We hope you are well in these testing times, as the month of November becomes Lockdown 2 for England. The Harbour Key office remains open, with some of the team working from the office and some staff working remotely. All the team are available by calling the office number, 01452 713277. The office is open during normal working hours should you need to drop off your paperwork.

We are continuing not to hold face to face meetings, using alternatives such as Microsoft Teams and Zoom, but we would request clients wear face coverings if visiting the office.

Harbour Key service continues as normal in these testing times, and with only two and half months (which includes the Christmas break) to go before we hit the 31 January filing deadline, we would ask those clients who have not provided their tax return information to send it to us at the earliest opportunity.

With the announcement of the second lockdown in England to tackle a surge in coronavirus cases, previous business and personal financial support measures have been extended. For example, the furlough scheme, which was due to end on the day of the announcement, has been extended to 31 March 2021. The third self-employed income support scheme grant has been made more generous, together with grants for businesses that have been forced to close. It is difficult for businesses to plan at the moment and the ever-developing situation is testing resilience, but we all hope light is at the end of the tunnel with the vaccine announcement last week. We put out three updates in the last couple of weeks, following the Lockdown announcement regarding the support measures and extensions, which can be found at our Business Forward Covid Support page.

Office of Tax Simplification (“OTS”) review of Capital Gains Tax (“CGT”)

We reported in August the Chancellor’s request that CGT be reviewed. 

The OTS published its first report last week on the policy design and principles underpinning CGT. The first report considers high level views on the future of CGT and the second report will consider more detailed comments about the technical detail and practical operation of CGT, which isn’t due until early next year. The OTS recommendations in the first report can be summarised as follows: 
  • Increasing the CGT rates to align more closely with rates of income tax;
  • Reducing the annual CGT exemption, the amount of chargeable gain that is tax free, by about 50% (currently £12,300);
  • Removing the capital gains uplift on death; and
  • Abolishing or reforming some valuable reliefs including replacing Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).
It is important to keep this OTS report in context and to bear in mind that this is not the first OTS report making radical recommendations on capital taxes. Over the last few years, the OTS has been asked by the Government to undertake reviews of a number of different areas, for example inheritance tax, but decided to make no changes. However, we can all agree that the rate of CGT will change, the press reported at the weekend that Conservative back benchers are arguing the case for no increase, but this looks unlikely with the 20% rate being so low.

HMRC increases enquiry/nudge activities

With tax revenues down, and likely to be the position for a significant period of time, we have noted an increase in HMRC check/enquiry activity in respect of 2019 self-assessment returns.  In addition to which HMRC have launched or are about to launch a number of educational letters, what we call “nudge” letters.  Nudge letters are where HMRC send a letter of “advice” to target taxpayers, not opening an enquiry, but advising the taxpayer to check their tax reporting to make sure they are reporting everything correctly, listing a number of points where common errors or mistakes are made.  More information on HMRC’s targeted areas, one of which is our main client base, owner managers, and what HMRC are looking for can be found on this link.

Leaving the EU

In addition to nudge letters, HMRC, together with other Government organisations and the increased advertising is reminding all businesses to look at their business and what needs to be done before the UK leaves the EU on 1st January 2021. With everything else businesses are trying to deal with at the moment, we do not want to add to businesses’ and individuals’ stress levels, however we would urge businesses to take action to prepare. You can use the straightforward Government checker tool to identify the specific steps you need to take to be ready.You can also sign up to receive regular Business Readiness Transition Bulletins providing information on major announcements and recently published guidance.

We know that this is a very difficult time for all businesses, with constant change and some difficult decisions having to be made. Should you wish to speak to 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 - 01452 713277