.9% in the year to November, the ONS confirmed.

The fall was bigger than the ONS had anticipated with lower petrol prices contributing to the reduction in the inflation rate.

Price increases for bread and cakes are also easing, according to the ONS.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:

'Today's data showing the CPI rate grew at 3.9% in November, a greater slowdown than expected, is welcome confirmation that the headline rate of inflation is continuing to ease. However, prices are still rising from a very high base following multiple economic shocks and core CPI remains stubborn at 5.1%.

'Persistent inflation and high interest rates are likely to remain a barrier to business growth for some time to come. Businesses are desperate for a clear, long-term plan for growth which sets out a vision for infrastructure, skills and green innovation.'

The fall in inflation followed the Bank of England’s decision to hold interest rates at 5.25%, marking the third time in a row that the Bank has left the rate unchanged.

Bharier said:

'While a cut in the interest rate could have provided some relief for firms ahead of Christmas, [the] decision to hold at 5.25% was expected and allays fears of further rises.

'UK businesses have been faced with the twin shock of an inflation crisis and increased borrowing costs.

'The BCC's latest Economic Forecast expects only a 0.25% point cut in the interest rate for the whole of 2024, although businesses need to be prepared for any unexpected changes given the uncertain policy landscape.'

Internet links: ONS website ONS website BCC website Bank of England website BCC website

 

HMRC updates off payroll compliance guidance

HMRC recently updated its guidance on off payroll working compliance for employers.

The new guidance sets out 'practical steps' for organisations to follow. It affects employers who are responsible for operating off payroll working rules and who engage workers who provide their services through their own intermediary.

The guidance states that organisations should apply the new guidelines to 'reflect the complexity and scale of their own off payroll working engagements'. It said that the guidelines should be used to 'help make informed decisions based on individual circumstances'.

The guidance also outlines a change in policy that could affect organisations with an open compliance check as part of the reformed IR35 rules. This was initially announced at the Autumn Statement on 22 November last year.

From 6 April 2024, HMRC will take into account the taxes a worker or their intermediary have already paid against the amount the deemed employer owes. This change applies to income tax and National Insurance contributions (NICs) assessed by HMRC on or after 6 April 2024 from off-payroll working errors in payments since 6 April 2017.

Internet link: GOV.UK

 

Countdown for 5.7 million to file their 2022/23 self assessment tax return

With less than a month to go to the self assessment deadline 5.7 million taxpayers have been urged to file their 2022/23 tax returns by HMRC.

HMRC data shows almost 6.5 million customers have already beaten the self assessment clock by filing their tax return.

This includes 49,317 taxpayers who used the New Year holiday to get a head start on their tax obligations:

  • 25,593 taxpayers filed their tax return on New Years Eve, with the most popular time being between 12:00 and 12:59, when 2,677 customers filed
  • 127 taxpayers saw in the New Year by filing their tax return between 00:00 and 00:59 on 1 January
  • 23,724 taxpayers filed on New Year’s Day, with the most filing between 15:00 and 15:59.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

‘The clock is ticking for those customers yet to file their tax return. Don’t put it off, kick start the new year by sorting your self assessment.’

Internet link: HMRC press release

 

Red tape, rising costs and regulation 'holding back exports'

Red tape, rising costs and increasing regulation are holding back exports, a survey of UK businesses carried out by the British Chambers of Commerce (BCC) has found.

Current customs checks and declarations present 'barriers to exporting', according to 49% of firms polled. An additional 40% of businesses said taxes and duties are other areas of concern.

Regulation, such as product certification, causes problems for 38% of small firms, the BCC found.

William Bain, Head of Trade Policy at the BCC, said:

'Our findings highlight the key priorities for business that could make a difference when it comes to UK trade negotiations and other related policy developments.

'What they want to see are faster customs processes, removal of non-tariff regulatory barriers, tariff reductions where these could make a difference, fewer hoops to jump through and greater certainty.

'With the UK government involved in trade negotiations with so many countries right now, including India, South Korea, Canada and Mexico, these findings are a timely reminder of the important issues.'

Internet link: BCC website

 

Greater protection for businesses under new Ofgem proposals

Proposals to provide greater protection to UK small businesses on energy bills have been launched by the energy regulator Ofgem.

Ofgem's proposals will help to ensure businesses receive the highest standards of service and more clarity on the costs being paid to third party brokers.

Ofgem said that it has listened to business groups, who warned that firms require more support with energy issues and has developed the proposals to 'ensure better deals, better protection and more clarity for businesses'.

The energy regulator has opened a consultation on the implementation of a new set of rules for suppliers to make sure they improve customer service and clearly outline costs for customers.

Tina McKenzie, Policy Chair at the Federation of Small Businesses, said:

'We welcome the launch of the consultation on Ofgem's proposals to provide greater protection for businesses. It shows the energy regulator has listened to our calls to take action against poor customer services and narrow the treatment gap between small businesses and domestic customers.'

Internet links: Ofgem website FSB website

 

Businesses say hybrid working is here to stay

Less than 30% of firms expect their workforce to fully return to the workplace over the next five years, according to research by the British Chambers of Commerce (BCC).

The survey of over 1,000 businesses found just 27% of respondents predict their employees will be fully physically present in the workplace over the next five years. In addition, 47% anticipate their staff will be mostly in-person, 16% expect mostly remote and 8% fully remote.

The research found a clear divide between different sectors. Only 17% of B2B services organisations expect fully in-person working, while the figure for manufacturers is 38% and B2C services 37%.

Jane Gratton, Deputy Director of Public Policy at the BCC, said:

'Our data shows that hybrid working is now part of the fabric of the modern workplace. This flexibility is valued by employers and their teams. Less than 30% of firms expect staff to be working fully in-person over the next five years.

'Flexible working makes good business sense. In a tight labour market where employers are competing for skilled workers, hybrid working and flexible working more generally have become important parts of staff benefit packages.'

Internet link: BCC website

 

Capital Gains on UK Residential Property Sales

You must report and pay any Capital Gains Tax due on UK residential property within 60 days of selling the property if the completion date was on or after 27 October 2021.

The disposal has to be reported by UK resident individuals, partners in partnerships, trustees or personal representatives on a HMRC Residential Property Capital Gains disposal return

For UK residents, a return will not be required if there is no CGT liability. A CGT return will not be required if there is a loss on disposal or if the gain is covered by the CGT annual exemption (£6,000 for 2023/24 reducing to £3,000 from 2024/25) or if current year losses arising prior to the date of exchange cover the gain.

All UK residential property that is not occupied as a main residence will fall within the reporting requirements. Therefore, if you own an interest in a property which you do not occupy; for example if it is let out or is held as an investment property, you will most likely need to complete a capital gains tax return.

There are substantial penalties for missing the return filing deadline or for failing to pay the Capital Gains Tax by the 60 day deadline

Individuals who need to complete self assessment returns also need to enter the disposal onto their self assessment return.

Internet link: GOV.UK

 

Latest guidance for employers

HMRC has published the latest issue of the Employer Bulletin. The December issue has information on various topics, including:

 

•         National Minimum Wage, Geographical Compliance Approach – support for employers
•         payrolling expenses and benefits for the 2024/25 tax year
•         off payroll working rules (IR35) – opportunity to pause settlement
•         help to check if work qualifies for Research and Development tax relief
•         make sure you stay on top of your workplace pension duties
•         Childcare Choices – helping families to juggle work and life.

Please contact us for help with tax matters.

Internet link: Employer Bulletin

 

Tuesday 5 December 2023

NEWSLETTER 183

 

DECEMBER 2023

In this month’s Enews we look at what the Chancellor’s Autumn Statement meant for businesses, employees and the self-employed. We also update you on the criticism of HMRC’s Making Tax Digital programme and a crackdown on crypto tax evasion. With the latest data on the UK economy and the new advisory fuel rates, there is a lot to update you on.

Chancellor makes Full Expensing permanent in Autumn Statement

Chancellor Jeremy Hunt used his Autumn Statement to make Full Expensing permanent for those businesses investing in IT equipment, plant and machinery.
The Chancellor said he was aiming to stimulate economic growth and highlighted 110 measures for businesses in the Statement.
Full Expensing was first announced in the March Budget and was scheduled to last for three years. The rules allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is unused and not second-hand.
Mr Hunt has now made it permanent and said it represents the 'largest business tax cut in modern British history', worth £11 billion per annum.
The Chancellor also extended the tax reliefs and incentives for Freeports and the Investment Zones programme from five to ten years. In addition, he announced three advanced manufacturing Investment Zones, which will be established in Greater Manchester, the East Midlands and the West Midlands.
There is also a business rates support package worth £4.3 billion over the next five years to help high streets and protect small businesses. This includes a rollover of the 75% retail, hospitality and leisure relief.
Rain Newton-Smith, Chief Executive of the Confederation of British Industry (CBI), said:
'Making full capital expensing a permanent feature of the tax system can be transformational for accelerating growth and improving living standards in the long-term. Helping firms to unleash pent-up investment is critical to getting momentum into the economy.'
Internet link: GOV.UK CBI website

National Insurance changes 'ease burden on strivers'

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to 'ease the burden on strivers up and down the country', according to the Federation of Small Businesses (FSB).
Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut.
For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.
Tina McKenzie, Policy Chair at the FSB, said:
'The Chancellor's decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.
'The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.'
Internet link: GOV.UK FSB website

Autumn Statement cuts won't stop tax revenues rising to highest ever levels

The tax cuts announced in the 2023 Autumn Statement won't prevent tax revenues rising to their highest ever levels, the Institute for Fiscal Studies (IFS) has warned.
The IFS stated that announcing tax cuts in response to 'highly uncertain' changes in assumptions about the UK's medium-term economic prospects 'does not feel like a recipe for good management of the public finances'.
It also acknowledged that the Chancellor's cuts to the rates of National Insurance contributions (NICs) put money back into the pockets of 27 million workers. However, it said the bigger picture means that the changes give back less than £1 of every £4 that has been taken away from households through changes to NICs and income tax announced since March 2021.
However, the business group did welcome the Chancellor's decision to make Full Expensing permanent but noted that the move indicates that the Autumn Statement was an event focused on medium-term growth.
Paul Johnson, Director of the IFS, said:
'The growth outlook has weakened. Inflation is expected to stay higher for longer. Higher inflation pushes up tax receipts by more than it pushes up spending on debt interest or social security benefits.
'His immediate cut to national insurance will put more money into workers' pockets when it comes in but won't be enough to prevent this from being the biggest tax-raising parliament in modern times. These cuts will also not stop tax revenues rising to their highest ever levels.'
Internet link: IFS website

HMRC is ‘Making Tax Difficult’ with MTD programme

HMRC is ‘Making Tax Difficult’ for taxpayers as Making Tax Digital (MTD) adds to the burdens they face, according to a report by the Public Accounts Committee (PAC).
The report says that HMRC has lost sight of the need to put taxpayers at the heart of changes to the tax system.
The PAC says that HMRC is increasing the burdens imposed on some taxpayers through the MTD initiative. It said that in seeking further investment in MTD, HMRC has not been transparent enough about the 'substantial costs' MTD will impose on many taxpayers.
According to the Committee, the design of MTD fails to take into sufficient account the realities facing business taxpayers and agents.
It said that while MTD will 'substantially benefit' HMRC by improving its systems, taxpayers are asked to spend more and do more in order to be compliant.
The report revealed that HMRC excluded more than £2 billion in upfront transitional MTD costs for taxpayers from its 2022 and 2023 business cases for the scheme. It also found that 'widespread and repeated' failures in HMRC's planning, design and delivery of MTD have led to increased costs and delays to the initiative.
Meg Hillier, Chair of the PAC, said:
'When reporting on proposals for digitalising the tax system, our committee should not have to be recommending that HMRC start with what taxpayers need – in an ideal world, one would hope this would simply go without saying. But seven years and £640 million into the MTD programme, we are concerned HMRC is also succeeding in making tax difficult.'
Internet link: Parliament website

Government agrees to crack down on crypto tax evasion

The UK government has agreed an 'historic' commitment with 48 countries to combat criminals using crypto assets to evade tax.
The landmark agreement follows on from the UK's tax deal made in 2021 to clamp down on corporate tax avoidance and 'ensure the right tax is paid in the right place'.
The new Crypto-Asset Reporting Framework is the Organisation for Economic Co-operation and Development's (OECD's) flagship tax transparency standard that will require crypto platforms to begin sharing taxpayer information with tax authorities.
The new framework will allow international authorities to exchange information in order to enforce tax compliance and builds on the existing Common Reporting Standard system authorities utilise to share information.
Victoria Atkins, Financial Secretary to the Treasury, said:
'I am proud that the UK is once again demonstrating leadership on tackling global tax evasion, helping to secure the revenue that's essential for the public services we all use.
'We are sending out a strong message that we will not allow criminals to use crypto to avoid paying their fair share.'
Internet link: GOV.UK

Real Living Wage to increase by 10%

The Real Living Wage is set to increase by 10%, the Living Wage Foundation has announced.
The rate will rise to £12 an hour across the UK and £13.15 an hour in London. The increase will affect over 460,000 people working for 14,000 Real Living Wage employers across the UK.
Unlike the National Living Wage (NLW), the Real Living Wage is independently calculated based on rising living costs and applies to everyone over 18.
Katherine Chapman, Living Wage Foundation Director, said:
'As inflation eases, we cannot forget that low paid workers remain at the sharp end of the cost-of-living crisis. Low paid workers continue to struggle with stubbornly high prices because they spend a larger share of their budget on food and energy.
'During these tough economic times, it is heartening that record numbers of employers are signing up to join the Living Wage movement, protecting everyone who works for them - including cleaners - from rising prices and seeing the benefits of a more motivated and engaged workforce.'

Rate of inflation falls as interest rates held

UK inflation fell to a two-year low while the base rate of interest was unchanged by the Bank of England for the second month in a row.
The Office for National Statistics (ONS) found that the UK's rate of Consumer Price Index inflation fell to 4.6% from 6.7% in September.
The ONS found that a small reduction in the energy price cap helped to bring the inflation rate down. According to the data, electricity costs are down 15.6% compared to a year earlier, whilst gas costs are down by 31%.
Meanwhile, the Monetary Policy Committee (MPC) held the base interest rate at 5.25%.
The latest decision marks the second time in a row that interest rates have been held at 5.25% – their highest level in 15 years.
David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:
'The decision to again hold the interest rate at 5.25% will allay some concerns of the businesses we speak to that are unable to stomach further rises.
'Our research has shown that interest rates have grown as a key issue among companies. This is especially true for smaller firms and those in consumer facing sectors who have seen rising borrowing costs and decreased customer demand.’
Internet link: ONS website Bank of England website BCC website

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 December 2023.
The guidance states: ‘you can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.
The advisory fuel rates for journeys undertaken on or after 1 December 2023 are:
 

Engine size

Petrol

1400cc or less

14p

1401cc - 2000cc

16p

Over 2000cc

26p

 

Engine size

LPG

1400cc or less

10p

1401cc - 2000cc

12p

Over 2000cc

18p

 

Engine size

Diesel

1600cc or less

13p

1601cc - 2000cc

15p

Over 2000cc

20p

HMRC guidance states that the rates only apply when you either:
         reimburse employees for business travel in their company cars
require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.
The Advisory Electricity Rate for fully electric cars is 9p per mile. Electricity is not a fuel for car fuel benefit purposes.
If you would like to discuss your company car policy, please contact us.
Internet link: GOV.UK AFR

Tuesday 28 November 2023

Christmas Pay Dates

 




Reporting PAYE information in real time when payments are made early at Christmas

In 2019 HMRC introduced a permanent easement on reporting PAYE information in real time. They are aware some employers pay their employees earlier than usual over the Christmas period. This can be for a number of reasons, for example, during the Christmas period the business may close, meaning workers need to be paid earlier than normal.
  
If you do pay early over the Christmas period, please report your normal or contractual payday as the payment date on your Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.
 
For example, if you pay on Friday 15‌‌‌ December‌‌‌ 2023 but the normal or contractual payment date is Friday 29‌‌‌ December‌‌‌ 2023, you will need to report the payment date on the FPS as 29‌‌‌ December‌‌‌ 2023 and ensure the submission is sent on or before 29‌‌‌ December‌‌‌ 2023.
 
This will help to protect any of your employees who are eligible for Universal Credit. Reporting the payday as the date payment is made may affect current and future entitlements to Universal Credit.

The overriding PAYE reporting obligation for employers is unaffected by this exception and remains that you must report payments, on or before the date the employee is paid.


Monday 16 October 2023

Newsletter 181

 

October 2023

In this month’s Enews we look at the upcoming Autumn Statement and the latest data on the UK economy. We also update you on changes to the National Minimum Wage and SME finance. With news on Covid grant fraud and Child Trust Funds, there is a lot to update you on.

Firms looking to Autumn Statement for help with rising operating costs

Small firms will look to the upcoming Autumn Statement for signs that the government understands their operating concerns, says the Federation of Small Businesses (FSB).

The business group said that UK businesses need urgent action to help stem the issue of late payment. It says that large corporates use late payments to offset interest rate rises by 'demanding, in practice, free credit from their supply chains'.

The FSB is also urging Chancellor Jeremy Hunt to overhaul the business rates system and has called for an extension of the 75% business rates discount for small and medium-sized enterprises (SMEs) in the retail, hospitality and leisure sectors, as this discount is set to expire in April 2024. It said that these sectors have been 'acutely affected' by falling confidence levels and economic headwinds.

Martin McTague, National Chair of the FSB, said that the recent decision by the Bank of England not to raise interest rates will 'give firms breathing space'.

He continued:

'[The] unexpectedly large drop in GDP is a sign that the painful interest rate rises we have endured are acting as predicted, and we urge the Bank to allow time for the lag between rate hikes and the full effect on spending to be fully observed, so that there is less risk of overshooting and causing unnecessary economic damage.

‘Small firms need some respite, and now will look to the Autumn Statement for signs from the government that it’s listening and understands their concerns. As a nation, we urgently need action to stem late payments, which are used by large corporates to offset interest rate rises by demanding, in practice, free credit from their supply chains.’

Chancellor Jeremy Hunt will deliver the 2023 Autumn Statement on 22 November.

Internet link: FSB website GOV.UK

Interest rates held as inflation falls

The UK’s base rate of interest was held at 5.25% in September as the rate of inflation fell to 6.7% in the year to August 2023.

The fall in the rate of inflation surprised economists, who expected it to rise. The Consumer Prices Index (CPI) fell from 6.8% in July to 6.7% in August.

Slowing food price increases helped drive the fall, the Office for National Statistics (ONS) found, particularly prices for eggs, milk and cheese.

Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said:

‘Inflation fell again in August, defying expectations of a slight uptick. We expect inflation to continue falling over the rest of this year, but the recent uptick in global oil and domestic fuel prices means that the path back down may now be bumpier.’

Following the fall in the rate of inflation, interest rates were left unchanged at 5.25% by the Bank of England's Monetary Policy Committee (MPC).

The MPC had previously raised rates 14 times in a row to tame inflation, leading to increases in mortgage payments but also higher savings rates.

Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said:

‘Businesses will be giving a cautious welcome to today’s decision by the Bank of England to hold the base rate at 5.25%. Constant hikes in the cost-of-borrowing have had a hugely detrimental impact on the firms we represent.

‘Companies need reassurance that decisions on interest rates are not knee-jerk reactions to the most recent inflation data.

‘We need clear direction from decision makers, creating a roadmap for business that really boosts confidence and investment.’

Internet link: Bank of England website ONS website CBI website BCC website

National Living Wage to rise from April 2024

The National Living Wage (NLW) will rise to at least £11 an hour from April 2024, Chancellor Jeremy Hunt has confirmed.

The Chancellor confirmed the increase in a speech to the Conservative Party conference and said the rise will benefit two million low paid workers. People aged 23 and over are eligible for the NLW.

The Treasury stated that as a result of successive increases, a full-time worker on the NLW will be more than £9,000 better off than they would have been in 2010.

Katherine Chapman, Director of the independent Living Wage Foundation, said:

'A rise in the statutory NLW from next April is welcome news for low paid workers, but may fall short of the real Living Wage next year, the only rate that is independently calculated based on the cost of living.

'Our research ... showed that 60% of people earning below the real Living Wage had used a foodbank in the past year and nearly 40% were regularly skipping meals.'

Internet links: GOV.UK Living Wage Foundation

SMEs 'struggling to access finance'

Small and medium-sized enterprises (SMEs) are struggling to access finance and working capital, according to a report published by the Association of Chartered Certified Accountants (ACCA).

The ACCA's data showed that small firms are struggling to access finance for a range of reasons, including rising interest rates. 57% of firms reported that borrowing in order to manage cashflow has proven more difficult over the last quarter when compared to the previous 12 months.

47% stated that supplier credit is now harder to access, and 27% said that accessing support from HMRC's Time to Pay initiative is harder.

Small firms also found late payment to be a 'persistent problem' in the UK, creating barriers for cashflow throughout supply chains and leading to adverse consequences for some businesses.

Late payments by large businesses have the most detrimental impact on small firms, the research revealed: late payments from large firms generate a 'domino effect' throughout supply chains.

Glenn Collins, Head of Technical and Strategic Engagement at the ACCA, said:

'More effort is needed in encouraging banks to reach out to the SME community and to provide more suitable financial products.

'Equity finance offers an alternative route to raising funds. And government needs joined up thinking to make sure it is not accidentally restricting the flow of finance to this crucial sector.'

Internet link: ACCA website

Government slow to recover over £1 billion Covid grant fraud

The government has been slow to recover losses of £1.1 billion from fraud and error in Covid grant schemes, according to MPs in the Public Accounts Committee (PAC).

The latest PAC report found that after spending £22.6 billion on business support schemes during the pandemic, the government had only recovered £20.9 million of the estimated £1.1 billion in fraud and error losses by May 2023.

The Department for Business and Trade (DBT) said it would take until the end of 2025 to recover the losses from fraudulent claims and estimated that it would be ‘very expensive’ to check the veracity of every claim.

The Covid grant scheme ran for two years from March 2020 to March 2022, and local authorities handled applications from businesses.

PAC Chair, Dame Meg Hillier MP, said:

'The government must not wait for the conclusions of the Covid inquiry to learn the lessons laid out in this report. Never again should a national emergency find policy being written as we go along, without firm planning and good local data, with local authorities not properly funded to work in partnership on the support required.

'The next emergency must find the government rigorously prepared with an understanding of the optimal means to support businesses through difficult times.

'The lack of planning from government also meant that a door was left wide open in these schemes to fraudsters who took shameful financial advantage of schemes that were designed with national solidarity in mind.'

Internet link: Parliament website

HMRC urges nearly 430,000 young people to claim Child Trust Fund cash

HMRC has urged almost 430,000 young people with an unclaimed Child Trust Fund (CTF) to claim their cash.

CTFs are tax-free savings accounts that were created for every child born between 1 September 2002 and 2 January 2011. The government contributed an initial deposit of at least £250. Family and friends can contribute up to a maximum of £9,000 in any one year into an existing CTF account.

CTF accounts began to mature in September 2020 when the first children turned 18.

HMRC revealed that there are currently 5.3 million open CTF accounts, and that more than 500,000 matured CTF accounts have been claimed or transferred into an ISA since September 2020.

Angela MacDonald, Deputy Chief Executive at HMRC, said:

'Many 18–21-year-olds are starting out in first jobs or apprenticeships, starting university or moving into their first home and their CTF is a pot of money with their name on.

'I would encourage young people to use the online tool to track it down or, for parents of teenagers, to speak to them to ensure they're aware of their CTF. It could make a real difference to their future plans.'

Internet link: HMRC website

Less than 1% of small firms receiving net zero help

Less than 1% of small firms have benefitted from key local support schemes across England on net zero, according to research from the Federation of Small Businesses (FSB) and Warwick Business School.

The research has raised concerns over the reach and accessibility of the programmes as the UK's 2050 target edges closer.

Small businesses also face future challenges due to the changing funding landscape for net zero business support in England. While local authorities emerge as the most common contributor, the European Regional Development Fund is no longer available due to Brexit.

The FSB makes several recommendations, including a national 'Help to Green' scheme, consisting of an online hub of practical information on reducing energy usage and carbon emissions.

Richard Askew, FSB England Policy Unit Chair, said:

'Small businesses play a critical role in reaching net zero by 2050 and it's encouraging to see that many firms are taking steps to mitigate their impact on the environment – from installing basic measures such as LED lighting to becoming fully self-sufficient microgenerators.

'But reaching net zero is a complex process and there are still many small businesses that lack the money, resources and time to progress their decarbonising efforts.'

Internet link: FSB website

Number of cash transactions rises for first time in a decade

The number of payments made with cash rose for the first time in a decade in 2022, according to data published by UK Finance.

According to UK Finance, the total number of payments made last year increased to 45.7 billion from 40.4 billion in 2021. 50% of all payments in the UK were made using debit cards, and the number of cash payments rose to 6.4 billion.

The data also showed that almost a third of all adults in the UK are registered for at least one mobile payment service and 86% of individuals use remote banking.

Businesses' payments accounted for 13% of all payments made in the UK during 2022, and consumers made 87% of all payments.

Adrian Buckle, Head of Research at UK Finance, said:

'During 2022 we saw increased use of contactless, online banking and mobile payments, although cost-of-living challenges meant that some people preferred to use cash to help with their budgeting.

'Changes to shopping and travel habits, particularly related to the rise of hybrid working, led to a big jump in the volume of transactions made. Debit cards remain the most popular way of paying, with them now accounting for half of all payments made in the UK.'

Internet link: UK Finance website