31st March 2023 – Hillmans Weekly Update

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

Are you buying or trading Crypto?
If you are thinking about buying cryptoassets (“crypto”) you need to know the basics and understand the risks before jumping in. And remember, if you decide to invest in crypto then you should be prepared to lose all the money you have invested.

The range and accessibility of crypto have grown rapidly in the last few years, accompanied by a surge in speculative trading – which means people trading just because they have heard it may rise in value, rather than seeing evidence to support a potential rise. A number of people invest simply for fun!

Crypto can be thought of as ‘digital representations of value or rights’ that are secured by encryption and typically use some type of ‘distributed ledger technology’ (DLT). DLT allows data to be recorded and stored across a network of participants. This keeps the data secure and means there is no one single central data storage point or one central authority that grants participants permission to access and participate in the network.

The way some cryptoassets are created and operated makes them very different from what some people would class as ‘tangible’ assets (meaning things that you can physically see and touch) like gold or cash. So called ‘unbacked’ crypto have no tangible assets that sit behind them. Their price can increase or decrease depending on whether other people are willing to buy them. If people stop buying, the price could fall dramatically.  

Whereas central banks – like the Bank of England – issue and oversee the money we use daily (fiat currencies), cryptoassets are developed and run by groups, individuals, or companies. Publicly available information about some of these groups/individuals can be vague, and as crypto activity is not regulated yet in the UK, there is no safety net if things go wrong. 

Currently, using crypto as a means of payment is very limited – they’re accepted by certain IT and travel companies, for example, but you probably won’t be doing your weekly shop or paying your 5-a-side football subs with crypto. The reason for this is that cryptoassets tend to be very volatile, so it’s hard to pinpoint their value from one day to the next, which makes them unreliable as a payment method. However crypto that are are linked to fiat currency can be less volatile and more stable and have the potential to provide faster, cheaper and more efficient payments in the future. Some investors take the view that crypto could possibly one day be accepted in everyday transactions but this is some way off. 

Investing in crypto comes with all kinds of risks, some of which you might not even have thought of. For example, converting crypto to fiat currency can prove challenging and holders must keep a record of their digital keys. Capital gains tax can apply to exchanges and other disposals of crypto, even if fiat currency has not been realised. In 2022, crypto lender, Celsius, filed for bankruptcy and owed its users $4.7 billion, meaning many investors could not get their money out and did not get anything back. 

Following the surge in people’s interest in crypto over the last few years, scammers have been increasingly active in targeting potential investors. Remember - if something sounds too good to be true then it probably is. Find out how to protect yourself and others from investment scams on the ScamSmart site.

If you are trading in crypto be aware HMRC expects you to keep detailed and accurate records of your purchases and sales. In 2021 they published their internal Cryptoassets Manual which outlines how they measure any profit or loss on trading and details the records required. You can see this here: Cryptoassets Manual - HMRC internal manual - GOV.UK (www.gov.uk). It has just been announced in Budget 2023 that new boxes will appear on the self-assessment tax return to prompt crypto disclosures next year.

Anyone trading in Crypto needs to be aware of their tax obligations and when transactions need to be included in their tax return. Please make sure you tell us about any transactions (even if fiat currency has not been received) so that we can assist and include the appropriate amounts in your self-assessment tax return, as required.

See: Crypto: The basics | FCA
 
Employer duties for the change in the tax year
As an employer running payroll, you need to report to HM Revenue and Customs (HMRC) on the previous tax year (which ends on 5 April 2023), give your employees a P60, and prepare for the new tax year, which starts on 6 April.

What you need to do                                               When
Send your final payroll report of the year            On or before your employees’ payday
Update employee payroll records                        From 6 April
Update payroll software                                         From 6 April
Give your employees a P60                                   By 31 May
Report employee expenses and benefits                        By 6 July

HMRC have published important information for employers on GOV.UK, which includes help with finishing the tax year 2022 to 2023.

Please talk to us about our payroll services; we offer a secure payroll service that not only saves you time and money but can eliminate the risk of getting something wrong.
 
New ‘Help to Grow’ website for businesses
The Department for Business and Trade (DBT) has unveiled a new centralised website, targeted at helping the UK’s 5.5 million businesses.

The new ‘Help to Grow’ site from DBT is aimed at upskilling both big and small businesses across the country by helping them to:

• learn new skills,
• reach more customers, and
• boost business profits.

See: Homepage - Help to Grow
 
Spring Budget 2023 – GAD’s analysis
Experts at the Government Actuary’s Department (GAD) have focused on pensions taxation, pension fund investment and retirement planning in their analysis of the Spring Budget.

The Chancellor set out plans to deliver on 3 of the Prime Minister’s 5 key priorities: to halve inflation, grow the economy and get debt falling.

Pensions tax reform
GAD’s latest Technical Bulletin examines the government’s announcements on pensions tax reform. The Spring Budget aimed to increase the labour supply and support people to move into employment. There is a particular emphasis on encouraging workers aged over 50 to extend their working lives.

Reforms were announced to the total tax-relieved pension savings an individual can make each year and over their lifetime. These affect the lifetime allowance (LTA), annual allowance (AA), and money purchase annual allowance (MPAA), as well as other tax limits.

Pension fund investment
GAD’s Technical Bulletin also looks at the government’s plans to support high growth sectors of the economy. This will include encouraging investment and smarter regulation.

The Spring Budget set out some initial measures, while the government will work closely with industry and regulators to bring forward a package of measures by the autumn.

Retirement planning
There will be more focus on retirement planning. People in their 40s, 50s and 60s will be encouraged to make more active planning in key areas of work, wellbeing, and money. In the Spring Budget 2023, the government announced it will work with employers and pension providers to encourage people to undertake midlife MOTs.

See: Spring Budget 2023: a GAD technical bulletin - GOV.UK (www.gov.uk)
 
Religious festivals, holy days and observances
In the UK there is a wide range of different religions that both employers and employees may need to have some understanding of and how they may occasionally affect the workplace.

One of the holiest months of the Islamic calendar, Ramadan, which began on Wednesday 22 March and will end on the evening of Friday 21 April. This means Eid al-Fitr 2023 will be celebrated on Friday 21 April. As the commencement of Ramadan is confirmed by moon sighting, these dates may vary by one day.

Ramadan is the ninth month of the Islamic calendar, observed by Muslims worldwide as a month of fasting, prayer, reflection, and community.

Many workplaces have employees from different religious and non-religious backgrounds.

Other examples include:

• Diwali (Hindu),
• Guru Nanak (Sikh),
• Lent (Christian),
• Pesach/Passover (Jewish), and
• Vesak (Buddhist).

Encouraging greater awareness and understanding of these backgrounds can be rewarding, particularly in terms of team building.

It can also help to reduce the chance of misunderstanding resulting in complaints or disciplinary action.

See: Acas guide on religion or belief discrimination | Acas

See: Religion or belief: a guide to the law | Equality and Human Rights Commission (equalityhumanrights.com)
 
Fast Growth 50 2023
Fast growth firms - which are normally defined as achieving 20% growth per annum - make up less than 1% of the UK business population but represent 50% of the total SME turnover output.

The UK Fast Growth 50 project will undertake a data-driven approach to identifying the fastest growing firms in each nation and region of the UK. It will research, develop, and publish lists that identify the 50 fastest growing companies in eight UK nations and regions, namely the East of England, London, the Midlands, North of England, Northern Ireland, Scotland, South of England, and Wales.

See: The UK Fast Growth 50 | Ideas Forums Ltd (freshbusinessthinking.com)

24th March 2023 – Hillmans Weekly Update

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

UK Budget Summary
Last week, Jeremy Hunt, Chancellor of the Exchequer, revealed his first Spring Budget. There was a focus on managing inflation and government debt, encouraging those who have left their jobs to return to the workforce, and increasing business investment.

Here are some of the key measures announced in the Spring Budget that will affect businesses and individuals across the UK:

• The Main rate of corporation tax, paid by businesses on taxable profits over £250,000 has been confirmed to increase from 19% to 25%. Companies with profits below £50,000 will pay at 19% and companies with profits between £50,000 and £250,000 will pay at an effective marginal rate that is between 19% and 25% from 1 April 2023.
• There are changes to Research and Development Expenditure Credit (RDEC) available and, for non-SME companies, RDEC will be increased from 13% to 20%. For many SME companies, the R&D tax relief enhancement will be reduced from 230% to 186%.
• The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £1million. The super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on 31 March 2023.
• From 1 April, companies can fully deduct investment in new qualifying plant and machinery to lower their taxable profits. In addition, a 50% first year allowance will be available for integral features.
• From 6 April 2023, the Company Share Option Plan (CSOP) employee share options limit will increase from £30,000 to £60,000. Additionally, restrictions on the types of shares eligible for CSOP options will be lifted.
• The Government will establish 12 ‘Investment Zones’ across the UK, including a promise to have at least one each in Scotland, Northern Ireland, and Wales.
• The Government is increasing the availability of the Seed Enterprise Investment Scheme for start-up companies. The amount of investment that companies will be able to raise under the scheme will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within 3 years (increased from 2 years) of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000. The changes take effect from 6th April 2023.
• Fuel duty freeze – A freeze on fuel duty and the 5p reduction will remain in place for another year.
• Alcohol taxes are to rise in line with inflation from August, with new reliefs for beer, cider and wine sold in pubs.
• Pension tax reform – The pensions annual tax-free allowance will increase from £40,000 to £60,000 and the Lifetime Allowance will be abolished to encourage highly skilled individuals to continue working for longer.
• The Energy Price Guarantee which caps how much suppliers can charge per unit of energy used will stay in place until June 2023.
• 30 hours of free childcare to be provided for one and two-year-olds to help parents in England return to work, this will eventually cover all children from the age of nine months. This will be rolled out in stages from April 2024.

Combined with the many mini-budgets and statements made towards the end of 2022, this Budget brings change; good, bad, and often to be determined with time. What is clear is that 2023 remains a year of opportunity and we are here to work alongside you and help you grow!

For further details please see our more detailed Budget Summary released last week and please talk to us if you need guidance on any of the changes announced last week.
 
New UK Version of GDPR
New data laws to cut down paperwork for businesses and reduce cookie pops-up have been introduced by the UK government. 

The Data Protection and Digital Information Bill was first introduced last Summer and paused in September 2022 so ministers could engage in a co-design process with business leaders and data experts, ensuring that the new regime builds on the UK’s high standards for data protection and privacy and seeks to ensure data adequacy while moving away from the ‘one-size-fits-all’ approach of the European Union’s GDPR.

Data is fundamental to fuelling economic growth in all areas of society, from unlocking medical breakthroughs to helping people travel, manage their finances, and shop online. It is vital to the development and use of innovative technologies such as artificial intelligence.

Data-driven trade generated 85 per cent of the UK’s total service exports and contributed an estimated £259 billion to the economy in 2021.

The bill will:

• Introduce a simple, clear and business-friendly framework that will not be difficult or costly to implement – taking the best elements of GDPR and providing businesses with more flexibility about how they comply with the new data laws;
• Ensure the new regime maintains data adequacy with the EU, and wider international confidence in the UK’s comprehensive data protection standards;
• Reduce the amount of paperwork organisations need to complete to demonstrate compliance;
• Support international trade without creating extra costs for businesses if they are already compliant with current data regulation;
• Provide organisations with greater confidence about when they can process personal data without consent; and
• Increase public and business confidence in AI technologies by clarifying the circumstances in which robust safeguards apply to automated decision-making.

See: British Businesses to Save Billions Under New UK Version of GDPR - GOV.UK (www.gov.uk)
 
The recent Global bank stocks slump has implications for all businesses
Following the collapse of Silicon Valley and Signature banks, bank shares in Asia and Europe have slumped, despite the reassurances from Joe Biden.
The volatility has led to speculation that the Federal Reserve will pause plans to raise interest rates, designed to halt inflation.

We should remember that post 2008 there was a focus on reforming banks considered “too big to fail” and the issues right now mainly focus on medium to smaller sized banks. There is a clear message about the failure of Silicon Valley and Signature banks in that they were mainly concentrated in one sector, and they came under pressure as the rise in interest rates affected asset values.

Understanding who your most valuable customers are helps focus your efforts to increase sales, but diversification is also important. Even if you have many customers, it's risky if they are too similar and could be affected by a similar change in business or the market. For example, if your three largest customers are based in the US, an unfavourable change in the exchange rate could see them all drastically reduce their orders.

If you run a business, then the message is: “Diversify your customer base”. Here are some thoughts:

• increase your market share by widening your customer base in your existing markets,
• use information to understand your competitors and take advantage of any gaps in the market,
• grow through product and service development,
• grow through strategic partnering with other businesses, and
• grow through international trade.

The key question is: ”Do you have a Marketing Plan?”
Successful businesses all have two things in common: a thorough understanding of customer needs and a total dedication to their customers.
The logic is that you gather information about your business and get an insight into the way customers and prospective customers think and make ‘buy’ decisions. So, take a day out to work on your marketing plan and set some targets.

By the end, you should be in a position to:

• Have gathered information about existing and potential customers needs and wants;
• Have facilitated a discussion about the marketing actions the company should take;
• Know the unique selling points that your business has and how to take advantage of these;
• Understand how to differentiate the business from competitors; and
• Produce a marketing plan.

A marketing plan sets out how you are going to put your business strategy into practice. The marketing plan ensures that everyone in the business knows what you are trying to do and what they need to do to make it happen.
Please talk to us – we can provide you with a marketing template to get your thoughts into a plan so you can take action and grow your business!  
 
The King's Awards for Enterprise
Businesses will soon be invited to apply for the UK's most prestigious business award when applications open in May.

The Queen’s Award for Enterprise has been renamed following the Accession of King Charles III. The Awards will become The King’s Award for Enterprise. The King's Awards for Enterprise recognise and encourage the outstanding achievements of UK businesses in the fields of:

• international trade,
• innovation,
• sustainable development, and
• promoting opportunity through social mobility.

Businesses of all sizes and from all sectors can apply. The awards are free to enter, and you can apply for more than one award. To be eligible, your organisation must:

• be based in the UK (including the Channel Islands and the Isle of Man);
• have a good compliance record with HM Revenue and Customs (HMRC) - for example, showing you pay the right amount of tax on time;
• be a self-contained enterprise that markets its own products or services and is under its own management;
• have at least two full-time UK employees or part-time equivalents; and
• demonstrate strong corporate social responsibility.

Your organisation can be a business or a non-profit organisation. Each of the award categories has additional entry criteria.
The awards are valid for five years. Previous winners have reported benefiting from worldwide recognition, increased commercial value, excellent marketing opportunities and press coverage and a boost to staff morale.
See: The King's Awards for Enterprise: About the awards - GOV.UK (www.gov.uk)

16th March 2023: Hillmans Weekly Update - Budget Special

Welcome to our round-up of the latest business and tax news for our clients. On the 15th March 2023, Chancellor Jeremy Hunt presented his first Budget to Parliament and set out a plan to reduce inflation, grow the economy and get government debt falling all whilst avoiding a recession and tackling labour shortages. 

Below we set out some of the main points.

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

COST OF LIVING SUPPORT       

Energy Costs
The Energy Price Guarantee (EPG) brings a typical household energy bill in Great Britain down to around £2,500 per year. It has now been announced that the £2,500 EPG will be extended by 3 months to 30th June 2023, before increasing to £3,000 until the end of the EPG period on 31 March 2024. This extra 3 months at £2,500 will be worth £160 for a typical household.

In Northern Ireland, a similar scheme operates, reducing typical household energy bills to around £2,109 per year. This has also been extended at the same rate until 30th June 2023.

A new scheme for businesses, charities and the public sector has been confirmed. The Business Energy Bills Discount Scheme will run until 31 March 2024, giving non-domestic customers discounts on their gas and electricity bills.

Childcare
Additional support is being provided towards childcare costs in what the government describe as a ‘childcare revolution’. This includes 30 hours of free childcare for every child over the age of 9 months, with support being phased in until every eligible working parent of under 5s gets this support by September 2025.

For Universal Credit claimants, the government will also pay childcare costs in advance rather than arrears, when parents move into work or increase their hours. The maximum they can claim will also be boosted to £951 for one child and £1,630 for two children, an increase of around 50%.

Benefits and State Pension
As confirmed at Autumn Statement 2022, the government will also increase benefits, including the State Pension, paid to recipients in the tax year to 5 April 2024 by 10.1%.

This increase in the State Pension means that most pensioners will receive £10,600 in 2023/24, where they have 35 qualifying years. Individuals are being urged to check their contribution record on their Government Gateway account and consider making Class 3 voluntary National Insurance (NI) contributions in respect of missing qualifying years. Normally it is only possible to make voluntary NI contributions for the past 6 tax years, but until 31 July 2023, it is possible to go back as far as 6 April 2006 and pay additional contributions at the 2022/23 Class 3 rate of £15.85 per week.
In-year Class 3 contributions for 2023/24 will increase to £17.45 per week.

INCOME TAX

Increasing liabilities
The personal allowance and basic rate band threshold are now frozen in place until 5 April 2028. As earnings increase, individuals will move into higher tax bands. This is often referred to as ‘fiscal drag’ because it will raise more tax without the government increasing income tax rates.

The personal allowance continues to be partially and then fully withdrawn for higher earners, with £1 of personal allowance lost for every £2 of adjusted net income over £100,000.
 
Summary table of key income tax rates and allowances for the tax year to 5 April 2024 (2023/24)

Other allowances
Savings income continues to benefit from a personal savings allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. Dividend income attracts a £1,000 dividend allowance in 2023/24, down from the £2,000 allowance seen in previous years. These allowances are in addition to the personal allowance and attract a 0% rate of income tax.

Scotland
Individuals living in Scotland and classed as Scottish taxpayers have a slightly different banding system for ‘other income’ (non-savings, non-dividend) as follows:

The application of income tax to savings and dividends income is the same as for the rest of the UK.

Pension tax relief
There was good news in the Budget for those saving in a personal pension. The current pension lifetime allowance (LTA) charge is being abolished from 6 April 2023. The LTA has caused some high earners, particularly doctors, to retire early as tax charges apply on crystallisation of pension funds if the LTA (currently £1,073,100) is exceeded. 

Individuals may be able to receive 25% of their pension savings as a tax-free lump sum when they become entitled to their pension benefits. This is currently capped at 25% of the LTA and going forwards, for most individuals, will remain capped at £268,275.

Another pension limit increased by the Chancellor in the Budget was the pension Annual Allowance (AA) which increases from £40,000 to £60,000 from 6 April 2023. The AA applies to the combined pension input by the individual and, in the case of employees, their employer. Pension contributions in excess of the AA result in a tax charge on the individual, although they may take advantage of unused AA amounts from the 3 previous tax years.

For those with high incomes, the AA is tapered. From 6 April 2023, where a taxpayer’s adjusted income exceeds £260,000 (increasing from £240,000), the AA is tapered by £1 for every £2 in excess of £260,000, down to a minimum of £10,000 (increasing from £4,000).

The Money Purchase Annual Allowance (MPAA) replaces the AA when an individual starts to flexibly access a defined contribution pension scheme. The MPAA will increase from £4,000 to £10,000 on 6 April 2023.

Note that an individual’s pension contributions can be very tax efficient depending on their level of income.

The taxation rules for pensions are complex as there have been numerous changes in recent years so please talk to us about your pension contribution strategy.

Tax Efficient Savings
There were no changes to the annual limits for Individual Savings Accounts (ISAs), Child Trust Funds or the Junior ISA. These limits remain at £20,000, £9,000 and £9,000 respectively.

CAPITAL GAINS TAX

In the Autumn Statement, the Chancellor announced that the £12,300 annual tax-free capital gains tax exemption (or allowance) will be reduced to just £6,000 in 2023/24 and only £3,000 in 2024/25.

This change will mean that those disposing of capital assets will pay more tax, where the new lower allowance is exceeded.
Couples who are in the process of separating, or who have commenced divorce proceedings, need to be aware of new rules taking effect from 6 April 2023 concerning the transfer of capital assets between them as a result of their separation. 

If you are planning any capital disposals, please contact us to discuss the best strategy for the disposal.

INHERITANCE TAX

In the 2023 Autumn Statement, the inheritance tax nil rate band was frozen at £325,000 until April 2028. The residence nil rate band will also remain at £175,000 and the residence nil rate band taper will continue to start at £2 million.

If you anticipate your estate giving rise to inheritance tax in the future, please contact us to discuss measures that could potentially be put in place, alongside asset distribution within your family.

VAT

The VAT registration and deregistration thresholds continue to be frozen at £85,000 and £83,000 respectively, instead of increasing each year in line with inflation. This will remain the case until March 2026.

Since 1 January 2023, a new penalty regime has been in operation for late VAT return submission and late payment of VAT. The new system is designed to target more persistent offenders, with penalties escalating quickly where defaults reoccur.

BUSINESS TAXES

National Insurance Contributions (NIC) for the self-employed in 2023/24
Self-employed individuals are required to pay Class 2 and Class 4 NICs if their profits exceed £12,570. These NICs are usually collected with the individual’s income tax self-assessment payments.

For 2023/24, Class 2 NICs are calculated at £3.45 per week and Class 4 NICs are calculated at 9% on profits between £12,570 and £50,750, and at 2% on profits over £50,750.
 
Making Tax Digital (MTD) for Income Tax
Under MTD for Income Tax, businesses will keep digital records and send a quarterly summary of their business income and expenses to HMRC using MTD-compatible software. These requirements will not be phased in until April 2026, starting with sole traders and property landlords with gross income over £50,000. Other individuals subject to Income Tax will follow at a later stage.

Tax Relief for expenditure on plant and machinery
The Annual Investment Allowance (AIA), giving 100% tax relief to unincorporated businesses and companies investing in qualifying plant and machinery, is now permanently set at £1million.

The super-deduction, which gives enhanced 130% relief for new qualifying plant and machinery acquired by companies, will end on 31 March 2023.

As a replacement for the super-deduction, ‘full expensing’ (effectively 100% tax relief, called a ‘First Year Allowance’ (FYA)) will be available to companies incurring expenditure on new qualifying plant and machinery between 1 April 2023 and 31 March 2026. The qualifying criteria is quite broad although there are exclusions, including cars and features integral to a building (for example, heating systems). With regard to ‘integral features’, a smaller 50% FYA will be available. Subsequent disposals of assets on which one of these FYAs has been claimed will trigger a clawback of tax relief at a rate of 100% or 50% of the disposal proceeds, depending on the rate of the original relief. These new FYAs will mainly be of interest to companies that have already fully utilised their £1million AIA.

The separate 100% FYA for electric vehicle charge points remains available for unincorporated businesses and companies until Spring 2025.

Unincorporated businesses and their accounting year-ends
Unincorporated businesses that prepare annual accounts to a date other than 31 March or 5 April will soon need to adopt a new process for how the profits or losses arising in those accounts are reported to HMRC.

At present, ‘basis period’ rules apply that broadly allow annual accounts that end in a tax year to act as the basis of profits or losses arising in that tax year.

This new system starts with transitional rules in the tax year ending on 5 April 2024 (2023/24). Going forwards, actual profits or losses arising in a tax year must be reported to HMRC, but this does not necessarily require a change in accounting year-end.

Unfortunately, this will make it harder for some self-employed individuals to predict their income tax liabilities, but we will be on hand to help you.

CORPORATE TAXES

New rates from 1 April 2023
From 1 April 2023, the rate of Corporation Tax will increase to 25% if a company’s profits exceed £250,000 a year. The current 19% rate will however continue to apply where profits are no more than £50,000 a year.

Where a company’s profits fall between £50,000 and £250,000 a year, the profits are taxed at the higher 25% rate, but a ‘marginal relief’ is given to reduce the liability, with the effective rate being closer to 19% for those with profits just over £50,000.

Companies in the same corporate group (or otherwise connected by association) must share the £50,000 and £250,000 thresholds between them, making the 25% rate more likely to apply.

Research & Development (R&D) Reliefs
From 1 April 2023 a raft of changes is coming to the R&D tax relief regime and claimant companies should consider obtaining updated advice if they’ve not already done so. The key changes are:

• The Research and Development Expenditure Credit (RDEC) available to non-SME companies will be increased from 13% to 20%.
• For SME companies, R&D tax relief rates will be reduced from 230% to 186%.
• For loss-making SME companies, the current payable credit of 14.5% will only be available for companies whose R&D expenditure constitutes at least 40% of their total expenditure. For R&D claimants that don’t meet the new 40% test, the payable credit will be reduced from 14.5% to 10% of the eligible loss.
• Qualifying R&D expenditure will be expanded to include data licences and cloud computing services.
• New claimants (those who have not made a claim in the previous 3 years) will be required to inform HMRC of their intention to make a R&D claim within 6 months of the end of the accounting period to which the claim relates.

From 1 August 2023, additional information requirements will need to be fulfilled when making a R&D claim.

Creative industries tax reliefs
The government continues to support the creative industries by reforming and enhancing film, TV and video games tax reliefs. The government will also extend the temporary higher rates of theatre, orchestra, and museums and galleries tax reliefs for 2 further years until April 2025.

EMPLOYMENT TAXES

National Insurance Contributions (NICs)
Like the main income tax bandings, employer and employee NIC thresholds are now also frozen until 5 April 2028. This broadly means that employers’ NIC will continue to apply at 13.8% to earnings in excess of £9,100 a year (£175 per week) and employees will continue to pay 12% on earnings between £12,570 and £50,270 and 2% thereafter.

Company Cars and Other Benefits
Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. Employers also pay Class 1A NIC at 13.8% on the value of benefits.

The set percentages used to calculate company car benefits are fixed until 5 April 2025 before slight increases apply to most car types, including electronic and ultra-low emission, from 6 April 2025.

More imminently, the figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) will increase in line with the Consumer Price Index (CPI) from 6 April 2023. These will become:

• Van benefit                         £3,960
• Van fuel benefit                  £757
• Car fuel benefit multiplier   £27,800

Share Options
From 6 April 2023, the Company Share Option Plan (CSOP) employee share options limit will increase from £30,000 to £60,000. Additionally, restrictions on the types of shares eligible for CSOP options will be lifted.

Simplifications will also be made to the process to grant Enterprise Management Incentive (EMI) options. From 6 April 2023, there will no longer be a requirement for the company to set out any restrictions to the shares being acquired in the option agreement and the employee will no longer have to sign a working time declaration.
 
National Minimum Wage
The hourly rates applicable from 1 April 2023 are:

INVESTMENT ZONES

The Government will establish 12 ‘Investment Zones’ across the UK, including a promise to have at least one each in Scotland, Northern Ireland and Wales.

Each successful zone will have access to £80m funding over 5 years and benefit from a package of tax reliefs. These include relief from Stamp Duty Land Tax (SDLT), enhanced capital allowances for plant and machinery, enhanced structures and buildings allowances and relief from secondary Class 1 National Insurance Contributions (NICs) for qualifying employers on the earnings of eligible employees up to £25,000 per annum.

VENTURE CAPITAL SCHEMES

The Government is increasing the generosity and availability of the Seed Enterprise Investment Scheme for start-up companies. The amount of investment that companies will be able to raise under the scheme will increase from £150,000 to £250,000. The gross asset limit will be increased from £200,000 to £350,000 and the investment must be made within 3 years (increased from 2 years) of trade commencing. In a bid to support these changes, the annual investor limit will be doubled to £200,000. The changes take effect from 6^th April 2023.

IN CONCLUSION

Combined with the many mini-budgets and statements made towards the end of 2022, this Budget brings change; good, bad, and often to be determined with time. What is clear is that 2023 remains a year of opportunity and we are here to work alongside you and help you grow.

10th March 2023 – Hillmans Weekly Update

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

The Windsor Framework - More than a regional agreement
Last week we saw the Windsor Framework, agreed by the Prime Minister and European Commission President, replacing the old Northern Ireland Protocol, providing a new legal and UK constitutional framework.

The UK government states that “It delivers free-flowing trade in goods between Great Britain and Northern Ireland by removing any sense of the border in the Irish Sea for goods staying within the UK. These goods will travel as normal through a new green lane without red tape or unnecessary checks, with the only checks remaining designed to prevent smuggling or crime.”

The devil is always in the detail and what we can see is that the framework should deliver the free-flowing movement of goods between Northern Ireland and Great Britain:

A new green lane (the UK internal market scheme) means traders moving goods destined for Northern Ireland will be freed of unnecessary paperwork, checks and duties, using only ordinary commercial information rather than burdensome customs bureaucracy or complex certification requirements for agrifood. All goods destined for the EU will use the red lane. 

• All requirements have been removed for trade from Northern Ireland to Great Britain on a permanent basis, including the requirement for export declarations.
• The green lane will be expanded to include food retailers such as supermarkets and hospitality businesses, significantly reducing Sanitary and Phytosanitary (SPS) checks and paperwork and ensuring choice for consumers on supermarket shelves. A supermarket lorry (who previously had to provide many certificates) can now make a straightforward commitment that goods will stay in Northern Ireland. Retailers will mark goods as “not for EU”, with a phased rollout of this requirement to give them time to adjust.
• Chilled meats like sausages, which were banned under the old Protocol, can move freely into Northern Ireland like other retail food products.
• Parcels from people or businesses in Great Britain can now be sent to friends, family, and consumers in Northern Ireland as they are today, without customs declarations, processes or extra costs under the old Protocol. Parcels sent business to business will travel via the green lane.

Under the current protocol, some EU law applies in Northern Ireland, but politicians have no way to influence the rules, the new agreement reduces the proportion of EU rules applied in Northern Ireland to less than 3%. The European Court of Justice continues to be the final arbiter in disputes over these remaining rules. The framework introduces a "Stormont brake" which allows the Northern Ireland Assembly to raise an objection to a new goods rule. The process would be triggered if 30 Member of the Legislative Assembly (MLAs) from two or more parties sign a petition. The brake cannot be used for "trivial reasons" but reserved for "significantly different" rules.

UK VAT and excise rules will apply to Northern Ireland for alcoholic drinks for immediate consumption and immovable goods such as heat pumps; EU VAT rules will still apply for other items.

The UK government has confirmed it is scrapping the Northern Ireland Protocol Bill. Legal opinion published by the government says there is now "no legal justification" for going ahead with it after the new agreement.

In the wider scheme, this framework, if approved by all parties, can be considered good news for Northern Ireland and the UK as a whole.

In a White House statement, US President Joe Biden has hailed the UK and EU for reaching a deal on the protocol with the framework and has stated “I am confident the people and businesses of Northern Ireland will be able to take full advantage of the economic opportunities created by this stability and certainty, and the United States stands ready to support the region’s vast economic potential.”

Northern Ireland is now the only part of the UK which is essentially back to its “Pre-Brexit” trading status. The region could become a hub of new investment and a prime location to set up or grow a business with market access to both the EU and UK.  
Ursula von der Leyen, European Commission President, described the framework as “good news for scientists and researchers in the EU and in the UK”, leading many to speculate the UK’s re-entry into the Horizon scheme, the continent-wide science research programme.

If the UK and the EU are now in a “closer” relationship then many in the financial services sector will be hoping for “Equivalence” with the EU on rules so that the EU will grant domestic market access to UK financial services companies, who were excluded under the original Brexit deal. The UK has already granted equivalence in 22 areas to European Economic Area (EEA) companies.  

See: Windsor Framework unveiled to fix problems of the Northern Ireland Protocol - GOV.UK (www.gov.uk)
 
Your long-term financial stability
This may seem a strange time to be thinking about financial stability, but if we want to provide those we love with security then we need think long term.

The pandemic and the current increase in the costs of living show all too clearly that good health, and even life itself cannot be taken for granted.

When both partners’ income and assets are vital for the household’s financial security, it will inevitably mean financial difficulty for the survivor should either of them die. 

With the right financial planning you can minimise the problems for your loved ones; here are a few reminders of the essentials:

1. Write your will

Without a will, your assets will be distributed according to intestacy rules. This would mean if you have surviving children, grandchildren, or great-grandchildren, your partner will inherit your personal property and only the first £270,000 and then half of the remainder of your estate.  This could mean them losing their home.

Writing your will should therefore be a priority, especially if you’re not married or in a civil partnership.  Common-law partners have no automatic legal right to inherit anything at all. 

Getting help on the financial side of will writing could mean avoiding tax problems for all concerned.

2. Look at your pension

Your pension may be one of the largest assets you own. Many people are surprised that it is not covered by their will. 
Instead, you will need to make your wishes clear to your pension provider to let your partner access the money within your pension. 

You should also think about how you will take your pension. You could take an annuity; in return for your pension pot, an annuity can provide a guaranteed income for the rest of your life. A joint annuity is designed for couples and will provide an income so long as either partner lives – but the income provided will be lower.

A drawdown arrangement might offer a more rewarding alternative and provide greater flexibility to allow a surviving partner to make the financial arrangements they need.

It is a good idea to seek independent advice to ensure your pension can go on providing for your loved ones.

3. Take out a life insurance policy

Life cover is probably the most important step of all. A life insurance policy is designed to pay out a lump sum on death of the life or lives assured, providing your partner with the means to pay off things like the mortgage and help replace your income.

There are many kinds of life insurance and, in an attempt to keep the premiums to a minimum with a maximum level of cover, (subject to health and meeting underwriting conditions) most of us seem to choose term insurance, which ceases when we reach an agreed age. The facts show we are living longer, and this type of cover may run out. A whole of life policy will cost more but will potentially allow you to provide for your loved ones whatever age you reach.

You also need to ensure that you have the right level of cover.  Inflation may mean that a lump sum that was adequate 10 years ago is far from sufficient now.

You might need to include some extra benefits to your life policy, for example Critical illness cover and Long-Term Income Protection cover. In addition, you may need to consider a further type of cover such as Accident, Sickness and Unemployment. All these types of protection have a part in providing real financial security.

4. Get expert help

Security for your loved ones is simply too important to leave to chance. Expert help with the planning is vital to ensure they have the financial future you want them to have, whatever happens to you. If you do not have an independent adviser, then ask us for a recommendation or see: Finding an adviser | FCA
 
New VAT penalties and interest payments
The new penalties will impact businesses who submit their VAT returns or pay their VAT late. The first monthly returns and payments affected by the penalties are due by 7 March 2023.

The late payment penalties and points-based late submission penalties were introduced from 1 January 2023, replacing the VAT default surcharge, and apply to accounting periods which start on or after that date.

The penalties for late VAT returns also apply to businesses that submit nil returns and repayment returns. Changes have also been made to how interest is calculated.

The changes to VAT penalties and interest payments are:

Late submission penalties
These work on a points-based system. For each VAT return submitted late, HMRC customers will receive a penalty point until they reach the penalty point threshold – at which stage they will receive a £200 penalty. A further £200 penalty will also apply for each subsequent late submission while at the threshold, which varies to take account of monthly, quarterly and annual accounting periods.

Late payment penalties
If a VAT payment is more than 15 days overdue, businesses will pay a first late payment penalty. If the VAT payment is more than 30 days overdue, the first late payment penalty increases and a second late payment penalty will also apply. To help customers get used to the changes, HMRC will not charge a first late payment penalty on VAT payments due on or before 31 December 2023, if businesses either pay in full or a payment plan is agreed within 30 days of the payment due date.

Payment plans
HMRC will help businesses that cannot pay their VAT bill in full. HMRC customers may be able to set up a payment plan to pay their bill in instalments. After 31 December 2023, if a HMRC customer proposes a payment plan within 15 days of payment being due and HMRC agrees it, they would not be charged a late payment penalty, provided that they keep to the conditions of the payment plan. Late payment penalties can apply where proposals are made after the first 15 days, but the agreement of the payment plan can prevent them from increasing.

Interest calculations
HMRC has introduced both late payment and repayment interest, which will replace previous VAT interest rules. This brings the new regime in line with other taxes.

See: VAT penalties and interest - GOV.UK (www.gov.uk)
 
Getting ready for the 2025 PSTN switch-off
From 2025, ISDN (integrated services digital network) and PSTN (public switched telephone network) telephone lines will be permanently turned off. This applies to business and home customers.

You need to start planning your move today because there could be a lot to do. 

Remember, it’s not just about your phone services, you need to review everything you’re connecting to your phone lines, like alarms, EPOS machines, door entry systems, CCTV, and faxes. 

Many businesses have already embraced an all-digital model, moving their communications to the cloud, making calls over the internet and embracing video conferencing.

See: Getting ready for the 2025 PSTN switch-off (bt.com)
 
Genuine HMRC contact and recognising phishing emails
Find out about methods fraudsters use to try and get your personal information by viewing examples of scams identified by HMRC. 

HMRC will sometimes contact customers by telephone, email, letter, and also sometimes use research companies to contact customers. If you’re not sure the contact is genuine then take a look the updated guidance on examples of HMRC related phishing emails, suspicious phone calls, and texts.

See: Examples of HMRC related phishing emails, suspicious phone calls and texts - GOV.UK (www.gov.uk)
 
£1 million fund for fresh ideas to improve health at work
The UK Government is launching a competition for businesses to bid for a share of £1 million to stimulate innovation in Occupational Health (OH).

Successful bidders will receive up to £100,000 to back their projects from 19 May 2023, with the UK Government looking for innovative solutions to drive better access for SMEs and the self-employed to OH services. Applicants are being encouraged to demonstrate how they would deliver improvements to OH, harnessing technology such as artificial intelligence or data collection, to deliver better health outcomes for employees of SMEs.

Better health provision for staff helps employers look after their workforce, meaning more are likely to stay in work. While larger employers often have better access to OH services, for smaller businesses and the self-employed the lack of support for people with health needs can potentially lead to more people becoming economically inactive.

Applications can be from those who work alone or with others from business, research organisations, research and technology organisations or the third sector.

The competition closes on 15 March 2023.

See: Competition overview - SBRI: Increasing access to and capacity in Occupational Health: Phase 1 - Innovation Funding Service (apply-for-innovation-funding.service.gov.uk)
 
Know where your old stamps are?
Royal Mail have added barcodes to their regular stamps. Regular stamps without a barcode will no longer be valid after 31 July 2023. This follows the introduction of a 6 month grace period from the initial 31 January deadline. You can either use up your non-barcoded stamps before this new deadline or swap them for the new barcoded ones. 
 
The stamps that have changed are the stamps that will be very familiar to you. They feature the profile of Her Late Majesty The Queen on a plain coloured background.

See: Know where your old stamps are? | Royal Mail Group Ltd

3rd March 2023 – Hillmans Weekly Update

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

Is the UK going to swerve a recession?
Better than anticipated purchasing managers’ index (PMI) data for February indicate encouraging resilience of the economy in the face of headwinds which include rising interest rates, the ongoing cost of living crisis, labour shortages and strikes.

While many companies continue to report tough operating conditions, especially in the manufacturing sector, the broader business mood has been lifted by signs of inflation peaking, supply chains improving, and recession risks easing. The stress created by last autumn's mini budget is also continuing to work its way out of the financial system.

However, while the data suggest that near-term recession odds have fallen considerably, elevated inflation pressures clearly remain a concern, especially in the service sector. As such, the resilience of the economy and the stickiness of the survey's inflation gauges add to the likelihood of the Bank of England tightening policy further, which may dampen future growth expectations and suggests that the possibility of recession later in the year should not be ruled out.

UK business activity grew back into life in February, according to the flash PMI survey data compiled by S&P Global and sponsored by The Chartered Institute of Procurement & Supply (CIPS), displaying improved growth after six months of continual decline.

The latest reading is consistent with GDP growing at a quarterly rate of 0.3% after a 0.3% rate of contraction had been indicated for January. That leaves the signal for the first two months of the year flat on average, though momentum is clearly improving to suggest that the economy could return to growth in the first quarter as a whole after having stalled in the fourth quarter of last year and having contracted in the third quarter.

See: UK recession risks ebb as flash UK PMI signals resurgent economic growth in February | S&P Global (spglobal.com)

Year End Tax Planning
It’s not too late to undertake some end of year tax planning. If you have available funds, an obvious tax planning point would be to maximise your £20,000 ISA allowances for the 2022/23 tax year.

You might also want to consider increasing your pension savings before 5 April 2023, if you have available ‘pension annual allowance’ to obtain tax relief for any additional contributions. The pension annual allowance includes any unused elements from the last three tax years as well.

Under the current rules, the government adds to your pension contributions at the 20% basic rate. For instance, if you save £4,000 in a personal pension the government tops this up to £5,000. Then, if you are a higher rate (40%) taxpayer, there is a further £1,000 tax relief given when your tax liability is calculated, reducing the net cost to £3,000. This can be even more effective if your income is between £100,000 and £125,140 where the effective tax rate is 60% due to the restriction of your personal allowance.

You might also want to consider making capital disposals and accelerating capital gains into 2022/23 if you haven’t yet used your £12,300 capital gains tax annual exempt amount. This annual exemption will reduce to just £6,000 for gains made in 2023/24.

There are other useful tax planning points we can discuss as well, including in relation to profit extraction from owner managed businesses and in gifting inheritances. Please do get in touch if you’d like to discuss the best strategies for your circumstances.
 
Age-Friendly Employer Pledge
The Age-Friendly Employer Pledge is an initiative run by the Centre for Ageing Better to help promote age-inclusive working practices.

The programme encourages employers to commit to improving work for people in their 50s and 60s and helps them take the necessary action to help older workers flourish in a multigenerational workforce.

More people are working later in life, but older workers often face prejudice and are overlooked. However, multigenerational workforces drive productivity and innovation.

The Age-Friendly Employer Pledge is a nationwide programme for employers who:

• recognise the importance and value of older workers;
• are committed to improving work for people in their 50s and 60s (and beyond); and
• are prepared to take action to help them flourish in a multigenerational workforce.

Signing up for the Age-Friendly Employer Pledge shows your commitment to older workers.

See: Age-friendly Employer Pledge | Centre for Ageing Better (ageing-better.org.uk)
 
Coping with the rising cost-of-living
The recent rise in the cost-of-living has presented many of us with unexpected challenges. New research suggests that over 12 million people are now borrowing money for food or essential bills and half of them are doing so for the first time in their lives.

The results come as the Money and Pensions Service (MaPS) launches a campaign to reach people who are struggling with cost-of-living pressures, which will run alongside the UK Government’s Help for Households.

It focuses on MaPS’ MoneyHelper service, which provides free money guidance from an expert in a range of different formats, such as online, webchat, WhatsApp and telephone.

If you’re already struggling, or worried things are heading that way, it can feel like there’s no way forward. However, the first step to solving money problems is knowing where to turn. 

See: Free and impartial help with money, backed by the government | MoneyHelper 
 
HMRC see an increase in fraudulent claims for R&D tax relief
HMRC state that they have seen an increase in fraudulent claims for Research & Development (R&D) tax relief. They believe companies in certain sectors are being deliberately targeted by third parties to make inaccurate R&D claims as an amendment to their Company Tax Returns. As a result of this, they are increasing their compliance enforcement activity.

As part of a “One to Many” letter campaign, HMRC have sent letters to company directors whose companies have made R&D claims in the past. The letter asks them to review their previous claims using a checklist to make sure that the information they have provided about their claim is complete and correct and, if there is an error, to make amendments as necessary. 

Directors are prompted to review their R&D claims by using the following checklist:

• Have you read and understood the HMRC guidance on R&D?
• Have you considered the conditions for making an R&D claim? Are you happy that the project is seeking an advance in the field of science and technology?
• Do you understand what you’re claiming for?
• Who has helped with the supporting R&D report and are they qualified to do so?
• Have you read the R&D report, and do you agree with its contents?
• If you’re working with a third party to make a claim, have they answered your questions satisfactorily?
• Does this claim seem to be too good to be true?

See: Research and Development Tax Relief - HMRC One to Many letter
 
Does your company have a shareholders agreement?   
For limited companies, when it comes to making decisions, Company Law states shareholders who own more than 50% can pass a motion at a company meeting regardless of the views of other shareholders and if a shareholder(s) owns 75% or more of the shares they control the company outright and can veto the decisions of all other shareholders. 

This may not suit all business situations, especially where you have two or more founders holding equal share capital or a group of owners with varying amounts of capital, some of whom are directors and some who are not, but who are all working together for the company’s success.

A shareholders’ agreement is entered into between all or some of the shareholders in a company. It regulates the relationship between the shareholders, the management of the company, ownership of the shares and the protection of the shareholders. They also govern the way in which the company is run.

A shareholders’ agreement can help define how a business makes decisions to the benefit of all owners and is recommended where:

• A small number of owners want to reach collective and fair decisions for the benefit of all;
• Some owners may want to be able to influence decisions that are particularly relevant to them; or
• Some shareholders may not be directors and cannot influence operations on a day to day basis.

Typically it is seeking to deal with the three “D’s” of death, disability and disagreement. It may also cover a variety of other significant areas for example, retirement and buy back of shares. 

Our view is that a shareholders’ agreement is an essential document for any limited company and an equitably drafted agreement should provide comfort to all parties to the agreement.

Please talk to us if you need help in planning for an agreement, especially where there are several shareholders, a new company is being formed, a shareholder wants to sell their shares or pass them to their children, someone is nearing retirement, or the company has borrowed money from a shareholder. We can help put you in touch with a local business valuer for share and company valuations, and putting the shareholders wishes into an agreement with a local solicitor.