Category Archives: Uncategorised

Back to work plan

On her first visit as Secretary of State, with the rest of the Ministerial team, Liz Kendall MP will confirm the three pillars of the Government’s Back to Work Plan:

  • A new national jobs and career service to help get more people into work, and on in their work.
  • New work, health and skills plans for the economically inactive, led by Mayors and local areas.
  • A youth guarantee for all young people aged 18 to 21.

Under the DWP’s plan, Jobcentre Plus and the National Careers Service will be merged to get more people into work and to support those seeking better opportunities with the means to find better paid work.

The Youth Guarantee will mean more opportunities for training, an apprenticeship or help to find work for all young people aged 18-21 years old, to prevent young people becoming excluded from the world of work at a young age.

More disabled people and those with health conditions will be supported to enter and stay in work, by devolving more power to local areas so they can shape a joined-up work, health, and skills offer that suits the needs of the people they serve.

Expect more incentives to be announced to reduce unemployment as the new government digs into this issue in the coming months.

As Work and Pensions Secretary, Liz Kendall said:

“Growth is our number one mission and, as the Chancellor said, our Back to Work Plan is central to achieving our plans.

“Economic inactivity is holding Britain back – it’s bad for people, it’s bad for businesses, and it’s bad for growth.

“It’s not good enough that the UK is the only G7 country with employment not back to pre-pandemic levels.”

But of course, the real test of these remarks is positive results following any necessary actions. We shall have to wait to see if these early changes have the expected results.

How will Rachel Reeves change UK taxation?

At some point between now and the end of 2024, Rachel Reeves will step up to the despatch box and deliver her first Autumn Statement. As tax changes announced will likely have the Office for Budget Responsibility oversight, changes announced will form the basis of the 2025 Finance Bill.

And some of her commentary will be the subject of consultation with interested parties rather than immediate integration into the UK tax code.

 

Manifesto pledges

The new government has declared its intention to action three tax related changes:

  • Ending some of the tax privileges of private schools, primarily exemption from VAT and non-payment of business rates.
  • Tightening the rules that govern the tax status of non-domiciled individuals, and
  • Introducing an increased windfall tax on energy companies.

 

Funding economic growth

As the new government seems committed to achieving economic growth, and therefore higher tax revenues, how will it fund the initial changes required to accomplish this?

 

Although the Labour Party manifesto made it clear that they would not increase income tax, National Insurance or VAT, there are a raft of other taxes that could be tweaked. For example:

  • Capital Gains Tax rates could be increased such that gains were taxed at the same rates as income. This would simplify an overly complex tax and be fairly easy to impose.
  • Inheritance tax rates could be increased, although press speculation recently has focussed on trimming IHT reliefs such as lifetime gifts, business and agricultural land reliefs.
  • Dividends are still taxed at rates slightly lower than other income sources. These lower dividend rates could be scrapped, and dividends taxed at income tax rates.
  • Stamp Duty Land Tax could be increased especially for non-domiciled individuals.

 

Tax Planning

It is highly likely that any significant tax changes will have an impact on our recommended tax planning strategies. As and when these tax changes are declared, we will notify you of the relevant detail and flag how these changes will have an impact on present tax strategies.

Government is using AI

The Government Actuaries Department has declared it is using artificial intelligence to help government departments process consultation responses. In a recent news story, they said:

“We are using artificial intelligence (AI) to help clients in government departments process responses to consultations.

“This development helps public sector clients analyse responses which are submitted by people in industry and from the public. We have helped clients from government departments across the UK.

Categorise and analyse

Recently the Government Actuary’s Department (GAD) used AI software to help categorise and analyse almost 120 responses for a consultation issued by a central government department. In all we processed close to half a million words through either the use of AI or reading responses.

We had to consider how best to use AI to produce an initial summary of the responses that were received. For example, we grouped respondents by industry type so that the AI could pick out themes within these groups.

We used the AI program ChatGPT to summarise the largest consultation responses (about 50 out of the number received). The team fed in all these responses for each question and instructed the AI program to summarise views in 1 to 2 paragraphs. The output was read by an actuary to ensure it reflected a technically correct summary.

“Themes and replies

The output was then collated into 40 summarised responses (one per question) from which we were able to draw out key themes and collate replies.

Actuary Laura Brunton worked on the project and said:

“While we read all the responses, the AI output was a really useful starting point to analyse the responses to make sure the output was coherently presented. We undertook further editing and were able to ensure that the AI created an initial summarised view which we could use to build in the views of all respondents.”

Is this a slippery slope or progress? It is worth noting that in future government may be tempted to use AI on a more widespread basis especially if it cuts down on the cost of producing reports and consultations.

Remember to pay your Class 1A NIC

Class 1A NICs for 2023-24 are payable if you have provided employees with taxable benefits for that year. You are also required to pay them on payments of more than £30,000 that you make to employees when their employment ends, for example, if they are paid termination or redundancy payments.

When to pay

When you pay Class 1A National Insurance contributions depends on whether they are work benefits or termination awards.

If work benefits, you need to pay contributions by 22 July 2024 (for the tax year 2023-24). You will need to pay by 19 July 2024 if paying by post, for example, sending a cheque.

Class 1A due on termination payments is settled via PAYE.

You can make online payments via your bank software, set up a direct debit – in which case the payment will be collected by HMRC – or pay by debit or a corporate credit card.

 

Be sure to quote the correct tax reference number when making the payment. This will normally be printed on the formal notice to pay Class 1A NIC, sent by HMRC.

 

Other ways to pay contributions on work benefits

Make sure you pay HM Revenue and Customs (HMRC) by the deadline. You may have to pay interest and penalties if your payment is late.

The time you need to allow depends on how you pay.

Same or next day:

  • approve a payment through your online bank account

  • online or telephone banking by Faster payments or CHAPS

  • online by debit or corporate credit card

3 working days

  • Direct Debit (if you have set up one for HMRC before)

  • online or telephone banking by Bacs

  • by cheque through the post

5 working days

  • Direct Debit (if you have not set up one for HMRC before)

If the deadline falls on a weekend or bank holiday, your payment must arrive in HMRC’s bank account on the last working day of the week (unless you are paying by Faster Payments using online or telephone banking).

 

Beware business rates appeals deadlines

The Valuation Office Agency (VOA) has issued the following warning to business rate payers who may have been approached by agencies with false claims about upcoming deadlines to appeal the 2023 rating lists.

According to the VOA these claims are not true, and you should be wary of anyone making these claims.

You are generally able to challenge your property valuation on the 2023 list at any time until March 2026. Any claim of an earlier deadline, for example the end of June or August this year, are false.

The VOA says you should be cautious of any agent who:

  • tries to pressure you to make a decision or sign a contract;
  • makes claims about ‘unclaimed credits’ or similar;
  • says they are acting on behalf of the VOA; and
  • demands large sums of money up front.

Remember – you do not have to use an agent to manage your business rates.

If you want an agent to manage your business rates, use the VOA checklist to choose an agent. Do not let an agent choose you.

VOA agent standards set out clear expectations for agents regarding:

  • their behaviour;
  • their professional practice; and
  • the service they provide to their customers.

The vast majority of agents are reputable and provide a good service, but a small minority act in bad faith.

The VOA collect evidence of poor agent behaviour and practices in the course of their work. This evidence allows the VOA to proactively address issues or concerns.

If you are concerned about potential misrepresentation by agents, send any evidence to ccaservice@voa.gov.uk.

Check your State Pension forecast

The enhanced Check Your State Pension forecast service is now available online. The service can be found on GOV.UK at the following webpage https://www.gov.uk/check-state-pension.

The new digital service is a joint service by HM Revenue and Customs (HMRC) and the Department for Work and Pensions (DWP). It has been enhanced to include a fully end-to-end digital solution.

The service allows most people under State Pension age to view their pension forecast and identify any gaps in their National Insurance Contributions (NICs) record. This will be helpful for taxpayers looking to make voluntary NIC contributions to increase their entitlement to benefits, including the State or New State Pension.

Usually, HMRC allow you to pay voluntary contributions for the past 6 tax years. The deadline is 5 April each year. However, there is currently an opportunity for people to make up gaps in their NICs for the tax years from April 2006 to April 2017 as part of transitional measures to the new State Pension. The deadline has been extended a number of times and has been most recently extended until 5 April 2025.

The launch of HMRC’s online service will help speed up this process. HMRC’s helplines have been struggling to meet the demands for information and processing claims to pay additional NIC contributions.

HMRC has also confirmed that all relevant voluntary NIC payments will be accepted at the rates applicable in 2022-23 until 5 April 2025.

It is worthwhile checking your State Pension position on a regular basis, this will help to optimise your entitlement. You should also consider what other savings or pensions might be required for a long and comfortable retirement.

Tax relief for training costs

If you are self-employed it is important to know if an expense is tax allowable. Any allowable costs can be used to reduce your taxable profit.

As a general rule you can claim for items that you would normally use for less than 2 years as allowable expenses such as stationery and other office sundries as well as rent, rates, power and insurance costs.

HMRC lists the following office expenses as being allowable:

  • office costs, for example stationery or phone bills
  • travel costs, for example fuel, parking, train or bus fares
  • clothing expenses, for example uniforms
  • staff costs, for example salaries or subcontractor costs
  • things you buy to sell on, for example stock or raw materials
  • financial costs, for example insurance or bank charges
  • costs of your business premises, for example heating, lighting, business rates
  • advertising or marketing, for example website costs
  • training courses related to your business, for example refresher courses

Regarding training costs, you can claim training costs that help you:

  • improve skills and knowledge you currently use for your business;
  • keep up-to-date with technology used in your industry;
  • develop new skills and knowledge related to changes in your industry; or
  • develop new skills and knowledge to support your business – this includes administrative skills.

You cannot claim for training courses that help you:

  • start a new business; or
  • expand into new areas of business that are not related to your current business activities.

Correcting errors in VAT returns

Where an error on a past VAT return is uncovered businesses have a duty to correct the error as soon as possible. As a general rule, any necessary adjustment can be made on a current VAT return. To do this, the errors must be below the reporting threshold.

Under the reporting threshold rule, businesses can make an adjustment on their next VAT return if the net value of the errors is £10,000 or less. The threshold is further increased if the net value of errors found on previous returns is between £10,000 and £50,000 but does not exceed 1% of the total declare sales value for the return period in which the errors are discovered.

HMRC must be separately notified of errors that exceed either of the limits set out above or if the error was deliberate. VAT errors of a net value that exceed the limits for correction on a current return or that were deliberate should be notified to HMRC by making the correction online or submitting form VAT 652 (or providing the same information in letter format) to HMRC's VAT Error Correction team.

HMRC can also charge penalties of up to 100% of any tax under-stated or over-claimed if you file an inaccurate return.

Filing your tax return early

The 2023-24 tax year ended on 5 April 2024 and the new 2024-25 tax year started on 6 April 2024. Most taxpayers will be happy to leave dealing with their 2023-24 tax returns until later this year or even until January 2025.

The 31 January 2025 is not just the final date for submission of the 2023-24 self-assessment tax return but also an important date for payment of tax due. This is the final payment deadline for any remaining tax due for the 2023-24 tax year. In addition, the 31 January 2025 is also the usual payment date for any Capital Gains Tax due in relation to the 2023-24 tax year, and please note, any CGT due on the sale of a residential property needs to be paid within 60 days from the completion of the disposal. The 31 January 2025 is also the first payment on account deadline for 2024-25.

We recommend that you consider acting early and calculating what payments you will need to make by 31 January 2025. By preparing your tax return early in the tax year you have not accelerated the payment date, but you will know what your tax bill will be well before the payment deadline of 31 January 2025. Your accountant will also appreciate the extra time to prepare your tax return and you will avoid the eleventh-hour rush. If you are due a tax refund, this will also be processed more quickly.

Remember that calculating how much tax you may owe is different from filing the return. This strategy should also give you time to set aside enough money to pay any tax due by 31 January 2025 and avoid any last-minute surprises. Of course, if you are due a repayment of tax then it is a useful strategy to file your tax return as soon as possible.

Tax Diary July/August 2024

1 July 2024 – Due date for corporation tax due for the year ended 30 September 2023.

6 July 2024 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2024 – Pay Class 1A NICs (by the 22 July 2024 if paid electronically).

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

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

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

1 August 2024 – Due date for corporation tax due for the year ended 31 October 2023.

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

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

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