New Reporting Requirements for Small Companies!

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 the 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.


New Reporting Requirements for Small Companies

Under the new Economic Crime and Corporate Transparency Act 2023, small companies will be required to file a profit and loss account and directors’ report. This will ensure that key information such as turnover is available on the public register.

Companies will no longer be able to file abridged accounts.

Key information such as turnover will be available on the public register at Companies House.

There are various other technical changes but publishing your profit and loss account means your competitors will be able to get that information from Companies House. This is turning back the clock because many years ago, there was a requirement to file a profit and loss account, but this was scrapped.

The government plans to make further changes to reporting rules in a future amendment to the Act, including mandating digital filing, full tagging of financial information in iXBRL format, and a reduction of the number of times a company can shorten its Accounting Reference Period.

The implementation date for the new accounting requirements has not been confirmed.



Companies House – New Powers

The Economic Crime and Corporate Transparency Act gives Companies Hose power to deal with companies set up under fake “Donald Duck” identities.

The government introduced the bill with the aim of improving transparency over UK companies and other legal entities after Russia’s invasion of Ukraine and the subsequent crackdown on “dirty” Russian money washing through the UK.

The main changes introduced to Companies House as a result of the bill include identity verification for all new and existing registered company directors, people with significant control and those delivering documents to the registrar. These checks will target criminals who register companies under fictional names such as Mickey Mouse or Donald Duck. Up until now Companies House had no powers to verify the accuracy of the information it publishes. This will prevent those setting up companies under fake identities from hiding money behind these fictional names.

The bill also includes measures that strengthen anti-money laundering powers, particularly around information sharing, and greater powers to seize and recover cryptoassets.

In addition, Companies House will also be given more investigation and enforcement powers. The government noted that this includes the introduction of “better cross-checking of data with other public and private sector bodies”, which will enable the government agency to share information more effectively with law enforcement bodies.

There are new measures that hold companies liable if they profit from the fraudulent actions of their employees.



McVitie’s VAT and Biscuits

Under the VAT Act food is zero-rated, but with a number of exceptions. These include

“confectionery, not including cakes or biscuits other than biscuits wholly or partly covered with chocolate or some product similar in taste and appearance”.

This worked in McVitie’s favour in the notorious case of the Jaffa Cake, which it successfully argued should be treated as a cake and thus zero-rated despite its chocolate covering.

This new case involved the McVitie’s Blissfuls biscuits. This time the focus was on whether the chocolate – or substance similar to chocolate can be said to be partly covering or merely filling the biscuit. There was some discussion around the percentage of the biscuit covered by the biscuit topping, however this was a moot point as it is a matter of fact that the biscuit is not “wholly covered” by it.

This product consists of a biscuit cup with a flat bottom base, approximately 44mm in diameter and 9.5mm in height. It has a layer of chocolate hazelnut, a layer of chocolate and a McVitie’s logo made of biscuit on top, the circumference of which is smaller than the base.

As the biscuit logo sits on top of the chocolate layer, the taxpayer argued that it is impossible to reach the chocolate without first crunching through the biscuit. It is the topmost surface of the biscuit.

This interpretation would bring the Blissful into the same zero-rated category as other sandwich biscuits such as Bourbon creams where the chocolate or similar forms a sandwich layer between two biscuit halves and is not continued onto the outer surface”.

HMRC’s argued that as the biscuit logo does not wholly cover the chocolate layer, then chocolate forms the rest of the upper layer.

The tribunal concluded that an “ordinary man in the street informed as we are, would conclude that the biscuit is partly covered by a layer of chocolate. The taxpayer’s appeal was dismissed and Blissfuls made subject to VAT at the standard rate.



Failure to Prevent Fraud

There is a new 0criminal offence, called ‘failure to prevent fraud’, which will hold a large organisation criminally liable if it benefits from a fraud that is committed by a member of staff.

In addition, businesses can be held criminally liable for the actions of their senior managers who commit an economic crime.

This will enable corporates to be prosecuted for economic crimes and deter instances where senior managers use their authority granted under the corporation to commit economic crimes.

Both changes remove the ability for a large company to hide behind complex management structures to evade scrutiny.



Tax Liability of State Pension

HMRC is causing confusion by removing taxpayers from self-assessment, even though the increase in state pension means that they have tax to pay, raising the question of whether state pensions should be taxed at source.

State pensions are expected to rise by 8.5% in April 2024, taking the new state pension to £11,501 for 2024/25, leaving just £1,069 of personal allowance remaining.

A similar rate of increase in the following years would make the new state pension greater than the personal allowance.



HMRC and Voice Biometrics Trial

It has been reported that HMRC is considering a small-scale voluntary trial using voice biometrics as a means of confirming the identity of individual callers to its helplines.

Voice Biometrics  is a system with the functionality to verify the identity of individual taxpayers phoning HMRC. It does this by analysing their voice characteristics and comparing them with stored voice prints. HMRC believes that the use of this technology has the potential to improve security for the customer calling and for HMRC and reduce call lengths.




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