Autumn is upon us, and that means an Autumn Statement, which the Chancellor will give on 27 October, (slightly earlier than normal). The tax climate has clearly changed as a result of the pandemic and the Government has already announced tax rises, a total tax increase over the past six months of £36bn a year. Being the highest increases in 70 years. Since the NIC rise announced last month, there have been rumors that any further tax announcements in the Budget will be “technical” ones, not raising tax rates. For example, freezing personal tax allowances which has already been announced from April 2022, will raise considerable revenue due to fiscal drag (i.e. allowances not rising as wages/inflation goes up means more tax is collected). With inflation on the rise, these are likely to be a nice little earners for the Chancellor over the next few years.
However, some commentators are still predicting changes to Inheritance Tax and Capital Gains Tax following the reviews by the Office of Tax Simplification of these taxes, which we have reported previously. Will the Chancellor increase capital gains tax which may not increase the total tax take by that much and be unpopular with the Government’s voters? Could there be more technical changes to capital gains tax, similar to the one in the March 2020 Budget that reduced the lifetime allowance for the 10% tax rate on the sale of a business or shares in a trading company from £10m to £1m.
Every Chancellor wants to be seen to be collecting more revenue from “tax avoiders” and closing the tax gap. We are currently seeing that HMRC is focused on tax errors and avoidance related to Government Covid support schemes. It is reported that HMRC tax investigations have saved £4bn in taxes from being lost in the last quarter as it ramps up activity after the pandemic. HMRC received 107,000 reports of suspected tax fraud in the year to March 2021, with many of these linked to suspected fraudulent claims related to the Covid support schemes set up for businesses affected by the pandemic. HMRC has seen more than 28,000 reports of suspected fraud relating to the furlough scheme, with it estimated that the tax office will need to recover up to £3.5bn of fraudulently or mistakenly claimed money paid through scheme. HMRC is also targeting non-domiciled individuals by sending ‘nudge’ letters to those who may have failed to declare and pay the annual remittance basis charge.
At Harbour Key, while we wait for the Budget, we are very busy with transactional work, in addition to the winter rush of compliance work. Sellers wish to complete their transaction asap in case there is an increase in the capital gains tax rate in the Budget. One transaction we have completed is our first sale to an employee ownership trust, a special form of trust introduced by the Government in 2014 to encourage employee-ownership. The incentive for owners in transferring the Company to their employees, is a very generous tax break, provided all the qualifying conditions are met, in that they pay no tax on the disposal. More information on employee ownership, where it can be considered and the tax and other benefits available.
We reported in our August newsletter the increased level of checks and due diligence undertaken today in various areas to prevent money laundering, including in our business (see our to August article money laundering checks). From April 2023 Companies House will require us (or you if you file your own statement) to upload know your client information when filing Confirmation Statements. All part of the government’s crackdown on money laundering. It is likely that a similar measure will be introduced for company incorporation's.
TEMPORARY COVID INSOLVENCY MEASURES
Measures brought in to support UK businesses in respect of insolvency during the pandemic are being phased out from 1 October. Businesses facing critical cash flow problems, due to the economic effects of the pandemic, were given extra protection from creditor action in June last year. From 1 October those protections are being lifted and new “targeted measures” will be introduced to support small businesses and commercial tenants.
The new legislation will protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding-up petition to £10,000 or more. New measures will also require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding-up action.
The new measures are set to be in force until at least 31 March 2022 and will cover England, Scotland and Wales. Northern Ireland will implement similar legislation to mirror these measures.
COMPANY CARS / BUSINESS CARS
Recent reports show that one in ten cars on the road today is electric and recently the Tesla Model 3 became the bestselling car of any kind in the UK. This could be down to the public understanding the need to change to greener cars, or more recently the fuel crisis. However, a big factor must be the tax breaks for companies, employees and businesses for electric cars, including grants towards the costs of chargers. These tax breaks are not going to be available for ever, as the increasing car numbers is meeting the Government’s objective of increasing electric car use, but also the significant drop in Government revenue from fuel duty will need to be replaced.
If you are due to change/update your car, we would recommend considering electric and we can provide advice on the tax benefits for the business and you.
DATES FOR YOUR DIARY
- 27 October 2021 – Autumn Statement.
- 31 October 2021 – Due date to submit self-assessment return if filed by paper!
- 1 November 2021 – Due date for payment of Corporation Tax for period ended 31 January 2021.
- 7 November 2021 – Deadline for VAT returns & payments of Accounting Quarter period ending 30 September 2021
Should you wish to speak with 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.
Please do not hesitate to give us a call us on 01452 713277