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.
Late Charities Could Lose Gift Aid
The government is considering stopping Gift Aid payments and other tax reliefs from charities that are late with their HMRC reporting and filing obligations. The intention is to ensure tax returns are filed when they are required or requested. HMRC could withhold claims to reliefs until the charity submits the relevant returns.
According to HMRC, the measure is designed to encourage charities to fulfil their obligations.
There are also a number of proposals to stop abuse of tax relief on donations and expenditure including curbing the use of loans to donors.
One way that this works is where a donor makes a significant donation to a charity allowing the donor to claim higher rate relief and the charity to claim Gift Aid on the donation. The charity could then return the donation to the donor, or a connected person to the donor, by way of a loan with a commercial rate of interest. The loan may never be repaid and is eventually written off.
Alternatively, following a donation, the charity then invests the donation in a company or fund controlled by the donor.
HMRC is also looking at tightening up rules on investment as these can expose charities to risk. They want to ensure any investment is made for the benefit of the charity and not for the avoidance of tax, or some other purpose’.
HMRC on Strike
The strikes will involve 400 HMRC staff in the personal taxes operations in Glasgow and Newcastle.
The strike action will affect helplines including the HMRC employer helpline, construction industry scheme (CIS), the student loans unit, PAYE registrations, maternity, paternity and sick pay.
The strikes will be held on 10-12, 15-19, 22-26, 29-31 May and on 1 and 2 June.
Simple Assessment Confusion
HMRC is issuing paper copies of simple assessments including some for tax demands that have already been paid for assessments previously issued digitally. This duplication is causing some confusion.
HMRC call centres are unable to handle queries about these simple assessment payments.
The paper assessments were issued because there was some doubt about whether the digital versions were legally issued.
The paper assessments show the full amount of the simple assessment regardless of whether it has been paid, possibly prompting duplicate payments.
HMRC knows who you are!
Sellers on eBay, Etsy and Facebook Marketplace are among thousands who have received HMRC nudge letters with details about their potential tax liability.
It appears that HMRC has detailed information on sales activity and so is inviting individuals to respond within 30 days summarising their tax position and make a voluntary disclosure of their undeclared income within 90 days.
It appears that HMRC has accessed sales data from these online platforms.
Anyone can sell goods up to the value of £1,000 a year without having to pay tax. Sales over that amount should be declared and taxed as income.
Tax take up 10%
The total tax collected by HMRC soared this year by £71.1bn to £786.6bn. We are all paying more tax.
Receipts from PAYE income tax and NICs for tax year 2022-23 were £40.2bn higher than in the same period a year earlier.
Overall receipts for business taxes for the 2022/23 tax year increased by £17.5bn compared with the same period a year earlier.
VAT receipts for the year were up by £2bn compared with the same period a year earlier.
Double figure inflation pushed inheritance tax (IHT) receipts up by £1bn more than in the same period a year earlier.
More families are expected to be caught by the IHT net given the inflationary growth of asset values coupled with the fact that the nil rate band remains frozen at £325,000 until at least April 2028.
A good shareholder agreement can help prevent arguments at a later date. Shareholder agreements can play a key role in how companies operate.
Shareholder agreements help determine what happens to shares in a variety of situations. They can prevent companies from taking certain steps without shareholder approval.
They can provide protections to shareholders who want to sell their shares, and can deal with the specific issues where person is both a shareholder and employee.
At its simplest, a shareholder agreement governs the rights, obligations, and responsibilities of the shareholders in a company. But they can be different depending on the nature of the company and the shareholders.
It should set out what the dividend policy is and what input each of the shareholders will have in terms of their roles. It will also set out exactly what happens if there is a dispute between the shareholders.
Once all shareholders are happy with the terms of a shareholders agreement it becomes a binding agreement.
It therefore becomes the first port of call in the event of a disagreement or a deadlock between shareholders when making decisions for the company.
The Shareholders’ agreement will include:
- Ownership structure – number and type of shares held by each shareholder.
- Shareholder rights and obligations
- Management structure
- Dispute resolution
- Confidentiality clause
- Non-compete clauses
HMRC – Points Based Penalties for Self-Assessment
The current standard £100 fine for late filing of self-assessment tax returns is due to be changed to a points-based system from 2026
This will be of benefit for taxpayers who only make occasional mistakes. HMRC will focus on those who persistently miss filing and payment deadlines.’
The planned penalty reforms for sending in a tax return late will be based on points. Taxpayers who miss a filing deadline will initially be given a point, with a financial penalty being charged only once a set number of points is reached.
The new penalty regime will penalise the minority who persistently do not comply by missing filing and payment deadlines, while being more lenient on those who make the occasional slip-up.
These reforms already apply for VAT.
Tax Administration and Maintenance Day
On TAM day (27 April), the government published a series of consultations and tax policy updates.
The policy paper also announced several consultations that will happen later in 2023.
The TAM day’s main focus was on simplifying and modernising the tax system and tackling the tax gap.
Cash is Still King
To stay afloat and profitable, finance teams have had to focus their efforts on maximising their cash flow and tightening their forecasting approaches.
It is clear that now more than ever, cash is absolutely at the heart of any business, and careful cash management is critical. The crises of recent years led a lot of businesses being more prudent about the future, better preparing for the unforeseen and trying to build up a war chest, just in case.
Understanding cash flow in real time has become more important and for smaller businesses the issue of managing cash is critical. The impact of the pandemic and the ongoing economic uncertainty mean that staying on top of cash flow is more important than ever. In uncertain economic times, small businesses are being squeezed from all sides with late payments alongside inflation and energy costs – continuing to create cash-flow issues for the small business economy.
With a focus now on growth, cash flow is as critical as ever. Growth locks up cash in working capital as well as additional asset acquisitions.
If long-term growth is your aim this needs careful planning and forecasting, and cash planning is key to make those plans happen.
For most companies, the priority now is robust cash planning, not just for the next month or three months, but for the next year and beyond. It’s unlikely that organisations will ever return to looser cash management irrespective of economic conditions without running serious risk of failure..
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