30th August 2024 – Hillmans Weekly Update

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 holiday weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

SHOULD YOU PASS ON WEALTH NOW TO AVOID INHERITANCE TAX?
Many wealthy individuals are apparently passing on substantial amounts of their wealth in anticipation of possible changes to inheritance tax (IHT) in Labour’s first Budget on 30 October. This allegedly includes a number of high-profile individuals such as TV presenter Anne Robinson who confirmed that she had passed on £50 million to her children and grandchildren. Should you consider doing the same?

Firstly, you need to check with us the value of your estate and potential IHT exposure under the current rules. Currently each individual receives a nil rate band of £325,000 and potentially up to a further £175,000 against the value of the family home, provided it, or assets to its value, is left to direct descendants on death. This additional £175,000 allowance is referred to as the residence nil rate band (RNRB).

There is currently an unlimited exemption where assets are transferred during lifetime or on death to the surviving spouse or civil partner. If the deceased spouse’s nil rate bands are unused then they are available to the survivor, potentially increasing the tax-free amount on the death of the second spouse to £1 million. Unfortunately, it’s not quite that simple as where the estate exceeds £2 million the RNRB is reduced by £1 for every £2 that the estate exceeds £2 million. Consequently, for wealthy couples the RNRB reduces to nil where the value of the estate exceeds £2.7 million leaving just the combined nil rate bands of £650,000. Note that the current rate of IHT on the death estate is 40% once the nil rate band has been used.

There is currently 100% relief from IHT where business and farming assets are transferred during lifetime and on death and it is hoped that these reliefs will continue so that survivors do not need to sell off assets to pay the tax. However, those generous reliefs may not continue under the new government.

Transfers during lifetime
Under the current rules there is no IHT payable where the donor survives for at least 7 years following the date that assets are transferred. Such transfers are referred to as potentially exempt transfers (PETs) and IHT is payable should the donor die within 7 years. Note that the transfer needs to be an outright gift with no continued use or enjoyment of the asset by the donor. Hence giving away the family home but continuing to live there will generally be ineffective unless other conditions, such as paying market rent, are satisfied.

There may also be capital gains tax (CGT) consequences of a lifetime gift, although it may be possible to hold over the gain so that no CGT is payable on the increase in value from when the asset was acquired. Holdover relief is currently available in the case of business assets and on transfers of assets into trust.

Please get in touch with us if you have concerns about IHT and want to consider taking action before Budget Day.

HMRC CHECKING ON WORKPLACE NURSERIES
With the ever-increasing costs of childcare, a very attractive benefit provided by more and more employers is a creche or nursery for employees’ children.

If correctly structured, this is a tax-free benefit and will help employers attract and retain staff. Larger employers may provide an on-site nursery but for smaller employers it is more common to enter into partnership with a local nursery provider.

Two key elements of the partnership requirements for tax exemption are:

Responsibility for financing - Employers must take real responsibility for the financing of the childcare provision – for example by committing to fund an agreed proportion of the total costs, and by bearing their share of any losses. Employers simply paying a fixed cost per employee’s child are unlikely to meet this test.

Responsibility for management - Employers should be closely involved in the management of the childcare provision – for example, having close involvement in appointing and managing nursery staff, and in allocating places. Employers occasionally giving advice or ‘rubber stamping’ decisions are unlikely to meet this test. If an employer representative is appointed to the management board of a nursery, there must be evidence that they actively represent the employer in the running of the nursery.

HMRC have recently been checking these arrangements to ensure that the conditions for tax exemption are met. They have identified that some intermediaries promote schemes encouraging employers to offer childcare provisions to their employees, often under salary-sacrifice arrangements.

Those promoting the scheme often deal with all the necessary arrangements, meaning that the employer has very little involvement in providing the childcare and potentially fails the tests for tax exemption. Please contact us if you have any concerns over whether your childcare arrangements satisfy the conditions for tax exemption.

For the self-employed and those working for an organization that does not provide nursery facilities, the alternative is to set up a government tax-free childcare account.

BACK TO SCHOOL – SET UP A TAX-FREE CHILDCARE ACCOUNT?
The Government’s Tax-Free Childcare Accounts provide a 25% subsidy towards the cost of childcare. The account can be used to pay nursery fees, breakfast clubs, after school clubs and registered childminders.

The scheme operates by topping up savings of up to £8,000 per child by 25%, potentially an extra £2,000 a year from the Government to spend on qualifying childcare. The scheme generally applies to children under 12. In the case of disabled children, the age limit is 16 and the amount that can be saved is £16,000 a year, topped up by the Government by a further 25% to potentially £20,000.

Unlike childcare vouchers, still provided by some employers, tax free childcare accounts are available to both employees and the self-employed. To be eligible, the parent generally needs to be working and earning at least the National Minimum Wage or National Living Wage for at least 16 hours a week on average. However, parents are not eligible if either of the parents’ adjusted net income is more than £100,000 a year.

Note that where an employer provides Childcare Vouchers then the parents are not allowed to set up a Tax-Free Childcare Account as well. Please contact us for advice on whether or not it would be beneficial to leave your employer’s Childcare Voucher Scheme, noting in particular that the voucher scheme applies to children up to age 16, rather than age 12.

HOURS WORKED REPORTING DELAYED TO 2026
It was originally proposed that from 2025/26, employers would be required to provide more detailed information on employee hours worked via real time information (RTI) PAYE reporting. It has now been announced that this additional information will not now need to be reported until 2026/27 at the earliest.

ADVISORY FUEL RATE FOR COMPANY CARS
The table below sets out the HMRC advisory fuel rates from 1 September 2024. These are the suggested reimbursement rates for employees' private mileage using their company car.
 
Engine Size - Petrol (pence per mile) | Diesel (pence per mile) | LPG (pence per mile):
 
1400cc or less:
Petrol: 13p (14p)
Diesel: 12p (13p)
LPG: 11p (11p)

1401cc to 2000cc:
Petrol: 15p (16p)
Diesel: 14p (15p)
LPG: 13p (13p)

1600cc or less:
Petrol: 12p (13p)

1601cc to 2000cc:
Petrol: 14p (15p)

Over 2000cc:
Petrol: 24p (26p)
Diesel: 18p (20p)
LPG: 21p (21p)
 
Where there has been a change the previous rate is shown in brackets.
You can also continue to use the previous rates for up to 1 month from the date the new rates apply.
Note that for hybrid cars you must use the petrol or diesel rate.
For fully electric vehicles the rate is 7p (9p) per mile.
 
Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys without the amount being taxable on the employee.
 
Input VAT
Within the 45p/25p payments the amounts in the above table represent the fuel element. The employer is able to reclaim 20/120 of the amount as input VAT provided the claim is supported by a VAT invoice from the filling station. For a 2000cc diesel-engine car, 3 pence per mile can be reclaimed as input VAT (18p x 1/6)
 
Employees using their own cars
For employees using their own cars for business purposes the Advisory Mileage Allowance Payment (AMAP) tax-free reimbursement rate continues to be 45 pence per mile (plus 5p per passenger) for the first 10,000 business miles, reducing to 25 pence a mile thereafter.  Note that for National Insurance contribution purposes the employer can continue to reimburse at the 45p rate as the 10,000 threshold does not apply.

23rd August 2024 – Hillmans Weekly Update

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 bank holiday weekend.

Kind regards,
 
Steve
 
Steven Hillman BSc (Hons) FCA
Chartered Accountant
Tel: 01934 444100
https://www.hillmans.co.uk

Pitfalls to avoid in making a strategic plan
For businesses, having a strategic plan in place is vital for the long-term success and sustainability of the business. It serves as a roadmap for your business that gives you a clear direction, sets out the priorities, and helps you to make sure that you are using your resources effectively to reach your goals.

There are some potential drawbacks though and we will discuss a few so that you can avoid them.

Rigidity
A strategic plan can sometimes lead to rigidity. The business becomes too focused on the plan and resists adapting to new opportunities or changes in the market.

It’s important then to strike a balance between sticking to the plan and being flexible. This can be more difficult when a plan is very detailed. Therefore, concentrate on broader concepts rather than nailing down every detail so that flexibility can be built into the plan.

Time-consuming
Developing a strategic plan can be time-consuming and resource-intensive. It needs thorough research and analysis and will likely also involve consulting with other parties. This can all divert attention away from day-to-day activities if you’re not careful.

You need to allocate sufficient time but be careful not to aim for a ‘perfect’ strategic plan. If daily activities are being compromised, then you may be going too far.

Overemphasis on long-term goals
Focusing too much on long-term goals can sometimes lead to neglecting short-term needs and opportunities.

By including short-term objectives and milestones into the strategic plan, you’ll be able to work at things that contribute to the overall vision but give room for finding success and accomplishment in the short term rather than delaying this to a distant future.

Implementation challenges
Even the best strategic plans can fail if they are not implemented effectively.

It is important that you take a strong lead in the business and clearly communicate the plans and objectives to your employees. It is also important to keep monitoring as this will highlight where an objective may not actually be realistic, or it may provide opportunity to readjust so that the business can continue to press forwards.

While creating a strategic plan can be challenging, the benefits far outweigh the drawbacks. We have useful tools and checklists that can help you to put your strategic plan together. Why not ask us for a copy, we would love to help you in making your business grow and be successful.
 
Chancellor refuses to rule out increase to capital gains tax
Chancellor Rachel Reeves visited the US and Canada last week, and during an interview with Bloomberg was asked whether she was considering increasing capital gains tax.

She replied: “We’ve got a budget on October 30 and we will set out our policy then, but it’s always important when you’re deciding tax policy to strike the right balance. Of course, you need to bring in the revenue to fund public services, but we’ve also got to grow the economy. I won’t do anything that makes it harder to achieve that economic growth and prosperity.”

The Chancellor has ruled out raising VAT, income tax rates or National Insurance rates, but this has added speculation on whether other taxes will be increased.

Last year, Ms Reeves told the BBC that she had no plans to increase capital gains tax. However, since the Labour party came into office, she has claimed that there is a £22 billion shortfall in public finances this year. She has identified some savings, but it seems likely that the gap will also be plugged by raising taxes somewhere.

In addition to changing the rates of capital gains tax, the government could also remove some reliefs to increase their tax take.

Whether there will be any changes to capital gains tax, and what they might be, is difficult to predict, but it may be telling that Ms Reeves refused to rule it out.

If you are thinking about disposing of an asset and would like to know the likely tax cost under the current rules, please get in touch. We would be happy to help you.

See: https://www.bbc.co.uk/news/articles/c9v880z470lo
 
Government investing £32 million in AI projects to boost productivity and improve public services
The UK government has announced £32 million in funding for 98 innovative AI projects, aimed at improving efficiency in various sectors. These include delivery of prescriptions, railway maintenance and training construction workforces. The funding will support over 200 businesses and research organisations across the UK.

The projects span across the UK from Southampton to Birmingham and Northern Ireland. Examples of some of the projects being funded include:

• Construction Safety Training: V-Lab Ltd has received £165,006 to develop AI-powered virtual simulations for training workers in the construction sector. These simulations train workers on risk assessments and safety protocols, ensuring a skilled and safety-conscious workforce. 
• Efficient Prescription Deliveries: Anteam, based in Nottingham, is working with retailers and the NHS to optimise prescription deliveries using AI algorithms. This initiative seeks to match delivery needs with existing routes, reducing carbon emissions and improving patient experience. 
• Autonomous Railway Maintenance: Hack Partners is spearheading a project to create an autonomous system for monitoring and maintaining rail infrastructure. This development hopes to improve the efficiency and safety of the UK's railway network. 
• Electric Vehicle Motor Design: Cambridge-based Monumo is part of a team awarded £750,152 to enhance motor designs for electric vehicles using a 3D Generative-AI Tool, aiming to improve sustainability across various transportation sectors.

The government is clearly committed to finding ways to harness the power of AI to improve productivity. AI can bring benefits to businesses of all sizes, have you considered how AI could help you?

See: https://www.gov.uk/government/news/ai-to-reduce-train-delays-speed-up-nhs-prescriptions-and-train-construction-workers-gets-32-million-boost
 
HMRC interest rates to be reduced
The Bank of England’s decision to reduce the base rate to 5% means that HM Revenue & Customs (HMRC) will also reduce their interest rates.

The interest rates charged by HM Revenue and Customs on late tax payments, as well as the rates they pay on repayments are linked to the Bank of England’s base rate. Late payment interest is charged at base rate plus 2.5%. Repayment interest is paid at base rate minus 1%, subject to a minimum of 0.5%.

The reduced rates will apply from:

• 12 August 2024 for quarterly instalment payments; and
• 20 August 2024 for non-quarterly instalments payments.

If you need help with your tax or are concerned about being able to pay a tax payment, please get in touch. We can work with you to make a payment arrangement with HMRC.

See: https://www.gov.uk/government/news/hmrc-late-payment-interest-rates-to-be-revised-after-bank-of-england-cuts-base-rate
 
First instalments of delinked payments paid out to farmers
Last week, the Rural Payments Agency (RPA) announced that 98% of eligible farmers have now received their first instalment of the new delinked payments.

The second instalment is due to be paid from 30 September. This is earlier than originally planned. According to RPA Chief Executive Paul Caldwell, the payment has been brought forward “to make sure farmers are paid promptly to improve cash flow during this challenging period.”

Farmers will receive support via delinked payments until 2027.

The delinked payments are based on the average BPS payment received by the farm for the 2020 to 2022 scheme years. Progressive deductions will be applied when calculating the delinked payments each year from 2024 to 2027.

If you were expecting a delinked payment and have not received your first instalment, please feel free to get in touch and we will be happy to help you.

See: https://www.gov.uk/government/news/first-instalment-of-new-delinked-payments-issued-to-businesses
 
2024 Sustainable Farming Incentive agreements now live
The first of the 2024 Sustainable Farming Incentive agreements for 2024 are now live.

A tool is available that can help you find out about grants and funding that you may be eligible for. The tool can be found here - https://www.gov.uk/find-funding-for-land-or-farms

The tool doesn’t confirm your eligibility, but it is a good way of tracking down actions that you may be able to get paid for.

If you need any help finding funding that you may be eligible for, please feel free to give us a call and we would be happy to help.

See: https://www.gov.uk/government/news/first-sustainable-farming-incentive-agreements-live-for-2024
 
Do you want to supercharge your growth?
Small Business Britain has opened up registrations for its September instalment of the Small and Mighty Enterprise Programme.

This is a six-week CPD accredited programme that’s designed for small businesses and will give sole traders and micro businesses expert guidance and mentoring to help them grow.

The programme is free and will be held entirely online, meaning that it can be accessed from anywhere in the UK with an internet connection. An in-person event will be held to celebrate the achievements of those participating.

For further information and to register, see: https://smallbusinessbritain.uk/small-and-mighty
 
The Strikes Act to be repealed
The government has announced its intention to repeal the Strikes (Minimum Service Levels) Act 2023.

The Act was intended to ensure minimum service levels were maintained during strikes, particularly in critical sectors that are essential for the safety, health, and welfare of the public. This includes services like healthcare, transportation, education, and emergency services.

With a number of high-profile strikes occurring this year, no employer has actually used the legislation and the laws have not helped resolve disputes.

The Act will be formally repealed as part of the upcoming Employment Rights Bill that will be introduced in the next few weeks.

See: https://www.gov.uk/government/news/public-services-back-on-track-as-strikes-act-to-be-repealed
 
Energy to be harnessed from wastewater
Wastewater Fuels, located in Warwickshire, have come up with a new innovation that harnesses energy from wastewater.
Stainless steel mesh rods are used in wastewater to break down organic material into hydrogen ions that are then converted into hydrogen gas and stored in the rods.

The process has been tested in several trials and production of a full-scale sewage facility that makes use of it has now been given the green light.

The new technology has considerable potential. Currently, about 2-3% of National Grid energy is used in treating wastewater at 9,000 water treatment sites across the country. A method to treat wastewater while generating energy at the same time could be transformative as a renewable energy source.

For further information about the processes involved, see: https://www.gov.uk/government/case-studies/flush-to-fuel-transforming-wastewater-into-hydrogen-power

16th August 2024 – Hillmans Weekly Update

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

Could government-backed financing help your business expand?
A small business from Barnsley, Slime Party UK, has successfully secured government-backed financing, enabling it to significantly expand its operations, create new jobs, and develop new product lines.

This success story provides a valuable blueprint for other small businesses seeking to grow, especially those looking to enter or expand in export markets.

Slime Party UK’s journey: From kitchen to global markets
Slime Party UK began as a humble kitchen project by its founder, Ruby Sheldon, producing a mess-free variety of sensory putty. The business quickly gained traction and now supplies some of the largest toy retailers globally. However, despite its popularity, the company faced significant challenges in securing the necessary financing to continue its growth, particularly in export markets.

Overcoming financing challenges
With a £150,000 turnover, the company was too small to qualify for traditional trade finance packages, a common issue for micro-enterprises. So, Slime Party UK reached out to UK Export Finance (UKEF), the UK government’s export credit agency.

UKEF connected the company with Newable Commerce, a specialist lender focused on supporting small and medium-sized enterprises (SMEs). Backed by UKEF’s General Export Facility (GEF) guarantee, Newable Commerce were willing to provide a £55,000 financing package to Slime Party UK.

This funding has been instrumental in the company’s growth, allowing it to open a new 15,000 square foot factory in Barnsley, increase its staff by 50%, and expand its product range.

The financing has also enabled Slime Party UK to meet the high demand from its export markets, particularly in Europe and the Middle East, including Lebanon, Malta, and Ireland.

The business is now well-positioned to continue its expansion into new markets globally, thanks to the financial backing and strategic support it received.

Lessons for other small businesses
There are some key takeaways for all small businesses, especially those involved in exporting, including:

1. Explore Government-Backed Financing: UKEF’s General Export Facility and other government-backed financing options can be a lifeline for you if you are struggling to secure traditional financing for your business. These resources are designed to support SMEs at various stages of growth, particularly those looking to expand internationally.
2. Be willing to partner with specialist lenders: Working with non-bank lenders, like Newable Commerce, that specialise in supporting SMEs, can provide access to tailored financing solutions that align with your business’ unique cash flow needs and growth objectives.
3. Leverage Networking Opportunities: UKEF not only provided financial support but also connected Slime Party UK with Dynamic Funding Limited, a broker that helped the business secure additional private financing. Building a network of financial and strategic partners can open doors to you for new opportunities and resources.
4. Invest in Growth and Innovation: With the right financing in place, Slime Party UK was able to invest in new facilities, staff, and product development. For your business, securing funding is just the first step - investing wisely in areas that will drive growth and innovation is crucial.

If you are a small business looking to follow in Slime Party UK’s footsteps, the message is clear: the right financial backing, coupled with strategic partnerships, can unlock significant growth opportunities and pave the way for success.

Why not give us a call and see how we can help you evaluate the best finance options for your business for it to successfully grow?

See: https://www.gov.uk/government/news/yorkshire-toy-maker-grows-with-government-backing
 
Former investment firm director receives 15-year bankruptcy restrictions for fraud
Andrew Paul Bird, a 60-year-old former investment firm director from Quarndon, Derbyshire, has been subjected to the maximum 15-year bankruptcy restrictions after being found guilty of defrauding investors. Mr Bird misled 13 individuals and couples into investing in a fraudulent scheme between 2011 and 2016, promising secure returns while exposing them to significant financial risks for his personal gain.

Mr Bird was first declared bankrupt in November 2016 and became subject to an interim Bankruptcy Restrictions Order (BRO) in January 2018. This order was put in place to prevent further harm while he awaited trial. On August 1, 2024, Mr Bird was sentenced to eight years in prison at Nottingham Crown Court for his fraudulent activities.

The Official Receiver’s investigation revealed that Mr Bird knowingly provided false information to investors. As a result, he signed an undertaking extending the bankruptcy restrictions until January 24, 2033. These restrictions prevent Mr Bird from acting as a company director, borrowing more than £500 without disclosing his status, and taking certain public roles, significantly curtailing his business activities.

The case offers valuable takeaways for both investors and small business owners. Here are the key lessons:

Due diligence is crucial:
If you are looking to invest, you should thoroughly investigate any investment opportunity before committing your funds. This includes verifying the legitimacy of the investment, the credibility of the individual or firm offering it, and understanding the associated risks.
Investing based on trust alone without adequate research opens you to considerable risk as this case shows.

Beware of too-good-to-be-true offers:
We all know that if it sounds too good to be true, it probably is. But when you are being offered promises of high returns, they can be hard to resist.

It is important to remember that promises of high returns with little to no risk are usually red flags that things are not all they seem. In Bird’s scheme, the investors were likely enticed by the prospect of secure and profitable investments and regretted it when they turned out to be fraudulent.

It is best for you to be sceptical of any such offers and seek independent financial advice.

Legal recourse and protections:
You do have legal protections and recourse available to you, so be aware of them. In the case of fraud, you should report it to authorities such as the Insolvency Service.
Bird’s conviction and subsequent bankruptcy restrictions demonstrate that fraudulent behaviour can lead to significant legal consequences, which can help to protect future potential victims

See: https://www.gov.uk/government/news/maximum-term-bankruptcy-restrictions-for-investment-scheme-fraudster
 
Updated interest rates and repayment thresholds for student loans announced
The latest annual update to Student Loan interest rates was made last week by the Department for Education.

Different rates and thresholds apply depending on the type of student loan and the new rates will apply from 1 September 2024 to 31 August 2025.

Those running payroll may want to be aware that the rates are changing in case of queries from staff with student loans who notice a change in their deduction in their September pay packet.

For details of the rates, see: https://www.gov.uk/government/news/student-loans-interest-rates-and-repayment-threshold-announcement--5
 
Former Employee Fined for Data Breach: What Your Business Can Learn
A recent case involving a former employee of Enterprise Rent-A-Car highlights the importance of robust data protection measures.

Jonathan Riches, 46, was fined £10,000 and ordered to pay £1,700 in costs after pleading guilty to illegally accessing motorists' personal details. This breach, which occurred between 2009 and 2011, involved Mr Riches using his former connections at Enterprise to obtain sensitive data for personal injury claims. According to the Information Commissioner’s Office, he made hundreds of thousands of pounds in financial gain as result.

Mr Riches, who had previously settled a civil case with Enterprise for £300,000, fled to the U.S. in 2016 after being summoned to court but eventually returned to face justice in 2024. The case underscores the importance of maintaining strong data security procedures for employee access to business systems.

So, what can your business learn from this? Here are some key takeaways to help you avoid a similar situation:

1. Strengthen access controls:
Sensitive data should only be accessible to employees who need it. Therefore, regularly review who has access and update permissions as and when roles change within your business.
2. Implement robust data security policies:
Having clear and comprehensive data protection policies in place is essential. These policies should be communicated to all employees, who will need regular reminders to ensure that everyone understands their role in protecting client information.
3. Monitor and audit access:
Your systems should be capable of monitoring who is accessing your data and you should arrange for regular audits to be carried out. This can help you spot any unauthorised access early and take immediate action.
4. Effective employee offboarding:
When an employee leaves your company, it's vital to revoke their access to your business systems and data immediately. This step helps prevent any potential misuse of information after their departure.
5. Prompt reporting and response:
If a data breach does occur, you should report it to the appropriate authorities immediately. Having a clear action plan in place ensures you can respond quickly so that you can minimise any damage caused and protect your business.

By taking these proactive measures, you can better safeguard your business against data breaches and avoid the legal and financial repercussions that come with them.

Ensuring your data protection practices are up to date not only protects your clients but also strengthens your business’s reputation and trustworthiness.

See: https://ico.org.uk/about-the-ico/media-centre/news-and-blogs/2024/08/porthcawl-man-sentenced-after-brazen-car-scam-worth-hundreds-of-thousands-of-pounds/
 
FSB Insurance Service provides advice for riot affected businesses
The recent riots have left many small businesses dealing with damage and disruption.

The Federation of Small Businesses (FSB) Insurance Service has created some guidance to help businesses that have been affected.

The guide includes practical steps that businesses can take when experiencing or expecting problems.

It also encourages businesses to check their insurance coverage. All policies are different so it may be necessary to check with your broker to confirm what you are covered for.

The Riot Compensation Act 2016 covers what government compensation is available, but not all instances of damage or loss during a civil disturbance is covered. To check the government guidance on this, see here.

To review the FSB guidance, see: https://www.fsb.org.uk/resources-page/insurance-guidance-for-small-businesses-affected-by-the-riots.html
 
Rural Businesses Set for Major Broadband Boost
Rural business owners across Britain are on the cusp of a significant digital transformation, thanks to a landmark deal between the UK Government and Openreach that’s part of an initiative aimed at modernising outdated broadband infrastructure.

With up to £800 million in investment, this ambitious project is aiming to deliver lightning-fast gigabit-capable broadband to around 312,000 homes and businesses in some of the most remote areas, including parts of Wales, Scotland, and England.

Current broadband challenges in rural areas
For many rural businesses, slow and unreliable internet has been a persistent challenge, and can limit the business’ ability to compete in an increasingly digital economy.

This issue is particularly acute in areas such as the South Wales Valleys, Exmoor National Park, and the Forest of Bowland, where current broadband infrastructure struggles to support even basic online tasks. This lack of reliable connectivity has not only hindered productivity but also stifled innovation and economic growth in these regions.

Project Gigabit
Project Gigabit was launched by the government to try and bridge the digital divide. This initiative hopes to bring the fastest available broadband to rural areas that have been left behind.

This new phase of the project includes a £288 million contract with Openreach, which will connect approximately 96,600 homes and businesses across England and Wales.

There are also further contracts in the pipeline, that will aim to extend high-speed connectivity to an additional 215,800 premises across Great Britain, including central and northern Scotland, North and South West Wales, and other remote regions.

Impact on Rural Businesses
For rural business owners, the rollout of gigabit-capable broadband could be a game-changer.

The improved infrastructure will enable businesses to operate more efficiently, whether that’s by facilitating remote work, enhancing online services, or making it possible for the business to adopt new digital technologies.

In turn, these improvements should also stimulate local economies and attract new businesses to the affected areas.

As the upgrade unfolds, rural businesses should be ready to capitalise on the opportunities that can come from improved broadband access.

See: https://www.gov.uk/government/news/312000-rural-homes-and-businesses-to-get-access-to-faster-broadband-in-overhaul-of-old-infrastructure

9th August 2024 – Hillmans Weekly Update

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

Chancellor’s speech paving the way to a potentially difficult Autumn budget
The Chancellor of the Exchequer, Rachel Reeves, addressed the House of Commons last week to detail the results of a Treasury spending audit. She has alluded to this in previous comments when referring to making assessments of the public spending inheritance.

She claimed that the audit revealed £22 billion of unfunded pledges that have been inherited from the previous government. These include commitments made to the Rwanda scheme, the Advanced British Standard and the New Hospital Programme. Shortfalls were also found from not increasing Departmental budgets to cover public sector pay settlements.

As a start on dealing with the overspend, the Chancellor announced savings of £5.5 billion for this year, with a further £8.1 billion to come next year. These measures include:

• Cutting winter fuel payments to only those who receive other State support. (Note that winter fuel payments are devolved in Scotland and Northern Ireland.)
• Scrapping the Rwanda migration partnership and retrospection of the Illegal Migration Act.
• Cancelling the Investment Opportunity Fund and other small projects.
• Next year, cancelling the Advanced British Standard and unaffordable road and railway schemes.
• The New Hospital Programme will also be reviewed.

The Chancellor did confirm that the Independent Pay Review Body recommendations for pay uplifts for public sector workers have been accepted. These will average 5.5%.

New plans were outlined for Spending Reviews to be set every two years but cover a three-year period so that there is a one-year overlap with the previous Spending Review. This should allow for a more joined up approach to public finance.

The Chancellor also committed to a single major fiscal event a year, as has been the case for the last few years. This presumably will continue with the recent pattern in which the Budget takes place in the autumn, covering all significant tax and spending announcements. Any spring Statement would simply be in response to the second forecast that the Office for Budget Responsibility makes.

As part of her speech, the Chancellor also outlined tax plans that will be confirmed in the Budget, which is scheduled for 30 October. These include:

• Ending VAT tax breaks for private schools from 1 January 2025.
• Replacing the non-domicile regime with a new residence-based regime (this was already planned under the previous government)
• Extending the Energy Profits Levy for one year to 31 March 2030, tightening its investment allowances and increasing the levy rate to 38% (from 35%) from 1 November 2024.
• Closing the carried-interest loophole used by private equity fund managers to reduce their tax.

These measures have all been discussed in the Labour Party manifesto so there are no great surprises here.

Of course, you don’t need a calculator to see that the £22 billion shortfall in public spending will not be covered by the saving measures the Chancellor has already announced. So, it remains to be seen whether there will be any further ‘pain’ in the October Budget.

Alternatively, the Chancellor may be delivering all the bad news now, while it’s expected following the change in government, and she’s saving some good news for the budget. We wait to see, but we will keep you posted on all the changes that may affect you. If you are concerned about how any of these measures may affect you, please feel free to get in touch, we will be happy to help you.

See: https://www.gov.uk/government/speeches/chancellor-statement-on-public-spending-inheritance
 
Bank of England reduces base rate to 5%
As anticipated, the Bank of England reduced their base interest rate on August 1 from 5.25% to 5%. The decision was a close call, with a majority of five to four voting in favour of the cut.

The Monetary Policy Report that accompanies the decision explains that while higher interest rates have helped return inflation to the Bank’s target of 2% and allowed them to make this cut, they are expecting a temporary increase to 2.75% later this year.

Why might inflation increase again?
The fall in household energy prices has been helping to bring inflation down, however as energy prices normalise, the downward pull they’ve been exerting on inflation will end. Prices for services, such as hotels and restaurants, insurance and rents for housing, on the other hand continue to rise at rates well above their past averages.

In addition, demand for goods and services this year have been higher than expected and this may contribute to higher inflation.
However, the Bank consider this to be a temporary situation and expect inflation to fall back to their target level next year.

Is another cut likely?
The Bank are prioritising making sure that inflation stays low and have said that they will not cut rates too much or too quickly. This suggests a further cut when they next meet on 19 September is unlikely.

What should you do about the rate cut?
Regardless of future decisions, the cut to 5% is good news for borrowers, but may not be so good for savers.

Commercial banks typically tend to follow the Bank of England, but not necessarily all to the same degree. If you have loan finance on variable interest rates, check to see that the interest rate reduces. Many loans and overdrafts have a rate that is tied to the Bank of England’s base rate so these should reduce automatically.

For savings it may be worth shopping around to make sure that you are getting the best rates on the market.

See: https://www.bankofengland.co.uk/monetary-policy-report/2024/august-2024
 
Abolishment of Furnished holiday lettings tax regime confirmed
HM Revenue and Customs (HMRC) have published draft legislation and a policy paper outlining the proposal for the abolition of the furnished holiday lettings (FHL) tax regime. This was originally announced by the previous government and any hopes that this may be stalled by the new government are now laid to rest.

The new measures are proposed to take effect on or after 6 April 2025 for income and capital gains tax, and from 1 April 2025 for corporation tax.

The proposed revisions will remove the tax advantages that furnished holiday let landlords have over other property businesses, as follows:

1. Loan interest will be restricted to the basic rate for Income Tax.
2. Capital allowance rules for new expenditure will be removed and replaced with the replacement of domestic items relief available to other property businesses.
3. Capital gains tax reliefs based on disposing a business asset will no longer apply to furnished holiday lets.
4. Furnished holiday let income will no longer be included within relevant UK earnings when calculating maximum pension relief.

There are some specific transitional rules that will apply to these changes.

If you own properties that currently qualify for the FHL tax regime, we recommend that you review the effects that the change in legislation will have on you so that you can determine if you need to take any action. If you need any help with this, please do not hesitate to contact us, we would be pleased to help you.

See: https://www.gov.uk/government/publications/furnished-holiday-lettings-tax-regime-abolition
 
VAT on Amazon Fees from 1 August 2024
From 1 August 2024, selling fees charged by Amazon to UK vendors will be subject to VAT at 20%.

This is because of a change in the legal entity that charges the fees. Previously, fees were charged by Amazon Service Europe S.a.r.l (ASE), which did not have a UK establishment, so the fees were subject to the VAT reverse charge procedure. From 1 August, fees will be charged by Amazon EU S.a.r.l (AEU), which has a UK branch. This means that AEU must charge VAT at 20% on fees.

Vendors who are VAT-registered will be able to reclaim the VAT, subject to the usual partial exemption rules. Those who are not VAT-registered will see their selling fees increase by 20% because they cannot claim the VAT.

Generally, such increases in VAT are largely borne by the consumer, as vendors pass the increased costs onto their customers.

For more information, see: https://sellercentral.amazon.co.uk/seller-forums/discussions/t/fe8e800e-d95c-42ae-a98b-e6e682547f90
 
Changes to National Minimum Wage recommendation criteria
The government made changes last week to the remit for the Low Pay Commission (LPC) that will mean it takes the cost of living into account when recommending minimum wage rates.

The LPC have also been instructed to narrow the gap between the minimum wage rate for 18-20 year olds and the National Living Wage. The longer term objective is to remove the age bands altogether and have a single adult rate.

Each October the LPC makes recommendations to the government on the minimum wage rates to apply from the following April. The new remit keeps this process and timeline in place, allowing for businesses to plan for uplifts.

As well as the cost of living, the LPC’s remit will continue to look at the impact on business, competitiveness, the labour market and the wider economy.

See: https://www.gov.uk/government/publications/national-minimum-wage-and-national-living-wage-updated-low-pay-commission-remit-2024
 
Changes to non-domiciled tax status to go ahead
The previous government included plans to end non-domiciled tax status at the Spring Budget and replace it with a 4-year foreign income and gains (FIG) regime. The new government have now announced their intention to continue with these plans, while ending some advantages for existing non-domiciled individuals.

What the change in tax status will mean
Preferential tax treatment based on domicile status will be removed for all new FIG arising from 6 April 2025. This means that foreign income and gains will all be taxable in the UK where you are classed as residing in the UK, not just that included under the remittance basis.

A relief will be available for new arrivals
New arrivals to the UK will have 100% relief in their first four years of tax residence, as long as they have not been a UK tax resident in any of the 10 consecutive years prior to arriving.

Transitional measures
As a transitional measure, it was previously announced that there would be a 50% reduction in foreign income subject to tax for the first year for those losing access to the remittance basis. However, the government has said this will not now happen.

The government has also outlined transitional arrangements to cover FIG that arose before 6 April 2025 and remitted to the UK afterwards – it will be taxed when remitted as per the current rules. A new Temporary Repatriation Facility (TRF) will also be available that allows for paying a reduced tax rate on a remittance for a limited time period after the remittance basis ends.

Changes to inheritance tax included
The government plans to replace the existing domicile-based system for inheritance tax (IHT) with a new residence-based one from 6 April 2025.
The basic test they are proposing for whether non-UK assets are within the scope for IHT will be whether a person has been resident in the UK for 10 years prior to the tax year in which the chargeable event happens. A person will also be kept within scope for 10 years after leaving the UK.

There are also plans to end the use of Excluded Property Trusts that keep assets out of the scope of IHT. Confirmation of how the rules relate to this and how existing trusts are affected will be provided at the Budget on 30 October.

If you are concerned about how these changes will affect you and the tax you pay, please call us at any time and we will be happy to discuss this with you.

See: https://www.gov.uk/government/publications/2024-non-uk-domiciled-individuals-policy-summary
 
VAT on private school fees: What that means for you
Draft legislation has now been published for the government’s plan to end the VAT exemption for private school fees.

The government is also legislating to remove private schools from being eligible for business rates charitable rates relief. Because business rates policy is devolved, the business rates policy change will only affect private schools in England. VAT policy, however, is reserved and so the VAT changes will affect private schools across the UK.

The current situation for VAT
Currently, private schools, as regulated education providers, qualify as exempt from VAT. This means no VAT is currently charged on private school fees.

Private schools also cannot recover any VAT they incur on expenditure.

What will change?
From 1 January 2025, all education services and vocational training supplied by a private school, or a “connected person”, for a charge will be subject to VAT at the standard rate of 20%. Any boarding services that are closely related to this supply will also be subject to VAT at 20%.

For parents this means a likely increase of 20% in private school fees beginning next year. However, since private schools will now be able to claim back the VAT on expenditure they incur. This might provide some latitude for the school to be able to absorb some of the increase.

What if a pupil is being funded by the Local Authority?
In some cases, pupils are in a private school because their needs cannot be met in a state run school and the Local Authority funds this. Where this is the case the Local Authority will be compensated for the VAT they incur. If this is your situation then you should see no change.

Can I pay fees in advance to save VAT?
Unfortunately not. As an anti-forestalling measure, any fees paid from 29 July 2024 that relate to the term starting in January 2025 and onwards will be subject to VAT.

Does this apply to nurseries?
The intention is that nurseries, whether standalone or attached to a private school will remain exempt from VAT.

It will be the fees for children who turn compulsory school age that will become taxable. So, this means that VAT will start to apply when a child begins their first year of primary school.

How about sixth form?
Education and vocational training provided by standalone private sixth form colleges or ones attached to a private school will also be subject to VAT.

However, further education colleges that are classified as public sector institutions will not be subject to VAT.

Is there any change for state schools and academies?
No, state schools, including academies, will continue to be exempt from VAT for education and boarding.

How about other goods and services supplied by private schools?
Outside of boarding, a private school will also often provide school meals, transport and books and stationery. The government has confirmed that other closely related goods and services other than boarding which are for the direct use of the pupils and necessary for delivering the education to the pupils
will remain exempt from VAT.

This opens the possibility that a school might limit the amount of VAT they charge by assigning a high value to these VAT exempt goods and services and a low value to the VATable education and boarding services. However, the government have confirmed their awareness of this, and any such practice will be challenged.

The additional fly in the ointment with having a mixture of taxable and exempt supplies is that it can affect the amount of VAT that can be recovered by the school on its expenditure. Partial exemption calculations are needed, and HM Revenue and Customs (HMRC) have said they will provide specific guidance for schools on how to do this.

It’s also been confirmed that VAT will need to be charged on any education after school hours or during the holidays. However, before or after school childcare, or childcare holiday clubs, that just consist of childcare will remain exempt from VAT.

When will private schools need to register for VAT?
Any private schools that are not already VAT registered will need to register from 1 January 2025.

Schools that don’t already make any taxable supplies will be able to register from 30 October. Schools that do currently make taxable supplies, such as hiring out facilities, can choose to voluntarily register early.

If you are involved in running a private school and would like help on what these VAT changes will mean to you or would like training or advice on how to deal effectively with VAT, please call us and we would be happy to help.

See: https://www.gov.uk/government/publications/vat-on-private-school-fees-removing-the-charitable-rates-relief-for-private-schools
 
IPO issues warning about misleading invoices
The Intellectual Property Office (IPO) has issued a warning for businesses to beware of unsolicited payment requests.

There has been a recent upsurge in these bogus requests being reported. The unsolicited request may ask for payment for trademarks, designs or patent services. Following payment, the ‘services’ may not be provided, or may not have any benefit to the payer.

Invoices may also request payment for services at a much-inflated price that are available directly from the IPO at a much lower amount, or even free of charge.

The IPO say that the payment request will usually come from an organisation that you do not recognise and may be accompanied with a copy of a fraudulently signed agreement designed to get accounts departments to automatically approve payment.

Examples of misleading invoices have been released by the IPO and it has also published a list of names that are currently known to be used by these organisations.

If you receive such an invoice, you should not pay it and should report it to the IPO immediately. If you believe you have been a victim of fraud, then you should report this to the police.

For more information and links to example invoices, see: https://www.gov.uk/government/news/ipo-issues-fresh-warning-to-beware-of-misleading-invoices
 
Cyber Security and Resilience Bill to help the UK’s critical systems stay online
The widely reported IT outage in July caused significant disruption worldwide. In this case the fault was essentially due to a bug in a security update rather than a cyber-attack, but it demonstrated the vulnerability of networks.

The government announced its plan during the King’s Speech to introduce a Cyber Security and Resilience Bill. The National Cyber Security Centre (NCSC) report that the threat to services we all rely on, such as water, power and healthcare, is under increasing threat. Both ransomware actors and state
or state-aligned groups have shown interest in targeting these systems.

NCSC have welcomed the prospect of the new Bill, which they say will make it harder for weak points in the UK’s critical national infrastructure to be exploited.

See: https://www.ncsc.gov.uk/blog-post/legislation-help-counter-cyber-threat-cni
 
New mandatory housing targets for councils
The government have announced an overhaul of the housing planning system, with all councils in England being given new, mandatory housing targets.

The targets are being set to allow for achieving the new government’s pledge to deliver 1.5 million more homes.

The reforms include making brownfield development much easier to grant. Councils will also need to review their green belt land if necessary and identify and prioritise ‘grey belt’ land. A definition for this has been provided and includes land on the edge of existing settlements or roads, as well as old petrol stations and car parks.

Land that is safeguarded for environmental reasons will continue to be protected. Any land that is released in green belt areas will need to provide 50% affordable homes as part of the development.

These reforms should create opportunities for all construction related businesses.

See: https://www.gov.uk/government/news/housing-targets-increased-to-get-britain-building-again

2nd August 2024 – Hillmans Weekly Update

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

BEWARE THE 60% INCOME TAX TRAP

It has recently been reported over half a million taxpayers paid a marginal income tax rate of 60% in 2022/23, up by 23% from the number in 2021/22. This marginal rate applies where an individual’s adjusted net income falls between £100,000 and £125,140, where every £2 income over £100,000 reduces the £12,570 personal allowance by £1, such that it is fully eroded at £125,140.

Planning to mitigate the problem
The definition of “adjusted net income” is the individual’s total taxable income less personal pension payments and charitable payments under Gift Aid.

Such payments can effectively save income tax at 60%. For example, an £80 payment to charity under gift aid is grossed up to £100 and the taxpayer’s income is reduced by £100, thus saving £60 tax where the individual’s income is between £100,000 and £125,140. If an individual’s total income is projected to be £105,000 for 2024/25 they could consider making an additional pension contribution of £4,000 before 5 April 2025 as that would reduce their income to £100,000, thereby restoring their £12,570 personal allowance.

Such planning is also effective for those caught by the high income child benefit claw back charge (HICBC). That charge claws back child benefit by 1% for every £200 adjusted net income between £60,000 and £80,000.

Salary sacrifice arrangements can also be effective
Another way to mitigate the effects of the personal allowance restriction and the HICBC would be to agree with your employer to forgo some of your salary, pay rise, or bonus for an additional employer pension contribution or an electric company car. For example, an employee on £96,000 a year might be entitled to a £10,000 bonus. They could agree with their employer to have £6,000 of the bonus paid into their pension (tax-free, provided the £60,000 pension annual allowance isn’t exceeded) with the remainder of the bonus just keeping them at £100,000 and retaining their personal allowance.

Sacrificing salary for an electric company car isn’t quite as tax efficient, as the employee would currently be taxed on 2% of the list price instead of the salary foregone. On a £50,000 electric car that would just be a £1,000 taxable benefit in kind, which for a 40% taxpayer would mean £400 income tax.

The employing company would obtain a tax deduction for the cost of providing the benefit and would also save on employers national insurance. So, it’s win, win.

USE TAX-FREE CHILDCARE ACCOUNT TO PAY FOR SUMMER HOLIDAY CLUBS
Tax-Free Childcare accounts can be used to pay for approved childcare for children aged 11 or under, or 16 if the child has a disability.  This can include paying for a summer holiday club or childminder.

The account can also be used to pay nursery fees, to pay for breakfast or after school clubs in term-time, as well as out of school activities.
Opening a Tax-Free Childcare account is quick and easy and can be done at any time of the year. Families who have not yet signed up should check their eligibility and apply online today.

For every £8 paid into an online account they will receive an additional £2 from the government. This means parents and carers can receive up to £500 every 3 months (£2,000 a year for each child), or £1,000 (£4,000 a year for each child) if their child is disabled.

Money can be deposited at any time to be used straight away, or whenever it is needed. Unused money in the account can be withdrawn at any time.

Eligibility
Families could be eligible for Tax-Free Childcare if they:

• have a child or children aged 11 or under. They stop being eligible on 1 September after their 11th birthday. If their child has a disability, they can receive support until 1 September after their 16th birthday;
• earn, or expect to earn, at least the National Minimum Wage or Living Wage for 16 hours a week, on average;
• each earn no more than £100,000 per annum; and
• do not receive tax credits, Universal Credit or childcare vouchers.

PLANNING A STAFF SUMMER BARBEQUE?
Employers may meet the cost of certain social events for staff without creating a tax liability. This used to be a concession but is now a statutory exemption provided certain conditions apply.

The exemption applies to an “annual party or similar function” provided it is available to all employees or available generally to those at a particular location. During the Covid-19 pandemic HMRC confirmed that a ‘function’ could include a virtual party, where employers were unable to host a traditional party at which employees would have been physically present.

A key condition is that the cost per head of the party or function must not exceed £150, inclusive of VAT. If an event costs more than £150 then it is taxable in full, not just on the excess over £150.

If you have already held a Christmas Party for staff it may be possible to have another event, and for that to also be exempt from tax, provided the combined cost per head is no more than £150 a year. If the combined cost exceeds £150 for the year the employer can designate which ones should be taken into account to make best use of the exemption. If, for example, the cost per head of the Christmas party was £100, and the Summer event was £70, the employer can nominate the Christmas party to be covered by the exemption, but the £70 Summer Event would be taxable (not just the excess £20).

Rather than the employee being taxed on the £70 the employer can deal with the tax and national insurance on the employees’ behalf by way of a PAYE settlement agreement.

BUDGET DATE ANNOUNCED
The State Opening of Parliament took place on 17 July and the King’s Speech set out the measures that the government intends to introduce during the next session of parliament. Other than a mention of the proposal to remove the VAT exemption for private school fees (which we covered in a previous edition of this newsletter), very little was said about measures that will affect tax for businesses and individuals. Instead, we must wait for the Labour government’s first budget in order to learn about their tax plans. The budget is set to take place on 30 October 2024.

PROPOSED REPEAL OF THE SPECIAL TAX TREATMENT OF FURNISHED HOLIDAY LETTINGS
The government has now issued the draft legislation to abolish the special tax treatment of furnished holiday lettings (FHL) with effect from 6 April 2025 for individuals (1 April 2025 for corporation tax). This change will remove the tax advantages that current FHL landlords have received over other property businesses in 4 key areas by:

• applying the finance cost restriction rules so that loan interest will be restricted to the basic rate of Income Tax;
• removing capital allowances rules for new expenditure and allowing relief when domestic items are replaced;
• withdrawing access to reliefs from taxes on chargeable gains for trading business assets; and
• no longer including this income within relevant UK earnings when calculating maximum pension relief.

After repeal, former furnished holiday let properties will form part of the person’s UK or overseas property business and be subject to the same rules as residential property businesses.
 
Transitional rules
Where an existing FHL business has an ongoing capital allowances pool of expenditure, they can continue to claim writing-down allowances on that pool — any new expenditure incurred on or after the operative date must be considered under the property business rules

After the changes, former FHL properties will be part of the person’s UK or overseas property business as appropriate. That property business will then include the amalgamated profits and losses of all the properties in that business

Losses generated from a person’s FHL business will be permitted to be carried forward and be available for set off against future years’ profits of either the UK or overseas property business as appropriate.

Eligibility for CGT roll-over relief, business asset disposal relief, gift relief, relief for loans to traders, and exemptions for disposals by companies with substantial shareholdings will cease with effect from 6 (1) April 2025.

In relation to CGT business asset disposal relief, where the FHL conditions are satisfied in relation to a business that ceased prior to 6 April 2025, relief may continue to apply to a disposal that occurs within the normal 3-year period following cessation.

There is also an anti-forestalling rule which is intended to prevent the obtaining of a tax advantage through the use of unconditional contracts to obtain capital gains relief under the current FHL rules, effective from 6 March 2024.
 
CHANGES TO VAT ON INDEPENDENT SCHOOL FEES
On 29 July 2024, the Chancellor announced that as of 1 January 2025, all education services and vocational training supplied by a private school, or a connected person, for a charge will be subject to VAT at the standard rate of 20%. Boarding services provided by a private school, or a connected person, will also be subject to VAT at 20%.

Draft legislation issued on 29 July 2024 also provides that fees invoiced or paid on or after 29 July 2024 and before 30 October 2024 are to be treated for the purposes of the charge to VAT as a supply taking place on the later of—

(a) 1 January 2025, and
(b) the first day of that term.

School fees paid before 29 July 2024 will follow the VAT treatment in force at the time of the normal tax point for these supplies, where the fee rate for the relevant term has been set and was known at the time of payment.  

If any of the above issues affect you, please speak to us – we may be able to help you plan for some of the potential changes. Of course, more detail will be available after the budget, and we will keep you informed then.