Hikes in Interest Rates

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.


Hikes in Interest Rates

The Bank of England has once again increased the UK interest rate, updating its figure to 5.25%.

The Bank of England’s Monetary Policy Committee (MPC) voted on the quarter percentage point increase with a split vote, 6 for a .25% increase. 2 for a .5% increase and 1 to leave rates unchanged.

The MPC has forecasted a further drop of inflation to 5% by the end of the year on its way to 2% by . Q2 2025.

June’s inflation figure dropped from 8.7% in May to 7.9%. The recent easing of inflation pressure will be seen as justification for the BoE’s aggressive increases of the bank rate.


HMRC sets professional standards for compliance

The Revenue has introduced four professional standards for compliance, which sets out the way the tax department will “behave and act when conducting any form of compliance work”.

As other parts of HMRC have come under scrutiny for poor service levels, the professional standards for compliance has largely been welcome across the profession, with professional bodies seeing the standards as a step towards driving a more collaborative approach to compliance.

The four standards are:

  1. Getting things right
  2. Being aware of customers’ situation
  3. Being responsive – communicating with customers
  4. Treating customers fairly.

HMRC view is that the standards will play “a vital role in helping us become a trusted and modern tax department”.

The four standards are underpinned by an expectation that HMRC will correctly apply the law, guidance and business procedures in its compliance activity.


VAT in Taxi Fares

Cab firms outside London may have to raise their prices by a fifth following a decision in the High Court that the entire taxi trade may have to add VAT to their fares.

The judgement means that the operator is providing the taxi service as the principal not as an agent, and therefore is liable for VAT. Until now, private drivers working for the operators generally fall below the UK VAT registration threshold of £85,000 and so do not charge VAT, The taxi firms will now be liable to account for VAT on the whole fare.


Accountants Quit

A recent report revealed that nearly half of people working in accountancy who have considered changing roles in the past two years have actually changed jobs

The high level of staff turnover is putting pressure on accountancy firms as they struggle to hire experienced staff.

A third of accountants are less than fully satisfied with their current jobs.

When asked about the most important aspects of a job offer, the most popular response was salary (57%), followed by flexible working and having a career development plan (38%).

A quarter of professionals also mentioned the importance of compatible company culture and having mentorship opportunities.

The most sought-after benefits included pension contributions (46%) and holiday allowances offered above the statutory minimum (42%), followed by flexible working hours (38%).


Companies House Edinburgh Relocates

The Edinburgh Quay office will close for public access on 4 September. The plan is for all filing to move to digital only, meaning that a physical location is no longer required.

This follows the decision to close counter services at Companies House London office as well as the closure of counter services in Belfast, Edinburgh and Cardiff.

Companies registered in Scotland who want to file paper documents will now need to post them to the Cardiff office: Companies House, Crown Way, Cardiff CF14 3UZ.

Companies House will continue to accept post at its current Edinburgh office until 31 October 2023. Any documents posted to the current Edinburgh office after 31 October will be re-directed and will take longer to reach the relevant department.


Tighter Investment Rules for Charities

The Charity Commission has updated its guidance on charity investments for trustees in England and Wales.

The refresh follows a Commission consultation on financial investment and reflects a significant High Court judgment on charity trustees’ investment duties (Butler-Sloss case).

The charity Commission guidance:

  • includes examples of various issues which may be relevant for trustees to consider when making investment decisions, such as the potential for an investment to conflict with the purposes of the charity, or the reputational impact of an investment decision.
  • lists steps trustees must take to be compliant with the law and other actions which trustees ‘should’ do which are strongly recommended as best practice but not legally required.
  • explains that acting in the best interests of a charity is about ensuring that above all else any decision furthers its purposes. It also warns trustees to not allow personal motives, opinions, or interests to affect the decisions they make.
  • incorporates previously separate guidance on social investment and no longer uses terminology that could get in the way of trustees’ understanding, such as ‘ethical investment’, ‘mixed motive investment’ and ‘programme related investment’.

The guidance from the Charity Commission is referred to in the OSCR guidance for Scottish charities.


Airbnb Landlords Must Register

In a couple of months the rules on mandatory licences for short-term let landlords come into force,.

Short-term let hosts and landlords, including people providing accommodation through online booking platforms like Airbnb, Booking.com and HomeAway, must sign up to the scheme before 1 October 2023 if they let out property on a short-term basis anywhere across Scotland.

The rules come into effect from 1 October 2024, but hosts must apply a year in advance if they want to rent out property from October 2025. The licences have to be renewed annually.

They will also need to provide the necessary fire safety checklist, proof of insurance and energy performance certificates.

Owners who started operations after 1 October 2022 cannot begin trading until they receive their licence.

Licence fees will vary across different local councils and will depend on the size and capacity of the accommodation.

All applications must include a floor/layout plan for the dwelling, and permission or a ‘certificate of lawfulness’.

There will be fines of up to £2,500 and a one-year ban from offering lettings for failure to have a licence.


BPR on Gift of Shares

What happens if shares that qualify for BPR are transferred but the company ceases trading and the donor dies within 7 years.

At the time of making the gift it would have been classified as a potentially exempt transfer (PET). BPR is not required at this point and, in simplistic terms, where the donor survives the following seven years inheritance tax is not chargeable on the transfer.

As a general principle, when calculating BPR on the donor’s death, the donee must either still own the relevant business property at the time of the donor’s death or, if sold, have replaced it with other relevant business property within three years of the disposal.

BPR can also be withdrawn where the property has been retained by the donee but no longer qualifies for BPR on the date the donor died.

While this might  appear to be the case here as the company has ceased trading the legislation comes to the rescue.

Therefore, as long as the unquoted shares qualified for BPR at the date of the original gift and the shares are still unquoted at the date of death BPR will be available even though the company is no longer trading.


Tax Hike on Wines

From 1 August, all products will be taxed in line with alcohol by volume (ABV) strength, rather than different duty structures for different drinks. This means there will be fewer main duty rates, reduced from 15 to 6.

This will  raise £13.1bn in tax in 2023-24 rising to £15.8bn by 2027-28.

The changes will see duty increase overall, with a typical bottle of wine with an ABV of 12% going up by 44p, which when combined with VAT, will see consumers paying an extra 53p.

Wine with an ABV of 15% will see tax rise by a total of 98p.

Wine from hotter countries will be penalised most of all, because the grapes grown in hotter climates naturally produce higher alcohol wines.

Duty on 18% cream sherry will go up by £1 while a bottle of port will go up by more than £1.50. The total tax on a bottle of gin or vodka will go up by around 90p.


HMRC – Basis Period Tax Reporting

Basis period reform affects partnerships and self-employed people whose accounting year does not end on or between 31 March or 5 April.

Up to 5 April 2023, the basis period reporting rules applied. This means profits were reported in line with the business accounting year end date within the relevant tax year.

From 6 April 2023, the new tax year basis applies. This means profits will need to be reported up to the tax year end, even if the accounting year ends at a different time. As a result profits may need to be apportioned between accounting periods.

The 2023-24 tax year is known as the ‘transition year’. This means sole traders and partnerships will have to:

  • report profits covering more than one year; and
  • may need to apportion two sets of accounts to estimate the profits for the year.

If the reported profits covers more than 12 months, the excess is known as ‘transition profit’. This can be reduced by overlap relief and any remaining profit will be spread over the following years, up to the tax year 2027-28.

If the business accounting year ends on or between 31 March to 4 April, the accounting year can be treated as if it ends on 5 April. These profits can be reported without apportioning for the five days after 31 March.

Businesses that may be affected should consider their tax liabilities in the coming years, and whether aligning their accounting year with the end of the tax year could make things simpler for them in the future.

The transitional year rules could see a temporary increase in the tax payable by businesses without a 31 March or 5 April year end.  These businesses could also experience ongoing additional administrative burdens unless they change their yearend going forwards to 31 March.



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.



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