Newsletter 178

 

July 2023

In this month’s Enews we look at HMRC’s extension to the deadline for voluntary NICs and the temporary closure of the self assessment helpline. We also update you on cost overruns on Making Tax Digital and the latest on UK inflation. With guidance on the National Minimum Wage and another increase to the UK’s base interest rate, there is a lot to update you on.

• HMRC extends deadline for voluntary NICs to April 2025
• HMRC closes self assessment helpline for three months
• MTD expected to cost £1 billion more than originally forecast
• UK inflation stays at 8.7%
• Bank of England raises UK base interest rate to 5%
• More than 200 companies named and shamed for minimum wage breaches
• Post-Brexit trade plan must be replaced with 'ambitious strategy', says think tank
• Industrial strategy required to 'focus on innovation', says IoD

HMRC extends deadline for voluntary NICs to April 2025

HMRC has extended the voluntary national insurance contributions (NICs) deadline until 2025.

Extending the voluntary NICs deadline until 2025 will give people more time to consider whether paying voluntary contributions is right for them, and also ensures individuals do not miss out on the possibility of boosting their State Pension entitlements.

The original deadline was extended to 31 July 2023 earlier this year. HMRC said the new extension allows thousands more people to add extra years to their national insurance record.

HMRC stated that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022/2023 until 5 April 2025.

Victoria Atkins, Financial Secretary to the Treasury, said:

'People who have worked hard all their lives deserve to receive their State Pension entitlement, and filling gaps in national insurance records can make a real difference.

'With the deadline extended, there is no immediate rush for people to complete gaps in their record and they will have more time to spread the cost.'

Internet link: HMRC press release

 

HMRC closes self assessment helpline over the summer

HMRC has to closed its self assessment tax helpline over the summer to focus call centre resources on dealing with other problem calls.

All calls to the helpline will be redirected to digital services over the period to give HMRC time to deal with other more urgent phone enquiries.

The helpline will be closed until Monday 4 September.

During this time HMRC said it will 'trial directing self assessment queries from the helpline to the department's digital services, including its online guidance, digital assistant and webchat'.

HMRC will increase the number of advisers available on webchat, the online service helpline and the extra support team helpline.

Angela MacDonald, Deputy CEO and Second Permanent Secretary at HMRC, said:

'We continually review our services to see how they can best serve the public and we are taking steps to improve them.'

We are experienced in self assessment matters and dealing with HMRC. Please contact us if you have any queries.

Internet link: GOV.UK

 

MTD expected to cost £1 billion more than originally forecast

A report published by the National Audit Office (NAO) has found that HMRC's Making Tax Digital (MTD) initiative is expected to cost around £1 billion more than its initial £226 million budget, which was forecast in 2016.

MTD is intended to modernise the tax system for income tax self assessment, VAT and corporation tax. It requires taxpayers to keep records digitally and submit quarterly tax returns.

The NAO labelled HMRC's initial timeframe for the implementation of MTD as 'unrealistic'. It stated that bosses 'failed to take the scale of the task into account'.

According to the NAO, HMRC’s ability to secure value for money from MTD now relies on exploring the options for reducing costs, resolving questions about design and rigorously managing delivery risks.

The NAO has recommended that HMRC prepares a separate business case for MTD for Income Tax Self Assessment (MTD for ITSA) so that those making decisions can better understand the costs, benefits and risks associated with the initiative. It has urged HMRC to include 'greater clarity' on how taxpayers will be affected.

Gareth Davies, Head of the NAO, said:

'The repeated delays and rephasing of MTD have undermined the programme's credibility and increased its costs. They put at risk the support of taxpayers and delivery partners, including those who are essential to the programme succeeding.

‘HMRC’s plan to digitalise the tax system has the potential to improve the system’s efficiency and effectiveness. It has made some recent progress on VAT but it has not yet tackled the most complex elements of the programme and significant delivery risks remain.’

Internet link: National Audit Office website

UK inflation stays at 8.7%

The UK's rate of inflation plateaued at 8.7% in May, data published by the Office for National Statistics (ONS) has shown.

Inflation was expected to fall in May but remained at 8.7% – the same rate as was recorded in April. The rate of 8.7% is higher than economists had expected, and many now anticipate a rise in interest rates.

Experts have stated that so-called 'core inflation' – which excludes volatile elements such as food, fuel and energy prices – is now at its highest level in the UK for over 30 years. Many warn that the high inflation rate will have knock-on effects for mortgages.

UK inflation is higher than inflation rates in comparable countries, the data revealed: Germany recorded a rate of inflation of 6.3%; France's rate is currently 6%; and the USA's inflation rate is 2.7%.

Chancellor Jeremy Hunt said:

'We need to squeeze every last drop of high inflation out of the economy.

'Inflation is the biggest, the most invidious, tax rise the British people are facing right at the moment because it is eroding the value of their salaries – so that is our primary priority.'

Internet link: Office for National Statistics website

Bank of England raises UK base interest rate to 5%

The Bank of England has raised UK interest rates to a 15-year high of 5% as it continues its battle against inflation.

Despite concerns that mortgage-holders face a timebomb of higher rates, the Bank's Monetary Policy Committee (MPC) decided to raise its benchmark rate from 4.5% to 5%, an increase of half a percentage point.

It is the 13th increase in UK interest rates in a row, going back to December 2021.

Chancellor Jeremy Hunt said:

'High inflation is a destabilising force eating into pay cheques and slowing growth.

'Core inflation is higher in 14 EU countries and interest rates are rising around the world, but the lesson from other countries is that if you stick to your guns, you bring inflation down.

'Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages. If we don't act now, it will be worse later.'

Internet link: Bank of England website

 

More than 200 companies named and shamed for minimum wage breaches

Over 200 employers have been named by the government for failing to pay their lowest paid employees the minimum wage.

The 202 employers were found to have failed to pay their workers almost £5 million in a clear breach of the National Minimum Wage (NMW) law, leaving around 63,000 workers out of pocket.

Companies named and shamed range from major high street brands to small businesses and sole traders.

The businesses named have since paid back what they owe to their employees and have also been given financial penalties.

The employers named previously underpaid workers in the following ways:

• 39% of employers deducted pay from workers' wages
• 39% of employers failed to pay workers correctly for their working time
• 21% of employers paid the incorrect apprenticeship rate.

Minister for Enterprise, Markets and Small Business, Kevin Hollinrake, said:

'Paying the legal minimum wage is non-negotiable and all businesses, whatever their size, should know better than to short-change hard-working staff.

'Most businesses do the right thing and look after their employees, but we're sending a clear message to the minority who ignore the law: pay your staff properly or you'll face the consequences.'

Internet link: GOV.UK

Post-Brexit trade plan must be replaced with 'ambitious strategy', says think tank

The Resolution Foundation think tank has called for the government to replace the initial post-Brexit trade plan with a 'far more ambitious' strategy to help protect Britain's manufacturing firms and seek new markets for UK services firms.

A report published by the Foundation found that the UK's initial post-Brexit trade plan to secure Free Trade Agreements (FTAs) with other countries had 'been largely successful'.

However, it suggested that this approach has 'run out of road' as FTAs with the US and China 'are not on the horizon'. According to the think tank, Britain's high value manufacturing sector is 'particularly vulnerable' following the UK's exit from the EU as it often relies on being part of European supply chains.

It warned that manufacturing firms' positions in these chains will erode over time as a result of higher trade costs.

The Resolution Foundation said that a new 'twin-track' trade strategy is needed, with a defensive focus on goods and a fresh approach to promoting the UK's strengths as the world's second largest exporter of services.

Sophie Hale, Principal Economist at the Resolution Foundation, said:

'For the first time in half a century Britain needs a trade strategy. But it does not have one.

'A new strategy must recognise the nature of the UK economy, developments in global trade patterns, and rising geopolitical tensions regarding goods trade in particular. That requires a twin-track approach, protecting important high value manufacturing sectors, from cars to chemicals, struggling to retain their place in European supply chains, while focusing on new markets for its world-leading services firms.'

Internet link: Resolution Foundation website

Industrial strategy required to 'focus on innovation', says IoD

The Institute of Directors (IoD) has urged the government to create an industrial strategy to help 'define specific long-term priorities for the UK economy'.

A survey carried out by the IoD revealed that 88% of its members favour the development of an industrial strategy. Less than 10% of IoD members think economic growth should be generated by market forces.

The survey found that firms want an industrial strategy that focuses on reinforcing the UK's capabilities as a centre of excellence for Research and Development (R&D) and green investment.

The survey found that 58% of firms believed that the strategy should also focus on the development of skills, and 57% would like it to champion developing infrastructure.

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

'The recent priority for UK government policy has been on regaining economic and financial stability, and in laying the groundwork for the return of economic growth.

'However, this is not enough to sustain the competitiveness of UK business. Business leaders clearly see the value of a longer-term policy framework which places innovation at its core, and which enables innovations to be commercially exploited in the UK.

'Experience suggests that UK policymakers are ill-suited to 'picking winners', either in terms of companies or sectors.'

Internet link: IoD website

 

HMRC Suspends Taxpayer Support Telephone Line

 

 

HMRC Suspends Taxpayer Support Telephone Line

HMRC has temporarily suspended the Self Assessment general telephone line for the general public.

The general number will re-open on 4 September because, according to Angela McDonald, Deputy CEO at HMRC, “Self Assessment is a seasonal issue and demand for the service is much lower during the summer”.

This may be great for those people who might otherwise spend an hour of their life “on hold” before being cut off & having to start again but it seems that there is really no hard evidence to support that assertion.

McDonald went on to say that the suspension was in part due to not having received sufficient Government funding.

The suggested response is that people should look at the Government website FAQ’s & use HMRC’s webchat service

It seems as though this “trial” could be stopped and the phone line reinstated if demand proved it necessary.

 How will they know if they stop answering the phones?

 

 

R&D Tax Credits

 

We are now starting to see enquiry letters from HMRC with regard to Research & Development (R&D ) Claims made by clients.

In all cases the claims were made by clients who used the services of 3^rd party “R&D Claims companies”

HMRC clearly did not anticipate the spectacular increase in claims being made as a consequence of the R&D legislation & the benefits to be gained.

This, of course, has led to a market place in which some unscrupulous companies have received significant fees for assisting companies to make R&D claims, many of which would in reality never meet the HMRC criteria.

Companies are increasingly finding “that if it sounded too good to be true then it probably was".

Enquiries being sent out by HMRC seem to be very much on the offensive – We think the claim is wrong so you need to now prove it was correct.

The problem is that if a claim is found to be incorrect then interest & penalties will follow.

In the event of a wrongful claim, HMRC are duty bound to consider penalties and mitigation is based generally around the following principles :-

1/ Did the company ( not the 3^rd party advisors) fully understand the R&D Guidelines?

2/ How did the company come to the conclusion that it qualified as R&D?

3/ Did the company seek advice from its regular accountants or just rely upon what a so-called “ R&D specialist “ told them?

4/ Has the company ever discussed R&D previously with HMRC?.

5/ Why did the company decide to make a claim? – it is not sufficient to say “ we relied upon someone who told us they were experts”

The core problems with claims made appears to be that they are based not upon true innovation but upon extending something which already exists albeit perhaps in a different format.

HMRC have said that in the worst cases of mis-claiming, they wii punish those involved by naming & shaming them That is  it seems, hardly a dis-incentive

If companies wish to make an R&D claim we would encourage them to check with us first as to the validity – penalties can be very expensive

 

Newsletter 177

 

June 2023

In this month’s Enews we look at the latest analysis of inflation and a reminder from HMRC on tax refunds. We also update you on record numbers of early self assessment filers and the latest increase in HMRC’s interest rates for repayments. With details on an increase in higher rate taxpayers and the new advisory fuel rates, there is a lot to update you on.

• UK rate of inflation fell sharply in April
• Number of early self assessment filers doubles in five years
• HMRC increases late payment interest rate to 7%
• 'Fresh thinking' needed in regard to MTD for ITSA
• One in five workers will be higher rate taxpayers by 2027, says IFS
• Energy suppliers urged to renegotiate fixed contracts for small businesses
• Advisory fuel rates for company cars

UK rate of inflation fell sharply in April

The UK rate of inflation fell to 8.7% in April from 10.1% in March, according to the latest data from the Office of National Statistics (ONS).

The fall has been attributed to energy price rises slowing from their hikes in 2022.

The rate at which grocery prices rose slowed marginally in the year to April, but at 19.1% is close to record highs.

The ONS said that while food price inflation was still close to its recent peak, the prices of staples like bread, cereal, fish, milk and eggs were rising slightly less quickly.

Chancellor Jeremy Hunt said:

'The IMF said yesterday we've acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast.

'So, as well as helping families with around £3,000 of cost-of-living support this year and last, we must stick resolutely to the plan to get inflation down.'

Internet link: ONS website

 

Number of early self assessment filers doubles in five years

The number of self assessment taxpayers filing their tax return on the first day of the tax year has more than doubled since 2018, HMRC has revealed.

More than 77,500 customers submitted their tax return for the 2022/23 tax year on 6 April 2023, compared to almost 37,000 customers on 6 April 2018.

The deadline to file tax returns for the 2022/23 tax year is 31 January 2024 and customers have been able to submit theirs since the start of the new tax year.

HMRC says that by completing their self assessment return early, customers avoid the stress of last-minute filing – something which encouraged more than 860,000 customers to file their tax return for the 2021/22 tax year on 31 January 2023.

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

'Filing your self assessment early means you can spend more time building your business or doing the things that you enjoy and less time worrying about completing your tax return.'

Internet link: GOV.UK

HMRC increases late payment interest rate to 7%

Following the Bank of England’s latest increase in the base rate, HMRC has increased both late paid tax and the rate paid on repayments of tax.

The Bank increased the base rate to 4.5% from 4.25% on 11 May, the 12the consecutive rise.

The late payment and repayment interest rates follow this rise and are applied to the main taxes and duties that HMRC currently charges and pays interest.

The late payment interest rate will increase by 0.25% to 7% from 31 May. This is the highest rate since the start of the financial crisis in November 2008.

Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gains tax, corporation tax pay and file, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 7%.

Repayment interest will also be increased from the current 3.25% rate to 3.5%.

Corporation tax self assessment interest rates relating to interest charged on underpaid quarterly instalment payments rose to 5.25% from 5% a week earlier on 22 May.

Internet link: GOV.UK

'Fresh thinking' needed in regard to MTD for ITSA

The Institute of Chartered Accountants in England and Wales (ICAEW) has written to HMRC regarding how Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) can be better shaped to suit the needs of small property businesses and the self-employed.

On 19 December 2022, HMRC announced the deferral of MTD for ITSA's start date and an informal review into the initiative.

The ICAEW has written to HMRC to outline key points that it believes should be considered before the implementation of MTD for ITSA. These include rethinking the 'disproportionate' administrative burden associated with quarterly updates; decoupling the requirements to maintain digital records and to submit details of income from self-employment and property directly from software; and refocusing the MTD for ITSA initiative on digital record keeping and filing from software.

HMRC intends to make its final recommendations on MTD for ITSA to the Financial Secretary to the Treasury in June 2023.

Internet link: ICAEW website

One in five workers will be higher rate taxpayers by 2027, says IFS

The number of people paying income tax at 40% or above will reach 7.8 million by 2027/28, according to research published by the Institute for Fiscal Studies (IFS).

This represents one in five taxpayers and one in seven of the adult population – a near-quadrupling of the share of adults paying higher rates since the early 1990s, the IFS said.

It stated that the six-year freeze to income tax allowances and thresholds which started in April last year is set to become the single biggest tax-raising measure since Geoffrey Howe doubled VAT in 1979.

Isaac Delestre, Research Economist at the IFS, said:

'For income tax, the story of the last 30 years has been one of higher-rate tax going from being something reserved for only the very richest to something that a much larger proportion of adults can expect to encounter.

'The freeze to thresholds is supercharging that process, pulling an additional 2.5 million more people into paying rates of 40% or more by 2027/28. Whether or not the scope of these higher rates should be expanded is a political choice as much as an economic one, but achieving it with a freeze leaves the income tax system hostage to the vagaries of inflation – the higher inflation turns out to be, the bigger impact the freeze will have.'

Internet link: IFS website

Energy suppliers urged to renegotiate fixed contracts for small businesses

The Federation of Small Businesses (FSB) has urged energy suppliers to renegotiate fixed contracts for small firms on market-peak tariffs.

Research carried out by the FSB revealed that many small businesses are trapped in contracts that mean that their latest bills are at last summer's peak market rate for energy, despite wholesale prices having fallen since the winter of 2022.

13% of small firms polled fixed their energy contracts during market peak in 2022, the FSB found. It suggested that 93,000 small businesses could be forced to downsize, restructure or even close.

The business group has urged energy suppliers to give small businesses the option to 'blend and extend' their fixed energy contracts, allowing them to renegotiate or sign up for longer.

Tina McKenzie, Policy Chair at the FSB, commented:

'Having come out from a tough winter, this spring is supposed to be the beginning of economic recovery, but tens of thousands are still very much in survival mode because they are tied-in to sky-high energy contracts.

'Many small businesses agreed to lock in energy contracts last year to ensure they qualified for the maximum level of government support. Now, with that support largely disappearing, they are once again faced with massive energy bill hikes as rates go back to pre-Energy Bill Relief Scheme level.'

Internet link: FSB website

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 June 2023.

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

The advisory fuel rates for journeys undertaken on or after 1 June 2023 are:

 

Engine size	Petrol
1400cc or less	13p
1401cc - 2000cc	15p
Over 2000cc	23p

 

Engine size	LPG
1400cc or less	10p
1401cc - 2000cc	12p
Over 2000cc	18p

 

Engine size	Diesel
1600cc or less	12p
1601cc - 2000cc	14p
Over 2000cc	18p

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

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

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 9p per mile. Electricity is not a fuel for car fuel benefit purposes.

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

Internet link: GOV.UK AFR

 

Newsletter 176

May 2023

In this month’s Enews we look at the closure of the VAT filing portal and the latest rate of UK inflation. We also update you on the impact of frozen tax thresholds and pandemic support scheme fraud. With guidance for employers and warnings on scams, there is a lot to update you on.

• Online VAT filing portal to close in May
• UK inflation falls to 10.1% in March
• Tax threshold freeze trebles to £25 billion
• PAC criticises government for billions lost to error and fraud
• No sign of hiring difficulties easing, says BCC
• £177.6 million lost to impersonation scams in 2022
• Workers must be protected from decisions made by AI, TUC says
• Latest guidance for employers

Online VAT filing portal to close in May

HMRC has reminded businesses that file VAT returns annually that the online VAT filing portal will close from 15 May 2023.

The VAT portal closed to standard quarterly filers on 7 November 2022, but was kept open for a longer period for those who file annual returns.

In emails to businesses and tax agents, HMRC urged all VAT registered businesses to use Making Tax Digital for VAT (MTD for VAT) compatible software to keep VAT records digitally and file VAT returns.

Following the closure of the portal, businesses that file VAT returns annually will no longer be able to use their VAT online account and instead must use compatible software to file future VAT returns.

HMRC said that businesses that fail to do so may have to pay a penalty.

If a business is already exempt from filing VAT returns online or if it is subject to an insolvency procedure, it is automatically exempt. Business owners can apply for an exemption if it's not reasonable or practical for them to use computers, software or the internet to follow the MTD for VAT rules.

Internet link: GOV.UK

 

UK inflation falls to 10.1% in March

UK inflation has dropped, but remains in double-digit levels, as the cost-of-living crisis eased slightly in March.

The annual consumer prices index dropped to 10.1% in March, down from 10.4% in February, the Office for National Statistics (ONS) reported.

It was widely expected to fall below 10%, but food prices remained stubbornly high, rising at their fastest rate in 45 years.

Increased prices for bread, cereal and chocolate meant the cost of living rose more than expected last month.

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

‘Prices continue to rise at an alarming rate. Driven largely by housing and food costs, this is on top of an already high growth rate from this time last year.

‘Our research shows that inflation is still by far and away the top concern for UK SMEs. This has been driven by three years of global lockdowns, supply chain crises, energy shocks, and new trade barriers with the EU.

‘Small businesses, particularly those in the retail and hospitality sector, have been the least able to absorb cost rises, and we see that most have not invested or grown.

‘Businesses need to see a reduction in the cost and burden of exporting and importing, particularly with the EU, as well as increased support to deal with the unprecedented energy price shock.’

Internet link: ONS website BCC website

 

Tax threshold freeze trebles to £25 billion

Research carried out by think tank the Resolution Foundation has suggested that the size of the UK's six-year 'stealth tax' threshold freeze has nearly trebled to £25 billion.

The figure is significantly higher than the previous forecast of £9 billion announced during the 2021 Budget.

A small number of tax thresholds have been frozen since 2021/22 and are set to remain frozen until April 2028. The think tank found that next year's threshold freeze will raise £12 billion a year by the time of the final freeze in 2027/28.

Adam Corlett, Principal Economist at the Resolution Foundation, said:

'High inflation has pushed up the projected revenue take from the government's personal tax threshold freeze to £25 billion a year – almost triple the amount forecast when the freeze was introduced. But higher-income households will be the ones most affected by next year's major tax rises.

'High inflation also means benefits are being uprated by 10.1 in April, which will boost low-income households' finances, although benefits are only set to fully catch up with price rises after April 2024's uprating.'

Internet link: Resolution Foundation website

PAC criticises government for billions lost to error and fraud

The Public Accounts Committee (PAC) has criticised the government for losing billions of taxpayers’ money to fraud and error in pandemic support.

The Department for Business and Trade (DBT) is ‘effectively writing off’ nearly £1 billion paid out erroneously by local authorities on its behalf in pandemic support. Meanwhile, of an estimated £2.2 billion lost to fraud and error in Covid-19 schemes, only about £10 million has so far been recovered.

The PAC’s report says the DBT continues to make slow progress on its counter fraud activities related to the Bounce Back Loan Scheme, and its ‘lack of curiosity’ about lenders’ performance increases the risk of losses for the taxpayer.

Despite accepting that grant payments made through councils to their local businesses under Covid-19 business support grant schemes were ‘not in line with how the scheme was meant to work’, the Business Department does not expect to recoup these funds. Of the estimated £985 million of grants paid out in error, only £5.3 million has been recovered.

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said:

‘At a time of financial crisis, the Department for Business has lost billions of taxpayers’ desperately needed funds. It shows no real signs of making the improvements that would prevent the big mistakes it has made over many years, especially during the pandemic, happening all over again.’

Internet link: Parliament website

 

No sign of hiring difficulties easing, says BCC

Businesses are still facing major difficulties in hiring new staff, according to a survey conducted by the British Chambers of Commerce (BCC).

The latest Quarterly Recruitment Outlook (QRO), a survey of more than 5,000 UK firms, found that 80% of those attempting to recruit have faced challenges.

While recruitment difficulties are being experienced across the economy, firms in the hospitality and manufacturing sectors were the most likely to report recruitment difficulties. This is closely followed by the construction and engineering sector and then professional services; and the public, education and health sector.

The BCC is calling on the government to work with business on solutions including skills training, investment and urgent reform of the Shortage Occupations List (SOL).

Jane Gratton, Head of People Policy at the BCC, said:

‘People shortages are a massive issue and employers can see little sign of improvement. The high number of unfilled job vacancies is damaging businesses and the economy. Firms are struggling to fulfil order books and turning down new work.

‘There is no quick fix and employers and the government need to work together to find solutions. While firms can do more to make workplaces more flexible and jobs easier to access, the government must redouble its efforts to encourage and help people into work.’

Internet link: BCC website

£177.6 million lost to impersonation scams in 2022

£177.6 million was lost to impersonation scams in 2022, data published by trade association UK Finance has revealed.

The data showed that there were 45,367 cases of impersonation scams in 2022. It also revealed that just 51% of individuals always check whether a request for personal data or money is legitimate. Just 38% of 18–34-year-olds always checked, according to UK Finance's research.

Impersonation scams involve criminals pretending to be a trusted organisation such as a utility company, your bank or the police, and often begin with an email, text or call with a request for money or personal information.

UK Finance says individuals should stop and take a moment to think before parting with money or information; challenge any unsolicited communication; and protect themselves and their finances by contacting their bank immediately if they think they've fallen for a scam.

Katy Worobec, Managing Director of Economic Crime at UK Finance, said:

'We receive genuine communication from trusted organisations on a daily basis, meaning it’s not always easy for us to spot when an approach for information is in fact from a criminal.

‘Anyone can be caught out by a scam in the heat of the moment and criminals are constantly adapting their tactics to appear legitimate.

'It has never been more important to take steps to check for genuine communication and follow the advice of the Take Five to Stop Fraud campaign and to stop, challenge and protect.'

Internet link: UK Finance website

Workers must be protected from decisions made by AI, TUC says

The Trades Union Congress (TUC) has stated that UK employees must be protected from workplace decisions made by artificial intelligence (AI) systems.

The TUC warned that, in some instances, AI technology is making 'life-changing' decisions, including those in relation to line managing, hiring and firing.

AI systems are being used to analyse the facial expressions and tone of voice of job applicants during recruitment processes. The TUC said that this could lead to 'greater discrimination at work'.

It also suggested that AI technologies could be used by employers to track their employees' performances and make automated decisions to help to dismiss employees.

TUC Assistant General Secretary Kate Bell said:

‘AI is going to transform the way millions work in this country and is already being used across the economy to line-manage and hire and fire staff.

‘Without fair rules, this could lead to widespread discrimination and unfair treatment at work.

‘But the government is refusing to put in place the necessary guardrails to stop people from being exploited.

‘Instead of clear and enforceable protections, ministers have issued a series of vague and flimsy commitments that are not worth the paper they are written on. And they have failed to provide regulators with the resources they need to do their jobs properly.

‘It’s essential that employment law keeps pace with the AI revolution. But last month’s dismal AI white paper spectacularly failed to do that.’

Internet link: TUC website

Latest guidance for employers

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

• reporting expenses and benefits for the tax year ending 5 April 2023
• the annual ‘Tell ABAB’ survey gives small businesses a voice in the tax system
• understanding your obligations on right to work and National Minimum Wage
• anti-money laundering supervision YouTube videos to help businesses
• preparing for the Economic Crime Levy
• the official rate of interest from 6 April 2023.

Please contact us for help with tax matters.

Internet link: Employer Bulletin 

Newsletter 175

 

April 2023

In this month’s Enews we look at the measures taken in the Spring Budget and the business reaction to the Chancellor’s statement. We also update you on the abolition of the pensions lifetime allowance and the rising interest rates. With details on voluntary national insurance contributions and Welsh freeports, there is a lot to update you on.

• Capital allowances reformed in 'Budget for growth'
• Business groups welcome Spring Budget
• HMRC issues guidance on abolition of pensions lifetime allowance
• Bank of England raises UK interest rates to 4.25%
• HMRC late payment interest rate hits 6.75%
• Taxpayers given more time for voluntary national insurance contributions
• Two freeports confirmed for Wales
• Small businesses at risk as energy costs rise

 

Capital allowances reformed in 'Budget for growth'

A £27 billion transformation of capital allowances from April was announced by Chancellor Jeremy Hunt as he delivered a 'Budget for growth'.

The Spring Budget followed an improved forecast from the Office for Budget Responsibility (OBR). The OBR said it expects the UK to avoid a technical recession this year, with a stronger-than-expected performance from the economy as inflation continues to fall.

The Chancellor announced that a £27 billion transformation of capital allowances from April this year will include 'full expensing' of investment on IT and plant and machinery for three years, plus an extension to the 50% first-year allowance in the same period.

There was also a £500 million package for research and development (R&D)-intensive businesses. In addition, Mr Hunt announced 12 investment zones across the UK, with funding for skills and support.

Reforms to childcare, which will see free care expanded for children over the age of nine months, were key to Mr Hunt's plans to remove the barriers to work. A range of other measures were also announced to encourage parents, the disabled and the over-50s back into the workplace.

The Chancellor also made changes to the pension system to provide incentives for doctors and other highly-skilled workers to remain in the labour market.

As high energy costs continue to affect the UK, the Chancellor extended the Energy Support Guarantee (ESG) at £2,500 for another three months, while fuel duty was frozen once more.

Mr Hunt said:

'Our plan is working – inflation falling, debt down and a growing economy.

'Britain is on a lasting path to growth with a revolution in childcare support, the biggest ever employment package and the best investment incentives in Europe.'

Internet link: GOV.UK

 

Business groups welcome Spring Budget

The UK’s business groups largely welcomed the measures taken in the Chancellor’s Spring Budget.

The Confederation of British Industry (CBI) branded the Budget as a 'strong second act' in Mr Hunt's plan for stability and growth. Matthew Fell, Interim Director General of the CBI, said:

'The CBI called for action on people and productivity and the government has delivered support for both. Measures to help households and businesses will secure the growth we need to boost living standards for all.

'Boosting childcare provision is a big win for businesses struggling to recruit and retain, and parents balancing care and career needs.'

The British Chambers of Commerce (BCC) praised the Chancellor for his changes to free childcare for working parents.

Shevaun Haviland, Director General of the BCC, commented:

'The Chancellor has acted to address the unfilled jobs blighting our economy. It is especially good to see the help on childcare and for over 50s workers. The plans for full capital expensing are also a step in a right direction to offset the rise in corporation tax, but the jury is out on how it will impact businesses compared to the super-deduction scheme.'

Meanwhile, the Institute of Directors (IoD) said that it 'strongly supports' the Chancellor's decision to allow all investment expenditure to be set against revenue for tax purposes in the year it is spent.

Kitty Ussher, Chief Economist at the IoD, said:

'Our economy has been held back in recent years because people running businesses have felt nervous of committing to investment when the climate is so uncertain. The introduction of 100% full expensing for the next three years is therefore very welcome, and we urge it to be continued thereafter.'

However, the Federation of Small Businesses (FSB) stated that the Budget 'will leave many feeling short-changed'.

Martin McTague, National Chair of the FSB, said: 'The distinct lack of new support in core areas proves that small firms are overlooked and undervalued. Budgets are about tough choices, and with . . . billions being allocated to big businesses and households, 5.5 million small businesses and the 16 million people who work for them will be wondering why the choice has been made to overlook them.'

Internet link: CBI website BCC website IoD website FSB website

 

HMRC issues guidance on abolition of pensions lifetime allowance

HMRC recently issued preliminary guidance in regard to the abolition of the pensions lifetime allowance.

At the Spring Budget, Chancellor Hunt announced that the lifetime allowance charge will be removed from 6 April 2023. The allowance will be fully abolished from the 2024/25 tax year via a future Finance Bill, HMRC said.

HMRC states that pension scheme administrators ‘will need to continue to operate lifetime allowance checks when paying benefits (for example, assessing whether an individual has available lifetime allowance) and to issue benefit crystallisation event statements.

‘However, following the standard lifetime allowance checks, for a benefit crystallisation event occurring after 6 April 2023 no lifetime allowance charge will arise and there will be no requirement to report lifetime allowance charges on the accounting for tax return (AFT).’

As a result of the abolition of the lifetime allowance, the maximum amount most members can take as a pension commencement lump sum will be frozen at £268,275, which is 25% of the current standard lifetime allowance of £1,073,100. However, members with a protected right to a higher pension commencement lump sum on 5 April 2023 will continue to be able to access this right.

Internet link: HMRC website

 

Bank of England raises UK interest rates to 4.25%

Interest rates have been increased to 4.25% from 4% by the Bank of England (BoE) as it tries to slow rising prices.

The BoE's decision to increase rates for the 11th time in a row comes after figures showed that the cost of living has risen by more than expected. Data published recently by the Office for National Statistics (ONS) showed that inflation jumped to 10.4% in the year to February, despite predictions it would fall.

The Monetary Policy Committee (MPC) voted in favour of the latest rise by a majority of seven to two.

Commenting on 23 March, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said:

'Today’s decision to increase the interest rate indicates the Bank are still pursuing strong action following yesterday’s surprise rise in inflation. Record high inflation remains the top issue of concern for SMEs and it has been wiping out their ability to invest and grow for almost two years now.

'However, an interest rate rise alone is a blunt instrument that doesn't address some of the fundamental causes of inflation, such as failure in the energy market and global supply chain shocks.'

Internet link: BoE website BCC website

 

HMRC late payment interest rate hits 6.75%

HMRC has revised interest rates with late payment bills charged 6.75% from 13 April, the highest level since January 2008

The late payment and repayment interest rates follow the rise in the Bank of England base rate to 4.25% on 23 March and are applied to the main taxes and duties that HMRC currently charges and pays interest. The rates will rise to:

• late payment interest rate — 6.75% from 13 April 2023
• repayment interest rate — 3.25% from 13 April 2023.

This means that the late payment interest rate will increase by 0.25% to 6.75% from 13 April. This is the highest rate since the start of the financial crisis in November 2008. The previous increase to the rate was to 6.5% on 21 February.

Late payment interest is payable on late tax bills covering income tax, National Insurance contributions, capital gain tax, stamp duty land tax, stamp duty and stamp duty reserve tax. The corporation tax pay and file rate also increases to 6.75%.

Internet link: GOV.UK

 

Taxpayers given more time for voluntary national insurance contributions

The government has extended the voluntary national insurance deadline to give taxpayers more time to fill gaps in their contributions and boost their state pensions.

The extension comes after members of the public voiced concerns over the previous deadline of 5 April 2023.

As part of transitional arrangements to the new state pension, taxpayers have been able to make voluntary contributions to any incomplete years in their national insurance record between April 2006 and April 2016. After an increase in customer contact, the government has extended the deadline to 31 July 2023 to ensure people have time to make their contributions.

The extension of the deadline was announced via a written Ministerial Statement, and HMRC is urging taxpayers to ensure they do not miss out.

Individuals with gaps in their national insurance record from April 2006 onwards now have more time to decide whether to fill the gaps to boost their new state pension. Any payments made will be at the lower 2022-2023 tax year rates.

Victoria Atkins, the Financial Secretary to the Treasury, said:

'We've listened to concerned members of the public and have acted. We recognise how important state pensions are for retired individuals, which is why we are giving people more time to fill any gaps in their national insurance record to help bolster their entitlement.'

Internet link: HMRC website

 

Two freeports confirmed for Wales

Two freeports have been confirmed for Wales by the UK and Welsh governments.

Celtic Freeport, covering Milford Haven and Port Talbot, and Anglesey Freeport will each be backed by £26 million in seed funding by the UK government.

The sites were chosen to exploit opportunities from renewable energies and the government said they would 'make a significant contribution to achieving the UK's net zero ambitions'. They will aim to attract £5 billion in private and public investment and create over 20,000 high-skilled jobs by 2030.

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

Tax incentives include enhanced capital allowances, relief from stamp duty land tax and reduced employer national insurance contributions (NICs) for new employees.

First Minister of Wales, Mark Drakeford, said:

'The Welsh government has a clear economic mission to transform the Welsh economy, creating a stronger, fairer and greener future. The designation of these sites as Wales's first freeports will reinforce that mission, building on the significant investments and partnerships we have made in these regions over many years.

'The joint working between governments on the freeport programme should serve as a blueprint for future intergovernmental work on a whole range of issues.'

Internet link: GOV.WALES

 

Small businesses at risk as energy costs rise

The end of the Energy Bill Relief Scheme (EBRS) on 1 April could threaten the future of hundreds of thousands of small firms, according to research by the Federation of Small Businesses (FSB).

The Energy Bill Discount Scheme (EBDS) offers a far lower level of support for small businesses.

Although market prices have stabilised for those fixing their contracts now or those who are on variable tariffs, businesses that fixed last year will see huge increases as they are locked into a high price before the government's relief.

A business paying £24,528 per year for energy under the old government support scheme will now pay £82,539 under the new scheme.

The FSB is calling for small firms to be allowed to renegotiate their energy contracts that were fixed last year. It is also calling for additional support for businesses to become more energy efficient.

Tina McKenzie, Policy Chair at the FSB, said:

'The jump in energy bills on April Fool's Day won't be a laughing matter but will be a shock to hundreds of thousands of small businesses, who signed up to fixed contracts when the government discount was guaranteed under EBRS.

'There's much that could and should be done rather than leaving small firms high and dry. Allowing the most vulnerable small businesses to renegotiate or 'blend and extend' their energy contracts to better reflect lower wholesale energy prices is the least the government and energy suppliers could do.'

Internet link: FSB website

 

VAT Reminder

For VAT accounting periods starting on or after 1 January 2023, late submission penalties apply if you submit your VAT Return late. This includes nil or repayment returns. 

The VAT default surcharge is being replaced by new penalties for returns that are submitted late and VAT which is paid late. The way interest is charged is also changing. 

 For VAT accounting periods starting on or before 31 December 2022, read guidance about the VAT default surcharge.’