Newsletter 190

 

July 2024

In this month’s Enews, we look at what businesses want following the General Election and the latest on the UK economy. We also examine the tax gap and take a look at HMRC’s lack of enforcement on the enablers of offshore tax evasion. With warnings on the EU trade deal and the UK’s business investment, there is a lot to update you on.

• Business ready to work in partnership with Labour government
• Tax gap at record high
• HMRC has not fined a single enabler of offshore tax evasion
• UK economy grew by more than previously estimated during first quarter
• Average earnings just £16 a week higher than 2010
• EU trade deal not working for UK business, warns BCC
• UK's investment rates worse than every other G7 country
• Savers dangerously underestimating minimum cost of retirement

 

Business ready to work in partnership with Labour government

The UK’s business groups have pledged to work in partnership with the new Labour government to revitalise the nation’s economy.

Labour leader Sir Keir Starmer is the new Prime Minister after leading the party to a decisive win in the General Election.

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

 ‘Congratulations to the Labour Party on their victory after a long and hard-fought campaign.

‘The public have delivered them a clear and decisive parliamentary majority – hopefully they will use this mandate to provide the stability and certainty businesses crave.

‘How we revitalise our economy was hotly debated throughout the past six weeks, and it is encouraging to see they have many policies which clearly align with our recommendations.

‘But after a gruelling election the really hard work starts now. We need to see action from day one on pulling together a coherent industrial strategy for the long-term, which places a strong emphasis on harnessing green innovation.

‘Closing the skills gap, growing exports, boosting productivity and harnessing the power of AI won’t happen overnight.’

The Confederation of British Industry (CBI) also congratulated Starmer and Labour on their victory.

Rain Newton-Smith, CBI Chief Executive, said:

‘Delivering sustainable growth should be the defining mission for the new government. Business stands ready to bring its innovation, ideas, and investment to make that shared mission a reality.

‘Building a partnership for prosperity between government and business holds the key to unlocking a revitalised pitch to global investors.

‘By working with business, the new government can deploy the capability and capacity of industry to deliver the connected transitions across net zero, the digital economy, and the future of work needed to put the economy on a pathway to sustainable growth.’

Internet link: BCC website CBI website

Tax gap at record high

The UK's tax gap estimate rose to a record to £39.8 billion in 2022/23 as small businesses accounted for almost two thirds of unpaid tax, according to HMRC's data.

The tax gap was 4.8%, which is the difference between the amount of tax that should be paid to HMRC and what is actually paid.

The tax gap estimate for corporation tax for small businesses rose to £10.9 billion, while the tax gap for total corporation tax was £13.7 billion.

John Barnett, Chair of the Chartered Institute of Taxation's Technical Policy and Oversight Committee, said:

'Critics of HMRC can point to a record amount – nearly £40 billion – not being collected, but HMRC can legitimately point out that they are bringing in a record share of the expected tax take.

'That both these things can be true simultaneously tells us more about current tax levels than anything else.

'These figures show there is plenty of work for HMRC to do in a range of areas to reduce the tax gap. However, we should not lose sight of the fact that their record, collecting more than 95% of tax due, compares well internationally.'

Internet links: GOV.UK Chartered Institute of Taxation website

HMRC has not fined a single enabler of offshore tax evasion

HMRC has not fined a single enabler of offshore tax evasion in five years, data released in response to a Freedom of Information (FOI) request has revealed.

This is despite HMRC having landmark powers, which were introduced in 2017, to impose hefty fines.

The data, which was released to the Bureau of Investigative Journalism (TBIJ), suggests that HMRC is failing to target the creators of offshore tax evasion schemes and instead pursues clients of such schemes.

According to the FOI request, HMRC has not fined a single partnership or company for enabling tax evasion since the change in the law in 2017.

Michelle Sloane, a tax disputes partner at law firm RPC, said:

‘Enablers were and still are a big focus for HMRC. But these figures show their rhetoric on tackling enablers … is clearly not being followed through with action.’

A spokesperson for HMRC said:

'We have a strong track record in tackling offshore non-compliance. Since the launch of our No Safe Havens strategy in 2019, we have secured almost £700 million from offshore initiatives.'

Internet link: TBIJ website

UK economy grew by more than previously estimated during first quarter

The UK economy grew by more than initially estimated at the start of this year, according to figures from the Office for National Statistics (ONS).

The economy grew by 0.7% between January and March 2024, up from the previous figure of 0.6%. Growth in the UK services sector helped to push it even higher, the ONS said.

The positive news on growth followed the UK inflation rate falling to its lowest level in almost three years.

According to the ONS, the Consumer Prices Index (CPI) rose by 2% in the year to May 2024, down from 2.3% in April.

The data showed that whilst prices are still rising, they're increasing at their slowest pace since July 2021.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said the data is ‘a further sign that the UK is exiting the inflation crisis which began in late 2020’.

He continued: ‘It provides additional weight for an interest rate cut in the coming months, something which will be welcomed by firms of all shapes and sizes.

'Our research has shown that a steadily declining number of businesses are concerned about inflation, from a record peak of 84% in mid 2022. This is positive news, but prices are not falling, just rising more slowly, and the economic outlook remains challenging.'

Internet links: ONS website ONS website BCC website

Average earnings just £16 a week higher than 2010

Real average earnings are just £16 a week higher than they were 14 years ago, according to research conducted by the Resolution Foundation.

The think tank said that the UK's labour market backdrop to the General Election is a prolonged pay squeeze that has left real average wages today just £16 a week higher than in 2010. It stated that this has been caused by three shocks to pay packets in little over a decade, including the financial crisis, the Brexit referendum and the cost-of-living crisis.

According to the Resolution Foundation, in the 14 years prior to the 2010 election, average real wages grew by £145 a week in total.

Hannah Slaughter, Senior Economist at the Resolution Foundation, said:

'Britain's prolonged pay depression has left average earnings just £16 a week higher than they were back in 2010, despite the welcome return of rising real wages in recent months.

'Worryingly, Britain's decade-long jobs boom during the 2010s has also gone bust, with the UK one of only a handful of countries where employment has yet to return to pre-pandemic levels.'

Internet link: Resolution Foundation website

EU trade deal not working for UK business, warns BCC

The UK government must stop ‘walking on eggshells’ around improving EU trade ties, the British Chambers of Commerce (BCC) has warned.

The new government must improve the current EU-UK trade and co-operation deal in order to boost economic growth, adds the BCC.

Businesses have criticised the additional red tape and increased costs that Brexit has placed on firms importing and exporting goods to and from the continent.

Importers of food and plants have been hit by charges associated with new Brexit border checks brought in at the end of April.

Other businesses have complained that the increasing divergence on standards, such as those around construction products, has made it more expensive for UK companies to get their products certified for sale on the continent.

Shevaun Haviland, Director General of the BCC said:

‘I’m not here to look backwards, I’m here to help build a better future for our business leaders and entrepreneurs. We must stop walking on eggshells and start saying it how it is. The current plan isn’t working for our members.  

‘The EU is the UK’s largest market, accounting for 42% of all our exports. Leaving the EU has made it more expensive and bureaucratic to sell our goods and services across the Channel. But better trading terms are possible if the UK government and the EU reach agreement in areas of mutual benefit for business on both sides.

‘A better deal is best for everyone.’

Internet link: BCC website

UK's investment rates worse than every other G7 country

The UK has the lowest rates of investment of any other country in the G7, according to analysis by the Institute for Public Policy Research (IPPR).

It found that, compared to the USA, Germany, France, Italy, Canada and Japan, the UK was in last place for business investment in 2022.

The IPPR also revealed that the UK has been bottom of the G7 league for investment in 24 out of the last 30 years. It said that the UK has the lowest rates of investment of any G7 economy, and that it ranks 28th out of 31 Organisation for Economic Co-operation and Development (OECD) countries for business investment.

According to the IPPR, countries such as Hungary, Slovenia and Latvia attract higher levels of private sector investment than the UK as a percentage of GDP.

Dr George Dibb, Associate Director for Economic Policy at the IPPR, said:

'If the economy is an engine, then investment is its fuel. The UK's dire productivity performance is the single biggest driver of our dire living standards. Without resources flowing into new investment, it's hard to see how UK economic performance can improve.'

Internet link: IPPR website

Savers dangerously underestimating minimum cost of retirement

UK savers are dangerously underestimating the minimum amount needed to retire, according to research from pension provider PensionBee.

A survey of 1,000 working-age UK adults showed that 23% were unsure of the total pension pot size needed to achieve the retirement income they desire.

Pension Bee said that, according to the Pensions and Lifetime Savings Association's (PLSA) Retirement Living Standards, a pension pot of £150,000 would only fund an individual's minimum retirement standard for ten years. Pension Bee suggested that working-age adults could be underestimating the true cost of retirement.

49% of those polled estimated that they would require a pension pot of around £250,000 or more. However, Pension Bee found that there was a lack of clear consensus in regard to desired annual income in retirement.

Becky O'Connor, Director of Public Affairs at Pension Bee, said:

'It's hard to plan for retirement without an idea of how much you might need, yet most Brits seem to be unaware of - or worse, dangerously underestimate - the true cost of retirement.

'A good pension pot is one that can provide enough money for the duration of retirement. As this exact amount will vary based on individual circumstances, pension calculators can be a helpful tool in setting financial goals and adjusting behaviours to achieve them.

‘However, one rule is broadly true: the earlier individuals start paying into a pension, the more likely they are to be able to afford their desired lifestyle, as their pension has longer to grow and the amount they’re required to save each month reduces.’

Internet link: PensionBee website

 

Newsletter 189

 

June 2024

In this month’s Enews we look at the business to the upcoming General Election and what an HMRC error could mean for the state pension of the self-employed. We also update you on issues with HMRC’s phone lines and early filers of tax returns. With the UK’s latest economic data and the new advisory fuel rates, there is a lot to update you on.

• Next government will need to build trust between HMRC and self-employed
• Revitalise ‘Brand Britain’, says CBI
• HMRC error means self-employed workers could lose out on state pension
• Taxpayers spend total of 800 years waiting to speak to HMRC
• Retirees report £119,000 shortfall in pension savings
• 300,000 file tax returns in the first week of the tax year
• Inflation falls after UK moves out of recession
• Advisory fuel rates for company cars
• Trevor Walker 1930-2024

Next government will need to build trust between HMRC and self-employed

The next government must take a direct hand in rebuilding trust between HMRC and the self-employed, according to the Association of Independent Professionals and the Self-Employed (IPSE).

The call is part of IPSE’s manifesto for the General Election on 4 July.

Under its proposals, a Cabinet minister would be charged with directly overseeing the tax office. Taxpayers would also be offered more recourse when the department has acted carelessly or unfairly.

The manifesto also calls for the prevention of ‘obscenely’ long payment terms and the scrapping of the off-payroll rules.

IPSE also wants to see an end to shortfalls in support for self-employed parents and better incentives for people to adopt side hustles.

Derek Cribb, IPSE’s CEO, said:

‘The self-employed vote is very much up for grabs at this election – more than at any election in living memory.

‘The sector is bursting with potential to get more people working, plug skills gaps and grow the economy. But this potential is being squandered by the devastating impact of late payments, careless tax enforcement, and a lack of proactive policymaking catered to the millions of people who work for themselves.

‘At this election, the party that fully embraces the self-employed stands to gain their support. The proposals in our manifesto offers the parties the chance to do just that.’

Internet link: IPSE website

Revitalise ‘Brand Britain’, says CBI

Revitalising ‘Brand Britain’ in its first 100 days in office should be a priority for the party that wins the General Election, says the Confederation of British Industry (CBI).

In its Business Manifesto, the business group has mapped out the steps it says the next government can take to redefine the UK’s growth trajectory.

The CBI says the next government will need to improve the pitch for private investment with a plan for sustainable growth.

Its key recommendations include a cutting-edge trade and investment strategy and unlocking the power of the UK regions.

Rain Newton-Smith, CBI CEO, said:

‘A new government of whatever colour provides an opportunity to shift gear and prioritise the long-term decisions that can deliver a decade of sustainable growth.

‘Top of the in-tray should be sharpening the investor pitch for ‘Brand Britain’ – ensuring we are at the very top of the league table when it comes to investment. At the same time, a focus on building momentum behind the ‘big three’ enablers across tax, planning and the labour market within the first 100 days can give firms a clear flightpath for growth.

‘We want to see a new government deliver a bold pitch to investors across the globe, restore the UK’s competitiveness, and double down on our climate commitments and opportunities.’

Internet link: CBI website

HMRC error means self-employed workers could lose out on state pension

An HMRC error could mean that some low-income, self-employed workers lose out on their entitlement to National Insurance-related benefits like the state pension, warns the Low Incomes Tax Reform Group (LITRG).

The issue centres around the payment of voluntary Class 2 National Insurance contributions (NICs) that can be made by self-employed taxpayers with profits under £6,725.

These voluntary contributions are usually paid by taxpayers as part of their self assessment return and must reach HMRC by 31 January following the end of the tax year.

HMRC then automatically transfers the NICs to the taxpayer's National Insurance record to be counted towards their entitlement to benefits.

However, it appears that HMRC did not initiate the transfer until after the 31 January deadline for the 2022/23 tax year resulting in the voluntary contributions being rejected and automatically refunded to the taxpayer.

In the absence of any action, this could mean that taxpayers miss a qualifying year of NICs.

Antonia Stokes, LITRG Technical Officer, said:

'The issue is unique to the year in question, and our advice to those who might be affected is to first check to see whether they have received a refund from HMRC.

'We would also like to see HMRC acknowledge the error and proactively offer help to those taxpayers who have been affected, in line with HMRC's own charter commitments. However, until they do so, there are practical steps that taxpayers can take to maintain their entitlement to National Insurance-related benefits.'

Internet link: LITRG

Taxpayers spend total of 800 years waiting to speak to HMRC

UK taxpayers spent the equivalent of 800 years on hold to HMRC in 2022/23, according to a report published by the National Audit Office (NAO).

The report found that funding pressures, job cuts and a push to reduce costs by encouraging people to manage their tax affairs online had all led to a poor call-handling performance by HMRC.

The average time spent waiting on the phone to speak to an adviser in the 11 months to February 2024 was almost 23 minutes - well above the five minutes recorded in 2018/19.

Altogether taxpayers spent 7 million hours, or 798 years, on hold to HMRC in 2022/23, according to the report.

Customer service is in a 'declining spiral' at HMRC, which had not met its goals for responding to taxpayer correspondence or telephone calls for several years, the NAO added.

The government has recently announced an extra £51 million in funding to help HMRC improve its telephone helplines.

Gareth Davies, Head of the NAO, said:

'HMRC's telephone and correspondence services have been below its target service levels for too long.

'While many of its digital services work well, they have not made enough of a difference to customers, some of whom have been caught in a declining spiral of service pressures and cuts. HMRC has also not achieved planned efficiencies.

'HMRC must allow more time for these services to bed in and understand the difference they make before adjusting staffing levels.'

Internet link: NAO website

Retirees report £119,000 shortfall in pension savings

UK adults face a significant shortfall in their pension savings at retirement compared to what they wanted to retire on, according to research from Standard Life.

Standard Life's Retirement Voice Report found that, on average, retirees had hoped to build up a pension pot of £250,000. However, the average amount that they accumulated by retirement was £131,000 – leaving a £119,000 shortfall.

Based on current annuity rates, a pot of £250,000 could lead to an income of £1,007 monthly, or £12,091 a year, assuming a retirement age of 66.

A pot of £131,000 could result in a monthly income of £527 in retirement, or £6,332 yearly - £480 a month, or £5,759 a year less.

However, even the not insignificant £250,000 pot falls short of a 'moderate' standard’ of living in retirement, according to the Pensions and Lifetime Savings Association.

Dean Butler, Managing Director for Retail Direct at Standard Life, said:

'It can be hard to work out how much you need to save to achieve your desired standard of living in retirement, particularly earlier on in your career. It's even harder to stick to it, as everyday expenses and those one-off costs that come up in life constantly threaten to move long-term saving down the priority list.

'Clearly there's a big gap between what people hope to save, and what they actually do – this is unsurprising, particularly when looking at it during a cost-of-living crisis, however the result can be a significantly reduced standard of living in retirement.'

Internet link: Standard Life website

300,000 file tax returns in the first week of the tax year

Almost 300,000 self assessment taxpayers filed their return in the first week of the new tax year, HMRC has revealed.

The early filers were almost 10 months ahead of the 31 January 2025 deadline.

Almost 70,000 people filed their return on the opening day of 6 April this year.

HMRC is encouraging people to file early and avoid the stress of last-minute filing.

The tax authority says early filing can also help with budgeting. A budget payment plan helps spread the cost of tax bills with weekly or monthly payments.

In addition, refunds of overpaid tax will be paid as soon as the return has been processed.

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

'Filing your self assessment early means people can spend more time growing their business and doing the things they love, rather than worrying about their tax return.

'You too can join the thousands of customers who have already done their tax return for the 2023-24 tax year by searching 'self assessment' on GOV.UK and get started today.'

Internet link: HMRC press release

Inflation falls after UK moves out of recession

The rate of UK inflation fell to 2.3% in the year to April, according to the Office for National Statistics (ONS).

Inflation is down from 3.2% in March and is the lowest level since September 2021.

However, it is still above the Bank of England's 2% target. The drop was driven by falling gas and electricity prices after the energy price cap was lowered by Ofgem.

The drop in inflation followed news that the UK economy grew by 0.6% between January and March, according to the ONS.

It means that the country officially emerged from recession with growth led by the services sector.

Despite the improving outlook, the Bank of England held interest rates at 5.25% for the sixth month in a row.

The British Chambers of Commerce (BCC) said the fall in the rate of inflation was positive news that increased the likelihood of an interest rate cut in the coming months.

David Bharier, Head of Research at the BCC, added:

'Uncertainty will persist with global conflicts and trade wars threatening supply chains. Real wage costs also continue to grow – our most recent business survey found almost half of firms expect their prices to rise over the next three months, with labour costs cited as the main driver.

'While the outlook may have brightened, the skies aren't yet fully clear. UK firms need to see a long-term vision for the UK economy from politicians, including action on making trade easier, especially with the EU.'

Internet link: ONS website 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 June 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 June 2024 are:

 

Engine size	Petrol
1400cc or less	14p
1401cc - 2000cc	16p
Over 2000cc	26p

 

Engine size	Diesel
1600cc or less	13p
1601cc - 2000cc	15p
Over 2000cc	20p

 

Engine size	LPG
1400cc or less	11p
1401cc - 2000cc	13p
Over 2000cc	21p

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 8p per mile.

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

Internet link: GOV.UK AFR

Trevor Walker 1930-2024

This month we are sad to report the death of Trevor Walker, one of the founding partners of Walker Thompson in 1985, after a short illness.
Trevor retired from the firm in 2002 although in many respects it seems that it was only yesterday. The legacy which he left within the firm, particularly with regard to taxation has been longstanding and his name will stay on as a testament to his work
A quiet and reserved person, he will be remembered by all the clients with whom he came into contact, many of whom still remain as clients today.
He was an extremely competent linguist speaking various European languages and attempting the more obscure such as Urdu & Chinese Mandarin. Away from the office he was passionate about skiing both on snow and artificial slopes.
He will be missed by all who knew him.

Click here to read an Obituary by Sherod Williams.

Newsletter 188

 

May 2024

In this month’s Enews, we look at the HMRC’s pilot for MTD for Income Tax and the impact of IR35 reforms on contractors. We also examine criticism of R&D tax reliefs and take a look at a new online service for voluntary National Insurance contributions (NICs). With news on the UK’s borrowing figures and the latest HMRC guidance for employers, there is a lot to update you on.

• MTD for Income Tax pilot now live
• IR35 reforms taking their toll on skilled contractors
• Government urged to implement reforms to R&D tax system
• HMRC clarifies tax rules for WFH commuting
• HMRC launches online voluntary NICs payment service
• UK borrowing reduces Chancellor’s wiggle room
• More than seven million adults still struggling to pay bills, finds FCA
• Latest guidance for employers

MTD for Income Tax pilot now live

HMRC's pilot scheme for Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is now live.

Accountants, agents and individuals are able to sign up to the pilot and test the programme out. The pilot aims to assess the MTD for ITSA reporting environment, with an initial focus on those who are self-employed and landlords with annual income exceeding £50,000. Signing up to MTD for ITSA will become mandatory for individuals with income in excess of this threshold from 6 April 2026.

Those signing up to the pilot will be required to keep digital records and submit quarterly updates on their income and expenditure to HMRC via MTD-compatible software so that HMRC may test and develop the system.

However, after HMRC revised its list of software products that support MTD for ITSA only five are available for the private beta testing of MTD for ITSA.

These are:

• 1 2 3 Sheets Ltd
• Intuit QuickBooks Online
• Sage Accounting
• SE reports
• self assessment direct.

Chosen software must be able to create and store digital records of business income and expenses, send quarterly updates, receive information from HMRC and make your final declaration by 31 January as part of the submission of tax returns.

HMRC recommends checking with the software providers when choosing software to ensure it suits businesses' needs.

Caroline Miskin, Senior Technical Manager at the Institute of Chartered Accountants in England and Wales (ICAEW), said:

'Choosing the right software is a critical decision. Software products do need to comply with HMRC's minimum functional standards but these are quite minimal. This means there will be very significant differences between products.

‘Cost is obviously a major consideration. The list includes some free products, but it is important to check the terms and conditions as well as what functionality is offered. It is disappointing that a wider range of software is not yet available.'

Internet link: GOV.UK

IR35 reforms taking their toll on skilled contractors

One in ten highly skilled freelancers are currently out of work due to the impact of reforms to IR35 tax legislation, according to research published by the Association of Independent Professionals and the Self-Employed (IPSE).

IPSE's survey of more than 1,300 contractors in highly skilled roles found that 21% are not currently working, with half of them attributing this to the impact of reforms to IR35 tax rules.

Meanwhile, 55% of contractors said they had rejected an offer of work in the past 12 months due to it being deemed 'inside IR35' by the client. Furthermore, 24% said they intend to seek contracts overseas this year to escape the rules.

Andy Chamberlain, IPSE's Policy Director, said:

'Three years later, the off-payroll rules are still keeping thousands of highly skilled individuals out of work. It's staggering that the Chancellor is happy for this to continue at a time when economic inactivity is one of his biggest concerns.

'Our findings show that contractors want to prioritise clients who are willing to hire them on a freelance basis, and happy to walk away from those who won't – even if this means not working at all.

'The blame for this impasse doesn't rest with clients – it rests with the culture of fear that is propagated by the IR35 rules. This is a damning legacy for a Chancellor who claims to be on the side of business.'

Internet links: IPSE website

Government urged to implement reforms to R&D tax system

The government is being urged to implement reforms to the Research and Development (R&D) tax relief system in order to avoid hurting small companies by the Suffolk Chamber of Commerce.

A report released by the Chamber found that recent changes by HMRC and a 'wild west' regulatory system in regard to who can act as R&D tax advisers are 'undermining confidence and take-up'.

The Chamber collected a number of case studies and original survey research, which showed that 46% of small companies are deterred from making future claims based on their latest experience.

Chair of the Chamber's R&D Tax Reliefs Task and Finish Group, Steve Elsom, said:

'Our original research into local businesses' experiences shows that the lack of knowledgeable experts at the HMRC, plus the imposition of an overly strict compliance regime is causing many legitimate companies' most recent claims to be delayed and/or refused, with others fearful that previously successful claims from previous years might now be challenged.

'Every right-thinking person applauds the crackdown in fraudulent claims, but HMRC appears to be going to extremes in its definition of the term. Our research showed that companies which might have made a very minor administrative error in their application are counted as fraudulent.’

Internet link: Suffolk Chamber of Commerce website

HMRC clarifies tax rules for WFH commuting

HMRC has updated guidance on when tax relief is available on travel expenses for staff who work from home.

The tax authority is responding to the growth of flexible or hybrid basis working contracts, particularly since the Covid-19 pandemic.

HMRC confirmed that ‘under such arrangements, the employee will have a base office and journeys from home to that location will be ordinary commuting’.

These trips are not eligible for tax relief.

Whether or not an employee’s home is a workplace does not affect the availability of tax relief for travel expenses.

Travelling from home to a permanent workplace is classed as ordinary commuting and not available for tax relief.

HMRC states:

‘Even though it may have been accepted that the employee’s home is a workplace, it does not necessarily follow that they’ll be entitled to tax relief for the cost of travel between their home and a permanent workplace.’

This is because even where working from home is part of the employment contract, this can be due to personal choice and not a requirement of the role. In such cases, travel from home to the office remains private travel.

Travel costs from home to a temporary workplace remain available for tax relief.

Internet link: GOV.UK

HMRC launches online voluntary NICs payment service

HMRC has launched a new online voluntary NICs payment service.

The government says the new service will make it easier for customers to check for and fill any gaps in their National Insurance record to help increase their State Pension.

It also said that the new Check your State Pension service has been enhanced to include an end-to-end digital solution.

The service shows customers by how much their State Pension could increase and outlines the voluntary NICs they would need to pay to achieve this.

The service also allows people under the State Pension age to view gaps in their National Insurance record and pay voluntary contributions to fill the gaps.

Minister for Pensions, Paul Maynard, said:

‘The State Pension is the foundation of income in retirement, which is why we have introduced this new online tool to help simplify boosting it for those who are able to.

‘I would encourage everyone to check their State Pension forecast and to take a look at how they could improve their State Pension award with only a few simple clicks.’

Internet link: GOV.UK

UK borrowing reduces Chancellor’s wiggle room

Higher than expected government borrowing has reduced the Chancellor’s ‘wiggle room’ at a pre-election Budget.

Government borrowing - the difference between spending and tax income - was £120.7 billion in the year to March, according to the latest figures from the Office for National Statistics (ONS).

This was £7.6 billion lower than last year, but £60 billion higher than the year before the pandemic and, critically, £6.6 billion higher than the Office for Budget Responsibility’s (OBR) forecast at the Spring Budget.

High inflation and rising interest rates also contributed to public spending rising by £58 billion for the year, according to the ONS.

Cara Pacitti, Senior Economist at the Resolution Foundation, said:

‘Last year was one of high but falling inflation and rising interest rates, causing both spending and tax receipts to rise in nominal terms compared to the year before.

‘While lower than last year, borrowing is already £6.6 billion higher than forecast at the Spring Budget last month. So far there are no signs of any new fiscal wriggle room emerging that might allow the Chancellor to announce another pre-election Budget in the Autumn.’

Internet links: ONS website Resolution Foundation website

More than seven million adults still struggling to pay bills, finds FCA

Around 7.4 million people in the UK struggled to pay a bill or a credit repayment in January, according to the Financial Conduct Authority (FCA).

The figure is lower than last year but is still significantly higher than before the cost-of-living crisis began.

According to the FCA, in January 2023, after the Russian invasion of Ukraine and the subsequent start of the cost-of-living crisis, the number of people in financial difficulty almost doubled to 10.9 million.

The FCA survey also suggested 5.5 million people had missed a bill or credit payment in the six months to January 2024.

In addition, one in nine people also had no disposable income, the FCA said.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:

'Our research shows many people are still struggling with their bills, though it is encouraging to see some benefiting from the help that's available.

'If you're worried about keeping up with payments, reach out to your lender straight away. They have a range of support options and will work with you to agree the best one for you. You can also find free debt advice through MoneyHelper.'

Internet link: FCA website

Latest guidance for employers

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

 

•         PAYE Settlement Agreement payment •         reporting expenses and benefits for the tax year ending 5 April 2024 •         mandating the payrolling of benefits in kind from April 2026 •         PAYE tax calculator •         basis period reform — reporting on a tax year basis •         claiming tax relief on work related expenses — don’t get caught out by bad tax advice.

Please contact us for help with tax matters.

Internet link: Employer Bulletin

Newsletter 187

APRIL 2024

In this month’s Enews we look at HMRC’s reversal of its helpline closures and the reaction to the Spring Budget. We also update you on the latest guidance on R&D relief and the latest on the UK economy. With more on the fight against fraud and analysis of the National Minimum Wage, there is a lot to update you on.

• Relief at HMRC’s reversal of helpline closures
• Jeremy Hunt cuts NICs again in the Spring Budget
• Business groups say challenges remain despite encouraging Budget
• New HMRC R&D tax relief guidance 'could be clearer', says ICAEW
• Bank holds interest rates as inflation and economy show improvement
• HMRC's services having a negative impact on SME productivity
• New measures aim to 'break the spell' of fraudsters
• The National Minimum Wage is the single most successful economic policy in a generation, says think tank
• First shoots of Recovery and Business Expansions
• A New Addition to The Walker Thompson Team

Relief at HMRC’s reversal of helpline closures

HMRC’s decision to halt its plans to restrict taxpayer helplines and direct people to online services instead has been met with relief by the Federation of Small Businesses (FSB).

The tax authority had announced that it was closing its self assessment helpline for six months every year. It was also restricting the opening times of its VAT helpline and the usage of its PAYE helpline.

HMRC says it is halting these plans 'in response to the feedback while it engages with its stakeholders about how to ensure all taxpayers' needs can be met'.

The FSB says that more investment in digital and telephone is needed - not a reduction in service.

Tina McKenzie, Policy Chair, FSB said:

‘Small businesses will definitely be relieved that the drastic reduction in HMRC’s helpline opening hours has been paused. We are very glad that HMRC has listened to the chorus of dismay which greeted its initial announcement.

‘While online services are a key part of the communications mix for the tax authority, sometimes there’s just no substitute for a real human on the end of a phone line who can listen, engage, and help untangle issues.

‘Before phone line cuts are considered, HMRC needs to build capacity in its digital services, as if those are improved – with real people online to offer help instead of chatbots – many small firms like to interact with the tax authority this way, as it can be more flexible and available out of hours.’

Internet link: GOV.UK FSB website

Jeremy Hunt cuts NICs again in the Spring Budget

The Chancellor made further changes to National Insurance contributions (NICs) following the cuts made in the Autumn Statement 2023. The rates for NICs will be cut by two percentage points for both employees and the self-employed from 6 April 2024.

This will see Class 1 employee NICs reduced from 10% to 8% from 6 April 2024, down from 12% at the end of last year. Meanwhile, Class 4 self-employed NICs are cut from 9% to 6% from 6 April 2024.

Mr Hunt made a number of other changes that will relieve the tax burden on businesses, families and motorists. He cut the higher rate of capital gains tax on residential property disposals from 28% to 24%. The lower rate will remain at 18% for any gains that fall within an individual's basic rate band.

The threshold for VAT registration will be lifted from £85,000 to £90,000 from 1 April 2024. According to the government, this will mean 28,000 businesses will no longer be VAT registered in 2024/25.

The Budget saw the creation of a new ISA that will allow people to invest in UK-focused assets. The new UK ISA creates an allowance of £5,000. This will be in addition to the £20,000 that can be subscribed into an ISA. The government will consult on the details.

The Chancellor made his cut to NICs possible with a series of tax raising measures. These include the abolition of the Furnished Holiday Lettings regime and Multiple Dwellings Relief, alongside a new duty on vaping and an increase in tobacco duty.

The UK's tax rules for non-UK domiciled individuals will be replaced with a residence-based regime that Mr Hunt says will raise £2.7 billion in revenue.

This new regime will commence on 6 April 2025 and applies UK-wide. Individuals who opt in to the new regime will be exempt from UK tax on foreign income and gains for their first four years of residence in the UK, while the government will make transitional arrangements for existing non-doms.

Internet link: HM Treasury press release

Business groups say challenges remain despite encouraging Budget

The UK’s business groups warned that challenges remain despite the Chancellor delivering an encouraging Spring Budget.

The British Chambers of Commerce (BCC) said that while the cut to NICs would ‘boost jobs’ it had failed to ‘shift the dial’ for business.

Shevaun Haviland, Director General of the BCC, said:

'Following the Autumn Statement this Budget was always set to deliver less for business, although changes to national insurance will provide some momentum.

'However, beyond this there were no major announcements to help shift the dial on conditions for business. Business confidence is improving but the coming months will remain challenging for many companies. It is vital that the economy remains front and centre of the campaign to come.'

The Institute of Directors (IoD) branded the Spring Budget 'unremarkable' for businesses.

Roger Barker, Director of Policy at the IoD, said:

'First and foremost, business was hoping for a Budget that would maintain a stable and credible policy framework for business. The Chancellor largely delivered that. However, beyond that, there was little in the announcements that can be regarded as a game-changer for business.'

Meanwhile, the Association of Independent Professionals and the Self-Employed (IPSE) said the Chancellor had ‘failed to address the substantive issues holding the self-employed back’.

Andy Chamberlain, Director of Policy at IPSE, said:

‘The self-employed make an enormous contribution to our economy and society, but it could be even greater if the government were to grasp the nettle of IR35 and address the forthcoming impact of Making Tax Digital for Self Assessment.’

Internet link: BCC website IoDwebsite IPSE website

New HMRC R&D tax relief guidance 'could be clearer', says ICAEW

New guidance from HMRC on Research and Development (R&D) tax relief 'could be clearer', according to the Institute of Chartered Accountants in England and Wales (ICAEW).

HMRC's draft guidance covers the restriction applying for contractor payments and payments for externally provided workers (EPWs) where the R&D activity takes place overseas; and the new rules for contracted-out R&D.

The ICAEW's Tax Faculty believes that additional clarity would be helpful on a few of the new points.

It also said that the guidance 'does not fully address the implications of an arrangement between the customer and the contractor that is governed by multiple contracts'. The Institute has called for the guidance to explain how to determine if the contractor took R&D into consideration at the time of the contract when multiple contract dates exist.

The ICAEW also called for clarity on the requirement that the carrying-on of R&D needs to be the primary objective of the customer in engaging the contractor if the customer is to claim the associated R&D tax relief.

Internet link: ICAEW website

Bank holds interest rates as inflation and economy show improvement

The Bank of England held interest rates at 5.25% despite continued falls in the rate of inflation and a return to growth for the UK economy in January.

The Bank's Monetary Policy Committee (MPC) voted by eight to one to hold the base rate at 5.25%, the fifth month in a row that it has stayed at that level.

The Bank said that it needs to be certain that inflation will fall to its 2% target and stay there before making cuts to rates.

David Bharier, Head of Research at the BCC, said the decision to hold rates was widely expected.

He added:

'However, it prolongs the period of uncertainty for firms grappling with high borrowing costs.

'While [the] inflation data showed a further easing, most small businesses know that the economy remains fragile. The interest rate is itself a driver of inflation, as housing, rental, and borrowing costs continue to rise.

'Our most recent forecast expects some cuts to the base rate going forward, potentially falling to 4.5% by the end of the year. But in the meantime, businesses need reassurance from policymakers that there is a clear plan to drive much needed economic growth.'

The Bank’s decision followed the release of data that showed the pace of inflation has slowed.

It fell to 3.4% in February, according to the Office for National Statistics (ONS).

That is down from 4% in January and December, and the lowest rate for nearly two and a half years.

The slower pace of food price rises helped push down overall inflation, along with soft drinks, restaurants and hotels, the ONS said.

This effect was partially offset by petrol prices and rental costs.

Meanwhile, the UK's economy returned to growth in January, according to the ONS.

The economy grew by 0.2% during the first month of 2024 following a fall in output during the previous month.

The economy was boosted by stronger sales in shops and online and more construction activity in January.

The ONS said the services sector led the bounce back after retailers struggled to draw in shoppers in December.

Internet link: BoE website BCC website ONS website ONS website

HMRC's services having a negative impact on SME productivity

The productivity and efficiency of SMEs is suffering as a result of poor HMRC services, according to members of the Association of Chartered Certified Accountants (ACCA).

In a survey of ACCA members, 66% said that poor HMRC services were having a negative impact on their clients, with small businesses 'bearing the brunt' of this issue.

This is a 14% increase in negative sentiment from the previous ACCA survey in October 2023, demonstrating that SMEs are 'reaching breaking point with the service'.

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

'Our members have repeatedly raised that dealing with HMRC is the number one issue they face in their daily work.

'Repeatedly we hear from our members of delays around basic requests such as VAT registration numbers, and a severe lack of skilled staff to handle more complex enquiries. This most recent survey reiterates our previous feedback to the Chancellor and HMRC and shows that in the space of six months service levels have declined even more.

'ACCA will continue to call for the Chancellor to properly fund HMRC, raise the levels of service standards, and to lean on accredited finance professionals wherever possible to ensure accuracy across the board.'

Internet link: ACCA website

New measures aim to 'break the spell' of fraudsters

New measures aim to 'break the spell' of financial fraudsters by giving payment providers more time, according to draft legislation published by the government.

Until now, payment service providers such as banks have generally been required to process payments by the end of the following business day, giving a limited timeline to investigate and alert relevant parties to possible fraud.

The draft legislation will give payment service providers a further 72 hours to investigate payments, but only where there are reasonable grounds to suspect fraud or dishonesty. The legislation has been designed to minimise any impact on legitimate payments.

The UK has seen an increase in authorised push payment fraud over the past few years – in 2022 victims lost £485 million to these scams.

Economic Secretary to the Treasury, Bim Afolami, said:

'Fraudsters spin whole webs of lies and fabricate all sorts of things to convince people to send them money – this legislation will give banks, other payment service providers and law enforcement more time to get in touch with victims and break the fraudster's spell before money is sent.

'The government is absolutely committed to tackling fraud and recognises the impact of this devastating crime on victims – this legislation is another tool in our arsenal to fight fraud.'

Internet link: HM Treasury press release

The National Minimum Wage is the single most successful economic policy in a generation, says think tank

The introduction of the UK’s National Minimum Wage (NMW) in 1999 is the single most successful economic policy in a generation, according to the Resolution Foundation.

The NMW has increased the pay of the UK’s lowest paid workers by £6,000 a year compared to their earnings simply rising in line with typical wages, says a report from the think tank.

The report notes that the policy was introduced 25 years ago against a backdrop of rising pay inequality.

Between 1980 and 1998, hourly pay growth in the UK was twice as fast for the highest earners as it was for the lowest earners.

But since 1999 – when the NMW was brought in – this trend has reversed, and hourly pay inequality has fallen with pay growth for the lowest earners five times that seen by the highest earners.

Nye Cominetti, Principal Economist at the Resolution Foundation, said:

‘The policy was introduced in the face of fierce opposition, but now experiences strong cross-party support. With its current remit ending this year, now is the time to discuss the future of the minimum wage and low pay more widely ahead of the election.

‘Politicians should reflect on why the minimum wage has been so successful – such as the combination of long-term political direction and independent, expert-led oversight – and whether this approach could be broadened to tackle some of the UK’s other low pay challenges.’

Internet link: Resolution Foundation website

First shoots of recovery and business expansions

March has seen our firm engaged upon three separate Corporate Finance transactions.

The first of these proved to be extremely pleasing as it involved the succession plan for a company which I first worked with in the 1970’s. A small, husband and wife engineering firm in Earlsdon, which had later moved to Bayton Road Industrial Estate. George and Mary Harris became friends as well as clients of my then firm Francis Webbs. The firm grew steadily and switched from manual machines to CNC lathes, producing highly specialised parts for readily recognisable products. With the passage of time, son Graham had joined the business and he was followed by his sister Deborah, who was in charge of the accounting and administration. Sadly, George and his wife passed away, but they had left the business in good hands. The company now operates from premises in Crondal Road, Exhall and employs over 30 staff who are literally at the cutting edge of engineering.  March saw the retirement of Deborah and the distribution of ownership between some of the employees who Graham views as the company’s future. Everyone at Walker Thompson wishes Deborah a very happy retirement and wishes the company every possible success for the future.

March also saw the transition in ownership of another longstanding client. Based in Northamptonshire, Kentbrim Ltd operates a residential nursing home. The company has, over time, successfully bought out the shares of four of its’ original investors using a typical process of a Company Purchase of Own Shares. Of the two remaining shareholders, one wished to withdraw and the other was content to stay on and manage the business as part of his own family succession plan. Walker Thompson worked alongside Procure Business Finance to pull together a manageable deal to facilitate the exit of one shareholder whilst ensuring sufficient working capital availability to allow the nursing home to continue serving the community in Northants. As is often the case, the transaction went down to the wire but, with a final shove, we got it over the line.

Finally, we were involved in bringing together the synergies of a Coventry based compressed air supply & service company with the expertise of a senior figure from the chilled air and cooling systems sector. Funded by in house money, a new company was created with control resting with the Managing Director. Within the new company, shares have been distributed in such a manner as to ensure reward for both success and loyalty. The arrangements are now clearly in place to ensure future success and also the continuity of family involvement with the inclusion of another family member.

All three transactions contain elements of planning for the future and an element of passing business through generations. At this point in the economic cycle this is a sign of companies bucking the trend. Government statistics suggest that fewer than 30% of SME’s in the UK reach the second generation whilst less than 10% make it to the grandchildren.

A new addition to the Walker Thompson Team

We are extremely pleased to be able to announce that Hollie Cox, one of our ACCA trainees, gave birth to a son, Freddie on 19 March 2024 at 10:47pm. Freddie weighed in at a healthy 7lb 14oz. Hollie and her partner, Michael, are absolutely delighted with the new addition to their family and we wish them all the very best for the future. 

Tax Returns & Crypto Currencies

 

Tax Returns & Crypto Currencies

 

There is currently a discussion taking place around the inclusion of Crypto currency disposals and the tax implications. Generally speaking, all disposals of Crypto currencies are subject to the UK Tax Regime.

Generally any profits made on trading a crypto asset are treated as Gains within Capital Gain Tax rules . This is, or should be, very straightforward if gains are made from trading the asset ie; buying it, holding it and then selling it when hopefully it increases in value.

HMRC have pointed out that the trading becomes less clear when crypto is used to purchase something. This is still a disposal for tax because in reality it reflects the encashment of the crypto and then the “cash” has been used to make the purchase. 

We understand that going forwards, HMRC will require full disclosure of all transactions in crypto within tax returns.

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
• Over one million miss self assessment deadline
• HMRC warns self assessment taxpayers as scam referrals rise
• Double-cab pickups go back to being vans as guidance reversed
• Pensions income needed to retire rises
• More than 500 firms named and shamed for underpaying staff
• Latest guidance for employers
• Advisory fuel rates for company cars

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 size	Petrol
1400cc or less	13p
1401cc - 2000cc	15p
Over 2000cc	24p

 

Engine size	Diesel
1600cc or less	12p
1601cc - 2000cc	14p
Over 2000cc	19p

 

Engine size	LPG
1400cc or less	11p
1401cc - 2000cc	13p
Over 2000cc	21p

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

 

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
• Tax cuts may have to be scrapped due to 'economic bind', warns IFS
• HMRC sends warning to cryptoasset users
• Raise VAT threshold to £100,000, says FSB
• Clarity on new border checks is vital, says BCC
• Artificial Intelligence will affect jobs and worsen inequality, says IMF
• Over 50s bucking decline in freelance numbers
• Only a third of UK adults confident with self assessment

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