Latest Tax News
Chancellor, Rishi Sunak, Unveils New Measures to SME Loan Scheme
The chancellor, Rishi Sunak, is extending the Coronavirus loan scheme for small and medium businesses who have been affected by the disease.
The Covid Business Interruption Loan Scheme (CBILS) was originally created to help firms who were struggling to secure regular commercial financing during the economic downturn of the virus.
But now Mr Sunak has extended CBILS to all viable small and medium business who have faced financial difficulty during the Coronavirus pandemic.
The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals.
Since 23 March, around 1,000 loans worth around £90m have been processed.
The number is expected to increase in the coming days and weeks as lenders get used to the new system.
IR35 changes postponed until 2021
As part of the package of measures aimed to help people as a result of COVID-19, HM Treasury have said they intend to postpone the introduction of the off-payroll working rules to the private sector.
The extension of the off-payroll working rules was due to commence on 6 April 2020. The start date will now be deferred to 6 April 2021.
Speaking in the House of Commons on the evening of 17 March, Chief Secretary to the Treasury Stephen Barclay stressed that this was a deferral, and not a cancellation, to help businesses and individuals in response to the ongoing spread of the virus.
All the key points from Rishi Sunak’s first budget:
The government’s response to Coronavirus is designed to be complementary to measures announced by The Bank of England and includes a "£30bn stimulus" package.
There is a warning of temporary disruption to economy from COVID-19. It will be "tough" and "significant" but says things will return to normal.
"What everyone needs to know is that we are doing everything we can to keep this country, and our people, healthy and financially secure". Budget aims to bring "stability and security".
Coronavirus - workers
Statutory sick pay available to those advised to self-isolate - even if they haven't presented with symptoms. More help for self-employed or those in gig economy through £500m welfare boost and new £500m hardship fund.
Government to meet cost of providing statutory sick pay for up to 14 days for workers in firms with up to 250 employees.
Coronavirus - NHS
NHS will get the resources it requires "whatever it needs, whatever it costs".
£5bn emergency response fund for NHS and public services initially.
£6bn in new money for the NHS over this parliament - separate to emergency fund.
Extra funding for taxman to secure money from tax evaders and avoiders - aimed at securing £4.4bn of extra revenue for the health service.
Coronavirus - businesses
Loans available to help small and medium-sized businesses. Business rates abolished for retail, leisure or hospitality business with a rateable value below £51,000.
£3,000 cash grant to businesses eligible for small business rates relief.
Fuel, beer, wine and spirit duties all frozen to help a "thriving" private sector
Business rates discount for pubs at £5,000 this year only
National Insurance threshold to rise from £8,632 to £9,500 saving a typical employee £104 annually.
No VAT on tampon products from January one we have left the EU
Corporation Tax remains at 19% and will not be cut to 17%.
Research and development investment rising to £22bn annually.
Reducing the lifetime limit for Entrepreneurs' Relief from £10m to £1m - saving taxpayers' £6bn.
Economic forecasts & spending
Budget package delivered within the government's fiscal rules on spending "with room to spare".
Independent Office for Budget Responsibility, without accounting for the impact of coronavirus, has forecast UK growth of 1.1% in 2020 , 1.8% in 2021.
OBR sees borrowing rising from 2.1% of GDP in 2019/20 to 2.4% in 2020/21 and 2.8% in 2021/22.
£1.5bn over five years to improve the further education college buildings.
Funding for up to 19 Maths schools on top of existing spending boost for education.
VAT on digital publications including books, newspapers, magazines and academic journals abolished from December.
Coronavirus 'gravest threat to global economy since financial crisis', says OECD
05 Mar 2020
The Coronavirus represents the ‘gravest threat to the global economy since the financial crisis in 2008, according to the Organisation for Economic Co-operation and Development (OECD).
The OECD has called on governments around the world to act immediately in order to limit the spread of the virus and protect people and businesses from its effects. It recommends that businesses allow employees a degree of flexibility in their working hours to ensure that they stay healthy. It also recommends that governments implement temporary tax and budgetary measures to ‘cushion the impact in sectors most affected’, such as travel, tourism and the automobile industry.
Global economic growth could fall to 2.4% in 2020 with supply chains and commodities likely to be affected as a result of the spread of the virus.
Commenting on the issue, Laurence Boone, Chief Economist at the OECD, said: 'The virus risks giving a further blow to a global economy that was already weakened by trade and political tensions.’
'Governments need to act immediately to contain the epidemic, support the healthcare system, protect people, shore up demand and provide a financial lifeline to households and businesses that are most affected.'
Chancellor promises that IR35 penalties will not be heavy handed
Chancellor Rishi Sunak has promised that the enforcement of IR35 penalties will not be 'heavy handed' during the first year of the implementation of off-payroll rules to the private sector.
Mr Sunak told business leaders in Birmingham that HMRC will allow organisations to adjust to the new measures during a ‘soft-landing’ penalty period.
From 6 April this year, the new tax rules will shift over the responsibility for assessing employment status to the medium and large businesses employing the individuals.
Commenting on IR35, the Chancellor said: 'We are shortly to publish a review of how it should be implemented with some tweaks and improvements to ensure that the transition is as seamless as possible.
'I can also tell you that I have spent time with HMRC to ensure that they are not going to be at all heavy handed for the first year to give time to adjust as well, which is an appropriate thing to do.
'What IR35 does is change the balance, so instead of people making the assumptions about how they should be taxed, we put the onus on the company to make that assessment for them.'
Minimum wage offenders to be named and shamed by Government
Employers who fail to pay their employees the National Minimum Wage (NMW) or the National Living Wage (NLW) will be named and shamed by the UK government.
The naming and shaming scheme which has been used before by the government and has now been reintroduced, will have a threshold of £500 before employers can be named. This is an increase over the previous threshold of £100 when the scheme was used in the past. This is to prevent businesses which fall foul of the rules by minimal amounts will not be named. However, the government has warned that offenders must still pay back workers and can face fines of up to 200% of the arrears.
The government is looking to increase support for employers to help them comply with NMW legislation. Proposed changes will provide more flexibility in how salaried workers.
Commenting on the changes, Business Minister Kelly Tolhurst said: 'Anyone who is entitled to the minimum wage should receive it – no ifs, no buts – and we're cracking down on companies that underpay their workers.
'We also want to make it as easy as possible for employers, especially small businesses and those trying to do right by their staff, to comply with the NMW rules, which is why we're reforming regulations.'
Small landlords leave buy-to-let market
Smaller landlords are leaving the buy-to-let market following tax relief cuts, according to research from estate agency Hamptons International.
The research found that in 2019 the number of landlords operating in the UK fell to 2.66 million, a seven-year low. Hamptons International's Monthly Lettings Index found that the landlord count has dropped 8% from its 2017 peak.
The reduction in mortgage tax relief and the 3% stamp duty surcharge on buy-to-let properties are having an impact on the market, with smaller landlords who own just one property suffering the most, according to Hamptons International.
Commenting on the figures, Aneisha Beveridge, Head of Research at Hamptons International, said: 'Those who have stayed tend to have bigger portfolios – a further sign that the sector is professionalising.
'The average landlord in Great Britain owned 1.93 properties last year, the highest level since 2009. Rents rose in every region across Great Britain in January to stand 3.6% higher than at the same time last year.
'The number of new homes purchased by landlords remains low, which is feeding through to fewer homes available to rent. This is particularly true in the South, where rents are rising the most.'
Chancellor raises NIC threshold to £9,500
Sajid Javid, the Chancellor of the Exchequer, has confirmed that the threshold at which taxpayers start to pay national insurance contributions (NICs) will rise to £9,500 a year.
The increase comes into effect from April 2020 and will apply to the 2020/21 tax year. The rise is seen as a step closer to the government’s target of £12,500 threshold for NICs to bring them in line with income tax.
According to the government, a typical employee will save around £104 during the next tax year, while self-employed people, who pay a lower rate, will save £78.
Commenting on the change, the Chancellor said: 'We're determined to do what we promised and put more money into the pockets of ordinary hard-working people. That's why we're starting this government as we mean to go on, by cutting their bills.
'We want everyone to feel that they can contribute to the new chapter we are opening for the economy and our country, because under this government work will always pay.'
HMRC Offers Guidance on Scam and Phishing Emails
HMRC has issued guidance on recognising genuine Revenue contact and scam/phishing emails.
Phishing emails are used by criminals to obtain taxpayers' personal or financial information. HMRC Stated that such emails often include a link to a bogus website, which encourages individuals to enter their personal details. HMRC also warned that the emails can look very realistic.
HMRC received 614,483 reports of suspicious communications from members of the public in 2019.
A spokesperson for HMRC said: 'Scammers use a range of techniques, including phoning taxpayers and offering a bogus tax refund or threatening them with arrest if they don't immediately pay tax owed.
'If someone calls you claiming to be from HMRC saying that you will be arrested, that we are filing a lawsuit against you or even that you are owed a tax refund, and asks for information such as your name, credit card or bank details, then it's a scam.'
HMRC urges taxpayers to forward dubious emails to [email protected] and texts to 60599.
Government Confirms Largest Ever Increase in UK Minimum Wage
The National Living Wage (NLW) will see its largest increase since it was introduced. The NLW will increase by 6.2% for workers aged 25 or over and between 4.6 and 6.5% for workers under 25, depending on age. The NLW will increase from its current rate of £8.21 to £8.72 per hour.
The new rates, which will come into effect from 1 April 2020, will result in an increase in wage of £930 annually for 2.8 million full-time workers earning the NLW.
HMRC received nearly half a million requests for tax refunds for the tax year 2018/19
According to insurer Royal London, 460,000 taxpayers requested income tax refunds from HMRC in the tax year 18/19.
Following a Freedom of Information (FOI) request, the insurer found that the main reasons for tax being overcharged included individuals changing jobs and taxpayers being subject to changes to taxable benefits.
Repayments to taxpayers in 2018/19 totalled £5.1 billion.
Commenting on the data, Becky O'Connor, Personal Finance Specialist at Royal London, said: 'This goes to show it's a good idea not to assume the taxman is always right about what he says you owe.
'Always check your tax statement for the year and keep a note of any unusual changes to your income that might mean you have overpaid.'
Employers are advised to take tax implications of seasonal parties into account
With the festive season upon us, the Institute of Chartered Accountants in England and Wales (ICAEW) has advised employers to be aware of the tax implications associated with a seasonal party.
Many employers are planning such parties for their employees and these count as benefits and can attract the attention of HMRC. To avoid seasonal staff parties being treated as taxable benefits, the cost per head must be £150 or less. If the sum spent is more than £150 per head, then the full amount will become liable to national insurance and income tax for both employee and employer.
The event must also be annual, such as a Christmas party or a summer barbecue, and it must be open to all employees.
HMRC releases updated version of IR35 checking tool
HMRC has released an updated version of the Check Employment Status for Tax (CEST) tool, which is used to determine whether a contractor should be classed as self-employed in line with IR35 legislation.
In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors' net income cut significantly. From April 2020, these rules will be extended to medium and large organisations in the private sector.
Responsibility for compliance has also shifted from the individual contractor to a public body or recruitment agency.
The CEST tool has been criticised as being not fit for purpose as it 'fails to provide definitive answers' in many cases. In a bid to improve the CEST tool before April's extension of IR35, HMRC has consulted stakeholders and tested the tool against case law and settled cases.
On the matter, Andy Chamberlain, Deputy Director of Policy at the Association of Independent Professionals and the Self-Employed, commented: 'We have grave reservations about CEST. We've looked at the updated version and spoken to HMRC and we're still not satisfied it is accurate.
'It still does not test the mutuality of obligations, which is a key tenet of recent IR35 cases.'
Office of Tax Simplification calls for changes to Personal Tax Accounts
The Office of Tax Simplification (OTS) has called for an overhaul of HMRC's Personal Tax Accounts (PTAs) in a bid to make them easier to use for taxpayers.
In a new report, the OTS has suggested that merging Personal Tax Accounts and Business Tax Accounts (BTAs) to form a new Individual Tax Account will allow taxpayers to view information about their different types of income separately in one place.
In the report, the OTS stated that the government should 'explore the potential for HMRC to offer a fully integrated Individual Tax Account, providing an end-to-end tax reporting and payment service'.
According to the OTS, Individual Tax Accounts would offer taxpayers a 'running calculation of the additional tax that the individual may be required to pay in relation to the year to date'. This calculation would be generated by looking at the information held in the Individual Tax Account.
'The key recommendation in this report is for HMRC to continue its work on the PTA further, to enhance its capabilities and integrate it with the BTA,' said Bill Dodwell, Tax Director at the OTS.
'Previous work from the OTS has established that many self-employed taxpayers want additional help in reporting and paying tax. In some sectors, third-party reporting could help. Further in-depth work is needed to test this and potentially develop a workable plan.'
Sole trader vs limited company... which is right for your business?
Lets look at some comparisons to help you decide.
Firstly let us look at a Sole Trader:
As a sole trader you are personally liable for any debt of the business.
Sole traders pay tax on their business profits via a self-assessment tax return.
The deadline for filing online self-assessment returns to HMRC is
31 January after the end of the tax year. The personal allowance for the
tax year 2019/20 is £12,500.
The Basic rate of 20% is paid on income from £12,501 up to £50,000, the Higher rate of 40% is paid on income between £50,001 and £150,000 and the
additional rate of 45% is paid on income over £150,000.
Losses can be offset against other income in the same year, carried back
and offset against previous year's profits or carried forward and
offset against future profits.
National Insurance (NI)
A sole trader pays Class 2 NI contributions and Class 4 NI contributions of 9% on
profits in excess of £8,632 (2019/20).
Accounts and Tax Returns
Sole Traders and Partners are not legally required to file annual accounts.
They must, however, keep records of income and expenses for the
purpose of completing their tax returns.
Now let us look at a Limited Company:
A limited company is a separate legal entity, so as a shareholder your personal
liability is limited to your shareholding.
A director of a company may take a salary from a limited company and this is
taxed at source under the Pay As You Earn tax system (PAYE).
Unless they have absolutely no pay or benefits then a director MUST
file a tax return. This is regardless of whether tax is owed or not.
A limited company pays corporation tax on its profits which is charged
at 19% from 1 April 2019 and is payable 9 months and 1 day
after the accounting period end. A company tax return must be
filed 12 months after the accounting period end.
The dividend allowance (the value of dividends that shareholder can receive
tax free) currently stands at £2,000. For dividends above the dividend
allowance the following tax rates apply: 7.5% at the Basic rate, 32.5% at the
Higher rate and 38.1% at the Additional rate.
Losses can be carried forward and offset against future profits or carried back
and offset against the previous year's profits.
National Insurance (NI)
Class 1 National Insurance may be payable on directors' salaries and bonuses
depending on the level of income. Employers National Insurance at
13.8% may also be paid on directors' salaries and bonuses.
Accounts and Tax Returns
A director of a limited company has certain legal responsibilities, including:
Your newly set up limited company must be registered at Companies House.
Annual accounts and confirmation statements must be filed with Companies
House every year.
Statutory accounts must be filed with HMRC every year.
A Corporation tax return must be completed each year and filed with HMRC.
We can form your limited company and complete all necessary legal requirements, leaving you to get on with running your business.
Chancellor hints that Inheritance tax could be scrapped
Chancellor Sajid Javid has hinted that the government may scrap inheritance tax (IHT).
Inheritance tax is levied on a person's estate when they die (40% where chargeable) as well as certain gifts made during an individual's lifetime (20% where chargeable). For the tax year 2019/20, the first £325,000 chargeable to IHT is within the nil-rate band and chargeable at 0%.
A reduced rate of IHT (40% reduced to 36%) is applied in cases where 10% or more of a deceased individual's net estate (after deducting IHT exemptions, reliefs and the nil-rate band) is left to charity.
Speaking at the Conservative Party Conference, the Chancellor revealed that he is considering scrapping IHT.
He said: 'I understand the arguments against that tax. You pay taxes already through work or through investments, and your capital gains in other taxes. There is a real issue with then asking them to, on that income, pay taxes all over again.
'Sensible changes have already been made but it's something that's on my mind.'
Expert have raised concerns that abolishing IHT could be 'hugely expensive’ with the tax raising £5.3 billion for the Treasury in 2018.
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