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.
Tax breaks for start-ups
The tax breaks for start-ups and entrepreneurs have a sunset clause, which required new legislation to extend the reliefs.
The schemes have now been extended until 5 April 2035.
The Enterprise Investment Schemes (EIS and SEIS) and Venture Capital Trusts are designed to encourage investment into new or young companies through tax-relief incentives, encouraging innovation, creating jobs and stimulating economic growth.
Both EIS schemes offer incentives to investors of up to 30% (EIS) and 50% (SEIS) upfront income tax relief and an exemption from capital gains tax (CGT) on any profits made after the sale of shares.
The extension, announced in a written ministerial statement in the Commons, will provide the confidence to continue investment into high-risk, early-stage businesses in the UK, supporting long-term growth and the development of their companies.
HMRC’s Debt Collectors
If you have ever got a little behind with your tax payments, you may have received a letter about the debt from debt collectors. Many people think these are a scam, but generally they are not.
HMRC currently has contracts with eight debt collection agencies. You will find a list of the agencies on the HMRC website.
These agencies can contact you by letter, phone and text message but they cannot visit you in person.
They can accept payment in full or agree a time to pay arrangement within certain criteria failing which they will pass the case back to HMRC to deal with. They cannot deal with any dispute over the amount of the debt which need to be taken up directly with HMRC.
When an agency makes a phone call they will ask some security questions, and also you whether you consent to discuss the debt with an agent.
Any complaints should be made with the agency itself.
The Cost of Tax Compliance
Taxpayers are not customers, although HMRC use that label for them. We do not have a choice whether to engage with them or indeed, use a competitor, one that perhaps has lower rates of tax.
Where we have no choice but to interact online in some digital format, that generally means that we incur a cost in complying with HMRC’s requirements.
But software has a cost, and someone has to pay for it. Should that be the taxpayer or HMRC? Many organisations offer discounts for dealing with them online. In the case of HMRC, it is the opposite.
HMRC used to provide free software but the free software is usually only suitable for taxpayers with the most basic tax affairs such as HMRC’s Basic PAYE.
These days HMRC are more reluctant to provide anything free. Their systems are also pushing us all towards having to buy software. In the case of VAT, you used to be able to enter the return totals on to a screen on the HMRC website. Now, you have to buy software that will talk directly to HMRC’s systems. The old facility is going.
A similar story has played out for corporation tax. Most companies must submit accounts in an iXBRL format and submit those figures digitally to HMRC. Smaller companies can submit the annual accounts and corporate tax return to HMRC using the HMRC free online service. However, the number of companies eligible to use this service is reducing as the rules are changed.
So, the end result is that virtually everyone will have to pay in order to be tax compliant.
RTI Data Collected by HMRC
There was a proposal to collect additional information with the regular RTI submissions.
Employers will not be required to start providing more detailed employees’ hours data through RTI from April 2025. This requirement will not be implemented until April 2026 at the earliest.
One criticism of HMRC was that they had not provided a clear rationale for asking for the additional data. It is estimated that about two thirds of employer would need to install new systems and possibly new equipment to capture the details required
MTD IT Preparations
From April 2026, self-employed individuals and landlords with income from self-employment and property that totals over £50,000 will have to keep digital records and send quarterly updates to HMRC using compatible software. Those with a total income over £30,000 will have to do this from April 2027.
HMRC is currently testing the new systems, both to improve the systems, with a focus this year on testing a range of IT functionality and customer journeys with small numbers to check the process works as it should. This testing will be expand in 2025 in the lead up to going fully live.
They are also working with various software providers to facilitate appropriate software in time.
MTD is supported by the introduction of the new points-based penalty system, which will ensure you will not be immediately penalised for failure to comply with more frequent reporting under MTD until a points threshold is reached. There is no other indication of a soft landing in the initial period after introduction.
You will need to store your digital records for at least five years after the 31 January submission deadline for a tax year. You should therefore make sure that you can access these digital records from previous tax years. You may need to export your digital records from your old software.
If you change software during a tax year, then you will need to import your digital records into the new compatible software for the current tax year.
If you consider yourself digitally excluded you’ll be able to apply for an exemption from using MTD IT.
You will be digitally excluded if:
- it’s not practical for you to use software to keep digital records or submit them due to your age, disability, location or another reason
- you are a practising member of a religious society (or order) whose beliefs are incompatible with using electronic communications or keeping electronic records.
Employment Rights Overhaul
Plans for the new Employment Rights Bill are progressing at speed with government stressing that it is working closely with business organisations to consult on the proposals with a view to setting out the legislation by 14 October.
Government has been meeting with trade bodies and business groups to discuss plans but it seems unlikely that there will be a wider consultation. They seem to be moving straight to draft legislation for debate in parliament.
There is however some concern that the Make Work Pay Plan could ‘increase red tape and increase the costs of doing business, and reduce financial stability.
However, the minister has said that they are going to raise the employment floor but it is already an area where many UK businesses are already operating above that.
The changes being introduced cover Day one employment rights, zero hours contracts, a four-day week, a right to switch off, higher and broader national living wage, business taxes including business property relief and the fair work agency.
Zero hours contracts will come to an end with all workers given the right to an employment contract calculated on the basis of the hours worked in the last three months.
Non-doms Leaving UK
Labour has now ramped up the scope of the proposed reforms, first announced by the Conservatives, pulling in global inheritance tax liability with a 10-year reach even after departing the UK.
Recent surveys have pointed to up to 60% of non doms looking to leave the UK.
The reform is expected to rake in a further £2.7bn a year by 2028-29, on top of the existing annual take of £8.5bn, reported for 2023-24.
However an alternate prediction is that the reforms would raise £1.3bn in 2025-26 but as emigration in non-doms increases the revenue may begin to drop with the possibility that by 2029-30 it could potentially cost the economy £900,000 in lost taxes.
Deals Accelerated Ahead of CGT Increase
There is growing concern about an increase in the rates of capital gains tax (CGT) at the Budget on 30 October.
The focus for many business owners is the upcoming Budget and the looming threat of an increase in capital gains tax, as sellers rush to get deals over the line.
For those that don’t manage to complete deals ahead of the 30 October, their decision of whether to sell up or to pause all negotiations and hang on to the business will be a difficult choice.
Small Businesses Evading Tax
Tax evasion among small businesses is causing the UK to lose billions of pounds a year in revenue, according to a new report by the National Audit Office, which also suggests that HMRC does not know how successful it is in tackling the problem.
According to the report, the HMRC’s estimate of tax lost due to evasion in 2022/23 was £5.5bn, of which 81% came from small businesses.
The report says that HMRC has an overall compliance strategy that focuses on tackling all forms of non-compliance, with an overall aim to stop the tax gap increasing. The strategy is primarily tailored around types of taxpayers, such as small or medium-sized businesses.
In addition, since 2011, when online incorporations were introduced, it has been quick and easy to set up UK companies online from anywhere in the world, leaving the UK vulnerable to tax evasion from fraudulent businesses. Government has started to introduce tighter requirements at Companies House from March 2024, b But some new measures will not be in force until Companies House develops the necessary systems and capability, or until further secondary legislation is in place (e.g. verifying directors’ identities.
The report goes on to say that although tax evasion has been growing among small businesses, HMRC has so far lacked an effective strategic response.
Companies House Government Gateway Access
Companies House has confirmed that from this autumn it will move to the new system which will have to be used by companies to access all online services on the companies’ register in time.
It described the Gov.uk One Login as a ‘new straightforward, secure way to access government digital services’ and in essence will require just one account, one username and one password to access all government services.
The change will be introduced in two phases over this autumn with phase one of the rollout set to complete by the end of 2024.
The new login service has two factor authentication and will be rolled out across all government web services to replace Government Gateway accounts over the next three years with full implementation by mid-2027.
National Living Wage Projected Increase of 5.7%
Businesses should also be prepared for another significant increase in the main national living wage rate with a possible rise of 5.7% based on early projections from the current rate of £11.44 per hour to £12.10.
In terms of the 2024-25 national living wage rate for anyone aged over 21 years old, the Commission said that it was projecting a range from £11.82 to £12.39, with £12.10 the likeliest rate taking into account strong wage growth.
In order to narrow the gap from April 2025, there will be larger increases for the 18-20 Year Old Rate, currently set at £8.60.
The Low Pay Commission will continue gathering evidence until it is due to submit its recommendations to the government by the end of October 2024. This includes a wide range of evidence to assess the impacts on business, competitiveness, the labour market and the wider economy.
Changes in rates will come into force from April 2025.
Questions?
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.
