Anyone watching the news in recent days can't help but be moved by the pictures coming out of Ukraine; queues of families at the borders; civilians of all ages taking up arms; families being separated; indiscriminate bombing etc. Our hearts go out the Ukrainians and we are sure everyone is supporting in the best way they can personally, whatever that is. Anyone wishing to donate money is recommended to give to the Disasters Emergency Committee via their website. Donations will attract income tax relief. The DEC WEBSITE.
In the typical stoicism we have seen from the Ukrainians on the news and via social media, the Ukrainian authorities have told citizens that any Russian military equipment they seize will not need to be declared for tax purposes! Ukraine's National Agency for the Protection against Corruption has reportedly declared: “Have you captured a Russian tank or armoured personnel carrier and are worried about how to declare it? Keep calm and continue to defend the motherland!” A brave nation standing against the aggressor.
For UK businesses, it is important that they ensure they are not trading with sanctioned Russian companies. It is also important to establish the potential impact of Russian sanctions on your businesses or interests by carrying out swift and effective due diligence on any individual, entity, funds, or transaction with a connection to Russia. The penalties are expensive if you get it wrong. More information can be found at the Government WEBSITE.
Advice can also be sought from the Government’s Export Support Service which has moved to being open 7 days a week.
The conflict has also speeded up measures that have been discussed for the last few years, with The Economic Crime (Transparency and Enforcement) Bill being introduced in Parliament a few weeks ago for its first reading. This new legislation will help the National Crime Agency prevent foreign owners from laundering their money by acquiring UK property. A Register of Overseas Entities will be put in place where all non-UK companies owning UK property will have to list on the register who the beneficial owners are. The only key part awaiting agreement is when the register is to be introduced and how quickly owners will have to register – the latest proposal seems to be six months. Watch this space.
In addition, the Government has set out plans to reform governance at Companies House to stop the use of anonymous or fraudulent shell companies and partnerships, which could include small companies having to file their profit and loss accounts at Companies House as part of their annual accounts. Yes – a profit & loss account in the public domain! Another space to watch.
YEAR-END TAX PLANNING
There are only a few weeks until the end of the tax year, so there is limited time to consider any year-end tax planning and check whether you have taken full advantage of the tax reliefs and exemptions that are available.
Our year-end tax planning checklist can be found HERE.
Also don’t forget to check your coding notice, which are now being issued by HMRC for the 2022/2023 tax year. See our blog on coding notices ONLINE.
The Chancellor’s Spring Budget Statement is scheduled for 23 March this year and although there are only a couple of weeks to go, the usual level of “noise” in advance re possible announcements is not yet taking place. In fact, one of Harbour Key’s training providers who provide a Budget update a couple of days after the speech has cut the training slot from three hours to one! The one point that is under debate is whether the Government will go ahead with the 1.25% increase in national insurance and dividend income tax due to the spiralling cost of living and inflation. Labour have tabled a motion for the increase to be scrapped, but the Treasury are pushing back.
HMRC has asked businesses to print the reasoning behind the Government's National Insurance tax increase on workers' payslips, with firms asked to note that the 1.25% increase funds the NHS, health and social care!
One area which may be looked at as part of the Budget is research & development (“R&D”) tax credits for SMEs, as it is reported the Chancellor is frustrated at the lack of investment into small businesses, despite the UK having what he describes as one of the most generous tax regimes for R&D investment in the world. A recent report revealed that self-funded business investment in R&D was between 10% & 15% lower than before the tax relief was introduced. Consequently, the Chancellor is looking at whether R&D tax credits would be better focused on larger companies, rather than SMEs. However, it is thought that R&D tax credits for SME’s would not be totally abolished but would be merged with the existing, less generous RDEC scheme for larger companies.
The extended deadline for filing self-assessment tax returns was 28 February. It is reported that a record 1.3 million individuals have failed to file their return on time despite the extension, resulting in £130 million of automatic £100 fines. A record for HMRC in penalties. 2.4million missed the 31 January normal filing deadline and based on the reported number of fines only 1.1 million took advantage of the additional 28 days. Interest has been accruing on late paid taxes since 1 February and if you have not settled your tax liability or agreed a time to pay with HMRC by 1 April, then a 5% late payment surcharge will be applied in addition to the interest charge.
HMRC has also increased its late payment interest rate by 0.25% to 3% from 21 February, the second increase this year in line with the Bank of England. It should be noted that repayment interest remains at 0.5%, which it has been since 2009.
MAKING TAX DIGITAL ("MTD")
MTD is part of the government’s plan to make it easier for businesses to stay on top of their day-to-day accounts and tax reporting, which it believes will improve tax collection and minimise fraud. HMRC research has estimated that £195million extra tax revenue has been brought in through businesses using MTD for VAT. HMRC wants to be one of the most digitally advanced tax administrations in the world. You will hear us nagging those business clients and landlords who do not have financial management information software in place. More information can be found at our WEBSITE.
Until now, MTD applied to VAT-registered entities, making supplies above the VAT threshold (currently £85,000). From 1 April 2022, MTD for VAT will be applied to all VAT-registered entities, bringing those operating below the VAT threshold into the MTD regime. There are some digital exclusion exemptions that may apply, but generally everybody registered for VAT will need to comply with the rule changes.
DATES FOR YOUR DIARY
- 23 March 2022 - The Chancellor’s Budget Statement.
- 1 April 2022 - 5% late payment surcharge applies for those who have not paid their tax liability of arranged a time to pay arrangement with HMRC.
- 5 April 2022 - Last day of the 2022 tax year and opportunity for any tax planning & deadline for claiming tax overpaid for the 2017/18 tax year under self-assessment.