Our Blogs2

Self-employed tax basis period reform

The self-employed tax basis period reform has changed the way trading income is allocated to tax years. Under the reforms, the tax basis period has changed from a ‘current year basis’ to a ‘tax year basis’.

This means that all sole trader and partnership businesses must now report their profits on a tax year basis, beginning with the self-assessment return due by 31 January 2025 (covering the tax year 2023-24) and future years.

Under the old rules there could be overlapping basis periods, which charged tax on profits twice and generated corresponding ‘overlap relief’ which was usually given on cessation of the business. The new method of using a ‘tax year basis’ has removed the basis period rules and prevents the creation of further overlap relief. 

The changes do not affect sole traders and partnership businesses who draw up annual accounts to a date between 31 March and 5 April. These businesses will continue to file as usual for the 2023-24 accounting year and beyond. 

The new rules will come into effect in the current 2024-25 tax year with the previous 2023-24 tax year known as the ‘transition year’. During the transitional year, all businesses’ basis periods will have been aligned to the tax year and all outstanding overlap relief used against profits for that tax year.

Any excess profit (after overlap relief) covering more than 12 months, is known as ‘transition profit’. The transitional profit will be spread by default over 5 tax years from 2023-24 until 2027-28.

Source:HM Revenue & Customs | 29-04-2024

New tips guidance published

New rules that stop employers from withholding tips from people working in the hospitality, leisure and services sectors are a step closer following the publication of a new Code of Practice on tipping.

The Employment (Allocation of Tips) Act 2023 colloquially known as the Tipping Act received Royal Assent on 2 May 2023. However, the measures in the Act do not come into force until all the necessary secondary legislation is in place. The measures are expected to come into force on 1st October 2024, once Parliament has approved them.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted.

The statutory Code of Practice will provide businesses with advice on how tips should be distributed among staff. The updated Code of Practice will be statutory and have legal effect, meaning it can be introduced as evidence in an employment tribunal.

Workers will also be given new rights to view an employer’s tipping policy and their tipping record, which will help them to bring forward a credible claim to an employment tribunal.

The Business and Trade Minister said:

‘It is not right for employers to withhold tips from their hard-working employees. Whether you are cutting hair or pulling a pint, this government’s legislation which will protect the tips of workers and give consumers confidence that when they leave a tip, it goes to the hardworking members of staff.’

Source:Department for Business and Trade | 29-04-2024

VAT boost to charitable donations

The government is looking to introduce a new relief that would provide a VAT boost to charitable donations. The new VAT relief would be designed to encourage businesses to donate everyday items to charities without creating a VAT liability. A 12-week consultation on the proposed changes will be launched before 23 July 2024.

Under the current rules, firms do not pay VAT on any goods they donate which are then sold on, such as clothes, hygiene supplies and cleaning products. However, if these goods are not sold but are instead distributed free of charge to those in need VAT must be accounted for. 

The proposed relief would help encourage donations of low value household goods such as:

  • hygiene items (soap, toothpaste, toothbrushes, shower gel, toilet rolls)
  • second hand items from hotels (such as sheets, kettles)
  • cleaning supplies – including laundry detergent

The new VAT relief will not include goods which are donated to charities for the charity to use, such as new IT equipment, in order to prevent any possible VAT avoidance.

The result of the consultation and confirmation of any changes will be announced at a future fiscal event.

Source:HM Treasury | 29-04-2024

Post Office Offences Bill to be extended

The Government has tabled amendments to expand the territorial extent of the Post Office Offences Bill. Convictions resulting from the Post Office Horizon scandal in Northern Ireland will now be within scope.

This blanket exoneration will automatically quash convictions brought about by the scandal, including 26 in Northern Ireland, clearing the names of many people who have had their lives ruined.

As in England and Wales, convictions in Northern Ireland will need to meet a set of criteria before they are quashed, including:

  • Prosecutions brought about by the state prosecutor or the police.
  • Offences carried out in connection with Post Office business between 1996 and 2018.
  • Were for relevant offences such as theft, fraud and false accounting.
  • Were against sub-postmasters, their employees, officers, family members or direct employees of the Post Office working in a Post Office that used the Horizon system software.

Postal Affairs Minister Kevin Hollinrake said:

” We always carefully consider the territorial extent of each piece of legislation and are rigorous in our commitment to devolution. However, it has become apparent that the Northern Ireland Executive does not have the ability to rapidly address the 26 convictions known to be within its purview.

It has become clear that postmasters in Northern Ireland could have their convictions quashed significantly later than those who were convicted in England and Wales, which would be unacceptable.

This follows the decision to introduce landmark legislation – which is making its way through parliament – to quash the convictions of hundreds of innocent sub-postmasters wrongly convicted as a result of the Horizon scandal. This will speed up the financial redress process – where we are offering a £600,000 fixed sum which can be administered quickly for those who accept it.”

Source:Other | 29-04-2024

Free management course for SMEs

The government has launched the new Help to Grow: Management Essentials course; a short online course with practical tips and resources for small business leaders.

It is based on the 12-week Help to Grow: Management Course and is suited for leaders of newer or smaller SMEs, or those who are looking to explore the principles of business growth and management before taking the next step and enrolling in the full course.

The government sees small businesses as a vital part of local economies across the UK and supporting them is crucial to delivering on the need to grow the economy.

2024 is nominated as the year of the SME and the government has pledged it will continue to support and engage small businesses, reaffirming their role as the engines of our economy. The recent launch builds on a raft of measures designed to help them meet their full potential.

Essentials is the latest addition to the extensive package of SME support announced by Government as part of the ‘Help to Grow’ campaign: a one-stop shop for SMEs. The Help to Grow site makes it quicker and easier for business owners to find the resources they need for every step of their growth journey from across government.

Source:Other | 29-04-2024

Checking your National Insurance records

There is an online service available on HMRC to check your National Insurance Contributions (NIC) record online. The service is available at https://www.gov.uk/check-national-insurance-record

In order to use this service, you will need to have a Government Gateway account. If you do not have an account, you can apply to set one up online.

By signing in to the 'Check your National Insurance record' service you will also activate your personal tax account if you have not previously done so. HMRC’s personal tax account can be used to complete a variety of tasks in real time such as claiming a tax refund, updating your address and completing your self-assessment return.

Your National Insurance record online will let you see:

  • What you have paid, up to the start of the current tax year (6 April 2024).
  • Any National Insurance credits you have received.
  • If gaps in contributions or credits mean some years do not count towards your State Pension (they are not 'qualifying years').
  • If you can pay voluntary contributions to fill any gaps and how much this will cost.

In some circumstances it may be beneficial, after reviewing your records, to make voluntary NIC contributions to fill gaps in your contributions record to increase your entitlement to benefits, including the State or New State Pension. If you would like to discuss this further, please call.

Source:HM Government | 21-04-2024

Transferring unused nil rate band for IHT

The Inheritance Tax residence nil rate band (RNRB) is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death. 

The allowance increased to the present maximum level of £175,000 from 6 April 2020. The allowance is available to the deceased person’s children or grandchildren. Any unused portion of the RNRB can be transferred to a surviving spouse or partner. The RNRB is on top of the existing £325,000 Inheritance Tax nil-rate band.

The allowance is available to the deceased person's children or grandchildren. Taken together with the current Inheritance Tax limit of £325,000 this means that married couples and civil partners can pass on property worth up to £1 million, free of any Inheritance Tax liability, to their direct descendants. 

The transfer does not happen automatically and must be claimed from HMRC when the second spouse or civil partner dies. This is usually done by the executor making a claim to transfer the unused RNRB from the estate of the spouse or civil partner that died first. This transfer can also happen even if the first spouse or civil partner died before the RNRB was introduced on 6 April 2017.

There is a tapering of the RNRB for estates worth more than £2 million even where the family home is left to direct descendants. The additional threshold will be reduced by £1 for every £2 that the estate value exceeds the £2 million taper threshold. This can result in the full amount of the RNRB being tapered away. The RNRB maximum rate and the taper threshold are currently frozen until at least April 2028.

Source:HM Revenue & Customs | 21-04-2024

Tax-free home sales

In general, there is no Capital Gains Tax (CGT) liability created when a property used as the main family residence is sold. An investment property which has never been used as a home will not qualify. This relief from CGT is commonly known as private residence relief.

Taxpayers are entitled to full relief from CGT when all of the following conditions are met:

  1. The family home has been the taxpayers only or main residence throughout the period of ownership.
  2. The taxpayer has not sublet part of the house – this does not include having a lodger share your house.
  3. No part of the family home has been used exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use).
  4. The garden or grounds including the buildings on them are not greater than 5,000 square metres (just over an acre) in total.
  5. The property was not purchased just to make a gain.

If a property has been occupied at any time as an individual’s private residence, the last nine months of ownership are disregarded for CGT purposes – even if the individual was not living in the property when it was sold. The time period can be extended to thirty-six months under certain limited circumstances. There are also special rules for homeowners that work or live away from home.

Married couples and civil partners can only count one property as their main home at any one time.

Source:HM Revenue & Customs | 21-04-2024

Bikes for employees

The Cycle to Work scheme allows employers to provide bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme must be offered to all employees and the bike must be used mainly for qualifying journeys i.e., between home and work. However, private use of the bike is also allowed. Where the scheme conditions are satisfied employees can benefit from a significant tax and National Insurance Contributions (NICs) exemption. In addition, there is no employer liability to pay Class 1A NICs.

The cycle to work benefits only relate to the loan period. However, it is commonplace for an employer or a third party bicycle provider to offer the employee the bicycle / equipment they have been using for sale after the loan period has ended. The bike may be offered to the employee for sale at a fair market value, but this must be done as a separate agreement.

Employers of all sizes across the public, private and voluntary sectors are eligible to take part in the scheme to provide (technically loan) bicycles and cyclists’ safety equipment to employees as a tax-free benefit. The scheme can also include electronic bikes known as e-bikes.

Source:HM Revenue & Customs | 21-04-2024

Do’s and don’ts for Standard Visitors to the UK

There is useful guidance published on GOV.UK that explains the do’s and don’ts for Standard Visitors to the UK. Visitors to the UK who are classed as a ‘Standard Visitor’ are allowed in the UK for tourism, business, study (courses up to 6 months) and other permitted activities.

Permitted activities include the following:

  • for tourism, for example on a holiday or vacation;
  • to see your family or friends;
  • to volunteer for up to 30 days with a registered charity;
  • to pass through the UK to another country (‘in transit’);
  • for certain business activities, for example attending a meeting or interview;
  • for certain paid engagements or events (a ‘permitted paid engagement’) as an expert in your profession, for example to give lectures or perform;
  • to take part in a school exchange programme;
  • to do a recreational course of up to 30 days, for example a dance course;
  • to study, undertake a placement or take an exam;
  • as an academic, senior doctor or dentist; or
  • for medical reasons.

The following activities are not permitted for a Standard Visitor:

  • undertake paid or unpaid work for a UK company or as a self-employed person, unless you are doing a permitted paid engagement or event;
  • claim public funds (benefits);
  • live in the UK for long periods of time through frequent or successive visits; or
  • marry or register a civil partnership or give notice of marriage or civil partnership – you will need to apply for a Marriage Visitor visa.
Source:HM Government | 21-04-2024

Childcare Account chores

HMRC’s Childcare account can be used to claim free childcare (if eligible) or pay for Tax-Free Childcare. HMRC’s sign in page for the account states that in order ‘…to keep getting free childcare or Tax-Free Childcare, you must sign in every 3 months and confirm your details are up to date’.

There are various eligibility rules that must be met to claim free childcare via the Childcare Account. As a starting point you must be the parents of a child two, three or four years old and living in England. From September 2024, the scheme will be extended for children of working parents from the age of 9 months. You can apply from 12 May 2024. There are different schemes in Scotland, Wales and Northern Ireland

The Childcare Account can also be used to claim under the Tax-Free Childcare (TFC) scheme. The TFC scheme can help parents of children aged up to 11 years old (17 for those with certain disabilities). The TFC scheme helps support working families with their childcare costs. There are many registered childcare providers including childminders, breakfast and after school clubs and approved play schemes signed up across the UK. Parents can pay into their account regularly and save up their TFC allowance to use during school holidays. 

The TFC scheme provides for a government top-up on parental contributions. For every £8 contributed by parents an additional £2 top up payment will be funded by Government up to a maximum total of £10,000 per child per year. This will give parents an annual childcare savings of up to £2,000 per child (and up to £4,000 for disabled children until the age of 17). 

The TFC scheme is open to all qualifying parents including the self-employed and those on a minimum wage. The scheme is also available to parents on paid sick leave as well as those on paid and unpaid statutory maternity, paternity and adoption leave. In order to be eligible to use the scheme, parents will have to be in work at least 16 hours per week and earn at least the National Minimum Wage or Living Wage. If either parent earns more than £100,000, both parents are unable to use the scheme.

Source:HM Revenue & Customs | 21-04-2024

Smart energy

In a recent press release, the Department for Energy Security and Net Zero confirmed that consumers are set to benefit from cheaper and more convenient energy deals as part of new measures to create a smart, flexible electricity system to help save money on bills. They said:

“New proposals set out in a recent consultation will introduce minimum requirements for cyber security and grid stability, and minimum product standards for energy smart appliances to give consumers confidence to accept smart devices and make it easier for them to benefit from cheaper bills. Electric heating appliances with the greatest flexibility potential – like heat pumps – could also be required to have smart functionality.

“Smart appliances enable consumers to manage their energy use to benefit from cheaper tariffs at times of low electricity demand, for example a smart charge point which waits for a period of low-demand overnight to charge the car. This will reduce the consumer’s bill while also ensuring that their car is ready to be used in the morning.

“By shifting some electricity use away from peak periods, this will ease pressure on the grid and reduce reliance on backup fossil fuel generation and the need for new infrastructure like pylons, helping to save up to £50 billion by 2050. The use of smart systems and flexibility could create 10,000 jobs and increase GDP by up to £1.3 billion by 2050. A further 14,000 jobs could be created by exporting the technology.”

Source:Other | 23-04-2024

Tipping boost

The government’s Tipping Act is a step closer to coming into force, as the Code of Practice is published and laid before Parliament. The new Code of Practice will protect the tips of more than 2 million workers giving them a fair share of the tips received by a company.

Millions of UK workers are set to take home an estimated £200 million more of their hard-earned cash, as landmark legislation on tipping took a step towards coming into force.

The government introduced the Code of Practice on the fair and transparent distribution of tips that will have legal effect under the Employment (Allocation of Tips) Act 2023.

The updated Code of Practice will be statutory and have legal effect, meaning it can be introduced as evidence in an employment tribunal.

The Act and secondary legislation make it unlawful for businesses to hold back service charges from their employees, ensuring staff receive all of the tips they have earned.

The measures are expected to come into force on 1st October 2024, once they have been approved by Parliament.

Many hospitality workers rely on tips to top up their pay and are often left powerless if businesses do not pass on service charges from customers to their staff.

This overhaul of tipping practices is set to benefit more than 2 million UK workers across the hospitality, leisure and services sectors helping to ease cost of living pressures and give them peace of mind that they will keep their hard-earned money.

Source:Other | 23-04-2024

Tax Diary May/June 2024

1 May 2024 – Due date for corporation tax due for the year ended 30 July 2023.

19 May 2024 – PAYE and NIC deductions due for month ended 5 May 2024. (If you pay your tax electronically the due date is 22 May 2024).

19 May 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 May 2024. 

19 May 2024 – CIS tax deducted for the month ended 5 May 2023 is payable by today.

31 May 2024 – Ensure all employees have been given their P60s for the 2023/24 tax year.

1 June 2024 – Due date for corporation tax due for the year ended 31 August 2023.

19 June 2024 – PAYE and NIC deductions due for month ended 5 June 2024. (If you pay your tax electronically the due date is 22 June 2024).

19 June 2024 – Filing deadline for the CIS300 monthly return for the month ended 5 June 2024. 

19 June 2024 – CIS tax deducted for the month ended 5 June 2024 is payable by today.

Source:HM Revenue & Customs | 14-04-2024

Class 4 NICs who is liable?

Most self-employed people are required to pay Class 4 National Insurance contributions (NICs) if their profits are £12,570 or more a year.

Class 4 NIC rates for the tax year 2024-25 are 6% (2023-24: 9%) for chargeable profits between £12,570 and £50,270 plus 2% on any profits over £50,270.

A number of categories of people are exempt from paying Class 4 NICs, these include:

  • People under the age of 16 at the beginning of the year of assessment.
  • People over State pension age at the beginning of the year of assessment. A person who attains State pension age during the course of the year of assessment remains liable for Class 4 NICs for the whole of that year.
  • Trustees, guardians etc of an incapacitated person are exempted from Class 4 NICs on that income.

The Class 4 NIC rate is lower than the corresponding rate for employees who pay National Insurance at 8% on the same income levels. Both the employed and self-employed pay 2% National Insurance contributions on income above the higher rate threshold.

Source:HM Revenue & Customs | 15-04-2024

Post Transaction Valuation Checks

A Post Transaction Valuation Check (PTVC) can be requested from HMRC for an individual to work out a capital gains tax liability or for companies to calculate corporation tax liability on chargeable gains. The request for a PTVC should be made using the CG34 form. HMRC’s guidance says the form must be completed and sent to the address on the form at least three months before the relevant tax return filing date.

The PTVC is a service offered by HMRC to check valuations after a disposal has been made, including a deemed disposal following a claim that an asset has become of negligible value but before the completion of a self-assessment return. This service is available to all taxpayers, individuals, trustees and companies.

If HMRC agrees with the valuations set out they will not question the use of those valuations in the return, unless there are any important facts affecting the valuations that have not been disclosed. Agreement to the valuations does not always mean that HMRC agree the gain or loss. When the return is filed, HMRC will consider the other figures used. If an agreement cannot be reached, HMRC will suggest alternatives such as using specialist valuers.

Source:HM Revenue & Customs | 15-04-2024

View and prove your immigration status

A UK Visas and Immigration (UKVI) account can be used by eligible users to view and prove their immigration status online. This may be required to provide proof of your status to employers or higher education providers.

The service can also be used to update personal details or to check what rights you have in the UK, for example the right to work, rent or claim benefits.

You will have a UKVI if you have ever:

  • applied to the EU Settlement Scheme;
  • used the ‘UK Immigration: ID Check’ app to prove your identity when applying for a visa;
  • created one when applying for a visa (you will have received a UKVI account confirmation email); and
  • created one to get access to an eVisa (an online record of your immigration status) – you will have received an email about this.

If you are unable to access your account, then you will need to recover your UK Visas and Immigration Account by calling the UK Visas and Immigration phone line on 0300 790 6268.

Source:Home Office | 15-04-2024

Taxable employment benefits from April 2026

From April 2026, the government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions on benefits in kind via payroll software. This represents a significant change to the current system and should reduce the administrative requirements and simplify the tax system for both employers and employees.

This means that the 2025-26 tax year will be the last year that employers will be able to file P11Ds and P11D(b)s with HMRC in most cases. From April 2026, tax on employment benefits will be collected in real time and not through tax codes in arrears. Class 1A National Insurance contributions will also be collected in real time for each pay period rather than at the end of the year. HMRC has said that this change will remove the need for 4 million end of year returns to be submitted.

HMRC has said that they will engage with stakeholders to discuss their proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

Source:HM Revenue & Customs | 15-04-2024

Changes to Scottish Income Tax rates 2024-25

A reminder of the changes to Scottish Income Tax rates for the 2024-25 tax year. It was announced as part of the Scottish Budget measures that a new tax band called the advanced rate band will apply a 45% tax rate on annual income between £75,000 and £125,140 and would come into effect from 6 April 2024. 

In addition, 1p was added to the top rate of tax and the starter and basic rate bands were increased in line with inflation (6.7%, based on Consumer Price Index from September 2023). There were no changes to the Starter, Basic, Intermediate and Higher tax rates and the Higher rate threshold was maintained at £43,662. The measures are expected to raise an additional £1.5 billion in Income Tax revenue.

The Scottish rates and bands for 2024-25 are as follows:

Starter rate – 19% £12,571 – £14,876
Basic rate – 20% £14,877 – £26,561
Intermediate rate – 21% £26,562 – £43,662
Higher rate – 42% £43,663 – £75,000
Advanced rate – 45% £75,001 – £125,140
Top rate – 48% Above £125,140

The standard personal allowance for 2024-25 remains frozen at £12,570. 

Source:The Scottish Government | 15-04-2024

Payrolling employee expenses and benefits

Employers can register on a voluntary basis (before the start of the tax year) to report and account for tax on certain benefits and expenses via the RTI system. This is known as payrolling and removes the requirement to complete a P11D for the selected benefits at the tax year end.

The deadline for submitting the 2023-24 forms P11D, P11D(b) and P9D is 6 July 2024. These forms can be submitted using commercial software or via HMRC’s PAYE online service. HMRC no longer accepts paper P11D and P11D(b) forms. Employees must also be provided with a copy of the information relating to them on these forms by the same date. P11D forms are used to provide information to HMRC on all Benefits in Kind (BiKs), including those under the Optional Remuneration Arrangements (OpRAs) unless the employer has registered to payroll benefits.

It should be noted that a P11D(b) is still required for Class 1A National Insurance payments regardless of whether the benefits are being reported via P11D or payrolled. The deadline for paying Class 1A NICs is 22 July 2024 (or 19 July if paying by cheque).

Where no benefits were provided from 6 April 2023 to 5 April 2024 and a form P11D(b) or P11D(b) reminder is received, employers can either submit a 'nil' return or notify HMRC online that no return is required. Employers should ensure that they complete their P11D's accurately, including all the details of cars and loans provided. There are penalties of £100 per 50 employees for each month or part month a P11D(b) is late. There are also penalties and interest if late payments are made.

Source:HM Revenue & Customs | 15-04-2024

Settling energy disputes

Business owners that are in dispute with their energy suppliers will be interested in the free support on offer from the Energy Ombudsman.

In a recent press release the Department for Energy Security and Net Zero confirmed the following:

“Businesses will get free support to resolve issues with their energy contracts, as part of government and Ofgem changes to tackle cowboy practices like hidden fees, inaccurate energy bills and pressurising sales tactics for energy contracts.

“Small organisations with fewer than 50 employees will be entitled to free support from the Energy Ombudsman on disputes with their energy supplier. It will extend the service to cover 99% of all businesses in Great Britain, giving them the confidence to grow – as part of the government’s long-term plan to boost the economy and improve economic security for all.

“The Ombudsman has the power to order suppliers to provide compensation of up to £10,000 or take action to resolve issues – such as raising standards for their customers, or to credit or amend customer accounts.

“The move will also enable businesses and other organisations to settle disputes with their energy broker via the Ombudsman, without the need for costly legal proceedings – as part of changes set out by the government and Ofgem today. It is a first step in a crackdown on rogue energy brokers targeting small organisations with thousands of pounds in hidden fees.

“Energy Affordability Minister Amanda Solloway has warned energy brokers to end these unacceptable practices, with the government planning to consult later this year on regulating brokers and other third-party intermediaries.”

Source:Other | 15-04-2024

COVID Bounce Back abuse

The Insolvency Service has recently published information confirming that a total of 831 company directors were banned in 2023-24 for Covid support scheme abuse, up more than 80% on the previous year, and that the average length of director disqualification for Covid misconduct in 2023-24 was almost 10 years.

The Covid Bounce Back Loan Scheme was introduced at the start of the pandemic in 2020. It helped small and medium-sized businesses borrow between £2,000 and £50,000 at a low interest rate, guaranteed by the government. 

Businesses were entitled to a single loan of up to 25% of their turnover under the scheme. 

Individuals could only use the loans for the economic benefit of the business and not for personal purposes. 

Enforcement action taken against those that have abused the support schemes has ranged from companies being wound-up in court to criminal convictions, compensation orders and director disqualifications. 

The Insolvency Service has successfully applied to have 1,430 directors banned for abusing Covid support schemes since it started investigating potential financial wrongdoing in this area in 2021. 

Source:Other | 15-04-2024

Paying VAT on goods from EU to Northern Ireland

There are special procedures for moving goods in and out of Northern Ireland. Under the Northern Ireland Protocol, all Northern Ireland businesses continue to have access to the whole UK market. 

There is specific guidance published by HMRC that should be followed for goods that are received into Northern Ireland from a supplier in the EU.

  • If you are registered for VAT in the UK and receive goods in Northern Ireland from countries in the EU, you will normally account for the VAT through your VAT Return. You will need to account for the VAT at the same rate that you would have paid if you had bought them from a UK supplier. This VAT is known as acquisition VAT, and you can normally reclaim some or all of this if the acquisitions relate to VAT taxable supplies that you make.
  • If you are not VAT registered and receive goods in Northern Ireland from countries in the EU, your supplier will charge VAT at the local rate in the EU country from which the goods are supplied. If you are not already registered for VAT in the UK and buy goods worth £90,000 (£85,000 prior to 1 April 2024) you may be required to register for VAT.

You may also be required to complete an Intrastat Supplementary Declaration if your acquisitions of goods from the EU exceed an annual amount. The delivery terms threshold for both arrivals and dispatches is currently £24 million.

Source:HM Revenue & Customs | 08-04-2024

VAT retail schemes

VAT retail schemes are a special set of schemes used by retail businesses to account for VAT. The schemes are used by businesses that sell a significant amount of low value and/or small quantity items to the public with different VAT liabilities.

The use of the schemes can save businesses a significant amount of time in calculating the amount of VAT due to HMRC on each sale. In many circumstances, it would be extremely difficult for these businesses to account for VAT using standard VAT accounting. By using the VAT retail scheme, retailers are able to calculate VAT due to HMRC at the standard, reduced and zero rates of VAT as a proportion of sales. Usually this is done on a day by day basis.

There are a number of standard VAT retail schemes:

  • the point of sale scheme
  • two apportionment schemes
  • two direct calculation schemes

There is also the option of using a bespoke scheme. The use of a bespoke scheme is obligatory for retailers with a turnover excluding VAT of £130 million or more.

The decision as to which retail scheme to be used is usually driven by a combination of looking at the scheme that provides the best result for the business in question combined with the cost of using the scheme with the important caveat that HMRC are of the opinion that the chosen scheme is fair and reasonable.

Source:HM Revenue & Customs | 08-04-2024

Termination payment clearance process

The tax treatment of termination payments has changed significantly over recent years. The changes have aligned the rules for tax and secondary National Insurance contributions (employer (NICs)) by making an employer liable to pay NICs on termination payments they make to their employees. 

HMRC has announced that it is aligning its approach to providing advance assurance on certain termination payment enquiries. 

HMRC guidance had previously committed HMRC to giving a binding answer if you made enquiries on termination cases involving:  

  • the disability and injury compensation exception;
  • the foreign service exception;
  • how the £30,000 threshold applies to payments made by the third party and by the employer; and
  • non-cash provisions.

HMRC will no longer give a binding answer on these cases outside the normal Non-Statutory Clearance process, for example, where there is a genuine point of uncertainty on the correct treatment.

This means that any future enquiries from taxpayers and employers on termination payments should be dealt with through the existing Non-Statutory Clearance procedure. HMRC will no longer provide clearance outside of the Non-Statutory Clearance route.

Source:HM Revenue & Customs | 08-04-2024

HMRC continues to target till fraud

HMRC has, for many years, looked to target businesses that deliberately undertake electronic sales suppression (ESS). ESS happens where a business deliberately manipulates its electronic sales records in order to hide or reduce the value of individual transactions. 

This type of fraud is hard to spot as it tries to reduce the recorded turnover of the business and the corresponding tax liabilities while providing what appears to be a credible and compliant audit trail. This can be done by misusing built in till functions or installing software specifically designed to suppress sales.

HMRC officers are continuing to target businesses across the country that are suspected of being involved in making, supplying or promoting ESS systems. These businesses can face fines of up to £50,000 and criminal investigations. HMRC is also actively targeting users of these systems who will also face having to pay back tax evaded, financial penalties and possible criminal convictions. HMRC has confirmed that they will continue to contact and target till fraud throughout 2024.

HMRC is also urging affected businesses to voluntarily come forward and use the online portal to disclose their undeclared sales and stop using ESS software immediately. If businesses do not come forward, HMRC may issue an assessment and open an investigation, and harsher penalties will apply.

Source:HM Revenue & Customs | 08-04-2024

Using the starter PAYE checklist

Employers that take on a new employee need to work out which tax code and starter declaration to use in their payroll software. Incorrect tax codes can lead to a new employee paying more tax than is due.

Employers will require certain information from their new employee in order to ensure that the correct tax code and starter declaration information is entered on the payroll software. In most cases, all the necessary information can be found on the employees P45. It is important to remind new employees to bring this with them on their first day of work.

If the employee does not have a P45 the necessary information can be collected by asking the new employee to complete HMRC's online starter PAYE checklist. A paper version can also be completed if the new employee is unable to use the online version. This information must be held in the employers’ payroll records for the current year and the 3 following tax years. Once the information has been collated, HMRC’s online tool can be used to work out the employee’s tax code.

The starter checklist can be used by a new employee if:

  • they have a student or postgraduate loan;
  • their personal details are different to those shown on their P45;
  • they do not have a P45; and
  • they have been sent to work temporarily in the UK by their overseas employer.

Once the checklist has been completed, the new employee should email, post or give the completed list to their employer. There is no requirement to send the checklist to HMRC.

Source:HM Revenue & Customs | 08-04-2024

Accessing the HMRC mobile APP

HMRC’s free tax app is available to download from the App Store for iOS and from the Google Play Store for Android. The latest version of the app includes updated functionality.

The app can be used to see:

  • your tax code and National Insurance number;
  • your income and benefits;
  • your income from work in the previous 5 years;
  • how much you will receive in tax credits and when they will be paid;
  • your Unique Taxpayer Reference (UTR) self-assessment;
  • how much self-assessment tax you owe;
  • your Child Benefit; and
  • your State Pension.

The app can also be used to complete a number of tasks that usually require the user to be logged on to a computer. This includes:

  • get an estimate of the tax you need to pay;
  • make a self-assessment payment;
  • set a reminder to make a self-assessment payment;
  • report tax credits changes and complete your renewal;
  • access your Help to Save account;
  • using HMRC’s tax calculator to work out your take home pay after Income Tax and National Insurance deductions;
  • track forms and letters you have sent to HMRC;
  • claim a refund if you have paid too much tax;
  • ask HMRC’s digital assistant for help and information;
  • update your name and / or postal address;
  • save your National Insurance number to your digital wallet; and
  • choose to be contacted by HMRC electronically, instead of by letter.
Source:HM Revenue & Customs | 08-04-2024

What do we mean by profit?

When most business owners refer to business profits, they are likely to mean the difference between sales and costs, and more concisely, that sales exceed costs.

However, the word “profits” can prove to be a moveable feast as HMRC, banks and traders will likely have a different interpretation.

For example, do costs include:

  • intangible overheads like depreciation;
  • the write-off of goodwill; or
  • taxation.

The distinctions can prove to be important especially if comparisons are being made for benchmarking purposes – comparing the results of a business with the results for the relevant industry sector.

Company accounts display sales, costs, intangible write-offs and corporation tax charges, but any dividends taken by directors as part of their remuneration package – most directors of small companies take low salaries and high dividends to save NIC costs – are not deducted as a cost in the Profit & Loss account. And so reported profits after tax are not the complete story; any dividends taken by working directors need to be considered as these will reduce retained profits.

The question, what is profit, is therefore dependent for its usefulness as an indicator of a businesses’ health, only if its definition is fully appreciated.

Source:Other | 08-04-2024

New employment protections

New legislation, including three Government backed cross party Acts, came into force from 6 April 2024.

Pregnant women and new parents will now receive special treatment in a redundancy situation, as a suite of new laws are introduced – delivering the Government’s plan to support families and back hardworking Brits.

New laws will protect workers by strengthening existing redundancy protections to cover pregnancy and a period of time after parents return to work.

The Government-backed package of Acts will also boost support to vulnerable workers offering greater flexibility and confidence to workers and businesses – to help galvanise productivity, help grow the economy and tackle inactivity.

Families will receive new employment protections, including redundancy protections for pregnant women and new parents and a new leave entitlement for unpaid carers. In addition, there will be new flexible paternity leave and pay for parents of babies due on or after 6 April 2024. 

Against a backdrop of skills and labour shortages, these measures will help businesses to attract and retain talented staff. The measures also support groups more likely to fall out of the workforce, such as parents and disabled people, enabling them to thrive in the workplace.

Source:Other | 08-04-2024