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.
Fiscal Plan Now 17 November
Chancellor Jeremy Hunt has confirmed that there will be a full Autumn Statement on 17 November alongside the fiscal forecast from the Office of Budget Responsibility.
The Treasury said the Autumn Statement “will contain the UK’s medium term fiscal plan to put public spending on a sustainable footing, get debt falling & restore stability”.
This will be the first big test for Sunak and Hunt as they attempt to fill a £35bn black hole
It’s probably not surprising that the new PM didn’t want to have his premiership defined by the expected spending cuts and tax rises only days into the role.
We can perhaps expect something similar to the budget that Sunak announced when he was Chancellor back in March. WE may also expect reform of R & D Tax Credits to make them less generous while encouraging more business investment.
Fantasy Budget 1
In her fantasy budget, Rebecca Cave (published on Accountingweb) made some interesting suggestions. Here are some extracts:
Reverse the damaging effect of Brexit:
“We need to take action to reverse this immediately. Today my right honourable friend the Home Secretary has agreed to lift all restrictions that apply to people coming to work in the UK from EU and EEA countries. We need these workers in our NHS, our care homes, in construction, hospitality and farming. Employers in nearly all sectors of our economy are finding it difficult to fill the roles they advertise, which is restricting their ability to grow.
The UK government will immediately open negotiations to re-establish freedom of movement of UK and EU citizens between our countries, which is a necessary component of the UK joining the EU Customs Union and Single Market.”
“This is nothing more than a tax on employment. It distorts the labour market and drives workers and employers to use artificial structures to avoid this tax.
Various governments have spent over two decades inventing complex rules to discourage the avoidance of NIC, so I have decided to grasp the nettle and abolish it.
I will ask the reinstated Office of Tax Simplification (OTS) to examine how all classes of NIC can be merged with income tax payable by individuals.
The goal is to have one set of income tax rates that will apply to all types of income from earnings, trading, property, pensions and dividends. There will be no discount in the rates of income tax a person pays merely due to their age. “
“The Scottish and Welsh governments will be given the powers to set income tax rates and bands for all income types for residents of those countries. When the Northern Ireland Assembly starts functioning again, we will consider what tax powers can be devolved to that institution. “
“Payment of classes 1 and 2 of NIC allows the individual to build up credits towards the state retirement pension. After the merger of NIC and income tax, an individual will receive a credit towards their state pension if they have been subject to tax on an amount equivalent to the national minimum wage (appropriate to their age) for at least 60 hours per month. Individuals will be able to build up credits month by month, rather than having to accrue a full year of credits.
Individuals who pay little or no UK tax will be able to pay a voluntary tax to secure their state pension credit for a particular tax month or year. “
Fantasy Budget 2:
I came across another fantasy budget. This time it was Richard Murphy who also published his fantasy budget on Accountingweb. Here are some extracts:
“ I am launching a Green New Deal. This is a plan to build a sustainable UK. It will create a carbon army of people employed in every part of the UK to insulate houses, install solar panels, build wind farms, and develop tidal energy as well as to build the sustainable transmissions systems, transport and flood prevention systems on which we must all rely. This will be the plan to keep this country going when nothing but government spending can. It will cost £100 billion a year.
How will I pay for this? The answer to that question is “quite easily”.
- To pay for the Green New Deal I will require that all new ISA savings, whoever provides them, will now be in cash-based Green New Deal accounts, paying market competitive rates with the capital being made available to fund the investment we need. This alone will raise £70bn a year.
- I will also require that 25% of all new pension contributions be invested in funds that create new jobs in sustainability in the UK or tax relief will not be available.
- Together these measures will easily deliver the £100bn of capital funding the Green New Deal requires each year.
- As for revenue spending, we have to stop pretending that this is possible without new taxes. We also have to stop pretending that anyone but the rich can pay these new taxes. Instead, and precisely because the richest in society have been so inordinately favoured in recent decades, we must now redress the balance of tax in this country to make it truly progressive, as it clearly needs to be if it is to be fair, which it is not at present. “
- Introducing a top rate of income tax of 50% on earnings over £150,000.
- Introducing VAT on private education, healthcare and the sale of houses to be used as second homes.
- Charging capital gains tax as if it is the top part of a person’s income.
- A capital gains tax charge on the final lifetime sale of a property used as a home by a surviving spouse or civil partner, with necessary protection for carers, with such property then falling out of inheritance tax.
- That all tax reliefs, including on pensions, charitable contributions and for any other purpose will be provided at the basic rate of income tax.
- That there will be an investment income surcharge of 15% on all investment income above £5,000 a year, increased to £50,000 for pensioners, with the explicit aim of replicating national insurance on earnings.
- That national insurance be charged at full rate on all earnings from employment over £100,000.
- That close company rules be reintroduced to prevent the accumulation of unearned wealth at low tax rates in private companies”
Planning for an Uncertain Future
Keeping a close eye on cashflow is critical anytime but in the present economy it is vital, in order to avoid running out of cash and hitting a wall.
Remember, cash is king!
While cash is indeed King you cannot run a business by spending what you see in the bank. Some of that that has to be kept for things like tax.
If you are concerned about poor cash flow here are some suggested items to consider when making your projections:
- Review margins to ensure costs are covered
- Allow for tax bills (even if, at this stage these are only estimates.
- Allow for depreciation on your fixed assets – keep your fixed asset register up to date
- Don’t forget all your payroll outgoings including payments to HMRC.
- Run off weekly reports on payables and receivables and keep up to date. Review action on recovery of old debt
- Don’t take too much out through the directors’ loan account extracting dividends in excess of profits.
In preparing for the potential downturn to come you need to ensure that you really do understand cash and what’s in your business.
Here are some basic things to consider when looking at the economic effect on your business of the downturn:
- Review suppliers and supply chain weak links
- Are any projects in danger because this will impact any contractors working on that project
- Review trade debtors to see who is most at risk of not being able to pay.
- Review your own personal financial position.
- Look at payment plans to spread costs.
- If profits are affected, what will be the implications for paying dividends.
- Consider strategies for encouraging early settlement such as prompt payments discounts.
- Where appropriate or necessary, ask for payments upfront.
- Agree stage payments or payments on account so you don’t need to wait till the end of the project to get paid. Consider taking deposits
Understand your own cash profile will put you in good stead over the next year or two.
MTD for VAT and ecommerce
Many businesses are still unaware that from Tuesday 1 November 2022, they will no longer be able to use the existing VAT portal to submit quarterly or monthly VAT returns.
Some software providers are offering simple routes for larger ecommerce business using online marketplaces to sell items or services. These may not be appropriate for smaller businesses but there are a variety of ways to keep appropriate records without necessarily implementing complex software packages.
However, a survey as recent as January 2022 found that over a quarter of voluntarily VAT-registered businesses incorrectly believed that they would not be affected by MTD for VAT.
For many of these smaller operations it may be that a simple solution that relies on a business bank account will be the cheapest and easiest solutions and these records may also integrate with the sales platform. Packages such as Xero and QuickBooks may offer appropriate add-ons to link them to the selling platform.
This will also be a step towards preparing for the planned introduction of MTD for Income tax self-assessment in April 2024.
These small business owners also need to be aware of the new penalty regime for late VAT filing that will come into force for VAT periods beginning on or after 1 January 2023. This regime will also affect businesses making a nil or repayment return.
It will be worth investigating what ecommerce solutions exist for your particular type of online trading and the scale of your business.
Maternity V Redundancy
The government is planning to offer pregnant women and new parents greater protections against redundancy. This will mean redundancy protection will be extended to pregnant women and new parents returning to work from a relevant form of leave and will help protect new parents and expectant mothers from workplace discrimination.
The bill will give new parents an expanded period covering from when a woman tells her employer she is pregnant until 18 months after the birth.
The 18-month window will ensure that a mother returning from a year of maternity leave can receive six months additional redundancy protection. It will also apply to maternity leave and shared parental leave.
Scottish Insolvencies up 28%
The number of corporate insolvencies increased from 211 (2021-22) to 270 (2022-23), driven largely by a rise in compulsory liquidations.
Personal insolvencies also saw an increase of 7.7%.
Supply chain issues, spiralling inflation and labour shortages, mean that many Scottish companies are struggling.
Online platforms disclose seller details
These new rules will require UK platform operators working across the gig economy to collect, verify and report certain details of sellers who work on their platform to HMRC, including address, name and in the case of property rental, details of properties available for let.
HMRC will exchange the information with other tax authorities and will use it to detect and tackle any non-compliance by sellers. The information given to sellers will also help them to comply and complete their tax returns correctly.
Platforms must report the information, including the seller’s income, to the tax authority annually by 31 January each year.
100 days left to file
HMRC is reminding you that there are just 100 days left to complete their self-assessment tax returns, ahead of the deadline on 31 January 2023
Filing early also means you will have plenty of time to access the number of payment options available including:
- paying via the free and secure HMRC app;
- setting up an online monthly payment plan (self-serve time to pay);
- paying through the PAYE tax code (subject to eligibility);
- payment on account
Those who are unable to pay their tax bill in full can access the support and advice that’s available on gov.uk. HMRC may also be able to help by arranging an affordable payment plan.
The tax authority has also warned customers to be aware of the risk of scams, reminding them to never share their login details.
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 firstname.lastname@example.org.