Topic: Uncategorized

HMRC is encouraging customers to be prepared and have all the information they need ready to file their Self-Assessment tax returns early, so they can avoid any last-minute stress and know what they owe sooner. HMRC has a range of online help and support and YouTube videos to assist anyone completing their return, including first-time filers.

Scams advice from HMRC. Remember to:

Protect

• criminals are cunning – protect your information
• take a moment to think before parting with your money or information
• use strong and different passwords on all your accounts so criminals are less able to target you

Recognise

• if a phone call, text or email is suspicious or unexpected, don’t give out private information or reply, and don’t download attachments or click on links
• check on GOV.UK that the contact is genuinely from HMRC
• do not trust caller ID on phones. Numbers can be spoofed

Report

• if you’re unsure about a text claiming to be from HMRC forward it to 60599, or an email to phishing@hmrc.gov.uk. Report a tax scam phone call on GOV.UK
• contact your bank immediately if you’ve had money stolen and report it to Action Fraud. In Scotland, contact police on 101
• by reporting phishing emails, you help stop criminal activity and prevent other people falling victim

The government launched its national campaign ‘Stop! Think Fraud’ earlier this year. Backed by organisations across law enforcement, tech, banking, telecoms and the third sector, a new website was created with advice on how to stay safe online. It can be found at www.gov.uk/stopthinkfraud

The Let Property Campaign provides landlords who have undeclared income from residential property lettings in the UK or abroad with an opportunity to regularise their affairs by disclosing any outstanding liabilities whether due to misunderstanding the tax rules or because of deliberate tax evasion. Participation in the campaign is open to all residential property landlords with undisclosed taxes. The campaign is not suitable for those letting out non-residential properties.

Landlords who do not avail of the opportunity and are targeted by HMRC can face penalties of up to 100% of the tax due together with possible criminal prosecution. Taxpayers that come forward will benefit from better terms and lower penalties for making a disclosure. Landlords that make an accurate voluntary disclosure are likely to face a maximum penalty of 0%, 10% or 20% depending on the circumstance, and these costs would be in addition to the tax and interest due. There are higher penalties for offshore liabilities. 

There are three main stages to taking part in the campaign are notifying HMRC that you wish to take part, preparing an actual disclosure and making a formal offer together with payment. The campaign is open to all individual landlords renting out residential property. This includes, amongst others, landlords with multiple properties as well as specialist landlords with student or workforce rentals. Once HMRC have been notified of the wish to take part in the campaign, landlords usually have 90 days to calculate and pay any tax owed.

HMRC’s guidance for landlords wishing to make a disclosure has recently been updated to provide further information about who is affected by the Let Property campaign and how to notify HMRC.

The limit on Income Tax reliefs has applied since 6 April 2013. This measure was the first time a limitation to existing reliefs had been introduced.

The cap is set at the greater of 25% of income or £50,000. This limit applies to the total amount of relevant reliefs claimed in a tax year and is calculated individually for each tax year in which relief is claimed.

The main reliefs subject to this limit are:

• trade loss relief against general income and early trade losses relief claimed on the self-employment, Lloyd’s underwriters or partnership pages;
• property loss relief (relating to capital allowances or agricultural expenses) claimed on the UK property or foreign pages;
• post-cessation trade relief, post-cessation property relief, employment loss relief, former employees deduction for liabilities, losses on deeply discounted securities and strips of government securities claimed on the additional information pages;
• share loss relief, unless claimed on Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) shares claimed on the capital gains summary pages; and
• qualifying loan interest.

The limit applies in addition to other provisions that restrict the amount of relief that can be used to reduce total taxable income for the year. The limit does not affect the amount of trading losses which may be claimed against capital gains.

HMRC’s guidance explains, with supporting examples, how the limit is calculated, the measure of income used to calculate the limit, which reliefs are subject to the limit, and how different circumstances are treated. As the 2024-25 tax year begins to draw to a close, taxpayers should seek to ensure that wherever possible, they structure their finances to avoid the cap.

There are specific rules regarding the liability to Inheritance Tax (IHT) on gifts made during a person’s lifetime. In most cases, gifts made during a person’s life are not taxed at the time they are given.

These lifetime gifts are referred to as “potentially exempt transfers” (PETs). The gift becomes exempt from IHT if the giver survives for more than seven years after making the transfer, commonly referred to as the seven year rule. There were expectations that this rule might have been changed as part of the Budget measures, but no changes were made.

If the giver dies within three years of making the gift, the IHT treatment is as if the gift was made upon death. If death occurs between three and seven years after the gift, a tapered relief applies.

The IHT rates on the amount exceeding the IHT nil-rate band are as follows:

• 0 to 3 years before death: 40%
• 3 to 4 years before death: 32%
• 4 to 5 years before death: 24%
• 5 to 6 years before death: 16%
• 6 to 7 years before death: 8%

If you give away an asset but continue to benefit from it, this is considered a “gift with reservation,” and the value of the asset will still count towards your estate. Examples of gifts with reservation include:

• Giving your home to a relative but continuing to live in the gifted property.
• Giving away a caravan but still using it for holidays without charge.
• Donating a valuable painting but still displaying it in your home.

The tax treatment of double cab pick-up vehicles (DCPUs) has been clarified as part of the recent Budget announcements. This follows a chequered history of the tax treatment of DCPUs after a 2020 Court of Appeal judgment and after the previous government reversed its plans to overhaul the tax treatment of these vehicles.

DCPUs with a payload of one tonne or more will be treated as cars rather than goods vehicles for the purposes of capital allowances, benefits in kind, and some deductions from business profits. These changes will take effect from 1 April 2025 for Corporation Tax, and 6 April 2025 for Income Tax. This means that going forward the vast majority of DCPUs equally capable of transporting passengers or goods will be categorised as cars. This shift could lead to higher tax liabilities for many businesses, including increased Benefit in Kind and National Insurance costs. Additionally, the change in vehicle classification could also impact the tax obligations of employees.

For expenditure incurred before 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax the existing capital allowances treatment will apply to those who purchase double cab pick-ups before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

The definition of DCPUs with a payload of less than one tonne has not changed and these vehicles will continue to be classed as cars as has historically been the case.

           1 December 2024 – Due date for Corporation Tax payable for the year ended 28 February 2024.

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

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

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

           30 December 2024 – Deadline for filing 2023-24 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2025-26.

           1 January 2025 – Due date for Corporation Tax due for the year ended 31 March 2024.

           19 January 2025 – PAYE and NIC deductions due for month ended 5 January 2025. (If you pay your tax electronically the due date is 22 January 2025).

           19 January 2025 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2025. 

           19 January 2025 – CIS tax deducted for the month ended 5 January 2025 is payable by today.

           31 January 2025 – Last day to file 2022-23 self-assessment tax returns online.

           31 January 2024 – Balance of self-assessment tax owing for 2023-24 due to be settled on or before today unless you have elected to extend this deadline by formal agreement with                  HMRC. Also due is any first payment on account for 2024-25.

Providing Christmas gifts can be a thoughtful gesture, but it’s essential to understand the tax consequences to avoid unexpected liabilities. The tax treatment for gifts differs depending on whether they are for staff, or customers and suppliers. Here’s a breakdown:

1. Gifts to Staff

Tax-Free Gifts: Trivial Benefits

• Conditions: A gift can qualify as a tax-free trivial benefit if:
  • It costs £50 or less per employee.
  • It isn’t cash or a cash voucher (non-cash vouchers like store vouchers are fine).
  • It isn’t a reward for performance or work.
  • It isn’t provided under a salary sacrifice arrangement.
• Examples: A box of chocolates, a bottle of wine, or a store gift card under £50.
• Tax Implications:
  • If all the above conditions are met, there’s no need to report the gift to HMRC, and it’s exempt from Income Tax and National Insurance Contributions (NICs).

Non-Trivial Gifts

• If the cost of the gift exceeds £50 or fails to meet any of the above conditions:
  • The entire value (not just the excess over £50) becomes taxable.
  • The benefit must be reported on form P11D, and Class 1A NICs apply.
  • Employers may choose to cover the tax via a PAYE Settlement Agreement (PSA).

Deductibility for the Employer

• Gifts to staff are generally tax-deductible for the business as they are considered part of employee welfare expenses.

2. Gifts to Customers and Suppliers

• General Rule: Gifts to customers and suppliers are treated as business entertaining, which is not tax-deductible for corporation tax purposes.
• Exceptions:
  • The gift is not food, drink, tobacco, or vouchers.
  • It bears a clear business logo or advertisement.
  • The total value per recipient in a tax year does not exceed £50.
• Examples of Deductible Gifts:
  • Branded pens, mugs, calendars, or diaries.

VAT Considerations:

• Input VAT on customer gifts can usually be reclaimed, provided the gift meets the criteria for tax deductibility.
• If the total cost of gifts to a single customer or supplier exceeds £50 in a 12-month period, VAT must be accounted for as output VAT on the value of the gifts.

Key Considerations

Record-Keeping: Maintain clear records of the cost, nature, and recipient of all gifts to support your tax position in the event of an HMRC enquiry.

PAYE Settlement Agreements (PSA): For gifts to employees that do not qualify as trivial benefits, a PSA can be used to simplify tax reporting and cover the tax on behalf of employees.

By planning Christmas gifts within the outlined tax rules, you can spread goodwill without incurring unnecessary tax liabilities.

In a recent news story issued by the Department for Business and Trade a consultation was launched to crack down on the use of online “subscription traps”. The full story says:

“New proposals to crack down on subscription traps have been unveiled today as the government launches a consultation on measures to make it easier for consumers to get a refund or cancel unwanted subscriptions. 

“”Subscription traps” are instances where consumers are frequently misled into signing up for a subscription through a “free trial” or reduced price offer. In some cases, if the consumer doesn’t cancel the trial within a set amount of time, they are often automatically transferred to a costly subscription payment plan. 

“It comes as new figures reveal consumers are spending billions of pounds each year on unwanted subscriptions due to unclear terms and conditions and complicated cancellation routes. Nearly 10 million of 155 million active subscriptions in the UK are unwanted, costing consumers £1.6 billion a year. 

“Subscriptions can be for anything from magazines to beauty boxes, with many subscriptions having complicated or inconvenient cancellation processes such as phone lines with long waits and restrictive opening hours that can leave consumers feeling trapped. 

“The consultation sets out proposals to make the refunds and cancellation processes simpler, with a requirement on retailers for greater transparency on their subscription programmes in a way that is proportionate to balance consumer rights without placing unnecessary burdens on businesses.”

It will probably be some time before the consultation publishes its findings, and further delays for legislation to be drafted and to complete the Parliamentary processes. But this announcement will be a welcome step, helping consumers challenge subscriptions to which they had no idea they were subscribed.

Small businesses in the UK are currently navigating a complex financial landscape, facing several significant challenges that impact their operations and growth prospects. Key concerns include:

1. Rising Operational Costs

Energy Expenses: Escalating energy prices have substantially increased overheads for small enterprises, straining profit margins. 

Material and Supply Costs: Inflation has led to higher prices for raw materials and supplies, affecting sectors reliant on physical goods. 

2. Taxation and Regulatory Changes

The proposed increases in Employers’ National Insurance Contributions (NICs): Recent proposed hikes in employer NICs have added financial pressure, particularly in labour-intensive industries like hospitality. 

Business Rates: The lack of reform in business rates continues to be a burden, especially for high-street retailers competing with online businesses. 

3. Access to Finance

Funding Challenges: Many small businesses report difficulties in securing necessary financing, hindering their ability to invest and grow. 

Debt Levels: The pandemic has left SMEs carrying significant debt, with collective borrowing increasing by approximately £36 billion since January 2020. 

4. Labour Market Issues

Staff Shortages: Recruitment challenges persist, with many businesses struggling to fill vacancies, impacting service delivery and growth. 

Wage Inflation: To attract and retain talent, businesses are facing pressure to increase wages, further squeezing profit margins. 

5. Economic Uncertainty

Consumer Spending: Reduced consumer spending due to the cost-of-living crisis has led to decreased revenues for many small businesses. 

Market Volatility: Ongoing economic fluctuations make financial planning challenging, affecting investment decisions and long-term strategies. 

6. Supply Chain Disruptions

Delays and Costs: Global supply chain issues have caused delays and increased costs, affecting inventory levels and operational efficiency. 

7. Technological Adaptation

Digital Transformation: Keeping pace with technological advancements is essential but can be costly and complex for small businesses with limited resources. 

Addressing these challenges requires a multifaceted approach, including government support, strategic financial planning, and adaptability to changing market conditions.

We are currently working with a number of clients to navigate these challenges, if you need help, please call so we can discuss your options. 

Recent legislative reforms have brought significant changes to how companies report profit and loss (P&L) details when filing accounts with Companies House. These changes, introduced under the Economic Crime and Corporate Transparency Act 2023, aim to enhance transparency, simplify the filing process, and combat economic crime. Here’s a short overview of these changes and when they come into effect.

Mandatory Filing of Profit and Loss Accounts

At present, small and micro-entity companies can opt to exclude their profit and loss accounts from public filings, submitting only a balance sheet and accompanying notes. 

Under the new regulations:

• All small companies, including micro-entities, will be required to file their profit and loss accounts with Companies House.
• This change makes essential financial data, such as turnover and profit or loss figures, publicly accessible. This ensures better-informed decisions by creditors, consumers, and other stakeholders.

Removal of Abridged Accounts Option

The option to file abridged accounts is being removed. Abridged accounts allow companies to submit condensed financial statements omitting certain details. Eliminating this option ensures consistency and a higher level of disclosure for all companies.

Directors’ Report Requirements

• Small companies must now file a directors’ report along with their accounts.
• However, micro-entities remain exempt from the requirement to prepare or file a directors’ report.

Transition to Digital Filing

Companies House is moving toward mandatory digital filing of accounts, requiring submissions through approved software. This transition, expected to be phased in over the next two to three years, aims to:

• Improve the efficiency and accuracy of filings.
• Align with broader digital transformation goals for UK companies.

When Will These Changes Take Effect?

While the Economic Crime and Corporate Transparency Act 2023 is already in force, the exact implementation date for mandatory P&L filing is yet to be finalised. The government has clarified:

• Accounts due from 1 January 2024 will not be impacted by these changes, providing businesses time to prepare.
• The effective date will be confirmed through secondary legislation and updates from Companies House.

Companies are encouraged to monitor announcements from Companies House to ensure timely compliance.

Implications for Small and Micro-Entity Companies

• Increased Transparency – mandatory P&L filing promotes transparency, enabling stakeholders to assess a company’s financial health more effectively.
• Compliance Obligations: Companies must be ready to update their financial reporting processes and use appropriate software solutions for digital filings to meet the forthcoming requirements.

Public Disclosure Concerns

The public availability of detailed financial information may raise concerns for some companies. However, this measure is designed to bolster trust and integrity across the corporate sector.

Next Steps for Businesses

To prepare for these changes, companies should:

1. Review Current Reporting Practices: Ensure they meet the new requirements.
2. Adopt Digital Filing Tools: Begin transitioning to software that complies with Companies House standards.
3. Monitor Announcements: Stay updated on secondary legislation and the confirmed implementation timeline.

Conclusion

The changes to profit and loss reporting at Companies House represents a significant shift towards greater transparency and accountability. Although the exact date for implementation remains unconfirmed, businesses should act now to align their processes with these upcoming requirements. By staying proactive, companies can ensure compliance and maintain stakeholder confidence in a rapidly evolving regulatory landscape.

Readers whose professional advisors deal with their filing obligations will be relieved that their filing processes will meet the new regulations. And as soon the secondary legislation is published – with the details of what will be required to file – you will be advised. Watch this space.