Topic: Uncategorized

Change of heart over new company reporting proposals

The Government has withdrawn draft regulations for company reporting after consultation with businesses raised concerns about imposing additional requirements.

Instead, the Government will pursue options to reduce the burden of red tape to ensure the UK is one of the best places in the world to do business.

Draft regulations published in July would have added certain additional corporate and company reporting requirements to large UK listed and private companies, including an annual resilience statement, distributable profits figure, material fraud statement and triennial audit and assurance policy statement.

This would have incurred additional costs for companies by requiring them to include additional layers of corporate information in their annual reports.

Since July, the Government has completed a call for evidence on existing non-financial reporting requirements, which has identified a strong appetite from businesses and investors for reform, including to simplify and streamline existing reporting.

Reporting simplification

The Business Secretary has now decided to withdraw these regulations, and will be setting out options to reform the wider framework shortly to reduce the burden of red tape on businesses.

Business Minister Kevin Hollinrake said: “Since the Government first published these draft regulations in July, discussions with businesses and stakeholders have highlighted a strong appetite for existing reporting requirements to be simplified.

“The Government has decided not to implement the draft regulations at this time, while we continue at pace with our plans to reform the wider non-financial reporting framework.

“This will deliver a more targeted, simpler and effective framework for both business and investors, reinforcing that the UK is one of the best places in the world for firms to list and to do business.”

The Government remains committed to wider audit and corporate governance reform, including establishing a new Audit, Reporting and Governance Authority to replace the existing Financial Reporting Council.

‘A welcome step’

This move will form part of a wider package of reform from the Government to streamline and simplify regulation for businesses.

It also builds on the 12-week call for evidence launched earlier this month to carry out an in-depth review of all regulators across the UK, in a campaign to bring about smarter regulation and make companies’ lives easier.

Julia Hoggett, CEO, London Stock Exchange plc, said: “This is a welcome step and will boost the competitiveness of the UK. Good corporate governance should be an enabler for companies to grow and reach their full potential in the interests of all stakeholders.

“However, founders, company boards and, increasingly, shareholders have highlighted that the UK’s approach of ever-increasing corporate governance processes has, however well-intentioned, impacted the effectiveness of listed companies and the standing of the UK over other capital markets.”

Question of the day -Why does tax year start on April 6?

If you have ever stopped to ask yourself, why does the tax year start on April 6, you are definitely not alone.

The idea that the tax year doesn’t begin until we are a quarter of the way into the year is a somewhat perplexing concept for many. Accountants and taxpayers alike often wonder why this seemingly arbitrary date was chosen as the starting point for the fiscal year.

Prepare to be enlightened.

The origins of the April 6 tax year date back to the 18th century. Prior to 1752, the British Empire used the Julian calendar, which was 11 days behind the Gregorian calendar used in Europe. In 1752, the British Empire adopted the Gregorian calendar, necessitating an adjustment to the fiscal year.

No plans to change

To do this, 11 days were added to the calendar, moving the official start of the tax year from March 25 to April 6, taking into account leap years. This change aimed to align the tax year with the new calendar, ensuring a smoother transition for tax collection and administration.

You might then ask, why was it originally in March? Good question. Starting a new year on January 1 is relatively new and the early Romans had March as the first month of the year – which explains why September, October, November and December are so named, bearing in mind that the Latin for seven to 10 is septem, octo, novem and decem.

Over the centuries, the April 6 tax year has become deeply ingrained in the UK's financial and administrative systems. Changing the date would be a complex and costly process, with significant implications for businesses, individuals and the Government. As a result, it has been retained to maintain continuity and stability in the tax system.

Sticking with tradition

From an accounting perspective, the April 6 tax year provides a logical break between financial periods. It allows accountants and businesses to close their books at the end of March and start fresh in April, making it easier to analyse financial performance and prepare for the new fiscal year. This consistency aids in tax planning and compliance, providing accountants with a structured framework for their work.

While April 6 may seem a peculiar date, its historical and practical underpinnings justify its continued use. For accountants, understanding the origins of this date can shed light on the nuances of the UK's tax system and how it influences financial planning and reporting. It also highlights the importance of adapting to historical conventions and traditions, which continue to shape the modern financial landscape.

FSCS provides confidence when headlines are negative

When a bank hits the headlines, it isn’t usually for good reasons. Such is the case for Metro Bank which has found itself the talk of the town.

Share prices took a massive dip amid concerns for its future, although the news has improved with a £925m investment package preventing it from collapsing.

But, while the talk in the media is all very high level with discussions around debt refinancing and capital raise, what does it mean if you’re a customer of a bank whose future looks at risk?

The primary concerns for customers in such situations include:

  • Loss of deposits: The most immediate concern is the potential loss of deposits. If a bank were to collapse, customers fear they could lose the money they have in their accounts, including savings and current accounts.
  • Disruption of banking services: A bank’s collapse can lead to a disruption in banking services that can affect routine transactions, such as payments, withdrawals and even accessing account information.
  • Uncertainty and stress: Customers may experience considerable stress and uncertainty regarding the safety of their money. This can have a ripple effect on their financial stability and overall well-being.

The Financial Services Compensation Scheme (FSCS) plays a vital role in mitigating these concerns:

  • Deposit protection: The FSCS provides protection for deposits held in UK banks and building societies. It ensures that customers will receive compensation up to a certain limit (currently £85,000 per person, per authorised firm) if their bank fails. This reassures customers that their money is safeguarded.
  • Rapid access to funds: In the event of a bank's collapse, the FSCS strives to compensate eligible depositors promptly, helping them regain access to their funds without prolonged financial disruption.
  • Stability and confidence: The FSCS helps maintain stability in the financial system by restoring confidence in the banking sector. This, in turn, ensures that customers continue to trust and use the banking services.

A bank's risk of collapse can have profound implications for its customers, potentially resulting in financial losses and disruptions. The FSCS acts as a safety net by providing deposit protection and compensation, assuaging customer concerns and contributing to the overall stability of the financial system.

Tougher measures to support small businesses in battle against late payments

Tougher measures to address late payments to small businesses have been announced by the Government.

In 2022, SMEs were owed, on average, an estimated £22,000 in late payments. This can slow down growth with many companies spending disproportionate time chasing payments that can lead to cash flow problems.

Small Business Minister Kevin Hollinrake said: “Small businesses form a crucial part of large companies’ supply chains. Without them, they couldn’t do business.

“It’s only right that they should be paid promptly for their services.”

The new measures are being proposed as part of the Government’s upcoming Prompt Payment and Cash Flow Review, a scrutiny of current payment practices.

The potential changes include:

  • Extending payment reporting obligations with new metrics including a disputed invoices metric
  • Providing greater advice to SMEs on negotiating payment terms that better suit them and managing their cash flow
  • Expanding the powers of the Small Business Commissioner to undertake investigations and publish reports on the basis of anonymous information and intelligence
  • A strengthening of the Prompt Payment Code so that business signatories must reaffirm their commitment every two years to stay on it

‘Measures will help SMES grow and prosper’

Announcing the plans, the Government said they will improve payment culture in the UK to support smaller businesses, many of whom do not have the resources to accommodate long or late payments from their business customers.

 

Paying small businesses on time could boost the economy by £2.5 billion a year, it is claimed.

Secretary of State for Business and Trade, Kemi Badenoch, said: SMEs make up 99 per cent of firms in the UK and are the lifeblood of our economy. I know that late payments are a massive barrier to growth and I am determined to fix that.

“The measures we’re announcing will take a big step towards making sure SMEs get their payments on time, helping firms to grow and prosper.”

Major increase to National Living Wage and its impacts

Two million people will receive a pay rise next year when the National Living Wage increases to at least £11 an hour.

It means the annual earnings of a full-time worker on the National Living Wage – currently set at £10.42 an hour ­– will rise by more than £1,000.

It will be welcome news for the lowest paid, but some commentators have pointed out the burden of the rise will land on businesses, many of which are already struggling with rising costs.

The Government has already set a target for the National Living Wage to reach two-thirds of median hourly pay by next October.

The rate is decided each year, based on the advice of independent advisory group, the Low Pay Commission, which said it should be between £10.90 and £11.43 to meet the Government’s target.

Wages for lowest paid are £9,000 higher than in 2010

Chancellor of the Exchequer, Jeremy Hunt, committed to accept the commission’s recommendations at the Conservative Party Conference speech in Manchester.

He said: “We promised in our manifesto to raise the National Living Wage to two-thirds of median income – ending low pay in this country.

“At the moment it is £10.42 an hour and we are waiting for the Low Pay Commission to confirm its recommendation for next year. But I confirm today, whatever that recommendation, we will increase it next year to at least £11 an hour.

“The wages of the lowest paid are over £9,000 a year higher than they were in 2010 – because if you work hard, a Conservative government will always have your back.”

‘Slap in the face’ for many businesses

The National Living Wage is the lowest amount workers aged 23 and over can be paid per hour by law and is currently £10.42 an hour. Younger workers have lower rates.

Michael Kill, chief executive of the Night Time Industries Association (NTIA), is reported as saying the news was a “slap in the face” for many struggling businesses.

“The night-time economy has been battered by the pandemic, with our venues facing closures, restrictions, and crippling financial losses,” he said.

“Now, just as we're trying to get back on our feet, the Chancellor decides to unload the burden of a wage increase squarely on to the shoulders of operators.

“While we support fair wages, the timing couldn't be worse. It's a cynical attempt to score political points at our expense.”

Almost 430k young adults urged to claim their cash

Hundreds of thousands of young adults have an average of £2,000 sitting unclaimed in Child Trust Funds.

The long-term, tax-free savings accounts were set up for every child born between September 2002 and January 2011, with the Government contributing an initial deposit of at least £250.

Funds can be withdrawn once the account matures when the child turns 18; however, almost 430,000 young people aged 18 to 21 are yet to claim their cash.

Online tool to track down cash

Angela MacDonald, HMRC’s Second Permanent Secretary and Deputy Chief Executive, said: “Many 18 to 21-year-olds are starting out in first jobs or apprenticeships, starting university or moving into their first home and their Child Trust Fund is a pot of money with their name on.

“I would encourage young people to use the online tool to track it down or, for parents of teenagers, to speak to them to ensure they’re aware of their Child Trust Fund. It could make a real difference to their future plans.”

There are currently 5.3 million open Child Trust Fund accounts. Families can continue to pay up to £9,000 a year tax-free into a Child Trust Fund until the account matures.

The money stays in the account until the child withdraws or reinvests it into another account once they turn 18.

‘Disproportionate’ amount of funds goes unclaimed by disadvantaged

A UCAS survey revealed that 74 per cent of respondents were aware of Child Trust Funds. Of the people who had not yet claimed their Child Trust Fund, 76 per cent were likely to take steps to learn more about the withdrawal process.

Sharon Davies, CEO of Young Enterprise, said: “We would encourage all young people to investigate if they have money which is unclaimed in a Child Trust Fund and to use it wisely.

“A disproportionate amount of the money is unclaimed by young people from disadvantaged backgrounds who are the very people who would benefit most from these funds. The investment could be placed into an adult ISA or put towards driving lessons, education or starting a business.

“The money in a Child Trust Fund has the potential to be life changing and the lack of knowledge about them shows the importance of financial education and financial planning from a young age.”

Visit www.gov.uk/child-trust-funds/find-a-child-trust-fund to learn more.

Winter Fuel and Cost of Living payments

A raft of money changes comes into play this month which could affect your finances, and as we are approaching the winter season – dark nights and lower temperatures – these support payments to help with energy costs will be gratefully received.

These include adjustments to the Ofgem energy price caps, while the latest Cost of Living payment will land for those claiming certain DWP benefits.

On the subject of benefits, the Office for National Statistics will release the inflation rate for the 12 months to September, on October 18. This inflation rate usually dictates how much benefits will rise in April.

Winter Fuel Payments

Depending on living arrangements and circumstances, this payment can be worth up to £600. It includes a top-up pensioner Cost of Living payment from the Government.

Most people on state pension will automatically receive the payment; however, some will need to physically apply. From October 4, claims can be made over the phone.

£300 Cost of Living payment

The next Cost of Living payment – worth £300 – lands between October 31 and November 19 for those claiming certain benefits in the qualifying period.

HMRC Tax Credit claimants will be paid between November 10 and November 19.

Warm Home Discount scheme

The £150 discount scheme is due to reopen on October 16. It is a one-off discount on an electricity bill, although some may be able to claim the discount on their gas bill if the supplier provides both gas and electricity. You can check the gov.uk website to see if you are eligible.

Autumn Statement 2023

The Chancellor, Jeremy Hunt, has announced that he will deliver his Autumn Statement to the House of Commons on Wednesday, 22 November 2023. This move would imply that the annual Budget will not take place until the spring of 2024.

The Autumn Statement is used to give an update on the state of the economy and will respond to the economic and fiscal forecast published by the independent Office for Budget Responsibility (OBR). The Autumn Statement also presents an opportunity for the government to publish consultations, including initiating early-stage calls for evidence and consultations on long-term tax policy issues.

The OBR has executive responsibility for producing the official UK economic and fiscal forecasts, evaluating the government’s performance against its fiscal targets, assessing the sustainability of and risks to the public finances and scrutinising government tax and welfare spending.

The Chancellor has made it clear that the main focus of the Autumn Statement will be to continue with measures to bring down inflation. We are therefore unlikely to see any major tax cuts that could further fuel inflation.

Tax on trivial benefits

There is a benefit-in-kind (BiK) trivial exemption that applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers given occasionally to employees, or any other BiK classed as 'trivial' that falls within the exemption. By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees.

The trivial benefit rules provide a great opportunity to provide small rewards as an incentive to employees. The main caveat being that the gifts are not provided as a reward for services performed or as part of the employees’ duties. However, gifts to employees on milestone events such as the birth of a child or a marriage or other gestures of goodwill would usually qualify.

The employer also benefits as the trivial benefits do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

  • is not cash or a cash-voucher; and
  • costs £50 or less; and
  • is not provided as part of a salary sacrifice or other contractual arrangement; and
  • is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from this relief but with an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per person per year. The £300 cap does not apply to employees. If the £50 limit is exceeded for any gift, the value of the benefit will be taxable.

Checking your National Insurance record

HMRC offers an online service to check your National Insurance Contributions (NIC) record online. In order to use the service, you will need to have a Government Gateway account. If you don't have an account, you can apply to set one up online.

By signing in to the 'Check your National Insurance record' service you will also activate your personal tax account if you have not previously done so. HMRC’s personal tax account can be used to complete a variety of tasks in real time, such as claiming a tax refund, updating your address and completing your Self-Assessment return.

Your National Insurance record online will let you see:

  • What you have paid, up to the start of the current tax year (6 April 2023).
  • Any National Insurance credits you’ve received.
  • If gaps in contributions or credits mean some years don’t count towards your State Pension (they aren't 'qualifying years').
  • If you can pay voluntary contributions to fill any gaps and how much this will cost.

In some circumstances it may be beneficial, after reviewing your records, to make voluntary NIC contributions to fill gaps in your contributions record to increase your entitlement to benefits, including the State or New State Pension.