We have recently been made aware of some
not well publicised practices which are causing concerns for clients.
As part of the Governments Assistance to
Business during the Covid pandemic, HMRC offered VAT registered businesses the
opportunity to defer VAT payments and for the Self Employed, the opportunity to
defer their July 2020 tax instalment.
In some cases and without forewarning,
clients have received letters from HMRC demanding that any arrears should be
settled and that taxpayers risk damaging their credit record by not doing so. A
client recently tried to purchase a business vehicle but at the final hurdle
was informed that the company credit rating was such that they could not obtain
finance. Upon further investigation it seemed that a marker had been placed on
the credit rating because a VAT Return had been submitted late. HMRC had been
kept informed that the taxpayer had been suffering with the effects of Covid
and the VAT return had been filed at the earliest possible opportunity. The
client is trying hard to run his business through to full recovery and is being
blocked by a Government agency in doing so.
We have also encountered circumstances
where a VAT Registered business has filed their VAT Return on time but because
of bank daily limitations they had to spread payment over 2 days, the final day
for payment and the following day, being technically a late payment. HMRC
systems initiated an immediate financial penalty of over £1,500. It seems that
whilst some large corporates are still not contributing fully to the Treasury,
HMRC are still targeting SME businesses in an attempt to refill the coffers.
The government has delayed the
introduction of Making Tax Digital (MTD) for Income Tax Self Assessment (MTD
for ITSA) for a year, HMRC recently announced.
The government says it has made the move
in recognition of the challenges faced by many UK businesses as the country
emerges from the pandemic.
It will now introduce MTD for ITSA in the
tax year beginning in
April 2024, a year later than planned.
It says the later start for MTD for ITSA
gives those required to join more time to prepare and for HMRC to deliver a
robust service, with additional time for customer testing in the pilot.
Lucy Frazer, Financial Secretary to the
Treasury, said:
'The
digital tax system we are building will be more efficient, make it easier for
customers to get tax right, and bring wider benefits in increased productivity.
'But
we recognise that, as we emerge from the pandemic, it's critical that everyone
has enough time to prepare for the change, which is why we're giving people an
extra year to do so.
'We
remain firmly committed to MTD and building a tax system fit for the 21st
century.'
Internet
link: GOV.UK
From April 2022, the government plans to create a new social care
levy which will see UK-wide tax and National Insurance Contribution (NIC)
increases.
There will be a 1.25% increase in NICs on earned income, with
dividend tax rates also increasing by 1.25%. The money raised will be
ringfenced for health and social care costs.
The Levy will be effectively introduced from April 2022, when NIC
for working age employees, the self-employed and employers will increase by
1.25% and be added to the existing NHS allocation. The Levy will not apply to
Class 2 or 3 NICs.
From April 2023, once HMRC’s systems are updated, the 1.25% Levy
will be formally separated out and will also apply to individuals working above
State Pension age and NIC rates will return to their 2021/22 levels.
Individuals who receive dividend income will also face a higher tax
bill as all rates of dividend tax will increase by 1.25% from April 2022.
The dividend tax is applicable on dividend income above the frozen
£2,000 dividend allowance and above the £12,570 personal allowance. Dividends
on assets held in ISAs are excluded from the dividend tax.
From the 2022-23 tax year, basic rate dividend tax will be charged
at 8.75% instead of 7.5% this year. Higher rate dividend taxpayers will be
charged 33.75% instead of 32.5% and additional rate dividend taxpayers will pay
39.35% instead of 38.1% respectively.
Internet links: GOV.UK
27 October
HM Treasury has announced that Chancellor Rishi Sunak will deliver
the Autumn 2021 Budget on Wednesday 27 October.
On 7 September the Chancellor launched Spending Review 2021, which
will conclude on 27 October and will be presented alongside the Autumn Budget.
The Spending Review will outline government departments' resource and capital
budgets from 2022/23 to 2024/25.
The Spending Review is also expected to set out how the government
will deliver on its promises to the British public through leading the
transition to net zero across the country; ensuring strong and innovative
public services; levelling up across the UK to increase and spread opportunity;
and delivering its Plan for Growth.
The Chancellor said:
'Despite the worst economic
recession in 300 years, we have not only got people back into work through the
Plan for Jobs but continued to deliver on the priorities of the British people.
'At the Spending Review . .
. , I will set out how we will continue to invest in public services and drive
growth while keeping the public finances on a sustainable path.'
Internet link: GOV.UK
The government's Coronavirus Job Retention Scheme (CJRS) ended on 30
September after supporting millions of workers during the pandemic.
The government said the wages of more than 11 million people were
subsidised for at least some of the scheme's duration at a cost of around £70
billion.
Economists say there is likely to be a rise in unemployment due to
new redundancies, despite the fact that some may be able to find work in
recovering sectors such as travel and hospitality.
The Federation of Small Businesses (FSB) said the end of the furlough
scheme, the scrapping of the small employer sick pay rebate and the closure of
the government's apprenticeship incentive scheme will only add pressure on
companies.
Mike Cherry, the FSB's National Chair, said:
'It's potentially a
dangerous moment. As the weather turns colder, so too will the operating
environment for many firms. With recent economic growth numbers having fallen
below expectations, the upcoming festive season may not provide as much of a
boost as hoped to
many small businesses' bottom lines.'
Internet link: GOV.UK FSB
website
The government's scheme that enables small businesses to recoup
statutory sick pay costs caused by COVID-19 closed at the end of September.
Legislation ending the Coronavirus Statutory Sick Pay Rebate Scheme
(SSPRS) was laid before parliament on 9 September.
Before the COVID-19 pandemic, employers were obliged to pay
Statutory Sick Pay (SSP) to eligible employees unable to work because of
sickness. It is paid at a flat rate of £96.35 (at the current rate) for up to
28 weeks. The full cost of SSP is met by the employer.
To support employers during the pandemic, the government legislated
to allow certain small and medium size employers to reclaim some, or all, of
their SSP costs from HMRC via the SSPRS.
Under the new regulations, employers will not be able to reclaim SSP
from 30 September 2021 and any claims relating to periods prior to that date
must have been filed by 31 December 2021.
The Institute of Chartered Accountants in England and Wales (ICAEW)
said:
'It would appear that the
suspension of the requirement to wait for three days before SSP is paid has not
yet been repealed. The three-day rule was suspended temporarily during the peak
of the COVID-19 crisis to encourage people to stay at home as soon as they felt
ill.'
Internet link: ICAEW
website GOV.UK
The government has opened a £800 million Reinsurance Scheme to cover
live events against cancellations stemming from the COVID-19 pandemic.
The live events sector is worth more than £70 billion annually to
the UK economy and supports more than 700,000 jobs, including small businesses
and the self-employed.
The UK Live Events Reinsurance Scheme will support live events
across the country – such as concerts and festivals, conferences and business
events – that are at risk of being cancelled or delayed due to an inability to
obtain COVID-19 cancellation insurance.
The government has partnered with Lloyd's Market Association to deliver
the scheme as part of its Plan for Jobs.
The scheme will see the government act as a 'reinsurer', stepping in
with a guarantee to make sure insurers can offer the products events companies
need. The scheme is available from 22 September 2021 and will run until the end
of September 2022.
Chancellor Rishi Sunak said:
'The events sector supports
hundreds of thousands of jobs across the country and as the economy re-opens,
we're helping events providers
and businesses plan with confidence right through to next year.'
Internet links: GOV.UK
UK workers could get more choice over when and where they work under
new proposals to make the right to request flexible working a day one
entitlement.
The government will also introduce a day one right to one week's
unpaid leave for carers balancing a job with caring responsibilities. The
government says the plans will make for more productive businesses, whilst
accommodating both employee and employer needs.
The proposals consider whether limiting an employee's application
for flexible working to one per year continues to represent the best balance
between individual and business needs.
The consultation also looks at cutting the current three-month
period an employer has to consider any request.
If an employer cannot accommodate a request, as can be the case,
they would need to think about what alternatives they could offer.
Matthew Fell, Chief Policy Director at the Confederation of British
Industry (CBI), said:
'Businesses have learnt a
huge amount about the pros and cons of flexible working during the pandemic,
with many firms expecting to receive more formal and informal requests in the
future. Employers support giving employees the right to request flexible
working from day one in the job.
'Companies want to work
with the government to ensure that they can say 'no' when they have properly
considered requests but for good reason can't accept them.'
Internet link: GOV.UK CBI
website
COVID-19 emergency finance schemes offered £80.5 billion of finance
to almost 1.7 million businesses through the British Business Bank (BBB) during
the last financial year.
This support, which is not included under the Bank's core
programmes, was evenly distributed across the nations and regions of the UK.
In addition, the BBB supported £8.5 billion through its normal core
finance programmes, although this was below its target of £9.085 billion due to
displacement of existing programmes by COVID-19 emergency finance schemes.
The Bank was independently assessed as having deployed its expertise
to the government effectively, ranging from advice on COVID-19 scheme
development and delivery to fulfilling priorities on research and market
engagement.
Catherine Lewis La Torre, CEO of the BBB, said:
'Throughout 2020/21, in
response to the pandemic, the BBB performed a role vital to the UK government,
finance markets and the economy as a whole.
'Our financial support to
smaller businesses has increased by more than £80 billion during the last
financial year, and now stands at nearly £89 billion.
'We look forward to using
our unique position in the market to support businesses further as they recover
and return to growth once more, thereby rebuilding the foundations of the UK's
future prosperity.'
Internet link: British
Business Bank website
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