Topic: Uncategorized

Companies House introduces changes

As we have mentioned in previous posts, Companies House have been tasked with introducing a number of changes introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCT Act), that came into force on Monday 4 March 2024.

Changes introduced 4th March include:

  • greater powers to query information and request supporting evidence;
  • stronger checks on company names;
  • new rules for registered office addresses (all companies must have an appropriate address at all times – they will not be able to use a PO Box as their registered office address);
  • a requirement for all companies to supply a registered email address;
  • a requirement for subscribers to confirm they’re forming a company for a lawful purpose when they incorporate, and for a company to confirm its intended future activities will be lawful on its confirmation statement;
  • greater powers to tackle and remove factually inaccurate information; and
  • the ability to share data with other government departments and law enforcement agencies.

New criminal offences and civil penalties will complement the measures introduced.

Companies House have confirmed that they will now be making their priority the cleansing of the register to remove details of those appointed without consent.

Companies House CEO Louise Smyth said:

“These new and enhanced powers are the most significant change for Companies House in our 180-year history.

“We’ve known for some time that criminals have misused UK companies to commit fraud, money laundering and other forms of economic crime.

“As we start to crack down on abuse of the register, we are prioritising cases where people’s names and addresses have been used without their consent. It will now be much quicker and easier to report and remove personal information that has been misused.”

As further changes mandated by the ECCT Act are introduced later this year we will post details on this blog.

Impact of the Spring Budget 2024

We all knew that the Chancellor would have restricted options when considering the contents of his recent spring budget announcement on 6 March. But it seems he has the skills after all to “play tennis” with his arms tied behind his back…

Would there be a combination of tax cuts and public expenditure cuts, or would he go for broke and flex his fiscal rules to place the UK economy in a more expansive position?

Rather than relisting what he actually offered we have summarised below a few of the areas that will have the most impact on small businesses and individuals in the coming 2024-25 tax year.

Key dates

The VAT registration threshold is to increase to £90,000 from 1 April 2024, while the National Insurance reduction and increase in HICBC threshold take effect from 6 April 2024. The cut in the top rate of residential capital gains tax applies from the same date. The abolition of the Furnished Holiday Lettings (FHL) regime and the replacement of the remittance basis rules take effect from April 2025.

 

This note highlights some of the key changes.

 

Further National Insurance cuts

Following on from the National Insurance cuts announced at the time of the 2023 Autumn Statement, the Chancellor announced that the main primary Class 1 rate would fall to 8% from 6 April 2024. The rate was previously cut from 12% to 10% with effect from 6 January 2024. The further 2% cut will reduce the amount of Class 1 National Insurance payable by employees in 2024/25 by £754.

The self-employed are also to benefit from National Insurance cuts. At the time of the Autumn 2023 Statement, the Chancellor announced that the main Class 4 rate was to be cut from 9% to 8% from 6 April 2024. However, this is to be cut by a further 2% to 6% from 6 April 2024. This too will be worth up to £754 in 2024/25.

At the time of the 2023 Autumn Statement, the Chancellor announced that Class 2 National Insurance contributions are to be abolished from 6 April 2024. The Government are to consult later in the year on how this will be delivered.

Abolition of the FHL regime

Furnished holiday letting (FHLs) enjoy tax advantages which are not available to landlords letting residential property on long-term lets. These include the ability to deduct interest and finance costs in full when calculating the taxable profit and access to capital gains tax rollover relief and business asset disposal relief.

 

To address concerns as to the lack of residential property in tourist hot spots, the FHL regime is to be abolished from 6 April 2025. Draft legislation will be published for consultation. This will include anti-forestalling measures to prevent the use of unconditional contracts to secure capital gains tax relief under the existing FHL rules. The anti-forestalling measures will apply from 6 March 2024.

 

Reduction in top rate of capital gains tax on residential gains

Currently, chargeable gains on residential property are charged at a rate of 28% where income and gains exceed the basic rate band (set at £37,700). This is to fall to 24% from 6 April 2024. The lower residential rate will remain at 18% where chargeable gains on residential property fall within the basic rate band.

Where the conditions for business asset disposal relief were met, gains on the disposal of a FHL which were not rolled over were taxed at 10%.

Increase in the VAT registration threshold

The VAT registration threshold is to rise from £85,000 to £90,000 with effect from 1 April 2024. The VAT de-registration threshold will rise from £83,000 to £88,000 from the same date.

High Income Child Benefit Charge

The High Income Child Benefit Charge (HICBC) claws back child income where the claimant or their partner have adjusted net income of £50,000 or more. The charge is equal to 1% of the child benefit for the tax year for every £100 by which adjusted net income exceeds £50,000. Once income reaches £60,000, the charge is equal to the full amount of the child benefit for the year.

The thresholds are increased and the claw back rates are reduced from 6 April 2024.

For the 2024/25 tax year, the abatement threshold is increased from £50,000 to £60,000. Once adjusted net income exceeds £60,000, the HICBC is equal to 1% of child benefit paid for every £200 by which adjusted net income exceeds £60,000. Once adjusted net income reaches £80,000, the charge will be equal to the child benefit for the 2024/25 tax year.

The HICBC is a complicated charge with a number of anomalies. Currently, a couple where both partners have adjusted net income of £49,999 (total combined income of £99,998) are able to keep their child benefit in full, whereas a couple where one partner has no income and the other has income of £60,000 will effectively lose all their child benefit in the form of the HICBC. To address this, the HICBC will be based on household income from April 2026.

 

Abolition non-UK domicile tax regime

The remittance basis tax regime for non-UK domiciled individuals who are resident in the UK allows them to be taxed only on foreign source income and gains if they are remitted to the UK in return for paying a remittance basis charge. The charge depends on how many years they have been resident in the UK for tax purposes. Once a person has been resident for 15 of the previous 20 tax years, they are deemed to be UK-domiciled and taxed in the UK on all their worldwide income.

The remittance basis rules are to be abolished from April 2025 and replaced by a simpler residence-based regime. Individuals who opt into that regime will not pay any tax on foreign income for the first four years in which they are resident in the UK as long as they have not been resident for the last ten tax years. Transitional arrangements will apply.

Overseas Workday Relief (OWR) is also to be reformed and eligible employees will be able to claim it for the first three years of tax residency.

The Government are also to consult on moving to a residence-based regime for inheritance tax.

British ISA

The Government are to introduce a British ISA with a separate £5,000 limit in addition to the usual ISA limit of £20,000. They will consult on the details at a later date.

Duties

Fuel duty rates will remain frozen for a further 12 months until March 2025, while alcohol duty rates will remain frozen until 1 February 2025.

A new duty on vaping products is to be introduced and will apply from 1 October 2026. Rises in tobacco duty will take effect from the same date. 

Air passenger duty for flights other than economy flights is to increase from 1 April 2025.

 

Please call if you need help with any of the issues raised in this alert.

Beware fake tax rebate offers

HMRC continues to warn of the ever-present problem of fraudulent phishing emails, suspicious phone calls and texts. These unwanted emails, phone calls and texts are being sent from around the world as HMRC and other agencies continue to combat the problem.

These messages aim to obtain taxpayers personal and or financial information such as passwords, credit card or bank account details. The phishing emails and texts often include a link to a bogus website encouraging the recipient to enter their personal details.

For example, taxpayers who completed their tax return for the 2022-23 tax year by the 31 January 2024 deadline might be taken in by an email, phone call or text message offering a tax rebate.

Recipients of phony messages should avoid clicking on any links. HMRC asks that phishing emails and bogus text messages are reported. The emails can be sent to HMRC by email phishing@hmrc.gsi.gov.uk or by text message to 60599.

HMRC responded to 207,800 referrals from the public of suspicious contact in the past year to January – up 14% from the 181,873 reported for the previous 12 months. More than 79,000 of those referrals offered bogus tax rebates.

HMRC is clear that they do not email, text or phone a customer to tell them that they are due a refund or ask them to request a refund. Taxpayers receive repayments into their chosen bank account, and can see any transactions in their online HMRC account and in the HMRC app.

Eligibility for the VAT Flat Rate Scheme

The VAT Flat Rate scheme is open to VAT registered businesses that expect their taxable turnover in the next 12 months to be no more than £150,000, excluding VAT. The annual taxable turnover limit is the total of everything that a business sells during the year that is not VAT exempt.

Under the scheme rules, businesses pay VAT as a fixed percentage of their VAT inclusive turnover. The actual percentage used depends on the type of business. There is a special 1% discount for businesses in their first year of VAT registration.

If any of the following apply, you will not be eligible to join the scheme:

  • you left the scheme in the last 12 months;
  • you committed a VAT offence in the last 12 months, for example VAT evasion;
  • you joined (or were eligible to join) a VAT group in the last 24 months;
  • you registered for VAT as a business division in the last 24 months;
  • your business is closely associated with another business;
  • you’ve joined a margin or capital goods VAT scheme; or
  • you are using the Cash Accounting Scheme.

Once you join the scheme you can usually continue using it provided your total business income does not exceed, or you do not expect it to exceed, £230,000 (including VAT) in a 12-month period. You must also leave the scheme if you expect your total income in the next 30 days alone to be more than £230,000 (including VAT). There are special rules if the increased turnover is temporary.

If you think that the scheme may be beneficial for your business, please get in touch and we can help you consider your options.

Reporting employee changes to HMRC

There are rules that businesses must follow when they are reporting employee changes. These changes must be sent to HMRC using a Full Payment Submission (FPS). The FPS is a submission that is required every time you pay your employees and must be submitted on or before the usual date you pay your employees. The information provided on an FPS helps HMRC ensure that they have the up-to-date information on your employees.

Additional information is required on your FPS if:

  • it includes a new employee
  • an employee leaves
  • you start paying someone a workplace pension
  • it’s the last report of the tax year
  • an employee changes their address

You may also need to tell HMRC if an employee:

  • becomes a director
  • reaches State Pension age
  • goes to work abroad
  • goes on jury service
  • dies
  • joins or leaves a contracted-out company pension
  • turns 16
  • is called up as a reservist
  • changes gender

File early to have self-assessment tax coded out

The coding out threshold may entitle you to have tax underpayments collected via your tax code when you are in employment or in receipt of a company pension. Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over the tax year.

If you want to benefit from this opportunity to pay tax due on 31 January through your tax code, then you need to file early. The deadline for the 2022-23 tax year has already passed.

You can pay your self-assessment bill through your PAYE tax code as long as all these apply:

  • you owe less than £3,000 on your tax bill (you cannot make a part payment to meet this threshold);
  • you already pay tax through PAYE, for example you’re an employee or you get a company pension; and
  • you submitted your paper tax return by 31 October or your online tax return online by 30 December.

HMRC will automatically collect what you owe through your tax code if you meet these three conditions unless you have specifically asked them not to (on your tax return). There are circumstances when HMRC will not collect the monies through your tax code, for example, if you do not have enough PAYE income to cover he debt.

If you would like to consider paying your self-assessment bill in this way for the 2023-24 tax year, you have until 30 December 2024 to file your online self-assessment returns to have the monies collected in the 2025-26 tax year starting on 6 April 2025. If you qualify to have your tax debt coded out then this is a good reason to deal with your tax return obligations as soon as you can, after the end of the relevant tax year.

Tax Diary March/April 2024

1 March 2024 – Due date for Corporation Tax due for the year ended 31 May 2023.

2 March 2024 – Self-Assessment tax for 2022-23 paid after this date will incur a 5% surcharge unless liabilities are cleared by 1 April 2024, or an agreement has been reached with HMRC under their time to pay facility by the same date.

19 March 2024 – PAYE and NIC deductions due for month ended 5 March 2024 (If you pay your tax electronically the due date is 22 March 2024).

19 March 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2024.

19 March 2024 – CIS tax deducted for the month ended 5 March 2024 is payable by today.

1 April 2024 – Due date for corporation tax due for the year ended 30 June 2023.

19 April 2024 – PAYE and NIC deductions due for month ended 5 April 2024. (If you pay your tax electronically the due date is 22 April 2024).

19 April 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2024.

19 April 2024 – CIS tax deducted for the month ended 5 April 2024 is payable by today.

30 April 2024 – 2022-23 tax returns filed after this date will be subject to an additional £10 per day late filing penalty for a maximum of 90 days.

Budget summary 6 March 2024

As expected, the Chancellor has found wriggle room in his fiscal rules that have allowed him to please his fellow Conservatives by reducing the impact of taxation. Not an unfamiliar tactic for a government in a general election year.

 

The impact of tax changes announced are summarised below.

 

Impact on personal finances

 

Further fall in employee National Insurance contributions (NIC)

As expected, the Chancellor has found headroom to make a further reduction of 2 percentage points, from 10% reduced to 8%, effective from April 2024.

Taken together with the previous 2% drop following the Autumn Statement, this represents a reduction in this tax charge by one-third. It means that a person earning £35,400 will be more than £900 a year better off.

 

High Income Child Benefit Charge (HICBC)

From 6 April 2024, the income threshold at which the HICBC can recover Child Benefits from parents is being increased from £50,000 to £60,000. The band of income that will affect the amount of any HICBC clawback is also doubled, from £60,000 to £80,000.

From April 2024, Child Benefits will be subject to the HICBC at a rate of 1% of benefits received for every £200 the highest paid parent exceeds £200. This means that when the highest paid earner’s income exceeds £80,000, all Child Benefits will be recovered.

For new Child Benefit claims made after 6 April 2024, any backdated payment will be treated for HICBC purposes as if the entitlement fell in the 2024-25 tax year if backdating would otherwise create a HICBC liability in the 2023-24 tax year.

Capital Gains Tax (CGT) on UK residential property sales

The higher rate of CGT for residential property gains is being reduced from 28% to 24%. The change will take effect from 6 April 2024. The lower rate will remain at 18% for any gains that fall within an individual’s basic rate band.

The 18% and 28% rates of CGT that apply to gains in respect of carried interest remain unchanged from 6 April 2024. These rates previously mirrored those for CGT on disposals of residential property.

Restriction in scope of Agricultural Property Relief and Woodlands Relief

The scope of Agricultural Property Relief and Woodlands Relief will be restricted to property in the UK. Property located in the European Economic Area (EEA), the Channel Islands and the Isle of Man will be treated the same as other property located outside the UK. The changes will take effect from 6 April 2024.

Stamp Duty Land Tax – Multiple Dwellings Relief (MDR)

The MDR is being abolished. This change will come into effect for transactions with an effective date on or after 1 June 2024. Transitional rules mean that MDR can still be claimed for contracts which are exchanged on or before 6 March 2024, regardless of when completion takes place. This is subject to various exclusions, for example that there is no variation of the contract after that date.

Changes to Non-UK Domiciled tax rules

The government will abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence-based regime, which will take effect from 6 April 2025. Individuals who opt into the regime will not pay UK tax on foreign income and gains for the first four years of tax residence.

Overseas Workday Relief (OWR) will be reformed with eligibility for the relief based on the new regime. OWR will continue to provide Income Tax relief for earnings from duties conducted overseas for the first three years of tax residence with restrictions on remitting these earnings removed.

The government has also announced an intention to move to a residence-based regime for Inheritance Tax, with plans to publish a policy consultation on these changes, followed by draft legislation for a technical legislation, later in the year.

 

A new ISA

A new British ISA with its own allowance of £5,000 a year is to be introduced for investments in UK equity. Further details of the new scheme will be released later this year.

Flat lining Income Tax rates and allowances

One area of personal tax that was not eased in the Budget announcements was the fiscal drag created by the freezing of the Income Tax personal Allowance and High Income Threshold.

The Income Tax Personal Allowance (presently £12,570) and the higher rate threshold (presently £50,270) above which you will pay Income Tax at 40% not 20%, have not seen a significant increase for over four years.

In the same period, the Consumer Prices Index (CPI) has increased from 108 to 132. To keep pace with inflation, based on the CPI increase, a £45,000 salary in April 2020 would now need to be £55,000 to maintain the same purchasing power. And as the higher rate threshold has remained unchanged, at £50,270, the top £4,730 will be taxed at 40% not 20%.

Based on the CPI change, the present Personal Allowance should be circa £15,400 and the Higher Rate threshold £61,400 to maintain their monetary value.

The Income Tax Personal Allowance and Higher Rate Threshold will remain unchanged and will not be reviewed again until April 2028.

 

Vaping Products Duty

The government has published a consultation on the detailed design and implementation of the duty, which will close on 29 May 2024. Registration for the duty will open on 1 April 2026 with the duty taking effect from 1 October 2026 alongside a proportionate increase in tobacco duties.

The duty will apply to liquids for use in vaping devices and e-cigarettes at the following rates:

  • £1 per 10ml for nicotine free liquids
  • £2 per 10ml for liquid containing nicotine at concentrations between 0.1 to 10.9mg per ml
  • £3 per 10ml for liquids containing nicotine at concentrations 11mg per ml, or above

The government will also make a one-off tobacco duty increase of £2 per 100 cigarettes or 50 grams of tobacco from 1 October 2026.

Alcohol Duties

These duties will be frozen from 1 August 2024 until 1 February 2025. This extends the present six-month freeze announced last year.

 

Fuel Duty main rates

The rates of Fuel Duty introduced at Spring Statement in March 2022, and extended at Spring Budget in March 2023, will be extended for a further 12 months.

This will maintain the cut in the rates for heavy oil (diesel and kerosene), unleaded petrol, and light oil by 5 pence per litre, and the proportionate percentage cut (equivalent to 5 pence per litre from the main Fuel Duty rate of 57.95 pence per litre) in other lower rates and the rates for rebated fuels, where practical.

The changes will take effect from 23 March 2024.

 

Impact on UK businesses

 

VAT registration threshold increase

The taxable turnover threshold which determines whether a person must be registered for VAT, will be increased from £85,000 to £90,000. The taxable turnover threshold which determines whether a person may apply for deregistration will be increased from £83,000 to £88,000.

These changes will be effective from 1 April 2024.

This will benefit smaller traders who are tiptoeing towards the present registration threshold of £85,000 and really don’t want to register as they will not be able to pass on the 20% VAT to their customers.

 

NIC cuts for the self-employed

The Chancellor has made a further reduction in the Class 4 NIC paid by the self-employed. The further cut will be a reduction from 8% of chargeable profits to 6%. Essentially, the overall reduction will be from 9% to 6% effective from 6 April 2024.

 

No change in Corporation Tax (CT) rates

For the financial year beginning 1 April 2025, the rates of CT will remain unchanged. The main rate will stay at 25% with the reduced small profits rate at 19%.

 

Abolition of the Furnished Holiday Lets (FHL) tax regime

In a surprise announcement, the present favourable tax benefits of letting properties as short-term holiday lets is to be abolished from April 2025.

Draft legislation will be published at a future date and will include an anti-forestalling rule. This will prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules. This rule will apply from 6 March 2024.

 

Full expensing to be extended to leased assets

At present, full-expensing of plant or machinery for leasing is excluded from a claim under the full-expensing or the 50% first year allowance for special rate assets.

The government will shortly publish draft legislation to bring leased assets into these reliefs.

 

Support for independent film makers

This relief will benefit independent filmmakers and will be provided via the Audio-Visual Expenditure Credit.

The Independent Film Tax Credit is aimed at films that have budgets (or total core expenditure) of up to £15 million and that receive a new accreditation from the British Film Institute. The credit rate will be 53% of qualifying expenditure. Qualifying expenditure is capped at a maximum of 80% of a film’s total core expenditure; the most taxable credit a film can receive will be £6.36 million.

The changes will take effect for films that commence principal photography from 1 April 2024 on expenditure incurred from 1 April 2024. Claims may be submitted from 1 April 2025.

Permanent extension for higher rates of Theatre, Orchestra and Museums and Galleries Tax Reliefs

This change affects the permanent extension of 40%/45% (for non-touring/touring and orchestral productions respectively) headline rates of relief for Theatre Tax Relief, Orchestra Relief, and Museums and Galleries Exhibition Tax Relief. These rates will take effect from 1 April 2025.

 

Energy Profits Levy — One Year Extension

As announced at Spring Budget 2024, the government will extend the sunset end date of the Energy Profits Levy to 31 March 2029. This is expected to raise a further £1.5 billion for the Treasury.

OUR SUMMARY

There are no radical changes in this Budget from a tax point of view although the Chancellor seems to have abolished as much as he has created in new regulations.

The Chancellor’s Budget speech to parliament was also peppered with much point scoring against the opposition parties. We will have to wait and see if the contents of the Budget provide a big enough rise in polling to prompt the Prime Minister to plump for a May general election.

New measures to trim energy bills

Government has announced a new package of measures to help families save on energy costs and access cheaper deals as figures published recently show energy prices are set to fall to their lowest level since Putin’s invasion of Ukraine.

Ofgem confirmed the price cap

The maximum amount a typical household pays for gas and electricity – will fall by £238 from April.

Long-term measures announced include examining how standard energy deals should work to pass on the cheapest electricity costs, plus £10 million in funding for companies to test new technologies and tariffs with their customers, to make the most of cheap, low-carbon power.

Smart meters

A new scheme to help customers repair or replace smart meter in-home displays after the one-year warranty is also being launched. Eight suppliers, covering the majority (60%) of the market, have signed up so far, including E, E.ON, Good Energy, Octopus, Ovo, Scottish Power, Utilita and Utility Warehouse.

These displays provide an important service in helping families, including older and vulnerable people, keep track of their energy use. Extending support will help customers continue to make the most of the savings smart meters can offer as the price cap falls and competitive deals return to the market.

Over half of British homes already use a smart meter, meaning they can access cheaper, off-peak energy tariffs. These deals can save households around £900 a year by charging an electric car, for example, at off-peak times such as during the night – with 63% of people saying they would be likely to switch to a flexible tariff to help them save money.

Evidence required

The government is also putting out a call for evidence on standard energy tariffs, which customers are rolled onto at the end of fixed-term contracts, resulting in the vast majority paying a flat rate throughout the day and a potentially higher price than they need to pay.

The government is seeking views on making these tariffs more flexible, so families pay less if using electricity at a time of day when prices are lower while protecting those who aren’t suited to a flexible tariff.

Are you missing out on the Marriage Allowance?

According to HMRC, couples who are married or in civil partnerships could be due a financial boost by sharing unused tax allowances.

HMRC has revealed that March is the most popular month for Marriage Allowance (MA) applications, with almost 70,000 couples applying in March last year. And with the option to backdate their claim for the previous 4 tax years, eligible couples could receive a lump-sum payment worth more than £1,000, in addition to reducing their tax bill for the 2023-24 tax year by up to £252.

The MA saves couples money by allowing the lower or non-earner to reduce the amount of tax their partner/spouse pays by transferring up to £1,260 of their Personal Allowance in the current tax year (2023-24).

The MA can be transferred to their husband, wife or civil partner but there are restrictions on who can claim.

To benefit from the tax relief, one partner must have income less than the Personal Allowance of £12,570, and the higher earning partner’s income must be between £12,571 and £50,270 (£43,662 in Scotland). To clarify, in Scotland, couples can benefit from MA if the partner with the higher income pays income tax at the starter, basic rate or intermediate rate – which typically means their income is between £12,571 and £43,662.

If you are eligible, we suggest you make your application before the end of March to avail yourself of any backdated claims you are able to make.

Unfortunately, you cannot claim this allowance if you are living together but you are not married or in a civil partnership.

The easiest way to claim Marriage Allowance is online via GOV.UK.

It will not affect your application for MA if you or your partner:

  • are currently receiving a pension; or
  • live abroad – as long as you still qualify for a UK Personal Tax Allowance

If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.