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.
Additional Bank Holiday for The King
8th May 2023 has been designated as a bank holiday to mark King Charles’s Coronation. But who has the right to take this additional bank holiday as paid leave? This will be determined by the specific language of staff employment contracts.
If the contract says that the annual holiday entitlement will be a certain number of days plus public or bank holidays, they will be contractually entitled to take the additional holiday.
If the contract gives a set number of bank holidays or specifically names the bank holidays, they will not be entitled to the additional day off.
If the contract simply refers to 20 days plus “the usual bank holidays” or “commonly observed bank holidays”, then this is not a commonly observed bank holiday and employees are not entitled to it.
Likewise if the contract gives a certain number of days holiday per annum including public holidays, they have no entitlement to the extra day.
However, an employer can grant the additional day but If you do, it is important to make sure you highlight that it is a one-off benefit and not an entitlement.
Then there is the question of what do you do about part time staff and I do not propose to deal with that here.
Johnston Carmichael quits
Johnston Carmichael have resigned as auditors of the SNP following a police probe into party finances.
JC are the largest independent auditors in Scotland and decided to resign after more than 10 years handling the audit.
The SNP is now looking to appoint a new auditor to handle the 2022 year end accounts which are due to be submitted to the Electoral Commission by a deadline of 7 July.
The resignation follows a police investigation into Peter Murrell, the former chief executive of the SNP, who faces a probe into the financial affairs of the party relating to a £600,000 ringfenced fund to finance a second Scottish referendum.
Murrell resigned earlier this month after 20 years at the head of the party.
Johnston Carmichael earned £57,235 in audit fees for yearend 2021, up from £26,290 the previous year.
Although we are more likely to see businesses disincorporating, there will still be occasions when sole traders and partnerships want to incorporate.
There are various ways to incorporate a trade, a gift, a sale for consideration or a sale for shares.
Incorporation relief requires all assets of the business, other than cash, to be transferred wholly or partly for shares.
If the entire consideration is shares, full relief will be due. If only part of the consideration is shares, only part of the gain will qualify for relief.
The legislation is silent on liabilities but there is an HMRC extra statutory concession which avoids unwanted tax considerations.
If you are utilising this relief, any capital gains on the “sale” of the assets to the company are rolled over into the price for the shares, avoiding paying CGT at incorporation.
HMRC Services Need Funding
Like so many other government-controlled operations HMRC is being starved of resources and cannot do what it should be doing and needs to do.
It seems that the problems facing HMRC, tax advisers and taxpayers are only going to get worse with HMRC services already fallen to unacceptable levels.
The government has missed the opportunity to resource the UK’s tax authority adequately, and especially considering all the changes that we are expecting in the tax system in the next few years.
We all face long delays when contacting HMRC, hanging on the phone for an hour or more to sort out the simplest query.
Over the next year there will be a lot more taxpayers who need to interact with HMRC. One group will be people who were able to benefit from the £2000 dividend allowance, now reduced to £1000 and to go down further to £500. A large number of people, probably basic rate taxpayers reporting trifling amounts of taxable income. The question has to be whether HMRC can cope.
Calls to HMRC not Answered
More than a third of calls to HMRC were left unanswered in February.
The latest HMRC performance report shows that 35% of calls to HMRC call centres were not answered compared with 27.8% in January. At the same time, 69% of callers waited more than 10 minutes for the call to be picked up, the worst performance since April 2022, while the average pick-up time was 21 minutes and 40 seconds, which marked a low for the year, and compared with 12 minutes and 35 seconds for the same time a year ago.
During February, HMRC received 3,229,945 calls, up 20% compared with 2.68m calls in February 2022. This is despite the tax authority’s attempts to push people to use online services and webchat to resolve queries.
Spring Budget and Charities
Jeremy Hunt announced over more financial support for local charities and community organisations.
Funding to charities will be targeted towards those organisations most at risk, due to increased demand from vulnerable groups and higher delivery costs, as well as providing investment in energy efficiency measures to reduce future operating costs.
Charitable tax reliefs
The Government will change the tax definition of a charity and of Community Amateur Sports Clubs (CASCs), restricting charitable tax reliefs to UK charities and CASCs. For charities, this will mean that only those which come within the jurisdiction of the High Court in England, Wales or Northern Ireland, or the Court of Session in Scotland, will qualify for tax reliefs.
R& D Relief
There are a lot of changes on the horizon.
The main changes and operative dates are outlined below:
WEF 1 April 2023
- The rate of additional deduction for SMEs is cut from 130% to 86%.
- The rate of payable credit for SMEs is reduced from 14.5% to 10%.
- A new category of R&D-intensive SME will be created that will continue to receive payable credit (if relevant) at 14.5%.
- The RDEC rate increases from 13% to 20%
- Companies will need to formally notify HMRC of their intention to claim R&D relief.
SMEs will be getting significantly less relief than they are used to receiving under the SME regime for their R&D expenditure. The benefit received by SMEs claiming under the RDEC scheme (which they might use where they have subsidised expenditure) will, however, go up slightly.
An ‘R&D-intensive SME’ will be one whose eligible R&D expenditure is at least 40% of their total tax deductible expenditure for the year.
1 August 2023
Companies filing R&D claims on or after this date will also need to file an additional information form before, or at the same time as, the CT600.
1 April 2024
- Restrictions on overseas R&D expenditure will be introduced.
- The government wanted to introduce a single R&D regime by this date, but we will have to wait and see if that actually happens.
Basis Period Reform
Businesses unable (or perhaps unwilling) to move their accounting period to 31 March or 5 April may well have been within the new regime for a while. Tax year 2023/24 is the transition year so if your year end is other that 31 March (or 5 April) then the basis period for 2023/24 will include your year ending in that tax year. e.g. 30 April 2023, 31 May 2023 and so on.
There is an expectation that most businesses who do not currently have a 31 March or 5 April year-end will change. Some either cannot or will not change.
Partnerships will be worst affected.
The key problems are twofold:
- The practicalities of filing within statutory deadlines, in terms of assembling numbers, resourcing additional work, paying the right amounts of tax, and communicating to end users (i.e., individual and corporate partners).
- Estimates/provisional figures are needed.
So, if your year end is say 31 August then:
- The 2024/25 tax returns must be filed by 31 January 2026.
- The assessable profit will be based on 5/12 of the profit to 31 August 2024 and 7/12 of the profit to 31 August 2025.
- Come 31 January 2026, the figures for the year to 31 August 2025 needed in the apportionment may not be available in final form.
- A good estimate may be needed of the taxable profit and provisional profit-sharing arrangements.
We end up with estimates, provisional figures and tax payments that are either too low or too high until the final tax returns are submitted, amending the provisional figures for a tax return at the same time as and by the deadline for filing the following tax return
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.