DECEMBER E-NEWSLETTER 2021

A poll by accounting software Dext shows that small business owners have no idea how much money they have in the bank, with one in six saying they are too busy to keep up with the cash going in and out. More than a third of those surveyed said they would like to employ the services of an accountant or bookkeeper. The study of 500 UK SME owners found 26% struggle with financial admin, with 38% identifying rising costs as their biggest challenge. The poll also shows that 58% operate from week-to-week rather than planning for long-term sustainability, with 61% saying they wish they had more time to look at strategies to achieve their business goals. We would hope none of our businesses are struggling with financial admin, however if this is an area you are, please do not hesitate to contact us.

The Christmas break is an opportunity to take a step back and look at your business, review how the business is working (review how you work in the business!), what your goals/ambitions are and take a look at some common problems/issues. Due to problems and situations we have assisted clients with over the year, some driven by the pandemic, one area we have focused on with our business clients, as well as our private clients, is reviewing shareholder agreements and wills or, if they have not got either in place already, to start working to put them in place.  An important part of this review in lasting power of attorney, what they are and their importance can be found at in our blog,

This important day in the calendar (30^th November) may have escaped your notice!  The day is when the Government publishes a Tax Administration and Maintenance paper outlining steps, actions and consultations to building a trusted, modern tax administration system.  One announcement that came out on this day was The Treasury rejecting the proposal to raise capital gains tax rates to align with income tax and reduce the annual allowance.  You may recall back at the end of 2020, The Office of Tax Simplification (OTS), had released proposals to simplify capital gains tax following on from its review into CGT requested by the Chancellor.  In a letter to the OTS, sent yesterday, the Treasury made it clear that the recommendations are unlikely to be implemented in the near future.  Lucy Frazer, financial secretary to the Treasury, wrote: “These reforms would involve a number of wider policy trade-offs and so careful thought must be given to the impact that they would have on taxpayers, as well as any additional administrative burden on HMRC.  “The government will continue to keep the tax system under constant review to ensure it is simple and efficient. Your report is a valuable contribution to that process.”
But the government has accepted five recommendations made by the OTS in its second report on CGT – which covered much more narrow, technical issues.

In the same letter, the Treasury also rejected making any changes to inheritance tax – as was suggested by the OTS in reports in 2018 and 2019.  A copy of the letter can be found HERE.  

This announcement may ease the pressure on the run up to future Budgets, as we have recent experience of clients rushing to complete transactions in case of capital gains tax increases.  The Chancellor did say at the end of his Autumn Statement that he did not wish to increase taxes any further in this parliament, and The Sunday Times at the weekend reported he was preparing to cut income tax by 2p and/or cut VAT, or cut inheritance tax before the next election.  The paper also reported consideration was being given to scrapping the additional rate of income tax (45%).

This year it is hoped, despite the new covid variant, that businesses will be able to hold Christmas parties. Despite lobbying and the fact most businesses didn’t have any staff parties in 2020, HMRC have confirmed that the annual parties’ exemption remains at £150 per head and will not be increased.  Details on the exemption, and for gifts to employees and customers, can be found HERE.

If you are buying Christmas presents from the EU, check whether your order is worth more than £135, before extra costs such as shipping and insurance are applied. If it is, you should check the rules to see if you need to pay import VAT and customs duty.

We wrote last month about HMRC’s targeted action in respect of crypto assets and the taxation of this type of asset.

HMRC action in this space continues, having told cryptocurrency exchanges that they will not be exempt from the digital services tax, as online financial marketplaces are, arguing that crypto assets “are not financial instruments” and do not qualify as commodities or money.  With El Salvador becoming the first country to make Bitcoin legal tender, it is understood that taxpayers have been looking to cut their tax bills by exploiting a loophole for foreign currencies. While profits made from moves in foreign currencies held in bank accounts are currently exempt from capital gains tax, cryptocurrencies are not. A HMRC spokesman said that it does not consider crypto assets to be currency or money.

More than 63,500 taxpayers filed their tax return on 6 April, the first day of the tax year, and the first day you can file the 2021 tax return. Last year, HMRC at the last minute extended the 31 January filing deadline, however this year we are not expecting this, so please do not rely on any extension to avoid a late filing penalty.  It should also be noted that for 2021 tax reporting, you must declare if you have received grants or payments from COVID-19 support schemes up to 5 April 2021, as these are taxable.

In the month of December, HMRC will be closing its customer phone lines for three days to catch up with a back-log of post that has built up during the pandemic.  VAT and corporation tax lines were closed Friday 3 December and will be shut again for the next two Fridays.  HMRC is hoping to get back to pre-pandemic levels of service by April.