AUGUST 2022
In this month’s Enews we consider the relaunch of the Recovery Loan Scheme. We also update you on increases to the National Insurance threshold and the IMF’s latest economic forecasts. With new Financial Services legislation going through Parliament and calls to make the super-deduction permanent, there is a lot to update you on.
HMRC starts chasing up SEISS overpayments
HMRC has started to recover overpayments of Self-employment Income Support Scheme (SEISS) grants.
From April, HMRC is writing to taxpayers whose entitlement to the fourth or the fifth SEISS grant has reduced by more than £100 to ask them to repay amounts that were overpaid.
Entitlement to the fourth and fifth SEISS grants can be affected by an amendment to a tax return. HMRC's letters include an assessment and a date by which you must make the repayment. If the payment is over 30 days late, a late payment penalty of 5% of the unpaid tax will be applied.
Even if you do not receive a letter, you must tell HMRC within 90 days if an amendment to a tax return affects your entitlement.
Anyone who needs to repay grants can make use of HMRC online tools to help them calculate what they owe. Individuals who receive a letter from HMRC are required to use the payment reference beginning with X when making their repayment.
If you are not able to pay in full, you may be able to set up a Time to Pay arrangement with HMRC.
HMRC names avoidance scheme promoters for first time
HMRC has named two tax avoidance schemes and their promoters for the first time, advising anyone involved to withdraw from them as soon as possible to prevent the build up of large tax bills.
Both schemes involve individuals working as contractors agreeing to an employment contract under which they are paid the National Minimum Wage (NMW). The balance of their wage is paid as a loan to try to avoid national insurance and income tax.
HMRC is letting taxpayers know as early as possible so they can steer clear of these schemes or exit them if they have already joined. This is the first time HMRC has used new powers to name tax avoidance schemes and their promoters as part of a campaign to warn the public not to get caught up in tax avoidance.
Mary Aiston, Director of Counter Avoidance at HMRC, said:
'These schemes are cynically marketed as clever ways to pay less tax. The truth is they rarely work in the way the promoters claim and it's the users that end up with big tax bills.
'New legal powers allow us to name promoters and the schemes they peddle much faster, and this announcement is just the first step. But we need the public to be vigilant, and that's why we're also helping people identify and steer clear of these schemes through our Tax Avoidance – Don't Get Caught Out campaign.'
Internet link: Tax Avoidance campaign website HMRC press release
New HMRC one-stop online shop provides taxpayers with tax relief information
HMRC has launched a new one-stop online shop designed to provide taxpayers with information on the tax reliefs and financial help available from HMRC.
In a new section of the GOV.UK website, HMRC has listed financial support available to ensure individuals are not missing out. There is guidance on relief for childcare and work-related expenses, as well as information about savings and getting help if you cannot pay your tax bill.
The shop is designed to make it easier than ever for taxpayers to claim the benefits, credits and allowances they are entitled to. HMRC has provided online guidance and tools to permit people to check if they are eligible for each relief.
Myrtle Lloyd, Director General for Customer Services at HMRC, said:
'We understand these are very difficult times for many so it's vitally important we continue to highlight the range of support available.
'We'd encourage those who think they may be eligible for support to take a look and claim what they're entitled to – it could make an important difference to household budgets at a time when it's needed the most.'
Internet link: GOV.UK
Export growth is 'stagnant', BCC finds
Data published by the British Chambers of Commerce (BCC) shows that UK export growth has been effectively stagnant for the past year.
The BCC's quarterly Trade Confidence Outlook revealed that the proportion of exporters reporting increased overseas sales was 29%, whilst 25% reported a decrease.
Manufacturers were more likely to report increased export sales than business-to-business firms or business-to-consumer firms (such as online stores), the data showed.
William Bain, Head of Trade Policy at the BCC, said:
'UK exporters are facing the headwinds of higher red tape costs from trading with the EU, raised raw material pressures and ongoing issues in global shipping markets.
'If we are to realise the aspirations of the UK government's Export Strategy then 2022 has to be the year where these structural factors holding back our exporters are addressed.
'Sustained export growth should be powering our economic recovery from the pandemic.'
Internet link: BCC website
Government inaction on long COVID could cost billions
There are now more than a million workers missing from the workforce compared to pre-pandemic figures, according to a report published by the IPPR think tank.
About 400,000 of these are no longer working because of health factors relating to the pandemic, including long Covid, according to the IPPR.
The report suggests that unresolved, this 'will drag down economic activity this year by an estimated £8 billion'.
The nation's health affects the economy in more ways than keeping workers away from their jobs. Poor health can affect productivity and promote chronic stress. Inhabitants of economically deprived areas of the country show poorer health, have fewer job opportunities and tend to be paid less.
Dame Sally Davies, co-chair of the Commission on Health and Prosperity, said:
'A fairer country is a healthier one, and a healthier country is a more prosperous one. While the restrictions have eased, the scars of the pandemic still remain deep on the nation's health and our economy.
'Not only are we facing a severe cost of living crisis, driven in part by pandemic induced inflation, we're also experiencing a workforce shortage driven by poor health that's holding back the economy. It has never been more important to put good health at the heart of our society and economy – and our commission will bring forward a plan to do just that.'
Internet link: IPPR website
Number of firms in critical financial distress rises sharply
A growing number of UK businesses are at risk of going under as costs spiral and Covid loan repayments become due, according to a report from insolvency firm Begbies Traynor.
Although COVID restrictions have been lifted, some firms are still feeling the impact of disruptions to supply chains, and the price of energy and other inputs have risen sharply.
Firms are finding it hard to recruit staff in some sectors, and wage costs, including the minimum wage and national insurance payments, have gone up.
As the cost of living rises, many UK households are looking for ways to save money, putting further pressure on businesses that rely on discretionary spending, like bars and restaurants.
The construction and hospitality sectors are the sectors struggling most, according to the report.
Julie Palmer, Partner at Begbies Traynor, said:
‘The government’s finances are themselves taking a hit from the increasing interest environment; they are simply not able to introduce further significant funding into the system, and they now have a choice to make. Do they rush to recover funds handed out during the pandemic to ensure there was a functioning economy afterwards? Or look for ways to control the number of businesses that fail?
‘Having put so much money into protecting businesses over the past two years, ministers won’t want to see it wasted as companies collapse, unable to repay their debts.’
Internet link: Begbies Traynor website
HMRC issues £14 million in penalties for minimum wage offences
HMRC issued 580 penalties totalling over £14 million for minimum wage offences during 2020/21, according to a report released by the Department for Business, Energy and Industrial Strategy (BEIS).
The penalties given out for national minimum wage (NMW) and national living wage (NLW) offences have dropped by £4.5 million from the year before, which saw 992 penalties worth £18.5 million.
BEIS’s report says that HMRC has adapted its communications to make it clear to workers that they have the option to remain anonymous if they make a complaint, and that they can report a previous employer for minimum wage breaches.
It also says it will be more transparent about the most common minimum wage breaches it finds, which include deductions from workers’ pay and unpaid working time, to help organisations remain compliant.
The report said:
‘BEIS therefore publishes an educational bulletin with each naming round to help raise awareness of minimum wage rules and improve compliance. Bulletins include analysis of the most common breaches in each naming round, examples to ensure understanding of how such breaches can be avoided, and links to the government’s Calculating Minimum Wage guidance for further details.’
Internet link: GOV.UK
Advisory fuel rates for company cars
New company car advisory fuel rates have been published and took effect from 1 June 2022.
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 2022 are:
| Engine size | Petrol |
| 1400cc or less | 14p |
| 1401cc - 2000cc | 17p |
| Over 2000cc | 25p |
| Engine size | LPG |
| 1400cc or less | 9p |
| 1401cc - 2000cc | 11p |
| Over 2000cc | 16p |
| Engine size | Diesel |
| 1600cc or less | 13p |
| 1601cc - 2000cc | 16p |
| Over 2000cc | 19p |
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 5p 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
MTD for income tax pilot extended
HMRC is extending the pilot for Making Tax Digital for Income Tax Self Assessment (MTD ITSA) to more self-employed workers and landlords.
From July, those taking part will be able to test MTD ITSA before April 2024, including their own internal processes for managing MTD.
Agents and customers are already taking part, and HMRC wants more agents to start signing up a small number of their clients to trial the system. It is noted that clients will need to have an accounting period that aligns with the tax year in order to take part in the pilot.
From April 2024, all businesses with annual income from self employment or property above £10,000 will have to follow MTD rules.
Under MTD, the quarterly reporting is a summary, providing a total of the incomes and outcomes going through the business per quarter. As a result, there is not necessarily a need to report under each property address as it is an accumulation of all the data that is required, HMRC said.
It commented:
‘We want to ensure this is well tested before mandation, and that agents and customers have opportunities to feedback on how it will work in practice. That’s why we’re running a pilot, inviting agents to recommend clients who can help us test and learn.
‘The pilot is still a test environment. Those taking part have the benefit of testing the MTD ITSA before April 2024, including their own internal processes for managing MTD.
‘Agents and customers are already taking part, and we would like to encourage more agents to start signing up a small number of their clients.’
Internet links: GOV.UK
HMRC criticised over IR35 implementation
HMRC needs to demonstrate that off-payroll working rules, commonly known as IR35, can operate effectively and fairly in the real world, according to a report by the Public Accounts Committee (PAC).
The tax authority should also investigate whether the costs and unintended consequences of IR35 are proportionate to the additional tax revenue that the reforms raise.
The PAC concluded that it is too difficult for workers to challenge incorrect status determinations.
It also said that HMRC is not doing enough to understand the impact of the reforms on workers and labour markets.
Dame Meg Hillier MP, Chair of the PAC, said:
'While workers in the gig economy have challenged their work and tax status in the courts, there is no recourse for workers deemed subject to IR35 tax rules despite the confusion and non-compliance that persist even in central government itself.
'After years of fiddling with these reforms and with central government spending hundreds of millions of pounds to cover tax for individuals wrongly assessed as self-employed, the fundamental problems underlying UK taxation of work remain.
'It is now up to HMRC to demonstrate that the system can work fairly in the real world; to prove that it is correctly claiming revenues under the system and that the additional revenues raised are worth the costs and unintended consequences in the labour market.'
Internet links: UK Parliament website
NICs increase has immediate impact on businesses
Four out of five employers stated that they were immediately impacted by the increase in national insurance contributions (NICs), according to research by the British Chambers of Commerce (BCC).
The BCC surveyed more than 1,100 UK employers and found that the NICs increase has caused negative impacts to 81% of businesses.
Firms said the rise in employer NICs from 13.8% to 15.05% has increased staffing costs, forced some to put up their prices and meant they would be limiting their investment.
As part of its call for an Emergency Budget, the BCC said the rise should be immediately reversed for at least a year, as firms battle surging costs on multiple fronts.
The BCC is calling for action to give businesses a chance to keep a lid on rising prices, boost productivity and ease cost pressures.
Hannah Essex, Co-Executive Director at the BCC, said:
'Businesses are telling us that the rise in NICs has been a body blow as they try to get back on their feet. With firms' profits also taking a further hit, after two years of the pandemic, it is no surprise that their investment intentions are also weakening.
'But it is not too late to change tack and push the increase back until firms are in a better place to take on the extra burden. The costs crises facing firms and people in the street are two sides of the same coin. If we can ease the pressure on businesses, then they can keep a lid on the price rises.'
Internet link: BCC press release
Manufacturers call for support package
Manufacturing trade body Make UK is calling for an emergency, pre-recess package of business support measures.
The call comes after a Make UK survey showed growth and orders slowing significantly with exports close to a standstill.
Make UK has made recommendations for measures the government can introduce now to address rising business costs, including:
- waiving or reducing business rates for the next 12 months
- implementing VAT deferrals for larger businesses and waiving completely for SMEs
- temporarily freezing the Climate Change Levy
- reviewing the efficacy of the business interruption loan schemes introduced during the pandemic and deploying a successor scheme
- extending the 130% super-deduction tax break, due to end in March 2023
- making the increase in the Annual Investment Allowance (AIA) permanent.
Stephen Phipson, chief executive of Make UK, said:
'Whilst industry has recovered strongly over the last year we are clearly heading for very stormy waters in the face of eyewatering costs and a difficult international environment. This threatens to shatter expectations of a sustained recovery from the pandemic.’
Internet link: Make UK website
New homeowners warned over tax refund claims
New homeowners are being warned about cold calls from rogue tax repayment agents advising them to make speculative Stamp Duty Land Tax (SDLT) refund claims, which could leave them with large tax bills.
The warning comes after a recent spate of Stamp Duty refund claims to HMRC failed to meet specific criteria.
The agents have been known to call new property owners after finding them through Land Registry records and property search websites, promising money back on 'unknowingly overpaid' SDLT.
Recent analysis undertaken by HMRC suggests that up to a third of claims for 'multiple dwelling relief' refunds were incorrect.
HMRC raises enquiries on these claims, but sometimes that is after the agent has taken their fee, leaving the homeowner to pick up the difference. Incorrect refund claims must be repaid with interest, with some potentially facing penalties as well.
Nicole Newbury, HMRC Director for Wealthy and Mid-sized Business, said:
'We are seeing obviously spurious refund claims that are never going to succeed; but will lead to an unnecessary bill for the customer.
'So, we are warning new homeowners not to get caught out by tax repayment agents promising easy money on a 'no win, no fee' basis. If it sounds too good to be true, it probably is. We want to help people get it right and avoid unnecessary tax bills, so treat promises of easy money with real caution.'
Internet link: HMRC press release
Recovery Loan Scheme to be relaunched
The Recovery Loan Scheme (RLS) will be relaunched during August 2022 as the government aims to continue supporting recovering small businesses.
The RLS launched in April 2021 and was originally scheduled to run until 31 December 2021.
At Autumn Budget 2021, the government extended the scheme by six months to 30 June 2022 and made some adjustments to its terms. The government provided a guarantee of 80% for loans made before 1 January 2022 and 70% for loans after that date. The borrower remains 100% liable for the debt.
According to the British Business Bank, accredited lenders have offered over £4.5 billion, through the RLS, to smaller UK businesses as they steer a path towards a sustainable recovery.
The relaunched RLS will support facility sizes of up to £2 million for borrowers outside the scope of the Northern Ireland Protocol, and up to £1 million for those in scope of the Northern Ireland Protocol.
The scheme will be open to smaller businesses with a turnover of up to £45 million.
Catherine Lewis La Torre, CEO, British Business Bank, said:
‘The British Business Bank is committed to supporting smaller businesses in accessing the finance they need to grow sustainably. Thousands of businesses in all sectors and from right across the UK have taken out loans under the RLS. This will better position them to confront both the challenges and opportunities that are ahead.’
Internet link: British Business Bank website
National insurance threshold rises to £12,570
The level at which people start paying national insurance rose from £9,880 to £12,570 from 6 July.
According to the government, 30 million people across the UK will benefit from this tax cut. It says the increase will lift 2.2 million people out of paying any personal tax.
The threshold change means that 70% of UK workers will pay less national insurance, even after accounting for the Health and Social Care Levy, the government added.
Prime Minister Boris Johnson said:
'We know it's tough for many families across the UK, but we want you to know that this government is on your side.
'Today's tax cut means around 70% of British workers will pay less national insurance - even after accounting for the Health and Social Care Levy that is funding the biggest catch-up programme in NHS history and putting an end to spiralling social care costs.
'So whether you are a receptionist, work in hospitality or are a delivery driver, this tax cut is likely to make you and your family better off.'
Internet links: HM Treasury press release
IMF warns UK is set for slowest rate of growth of G7 countries
The International Monetary Fund (IMF) has warned that the UK faces the slowest rate of growth in the G7 next year.
The IMF predicts that UK economic growth will fall to 0.5% in 2023, which is considerably lower than its previous prediction of 1.2%, which was forecast in April.
Russia's invasion of Ukraine and the Covid-19 pandemic has caused the global economy to shrink, the IMF stated. It has consequently cut its 2022 global growth forecast to 3.2%.
It also said that rising prices and higher borrowing costs are continuing to squeeze households and businesses around the world. The data revealed that in the three months to July, global economic growth contracted, marking the first decline since the onset of the pandemic.
The IMF predicts a 15% probability of recessions in the G7 economies, which include Germany, France, the US, the UK, Japan, Canada and Italy. This is almost four times higher than usual, according to the IMF.
Pierre-Olivier Gourinchas, Economic Counsellor and the Director of Research at the IMF, said:
‘The global economy, still reeling from the pandemic and Russia’s invasion of Ukraine, is facing an increasingly gloomy and uncertain outlook.
‘Higher-than-expected inflation, especially in the United States and major European economies, is triggering a tightening of global financial conditions. China’s slowdown has been worse than anticipated amid Covid-19 outbreaks and lockdowns, and there have been further negative spillovers from the war in Ukraine. As a result, global output contracted in the second quarter of this year.
‘The outlook has darkened significantly since April. The world may soon be teetering on the edge of a global recession, only two years after the last one. Multilateral cooperation will be key in many areas, from climate transition and pandemic preparedness to food security and debt distress.’
Internet links: IMF website
Reform required to combat staff shortages, says BCC
The British Chambers of Commerce (BCC) has called for action to help firms employ more staff amidst recruitment difficulties.
A survey carried out by the business group revealed that 61% of firms are looking to recruit more employees, but many are facing difficulties in doing so.
According to the BCC, the construction sector is facing the most severe recruitment challenges, with 83% of construction businesses reporting issues with recruiting skilled workers.
The BCC has outlined a three-point plan to help businesses recruit. This plan includes encouraging firms to 'find new ways of unlocking pools of talent'; helping employers invest in training; and reforming the Shortage Occupation List (SOL).
Jane Gratton, Head of People Policy at the BCC, said:
'Businesses remain under huge pressure to fill jobs, but record levels of recruitment difficulty are showing no signs of improvement. Solutions are urgently needed so that firms can keep their doors open throughout these tough times.
'We have written to the government outlining a three-point plan on how they can work with businesses to solve this.'
Internet link: BCC website
IoD calls for extension of capital allowances super-deduction
The Institute of Directors (IoD) has called on the government to extend the capital allowances super-deduction.
Data published by the IoD found that the super-deduction has had 'a positive and measurable impact' since it was introduced at Budget 2021. The data showed that 13% of firms reported that the super-deduction had had a direct impact on their level of investment undertaken between 2021and 2023. For half of these businesses, it was entirely new investment as a direct result of the super-deduction.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.
Under this measure a company will be allowed to claim:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
The relief is not available for unincorporated businesses.
The business group is urging the government to make the super-deduction permanent.
Kitty Ussher, Chief Economist at the IoD, said:
‘Our data shows the positive impact the super-deduction has already had in doing just that. We are therefore calling for the Chancellor to make it a permanent feature of doing business in Britain.
'It is wrong to look at declining overall levels of business investment in recent months and conclude that the super-deduction has not worked. Instead, our data shows that even less investment would have taken place if the super-deduction did not exist.'
Internet link: IoD website
Insurer warns of rise in fraudulent claims amid cost-of-living crisis
Insurer Zurich UK has stated that there has been a significant increase in the number of fraudulent claims as a result of the cost-of-living crisis.
Zurich found that between 1 January and 31 May 2022, the number of fraudulent property claims rose by 25% compared to the same period in 2021. It also stated that in the last five months, it has prevented fraud amounting to £4.2 million, which equates to more than £40,000 a day.
TVs, mobile phones and jewellery were some of the most common items fraudsters claimed to have had stolen or to have lost.
Scott Clayton, Head of Claims Fraud at Zurich UK, said:
'Sadly, many more people are facing hardships as a result of the cost-of-living crisis, which is contributing to an increase in fraudulent claims. Since the start of the year, we've seen a significant rise in bogus property claims as households and businesses come under increased financial strain.
'While exaggerating or faking a claim might seem like a chance worth taking, the consequences can be severe, with fraudsters facing criminal prosecution and potentially even a prison sentence.'
Internet link: Zurich website
New finance legislation aims to unlock investments
The government has introduced legislation to Parliament, which it says will enhance the competitiveness of the UK financial services sector and unlock tens of billions of pounds of investment.
The Financial Services and Markets Bill repeals hundreds of pieces of EU retained law to deliver a ‘comprehensive model of regulation for the UK’.
The government says this will establish a 'coherent, agile and internationally respected approach to financial services regulation that works in the interests of British people and businesses'.
The Bill will implement the government's vision for the sector that is 'open, green, technologically advanced and globally competitive – while maintaining high levels of consumer protection'.
Commenting on the legislation, David Postings, Chief Executive of banking industry group UK Finance, said:
'A successful financial services sector is critical for achieving economic growth and benefits the whole country – it is one of our most important industries, delivering jobs, investment and growth across every region.
'To ensure the sector continues to be successful, alongside maintaining the pace of reform, there needs to be a keen focus on international competitiveness from the next government.'
Internet link: HM Treasury press release
Pandemic-born businesses could add £20.4 billion to UK economy
More than £20 billion could be added to the UK economy in the future from the number of additional businesses created during the pandemic, according to research carried out by the Confederation of British Industry (CBI).
Around 800,000 companies were registered in the first year of the pandemic, a 22% increase compared with the previous year. Only 13% of these start-ups cited regulation as a challenge when starting their business.
However, access to finance was a key concern for many burgeoning business leaders, with 55% highlighting this post-2020, compared with 42% pre-Covid.
The research also found that businesses born during the pandemic are 20% more likely to embrace sustainability than firms established prior to 2020.
Tony Danker, Director General of the CBI, said:
'Pandemic-born businesses – led by ambitious, resilient entrepreneurs – have innovated in so many ways, and at such speed, giving me great sense of optimism. It's crucial we give these leaders the support they need to grow and succeed.
'Rising energy prices, supply chain challenges, an uncertain economic outlook and cost-of-living crisis mean we've some testing months, and possibly years, ahead. For start-ups which count their experience in months, not years, that environment is even tougher.
'That said, even if the cost of doing business is rising, the cost of starting a business shouldn't. The UK needs the ideas and ingenuity of entrepreneurs to help us grow.'
New Employee
We are pleased to announce that we have, this month, employed a new accounting apprentice Logan Thomas-Ryan. Logan is already starting his AAT qualification with us through CWT. Away from the office he is a Liverpool FC fan, although we don't hold that against him, and he enjoys mountain biking.
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