Archive for March, 2022

tax

A few days left to pay self-assessment bills

Thursday, March 31st, 2022

Self-Assessment taxpayers have until 1 April 2022 to pay their tax bill for 2020-21 or set up a payment plan to avoid incurring a penalty.

A payment plan, if agreed with HMRC, will allow a taxpayer to spread the cost of their bill into manageable monthly instalments.

The online Time to Pay service is available for businesses and individuals who have filed their Self-Assessment tax return and owe up to £30,000. They can set up a payment plan online at GOV.UK without speaking to HMRC.

If taxpayers owe more than £30,000, or need longer to pay, they can call the Self-Assessment payment helpline on 0300 200 3822.

The Self-Assessment deadline was 31 January but, this year, HMRC gave customers extra time to file and pay their 2020-21 tax return and not face penalties.

More than 11.3 million customers filed by 28 February, with one million of those taking advantage of the extra time by filing their tax return in February.

Customers can make secure Self-Assessment payments through the HMRC app by either connecting to their bank to make their payments or paying by Direct Debit, personal debit card or corporate/commercial credit/debit card.

A full list of the payment methods customers can use to pay their Self-Assessment tax bill is available on GOV.UK.

HMRC has urged everyone to be alert if they are contacted unexpectedly by someone asking for money or personal information. Taxpayers should always type in the full online address www.gov.uk/hmrc to get the correct link for filing their Self-Assessment return online securely and free of charge. HMRC sees high numbers of fraudsters emailing, calling or texting people claiming to be from the department. If customers are in doubt, do not reply directly to anything suspicious, but contact HMRC straight away and search GOV.UK for ‘HMRC scams’.

Further information:

Interest has been applied to all outstanding balances owing to HMRC since 1 February.

A 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1 April 2022. Further late payment penalties will be charged at the usual 6 and 12-month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up.

energy

Energy bills support 2022

Tuesday, March 29th, 2022

We have summarised below the three main sources of government support to assist householders with their energy bills for the coming year. They are:

  • A £200 discount on their energy bill this Autumn for domestic electricity customers in Great Britain. This will be paid back automatically over the next 5 years.
  • A £150 non-repayable Council Tax Rebate payment for all households that are liable for Council Tax in Bands A-D in England.
  • £144 million of discretionary funding for Local Authorities to support households who need support but are not eligible for the Council Tax Rebate.

The devolved administrations are receiving around £715 million funding through the Barnett formula as usual where UK Government support does not cover Scotland, Wales or Northern Ireland.

Details of each scheme are set out below:

How will the Energy Bill Discount Scheme work?

  • Domestic energy customers in Great Britain will receive a £200 cash discount on their bills this Autumn. The government will provide funding to all suppliers for them to pass on to their domestic energy customers from October.
  • Customers will pay back the discount automatically in equal instalments over five years, starting from financial year 2023-24, when wholesale gas prices are expected to come down. This is expected to be reflected as an increase to standing charges on bills.
  • This approach will help to spread the increased costs of global prices over time in a way that is more manageable for households.
  • The Department for Business, Energy and Industrial Strategy will set out more detail on this policy in a consultation in the spring.

How will the Council Tax rebate work?

  • Households in England in Council Tax Bands A-D, who are not exempt from Council Tax, will be eligible for a £150 Council Tax Rebate payment from April this year.
  • The rebate will be made by local authorities as a payment to households. This won’t have to be repaid.
  • 80% of households in England are in Council Tax Bands A-D, so will benefit from this rebate.
  • The rebate will not be paid for second homes or empty properties.
  • Households in England in Bands A-D that pay less than £150 or do not pay Council Tax as a result of Local Council Tax Support will also be eligible for a payment of £150.
  • People in receipt of the Single Person Discount in Bands A-D will be eligible for a payment of £150.
  • We expect the vast majority of people who pay by Direct Debit to receive this money in April. For households in Bands A-D who do not pay by Direct Debit, their councils will be ready to process their claims in April.
  • The government is providing new funding to local authorities for these rebates, as well as extra funding to help with increased administrative costs.
  • For those who need help with their energy bills but are not eligible – such as households on income support in higher bands (E-H) or with properties in bands A-D that are exempt from council tax – local authorities will receive £144 million of discretionary funding to help.
  • Further details will be set out by the Department for Levelling Up, Housing and Communities and local authorities.

Will people across the whole UK benefit?

  • The £200 energy bills discount applies across England, Wales and Scotland. The Northern Ireland Executive is responsible for energy policy in Northern Ireland. The Northern Ireland Executive will be funded to provide comparable support with around £150 million through the Barnett formula next year. The Barnett formula will also be applied when UK Government spending is recovered in future years, which will result in lower funding for the Executive in those years.
  • The £150 Council Tax Energy Rebate applies in England only, as Council Tax policy is devolved in Wales, Scotland and Northern Ireland. As a result, the devolved administrations will receive around £565 million extra funding through the Barnett formula, which will enable them to provide similar support. They will be able to choose whether to spend this funding this year or next year.
  • This comprises around £290million for the Scottish Government, £175million for the Welsh Government and £100million for the Northern Ireland Executive.

Spring Statement 2022

Thursday, March 24th, 2022

The Chancellor, Rishi Sunak, has delivered his Spring Statement to the House of Commons against a backdrop of a growing cost of living crisis. The Chancellor also stressed that, apart from the untold human suffering, the Russian invasion of Ukraine is creating further uncertainty in the domestic and global economy, particularly in relation to energy markets and the food supply-chain.

On the morning of the Spring Statement, the Office for National Statistics (ONS) announced that the rate of Consumer Price Index inflation increased to 6.2% in February putting further pressure on the Chancellor to act. The Office for Budget Responsibility (OBR) also expects average inflation to rise to 7.4% this year.

We have highlighted below the main tax measures that were announced:

National Insurance contributions (NICs)

The Chancellor did not remove the 1.25% increase in NICs due to come into effect from this April to help fund the NHS and Social Care. However, he did try to soften the blow by announcing a significant increase in the National Insurance Threshold from £9,880 to £12,570. This increase will see the alignment of the Primary Threshold (PT) for Class 1 NICs and Lower Profits Limit (LPL) for Class 4 NICs with the personal allowance of £12,570 from 6 July 2022. It has also been confirmed that the thresholds will remain aligned going forward. According to government figures this means that around 70% of employees will pay less NICs, even accounting for the introduction of the Health and Social Care Levy.

The PT and LPL will be £9,880 (as previously announced) from 6 April 2022 – 5 July 2022. It is unusual for tax rates to change during a tax year, but the Chancellor was facing pressure to make changes and the short period before the new tax year starts left him with no choice but to delay the increase for 3 months. July is the earliest date that will allow all payroll software developers and employers to update their systems and implement the necessary changes. This means the LPL will be £11,908 for the 2022-23 tax year which is equivalent to 13 weeks of the threshold at £9,880 and 39 weeks at £12,570.

Reducing Class 2 NICs payments for low earners

From April 2022, the self-employed will see Class 2 NICs liabilities reduced to nil on profits between the Small Profits Threshold (SPT) and LPL. This will ensure that no one earning between the SPT and LPL will pay any Class 2 NICs, while allowing individuals to be able to continue to build up National Insurance credits. This change represents a tax cut for around 500,000 self-employed people worth up to £165 per year.

Employment Allowance

In his speech, the Chancellor confirmed that the government would increase the Employment Allowance by £1,000 to £5,000 from April 2022. This represents a tax boost for around 495,000 small businesses who can claim an increased reduction in their NIC liabilities or even reduce their bills to zero.

In total, this means that from April 2022, 670,000 businesses will not pay NICs and the Health and Social Care Levy due to the Employment Allowance. The Employment Allowance is only available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance.

 

 

Fuel duty cut

The Chancellor announced a temporary UK-wide 5p per litre cut in fuel duty on petrol and diesel from 6pm on 23 March 2022 for 12 months. This is a saving worth around £100 for the average car driver, £200 for the average van driver, and £1500 for the average haulier in the coming year. This represents total savings for households and businesses worth around £2.4 billion in 2022-23 and is only the second cut in fuel duty over the last 20 years.

VAT

The government will expand the scope of VAT relief available for energy saving materials (ESMs) by reducing VAT from 5% to 0% from 1 April 2022 until 31 March 2027. This will ensure that households having energy saving materials installed like solar panels, heat pumps, or insulation will pay no VAT.

The government will also include additional technologies and remove the complex eligibility conditions, reversing a Court of Justice of the European Union ruling that unnecessarily restricted the application of the relief. A typical family having roof top solar panels installed will save more than £1,000 in total on installation, and then £300 annually on their energy bills.

The VAT rate cannot immediately be reduced to 0% in Northern Ireland due to the Northern Ireland Protocol. However, the Northern Ireland Executive will receive a Barnett share of the value of the relief until it can be introduced UK-wide.

Household Support Fund

The government launched a £500 million package of support for vulnerable households in October 2021. The Household Support Fund is used to help support millions of vulnerable households in England and monies is distributed by councils. This means that local councils can use the funding to provide discretionary support to vulnerable households. This could include using small grants to meet daily needs such as food, clothing, and utilities.

The Chancellor announced as part of his Spring Statement measures that the government will provide an additional £500 million for the Household Support Fund from April 2022. The Barnett formula will apply in the usual way to additional funding for the devolved administrations.

R&D tax relief reform

It has been confirmed that from April 2023, all cloud computing costs associated with R&D, including storage, will qualify for relief. This change will boost sectors where the UK is a world-leader, including AI, robotics, manufacturing, and design. Further changes to the relief may also be announced as part of the Budget later this year.

Income Tax basic rate

Whilst no immediate changes were announced, the Chancellor confirmed that the government will reduce the basic rate of income tax to 19% from April 2024.

This will apply to the basic rate of non-savings, non-dividend income for taxpayers in England, Wales and Northern Ireland and to the savings basic rate which applies to savings income for taxpayers across the UK.

The reduction in the basic rate for non-savings-non-dividend income will not apply for Scottish taxpayers because the power to set these rates is devolved to the Scottish Government. However, the Scottish government will receive additional funding which they can use as they see fit, including on reducing income tax or other taxes, or increased spending.

Increase in corporation tax next year

Wednesday, March 23rd, 2022

In just over a year’s time, from 1 April 2023, corporation tax rates are increasing.

At present, companies pay tax on profits at a single rate of 19%, irrespective of the amounts of profits subject to corporation tax. From 1 April 2023, this elegantly simple process is about to change.

From 1 April 2023:

  • Companies will continue to pay tax at 19% if their taxable profits are below a lower profits limit of £50,000. Accordingly, many smaller businesses will see no increase in their tax bills.
  • Companies with taxable profits above £250,000 will pay tax at the new mainstream rate of 25%.
  • Companies with profits between £50,000 and £250,000 will pay tax at the 25% mainstream rate less marginal relief. Marginal relief smooths the impact of the 25% rate which will be adjusted to gradually increase from 19% to 25%.

Complications if a company is associated with other companies

Unfortunately, companies that have a number of associated companies will suffer a reduction in these £50,000 and £250,000 limits.

The limits are divided by the number of associated companies plus 1. For example, if you have one associated company, the lower limit is reduced to £25,000 and the upper limit to £125,000 – the limits are divided by two. Likewise, if you have four associated companies, the limits are £10,000 and £50,000 – the limits are divided by five.

A company is an associated company of another company if one of the two has control of the other or both are under the control of the same person or persons.

Reviewing company structures

You may want to review your company structures prior to 6 April 2023. For example, if you have one company with taxable profits of £40,000 and one company with taxable profits of £5,000, the company with the taxable profits of £40,000 will not benefit from the small profits rate as the profits are above the lower limit of £25,000 that applies to a company with one associate.

Merging the companies will mean that there is only one company and the combined profits of £45,000 will be charged at the small profits rate of 19%.

Time for a review?

If you have a number of associated companies, you may want to consider your options. Please call, we can help.

Time to consider your options

Thursday, March 17th, 2022

As we approach the beginning of the next fiscal year, from April 2022 to March 2023, what options do you have to rethink your planning options for your personal and business finances?

The list that follows is not exhaustive, but it does outline some of the opportunities you have to reconsider your options.

Personal finances

  • Funding your retirement – could you increase payments to meet the likely increases in the cost of living if inflation is set to become a feature in the coming years?
  • Why multiple income streams make sense – considering various options for creating new income streams.
  • Estate planning – consideration of inheritance tax issues, and should you reconsider your Will and/or powers of attorney?
  • Wealth management – when was the last time you calculated your personal net worth and considered any asset holdings that would be subject to capital gains tax if sold?
  • Family issues – reconsider ownership of income producing assets within the family to reduce your family tax footprint.

 

Business development and tax planning

  • Working from home – have you claimed for any additional costs of running your business or being required to work from home. What are the tax disadvantages and advantages of building a bespoke garden office or extension at home?
  • Tax-free perks – are you taking advantage of tax-free, ‘trivial’ payments?
  • Extracting company profits – if your circumstances – business or personal – are changing, should you reconsider the way you extract funds for personal use from your company?
  • A new business – like to plan to develop a new business?
  • Business exit plan – time to create or review your business exit plans?
  • How will HMRC’s Making Tax Digital changes affect you? – getting ready for the need to file quarterly tax and VAT returns.
  • The benefits of real-time data – adopting and benefitting from the use of cloud-based accounts software.
  • When to incorporate your business – the commercial and tax benefits of a corporate structure.
  • When to incorporate a property business
  • Planning for corporation tax increase April 2023
  • Planning for change to self-employed basis period rules
  • Benefits of converting to electric vehicles
  • Reviewing salary sacrifice arrangements

 

We can help

If you are interested in discussing your options regarding any of the above issues, please call.

Check large company payment profile

Wednesday, March 16th, 2022

Since January 2021, large companies have been requested to sign up to a government initiative that requires them to set out how effective they are at settling supplier payments.

This information can be a critical factor if you are a small company supplying goods or services to a larger concern and cannot afford to wait for extended periods for your invoices to be paid.

The changes that came into effect from January 2021are:

  • requiring a company’s CEO or Finance Director, or the business owner where it is a small business, to personally sign the Code to ensure responsibility for payment practices is taken at the highest level of an organisation
  • introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it
  • acknowledgement as a condition of signing the Code that suppliers can charge interest on late invoices
  • enabling administrators of the Code to investigate breaches based on third-party information

In addition, the new requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021.

The target for larger businesses will remain 95% of invoices within 60 days.

To make it easy to check the reports made by companies there is an online process on the GOV.UK website at https://www.gov.uk/check-when-businesses-pay-invoices.

Simply enter the name of your ‘large business’ customer to access their payment effectiveness reports, these display:

  • the average time it takes for a large business to pay its suppliers, and
  • the proportion of payments (for example, invoice payments) that it doesn’t pay on time.

If you are considering supplying goods or services to a large company for the first time, this facility should be used to check their payment history. As we have mentioned above, you may be anxious to take their business, but you need to know that your standard credit terms will be met.

Regulator urges safe giving

Thursday, March 10th, 2022

The following press release issued by the Charity Commission sets out how to ensure your donations reach those affected by the invasion of Ukraine.

“The Charity Commission and Fundraising Regulator have urged the public to ‘give safely’ to registered charities as people make generous donations to causes helping to support and protect people affected by the invasion of Ukraine.

“As the conflict and ensuing humanitarian situation in Ukraine continues to escalate, it is vital that charitable donations of goods and money reach their intended causes. UK charities are pivotal to a collective response to this crisis.

“The Disasters Emergency Committee, a coalition of 15 leading UK charities, has launched its collective appeal to provide emergency aid and rapid relief to civilians suffering during the conflict. Many registered charities are also helping to provide vital life-saving services, like water, food and healthcare, to those caught up in the conflict, including those forced to flee to neighbouring countries.

“By giving to a registered, regulated charity, the public can have assurance that their funds will be accounted for in line with the charity law framework. Established charities with experience of responding to disasters are usually best placed to reach victims on the ground.

“Members of the public initiating their own informal fundraising appeals that are not linked to established registered charities should be aware of the ongoing responsibilities associated with overseeing and managing funds and ensuring they are applied in line with donors’ wishes.

“People looking to donate to causes working in Ukraine and neighbouring countries, should make a few simple checks before giving:

  • check the charity’s name and registration number at www.gov.uk/checkcharity. Most charities with an annual income of £5,000 or more must be registered, and you can use the advanced search function to identify charities working in specific regions and countries,
  • make sure the charity is genuine before giving any financial information,
  • be careful when responding to emails or clicking on links within them,
  • contact or find out more online about the charity that you’re seeking to donate to or work with to understand how they are spending their funds,
  • look out for the Fundraising Badge on charity fundraising materials, this is the logo which shows that a charity has committed to fundraise in line with the Code of Fundraising Practice.

Tax relief for charitable donations

Tuesday, March 8th, 2022

Many of us have chosen to donate to relief organisations in the past week as the plight of displaced persons in Ukraine continues to dominate the news.

The following notes explain how you can claim for tax relief on these, and any other charitable donations made this tax year.

Giving from your personal funds

Donations made personally generally qualify for Gift Aid. This is of great benefit to the charities and means they can claim an extra 25p for every £1 you give. It will not cost you any extra.

So that the donations you have made qualify for Gift Aid you will need to make a Gift Aid declaration. You usually do this by filling in a form or checking the appropriate box if donating online. You must give a declaration to each charity you want to donate to through Gift Aid.

Paying enough tax to qualify for Gift Aid

Your donations will qualify as long as they are not more than four times what you have paid in tax in the relevant tax year. The tax could have been paid on income or capital gains. You must tell the charities you support if you stop paying enough tax.

Paying tax at higher rates?

If you pay income tax above the basic rate, you can claim the difference between the rate you pay and basic rate on your donation. It’s the same if you live in Scotland. Do this either:

  • through your Self-Assessment tax return
  • or by asking HMRC to amend your tax code.

 

For example, if you donate £100 to charity – they claim Gift Aid to make your donation £125. You pay 40% tax so you can personally claim back £25.00 (£125 x 20%).

 

Getting tax relief sooner

On your Self-Assessment tax return, you normally only report things from the previous tax year, but for Gift Aid, you can also claim tax relief on donations you make in the current tax year (up to the date you send your return) against earnings in the previous tax year.

This is a useful way to speed up tax relief or reduce liability in a previous year when your income – and therefore tax paid – was higher than the current tax year.

You cannot do this if you miss the filing deadline (31 January if you file online) or if your donations do not qualify for Gift Aid. Also, your donations from both tax years together must not be more than four times what you paid in tax in the previous year.

 

Giving through your limited company

Companies cannot donate using Gift Aid. Any charitable donations made are treated as a business expense and will reduce profits subject to corporation tax.

Online Sales Tax – a step closer?

Thursday, March 3rd, 2022

High street retailers will be interested in the recent publication of an early-stage consultation that explores the argument for and against an Online Sales Tax. It is argued by the retail sector that business rates discriminate against the high street. The idea is to use any revenue from this tax to fund reductions in business rates for retailers with properties in England and to fund the block grants of the devolved administration so they can also fund rates reductions.

Addressing this issue, a recent Treasury news story states:

“As part of the three-month consultation stakeholders will be asked for their views on the challenges on the design of an Online Sales Tax, including which products and services would be in scope and whether it would be a flat-fee tax based on the number of transactions or deliveries, or a revenue-based tax.

“The consultation delves into what effect an Online Sales Tax would have on consumers and businesses alike, which will also be a key determining factor in policy decisions.”

Offer your point of view

Business owners of shop outlets or online sales facilities can offer their point of view by making a formal submission to the consultation. To access an online response form Google ‘Online Sales Tax: Policy Consultation’.

You could also submit your views on this issue by email to: OSTconsultation@hmtreasury.gov.uk or by post to:

Corporate Tax Team,

1 Yellow, HM Treasury,

1 Horse Guards Road,

London, SW1A 2HQ.

In an attempt to provide a rounded approach to the issue the government acknowledges:

“…that an array of business models operates in UK retail – a mark of the vibrant and innovative sector – and this will lead to a diverse range of opinions. Some retailers with a stronger bricks and mortar presence consider that their sector is overburdened by business rates relative to online competitors. Others view the growing market share of online retail as a signal of consumer choice and innovation which should not be subject to an increased tax burden. Many businesses operate both in-store and online. The government wants to review the evidence in the round.”

Tax Diary March/April 2022

Wednesday, March 2nd, 2022

1 March 2022 – Due date for Corporation Tax due for the year ended 31 May 2021.

2 March 2022 – Normally Self-Assessment tax for 2020-21 would need to be paid by 2 March or a 5% surcharge would be incurred. This year HMRC is giving taxpayers more time to pay and no surcharge will be incurred if liabilities are cleared by 1 April 2022, or an agreement has been reached with HMRC under their time to pay facility by the same date.

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

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

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

1 April 2022 – Due date for corporation tax due for the year ended 30 June 2021.

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

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

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

30 April 2022 – 2020-21 tax returns filed after this date may be subject to an additional £10 per day late filing penalty for a maximum of 90 days.

Switch to our mobile site