As the summer holiday season approaches, we remain busy at HK with a number of business transactions taking place, despite the bleak outlook for the economy, there are still investment funds and businesses with cash looking for good acquisition opportunities. Last month we completed a £15m sale transaction funded with US money, but we are seeing UK funded transactions.
Compliance work (accounts and tax) continues at pace, as we note lenders are wishing to stress test businesses earlier than normal and, with continued interest rate increases, clients are seeking new mortgage deals. Please note that if you are applying for a mortgage or other borrowing, the lenders are seeking up to date information. If your year-end is 31 March, most lenders will now require 2023 year-end results before considering an application and, if we have not been provided the information or started the work, we are unlikely to be able to deliver on demand due to the needs of other clients who have already had their work planned in our schedule and delivered their information to us. It should also be noted that we are seeing a number of mortgage lenders requiring forecasting or letters from the accountants’ explaining changes in historic figures. Lending is getting very tough!
We have a couple temporary members to the HK team over the holiday season. Rhys is using his summer break from university to gain some work experience and assisting us with some administration duties. Tom is with us for a week from a local school for his work experience placement.
HMRC SERVICE LEVELS
A regular theme of recent HMRC publications, and in response to open letters from professional bodies and replies to Parliamentary Commissions regarding the poor quality service being provided by the organisation, is to point to the digital services and help that is available online. For those who are not aware, although HMRC has actively encouraged taxpayers to file their self-assessment returns early, the telephone helpline service is temporarily closed until 4th September. HMRC are driving customers to use their website. With HMRC wanting taxpayers to use their digital services, we would recommend that all clients, if not already in place, ensure that they have a Government Gateway account for both themselves personally, as well as any entity that they control (including partnerships, limited companies and trusts), which is also useful for access to other Government services outside of tax.
SOUTH WEST INVESTMENT FUND
For our clients based in the South West, the British Business Bank have launched the new £200 million South West 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).
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.
START UP LOANS
For new businesses, the British Business Bank, has also announced Virgin StartUp and BizBritain being appointed as national business support partners. The Start Up Loans scheme delivers finance to small businesses through its partners at a fixed interest rate of 6%, as well as providing mentoring to recipients. More details can be found HERE.
FIND A GRANT SERVICE
The government has launched a digital service for organisations applying for government grants, which should make it easier for organisations to access government grant funding, as well as reduce duplication and cut time spent on grant applications by 72%. The web-based tool can be found HERE.
The number of businesses transitioning to employee ownership is continuing to rise, with 2022 being the highest year to date for this type of transaction. A report from The Employee Ownership Association (EOA), produced in collaboration with the White Rose Employee Ownership Centre (WREOC), found that 332 businesses made the switch in 2022. This brings the total number of companies owned partially or fully by their employees, as of June 2023, to 1,418. We have had number of conversations with clients regarding Employee Ownership, as well as completing a couple of transactions. Although we don’t believe the structure is appropriate for all business, it is an option that can be considered. More details can be found HERE.
NATIONAL INSURANCE CONTRIBUTIONS RECORD
Taxpayers now have an extra two years to make additional payments to their National Insurance (NI) contributions to increase state pension entitlements. The cut-off point for voluntary NI contributions from April 2006 to April 2017 has been extended to 5 April 2025 to help people plug gaps in their NI record - an extension of nearly two years.
HMRC's original plan had set the deadline to 5 April 2023, but in March this was extended to 31 July, following capacity problems on government helplines. Extending the deadline until 2025 means that taxpayers will have more time to properly consider whether paying voluntary contributions could boost their state pension entitlement.
EMPLOYMENT RELATED SECURITIES (ERS)
Although the deadline for filing ERS returns has passed (6th July), we feel many employers don’t realise there is a reporting requirement nor what needs to be reported, etc. It is an area of tax reporting that catches out many clients and tends to get picked up when the business sells, when the buyer’s advisors’ flag there has been ERS activity and a reporting failure. We would advise that even though the deadline is missed, employers should still review and where required file late returns. More details can be found HERE.
- Late Payment Interest - HMRC has increased the interest rate on unpaid taxes, which is linked to the Bank of England base rate. With the recent base rate rise to 5%, late payment interest increases to 7.5% from 3 July.
- Nationwide Building Society Loyalty Bonus – If you were one of the lucky members of the Nationwide, who received the £100 loyalty bonus, please note for tax purposes, this is treated as normal bank interest, However, in most cases it will be covered by your savings allowance of £1,000 (£500 for higher rate taxpayers). Taxpayers who pay income tax at 45% on savings do not benefit from a savings allowance, so they will have to pay £45 in tax on the bonus.
- Pandora Papers – This is the 11.9 million of leaked documents from 14 offshore financial service companies, released by the International Consortium of Investigative Journalists from October 2021 onwards. HMRC has been reviewing the data and is now writing to around 600 people named in those papers. This is only the first tranche of the total number of taxpayers who HMRC will contact because of this information coming to light. The HMRC letter asks the taxpayer to review their disclosure of offshore income or gains on their tax returns and warns that if there is an under-declaration the penalties could amount to 200% of the unpaid tax. The individual could also face a criminal prosecution if they make a dishonest disclosure. Seek advice if you receive a letter!
DATES FOR YOUR DIARY
- 19 July - Non-electronic payment of Class 1A NIC for 2022/23 on benefits returned on a declaration of expenses and benefits (form P11D(b)) must reach HMRC by this date.
- 21 July - Payment of Class 1A NIC made by an approved electronic payment method must reach HMRC by this date.
- 31 July - Second payment on account for self-assessment to be paid.
- 31 July - All tax credit claims for 2022/23 must be confirmed and renewed for 2023/24 if required.