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.
Corporation Tax at 26.5% Again
Another day, another tax rate. The Government has decided to keep the hike in Corporation Tax. This will hit any small business operating through a company and with profits above £50,000. For every £1000 of profits above £50,000 you pay £265 in tax.
I don’t think that this government appreciates just how many small companies, currently struggling, will be affected adversely by this measure.
Will they change their minds again before April?
They estimate that this will raise£18bn for the Exchequer but we will be doing all we can (legally) to reduce this.
However, in her statement Liz Truss still committed to wanting to deliver “a low tax, high wage, high growth economy”. She said: “I was elected by my party to do. That mission remains.” We can only hope that the Corporation Tax rate will come back down.
So, what can we expect from the new Chancellor, Jeremy Hunt? In the short term, probably whatever it takes to take the heat out of the current situation and to get the media off the back of the Prime Minister.
The prime minister has named Jeremy Hunt as the new Chancellor, making him the fourth person to hold that position in four months. Hunt returns to the cabinet after previously serving in numerous roles in the David Cameron government, such as health secretary and culture secretary.
How to Choose a Tax Agent
HMRC has released new guidance on how to choose a tax agent, advising taxpayers to check if an agent holds relevant professional qualifications.
They have published a list of parameters an individual should consider when choosing an agent.
The guidance includes a large section on choosing an agent with affiliation to a professional body, advising customers to “check if your adviser holds relevant professional qualifications or is a member of an accountancy or tax professional body.”
HMRC expanded on this point, adding “that anyone can call themselves a tax agent – they do not have to have qualifications or professional training and HMRC does not regulate agents.”
The section continued: “Professional bodies will also review the behaviour of their members and take action if their behaviour falls short of professional standards. Members of professional bodies are also more likely to hold professional indemnity insurance, which can help protect you if things go wrong.”
The guidance also recommends taxpayers pay close attention to other factors when choosing an agent and emphasising the need to “meet the person who will be interacting with HMRC on your behalf and find out how much they will charge you for their services”.
This includes checking their website and seeing what tax services they offer, reviewing their reputation and history by seeking out online reviews and checking their Facebook page and ensuring they have the right experience and services.
Other factors to consider include reading the terms and conditions to understand any fees they will have to pay and checking how and when they would be expected to make payment.
The Long Partnership are Chartered Accountants and Chartered Tax Advisers being regulated by both accountancy and tax institutes. Check out our website.
A company will go through various stages of development as it grows from newborn to mature. Here is a list of some of the growing pains you can expect.
You might raise funds through the bank or you can consider other routes such raising funds by issuing shares through the SEIS for new starts and EIS for larger more mature companies. There are others.
At the beginning you can handle everything yourself, but as the company grows you may struggle to cope with increased transaction volumes. At a time when you need information from your books on how you are doing, you also need to keep your hand on the helm and keep the work flowing.
As you look for new markets you might start to trade overseas. Then your records need to take into account more than one currency. What about multi-currency accounts?
This is one we understand very well. You cannot be in every office, shop or factory all of the time. You need to have trusted staff in each location. Your accounting records also need to be adapted to gathering data from each site. You will need an effective audit trail to control and keep tabs on all financial transactions and reports.
You cannot manage by wandering about anymore as you grow. You need to be gathering data, as near to real time as possible, to alert you to problems in any location or department of the business, so that you can sort it out before the issue becomes serious. You also need information on revenues, profitability, products and staff performance so that you can make prompt intelligent decisions.
The system that you put in place at the start may no longer be relevant for the new scale of the business. Automation and integration between departments and locations will be key.
The current nightmare. How to build a team when the recruitment landscape is so difficult. And having built the team, how do you keep them. You can minimise the problem by installing appropriate systems to reduce the dependency on number of people.
If you need help with this get in touch with Donna Smith at Thystle Limited who can review your systems and help you find efficiencies including how to employ less people.
Unemployment rate falls to 3.5%
This does beg the question, how can you have a high growth economy when the lack of staff is holding back so many companies.
The UK unemployment rate has fallen to its lowest level in nearly 50 years, according to the Office for National Statistics
Unemployment rates fell to 3.5% for June to August, the lowest recorded rate since early 1974. The number of unemployed people per vacancy fell to a record low of 0.9%.
Growth in average total pay (including bonuses) stood at 6%, and regular pay was 5.4% among employees from June to August 2022. This was the strongest growth in regular pay seen outside of the covid-19 pandemic period, the ONS said.
Covid Fraud Arrests
HMRC made a total of 309 arrests in 2021/22 compared to 303 in the previous year, with the majority of arrests focusing on tax evasion.
There were 41,000 open compliance cases relating to covid fraud by the end of March 2022. The tax authority expects to recover up to £1.5bn in fraudulent and incorrect payments by April 2023.
HMRC has ramped up its investigations into covid-related fraud following the additional funding for the taxpayer protection taskforce to pursue fraudsters.
During the pandemic, the furlough scheme, self-employment income support scheme (SEISS) and Eat Out to Help Out attracted large numbers of fraudulent applications. HMRC is now deploying huge amounts of resources to track down individuals and businesses who committed covid-related fraud.
Anyone who suspect they may have committed fraud during the pandemic, or made innocent, but erroneous furlough claims, would be advised to contact HMRC if they want to receive a more sympathetic hearing’ and reduced penalties. You will likely face much more severe penalties if you wait till HMRC find you..
HMRC have a long time in which to review and investigate claims. Don’t assume that as you have not heard anything yet, that they have missed you.
Having said that the dedicated covid fraud taskforce at HMRC has failed to meet targets set for fraud recovery as investigations are taking longer than expected to complete
HMRC forecasts it will recover around £1.1bn of error and fraud related to covid schemes by 2023-24.
HMRC forecasts the taxpayer protection taskforce will secure £623m in fraudulent payments by 2023-24, with £605m coming from CJRS and self-employment income support scheme (SEISS) fraud.
HMRC’s earlier expectation was that the taskforce would recover a minimum of £800m across 2021-22 and 2022-23.
The government has committed to keep the taskforce operating until at least September 2023, at which time its responsibilities will be passed to existing compliance teams.
As at March 2022, HMRC had issued £1.1m of penalties for CJRS, while for SEISS, penalties were £3.5m (7%).
HMRC Winding-up Petitions
These petitions are a tactic of last resort to claim back monies owed but HMRC is becoming more aggressive, and the number of such petitions is increasing rapidly.
The petitions give businesses a short period to repay debts in full, to consider corporate restructuring options or risk being forced into compulsory liquidation.
Government statistics show an 82% jump in HMRC-originated winding-up petitions from August to September 2022.
The use of petitions largely disappeared during the pandemic due to protective measures implemented by the government and perhaps a willingness to hold off because of the pandemic, but they are now being used more frequently because of the Treasury’s need for funds.
Renewable Energy Companies – Windfall Tax
Renewable electricity companies are seeing their profits soar. The government is therefore preparing to make a one -off tax charge on these enhanced profits.
There are no details yet about the rate of tax.
A cost-plus revenue limit will curb the amount generators can make, ‘allowing generators to cover their costs, plus receive an appropriate revenue’.
The tax has been estimated to raise between £3bn and £4bn which will be used to offset some of the £80bn plus bill for energy support for consumers and businesses.
This is in addition to the windfall tax on oil and gas companies introduced in July 2022 .
Talks are underway to determine if the measure will apply in the same way in Scotland.
More than 10,000 websites have apparently been identified that attempt to defraud self-assessment taxpayers.
In the 12 months to August 2022, HMRC responded to more than 180,000 referrals of suspicious contacts from the public, of which almost 81,000 were scams offering fake tax rebates.
They have also responded to 55,386 reports of phone scams in total.
Criminals claiming to be from HMRC have targeted individuals by email, text and phone with their communications ranging from offering bogus tax rebates to threatening arrest for tax evasion. Contacts like these should sound alarm bells – HMRC would never call threatening arrest.
Anyone contacted by someone claiming to be from HMRC in a way that arouses suspicion is advised to check the scams advice on gov.uk.
Taxpayers can report any suspicious activity to HMRC by forwarding suspicious texts claiming to be from HMRC to 60599 and emails to firstname.lastname@example.org. Any tax scam phone calls can be reported to HMRC using the online form on gov.uk.
Fraudsters target taxpayers when they know they are more likely to be in contact with HMRC, which is why anyone completing self-assessment tax returns should be extra vigilant to this activity. There is a risk they could be taken in by scam texts, emails or calls either offering a ‘refund’ or demanding unpaid tax, thinking that they are genuine HMRC communications referring to their self-assessment return.
HMRC warned that some taxpayers who have not done a self-assessment return before might be tricked into clicking on links in these emails or texts and revealing personal or financial information to criminals.
A statutory tax exemption for trivial benefits was introduced in 2016 and there are four conditions for the exemption to apply for benefits provided by, or on behalf of, an employer to an employee or a member of the employee’s family or household:
- the benefit is not cash or a cash voucher.
- the cost of providing the benefit does not exceed £50 (or the average cost per employee does not exceed £50 if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person);
- the employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements); and
- the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties.
Where benefits are provided to an individual who is a director or other office holder of a small company (or a member of their family or household) the exemption is capped at a total cost of £300 in the tax year.
If an employer wishes to say ‘thank you’ to an employee and tells them to treat themselves to something up to the value of £50 and claim it back through expenses, this does not qualify for the trivial benefits exemption. The employee is receiving cash rather than a benefit from their employer and the first condition is not satisfied.
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 email@example.com.