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 sole basis for making decisions.
Companies House – Changes
The Government is of a mind that Companies House is in need of modernisation and has therefore been consulting with various organisations. It issued its final White Paper on Corporate Transparency and Register Reform at the end of February.
Key changes include:
- Filing deadlines will not be shortened now, but legislation will be introduced to facilitate future changes, so you can expect this to happen in the future.
- Small companies will no longer have the option to prepare and file abridged or filleted accounts and will be required to file both their profit and loss account and directors’ report.
- Micro-entities will also be required to file their profit and loss account but will continue to have the option to not prepare or file a directors’ report.
- Dormant companies will be required to file an eligibility statement
- All companies will be required to file accounts digitally, with full tagging.
Although we will be going back to the way things were many years ago with much more extensive disclosure, the publication of a company’s profit and loss account allows sensitive commercial information to be readily available to a company’s competitors.
It will be some time before these measures come into effect.
We are a company but have never filed accounts at Companies House. If you want to find out more, just get in touch.
A case concerning whether a restrictive covenant was enforceable was recently decided in the High Court, but you would need to discuss the implications with your own HR adviser. The case involved a solicitor who left one firm to go and work for another.
What makes this case interesting was that they were subject to 2 restrictive covenants entered into at different stages of their career.
One prevented the solicitor from working for any business which was (or intended to be) in competition with the parts of their employer’s business in which they had been materially involved during the 12 months before they left. It was therefore limited to those parts of the employer’s business in which the solicitor was involved to a material extent within a relatively close period to their departure. This ensured that the covenant was reasonable in the scope of its operation.
The other prevented the solicitor from working for any business which competed, directly or indirectly, with a business of their employer in the same territory in the 12 months before they left. This one operated to prevent the solicitor from being involved in any other business that competed with any part of the employer’s business, regardless of whether or not they had any role in the conduct of that part of the business or enjoyed customer connections in relation to it. The court found that this was unreasonably broad and extended beyond what was reasonably necessary for the protection of legitimate business interests.
NIC Hike Set to increase Prices
A recent survey by the Institute of Directors, found that 29% of the businesses surveyed stated that they would increase their good/services costs to combat the 1.25% increase in the NICs.
In the British Chambers of Commerce quarterly economic survey 62% of businesses expected to raise prices.
The decision to increase in tax will inevitably pushing up inflation.
The Institute of Directors’ survey also found that 15% would employ fewer people, 4% would reduce wages and 15% would reduce planned investment.
Bounce Back of Hospitality VAT Rate
The VAT reduction was introduced for businesses trading in the hospitality sector in June 2020.
On 1 April 2022, the VAT rate returns to its original rate of 20%.
The reduction in VAT was given to financially support them during the initial lockdown of the Covid-19 pandemic. VAT originally dropped to 5% in July 2020 with the rate increasing to 12.5% in October 2021.
Chancellor announces changes to R&D tax regime
The extent of the changes has not yet been made clear but they are planned to take effect from April 2023, with draft legislation to be included in the next Finance Bill.
The government is considering increasing the R&D expenditure credit (RDEC) scheme, which is aimed at larger companies, to make the regime more internationally competitive. Changes to the SME scheme are more likely to be restricted to limiting current abuse of this scheme.
Some specific sectors and types of business will benefit from these plans. The expansion is expected to include cloud computing, storage, data, and pure mathematics. This change reflects the value these businesses bring to the UK economy through leading-edge R&D activities at scale. They want to increase the generosity of the RDEC scheme to boost R&D investment in the UK.
There are four key issues being considered, namely overseas activities, cloud computing costs, pure mathematics costs and finally increased substantiation. It is the last of these that will impact on most of you.
HMRC want to track the efficacy of the regime and assess whether it remains fit for purpose. In this regard, you can expect an increase in the requirements in relation to the quantification of the claim, the credit claimed, how it has been calculated, which activities have been included and excluded. That is, they look as though they are going to be checking the claims more thoroughly than they do at present.
Taxi Drivers – New Compliance Rules
Taxi and minicab drivers will feel the impact from April, as HMRC bid to reduce tax evasion. The new rules will allow HMRC to scrutinise workers in what it sees as a high risk sector for tax evasion due to the prevalence of cash based services.
From 4 April, taxi and minicab drivers will have to confirm to HMRC that they pay their taxes in full in order to renew their licences from local licensing authorities.
If they have underpaid tax and do not tell HMRC about it, they open themselves up not only to their licences to operate being lost but also to potential criminal prosecution. HMRC are therefore threatening the livelihoods of those in certain trades in order to ensure compliance as HMRC will be able to block licenses being issued to people who have underpaid tax or who fail to complete the tax check.
This will impact on any individual taxi or minicab drivers that make a licence application from 4 April 2022 who will now will need to complete a tax check if they are renewing a licence; applying for the same type of licence previously held, that ceased being valid less than a year ago, and applying for the same type of licence already held with another licensing authority.
The tax check must be carried out by the individual applicant and cannot be conducted by an accountant or tax agent.
There will be a number of questions to identify whether the individual complies with tax rules and how they pay any tax that may be due on income earned from the licensed trade before a licence will be issued.
Once the tax check is completed and verified by HMRC, a nine-character tax check code will be issued. This must then be included with the application to the licensing authority, so they can confirm a tax check has been completed.
The Finance Function – New Tech.
For a few years now we have seen some fundamental changes to the finance function of businesses of all shapes and sizes and these changes have all been driven by new technology. e.g. cloud accounting systems.
Although initially a potentially painful process, ultimately it is viewed by those who have gone through the pain, as a positive step. Everyone from bookkeepers to finance teams now have more tools at their disposal than ever before. But to benefit from these comes a need to be more strategic thinking and have a greater understanding of the external world, as well as the internal organisation.
Previously the finance function was dominated by manual processes and month end, quarterly or year-end cycles. Monthly cycles are being replaced by continuous tracking of sales, cash flow, inventories, and more.
Software and apps are pushing the finance function up the value chain in organisations because you will be able to focus on analysis and strategic decision makings based on real-time business intelligence. Even at the most basic, imagine the benefit of having up to date records upon which to base business decisions.
The structure of everything from bookkeeping to whole finance teams is changing. Whereas there were lots of people in transaction processing and basic recording, that picture is now changing.
With change moving at an unprecedented pace and so many new technologies to choose from, the modern recording function will continue to evolve.
The other driver to modernise the finance function of any small businesses is HMRC and the introduction of MTD, initially for VAT, but in a couple of years, sole traders and landlords, and then subsequently partnerships and companies. Everyone will have to keep digital records and hence embrace new technologies.
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