Regulations burden lifted for medium-sized businesses

Around 40,000 businesses are now exempt from reporting requirements as the Prime Minister unveils a new plan to boost productivity.

Liz Truss has announced that thousands of the UK’s fastest-growing businesses will be released from existing requirements and other regulations.

Currently, small businesses are presumed to be exempt from certain regulations. However, many medium-sized businesses – those with between 50 and 249 employees – still report that they are spending more than 22 staff days per month on average dealing with regulation. Over half of all businesses consider regulation to be a burden to their operation.

The Prime Minister has announced plans to widen these exemptions to businesses with fewer than 500 employees for future and reviewed regulations, meaning an additional 40,000 businesses will be freed from future bureaucracy and the accompanying paperwork that is expensive and burdensome for all but the largest firms.

The exemption will be applied in a proportionate way to ensure workers’ rights and other standards will be protected, while at the same time reducing the burden for growing businesses.

Regulatory exemptions are often granted for SMEs, which the EU defines as below 250 employees. However, The UK is free to take its own approach and exempt more businesses to those with under 500 employees. The Government can also apply this to retained EU law currently under review, which would not have been possible as part of the EU.

The changed threshold came into force last week for all new regulations under development as well as those under current and future review, including retained EU laws. The Government will also look at plans to consult in the future on potentially extending the threshold to businesses with 1,000 employees once the impact of the current extension is known.

This is the first step in a package of reforms to ensure UK business regulation works for the UK economy. The reforms will harness the freedoms the UK has since leaving the EU to remove bureaucratic regulations on businesses, while streamlining and making it easier for them to comply with existing rules, ultimately saving them valuable time and money.

Are you ready for MTD? Deadline is approaching

Time is fast running out for VAT-registered businesses to be ready for Making Tax Digital filing.

From the start of next month, organisations will no longer be able to submit VAT returns through their existing online account.

By law, all VAT-registered businesses must sign up to Making Tax Digital (MTD) and use compatible software to keep their VAT records and file their returns.

Richard Fuller MP, Economic Secretary to the Treasury, said: “Making Tax Digital can help businesses get their tax right first time, which cuts the administration burden and frees up time for them to get on with what matters most to them – growing their business.

“I encourage any VAT-registered businesses still to register for Making Tax Digital to get online and sign up.”

MTD’s aim is to help businesses reduce errors in their returns, making it easier for them to manage their tax affairs, and consequently helping them to grow.

More than 1.8 million businesses are already benefitting from the service, and more than 19 million returns have been successfully submitted through MTD-compatible software so far.

In less than one month, businesses who file their VAT returns on a quarterly and monthly basis will no longer be able to submit them using their existing VAT online account, unless HMRC has agreed they are exempt from MTD.

If businesses do not file their VAT returns through MTD-compatible software, they may have to pay a penalty. Even if a business currently keeps digital records, they must check their software is MTD compatible and sign up for MTD before filing their next return.

If a business has not already signed up to MTD or started using compatible software, they must follow these steps now:

  1. choose MTD-compatible software – a list of software, including free and low-cost options, can be found on GOV.UK.
  2. check the permissions in the software – once a business has allowed it to work with MTD, they can file VAT returns easily. Go to GOV.UK to learn how to do this and search ‘manage permissions for tax software’.
  3. keep digital records for current and future VAT returns – a business can find out what records need to be kept on GOV.UK.
  4. sign up for MTD and file future VAT returns using MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’.

If a business is already exempt from filing VAT returns online, or if their business is subject to an insolvency procedure, they will automatically be exempt.

If a business is new and is not yet registered for VAT, they will automatically be signed up for MTD while registering for VAT through HMRC’s new VAT Registration Service (VRS).

A range of accessible help is available online through GOV.UK, webinars and videos as well as through HMRC’s Extra Support Service. Thousands of people have also benefitted from HMRC’s live webinars, which offer support on filing digitally and explain how it can help businesses. HMRC is continuing to communicate directly with businesses and agents to support them as they transition to MTD for VAT.

Are you unsure what to do? Get in touch for our help.

Tax returns – have you told HMRC your plans?

Anyone planning to complete a tax return for 2021-22 must notify HM Revenue and Customs (HMRC) by Wednesday.

Before customers can complete their first tax return, they need to register with HMRC to receive their Unique Taxpayer Reference (UTR) which they need to file a return.

The tax return deadline for the 2021 to 2022 tax year is 31 October 2022 for those completed on paper forms, and 31 January 2023 for online returns.

HMRC is encouraging customers to plan ahead to give themselves the best chance to complete their Self Assessment on time. Customers who file early will benefit from knowing what they owe, allowing them to budget and pay at a time that suits them. If customers are due a refund, they could get it back quicker. Customers have until 31 January to pay any tax owed.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said: “By registering early, Self Assessment customers will have plenty of time to prepare and access all the help available to them before they start their first tax return.

“Help and support is available to anyone completing a return, just search ‘Self Assessment’ on GOV.UK.”

Customers can check if they need to complete a tax return by using the free online tool on GOV.UK. Customers who are new to Self Assessment for the 2021 to 2022 tax year may include:

  • those who are newly self-employed and earned more than £1,000
  • a new partner in a business partnership
  • those who have received any untaxed income
  • those claiming Child Benefit if they or their partner have an income above £50,000
  • Self-employed customers must also register for Class 2 National Insurance contributions.

The easiest way to complete a tax return is online. Once a customer is registered for Self Assessment, they can use their UTR to access their tax return, as well as details of their income or earnings and other financial records. Detailed information on what documents are needed for Self Assessment are on GOV.UK.

For customers who have already filed their tax return but still need to pay any tax owed, they can visit GOV.UK to find out more about the payment options. Customers can now make Self Assessment payments quickly and securely through the free HMRC app.

If anyone is worried about paying their tax bill, support is available on GOV.UK, for example if customers are unable to pay in full, they may be able to set up a monthly payment plan online if the tax owed is less than £30,000.

All Self Assessment customers need to be alert to the risk of criminals emailing, calling or texting claiming to be from HMRC. Scams come in many forms – some threaten immediate arrest for tax evasion, others offer a tax rebate. Contacts like these should set alarm bells ringing and HMRC advises customers to take their time and check scams advice by searching for ‘HMRC scams’ on GOV.UK.

HMRC also urges customers never to share their HMRC login details. Someone using them could steal from the customer or make a fraudulent claim in their name.

If you need any advice, get in touch to arrange an appointment.

Tax Diary October/November 2022

1 October 2022 – Due date for Corporation Tax due for the year ended 31 December 2021.

19 October 2022 – PAYE and NIC deductions due for month ended 5 October 2022. (If you pay your tax electronically the due date is 22 October 2022.)

19 October 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 October 2022.

19 October 2022 – CIS tax deducted for the month ended 5 October 2022 is payable by today.

31 October 2022 – Latest date you can file a paper version of your 2021-22 self-assessment tax return.

1 November 2022 – Due date for Corporation Tax due for the year ended 31 January 2022.

19 November 2022 – PAYE and NIC deductions due for month ended 5 November 2022. (If you pay your tax electronically the due date is 22 November 2022.)

19 November 2022 – Filing deadline for the CIS300 monthly return for the month ended 5 November 2022.

19 November 2022 – CIS tax deducted for the month ended 5 November 2022 is payable by today.

Ways to pay your VAT bill

Make sure your payment will reach HMRC’s bank account by the payment deadline. You may have to pay a surcharge if you do not pay on time. If you are not sure of the actual payment deadline you can use the VAT payment deadline calculator to work out how much time to allow.

To make payments on the same or next day

  • online or telephone banking (Faster Payments)
  • through your online bank account
  • CHAPS

To make payments within three working days

  • Direct Debit
  • Bacs
  • standing order (only for businesses using the Annual Accounting Scheme or Payments on Account)
  • online by debit or corporate credit card
  • at your bank or building society

 

If the deadline falls on a weekend or bank holiday, your payment must arrive in HMRC’s bank account on the last working day before (unless you pay by Faster Payments).

Buy-to-let loan interest trap

Although finance costs, predominantly loan interest, are now disallowed as an expense that can be utilised to reduce taxable rental income, these charges do qualify for a tax credit limited to 20% basic rate Income Tax. For example, if your loan/mortgage interest amounts to £10,000 this cannot be used to reduce your rental income. It will simply reduce your Income Tax bill by £2,000 (£10,000 x 20%).

However, there are three hoops that these claims need to jump through. The tax deduction is worked out as the lower of:

 

  • 20% of any finance costs – costs not deducted from rental income in the tax year plus any unrelieved finance costs brought forward, in the above example £2,000;
  • 20% of property business profits – the profits of the property business in the tax year (after using any brought forward losses); and
  • 20% of adjusted total income – the income (after losses and reliefs and excluding savings and dividends income) that exceeds your personal allowance.

It is the final condition that can catch taxpayers out and deny relief. For example, if the majority of earnings are dividend income, and other earnings in total are lower than the annual personal tax allowance, currently £12,570, then no relief for finance charges can be claimed.

This could impact director shareholders of smaller companies with personal property income and finance costs, who many have adopted the high-dividend low-salary approach to taking remuneration from their company

This is a further justification for ongoing tax planning to ensure that all options are considered and reviewed to minimise overall tax payments.

Winter Fuel Support

If you were born on or before 25 September 1956 you could receive between £250 and £600 to help you pay your heating bills. This is known as a ‘Winter Fuel Payment’.

The amount you receive will include a ‘Pensioner Cost of Living Payment’. This is between £150 and £300. You will only get this extra amount in winter 2022 to 2023. This is in addition to any Cost-of-Living Payment you get with your benefit or tax credits.

You will get your Winter Fuel Payment automatically (you do not need to claim) if you are eligible and either:

  • receive the State Pension; or
  • receive another social security benefit (not including Adult Disability Payment from the Scottish Government, Housing Benefit, Council Tax Reduction, Child Benefit or Universal Credit).

If you do not receive either of these, or if you live abroad, you may need to make a claim.

If you’ve got a Winter Fuel Payment before, you do not need to claim again unless you’ve deferred your State Pension or moved abroad.

Energy Grant

In addition to the Winter Fuel Support, all UK households will receive a grant which will automatically reduce their energy bills by a total of £400 during the coming winter period.

The grant will automatically be credited to energy suppliers’ accounts in equal instalments of £66 from October 2022 to March 2023.

More start-ups eligible for slice of �900m loan pot

More new businesses are going to be able to take advantage of an £884 million loan scheme after the Business Secretary expanded its eligibility.

Start-ups that have been trading for up to three years will now be able to apply for loans of up to £25,000 and second loans will be available to businesses up to five years old.

Business Secretary Jacob Rees-Mogg said: “This government is relentlessly focused on driving growth to create better jobs, boost wages and fund our vital public services like the NHS.

“Encouraging entrepreneurship and new businesses to thrive is critical to growing the economy and raising living standards.”

The Start Up Loans programme has provided more than 95,000 loans to start-ups across the UK since its inception in June 2012, offering an average of just over £9,000 in support.

With 33,000 new loans available, eligibility has widened to include businesses trading for up to three years (formerly two years). Businesses can apply immediately under the new criteria.

Start Up Loans provide a fixed interest rate of six per cent, as well as mentoring, support and funding to aspiring business owners across the UK, providing support to those who might find it difficult to secure loans from traditional lenders.

Alongside this, a new second loan will be available to businesses operating for up to five years, providing eligible businesses between three and five years old much-needed government-backed finance to support their expansion at a crucial juncture.

“From a hair salon in Wales, to a furniture business in Northern Ireland and a cake seller in the Lake District, expanding the Start Up Loans Scheme will support these small businesses through this challenging period and position them to grow – creating jobs and opportunities across the UK.”

The scheme has backed businesses across the United Kingdom, with more than £54 million provided to businesses in Scotland, £42 million in Wales and over £12 million in Northern Ireland.

The extension provides further government support for businesses grappling with cost pressures and adds to measures announced by the Chancellor in his mini-Budget, including the introduction of the Energy Bills Relief Scheme to help support them with the costs of energy, reforming off payroll working rules and simplification of the alcohol duty system.

It also builds on key measures the Government has announced for small businesses in particular, including extending the £4.5 billion Recovery Loan Scheme and delivering the Help to Grow schemes, which provide mentoring and free software to thousands of businesses across the UK.

Michelle Ovens CBE, founder, Small Business Britain said: “The expansion of funding opportunities for start-ups and growing businesses will certainly be welcomed by small firms as a positive move to unleash their potential. Access to finance is vital for entrepreneurs to grow, and with rising costs and challenges across the board they need all the help they can get right now to realise their ambitions.”

Will you be applying for a Start Up Loan? Get in touch if you’d like to discuss it with us.

Mini-Budget delivers some big changes

New Chancellor Kwasi Kwarteng found himself firmly in the spotlight as he delivered a mini-Budget that saw the pound crashing to a new 37-year low.

The winners and losers were left to reflect on the announcements as the Chancellor delivered a package of tax cuts worth £45 billion in an attempt to boost the UK’s economic growth.

A lot of the changes had already been forecast in the days running up to Friday’s Westminster statement, but scrapping the 45 per cent additional rate of income tax was unexpected.

Mr Kwarteng told MPs: “The additional rate of income tax at 45 per cent is currently higher than the headline top rate at G7 countries like the US and Italy, and it is even higher than social democracies like Norway.

“But I am not going to cut the additional rate of tax today, Mr Speaker, I am going to abolish it altogether. From April 2023, we will have a single higher rate of income tax of 40 per cent.”

The Chancellor also stopped the planned increase from 19 per cent to 25 per cent on corporation tax; scrapped the 1.25 per cent increase to National Insurance that was due to come in in November; and said there would be a permanent cut to stamp duty.

There will be no duty to pay up to £250,000, while for first-time buyers this goes up from £300,000 to £425,000.

He continued his list of announcements by lifting the cap on bankers’ bonuses and bringing forward the planned 1p reduction to the basic rate of income tax. This was due to happen in 2024, but will now go ahead next year, although not in Scotland.

The Government has indicated that 31 million people will enjoy an average £170 a year reduction in their tax with this move.

Given the ongoing cost-of-living crisis, do you think the mini-Budget has provided any answers for cash-strapped families? What would you like to have seen included?

Relief scheme takes the heat off energy bills

Businesses have been given a helping hand by the Government to cope with the dramatic rise in energy prices as a new winter of discontent looms.

Through a new Energy Bill Relief Scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector, including charities, and the public sector such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices.

This support will be equivalent to the Energy Price Guarantee put in place for households.

Business Secretary Jacob Rees-Mogg said: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes.

“The help we are already putting in place will save families money off their bills, and the Government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support.

“This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”

The Scheme will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.

As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support that will automatically be applied to bills.

To administer support, the Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity. This is equivalent to the wholesale element of the Energy Price Guarantee for households. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.

The level of price reduction for each business will vary depending on contract type and circumstances.

If you are not connected to either the gas or electricity grid, equivalent support will also be provided for non-domestic consumers who use heating oil or alternative fuels instead of gas.

 

Prime Minister Liz Truss said: “I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.

“As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.

“At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”