Newsletter 172

 

January 2023

In this month’s Enews we consider the delays to the next stages of Making Tax Digital and the impact of the pandemic on tax compliance. We also update you on the government’s mortgage guarantee scheme and the latest developments in the UK economy. With news on freeports and financial sector reforms, there is a lot to update you on.

• MTD for ITSA delayed for two more years
• Tax non-compliance during pandemic cost UK £9 billion
• Government extends mortgage guarantee scheme
• Chancellor announces Spring Budget date
• Bank of England raises base rate to 3.5%
• Brexit deal not delivering for businesses
• Plymouth and South Devon freeport gets go ahead
• Chancellor launches financial sector reforms
• Client news

 

MTD for ITSA delayed for two more years

The Treasury has announced that Making Tax Digital for income tax self assessment (MTD for ITSA) will be delayed for two more years until April 2026.

MTD for ITSA was due to take effect from April 2024 and would have required all self-employed individuals and landlords with income over £10,000 to report earnings quarterly through the MTD for ITSA system.

However, in a Written Statement, Victoria Atkins, Financial Secretary to the Treasury, confirmed that the mandation of MTD for ITSA will now be introduced from April 2026. Businesses, self-employed individuals and landlords with income over £50,000 will be required to join first. From April 2027, those with income over £30,000 will be mandated to join, the Treasury said.

Ms Atkins said:

‘The government understands businesses and self-employed individuals are currently facing a challenging economic environment, and that the transition to MTD for ITSA represents a significant change for taxpayers, their agents and for HMRC.

‘That means it is right to take the time needed to work together to maximise those benefits of MTD for small business by implementing gradually.’

The Treasury said that the government now intends to review the needs of smaller businesses in regard to MTD for ITSA, and will consider how the initiative can be shaped to meet their needs.

Once the review is finalised, the government will outline plans for any further mandation of MTD for ITSA.

The Treasury also stated that the government will not extend MTD for ITSA to general partnerships in 2025, saying that the government 'remains committed to introducing MTD for ITSA for partnerships at a later date'.

Internet link: UK Parliament website

Tax non-compliance during pandemic cost UK £9 billion

Tax non-compliance during the pandemic cost the UK government £9 billion, according to a report from the National Audit Office (NAO).

HMRC redeployed around 1,350 workers to Covid-19 support schemes throughout 2020/21, shrinking the number of those working on tax compliance, the NAO said.

This reduced the tax authority’s capacity to investigate people and businesses not paying the correct levels of tax, according to the NAO.

Before the pandemic, tax revenues from HMRC’s compliance work were on average 5.2% of its total revenues. This dropped to 4.2% between 2020 and 2022 causing a £9 billion reduction in revenues.

Gareth Davies, Head of the NAO, said:

‘HMRC had to move swiftly to reallocate resources to Covid-19 schemes, as the circumstances of the pandemic demanded. However, this directly affected its ability to investigate cases of people and businesses not paying the right tax.

‘There is now a risk that more people ultimately fail to pay the right tax or escape investigation or prosecution. It is concerning that HMRC’s planning indicates that non-compliance may grow following the pandemic. The next two years are critical, and swift action is likely to be needed to stem potential losses.

‘There is little doubt that HMRC’s compliance work offers good value for money, but it needs to evaluate its performance more consistently. Improving the effectiveness of HMRC’s compliance work can help maximise the amount of money available for public services in a challenging economic context.’

Internet link: NAO website

 

Government extends mortgage guarantee scheme

The Mortgage Guarantee Scheme will be extended by a year to the end of December 2023, helping people with 5% deposits on to the property ladder, the UK government has announced.

Under the scheme, the government offers lenders the financial guarantees they need to provide mortgages that cover the other 95%, subject to the usual affordability checks, on a house worth up to £600,000.

Launched in April 2021, the scheme has already helped over 24,000 households. It was originally planned to close at the end of this year but will now be extended until the end of 2023.

Chief Secretary to the Treasury, John Glen MP, said:

'For hard-working families facing today's challenging economic conditions, it's right that we continue to help them secure their first home or move into their dream house.

'Extending this scheme means thousands more have the chance to benefit, and supports the market as we navigate through these difficult times.'

Internet link: HM Treasury website

 

Chancellor announces Spring Budget date

Chancellor Jeremy Hunt has announced that the Spring Budget will be delivered on 15 March 2023.

Mr Hunt stated that he has commissioned the Office for Budget Responsibility (OBR) to prepare an economic forecast to accompany the Budget.

The Spring Budget will be the Chancellor's second fiscal event, following November's Autumn Statement. Mr Hunt used the Statement to reverse many of the tax cuts announced by his predecessor, Kwasi Kwarteng.

Internet links: UK Parliament website

 

Bank of England raises base rate to 3.5%

The Bank of England (BoE) has raised UK interest rates by half a percentage point to 3.5%.

It is the ninth consecutive increase and takes the base rate to its highest level for 14 years as the Bank battles to stem soaring prices.

The Bank's Monetary Policy Committee (MPC) voted 6-3 in favour of putting rates up by 0.5%. The BoE also warned that further increases may be necessary to tackle what it fears may be persistent domestic inflationary pressures from prices and wages.

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

'Another big interest rate rise from the BoE doesn't come as a surprise in the face of historically high inflation.

'However, with global price pressures starting to wane along with the economy set to fall into recession, it is likely that we'll see smaller interest rate rises for the foreseeable future. Nonetheless, high inflation and weakening activity will continue into 2023, putting strain on many households and businesses.'

Internet link: Bank of England website

 

Brexit deal not delivering for businesses

Over half of UK companies currently face difficulties in adapting to the new rules for trading goods with the EU, according to a British Chambers of Commerce (BCC) survey.

The survey also found that 77% of respondents who exported were unable to identify any growth as a result of the rule changes.

The post-Brexit trade deal, the trade and co-operation agreement (TCA), sees British and EU businesses facing no tariffs when sending goods in either direction.

However, there is extensive paperwork and red tape, alongside difficulties in getting visas approved for staff (44%).

The BCC has sent the government a report setting out the main issue the TCA is causing with solutions to many of the problems.

These include reaching agreement on the Northern Ireland Protocol and supplementary deals to reduce complexity for food exporters and exempt smaller firms from VAT requirements.

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

‘Businesses want political leaders on both sides to move on from the debates of the past and find ways to trade more freely.

‘This means an honest dialogue about how we can improve our trading relationship with the EU. With a recession looming we must remove the shackles holding back our exporters so they can play their part in the UK’s economic recovery.

‘If we don’t do this now then the long-term competitiveness of the UK could be seriously damaged. It is no coincidence that during the first 15 months of the TCA we stopped selling 42% of all the different products that we used to.

‘Businesses feel they are banging their heads against a brick wall as nothing has been done to help them, almost two years after the TCA was first agreed. The longer the current problems go unchecked, the more EU traders go elsewhere, and the more damage is done.’

Internet link: BCC website

 

Plymouth and South Devon freeport gets go ahead

The Plymouth and South Devon freeport has received final government approval.

It will now receive up to £25 million in seed funding to help boost investment and support the growth of regional businesses.

Freeports benefit from a range of measures, including tax reliefs, customs advantages, business rates retention, planning, regeneration and trade and investment support.

Tax incentives include enhanced capital allowances, relief from stamp duty land tax and employer National Insurance contributions for new employees.

Eligible new businesses moving into a freeport tax site, and some existing businesses that expand will also benefit from full business rates relief.

The approval will help accelerate the formation of advanced manufacturing clusters in marine, defence and space sectors, as well as delivering an estimated 3,500 jobs.

Dehanna Davison, Levelling Up Minister, said:

'Today is a historic day for Plymouth, South Devon and beyond, as the Plymouth and South Devon freeport gets up and running to drive growth and innovation locally and nationally.

'The freeport is going to shape the fortunes of the Plymouth and South Devon economies by pumping up to £100 million worth of investment across the region.

'We are maximising the opportunities of Brexit to drive growth and throw our doors open to the world.'

Internet link: PLYMOUTH.GOV.UK

 

Chancellor launches financial sector reforms

Chancellor of the Exchequer Jeremy Hunt is set to unveil over 30 regulatory reforms to the UK's financial sector, the government has announced.

The Chancellor will set out plans to repeal, and replace, EU retained laws governing financial services.

Mr Hunt says these reforms will unlock investment and turbocharge growth in towns and cities across the UK.

The plans included a commitment to make substantial legislative progress over the course of 2023 on repealing and replacing Solvency II – the rules governing insurers balance sheets.

As announced in the Autumn Statement, the government will look to announce changes to EU regulations in four other high growth industries by the end of 2023, including digital technology, life sciences, green industries and advanced manufacturing.

Chancellor of the Exchequer, Jeremy Hunt said:

'We are committed to securing the UK's status as one of the most open, dynamic and competitive financial services hubs in the world.

'The Edinburgh Reforms seize on our Brexit freedoms to deliver an agile and home-grown regulatory regime that works in the interest of British people and our businesses.'

Internet link: HM Treasury

 

Client News

In 2021, our client Fiona Hudson Kelly sold her Technology business .

By nature, Fiona is a well recognized and award winning business entrepreneur.

She has just published her second book  “Grow & Sell Your Start Up “ which offers information advice & inspiration to anyone who is just starting out in business.

It deals with all the difficulties & challenges which business life can throw at you together with real examples which needed to be overcome

Walker Thompson were involved in Fiona’s business journey and we wish her the best with this latest volume

The book along with her previous book “ Survival of the Smartest” are available through Amazon

Internet link: Amazon