IT’S P11D SEASON

IT’S P11D SEASON

Now that we have reached the end of the 2022/23 tax year, limited companies who provide benefits in kind to any directors or employees, or even to members of the director’s or employee’s family or household, have a legal requirement to report this to HM Revenue & Customs (‘HMRC’) on form P11D before 6 July 2023.

Examples of benefits in kind can include use of company cars or vans, private medical insurance, interest free loans greater than £10,000, gym memberships, reimbursement of personal costs and company assets placed at a director’s or employee’s disposal for personal use.

Don’t worry – there are no requirements to report expenses that have been reimbursed by the employer if they were incurred solely (wholly ,exclusively and necessarily) for business purposes, for example travel, subsistence and entertaining.

If you believe that your company has provided benefits in kind to directors or employees during the 2022/23 tax year, or if you would like more information about employee benefits, please do not hesitate to contact us, we are here to help.

As you might expect, failure to notify taxable benefits and late filing of form P11D will give rise to penalty charges.

Don’t forget the ‘trivial benefit’ rules which allow you to gift your employees, for a non-work reason, cash or vouchers that cost up to a value £50 per day without any of the above benefit in kind tax implications.

Exam Success

We are pleased to advise that our George Moyle was successful in his Level 3 AAT Preparing Financial Statements exam last Friday, achieving a mark of 83%.

Our congratulations to George!

Spring Budget 2023

This year we are not sending out a detailed commentary on the annual budget because most of it had been leaked in the Press beforehand anyway and there is not a huge impact to tax rates, other than the previously announced increase to Corporation Tax from 19% to 25%. We nonetheless have pleasure in attaching a tax card setting out the rates in force for the new tax year.

It would seem that the Government is asking businesses to facilitate growth and at the same time kicking them in the teeth by increasing their Corporation Tax rates by 30%.

Successful businesses which are able to pay their owners income of more than £50,000 will effectively be paying tax at over 60% on that income as opposed to their employees who will be paying 42% on the same level of income. We believe that this budget was disappointing and uninspiring and particularly for small and medium size businesses, previously when there were two different rates of Corporation Tax, the starting point for the higher rate was £300,000, which with inflation would equate to round about £400,000 these days – it is now £50,000.

On a positive note, and to replace the Super Deduction, companies will be able to claim 100% relief on qualifying capital expenditure without any cap. However, for many family-owned businesses the £1 million Annual Investment Allowance provided this relief already.

Reduced paperwork for international traders and longer time to submit customs forms will be welcomed by many. The new investment zones may provide for some interesting opportunities, albeit they may be fairly niche.

The tax changes made, whilst few in number, are quite significant – in particular pensions, R&D and capital allowances.

The lifetime allowance for pensions – previously £1.07M – was abolished but there is still an annual allowance limitation, albeit it at the higher level of £60,000 per year compared to £40,000 previously.

Self-Assessment Payment Deadline

This is a late reminder for any clients who have not yet paid their Self-Assessment liability which was due on 31^st January.

Interest will be running from 1^st February but if there are any amounts of tax still outstanding as at 28^th February, HMRC will apply an additional 5% surcharge.

However, if you contact HMRC and make arrangements to pay, the surcharge will not be applied. Interest will continue to run but you will save the cost of an additional 5%.

Therefore, if this applies to you, then we strongly recommend you contact HMRC as soon as possible to put payment arrangements in place.

The UK Economy: Light at the end of the economic tunnel

Despite the turbulent times that have befallen the UK economy over recent years, experts are reporting a positive outlook. The impacts of coronavirus, Brexit and wider supply disruptions may still be taking their toll but businesses, families and property owners can remain confident.

In this article, we’ll take a look at what experts are saying about the likely trends and how it will impact businesses, families, and property owners.

According to Handelsbanken, a leading international bank, the UK’s near-term outlook remains a little uncertain as we continue to navigate our way through the aftermath of the pandemic and the ongoing consequences of the war in Ukraine. However, there are many positive signs that suggest the worst is behind us and a return to some stability is expected.

James Sproule, Chief Economist at Handelsbanken recently delivered a webinar at which he shared some detailed insights and data about the economy, including some thoughts about ‘what’s next’, including (some very brief headlines):

· The UK is unlikely to avoid a recession, but the expectation is that this will be a ‘mild recession’.

· The employment market is broadly good.

· Inflation has most likely peaked (end of 2022).

· Falling energy prices will drive inflation lower.

· Inflation will come down slowly.

· The bank base rate will increase to 4% possibly 4.5% but then it should stabilise. It’s unlikely to drop this year.

· We are unlikely to return to the ‘cheap money’ we experienced in the period 2015 – 2020.

· The impact of the pandemic on certain sectors:

o Flights at Heathrow – down 14% & passenger numbers down 18% from pre-pandemic levels.

o Hotel bookings in the UK – down 5%.

o Offices/property – no reliable data but indicatively 8% more people work from home on Friday’s.

o Online shopping (amongst other things) has created new behaviours and habits that will be hard to reverse.

o Property – all asset classes are expected to reduce in value.

· Overall, the outlook is not gloomy, in fact it’s quite positive. We should all be a little more optimistic, we’ve been through a lot worse.

What Does This Mean for Businesses & Families?

Businesses have something to be optimistic about: consumer spending increases, new investments in technology and a reduction of overhead costs associated with office space rental should all contribute towards improved bottom lines. Wages are also likely to rise, allowing families the chance to gain financial stability by saving more money for larger purchases such as homes or cars. Furthermore, inflation rates could stabilise and then reduce over time – providing some welcome relief through cheaper prices on everyday goods.

What Does This Mean For Property Owners?

Property owners could experience a welcome period of stability, with the likelihood that consumer spending will return and strengthen demand for housing.

Conclusion

All in all, while there are still many uncertainties surrounding how exactly the UK economy will look beyond 2023 after a number of uncertain years, it looks like there is light at the end of this long economic tunnel!

Our latest research reveals that 34% of businesses have a positive outlook

In September and October, we asked businesses from across the UK to share their outlook for the next 12 months, as well as how they have fared in the past 12-months.

The results reveal that 34% of businesses have a positive outlook for the future. This compares to 48% of business asked the same question in 2021.
The research, which was carried out across the UK in conjunction with the UK200Group, also revealed that 23% of businesses across the UK have a bleak outlook.

Looking back over the last 12-months, 42% of businesses performed better than the previous 12-months, 19% had a worse period, leaving 39% of businesses saying things were about the same as normal.

Respondents were asked what one word they would use to describe their outlook for the next 12 months and the words uncertain, challenging, cautious and optimistic headed the list.

We also asked respondents what one word they would use to describe their biggest concern for the next 12 months. Not surprisingly ‘inflation’ & ‘costs’ headed the list. Closely followed by ‘economy’ and ‘uncertainty’.

This research shows that growing uncertainty due to factors including the economy, inflation, the war in Ukraine and the cost-of-living crisis, are directly affecting business confidence.

However, it’s not all doom and gloom. There are positive signs with many businesses having just had a better 12-months than they expected. Now more than ever is a time for businesses to ensure they have their ‘house in order’. Businesses need to focus on getting the basics right. Make sure you are up to date with your tax and other financial affairs, have control of your cashflow and finances, and review your supplier and customer contracts.”

You can see a full copy of the tracker outlook results on our handy infographic which is attached.

Budget Summary

We are pleased to present our report and analysis following last week’s Autumn Statement, which states out the tax landscape for the year ending 5 April 2024.

We all expected tax rises but in many ways, I think we were built up to expect worse than the final announcement on the personal tax front.

However, business is going to bear the brunt of the tax rises and there is no concession on the implementation of the 25% corporation tax rate with a starting point of profits of only £50,000.

In addition, eligibility for Research & Development claims has been severely restricted for SMEs.

There is detailed analysis in the attached document.

We believe that some companies may need to consider their trading style and even consider ceasing to operate as limited companies going forward.

There will be a further statement in March, which may have a bearing on the final position from 1 April 2023 onwards.

If you have any specific queries relating to this budget report, please do not hesitate to contact us.

In the first instance, the best people to contact would be either me or our tax manager Fran McRae.

Budget Predictions

We were proud to be able to send you all very shortly after the now infamous “mini-budget” a summary of the changes that were supposed to be brought in after than now infamous speech. Our advice at the time was to “fill your boots while it lasted” as it promised a big tax giveaway – little did we know what would then ensue and now of course that legislation has been reversed with the exception of the National Insurance reduction.

The new budget statement will be on 17 November and the following Wednesday we will send out a new summary based on what should then be the definitive legislation. Most people accept that tax rises are inevitable given the events of the past few years but the press speculation is that the main increase in tax will fall squarely on the commercial sector. The originally intended increase in corporation tax from 19% to 25% now seems certain to go ahead. This will effectively mean that corporation tax will increase by 30% from April 2023. We now understand that the Chancellor is also targeting dividend income although we do not yet know exactly what that format will take – it may be just a reduction in the tax-free dividend threshold which would not be unduly onerous but it may also mean an increase in the rate of tax applicable to dividends and it should be remembered that there was no additional tax on dividends at all until 2016.

When there used to be a different rate of tax for large companies as opposed to small companies, the threshold for the lower rate was £300,000. It seems likely that the threshold for small companies from now on will be only £50,000.

Our editorial comment is that the government seems unable to distinguishing between huge multinational companies quoted on the stock exchange and small family businesses, treating them all the same for tax purposes. If these rises do come into being, it may be appropriate to hold over any large items of expenditure such as one-off pension contributions or capital expenditure until the rate rise has taken place in order to get better value as it were, for such expenditure.

We won’t know for certain of course until next week and we will make sure, when the actual legislation is published, that you are fully informed.

HMRC VAT Government Gateway Portal to Close

This is just to remind anyone who is registered for VAT voluntarily and whose annual turnover is less than the £85,000 threshold, that HMRC’s Government Gateway Portal, in other words, the way in which VAT returns have been filed for a number of years, will close with effect from 7^th November.

This means that any VAT returns for periods after 30 September can no longer be filed in this way and you will have to register for Making Tax Digital (MTD).

For those to whom this is applicable, please read on as we are producing the email sent by HMRC to traders in that position who they call “customers”. If this is applicable to you and you do not know how to proceed, please do not hesitate to contact us so that we can make sure you remain compliant.

« Dear customer,

We previously let you know that from Tuesday 1 November 2022 your clients will no longer be able to use their existing VAT online account to file their monthly or quarterly VAT returns.

That’s because by law, all VAT-registered businesses must now sign up to Making Tax Digital (MTD) and use MTD-compatible software to keep their VAT records and file their VAT returns.  

If your clients do not sign up for MTD and file their VAT returns through MTD-compatible software, they may have to pay a penalty. The best way for businesses to avoid penalties is to start using MTD now.  

What businesses need to do now, or they could face a penalty 

If your clients haven’t signed up to MTD and started using compatible software already, they must follow these steps now: 

Step 1. Choose MTD-compatible software that’s right for them – you can find a list of software, including free options, on GOV.UK.

Step 2. Check the permissions in their software – once they’ve allowed it to work with MTD, they can file their return easily. Go to GOV.UK and search ‘manage permissions for tax software’ for information on how your clients should do this.

Step 3. Keep digital records for their current and future VAT returns – you can find out what records they need to keep on GOV.UK.

Step 4. Sign up for MTD and file their future VAT returns using your MTD-compatible software – to find out how to do this, go to GOV.UK and search ‘record VAT’.

If your clients are already signed up to MTD, no further action is required.

Information for businesses due to file by 7 November 2022

If your client’s turnover is under the VAT threshold of £85,000 and they haven’t signed up to MTD in time to file their next return by 7 November 2022, they can still use their existing VAT online account for that return only.

However, they must complete the steps above in order to file any returns due after 1 December 2022 if they file monthly or quarterly VAT returns, or they could face a penalty.

We’ll be contacting these businesses directly to let them know.

Businesses that file annual VAT returns will still be able to use their VAT online account until 15 May 2023. 

How to apply for an exemption from using MTD-compatible software

If your client is already exempt from filing VAT returns online or if they or their business are subject to an insolvency procedure, they’re automatically exempt from MTD.

You can check if they can apply for an exemption on GOV.UK. HMRC will consider each application on a case-by-case basis.

Help and support available   

You can find more information on how to support your clients on GOV.UK, including a step-by-step guide to signing up for MTD on your clients’ behalf.   

You can signpost your clients to help and support for MTD on GOV.UK, where they can find useful videos, register for live webinars and see the latest guidance and updates on MTD for VAT.   

Protect yourself and your client’s information    

You should never ask for or use your client’s HMRC sign in details to access their tax account.

If you need to access your client’s information, then you should obtain the correct authorisation from your client and use HMRC’s agent digital services.  

If you cannot get your client’s information using agent digital services, then we recommend asking your client to sign into their Personal Tax Account and provide the information or contact HMRC.

If someone contacts you or your client saying they’re from HMRC and wants you to transfer money urgently or give personal information, never let yourself be rushed. Take your time and check HMRC’s advice about scams on GOV.UK. »

EU VAT Issues

One of the consequences of Brexit for businesses has been that dealing with other EU countries has suddenly become an extremely complicated matter.

Terri Bruce, a fellow UK200 member firm Dains Accountants in the West Midlands is one of the leading experts in the country on the consequences of EU VAT transactions.

If you have any dealings with Europe then you will need to read the attached below. It will not necessarily give you any answers immediately but will further your understanding of how these transactions work and the need to take further advice.