Autumn Statement Looms: Taxation Takes Centre Stage in Election Season.
As we welcome the arrival of autumn, it's a reminder that the Autumn Statement is just around the corner, scheduled for delivery by the Chancellor on 22nd November. While we anticipate this statement, it's evident to many that we've entered the election campaign season, with tax emerging as a key component of the election agenda.
According to a recent Institute for Fiscal Studies (IFS) report, the UK government is poised to collect an additional £3,500 per household by the time of the next election, compared to the 2019 election, marking the largest tax-raising period in parliamentary history with a 4.2% increase. The report attributes this growth to factors like stealth taxes (where tax thresholds don't keep pace with inflation) and the corporation tax hike, which now stands at 25% for most businesses. The report also predicts that the tax burden will climb from 33% of GDP in 2019 to around 37%, marking the most significant increase since the 1950s, when records began. The government's current focus is on reducing inflation, while the Labour Party, as revealed in Shadow Chancellor Rachel Reeves' recent speech at their conference, may take a different approach:
- The additional stamp duty land tax for overseas purchasers of residential properties from the current premium of 2% above the standard rates;
- Windfall tax for energy companies;
- Abolish non-UK domicile tax status, that provides those who qualify with tax advantages. (HMRC recent data shows that the number of new non UK domiciles has fallen by 40% in the past year);
- Abolishing the VAT exemption for private schools;
- Covid corruption commissioner supported by a team of investigators to recover Government funding from those who obtained Government support or won contracts by way of fraud;
- Not a tax measure, but an employment law measure, with the announcement that zero-hour contracts will be banned, and new laws on fire and hire will be repealed while sick pay will be strengthened, and employees will be given ‘basic rights from day one’ regarding any new employment. The national minimum wage will also be increased to ‘a genuine living wage’ reflecting real living costs;
- Although not part of the speech, it was reported in advance of the conference, that Labour is exploring closing tax reliefs generating funds to meet spending commitments. The review of the tax system has identified at least £4 billion that could be raised by abolishing reliefs, that only a small percentage of the population benefit from.
Reliefs being considered:
- Reform of inheritance tax by abolishing agricultural property relief, or restricting its use, as well as business property relief which currently exempts shares in an unlisted company or a significant interest in a business, being subject to inheritance tax.
- Abolishing or reducing business asset disposal relief, which enable individuals who own qualifying business assets, including qualifying shares, paying a 10% tax rate on a capital disposal where a chargeable gain arises.
It is understood that the Labour party are driven by not allowing the Conservatives to fight the election on tax, having confirmed that it would not bring in a mansion tax on expensive properties, increase capital gains tax or raise the top rate of income tax.
Overturning the pension announcements in the March Budget earlier this year has not been mentioned recently, but Labour did make an announcement post the Budget, that they would reverse the changes.
Time will tell and we are probably at least 12 months from a general election, but the parties are starting their campaigns, and tax is likely to feature on all party’s agenda.
LASTING POWER OF ATTORNEY.
Beyond the potential tax implications, another crucial aspect of business and personal protection we frequently discuss with our clients is the importance of having an updated Will and a Power of Attorney in place. A Power of Attorney grants an individual the ability to designate one or more trusted individuals to make specific decisions on their behalf when they are unable to do so themselves. It's not only a good practice for personal assets but also highly advisable for business owners to safeguard both themselves and their businesses. For more information, please refer to the main article HERE. To establish a Power of Attorney, it's necessary to consult a solicitor, and this is also an opportune time to consider drafting or reviewing your Will.
LET'S COOK WITH JOSIE
At Harbour Key, we annually back a charity to boost their visibility and support their cause. This year, we're proud to support "Let's Cook with Josie," a local Community Investment Company (CIC) in Cheltenham. They offer cooking lessons to children and individuals from vulnerable or disadvantaged backgrounds, teaching them to prepare nutritious meals and operate a food bank. Harbour Key has contributed equipment and aid to this cause. While Let's Cook with Josie is not a registered charity, you can still show your support by purchasing lottery tickets through the Cheltenham Lottery. Josie receives 50% of the ticket sales each month, with the remaining proceeds benefitting other local initiatives, a prize fund, and covering administration costs.
HMRC CRACKDOWN ON BUY TO LET PROPERTY OWENERS RE A TAX AVOIDANCE SCHEME.
HMRC is warning buy to let property owners not to use a tax avoidance scheme to reduce the tax payable on rental profits. The planning uses a hybrid partnership structure, made up of individuals and a corporate. The scheme sees the landlord set up a limited company to hold the properties and then transfer their properties to a limited liability partnership (LLP) of which it is a member, together with the individual members of the LLP. enabling profits to be allocated members of the LLP is such a way to mitigate tax. The planning appears to breach a number of anti-avoidance measures, and HMRC is advising if taxpayers are using the scheme, or something similar, to look to unwind the arrangement and settle their tax affairs by making a disclosure.
If you require guidance or assistance concerning the process of unwinding or making a disclosure to HMRC, please feel free to reach out to us.
YOUR TAX AFFAIRS & PENALTIES
As we've previously highlighted, HMRC's enquiry activity has significantly intensified, leading to increased penalties. While some penalties may be suspended if the taxpayer commits to addressing their tax-related issues, penalties remain a revenue source for HMRC. Last year, 18,641 taxpayers faced penalties for careless mistakes on tax returns, and 1,025 fines were issued for deliberate errors aimed at concealing income or gains, which is the most severe level of penalty. For innocent careless mistakes, penalties range from 0% to 30% of the unpaid tax, while deliberate errors can result in fines ranging from 20% to 70% of the tax owed. Concealed deliberate errors can incur penalties ranging from 30% to 100%. HMRC may impose penalties even for unintentional errors, such as miscalculations. Alongside the current 7.75% late payment interest charge, even innocent errors can become costly. Therefore, it is advisable for individuals and businesses to complete tax reporting in a timely and organised manner to avoid last-minute errors and additional costs. Additionally, we recommend considering our tax investigations fee service to cover the costs of handling enquiries; you can find more information on our website.
- Regional Grant - Cotswold District Council is offering £1.7m funding to local businesses and communities for bright ideas to boost the district's economy. More details can be found at https://news.cotswold.gov.uk/news/looking-for-bright-ideas-to-improve-the-cotswolds
- British Business Bank's Business Finance Week 2023 - The British Business Bank will be working with organisations throughout the UK to host Business Finance Week 2023 between 6 to 10 November, to give advice and support to business re funding. The aim of the week is to help smaller businesses learn all about the different finance options available to support business growth.
- End of Portuguese non habitual tax residency regime - Portugal's prime minister has suggested that the country's non-habitual tax resident regime may be terminated from 2024. The regime grants a special tax rate to individuals who meet the qualifying conditions, including full tax exemptions granted on various foreign-source incomes, including employment income, rental income, dividends and other sources. However, a prime ministerial announcement has now indicated the special regime will shortly come to an end. The reason given is that the regime is 'a biased way' of contributing to real estate speculation and it is suspected has had inflationary effect on the residential property market, which many locals have been protesting against
DATES FOR YOUR DIARY
- 31 October - Deadline for filing paper self-assessment return.
- 6 to 10 November - British Business Bank's Business Finance Week.
- 22 November -Autumn Statement.
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