SCHOOLS OUT, LET THE FUN BEGIN!
We're delighted to bring you the August edition of our newsletter, where a rather damp summer has found its silver lining in the inspiring progress of the Lionesses in the World Cup.
The team are taking their summer breaks, but we continue to be busy, despite the “noise” with continued interest rate rises, lenders continuing to be difficult, but transactions (business acquisition and sales) continue at a pace. At the end of July, we completed the sale of a West Country business, which we had supported for the last seven months, acquired by a household name enabling the founders to exit.
Amidst the summer season, our commitment to compliance work (accounts and tax) remains unwavering. We kindly request our clients to address information requests and queries promptly, allowing us to efficiently complete our tasks without causing any delays in moving on to the next assignment. Your timely cooperation is greatly appreciated.
We report regularly on HMRC activity, areas they are targeting etc (see our most recent details here), as well as the difficulties we are encountering with service levels, changes in approach (think of the problems/issue with R&D claims), and a report released last month based on their survey numbers showed that 6 in 10 mid-sized firms are locked in tax disputes. This supports the position we are finding, with HMRC changing approaches, interpretations, together with difficulties businesses encounter when trying to navigate the complex tax system. In addition to the increase in tax enquiries, there were also 39,500 open tax tribunal appeals at the end of March, an 8% jump from the previous year. HMRC's annual report reveals that investigations into tax evasion and avoidance have yielded £34bn in extra tax revenue over the past year. Although the total this year was higher than the £30.8bn gained last year, it was still lower than the £36bn targeted by HMRC.
The current Government is unlikely to announce further tax increases and is still making promises of tax cuts before the election, therefore HMRC increased investigation activity, aids with increasing the tax take, and it could be viewed they are going for soft targets. With the increased enquiry activity, we highly recommend that clients take out tax investigation fee service, which will cover the fees in dealing with the enquiry. If you are interest in taking the service. please do not hesitate to contact us.
July 18th marked a significant event in the governmental calendar, colloquially known as "L-day." As the Government prepares for the summer holiday, it's a moment when a plethora of draft legislations are released, providing detailed information on announcements made over the past year, notably from various Budgets. This occasion often brings forth unexpected findings, and this year, two particular matters have captured the attention of Harbour Key:
- The first is regarding the inheritance of a pension fund, following the death of the pension holder, with an indication that the Government plan to change income tax rules for people who inherit pensions making them liable for marginal rate income tax. The proposed tax change has only been briefly mentioned as part of new guidance on the removal of the pension lifetime allowance (£1.07m), which received a lot of debate following the Spring Budget. Currently, payments of uncrystallised and crystallised lump sum death benefits in the event a pension holder dies under the age of 75, the beneficiaries are not charged to income tax, when drawing down in the future. The legislation appears to indicate that this is to be changed, with the beneficiary being charged to income tax at their marginal tax rate. Presumably this was included to offset the loss of tax from the removal of the lifetime allowance. (Beneficiaries where the pension holder dies over 75 have always been charged to income tax).
High income child benefit charge (“HICBC”)
- The second point is the HICBC, the tax charge designed to claw back child benefit where an individual or their partner has adjusted net income in excess of £50,000. As more people are dragged into higher rate tax, the Government is taking action to ensure that anyone liable for the HICBC will not be able to avoid the tax. (This has arisen, as those individuals who do not complete a self-assessment return, have been able to escape the charge, unless HMRC picks up the point). A single paragraph announcement in L Day documentation states that the government plans to deduct the HICBC directly from salaries via PAYE. The change should also mean that those who only have the HICBC to report and pay, should not have to register and file a tax return.
As the self-assessment tax return completion is in full flow, together with some recent changes, our main article this month covers arguably under-used, however potentially very beneficial, tax reliefs around charitable giving by individuals during their lifetime. Read our full blog HERE.
SOUTH WEST INVESTMENT FUND
We highlighted last month the launch of a new investment fund for our clients based in the South West, with the British Business Bank launching a £200 million Investment Fund. The fund is aimed at generating growth for small and medium sized businesses across the South West of England (covering Bristol, Gloucestershire, Somerset, Devon, Cornwall, Wiltshire and Dorset).
Having only been opened at the start of July, over 350 businesses have already expressed their interest and team Harbour Key are working on our first client application. The fund will provide early-stage finance for new and growing businesses, to support areas like product development, service innovation, new processes, or capital equipment. Loans will from £25,000 to £2 million, as well as equity investment up to £5 million available Applications for funding are made directly via the website.
Late Payment Interest
Every month we report the same increase, and again as the Bank of England has increased its interest rate, HMRC follows with an increase in the rate for unpaid taxes. Late payment interest increases to 7.75% from 22 August, the highest rate since 2001. This is particularly important for anyone who has failed to make their second payment on account due 31 July 2023. However, if HMRC are holding on to your tax repayment, you are earning interest at 4.25%. For companies that have to make quarterly instalment payments, the rate rises to 6.25% from 6% from the earlier date of 14 August for under payments.
Xero Fee Increase
Starting in September, Xero, the widely utilised financial management software among a substantial portion of our clients, has revealed upcoming price adjustments as outlined below:
- Starter will increase from £14 to £15 per month
- Standard will increase from £28 to £30 per month
- Premium will increase from £36 to £42 per month
- Ultimate will increase from £49 to £55 per month
Private School Fee Planning
HMRC is probing a number of tax firms promoting what they have defined as tax avoidance schemes aimed at enabling families to cover the cost of private school fees. The planning generally involves shares in a family-owned company held by the parents, transferring part of their shareholding to a relative, generally a grandparent, who then gifts the shares to the children or a trust, using a non-market value, which is a planned transaction to circumvent the anti-avoidance measures to prevent parents diverting income to their children to avoid tax.
HMRC Tracks Tax Haven Activity
HMRC is tracking over 500 UK businesses suspected of using so-called tax havens, up 84% from the 277 businesses flagged last year. HMRC is focused on 12 tax havens, which are under OECD supervision Anguilla, The Bahamas, Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands, and the United Arab Emirates (UAE). Under international information exchange agreements, HMRC receives information on UK business/individuals using these countries, which will initiate a review of the reported parties’ activities.
Overseas Entity Register
Companies House is reminding all those entities registered on the Overseas Entity Register, that an update statement must be filed every year. Details of who and what need to be registered on the register can be found in our article. The annual return requires the entity to check and confirm that all the information about the overseas entity on the register is still correct, and update anything that has changed. You must file an update statement even if nothing has changed. More details can be found HERE.
DATES FOR YOUR DIARY
- 31st August -Deadline for filing of accounts for accounting period ending 30 November 2022;
- 7th September -31 July 2023 VAT quater submission and payment;
- 22nd September -Deadline for electronic remittance of PAYE, NICs and CIS;
- 30th September - Deadline for filing of accounts for accounting period ending 31 December 2022.
Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call.
Please do not hesitate to give us a call us on 01452 713277