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.
A Special Day
Everyone has their own list of special days, but those of us who are seasoned professionals will have another day that gives even greater pleasure than any of these celebrations and that is 1 February.
Today is the day when we finally escape the tyranny of the tax return season, working long hours with little time off. Now we can get back to doing whatever we want to do, and not working every weekend.
But it has to be said that we got done what needed to be done, even for those of you who were doing your best to be late.
It’s amazing what you miss when you are so immersed in getting tax returns submitted, so it will be interesting plugging back into normal life and seeing what we have missed.
So what’s next? Well we start planning for the next tax return season and of course, catching up on all of the other work that has been deferred for far too long.
300,000 late Tax Returns
11,733,465 (97.3%) returns were received before the deadline, meaning an estimated 327,407 taxpayers missed the deadline – raising £32m in late penalties for HMRC.10.2m returns were completed by the 2021 deadline.
On 31 January, 861,085 taxpayers filed online to meet the deadline, some with minutes to spare – 36,767 individuals filed in the last hour before the deadline.
The peak hour for filing on the day was 16:00 and 16:59 when 68,462 taxpayers submitted their tax return.
Around 10.9m (94.5%) of returns were filed online, with 385,296 (3.4%) filed on paper.
As well as incurring penalties, the late filing of tax returns can also be seen as a ‘red flag’ by HMRC, putting the individual concerned at greater risk of a tax investigation.
There is also a risk of a ‘super penalty’ of 200% of tax owed if your tax returns is more than 12 months late.
Pay voluntary Class 2 NICs
Self-employed individuals with profits of less than the small profits threshold of £6,725 (2021/22 £6,515) or losses can voluntarily pay class 2 NIC of £3.15 (2021/22 £3.05) per week.
To tell HMRC that voluntary payments will be made in these circumstances, put ‘x’ in box 36 of the short self-employment page or box 100 of the full self-employment page of the self-assessment return.
The class 2 NIC should be paid by 31 January, alongside any self-assessment balancing payment. Paying voluntary NIC entitles the trader to state pension and certain contributory social security benefits.
From April 2022, those with profits above the small profits threshold (£6,725) and no more than the lower profits threshold (£11,908) are not liable to pay class 2 NIC, but will be given an NIC credit. This credit will provide the same benefits as if class 2 NIC had been paid.
If your profits are below the small profits threshold or even losses you can still pay voluntary class 2 NIC in order to preserve your contribution history..
300 Directors Banned for Covid Fraud
In the last nine months, over 300 directors have been banned for covid fraud, although few cases have gone to court and only a handful of fraudulent directors has been jailed for tax fraud.
At the same time the average length of bans has increased from 5.9 to 7.2 years.
The increase in the number of director disqualifications, combined with longer bans, suggests that the Insolvency Service is accelerating its enforcement activity in relation to Covid fraud.
The majority of covid fraud leading to director bans related to fraudulent claims for bounce back loans from £25,000 to £100,000 in value. In many cases claimants overstated the turnover for their businesses.
The government is introducing an offence of failure to prevent false accounting or fraud in the Economic Crime Bill.
This will be the first time there is a specific criminal offence to hold company executives accountable for failing to prevent false accounting, fraud or money laundering.
An offence under the Economic Crime and Corporate Transparency Bill is committed where a person associated with a company commits a fraud, false accounting or an act of money laundering, or aids and abets a fraud, false accounting, or act of money laundering.
A body corporate commits an offence where the offence is committed with the consent, connivance, or neglect of a senior manager.
The rules will cover a ‘senior manager’ of an entity including chief executives and chief financial officers. Senior manager is defined as an individual that plays a significant role in the making of decisions about how the entity’s relevant activities are to be managed or organised, or the managing or organising of the entity’s relevant activities.
Inverness and Cromarty Firth Green Freeport
What are Freeports?
Freeports are special areas within the UK’s borders benefitting from tax and customs incentives,
Eligible businesses in Freeports will enjoy a range of tax incentives and customs easements.
Eligible businesses will have access to a suite of tax reliefs including Business Rates, Stamp Duty Land Tax (SDLT), Employer National Insurance Contributions (NICs), Enhanced Structures and Building Allowance and Enhanced Capital Allowances designed to incentivise new investment within the boundaries of Freeport ‘tax sites’.
Business Rates Retention
The council area in which the Freeport tax sites are located will be able to retain 100% of the business rates growth above an agreed baseline. This will be guaranteed for 25 years, giving councils the certainty, they need to borrow and to invest in regeneration and infrastructure that will support further growth.
Businesses operating within Freeport customs sites will have access to simplified customs arrangements.
Freeports will provide a supportive planning environment for the development of tax and customs sites through locally led measures.
To support innovative firms to navigate regulation as they develop, test and apply new ideas and technologies, business within Freeports will enjoy direct access to relevant regulators through a Freeport Regulation Engagement Network. This will enable an early engagement between businesses and regulators, minimising bureaucracy and uncertainty.
Each Freeport will be granted up to £25 million of seed capital funding, primarily to be used to address infrastructure gaps in tax and/or customs sites that are holding back investment.
Trade and Investment
The Department for International Trade will provide targeted and specific trade and investment promotion support to Freeports, helping them attract and secure investment and exporters.
- Where are they located?
The 2 Scottish Green Freeports are:
- Firth of Forth Green Freeport
- Inverness and Cromarty Firth Green Freeport
Possible Non-dom Review in Budget
As part of its Opposition Day when opposition parties get to set the parliamentary agenda, Labour called for the Treasury analysis on the effects of withdrawing non-dom status, ordered by Chancellor Jeremy Hunt in November, to be presented to MPs by the end of February.
Non-dom status allows UK residents whose permanent homes are abroad to avoid paying British taxes on overseas income.
Financial secretary Victoria Atkins rejected calls to make the analysis public, saying that ministers need a ‘safe space’ to examine policy changes and that ‘should not play out in public’.
However, she made several references to the upcoming Budget in March, possibly hinting that an announcement on the issue may be made then.
Atkins said non-doms already bring in ‘a very large sum of money’, and that in recent years the government has reformed rules to end permanent non-dom status and close a capital gains tax loophole, bringing in almost £4bn extra per year.
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