Welcome to our latest 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!
Have a great weekend.
Kind regards,
Steve
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk
Guide to the General Election 2024:
Tax implications for your business
As a business owner, you’ll likely be wondering
how the upcoming general election on 4 July 2024 is likely to affect your
business. A new government can mean significant legislative changes and tax
upheavals that can impact your business operations and financial planning.
The parties have issued their manifestos, so
let’s break down what they’ve said about tax.
What Labour and the Conservatives
have said about tax
Here is a comparison of what Labour and the Conservatives say in their manifestos about tax.
Income Tax
Labour: The basic, higher, and additional rates of income tax will not be increased. Pension reforms will be adopted alongside a review of the pensions landscape. There will be no new taxes on pensions; marginal rate relief and the 25% tax-free lump sum will be maintained. No mention of the High Income Child Benefit Charge.
Conservatives: Income tax rates will not be increased. The tax-free allowance for pensioners will be brought into a new ‘Triple Lock Plus,’ pledging a rise equal to the highest of inflation, earnings, or 2.5%, applicable from April 2025. The tax-free allowance is currently frozen at £12,570 for all taxpayers until April 2028. The High Income Child Benefit Charge will be assessed on a household basis, starting when combined income reaches £120,000.
National Insurance Contributions (NIC)
Labour: National Insurance will not be increased.
Conservatives: A further 2p reduction in the main rate of employees’ NIC is promised, cutting it to 6% by April 2027. NIC will not be extended to employer pension contributions.
Business Tax
Labour: A roadmap for business taxation for the next parliament will be published, enabling confident investment planning. Full expensing and the annual investment allowance will be retained, with greater clarity on qualification criteria to aid investment.
Conservatives: Further reductions in the main rate of self-employed Class 4 NIC, aiming to abolish it by the end of the next Parliament. Extension of full expensing for new plant and machinery once fiscal conditions allow.
Corporation Tax
Labour: Corporation tax will be capped at the current main rate of 25% for the whole parliament, hinting at possible increases for companies with annual profits of less than £250,000.
Conservatives: No increase in corporation tax.
VAT
Labour: The rate of VAT will not be increased but will be applied to private school fees.
Conservatives: The rate of VAT will not be increased. The VAT registration threshold will be reviewed to smooth the current £90,000 cliff edge.
Capital Gains Tax (CGT)
Labour: No specific mention of CGT rates or reliefs. The 'carried interest tax loophole' for private equity executives will be closed.
Conservatives: CGT will not be increased. Business Asset Disposal Relief and Private Residence Relief will be retained. A new temporary 2-year CGT relief for landlords selling to existing tenants.
Inheritance Tax (IHT)
Labour: No specific mention of IHT rates or reliefs. The use of offshore trusts to avoid inheritance tax will be ended.
Conservatives: No specific mention of IHT rates or reliefs. Agricultural Property Relief and Business Relief will be retained.
Stamp Duty Land Tax (SDLT)
Labour: SDLT on purchases of residential property by non-UK residents will increase by 1%.
Conservatives: Rates and levels of SDLT will not be increased. The first-time buyer threshold will be permanently set at £425,000.
Non-domiciled individuals
Labour: The non-domiciled status will be abolished and replaced with a modern scheme for short-term stays.
Conservatives: No mention of plans to curb non-domiciled individuals’ use of the remittance basis from April 2025.
Furnished holiday lets
Labour: No indication given.
Conservatives: Councils will manage the growth of holiday lets, with reforms limiting tax benefits from April 2025.
SME growth initiatives
Labour: No indication given.
Conservatives: The Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCT) regimes will be retained.
Research & Development (R&D) and Creative tax reliefs
Labour: No indication given.
Conservatives: R&D tax reliefs will be maintained, prioritizing cutting-edge farming technology. Creative sector tax incentives will remain competitive.
HMRC resources
Labour: A £855 million investment to reduce tax avoidance, modernize HMRC, and strengthen its powers.
Conservatives: A further £6 billion a year to be raised by tackling tax avoidance and evasion. No specific commentary on funding for HMRC but pledges to double digital and AI expertise within the civil service.
Taxpayer digitalisation
Labour and Conservatives: The Making Tax Digital (MTD) initiative is not mentioned in either manifesto.
Other associated pledges
Labour: Commitment to one major fiscal event a year, a genuine living wage with removed age bands, a fairer business rates system, a new plan to ‘Make Work Pay,’ and a windfall tax on oil and gas giants.
Conservatives: The National Living Wage maintained at two-thirds of median earnings, a £4.3 billion business rates support package, creation of more freeport and business rate retention zones, and continued backing for investment zones.
What the other parties have said about tax
The Liberal Democrats, under their manifesto
"For a Fair Deal," are proposing a fairer tax system. They're looking
at:
·
increasing the global minimum
corporation tax rate to 21%. This looks like an increase to the current UK
small profits rate of 19%.
·
raising the personal income tax
allowance when public finances allow.
The Green Party's "Real Hope. Real
Change" manifesto is quite ambitious. They’re advocating for:
·
a £15 per hour National Minimum
Wage but allowing small businesses to reduce their National Insurance payments
as an offset.
·
a wealth tax for those with
assets above £10 million.
·
aligning Capital Gains Tax (CGT)
rates with income tax rates.
·
aligning the tax rates on
investment income with the combined income and NIC rates paid on employment
income.
·
removing the NIC upper earnings
limit, which will mean higher earning employees paying NICs on all their
employment earnings at the main rates.
Reform UK, with their "Britain Needs
Reform" manifesto, includes proposals like:
·
increasing the personal allowance
to £20,000 and the higher rate threshold to £70,000.
·
cutting residential Stamp Duty
Land Tax (SDLT) to 0% for properties below £750,000 and 2% for properties
costing £750,000 - £1.5m.
·
reestablishing the VAT refund
scheme for tourist shopping.
·
abolishing Inheritance Tax (IHT)
for estates under £2 million and bringing the rate for estates worth more than that
down to 20%.
·
lifting the small profits
threshold for corporation tax to £100,000.
·
lowering the main rate of
corporation tax from 25% to 15% over three years.
·
abolishing IR35 rules.
·
increasing the VAT registration
threshold to £150,000.
·
no VAT and a 20% income tax
relief on school fees
·
reducing UK tax legislation from
21,000 pages to nearer 500.
Plaid Cymru, in their “For Fairness, For
Ambition, For Wales” manifesto:
·
Believe that Wales should have
full control of economic levers and want the Senedd to have powers to set
income tax bands and thresholds, as is the case in Scotland.
·
Pledge to campaign for capital
gains tax to be equalised with income tax.
·
Pledges to investigate increasing
NICs, introduce a wealth tax, further crack down on evasion and avoidance and to
abolish loopholes for non-domiciled individuals.
The SNP’s manifesto, “A future made in
Scotland” includes:
·
The demand for the full
devolution of tax powers, including over National Insurance, windfall taxation
for companies and to crack down on tax avoidance and evasion.
·
Support for the reform of VAT to
address imbalances in the rating system, including ending the VAT exemption for
private schools.
·
A pledge to introduce a lower VAT
rate for hospitality and tourism sectors.
Can you rely on these manifesto
pledges?
A government is not legally held to its
manifesto or required to stick to the promises they have made. Circumstances
change and even a fully intentioned promise made now may or may not be suitable
in 2029. So, while it’s reasonable to think that at least some pledges will
turn into reality, there is no guarantee.
Whether or not these pledges are actually affordable
when it comes down to it is of course another question.
Will we have another budget?
If a new party comes into power on 4 July,
then they will likely set out their initial plans in an ‘emergency’ budget.
Since the Office of Budget Responsibility (OBR) will need 10 weeks to prepare
independent forecasts, this is unlikely to happen until September or October.
Regardless of the election outcome, we are
here to support you through any changes. Following the election and the
announcement of any budget, we’ll let you know and we’ll be happy to provide
you with personalised advice if you want it.
Please feel free to reach out to discuss any
concerns or to schedule a consultation. Together, we can navigate these changes!
Inflation falls to 2%
Figures released by the Office of National
Statistics show that the Consumer Prices Index (CPI) for May 2024 was 2%. This
is a reduction from the 2.3% assessed in April and means that inflation has hit
the Bank of England’s target rate for the first time in nearly 3 years.
The main reason for the drop is food, where
prices are falling now but were rising a year ago. However, it is worth noting
that food prices are generally still 25% higher than they were at the beginning
of 2022.
The main upward pressure on inflation currently
is coming from petrol since prices are rising whereas they were falling a year
ago.
The fall in inflation doesn’t mean that
prices overall are coming down, just that they are rising more slowly.
The Bank of England met on Thursday last week
to discuss their interest base rate. This has been set at 5.25% since August
2023 and they decided to maintain that rate. This means no relief yet for
borrowers, but in view of the inflation news, a reduction in the base rate is
expected within the next few months.
See: https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/latest
New rules on distributing tips: Understanding
the Employment (Allocation of Tips) Act 2023
On 1 October 2024, the Employment (Allocation
of Tips) Act 2023 will come into effect, introducing significant changes to how
tips are managed and distributed in the hospitality industry.
This legislation aims to improve fairness by mandating
that all tips, gratuities, and service charges are allocated fairly among
employees. The new rules address longstanding concerns about the retention and
distribution of tips by employers, ensuring transparency and fairness.
Summary of the New Rules
1. Fair Distribution: Employers must
distribute all tips, gratuities, and service charges fairly and equitably among
workers. This includes both cash and card tips. The distribution has to be fair
and transparent with due regard to a Code of Practice and can include a tronc
arrangement.
2. No Deductions: Employers are
prohibited from making any deductions from tips, including administrative fees.
The only exceptions are those required by law (e.g., tax).
3. Transparency: Employers must
clearly communicate their tipping policies to employees and customers, ensuring
transparency in how tips are allocated.
4. Record-Keeping: Employers are
required to keep detailed records of all tips received and distributed for a
period of three years. These records must be made available to employees upon
request.
5. Written Policy: A written
policy outlining the distribution of tips must be in place and accessible to
all staff members.
6. Service Charges: Any service
charges added to bills must be treated as tips and distributed accordingly.
Impact on Employers
If you are an employer affected by the rules,
you will likely need to make some changes in how you manage tips. It will be
crucial that you comply with these regulations to avoid potential penalties and
to maintain a fair working environment.
Here are the key impacts with some
suggestions for procedures that affected employers will need to consider:
1. Review and Update Tipping Policies: Employers will need to review their current tipping policies
and make sure they line up with the new rules. They will need to establish a
clear and equitable distribution method that is communicated to all employees.
2. Implement Transparent Systems:
Employers should implement transparent systems for tracking and distributing
tips. This might involve using software solutions that automatically record and
allocate tips based on predefined criteria.
3. Employee Training: Training sessions
should be conducted to inform employees about the new rules and how tips will
be managed. This ensures everyone is aware of their rights and the procedures
in place.
4. Maintain Accurate Records:
Employers must establish robust record-keeping practices to document all tips
received and distributed. These records should be maintained for at least three
years and be readily accessible for inspection by employees or regulatory
bodies.
5. Communicate with Customers: Clearly
communicate tipping policies to customers, possibly through notices on menus or
at the point of sale. This transparency helps manage customer expectations and
ensures they understand how their tips will be used.
6. Regular Audits: Conduct regular
audits to ensure compliance with the Act. This helps identify and rectify any
discrepancies or non-compliance issues promptly.
By implementing these procedures, employers
can not only comply with the new rules but also foster a fairer and more
transparent working environment. This can enhance employee satisfaction and
trust, ultimately benefiting the overall business.
If you need any help with the new rules or
applying the Code of Practice, please feel free to get in touch and we will be
happy to help you.
Don’t be caught by false claims
on business rates appeal deadlines
The Valuation Office Agency (VOA) has issued
a warning about false claims being made about the deadline for appealing the
2023 list for business rates.
Some are claiming that the deadline is 30
June, however this is not true. Generally, you are able to appeal your property
valuation on the 2023 list at any time until March 2026.
If an agent contacts you trying to pressure
you to make a decision or sign a contract; makes claims about ‘unclaimed
credits’; says they are acting on behalf of the VOA; or demands large sums of
money upfront, then VOA advise you to be cautious.
It is not necessary to use an agent, but if
you choose to do so then the VOA provide a checklist
you can use to select one.
While the vast majority of agents are
reputable and will give you a good service, there are a small minority acting
in bad faith.
The VOA advise that if you have any concerns
about having been potentially misrepresented by an agent, please send any
evidence to ccaservice@voa.gov.uk.
See: https://www.gov.uk/government/news/warning-of-false-claims
Mackerel fishing deal struck with
Norway and the Faroe Islands
Last week, the UK agreed a deal with Norway
and the Faroe Islands that will help reduce the fishing pressure on mackerel.
The deal gives access to Norway and the Faroe
Islands to be able to fish some of their quota in the UK zone. In exchange for
this, an annual transfer of some of their quota will be made to the UK.
It is hoped that this deal will be stepping-stone
to a more long-term quota-sharing arrangement between the nations fishing these
waters.
Don’t lose out on Child Benefit
available to children in further education
Parents of children aged between 16 and 19
years of age and continuing their education or training after their GCSEs can
extend the Child Benefit they receive.
If this is true for you, then HM Revenue
& Customs (HMRC) should be in the process of writing to remind you about
this. On their letter, it will include a QR code. If you scan this and follow
the link, you will be directed to a page on GOV.UK that will allow you to
easily update your claim.
You should receive this letter by 17 July. If
for some reason, you have not received a letter by then, you can also make the
claim via GOV.UK yourself or by using the HMRC app. You will need a Government
Gateway user ID and password to be able to do this.
Child Benefit can be worth £1,331 a year for
your first or only child, and up to £881 a year for each additional child.
Payments will automatically stop on 31 August after the child has turned 16
unless the parents take action to renew their claim.
The payments can be extended if your child is
studying full time in approved non-advanced education. This includes:
·
A levels or Scottish Highers;
·
International Baccalaureate;
·
Home education – generally only
if started before the child turned 16, unless you have a statement of special
educational needs that was assessed by your local authority;
·
T levels; and
·
NVQs, up to level 3.
The following unpaid approved training
courses also qualify for extending your claim:
·
Wales: Foundation
Apprenticeships, Traineeships or the Jobs Growth+ Wales scheme;
·
Northern Ireland: PEACEPLUS Youth
Programme 3.2, Training for Success or Skills for Life and Work; and
·
Scotland: Employability Fund
programme and No One Left Behind.
If you have any difficulties with extending
your claim or would like help in making the claim, please feel free to contact
us. We will be happy to help you!
See: https://www.gov.uk/government/news/dont-lose-out-extend-child-benefit-for-your-16-to-19-year-old
Openreach fined £1.34 million after
death of an engineer
The Health and Safety Executive (HSE)
announced that they have fined Openreach £1.34 million after investigating the
death of an engineer.
The engineer, Alun Owen from Bethesda,
tragically died while trying to repair a telephone line that ran across the
River Aber in Abergwyngregyn.
A number of engineers had been trying to
repair the telephone lines in the area over a 2-month period, working both near
and in the river. At the time of the incident, because of flooding, the river
was much higher and flowing faster than usual.
Mr Owen had gone into the river and made his
way to an island in the middle of the river to try and throw a new telephone
cable across to the other side by taping it to a hammer and then throwing the
hammer. While he attempted to cross the remaining part of the river, he slipped
in a deeper part and the force of the river swept him away.
North Wales Police were involved with HSE in
the investigation, which found that there was no safe system of work in place.
Mr Owen and others working there had not received any training, information or instruction
on safe working on or near water.
Openreach pleaded guilty and have been fined
and ordered to pay costs.
HSE have stated that Mr Owen should not have
been put in an unsafe working situation. Businesses that have staff who may
work on or near water are reminded of the need to have an effective safe system
of work in place.
See: https://press.hse.gov.uk/2024/06/05/openreach-fined-following-death-of-engineer
Meta pauses plans to train AI
with user data
Meta, the company behind Facebook and
Instagram, have had plans to use Facebook and Instagram user date to train
generative AI.
The Information Commissioner’s Office (ICO), shared
concerns with Meta that they had received from users in the UK. The ICO were
subsequently pleased to report that Meta have responded by pausing and
reviewing their plans.
ICO reported: “In order to get the most out
of generative AI and the opportunities it brings, it is crucial that the public
can trust that their privacy rights will be respected from the outset.”
ICO have confirmed that they will continue to
monitor all the major developers of generative AI to check they have
appropriate safeguards in place and make sure that the information rights of UK
users are protected.
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