Welcome to our round-up of the latest business and tax news for our clients. Please contact us if you want to talk about how these updates affect you. We are here to support you!
I hope you have a good weekend.
Kind regards,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk
HMRC is changing how they assess
profits for some sole traders and partnerships
How HMRC
assesses profits for sole traders and partnerships who use an accounting date
between 6 April and 30 March will change
from 6 April 2023. This change will not affect companies.
Your accounting
date is the last day of the period that you prepare your accounts for. You
choose your accounting date when you set up your business and will normally
make your accounts up to that date every year. Under the current rules, you are
taxed on profits for the accounting date that ends in a given tax year. For
example, if your accounting date is 30 November, for the 2022 to 2023 tax year
you will be taxed on profits in your 30 November 2022 accounts.
From 6 April
2024, you will be assessed on your profits for each tax year that runs from 6
April to 5 April. This change will affect how you fill in your tax return if
you use an accounting date between 6 April and 30 March. The way your profits
are assessed if you use an accounting date between 31 March and 5 April will
not change.
There will be a
transition year from 6 April 2023 to 5 April 2024 to allow any overlap relief
that you may be due to be used against your profits for that tax year. You may
be due overlap relief from when you started to trade, or if you subsequently
changed your accounting date.
How
your profits for the 2023 to 2024 tax year will be assessed
The changes
will mean the amount of tax that you owe in the 2023 to 2024 tax year may
change if you use an accounting date between 6 April and 30 March. You will be
assessed to tax on both:
●
The
12-month accounting period you have previously been using (the one that ends in
2023/24).
●
The
rest of the 2023 to 2024 tax year — minus any overlap relief that you may be
due — spread over 2022/23 and the next 4 tax years. You can spread these
‘excess’ profits over a shorter period if you wish.
Example
(assuming no overlap relief is available):
- Your accounting period is from 1 January to
31 December.
- Your assessable profit is £32,000 from 1
January 2023 to 31 December 2023.
- Your assessable profit is £18,000 from 1
January 2024 to 5 April 2024.
- The £18,000 profit is divided equally and
assessed over the next 5 tax years at £3,600 a year (£18,000 divided by
5).
- In the 2023 to 2024 tax year, your total
assessable profits will be £35,600 (£32,000 plus £3,600).
Any increased
profits from the 2023 to 2024 tax year will be treated in a special way to
minimise the impact on benefits and allowances.
How
overlap relief can be used
If you set an accounting
date between 6 April and 30 March when you started your business, or if you
subsequently changed your accounting date, you may have paid tax twice on some
of your profits and be entitled to ‘overlap relief’.
Usually,
businesses can only use overlap relief to get this tax back when they stop
trading or change their accounting date. However, HMRC will allow a business
with unused overlap relief to use it in the 6 April 2023 to 5 April 2024
transition year.
In the example
above, any overlap relief would be deducted from the £18,000 in step 3, also
thereby reducing the profits spread over the subsequent 4 tax years.
Please speak to
us about how much overlap relief you may be due in the future.
Changing
your accounting period
You do not have
to change your accounting period and can continue to use whatever accounting
date suits your business.
However, you
may want to consider changing your accounting date to 31 March or 5 April. If
you do, this will align your accounting period with the end of the tax year,
and you will not need to apportion profits on your tax return every year.
HMRC have
confirmed that the restrictions on changing your accounting date that are
currently in place will be lifted starting from the tax return for 2023 to
2024. If you change your accounting date in your tax return for a year before
2023 to 2024, you will not be able to spread any extra profits that arise in
the tax year you made the change in.
Please talk to
us because we will be able to clarify this change and discuss your options
directly.
“Off-payroll” working rules
continue to apply
With all of the
U-turns on tax policy in the last couple of months, businesses may be confused
about what changes are going ahead and which ones have been scrapped by the new
chancellor.
One of the
controversial announcements in the mini-budget on 23 September was the
abolition of the “off-payroll” rules that apply when workers are engaged via an
intermediary, typically their own personal service company (PSC). This was due
to take effect from 6 April 2023, restoring the tax rules to the pre-6 April
2017 position and would have reduced the compliance burden on end-user
organisations. However, this is one of the many measures that was scrapped by
Jeremy Hunt, so the current rules continue to apply.
This means that public sector bodies and large and medium-sized
organisations will still need to decide the employment status of every worker
who supplies their services through their own intermediary (PSC), even if they
are provided through an agency. Whether the organisation qualifies as large or
medium-sized is determined by the criteria set out in the Companies Act.
If the
off-payroll working rules apply to the relationship, they are required to
communicate the worker’s employment status determination to them and also the
fee-payer by using a Status Determination Statement (SDS). If the end-user organisation is also the
fee-payer, they will need to deduct and pay Income Tax and National Insurance
contributions to HMRC.
HMRC suggest
that end-users utilise the Check Employment Status for Tax service to help them decide if the off-payroll working
rules apply.
For detailed
guidance see: April 2021 changes to off-payroll working for clients -
GOV.UK (www.gov.uk)
Cost of living crisis – Support
for charities
The rising cost
of living crisis is impacting us all, and charities are no exception.
Fundraising
challenges, cost of business increases and volunteer and staff stability are
just some of the many issues charities may face.
Over the coming
weeks, the Charity Finance Group (CFG) will be sharing a selection of free
resources in their cost of living hub.
In the
meantime, take a look at some of their advice below:
●
Cost
of living overview: The cost of living: what can your charity do now?
●
Supporting
your people: How can charity employers support employees? and seven quick tips for employers
●
Reducing
costs: Understanding energy consumption and As prices rise, look to procurement!
●
Inflation,
investments and reserves: How to invest in a world of high inflation and Making your assets work for you
●
Reducing
risk, boosting resilience: Six steps to developing a business continuity plan and Managing in a crisis: a guide
The cost of
living hub will provide you with the ideas, strategies and tools you need to
help you, your teams and your communities work through the cost of living
crisis together.
For further
information, see: Charity Finance Group | Cost of living (cfg.org.uk)
Christmas workers can save time
with the HMRC app
New employees
can use the secure HMRC app to find out their personal tax information and pass
details on to their employer - saving them time.
As tens of
thousands of people start seasonal jobs over the next few weeks, they can use
the HM Revenue and Customs (HMRC) app to save them time finding details they
need to pass on to their employers.
In the 12
months up to October 2022, HMRC received almost 3 million calls from
people asking for information that is now readily available on the app, with
more than 340,000 using it to access employment and income information since
July 2022.
New functions
and capabilities mean that customers can access their income and employment
history, salary information, National Insurance number or tax code via the app,
whenever they need it. The information can be downloaded and printed – so there
is no need to call HMRC to ask for it to be sent in the post. This
means that using the app rather than calling the helpline makes the process
much quicker.
See: Check your tax with the official HMRC app - GOV.UK
(www.gov.uk)
Autumn Finance Bill 2022 published
The Autumn
Finance Bill 2022 was published last week, legislating for key tax changes
announced by the Chancellor in the Autumn Statement.
Measures
include:
●
The
Energy Profits Levy (EPL) is being extended to help fund cost of living support
and ensure oil and gas companies pay their fair share of tax. The rate of tax
applied to the profits of oil and gas companies is increasing from 25% to 35%
and the sunset clause changing to March 2028 rather than December 2025. This
measure also reduces the investment allowance from 80% to 29%, except for
investment expenditure on upstream decarbonisation, where it will remain at
80%. This broadly maintains the existing cash value of total tax relief for non-decarbonisation
investments.
●
The
threshold for the additional rate of income tax will be lowered from £150,000
to £125,140.
●
The
Dividend Allowance will be reduced from £2,000 to £1,000 from April 2023 and to
£500 from April 2024, and the Capital Gains Tax (CGT) annual exempt amount will
be reduced from £12,300 to £6,000 in April 2023, and £3,000 in April 2024.
●
Introducing
Vehicle Excise Duty (VED) for Electric Vehicles (EVs) from April 2025. This
aligns their taxation with that of petrol and diesel vehicles, reflecting their
permanent role in the net-zero economy of the future. Alongside this, the
government will provide certainty on favourable Company Car Tax rates for
electric cars until 2028.
●
Income
Tax thresholds will remain fixed at their current levels until 2028, an
extension of two years.
●
The
current thresholds for inheritance tax will also remain in place until 2028, an
extension of two years.
●
Research
and development (R&D) tax reliefs will be reformed to make sure taxpayers’
money is spent as effectively as possible, including by reducing error and
fraud. From 1 April 2023, the Research and Development Expenditure Credit
(RDEC) rate will be increased to 20% from 13%, the SME deduction rate will be
reduced to 86% from 130%, and the Small and Medium Enterprise credit rate
decreased to 10% from 14.5%.
The main Spring
Finance Bill 2023 will follow the Spring Budget in the usual way, for remaining
tax measures needed ahead of April 2023. Please talk to us about how the
measures affect you and we will be delighted to help.
See: Autumn Finance Bill 2022 published - GOV.UK (www.gov.uk)
Innovation Loans Future Economy
competition - Round 7
Innovate UK is
offering up to £25 million in loans to micro, small and medium-sized
enterprises (SMEs). Loans are for highly innovative late-stage research and
development (R&D) projects with the best potential for the future. There
should be a clear route to commercialisation and economic impact.
Your project
must lead to new products, processes or services that are significantly ahead
of others currently available or propose an innovative use of existing
products, processes or services. It can also involve a new or innovative
business model.
Innovate UK are
particularly interested in projects that focus on the future economy areas
included in the Innovate UK plan for action.
You must be
able to show that you:
●
Need
public funding.
●
Can
cover interest payments.
●
Will
be able to repay the loan on time.
You can apply
for a loan of between £100,000 and £2 million to fund your project's eligible
costs.
Global Incubator Programme:
Healthtech - USA
Innovate UK is
inviting innovative companies in the digital health and medical device sectors
to join their Global Incubator Programme (GIP) in the USA.
Applications
are open to innovative companies developing technologies across a broad range
of healthtech sectors including:
●
Clinical
decision support
●
Hospital
efficiency
●
Remote
patient monitoring
●
Digital
therapeutics
●
Surgical
devices
●
ICU
devices
●
Outpatient
medical devices
●
Artificial
intelligence in radiology
●
Wearables
and devices that enable patient monitoring
●
Diagnostic
platforms
●
Biomaterials
Prospective
applicants should have:
●
A
novel / innovative solution with some traction (such as efficacy data or
reference customers).
●
A
strong leadership team ready to dedicate time in Houston at the TMC Innovation
Factory to build relationships with advisors, investors, clinical champions and
decision-makers.
●
A
willingness to adapt and openness to incorporating the feedback and guidance
provided by experts in the Innovate UK network.
●
An
initial US value proposition and a hypothesis about how to reduce cost, drive
quality and increase revenue in the US healthcare provider market.
See: GIP_Healthtech_USA_Houston_FLYER copy (ukri.org)
Materials for Space virtual
roundtables
Innovate UK
Knowledge Transfer Network (KTN) and the Defence Science Technology Laboratory
(Dstl) are inviting you to attend three virtual roundtable discussions in
December.
The discussions
will focus on:
●
Sustainable
materials for space - 1 December 2022
●
Lightweight
materials and structures for space - 6 December 2022
●
Materials
to survive the natural space environment - 8 December 2022
This is your
chance to influence the focus areas of Dstl's Materials for Space Science and
Technology Research direction.
The findings
will feed into a technology roadmap to shape Dstl's future Materials for Space
strategy for advanced materials and processes relating to each of the
roundtable themes.
These events
are for:
●
Materials
innovators
●
Industrial
research and development users
●
Academic
researchers
●
Small
and medium-sized businesses
●
Original
equipment manufacturers
●
Space
primes
See: Innovate UK KTN & Dstl Technology Consultation –
Materials for Space - Innovate UK KTN (ktn-uk.org)
No comments:
Post a Comment