WECLOME TO OUR OCTOBER E-NEWSLETTER 2025
BUDGET SPECULATION HEATS UP - SMART MOVES TO CONSIDER BEFORE 26 NOVEMBER
DON’T LET BUDGET RUMOURS DERAIL YOUR PLANS - ACT WITH PURPOSE
As summer draws to a close and the 26 November Budget approaches, speculation continues to build around potential announcements. The latest discussions point to a softening of the proposed changes to Agricultural Property Relief for farmers. Reports suggest the lifetime allowance may rise from £1 million to £5 million. However, if such concessions are made for farmers, the question remains - what about business owners?
Our advice is always do not try and second guess what is going to happen by implementing any “knee jerk” planning actions. If you are going to undertake any actions regardless of the Budget, for example, sell a rental property, then continue with the plan and try to beat the 26 November Budget date, but don’t do something only because of the forthcoming Budget, based on rumour. That said, we have a few tips and measures you may wish to consider:
- There may be a risk that Dividend Income tax rates may increase. To beat the increase (subject to any anti forestalling measures), if you are an owner manager who declares dividends towards the end of the calendar year or first quarter next year, then you may wish to consider, if your company has sufficient reserves, to declare a dividend in advance of the Budget. It is important that the dividend is legal, meeting Company Law requirements, recorded and paid correctly, which means having up to date financial management information.
- If you are considering making a gift for Inheritance Tax Planning reasons, again with rumours circulating there may be changes to the potentially exempt transfer (“PET”) rules, you may wish to complete the gift in advance of the Budget.
- With inheritance tax being charged on Pensions from April 2027, see our article HERE, for those with healthy pension pots with other sources of income to rely on, consideration (together with financial advice) should be given to extracting the tax-free lump sum to enable gifts to be made.
While we cannot predict the future, the suggestions above may be worth considering depending on your individual circumstances.
COVID SUPPORT AMNESTY
We reported over the summer that HMRC are still focusing on Covid fraud and now The Treasury has launched a three-month Covid amnesty to enable the settlement of unpaid pandemic related debts and repay the incorrect support claims.
The voluntary “no questions asked” disclosure is aimed at businesses that were not entitled to the money given to them after applying for it during the pandemic. The disclosure has been branded a ‘use it or lose it’ opportunity before the government brings in tougher sanctions. The government has stated that those who do not take this last chance to repay any outstanding money could face prosecution when they receive additional investigatory powers in the coming year.
All Covid schemes, including Bounce Back Loans, Coronavirus Job Retention Scheme (furlough), local government grants, and benefits such as Universal Credit, will fall under the Voluntary Repayment Scheme.
HMRC has also launched a whistleblower Covid Fraud Reporting website to allow the public to report a person or organisation suspected of committing Covid Fraud.
PREVENTION OF FRAUD OFFENCE
We set out in last month’s newsletter and in an email to all our company directors, the need for them, together with persons with significant control (PSCs), to be registered and set up for mandatory verification with Companies House at the earliest opportunity.
If you missed this please see our full blog below.
COMPANIES HOUSE - MANDATORY IDENTITY VERIFICATION BLOG.
The measure is part of The Economic Crime & Corporate Transparency Act, which has been introducing stepped changes since it was passed in November 2023. Another measure was introduced in September regarding introducing the offence of failing to prevent fraud, which applies to large organisations, the majority of Harbour Key’s clients do not meet the test to be under the new regime. However, the new rules should not be ignored, as it is a rolling test. The guidance does refer to small business, and we are finding on due diligence for sales more large buyers are looking at the target’s internal criminal & fraud protection measures.
ECONOMIC CRIME AND CORPORATE TRANSPARENCY ACT 2023 (ECCTA) BLOG.
HMRC INVESTIGATIONS – CONNECT TOOL.
We have highlighted on many occasions HMRC’s powerful data analysis tool, known as Connect, which, following a recent information request, raised an additional £4.6bn in 2024-25, as HMRC staff use the big data network to root out non-compliant taxpayers. In total, 540,000 cases were enabled through HMRC’s use of Connect data in 2024-25. This figure was up 35% on the annual average of £3.4bn that HMRC has collected from Connect-enabled tax investigations in recent years.
Connect captures information from multiple data sources and builds networks from this data ‘allowing HMRC to see patterns and links in the mass of data, that would be impossible for humans to spot, enabling the quick and efficient interrogation of information from a wide range of both internal and external data sources.
As Connect grows, taxpayers should expect far greater scrutiny of their financial affairs and far fewer gaps left undetected. HMRC has confirmed a partnership with Palantir, the US data analytics firm best known for its work with military intelligence and security agencies.
It is expected that this partnership will see more sophisticated data analytics applied to HMRC’s data. Tackling tax avoidance and the £40bn plus tax gap is a major priority for HMRC with millions of pounds of extra funding allocated in recent years by successive chancellors to hire more compliance staff. The Labour government has set targets of raising an additional £5bn a year from this team by the end of Parliament in 2027 and HMRC’s Connect system will be a key part of this.
We have noted in our client base, an increase in the number of enquires and compliance checks including nudge letters, and best practice is to get your affairs correct first time when preparing your tax return (i.e. do not leave until last minute). Then if an issue is spotted later by you, deal with the rectification at the earliest opportunity, do not turn a blind eye, and hope not noticed!
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