Every week we take a look at what is trending in the accountancy and tax press and share items that we think will interest you. However, these are only outlines and where they relate to tax planning should not be acted upon without looking into them more completely as everyone’s circumstances are particular to them. You need to take specific advice appropriate to your own circumstances.
While every effort is made to deliver accurate, informative and balanced articles this content is general in nature and should not be used as the basis for making decisions without seeking further advice and guidance.
I was reading an interesting article by Rebecca Cave, a tax writer on Accountingweb and I thought that I would share it. It concerns the complex interaction between the rates of tax set by the Scottish Government and the UK wide tax rates and bands set in Westminster.
The Scottish Parliament has the power to set its own rates and thresholds for income tax, so since 2017 the Scottish tax bands do not tie up with the thresholds for NIC in the rest of the UK. This is because powers to set the NIC thresholds have not been devolved to the Scottish Parliament.
The result for 2022/23 will be some very high marginal tax rates (see table) for Scottish taxpayers on earnings and profits. The Scottish income tax rates do not apply to income from savings, dividends, or to set the level of capital gains tax payable.
Example: Employee in Scotland in 2022/23
| Income in band (including personal allowance) £ | Scottish tax% | NIC % | Total rate on band % |
| 0 – 9,568 | 0 | 0 | 0 |
| 9,568 – 12,570 | 0 | 13.25 | 13.25 |
| 12,571 – 14,667 | 19 | 13.25 | 22.25 |
| 14,668 – 25,296 | 20 | 13.25 | 33.25 |
| 25,297 – 43,662 | 21 | 13.25 | 34.25 |
| 43,663 – 50,270 | 41 | 13.25 | 54.25 |
| 50,271 – 100,000 | 41 | 3.25 | 44.25 |
| 100,001 – 125,140 | 61.5 | 3.25 | 64.75 |
| 125,140 to 150,000 | 41 | 3.25 | 44.25 |
| Over 150,000 | 46 | 3.25 | 49.25 |
The 54.25% marginal rate between £43,663 and £50,270, is due to the Scottish higher tax rate of 41% starting at a lower level than the reduced NIC rate, which is aligned with the 40% band in the rest of the UK. Taxpayers in England, Wales and Northern Ireland will pay a marginal tax rate of 33.25% on earned income in this band.
The 64.75% marginal rate between £100,001 and £125,140 arises because the personal allowance is withdrawn by £1 for every £2 of additional income in that band.
VAT Flat Rate Scheme – Help with holiday lets
There are still some situations when the VST Flat Rate Scheme can save you a lot of money.
For example, suppose that as well as your trading business you have a holiday letting business. That will mean that you lose 1/6th of your holiday letting income in tax.
Something to consider, if you qualify for the FRS, is applying to join the Flat Rate Scheme, which will mean that the tax lost on the letting income will be reduced.
It will depend upon what your FRS percentage is but it might be worth having a look. The percentage will be dictated by your main business which will probably be your trade,
QuickBooks Expansion
US business software giant and QuickBooks owner Intuit has bought Mailchimp for $12bn.
Mailchimp has a global user base of 13m. Around 800,000 of those users pay for enhanced services, with a 50:50 split between the US and the rest of the world.
CEO, Sasan Goodarzi says that Mailchimp fitted into his vision of QuickBooks not as an accounting app, but an end-to-end business platform and that together, Mailchimp and QuickBooks will help solve small and mid-market businesses’ biggest barriers to growth, which is getting and retaining customers.
It is expected that as Mailchimp is integrated into the QuickBooks offering, that platform will be able to handle ecommerce, marketing/CRM, analytics, collections, payments, funding and compliance.
With MTD just around the corner, Mailchimp could play a helpful role in the client communication and deadline-chasing workload that will accompany the transition to the new income tax regime in 2023.
There are Unregulated Tax Advisers
A recent report says that HMRC is investigating 153 unregulated tax advisers for allegedly helping clients avoid tax. Cracking down on enablers of tax evasion has been a key area of focus for HRMC since it established its fraud investigation service in 2015. The definition of ‘enablers’ falls into two categories, those who are knowingly complicit in criminal activity and those who may not be aware of their client’s involvement in criminal activity but have failed to carry out proper risk assessment checks.
In case you are wondering we are double regulated being both Chartered Accountants and Chartered Tax Advisers, so we get scrutinised twice.
Impersonation Scams
Criminals pretending to be HMRC, banks, and parcel delivery firms have defrauded the public out of £129.4m so far this year
A recent report says the number of impersonation scam cases in 2021 so far has reached 33,115 which is over double the 14,947 cases recorded in 2020. The impersonation scams led to £57.9m being stolen from the public in 2020, compared with this year’s £129.4m.
The top ‘smishing’ attack is the parcel and package delivery scam which accounted for 67% of all reported fraud over the last year with financial institutions and banks following at 22% and government entities and others at 10%.
Between September 2020 to August 2021 HMRC responded to 998,485 referrals of suspicious contact from the public with nearly 440,730 of these offering bogus tax rebates.
Vulture Culture
The All Parliamentary Party Group (APPG) on Fair Business Banking has harshly criticised the role of insolvency practitioners, describing the business as a ‘lucrative vulture culture’
In a wide-ranging report into the state of the insolvency market, the MPs on the APPG called for a number of changes to the current insolvency environment to protect the public and creditors.
According to the APPG, change is urgently needed and we have five recommendations:
- Conflict of interests ban.
- Single regulator with ombudsman.
- Code of Ethics on statutory footing.
- Centralised database monitoring insolvencies.
- Further rule changes to support a rescue focused insolvency regime.
The APPG report stated: ‘A common theme in complaints received by the APPG is that IPs protect the interests of the party with the power to appoint them, generally the secured creditor or bank, rather than promoting the interests of the company facing insolvency. While many IPs act professionally and ethically, the complaints remain an area of concern.’
The General Electric Deal
Members of the All-Party Parliamentary Group on anti-corruption and responsible taxes has criticised HMRC after it agreed an £82m settlement with General Electric over a disputed $1bn (£725m) tax bill
The Committee criticised the tax authority in a series of tweets after it was revealed that HMRC had settled the $1bn (£725m) disputed tax bill case with General Electric out of court which reportedly sees the company pay £82m ($112m) in deferred tax with the fraud allegations from HMRC dropped.
The 15-year-old dispute between General Electric and HMRC was set up due to a clash in the Supreme Court.
The tweet sent by the parliamentary group accused the tax authority of agreeing to a ‘sweetheart deal’ and that ‘deals like this one sees the taxpayer lose out on millions in lost tax revenue’.
APPG chair Margaret Hodge stated that the settlement seemed ‘pathetic’ when compared to the tax amount that HMRC accused General Electric of owing.
Long Term Covid Costs
Scotland spent an estimated £8.6bn on Covid-19 support and grants in 2020/21 in response to the pandemic.
The largest area of Covid-19 spending was on business support, which received nearly £3.8bn. The largest funding measures were for business support grants (£1.2 bn) and non-domestic rates relief (£972m).
The second-largest area of spending was health and social care, which received over £2.9bn for Covid-19. UK government covered the costs for furloughing staff through the Coronavirus Job Retention Scheme, which is due to end shortly.
For 2021-22, the Scottish government has set aside £3.3bn for covid-related spending.
Audit Scotland warned that ‘increasingly, the Scottish budget is subject to a high degree of change during the financial year. This volatility has been exacerbated during the pandemic with big changes required to spending plans’.
‘With increasing pressures on public revenues and spending, and the Scottish budget subject to ever more volatility, uncertainty and complexity, it will be challenging to match spending to the available funding in the coming years. This will need to be done in a way that minimises the disruption to individuals, public bodies and services, ensures value for money is maintained and avoids unintended consequences,’ the report stated.
Questions?
If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.
