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.

Coming Up!

Corporation Tax

The increase in the rate of corporation tax will result in an increase to 25% from the current rate of 19% which will affect companies with profits over £50000, to a greater or lesser extent.

Income Tax

The rates in Scotland will be announced shortly by The Scottish Government.

National Insurance Contributions

The Health and Social Care levy has been repealed meaning that national insurance rates will return to last year’s rates from 6 November 2022. Watch out for whether payroll software and HMRC PAYE tools have been updated or not to accommodate the repeal. Dividend rates of tax will not be reduced from 6 April 2023.

Investment Zones

Proposed investment zones (locations tbc) have been announced promising very favourable tax treatment in addition to the existing freeports. They will be similar to the Enterprise Zones seen in the 1990s.

Other investment measures

SEIS has been enhanced by increasing the investor limit to £200000 along with other changes.

Research & Development Tax Relief

Major reforms are coming into force to combat widespread abuse of the system including a requirement to pre-notify HMRC of research & development activities.

CGT on Divorce

New rules  allow for a longer period in which separating couples can make transfers to each other on a no gain/no loss basis, meaning that disposals are covered until the earlier of:

• the end of the third tax year following the year in which the couple ceased to live together; or
• the grant or an order or decree for divorce, the annulment of the marriage, the dissolution or annulment of the civil partnership, or the date of a separation under a separation order.

Capital allowances

• Annual Investment Allowance staying at £1million
• Super-deduction allowance ends on 31 March 2023.

Residential Property CGT

The new process for dealing with ‘digitally excluded’ taxpayers is being rolled out.

The window for filing CGT returns has been increased from 30 to 60 days.

VAT Penalty Regime

There is a new penalty regime for VAT accounting periods starting 1 January 2023 Any existing default surcharge notices are reset from that date.

Basis period reform

Reform coming into force in the 2024/25 tax year will affect the period of account that is considered for purposes of calculating income tax.

Buy to let Landlords – Nudge Letters

The nudge letters are widely targeted at individuals or businesses based on information received, primarily from other governmental departments, banks or, in this case, the tenancy deposit scheme.

HMRC are using the deposit information to estimate the rentals that should have been declared.

Apparently the nudge letters tend to include a statement saying that HMRC has received relevant information, suggesting the landlord review their tax position, and including a suspiciously simple certificate of tax position to be completed and returned.

However. these letters will not take into account vacant periods or reductions in rent etc.

There is no obligation to respond or to sign the certificate of tax position.

However, if you do receive one of these letters, it would be sensible to review your tax position and the information you are declaring to HMRC.

Salary Sacrifice and Work Cars

This gives individuals the opportunity to ‘sacrifice’ a portion of their salary, pre-National Insurance and income tax, to put towards a brand new vehicle of their choice, making it a cost-effective way of financing a car.

Salary sacrifice is an excellent way to offer electric vehicles or ultra-low-emission vehicles to those who may not qualify for a company car.

The benefit-in-kind (BIK) tax obligation for EVs is just 2%, and it will stay at this level until April 2025.

It also offers substantial Class 1A National Insurance (NI) savings for employers.

Employees will see lower NI contributions.

Employees selecting an EV will also find their running costs are significantly less, particularly if they can charge up at home overnight or at work if the business has installed EV charging points.

Higher Demand for Accountant’s Services

A QuickBooks poll indicates that 83% of SMEs said that their accountant had helped reduce the impact of inflation on their business.

It also found that accountants were becoming increasingly important at times of austerity with 93% of small businesses stating that their business was more likely to survive with an accountant on board.

However, small businesses without an accountant were 16% less likely to report strong financial health.

For those businesses without an accountant, the survey found that half of business owners take on the burden of finance,  while others rely on family and friends  or someone else unqualified  to manage their books.

93% of UK business owners say their accountant help them feel less stressed.

SMEs without an accountant also said they were less confident in their ability to pay taxes correctly

and meet compliance checks.

Perhaps this highlights just how important accountants are in small business success. Small businesses know where they can get the help and advice they need in these difficult times.

Benefits Fraud

The Department for Work and Pensions (DWP) overpaid £8.6bn in benefits in 2021-22, with £6.5bn of that figure due to fraud

MPs on the Public Accounts Committee (PAC) said the level of fraud and error in benefits expenditure was ‘unacceptably’ high.

The DWP acknowledged that fraud and error levels remained too high and maintained that current levels were still due to Covid-19.

The Department told MPs that it expects a £613m investment in counter-fraud measures to generate £4bn of savings over five years.

In 2021-22, the department spent £104.1bn on the state pension and £113.1bn on all other benefit payments.

The report criticised the DWP’s ability to ‘strike the right balance’ between being robust in tackling fraud and ensuring that claimants are treated fairly.

The Department also estimated that 237,000 pensioners have been underpaid a total of £1.64bn in state pension, with underpayments going back as far as 1985.

Made.com

Made.com has confirmed that its brand has been picked up by Next for £3.4m after the online furniture group fell into administration

Next, which currently has a homeware business of its own, confirmed that while the deal includes the internet domain names and intellectual property, it does not include the inventory or staff.

The transaction does not include staff. Consequently, this will result in 320 redundancies across the business. In addition, 79 employees who had resigned and were working their notice have been released with immediate effect.’

In 2021, the company employed around 700 staff and had offices across Europe and Asia, operating in European markets including the UK, France, Germany and the Netherlands.

The company reported a surge in growth in June last year and was listed on the London Stock Exchange at a value of £775m.

The company has been reported as saying that it had struggled this year as households cut back on big purchases amid the cost of living squeeze.

Last week, the furniture brand announced that its shares had been suspended and all bids to rescue the company had been rejected.

Fraud Facilitator

Companies House has been criticised for facilitating fraud highlighting issues like the ease with which fraudsters can register a fraudulent company using a victim’s home addresses.

Current proposed reforms will increase transparency, alongside new powers for the regulator to scrutinise anti-corruption and fraud.

However, critics say that the proposed legislation does not go far enough, and more needs to be done to facilitate against business fraud.

Issues that has been identified include shell companies and also ‘burner’ companies, who are doing short-term fraudulent activity and then disappear.

The lack of checks for people setting up a business through Companies House, which costs just £12, is making it harder to spot fraud. Institutions place reliance on the Companies House records and many people feel that more checks should be performed by Companies House.

Retire and Get a Job

If you go back to work after retirement, your earnings will be added to other sources of income e.g. state and private pensions,  and your income tax calculation is based on your total income for the tax year.

People who have reached state pension age usually do not pay National Insurance contributions.

If you are returning to work as an employee, then income tax should be deducted from your wages before being paid.

If you have other sources of income, HMRC may well alter your tax code to take this into account.

If you do not have a form P45 to give to your new employer you will need to complete a starter checklist.

If you have previously been self-employed before retirement, you might be familiar with dealing with tax as a trader. However, there are some important changes on the horizon including MTD for Income Tax.

If you are undertaking only a small amount of casual self-employed work, then you might consider using the trading allowance. If your gross income (before deducting any expenses) from self-employed/casual work is less than £1,000 in a tax year, then the trading allowance may apply automatically, and you may not need to register your self-employment with HMRC or complete a self-assessment tax return.

When returning to work, you might wish to make pension contributions from your earnings. You are generally able to do this as long as you are under the age of 75, subject to certain contribution limits.

Employers in the UK must automatically enrol certain employees into a workplace pension scheme. If you have not yet reached state pension age and earn more than £10,000 a year, then you should be automatically enrolled into a workplace pension scheme by your employer, unless you decide to opt-out.

If you are over state pension age, you will not be automatically enrolled in a workplace scheme.

If you have already started to take money from a defined contribution pension pot, then you will need to bear in mind the money purchase annual allowance). This will not  usually apply if you have only taken a tax-free lump sum from a defined contribution pension or the small pension pot was previously cashed in.

If the allowance does apply, then the amount of any further contributions to any pension scheme is limited to £4,000 per year (gross).

If you are a carer and receive carer’s allowance then this might be affected by a return to work, as entitlement to the benefit is limited to those with weekly earnings of £132 (after tax, National Insurance and expenses). You will therefore need to bear this earnings limit in mind if you wish to preserve your entitlement to carer’s allowance.

If you are in receipt of universal credit or pension credit, or any other means-tested benefits, then your awards might be impacted if you return to work.

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.