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.
Covid loan defaults – £2bn
A recent report says that 8% of borrowers of covid loans amounting to £2bn (62,397 loans) have defaulted on their repayments.
7% of borrowers valued at £9bn have already repaid their loans. 85% of loans are being paid back on monthly repayments.
In total businesses borrowed over £77.1bn through the various Covid loan schemes.
The loans were underwritten by the government so that defaults would not significantly affect the banks.
Metro Bank and Barclays are currently reported to be the biggest claimants with the government refunding them £122m and £88m respectively for bounce back loan defaults.
Tide Bank, which issued almost £60m in bounce back loans, has claimed back around 25% of the money lent to businesses.
Starling Bank has claimed £61m of the £1.6bn it issued in loans.
PAYE Payments by Direct Debit
HMRC will shortly be offering a recurring direct debit to facilitate the payment of PAYE. You can currently set up a direct debit but only for a single payment.
It is planned to have the service available from mid-September 2022.
In the business tax account (BTA) under liabilities and payments there will be a new link for ”set up a direct debit” allowing you to set up a direct debit instruction once, authorising HMRC to collect directly from your bank account based on your RTI submissions.
This service is not available for agents and only employers will be able to create, view, amend and cancel a direct debit.
Scottish Corporate Insolvencies
Corporate insolvency numbers in Scotland increased by 49.1%.
The figure in the first quarter of 2022 was 243 compared to 163 in the first quarter of 2021. Personal insolvencies rose by 8.1% over the same period.
There was a 52% increase in the number of creditors’ voluntary liquidations (CVLs) possibly illustrating that rather than trying to trade out in the current climate, many directors are choosing to close their businesses.
HMRC Consults on Data Collection
HMRC is working on plans to access more information about all of us in order to tackle tax evasion
The main focus will be on accessing more data about the self-employed, partnerships and those earning dividends, as well as the number of hours worked by employees, their job titles and the relevant locations.
HMRC proposes to add a compulsory field to real time information (RTI), requesting the occupation of each employee as well as which office or business location the employee is based.
These actions would require a change in legislation to give HMRC far more powers.
HMRC also wants to access more detailed information about the profile of the self-employed and the type of business. This may be achieved by the self-employed being required to enter a description of their business type when they complete their annual self-assessment tax return.
HMRC’s view is that it would increase HMRC’s ability to target compliance interventions at higher risk sectors. This would help the vast majority of businesses who try to get their tax right, by nudging those who are accidentally non-compliant and helping to avoid unnecessary investigations.
It will also provide more data to permit better targeting of sector-specific policy interventions, both in HMRC and across government.
Businesses tell HMRC the ‘nature of business’ when they register but this can become out of date, but under the new proposals it would ensure that HMRC’s record is regularly updated.
It also wants to expand the amount of information it collects about dividend payments and proposes changing the reporting requirements for owner managed businesses.
The consultation closes for comment on 12 October 2022.
Employment Status Rules
In 2018 the government consulted on the employment status framework, focusing on its complexity, the fact that it was open to interpretation, and the difficulty to resolve disputes and alignment between the frameworks for tax and employment rights.
Many describe the current employment status tests as outdated and not relevant to modern working practices.
However, it appears that there will be no change to the current position, with the government stating: that the benefits of creating a new framework for employment status are currently outweighed by the potential disruption associated with legislative reform as the country is recovering from the pandemic.
It appears that the issue of employment status is too tricky for the government to tackle at the present time.
Probe into Tax Reliefs
The Treasury committee is beginning an enquiry that will examine the tax reliefs available to individuals and businesses and explore whether these provide benefits to the broader economy.
This cross-party committee is seeking views on whether the current range of tax reliefs provides value for money, and if, among other things, they impact employment, investment and growth in the UK. It will range from the tax free income allowance through to business tax reliefs like capital allowances and the research and development (R&D) tax relief.
One of the things they want to look at is whether the reliefs are being used in the way that government and parliament intended, and if they cause problems to the tax system, such as through tax evasion or avoidance.
Unsurprisingly the number of restaurant insolvencies, according to The Insolvency Service, has increased dramatically from 856 in 2020/21 to 1,406 fuelled by rising inflation, a fall in consumer spending and labour shortages.
Insolvencies within the restaurant sector are even higher than in the wider hospitality industry, which has seen a 56% increase in company insolvencies in the past 12 rising from 1,407 to 2,193.
One of the issues especially for smaller restaurants is the shortage of EU staff post-Brexit. Many are finding that they simply cannot hire enough staff to deliver enough of a service to remain profitable.
CGT Property Returns
Disposals of UK residential property must be reported and the capital gains tax (CGT) arising paid within 60 days of completion. Many transactions are not being reported at the correct time partly because many solicitors do not prepare these returns.
HMRC has confirmed that a CGT property return must be filed even if the disposal has already been reported on a self-assessment return.
But where the disposal has not been identified until the self-assessment (SA) return is filed it is not possible to file a CGT online return. HMRC have stated that, where the SA return has already been filed, the CGT return must still be filed, but as a paper return.
HMRC will charge penalties and interest. In most cases, you will have paid the relevant tax for a disposal and interest would have stopped running when the payment was made.
What are the rules for regular seasonal workers.
Workers permanently employed but seasonally can no longer have their annual leave pro-rated for the number of weeks in the year that they actually work i.e. adding 12.07% to their wages to take account of holiday pay.
These employees need to be given a full entitlement of 5.6 weeks paid annual leave, calculated on the basis of their average salary over 52 working weeks.
This follows a recent case in the UK Supreme Court.
It would however be sensible to agree with the employees that this leave is to be taken outside of the times that they are working each year. i.e. booking the leave and paying them for it at another time of the year, perhaps at the end of the season.
In addition, contracts of employment should be reviewed to make sure that they take account of these arrangements.
Help to Grow Scheme Expanded
The Help to Grow scheme was launched in January 2022 providing discounts to small and medium-sized businesses looking to buy digital technologies and software including digital accounting software. Businesses can get up to 50% off approved technology solutions, saving up to £5,000 in related costs.
Previously you had to have at least 5 employees but eligibility to the scheme has been expanded to businesses with at least one employee, meaning more than 1.2 million businesses could benefit.
Businesses which employ from 1 to 249 employees can now access a variety of discounts worth up to £5,000 on 30 approved software solutions, which include 14 technology suppliers for CRM software and digital accounting.
The scheme has also been extended to cover ecommerce software for the first time, including helping businesses to manage inventory, take payments and gather data and insights on customer needs.
The scheme will now also provide one-to-one advice for SMEs, including recommendations on how businesses can adopt digital technology and software to help boost productivity. This advice service will go live later this year.
For more information google “Help to Grow”.
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