October was an exceptionally business month for team Harbour Key, in addition to the push on compliance work with the 31 December and January deadlines looming, the Autumn Statement and the risk of further tax increases, in particular capital gains tax rises, resulted in a flood of transactional work. Lots of business owners were looking to exit in case the 10% business asset disposal relief was abolished, or the 20% rate on non-residential property disposals was increased. As it would happen, no increases!
Although no new tax increases were announced in the Autumn Statement, as a result of previous announcements and the fact that no allowances or tax bands are increasing in line with inflation, taxes are set to hit levels not seen since the early 1950s. The Office of Budget Responsibility report suggests that inheritance tax and capital gains tax takings will increase bringing in more than £130bn over the next six years. We reported recently that the inheritance tax take is increasing, with property prices climbing and the nil rate band (the amount on which no inheritance tax is paid (£325,000)) not having increased for a number of years, and frozen until at least 2026. In respect of capital gains tax, there has been a 62% rise in receipts in the last five years, increasing by more than 50% to £11.5bn in 2020-21, compared to £7.1bn in 2015-16, again mainly thought to be driven by property sales.
The Chancellor stated at the end of his Autumn Statement that cutting taxes will be his "priority" from now on, saying the that he is "not comfortable" with the current tax burden. However, in an interview with Sky News post statement, the Chancellor would not commit to cutting taxes before the next general election.
One area that The Chancellor, The Treasury and HMRC always look at to increase tax revenue is closing the tax gap, the amount of tax lost in Britain through non-payment, avoidance and fraud, which HMRC has reported has reached £35bn. A £2bn increase in the 2019/20 financial year, compared to the 12 months before. One area HMRC is starting to look at is crypto assets. As the popularity of crypto currency increases (El Salvador becoming the first country to adopt a cryptocurrency as currency, with others looking to follow) and Bitcoin hitting an all-time high, this area has become a rapidly growing focus area for HMRC investigations. HMRC’s latest ‘nudge letter’ campaign (letters sent to taxpayers saying, essentially: “we know you have something, should you be reporting and paying tax?”) advises taxpayers who may have failed to pay tax on their crypto assets to review their returns. Further information on the HMRC campaign and the taxation of crypto, SEE OUR BLOG.
ENVIRONMENT TAXES & SUPPORT
With the COP21 conference taking place, bringing environmental issues to the forefront, Small & Medium Businesses are calling for support to go green. A report from the Federation of Small Businesses (FSB) states that business “are keen to play their part” in regard to climate change, but often lack the resources, finances and dedicated specialists enjoyed by larger businesses, “so can find identifying and taking the necessary steps a challenge”. A poll by the FSB shows that while the majority of SMEs are concerned about climate change, just one in three have a plan in place to help tackle it. The FSB poll of 1,200 businesses found that 54% thought grants or low-interest loans would incentivise firms to become more energy-efficient, while 28% said a business rates discount would help. The FSB has suggested that lowering the capital requirements banks must adhere to when lending to businesses for sustainability purposes could help more SMEs go green. In the Autumn Statement announcements were expected, but very little was provided other than measures regarding energy efficiency funding and announcing additional funding for transport infrastructure. We think there will be movement in the space regarding tax incentives, tax penalties, grants etc, but at this stage as we recover from the pandemic it is wait and see.
GOVERNMENT COVID SUPPORT MEASURES
Following on the theme of closing the tax gap, HMRC have released data showing that more than £5.5bn of taxpayer money from the Government’s coronavirus support schemes was acquired fraudulently or given out incorrectly. As we have advised previously, HMRC has assembled a taskforce which will be targeting Covid support and it is important that businesses have their records in order and if a claim has been made in error, rectify the situation. Fraudulent claims will be dealt with severely, a director has been banned for nine years and three more collectively received extended bankruptcy restrictions after fraudulently claiming £100,000 from the Bounce Back Loan (BBL) scheme.
It should be noted that HMRC have the power to issue joint and several liability notices to directors, shadow directors and certain other individuals connected to a company, where the business has received a coronavirus support payment to which they were not entitled.
In respect BBL & CBILS, a central team are working on online statements for all banks that lent money to show the capital and interest element paid monthly. The release should come in January. A lot of firms that took BBL are starting to pay their first instalments this month after the six-month extension, and decisions will need to be made by those business who took the funding but have not used it, whether they retain or pay back.
ALI HAS STARTED HIS CHARTERED ACCOUNTING QUALIFICATION TRAINING
Having joined us back in January 2021 under “home working” as we headed back into the UK’s 3# lockdown, Alastair has become a key member of HK compliance team, gain experience with accounts preparation and personal tax. He is now fast approaching a year at Harbour Key and has taken the decision to embark on the ICAEW ACA qualification.
Alastair will be training with First Intuition Bristol, learning a wide range of topics ranging from law, audit, taxation and much more. Alastair is currently studying both the law and assurance modules, with exams early next year. The qualification will span a three-year period, with external and internal courses along the way.
We look forward to supporting Alastair through his training, seeing him progress on his journey to become a chartered accountant.
DATES FOR YOUR DIARY
- 31 December 2021 – filing date for 31 March 2021 accounts year-end and tax payments.
- 31 January 2021 – filing deadline for 2021 self-assessment returns and personal tax payments.