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 and should not be used as the sole basis for making decisions.
Spring Budget 2024 date confirmed
Spring Budget 2024 will be on 6 March.
What Did You Do on Christmas Day?
4,757 of you filed your 2023 tax returns on Christmas Day.
127 of you filed your tax returns between midnight and 1 AM on 1 January.
Over the three-day Christmas break, 25,769 of you submitted your tax returns with Boxing Day being the most popular day with 12,136 filing while only 8,876 found the time on Christmas Eve.
The peak time was between noon and 1 PM on Boxing Day when 1,121 returns were received by HMRC.
Child Benefit Digital for New Parents
With the new online claims process, HMRC claims will take around 10 minutes to complete, and payments could be made in as little as three days.
Initially launched in May 2023, the online service was only available to a small number of parents with newborn children. HMRC has now extended the service, so the vast majority of parents are now able to claim child benefits online.
HMRC has also put together several tips for parents applying for child benefits online:
- parents can claim child benefits from the day after a child’s birth has been registered; make sure to have the birth certificate to hand when claiming.
- create a Government Gateway account when making a claim for child benefit, with a passport and other proofs of ID. This can also be done in advance of a child’s birth to save time later on.
- when creating a new account, HMRC will send an activation code via email. Once received, this can then be used to apply for child benefits online.
When ready to make the claim, applicants should have the following documents to hand:
- the child’s birth certificate
- your bank details
- your national insurance number
- your partner’s national insurance number (if you have a partner)
Once parents have applied online, they can manage their child benefits by using the HMRC app, which offers features such as the ability to report changes in circumstances, update bank details, view the last five child benefit payments, and view proof of entitlement for child benefit.
Child benefits can be backdated by up to three months, and HMRC urged parents with children over three months old who have yet to claim to do so as soon as possible.
The Accountant’s Best Friend
Sir Keir Starmer and Rachel Reeves have offered a substantial list of promises regarding the economy and the tax regime, many of which sound suspiciously like watered-down versions of the current regime’s plans.
Starmer and Reeves are keen to emphasise that they will stick to fiscal rules, which means very limited spending. However, they have big plans to develop a green strategy, support health and education etc.
All of that will cost money and it has to come from somewhere.
So, without any justification, what is being speculated at the moment:
- an increase in the rate of inheritance tax
- windfall taxes on a selection of industries including energy, banking, finance and anyone who has made a killing as a result of the pandemic
- a 50% income tax rate
- unification of income tax and capital gains tax rates
- a widespread review of tax avoidance and loopholes, closing down many of those clever strategies that have made our clients (and by extension ourselves) rich.
It will be an interesting year.
Tax is always front and centre during election campaigns, making it big news and bringing it back into the mainstream. We will likely see much change over the next 12 months.
Do You Own Woodland?
Woodlands may be eligible for certain tax reliefs and exemptions, depending on the type of woodland and its purpose.
- Commercial woodlands
Business Relief may be available. If the woodlands qualify for 100% Business Relief, Inheritance Tax will not be chargeable in relation to either the land or the trees.
If the woodland does not qualify for Agricultural Relief or Business Relief, but the trees or underwood are growing, Woodlands Relief may be available.
Where Woodlands Relief is available, you can elect to exclude the value of the trees or underwood (but not the land itself) from the value of the estate. Inheritance Tax is instead paid when the trees are sold, given away, or otherwise disposed of.
Income Tax and Corporation Tax
Income Tax and Corporation Tax do not apply to woodlands managed on a commercial basis and with a view to making profits.
Where registered, VAT must be charged on all timber sales.
Capital Gains Tax
Profits from the sale of trees in commercial woodlands are exempt from Capital Gains Tax. This exemption applies whether the trees are standing or have been felled.
A growing timber crop (but not the land it grows on) is exempt from Capital Gains Tax, where managed as a commercial investment.
- Amenity woodlands
Where the estate of someone who has died includes amenity woodland that is not used to produce commercial timber, it will most likely not qualify for Agricultural Relief.
The woodland may qualify for Agricultural Relief if the land is occupied with, and that occupation is ancillary to, agricultural land or pasture. This could include:
- woodland shelter belts
- game covert
- fox coverts
- coppices grown for fencing materials on the farm
- clumps of amenity trees
Where the land does not qualify for Agricultural Relief, Business Relief may be available under the Inheritance Tax rules.
- Short-rotation coppice
Short rotation coppice is where high-yielding varieties of either willow or poplar are densely planted and harvested on a 2 to 5-year cycle. The roots are not disturbed and send up shoots, which are cut down to ground level and used for fuel.
Income Tax and Corporation Tax
The cultivation of short rotation coppice is considered husbandry and therefore classed as farming and not woodland for Income Tax and Corporation Tax purposes.
Short rotation coppice is considered agricultural land, and buildings used in connection with its cultivation are regarded as farm buildings.
Where the estate of someone who has died includes such land and buildings it may qualify for Agricultural Relief.
A reduced rate of VAT may apply to supplies of fuel and power for qualifying use, including wood.
- Short rotation forestry
For Inheritance Tax purposes, trees planted and harvested with a longer rotation than 10 years may not qualify for Agricultural Relief but could qualify for Business Relief or Woodlands Relief. This is because they could be considered a form of commercial woodland.
- Ancient semi-natural woodlands; woodland sites of special scientific interest
To preserve and protect national heritage for the benefit of the public, the government introduced the Conditional Exemption Tax Incentive Scheme.
Buildings, land (including woodland), works of art and other objects that qualify under the scheme might be exempt from Inheritance Tax and Capital Gains Tax. These property types are called ‘heritage properties’ by HMRC.
To be eligible you must own ancient semi-natural woodlands which are, or could be, included on the inventories of Ancient Woodland kept by Natural England and Scottish Natural Heritage. HMRC will consider your case for conditional exemption from capital taxes based on scientific, scenic or historic value.
Changes to UK Company Law from 4 March
New rules are being introduced to tackle abuse of the Companies House register, such as companies set up to commit fraudulent activities and to improve transparency over the register.
The new changes are set for the start of March, although the introduction hinges on the secondary legislation, but that is at the will of Parliamentary timetables. However, the date will not be before 4 March.
Changes to registered office addresses
One of the most significant changes will be to companies’ registered office addresses.
Companies will not be able to use a PO Box address as its registered address, but they will still be able to use a third-party agent’s address, although that comes with the proviso that it must still meet the aforementioned registered office conditions.
At first, when a company is identified as having an inappropriate address, Companies House will change their current address to a default one, and then give the company 28 days to change to an appropriate one, otherwise the registrar will start the striking-off process.
There will also be new requirements for all companies to supply a registered email address, although this information will not be available on the public register. From 4 March companies will have to give a registered email when they incorporate, while existing companies will have to give a registered email when they next submit a confirmation statement from 5 March.
Greater powers to scrutinise
Companies House will also get greater powers to query information and request supporting evidence.
This means stronger checks on company names, which has been a longstanding problem, with fraudulent companies set up with owners named Mickey Mouse, Donald Duck and Adolf Hitler previously waved through.
Companies will have to confirm that they’re forming the company for a lawful purpose when they incorporate. Companies will then have to state on their confirmation statement that their intended future activities will be lawful.
What is currently not included in the list of new measures is the requirement for small companies and micro-entities to file a full profit and loss account, which will then be available on the public register. Further information on that aspect of the bill will be released after secondary legislation and the finalisation of the implementation programme.
The changes to small companies and micro-entities filing are tentatively planned to come into force in 2026.
Five Common Mistakes to Avoid on Tax Returns
Do you need to file a tax return?
You must submit a tax return if you have self-employed earnings or have received untaxed income over £1,000.
You will also have to file if you have any untaxed income from:
- money from renting out a property, including through Airbnb.
- tips and commission.
- income from savings, investments and dividends.
- foreign income.
Five common mistakes to avoid
- Give yourself plenty of time.
- Claim tax relief on pension contributions.
- Remember to include charity gift aid payments.
- Keep a copy of your completed tax return for five years and 10 months.
- Take advantage of your personal savings allowance.
Don’t forget that once you have filed your 2023 tax return by 31 January 2024, you have until next 31 January to make any corrections, without penalty.
Payrolling of employment benefits from 2026
Benefits will have to be payrolled from 6 April 2026.
This is part of HMRC’s plans for a move to a digital-first tax authority.
This measure will reduce administrative burdens for employers by simplifying and digitising the process of reporting and paying tax on all employment benefits as they will no longer have to submit end-of-year returns.
Although payrolling BIK removes the need for employers to submit forms P11D for these BIK, class 1A NIC currently still needs to be reported and paid separately to HMRC using form P11D(b).
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.